SEC Division of Investment Management staff letter: Transamerica Series, Inc.

, NO V 1994
Our Ref. No. 94-693-CC

Transamerica Series, THE CHIEF COUNSEL Inc.
INVSTMNT MAAGEMENT File No. 811-5254
By letter dated October 20, 1994, you request our assurance

that we would not recommend enforcement action to the Commission

under Section 20 (a) of the Investment Company Act of 1940 ("1940

Act") or Rule 20a-l(a) thereunder if Transamerica Series, Inc.

("TSI"), a registered open-end management investment company,

holds shareholder meetings for each of its series for the

election of directors without first sending to the shareholders

of each series that series' respective annual report for the last

fiscal year ended prior to the meeting date. il

The Commission recently revised the proxy rules for

investment companies. 21 The amendments, among other things,

eliminate the requirement that investment company proxy

statements for the election of directors be accompanied or

preceded by the investment company's annual report for its last

fiscal year ended prior to the meeting. ¿I While the amendments

do not become effective until November 23, 1994, we would not

recommend enforcement action to the Commission if TSI does not provide the shareholders of each series with that series' respective annual report for the fiscal year ended October 31,

1994 and does not comply with the conditions described in your

il TSI consists of six series, each of which has a fiscal year

ending on October 31. While TSI has one combined proxy

statement r each series will prpduce a separate annual

report, and each series will have a separate shareholder

meeting.
21 See Investment Company Act ReI. No. 20614 (Oct. 13, 1994) ("Release"), 59 Fed. Reg. 52689 (Oct. 19, 1994).

¿I Item 22 (a) (3) (iii) of Schedule A of the Securities Exchange Act of 1934 as amended requires, in lieu of the annual

report, inclusion in the proxy statement of a prominent

statement that funds will furnish, without charge, their

most recent annual and semi-annual reports on request. In

addition, the amendment requires funds to provide requesting

shareholders with a copy of the requested report by first

class mail or other means designed to assure prompt

delivery, within three business days of the request. See

Release at 32, ,59 'Fed. Reg. at 52,697.

letter. This relief is conditioned on TSI complying with the requirements of Item 22 (a) (3) (iii) of Schedule 14A of the Securities Exchange Act of 1934, as recently amended. ~/

ana M. ca~ - 0lj¡1L
Attorney
4/ Ronald Feiman confirmed in a telephone conversation with

Dorothy Donohue on November 2, 1994 that TSI would comply

with recently amended Item 22 (a) (3) (iii) of Schedule 14A.

• 2

GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN

114 WEST 47TH STREET NEW YORK, N.Y. 10036-1510 WRITER'S DIRECT DIAL NUMBER THEODORE ALTMAN MICHAEL B REUBEN 12121626- oß"e JORDAN L. BLEZNICK DOUGLA S. RICH DAVIO M BUTOWSKY. P.C VICTOR J. ROCO MARJORIE SYBUL AOAMS ELLIS L. REEMER TELEPHONE 12121626-0800 RONALD M "ElMAN KEITH L. SCHAITKIN JE....REY M GUSSOF"F" BARRY D. SHALOV TELECOPIER 12~~6:26'0799

STEPHEN A. HELMAN STUART M. STRAUSS
RICHARD M. HERVEY BRUCE J. WEIN
PAUL RICHARD KARAN MARC WEITZEN . t . ~\h .~--- 19t¡~~-"."-~'--"~ '''RAYMD. N. 0 ~'. F"ERSKD

IRVING H PiCARD LAWRENCE J. ZWEIF"ACH ~ - - U Ç.;J,pt-ARD GORDON BONNIE 0 PODOLSKY DENNIS H. GRtENwALD ,~: eel; ion JAVIER HERNANDEZ COUNSEL REBECCA A. BERLOW JON D KAPLON GEORGE L BISCHOF" STACY L. KATZ t';,le ç;() Ct ~ I DAVID M. BRENSILBER JONATHAN KLEIN ''.i::Üic' DENNIS M. BRESNAN NANCY O. LIEBERMAN JUNE H. BRETTLER LAWRENCE A LONDON "..:~=1r:b1l1ty I j - .. 7- 9 L(' JErrREY P BURNS. F"ELICIA A. MENNIN ANDREW H. CHARLES CARIN F". MUHLBAUM ;'~---.""~~;;:.:,.,.,..-,:_.",.:
M JEAN CONNOLLY ALEXAN ORA POE
CLIF"F"ORD S DICKSON LOUISA S. RUF"F"INE
DANIEL AETNA HOLLY G. RUSSELL
BARBARA E. F"EINMAN BRUCE O. SHAPIRO
KIM B F"IELDS LYLLIAN S. SIMINS
DEBORAH A GARF"IELD LISA A STANCATI
JEF"F"REY S. GERON CLAIRE R. TELECKI
KAREN B GOLDF"ARB JUDSON K. VICKERS
HILLEL Y GOLDSTEIN ISAAC M ZUCKER
VIRGINIA J. HARNISCH 1940 Act/Rule 20a-1
-ADMni£O "N Oi-UO ONL y

Di vision of Investment Management

Securities and Exchange Commission

450 Fifth Street, N. W.

Washington, D.C. 20549

Re: Transamerica Series, Inc.
Madame/Sir:
As you may be aware, on October 14, 1994 Trans￾america Asset Manag~ment Group, Inc. ("Transamerica"), an

indirect wholly-owned subsidiary of Transamerica Corporation

("Transamerica Corporation") entered into an agreement to

sell all the common stock of its wholly-owned subsidiary

Transamerica Fund Management Company ("TFMC"), to a subsidi￾ary of John Hancock Mutual Life Insurance Company, The

Berkeley Financial Group ("Berkeley"). It is proposed that,

upon completion of the transaction (the "Acquisition"), John

Hancock Advisers, Inc. ("John'Hancock Advisers"), a wholly-

owned subsidiary of Berkeley, which shall have retained key

personnel of TFMC" shall enter into advisory contracts to

A PARTNERSHIP WHICH INCLUDES A PROF"ESSIDNAL CORPORATION

manage each registered investment company currently managed

by TFMC (collectively, the "Transamerica Funds") .

As more fully described below, Transamerica, TFMC,

and Transamerica Series, Inc. (IITSI II), a Maryland corpora￾tion having six series of shares (the IITSI Series"), each of

which is operated as a separate registered investment com￾pany, request confirmation that the Division of Investment

Management of the Securities and Exchange Commission (the

"Commission") would not recommend enforcement action to the

Commission if, under the circumstances described herein,

TSI's combined proxy statement for the meetings at which shareholders of each of the TSI Series (together, the IIMeeting") will consider certain proposals in connection

with the Acquisition, is not accompanied or preceded by

TSI's annual report for its fiscal year ending most recently

prior to the Meeting. 1

I . FACTS

TFMC acts as investment adviser and administrator

to each of the eight Transamerica Funds, which, as of Sep￾tember 30, 1994, comprised an aggregate of seventeen managed

portfolios and had aggregate assets of approximately $ 3

billion, and approximately 142,152 shareholders. The Trans￾america Funds' fiscal year ends are staggered throughout the

year to minimize the accounting burden during any particular

fiscal period.

Since the Acquisition 'will result in an "assign￾ment" (as defined in Section 2 (a) (4) of the Investment Com￾pany Act of 1940 Act (the "1940 Act")) of TFMC's investment

management agreements, TSI will submit a proposal to

shareholders of the TSI Series to approve new investment

management contracts between TSI, on behalf of each of the

1/ The requested relief is substantially similar to

that granted in Dreyfus California Tax Exempt Bond Fund,

Inc. et al. (pub. avail. June 9, 1994) and Dean Witter

American Value Fund, et al (pub. avail. November 18, 1992).

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TSI Series, and John Hancock Advisers. The new management

contracts of the TSI Series have been approved by the Board

of Directors. The Acquisition is conditioned on obtaining

the necessary approvals for new investment management

contracts and for new distribution plans pursuant to Rule

12b-1 under the 1940 Act for all eight Transamerica Funds,

including TSI, and all seventeen managed portfolios thereof,

including the six TSI Series. Consequently it is necessary

to hold the Meeting promptly. The other Transamerica Funds

have called shareholders meetings for December 16, 1994 and

TSI has authorized calling a meeting for the same date, sub￾ject to receipt of an affirmative response to the request

contained in this letter.

TSI anticipates that, given, among other things,

the number of shareholders of the TSI Series, at least 40

days will be required following the mailing of proxy

materials to the shareholders to be reasonably certain of

assuring that a number of shareholders representing a quorum

of shares of each TSI Series will have returned executed

proxy cards by the date of the Meeting. Accordingly, TSI

expects to mail proxy materials to shareholders during the

first seven days of November, 1994.

Transamerica Corporation intends to pay the costs

of soliciting proxies, except that fees and expenses of any

outside solicitors and the printing and postage expenses re￾lated to the preparation of the proxy statement will be

shared by Transamerica Corporation and Berkeley, provided

that Berkeley's share of any such expenses with respect to

all the Transamerica Funds shall not exceed $375,000.

In connection with the Acquisition, the share￾holders will also be asked to elect the directors of TSI.

Since TSI is a Maryland corporation, it is not legally

required to hold annual meetings for the election of Board

members. Nevertheless, such action would benefit TSI as it

will provide maximum flexibility to add new Board members

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thereafter without having to incur the expense of conducting

another shareholders meeting for such purpose. 2

The Acquisition is expected to be consummated

prior to December 31, 1994. Transamerica Corporation deter￾mined the date of the closing as part of its overall

business plan to sell TFMC. Rule 14a-3 (b) ("Rule 14a-3")

under the Securities Exchange Act of 1934, as amended (the

"1934 Act"), if applied to TSI could force a delay of the

Acquisi tion by a number of weeks, which Transamerica,

Berkeley and TSI believe would be detrimental to the

interests of the parties to the Acquisition and the

shareholders of the TSI Series. Hence, TSI is requesting re￾lief from Rule 20a-1 under the 1940 Act and Rule 14a-3 upon

the conditions set forth herein.

II. INTERPRETATION OF RULE 14a-3

Rule 20a-1(a) under the 1940 Act provides, in per￾tinent part, that: "No person shall solicit or permit the

use of his name to solicit any proxy, consent or authoriza￾tion in respect of any security of which a registered in￾vestment company is the issuer, except upon compliance with

. . . all rules and regulations adopted pursuant to Section

14 (a) of the Securities Exchange Act of 1934 that would be

applicable to such solicitation if it were made in respect

2/ Section 16 (a) of the 1940 Act permits vacancies in

the Board of Directors which occur between meetings to be

filled by the Board without a' shareholder vote provided that

immediately after filling such. vacancy at least two-thirds

of the directors have been elected by shareholders. While it

is noted that the particular slate of directors proposed for

election at the Meeting would require a shareholder vote

under Section 16 (a), the slate has been proposed by the

disinterested directors of TSI in view of the requirements of Section 15 (f) (1) (A) of the 1940 Act in connection with the Acquisition and is thus beneficial to TSI and incidental

to the Meeting's primary purpose.

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of a security registered on a national securities exchange.

"
Rule 14a-3 (b) under the Securities Exchange Act of

1934 (the "1934 Act") provides, in relevant part, that:

if the solicitation (of any proxy, con￾sent or authorization) is made on behalf

of the registrant and relates to an

annual (or special meeting in lieu of

the annual) meeting of security holders

. . ., at which directors are to be

elected, each proxy statement . . .

shall be accompanied or preceded by an annual report to security holders. .
As noted above, the Meeting is being called, among

other things, for the purpose of voting on the investment

management contracts and distributions plans. Absent the

need for such a vote, the Meeting would not be held. Be￾cause Board members will be elected at the Meeting, under

state law, the Meeting may be considered an annual meeting.

Rule 14a-3 (b) (1) then requires that the annual report of

each TSI Series include an audited balance sheet as of the

end of the last fiscal year and an audited statement of

changes in net assets for the two most recent fiscal years.

The "last fiscal year" is defined in Rule 14a-1 (e) as the

last fiscal year which ends prior to the date of the

shareholder meeting. .

Each TSI Series' fiscal year ends on October 31.

Thus, if Rule 14a-3 ïs appliea strictly, TSI would be

required to furnish annual reports for the TSI Series with

respect to the fiscal year ending October 31, 1994.

However, auditors typically require approximately two months

to prepare and certify an investment company's financial

~
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statements included in its annual report.3 Therefore, the

1994 annual report for each TSI Series is not expected to be

available until early 1995.

III. LEGAL AN POLICY ARGUMENTS

Regulation S-X permits the use of unaudited finan￾cial statements when audited financial statements, as a

practical matter, cannot be generated on a timely basis. In

particular, Rule 3-18 of Regulation S-X provides limited re￾lief from the requirement that audited financial statements

as of the "last fiscal year" of the registrant be provided by permitting the use of interim unaudited financial state￾ments (in addition to the most recent available audited

statements) where the filing is made within 60 days after

the end of the registrant's most recent fiscal year. 4 We

believe that this Rule could be applied to provide TSI with

from Rule 14a-3 under the circumstances herein des￾cribed. S

relief
3/ See supra note 1 and Dreyfus Connecticut Municipal

Money Market Fund and Dreyfus Michigan Municipal Money Mar￾ket Fund (pub. avail. December 5, 1990).

4/ Rule 3-12 of Regulation S-X provides limited relief

from the requirement that audited financial statements be

provided in a proxy statement of non-investment company reg￾istrants under circumstances where the proposed mailing date

of a proxy statement (as opposed to the meeting date) falls within 90 days after .the end of the fiscal year. S / Rule 14a-3 (b) (1) provides that the required finan￾cial statements be prepared in accordance with Regulation S￾X, "except that the provisions of Article 3, other than

Rules 3-03 (e), 3-04 and 3-20 and Article 11 shall not ap￾ply. " That provision, in our view, may reasonably be inter￾preted to eliminate certain requirements which otherwise

would have been unduly burdensome with regard to the pre￾paration of annual reports and should not be read as re￾stricting issuers from relying upon the permissive provi￾10/20/94; 6:55pm 14670/2010/60.2 ¿I

Read literally, Rule 3 - 18 applies only to finan￾cial statements required to be included in a registration

statement or proxy statement and not to the financial state￾ments included in an annual report which are not part of the

proxy materials filed with the Commission. Yet the Rule ob￾viously reflects a determination that, in the absence of

available audited financial statements, unaudited financial

statements are adequate to enable shareholders to make an

informed decision in the context of financially driven

transactions, such as the Acquisition. We believe the same

financial statements also should be appropriate where

proxies are solicited for the election of Board members.

This seems particularly true under the circumstances pre￾sented here where the election of Board members is inciden￾tal to the Meeting's primary purpose.

As noted above, if TSI is required to furnish 1994

annual reports along with or before delivery of proxy mater￾ials, TSI would be forced to delay the mailing of the proxy

materials for a considerable period, resulting in a corres￾ponding delay in the Meeting with uncertain consequences for

the timing of the Acquisition.6

iv. APPLICABLE CONDITIONS

TSI has advised that, as a condition to the re￾quested relief, the Proxy Statement sent to shareholders of

each of the TSI Series:

1. Will be accompanied or preceded by the annual re￾port for the fiscal year ended October 31, 1993. This annual

report will be dated .no earlier than 16 months before the

Meeting date, and will include: (i) an audited balance

sheet of such Series as of October 31, 1993; and (ii) an

sions of such article respecting the delivery of unaudited

financial statements in the absence of audited financial

statements.
6/ See Dean Witter American Value Fund suora note 1.

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audited statement of changes in the net assets of such

Series for the two fiscal years ended October 31, 1993 and

October 31, 1992;

2. will be accompanied or preceded by most recent

semi-annual report for such Series;

3. Will include a representation from TSI that there

has been no material adverse change in the financial opera￾tions of such Series since the date of the financial state￾ments contained in its most recent semi-annual report; and

4. will include a statement that proxies solicited by

TSI's Board for the meeting will not be voted for the elec￾tion of Board members unless (a) TSI shall have received a

certificate from its President, dated the date on which such

vote is to be taken, that, to the best of his knowledge,

there has been no material adverse change in the financial

operations of each TSI Series since the date of the

unaudited financial statements included in such Series' most

recent semi-annual report, unless such material adverse

change has been disclosed to shareholders in additional

proxy solicitation material, or (b) TSI shall have mailed to

all shareholders of record audited financial statements of

such Series in an annual report (in accordance with Section

30 of the 1940 Act) and given the shareholders of such

Series an opportunity to revoke any proxies previously furnished.
For purposes of conditions 3 and 4 above, changes

attributable to general market or economic conditions will

not be taken into account except to the extent that any such

changes result from TFMC's or .the Board's improper perform￾ance of its responsibilities.

V. CONCLUSION

Based upon the foregoing, we respectfully request

that the staff grant the no-action relief requested. If you

have any questions, please call the undersigned at the num￾ber noted above. If, based upon this letter, you believe

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..

that the staff will not be inclined to grant the relief

requested, please call the undersigned at the number above

immediately.
AP/bif
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