Transamerica Variable Insurance Fund, Inc.
Growth Portfolio
Annual report
Year ending December 31, 1998
Managers comments
December 31, 1998
TRANSAMERICA VIF Growth Portfolio
Portfolio Manager: Jeffrey S. Van Harte
Fund Performance
The Transamerica VIF Growth Portfolio performed extremely well in 1998. The
Portfolio generated a total return of 43.28% for the year compared to a 28.58%
advanced by the S&P 500 for the same period. Since the reorganization in
November 1996, the Portfolio has earned an average annual total return of 47.03%
while the S&P 500 has returned 28.06%.
Portfolio Manager Comments
A few large capitalization stocks were the key drivers contributing to the
strong success of the Portfolio over the past year. The reason is that there are
very few companies that have learned to deal with deflation, or the decline in
the prices of goods and services. Those companies that have learned to make
deflation their friend are winning the battle for customers, market share and
profit growth. These are new winners in the stock market and we seek to own
them.
Great examples of companies that have learned to deal with deflation are found
within the Portfolio's top two holdings, Dell Computer and Charles Schwab. Dell
has mastered the direct model of delivering desktop PC's by holding little
inventory and custom manufacturing so as to always deliver the best technology
at the lowest price to their customers. Schwab made a remarkable transition this
year. The company chose to go to their flat rate pricing for electronic trading
over the Internet and telephone. Average revenue per trade dropped from over $70
to around $50, yet the company's profitability blossomed. This is how companies
win in the world of deflation--delivering the best possible customer service or
product, at a low price.
Portfolio Asset Mix
Common Stocks 98.1%
Cash and Cash Equivalents 1.9%
Going Forward
We expect weaker world economies and continued pressure on prices in 1999. Given
our outlook, our equity selection strategy is focused on high quality companies
that have the wherewithal to withstand weak economies, and have a business model
that works well in a deflationary environment.
Managers comments (cont'd)
December 31, 1998
Comparison of change in value of a $10,000 investment in Transamerica Growth
Portfolio with the S&P 500 index*
Growth Portfolio ($101,278 at 12/31/98) S&P 500 Index ($57,970 at 12/31/98)
Average Annual Total Return
as of December 31, 1998 One Year Five Year Ten Year
Growth Portfolio 43.28% 37.34% 26.05%
- --------------------------------------------------
S&P 500 Index 28.58% 24.06% 19.21%
- --------------------------------------------------
*Hypothetical illustration of $10,000 invested on December 31, 1988, assuming
reinvestment of dividends and capital gains at net asset value through December
31, 1998.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500") consists
of 500 widely held, publicly traded common stocks. The S&P 500 Index does not
reflect any commissions or fees which would be incurred by an investor
purchasing the securities it represents.
The Portfolio is only available through the purchase of variable insurance
products. The performance data does not reflect the additional charges
associated with such products. Application of these charges would reduce the
performance of the Portfolio. Variable products pose investment risks, including
loss of capital. Past performance is not predictive of future performance.
If the Investment Adviser had not waived fees, the returns of the Portfolio
would have been lower.
Growth Portfolio schedule of investments
December 31, 1998
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 98.1%
Broadcasting - 3.0%
Clear Channel Communications, Inc. (a) 60,000 $ 3,270,000
- --------------------------------------------------------------------------------
Business Services -5.4%
Envoy Corporation (a) 40,000 2,330,000
First Data Corporation 110,000 3,485,625
- --------------------------------------------------------------------------------
5,815,625
Chemicals -6.2%
Minerals Technologies, Inc. 60,000 2,456,250
Monsanto Company 90,000 4,275,000
- --------------------------------------------------------------------------------
6,731,250
Commercial Services -3.7%
Sodexho Marriott Services, Inc. 145,000 4,014,688
- --------------------------------------------------------------------------------
Computers & Business Equipment -14.1%
Cisco Systems, Inc. (a) 45,000 4,176,562
Dell Computer Corporation (a) 150,000 10,978,125
- --------------------------------------------------------------------------------
15,154,687
Conglomerates -2.9%
Gillette Company 65,000 3,140,313
- --------------------------------------------------------------------------------
Diversified Operations -3.7%
Berkshire Hathaway, Inc. (a) 1,700 3,995,000
- --------------------------------------------------------------------------------
Drugs & Health Care -8.8%
McKesson Corporation 40,000 3,162,500
Merck & Company, Inc. 20,000 2,953,750
Pfizer, Inc. 27,000 3,386,812
- --------------------------------------------------------------------------------
9,503,062
Electronics -8.4%
Applied Materials, Inc. (a) 85,000 3,628,437
Intel Corporation 46,000 5,453,875
- --------------------------------------------------------------------------------
9,082,312
Financial Services -11.0%
Charles Schwab Corporation 114,000 6,405,375
Franklin Resources, Inc. 75,000 2,400,000
Merrill Lynch & Company, Inc. 45,000 3,003,750
- --------------------------------------------------------------------------------
11,809,125
Hotels & Restaurants -3.9%
McDonald's Corporation 55,000 4,214,375
- --------------------------------------------------------------------------------
Human Resources -1.9%
Robert Half International, Inc. (a) 45,000 $ 2,010,938
- --------------------------------------------------------------------------------
Leisure & Entertainment -1.6%
Pixar, Inc. (a) 50,000 1,750,000
- --------------------------------------------------------------------------------
Retail -5.6%
Fred Meyer, Inc. (a) 100,000 6,025,000
- --------------------------------------------------------------------------------
Retail Grocery -3.4%
Safeway, Inc. (a) 60,000 3,656,250
- --------------------------------------------------------------------------------
Software -11.1%
IMS Health, Inc. 50,000 3,771,875
Microsoft Corporation (a) 45,000 6,240,937
SAP AG ADR (b) 55,000 1,983,438
- --------------------------------------------------------------------------------
1,996,250
Transportation -3.4%
Kansas City Southern Industries, Inc. 75,000 3,689,063
- --------------------------------------------------------------------------------
Total Common Stocks
(cost $61,050,211) 105,857,938
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -2.0% State Street Bank and Trust Company, 4.00%, due
01/04/99, (collateralized by $2,065,000 par value U.S. Treasury Note, 6.375%,
due 03/31/01, with a value of
$2,173,774, cost $2,130,000) 2,130,000 2,130,000
- --------------------------------------------------------------------------------
Total Investments - 100.1%
(cost $63,180,211)* 107,987,938
Liabilities in Excess of Other Assets - (0.1)% (95,759)
Net Assets - 100.0% $107,892,179
(a) Non-income producing security
(b) ADR - American Depositary Receipts
*Aggregate cost for Federal tax purposes. Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax
cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $46,516,280 and $1,708,553,
respectively. Net unrealized appreciation for tax purposes is $44,807,727.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1998
Growth
Portfolio
Assets
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at cost $63,180,211
Investments, at value $107,987,938
Cash 138,908
Receivables:
Fund shares sold 318,083
Dividends and interest 29,362
Due from Administrator 5,513
Other Assets 378
- ------------------------------------------------------------------------------------------------------------------
108,480,182
Liabilities
Payables:
Securities purchased 476,675
Fund shares redeemed 3,912
Advisory fees 63,628
Audit fees 27,167
Custody fees 8,422
Other accrued expenses 8,199
- ------------------------------------------------------------------------------------------------------------------
588,003
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $107,892,179
- ------------------------------------------------------------------------------------------------------------------
Net Assets Consist Of:
Paid in capital $62,577,616
Accumulation net realized
gain in investments 506,836
Net unrealized appreciation
of investments 44,807,727
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $107,892,179
- ------------------------------------------------------------------------------------------------------------------
Shares outstanding 5,573,650
- ------------------------------------------------------------------------------------------------------------------
Net asset value per share $19.36
</TABLE>
Statement of Operations
Year Ended December 31, 1998
Growth
Portfolio
- --------------------------------------------------------------------------------
Investment Income
Interest income $ 138,975
Dividend income 225,995
- --------------------------------------------------------------------------------
364,970
- --------------------------------------------------------------------------------
Expenses
Investment Adviser fee 519,142
Custodian fees 47,081
Administration fees 47,296
Audit fees 27,144
Transfer Agent fees 21,365
Printing expenses 2,004
Other expenses 3,372
- --------------------------------------------------------------------------------
Total expenses before waiver
and reimbursement 667,404
Reimbursed and waived expenses (79,043)
- --------------------------------------------------------------------------------
Net expenses 558,361
- --------------------------------------------------------------------------------
Net Investment Loss (223,391)
Net realized and Unrealized
Gain on Investments
Net realized gain on investments 7,971,054
Net change in unrealized appreciation
of investments 18,232,158
- --------------------------------------------------------------------------------
Net Realized and Unrealized
Gain on Investments 26,203,212
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
From Operations $25,979,821
<TABLE>
<CAPTION>
statements of changes in net assets
Year ended
December 31, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets
Operations:
<S> <C> <C>
Net investment loss $ (223,391) $ (161,554)
Net realized gain on investments 7,971,054 5,194,303
Net change in unrealized
appreciation of investments 18,232,158 9,864,234
Net increase in net assets resulting
from operations 25,979,821 14,896,983
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Net realized gains (8,918,631) (3,656,425)
- ------------------------------------------------------------------------------------------------------------------
Fund share transactions (Note 3) 44,452,582 2,899,412
Net increase in assets 61,513,772 14,139,970
Net Assets
Beginning of year 46,378,407 32,238,437
- ------------------------------------------------------------------------------------------------------------------
End of year $ 107,892,179 $ 46,378,407
</TABLE>
<TABLE>
<CAPTION>
Growth Portfolio Financial Highlights
December 31, 1998
Selected data for a share outstanding throughout each period are as follows*
Year ended December 31,
1998 1997 1996 1995 1994
Net Asset Value
<S> <C> <C> <C> <C> <C>
Beginning of period $14.750 $10.930 $8.582 $5.615 $5.239
- ------------------------------------------------------------------------------------------------------------------
Operations:
Net investment loss (0.013) (0.050) (0.065) (0.069) (0.042)
Net realized and
unrealized gain 6.380 5.130 2.413 3.036 0.418
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations 6.367 5.080 2.348 2.967 0.376
- ------------------------------------------------------------------------------------------------------------------
Dividends/Distributions
to Shareholders:
Net realized gains (1.757) (1.260) - - -
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value
End of period $ 19.360 $ 14.750 $ 10.930 $ 8.582 $ 5.615
- ------------------------------------------------------------------------------------------------------------------
Total Return 43.28% 46.50% 27.36% 52.84% 7.19%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios and
Supplemental Data:
Expenses to average
<S> <C> <C> <C> <C> <C> <C>
net assets (1) 0.85% 0.85% 1.27% 1.41% 1.43%
Net investment loss to average net assets (2)
(0.32%) (0.39%) (0.68%) (0.94%) (0.80%)
Portfolio turnover rate 34.41% 20.54% 34.58% 18.11% 30.84%
Net Assets,
end of period
(in thousands) $107,892 $46,378 $32,238 $25,738 $17,267
</TABLE>
*Prior to November 1, 1996, activity represents accumulated unit values of the
Separate Account which have been converted to share values for presentation
purposes. (1)If the Investment Adviser had not waived expenses, the ratio of
operating expenses to average net assets would have been 0.96%, 0.98% and 1.34%
for the years ended December 31, 1998 and 1997 and 1996, respectively. (2)If the
Investment Adviser had not waived expenses, the ratio of net investment loss to
average net assets would have been (0.44%), (0.52%) and (0.75%) for the years
ended December 31, 1998 and 1997 and 1996, respectively.
1. Organization and Summary of Significant Accounting Policies Transamerica
Variable Insurance Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as an open-end management investment company. One of the
Fund's portfolios is the Growth Portfolio. The Growth Portfolio's investment
objective is long-term capital growth.
The Fund was established as a Maryland Corporation on June 23, 1995. The Growth
Portfolio is the successor to Transamerica Occidental's Separate Account Fund C
(the "Separate Account") which was organized as an open-end diversified
management investment company. On November 1, 1996, all investments held by the
Separate Account with a fair value of $29,567,077 and a cost basis of
$15,661,836 were transferred to the Growth Portfolio of the Fund. In exchange
for these investments, the Separate Account received all of the outstanding
shares (2,956,116) of the Growth Portfolio. This transaction was accounted for
in a manner similar to a pooling of interests. Thereafter, the Separate
Account's only investment is shares of the Growth Portfolio. Effective October
31, 1996, the net asset value of the Growth Portfolio was repriced at $10 per
unit. All previous accumulation unit values of the Separate Account have been
restated for presentation purposes to account for this change.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements:
(A) Valuation of Securities
Equity securities traded on a national exchange, NASDAQ and over-the-counter
securities are valued at the last sale price. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith pursuant to procedures established by the Fund's Board of Directors.
Debt securities with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
(B) Repurchase Agreements
The 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. If the seller is unable to make a timely repurchase, the
Portfolio's expected proceeds could be delayed, or the Portfolio could suffer a
loss in principal or current interest, or incur costs in liquidating the
collateral.
(C) Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date and interest income is recorded daily on an
accrual basis. Realized gains and losses on investments are determined using the
identified cost method for both financial statement and Federal income tax
purposes. The aggregate cost of securities purchased (excluding short-term
investments) and proceeds from sales for the Growth Portfolio were $58,317,973
and $23,286,114 respectively, for the year ended December 31, 1998.
(D) Dividends and Distributions
The Growth Portfolio declares and distributes dividends from net investment
income and distributes its net realized capital gains, if any, at least
annually. All distributions are paid in shares of the Portfolio at net asset
value.
(E) Federal Income Taxes
The Portfolio's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders. Therefore, no federal income tax
provision is required. On December 30, 1998, the Growth Portfolio paid a capital
gain distribution of $8,918,613 and $1.757 per share.
Net investment income distributions and capital gains
distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are due to differing treatments for items such as deferral of
wash sales, net operating losses and capital loss carryforwards. For the year
ended December 31, 1998, the Growth Portfolio increased accumulated net
investment loss by $223,391 and decreased paid in capital by $223,391.
(F) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.
2. Investment Advisory Fees and Other Transactions With Affiliates
The Fund has entered into an Investment Advisory Agreement with Transamerica
Occidental Life Insurance Company ("the "Adviser"), a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which in turn is a wholly
owned subsidiary of Transamerica Corporation. For its services to the Growth
Portfolio, the Adviser receives an annual advisory fee of 0.75% of the average
daily net assets of the Portfolio.
The Adviser has contracted with Transamerica Investment Services, Inc., a
wholly-owned subsidiary of Transamerica Corporation to provide investment advice
to the Portfolio. Transamerica Investment Services receives its fee directly
from the Adviser, and receives no compensation from the Portfolio.
The Adviser, at its discretion, has agreed to waive its fee and assume any other
operating expenses (other than certain extraordinary or non-recurring expenses)
of the Growth Portfolio which exceed 0.85% of the average daily net assets of
the Portfolio.
Certain directors and officers of the Fund are also directors and officers of
the Adviser, Transamerica Investment Services, and other affiliated Transamerica
entities, however they receive no compensation from the Fund.
3. Capital Stock Transactions
The Fund has one billion shares of $0.001 par value stock authorized. As of
December 31, 1998, the Growth Portfolio was authorized to issue two hundred
million shares.
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------
Growth Portfolio Shares Amount Shares Amount
<S> <C> <C> <C>
Capital stock sold 2,397,169 $43,159,237 - $ -
Capital stock
issued upon
reinvestment
of dividends and
distributions 464,996 8,918,618 247,893 3,656,425
Capital stock
redeemed (432,728) (7,625,273) (53,456) (757,013)
- ------------------------------------------------------------------------------------------------------------------
Net increase 2,429,437 $44,452,582 194,437 $2,899,412
</TABLE>
Report of independent auditors
Report of Ernst & Young LLP, Independent Auditors
To The Shareholders and Board of Directors of
Transamerica Variable Insurance Fund, Inc.
We have audited the accompanying statements of assets and liabilities of
Transamerica Variable Insurance Fund, Inc. (comprising, respectively, the Growth
Portfolio and Money Market Portfolio) (the "Funds") as of December 31, 1998, and
the related statements of operations, statements of changes in net assets, and
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Transamerica Variable Insurance Fund,
Inc., as of December 31, 1998, and the results of their operations, the changes
in their net assets and their financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
Sincerely, Ernst & Young LLP Los Angeles, California February 10, 1999 VIM
190-0299
<PAGE>
TRANSAMERICA VIF Money Market Portfolio
Portfolio Manager: Kevin J. Hickam
Portfolio Performance
The Transamerica VIF Money Market Portfolio delivered good results during 1998.
The Portfolio's return over the period as of December 31, 1998 was 4.93% in
comparison to the IBC Money Fund Report return of 4.97%. The seven-day current
and effective yields were 4.65% and 4.76% respectively, as of December 31, 1998.
The Portfolio's average annual total return since its inception in January 1998
is 4.95%.
Portfolio Manager Comments
The Transamerica VIF Money Market Portfolio has performed well since its
commencement in January of 1998. During the fourth quarter, in response to
economic turmoil in Latin America, Asia and Eastern Europe, the Federal Reserve
Board cut the Federal Funds Rate from 5.50% to 4.75% as of year end. They did
this with a series of 25 basis point rate cuts beginning in late September. The
Federal Reserve Board's strategy was successful in increasing liquidity and
restoring confidence to the U.S. financial markets. By actively monitoring
economic activity, anticipating the actions taken by the Federal Reserve, and
actively searching out attractive investment opportunities, we were able to
achieve excellent results for our shareholders.
Portfolio Asset Mix
Common Paper (Domestic) 91.2%
Common Paper (Foreign) 7.0%
Repurchase Agreement 1.8%
Going Forward
Over the next six months, the United States is expected to continue to enjoy
solid economic growth, although the rate of growth is expected to be more
moderate than that of 1998. Economic data indicates that the low inflation
environment that we are presently experiencing is likely to continue. Prices on
consumer goods are expected to remain stable or perhaps go even lower. The
Portfolio's objectives will remain the same: to provide safety, liquidity and
performance.
Average Annual Total Return
As of December 31, 1998 One Year
Money Market Portfolio 4.93%
The IBC's Money Fund Report(TM) 4.97%
Money Market Portfolio ($10,493 at 12/31/98)
The IBC's Money Fund Report(TM) ($10,497 at 12/31/98)
Hypothetical illustration of $10,000 invested at inception (January 2, 1998),
assuming reinvestment of dividends and capital gains at net asset value through
December 31, 1998.
- -The IBC's Money Fund ReportTM -All Taxable, First Tier is a composite of
taxable money market funds that meet the SEC's definition of first tier
securities contained in Rule 2a-7 under the Investment Company Act of 1940. It
does not reflect any commissions or fees which would be incurred by an investor
purchasing the securities it represents. -The Portfolio is neither insured nor
guaranteed by the U.S. government, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per share.
- -The Portfolio is only available through the purchase of variable insurance
products. The performance data does not reflect the additional charges
associated with such products. Application _of these charges would reduce the
performance of the Portfolio. Variable products pose investment risks, including
loss of capital. Past performance is not predictive of future performance. -If
the Investment Adviser had not waived fees and reimbursed expenses, the returns
of the Portfolio would have been lower.
See notes to financial statements
COMMERCIAL PAPER - DOMESTIC -- 91.2%
- ----------------------------------------------------------------------------
Agricultural Machinery -- 1.8%
Deere & Company
4.950% 03/23/99 $125,000 $123,608
- ----------------------------------------------------------------------------
Banking -- 3.7%
J.P. Morgan & Company, Inc.
5.100% 02/19/99 250,000 248,264
- ----------------------------------------------------------------------------
Chemicals -- 4.2%
E. I. du Pont de Nemours and Company
5.150% 01/13/99 285,000 284,511
- ----------------------------------------------------------------------------
Commercial Financial Services -- 16.2%
Associates Corporation of North America
5.280% 01/12/99 130,000 129,791
5.000% 04/01/99 200,000 197,500
General Electric Capital Corporation
5.170% 01/15/99 138,000 137,722
5.330% 01/21/99 147,000 146,565
IBM Credit Corporation
5.280% 01/11/99 100,000 99,853
5.040% 01/25/99 245,000 244,177
John Deere Finance Ltd.
5.280% 01/22/99 150,000 149,538
- ----------------------------------------------------------------------------
1,105,146
- ----------------------------------------------------------------------------
Consumer Financial Services -- 17.9%
Ford Motor Credit Company
5.330% 01/05/99 135,000 134,920
5.370% 01/08/99 200,000 199,791
Motorola Credit Corporation
4.980% 02/05/99 125,000 124,395
5.100% 02/16/99 200,000 198,697
Toyota Motor Credit Corporation
5.180% 01/08/99 230,000 229,768
USAA Capital Corporation
5.300% 01/08/99 128,000 127,868
4.900% 02/08/99 200,000 198,966
- ------------------------------------------------------------------------
1,214,405
- ------------------------------------------------------------------------
Consumer Products -- 1.6%
The Procter & Gamble Company
5.150% 01/21/99 110,000 109,685
- ------------------------------------------------------------------------
Electric Utilities -- 4.8%
Duke Energy Corporation
5.800% 01/14/99 100,000 99,790
5.370% 01/28/99 230,000 229,074
- ------------------------------------------------------------------------
328,864
- ------------------------------------------------------------------------
Electrical Equipment -- 1.5%
Emerson Electric Company
5.450% 01/21/99 100,000 99,697
- ------------------------------------------------------------------------
Financial Services -- 14.9%
Caterpillar Financial Services
5.120% 01/25/99 150,000 149,488
5.180% 02/05/99 178,000 177,104
Chevron USA, Inc.
5.200% 01/22/99 100,000 99,697
Export Development Corporation
5.150% 02/19/99 300,000 297,897
Merrill Lynch & Company, Inc.
5.190% 01/19/99 290,000 289,247
- ------------------------------------------------------------------------
1,013,433
- ------------------------------------------------------------------------
Food & Beverages -- 3.5%
Coca Cola Company
5.150% 01/07/99 240,000 239,794
- ------------------------------------------------------------------------
Gas & Pipeline Utilities -- 4.9%
Consolidated Natural Gas Company
5.130% 01/28/99 335,000 333,711
- ---------------------------------------------------------------------------
Insurance -- 4.9% AIG Funding, Inc.
5.200% 01/07/99 335,000 334,710
- ---------------------------------------------------------------------------
Leisure & Entertainment -- 1.6%
The Walt Disney Company
5.000% 01/08/99 110,000 109,893
- ---------------------------------------------------------------------------
Oil -- 3.6%
Chevron Corporation
5.220% 01/11/99 245,000 244,645
- ---------------------------------------------------------------------------
Photography -- 4.2%
Eastman Kodak Company
5.050% 01/25/99 290,000 289,024
- ---------------------------------------------------------------------------
Telecommunications -- 1.9% BellSouth Telecommunications, Inc.
4.900% 02/23/99 128,000 127,076
- ---------------------------------------------------------------------------
Total Commercial Paper - Domestic
(amortized cost $6,206,466) 6,206,466
- ---------------------------------------------------------------------------
COMMERCIAL PAPER - FOREIGN -- 7.0%
- ---------------------------------------------------------------------------
Banking -- 2.6%
Toronto Dominion Holdings
5.440% 02/10/99 175,000 173,942
- ---------------------------------------------------------------------------
Financial Services -- 2.9%
Canadian Imperial Holdings, Inc.
5.160% 02/01/99 200,000 200,000
- ---------------------------------------------------------------------------
Government -- 1.5%
Province of British Columbia
5.010% 02/18/99 100,000 99,332
- ---------------------------------------------------------------------------
Total Commercial Paper - Foreign
(amortized cost $473,274) 473,274
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
State Street Bank and Trust Company,
4.00%, due 01/04/99,(collateralized
by $135,000 par value U.S. Treasury Note,
6.375%,due 03/31/01, with a value of
$142,111, cost $135,000) 135,000 135,000
- ----------------------------------------------------------------------------
Total Investments - 100.2%
(amortized cost $6,814,740) 6,814,740
Liabilities in Excess of Other Assets - (0.2)% (11,686)
- ----------------------------------------------------------------------------
Net Assets - 100.0% $ 6,803,054
- ----------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
See notes to financial statements
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Statements of Assets and Liabilities
December 31, 1998
Money Market
Portfolio
ASSETS
<S> <C>
Investments, at cost $6,814,740
Investments at value $6,814,740
Cash 452
Receivables:
Fund shares sold 9,369
Dividends and interest 1,821
Due from Administrator 10,581
Other Assets -
-------------
6,836,963
LIABILITIES
Payables:
Securities purchased -
Fund shares redeemed 348
Advisory fees 1,937
Audit fees 15,001
Custody fees 4,642
Other accrued expenses 11,981
33,909
TOTAL NET ASSETS $ 6,803,054
=============
NET ASSETS CONSIST OF:
Paid in capital $ 6,803,054
Accumulated net realized gain on investments -
Net unrealized appreciation of investments -
-------------
TOTAL NET ASSETS $ 6,803,054
=============
Shares outstanding 6,803,054
Net asset value per share $ 1.00
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC. - MONEY MARKET PORTFOLIO
Statements of Operations
For the period ended December 31, 1998
Money Market
Portfolio*
Investment Income
Interest income $ 181,318
Dividend income -
181,318
Expenses
Investment Adviser fee 11,662
Custodian fees 27,105
Administration fees 25,853
Audit fees 15,001
Transfer Agent fees 19,489
Printing expenses 2,004
Other expenses 385
-------------
Total expenses before waiver and reimbursement 101,499
Reimbursed and waived expenses (81,450)
--------------
Net Expenses 20,049
-------------
Net Investment Income 161,269
Net Realized and Unrealized Gain on Investments
Net realized gain on investments -
Net change in unrealized appreciation of investments -
Net Realized and Unrealized Gain on Investments -
Net Increase in Net Assets Resulting From Operations $ 161,269
=============
</TABLE>
* Commenced operations on January 2, 1998.
<PAGE>
<TABLE>
<CAPTION>
See notes to financial statement
TRANSAMERICA VARIABLE INSURANCE FUND, INC. -MONEY MARKET PORTFOLIO
Statements of Changes in Net Assets
Year ended
December 31,
1998*
Increase in Net Assets
Operations:
<S> <C>
Net investment income $ 161,269
Net realized gain on investments -
Net change in unrealized appreciation of investments Net increase in net
assets resulting from operations 161,269 Dividends and distributions to
shareholders:
Net investment income (161,269)
Net fund share transactions (Note 3) 6,803,054
-------------
Net increase in net assets 6,803,054
Net Assets
Beginning of period -
End of period $ 6,803,054
</TABLE>
* The Portfolio commenced operations January 2, 1998
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA VARIABLE INSURANCE FUND, INC. - MONEY MARKET PORTFOLIO
Financial Highlights
Selected data for a share outstanding throughout each period are as follows*
Period ended
December 31, 1998*
- -----------------------------------------------------------------------------------
----------------------
Net Asset Value
<S> <C>
Beginning of period $1.000
----------------------
Operations:
Net investment income 0.048
----------------------
Dividends/Distributions to Shareholders:
Net investment income (0.048)
----------------------
Net Asset Value $1.000 1.000
End of period
----------------------
Total Return (a) 4.93%
----------------------
Ratios and Supplemental Data:
Expenses to average net assets (1)(3) 0.60%
Net investment income to average net assets (2)(3) 4.81%
Net Assets, end of period (in thousands) $6,803
</TABLE>
* The Portfolio commenced operations January 2, 1998.
(a) Total return is not annualized for periods less than one year.
(1) If the Investment Adviser had not waived expenses, the ratio of operating
expenses to average net assets would have been 3.03% for the period ended
December 31, 1998.
(2) If the Investment Adviser had not waived expenses, the ratio of net
investment income to average net assets would have been 2.38% for the period
ended December 31, 1998.
(3) Annualized.
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Notes to Financial Statements
December 31, 1998
1. Organization and Summary of Significant Accounting Policies
Transamerica Variable Insurance Funds, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end management investment company. The
of the Fund's portfolios are the Growth Portfolio and the Money Market Portfolio
(the "Portfolios"). The Growth Portfolio's investment objective is long-term
capital growth and the Money Market Portfolio's investment objective is to
maximize current income. The Money Market Portfolio commenced operations on
January 2, 1998.
The Fund was established as a Maryland Corporation on June 23, 1995. The Growth
Portfolio is the successor to Transamerica Occidental's Separate Account Fund C
(the "Separate Account") which was organized as an open-end management
investment company. On November 1, 1996, all investments held by the Separate
Account with a fair value of $29,567,077 and a cost basis of $15,661,836 were
transferred to the Growth Portfolio of the Fund. In exchange for these
investments, the Separate Account received all of the outstanding shares
(2,956,116) of the Fund. This transaction was accounted for in a manner similar
to a pooling of interests. Thereafter, the Separate Account's only investment is
shares of the Growth Portfolio Effective October 31, 1996, the net asset value
of the Growth Portfolio was re-priced at $10 per unit. All previous accumulation
unit values of the Separate Account have been restated for presentation purposes
to account for this change.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements:
(A) Valuation of Securities
Equity securities traded on a national exchange, NASDAQ and over-the-counter
securities are valued at the last sale price. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith pursuant to procedures established by the Fund's Board of Directors.
Debt securities with a maturity of 60 days or less, and all investments in the
Money Market Portfolio are valued at amortized cost, which approximates market
value.
(B) Repurchase Agreements
The Portfolios may enter into repurchase agreements with Federal Reserve System
member banks or U.S. securities dealers. A repurchase agreement occurs when the
Portfolios purchase an interest-bearing debt obligation and the seller agrees to
repurchase the debt obligation on a specified date in the future at an
agreed-upon price. If the seller is unable to make a timely repurchase, the
Portfolio's expected proceeds could be delayed, or the Portfolio could suffer a
loss in principal or current interest, or incur costs in liquidating the
collateral.
<PAGE>
(C) Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date and interest income is recorded daily on an
accrual basis. Realized gains and losses on investments are determined using the
identified cost method for both financial statement and Federal income tax
purposes. The aggregate cost of securities purchased (excluding short-term
investments) and proceeds from sales for the Growth Portfolio were $58,317,973
and $23,286,114 respectively, for the year ended December 31, 1998.
(D) Dividends and Distributions
The Growth Portfolio declares and distributes dividends from net investment
income and distributes its net realized capital gains, if any, at least
annually. The Money Market Portfolio declares dividends daily and pays such
dividends monthly. Net realized capital gains, if any, are distributed. All
distributions are paid in shares of the relevant Portfolio at net asset value.
(E) Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no federal income tax provision
is required. On December 30, 1998, the Growth Portfolio paid a capital gain
distribution of $8,918,613 and $1.757 per share.
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales, net operating losses and
capital loss carryforwards. For the year ended December 31, 1998, the Growth
Portfolio increased accumulated net investment loss by $223,391 and decreased
paid in capital by $223,391.
(F) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.
2. Investment Advisory Fees and Other Transactions With Affiliates
The Fund has entered into an Investment Advisory Agreement with Transamerica
Occidental Life Insurance Company ("the "Adviser"), a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which in turn is a wholly
owned subsidiary of Transamerica Corporation. For its services to the Growth
Portfolio, the Adviser receives an annual advisory fee of 0.75% of the average
daily net assets of the Portfolio. For its services to the Money Market
Portfolio, the Adviser receives an annual advisory fee of 0.35% of the average
daily net assets of the Portfolio.
The Adviser has contracted with Transamerica Investment Services, Inc., a
wholly-owned subsidiary of Transamerica Corporation to provide investment advice
to the Portfolios. Transamerica Investment Services receives its fee directly
from the Adviser, and receives no compensation from the Portfolios.
The Adviser, at its discretion, has agreed to waive its fee and assume any other
operating expenses (other than certain extraordinary or non-recurring expenses)
of the Growth and Money Market Portfolios which exceed 0.85% and 0.60%,
respectively, of the average daily net assets of the Portfolios.
Certain directors and officers of the Fund are also directors and officers of
the Adviser, the Separate Account, Transamerica Investment Services, and other
affiliated Transamerica entities, however they receive no compensation from the
Fund.
3. Capital Stock Transactions
The Fund has one billion shares of $0.001 par value stock authorized. As of
December 31, 1998, the Growth Portfolio was authorized to issue two hundred
million shares.
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1998 December 31, 1997
---------------------------------- -----------------------------------
Growth Portfolio Shares Amount Shares Amount
---------------------------------------- ---------------- ----------------- ---------------- ------------------
<S> <C> <C>
Capital stock sold $ 43,159,237 $
2,397,169 - -
Capital stock issued upon
reinvestment of dividends and
distributions
464,996 8,918,618 247,893 3,656,425
Capital stock redeemed
(432,728) (7,625,273) (53,456) (757,013)
---------------- ----------------- ---------------- ------------------
Net increase $44,452,582 $
2,429,437 194,437 2,899,412
---------------------------------------- ---------------- ----------------- ---------------- ------------------
.
</TABLE>
As of December 31, 1998, the Money Market Portfolio was authorized to issue two
hundred million shares.
Period ended December 31, 1998*
----------------------------------
Money Market Portfolio Shares Amount
---------------- -----------------
----------------------------------------
Capital stock sold $ 9,566,932
9,566,932
Capital stock issued upon
reinvestment of dividends and
distributions
161,266 161,266
Capital stock redeemed (2,925,144) (2,925,144)
---------------- -----------------
Net increase $6,803,054
6,803,054
---------------------------------------- ---------------- -----------------
* Portfolio commenced operations January 2, 1998.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Report of Ernst & Young LLP, Independent Auditors
To The Shareholders and Board of Directors of Transamerica Variable Insurance
Fund, Inc.
We have audited the accompanying statements of assets and liabilities of
Transamerica Variable Insurance Fund, Inc. (comprising, respectively, the Growth
Portfolio and Money Market Portfolio) (the "Funds") as of December 31, 1998, and
the related statements of operations, statements of changes in net assets, and
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Transamerica Variable Insurance Fund,
Inc., as of December 31, 1998, and the results of their operations, the changes
in their net assets and their financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
Sincerely, Los Angeles, California
[GRAPHIC OMITTED]
February 10, 1999
