TRANSAMERICA LIFE COMPANIES
Transamerica Center
1150 South Olive
Los Angeles, CA 90015-2211
October 9, 1996
To Our Contract Owners:
We are sending you this letter with the enclosed proxy card and proxy
statement, and recommend that you vote to approve the reorganization of
Transamerica Occidental's Separate Account Fund C ("Old Account C"), in which
you now participate as an owner of a variable annuity contract issued by
Transamerica Occidental Life Insurance Company ("Transamerica"). The purpose of
this letter is to outline for you the advantages we see resulting from approval
of the proposed reorganization. We urge you to read this letter and the attached
proxy statement carefully, and retain them both for future reference.
Under the proposed reorganization, Old Account C's assets will be
transferred intact to a newly-created mutual fund, the Growth Portfolio of
Transamerica Variable Insurance Fund, Inc. (the "Fund"), in exchange for shares
of the Growth Portfolio of the Fund. The Fund is a Maryland corporation and,
like your separate account, is a management investment company registered under
the Investment Company Act of 1940. The investment objective of the Growth
Portfolio of the Fund is identical to that of Old Account C. After the
reorganization, Old Account C will continue as a separate account of
Transamerica supporting your variable annuity contract, but will be restructured
as a passive investment vehicle, a unit investment trust, that will invest
exclusively in shares of the Growth Portfolio of the Fund. Following the
reorganization, you will have an interest in the Growth Portfolio that is
equivalent to your present interest in Old Account C.
The value under your Contract immediately after the transaction will equal
the value of your Contract immediately before the transaction.
Your benefits under the Contract, such as variable annuity options, rights
of termination, death benefits, and expenses and fees will not be changed.
If the reorganization is approved, you will continue to instruct
Transamerica how to vote with respect to the same kinds of matters as you do at
present. Transamerica will vote your interests in the Growth Portfolio of the
Fund. Please see the enclosed proxy statement for a description of your voting
rights.
After the reorganization, your Contract value will be allocated to the
Growth Portfolio which we expect will continue to grow and attain a larger asset
base than your present Old Account C, in part because, after the reorganization,
other separate accounts will also be able to invest in the Growth Portfolio and
these additional investments are expected to result in enhanced investment
flexibility and reduced costs through administrative efficiencies and economies
of scale.
Transamerica will pay the entire cost of the reorganization. The value of
your account will not change and the total charges under your Contract will not
be increased as a result of the reorganization.
The Board of Managers of Old Account C has determined that the
reorganization would be in the best interest of all Contract Owners. Contract
Owners are being asked to consider the proposal and to vote this proxy or attend
a Special Meeting of Contract Owners of Old Account C to be held on October 30,
1996, at 9 a.m., Pacific Standard Time, at Transamerica's home office, 1150
South Olive, Los Angeles, California 90015. All Contract Owners who have an
interest in Old Account C are being asked to vote on the proposed
reorganization. If approved by a majority of Contract Owners, the reorganization
is expected to occur on or about November 1, 1996.
Detailed information about the reorganization and the reasons therefore are
set forth in the enclosed materials. Please exercise your right to vote by
completing, dating, and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience. It is very
important that you vote and that your voting instructions be received by us no
later than October 29, 1996. WE STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU
TO REVIEW, COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
Sincerely,
/s/ Thomas J. Cusack
Thomas J. Cusack
President, Chief Executive Officer
Transamerica Occidental Life Insurance Company
IT IS IMPORTANT THAT YOU VOTE.
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
1150 South Olive
Los Angeles, CA 90015
NOTICE OF MEETING OF CONTRACT OWNERS
NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting") of
owners of Individual Equity Investment Fund Contracts ("Contract owners") issued
by Transamerica Occidental Life Insurance Company ("Transamerica" or the
"Company") entitled to give voting instructions in connection with Transamerica
Occidental's Separate Account Fund C ("Old Account C") will be held at the
Company's home office at 1150 South Olive, Los Angeles, California 90015, on
October 30, 1996, at 9 a.m., Pacific Standard Time, in the conference room on
floor 27, for the purposes of considering and acting on the following matters,
as set forth in the accompanying Proxy Statement/Prospectus:
1. To approve or to disapprove an Agreement and Plan of Reorganization (the
"Agreement") and related transactions (together, the Agreement and related
transactions are the "Reorganization") whereby Old Account C, presently a
management investment company, would be converted into a unit investment
trust, Transamerica Occidental Separate Account C, by transferring all of Old
Account C's securities and other investments to the Growth Portfolio of
Transamerica Variable Insurance Fund, Inc. (the "Fund") in exchange for shares
of the Growth Portfolio of the Fund of equal value as described in the
accompanying Prospectus/Proxy Statement;
2. If the Reorganization is approved, to instruct the Company regarding the
election of directors of the Fund;
3. If the Reorganization is approved, to instruct the Company as to the approval
or disapproval of an investment advisory agreement between the Company and
the Fund;
4. If the Reorganization is approved, to instruct the Company as to the approval
or disapproval of an investment sub-advisory agreement between the Company
and Transamerica Investment Services, Inc.;
5.If the Reorganization is approved, to instruct the Company as to the
ratification
or the rejection of Ernst & Young LLP as the independent auditors of the
Fund; and
6. To consider and act upon such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
The Board of Managers of Old Account C has fixed the close of business on
September 25, 1996, as the record date for determination of Contract owners
entitled to notice of, and to vote at, the Meeting or any adjournment or
postponement thereof.
YOUR VOTE IS IMPORTANT. CONTRACT OWNERS WHO DO NOT EXPECT TO ATTEND THE MEETING
ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY, AND TO RETURN
IT IMMEDIATELY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT THEY MAY BE
REPRESENTED AT THE MEETING. IF YOU LATER DECIDE TO ATTEND THE MEETING IN PERSON,
YOU MAY VOTE AT THE MEETING EVEN THOUGH YOU PREVIOUSLY SUBMITTED A PROXY.
For the Board of Managers of Transamerica
Occidental's Separate Account Fund C
/s/ Thomas M. Adams
Thomas M. Adams
Secretary of Transamerica Occidental's
Separate Account Fund C
Los Angeles, California
October 9, 1996
<PAGE>
PART A
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
1150 South Olive
Los Angeles, California 90015-2211
PROXY STATEMENT/PROSPECTUS
October 9, 1996
This Prospectus/Proxy Statement is furnished by the Board of Managers of
Transamerica Occidental's Separate Account Fund C ("Old Account C") to owners of
Individual Equity Investment Fund Contracts (the "Contracts") issued by
Transamerica Occidental Life Insurance Company ("Transamerica" or the
"Company").
Contract owners are being asked:
(1) to approve an Agreement and Plan of Reorganization. The purpose is to
convert Old Account C from a management investment company into a unit
investment trust investing exclusively in shares of the Growth
Portfolio of Transamerica Variable Insurance Fund, Inc. (the "Fund").
If the Reorganization is approved, Contract owners are also asked to
instruct the Company regarding:
(2) the election of directors of the Fund;
(3) the approval or disapproval of an investment advisory agreement for the
Fund; (4) the approval or disapproval of an investment sub-advisory
agreement for the Fund; (5) the ratification or the rejection of the
selection of independent auditors for the Fund; and (6) to consider and act
upon any other matter that may properly come before the meeting.
Old Account C was established by Transamerica on February 26, 1969, as a
separate investment account to act as a funding medium for three
non-tax-qualified variable annuity contracts, which are called Individual Equity
Investment Fund Contracts -- Annual Deposit, Single Deposit Deferred, and Single
Deposit Immediate. As part of the Reorganization, the assets of Old Account C
will be transferred intact to the Growth Portfolio of the Fund (the "Growth
Portfolio" or the "Portfolio") in exchange for shares of the Growth Portfolio.
Old Account C would be redesignated as Transamerica Occidental Separate Account
C ("New Account C"). The value of a Contract will not change as a result of the
Reorganization, and Contract owners will have the same contract rights after the
Reorganization as before. Transamerica will bear the expenses of the
Reorganization, and fees and expenses charged to Contract owners will not
increase.
The enclosed proxy will be voted pursuant to a Contract owner's direction
at the meeting of Contract owners to be held at Transamerica's office at 1150
South Olive, Los Angeles, California 90015, on October 30, 1996, at 9 a.m.,
Pacific Standard Time, in the conference room on floor 27, and at any
adjournment or postponement thereof (the "Meeting"). A Contract owner may revoke
an executed and submitted proxy at any time before it is voted by filing with
the Secretary to the Board of Managers, prior to the Meeting, either a duly
executed instrument of revocation or a duly executed proxy bearing a later date.
In addition, the proxy may be revoked by a Contract owner personally attending
the Meeting and voting in person.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Reorganization, Old
Account C, the Fund and New Account C that a Contract owner should know before
approving or disapproving the Reorganization. A Statement of Additional
Information, dated October 9, 1996, containing more detailed information
relating to the matters covered in this Proxy Statement/Prospectus has been
filed with the SEC and is incorporated herein by reference. Copies of the
Statement of Additional Information may be obtained without charge by writing
Transamerica at the Transamerica Annuity Service Center, 101 North Tryon Street,
Suite 1720, Charlotte, North Carolina 28246 or calling 1-800-258-4260, ext.
5560.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROXY STATEMENT/PROSPECTUS
Table of Contents
Page
GENERAL VOTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 3
I. APPROVAL OR DISAPPROVAL OF THE REORGANIZATION. . . . . . . . . . . . 4
Summary of the Reorganization . . . . . . . . . . . . . . . . . . . 4
Reasons for the Reorganization. . . . . . . . . . . . . . . . . . . 4
Principal Risk Factors. . . . . . . . . . . . . . . . . . . . . . . 4
Comparative Fees and Expenses . . . . . . . . . . . . . . . . . . . 5
Comparative Fee Table . . . . . . . . . . . . . . . . . . . . . . . 5
Comparison of Old Account C and the Growth Portfolio. . . . . . . . 7
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shares of the Growth Portfolio. . . . . . . . . . . . . . . . . . . 11
Existing and Pro Forma Capitalization . . . . . . . . . . . . . . . 13
Transamerica Occidental Life Insurance Company. . . . . . . . . . . 13
Old Account C . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Recommendation of the Board of Managers . . . . . . . . . . . . . . 16
II. ELECTION OF THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 17
Board of Directors of the Fund. . . . . . . . . . . . . . . . . . . 17
Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
III. APPROVAL OR DISAPPROVAL OF INVESTMENT ADVISORY AGREEMENT FOR THE
GROWTH PORTFOLIO OF THE FUND. . . . . . . . . . . . . . . . . . . . 19
IV. APPROVAL OR DISAPPROVAL OF INVESTMENT SUB-ADVISORY AGREEMENT FOR
THE GROWTH PORTFOLIO OF THE FUND. . . . . . . . . . . . . . . . . . 21
V. RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT AUDITORS. 23
VI. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 24
Principal Holders of Shares of the Fund . . . . . . . . . . . . . . 24
Principal Holders of the Contracts. . . . . . . . . . . . . . . . . 24
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Public Information. . . . . . . . . . . . . . . . . . . . . . . . . 24
Interests of Named Experts and Counsel. . . . . . . . . . . . . . . 25
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
GENERAL VOTING INFORMATION
This Proxy Statement/Prospectus is furnished to Contract owners by the
Board of Managers of Old Account C, in connection with the solicitation of
voting instructions from such Contract owners for use at a Meeting of Contract
owners to be held on October 30, 1996. The Board has called the Meeting for
Contract owners to consider and to approve or disapprove a Reorganization by
which Old Account C, currently a management investment company, would be
restructured into New Account C, a unit investment trust investing exclusively
in shares of the Growth Portfolio of Transamerica Variable Insurance Fund, Inc.
(the "Fund"). If the Reorganization is approved, Contract owners would also vote
on the following matters necessary for the organization of the Fund: to elect
directors for the Fund; to approve or disapprove separate investment advisory
and investment sub-advisory agreements for the Fund; to ratify or reject the
selection of independent auditors for the Fund; and to consider and act upon any
other matter that may properly come before the Meeting.
The Board of Managers has fixed the close of business on September 25,
1996, as the record date for the determination of Contract owners entitled to
notice of and to vote at the Meeting. As of that date, there were 72,334 votes
entitled to be cast by Old Account C Contract owners. Except for Transamerica,
no person owns beneficially more than 5 percent of Old Account C's outstanding
units. No manager/nominee or executive officer of Old Account C beneficially
owns any Old Account C units.
The rules and regulations of Old Account C provide that the number of votes
that may be cast by a Contract owner before the Retirement Date (the date the
first annuity payment is made under a Contract) is equal to the Contract owner's
Accumulation Account Value divided by 100. The number of votes that may be cast
by a Contract owner on or after the Retirement Date is equal to the amount of
the reserve established to meet Variable Annuity obligations related to the
Contract divided by 100.
To be given effect, the enclosed proxy must be: 1) properly executed; 2)
returned to Transamerica by using the enclosed addressed, postage paid envelope
or by mailing to Transamerica Occidental Separate Account Fund C Proxy
Tabulator, Management Information Services Corp., P.O. Box 9122, Hingham,
Massachusetts 02043 or if by means other than U.S. mails to Transamerica Proxy
Tabulators, Management Information Service Corp., 61 Accord Park Drive, Norwell,
Massachusetts 02061; and 3) received by Management Information Services by 5
p.m. Eastern Standard Time, October 29, 1996. A properly executed and returned
proxy may be revoked at any time before it is voted by providing either written
notice of revocation to Transamerica, a duly executed proxy bearing a later
date, or a vote in person at the Meeting. If no choice as to the Reorganization
or any other agenda item is specified on a proxy returned to Transamerica,
Transamerica will consider its timely receipt of the proxy as an instruction to
vote in favor of the Reorganization or such other agenda item.
Approval of the Reorganization requires the affirmative vote of a majority
of the accumulation and annuity units represented in person or by proxy at the
Meeting if a quorum is present. A quorum is comprised of Contract owners
entitled to cast 33 percent of the accumulation and annuity units that may be
cast at the Meeting. If a quorum is not present, Contract owners entitled to
cast a majority of the accumulation and annuity units represented at the Meeting
may adjourn the Meeting for the purpose of further proxy solicitation, or for
any other purpose. Unless otherwise instructed, a proxy will be voted in favor
of any adjournment. At any subsequent reconvening of the Meeting, unless a proxy
is revoked it will be voted in the same manner as it would have been voted at
the original Meeting.
Although Transamerica has a majority interest in Old Account C (see
"Principal Holders of Shares of the Fund," below), Transamerica will not vote on
any matter presented at the meeting, except that Transamerica will vote those
accumulation and annuity units attributable to the Contracts as to which no
timely instructions are received in proportion to the voting instructions that
are received.
Transamerica bears the entire cost of this proxy solicitation, which is
made by mail and in some instances, also by telephone or other means by officers
or employees of Transamerica and/or its affiliates. The approximate date for
mailing of proxy materials to Contract owners is October 9, 1996.
I. APPROVAL OR DISAPPROVAL OF THE REORGANIZATION
Summary of the Reorganization
On June 26, 1995, the Board of Managers of Old Account C approved
resolutions authorizing the reorganization of Old Account C from a management
investment company into an unmanaged unit investment trust that will be
comprised of one subaccount investing exclusively in shares of the Growth
Portfolio of the Fund. The Fund is a newly created management investment company
of which the Growth Portfolio is the only investment portfolio. The Growth
Portfolio has the same investment objective as Old Account C, which is long-term
capital growth. Just like Old Account C, the Growth Portfolio generally will
invest primarily in stocks and other equity securities.
The Agreement, a copy of which is attached hereto as Exhibit A, provides
that the assets and related liabilities of Old Account C will be transferred
intact to the Growth Portfolio in exchange for shares of the Growth Portfolio of
equal value. The Growth Portfolio shares issued in connection with the
Reorganization will be recorded as assets of New Account C. After the
Reorganization, Contract owners' indirect interests in the Growth Portfolio will
be equal to their pre-Reorganization interests in Old Account C. In addition,
the Growth Portfolio will mirror the investment policies of Old Account C. If
approved by Contract owners following their approval of the Reorganization, the
Growth Portfolio also will have the same investment adviser, the same investment
sub-adviser, and the same Board of Directors (Managers) as Old Account C.
Transamerica will assume all costs and expenses associated with effecting the
Reorganization.
The Reorganization will not have any adverse economic impact on Contract
owners. The total charges and fees assessed, directly or indirectly, and the
annuity features under the Contracts will not be affected by the Reorganization.
The new structure will allow other types of variable insurance products to
invest in the Fund.
Reasons for the Reorganization
The purpose of the Reorganization is to enable the Fund to act as the
underlying investment medium for New Account C, as well as other separate
investment accounts of Transamerica and, in the future, other insurance
companies and certain qualified pension and retirement plans. Transamerica
believes that the utilization of a common underlying vehicle will enhance the
investment flexibility of Contract owners. It is expected that the
Reorganization will reduce costs through administrative efficiencies and
economies of scale. Also, existing Contract owners may benefit to the extent
that the common management of a larger asset base will enhance investment
flexibility and return, and increase the potential for additional investment
portfolios.
Principal Risk Factors
The principal risk factors involved in investing in New Account C and the
Growth Portfolio will be substantially similar to the principal risk factors
currently associated with investing in Old Account C. Those risk factors are
that the investments made by the Growth Portfolio's investment adviser may not
appreciate in value or will, in fact, lose value. Specifically, the principal
investment risk applicable to both Old Account C and the Growth Portfolio is
"market risk" which refers to the degree to which the price of a security will
react to changes in conditions in the securities markets, changes in the
company's situation, and changes in the overall level of interest rates. There
is also "financial risk" which refers to the ability of the issuer of a security
to pay principal and interest when due or to maintain or increase dividends; and
"current income volatility" which refers to the degree to which and the timing
by which changes in the overall level of interest rates or other underlying
economic variables or indices affect the current income from an investment.
Comparative Fees and Expenses
Currently, a maximum 6.50% sales expense charge and 2.50% administration
expense charge (plus state premium taxes ranging from 0% to 3.5%) are deducted
from each amount paid to the Company under the Contracts. In addition, two
charges are deducted from the average daily net assets of Old Account C: a 1.10%
mortality and expense risk charge and a 0.30% management fee. After the
Reorganization, the sales expense and administration expense (and any applicable
premium tax) charges will continue to be deducted from purchases under the
Contract; however, the 0.30% management fee will no longer be deducted from the
net assets of New Account C. Instead, Transamerica, as investment adviser for
the Growth Portfolio (if approved by Contract owners) will charge a management
fee of 0.75% of the Growth Portfolio's average daily net assets and the Growth
Portfolio will bear certain operating expenses that are not anticipated to
exceed 0.10%. Although the management fee is higher after the Reorganization, if
the sum of the annual expenses to be charged against the Contracts by New
Account C plus the Growth Portfolio's expenses is greater in amount than the
annual expenses that would have been charged by Old Account C had the
Reorganization not occurred, then, as to the Contracts outstanding as of the
closing date of the Reorganization, Transamerica will reduce the mortality and
expense risk charge to fully offset the effect of any and all expenses of a type
or in an amount that would not have been borne by Old Account C had the
Reorganization not occurred. It is anticipated that the mortality and expense
risk charge will be 0.55% after the Reorganization. Accordingly, there will be
no increase in total fees and expenses for existing Contract owners.
Comparative Fee Table
The following comparative fee table and examples illustrate the charges and
deductions currently applicable to Old Account C, the fees and expenses of the
Growth Portfolio, and the charges and deductions under the Contract applicable
to New Account C (including the fees and expenses of the Growth Portfolio)
restated as if the Reorganization has occurred. The tables and examples assume
the highest deductions possible under the Contracts whether or not such
deductions actually would be made from an individual Contract owner's account.
<PAGE>
Old Account C
(actual)
Growth Portfolio
(actual)
New Account C
Plus Growth
Portfolio
(pro forma)
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases:
6.50%
None
6.50%
Administration Expense Imposed on Purchases:
2.50%
None
2.50%
Maximum Total Contract Owner Transaction
Expenses:
9.00%
None
9.00%
Annual Expenses:
(as a percentage of average daily net assets)
Management Fee
0.30%
0.75%
0.75%
Mortality and Expense Risk Charge
1.10%
None
0.55%
Other Expenses
None
0.10%
0.10%
Total Annual Expenses
1.40%
0.85%
1.40%
The following Examples should not be considered a representation of past or
future expenses and charges. Actual expenses may be greater or less than those
shown. Similarly, the assumed 5% annual rate of return is not an estimate or a
guarantee of future investment performance.
A $1,000 investment would be subject to the total expenses shown below,
assuming 5% annual return on assets.
1 Year 3 Years 5 Years 10 Years
Old Account C $103 $130 $160 $243
New Account C $103 $130 $160 $243
Comparison of Old Account C and the Growth Portfolio
Investment Objectives, Policies, and Restrictions. The Growth Portfolio of
the Fund has been designed to duplicate the investment objective, policies, and
restrictions of Old Account C as closely as possible. Old Account C and the
Growth Portfolio of the Fund have an identical investment objective: long-term
capital growth. Old Account C and the Growth Portfolio each attempt to achieve
their investment objective primarily though investments in common stock;
however, both may also invest in debt securities and preferred stock having a
call on common stocks.
In the opinion of Transamerica and the Board of Managers of Old Account C,
the investment policies and restrictions of Old Account C are not materially
different in substance from the investment policies and restrictions of the
Growth Portfolio; however, there are differences between Old Account C and the
Growth Portfolio as to whether certain investment restrictions are deemed
fundamental. For a more complete description of the investment objective,
policies and restrictions of the Growth Portfolio and of which investment
policies are deemed fundamental, see the prospectus for the Growth Portfolio
which is attached as Exhibit C.
The investment policies and restrictions of Old Account C and the Growth
Portfolio of the Fund are compared below.
Old Account C
Growth Portfolio
Old Account C's investment objective is long-term capital growth, although this
objective may not be achieved. Common stock, listed and unlisted, is the basic
form of investment. Old Account C may also invest in debt securities and
preferred stock having a call on common stock by means of a conversion privilege
or attached warrants and warrants or other rights to purchase common stock.
Unless market conditions would indicate otherwise, Old Account C's portfolio
will be invested in such equity-type securities. However, when market conditions
warrant it, a portion of Old Account C's assets may be held in cash or debt
securities. The Growth Portfolio's investment objective is long-term capital
growth. Common stock, listed and unlisted, is the basic form of investment.
Although the Portfolio invests the majority of its assets in common stocks, the
Portfolio may also invest in debt securities and preferred stocks (both having a
call on common stocks by means of a conversion privilege or attached warrants)
and warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
No stated Policy.
The Portfolio may invest up to 10% of the Portfolio's assets in debt securities
having a call on common stocks that are rated below investment grade. Those
securities are rated Ba1 or lower by Moody's Investors Service, Inc. ("Moody's")
or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if unrated, deemed
to be of comparable quality by Investment Services. If a security that was
originally rated "investment grade" is downgraded by a ratings service, it may
or may not be sold. This depends on Investment Services' assessment of the
issuer's prospects. However, Investment Services will not purchase
below-investment-grade securities if that purchase would increase their
representation in the Portfolio to more than 10%.
No stated Policy.
The Portfolio may invest up to 10% of its net assets in the securities of
foreign issuers that are in the form of American Depository Receipts ("ADRs").
ADRs are registered stock of foreign companies that are typically issued by an
American bank or trust company evidencing ownership of the underlying
securities. ADRs are designed for use on the U.S. stock exchanges.
As to 75% of the value of its total assets, Old Account C will not invest more
than 5% of the value of its total assets in the securities of any one issuer,
except obligations of the United States Government and instrumen- talities
thereof. However, holdings may exceed the 5% limit if it results from investment
performance, and is not the result, wholly or partially, of purchase. With
respect to 75% of total assets, the Portfolio may not purchase securities of any
issuer if, as a result of the purchase, more than 5% of the Portfolio's total
assets would be invested in the securities of the issuer. This limitation does
not apply to securities issued or guaranteed by the United States government,
its agencies or instrumentalities.
Not more than 10% of the voting securities of any one issuer will be acquired.
With respect to 75% of total assets, the Portfolio may not purchase more than
10% of the voting securities of any one issuer
Investment will not be made in the securities of a company for the purpose of
exercising management or control in that company. The Portfolio may not invest
in companies for the purpose of exercising management or control in that
company.
Old Account C does not currently intend to make investments in the securities of
other investment companies. Old Account C does reserve the right to purchase
such securities, subject to the following limitations: Old Account C will not
purchase such securities if it would cause (1) more than 10% of the value of the
total assets of Old Account C to be invested in securities of registered
investment companies; or (2) Old Account C to own more than 3% of the total
outstanding voting stock of any one investment company; or (3) Old Account C to
own securities of any one investment company that have a total value greater
than 5% of the value of the total assets of Old Account C; or (4) together with
other investment companies advised by Transamerica, Old Account C to own more
than 10% of the outstanding voting stock of a closed-end investment company. The
Growth Portfolio does not currently intend to make investments in the securities
of other investment companies. The Growth Portfolio does reserve the right to
purchase such securities, provided the purchase of such securities does not
cause: (1) more than 10% of the value of the total assets of the Portfolio to be
invested in securities of registered investment companies; or (2) the Portfolio
to own more than 3% of the total outstanding voting stock of any one investment
company; or (3) the Portfolio to own securities of any one investment company
that have a total value greater than 5% of the value of the total assets of the
Portfolio; or (4) together with other investment companies advised by
Transamerica, the Growth Portfolio to own more than 10% of the outstanding
voting stock of a closed-end investment company.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the salability of which is
otherwise conditioned ("restricted securities"), as long as any such purchase or
acquisition will not immediately result in the value of all such restricted
securities exceeding 10% of the value of Old Account C's total assets. It is the
policy of the Board not to invest more than 10% of Old Account C's net assets in
restricted securities. Purchases or acquisitions may be made of securities which
are not readily marketable by reason of the fact that they are subject to the
registration requirements of the Securities Act of 1933 or the salability of
which is otherwise conditioned, including real estate and certain repurchase
agreements or time deposits maturing in more than seven days ("restricted
securities"), as long as any such purchase or acquisition will not immediately
result in the value of all such restricted securities exceeding 15% of the value
of the Portfolio's net assets.
Borrowings will not be made except as a temporary measure for extraordinary or
emergency purposes provided that such borrowings shall not exceed 5% of the
value of Old Account C's total assets. The Portfolio may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests and cash payments of dividends and distributions, provided
such borrowings do not exceed 5% of the value of the Portfolio's total assets.
Securities of other issuers will not be underwritten provided that this shall
not prevent the purchase of securities the sale of which may result in Old
Account C being deemed to be an "underwriter" for purposes of the Securities Act
of 1933. The Portfolio may not underwrite any issue of securities, except to the
extent that the sale of securities in accordance with the Portfolio's investment
objective, policies and limitations may be deemed to be an underwriting, and
except that the Portfolio may acquire securities under circumstances in which,
if the securities were sold, the Portfolio might be deemed to be an underwriter
for purposes of the Securities Act of 1933, as amended.
Investments will not be concentrated in any one industry nor will more than 25%
of the value of Old Account C's assets be invested in issuers all of which
conduct their principal business activities in the same general industry. The
Portfolio may not invest more than 25% of the value of its total assets in
securities issued by companies engaged in any one industry. This limitation does
not apply to investments in Government Securities.
The purchase and sale of real estate or interests in real estate is not intended
as a principal activity. However, the right is reserved to invest up to 10% of
the value of the assets of Old Account C in real properties, including property
acquired in satisfaction of obligations previously held or received in part
payment on the sale of other real property owned. The Portfolio reserves the
right to invest up to 10% of the value of its assets in real properties,
including property acquired in satisfaction of obligations previously held or
received in part payment on the sale of other real property owned. The purchase
and sale of real estate or interests in real estate is not intended to be a
principal activity of the Portfolio.
The purchase and sale of commodities or commodity contracts will not be engaged
in. The Portfolio may not purchase or sell commodities or commodities contracts.
Loans may be made by only through the acquisition of all or a portion of an
issue of bonds, debentures or other evidences of indebtedness of a type
customarily purchased for investment by institutional investors, whether
publicly or privately distributed. (It is not presently intended to invest more
than 10% of the value of Old Account C in privately distributed loans.
Furthermore, it is possible that the acquisition of an entire issue may cause
Old Account C to be deemed "underwriter" for purposes of the Securities Act of
1933.) The securities of Old Account C may also be loaned provided that any such
loan is collateralized with cash equal to or in excess of the market value of
such securities. (It is not presently intended to engage in the lending of
securities.) The Portfolio may not lend its assets or money to other persons,
except through: (a) the acquisition of all or a portion of an issue of bonds,
debentures or other evidence of indebtedness of a type customarily purchased for
investment by institutional investors, whether publicly or privately
distributed. (The Portfolio does not presently intend to invest more than 10% of
the value of the Portfolio in privately distributed loans. It is possible that
the acquisition of an entire issue may cause the Portfolio to be deemed an
"underwriter" fur purposes of the Securities Act of 1933.); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities.); and (c) entering into
repurchase agreements.
Old Account C does not intend to issue senior securities. The Portfolio may not
issue senior securities.
Old Account C does not intend to write put and call options. The Portfolio may
not write put and call options.
Purchase of securities on margin may not be made, but such short-term credits as
may be necessary for the clearance of purchases and sales of securities are
permissible. The Portfolio may not purchase securities on margin, except that
the Portfolio may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the deposit
or payment of initial or variation margin in connection with options on
securities will not be deemed to be a purchase of securities on margin by the
Portfolio.
Short sales may not be made and a short positions may not be maintained unless
at all times when a short position is open Old Account C owns at least an equal
amount of such securities or securities currently exchangeable, without payment
of any further consideration, for securities of the same issue as, and at least
equal in amount to, the securities sold short (generally called a "short sale
against the box") and unless not more than 10% of the value of Old Account C's
net assets is deposited or pledged as collateral for such sales at any one time.
The Portfolio may not make short sales of securities or maintain a short
position, unless at all times when the short position is open, the Portfolio
owns an equal amount of such securities or securities currently exchangeable,
without payment of any further consideration, for securities of the same issue
as, and at least equal in amount to, the securities sold short (generally called
a "short sale against the box") and unless not more than 10% of the value of the
Portfolio's net assets is deposited or pledged as collateral for such sales at
any one time.
Management. The Fund has the same management as Old Account C, the same
investment adviser and sub-adviser, and the same independent accountants.
Old Account C is managed by its Board of Managers. The affairs of Old
Account C are conducted in accordance with Rules and Regulations adopted by the
Board of Managers of Old Account C and the Board of Directors of Transamerica.
Transamerica, 1150 South Olive, Los Angeles, California 90015, serves as
the investment adviser to Old Account C, and develops and implements an
investment program subject to the supervision of the Board of Managers.
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to Old Account C. Investment Services has been in
existence since 1967 and has provided investment services to Old Account C and
other Transamerica Life Companies since 1980. These services include providing
recommendations on management of assets of the Fund, providing investment
research reports and information, determining those securities to be bought or
sold and placing orders for the purchase or sale of securities. Investment
decisions regarding the composition of Old Account C's portfolio and the nature
and timing of changes in the portfolio are subject to the control of the Board
of Managers. Investment Services' business address is 1150 South Olive, Los
Angeles, California 90015-2211. Both Transamerica and Investment Services are
registered with the SEC under the Investment Advisers Act of 1940.
The Growth Portfolio is managed by its Board of Directors, which is
comprised of the same persons as the Old Account C Board of Managers..
Transamerica also serves as investment adviser to the Growth Portfolio and
conducts the Portfolio's business and affairs. Transamerica also has engaged
Investment Services to act as the Growth Portfolio's investment sub-adviser to
provide the day-to-day portfolio management for the Growth Portfolio. The Board
of Directors is responsible for deciding matters of general policy and reviewing
the actions Transamerica and Investment Services, the custodian, the accounting
and administrative services providers and other service providers to the Growth
Portfolio. The officers of the Fund supervise the Growth Portfolio's daily
business operations.
Other Services. Transamerica Financial Resources, Inc. serves as the
principal underwriter for the Contracts. As part of the Reorganization,
Transamerica Securities Sales Corporation, the principal underwriter for the
Growth Portfolio, will replace Transamerica Financial Resources, Inc. as the
principal underwriter for the Contracts. Ernst & Young LLP is the independent
accountant for Old Account C and, subject to selection by the
Board of Directors and ratification by Contract owners, will also serve as the
independent accountant for the Fund.
Taxes. Transamerica believes, based on its review of existing federal
income tax laws and regulations, that the transfer of portfolio assets from Old
Account C to the Growth Portfolio in exchange for the issuance of shares of the
Growth Portfolio will be a tax-free event. Neither Old Account C, the Growth
Portfolio, nor New Account C will realize any gain or loss on the asset
transfers, and the Growth Portfolio will succeed to the same adjusted basis of
the portfolio assets as such assets had prior to the transfer. Transamerica has
received a private letter ruling from the Internal Revenue Service to confirm
the tax-free nature of the Reorganization. However, to the extent any tax
liability arises out of this transfer, such liability will be borne by
Transamerica.
The Agreement
The Agreement provides that on the closing date of the Reorganization (the
"Closing Date"), Transamerica will transfer all portfolio assets and related
liabilities of Old Account C to the Growth Portfolio of the Fund in return for
shares of the Growth Portfolio of equal value. Transamerica will record shares
issued by the Fund with respect to the Growth Portfolio as assets of New Account
C. The Old Account C assets include all cash (except for a minimal amount to
keep bank accounts open), all securities and other investments held or in
transit, all accounts receivable for sold investments, and all dividends and
interest receivable. The number of shares of the Fund to be issued in the
exchange shall be determined by dividing the value of the net assets of Old
Account C to be transferred, as of the close of trading on the first business
day preceding the Closing Date, by the per share value of the Growth Portfolio
shares. The shares of the Growth Portfolio, when issued, will be fully paid and
non-assessable and have no preemptive or conversion rights.
As of the Closing Date, Transamerica shall cause the shares of the Growth
Portfolio it receives pursuant to the Reorganization to be duly and validly
recorded and held on its records as assets of New Account C, such that the
Contract owners' interests in New Account C after the Closing Date will then be
exactly equal to their former interests in Old Account C. Transamerica shall
take all action necessary to ensure that such interests in New Account C,
immediately following the Closing Date are duly and validly recorded on the
Contract owners' individual account records.
Shares of the Growth Portfolio
General. The Fund currently consists of one investment portfolio, the
Growth Portfolio. The Board of Directors of the Fund may establish additional
portfolios without the consent of shareholders or Contract owners. The Board of
Directors also may decide at any time to discontinue any portfolio, subject to
compliance with any requirements for governmental approvals or exemptions or
approval by Contract owners.
The Fund will initially offer its shares solely to Old Account C as a
funding vehicle for the Contracts. The Fund does not offer its shares directly
to the general public. Transamerica owns more than 25% of the outstanding shares
of the Growth Portfolio which may result in Transamerica being deemed a
controlling person of the Growth Portfolio, as that term is defined int he 1940
Act. The Fund may, in the future, offer its shares to other registered and
unregistered insurance company separate accounts supporting other variable
annuity or variable life insurance contracts and to certain qualified pension
and retirement plans.
Voting. Each share of the Growth Portfolio outstanding is entitled to one
vote on all matters submitted to a vote of shareholders. The shares have
noncumulative voting rights. The voting procedures with respect to Old Account C
are set forth under "General Voting Information" above.
If the Reorganization is approved by Contract owners, Transamerica will
offer Contract owners the opportunity to instruct Transamerica as to how the
Growth Portfolio's shares allocable to their Contracts will be voted. The number
of shares of the Growth Portfolio held in New Account C deemed attributable to
each Contract owner for this purpose will be determined by dividing the total
value of the Contract's Accumulation Account Value (or, after the Retirement
Date, the amount of the reserve established to meet Variable Annuity obligations
related to the Contract) by the net asset value of one share of the Growth
Portfolio as of the record date. The number of votes will be rounded to the
nearest vote and each Contract owner will have at least one vote. Transamerica
will vote the shares of the Growth Portfolio held by New Account C that are
deemed attributable to the Contracts for which instructions are not provided in
proportion to instructions received from the Contract owners. Shares of the
Growth Portfolio held by New Account C that are not deemed attributable to
Contract owners will also be voted in the same proportions on each issue as the
votes received from Contract owners. Therefore, although voting instructions
will be reflected somewhat differently after the Reorganization than before,
Transamerica believes that this will not result in any diminution of Contract
owners' voting privileges.
Dividends, Distributions, and Taxes. Each issued and outstanding share of
the Growth Portfolio is entitled to participate equally in dividends and
distributions declared for the Portfolio's stock and, upon liquidation or
dissolution, in the Portfolio's net assets remaining after satisfaction of
outstanding liabilities.
The Growth Portfolio intends to qualify and to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In order to qualify for that treatment, the
Growth Portfolio must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income, consisting of net investment
income and net short-term capital gain.
To qualify for treatment as a regulated investment company, the Growth
Portfolio must also, among other things, derive its income from certain sources.
Specifically, in each taxable year, the Growth Portfolio must generally derive
at least 90% of its gross income from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in securities, or currencies. The Growth Portfolio must also generally
derive less than 30% of its gross income from the sale or other disposition of
any of the following which was held for less than three months: (1) stock or
securities, (2) options, futures, or forward contracts (other than options,
futures, or forward contracts on foreign currencies), or (3) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts) are not directly
related to the Growth Portfolio's principal business of investing in stock or
securities (or options and futures with respect to stock or securities). For
purposes of these tests, gross income generally is determined without regard to
losses from the sale or other disposition of stock or securities or other Growth
Portfolio assets.
To qualify for treatment as a regulated investment company, the Growth
Portfolio must also satisfy certain requirements with respect to the
diversification of its assets. The Growth Portfolio must have, at the close of
each quarter of the taxable year, at least 50% of the value of its total assets
represented by cash, cash items, United States Government securities, securities
of other regulated investment companies, and other securities which, in respect
of any one issuer, do not represent more than 5% of the value of the Growth
Portfolio's assets nor more than 10% of the voting securities of that issuer. In
addition, at those times not more than 25% of the value of the Growth
Portfolio's assets may be invested in securities (other than United States
Government securities or the securities of other regulated investment companies)
of any one issuer, or of two or more issuers which the Growth Portfolio controls
and which are engaged in the same or similar trades or businesses or related
trades or businesses.
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Growth Portfolio. These requirements generally are that no
more than 55% of the value of the Growth Portfolio's assets may be represented
by any one investment; no more than 70% by any two investments; no more than 80%
by any three investments; and no more than 90% by any four investments. For
these purposes, all securities of the same issuer are treated as a single
investment and each United States government agency or instrumentality is
treated as a separate issuer.
If the Growth Portfolio failed to qualify as a regulated investment
company, the Growth Portfolio might incur additional taxes. In addition, if the
Growth Portfolio failed to qualify as a regulated investment company, or if the
Growth Portfolio failed to comply with the diversification requirements of
Section 817(h) of the Code, Contract owners would be taxed on the investment
earnings under their Contracts and thereby lose the benefit of tax deferral.
Accordingly, compliance with the above rules is carefully monitored by the
Fund's sub-adviser and it is intended that the Growth Portfolio will comply with
these rules as they exist or as they may be modified from time to time.
Compliance with the tax requirements described above may result in a reduction
in the return under the Growth Portfolio, since, to comply with the above rules,
the investments utilized (and the time at which such investments are entered
into and closed out) may be different from that the sub-adviser might otherwise
believe to be desirable.
Existing and Pro Forma Capitalization
The following table shows the actual capitalization of Old Account C and
the Growth Portfolio as of December 31, 1995, as well as the pro forma
capitalization of New Account C, as adjusted to give effect to the
Reorganization:
Capitalization
Old Account C
Growth Portfolio
New Account C
Net Assets
$25,738,045
0
$25,738,045
Net Asset Value Per Unit or
Share
$18.786
0
$18.786
Units or Shares Outstanding
1,341
0
1,341
Transamerica Occidental Life Insurance Company
Transamerica is a stock life insurance company incorporated in the state of
California on June 30, 1906. Transamerica's home office is located at 1150 South
Olive, Los Angeles, California 90015-2211. Transamerica has been a wholly-owned
direct or indirect subsidiary of Transamerica Corporation, 600 Montgomery
Street, San Francisco, California 94111, since March 14, 1930. Transamerica
presently provides individual life insurance, especially interest-sensitive
products, variable and term life insurance, fixed and flexible premium annuity
contracts, and reinsurance. Subsidiaries of Transamerica include Transamerica
Assurance Company, Transamerica Life Insurance and Annuity Company, Transamerica
Life Insurance Company of Canada, Transamerica Occidental Life Insurance Company
of Illinois and a New York company, First Transamerica Life Insurance Company.
Old Account C
Old Account C was established under California law on February 26, 1969 as
a separate account by the Board of Directors of Transamerica to facilitate
investment of amounts paid to Transamerica under the Contracts. Old Account C's
assets are held for individuals currently and contingently entitled to benefits
under the Contracts. California law requires Old Account C's assets to be held
in Transamerica's name and Transamerica is not a trustee with respect thereto.
Income, gains and losses, whether or not realized, from assets allocated to Old
Account C are, in accordance with the Contracts, credited to or charged against
Old Account C without regard to other income, gains or losses of Transamerica.
Old Account C is not affected by the investment or use of other Transamerica
assets. Section 10506 of the California Insurance Law provides that the assets
of a separate account are not chargeable with liabilities incurred in any other
business operation of the insurance company (except to the extent assets in the
separate account exceed the reserves and the liabilities of the separate
account). Old Account C is registered as an open-end, diversified, management
investment company under the 1940 Act and meets the definition of a separate
account under the federal securities laws. Registration with the SEC does not
involve supervision or management of investment practices or policies of Old
Account C or Transamerica by the SEC. Old Account C has no subaccounts.
Obligations under the Contract are obligations of Transamerica. There are no
material legal proceeding pending to which Old Account C is a party; nor are
there any material legal proceedings involving Old Account C to which
Transamerica, Investment Services, or Transamerica Securities Sales Corporation,
the principal underwriter for the Contracts, are parties.
The Contracts
The following presents a brief description of the Contract's features.
Greater detail regarding the Contract is provided in the prospectus for Old
Account C which is attached to this Proxy Statement/Prospectus as Exhibit B and
is incorporated herein by reference.
General. The Contracts have been designed for retirement programs. Payments
made under the Contracts are invested in a portfolio that is comprised
principally of equity securities. Three types of Contracts have been offered
through Old Account C -- Annual Deposit, Single Deposit Deferred, and Single
Deposit Immediate. The Contracts are no longer being offered for sale but
additional payments may be made on certain outstanding Contracts.
The Annual Deposit Contract is a deferred variable annuity that provides
for payments to be made at least annually. The minimum payment is $10 and the
aggregate minimum annual payment must be $120 in any Contract year. Payments may
be increased on a Contract anniversary, but annual payments may not be increased
to more than three times the first year's payments without Transamerica's
consent.
The Single Deposit Deferred Contract provides a deferred variable annuity.
A minimum single payment of $1,000 must be made when the Contract is issued.
Additional payments of at least $20 may be made anytime within the first five
Contract years. Thereafter, Transamerica must give its consent to accept further
payments.
The Single Deposit Immediate Contract provides an immediate variable
annuity. The minimum single payment accepted under the Contract is $2,500. The
retirement date (the date the first annuity payment is made under a Contract)
specified by the Contract owner may not be changed.
Accumulation Unit Value. The Accumulation Unit Value of the Contract was
set at $1.00 on October 16, 1969. The Accumulation Unit Value is determined at
the end of a valuation period by multiplying the Accumulation Unit Value
determined at the end of the immediate preceding valuation period by the
Investment Performance Factor for the current valuation period and reducing the
result by the mortality and expense risk charges.
The market value of Old Account C's assets for each valuation period is
determined as follows: (1) each security's market value is determined by the
last closing price as reported on the Consolidated Tape (a daily report listing
the closing price quotations of securities); (2) securities that are not
reported on the Consolidated Tape but where market quotations are available are
valued at the most recent bid price; (3) value of the other assets and
securities where no quotations are readily available is determined in the manner
directed in good faith by the Board of Managers.
Old Account C's net value is calculated by reducing the market value of the
assets by liabilities at the end of a valuation period.
Annuity Payments. The Contracts provide for a series of monthly annuity
payments to begin on the retirement date. The Contract owner may select from
three variable payment options: a variable annuity with monthly payments during
the lifetime of the Contract owner; a variable annuity paid monthly to the
Contract owner or the person named to receive the annuity payments (the
"Annuitant") as long as either shall live; or a variable annuity paid monthly
during the lifetime of the Contract owner with a minimum guaranteed period of
60, 120 or 180 months. The amount of the annuity payments depends on the payment
option chosen, the age of the Annuitant, and the value of the Contract on the
retirement date. The minimum amount of the first annuity payments must be $20.
If the first monthly payment would be less than $20, Transamerica may make a
single payment equal to the total value of the Contract owner's account (the
"Accumulation Account Value").
Death Benefit. The Contracts provide a death benefit payable if the
Contract owner (or Annuitant) dies before the selected retirement date. For
Annual Deposit and Deferred Contracts, Transamerica will pay the beneficiary the
Accumulation Account Value as of the date Transamerica receives due proof of the
deceased's death and payment instructions. In lieu of the payment of such value
in one sum, the beneficiary may elect to have all or part of the Accumulation
Account Value applied under one of the forms of annuity payments described
above, or elect an optional method of payment subject to agreement by the
Company and compliance with applicable federal and state law. For Immediate
Contracts, Transamerica will pay to the beneficiary the Accumulation Account
Value based on the accumulation unit value determined on the valuation date
coinciding with or next following the date the Company receives proof of death.
If the death occurs on or after the retirement date, death benefits, if
any, payable to the beneficiary shall be provided under the annuity option or
elected optional payment method then in effect.
Surrender and Partial Withdrawals. Annual Deposit and Single Deposit
Deferred Contracts may be surrendered or partially withdrawn prior to a selected
retirement date for the Accumulated Account Value. That value will be
established at the end of the day on which the written request for withdrawal or
surrender is received, provided the New York Stock Exchange is open for trading
on that day. There is no surrender or withdrawal charge. A Contract must be
surrendered if a withdrawal reduces the Accumulated Account Value below $10 for
an Annual Deposit Contract or $20 for a Single Deposit Deferred Contract. There
are no surrender or withdrawal privileges for Single Immediate Contracts.
Charges and Deductions -- Sales Charge. Transamerica deducts a sales charge
from each payment made under the Contracts. The sales charge, which will
continue to be deducted after the Reorganization, is 6.5% of the first $15,000
of payments made under the Contract; 4.5% of the next $35,000 of payments made
under the Contract; 2.0% of the next $100,000 of payments made; and 0.0% (no
charge) for payments exceeding $150,000 under the Contract.
Administrative Charge. Transamerica deducts an administrative expense
charge from each payment made under the Contracts. This charge, which will
continue to be deducted after the Reorganization, is 2.5% of the first $15,000
of payments made under the Contract; 1.5% of the next $35,000 of payments made
under the Contract; 0.75% of the next $100,000 of payments made under the
Contract; and 0.0% (no charge) for payments exceeding $150,000 under the
Contract. This fee is guaranteed not to increase for the duration of the
Contract.
Mortality and Expense Risk Charge. Transamerica deducts a daily charge on
assets in Old Account C to compensate it for bearing certain mortality and
expense risks in connection with the Contracts. This charge is equal to an
effective annual rate of 1.10% of the value of the net assets in Old Account C.
The 1.10% charge consists of approximately 0.77% attributable to mortality risk,
and approximately 0.33% attributable to expense risk. Transamerica guarantees
that this charge will never exceed 1.10%. After the Reorganization, this charge
will be reduced to offset the amount by which the expenses of the Growth
Portfolio are higher than the expenses of Old Account C.
Taxes. Certain states impose a premium tax on annuity payments received by
insurance companies. Transamerica will deduct the aggregate premium taxes paid
on behalf of a particular Contract either from: (a) payments as they are
received; or (b) the Accumulated Account Value when a conversion is made to
provide annuity benefits. Premium taxes currently range from 0% to 3.5%. No
charges are currently made for federal, state, or local taxes other than premium
taxes.
Old Account C Expenses. A fee at an annual rate of 0.30% of the average
daily net assets of Old Account C is charged for Transamerica's investment
advisory services.
The Fund
The Fund is an open-end, diversified management investment company
incorporated in the state of Maryland on June 23, 1995, as the successor to Old
Account C. The Fund currently consists of one investment portfolio, the Growth
Portfolio. Additional investment portfolios may be created from time to time. An
investor in the Fund is entitled to a pro-rata share of all dividends and
distributions arising from the net income and capital gains on the investments
of the Growth Portfolio. Likewise, an investor shares pro-rata in any losses of
the Growth Portfolio. Additional information about the Fund is contained in the
Fund's prospectus which accompanies this Proxy Statement/Prospectus as Exhibit C
and is incorporated herein by reference.
Recommendation of the Board of Managers
The Board of Managers believes that the Reorganization is in the best
interests of Old Account C and that the interests of existing Contract owners
will not be diluted as a result of the Reorganization. The Board also believes
that the terms of the Agreement are reasonable and fair, and do not involve
overreaching on the part of any person concerned. The Board affirmatively
recommends that the Contract owners vote to approve and adopt the Agreement and
the Reorganization.
THE BOARD OF MANAGERS RECOMMENDS APPROVAL
OF THE REORGANIZATION
II. ELECTION OF THE BOARD OF DIRECTORS
Board of Directors of the Fund
It is proposed that the Board of Managers of Old Account C be elected as
the Board of Directors of the Fund. Accordingly, the following persons have been
nominated for election to the Board as the entire Board of Directors, to hold
office until his or her successor is duly elected and qualified, or until his or
her death, or until he or she shall resign or shall have been removed from the
Board: Donald E. Cantlay, Richard N. Latzer, DeWayne W. Moore, Gary U. Roll, and
Peter J. Sodini. These nominees are the current members of the Board of Managers
of Old Account C, and also the current members of the Board of Directors of the
Fund. All nominees have consented to being named in this Proxy
Statement/Prospectus and have agreed to serve if elected. If any nominee is
unable to serve as a Director at the time of the Meeting, or before any
adjournment thereof, another person or persons may be nominated for election as
a Director. The proxy holder named in the enclosed proxy intends to vote all
proxies (except those in which authority to vote on Directors is withheld) in
favor of the nominees to the Board of Directors named in the following table.
The Fund had not commenced operations as of the date of this Proxy
Statement/Prospectus. The Board of Directors has not established any audit,
nominating or compensation committees.
The members and nominees of the Board of Directors of the Fund are as
follows:
<TABLE>
<CAPTION>
Position
Name, Age and Address** with the FundPrincipal Occupation During the Past Five Years
<S> <C> <C>
Donald E. Cantlay (74) Board of Directors Director, Managing General Partner of Cee 'n' Tee Company;
Director of California Trucking Association and Western
Highway Institute; Director of FPA Capital Fund and FPA New
Income Fund.
Richard N. Latzer (59)* Board of Directors President, Chief Executive Officer and Director of Transamerica
Investment Services, Inc.; Senior Vice President and Chief
Investment Officer of Transamerica Corporation.
DeWayne W. Moore (82) Board of Directors Retired Senior Vice President, Chief Financial Officer and
Director of Guy F. Atkinson Company of California; Director of
FPA Capital Fund and FPA New Income Fund.
Gary U. Roll (55)* Chairman, Board of Director, Transamerica Investors, Inc.; Director,
Directors Executive Vice President and Chief Investment Officer of
Transamerica Investment Services, Inc.; Director and Chief
Investment Officer of Transamerica Occidental Life Insurance
Company.
Peter J. Sodini (55) Board of Directors Associate, Freeman Spogli & Co. (a private Investor); President
and Chief Executive Officer, Purity Supreme, Inc. (a
supermarket). President and Chief Executive Officer, Quality
Foods International (supermarkets); Director Pamida Holdings
Corp. (a retail merchandiser) and Buttrey Food and Drug Co. (a
supermarket).
* These members of the Board are interested persons as defined by Section 2(a)
(19) of the 1940 Act. ** The mailing address of each Board member is 1150 South
Olive, Los Angeles, California 90015.
The principal occupations listed above apply for the last five years. In
some instances, occupation listed above is the current position. Prior positions
with the same company or affiliate are not indicated.
The executive officers of the Fund are described in the table below. They
are the same as the executive officers of Old Account C.
Position
Name, Age and Address** with the FundPrincipal Occupation During the Past Five Years
Barbara A. Kelley (43) President President, Chief Operating Officer and Director of Transamerica
Financial Resources, Inc. and President and Director of
Transamerica Securities Sales Corporation, Transamerica
Advisors, Inc., Transamerica Product, Inc., Transamerica Product,
Inc. I, Transamerica Product, Inc. II, Transamerica Product, Inc.
IV, and Transamerica Leasing Ventures, Inc.
*Matt Coben (35) Vice President Vice President,
Broker/Dealer Channel of the Institutional
Marketing Division of Transamerica Life
Insurance and Annuity Company and prior to
1994, Vice President and National Sales
Manager of the Dreyfus Service Organization.
Sally S. Yamada (44) Treasurer and Vice President and Treasurer of Transamerica
Assistant Secretary Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Thomas M. Adams (61) Secretary Partner in the law firm of Lanning, Adams & Peterson.
Regina M. Fink (40) Assistant Secretary Counsel for Transamerica Occidental Life Insurance Company
and prior to 1994 Counsel and Vice President for Colonial
Management Associates, Inc.
</TABLE>
* The mailing address of this officer is 101 North Tryon Street, Suite 1070,
Charlotte, North Carolina 28246. ** The mailing address of each officer is 1150
South Olive, Los Angeles, California 90015.
Compensation
The following table shows the compensation expected to be paid by the Fund
and the Fund Complex during the current fiscal year ending December 31, 1996, to
all Directors of the Fund.
Name of Person
Aggregate
Compensation
From Fund1/
Total Pension or
Retirement Benefits Accrued
As Part of Fund Expenses2/
Compensation
From Registrant
and Fund Complex
Paid to Directors3/
Donald E. Cantlay
- -0-
- -0-
$6,000
Richard N. Latzer
- -0-
- -0-
- -0-
DeWayne W. Moore
- -0-
- -0-
$6,250
Gary U. Roll
- -0-
- -0-
- -0-
Peter J. Sodini
- -0-
- -0-
$4,750
Members of the Board, Officers or other individuals affiliated with the Fund,
who are also Officers, Directors or employees of Transamerica, are not entitled
to any compensation from the Fund for their services to the Fund. There is no
long-term compensation and no grants of stock options provided to any executive
officer.
None of the directors, executive officers or nominees for election as a
director, nor any of their immediate family has engaged in the last fiscal year
of Old Account C in any transaction to which Old Account C was a party in which
the amount involved exceeded $60,000. None of the aforementioned persons is
indebted to Old Account C in any amount.
There are no material pending legal proceedings to which any director,
nominee, or affiliated person (as defined in the 1940 Act) of such director or
nominee is an adverse party to Old Account C or any of its affiliated persons,
or has a material interest adverse to Old Account C or any of its affiliated
persons.
1/ Once the Fund commences operation, each director of the Fund will be
compensated $250 for each meeting they attend. (The Board plans to hold four
regularly scheduled board meetings each year; other meetings may be scheduled.)
This is the same compensation the directors received while members of the Board
of Managers of Old Account C.
2/ None of the members of the Board of Directors currently receives any pension
or retirement benefits due to services rendered to the Fund and thus will not
receive any benefits upon retirement from the Fund.
3/ During fiscal year 1996, each Board member was also a member of the Board of
Transamerica Occidental's Separate Account Fund B and of Transamerica Income
Shares, Inc., a closed-end management company advised by Transamerica Investment
Services, Inc. Mr. Roll is a director of Transamerica Investors, Inc. These
registered investment companies comprise the "Fund Complex."
THE BOARD OF MANAGERS RECOMMENDS A "VOTE FOR" EACH
NOMINEE TO THE BOARD OF DIRECTORS.
III. APPROVAL OR DISAPPROVAL OF INVESTMENT ADVISORY AGREEMENT FOR THE GROWTH
PORTFOLIO OF THE FUND
If the Reorganization is approved, Contract owners will be called upon to
instruct Transamerica as to the approval or the disapproval of an investment
advisory agreement between Transamerica and the Fund. Transamerica currently
serves as investment adviser to Old Account C. Transamerica, an investment
adviser registered with the SEC under the Investment Advisers Act of 1940, is
located at 1150 South Olive, Los Angeles, California 90015, is a wholly-owned
subsidiary of Transamerica Insurance Corporation of California, which is a
wholly-owned subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111. The proposed Investment Advisory Agreement was
approved by the Board of Directors of the Fund, including approval by a majority
of the Directors who are not interested persons of the Fund, on July 24, 1996.
The Investment Advisory Agreement will remain in effect from year to year
provided such continuance is specifically approved as to the Portfolio at least
annually by: (a) the Board of Directors or the vote of a majority of the votes
attributable to shares of the Portfolio; and (b) the vote of a majority of the
non-interested Directors, cast in person at a meeting called for the purpose of
voting on such approval. The Investment Advisory Agreement will terminate
automatically if assigned (as defined in the 1940 Act). The Investment Advisory
Agreement is also terminable at any time by the Board of Directors or by vote of
a majority of the votes attributable to outstanding voting securities of the
Portfolio (a) without penalty and (b) on 60 days' written notice to
Transamerica. The agreement is also terminable by Transamerica on 90 days'
written notice to the Fund.
A copy of the Investment Advisory Agreement is appended hereto as Exhibit D.
Under the terms of the Investment Advisory Agreement, Transamerica assumes
overall responsibility, subject to the supervision of the Fund's Board of
Directors, for administering all operations of the Fund and for monitoring and
evaluating the management of the Growth Portfolio's assets by Investment
Services on an ongoing basis. Transamerica provides or arranges for the
provision of the overall business management and administrative services
necessary for the Fund's operations and furnishes or procures any other services
and information necessary for the proper conduct of the Fund's business.
Transamerica also acts as liaison among, and supervisor of, the various service
providers to the Fund.
For its services to the Growth Portfolio of the Fund, Transamerica will
receive an advisory fee of 0.75% of the average daily net assets of the Growth
Portfolio. The fee is deducted daily from the assets of the Growth Portfolio.
Transamerica may waive some or all of its fee from time to time at its
discretion. This advisory fee will be higher than the advisory fee of 0.30% of
average daily net assets that has been charged against the assets of Old Account
C. For the year ended December 31, 1995, the actual advisory fee paid to
Transamerica by Old Account C was $67,198. Assuming the proposed Investment
Advisory Agreement had been in place during the year ended December 31, 1995,
the advisory fee for Old Account C would have been approximately $176,987. The
difference between the actual and the proposed fee for the year ended December
31, 1995 is approximately 250%. However, any increase in the advisory fee after
the Reorganization will be fully offset by a reduction in the mortality and
expense risk charge so that the total annual expenses of Contract owners will
not change. This offset will remain in effect for the duration of the Contracts.
The names of Directors and Executive Officers of Transamerica, their positions
and offices with Transamerica, and their other affiliations are as follows. The
address of Directors and Executive Officers is 1150 South Olive, Los Angeles,
California 90015-2211, unless otherwise indicated.
<TABLE>
<CAPTION>
Other business and business
address, profession, vocation or
employment of a substantial nature
engaged in for
Position and his own account during last two
Name and Principal Position and Offices Offices with fiscal years or as director, officer,
Business Addresswith TransamericaOld Account C employee, partner or trustee
<S> <C> <C> <C>
Robert Abeles Director, Executive Vice None None
President & Chief Financial
Officer
Thomas J. Cusack Director, President & None Senior Vice President of
Chief Executive Officer Transamerica Corporation
James W. Dederer Director, Executive None None
Vice President, General
Counsel and Corporate
Secretary
John A. Fibiger Director, Chairman None None
Richard H. Finn* Director None Executive Vice President of Transamerica
Corporation; Director, President and
Chief Executive Officer of Transamerica
Finance Group, Inc.
David E. Gooding Director, Executive None None
Vice President and
Chief Information Officer
Edgar H. Grubb* Director None Executive Vice President, and Chief
Financial Officer and Secretary of
Transamerica Corporation
Frank C. Herringer* Director None Director, Chairman and Chief Executive
Officer of Transamerica Corporation
Daniel E. Jund Director None President and Chief Executive Officer of
Transamerica Assurance Company
Richard N. Latzer* Director and Chief Director Director, Senior Vice President
Investment Officer Officer of Transamerica Corporation;
Director, President and Chief Executive
Officer of Transamerica Investment
Services, Inc.
Charles E. LeDoyen** Director and President None None
Structured Settlements
Division
Karen O. MacDonald Director, Senior Vice None None
President & Corporate
Actuary
Gary U. Roll Director and Chief Chairman, Executive Vice President
Investment Officer Board of and Chief Investment
Managers Officer of Transamerica Investment
Services, Inc.
James B. Roszak Director, President None None
Life Insurance Division
and Chief Marketing Officer
William E. Simms** Director and President, None None
Reinsurance Division
Nooruddin S. Veerjee Director and President, None Director, President of
Group Pension Division Transamerica Life Insurance and
Annuity Company
Robert A. Watson Director None Executive Vice President, Transamerica
Corporation
- --------------------
</TABLE>
* 600 Montgomery Street, San Francisco, California 94111
** 100 N. Tryon Street, Suite 2500, Charlotte, N.C. 28202-4004
The Board of Managers of Old Account C recommends that, following the
Reorganization, the Contract owners approve the Investment Advisory Agreement by
which Transamerica will serve as investment adviser to the Growth Portfolio.
The principal factors considered by the Board of Managers in making this
recommendation were as follows. Transamerica has been the investment advisor to
Old Account C since its inception and has provided high quality administrative
and insurance services. Moreover, the investment performance of the Account
under Transamerica's management has been outstanding.
THE BOARD OF MANAGERS RECOMMENDS A VOTE TO APPROVE THE INVESTMENT ADVISORY
AGREEMENT.
IV. APPROVAL OR DISAPPROVAL OF INVESTMENT SUB-ADVISORY AGREEMENT FOR THE
GROWTH PORTFOLIO OF THE FUND
If the Reorganization is approved, Contract owners will be called upon to
instruct Transamerica as to the approval or the disapproval of an investment
sub-advisory agreement between Transamerica and Transamerica Investment
Services, Inc. Investment Services is currently the sub-advisor for Old Account
C. Investment Services is a wholly-owned subsidiary of Transamerica Corporation,
and renders investment services to the Fund. Investment Services has been in
existence since 1967, and has provided investment services to investment
companies since 1968 and the Transamerica Life Companies since 1981. Investment
Services serves as the sub-advisor to Transamerica Occidental's Separate Account
Fund B, a management separate account with $40.6 million in net assets as of
December 31, 1995, that has an investment objective and advisory fee identical
to Old Account C. Since October 1995, Investment Services has served as
investment advisor to Transamerica Premier Equity Fund ("Equity Fund"), a mutual
fund with $11.0 million in net assets as of December 31, 1995, that seeks to
maximize long-term growth. For its services to the Equity Fund, Investment
Services receives an annual fee of .85% on the first $1 billion of assets. This
reduces to .82% on the next $1 billion, and finally .80% on assets over $2
billion.
Investment Services is located at 1150 South Olive, Los Angeles, California
90015-2211. Transamerica has agreed to pay Investment Services a monthly fee at
the annual rate of 0.30% of the first $50 million of the Fund's average daily
net assets, 0.25% of the next $150 million, and 0.20% of assets in excess of
$200 million. This fee is paid by Transamerica out of its advisory fee
(discussed above), not by the Fund. Prior to the reorganization, the assets held
in Old Account C were managed by Investment Services pursuant to an agreement
whereby Investment Services managed all the assets of Transamerica in exchange
for a flat fee. Investment Services was not paid a percentage of the net assets
it managed in Old Account C. Therefore, it is not possible to accurately provide
the dollar amount paid with respect to Old Account C or the percentage
difference between the current and the proposed subadvisory fee. Investment
Services will provide recommendations on the management of Fund assets, provide
investment research reports and information, supervise and manage the
investments of the Growth Portfolio, and direct the purchase and sale of
Portfolio investments. Investment decisions regarding the composition of the
Growth Portfolio and the nature and timing of changes in the Portfolio are
subject to the control of the Board of Directors of the Fund.
The Investment Sub-Advisory Agreement, a copy of which is attached as Exhibit
E, was approved for the Growth Portfolio by the Board of Directors, including a
majority of the Directors who are not parties to the investment sub-advisory
agreement or "interested persons" (as such term is defined in the 1940 Act) of
any party thereto (the "non-interested Directors"), on July 24, 1996. The
Investment Sub-Advisory Agreement will remain in effect from year to year
provided such continuance is specifically approved as to the Portfolio at least
annually by: (a) the Board of Directors or the vote of a majority of the votes
attributable to shares of the Portfolio; and (b) the vote of a majority of the
non-interested Directors, cast in person at a meeting called for the purpose of
voting on such approval. The Investment Sub-Advisory Agreement will terminate
automatically if assigned (as defined in the 1940 Act). The Investment
Sub-Advisory Agreement is also terminable at any time by the Board of Directors
or by vote of a majority of the votes attributable to outstanding voting
securities of the Portfolio (a) without penalty and (b) on 60 days' written
notice to Investment Services. The agreement is also terminable by Transamerica
or Investment Services on 90 days' written notice to the Fund.
The names and principal occupations of the executive officers and directors of
Investment Services are provided below. The address of each director and
executive officer is 1150 South Olive, Los Angeles, California 90015-2211,
unless otherwise indicated.
Directors
Thomas J. Cusack Frank C. Herringer
Richard H. Finn Richard N. Latzer
Edgar H. Grubb Gary U. Rolle'
Officers
President and Chief Executive Officer Richard N. Latzer*
Executive Vice President and Chief Investment Officer Gary U. Rolle'
Senior Vice President Susan A. Silbert
Vice President, Chief Financial Officer and Secretary J. Richard Atwood
Vice Presidents Glen E. Bickerstaff
John M. Casparian
Heather E. Creeden
Sharon K. Kilmer
Michael F. Luongo
Thomas D. Lyon
Heidi W. Robertson
Jeffrey Van Harte*
Assistant Vice Presidents Stephen J. Ahearn
Bruce C. Edwards
James J. Flick
William L. Griffin
Kevin J. Hickam
Matthew W. Kuhns
Timothy A. Monte
Thomas J. Ray
Philip W. Treick*
Reza Vahabzadeh
*Located at:
600 Montgomery Street
San Francisco, CA 94111
(415) 983-4358
The Board of Managers of Old Account C
recommends that the Contract owners approve the Investment
Sub-Advisory Agreement by which Investment Services will serve as investment
sub-adviser to the Growth Portfolio. The Board of Managers makes its
recommendation that Contract owners approve the Investment Sub-Advisory
Agreement because the agreement is substantially identical to the current
agreement (except for the fee structure) for Old Account C and the investment
objective and policies of the Growth Portfolio are substantially identical to
investment objective and policies of Old Account C (and New Account C) following
the Reorganization.
In addition, the Board of Managers considered that Investment Services has
been the sub-advisor for Old Account C since 1981, and in managing the portfolio
it has provided Contract owners with excellent investment performance.
THE BOARD OF MANAGERS RECOMMENDS A VOTE TO APPROVE THE INVESTMENT SUB-ADVISORY
AGREEMENT.
V. RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT AUDITORS
If the Reorganization is approved, Contract owners will be called upon to
instruct the Company as to the ratification or the rejection of the selection of
Ernst & Young LLP as the independent auditors of the Fund. Ernst & Young LLP
currently serves as independent auditors for Old Account C.
On July 24, 1996, the Board of Directors of the Fund, including a majority of
Directors who are not "interested persons" of the Fund, unanimously selected
Ernst & Young LLP as independent auditors for the Fund. The services performed
by Ernst & Young LLP are all considered to be audit services and include:
examination of annual financial statements; review and consultation connected
with filings of annual reports to Contract owners and with the SEC; and
consultation on financial accounting and reporting matters. The selection of
Ernst & Young LLP as the independent auditors for the Fund constituted approval
by the Board of Directors of each of the foregoing audit services, and the Board
of Directors believes that the services have no effect on audit independence.
Ernst & Young LLP also serves as the independent auditor for Transamerica.
Ernst & Young LLP has no direct or indirect financial interests in either Old
Account C, the Fund, or Transamerica, nor any connection with Old Account C, the
Fund or Transamerica in the capacity of underwriter, voting manager, director,
officer or employee. A representative of Ernst & Young LLP will attend the
Meeting, will be given an opportunity to make a statement if he or she desires
to do so, and will be available to answer appropriate questions.
THE BOARD OF MANAGERS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FUND.
VI. OTHER INFORMATION
Principal Holders of Shares of the Fund
The Board of Directors of the Fund, including nominees at the Meeting, owns as
a group less than one percent of the outstanding shares of the Fund.
As of December 31, 1995, approximately 74% of the assets in Old Account C were
owned by Transamerica. It is anticipated that Transamerica will own
approximately the same percentage of the Fund's shares.
Upon consummation of the Reorganization, no Contract owner will own five
percent or more of the outstanding shares of the Fund.
Principal Holders of the Contracts
There are no Contract owners holding five percent or more of the outstanding
units of Old Account C. The Board of Managers of Old Account C, including
nominees at the Meeting, owns as a group less than one percent of the
outstanding units of Old Account C.
Legal Proceedings
There are no material legal proceedings pending to which Transamerica, Old
Account C, or the Fund are a party, or to which their property is subject, which
depart from the ordinary routine litigation incident to the kinds of business
conducted by them.
Legal Opinions
Legal matters relating to federal securities laws and federal income tax laws
applicable to the Contracts have been passed upon by James W. Dederer, Executive
Vice President, General Counsel and Corporate Secretary to Transamerica
Occidental Life Insurance Company.
Public Information
Public information filed by Old Account C or the Fund can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such materials can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.
Interests of Named Experts and Counsel
No expert named herein or any counsel was employed on a contingent basis, or
did or will receive in connection herewith any substantial interest, direct or
indirect, in Old Account C or the Fund.
Other Matters
The Board of Managers of Old Account C and the Board of Directors of the Fund
do not know of any other matter that may properly be brought, and which is
likely to be brought, before the Meeting. However, should other matters be
properly brought before the Meeting, the persons named on the enclosed proxy or
their substitutes will vote in accordance with their best judgment on such
matters.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY.YOUR VOTE IS IMPORTANT.IF YOU WISH TO ATTEND
THE MEETING AND VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY.
By Order of the Board of Managers
<PAGE>
Exhibit A
Agreement and Plan of Reorganization
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered into as
of the _____ day of _________, 199_, by and among Transamerica Occidental Life
Insurance Company ("Transamerica"), a stock life insurance company organized and
existing under the laws of the State of California, Transamerica Occidental's
Separate Account Fund C ("Separate Account C"), a managed separate account
established and existing under the insurance laws of the State of California,
and Transamerica Variable Insurance Fund, Inc. (the "Fund"), a corporation
organized and existing under the laws of the state of Maryland, WITNESSETH, that
WHEREAS, Separate Account C is registered with the Securities and
Exchange Commission (the "Commission") as an open-end, diversified management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, Separate Account C is managed by a Board of Managers and has an
investment objective of long-term capital growth; and
WHEREAS, Separate Account C currently supports interests under three
types of variable annuity contracts -- annual deposit, single deposit deferred
and single deposit immediate (the "Contracts"); and
WHEREAS, the Contracts were registered under the 1933 Act and that
registration remains in effect and premiums are accepted under some contracts,
although new sales of the Contracts have been terminated; and
WHEREAS, Transamerica serves as investment adviser to Separate Account C
and Transamerica Investment Services, Inc. serves as sub-adviser to Separate
Account C; and
WHEREAS, the Fund is in registration with the Commission as an open-end,
diversified management investment company of the series type (as defined in Rule
18f-2 under the 1940 Act); and
WHEREAS, the Board of Managers of Separate Account C has approved the
reorganization of Separate Account C into a unmanaged separate account ("UIT
Account C") which shall be registered with the Commission under the 1940 Act as
a unit investment trust (the "Reorganization"); and
WHEREAS, as part of the Reorganization, the assets of Separate Account C
will be transferred intact to the newly-created Growth Portfolio of the Fund in
exchange for shares of the Growth Portfolio of the Fund that will be held by UIT
Account C; and
WHEREAS, following the Reorganization, UIT Account C will be a passive
investment vehicle with no Board of Managers, no investment adviser and no
active portfolio of investments, but will invest exclusively in shares of the
Growth Portfolio of the Fund; and
WHEREAS, following the Reorganization, the Growth Portfolio of the Fund
will have the same investment policies and objectives, the same Board of
Directors, and the same investment adviser and sub-adviser as Separate Account
C; and
WHEREAS, the Growth Portfolio of the Fund (and other future Portfolios of
the Fund) may in the future act as an investment vehicle for other separate
accounts supporting other interests in variable annuity and variable life
contracts issued by Transamerica, its affiliates and other insurance companies;
and
WHEREAS, the Board of Managers of Separate Account C has considered and
approved the actions contemplated by this Agreement; and
WHEREAS, the Boards of Directors of Transamerica and of the Fund have
each considered and approved the actions contemplated by this Agreement; and
WHEREAS, this Agreement is conditioned upon approval of the
Reorganization described herein by vote of a majority of the outstanding voting
securities of Separate Account C, as defined in the 1940 Act and rules
thereunder, at a meeting of the owners of the Contracts (the "Contract Owners")
called for that purpose, or any adjournments thereof;
NOW THEREFORE, in consideration of the mutual promises made herein, the
parties hereto agree as follows:
ARTICLE I
CLOSING DATE
SECTION 1.01. The Reorganization contemplated by this Agreement shall be
effective on such date as may be mutually agreed upon by all parties to this
Agreement (the "Closing Date"). The time on the Closing Date as of which the
Reorganization is consummated is referred to hereinafter as the "Effective
Time."
SECTION 1.02. The parties agree to use their best efforts to obtain all
regulatory and Contract Owner approvals and perform all other acts necessary or
desirable to complete the Reorganization as of the Closing Date.
ARTICLE II
REORGANIZATION TRANSACTIONS
SECTION 2.01. As of the Effective Time, Transamerica, on behalf of
Separate Account C, will sell, assign, and transfer all cash (except for a
minimal amount needed to keep bank accounts open), all securities and other
investments held or in transit, all accounts receivable for sold investments,
and all dividends and interest receivable (collectively, "portfolio assets") of
Separate Account C to the Growth Portfolio of the Fund (the "Growth Portfolio")
to be held as the property of the Growth Portfolio.
SECTION 2.02. In exchange for the portfolio assets of Separate Account C,
the Fund will issue to Transamerica for allocation to UIT Account C, shares of
the Fund's Growth Portfolio and the Growth Portfolio will assume any unsatisfied
liability incurred by Separate Account C before the Effective Time to pay for
securities or other investments purchased and to pay accrued and unpaid
investment advisory fees. The number of shares of the Growth Portfolio to be
issued in the exchange shall be determined by dividing the value of the net
assets of Separate Account C to be transferred, as of the close of trading on
the first business day preceding the Closing Date, by the initial per share
value assigned to the shares of the Growth Portfolio.
SECTION 2.03. As of the Effective Time, Transamerica shall cause the
shares of the Growth
Portfolio it receives pursuant to Section 2.02 above to be duly and validly
recorded and held on its records as assets of UIT Account C, such that the
Contract Owners' interests in UIT Account C after the Closing Date will then be
equivalent to their former interests in Separate Account C. Transamerica shall
take all action necessary to ensure that such interests in UIT Account C,
immediately following the Effective Time, are duly and validly recorded on the
Contract Owners' individual account records.
SECTION 2.04. The shares of the Growth Portfolio to be issued hereunder
shall be issued in open account form by book entry without the issuance of
certificates. Each such share that is issued pursuant to Section 2.02 above will
be issued for a consideration equal to the initial value of shares of the Growth
Portfolio.
SECTION 2.05. If, at any time after the Closing Date, UIT Account C, the
Fund, or Transamerica shall determine that any further conveyance, assignment,
documentation, or action is necessary or desirable to complete the
Reorganization contemplated by this Agreement or to confirm full title to the
assets transferred, the appropriate party or parties shall execute and deliver
all such instruments and take all such actions.
SECTION 2.06. Following the Closing Date, Transamerica shall cease
charging Separate Account C for investment advisory services. Subject to the
approvals required in paragraphs 3.02(h)(2) and 3.02(i)(2), investment advisory
expenses in excess of the investment advisory expense currently charged against
Separate Account C may be charged against the Fund. However, if the total
combined annual expenses to be charged against the Fund and UIT Separate C are
greater in amount than the annual expenses that would have been charged against
Separate Account C had the Reorganization not occurred, such excess expenses
will be waived or reimbursed by Transamerica, with respect to Contracts issued
prior to the Effective Time. Such waiver or reimbursement shall not apply to
federal income tax if the Fund fails to qualify as a "regulated investment
company" under the applicable provisions of the Internal Revenue Code, as
amended from time to time, or to any charge for Transamerica's federal income
taxes attributable to the Contracts, provided Transamerica has reserved the
right to charge such taxes against Separate Account C.
ARTICLE III
WARRANTIES AND CONDITIONS
SECTION 3.01. Separate Account C, Transamerica, and the Fund, as
appropriate, make the
following representations and warranties, which shall survive the Closing Date
and bind their respective successors and assigns (e.g., UIT Account C):
(a) There are no suits, actions, or proceedings pending or threatened
against any party to this Agreement which, to its knowledge, if adversely
determined, would materially and adversely affect its financial condition, the
conduct of its business, or its ability to carry out its obligations hereunder;
(b) There are no investigations or administrative proceedings by the
Commission or by any
insurance or securities regulatory body of any state or territory or the
District of Columbia pending against any party to this Agreement which, to its
knowledge, would lead to any suit, action, or proceeding that would materially
and adversely affect its financial condition, the conduct of its business, or
its ability to carry out its obligations hereunder;
(c) Should any party to this Agreement become aware, prior to the
Effective Time, of any suit, action, or proceeding, of the types described in
paragraphs (a) or (b) above, instituted or commenced against it, such party
shall immediately notify and advise all other parties to this Agreement;
(d) Immediately prior to the Effective Time, Transamerica shall have
valid and unencumbered title to the portfolio assets of Separate Account C,
except with respect to those assets for which payment has not yet been made;
(e) Each party shall make available all information concerning itself
which may be required in any application, registration statement, or other
filing with a governmental body to be made by the Fund, Transamerica, or
Separate Account C, or any or all of them, in connection with any of the
transactions contemplated by this Agreement and shall join in all such
applications or filings, subject to reasonable approval by its counsel. Each
party represents and warrants that all of such information so furnished shall be
correct in all material respects and that it shall not omit any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and
(f) Other than with respect to contracts entered into in connection with
the portfolio management of Separate Account C which shall terminate on or prior
to the Closing Date, no party is currently engaged, and the execution, delivery
and performance of this Agreement by each party will not result, in a material
violation of any such party's charter, by-laws, or any material agreement,
indenture, instrument, contract, lease or other undertaking to which such party
is bound, and to such party's knowledge, the execution, delivery and performance
of this Agreement will not result in the acceleration of any obligation, or the
imposition of any penalty, under any material agreement, indenture, instrument,
contract, lease, judgment or decree to which any such party may be a party or to
which it is bound.
SECTION 3.02. The obligations of the parties hereunder shall be subject
to satisfaction of each of the following conditions:
(a) The representations contained herein shall be true as of and at the
Effective Time with the same effect as though made at such time, and such
parties shall have performed all obligations required by this Agreement to be
performed by each of them prior to such time;
(b) The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Reorganization contemplated hereby;
(c) The appropriate parties shall have received orders from the
Commission providing such exemptions and approvals as they and their counsel
reasonably deem necessary, including exemptions from Sections 17(a), 17(d),
26(a)(2)(C), and 27(c)(2) of the 1940 Act and Rule 17d-1 thereunder, and shall
have made all necessary filings, if any, with, and received all necessary
approvals from, state securities or insurance authorities;
(d) Separate Account C and the Fund shall have filed with the Commission
a registration statement on Form N-14 under the Securities Act of 1933, as
amended, and such amendments thereto as may be necessary or desirable for the
registration of the shares issued by the Growth Portfolio of the Fund to UIT
Account C in exchange for Separate Account C's investment portfolio and for the
registration of the separate account interests in UIT Account C to Contract
Owners in exchange for the outstanding securities of Separate Account C held by
the Contract Owners, thereby effecting the purposes of the Reorganization;
(e) The Fund shall have filed a notification of registration on Form N-8A
under the 1940 Act, a registration statement on Form N-1A under the 1933 Act and
the 1940 Act, and such amendments thereto as may be necessary or desirable to
effect the purposes of the Reorganization;
(f) Separate Account C shall have filed on Form N-4 a post-effective
amendment to its registration statement under the 1933 Act and the 1940 Act, and
such amendments thereto as may be necessary or desirable to effect the purposes
of the Reorganization;
(g) The appropriate parties shall have taken all actions necessary for
the filings required by paragraphs 3.02(d) through (f) to become effective, and
no reason shall be known by the parties which would prevent such filings from
becoming effective in a timely manner;
(h) At a meeting of the Contract Owners called for such purpose (or any
adjournments thereof), a majority of the outstanding voting securities (as
defined in the 1940 Act and the rules thereunder) of Separate Account C shall
have voted in favor of approving this Agreement and the Reorganization
contemplated hereby, and shall also have voted to direct Transamerica to vote
to:
(1)elect a Board of Directors of the Fund;
(2)approve the investment advisory agreement between the Fund and
Transamerica; and
(3)approve the investment sub-advisory agreement between the Fund
and Transamerica Investment Services, Inc.;
(i)The Board of Directors of the Fund shall have taken the following
action at a meeting duly called for such purposes:
(1)approve this Agreement and adopted it as a valid obligation of
the Fund and legally binding upon it;
(2)approve the investment advisory agreement between the Fund and
Transamerica;
(3)approve the investment sub-advisory agreement between the Fund
and Transamerica Investment Services, Inc.;
(4)approve investment objectives, policies and restrictions for the
Growth Portfolio of the Fund that are substantially identical to the investment
objectives, policies and restrictions of Separate Account C as in effect
immediately prior to the Reorganization (which may include changes approved at
the Contract Owner's meetings referred to above); and
(5)Authorize the issuance by the Fund on the Closing Date of shares
of the Growth
Portfolio of the Fund at their initial net asset value per share in exchange for
the portfolio assets of Separate Account C as contemplated by this Agreement;
(j)Transamerica and Separate Account C shall have received an opinion of
counsel to the Fund (who may be the same as counsel to Transamerica and Separate
Account C) in form and substance reasonably satisfactory to Transamerica and
Separate Account C to the effect that, as of the Closing Date:
(1)the Fund has been duly organized, is existing in good standing,
and is authorized to issue its shares for the purposes contemplated by this
Agreement and is duly registered as an investment company under the 1940 Act;
(2)the shares of the Growth Portfolio of the Fund to be issued
pursuant to the terms of this Agreement have been duly authorized and, when
issued and delivered as provided herein, will be validly issued, fully paid, and
non-assessable;
(3)all corporate and other proceedings required to be taken by or on
the part of the Fund to authorize and carry out this Agreement and effect the
Reorganization have been duly and properly taken; and
(4)this Agreement is a valid obligation of the Fund and legally
binding upon it in accordance with its terms;
(k) The Fund and Separate Account C shall have received an opinion from
counsel to Transamerica (who may be the same as counsel to the Fund and Separate
Account C) in form and substance reasonably satisfactory to the Fund and
Separate Account C to the effect that, as of the Closing Date:
(1)Transamerica and Separate Account C are validly organized and in
good standing under
the laws of the State of California and are fully empowered and qualified to
carry out their business in all jurisdictions where they do so, including to
enter into this Agreement and effect the transactions contemplated hereby;
(2)All corporate and other proceedings necessary and required to be
taken by or on the part of Transamerica and Separate Account C to authorize and
carry out this Agreement and to effect the Reorganization have been duly and
properly taken; and
(3)this Agreement is a valid obligation of Transamerica and Separate
Account C and legally binding upon them in accordance with its terms;
(l) Each party shall have furnished, as reasonably requested by any other
party, other legal opinions, officers' certificates, incumbency certificates,
certified copies of board and committee resolutions, good standing certificates,
and other closing documentation as may be appropriate for a transaction of this
type.
ARTICLE IV
COSTS
SECTION 4.01. Transamerica shall bear all expenses in connection with
effecting the
Reorganization contemplated by this Agreement including, without limitation,
preparation and filing of registration statements, applications, and amendments
thereto on behalf of any and all parties hereto; and all legal, accounting, and
data processing services necessary to effect the Reorganization.
ARTICLE V
TERMINATION
SECTION 5.01. This Agreement may be terminated and the Reorganization
abandoned at any time prior to the Effective Time, notwithstanding approval by
the Contract Owners:
(a) by mutual consent of the parties hereto;
(b) by any of the parties if any condition set forth in Section 3.02 has
not been fulfilled by the
other parties; or
(c) by any of the parties if the Reorganization does not occur on or
before ________________, 199_ and no subsequent date can be mutually agreed
upon.
SECTION 5.02. At any time prior to the Effective Time, any of the terms
or conditions of this Agreement may be waived by the party or parties entitled
to the benefit thereof if such waiver will not have a material adverse effect on
the interests of Contract Owners.
<PAGE>
ARTICLE VI
GENERAL
SECTION 6.01. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
IN WITNESS WHEREOF, as of the day and year first above written, each of
the parties has caused this Agreement to be executed on its behalf.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Attest:
__________________________ By:__________________________________
Secretary
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
Attest:
__________________________ By:__________________________________
Secretary
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Attest:
__________________________ By:__________________________________
Secretary
<PAGE>
Exhibit B
Transamerica Occidental's Separate Account Fund C Prospectus
<PAGE>
Transamerica Occidental's Separate Account Fund C
Individual Equity Investment Fund Contracts
For Non-Tax Qualified Individual Retirement Plans
(LOGO)
1150 South Olive Street, Los Angeles, California 90015-2211 (213) 742-3065
- ------------------------------------------------------------------
Transamerica Occidental's Separate Account Fund C (the "Fund") offers three
types of variable annuity contracts, which are called Individual Equity
Investment Fund Contracts--Annual Deposit, Single Deposit Deferred and Single
Deposit Immediate ("Contract"). These Contracts are for non-tax-qualified
investments only.
The investment objective of the Fund is long-term capital growth. The Fund
pursues its investment objective by investing primarily in common stocks. Any
income and realized capital gains will be reinvested. There are no assurances
that the investment objective will be met. The Contract Owner bears all of the
investment risk.
This Prospectus sets forth information about the Fund and Contracts, which a
prospective investor ought to know before investing.
This Prospectus should be kept for future reference.
A Statement of Additional Information, which is incorporated herein by
reference, has been filed with the Securities and Exchange Commission (the
"Commission"). The Statement of Additional Information may be obtained, without
charge, by contacting Transamerica Occidental Life Insurance Company (the
"Company") at 1150 South Olive Street, Los Angeles, California 90015-2211 or by
calling (213) 742-3065.
The table of contents for the Statement of Additional Information is on page
20 of this Prospectus. The date of the Statement of Additional Information is
the same date as this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1996
THE CONTRACTS ARE NOT DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, NOR
ARE THE CONTRACTS FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THE
CONTRACTS INVOLVE INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
(LOGO)
<TABLE>
<CAPTION>
Page
Page
<S> <C> <C> <C> <C>
Terms Used in this Prospectus . . . . . 3 Changes to Variable Annuity Contract . . 13
Synopsis of Prospectus. . . 5 Inquiries . . . . . . . 13
Fee Table . . . . . . . . . 6 Annuity Period . . . . . 13
Per Accumulation Unit Income and Capital Death Benefits . . . . . . . . . . . . . 14
Changes . . . . . . . . . 8 Before Retirement . . . 14
Transamerica Occidental and The Fund. . 9 After Retirement . . . . . . . . . . . . 14
Transamerica Occidental Life Insurance. . . . . . . . . . . . Contract Values . . 15
Company . . . . . . . . . 9 Accumulation Unit Value. 15
The Fund. . . . . . . . . 9 Underwriter . . . . . . 16
Investment Objectives and Policies. . 9 Surrender of a Contract. . . . . . . . . . 16
Possible Change in Account Structure. 10 Federal Tax Status . . . . . . . . . . . . 17
Management. . . . . . . . . 10 Introduction. . . . . . 17
The Investment Adviser. . 10 Tax Status of the Contract. . . . . . . . . . . . . . . . . . . . 17
Charges Under the Contract. 11 Taxation of Annuities . 17
Charges Assessed Against the Deposits. 11 Legal Proceedings . 19
Charges Assessed Against the Fund . . 11 Table of Contents of the Statement of
Premium Taxes . . . . . . 11 Additional Information . 20
Description of the Contracts. . . . . . 12
Voting Rights . . . . . . 12
</TABLE>
- ------------------------------------------------------------------------
This Prospectus does not constitute an offer to sell, or a solicitation of any
offer to purchase, the Contracts offered hereby in any state or jurisdiction to
any person to whom it is unlawful to make such offer or solicitation in such
state. No salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer described herein and, if given or made,
such information or representation must not be relied upon.
<PAGE>
TERMS USED IN THIS PROSPECTUS
Accumulation Account: The account maintained under each
Contract comprising all Accumulation Units
purchased under a Contract and, if applicable,
any Net Deposit not yet applied to purchase
Accumulation Units.
Accumulation Account Value: The dollar value of an Accumulation Account.
Accumulation Unit: A unit purchased by the investment of a
Net Deposit in the Fund and used to measure the
value of a Contract Owner's interest under a
Contract prior to the Retirement Date under the
Contract.
Annuity: A series of monthly payments provided under a Contract for the
Participant or his beneficiary. Annuity payments will be due and
payable only on the first day of a calendar month.
Annuity Conversion Rate: The rate used in converting the
Accumulation Account Value to an Annuity
expressed as the amount of the first Annuity
payment to which the Participant or the
beneficiary is entitled for each $1,000 of
Accumulation Account Value.
Annuity Unit: A unit used to determine the amount of each Variable Annuity
payment after the first.
Consolidated Tape: A daily report listing the last closing price quotations of
securities traded on all national stock exchanges including the New York
Stock Exchange and reported by the National Association of
Securities Dealers, Inc. and Instinet.
Contract: Any one of the Individual Equity Investment Fund Contracts
(Annual Deposit, Single Deposit Deferred, or Single Deposit
Immediate) described in this Prospectus.
Contract Owner: The party to the Contract who is the owner of the Contract.
Generally, the Contract Owner will be the Participant.
Deposit: An amount paid to the Company pursuant to a Contract. (With
respect to some Contracts in which the term "Deposit" has been
replaced by the term "Purchase Payment," "Deposit" as used herein
shall also mean "Purchase Payment.")
<PAGE>
Net Deposit: That portion of a Deposit remaining after deduction of any
premium for Contract riders, charges for sales and administration expense and
for any applicable premium taxes.
Participant: The individual on whose behalf a Contract is issued.
Generally, the Participant will be the Contract Owner.
Retirement Date: The date on which the first Annuity payment is payable under a
Contract.
Variable Annuity:An Annuity with payments which vary in dollar amount throughout
the payment period in accordance with the investment experience of
the Fund.
Valuation Date: Each day on which the last closing price of securities are
reported on the Consolidated Tape.
Valuation Period: The period from the close of trading on
the New York Stock Exchange on one Valuation
Date to the close of trading on the New York
Stock Exchange on the next following Valuation
Date.
Written Request:An original signature is required on all Written Requests. If a
signature on record does not compare with that on the Written
Request, the Company reserves the right to request a Bank Signature
Guarantee before processing the request. Written Requests and other
communications are deemed to be received by the Company on the
date they are actually received at the Company's Home Office,
unless they are received: (1) on a day when the New York Stock
Exchange is closed or (2) after 1:00 p.m. Los Angeles, California
time. In these two cases, the Written Request will be deemed to be
received on the next day when the unit value is calculated.
<PAGE>
SYNOPSIS OF PROSPECTUS
The Fund was established on February 26, 1969, as an open-end diversified
investment company. The Fund's investment objective is long-term capital growth.
(See "Investment Objectives and Policies" on page 9.)
The Fund's management receives investment advice from both the Company, which
is the registrant's Adviser, which is paid an investment management fee pursuant
to contract, and from Transamerica Investment Services, Inc. (see "The Fund" on
page 9). The fee is accrued at the end of a Valuation Period at an annual rate
of 0.30% of the Fund's current net asset value. Transamerica Financial
Resources, Inc. is the principal underwriter ("Underwriter") of the Fund.
(See "Underwriter" on page 16.)
The Fund issued individual equity investment fund Contracts which are intended
to provide an investment in equity securities. These Contracts have been
designed for retirement programs under which Deposits are invested in a fund
comprised principally of equity securities. Three types of contracts were
offered--Annual Deposit, Single Deposit Deferred and Single Deposit Immediate.
(See "Description of the Contracts" on page 12.) The Contracts are no longer
being offered for sale but additional Deposits can be made on certain
outstanding Contracts.
A maximum 6 1/2% sales expense and 2 1/2% administration expense, plus state
premium taxes ranging from 0 to 3.5%, are deducted from each Deposit. This is
equivalent to 9.89% of the Net Deposit after deducting sales and administrative
expenses but before deducting premium taxes. Charges may be reduced as shown on
page 6.
Annual Deposit and Single Deposit Deferred Contracts may be surrendered prior
to a selected Retirement Date for the Accumulation Account Value. Amounts shall
be established at the end of a Valuation Period in which the Written Request for
surrender is received. Contracts must be surrendered through the Underwriter.
There is no surrender charge.
Contract Owners may choose to receive benefits in an Annuity form. With
respect to Annuity benefits, the Company assumes the mortality risk that
individuals may live longer than expected (see page 11). With certain exceptions
(see page 6) the rates at which charges for expenses are assessed may not be
changed during the life of the Contract. A deduction from the Fund, for assuming
these risks, is accrued at the end of each Valuation Period at an annual rate of
1.10% (.77% for mortality risk and .33% for expense risk) of the Fund's current
value.
With respect to Contract Owners who are natural persons, there should be no
Federal income tax on increases in the Accumulation Account Value until a
distribution under the Contract occurs (e.g., a surrender or annuity payment) or
is deemed to occur (e.g., a pledge, loan or assignment of a Contract).
Generally, a portion of any distribution or deemed distribution will be taxable
as ordinary income. The taxable portion of certain distributions will be subject
to withholding unless the recipient elects otherwise. In addition, a penalty tax
may apply to certain distributions or deemed distributions under the Contract.
(See "Federal Tax Status," p. 17.) This paragraph assumes that the Contracts
qualify as annuity contracts for Federal income tax purposes. (See "FEDERAL TAX
MATTERS--Tax Status of the Contracts" in the Statement of Additional
Information.)
<PAGE>
FEE TABLE
The following table and examples, prescribed by the Commission, are included
to assist Contract Owners in understanding the transaction and operating
expenses imposed directly or indirectly under the Contracts. The standardized
tables and examples assume the highest deductions possible under the Contracts
whether or not such deductions actually would be made from an individual
Contract Owner's account.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases: 6 1/2%
Total Deposits
Under the Sales
Contract Expense
First $15,000. . . 6 1/2%
Next $35,000. . . 4 1/2%
Next $100,000 . . 2 %
Excess . . . . . 1/2%
Administration Expense Imposed on Purchases: 2 1/2%
Total Deposits
Under theAdministration
Contract Expense
First $15,000. . . 2 1/2%
Next $35,000. . . 1 1/2%
Next $100,000. . . 3/4%
Excess . . . . . None
Maximum Total Contract Owner Transaction Expenses:1 9%
Total Contract
Owner
Total Deposits Transaction
Under theExpenses as %
Contractof Total Deposit
First $15,000. . . 9 %
Next $35,000. . . 6 %
Next $100,000. . . 2 3/4%
Excess . . . . . 1/2%
- -----------------
1 Premium taxes are not shown. Charges for premium taxes, if any, are deducted
when paid which may be upon annuitization. In certain states, a premium tax
charge will be deducted from each Deposit.
<PAGE>
Annual Contract Fee: None
Annual Expenses:
(as a percentage of average daily net assets)
Management Fee . . . . . . . . . . . . . . . . . . .. 0.30%
Mortality and Expense Risk Charge. . . . . . . . . . 1.10%
Other Expenses . . . . . . . . . . . . . . . . . . . None
Total Annual Expenses . . . . . . . . . . . . . . 1.40%
Example #1 Assuming surrender of the Contract at the end of the periods shown.2
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
1 Year 3 Years 5 Years 10 Years
$103 $130 $160 $243
Example #2 Assuming persistency of the Contract through the periods shown.
A $1,000 investment would be subject to the expenses shown, assuming 5% annual
return on assets.
1 Year 3 Years 5 Years 10 Years
$103 $130 $160 $243
The Examples should not be considered a representation of past or future
expenses and charges. Actual expenses may be greater or less than those shown.
Similarly, the assumed 5% annual rate of return is not an estimate or a
guarantee of future investment performance. See "Charges Under the Contract" in
this Prospectus.
- ----------------------
2 The Contract is designed for retirement planning. Surrenders prior to the
Annuity Period are not consistent with the long-term purposes of the Contract
and income tax and tax penalties may apply. Premium taxes may be applicable.
<PAGE>
PER ACCUMULATION UNIT INCOME AND CAPITAL CHANGES
On a per unit basis for an Accumulation Unit outstanding throughout the year,
the Fund's income and capital changes have been as shown below. Data for each of
the years presented below was included in the financial statements audited by
Ernst & Young LLP, the Fund's independent auditors, whose report for the year
ended December 31, 1995 appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
INCOME AND EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income. . $.070$.071 $ .080 $ .144 $ 0.121$ .136$ .108 $ .183 $ .094 $ .084
Expenses . . . . .256 .161 .146 .118 0.101 .087 .086 .064 .057 .047
Net investment (loss)
income . . . .(.151) (.090) (.066).0260.020 .049 .022.119 .037 .037
CAPITAL CHANGES
Net realized and unrealized gains
(loss) on investments. .6.646 .914 2.149 1.077 2.376 (.787) 1.642 1.132 .378 .304
Net increase (decrease) in
accumulation unit value 6.495 .8242.0831.1032.396(.738) 1.664 1.251 .415 .341
Accumulation unit value:
Beginning of year. 12.291 11.467 9.384 8.281 5.885 6.623 4.959 3.708 3.293 2.952
End of year. . $18.786 $12.291 $11.467 $ 9.384 $ 8.281 $ 5.885 $ 6.623 $ 4.959 $ 3.708 $ 3.293
Ratio of expenses to average
accumulation fund
balance. . . .1.41%1.43%1.43%1.43%1.43%1.43%1.44%1.43%1.44% 1.42%
Ratio of net investment (loss) income
to average accumulation fund
balance. . . .(.94%) (.80%) (.65%).31%0.28% .81% .37% 2.66% .94% 1.12%
Portfolio Turnover . 18.11% 30.84% 42.04% 43.07% 32.90% 49.87% 22.39% 52.18% 83.37% 66.07%
Number of accumulation units
outstanding at end of year
(000 omitted).1,3411,3731,4121,4521,4721,5451,6051,6741,713 2,119
</TABLE>
<PAGE>
TRANSAMERICA OCCIDENTAL AND THE FUND
Transamerica Occidental Life Insurance Company
The Company is a stock life insurance company incorporated in the state of
California on June 30, 1906. Its Home Office is located at 1150 South Olive
Street, Los Angeles, California 90015-2211. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. The Company presently
provides individual life insurance, especially interest-sensitive products,
variable and term life insurance, fixed and flexible premium annuity contracts,
and reinsurance.
Subsidiaries of the Company include Transamerica Assurance Company,
Transamerica Life Insurance and Annuity Company, Transamerica Life Insurance
Company of Canada, Transamerica Occidental Life Insurance Company of Illinois
and a New York company, First Transamerica Life Insurance Company.
The Fund
The Fund was established under California law on February 26, 1969 as a
separate account by the Board of Directors of the Company to facilitate
investment of Deposits under the Contracts. The Fund's assets are held for
individuals currently and contingently entitled to benefits under the Contracts.
California law requires the Fund's assets to be held in the Company's name and
the Company is not a trustee with respect thereto. Income, gains and losses,
whether or not realized, from assets allocated to the Fund are, in accordance
with the Contracts, credited to or charged against the Fund without regard to
other income, gains or losses of the Company. The Fund is not affected by the
investment or use of other Company assets. Section 10506 of the California
Insurance Law provides that the assets of a separate account are not chargeable
with liabilities incurred in any other business operation of the insurance
company (except to the extent assets in the separate account exceed the reserves
and the liabilities of the separate account). The Fund is registered as an
open-end, diversified, management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and meets the definition of a
separate account under the federal securities laws. There are no sub-accounts.
Obligations under the Contract are obligations of the Company.
The Fund is managed by a Board of Managers (the "Board").
Investment Objectives and Policies
The Fund has certain fundamental investment policies which may not be changed
unless authorized by a majority vote (as that term is defined in the 1940 Act)
of Contract Owners.
The Fund's investment objective is long-term capital growth, although this
objective may not be achieved. Common stock, listed and unlisted, is the basic
form of investment. The Fund may also invest in debt securities and preferred
stock having a call on common stock by means of a conversion privilege or
attached warrants and warrants or other rights to purchase common stock. Unless
market conditions would indicate otherwise, the Fund's portfolio will be
invested in such equity-type securities. However, when market conditions warrant
it, a portion of the Fund's assets may be held in cash or debt securities.
As to 75% of the value of its total assets, the Fund will not invest more than
5% of the value of its total assets in the securities of any one issuer, except
obligations of the United States Government and instrumentalities thereof.
However, holdings may exceed the 5% limit if it results from investment
performance, and is not the result, wholly or partially, of purchase.
Not more than 10% of the voting securities of any one issuer will be acquired.
Investment will not be made in the securities of a company for the purpose of
exercising management or control in that company.
The Fund does not currently intend to make investments in the securities of
other investment companies. The Fund does reserve the right to purchase such
securities, subject to the following limitations: the Fund will not purchase
such securities if it would cause (1) more than 10% of the value of the total
assets of the Fund to be invested in securities of registered investment
companies; or (2) the Fund to own more than 3% of the total outstanding voting
stock of any one investment company; or (3) the Fund to own securities of any
one investment company that have a total value greater than 5% of the value of
the total assets of the Fund; or (4) together with other investment companies
advised by the Company, the Fund to own more than 10% of the outstanding voting
stock of a closed-end investment company.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the saleability of which is
otherwise conditioned ("restricted securities"), as long as any such purchase or
acquisition will not immediately result in the value of all such restricted
securities exceeding 10% of the value of the Fund's total assets. It is the
policy of the Board not to invest more than 10% of the Fund's net assets in
restricted securities.
Possible Change in Account Structure
The Company is planning to change the organizational structure of the Fund
from an actively managed investment company (which operates like a mutual fund)
to a passive unit investment trust, which would then invest all of its assets in
a newly created mutual fund portfolio. This would be done by transferring all of
the Fund's net assets to that new mutual fund in exchange for shares in that
portfolio. It is contemplated that the new mutual fund portfolio would have the
same Board of Trustees, the same investment management, and the same investment
objectives and policies as the Fund now has. Any such reorganization would be
subject to certain regulatory approvals and approval by the Contract Owners.
MANAGEMENT
The Fund is managed by the Board. The affairs of the Fund are conducted in
accordance with Rules and Regulations adopted by the Board of Directors of the
Company and the Board of the Fund. The Company develops and implements an
investment program subject to the supervision of the Board.
The Investment Adviser
The adviser to the Fund is the Company.
The Company has contracted with an affiliate, Transamerica Investment
Services, Inc. ("Investment Services"), a wholly-owned subsidiary of
Transamerica Corporation, to render investment services to the Fund. Investment
Services has been in existence since 1967 and has provided investment services
to the Fund and other Transamerica Life Companies since 1980. These services
include providing recommendations on management of assets of the Fund, providing
investment research reports and information, determining those securities to be
bought or sold and placing orders for the purchase or sale of securities.
Investment decisions regarding the composition of the Fund's portfolio and the
nature and timing of changes in the portfolio are subject to the control of the
Board. Investment Services address is 1150 South Olive Street, Los Angeles,
California 90015-2211.
CHARGES UNDER THE CONTRACT
Charges Assessed Against The Deposits
The Company makes a deduction from each Deposit for sales and administrative
expenses. No such charges will be assessed against Deposits made from insurance
or annuity policies issued by the Company which are transferred to the Fund. The
charge for sales expense ranges from 6 1/2% to 1/2% and the charge for the
administration expense is from 2 1/2% to none. (See "Fee Table" on page 6.)
The sales expense charge is retained by the Company as compensation for the
cost of selling the Contracts. The Company pays the Underwriter and the
Underwriter's registered representatives for the sale of the Contracts. (See
"Contract Values" for more information about the Underwriter.) The distribution
expenses may exceed amounts deducted from Deposits as sales expenses and will be
paid from the Company's surplus, including profits, if any, from the mortality
and expense risk charges. The Company pays the sales expense charge to the
Underwriter as full commission.
The administrative expense charge will be retained by the Company for its
administrative services. The charge has been established at a level that does
not exceed anticipated cost.
Charges Assessed Against The Fund
At the end of each Valuation Period, the Accumulation and Annuity Unit values
are reduced by a mortality and expense risk charge at an annual rate of 1.10%
(approximately .77% for mortality risk and .33% for expense risk) and an
investment management charge at an annual rate of .3% of the value of the
aggregate net assets of the Fund at the close of each Valuation Date. Amounts of
such charges may be withdrawn periodically from the Fund.
There are no other fees assessed against the Fund.
Premium Taxes
Some states require the payment of premium taxes. Generally, the Contract
Owner's residence determines the existence and the rate of tax. Presently,
premium taxes range from 0% to 3.5%.
Generally, a charge for premium taxes is made against the Accumulation Account
Value when conversion is made to provide Annuity benefits. However, in certain
states, a tax will be deducted from each Deposit. If a tax is deducted from a
Deposit, a tax will not be similarly assessed when conversion is made to provide
Annuity benefits. State laws are subject to change, and any change will be
implemented and may raise or lower the premium tax charge.
DESCRIPTION OF THE CONTRACTS
The Contract Owner has all rights under the Contract during the accumulation
period. These include voting rights, selection of the proposed annuitant,
surrendering any portion of the Contract values, electing an Annuity
commencement date and option and selection of beneficiaries.
The Contract Owner retains his or her voting rights and right to select
beneficiaries, if the Annuity option permits, once the Annuity begins.
After the death of the annuitant, the beneficiaries have the right to the
value, if any, remaining in the Contract.
Voting Rights
Pursuant to the Rules and Regulations of the Fund, as amended by the Board,
the Fund is generally not required to hold regular meetings of Contract Owners
and does not anticipate holding annual meetings. Under the Rules and Regulations
of the Fund, however, Contract Owners' meetings will be held in connection with
the following matters: (1) the election or removal of a member or members of the
Board if a meeting is called for such purpose; (2) the approval of any contract
for which approval is required by the Investment Company Act of 1940 ("1940
Act"); and (3) such additional matters as may be required by law, the Rules and
Regulations of the Fund, or any registration of the Fund with the Securities and
Exchange Commission or any state, or as the Board may consider necessary or
desirable. Contract Owners may apply to the Board to hold a meeting under
circumstances provided for in the Rules and Regulations of the Fund. The
Contract Owners also would vote upon any changes in fundamental investment
objectives, policies or restrictions.
Contract Owners are entitled to vote in person or by proxy at the Fund's
meetings.
If Contract Owners hold a meeting, the method to calculate votes is shown
below:
The number of votes which a Contract Owner may cast is based on the Contract
Value established on a Valuation Date not more than 100 days prior to a meeting
date of Contract Owners and will be computed in the following manner:
(1) When the Valuation Date is prior to Retirement Date, the number of
votes will equal the Contract Owner's Accumulation Account Value divided by
100.
(2) When the Valuation Date is on or after the Retirement Date, the
number of votes will equal the amount of the reserve established to meet
Variable Annuity obligations related to the Contract divided by 100.
(Accordingly, as the amount of the reserve diminishes during the Annuity
payment period, the number of votes which a Contract Owner may cast
decreases.)
The number of votes will be rounded to the nearest vote; however, each
Contract Owner will have at least one vote.
Contract Owners of Contracts, other than those described herein, the reserves
for which are maintained in the Fund, shall also be entitled to vote. The number
of votes which such persons shall be entitled to cast shall be computed in the
same manner as described above.
To be entitled to vote, a Contract Owner must have been a Contract Owner on
the date on which the number of votes was determined.
Each Contract Owner shall receive a notice of the meeting of Contract Owners
and a statement of the number of votes attributable to his/her Contract. Such
notice will be mailed to the Contract Owner at the address maintained in the
Fund's records at least 20 days prior to the date of Contract Owner's meeting.
Changes To Variable Annuity Contracts
The Company has the right to amend the Contracts to meet current applicable
federal and state laws or regulations or to provide more favorable Annuity
Conversion Rates. Each Contract Owner will be notified of any amendment to the
Contract relating to any changes in federal or state laws.
The Contract Owner may change beneficiaries, Annuity commencement date or
Annuity option prior to the Annuity commencement date.
The Company reserves the right to deregister the Fund under the 1940 Act.
Inquiries
A Contract Owner may request information concerning a Variable Annuity
Contract by contacting a Company agent or by a Written Request mailed directly
to the Company.
ANNUITY PERIOD
A Participant may select an Annuity option at any age, by Written Request
received by the Company at least 60 days prior to commencement of an Annuity.
The monthly Annuity benefit is determined by the age of the Participant, and any
joint annuitant and the option selected.
The Contracts have three standard options:
(1) A Variable Annuity with monthly payments during the lifetime of the
Participant. No minimum number of payments is guaranteed, so that only one
such payment is made if the Participant dies before the second payment is due,
(2) A Variable Annuity paid monthly to the Participant and any joint
annuitant as long as either shall live. No minimum number of payments is
guaranteed, so that only one such payment is made if both the Participant and
joint annuitant die before the second payment is due, and
(3) A Variable Annuity paid monthly during the lifetime of the
Participant with a minimum guaranteed period of 60, 120 or 180 months. If a
Participant dies during the minimum period, the unpaid installments for the
remainder of the minimum period will be payable to the beneficiary. However,
the beneficiary may elect the commuted value to be paid in one sum. The value
will be determined on the Valuation Date the Written Request is received in
the Home Office.
Upon the Company's approval, other options may be selected. The form of
Annuity with the fewest number of guaranteed monthly payments will provide the
largest monthly payments.
If the Participant does not select any annuity option or a lump-sum payment,
the funds remain in the Accumulation Account.
The minimum account on the first monthly payment is $20. If the first monthly
payment would be less than $20, the Company may make a single payment equal to
the total value of the Contract Owners' Accumulation Account.
For information regarding the calculation of annuity payments, see the Annuity
Payments section of the Statement of Additional Information.
DEATH BENEFITS
Death Benefits--Before Retirement
(1) ANNUAL DEPOSIT & DEFERRED CONTRACTS:
In the event a Participant dies prior to the selected Retirement Date,
the Company will pay to the Participant's beneficiary the Accumulation
Account Value based on the Accumulation Unit value determined on the
Valuation Date coinciding with or next following the later of (i) the
date adequate proof of death is received by the Company or (ii) the date
the Company receives notice of the method of payment selected by the
beneficiary. Subject to certain requirements imposed by Federal tax law,
upon Written Request after the death of the Participant, the beneficiary
may elect, in lieu of the payment of such value in one sum, to have all
or a part of the Accumulation Account Value applied under one of the
forms of Annuities described under "Annuity Period," or elect an optional
method of payment subject to agreement by the Company, and to compliance
with any applicable federal and state law.
(2) IMMEDIATE CONTRACT:
In the event a Participant dies prior to the selected Retirement Date,
the Company will pay to the Participant's beneficiary the Accumulation
Account Value based on the Accumulation Unit value determined on the
Valuation Date coinciding with or next following the date proof of death
is received by the Company.
Death Benefit--After Retirement
If the Participant's death occurs on or after the Retirement Date, death
benefits, if any, payable to the beneficiary shall be as provided under the
Annuity option or elected optional method of payment then in effect.
CONTRACT VALUES
Annual Deposit Individual Equity Investment Fund Contract providing a deferred
Variable Annuity ("Annual Deposit Contract")--This Contract provides for
Deposits to be made annually or more frequently, but no Deposit may be less than
$10 and the aggregate minimum Deposit must be $120 in any contract year.
Normally, Contracts will not be issued for annual Deposits of less than $300.
Deposits may be increased on a Contract anniversary, but annual Deposits may not
be increased to more than three times the first year's Deposit without consent
from the Company. The non-forfeiture provision of the Contract will be applied
if annual Deposits are not paid when due or during a 31-day grace period. The
effect of this provision is that if a Deposit is not received within five years
of the last Deposit date, Deposits may not be resumed, but Contract benefits
remain in full force.
Single Deposit Individual Equity Investment Contract providing a deferred
Variable Annuity ("Deferred Contract")--This Contract provides for a single
Deposit when the Contract is issued. Additional Deposits of at least $20 each
may be made anytime within the first five Contract years. Thereafter, the
Company must give its consent to further Deposits. The minimum initial Deposit
is $1,000. The Company reserves the right to reduce the minimum.
A Retirement Date is specified in the application for Annual Deposit and
Single Deposit Individual Equity Investment Fund Contracts, but may be changed
by a Written Request to the Company at its Home Office at least 60 days before
an Annuity is to commence.
Single Deposit Individual Equity Investment Contract providing an Immediate
Variable Annuity ("Immediate Contract")--This Contract provides for a single
Deposit to be accepted when the Contract is issued which will begin an Annuity.
The issue date of this Contract is the last Valuation Date of the second
calendar month preceding the Retirement Date specified in the Contract. The
minimum Deposit is $2,500. The Company reserves the right to reduce the minimum.
The Retirement Date may not be changed.
Net Deposits are immediately credited to the Contract Owners Accumulation
Account in the Valuation Period in which they are received at the Company's Home
Office.
The number of Accumulation Units created by a Net Deposit is determined on the
Valuation Date on which the Net Deposit is invested in the Fund by dividing the
Net Deposit by the Accumulation Unit Value on that Valuation Date.
The number of Accumulation Units resulting from each Net Deposit will not
change.
Accumulation Unit Value
The Accumulation Unit Value was set at $1.00 on October 16, 1969. The
Accumulation Unit Value is determined at the end of a Valuation Period by
multiplying the Accumulation Unit Value determined at the end of the immediate
preceding Valuation Period by the Investment Performance Factor for the current
Valuation Period and reducing the result by the mortality and expense risk
charges.
The Investment Performance Factor is determined at the end of each Valuation
Period and is the ratio of A/B where "A" and "B" mean the following:
"A" is the value of the Fund as of the end of such Valuation Period
immediately prior to making any Deposits into and any withdrawals from the
Fund, reduced by the investment management charge assessed against such value
at an annual rate of 0.30%.
"B" is the value of the Fund as of the end of the preceding Valuation Period
immediately after making any Deposits into and any withdrawals from the Fund,
including any charges for expense and mortality risks assessed against the
Fund on that date, from the Fund.
The market value of the Fund's assets for each Valuation Period is determined
as follows: (1) each security's market value is determined by the last closing
price as reported on the Consolidated Tape; (2) securities that are not reported
on the Consolidated Tape but where market quotations are available are valued at
the most recent bid price; (3) value of the other assets and securities where no
quotations are readily available is determined in the manner directed in good
faith by the Board.
The Fund's net value is calculated by reducing the market value of the assets
by liabilities at the end of a Valuation Period.
Underwriter
Transamerica Financial Resources, Inc., is the principal Underwriter for the
Fund's Contracts. Its address is 1150 South Olive Street, Los Angeles,
California 90015-2211. It is a wholly-owned subsidiary of Transamerica Insurance
Corporation of California, which is wholly-owned by Transamerica Corporation. In
1995, commissions paid to registered representatives were $175.
SURRENDER OF A CONTRACT
Surrender and withdrawal privileges apply only to Annual Deposit and single
Deposit Deferred Contracts prior to Retirement Date. There are no surrender or
withdrawal privilege for Immediate Contracts.
A Written Request by the Contract Owner must be received at the Home Office
for either a withdrawal or surrender of Accumulation Account Value. Accumulation
Units will be cancelled with the equivalent dollar amount withdrawn or
surrendered. The Accumulation Unit value used to determine the number of
Accumulation Units cancelled shall be the value established at the end of the
Valuation Period in which the Written Request was received. The Accumulation
Account Value less any applicable tax charge will be paid within seven days
following receipt of the Written Request. However, the Company may postpone such
payment: (1) if the New York Stock Exchange is closed or trading on the Exchange
is restricted, as determined by the Commission; (2) when an emergency exists, as
defined by the Commission's rules, and fair market value of the assets cannot be
determined; or (3) for other periods as the Commission may permit.
There are no charges for withdrawals or surrender of the Contract. However,
withdrawals and surrenders may be taxable and subject to penalty taxes, as
described below.
A Contract must be surrendered through the Underwriter.
The Contract must be surrendered if a withdrawal reduces the Accumulation
Account Value below $10 for an Annual Deposit Deferred Contract or $20 for a
Single Deposit Deferred Contract.
Any Contract withdrawal may be repaid within five years after the date of each
withdrawal, but only one repayment can be made in any twelve month period. The
Company must be given concurrent Written Request of repayment. The sales charges
will not be deducted from the Deposit repayment, but the administrative charge
will be assessed.
FEDERAL TAX STATUS
Introduction
The following discussion is a general description of Federal tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under a Contract. Any person concerned about these tax implications
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon the Company's understanding of the present Federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of the continuation of
the present Federal income tax laws or the current interpretation by the
Internal Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
Tax Status of the Contract
The following discussion is based on the assumption that the Contract
qualifies as an annuity contract for Federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
Taxation of Annuities
1. In General
Section 72 of the Internal Revenue Code ("Code") governs taxation of annuities
in general. The Company believes that an Owner who is a natural person generally
is not taxed on increases in the value of a Contract until distribution occurs
by withdrawing all or part of the Accumulation Account Value (e.g., partial
withdrawals and surrenders) or as Annuity Payments under the Annuity option
elected. For this purpose, the assignment, pledge, or agreement to assign or
pledge any portion of the Accumulation Account Value generally will be treated
as a distribution. The taxable portion of a distribution (in the form of a
single sum payment or an annuity) is taxable as ordinary income.
The Owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the Accumulation Account Value
over the "investment in the contract" (discussed below) during the taxable year
with respect to deposits made after February 28, 1986. There are some exceptions
to this rule and a Contract Owner that is not a natural person may wish to
discuss these with a competent tax adviser.
The following discussion generally applies only to a Contract owned by a
natural person.
2. Surrenders
In the case of a surrender before the Retirement Date, under Code section
72(e), amounts received are generally first treated as taxable income to the
extent that the Accumulation Account Value immediately before the surrender
exceeds the "investment in the contract" at that time (this does not apply to
amounts allocable to investments made prior to August 14, 1982, nor the income
therefrom). Any additional amount withdrawn is not taxable. Generally, the
"investment in the contract" will be the total amount of Deposits made, less any
amount received under the Contract, to the extent that such amount received was
excluded from gross income.
3. Annuity Payments
Although tax consequences may vary depending on the annuity option elected
under the Contract, under Code section 72(b), generally gross income does not
include that part of any amount received as an annuity under an annuity contract
that bears the same ratio to such amount as the "investment in the contract"
bears to the expected return at the Retirement Date. In this respect (prior to
recovery of the "investment in the contract"), there is generally no tax on the
amount of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the annuity payments for the
term of the payments; however, the remainder of each income payment is taxable.
In all cases, after the "investment in the contract" is recovered, the full
amount of any additional annuity payments is taxable.
4. Penalty Tax
In the case of a distribution there may be imposed a Federal penalty tax equal
to 10% of the amount treated as taxable income. In general, however, there is no
penalty tax on distributions: (1) made on or after the date on which the
Contract Owner attains age 59 1/2; (2) made as a result of death or disability
of the Contract Owner; (3) received in substantially equal periodic payments as
a life annuity or a joint and surviving annuity for the lives or life
expectancies of the taxpayer and the taxpayer's "designated beneficiary"; (4)
from a qualified plan (except as provided in Code section 72(t)); (5) allocable
to "investment in the contract" before August 14, 1982; (6) under a qualified
funding asset (as defined in Code section 130(d)); (7) under an immediate
annuity (as defined in Code section 72(u)(4)), or (8) from Contracts which are
purchased by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.
5. Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a Contract, the irrevocable designation of an
Annuitant or other beneficiary who is not also the Contract Owner, or the
exchange of a Contract may result in certain tax consequences to the Contract
Owner that are not discussed herein. An Owner contemplating any such transfer,
assignment, or exchange of a Contract should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.
6. Multiple Contracts
All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by the Company (or its affiliates) to the same Contract
Owner during any single calendar year are treated as one annuity contract for
purposes of determining the amount includible in gross income under section
72(e) of the Code. The Treasury Department has specific authority to issue
regulations to prevent the avoidance of section 72(e) through the serial
purchase of annuity contracts or otherwise. In addition, there may be other
situations (for example, the combination purchase of an immediate annuity and a
deferred annuity) in which the Internal Revenue Service or the Treasury may
conclude that it may be appropriate to aggregate two or more annuity contracts
purchased by the same Contract Owner.
7. Withholding
Annuity distributions generally are subject to withholding for the recipient's
Federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. Recipients, however, generally are
provided the opportunity to elect not to have tax withheld from distributions.
8. Death Benefits
Amounts may be distributed from a Contract because of the death of a
Participant or Owner. Generally, such amounts are includable in the income of
the recipient as follows: (i) if distributed in a lump sum, they are treated
like a surrender, or (ii) if distributed under an annuity option, they are
treated like an annuity payment.
9. Other Tax Consequences
As noted above, the foregoing discussion of the Federal income tax
consequences under the Contract is general in nature and is not exhaustive and
special rules are provided with respect to other tax situations not discussed in
this prospectus. Further, the Federal income tax consequences discussed herein
reflect the Company's understanding of current Federal law and the law may
change. Federal gift and estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of distributions under the
Contract depend on the individual circumstances of each Contract Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
10. Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.) Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Fund is a party;
nor are there material legal proceedings involving the Fund to which the
Company, Investment Services, or the Underwriter are parties.
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Page
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . -2-
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . -2-
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . -4-
INVESTMENT ADVISORY AND OTHER SERVICES. . . . . . . . . . . -5-
BROKERAGE ALLOCATIONS . . . . . . . . . . . . . . . . . . . -6-
UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . -6-
ANNUITY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . -7-
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . -8-
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . -9-
<PAGE>
(This page intentionally left blank)
<PAGE>
(LOGO)
(a prospectus)
CUSTODIAN--Boston Safe Deposit and Trust Company of California
- ------------------------------------------------------------------------
AUDITORS--Ernst & Young LLP May 1, 1996
- ------------------------------------------------------------------------
ISSUED BY
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015-2211
(213) 742-3065
(LOGO)
Transamerica Occidental
Life Insurance Company
TFM-1007 ED. 5-96
<PAGE>
Exhibit C
Transamerica Variable Insurance Fund, Inc., Prospectus
<PAGE>
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
1150 South Olive Street, Los Angeles, California 90015, (213) 742-2111
PROSPECTUS October 9, 1996
The Growth Portfolio (the "Growth Portfolio" or the "Portfolio") of the
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
management investment company. The Growth Portfolio seeks long-term capital
growth. Common stock (listed and unlisted) is the basic form of investment. The
Portfolio may also invest in debt securities and preferred stock having a call
on common stocks.
Shares of the Fund are offered only to separate accounts of insurance
companies to fund the benefits of variable annuity contracts and variable life
insurance policies (collectively "variable insurance contracts") and certain
qualified retirement plans. Each variable insurance contract involves fees and
expenses not described in this Prospectus. See the accompanying variable
insurance contract prospectus for information regarding contract fees and
expenses and any restrictions on purchases or allocations.
This Prospectus contains information about the Fund and the Portfolio that a
prospective purchaser of a variable insurance contract should know before
allocating purchase payments or premiums to the Portfolio. It should be read in
conjunction with the Prospectus for the variable insurance contract and should
be retained for future reference. A Statement of Additional Information
containing more detailed information about the Fund is available free by writing
to the Fund at the Transamerica Annuity Service Center, 101 North Tryon Street,
Suite 1720, Charlotte, North Carolina 28246, or by calling (800) 258-4260, ext.
5560. The Statement of Additional Information, which has the same date as this
Prospectus, as it may be supplemented from time to time, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information is included at the
end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus should be read in conjunction with the
prospectus for the variable insurance contract.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are fund shares federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investing in fund shares involves certain investment risks,
including possible loss of principal.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . .
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . .
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . .
INVESTMENT METHODS AND RISKS . . . . . . . . . . . . .
Small Capitalization Companies . . . . . . . . . . .
High-Yield ("Junk") Bonds. . . . . . . . . . . . . .
Repurchase Agreements. . . . . . . . . . . . . . . .
State Insurance Regulation . . . . . . . . . . . . .
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . .
Directors and Officers . . . . . . . . . . . . . . .
Investment Adviser . . . . . . . . . . . . . . . . .
Investment Sub-Adviser . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . .
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . .
OFFERING, PURCHASE AND REDEMPTION OF SHARES. . . . . .
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. . .
TAXES . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . . .
Voting and Other Rights. . . . . . . . . . . . . . .
Custody of Assets. . . . . . . . . . . . . . . . . .
Accounting and Administrative Services . . . . . . .
Summary of Bond Ratings. . . . . . . . . . . . . . .
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION . .
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end,
diversified management investment company established as a Maryland Corporation
on June 23, 1995, as the successor to Transamerica Occidental's Separate Account
Fund C. The Fund currently consists of one investment portfolio, the Growth
Portfolio. (Additional Portfolios may be created from time to time.) By
investing in the Fund, an investor becomes entitled to a pro rata share of all
dividends and distributions arising from the net income and capital gains on the
investments of the Growth Portfolio.
Likewise, an investor shares pro-rata in any losses of the Growth Portfolio.
Pursuant to an investment advisory agreement and subject to the authority of
the Fund's Board of Directors, Transamerica Occidental Life Insurance Company
("Transamerica" or the "Investment Adviser") serves as the Fund's investment
adviser and conducts the business and affairs of the Fund. Transamerica has
engaged Transamerica Investment Services, Inc. ("Investment Services") to act as
the Fund's sub-advisor to provide the day-to-day portfolio management for the
Portfolio.
The Fund currently offers its shares solely to Separate Account C of
Transamerica Occidental Life Insurance Company as a funding vehicle for the
variable annuity contracts supported by Separate Account C. The Fund does not
offer its shares directly to the general public. A separate prospectus, which
accompanies this Prospectus, describes Separate Account C and the variable
annuity contracts it supports. The Fund may, in the future, offer its shares to
other insurance company separate accounts supporting other variable annuity or
variable life insurance contracts and to qualified pension and retirement plans.
CONDENSED FINANCIAL INFORMATION
As of the date of this prospectus, the Fund had not yet commenced operations,
had no assets or liabilities, had incurred no expenses and had received no
income. Accordingly, no Condensed Financial Information is included for the Fund
in this prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Growth Portfolio are described
below. There can be no assurance that the Growth Portfolio will achieve its
investment objective. Investors should not consider any one Portfolio alone to
be a complete investment program. As with any security, a risk of loss,
including possible loss of principal, is inherent in an investment in the shares
of the Portfolio.
The different types of securities, investments, and investment techniques used
by the Portfolio involve risks of varying degrees. These risks are described in
greater detail, under "Investment Methods and Risks" and in the Statement of
Additional Information. The Portfolio is subject to certain investment
restrictions that are described under the caption "Investment Restrictions" in
the Statement of Additional Information.
The investment objective of the Portfolio as well as the investment policies
that are not fundamental may be changed by the Fund's Board of Directors without
shareholder approval. Certain of the investment restrictions of the Portfolio
are fundamental, however, and may not be changed without the approval of a
majority of the votes attributable to the outstanding shares of the Portfolio.
See "Investment Restrictions" in the Statement of Additional Information.
The Growth Portfolio's investment objective is long-term capital growth.
Common stock, listed and unlisted, is the basic form of investment. Although the
Portfolio invests the majority of its assets in common stocks, the Portfolio may
also invest in debt securities and preferred stocks (both having a call on
common stocks by means of a conversion privilege or attached warrants) and
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
The Portfolio may invest up to 10% of the Portfolio's assets in debt
securities having a call on common stocks that are rated below investment grade.
Those securities are rated Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") or BB+ or lower by Standard & Poor's Corporation ("S&P"), or, if
unrated, deemed to be of comparable quality by Investment Services.
If a security that was originally rated "investment grade" is downgraded by a
ratings service, it may or may not be sold. This depends on Investment Services'
assessment of the issuer's prospects. However, Investment Services will not
purchase below-investment-grade securities if that purchase would increase their
representation in the Portfolio to more than 10%.
The Portfolio may invest up to 10% of its net assets in the securities of
foreign issuers that are in the form of American Depository Receipts ("ADRs").
ADRs are registered stocks of foreign companies that are typically issued by an
American bank or trust company evidencing ownership of the underlying
securities. ADRs are designed for use on the U.S. stock exchanges.
With respect to 75% of total assets, the Portfolio may not purchase more than
10% of the voting securities of any one issuer . The Portfolio may not invest in
companies for the purposes of exercising control or management.
Purchases or acquisitions may be made of securities which are not readily
marketable by reason of the fact that they are subject to the registration
requirements of the Securities Act of 1933 or the salability of which is
otherwise conditioned, including real estate and certain repurchase agreements
or time deposits maturing in more than seven days ("restricted securities"), as
long as any such purchase or acquisition will not immediately result in the
value of all such restricted securities exceeding 15% of the value of the
Portfolio's net assets.
INVESTMENT METHODS AND RISKS
The Growth Portfolio is subject to the risk of changing economic conditions,
as well as the risk inherent in the ability of Investment Services to make
changes in the portfolio composition of the Portfolio in anticipation of changes
in economic, business, and financial conditions.
In addition, the different types of securities, investments, and investment
techniques used by the Portfolio involve risks of varying degrees. For example,
with respect to equity securities, there can be no assurance of capital
appreciation and there is a substantial risk of decline in value. With respect
to debt securities, there exists the risk that the issuer of a security may not
be able to meet its obligations on interest or principal payments at the time
required by the investment. Certain risks associated with the types of
investments in which the Portfolio may invest are discussed below. For more
information on investment methods and risks, see "Special Investment Methods and
Risks" in the Statement of Additional Information.
Small Capitalization Companies
The Growth Portfolio may invest in securities of smaller, lesser-known
companies. Such investments involve greater risks than the investments of
larger, more mature, better known issuers, including an increased possibility of
portfolio price volatility. Historically, small capitalization stocks and stocks
of recently organized companies have been more volatile in price than the larger
capitalization stocks included in the S&P 500. Among the reasons for the greater
price volatility of these small company stocks are the less certain growth
prospects of smaller firms, the lower degree of liquidity in the markets for
such stocks and the greater sensitivity of small companies to changing economic
conditions. For example, these companies are associated with higher investment
risk than that normally associated with larger, more mature, better known firms
due to the greater business risks of small size and limited product lines,
markets, distribution channels and financial and managerial resources.
The values of small company stocks may fluctuate independently of larger
company stock prices. Small company stocks may decline in price as large company
stock prices rise, or rise in price as large company stock prices decline.
Investors should therefore expect that to the extent the Portfolio invests in
stock of small capitalization companies, the net asset value of the Portfolio's
shares may be more volatile than, and may fluctuate independently of, broad
stock market indices such as the S&P 500. Furthermore, the securities of
companies with small stock market capitalizations may trade less frequently and
in limited volume.
High-Yield ("Junk") Bonds
High-yield bonds (commonly called "junk" bonds) are lower-rated bonds that
involve higher current income but are predominantly speculative because they
present a higher degree of credit risk than higher-rated bonds. Credit risk is
the risk that the issuer of the bonds will not be able to make interest or
principal payments on time. The prices of junk bonds tend to be more reflective
of prevailing economic and industry conditions, the issuer's unique financial
situation, and the bond's coupon than to small changes in the market level of
interest rates. During an economic downturn or a period of rising interest
rates, highly leveraged companies may experience difficulties in making
principal and interest payments, meeting projected business goals, and obtaining
additional financing. See "Summary of Bond Ratings" on page ___ and the
Statement of Additional Information for a description of bond rating categories.
Repurchase Agreements
The Growth Portfolio may enter into repurchase agreements with Federal Reserve
System member banks or U.S. securities dealers. A repurchase agreement occurs
when the Portfolio purchases an interest-bearing debt obligation and the seller
agrees to repurchase the debt obligation on a specified date in the future at an
agreed-upon price. The repurchase price reflects an agreed-upon interest rate
during the time the Portfolio's money is invested in the security. Since the
security constitutes collateral for the repurchase obligation, a repurchase
agreement can be considered a collateralized loan. The Portfolio's risk is the
ability of the seller to pay the agreed-upon price on the delivery date. If the
seller is unable to make a timely repurchase, the Portfolio's expected proceeds
could be delayed, or the Portfolio could suffer a loss in principal or current
interest, or incur costs in liquidating the collateral. In evaluating whether to
enter into a repurchase agreement, Investment Services will carefully consider
the creditworthiness of the seller pursuant to procedures established by the
Fund's Board of Directors.
The Growth Portfolio will not invest in repurchase agreements maturing in more
than seven days if that would constitute more than 10% of the Portfolio's net
assets when taking into account the remaining days to maturity of the
Portfolio's existing repurchase agreements.
State Insurance Regulation
The Portfolio is intended to be a funding vehicle for variable annuity
contracts and variable life policies to be offered by insurance companies and
will seek to be offered in as many jurisdictions as possible. Certain states
have regulations or guidelines concerning concentration of investments and other
investment techniques. If such regulations and guidelines are applied to the
Portfolio, the Portfolio may be limited in its ability to engage in certain
techniques and to manage its portfolio with the flexibility provided herein. It
is the Portfolio's intention that it operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
PORTFOLIO TURNOVER
The Growth Portfolio will not consider portfolio turnover to be a limiting
factor in making investment decisions. Changes will be made in the Portfolio if
such changes are considered advisable to better achieve the Portfolio's
investment objective. The portfolio turnover rate is calculated by dividing the
lesser of the dollar amount of sales or purchases of portfolio securities by the
average monthly value of the portfolio securities, excluding debt securities
having a maturity at the date of purchase of one year or less. Investment
Services anticipates that the annual turnover rate for the Growth Portfolio will
generally not exceed 75%.
High rates of portfolio turnover involve correspondingly greater expenses
which must be borne by the Portfolio and its shareholders, including higher
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and reinvestment of other securities. High rate of turnover may
result in the acceleration of taxable gains and may under certain circumstances
make it more difficult for a Portfolio to qualify as a regulated investment
company under the Internal Revenue Code. See "Federal Tax Matters" in the
Statement of Additional Information.
MANAGEMENT
Directors and Officers
The Fund's Board of Directors is responsible for deciding matters of general
policy and reviewing the actions of the Adviser and Investment Services, the
custodian, the accounting and administrative services providers and other
providers of services to the Portfolio. The officers of the Fund supervise its
daily business operations. The Statement of Additional Information contains
information as to the identity of, and other information about, the directors
and officers of the Fund.
Investment Adviser
Transamerica Occidental Life Insurance Company ("Transamerica"), 1150 South
Olive Street, Los Angeles, California 90015, is the investment adviser of the
Portfolio. Transamerica is a stock life insurance company incorporated in the
state of California on June 30, 1906. It has been a wholly-owned direct or
indirect subsidiary of Transamerica Corporation, 600 Montgomery Street, San
Francisco, California 94111, since March 14, 1930. Transamerica acted as
investment adviser to Transamerica Occidental's Separate Account Fund C
("Separate Account Fund C"), the Fund's predecessor, and currently acts as
investment adviser to Transamerica Occidental's Separate Account Fund B.
The Fund has entered into an Investment Advisory Agreement with Transamerica
under which the Transamerica assumes overall responsibility, subject to the
supervision of the Fund's Board of Directors, for administering all operations
of the Fund and for monitoring and evaluating the management of the assets of
the Portfolio by Investment Services on an ongoing basis. Transamerica provides
or arranges for the provision of the overall business management and
administrative services necessary for the Fund's operations and furnishes or
procures any other services and information necessary for the proper conduct of
the Fund's business. Transamerica also acts as liaison among, and supervisor of,
the various service providers to the Fund.
For its services to the Portfolio, Transamerica receives an annual advisory
fee of 0.75% of the average daily net assets of the Growth Portfolio. The fee is
deducted daily from the assets of the Portfolio. This fee may be higher than the
average advisory fee paid to the investment advisers of other growth portfolios.
Transamerica may waive some or all of its fee from time to time at its
discretion.
Investment Sub-Adviser
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Portfolio. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies and the Transamerica Life Companies since 1980. Investment Services is
located at 1150 South Olive Street, Los Angeles, California 90015-2211.
Transamerica has agreed to pay Investment Services a monthly fee at the annual
rate of 0.30% of the first $50 million of the Portfolio's average daily net
assets, 0.25% of the next $150 million, and 0.20% of assets in excess of $200
million. Investment Services will provide recommendations on the management of
Portfolio assets, provide investment research reports and information, supervise
and manage the investments of the Portfolio, and direct the purchase and sale of
Portfolio investments.
Investment Services is also responsible for the selection of brokers and
dealers to execute transactions for the Fund. Some of these brokers or dealers
may be affiliated persons of Transamerica and Investment Services. Although it
is the policy of Investment Services to seek the best price and execution for
each transaction, Investment Services may give consideration to brokers and
dealers who provide Investment Services with statistical information and other
services in addition to transaction services. Additional information about the
selection of brokers and dealers is provided in the Statement of Additional
Information.
The transactions and performance of the Growth Portfolio are reviewed
continuously by the senior officers
of Investment Services. The portfolio manager for the Growth Portfolio is
Jeffrey S. Van Harte, C.F.A., Vice
President and Senior Fund Manager at Investment Services. Mr. Van Harte
is a member of the San Francisco
Society of Financial Analysts and received a B.A. from California State
University at Fullerton from 1980. Mr. Van
Harte has been managing the portfolio of the Fund's predecessor, Separate
Account Fund C, since 1984.
PERFORMANCE INFORMATION
From time to time the Fund may disseminate average annual total return figures
for the Portfolio in advertisements and communications to shareholders or sales
literature.
Average annual total return is determined by computing the annual percentage
change in value of $1,000 invested for specified periods ending with the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The average annual total return calculation
assumes a complete redemption of the investment at the end of the relevant
period.
The Fund also may from time to time disseminate year-by-year total return,
cumulative total return and yield information for the Portfolio in
advertisements, communications to shareholders or sales literature. These may be
provided for various specified periods by means of quotations, charts, graphs or
schedules. Year-by-year total return and cumulative total return for a specified
period are each derived by calculating the percentage rate required to make a
$1,000 investment in the Portfolio (assuming all distributions are reinvested)
at the beginning of such period equal to the actual total value of such
investment at the end of such period.
In addition, the Fund may from time to time publish performance of the
Portfolio relative to certain performance rankings and indices.
The Fund is the intended successor to Transamerica Occidental's Separate
Account Fund C ("Separate Account Fund C"). The reorganization of Separate
Account Fund C from a management investment company into a unit investment trust
is being submitted for Contract owner approval at a meeting of Contract owners
scheduled for October 30, 1996. If the reorganization is approved, the assets of
Separate Account Fund C will be transferred intact to the Growth Portfolio in
exchange for shares of the Growth Portfolio. As the successor to Separate
Account Fund C, the Growth Portfolio will treat the historical performance data
of Separate Account Fund C as its own for periods prior to the reorganization.
The performance data for the Growth Portfolio prior to the reorganization will
assume that the charges currently imposed by the Fund were in effect during that
period. In addition, such performance data will not reflect any sales or
insurance charges that were imposed under the annuity contracts issued through
Separate Account Fund C.
Since the Fund is not available directly to the public, its performance data
will not be advertised unless
accompanied by comparable data for the applicable variable annuity or variable
life insurance policy. The Fund's
performance data does not reflect separate account or contract level charges.
The investment results of the Portfolio will fluctuate over time and any
presentation of investment results for any prior period should not be considered
a representation of what an investment may earn or what the Portfolio's
performance may be in any future period. In addition to information provided in
shareholder reports, the Fund may, in its discretion, from time to time make a
list of the Portfolio's holdings available to investors upon request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is normally determined once
daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open, except as noted below. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year, except for certain holidays. The
net asset value of the Portfolio's shares will not be calculated on the Friday
following Thanksgiving, the Friday following Christmas if Christmas falls on a
Thursday and the Monday before Christmas if Christmas falls on a Tuesday. The
net asset value of the Portfolio is determined by dividing the value of the
Portfolio's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the
Portfolio outstanding.
The value of the Growth Portfolio's securities and assets generally is
determined on the basis of their market values. The short-term debt securities
having remaining maturities of sixty days or less held by the Growth Portfolio
(if any) are valued by the amortized cost method, which approximates market
value. Investments for which market quotations are not readily available are
valued at their fair value as determined in good faith by, or under authority
delegated by, the Fund's Board of Directors. See "Determination of Net Asset
Value" in the Statement of Additional Information.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Pursuant to its participation agreement with the Fund and Transamerica,
Transamerica Securities Sales Corporation ("TSSC") will act without remuneration
as the Fund's distributor in the distribution of the shares of each Portfolio.
TSSC is a wholly-owned subsidiary of Transamerica Insurance Corporation of
California, which is a wholly-owned subsidiary of the Transamerica Corporation.
TSSC has no obligation to sell any stated number of shares. TSSC is located at
1150 South Olive Street, Los Angeles, California 90015.
Shares of the Portfolio are sold in a continuous offering and will be
authorized to be offered to Separate Account C to support its variable annuity
contracts (the "Contracts"). Net purchase payments under the Contracts will be
placed in Separate Account C and the assets of the Separate Account C will be
invested in the shares of the Growth Portfolio. Separate Account C will purchase
and redeem shares of the Portfolio at net asset value without sales or
redemption charges.
For each day on which the Portfolio's net asset value is calculated, Separate
Account C will transmit to the Fund any orders to purchase or redeem shares of
the Portfolio based on the purchase payments, redemption (surrender) requests,
and transfer requests from Contract owners, annuitants and beneficiaries that
have been processed on that day. Shares of the Portfolio will be purchased and
redeemed at the Portfolio's net asset value per share calculated as of that same
day although such purchases and redemptions may be executed the next morning.
In the future, the Fund may offer shares of the Portfolio (including new
Portfolios that might be added to the Fund) to other separate accounts of
various insurance companies, whether or not affiliated with Transamerica, to
support variable annuity contracts or variable life insurance contracts.
Likewise, the Fund may also, in the future, offer shares of the Portfolio
directly to qualified pension and retirement plans.
In the event that shares of the Portfolio are offered to a separate account
supporting variable life insurance or to qualified pension and retirement plans,
a potential for certain conflicts may exist between the interests of variable
annuity contract owners, variable life insurance contract owners and plan
participants. The Fund currently does not foresee any disadvantage to owners of
the Contracts arising from the fact that shares of the Portfolio might be held
by such entities. However, in such an event, the Fund's Board of Directors will
monitor the Portfolio in order to identify any material irreconcilable conflicts
of interest which may possibly arise, and to determine what action, if any,
should be taken in response to such conflicts.
INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Growth Portfolio will distribute substantially all of its net investment
income in the form of dividends to its shareholders. The Growth Portfolio will
declare its dividends and capital gain distributions at least annually. It is
anticipated that all dividends and distributions will be reinvested in
additional Portfolio shares at net asset value.
TAXES
The Fund believes that the Portfolio will qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Portfolio intends to distribute substantially all of its net
income and net capital gains to its shareholders. As a result, under the
provisions of subchapter M, there should be little or no income or gains taxable
to the Portfolio. In addition, the Portfolio intends to comply with certain
other distribution rules specified in the Code so that it will not incur a 4%
nondeductible federal excise tax that otherwise would apply. See "Federal Tax
Matters" in the Statement of Additional Information.
The shareholders of the Portfolio will currently be limited to Separate
Account C and the Fund. For more information regarding the tax implications for
the purchaser of a Contract who allocates investments to the Portfolio, please
refer to the prospectus for Separate Account C.
OTHER INFORMATION
Reports
Annual Reports containing audited financial statements of the Fund and
Semi-Annual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract owners, annuitants or beneficiaries, as
appropriate. Inquiries may be directed to the Fund at the telephone number or
address set forth on the cover page of this Prospectus.
Voting and Other Rights
Each share outstanding is entitled to one vote on all matters submitted to a
vote of shareholders (of the Portfolio or the Fund) and is entitled to a
pro-rata share of any distributions made by the Portfolio and, in the event of
liquidation, of its net assets remaining after satisfaction of outstanding
liabilities. Each share (of the Portfolio), when issued, is nonassessable and
has no preemptive or conversion rights. The shares have noncumulative voting
rights.
As a Maryland corporation, the Fund is not required to hold regular annual
shareholder meetings. The Fund is, however, required to hold shareholder
meetings for the following purposes: (i) approving certain agreements as
required by the 1940 Act; (ii) changing fundamental investment objectives,
policies and restrictions of the Portfolio; and (iii) filling vacancies on the
Board of Directors in the event that less than a majority of the members of the
Board of Directors were elected by shareholders. Directors may also be removed
by shareholders by a vote of two-thirds of the outstanding votes attributable to
shares at a meeting called at the request of holders of 10% or more of such
votes. The Fund has the obligation to assist in shareholder communications.
After the reorganization, Transamerica will own more than 25% of the
outstanding shares of the Portfolio which may result in it being deemed a
controlling person of the Portfolio, as that term is defined in the 1940 Act.
Custody of Assets and Administrative Services
Pursuant to a custody agreement with the Fund, State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, Massachusetts 02110, will
hold all securities and cash assets of the Fund, provide recordkeeping and
certain accounting services and serve as the custodian of the Fund's assets. The
custodian will be authorized to deposit securities in securities depositories
and to use the services of sub-custodians.
Summary of Bond Ratings
Following is a summary of the grade indicators used by two of the most
prominent, independent rating agencies (Moody's Investors Service, Inc. and
Standard & Poor's Corporation) to rate the quality of bonds. The first four
categories are generally considered investment quality bonds. Those below that
level are of lower quality, commonly referred to as "junk bonds."
Investment Grade Moody's Standard & Poor's
Highest quality Aaa AAA
High quality Aa AA
Upper medium A A
Medium, speculative features Baa BBB
Lower Quality
Moderately speculative Ba BB
Speculative B B
Very speculative Caa CCC
Very high risk Ca CC
Highest risk, may not be
paying interest C C
In arrears or default D D
For more information on bond ratings, including gradations within each
category of quality, see the Statement of Additional Information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that Statement:
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INVESTMENT POLICY INFORMATION . . . . . . . . . . . . . . . . .
SPECIAL INVESTMENT METHODS AND RISKS . . . . . . . . . . . . . . . . . . .
Convertible Securities . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted and Illiquid Securities . . . . . . . . . . . . . . . . . . .
Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investment Companies . . . . . . . . . . . . . . . . . . . . . . .
Options on Securities and Securities Indices . . . . . . . . . . . . . .
Warrants and Rights. . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . .
High-Yield ("Junk") Bonds. . . . . . . . . . . . . . . . . . . . . . . .
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .
Fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . . . .
Non-fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . .
Interpretive Rules . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Advisory Agreement. . . . . . . . . . . . . . . . . . . . . .
Investment Sub-Advisory Agreement. . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE . . . . . . . . .
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .
FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHARES OF STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSTODY OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
Exhibit D
Investment Advisory Agreement
<PAGE>
INVESTMENT ADVISORY AGREEMENT
between
TRANSAMERICA VARIABLE INSURANCE FUND, IN
and
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
<PAGE>
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT is made this _____ day of ___1996,
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 (the 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 (the 1940 Act ) and desires to avail itself of
the investment experience, assistance and facilities available to Adviser and to
have Adviser perform for it 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-advisor
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 in accordance with the
limitations specified 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 the statement of additional information ( SAI ) filed with the
Securities and Exchange Commission ( SEC ) as part of the Funds Registration
Statement on Form N-1A, as amended from time to time, and to perform the other
services herein set forth subject to the supervision of the Board of Directors
of the Fund, for the period and on the terms herein set forth. Adviser hereby
accepts such employment and agrees during such period, at its own expense, to
render the services and to assume the obligations herein set forth for the
compensation herein provided.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets
of the Portfolios of the Fund, Adviser shall:
(a) obtain and evaluate pertinent economic, statistical and
financial data and other information relevant to the investment policies of the
Portfolios of the Fund, affecting the economy generally, and individual
companies or industries the securities of which are included in each Portfolio s
investment portfolio or are under consideration for inclusion therein and make
such data and information reasonably available to the Board of Directors of the
Fund at its request;
(b) develop and implement an investment program for each
Portfolio of the Fund consistent with each Portfolio s investment objective,
policies and limitations as stated in the Prospectus, SAI and Articles of the
Fund, which shall be subject to the overall review from time to time of the
Board of Directors of the Fund;
(c) provide necessary personnel to assist the Board of Directors
of the Fund in
managing the affairs of the Fund;
(d) authorize and permit any of its directors, officers and
employees, who may be elected as directors or officers of the Fund, to serve in
the capacities in which they are elected;
(e) provide for all expenses and fees incurred by the
sub-adviser as approved by
the Board of Directors of the Fund.
3. Any investment program undertaken by Adviser pursuant to this
Agreement and any
other activities undertaken by Adviser on behalf of the Fund shall at all times
be subject to any directives of the 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 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 to ensure that:
(a) each Portfolio complies with Section 817(h) of the Code, and
the regulations
issued thereunder, specifically Regulation Section 1.817-5, relating to the
diversification requirements for variable annuity and variable life insurance
contracts, and any amendments or other modifications to such Section or
regulation;
(b) each Portfolio continuously qualifies as a regulated
investment company under
Subchapter M of the Code and any successor provision; and
(c) 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.
6. For the services rendered hereunder, Adviser shall receive 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 monthly.
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. Advisor shall look only to the
assets of a particular Portfolio for payment of fees and services rendered to
that Portfolio. Advisor may, in its discretion and from time to time, waive all
or a potion 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, Advisor 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
Advisor 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 the Fund to engage in any other business or to devote his time and
attention in part to the management or other aspects of any other business or to
render services of any kind to any other corporation, firm, individual or
association.
10. Adviser agrees that it will maintain, or shall cause any
sub-adviser or other designee to maintain all required records, memoranda,
instructions or authorizations relating to the activities hereunder which are
required to be maintained by the Fund pursuant to the 1940 Act and the rules and
regulations thereunder. In compliance with Rule 31a-3 of the 1940 Act Adviser
agrees to preserve for the periods described in Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be
maintained by Rule 31a-1 under the 1940 Act. All records maintained by Adviser
with respect to these functions shall be open at all times to inspection and
audit by authorized representatives of the Fund, and any or all such records
shall be delivered to the Fund upon demand. Any records maintained by Adviser
with respect to such investment functions are the property of the Fund.
11. This Agreement shall be submitted for approval by the shareholders
of the Portfolios and if then approved by a majority of the Portfolio s
outstanding voting securities, this Agreement:
(a) shall continue in effect with respect to each Portfolio
only so long as its continuance is specifically approved for each Portfolio
annually by the Board of Directors of Fund (including a majority of the
independent directors) as required by the 1940 Act or by shareholders of each
Portfolio casting a majority of the votes entitled to be cast by shareholders;
(b) may not be terminated by Adviser with respect to each
Portfolio without the prior approval of a new investment advisory agreement by
the Portfolio s shareholders casting a majority of the votes entitled to be cast
and shall be subject to termination without the payment of any penalty, on sixty
days written notice, by the Board of Directors of the Fund or by vote of the
Portfolio s shareholders casting a majority of the votes entitled to be cast;
(c) shall not be amended without prior approval by the
Portfolio s shareholders
casting a majority of the votes entitled to be cast; and
(d) shall automatically terminate in the event of its
assignment by either party.
12. The Fund shall pay:
(a) brokers commissions in connection with portfolio
asset transactions to which
the Fund is a party;
(b) all taxes, including issuance and transfer taxes, which
may become payable to federal, state or other governmental entities, with
respect to the operation of the Portfolios of the Fund;
(c) all legal and auditing fees;
(d) all extraordinary expenses which may be incurred by or
on behalf of the Fund
in connection with matters not in the ordinary course of business;
(e) provide for expenses (including all fees) incurred in
connection with the registration and qualification of the Portfolios of the Fund
under the 1940 Act, the Securities Act of 1933 and state laws;
(f) provide for the charges and expenses of any custodian
or depository appointed
for the safekeeping of the cash, securities or other property of the Portfolios
of the Fund; and
(g) bear the expenses of calling and holding of meetings of
shareholders, the fees and expenses of members of the Board of Directors of the
Fund, and all ordinary expenses incurred in the ordinary course of business.
13. (a) In providing the Portfolios of the Fund with investment advice
and other services as herein provided, neither Adviser nor any officer,
director, employee or agent thereof shall be held liable by 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.
(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: Transamerica Occidental Life Insurance Company
Corporate Secretary
1150 South Olive Street
Los Angeles, California 90015
Fund: Transamerica Variable Insurance Fund, Inc.
Corporate Secretary
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 other 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.
All rights, powers and privileges confer-red 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.
IN WITNESS WHEREOF. the parties hereto have caused this Agreement to
be signed by their
respective officials thereunto duly authorized as of the day and year first
above written.
TRANSAMERICA VARIABLE TRANSAMERICA OCCIDENTAL LIFE
INSURANCE FUND, INC. INSURANCE COMPANY
By By
President President
By By
Secretary Secretary
<PAGE>
Exhib it A
to th e
Inves tment Advisory Agreement
betwe en
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 compensation
at an effective annual rate as follows:
Name of Portfolio Annual Rate of Compensation
Growth Portfolio 0.75 of 1% of the value of the Portfolios average
daily net assets
<PAGE>
Exhibit E
Investment Sub-Advisory Agreement
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
between
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
and
TRANSAMERICA INVESTMENT SERVICES, INC.
<PAGE>
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
advisor and is so registered as an advisor under the federal Investment Advisers
Act of 1940 (the Advisers Act ), and Adviser desires to avail itself of the
investment experience of Sub-Adviser and to have Sub-Adviser furnish certain
investment advisory services to the Growth Portfolio (the Portfolio ) of the
Transamerica Variable Insurance Fund, Inc. (the
Fund ), and such other portfolios of the Fund as the Fund may establish in the
future (the Portfolios ), 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. 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 Funds prospectus (the Prospectus ) and statement of
additional information ( SAI ) filed with the Securities and Exchange Commission
( SEC ) as part of the Funds 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 the terms herein set forth. Sub-Adviser shall also,
from time to time, furnish to and place at the disposal of Adviser and the Fund
such reports and information relating to industries, businesses, corporations,
or securities as may be reasonably required by Adviser or the Fund or as
Sub-Adviser may deem to be helpful to Adviser or the Fund in the administration
of the Portfolios assets.
(b) Sub-Adviser agrees to use its best efforts in providing such
advice and recommendations and in the preparation of such reports and
information, and for this purpose Sub-Adviser shall at all times maintain a
staff of officers and other trained personnel for the performance of its
obligations under this agreement. Sub-Adviser may, at its expense, employ other
persons to furnish to Sub-Adviser statistical and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance.
(c) Adviser will, on a 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 Funds 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 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-Advises overall
responsibilities with respect to accounts as to which it is exercising
investment discretion. All such actions are subject to the limitations as set
out in Section 6.
2. ALLOCATION OF CHARGES AND EXPENSES
Sub-Adviser shall furnish at its own expense executive, supervisory
and other personnel and services, office space, equipment, utilities and
telephone services in connection with supplying the investment advisory,
statistical and research services contemplated by this agreement.
3. COMPENSATION TO SUB-ADVISER
Adviser agrees to pay to Sub-Adviser and Sub-Adviser agrees to accept
as full compensation for all services rendered hereunder, a fee paid quarterly
in arrears and to be calculated as a percentage of the average daily net assets
of each Portfolio during the previous quarter at the annual rate specified in
Exhibit B hereto. For the purpose of determining fees payable to Sub-Adviser,
the value of each Portfolio s net assets shall be computed at the time and in
the manner specified in the Prospectus and/or SAI. No Portfolio shall be liable
for the obligations of any other Portfolio. Sub-Adviser shall look only to the
assets of a particular Portfolio for payment of fees and services rendered to
that Portfolio. Sub-Adviser may, in its discretion and from time to time, waive
all or a portion of its fees.
4. DURATION AND TERMINATION
This Agreement shall be submitted for approval by the shareholders of
the Portfolios and if then approved by a majority of the Portfolio s outstanding
voting securities, this Agreement:
(a) shall continue in effect with respect to each Portfolio only so
long as its continuance is specifically approved for each Portfolio annually by
the Board of Directors of 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 POLICIES
Sub-Adviser covenants and agrees that the investment planning,
investment advice and services that it furnishes Adviser will be in accordance
with the investment objective, policies, and limitations of each Portfolio as
set forth in the Funds Prospectus, SAI and Articles and shall be in compliance
with the 1940 Act.
6. TAX AND OTHER COMPLIANCE
(a) Sub-Adviser understands that shares of the Portfolios will be sold
to one or more separate accounts or sub-accounts of insurance companies as the
funding medium for variable annuity contracts and variable life insurance
policies ( variable products ); and that the variable products will not be
treated as variable products for tax purposes if each Portfolio does not:
1. meet the diversification requirements specified in
Section 817(h) of the
Internal Revenue Code of 1986, as amended (the Code ) and the regulations
issued thereunder; and
2. qualify as a regulated investment company under
Subchapter M of the Code
and any successor provision.
(b) Sub-Adviser represents that it shall use its best efforts to
manage and invest the Portfolios assets in such a manner and, with regard to its
duties under this Agreement, ensure that:
1. each Portfolio complies with Section 817(h) of the Code, and
the regulations issued thereunder, specifically Regulation Section 1.817-5,
relating to the diversification requirements for variable annuity and variable
life insurance contracts, and any amendments or other modifications to such
Section or regulation;
2. each Portfolio continuously qualifies as a regulated
investment company
under Subchapter M of the Code and any successor provision; and
3. any and all applicable state insurance law restrictions, as
amended from time to time, on investments that operate to limit or restrict the
investments that a Portfolio may otherwise make are complied with.
7. RECORDS
(a) Sub-Adviser agrees that it will maintain all required records,
memoranda, instructions or authorizations relating to the acquisition or
disposition of assets of the Fund, including all books and records required to
be maintained by the 1940 Act and the rules and regulations thereunder. In
compliance with Rule 31a-3 of the 1940 Act, Sub-Adviser agrees to preserve for
the periods described in Rule 31a-2 under the 1940 Act any records that it
maintains for the Portfolios and that are required to be maintained by Rule
31a-1 under the 1940 Act. All records maintained by Sub-Adviser with respect to
these functions shall be open at all times to inspection and audit by Advises
and/or the Funds 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 functions are the property of the Fund.
(b) Sub-Adviser shall assist and provide operational support in the
audit of any records
with respect to the services provided hereunder by Advises 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 Advises 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 incur-red 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.
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.
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, bonuses 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:
Title: Title:
By: By:
Title: Title:
<PAGE>
Exhibit A
Investment Advisory Agreement
<PAGE>
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.
<PAGE>
Exhibit F
Form of Proxy
<PAGE>
NOTICE
IT IS ESSENTIAL THAT YOU COMPLETE THIS PROXY AND RETURN
IT IMMEDIATELY IN THE POSTPAID RETURN ENVELOPE PROVIDED.
THANK YOU, TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Please fold and detach card at perforation before mailing
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY NOTICE OF SPECIAL MEETING OF
CONTRACT OWNERS - OCTOBER 30, 1996 SOLICITED BY ORDER OF THE BOARD OF MANAGERS
OF TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
A special meeting of owners of Individual Equity Investment Fund Contracts
("Contract owners") issued by Transamerica Occidental Life Insurance Company
("Transamerica") in connection with Transamerica Occidental's Separate Account
Fund C ("Old Account C") will be held at Transamerica's home office in the
conference room on floor 27 at 1150 South Olive, Los Angeles, California 90015,
on October 30, 1996, at 9:00 a.m., Pacific Standard Time.
Receipt of the Notice of Meeting and Proxy Statement accompanying this
Proxy is acknowledged by the undersigned. These proposals are discussed in
detail in the attached Proxy Statement/Prospectus.
Please vote, date, sign and return this Proxy.
Please sign exactly as your name appears at left. If signing is by attorney,
executor, administrator or guardian, please give full title.
Date:_________________, 1996
Signature:_________________________
BE CERTAIN TO SIGN YOUR PROXY
Please return your signed and dated Proxy promptly by using the enclosed
envelope.
Only Contract Owners of record at the close of business on September 25, 1996,
will be entitled to vote at the meeting.
Please indicate vote by filling in the appropriate boxes below, as shown, using
blue or black ink or dark pencil. Do not use red ink. This Proxy, when properly
executed, will be voted in the manner directed herein by the Owner signing this
Proxy. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1
AND 2(a), (c), and (d).
1. To APPROVE an Agreement and Plan of Reorganization (the "Agreement") and
related transactions (together, the Agreement and related transactions are
the "Reorganization") whereby Old Account C, presently a management
investment company, would be converted into a unit investment trust,
Transamerica Occidental Separate Account C, by transferring all of Old
Account C's securities and other investments to the Growth Portfolio of
Transamerica Variable Insurance Fund, Inc. (the "Fund") in exchange for
shares of the Growth Portfolio of the Fund of equal value as described in
the accompanying Proxy Statement/Prospectus:
FOR AGAINST ABSTAIN
2. To instruct Transamerica regarding the following:
(a) TO ELECT to the Fund's Board of Directors the following nominees:
Donald E. Cantlay, Richard N. Latzer, DeWayne W. Moore, Gary U.
Rolle', Peter J. Sodini
FOR all nominees listed WITHHOLD
(except as marked to the contrary at left) AUTHORITY
to vote for all nominees listed at left
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided
below.)
- --------------------------------------
(b) TO APPROVE a proposed Investment Advisory Agreement between the Fund
and Transamerica; and
FOR AGAINST ABSTAIN
(c) TO APPROVE a proposed Investment Sub-Advisory Agreement between
Transamerica and Transamerica
Investment Services, Inc.
FOR AGAINST ABSTAIN
(d) TO RATIFY the selection of Ernst & Young as independent auditors
of the Fund;
FOR AGAINST ABSTAIN
3. TO ACT upon any other business which may properly come before the meeting
or any adjournment thereof.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
Transamerica Occidental's Separate Account Fund C
STATEMENT OF ADDITIONAL INFORMATION
October 9, 1996
This Statement of Additional Information is not a prospectus. The
Statement of Additional Information should be read in conjunction with the
Prospectus/Proxy Statement of Transamerica Occidental's Separate Account Fund C
dated October 9, 1996. That document may be obtained by writing Transamerica
Occidental Life Insurance Company, 1150 South Olive, Los Angeles, CA 90015-2211
or by telephoning 1-800-258-4260, ext. 5550.
TABLE OF CONTENTS
Exhibit A -Transamerica Occidental's Separate Account Fund C Statement of
Additional Information (April 26, 1996)..................................
Exhibit B -Transamerica Occidental's Separate Account Fund C Semi-Annual Report
(June 30, 1996)...........................................................
Exhibit C - Growth Portfolio of Transamerica Variable Insurance Fund, Inc.
Statement of Additional Information (October 7, 1996).......................
<PAGE>
Additional Information About Old Account C
Additional information regarding Transamerica Occidental's
Separate Account Fund C ("Old Account C") is found in the
Statement of Additional Information to Old Account C's
Registration Statement on Form N-3 filed with the Securities
and Exchange Commission as Post-Effective Amendment No. 42 on
April 26, 1996 (File Nos. 2-36250; 811-2025). This Statement
of Additional Information is attached hereto as Exhibit A.
Additional Information About the Fund
Additional information regarding the Growth Portfolio of
Transamerica Variable Insurance Fund, Inc. (the "Fund") is
found in the Statement of Additional Information to the Fund's
Pre-Effective Amendment to its Registration Statement on Form
N-1A filed with the Securities and Exchange Commission on
September 12, 1996 (File No. 33-98984). That Statement of
Additional Information is attached hereto as Exhibit C.
Financial Statements
Financial statements regarding Old Account C dated December
31, 1995 are included in the Statement of Additional
Information provided in Exhibit A. Unaudited financial
statements regarding Old Account C dated June 31, 1996 are
included in the Semi-Annual Report of Old Account C provided
in Exhibit B.
-2-
<PAGE>
Exhibit A
Transamerica Occidental's Separate Account Fund C
Statement of Additional Information
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
Transamerica Occidental's Separate Account Fund C
Individual Equity Investment Fund Contracts
For Non-Tax Deferred Individual Retirement Plans
1150 South Olive Street, Los Angeles, California 90015-2211
This Statement of Additional Information is not a Prospectus, but
should be read with the Prospectus for Transamerica Occidental's Separate
Account Fund C (the "Fund"). A copy of the Prospectus may be obtained by writing
to the company at the above address or from a Company's agent.
The date of this Statement of Additional
Information is May 1, 1996 The date of the
Prospectus is May 1, 1996
<PAGE>
TABLE OF CONTENTS
Cross
Reference
to Prospectus
Page Page
General Information and History............ -2- 9
Investment Objectives and Policies......... -2- 9
Management................................. -4- 10
Investment Advisory and Other Services..... -5- 10
Brokerage Allocations...................... -6-
Underwriter................................ -6-
Annuity Payments........................... -7- 13
Federal Tax Matters........................ -8-
Financial Statements....................... -9-
GENERAL INFORMATION AND HISTORY
Transamerica Occidental Life Insurance Company (the "Company") was
formerly known as Occidental Life Insurance Company of California. The name
change occurred approximately on September 1, 1981.
The Company is wholly-owned by Transamerica Insurance Corporation of
California, which is in turn wholly-owned by Transamerica Corporation.
Transamerica Corporation is a financial services organization which engages
through its subsidiaries in consumer lending, commercial lending, leasing, life
insurance, real estate services and asset management.
On October 16, 1969, the Company invested $1,000,000 in Transamerica
Occidental's Separate Account Fund C (the "Fund") pursuant to California law.
The Company has stated to the Board of Managers (the "Board") that it intends to
maintain a minimum of $100,000 in the Fund. However, consistent with applicable
law it may withdraw amounts above $100,000 or increase its investment. On
December 31, 1995, the Company's share in the Fund was approximately 74% of the
total Contract Owner's equity. It will not vote on any matter in connection with
its investment.
INVESTMENT OBJECTIVES AND POLICIES
Certain investment policies are described on page 9 of the Prospectus
for the Fund. Other policies and investment restrictions which are fundamental
to the Fund are:
Borrowings will not be made except as a temporary measure for
extraordinary or emergency purposes provided that such borrowings shall
not exceed 5% of the value of the Fund's total assets.
Securities of other issuers will not be underwritten provided
that this shall not prevent the purchase of securities the sale of
which may result in the Fund being deemed to be an "underwriter" for
purposes of the Securities Act of 1993.
Investments will not be concentrated in any one industry nor
will more than 25% of the value of the Funds assets be invested in
issuers all of which conduct their principal business activities in the
same general industry.
The purchase and sale of real estate or interests in real
estate is not intended as a principal activity. However, the right is
reserved to invest up to 10% of the value of the assets of the Fund in
real properties,
-5-
<PAGE>
including property acquired in satisfaction of obligations previously
held or received in part payment on the sale of other real property
owned.
The purchase and sale of commodities or commodity contracts
will not be engaged in.
Loans may be made but only through the acquisition of all or a
portion of an issue of bonds, debentures or other evidences of
indebtedness of a type customarily purchased for investment by
institutional investors, whether publicly or privately distributed. (It
is not presently intended to invest more than 10% of the value of the
Fund in privately distributed loans. Furthermore, it is possible that
the acquisition of an entire issue may cause the Fund to be deemed
"underwriter" for purposes of the Securities Act of 1993.) The
securities of the Fund may also be loaned provided that any such loan
is collateralized with cash equal to or in excess of the market value
of such securities. (It is not presently intended to engage in the
lending of securities.)
The Fund does not intend to issue senior securities.
The Fund does not intend to write put and call options.
Purchases of securities on margin may not be made, but such
short-term credits as may be necessary for the clearance of purchases
and sales of securities are permissible. Short sales may not be made
and a short position may not be maintained unless at all times when a
short position is open and the fund owns at least an equal amount of
such securities or securities currently exchangeable, without payment
of any further consideration, for securities of the same issue as, and
at least equal in amount to, the securities sold short (generally
called a "short sale against the box") and unless not more than 10% of
the value of the Fund's net assets is deposited or pledged as
collateral for such sales at any one time.
None of the above fundamental policies may be changed unless authorized
by a majority vote of Contract Owners.
Portfolio Turnover Rate
Changes will be made in the portfolio if such changes are considered
advisable to better achieve the Fund's investment objective of long term capital
growth. Generally, long-term rather than short-term investments will be made and
trading for short-term profits is not intended. However, it should be recognized
that although securities will initially be purchased with a view to their
long-term potential, a subsequent change in the circumstances of a particular
company or industry or in general economic conditions may indicate that a sale
of a security is desirable. It is anticipated that annual portfolio turnover
should not exceed 75%. However, stocks being sold to meet redemptions and
changes in market conditions could result in portfolio activity greater than
anticipated. The portfolio turnover rates for 1993, 1994 and 1995 were 42.04%,
30.84% and 18.11%, respectively.
-6-
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT
Board of Managers and Officers of the Fund are:
<S> <C> <C>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
Donald E. Cantlay (74) Board of Managers Director, Managing General Partner of Cee 'n' Tee Company;
Director of California Trucking Association and Western Highway
Institute; Director of FPA Capital Fund and FPA New Income
Fund.
Richard N. Latzer (59)* Board of Managers President, Chief Executive Officer and Director of Transamerica
Investment Services, Inc.; Senior Vice President and Chief
Investment Officer of Transamerica Corporation.
DeWayne W. Moore (82) Board of Managers Retired Senior Vice President, Chief Financial Officer and Director
of Guy F. Atkinson Company of California; Director of FPA
Capital Fund and FPA New Income Fund.
Gary U. Rolle (54)* Chairman, Board of Managers Director of Transamerica Investors, Inc; Director, Executive Vice
President and Chief Investment Officer of Transamerica Investment
Services, Inc.; Director and Chief Investment Officer of
Transamerica Occidental Life Insurance Company.
Peter J. Sodini (55) Board of Managers Associate, Freeman Spogli & Co. (a private Investor); President and
Chief Executive Officer, Purity Supreme, Inc. (a supermarket).
President and Chief Executive Officer, Quality Foods International
(supermarkets); Director Pamida Holdings Corp. (a retail
merchandiser) and Buttrey Food and Drug Co. (a supermarket).
Barbara A. Kelley (42) President President, Chief Operating Officer and Director of Transamerica
Financial Resources, Inc. and President and Director of
Transamerica Securities Sales Corporation, Transamerica Advisors,
Inc., Transamerica Product, Inc., Transamerica Product, Inc. I,
Transamerica Product, Inc. II, Transamerica Product, Inc. IV, and
Transamerica Leasing Ventures, Inc.
Regina M. Fink (40) Assistant Secretary Counsel of Transamerica Occidental Life Insurance Company
Paul Norris (48) Vice President Vice President and Actuary of Transamerica Life Insurance and
Annuity Company and Transamerica Occidental Life Insurance
Company.
Sally S. Yamada (45) Treasurer and Vice President and Treasurer of Transamerica Occidental
Assistant Secretary Life Insurance Company and Treasurer of Transamerica Life
Insurance and Annuity Company.
Thomas M. Adams (60) Secretary Partner in the law firm of Lanning, Adams & Peterson.
</TABLE>
* These members of the Board are or may be interested persons as defined by
Section 2(a) (19) of the 1940 Act. ** The mailing address of each Board
member and officers is Box 2438, Los Angeles, California 90051.
The principal occupations listed above apply for the last five years,
except Regina Fink who, prior to 1994 was Vice President and Counsel for
Colonial Management Associates, Inc. However, in some instances, occupation
listed above is the current position. Prior positions with the same company or
affiliate are not indicated.
Messrs. Cantlay, Moore, and Soldini are not parties to either the
Investment Advisory Agreement or the
Investment Services Agreement nor are they interested persons of any such party.
-7-
<PAGE>
Remuneration of Board of Managers, Officers and Employees of the Fund
The following table shows the compensation paid during the most
recently completed fiscal year to all directors of the Fund by the Company
pursuant to its Investment Advisory Agreement with the Fund .
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement From Registrant
Compensation Benefits Accrued and Fund
Name of Person From As Part of Fund Complex Paid to
Position Registrant/Company Expenses Managers#
<S> <C> <C> <C>
Donald E. Cantlay $1,000 * $6,000
Board of Managers
Richard N. Latzer -0- + -0-
Board of Managers
DeWayne W. Moore $1,000 * $6,250
Board of Managers
Gary U. Rolle -0- + -0-
Chairman, Board of Managers
Peter J. Sodini $1,000 * $6,250
Board of Managers
</TABLE>
No member of the Board, no Officer, no other individual affiliated with
the Fund and no person affiliated with any member of the Board, the Company or
any Contract Owner is expected to receive aggregate remuneration in excess of
$1,000 from the Company during its current fiscal year by virtue of services
rendered to the Fund. Members of the Board, Officers or other individuals
affiliated with the Fund, who are also Officers, Directors or employees of the
Company, are notentitled to any compensation from the Fund for their services to
the Fund.
- --------------------------------
* None of the members of the Board of Managers currently receives any pension or
retirement benefits from the Company due to services rendered to the Fund and
thus will not receive any benefits upon retirement from the Fund.
+ Will receive Pension/Retirement benefits as an employee of Transamerica
Investment Services, Inc. .
# During 1995, each of the Board members 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.
INVESTMENT ADVISORY AND OTHER SERVICES
The Company is the investment adviser to the Fund.
The Company provides investment management to the Fund pursuant to an
investment Advisory Agreement between the Company and the Fund, and Transamerica
Investment Services provides investment advice. The annual charge for such
services is 0.3% of the value of the Fund. In the past three years the Fund paid
the Company $45,993 in 1993, $49,288 in 1994, and $67,198 in 1995.
-8-
<PAGE>
The Company performs all record keeping and administrative functions
related to the Contracts and each Participant;s account, including issuing
Contracts, valuing Participant's accounts, making Annuity payments and other
administrative functions. In addition, the Company supplies or pays for
occupancy and office rental, clerical and bookkeeping, accounting, legal fees,
registration and filing fees, stationery, supplies, printing, salaries and
compensation of the Fund's Board and its officers, reports to Contract Owners,
determination of offering and redemption prices and all ordinary expenses
incurred in the ordinary course of business.
Boston Safe Deposit and Trust Company of California, 1 Embarcadero
Center, San Francisco, California
94111-9123, is the Fund's custodian of the Securities. Boston Safe Deposit
and Trust Company of California holds
the securities for the Fund. The Company pays all fees for this service.
The financial statements of the Company and the Fund included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, whose reports on such financial statements are included
elsewhere herein. Ernst & Young LLP's address is 515 South Flower Street, Los
Angeles, California 90071. The financial statements audited by Ernst & Young LLP
have been included in reliance on their reports given on their authority as
experts in accounting and auditing.
BROKERAGE ALLOCATIONS
The Company and Transamerica Investment Services, Inc. ("Investment
Services") have no formula for brokerage business distribution for purchases and
sale of portfolio securities of the Fund. The primary objective is to place
orders for the most favorable prices and execution. Investment Services will
engage only those brokers whose commissions it believes to be reasonable in
relation to the services provided. The overall reasonableness of commissions
paid will be evaluated by rating brokers primarily on price, and such general
factors as execution capability and reliability, quality of research (including
quantity and quality of information provided, diversity of sources utilized,
nature and frequency of communication, professional experience, analytical
ability and professional nature of the broker), financial standing, as well as
net results of specific transactions, taking into account such factors as
promptness, size of order and difficulty of execution. To the extent such
research services are used, it would tend to reduce the Company and Investment
Services expenses. However, there is no intention to place portfolio
transactions for services performed by a broker in furnishing statistical data
and research, and thus such services are not expected to significantly reduce
expenses. During 1994, commissions were fully negotiated and paid on a best
execution basis. In 1993, 1994 and 1995 respectively, brokerage commissions were
.07%, .02%, and .01% of average assets, and the aggregate dollar amounts were
$10,058, $3,500, and $1,960 respectively.
Investment Services furnishes investment advice to the Fund as well as
other institutional clients. Some of Investment Services' other clients have
investment objectives and programs similar to those of the Fund. For example,
Investment Services also advises Transamerica Occidental Life Insurance
Company's Separate Account Fund B, which has a practically identical portfolio
as Fund C. Accordingly, occasions may arise when sales or purchases of
securities which are consistent with the investment policies of more than one
client come up for consideration by Investment Services at the same time. When
two or more clients are engaged in the simultaneous sale or purchase of
securities, Investment Services will allocate the securities in question so as
to be equitable as to each client. Investment Services will effect simultaneous
purchase or sale transactions only when it believes that to do so is in the best
interest of the Fund, although such concurrent authorizations potentially may,
in certain instances, be either advantageous or disadvantageous to the Fund.
Investment Services has advised the Fund's Board regarding this practice, and
will report to them on a periodic basis concerning its implementation.
UNDERWRITER
Transamerica Financial Resources, Inc. (the "Underwriter") is located
at 1150 South Olive Street, Los
Angeles, California 90015-2211. The Underwriter is registered with the
Securities and Exchange Commission and
the National Association of Securities Dealers as a broker-dealer.
The past three years, the Underwriter received from the sales of the
Fund's Contracts total payments of $1,148 in 1993, $873 in 1994, and $282 in
1995.
-9-
<PAGE>
ANNUITY PAYMENTS
Amount of First Annuity Payment
ANNUAL DEPOSIT AND DEFERRED CONTRACTS:
At a Participant's selected Retirement Date, the Accumulation Account
Value based on the Accumulation Unit value established on the last Valuation
date in the second calendar month preceding his/her Retirement Date is applied
to the appropriate Annuity Conversion Rate under the Contract, according to the
Participant's, and any joint annuitant's, attained age at nearest birthday and
the selected form of Annuity, to determine the dollar amount of the first
Variable Annuity payment. The Annuity Conversion rates are based on the
following assumptions: (i) Investment earnings at 3.5% per annum, and (ii)
Mortality - The Annuity Table for 1949, ultimate three year age setback.
IMMEDIATE CONTRACT:
The Net Deposit applicable under the Contract is applied to the Annuity
Conversion Rate for this Contract by the Company according to the Participant's,
and any joint annuitant's, attained age at nearest birthday and selected form of
Annuity, to determine the dollar amount of the first Variable Annuity payment.
The Annuity Conversion Rates are based on the following assumptions: (i)
Investment earnings at 3.5% per annum, and (ii) Mortality - The Annuity Table
for 1949, two year age setback.
Amount of Subsequent Annuity Payments
The amount of a Variable Annuity payment after the first is determined
by multiplying the number of Annuity Units by the Annuity Unit value established
on the last Valuation Date in the second calendar month preceding the date such
payment is due.
The Annuity Conversion Rates reflect the assumed net investment
earnings rate of 3.5%. Each annuity payment will vary as the actual net
investment earnings rate varies from 3.5%. If the actual net investment earnings
rate were equal to the assumed rate, Annuity payments would be level. If the
actual Net Investment Rate were lower than the assumed rate, Annuity payments
would decrease.
Number of Annuity Units
The number of the Participant's Annuity Units is determined at the time
the Variable Annuity is effected by dividing the dollar amount of the first
Variable Annuity payment by the Annuity Unit Value established on the last
Valuation Date in the second calendar month preceding the Retirement Date. The
number of Annuity Units, once determined, will remain fixed except as affected
by the normal operation of the form of Annuity, or by a late Deposit. Late
Deposit means a Deposit received by the Company after the Valuation Date in the
second calendar month preceding the Retirement Date.
Annuity Unit Value
On October 16, 1969, the value of an Annuity Unit was set at $1.00.
Thereafter, at the end of each Valuation Period, the Annuity Unit value is
established by multiplying the value of an Annuity Unit determined at the end of
the immediately preceding Valuation Period by the Investment Performance Factor
for the current Valuation Period, and then multiplying that product by an
assumed earnings offset factor for the purpose of offsetting the effect of an
investment earnings rate of 3.5% per annum which is assumed in the Annuity
Conversion Rates for the Contracts. The result is then reduced by a charge for
mortality and expense risks (see "Charges under the Contract" at page 11 of the
Prospectus).
-10-
<PAGE>
FEDERAL TAX MATTERS
Tax Status of the Contract
Diversification Requirements: Section 817(h) of the Code generally
provides that in order for a variable
contract which is based on a segregated asset account to qualify as an annuity
contract under the Code, the
investments made by such account must be "adequately diversified" in accordance
with Treasury regulations. the
Treasury regulations issued under Section 817(h) (Treas. Reg. ss. 1.817-5)
apply a diversification requirement to the
Fund. The Fund intends to comply with the diversification requirements.
Distribution Requirements: In order to be treated as an annuity
contract for Federal income tax purposes, section 72(s) of the Code requires any
nonqualified contract issued after January 18, 1985, to provide that (a) if any
Contract Owner dies on or after the annuity starting date but prior to the time
the entire interest in the Contract has been distributed, the remaining portion
of such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Contract Owner's death; and (b)
if any Contract Owner dies prior to the annuity starting date, the entire
interest in the Contract will be distributed within five years after the date of
the Contract Owner's death. These requirements will be considered satisfied as
to any portion of the Contract Owner's interest which is payable to or for the
benefit of a "designated beneficiary" and which is distributed over the life of
such "designated beneficiary" or over a period not extending beyond the life
expectancy of that Beneficiary, provided that such distributions begin within
one year of that Contract Owner's death. The Contract Owner's "designated
beneficiary" is the person designated by such Contract Owner as a beneficiary
and to whom ownership of the Contract passes by reason of death and must be a
natural person. However, if the Contract may be continued with the surviving
spouse as the new Contract Owner, an endorsement may be continued with the
surviving spouse as the new Contract Owner. An endorsement has been added to
these Contracts to comply with these new requirements.
Taxation of the Company
The Company at present is taxed as a life insurance company under Part
I of Subchapter L of the Code. The Fund is treated as part of the Company and,
accordingly, will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. The Company does not expect to incur any Federal
income tax liability with respect to investment income and net capital gains
arising from the activities of the Fund retained as part of the reserves under
the Contract. Based on this expectation, it is anticipated that no charges will
be made against the Fund for Federal income taxes. If, in future years, any
Federal income taxes are incurred by the Company with respect to the Fund, then
the Company may make a charge to the Fund.
Under current laws, the Company may incur state and local taxes in
certain jurisdictions. At present, these taxes are not significant. If there is
a material change in applicable state or local tax laws, charges may be made for
such taxes or reserves for such taxes, if any, attributable to the Fund.
-11-
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
REPORT OF INDEPENDENT AUDITORS
Unitholders and Board of Managers, Transamerica Occidental's Separate Account
Fund C
Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
Transamerica Occidental's Separate Account Fund C, including the portfolio of
investments, as of December 31, 1995, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the five
years in the period ended. These financial statements are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental's Separate Account Fund C at December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
Los Angeles, California
February 8, 1996
Ernst & Young LLP
<PAGE>
ANNUAL REPORT
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
Transamerica Occidental Separate Account Fund C's total return for 1995 was
52.84% after fees compared to a total return of 37.58% for the S&P 500. The
Fund's 5-year compound annual return is 26.13% after fees, or a total return of
219.21% versus the S&P 500 compound annual return of 16.59%, or a total return
of 115.46%. Performance was strong across all areas of the Fund's investments.
In contrast to 1994, 1995 was a plentiful year for the financial markets as many
fundamental factors fell into perfect alignment. The economy slowed, inflation
worries abated, the Federal Reserve eased, and interest rates fell. These
factors set the stage for an explosive rally in the stock market. Investors
flocked to equity funds to take advantage of these favorable conditions pouring
over $100 billion into equity mutual funds -- an all-time record.
The outlook for 1996 is for continued economic growth with low inflation.
Productivity gains and fierce worldwide competition will continue to keep
inflation in check. Real economic growth should slow to a more sustainable pace
of 2.0% to 2.5%. Stock market returns should be good but perhaps not as easy to
come by as in 1995.
The Fund's strategy of being a long-term investor in preeminent companies will
continue in 1996. Investments in companies like Intel, Microsoft, Walt Disney,
and Gillette are one of the reasons the Fund has achieved compound returns in
excess of 25%. These companies are not only leading American companies, but over
the years, have developed into leading international companies.
[SIGNATURE]
Gary U. Rolle
Chairman,
Board of Managers
Transamerica
Occidental's
Separate Account Fund C
1
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
Accumulation
End of Quarter Unit Value
------------
<S> <C>
December, 1985................. $ 2.952498
March, 1986.................... 3.411132
June, 1986..................... 3.650298
September, 1986................ 3.219560
December, 1986................. 3.293354
-13-
<PAGE>
March, 1987.................... 3.973170
June, 1987..................... 4.338086
September, 1987................ 4.775859
December, 1987................. 3.708451
March, 1988.................... 4.334971
June, 1988..................... 4.865491
September, 1988................ 5.053693
December, 1988................. 4.958858
March, 1989.................... 5.378070
June, 1989..................... 6.190418
September, 1989................ 6.892439
December, 1989................. 6.623246
March, 1990.................... 6.464164
June, 1990..................... 6.868643
September, 1990................ 5.454107
December, 1990................. 5.884997
March, 1991.................... 7.293164
June, 1991..................... 7.220767
September, 1991................ 7.543333
December, 1991................. 8.280727
March, 1992.................... 8.255356
June, 1992..................... 8.091654
September, 1992................ 8.389207
December, 1992................. 9.384407
March, 1993.................... 9.911080
June, 1993..................... 10.297556
September, 1993................ 11.486086
December, 1993................. 11.467367
March, 1994.................... 11.092828
June, 1994..................... 10.580454
September, 1994................ 11.536962
December, 1994................. 12.290689
March, 1995.................... 13.994468
June, 1995..................... 16.422538
September, 1995................ 18.967824
December, 1995................. 18.785670
</TABLE>
The table above covers the period from December, 1985 to December 31, 1995. The
results shown should not be considered a representation of the gain or loss
which may be realized from an investment made in the Fund today.
2
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
PORTFOLIO OF INVESTMENTS/DECEMBER 31, 1995
<TABLE>
<CAPTION>
Number
of Market
Shares Common Stock Value(1)
- ------- --------------------------------- -----------
-14-
<PAGE>
<C> <S> <C>
CONSUMER & BUSINESS
SERVICES 19.4%
25,000 Autodesk Inc. $ 856,250
22,000 Broderbund Software, Inc.* 1,336,500
15,000 CUC International* 511,875
16,000 Intuit, Inc.* 1,248,000
12,000 Microsoft Corporation* 1,053,000
-----------
5,005,625
FINANCIAL SERVICES 8.5%
22,000 Franklin Resources Inc. 1,108,250
54,000 Schwab (Charles) Inc. 1,086,750
-----------
2,195,000
INDUSTRIAL TECHNOLOGY 17.7%
26,000 Dell Computer Corp.* 900,250
30,000 Intel Corporation 1,702,500
30,000 Millipore Corporation 1,233,750
23,437 Molex Incorporated, CI A 717,758
-----------
4,554,258
INDUSTRIAL GROWTH/
SPECIAL SITUATIONS 12.4%
12,000 Briggs & Stratton Corp. 520,500
18,000 Gillette Company 938,250
31,250 Mattel, Inc. 960,938
12,000 United Healthcare Inc. 784,500
-----------
3,204,188
Number
of Market
Shares Common Stock Value(1)
- ------- --------------------------------- -----------
TELECOMMUNICATIONS &
ENTERTAINMENT 11.7%
16,000 Motorola Inc. 912,000
46,000 Silver King Communications Inc.* 1,598,500
25,000 Tele-Communications, Inc.* 496,875
-----------
3,007,375
TRANSACTION PROCESSING 12.3%
32,359 First Data Corporation 2,164,008
30,000 Transaction Systems Architect* 1,012,500
-----------
3,176,508
TRAVEL & LEISURE 15.5%
20,000 Disney (Walt) Company 1,177,500
82,500 Host Marriott Corporation* 1,082,812
50,000 Mirage Resorts Inc.* 1,725,000
-----------
-15-
<PAGE>
3,985,312
TOTAL COMMON STOCK (97.6%) $25,128,266
Cash, Cash Equivalents and
Receivables Less Liabilities
(2.4%) 609,779
-----------
NET ASSETS (100%) $25,738,045
===========
</TABLE>
- ---------------
(1) Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities.
* Indicates non-income producing stocks.
See notes to financial statements.
3
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment in common stock -- at market value (cost $12,384,471).............. $25,128,266
Cash and cash equivalents..................................................... 600,190
Dividends and interest receivable............................................. 17,064
Miscellaneous accounts receivable............................................. 1,800
-----------
TOTAL ASSETS............................................................. $25,747,320
===========
LIABILITIES:
Due to Transamerica Occidental's general account.............................. $ 9,275
-----------
TOTAL LIABILITIES........................................................ 9,275
NET ASSETS.................................................................... $25,738,045
===========
Net assets attributable to variable annuity contractholders -- 1,340,888.90
units at $18.785670 (Note E)................................................ $25,189,496
Reserves for retired annuitants (Note C)...................................... 548,549
-----------
$25,738,045
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
-16-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net investment loss.............................................. $ (208,742) $ (129,480)
Net realized gain from security transactions..................... 1,213,189 1,234,135
Net unrealized appreciation of investments....................... 8,056,995 64,204
----------- -----------
Net increase in net assets resulting from operations............. 9,061,442 1,168,859
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes)................... 4,460 18,728
Payments to Contract Owners:
Annuity payments............................................... (62,747) (48,557)
Terminations and withdrawals................................... (559,646) (476,885)
Adjustment for mortality guarantees on retired annuitants........ 27,121 21,659
----------- -----------
Total increase in net assets..................................... 8,470,630 683,804
Balance at beginning of year..................................... 17,267,415 16,583,611
----------- -----------
Balance at end of year........................................... $25,738,045 $17,267,415
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME
INCOME:
Dividends.................................................................. $ 84,254
Interest................................................................... 20,579
----------
Total investment income.................................................. 104,833
EXPENSES (Note A):
Investment management services............................................. 67,198
Mortality and expense risk charges......................................... 246,377
----------
Total expenses........................................................... 313,575
----------
Net investment loss........................................................... (208,742)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
-17-
<PAGE>
Realized gain from security transactions...................................... 1,213,189
Change in unrealized appreciation of investments.............................. 8,056,995
----------
Net realized and unrealized gain on investments............................... 9,270,184
----------
Net increase in net assets resulting from operations..................... $9,061,442
==========
</TABLE>
See notes to financial statements.
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940 as an
open-end diversified investment company. The funds investment objective is
long-term capital growth.
Investment in Securities
Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities. The cost of
securities purchased (excluding short-term investments) and proceeds from sales
aggregated $4,047,672 and $4,977,340 in 1995. Investments in common stocks have
a cost basis for federal income tax purposes of $12,384,471 at December 31,
1995. The Fund had gross unrealized gains of $12,743,795 at December 31, 1995
related to these investments. Realized gains and losses on investments are
determined using the average cost method.
Cash Equivalents
Cash equivalents consist of money market funds invested daily from excess
cash balances on deposit.
5
<PAGE>
Federal Income Taxes
Operations of the Fund will form a part of, and be taxed with, those of
Transamerica Occidental Life, which is taxed as a "life insurance company" under
the Internal Revenue Code. The Fund will not be taxed as a regulated investment
company under subchapter M of the Internal Revenue Code. As under current law,
income from assets maintained in the Fund for the exclusive benefit of
participants is in general not subject to federal income tax, Transamerica
Occidental Life will not charge the Fund for income taxes applicable to its
investment in the Fund.
Expenses
-18-
<PAGE>
The value of the Fund has been reduced by charges on each Valuation Date
for investment management services on the basis of an annual rate of 0.3% and
mortality and expense risks on the basis of an annual rate of 1.1%. These
charges are paid to Transamerica Occidental Life.
Other
The fund follows industry practice and records security transactions on the
trade date. Dividend income is recognized on the ex-dividend date, and interest
income is recognized on an accrual basis.
NOTE B -- TRANSAMERICA OCCIDENTAL LIFE INVESTMENT
As of December 31, 1995, Transamerica Occidental Life had deposited
$1,000,000 (current value of $19,169,930) in the Fund under an amendment to the
California Insurance Code which permits domestic life insurers to allocate
amounts to such accounts. Transamerica Occidental Life is entitled to withdraw
all but $100,000 of its proportionate share of the Fund, in whole or in part, at
any time.
NOTE C -- RESERVES FOR RETIRED ANNUITANTS
Reserves for retired annuitants are computed using The Annuity Table for
1949, ultimate, two year age setback and an assumed investment earnings rate of
3-1/2%.
NOTE D -- REMUNERATION
No remuneration was paid during 1995 by Transamerica Occidental's Separate
Account Fund C to any member of the Board of Managers or officers of Fund C or
any affiliated person of such members or officers.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for an accumulation unit outstanding throughout each year are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Investment income............................ $ .070 $ .071 $ .080 $ .144 $ .121
Expenses..................................... .256 .161 .146 .118 .101
------- -------- -------- ------ ------
Net investment income........................ (.151) (.090) (.066) .026 .020
Net realized and unrealized gain on
investments................................ 6.646 .914 2.149 1.077 2.376
------- -------- -------- ------ ------
Net increase in
-19-
<PAGE>
accumulation unit value............... 6.495 .824 2.083 1.103 2.396
Accumulation unit value:
Beginning of year.......................... 12.291 11.467 9.384 8.281 5.885
------- -------- -------- ------ ------
End of year................................ $18.786 $ 12.291 $ 11.467 $9.384 $8.281
======= ======= ======= ====== ======
Ratio of expenses to average accumulation
fund balance............................... 1.41 % 1.43 % 1.43 % 1.43% 1.43%
Ratio of net investment (loss) income to
average accumulation fund balance.......... (.94)% (.80)% (.65)% .31% .28%
Portfolio turnover........................... 18.11 % 30.84 % 42.04 % 43.07% 32.90%
Number of accumulation units outstanding
at end of year (000 omitted)............... 1,341 1,373 1,412 1,452 1,472
</TABLE>
7
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
REPORT OF INDEPENDENT AUDITORS
Unitholders and Board of Managers, Transamerica Occidental's Separate Account
Fund C
Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of assets and liabilities of
Transamerica Occidental's Separate Account Fund C, including the portfolio of
investments, as of December 31, 1995, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements are the
responsibility of Fund's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Transamerica Occidental's
Separate Account Fund C at December 31, 1995, the results of its operations for
the year then ended, the changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
-20-
<PAGE>
Los Angeles, California
February 8, 1996
8
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE [LOGO]
ACCOUNT FUND C
MANAGERS AND OFFICERS
DONALD E. CANTLAY, Manager
RICHARD N. LATZER, Manager
DeWAYNE W. MOORE, Manager
GARY U. ROLLE, Chairman of the Board
PETER J. SODINI, Manager TRANSAMERICA
BARBARA A. KELLEY, President OCCIDENTAL'S
PAUL L. NORRIS, Vice President SEPARATE
SALLY S. YAMADA, Treasurer and ACCOUNT FUND C
Assistant Secretary ANNUAL FINANCIAL
THOMAS M. ADAMS, Secretary REPORT
REGINA M. FINK, Assistant Secretary DECEMBER 31, 1995
Distributor:
Transamerica Financial Resources,
Inc.
1150 South Olive
Los Angeles, California 90015-2211
Tel. (800) 245-8250
Custodian:
Mellon Bank Securities Trust
1 Mellon Bank Ctr.
Pittsburgh, PA 15258
Tel. (800) 234-6356
Auditors:
Ernst & Young LLP
515 South Flower Street
Los Angeles, California 90071
Tel. (213) 977-3200
Transamerica Occidental [LOGO]
Life Insurance Company
1150 South Olive
Los Angeles,
-21-
<PAGE>
California 90015-2211
Phone (800) 821-9090
This report cannot be used as sales literature.
TFM 1037 Ed. 2-96
-22-
<PAGE>
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1995
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1995
Audited Consolidated Financial Statements
Report of Independent Auditors........................... 1
Consolidated Balance Sheet............................... 2
Consolidated Statement of Income......................... 3
Consolidated Statement of Shareholder's Equity........... 4
Consolidated Statement of Cash Flows..................... 5
Notes to Consolidated Financial Statements............... 6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
-23-
<PAGE>
We have audited the accompanying consolidated balance sheet of Transamerica
Occidental Life Insurance Company and Subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note A, the Company changed its method of accounting for certain
debt securities effective January 1, 1994.
ERNST & YOUNG LLP
February 14, 1996
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1995 1994
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
-24-
<PAGE>
Fixed maturities available for sale $ 25,997,403 $ 21,006,469
Equity securities available for sale 307,881 201,011
Mortgage loans on real estate 565,086 366,727
Investment real estate 38,376 69,246
Policy loans 426,377 412,938
Other long-term investments 62,536 50,079
Short-term investments 211,500 144,163
--------------------- ---------------------
27,609,159 22,250,633
Cash 49,938 42,916
Accrued investment income 394,008 363,121
Accounts receivable 174,266 202,456
Reinsurance recoverable on paid and unpaid losses 1,957,160 1,490,491
Deferred policy acquisitions costs 1,974,211 2,480,474
Deferred tax assets - 164,513
Other assets 257,333 241,733
Separate account assets 2,533,424 1,666,451
--------------------- ---------------------
$ 34,949,499 $ 28,902,788
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 22,057,773 $ 19,281,515
Reserves for future policy benefits 5,245,233 4,846,072
Policy claims and other 542,511 555,289
--------------------- ---------------------
27,845,517 24,682,876
Income tax liabilities 587,801 67,870
Accounts payable and other liabilities 534,866 567,300
Separate account liabilities 2,533,424 1,666,451
--------------------- ---------------------
31,501,608 26,984,497
Shareholder's equity:
Common Stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587 27,587
Additional paid-in capital 333,578 319,279
Retained earnings 2,171,412 1,921,232
Foreign currency translation adjustments (23,618) (28,347)
Net unrealized investment gains (losses) 938,932 (321,460)
--------------------- ---------------------
3,447,891 1,918,291
--------------------- ---------------------
$ 34,949,499 $ 28,902,788
===================== =====================
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1995 1994 1993
--------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 1,811,888 $ 1,430,019 $ 1,212,680
Net investment income 1,972,759 1,771,575 1,724,301
Other operating revenue - 13,273 -
Net realized investment gains 28,112 20,730 44,887
--------------- --------------- ---------------
TOTAL REVENUES 3,812,759 3,235,597 2,981,868
Benefits:
Benefits paid or provided 2,587,468 2,116,125 1,993,013
Increase in policy reserves and liabilities 236,205 204,159 121,325
--------------- --------------- ---------------
2,823,673 2,320,284 2,114,338
Expenses:
Amortization of deferred policy acquisition costs 182,123 176,033 169,457
Salaries and salary related expenses 145,681 133,591 127,130
Other expenses 200,339 190,500 182,193
--------------- --------------- ---------------
528,143 500,124 478,780
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,351,816 2,820,408 2,593,118
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 460,943 415,189 388,750
Provision for income taxes 149,647 143,491 138,997
--------------- --------------- ---------------
NET INCOME $ 311,296 $ 271,698 $ 249,753
=============== ===============
===============
</TABLE>
-26-
<PAGE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Foreign Unrealized
Additional Currency Investment
Common Stock Paid-in Retained Translation Gains
Shares Amount Capital Earnings Adjustments (Losses)
(In thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 2,206,933 $ 27,587 $ 229,900 $ 1,495,781 $ (17,314) $
74,643
Net income 249,753
Capital contributions from parent 89,379
Dividends declared (56,000)
Change in foreign currency
translation adjustments (3,740)
Change in net unrealized
investment gains (losses) (11,061)
Balance at December 31, 1993 2,206,933 27,587 319,279 1,689,534 (21,054)
63,582
Cumulative effect of change in
accounting for investments 795,187
Net income 271,698
Dividends declared (40,000)
Change in foreign currency
translation adjustments (7,293)
Change in net unrealized
investment gains (losses) (1,180,229)
Balance at December 31, 1994 2,206,933 27,587 319,279 1,921,232 (28,347)
(321,460)
Net income 311,296
Capital contributions from parent 14,298
Dividends declared (61,114)
Change in foreign currency
translation adjustments 4,728
Change in net unrealized
-27-
<PAGE>
investment gains (losses) 1,260,392
Balance at December 31, 1995 2,206,933 $ 27,587 $ 333,577 $ 2,171,414 $ (23,619) $
938,932
============ ========== ============= ============
============ =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1995 1994 1993
----------------- ------------------ ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 311,296 $ 271,698 $ 249,753
Adjustments to reconcile net income to net cash provided by operating
activities:
Changes in:
Reinsurance recoverable (466,669) (290,926) (175,952)
Accounts receivable (58,866) (31,934) (183,598)
Policy liabilities 1,273,723 804,296 921,067
Other assets, accounts payable and other
liabilities, and income taxes (252,362) 133,499 135,658
Policy acquisition costs deferred (381,806) (394,858) (359,146)
Amortization of deferred policy acquisition costs 191,313 182,312 232,309
Net realized gains on investment transactions (37,247) (27,008) (107,769)
Other (22,917) (124,644) (107,831)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 556,465 522,435
604,491
INVESTMENT ACTIVITIES
Purchases of securities (5,667,539) (9,354,375) (11,878,171)
Purchases of other investments (330,503) (143,771) (157,368)
Sales of securities 3,587,367 4,607,572 5,054,460
Sales of other investments 155,084 143,815 177,064
-28-
<PAGE>
Maturities of securities 341,485 2,251,763 4,433,933
Net change in short-term investments (67,337) 38,597 (57,625)
Other (35,384) (25,354) (25,655)
----------------- ----------------- -----------------
NET CASH USED BY
INVESTING ACTIVITIES (2,016,827) (2,481,753)
(2,453,362)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 5,151,428 4,434,726 4,166,316
Withdrawals from policyholder contract deposits (3,624,044) (2,419,915)
(2,313,176)
Capital contributions from parent or its affiliate - - 31,300
Dividends paid to parent (60,000) (40,000) (56,000)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,467,384 1,974,811
1,828,440
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH 7,022 15,493
(20,431)
Cash at beginning of year 42,916 27,423 47,854
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 49,938 $ 42,916 $
27,423
================= =================
=================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engages in providing life insurance,
-29-
<PAGE>
pension and annuity products, reinsurance, structured settlements and
investments which are distributed through a network of independent and
company-affiliated agents and independent brokers. The Company's customers are
primarily in the United States and Canada.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying combined
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In March 1995, the Financial Accounting Standards
Board issued a new standard on accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The Company will adopt the
standard in 1996. The standard required that an impaired long-lived asset be
measured based on the fair value of the asset to be held and used or the fair
value less cost to sell of the asset to be disposed of. When adopted, this
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for impairment of loans, which requires that an impaired
loan be measured based on the present value of expected cash flows discounted at
the loan's effective interest rate or the fair value of the collateral if the
loan is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for certain investments in debt and equity securities
which requires the Company to report at fair value, with unrealized gains and
losses excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs, with any resultant adjustment also excluded
from earnings and reported on an after tax basis in shareholder's equity. As of
January 1, 1994, the impact of adopting the standard was to increase
shareholder's equity by $795.2 million (net of deferred policy acquisition cost
adjustment of $367.2 million and deferred taxes of $428.2 million) with no
effect on net income.
Principles of Consolidation: The financial statements include the accounts of
TOLIC and its subsidiaries, all of which operate primarily in the life insurance
industry. TOLIC is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. All significant intercompany balances and transactions have been
eliminated in consolidation.
<PAGE>
-30-
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995
-8-
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments: Investments are shown on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value
effective as of January 1, 1994. The Company does not carry any debt
securities principally for the purpose of trading. Prepayments are
considered in establishing amortization periods for premiums and
discounts and amortized cost is further adjusted for other-than-temporary
fair value declines. Derivative instruments are also reported as a
component of fixed maturities and are carried at fair value if designated
as hedges of securities available for sale or at amortized cost if
designated as hedges of liabilities. See Note M - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Investment real estate--at cost, less allowances for depreciation and
possible impairment.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investment are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and deferred income taxes as a separate component of
-31-
<PAGE>
shareholder's equity and, accordingly, have no effect on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if unrealized gains or losses on securities available for sale were realized.
Changes in such adjustments are included in net unrealized investment
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
gains or losses on an after tax basis as a separate component of shareholder's
equity and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Investment risks associated with fair value
changes are borne by the contract holders. Accordingly, investment income and
realized gains and losses attributable to Separate Accounts are not reported in
the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on universal life and investment products
represent premiums received plus accumulated interest, less mortality charges on
universal life products and other administration charges as applicable under the
contract. Interest credited to these policies ranged from 2.8% to 10% in 1995
and 1994, and from 3.0% to 10.5% in 1993.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and annuities with life contingencies.
The reserve for future policy benefits for traditional life insurance products
has been provided on a net-level premium method based upon estimated investment
yields, withdrawals, mortality, and other assumptions which were appropriate at
the time the policies were issued. Such estimates are based upon past experience
-32-
<PAGE>
with a margin for adverse deviation. Interest assumptions range from 4.3% in
earlier years to 9.5% on later issues. Reserves for future policy benefits are
evaluated as if unrealized gains or losses on securities available for sale were
realized and adjusted for any resultant premium deficiencies. Changes in such
adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1995, 1994, or 1993.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances. In 1993, the Company adopted this
method of accounting for its single premium immediate annuity contracts issued
under structured settlement arrangements based on a determination that such
contracts do not involve significant mortality risk. Accordingly, amounts
received by the Company as payments under these contracts are no longer included
in revenues but are reported as policyholder contract deposits.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns filed by Transamerica Corporation, which
by the terms of a tax sharing agreement generally requires TOLIC to accrue and
settle income tax obligations in amounts that would result from filing separate
tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
-33-
<PAGE>
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
for independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained for
independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
<PAGE>
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
Reclassifications: Certain reclassifications of 1994 and 1993 amounts have
been made to conform with the 1995
- -----------------
presentation.
NOTE B--INVESTMENTS
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale are as follows
(in thousands):
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gain Loss Value
---------------- --------------- --------------- -----------
December 31, 1995
- -----------------
-34-
<PAGE>
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 92,958 $ 6,840 $ 99,798
Obligations of states and political
subdivisions 229,028 7,832 $ 572 236,288
Foreign governments 109,632 9,068 118,700
Corporate securities 11,945,631 1,126,903 30,58 13,041,953
Public utilities 4,338,637 390,237 2,909 4,725,965
Mortgage-backed securities 7,277,976 487,190 15,092 7,750,074
Redeemable preferred stocks 21,372 3,757 504 24,625
------ ----- --- ------
$ 24,015,234 $ 2,031,827 $ 49,658 $ 25,997,403
================ ================ ================
================
December 31, 1994
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 218,404 $ 535 $ 19,885 $ 199,054
Obligations of states and political
subdivisions 220,127 3,586 8,123 215,590
Foreign governments 210,789 1,551 6,367 205,973
Corporate securities 9,517,763 133,191 396,488 9,254,466
Public utilities 3,948,366 48,455 234,885 3,761,936
Mortgage-backed securities 7,791,957 105,175 530,362 7,366,770
Redeemable preferred stocks 3,140 - 460 2,680
----- - --- -----
$ 21,910,546 $ 292,493 $ 1,196,570 $ 21,006,469
================ ================ ================
================
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale at December 31,
1995, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1996 $ 590,327 $ 603,732
-35-
<PAGE>
Due in 1997-2000 3,016,991 3,150,785
Due in 2001-2005 3,714,128 3,962,712
Due after 2005 9,394,440 10,505,474
------------ ---------------
16,715,886 18,222,703
Mortgage-backed securities 7,277,976 7,750,075
Redeemable preferred stock 21,372 24,625
---------------- ----------------
$ 24,015,234 $ 25,997,403
================ ===============
The cost and fair value of equity securities available for sale are as follows
(in thousands):
1995 1994
--------------- -----------
Cost $ 150,968 $ 142,831
26,316 26,m
Gross unrealized gain 163,264 69,693
Gross unrealized loss (6,351) (11,513)
--------------- ---------------
Fair values $ 307,881 $ 201,011
=============== ===============
The components of the carrying value of investment real estate are as follows (in thousands):
1995 1994
Cost $ 48,913 $ 89,992
26,316 26,m
Allowance for depreciation (10,537) (20,746)
--------------- ---------------
$ 38,376 $ 69,246
=============== ===============
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
As of December 31, 1995, the Company did not hold a total investment in any one
issuer, other than the United States Government or a Unites States Government
agency or authority, which exceeded 10% of total shareholder's equity.
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements were $22.0 million at December 31, 1995.
<TABLE>
<CAPTION>
-36-
<PAGE>
Net investment income by major investment category is summarized as follows (in thousands):
1995 1994 1993
<S> <C> <C> <C>
Fixed maturities $ 1,904,519 $ 1,705,618 $ 1,657,178
Equity securities 3,418 5,587 7,624
Mortgage loans on real estate 40,702 40,030 44,230
Investment real estate 3,209 5,024 4,232
Policy loans 25,641 24,614 23,219
Other long-term investments 2,353 7,173 7,973
Short-term investment 13,286 9,689 5,584
---------------- ---------------- ----------------
1,993,128 1,797,735 1,750,040
Investment expenses (20,369) (26,160) (25,739)
---------------- ---------------- ----------------
$ 1,972,759 $ 1,771,575 $ 1,724,301
================ ================ ================
Significant components of net realized investment gains are as follows (in
thousands):
1995 1994 1993
---------------- ---------------- ----------
Net gains on disposition of investments in:
Fixed maturities $ 52,889 $ 7,181 $ 149,145
Equity securities 5,637 32,374 12,491
Other 2,327 2,546 1,607
---------------- ---------------- ----------------
60,853 42,101 163,243
Provision for impairment (23,551) (15,092) (55,504)
Accelerated amortization of DPAC (9,190) (6,279) (62,852)
---------------- ---------------- ----------------
$ 28,112 $ 20,730 $ 44,887
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1995 1994 1993
Gross gains $ 61,504 $ 46,702 $ 151,232106,649
Gross losses (8,615) (39,521) (2,087)
---------------- ---------------- ----------------
$ 52,889 $ 7,181 $ 149,145
================ ================ ================
</TABLE>
<PAGE>
NOTE B--INVESTMENTS (Continued)
-37-
<PAGE>
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Fixed maturities $ 71,429 $ 92,145
Equity securities - 395
Mortgage loans on real estate 21,516 23,479
Investment real estate 16,207 14,656
Other long-term investments 11,025 11,125
---------------- ---------------
$ 120,177 $ 141,800
================ ===============
</TABLE>
<TABLE>
<CAPTION>
The components of changes in net unrealized investment gains (losses) in the
accompanying consolidated statement of shareholder's equity are as follows (in
thousands):
1995 1994 1993
---------------- ---------------- ----------
Changes in unrealized gains (losses):
<S> <C> <C> <C>
Fixed maturities $ 2,886,246 $ (2,494,478) $ 10
Equity securities 98,733 (39,756) (15,287)
---------------- ---------------- ----------------
2,984,979 (2,534,234) (15,277)
Change in related DPAC adjustments (706,915) 718,498 -
Change in policy liability adjustments (339,000) - -
Related deferred taxes (678,672) 635,507 4,216
---------------- ---------------- ----------------
$ 1,260,392 $ (1,180,229) $ (11,061)
================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
Proceeds from disposition of investment in fixed maturities available for sale
were $3,802.6 million in 1995, $6,737.7 million in 1994 and $9,187.1 million in
1993.
<PAGE>
-38-
<PAGE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1995 1994 1993
----------------- ---------------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 2,480,474 $ 1,929,332 $ 1,811,992
Cumulative effect of change in
accounting for investments - (367,154) -
Amounts deferred:
Commissions 298,698 305,858 288,195
Other 83,108 89,000 70,951
Amortization attributed to:
Net gain on disposition of investments (9,190) (6,279) (62,852)
Operating income (182,123) (176,033) (169,457)
Fair value adjustment (706,915) 718,498 -
Foreign currency translation adjustment 10,159 (12,748) (9,497)
---------------- ---------------- ----------------
Balance at end of year $ 1,974,211 $ 2,480,474 $ 1,929,332
================ ================ ================
</TABLE>
NOTE D--POLICY LIABILITIES
<TABLE>
<CAPTION>
Components of policyholder contract deposits are as follows (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Liabilities for investment-type products $ 17,948,652 $ 15,862,970
Liabilities for non-traditional life insurance
products 4,109,121 3,418,545
------------ -------------
$ 22,057,773 $ 19,281,515
=============== ================
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $339 million as of December 31, 1995.
-39-
<PAGE>
<PAGE>
NOTE E--INCOME TAXES
<TABLE>
<CAPTION>
Components of income tax liabilities are as follows (in thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Current tax liabilities $ 35,689 $ 67,870
Deferred tax liabilities 552,112 -
---------------- ---------------
$ 587,801 $ 67,870
================ ===============
</TABLE>
<TABLE>
<CAPTION>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1995 1994
---------------- -----------
<S> <C> <C>
Deferred policy acquisition costs $ 696,728 $ 650,207
Unrealized investment gains (losses) 505,579 (173,094)
Life insurance policy liabilities (601,875) (586,025)
Provision for impairment of investments (42,062) (49,630)
Other-net (6,258) (5,971)
---------------- ---------------
$ 552,112 $ (164,513)
================ ===============
</TABLE>
TOLIC offsets all deferred tax assets and liabilities and presents them in a
single amount in the consolidated balance sheet.
<TABLE>
<CAPTION>
Components of provisions for income taxes are as follows (in thousands):
1995 1994 1993
---------------- ---------------- -----------
<S> <C> <C> <C>
-40-
<PAGE>
Current tax expense: $ 115,614 $ 204,087 $ 162,408
Deferred tax expense (benefit) 34,033 (60,596) (26,947)997
Adjustment for enacted change in tax laws - - 3,536
---------------- ---------------- ----------------
$ 149,647 $ 143,491 $ 138,997
================ ================
================
</TABLE>
<PAGE>
NOTE E--INCOME TAXES (Continued)
<TABLE>
<CAPTION>
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1995 1994 1993
---------------- ---------------- ----------
Income before income taxes:
<S> <C> <C> <C>
Income from U.S. operations $ 425,946 $ 389,778 $ 367,560
Income from foreign operations 34,997 25,411 21,190
--------------- --------------- ---------------
460,943 415,189 388,750
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 161,330 145,316 136,063
Income not subject to tax (685) (910) (535)
Low income housing credits (3,137) (902) -
Adjustment for enacted change in tax laws - - 3,536
Other, net (7,861) (13) (67)
--------------- --------------- ---------------
$ 149,647 $ 143,491 $ 138,997
=============== =============== ===============
</TABLE>
Low income housing credits are recognized over the productive life of acquired
assets. In 1995, the Company recognized a $4.4 million tax benefit related to
the favorable settlement of a prior year tax matter.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
-41-
<PAGE>
policyholders' surplus account balance at December 31, 1995 was $138 million. At
December 31, 1995, $1,788.9 million was available for payment of dividends
without such tax consequences. No income taxes have been provided on the
policyholders' surplus account since the conditions that would cause such taxes
are remote.
Income taxes of $153.3 million, $195.4 million and $162.2 were paid principally
to the parent in 1995, 1994 and 1993, respectively.
<PAGE>
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1995
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $ 264,153,296
==================== =================== ===================
===================
Premiums and other
considerations $ 1,857,449 $ 1,079,303 $ 1,033,752 $ 1,811,898
==================== =================== ===================
===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 849,800 $ 2,587,468
==================== =================== ===================
===================
1994
Life insurance in force,
at end of year $ 191,884,093 $ 115,037,553 $ 158,882,366 $ 235,728,906
==================== =================== ===================
===================
Premiums and other
considerations $ 1,085,555 $ 689,615 $ 1,034,079 $ 1,430,019
-42-
<PAGE>
==================== =================== ===================
===================
Benefits paid or
provided $ 2,338,370 $ 867,341 $ 645,096 $ 2,116,125
==================== =================== ===================
===================
1993
Life insurance in force,
at end of year $ 180,902,966 $ 95,719,350 $ 149,728,434 $ 234,912,050
==================== =================== ===================
===================
Premiums and other
considerations $ 1,273,293 $ 953,489 $ 892,876 $ 1,212,680
==================== =================== ===================
===================
Benefits paid or
provided $ 2,142,424 $ 633,782 $ 484,371 $ 1,993,013
==================== =================== ===================
===================
</TABLE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before
<PAGE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
retirement. Annual contributions to the plans generally include a provision for
current service costs plus amortization of prior service costs over periods
ranging from 10 to 30 years. Assets of the plans are invested principally in
publicly traded stocks and bonds.
The Company's total pension costs recognized for all plans were $2.5 million in
1995, $4.9 million in 1994 and $4.1 million in 1993, of which $2.0 million in
1995, $4.7 million in 1994 and $3.3 million in 1993, respectively, related to
the plan sponsored by Transamerica Corporation.
The plans sponsored by the Company are not material to the consolidated
financial position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
-43-
<PAGE>
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1995, 1994 and 1993.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include premiums for employee benefits (none in 1995, $5.5 million in 1994, and
$7.3 million in 1993), loans and advances, investments in a money market fund
managed by an affiliated company, rental of space, and other specialized
services. At December 31, 1995, pension funds administered for these related
companies aggregated $933.3 million and the investment in an affiliated money
market fund, included in short-term investments, was $55.2 million.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies in exchange for consideration with a fair value of $49.7
million, comprising mortgage loans of $35.1 million and cash of $14.6 million.
The excess of fair value of the consideration received over the book value of
the real estates transferred, net of related tax payable to the parent, is
included as a capital contribution.
During 1993, the Company transferred equity securities with a cost of $110.7
million and agreed to pay $31.3 million to Transamerica Corporation in exchange
for a note receivable of $200 million. The excess of fair value of the
consideration received over the cost of the assets transferred is included as a
capital contribution. The note matures in 2013 and bears interest at 7%.
NOTE I--OTHER OPERATING REVENUE
In 1994, the Company disposed of an investment in an affiliate which had been
accounted for under the equity method. Total consideration of $23.3 million was
received from the sale, resulting in income of $13.3 million.
<PAGE>
NOTE J-LEASES
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expense for equipment and properties was $25.3
million in 1995, $17.9 million in 1994, and $15 million in 1993.
The following is a schedule by years of future minimum
rental payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1995 (in
thousands):
Year ending December 31:
-44-
<PAGE>
1996 $ 20,011
1997 15,298
1998 11,429
1999 8,423
2000 5,897
Thereafter 24,445
$ 85,503
NOTE K--LITIGATION
The Company is a defendant in various legal actions arising from the normal
course of operations. Contingent liabilities arising from litigation are not
considered material in relation to the consolidated financial position and
results of operations of the Company.
NOTE L--REGULATORY MATTERS
<TABLE>
<CAPTION>
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of the Company's state of incorporation. Such
regulations include the risk based capital requirement and the restriction on
the payment of dividends. Generally, dividends during any year may not be paid,
without prior regulatory approval, in excess of the greater of 10% of the
Company's statutory capital and surplus as of the preceding year end or the
insurance Company's statutory net income from operations for the preceding year.
The insurance department of the domiciliary state recognizes these amounts as
determined in conformity with statutory accounting practices prescribed or
permitted by the insurance department, which vary in some respects from
generally accepted accounting principles. The Company's statutory net income and
statutory capital and surplus which are represented by TOLIC's net income and
capital and surplus are summarized as follows (in thousands):
1995 1994 1993
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 131,607 $ 175,850 $ 192,978
Statutory capital and surplus, at
end of year 1,115,691 947,164 801,722
</TABLE>
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
-45-
<PAGE>
follows (in thousands):
December 31
-----------------------------------------
1995 1994
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities $ 25,997,403 $ 25,997,403 $ 21,006,469 $ 21,006,469
Equity securities 307,881 307,881 201,011 201,011
Mortgage loans on real estate 565,086 671,835 366,727 382,164
Policy loans 426,377 408,088 412,938 383,531
Short-term investments 211,500 211,500 144,163 144,163
Cash 49,938 49,938 42,916 42,916
Accrued investment income 394,008 394,008 363,121 363,121
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 8,080,139 7,518,211 7,425,778 6,898,534
Single premium immediate annuities 4,123,954 4,677,652 3,735,691
3,510,764
Guaranteed investment contracts 2,958,850 2,998,047 2,382,195 2,336,682
Other deposit contracts 2,785,709 2,848,301 2,319,306 2,243,992
Off-balance-sheet assets (liabilities):
Exchange derivatives designated as
hedges of liabilities in a:
Receivable position - 23,881 - 4,974
Payable position - (3,086) - (24,625)
</TABLE>
Exchange derivatives, which require no premium payments at initiation, consist
principally of interest rate swap agreements and conditional derivatives, which
require premium payments at initiation, consist principally of swaptions and
interest rate floor and cap agreements.
The Company enters into various interest rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment
-46-
<PAGE>
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
income. The differential to be paid or received on those interest rate swap
agreements that are designated as hedges of financial liabilities is recorded on
an accrual basis as a component of benefits paid or provided. While the Company
is not exposed to credit risk with respect to the notional amounts of the
interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1995, there were no unfunded
interest rate swap agreements.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. The conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
The information on derivative instruments is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1995
Interest rate swap agreements designated as hedges of securities available for
sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 235,173 7.99% $ (9,307)
Floating rate interest 140,000 5.65% 137
Floating rate interest based on one
-47-
<PAGE>
index and receives floating rate
interest based on another index 65,000 242
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 741
Floating rate interest 934,678 6.17% 17,169
Floating rate interest based on one
index and receives floating rate
interest based on another index 152,000 (108)
560,500 6.46% 35,820
250,000 5.93% 792
1,367,140 5.52% 55,540
December 31, 1994
Interest rate swap agreements designated as hedges of securities available for
sale, where TLC pays:
Fixed rate interest 178,777 7.20% (1,305)
Floating rate interest 96,000 4.96% (2,975)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
Pays floating rate interest: 601,545 5.88% (19,651)
Interest rate floor agreements 560,500 6.46% 10,948
Interest rate cap agreements 100,000 5.00% 1,333
Swaptions and other 200,000 7.00% 5,313
</TABLE>
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
<PAGE>
NOTE M--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1995, the Company had no significant concentration of credit risk.
-48-
<PAGE>
Exhibit B
Transamerica Occidental's Separate Account Fund C
Semi-Annual Report
-49-
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
SEMI-ANNUAL REPORT
Transamerica Occidental's Separate Account Fund C's total return for the first
six months of 1996 was 10.33% after fees compared to a total return of 10.10%
for the S&P 500. The Fund's investments in selected technology stocks and
financial services helped performance while investments in telecommunications
subtracted from the Fund's performance.
In the first half of 1996, a divergence in performance developed between the
stock and bond markets. Lead by strong inflows into equity mutual funds, the
stock market picked up where it left off last year. In contrast, the fixed
income markets began to worry about the strong economy and inflation. The
30-year Treasury yield increased from 6.03% to 6.80% at the end of June. The
performance divergence between stocks and bonds cannot continue. In the second
half of this year, stocks may pause or correct to bring equity valuations more
into line with interest rate levels. In addition, equity mutual fund inflows
have shown recent signs of slowing from their earlier torrid pace.
A correction or pause in the stock market would be perfectly in keeping within a
long-term bull market. The markets have been worrying about resurging inflation
since the bull market started in 1982. From time to time, certain pockets of
price or wholesale inflation have emerged, but they have also proven to be
unsustainable. For the remainder of this year, we expect economic growth to slow
from its recent level. This should calm the bond market and set the stage for
decent stock market returns in the second half of 1996.
The Fund's long-term investment strategy in high quality companies remains
intact. However, in the first half of this year, the Fund did reassess its
investments in the telecommunications sector and sold its positions in Motorola
Corp. and Telecommunications Inc. Competition in this sector has increased
markedly while investment spending continues to be heavy. Returns to
shareholders could be delayed for several years. The Fund has also stayed away
from small, aggressive growth stocks that are currently overvalued.
Gary U. Rolle
Gary U. Rolle
Chairman,
Board of Managers
Transamerica Occidental's
Separate Account Fund C
1
0*0*0*
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
-50-
<PAGE>
Accumulation
End of Quarter Unit Value
------------
Accumulation
End of Quarter Unit Value
------------
March, 1986.................... $ 3.411132
June, 1986..................... 3.650298
September, 1986................ 3.219560
December, 1986................. 3.293354
March, 1987.................... 3.973170
June, 1987..................... 4.338086
September, 1987................ 4.775859
December, 1987................. 3.708451
March, 1988.................... 4.334971
June, 1988..................... 4.865491
September, 1988................ 5.053693
December, 1988................. 4.958858
March, 1989.................... 5.378070
June, 1989..................... 6.190418
September, 1989................ 6.892439
December, 1989................. 6.623246
March, 1990.................... 6.464164
June, 1990..................... 6.868643
September, 1990................ 5.454107
December, 1990................. 5.884997
March, 1991.................... 7.293164
June, 1991..................... $ 7.220767
September, 1991................ 7.543333
December, 1991................. 8.280727
March, 1992.................... 8.255356
June, 1992..................... 8.091654
September, 1992................ 8.389207
December, 1992................. 9.384407
March, 1993.................... 9.911080
June, 1993..................... 10.297556
September, 1993................ 11.486086
December, 1993................. 11.467367
March, 1994.................... 11.092828
June, 1994..................... 10.580454
September, 1994................ 11.536962
December, 1994................. 12.290689
March, 1995.................... 16.994468
June, 1995..................... 16.422538
September, 1995................ 18.967824
December, 1995................. 18.785670
March, 1996.................... 19.082640
June, 1996..................... 20.725819
The table above covers the period from March, 1986 to June 30, 1996. The results
shown should not be considered a representation of the gain or loss which may be
realized from an investment made in the Fund today.
2
-51-
<PAGE>
!0*((
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
Number
of Market
Shares Common Stock Value (1)
- ------ ---------------------------------------------------
CONSUMER & BUSINESS SERVICES (14.5%)
25,000 Autodesk Inc............................ $ 746,875
25,000 Broderbund Software, Inc.*.............. 806,250
23,000 Intuit, Inc.*........................... 1,086,750
12,000 Microsoft Corporation*.................. 1,441,500
-----------
4,081,375
FINANCIAL SERVICES (13.8%)
22,000 Franklin Resources Inc.................. 1,342,000
55,000 Schwab (Charles) Inc.................... 1,347,500
5,000 Wells Fargo & Company................... 1,195,625
-----------
3,885,125
INDUSTRIAL TECHNOLOGY (19.5%)
26,000 Applied Materials, Inc.*................ 762,500
26,000 Dell Computer Corp.*.................... 1,322,750
30,000 Intel Corporation....................... 2,203,125
28,000 Millipore Corporation................... 1,172,500
-----------
5,460,875
INDUSTRIAL GROWTH/
SPECIAL SITUATIONS (19.8%)
25,000 Briggs & Stratton Corp.................. 1,028,125
18,000 Gillette Company........................ 1,122,750
21,000 McGraw-Hill Companies................... 960,750
46,000 Silver King Communications Inc.*........ 1,380,000
45,000 Smith's Food & Drug Centers............. 1,068,750
-----------
5,560,375
Number
of Market
Shares Common Stock Value (1)
- ------ ---------------------------------------------------
TRANSACTION PROCESSING (14.0%)
32,359 First Data Corporation.................. $ 2,580,630
20,000 Transaction Systems Architect*.......... 1,340,000
-----------
3,920,630
-52-
<PAGE>
TRAVEL & LEISURE (15.4%)
20,000 Disney (Walt) Company................... 1,257,500
70,000 Host Marriott Corporation*.............. 910,000
40,000 Mirage Resorts Inc.*.................... 2,140,000
-----------
4,307,500
27,215,880
Total Common Stock (97.0%)..............
836,595
Cash, Cash Equivalents and Receivables
Less Liabilities (3.0%)................
-----------
$28,052,475
NET ASSETS (100%).......................
===========
- ------------
(1) Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities.'0*((
* Indicates non-income producing stocks.
See notes to financial statements.
3
0*((
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
STATEMENT OF NET ASSETS
June 30, 1996
ASSETS:
<S> <C> <C>
Investment in common stock -- at market value (cost $14,676,000).............. $27,215,880
Cash and cash equivalents..................................................... 510,826
Dividends and interest receivable............................................. 12,740
Receivable for investments sold............................................... 322,203
-----------
TOTAL ASSETS............................................................. 28,061,649
-----------
LIABILITIES:
Due to Transamerica Occidental's general account.............................. 9,174
-----------
TOTAL LIABILITIES........................................................ 9,174
-----------
-53-
<PAGE>
NET ASSETS.................................................................... $28,052,475
===========
Net assets attributable to variable annuity contractholders -- 1,325,334 units
at $20.725819 per unit...................................................... $27,468,627
Reserves for retired annuitants (Note C)...................................... 583,848
-----------
$28,052,475
===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
6 months ended June 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net investment loss............................................. $ (103,680) $ (85,054)
Net realized gain from security transactions.................... 2,951,635 342,159
Net unrealized (depreciation) appreciation of investments....... (203,915) 5,516,402
----------- -----------
Net increase in Net Assets from operations...................... 2,644,040 5,773,507
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).................. (1,210) (123)
Payments to Contract Owners:
Annuity payments.............................................. (37,933) (27,076)
Terminations and withdrawals.................................. (308,275) (141,031)
Adjustment for mortality guarantees on retired annuitants....... 17,808 11,687
----------- -----------
Total increase in Net Assets.................................... 2,314,430 5,616,964
Balance at beginning of year.................................... 25,738,045 17,267,415
----------- -----------
Balance at end of period........................................ $28,052,475 $22,884,379
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
STATEMENT OF OPERATIONS
-54-
<PAGE>
Six Months Ended June 30, 1996
NET INVESTMENT INCOME
INCOME:
<S> <C>
Dividends.................................................................. $ 66,757
Interest................................................................... 16,041
----------
Total investment income.................................................. 82,798
----------
EXPENSES (Note A):
Investment management services............................................. 39,989
Mortality and expense risk charges......................................... 146,489
----------
Total expenses........................................................... 186,478
----------
Net investment loss........................................................... (103,680)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions...................................... 2,951,635
Change in unrealized appreciation of investments.............................. (203,915)
----------
Net realized and unrealized gain on investments............................... 2,747,720
----------
Net increase in Net Assets from operations............................... $2,644,040
==========
</TABLE>
See notes to financial statements.
5
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND C
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as an
open-end diversified investment company. The Fund's investment objective is
long-term capital growth.
Investment in Securities
Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities. The cost of
securities purchased (excluding short-term investments) and proceeds from sales
aggregated $6,038,157 and $6,702,879 during the six month period ending June 30,
-55-
<PAGE>
1996. Realized gains and losses on investments are determined using the average
cost method.
Federal Income Taxes
Operations of the Fund will form a part of, and be taxed with, those of
Transamerica Occidental Life, which is taxed as a "life insurance company" under
the Internal Revenue Code. The Fund will not be taxed as a regulated investment
company under subchapter M of the Internal Revenue Code. As under current law,
income from assets maintained in the Fund for the exclusive benefit of
Participants is in general not subject to federal income tax. Transamerica
Occidental Life will not charge the Fund for income taxes applicable to its
investment in the Fund.
Expenses
The value of the Fund has been reduced by charges on each Valuation Date
for investment management services on the basis of an annual rate of 0.3% and
mortality and expense risks on the basis of an annual rate of 1.1%.
Other
The Fund follows industry practice and records security transactions on the
trade date. Dividend income is recognized on the ex-dividend date, and interest
income is recognized on an accrual basis.
NOTE B -- TRANSAMERICA OCCIDENTAL INVESTMENT
As of June 30, 1996, Transamerica Occidental Life had deposited $1,000,000
(current fund value of $21,149,764) in the Fund under an amendment to the
California Insurance Code which permits domestic life insurers to allocate
amounts to such accounts. Transamerica Occidental Life is entitled to withdraw
all but $100,000 of its proportionate share of the Fund, in whole or in part, at
any time.
6
0*((
<PAGE>
NOTE C -- RESERVES FOR RETIRED ANNUITANTS
Reserves for retired annuitants are computed using The Annuity Table for
1949, ultimate, two year age setback and an assumed investment earnings rate of
3 1/2%.
NOTE D -- REMUNERATION
No remuneration was paid during the six months ended June 30, 1996 by
Transamerica Occidental's Separate Account Fund C to any member of the Board of
Managers or officers of Fund C or any affiliated person of such members or
-56-
<PAGE>
officers.
FINANCIAL HIGHLIGHTS
Selected data for an accumulation unit outstanding throughout each six
month period ended June 30 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Investment income........................... $ .062 $ .036 $ .033 $ .043 $ .089
Expenses.................................... .140 .098 .078 .067 .058
-------- -------- -------- -------- ------
Net investment income (loss)................ (.078) (.062) (.045) (.024) .031
Net realized and unrealized gain (loss) on
investments............................... 2.018 4.195 (.842) .938 (.220)
-------- -------- -------- -------- ------
Net increase (decrease) in accumulation
unit value........................... 1.940 4.133 (.887) .914 (.189)
Accumulation unit value:
Beginning of year......................... 18.786 12.290 11.467 9.384 8.281
-------- -------- -------- -------- ------
End of period............................. $ 20.726 $ 16.423 $ 10.580 $ 10.298 $8.092
======= ======= ======= ======= ======
Ratio of expenses to average accumulation
fund balance.............................. 1.41% 1.39% 1.42% 1.41% 1.43%
Ratio of net investment income (loss) to
average accumulation fund balance......... (0.79%) (0.88%) (0.82%) (0.51%) 0.77%
Portfolio turnover.......................... 23.05% 14.48% 21.29% 21.39% 23.23%
Number of accumulation units outstanding at
end of period (000 omitted)............... 1,325 1,363 1,411 1,428 1,465
7
</TABLE>
<PAGE>
(LOGO)
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND C
Managers and Officers
RICHARD N. LATZER, Manager
DONALD E. CANTLAY, Manager
-57-
<PAGE>
DeWAYNE W. MOORE, Manager
TRANSAMERICA
GARY U. ROLLE, Chairman of the
Board
OCCIDENTAL'S
PETER J. SODINI, Manager
BARBARA A. KELLEY, President
SEPARATE
MATT R. COBEN, Vice President
ACCOUNT FUND C
SALLY S. YAMADA, Treasurer and
Assistant Secretary
THOMAS M. ADAMS, Secretary
SEMI-ANNUAL FINANCIAL
REGINA M. FINK, Assistant Secretary
REPORT
Distributor:
JUNE 30, 1996
Transamerica Financial Resources,
Inc.
1150 South Olive
Los Angeles, California 90015-2211
Tel. (800) 245-8250
Custodian:
Mellon Bank Securities Trust
1 Mellon Bank Ctr.
Pittsburgh, PA 15258
Tel. (800) 234-6356
Transamerica Occidental
Life Insurance Company
Annuity Service Center
P.O. Box 31848
Charlotte, NC 28231-1848
800 258-4260
(LOGO)
This report cannot be used as sales literature.
TFM 1037 Ed. 8-96
-58-
<PAGE>
Exhibit C
Transamerica Variable Insurance Fund, Inc.
Statement of Additional Information
-59-
<PAGE>
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
GROWTH PORTFOLIO
of the
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
October 9, 1996
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement expands upon information discussed
in the Prospectus for the Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. (the "Fund") and should, therefore, be read in conjunction
with the Prospectus for the Fund. To obtain a copy of the Prospectus with the
same date as this Statement of Additional Information write to the Fund at the
Transamerica Annuity Service Center, 101 North Tryon Street, Suite 1720,
Charlotte, North Carolina 28246, or by calling (800) 258-4260, ext. 5560.
-60-
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION....................................................... 1
ADDITIONAL INVESTMENT POLICY INFORMATION........................... 2
SPECIAL INVESTMENT METHODS AND RISKS................................ 2
Convertible Securities..................................... 2
Restricted and Illiquid Securities........................ 3
Borrowing.................................................. 3
Other Investment Companies................................. 4
Options on Securities and Securities Indices............... 4
Warrants and Rights........................................ 6
Repurchase Agreements..................................... 6
High-Yield ("Junk") Bond.................................. 7
Foreign Securities........................................ 7
INVESTMENT RESTRICTIONS............................................. 8
Fundamental Restrictions................................... 8
Non-Fundamental Restrictions............................... 9
Interpretive Rules........................................ 10
INVESTMENT ADVISER................................................. 11
Investment Advisory Agreement............................. 11
Investment Sub-Advisory Agreement......................... 12
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE........... 13
DETERMINATION OF NET ASSET VALUE................................... 14
PERFORMANCE INFORMATION............................................ 15
FEDERAL TAX MATTERS................................................ 18
SHARES OF STOCK.................................................... 20
CUSTODY OF ASSETS.................................................. 21
DIRECTORS AND OFFICERS............................................. 21
Compensation.............................................. 23
LEGAL PROCEEDINGS.................................................. 23
OTHER INFORMATION.................................................. 23
Legal Counsel............................................. 23
Other Information......................................... 24
Financial Statements...................................... 24
APPENDIX A......................................................... 25
- ii -
-ii-
<PAGE>
INTRODUCTION
Transamerica Variable Insurance Fund, Inc. (the "Fund") is an open-end
management investment company established as a Maryland corporation on June 23,
1995. The Fund is the intended successor to Transamerica Occidental's Separate
Account Fund C ("Separate Account Fund C"). The reorganization of Separate
Account Fund C from a management investment company into a unit investment
trust, Separate Account C, is being submitted for the approval of the Contract
Owners of Separate Account Fund C at a Contract Owners meeting scheduled for
October 30, 1996. Once the reorganization is approved, the assets of Separate
Account Fund C will be transferred intact to the Growth Portfolio of the Fund in
exchange for shares in the Growth Portfolio which will be held by Separate
Account C.
The Fund currently consists of one investment portfolio, the Growth
Portfolio (the "Portfolio" or "Growth Portfolio"). By investing in the
Portfolio, an investor becomes entitled to a pro-rata share of all dividends and
distributions arising from the net income and capital gains on the investments
of the Portfolio.
Likewise, an investor shares pro-rata in any losses of that Portfolio.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's board of directors (the "Board of Directors"),
Transamerica Occidental Life Insurance Company ("Transamerica") serves as the
Fund's investment adviser and conducts the business and affairs of the Fund.
Transamerica has engaged Transamerica Investment Services, Inc. ("Investment
Services") to act as the Fund's sub-adviser to provide the day-to-day portfolio
management for the Portfolio.
The Fund currently offers shares of the Growth Portfolio to Separate
Account C of Transamerica Occidental Life Insurance Company ("Separate Account
C") as the underlying funding vehicle for the variable annuity contracts (the
"Contracts") supported by Separate Account C. The Fund does not offer its stock
directly to the general public. Separate Account C, like the Fund, is registered
as an investment company with the Securities and Exchange Commission ("SEC"),
and a separate prospectus, which accompanies the prospectus for the Fund (the
"Prospectus"), describes that separate account and the Contracts it supports.
The prospectus for Separate Account C and the Contracts also has a statement of
additional information.
The Fund may, in the future, offer its stock to other separate accounts
of other insurance companies supporting other variable annuity contracts or
variable life insurance polices and to qualified pension and retirement plans.
Terms appearing in this Statement of Additional Information that are
defined in the Prospectus have the same meaning as in the Prospectus.
ADDITIONAL INVESTMENT POLICY INFORMATION
The Growth Portfolio seeks long-term capital growth. Common stock,
listed and unlisted, is the basic form of investment. Although the Portfolio
invests the majority of its assets in common stocks, the Portfolio may also
invest in: (i) debt securities and preferred stocks, having a call on common
stocks by means of a conversion privilege or attached warrants; and (ii)
warrants or other rights to purchase common stocks. Unless market conditions
would indicate otherwise, the Growth Portfolio will be invested primarily in
such equity-type securities. When in the judgment of Investment Services market
conditions warrant, the Growth Portfolio may, for temporary defensive purposes,
hold part or all of its assets in cash, debt or money market instruments.
- 1 -
-1-
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
Convertible Securities
The Growth Portfolio may invest in convertible securities. The
Portfolio currently does not intend to invest more than 5% of its net assets in
convertible securities. Convertible securities may include corporate notes or
preferred stock but are ordinarily a long-term debt obligation of the issuer
convertible at a stated exchange rate into common stock of the issuer.
Convertible securities have general characteristics similar to both fixed-income
and equity securities. As with all debt securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. In addition, because of the
conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock, and
therefore, will react to variations in the general market for equity securities.
As the market price of the underlying common stock declines, the convertible
security tends to trade increasingly on a yield basis, and thus may not
depreciate to the same extent as the underlying common stock.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Like all fixed-income securities, there is no assurance of current
income as the issuer might default in its obligations. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, rank senior to common stocks
in an issuer's capital structure and are consequently of higher quality and
entail less risk of declines in market value than the issuer's common stock.
However, the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a
fixed-income security.
Restricted and Illiquid Securities
The Growth Portfolio may invest no more than 10% of its net assets in
restricted securities (securities that are not registered or are offered in an
exempt non-public offering under the Securities Act of 1933 (the "1933 Act")).
However, such restriction shall not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
In addition, the Growth Portfolio will invest no more than 15% of its
net assets in illiquid investments, which includes most repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter option contracts, real estate,
securities that are not readily marketable and restricted securities (unless
Investment Services determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are eligible under Rule 144A and are liquid.)
The Board of Directors of the Fund has adopted guidelines and delegated
to Investment Services the daily function of determining and monitoring the
liquidity of restricted securities. The board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how the market for restricted
securities sold and offered under Rule 144A will develop, the board will
carefully monitor the Portfolio's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. To the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities, this investment
practice could have the effect of decreasing the level of liquidity in the
Portfolio.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities would trade
if they were not restricted, since the restriction makes them less liquid.
- 2 -
-2-
<PAGE>
The amount of the discount from the prevailing market prices is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Borrowing
The Portfolio may borrow money but only from banks and only for
temporary or short-term purposes. Such borrowings will not exceed 5% of the
value of the Portfolio's total assets. Temporary or short-term purposes may
include: (i) short-term ( i.e., no longer than five business days) credits for
clearance of portfolio transactions; (ii) borrowing in order to meet redemption
requests or to finance settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. The Portfolio will maintain
continuous asset coverage of at least 300% (as defined in the 1940 Act) with
respect to all of its borrowings. Should the value of the Portfolio's assets
decline to below 300% of borrowings, the Portfolio may be required to sell
portfolio securities within three days to reduce the Portfolio's debt and
restore 300% asset coverage.
Borrowing involves interest costs.
Other Investment Companies
The Growth Portfolio reserves the right to invest up to 10% of its
total assets, calculated at the time of purchase, in the securities of other
investment companies including business development companies and small business
investment companies. The Growth Portfolio may not invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. The Portfolio will
indirectly bear its proportionate share of any advisory fees paid by investment
companies in which it invests in addition to the management fee paid by the
Portfolio. Together with other investment companies advised by Transamerica, the
Portfolio will own no more than 10% of the outstanding voting stock of a
closed-end investment company.
Options on Securities and Securities Indices
The Growth Portfolio may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. The Growth Portfolio currently does not
intend to invest more than 5% of its net assets in options on securities and
securities indices. The Growth Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Growth Portfolio would normally purchase call options in
anticipation of an increase in the market value of securities of the type in
which it may invest. The purchase of a call option would entitle the Portfolio,
in turn for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise the Growth
Portfolio would realize a loss on the purchase of the call option.
The Growth Portfolio would normally purchase put options in
anticipation of a decline in the market value of securities in its portfolio
("protective puts") or in securities in which it may invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Portfolio's securities. Put options may also be
purchased by the Portfolio for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Growth Portfolio
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise
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the Portfolio would realize a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of the underlying portfolio securities.
The Growth Portfolio would purchase put and call options on securities
indices for the same purposes as it would purchase options on individual
securities.
Risks Associated with Options Transactions. There is no assurance that
a liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
The Growth Portfolio may purchase both options that are traded on
United States and foreign exchanges and options traded over-the-counter with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, the Growth Portfolio will treat purchased over-the-counter options
and all assets used to cover written over-the-counter options as illiquid
securities, except that with respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the formula.
Transactions by the Growth Portfolio in options on securities and stock
indices will be subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum number of
options in each class which may be purchased by a single investor or group of
investors acting in concert. Thus, the number of options which the Portfolio may
purchase may be affected by options written or purchased by other investment
advisory clients of Investment Services. An exchange, board of trade or other
trading facility may order the liquidations of positions found to be in excess
of these limits, and it may impose certain other sanctions.
The purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Investment Services's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
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Warrants and Rights
The Growth Portfolio may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time but will
do so only if such equity securities are deemed appropriate by Investment
Services for investment by the Portfolio. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.
Repurchase Agreements
Repurchase agreement have the characteristics of loans by the Portfolio
and will be fully collateralized (either with physical securities or evidence of
book entry transfer to the account of the custodian bank) at all times. During
the term of the repurchase agreement the Portfolio retains the security subject
to the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to the
agreement, and requires the seller to deposit with the Portfolio additional
collateral equal to any amount by which the market value of the security subject
to the repurchase agreement falls below the resale amount provided under the
repurchase agreement. The Portfolio will enter into repurchase agreements only
with member banks of the Federal Reserve System and with primary dealers in
United States Government securities or their wholly-owned subsidiaries whose
creditworthiness has been reviewed and found satisfactory by Investment Services
under procedures established by the Board of Directors and who have, therefore,
been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States government or its agencies or
instrumentalities, in which the Portfolio may otherwise invest.
If the seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Portfolio would look to
the collateral security underlying the seller's agreement, including the
securities subject to the repurchase agreement, for satisfaction of the seller's
obligations to the Portfolio. In such event, the Portfolio might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
High-Yield ("Junk") Bonds
The total return and yield of lower quality, high yield bonds, commonly
referred to as "junk bonds," can be expected to fluctuate more than the total
return and yield of higher quality bonds but not as much as common stocks. Junk
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Successful
investment in low and lower-medium quality bonds involves greater investment
risk and is highly dependent on Investment Services' credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high yield bond prices, because such events could lessen the ability of issuers
to make principal and interest payments. These bonds are often thinly-traded and
can be more difficult to sell and value accurately than high-quality bonds.
Because objective pricing data may be less available, judgement may plan a
greater role in the valuation process. In addition, the entire junk bond market
can experience sudden and sharp price swings due to a variety of factors,
including changes in economic forecasts, stock market activity, large or
sustained sales by major investors, a high-profile default, or just a change in
the market's psychology. This type of volatility is usually associated more with
stocks than bonds, but junk bond investors should be prepared for it.
The Portfolio will not purchase a non-investment grade debt security
(or "junk bond") if immediately after such purchase the Portfolio would have
more than 10% of its total assets invested in such securities.
Foreign Securities
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The Growth Portfolio may invest in the securities of foreign issuers
through the purchase of American Depository Receipts ("ADRs"). ADR's are
dollar-denominated securities that are issued by domestic banks or securities
firms and are traded on the U.S. securities markets.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that the Portfolio acquires ADRs through banks which do
not have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, the
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the NASD's national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
INVESTMENT RESTRICTIONS
Fundamental Policies and Restrictions
Certain investment restrictions and policies have been adopted by the
Fund as fundamental policies for the Portfolio. It is fundamental that the
Portfolio operate as a "diversified company" within the meaning of the
Investment Company Act of 1940. The investment objective of the Portfolio is
also a fundamental policy. See "Investment Objective and Policies" in the
Portfolio's Prospectus.
A fundamental policy is one that cannot be changed without the
affirmative vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding votes attributable to the shares of the Portfolio. For purposes
of the 1940 Act, "majority" of share means the lesser of: (a) 67% or more of the
votes attributable to shares of the Portfolio present at a meeting, if the
holders of more than 50% of such votes are present or represented by proxy; or
(b) more than 50% of the votes attributable to shares of the Portfolio.
The Portfolio's fundamental policies and restrictions are:
1. 5% Fund Rule With respect to 75% of total assets, the Portfolio may
not purchase securities of any issuer if, as a result of the purchase, more than
5% of the Portfolio's total assets would be invested in the securities of the
issuer. This limitation does not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities").
2. 10% Issuer Rule With respect to 75% of total assets, the
Portfolio may not purchase more than
10% of the voting securities of any one issuer.
3. 25% Industry Rule The Portfolio may not invest more than
25% of the value of its total assets
in securities issued by companies engaged in any one industry. This limitation
does not apply to investments in
Government Securities.
4. Borrowing The Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions, provided such
borrowings do not exceed 5% of the value of the Portfolio's total assets.
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5. Lending The Portfolio may not lend its assets or money to other
persons, except through: (a) the acquisition of all or a portion of an issue of
bonds, debentures or other evidence of indebtedness of a type customarily
purchased for investment by institutional investors, whether publicly or
privately distributed. (The Portfolio does not presently intend to invest more
than 10% of the value of the Portfolio in privately distributed loans. It is
possible that the acquisition of an entire issue may cause the Portfolio to be
deemed an "underwriter" for purposes of the Securities Act of 1933); (b) lending
securities, provided that any such loan is collateralized with cash equal to or
in excess of the market value of such securities. (The Portfolio does not
presently intend to engage in the lending of securities); and (c) entering into
repurchase agreements.
6. Underwriting The Portfolio may not underwrite any issue of
securities, except to the extent that the sale of securities in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be an underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. Real Estate The Portfolio reserves the right to invest up to 10% of
the value of its assets in real properties, including property acquired in
satisfaction of obligations previously held or received in part payment on the
sale of other real property owned. The purchase and sale of real estate or
interests in real estate is not intended to be a principal activity of the
Portfolio. The Portfolio currently does not intend to invest more than 5% of its
net assets in real estate.
8. Commodities The Portfolio may not purchase or sell
commodities or commodities contracts.
9. Senior Securities The Portfolio may not issue senior
securities.
All other investment policies and restrictions of the Portfolio are
considered by the Fund not to be fundamental and accordingly may be changed by
the Board of Directors without shareholder approval.
Non-Fundamental Restrictions
Non-fundamental restrictions represent the current intentions of the
Board of Directors, and they differ from fundamental investment restrictions in
that they may be changed or amended by the Board of Directors without prior
notice to or approval of shareholders.
The Portfolio's non-fundamental restrictions are:
1. Restricted and Illiquid Securities Purchases or acquisitions may be
made of securities which are not readily marketable by reason of the fact that
they are subject to the registration requirements of the Securities Act of 1933
or the salability of which is otherwise conditioned, including real estate and
certain repurchase agreements or time deposits maturing in more than seven days
("restricted securities"), as long as any such purchase or acquisition will not
immediately result in the value of all such restricted securities exceeding 15%
of the value of the Portfolio's total assets.
2. Securities of Other Investment Companies The Growth Portfolio does
not currently intend to make investments in the securities of other investment
companies. The Growth Portfolio does reserve the right to purchase such
securities, provided the purchase of such securities does not cause: (1) more
than 10% of the value of the total assets of the Portfolio to be invested in
securities of registered investment companies; or (2) the Portfolio to own more
than 3% of the total outstanding voting stock of any one investment company; or
(3) the Portfolio to own securities of any one investment company that have a
total value greater than 5% of the value of the total assets of the Portfolio;
or (4) together with other investment companies advised by Transamerica, the
Growth Portfolio to own more than 10% of the outstanding voting stock of a
closed-end investment company.
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3. Short Sales The Portfolio may not make short sales of securities or
maintain a short position, unless at all times when the short position is open,
the Portfolio owns an equal amount of such securities or securities currently
exchangeable, without payment of any further consideration, for securities of
the same issue as, and at least equal in amount to, the securities sold short
(generally called a "short sale against the box") and unless not more than 10%
of the value of the Portfolio's net assets is deposited or pledged as collateral
for such sales at any one time.
4. Margin Purchases The Portfolio may not purchase securities on
margin, except that the Portfolio may obtain amy short-term credits necessary
for the clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in connection
with options on securities will not be deemed to be a purchase of securities on
margin by the Portfolio.
5. Invest for Control The Portfolio may not invest in companies
for the purpose of exercising
management or control in that company.
6. Put and Call Options The Portfolio may not write put and call
options.
Interpretive Rules
For purposes of the foregoing restrictions, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, the Portfolio. In
addition, with regard to exceptions recited in a restriction, the Portfolio may
only rely on an exception if its investment objective(s) or policies (as
disclosed in the Prospectus) otherwise permit it to rely on the exception.
INVESTMENT ADVISER
Transamerica Occidental Life Insurance Company ("Transamerica") is the
investment adviser of the Fund and its Portfolio. It will oversee the management
of the assets of the Portfolio by Investment Services. In turn, Investment
Services is responsible for the day-to-day management of Portfolio.
Investment Advisory Agreement
The investment adviser, Transamerica, has entered into an Investment
Advisory Agreement with the Fund under which Transamerica assumes overall
responsibility, subject to the supervision of the Board of Directors, for
administering all operations of the Fund and for monitoring and evaluating the
management of the assets of the Portfolio by Investment Services on an ongoing
basis. Transamerica provides or arranges for the provision of the overall
business management and administrative services necessary for the Fund's
operations and furnishes or procures any other services and information
necessary for the proper conduct of the Fund's business. Transamerica also acts
as liaison among, and supervisor of, the various service providers to the Fund.
Transamerica is also responsible for overseeing the Fund's compliance with the
requirements of applicable law and in conformity with the Portfolio's investment
objective(s), policies and restrictions, including oversight of Investment
Services.
For its services to the Fund, Transamerica receives an advisory fee of
0.75% of the average daily net assets of the Portfolio. The fee is deducted
daily from the assets of each of the Portfolio and paid to Transamerica
periodically. Transamerica pays the salaries and fees, if any, of all officers
and directors of the Fund who are "interested persons" (as defined in the 1940
Act) of Transamerica and of all personnel of Transamerica performing services
relating to research, statistical and investment activities; the expenses of
printing and distributing any prospectuses, reports or sales literatures
prepared for its use or the use of the Fund in connection with the sale of Fund
shares; the cost of any advertising; and the fees of the Sub-Adviser.
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The Fund pays all of its expenses not assumed by Transamerica,
including custodian fees, legal and auditing fees, printing costs of reports to
shareholders, registration fees and expenses, and fees and expenses of directors
unaffiliated with Transamerica.
The Investment Advisory Agreement does not place limits on the
operating expenses of the Fund or of any Portfolio. However, Transamerica has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for the Portfolio, exceed .10% of the Portfolio's estimated average
daily net assets on an annualized basis.
The Investment Advisory Agreement provides that Transamerica may render
similar services to others so long as the services that it provides to the Fund
are not impaired thereby. The investment advisory agreement also provides that
Transamerica shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
management of the Fund, except for: (i) willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its duties or obligations under the investment advisory agreement; and (ii)
to the extent specified in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation.
The Investment Advisory Agreement was approved for the Portfolio by the
Board of Directors, including a majority of the Directors who are not parties to
the investment advisory agreement or "interested persons" (as such term is
defined in the 1940 Act) of any party thereto (the "non-interested Directors"),
on July 24, 1996, and will be submitted for the approval of the Contract Owners
of Separate Account Fund C at a Contract Owners meeting scheduled for October
30, 1996. The investment advisory agreement will remain in effect from year to
year provided such continuance is specifically approved as to the Portfolio at
least annually by: (a) the Board of Directors or the vote of a majority of the
votes attributable to shares of the Portfolio; and (b) the vote of a majority of
the non-interested Directors, cast in person at a meeting called for the purpose
of voting on such approval. The investment advisory agreement will terminate
automatically if assigned (as defined in the 1940 Act). The investment advisory
agreement is also terminable as to any Portfolio at any time by the Board of
Directors or by vote of a majority of the votes attributable to outstanding
voting securities of the applicable Portfolio (a) without penalty and (b) on 60
days' written notice to Transamerica. The agreement is also terminable by
Transamerica on 90 days' written notice to the Fund.
Investment Sub-Advisory Agreement
Transamerica has contracted with Transamerica Investment Services, Inc.
("Investment Services"), a wholly-owned subsidiary of Transamerica Corporation,
to render investment services to the Fund. Investment Services has been in
existence since 1967 and has provided investment services to investment
companies and the Transamerica Life Companies since 1980. Investment Services is
located at 1150 South Olive Street, Los Angeles, California 90015-2211.
Transamerica has agreed to pay Investment Services a monthly fee at the annual
rate of 0.30% of the first $50 million of the Portfolio's average daily net
assets, 0.25% of the next $150 million, and 0.20% of assets in excess of $200
million. Investment Services will provide recommendations on the management of
Fund assets, provide investment research reports and information, supervise and
manage the investments of the Portfolio, and direct the purchase and sale of
Portfolio investments. Investment decisions regarding the composition of the
Portfolio and the nature and timing of changes in the Portfolio are subject to
the control of the Board of Directors of the Fund.
The investment sub-advisory agreement was approved for the Portfolio by
the Board of Directors, including a majority of the Directors who are not
parties to the investment sub-advisory agreement or "interested persons" (as
such term is defined in the 1940 Act) of any party thereto (the "non-interested
Directors"), on July 24, 1996, and will be submitted for the approval of the
Contract Owners of Separate Account Fund C at a Contract Owners meeting
scheduled for October 30, 1996. The investment sub-advisory agreement will
remain
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in effect from year to year provided such continuance is specifically approved
as to the Portfolio at least annually by: (a) the Board of Directors or the vote
of a majority of the votes attributable to shares of the Portfolio; and (b) the
vote of a majority of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such approval. The investment sub-advisory
agreement will terminate automatically if assigned (as defined in the 1940 Act).
The investment sub-advisory agreement is also terminable at any time by the
Board of Directors or by vote of a majority of the votes attributable to
outstanding voting securities of the Portfolio (a) without penalty and (b) on 60
days' written notice to Investment Services. The agreement is also terminable by
Transamerica or Investment Services on 90 days' written notice to the Fund.
PORTFOLIO TRANSACTIONS, PORTFOLIO TURNOVER AND BROKERAGE
Investment Services is responsible for decisions to buy and sell
securities for the Portfolio, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
affiliates of Transamerica or Investment Services.
In placing orders for portfolio securities of the Portfolio, Investment
Services is required to give primary consideration to obtaining the most
favorable price and efficient execution. This means that Investment Services
will seek to execute each transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Investment Services generally seeks reasonably competitive
spreads or commissions, the Portfolio will not necessarily be paying the lowest
spread or commission available. Within the framework of this policy, Investment
Services will consider research and investment services provided by brokers or
dealers who effect or are parties to portfolio transactions of the Portfolio,
Investment Services and its affiliates, or other clients of Investment Services
or its affiliates. Such research and investment services include statistical and
economic data and research reports on particular companies and industries. Such
services are used by Investment Services in connection with all of its
investment activities, and some of such services obtained in connection with the
execution of transactions for the Portfolio may be used in managing other
investment accounts. Conversely, brokers furnishing such services may be
selected for the execution of transactions of such other accounts, whose
aggregate assets are far larger than those of the Portfolio, and the services
furnished by such brokers may be used by Investment Services in providing
investment sub-advisory services for the Portfolio. In 1993, 1994, and 1995
respectively, the brokerage commissions paid by Investment Services as
sub-adviser to Separate Account Fund C (the Fund's predecessor) were .07% ,
.02%, and .01% of the average assets, and the aggregate dollar amounts were
$10,058, $3,500, and $1,960, respectively.
On occasions when Investment Services deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as its other
advisory clients (including any other fund or other investment company or
advisory account for which Investment Services or an affiliate acts as
investment adviser), Investment Services, to the extent permitted by applicable
laws and regulations, may aggregate the securities to be sold or purchased for
the Portfolio with those to be sold or purchased for such other customers in
order to obtain the best net price and most favorable execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Investment Services in the manner
it considers to be most equitable as to each customer and consistent with its
fiduciary obligations to the Portfolio and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Portfolio.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
booker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Directors.
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Changes will be made in the assets of the Portfolio if such changes are
considered advisable to better achieve the Portfolio's investment objectives. It
is anticipated that the annual portfolio turnover should not exceed 75%. The
portfolio turnover rates for Separate Account Fund C (the Fund's predecessor)
for 1994 and 1995 were 30.84% and 18.11%, respectively.
DETERMINATION OF NET ASSET VALUE
Under the 1940 Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Portfolio. In
accordance with procedures adopted by the Board of Directors, the net asset
value per share is calculated by determining the net worth of the Portfolio
(assets, including securities at market value or amortized cost value, minus
liabilities) divided by the number of the Portfolio's outstanding shares. All
securities are valued as of the close of regular trading on the New York Stock
Exchange. The Portfolio will compute its net asset value once daily at the close
of such trading (normally 4:00 p.m. New York time), on each day (as described in
the Prospectus) that the Fund is open for business.
In the event that the New York Stock Exchange or the national
securities exchange on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors will
reconsider the time at which net asset value is computed. In addition, the
Portfolio may compute their net asset value as of any time permitted pursuant to
any exemption, order or statement of the SEC or its staff.
Portfolio assets of the Growth Portfolio are valued as follows:
(a) equity securities and other similar investments ("Equities")
listed on any U.S. or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") are valued at
the last sale price on that exchange or NASDAQ on the
valuation day; if no sale occurs, Equities traded on a U.S.
exchange or NASDAQ are valued at the mean between the closing
bid and closing asked prices;
(b) over-the-counter securities not quoted on NASDAQ are valued at
the last sale price on the
valuation day or, if no sale occurs, at the mean between the
last bid and asked prices;
(c) debt securities with a remaining maturity of 61 days or more
are valued on the basis of dealer-supplied quotations or by a
pricing service selected by Investment Services and approved
by the Board of Directors;
(d) options and futures contracts are valued at the last sale
price on the market where any such
option contracts is principally traded;
(e) over-the-counter options are valued based upon prices provided
by market makers in such
securities or dealers in such currencies;
(f) all other securities and other assets, including those for
which a pricing service supplies no quotations or quotations
are not deemed by Investment Services to be representative of
market values, but excluding debt securities with remaining
maturities of 60 days or less, are valued at fair value as
determined in good faith pursuant to procedures established by
the Board of Directors; and
(g) debt securities with a remaining maturity of 60 days or less
will be valued at their amortized cost which approximates
market value.
Equities traded on more than one U.S. national securities exchange are
valued at the last sale price on each business day at the close of the exchange
representing the principal market for such securities. If such quotations are
not available, the rate of exchange will be determined in good faith by or under
procedures established by the Board of Directors.
PERFORMANCE INFORMATION
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The Fund may from time to time quote or otherwise use average annual
total return information for the Portfolio in advertisements, shareholder
reports or sales literature. Average annual total return quotations are computed
by finding the average annual compounded rates of return over one, five and ten
year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion thereof).
Any performance data quoted for the Portfolio will represent historical
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
The Fund is the successor to Transamerica Occidental's Separate Account
Fund C ("Separate Account Fund C"). Separate Account Fund C has been a separate
account of Transamerica registered under the 1940 Act on Form N-3 as an
open-end, diversified, management investment company. The reorganization of
Separate Account Fund C from a management investment company into a unit
investment trust called Separate Account C, is being submitted for the approval
of Contract Owners of Separate Account Fund C at a Contract Owners meeting
scheduled for October 30, 1996. Once the reorganization is approved, the assets
of Separate Account Fund C will be transferred intact to the Growth Portfolio of
the Fund in exchange for shares in the Growth Portfolio which will be held by
Separate Account C. As the successor to Separate Account Fund C, the Growth
Portfolio will treat the historical performance data of Separate Account Fund C
as its own for periods prior to the reorganization.
In computing its standardized total returns for periods prior to the
reorganization, the Fund will assume that the charges currently imposed by the
Fund were in effect through each of the periods for which the standardized
returns are presented. The Growth Portfolio's performance data will not reflect
any sales or insurance charges that were imposed under the annuity contracts
issued through Separate Account Fund C.
Any performance data quoted for the Portfolio will represent historical
performance, and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance data for the Portfolio will not reflect charges
deducted under the variable annuity contracts. If contract charges are taken
into account, such performance data would reflect lower returns. Accordingly,
any advertisement that includes performance data for the Portfolio will also
include performance data for the variable annuity contracts.
From time to time the Fund may disclose cumulative total returns in
conjunction with the standard format described above. The cumulative total
returns will be calculated using the following formula:
CTR = (ERV/P) - 1
Where:
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<PAGE>
CTR = The cumulative total return net of
Portfolio recurring charges for the
period.
ERV = The ending redeemable value of the
hypothetical investment at the
end of the period.
P = A hypothetical single payment of $1,000.
From time to time the Fund may publish an indication of the Portfolio'
past performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Weisenberger Investment Companies Service,
Donoghue's Money Portfolio Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia Porter's
Personal Finance and The Wall Street Journal. The Fund may also advertise
information which has been provided to the NASD for publication in regional and
local newspapers. In addition, the Fund may from time to time advertise its
performance relative to certain indices and benchmark investments, including
(but not limited to): (a) the Lipper Analytical Services, Inc. Mutual Portfolio
Performance Analysis, Fixed-Income Analysis and Mutual Portfolio Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Portfolio Report published by
CDA Investment Technologies, Inc. (which analyzes price, risk and various
measures of return for the mutual fund industry); (c) the Consumer Price Index
published by the U.S. Bureau of Labor Statistics (which measures changes in the
price of goods and services); (d) Stocks, Bonds, Bills and Inflation published
by Ibbotson Associates (which provides historical performance figures for
stocks, government securities and inflation); (e) the Hambrecht & Quist Growth
Stock Index; (f) the NASDAQ OTC Composite Prime Return; (g) the Russell Midcap
Index; (h) the Russell 2000 Index - Total Return; (i) the ValueLine
Composite-Price Return; (j) the Wilshire 4500 Index; (k) the Salomon Brothers'
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (l) the Shearson Lehman Brothers
Aggregate Bond Index or its component indices (the Aggregate Bond Index measures
the performance of Treasury, U.S. Government agencies, mortgage and Yankee
bonds); (m) the S&P Bond indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); (n) the J.P. Morgan Global Government Bond
Index; (o) Donoghue's Money Market Portfolio Report (which provides industry
averages of 7-day annualized and compounded yields of taxable, tax-free and U.S.
Government money market funds); (p) other taxable investments including
certificates of deposit, money market deposit accounts, checking accounts,
savings accounts, money market mutual funds and repurchase agreements; (q)
historical investment data supplied by the research departments of Goldman
Sachs, Lehman Brothers, First Boston Corporation, Morgan Stanley (including
EAFE), Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data; (r) the FT-Actuaries Europe and Pacific Index; (s)
mutual fund performance indices published by Variable Annuity Research & Data
Service; (t) S&P 500 Index; and (u) mutual fund performance indices published by
Morningstar, Inc. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Portfolio's investments. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may be different from those of the
equations used by the Fund to calculate the Portfolio's performance figures.
The Fund may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish Investment
Services' views as to markets, the rationale for the Portfolio's investments and
discussions of the Portfolio's current asset allocation.
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a particular
Portfolio. Such advertisements or information may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail in the communication.
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<PAGE>
Such performance data will be based on historical results and will not be
intended to indicate future performance. The total return of the Portfolio will
vary based on market conditions, portfolio expenses, portfolio investments and
other factors. The value of the Portfolio's shares will fluctuate and an
investor's shares may be worth more or less than their original cost upon
redemption. The Fund may also, at its discretion, from time to time make a list
of the Portfolio's holdings available to investors upon request.
FEDERAL TAX MATTERS
The Portfolio intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for that treatment, the Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income, consisting of net investment income , net
short-term capital gain and net gains from certain foreign currency
transactions.
Sources of Gross Income. To qualify for treatment as a regulated
investment company, the Portfolio must also, among other things, derive its
income from certain sources. Specifically, in each taxable year, the Portfolio
must generally derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in securities, or these currencies. The
Portfolio must also generally derive less than 30% of its gross income each
taxable year from the sale or other disposition of any of the following which
was held for less than three months: (1) stock or securities, (2) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or (3) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stock or securities). For purposes of these tests,
gross income generally is determined without regard to losses from the sale or
other disposition of stock or securities or other Portfolio assets.
Diversification of Assets. To qualify for treatment as a regulated
investment company, the Portfolio must also satisfy certain requirements with
respect to the diversification of its assets. The Portfolio must have, at the
close of each quarter of the Portfolio's taxable year, at least 50% of the value
of its total assets represented by cash, cash items, United States Government
securities, securities of other regulated investment companies, and other
securities which, in respect of any one issuer, do not exceed 5% of the value of
the Portfolio's total assets and that do not represent more than 10% of the
outstanding voting securities of the issuer. In addition, not more than 25% of
the value of the Portfolio's total assets may be invested in securities (other
than United States Government securities or the securities of other regulated
investment companies) of any one issuer, or of two or more issuers which the
Portfolio controls and which are engaged in the same or similar trades or
businesses or related trades or businesses. For purposes of the Portfolio's
requirements to maintain diversification for tax purposes, the issuer of a loan
participation will be the underlying borrower. In cases where the Portfolio does
not have recourse directly against the borrower, both the borrower and each
agent bank and co-lender interposed between the Portfolio and the borrower will
be deemed issuers of the loan participation for tax diversification purposes.
The Portfolio's investments in U.S. Government Securities are not subject to
these limitations. The foregoing diversification requirements are in addition to
those imposed by the Investment Company Act of 1940 (the "1940 Act").
Because the Fund is established as an investment medium for variable
annuity contracts, Section 817(h) of the Code imposes additional diversification
requirements on the Portfolio. These requirements which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of the Portfolio's assets that may be represented by any single
investment. In general, no more than 55% of the value of the assets of the
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these
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<PAGE>
purposes, all securities of the same issuer are treated as a single investment
and each United States government agency or instrumentality is treated as a
separate issuer.
Additional Tax Considerations. The Portfolio will not be subject to the 4%
Federal excise tax imposed on amounts not distributed to shareholders on a
timely basis because the Portfolio intends to make sufficient distributions to
avoid such excise tax. If the Portfolio failed to qualify as a regulated
investment company, owners of Contracts based on the Portfolio: (1) might be
taxed currently on the investment earnings under their Contracts and thereby
lose the benefit of tax deferral; and (2) the Portfolio might incur additional
taxes. In addition, if the Portfolio failed to qualify as a regulated investment
company, or if the Portfolio failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts based on the
Portfolio would be taxed on the investment earnings under their Contracts and
thereby lose the benefit of tax deferral. Accordingly, compliance with the above
rules is carefully monitored by Investment Services and it is intended that the
Portfolio will comply with these rules as they exist or as they may be modified
from time to time. Compliance with the tax requirements described above may
result in a reduction in the return under the Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from that
Investment Services might otherwise believe to be desirable.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
SHARES OF STOCK
Each issued and outstanding share of the Portfolio is entitled to
participate equally in dividends and distributions declared for the Portfolio's
stock and, upon liquidation or dissolution, in the Portfolio's net assets
remaining after satisfaction of outstanding liabilities. The shares of the
Portfolio, when issued, will be fully paid and non-assessable and have no
preemptive or conversion rights.
As the designated successor to Separate Account Fund C, the Fund will
receive the assets of Separate Account Fund C. In exchange, the Fund will
provide Separate Account C with shares in the Growth Portfolio.
Under normal circumstances, subject to the reservation of rights explained
below, the Fund will redeem shares of the Portfolio in cash within 7 days.
However, the right of a shareholder to redeem shares and the date of payment by
the Fund may be suspended for more than seven days for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of securities owned
by it or fairly to determine the value of its net assets; or for such other
period as the SEC may by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual shareholder
meetings and does not intend to do so.
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<PAGE>
CUSTODY OF ASSETS
Pursuant to a custody agreement with the Fund, State Street Bank and Trust
Company ("State Street") will hold the cash and portfolio securities of the Fund
as custodian.
State Street is responsible for holding all securities and cash of the
Portfolio, receiving and paying for securities purchased, delivering against
payment securities sold, and receiving and collecting income from investments,
making all payments covering expenses of the Fund, all as directed by persons
authorized by the Fund. State Street does not exercise any supervisory function
in such matters as the purchase and sale of portfolio securities, payment of
dividends, or payment of expenses of the Portfolio or the Fund. Portfolio
securities of the Portfolio purchased domestically are maintained in the custody
of State Street and may be entered into the Federal Reserve, Depository Trust
Fund, or Participant's Trust Fund book entry systems.
DIRECTORS AND OFFICERS
The Directors and officers of the Fund are listed below together with
their respective positions with the Fund and a brief statement of their
principal occupations during the past five years.
<TABLE>
<CAPTION>
Positions and Offices
Name, Age and Address** with the Fund Principal Occupation During the Past Five Years
- ------------------------------------------------ -----------------------------------------------
<S> <C> <C>
Donald E. Cantlay (74) Board of Directors Director, Managing General Partner of Cee 'n' Tee Company;
Director of California Trucking Association and Western
Highway Institute; Director of FPA Capital Fund and FPA New
Income Fund.
Richard N. Latzer (59)* Board of Directors President, Chief Executive Officer and Director of Transamerica
Investment Services, Inc.; Director, Senior Vice President and
Chief Investment Officer of Transamerica Corporation.
DeWayne W. Moore (82) Board of Directors Retired Senior Vice President, Chief Financial Officer and
Director of Guy F. Atkinson Company of California; Director of
FPA Capital Fund and FPA New Income Fund.
Gary U. Rolle (54)* Chairman, Board of Director, Transamerica Investors, Inc.; Director,
Directors Executive Vice President and Chief Investment Officer of Transamerica Investment Services, Inc.;
Director and Chief Investment Officer of Transamerica Occidental Life Insurance Company.
Peter J. Sodini (55) Board of Directors Associate, Freeman Spogli & Co. (a private Investor); President
and Chief Executive Officer, Purity Supreme, Inc. (a
supermarket). President and Chief Executive Officer, Quality
Foods International (supermarkets); Director Pamida Holdings
Corp. (a retail merchandiser) and Buttrey Food and Drug Co. (a
supermarket).
Barbara A. Kelley (42) President President, Chief Operating Officer and Director of Transamerica
Financial Resources, Inc. and President and Director of
Transamerica Securities Sales Corporation, Transamerica
Advisors, Inc., Transamerica Product, Inc., Transamerica Product,
Inc. I, Transamerica Product, Inc. II, Transamerica Product, Inc.
IV, and Transamerica Leasing Ventures, Inc.
***Matt Coben (35) Vice President Broker/Dealer Channel of Transamerica Life Insurance and
Annuity Company and prior to 1994 Vice President and National
Sales Manager of the Dreyfus Service Organization
Sally S. Yamada (45) Treasurer and Vice President and Treasurer of Transamerica
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<PAGE>
Assistant Secretary Occidental Life Insurance Company and Treasurer of
Transamerica Life Insurance and Annuity Company.
Thomas M. Adams (60) Secretary Partner in the law firm of Lanning & Adams.
</TABLE>
* These members of the Board are or may be interested persons as
defined by Section 2(a) (19) of the 1940 Act. ** The mailing address of
each Board member and officers is 1150 South Olive, Los Angeles,
California 90015. *** The mailing address of this Baord member is 101
North Tryon Street, Suite 1070, Charlotte North Carolina 28246.
The principal occupations listed above apply for the last five years.
In some instances, occupation listed above is the current position. Prior
positions with the same company or affiliate are not indicated.
Each of the officers and members of the Board of the Fund holds the
same position with Transamerica Occidental's Separate Account Fund B. The
members of the Board of Directors are also members of the Board of Directors of
Transamerica Income Shares , Inc., a closed-end management company advised by
Transamerica Investment Services, Inc. Mr. Rolle is a director of Transamerica
Investors, Inc.
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<PAGE>
Compensation
The following table shows the compensation expected to be paid during
the current fiscal year to all directors of the Fund by Transamerica pursuant to
its investment advisory agreement with the Fund.
<TABLE>
<CAPTION>
Name of Person Aggregate Total Pension or Compensation
Compensation Retirement Benefits From Registrant
From Fund Accrued As Part of and Fund
Fund Expenses Complex Paid to
Directors
<S> <C> <C> <C>
Donald E. Cantlay $1,000 -0- $6,000
Richard N. Latzer -0- -0- -0-
DeWayne W. Moore $1,000 -0- $6,250
Gary U. Rolle -0- -0- -0-
Peter J. Sodini $1,000 -0- $6,250
- --------------------------------
</TABLE>
* None of the members of the Board of Directors currently receives any pension
or retirement benefits from Transamerica due to services rendered to the Fund
and thus will not receive any benefits upon retirement from the Fund.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the Fund.
Transamerica is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to Transamerica's assets.
OTHER INFORMATION
Legal Counsel
Sutherland, Asbill & Brennan, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404, has provided advice to the Fund with respect to
certain matters relating to federal securities laws.
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<PAGE>
Other Information
The Prospectus and this Statement do not contain all the information
included in the registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted from the Prospectus and this
Statement pursuant to the rules and regulations of the SEC. The registration
statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement of which the
Prospectus and this Statement form parts, each such statement being qualified in
all respects by such reference.
Financial Statements
This Statement of Additional Information does not contain audited or
unaudited financial statements for the Portfolio because as of the date of this
Statement the Portfolio has not yet commenced operations, has no assets or
liabilities, has incurred no expenses and has received no income. It is
anticipated that Ernst & Young LLP, 515 South Flower Street, Los Angeles,
California 90071, will act as the Portfolio's independent certified public
accountants.
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<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS1
A. Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered a medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or maybe characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements
and their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safe-guarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
- --------
1The rating systems described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P") at the date of this Statement for the securities
listed. Ratings are generally given to securities at the time of issuance. While
the rating agencies may from time to time revise such ratings, they undertake no
obligations to do so, and the ratings indicated do not necessarily represent
ratings which will be given to these securities on the date of the Fund's fiscal
year end.
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<PAGE>
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default
or there may be present elements of danger with respect to principal or interest
principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Unrated: Where no rating has been assigned or where a rating has been
suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is
not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A and Baa groups which Moody's believe possess
the strongest investment attributes are designated by the symbols Aa1,
A1 and Baa1.
B. Standard & Poor's Corporation's
AAA: Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay
interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
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<PAGE>
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB--B--CCC--CC--C: Bonds rated BB, B, CCC, CC and C are regarded as
having predominantly speculative characteristics with respect to the issuer's
capacity to pay interest and repay principal. BB indicates the least degree of
speculation and C the highest. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
Unrated: Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.
Notes: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the
risks of lower-rated speculative obligations. The Portfolio is
dependent on Investment Services' judgment, analysis and experience in
the evaluation of such bonds.
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