<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] 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
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
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 10 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
-----------------------------
Secretary
Los Angeles, California
May 6, 1999
<PAGE> 3
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. As
a technical matter, the Variable Insurers hold shares of the Corporation in
their respective separate accounts in which contributions and premiums received
under the Contracts are initially 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.
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 10 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 in accordance with voting instructions received from Contract Owners and in
accordance with voting procedures established by the Corporation. The
Corporation expects that all shares of a Portfolio attributable to Contracts for
which no voting instructions have been received by the Variable Insurers or
shares attributable to amounts retained by the Variable Insurers in their
respective separate accounts will be voted for, against or withheld from voting
on any proposal in the same proportions as are the shares for which voting
instructions have been received by the Variable Insurers from Contract Owners.
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").
-2-
<PAGE> 4
This Proxy Statement and the Notice of Special Meeting are first being
sent to shareholders on or about May 17, 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 17, 1999 in order to obtain voting instructions
from the Contract Owners.
Shareholders of each Portfolio will vote separately by Portfolio on
Proposal 1 (approval of a new investment advisory agreement) and Proposal 2
(approval of a new investment sub-advisory agreement). Shareholders of all
Portfolios will vote together as a single class on Proposal 3 (election of
directors) and Proposal 4 (ratification of independent public accountants).
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. 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 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." 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 the Variable Insurers
and their affiliates. Voting instructions may be obtained telephonically or by
electronic transmission. The Variable Insurers have
-3-
<PAGE> 5
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 Corporation
("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
hereto sets forth the number of shares outstanding for each Portfolio as of the
Record Date.
As noted above, the Corporation sells shares only in connection with
Contracts issued by the Variable Insurers. As of April 30, 1999, Transamerica
and its indirect wholly-owned subsidiaries, Transamerica Occidental Life
Insurance Company, Transamerica Life Insurance and Annuity Company and
Transamerica Life Insurance Company of New York, owned approximately [__%] of
the Corporation's outstanding shares. 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. Appendix 2 sets forth each
person known to the Corporation to own Contracts, as of May 10, 1999, entitling
such person to give voting instructions regarding at least 5% of a Portfolio's
shares. 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 greater
than 5% of any Portfolio's outstanding shares, except as stated in Appendix 2.
Appendix 3 hereto sets forth the number of shares of each Portfolio
attributable to Contracts owned by the directors, nominees for director or
executive officers of the Corporation. 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, except as stated in Appendix 3.
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 writing the
Corporation at the address shown at the beginning of this Proxy Statement.
-4-
<PAGE> 6
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").
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. A copy of the master form of
-5-
<PAGE> 7
New Investment Advisory Agreement is attached hereto as Exhibit A. 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 the Investment
Advisory Agreements are described under "Description of the Investment Advisory
Agreements" below.
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
"interested persons" (as defined in the 1940 Act) (the "Non-Interested
Directors" or "Non-Interested Board members") of any such party, 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.
- It is the current intention that the Transaction will not
result in any material change in the management or operations
of TOLIC as they relate to the Portfolios.
-6-
<PAGE> 8
- 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 will 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 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
-7-
<PAGE> 9
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.
("TIS"), 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 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 for or arranges for the
-8-
<PAGE> 10
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 in
conformity with the Portfolios' 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 4 hereto. 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
4. 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 pay any
such expenses (but not including brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes or other
extraordinary expenses) to the extent that such expenses, as accrued for each
Portfolio separately, exceed 0.10% of the Growth Portfolio's, and 0.25% of the
Money Market Portfolio's, estimated 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
-9-
<PAGE> 11
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 5 hereto. Also shown in Appendix 5 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 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, 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 that 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 6 includes information regarding each director and officer of the
Corporation who is associated with TOLIC. TOLIC also acts as investment adviser
and TIS also
-10-
<PAGE> 12
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
objective to that of the Growth Portfolio. TOLIC has not waived, reduced or
otherwise agreed to reduce its compensation for this fund.
<TABLE>
<CAPTION>
ANNUAL
ADVISORY
FEE RATE ANNUAL SUB-
PAYABLE TO ADVISORY FEE APPROXIMATE
TOLIC RATE PAYABLE TO NET ASSETS
FUND AND YEAR (AS A % OF TIS (AS A % OF AS OF
ORGANIZED NET ASSETS NET ASSETS) 4/30/99
----------- ----------- ----------- -------
<S> <C> <C> <C>
Transamerica Occidental's Separate 0.30% 0.15% $111,421,955
Account B (1968)
</TABLE>
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. Cusak * Chairman, President and Chief
Executive Officer
Nooruddin S. Veerjee * Director & President Insurance Products
Division
Richard N. Latzer * Director & Chief Investment Officer
Gary U. Rolle * Director & Chief Investment Officer
Edgar H. Grubb * Director
</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 The Transamerica
Pyramid, 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.
-11-
<PAGE> 13
AEGON is headquartered in The Hague, The Netherlands, and is a 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.
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. 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.
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 or (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.
-12-
<PAGE> 14
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").
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 Exemptive Order,
including the escrow of sub-advisory fees, as would apply to TOLIC under the New
Investment Advisory Agreements. A copy of the master form of New Investment
Sub-Advisory Agreement is attached hereto as Exhibit B. 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
considered similar factors to those it considered in approving the New
Investment Advisory Agreements, to the extent applicable. See "Proposal 1--
Board's Evaluation." The Board also took into consideration that the current
intention is that the Transaction will not result in any material change in the
management or operations of TIS as they relate to the Portfolios.
-13-
<PAGE> 15
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 ByLaws 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 4 hereto. 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 such Portfolio as also set forth in Appendix 4.
-14-
<PAGE> 16
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.
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 5 hereto. Also shown in Appendix 5 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.
-15-
<PAGE> 17
TIS
TIS is a Delaware corporation that 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 and to Transamerica and affiliated companies since 1981. TIS is a direct
wholly-owned subsidiary of Transamerica. TIS's address is 1150 South Olive
Street, Los Angeles, California 90015. Appendix 6 includes information regarding
each 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 the Growth
Portfolio. See "Proposal 1 -- TOLIC and Other Service Providers" regarding the
sub-advisory fee rate and 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.
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
Gary U. Rolle * Executive Vice President
Thomas J. Cusak * Director
Edgar H. Grubb * Director
Frank C. Herringer * Director
</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 or (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.
-16-
<PAGE> 18
III. ELECTION OF DIRECTORS
(PROPOSAL 3)
It is proposed that the three persons currently serving as directors of
the Corporation ("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,
Jon C. Strauss and [Nominee].
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 the last five years
of each Nominee, each Director, and each executive officer of the Corporation
are as indicated in the table below.
-17-
<PAGE> 19
NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS INFORMATION
<TABLE>
<CAPTION>
Position Principal Occupation
Name, Address** and Age with the Corporation During the Past Five Years
- ----------------------- -------------------- --------------------------
<S> <C> <C>
Gary U. Rolle (58) * President, Chairman, Board of Executive Vice President and Chief
Directors Investment Officer of Transamerica
Investment Services, Inc.; Director and
Chief Investment Officer of Transamerica
Occidental Life Insurance Company; Director,
Transamerica Investors, Inc.
Peter J. Sodini (58) Board of Directors Associate, Freeman Spogli & Co. (a private
investor); President, Chief Executive
Officer and Director, The Pantry, Inc. (a
supermarket); Director Pamida Holdings Corp.
(a retail merchandiser) and Buttrey Food and
Drug Co. (a supermarket).
Jon C. Strauss (59) Board of Directors President of Harvey Mudd College; Previously
Vice President and Chief Financial Officer
of Howard Hughes Medical Institute;
President of Worcester Polytechnic
Institute; Vice President and Professor of
Engineering at University of Southern
California; Vice President Budget and
Finance, Director of Computer Activities and
Professor of Computer and Decision Sciences
at University of Pennsylvania.
[Nominee] Board of Directors [Principal Occupation]
</TABLE>
-18-
<PAGE> 20
<TABLE>
<CAPTION>
Position Principal Occupation
Name, Address** and Age with the Corporation During the Past Five Years
- ----------------------- -------------------- --------------------------
<S> <C> <C>
Matt Coben (38) *** Vice President Vice President, Broker/Dealer
Channel of the Institutional
Marketing Services Division of
Transamerica Life Insurance and
Annuity Company and prior to
1994, Vice President and National
Sales Manager of the Dreyfus
Service Organization.
Susan R. Hughes (43) Treasurer Vice President and Chief Financial
Officer, 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>
* Director 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.
** Except as otherwise noted, the mailing address for each Nominee,
Director and executive officer is 1150 South Olive Street, Los Angeles,
California 90015.
*** The mailing address of this officer is 401 North Tryon Street,
Suite 700, Charlotte, North Carolina 28202.
The principal occupations of the Nominees, Directors and executive
officers for 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, the Corporation sells shares only in connection with
Contracts issued by the Variable Insurers. Appendix 3 hereto sets forth, as of
May 10, 1999, those shares of each Portfolio that are known to be attributable
to Contracts owned by Nominees, Directors and executive officers of the
Corporation. As of May 10, 1999, the Directors and executive officers
-19-
<PAGE> 21
of the Corporation as a group owned Contracts entitling them to give voting
instructions with respect to shares of the Portfolios as also set forth in
Appendix 3.
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, which is responsible
for the selection of the Corporation's auditors and for the monitoring of the
audit process and its results. Messrs. Sodini, Strauss and Cantlay each attended
the one audit committee meetings 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 $250 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 the 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>
(2) (3)
(1) AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME OF PERSON, POSITION FROM CORPORATION FROM COMPLEX*
------------------------ ---------------- ------------
<S> <C> <C>
Donald E. Cantlay $1,500 $6,000
Richard N. Latzer -0- -0-
Jon C. Strauss $1,500 $6,250
Gary U. Rolle -0- -0-
Peter J. Sodini $1,500 $4,750
</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 a director of Transamerica
Investors, Inc. These registered investment companies comprise
the "Fund Complex."
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 the
instructions on the form of proxy. If no instructions are made, the proxy will
be voted for such Nominees.
THE BOARD MEMBERS RECOMMEND A VOTE FOR THE ELECTION OF THE NOMINEES.
-20-
<PAGE> 22
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 & 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
-21-
<PAGE> 23
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 adjournments 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 such adjournment
those proxies which they are entitled to vote in favor of such proposals. They
will vote against any such adjournment those proxies required to be voted
against any of 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.
-22-
<PAGE> 24
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>
Portfolio Number of Shares Outstanding
as of May 10, 1999
- -------------------------- ----------------------------
<S> <C>
Growth Portfolio
Money Market Portfolio
</TABLE>
-23-
<PAGE> 25
APPENDIX 2
CONTRACT OWNERS ENTITLED TO GIVE VOTING INSTRUCTIONS REGARDING
5% OR MORE OF PORTFOLIO SHARES
<TABLE>
<CAPTION>
Name and Address Number of Percent of
Name of Portfolio of Contract Owner Shares Portfolio
- ----------------- ----------------- ------ ---------
<S> <C> <C> <C>
</TABLE>
-24-
<PAGE> 26
APPENDIX 3
DIRECTORS, NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
ENTITLED TO GIVE VOTING INSTRUCTIONS
REGARDING PORTFOLIO SHARES
<TABLE>
<CAPTION>
Name and Address Number of Percent of
Name of Portfolio of Contract Owner Shares Portfolio
- ----------------- ----------------- ------ ---------
<S> <C> <C> <C>
</TABLE>
[For each Portfolio, all directors and executive officers of the Corporation as
a group...]
-25-
<PAGE> 27
APPENDIX 4
PORTFOLIO ADVISORY AND SUB-ADVISORY FEE RATES, NET ASSETS
AND AGGREGATE ADVISORY AND SUB-ADVISORY FEES
<TABLE>
<CAPTION>
Portfolio Fiscal Net Assets Advisory Fee Rate Aggregate
Year End Advisory
Fees
- --------------------------- --------- ----------- ------------------ ---------
<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, Transamerica Occidental Life Insurance
Company, the investment adviser to each of the Portfolios, 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, Transamerica Occidental Life Insurance
Company waived the entire advisory fee payable by the Money Market
Portfolio.
<TABLE>
<CAPTION>
Portfolio Fiscal Sub-Advisory Fee Rate Aggregate
Year End Sub-Advisory
Fees
- ---------------------------- --------- ----------------------------- ----------------
<S> <C> <C> <C>
Growth Portfolio 12/31/98 0.30% of first $50 million $197,784
0.25% of next $150 million
0.20% over $200 million
Money Market Portfolio 12/31/98 0.15% $ 5,019
</TABLE>
-26-
<PAGE> 28
APPENDIX 5
DATES RELATING TO THE PORTFOLIOS' INVESTMENT ADVISORY
AND SUB-ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
Portfolio Commencement Date of Former Former
of Operations Former Investment Investment
Investment Advisory Advisory
Advisory Agreement Last Agreement Last
Agreement Approved By Approved by
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>
Portfolio Date of Former Former
Former Investment Investment
Investment Sub-Advisory Sub-Advisory
Sub-Advisory Agreement Last Agreement Last
Agreement Approved By Approved by
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>
-27-
<PAGE> 29
APPENDIX 6
DIRECTORS AND OFFICERS
ASSOCIATED WITH TOLIC AND TIS
Directors and Officers Associated with TOLIC
<TABLE>
<CAPTION>
Name Position with the Corporation
- ---- -----------------------------
<S> <C>
</TABLE>
Directors and Officers Associated with TIS
<TABLE>
<CAPTION>
Name Position with the Corporation
- ---- -----------------------------
<S> <C>
</TABLE>
-28-
<PAGE> 30
Exhibit A
INVESTMENT ADVISORY AGREEMENT
between
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
and
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<PAGE> 31
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
1
<PAGE> 32
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 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
2
<PAGE> 33
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.
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
3
<PAGE> 34
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;
4
<PAGE> 35
(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 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
5
<PAGE> 36
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.
TRANSAMERICA VARIABLE TRANSAMERICA OCCIDENTAL LIFE
INSURANCE FUND, INC. INSURANCE COMPANY
By: By:
---------------------------- --------------------------
Name: Name:
-------------------------- ------------------------
Title: Title:
------------------------- -----------------------
6
<PAGE> 37
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> 38
EXHIBIT B
INVESTMENT SUB-ADVISORY AGREEMENT
between
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
and
TRANSAMERICA INVESTMENT SERVICES, INC.
<PAGE> 39
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 advisery services to the Growth Portfolio ("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 advise
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.
1
<PAGE> 40
(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 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
2
<PAGE> 41
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 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.
5. COMPLIANCE WITH THE FUND'S POLICES
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.
3
<PAGE> 42
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.
4
<PAGE> 43
(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.
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.
5
<PAGE> 44
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
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.
6
<PAGE> 45
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.
TRANSAMERICA OCCIDENTAL LIFE TRANSAMERICA INVESTMENT
INSURANCE COMPANY SERVICES, INC.
By: By:
-------------------------- --------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
7
<PAGE> 46
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
<PAGE> 47
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:
Name of Portfolio Annual Rate of Compensation
----------------- ----------------------------
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.
<PAGE> 48
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street
Los Angeles, CA 90015
The undersigned hereby appoints [____________] and [____________], and each of
them, as proxies of the undersigned (the "Proxies"), each with full power to
appoint his substitute, and hereby authorizes each of them to represent and vote
all the shares of common stock of Transamerica Variable Insurance Fund, Inc.
(the "Corporation") 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 10 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 AGREEMENTS, FOR APPROVAL OF THE NEW
INVESTMENT SUB-ADVISORY AGREEMENTS, FOR ELECTION OF THE DIRECTORS 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
<PAGE> 49
<TABLE>
<S> <C>
PLEASE MARK VOTES AS IN THIS
EXAMPLE /X/
FOR AGAINST ABSTAIN
GROWTH PORTFOLIO 1. To approve the new investment advisory agreement [ ] [ ] [ ]
between your Portfolio and Transamerica Occidental
Life Insurance Company.
- ------------------------------------------------
2. To approve the new investment sub-advisory [ ] [ ] [ ]
agreement between your Portfolio and
Transamerica Investment Services, Inc.
Mark box at right if an address change
or comment has been noted on the
reverse side of this card [ ]
FOR THE
NOMINEE ABSTAIN
3. To elect as directors the nominees listed below:
GARY U. ROLLE [ ] [ ]
PETER J. SODINI [ ] [ ]
JON C. STRAUSS [ ] [ ]
[NOMINEE] [ ] [ ]
FOR AGAINST ABSTAIN
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.
Please be sure to sign and date proxy. Date
- ------------------------------------------------
Please sign exactly as name appears to the
left. 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.
RECORD DATE SHARES:
Shareholder signs here Co-owner signs here
- ------------------------------------------------
</TABLE>
-2-
