Managers comments - Growth Portfolio
June 30, 1999 (unaudited)
TRANSAMERICA VIF Growth Portfolio
Portfolio Manager: Jeffrey S. Van Harte
Fund Performance:
The Transamerica VIF Growth Portfolio performed well in first half of 1999,
surpassing the performance of the broad market. The Portfolio's total return for
the six-month period ended June 30, 1999 was 13.17% in comparison to a 12.39%
advance by the S&P for the same period.
Portfolio Manager Comments
The Transamerica VIF Growth Portfolio invests largely in growth stocks that
possess superior capacity for significant long-term appreciation. A large
portion of our portfolio is invested in technology, which is undergoing a huge
innovation cycle.
Experience has shown us that the number-one leaders in their industries accrue
far greater rewards than do the companies that place second or third. Strong
performers in the Transamerica VIF Growth Portfolio that have demonstrated
superior growth in recent months are EMC Corporation, the Gap, Inc., and
Knight/Trimark Group, Inc. Our outlook for the Portfolio remains extremely
positive, and we believe the merits of its holdings will be reflected well in
forthcoming quarters.
Portfolio Asset Mix
Common Stocks 97.9%
Cash and Cash Equivalents 2.1%
Going Forward
The U.S. economy still appears extremely strong, although the rise in interest
rates does create a degree of concern going forward. However, we certainly do
not expect inflation to re-ignite in the near term. To the contrary, we believe
that the technological innovation now benefiting our economy is deflationary for
most industries, driving prices lower for consumers. Companies such as those we
have purchased for the Transamerica VIF Growth Portfolio are extremely well
positioned to benefit from this economic shift.
Comparison of change in value of a $10,000 investment in Transamerica VIF Growth
Portfolio with the S&P 500 Index* Average Annual Total Return
As of June 30, 1999 One Year Five Year Ten Year
Growth Portfolio 30.76% 40.24% 25.19%
S&P 500 Index 22.77% 27.87% 18.77%
* Hypothetical illustration of $10,000 invested on June 30, 1989, assuming
reinvestment of dividends and capital gains at net asset value through June 30,
1999.
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.
The performance of Growth Portfolio prior to November 1, 1996 is the performance
of the Separate Account recalculated to reflect the fees and expenses of the new
Fund.
<PAGE>
Growth Portfolio - Schedule of Investments
June 30, 1999 (unaudited)
COMMON STOCKS -- 97.9%
Broadcasting -- 4.1%
Clear Channel Communications, Inc. (a) 100,000 $ 6,893,750
Business Services -- 4.7%
First Data Corporation 160,000 7,830,000
Chemicals -- 4.4%
Minerals Technologies, Inc. 60,000 3,348,750
Monsanto Company 100,000 3,943,750
7,292,500
Commercial Services -- 4.6%
Quintiles Transnational Corporation (a) 46,640 1,958,880
Sodexho Marriott Services, Inc. 300,000 5,756,250
---------
7,715,130
Communication Services -- 3.0%
Qwest Communications International, Inc.(a) 150,000 4,959,375
Computers & Business Equipment -- 13.8%
Cisco Systems, Inc. (a) 100,000 6,443,750
Dell Computer Corporation (a) 250,000 9,250,000
EMC Corporation (a) 130,000 7,150,000
---------
22,843,750
Containers & Packaging -- 1.9%
Sealed Air Corporation (a) 50,000 3,243,750
Diversified Operations -- 3.0%
Berkshire Hathaway, Inc., Class B (a) 2,200 4,928,000
Drugs & Health Care -- 6.8%
Merck & Company, Inc. 70,000 5,180,000
Pfizer, Inc. 55,000 6,036,250
---------
11,216,250
Electronics -- 7.6%
Applied Materials, Inc. (a) 90,000 6,648,750
Intel Corporation 100,000 5,950,000
---------
12,598,750
Financial Services -- 10.8%
Charles Schwab Corporation 114,000 12,525,750
Knight/Trimark Group, Inc. (a) 90,000 5,428,125
17,953,875
Hotels & Restaurants -- 3.5%
McDonald's Corporation 140,000 $ 5,783,750
Human Resources -- 2.0%
Robert Half International, Inc. (a) 125,000 3,250,000
Leisure & Entertainment -- 1.3%
Pixar, Inc. (a) 50,000 2,156,250
Retail -- 3.9%
Gap, Inc. 127,500 6,422,813
Retail Grocery -- 8.4%
Kroger Company (a) 280,000 7,822,500
Safeway, Inc. (a) 125,000 6,187,500
---------
14,010,000
Software -- 9.0%
IMS Health, Inc. 185,000 5,781,250
Microsoft Corporation (a) 90,000 8,116,875
Open Text Corporation (a) 35,000 1,050,000
---------
14,948,125
Technology -- 0.7%
VeriSign, Inc. (a) 14,000 1,207,500
Transportation -- 4.4%
Kansas City Southern Industries, Inc. 115,000 7,338,437
Total Common Stocks
(cost $103,370,560) 162,592,005
REPURCHASE AGREEMENT -- 4.3% State Street Bank and Trust Company, 4.00%, due
07/01/99, (collateralized by $6,610,000 par value U.S. Treasury Bond, 7.250%,
due 05/15/16, with a value of
$7,259,637, cost $7,115,000) $ 7,115,000 7,115,000
Total Investments - 102.2%
(cost $110,485,560)* 169,707,005
Liabilities in Excess of Other Assets - (2.2)% (3,625,992)
Net Assets - 100.0% $ 166,081,013
(a) Non-income producing security
* 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 $62,974,909 and $3,753,464,
respectively. Net unrealized appreciation for tax purposes is $59,221,445.
<PAGE>
Managers comments - Money Market Portfolio
June 30, 1999 (unaudited)
TRANSAMERICA VIF Money Market Portfolio
Portfolio Manager: Rex A. Olson
Fund Performance
The Transamerica VIF Money Market Portfolio had good results in the first half
of 1999, surpassing the performance of the broad market substantially. The
Portfolio's six-month return as of June 30, 1999 was 2.18% in comparison to the
IBC Money Fund Report return of 2.15%. Since its inception in January 1998, the
Portfolio yielded 4.79% while the IBC Money Market Report has yielded 4.77%.
Portfolio Manager Comments
The Transamerica VIF Money Market Portfolio's objective is to provide liquidity,
preservation of principal, and maximize current income. During the second
quarter of 1999, the U.S. economy continued to display strength. Consumer
spending remained robust, supported by a strong labor market and steady growth
in personal income. The strength of domestic demand in the U.S. economy and the
low unemployment rate raised concerns that the U.S. economy may be overheating.
This caused the Federal Reserve to adopt a tightening bias, citing "the
potential for a build-up of inflation imbalances."
At the June 30th Federal Open-Market Committee meeting, the Fed followed up with
a 25 basis-point increase moving in the federal funds target rate to 5%, and it
adopted a neutral bias. By actively monitoring economic activity, and
anticipating the Fed's actions, we achieved excellent results for our
shareholders.
Portfolio Asset Mix
Commercial Paper 100.0%
Going Forward
The pre-emptive strike by the Fed should help slow the economy to a sustainable
pace. Modest economic growth and continued low inflation should keep the Fed on
hold during the third quarter. However, further tightening by the Fed cannot be
completely ruled out, especially if unemployment continues to inch downward and
GDP continues above 4%. Interest rate volatility is likely to remain high over
the near term as investors watch upcoming economic releases and weigh the
prospects for further rate increases.
Comparison of change in value of a $10,000 investment in Transamerica VIF Money
Market Portfolio with the IBC's money fund report*
Average Annual Total Return
As of June 30, 1999 One Year
Money Market Portfolio 4.68%
The IBC's Money Fund Report(TM) 4.61%
Money Market Portfolio ($10,723 at 6/30/99) The IBC's Money Fund Report(TM)
($10,722 at 6/30/99)
* Hypothetical illustration of $10,000 invested at inception (January 2, 1998),
assuming reinvestment of dividends and capital gains at net asset value through
June 30, 1999.
The seven-day current yield as of June 30, 1999 was 4.44%.
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.
An investment in the Portfolio is neither insured nor guaranteed by the FDIC or
any other U.S. government agency. Although the Portfolio seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the Portfolio.
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.
Money Market Portfolio - Schedule of Investments
June 30, 1999 (unaudited)
COMMERCIAL PAPER - DOMESTIC -- 99.0%
Banking -- 4.4%
Bank of New York
4.900% 09/01/99 $ 425,000 $ 421,413
Commercial Financial Services -- 23.4%
Ameritech Capital Funding Corporation
4.970% 07/09/99 400,000 399,558
Assets Securitization Cooperative Corporation
4.900% 07/20/99 460,000 458,811
Associates Corporation of North America
4.960% 08/09/99 490,000 487,367
General Electric Capital Corporation
4.810% 09/09/99 450,000 445,791
John Deere Finance Ltd.
4.790% 08/10/99 450,000 447,605
-------
2,239,132
Conglomerate -- 4.9%
Gillette Company
4.870% 08/05/99 470,000 467,775
Consumer Financial Services -- 14.5%
Ford Motor Credit Company
4.760% 07/08/99 320,000 319,704
4.870% 07/27/99 175,000 174,384
Motorola Credit Corporation
5.000% 08/03/99 500,000 497,708
Toyota Motor Credit Corporation
4.790% 07/01/99 100,000 100,000
4.940% 07/16/99 300,000 299,383
-------
1,391,179
Consumer Products -- 3.9%
The Procter & Gamble Company
4.870% 07/12/99 175,000 174,740
4.850% 07/28/99 200,000 199,272
-------
374,012
Electric Utilities -- 5.2%
Florida Power Corporation
5.150% 07/06/99 495,000 494,646
Electrical Equipment -- 2.1%
Emerson Electric Company
5.050% 07/06/99 200,000 199,860
Financial Services -- 14.4%
Caterpillar Financial Services
4.780% 07/09/99 225,000 224,761
4.840% 07/28/99 245,000 244,111
Export Development Corporation
4.790% 07/22/99 435,000 433,784
Merrill Lynch & Company, Inc.
4.790% 07/16/99 374,000 373,254
5.070% 07/19/99 100,000 99,746
------
1,375,656
Food & Beverages -- 5.6%
Anheuser-Busch Companies, Inc.
5.180% 07/02/99 $ 100,000 $ 99,985
Coca Cola Company
4.760% 07/30/99 150,000 149,425
4.770% 07/30/99 285,000 283,905
-------
533,315
Oil -- 5.1%
Chevron Corporation
4.980% 07/21/99 490,000 488,644
Retail Grocery -- 5.0%
Albertson's, Inc.
4.930% 07/06/99 475,000 474,675
Telecommunications -- 5.7%
AT&T Corporation
4.780% 08/04/99 400,000 398,194
BellSouth Telecommunications, Inc.
4.830% 07/16/99 150,000 149,698
-------
547,892
Transportation Services -- 4.8%
United Parcel Service of America, Inc.
4.950% 07/02/99 165,000 164,977
5.000% 07/02/99 300,000 299,959
-------
464,936
Total Commercial Paper - Domestic
(amortized cost $9,473,135) 9,473,135
COMMERCIAL PAPER - FOREIGN -- 3.6%
Canadian Wheat Board
4.790% 08/25/99 350,000 347,439
(amortized cost $347,439)
Total Investments - 102.6%
(amortized cost $9,820,574) 9,820,574
Liabilities in Excess of Other Assets - (2.6)% (246,118)
Net Assets - 100.0% $ 9,574,456
<TABLE>
<CAPTION>
Statements of assets and liabilities
June 30, 1999 (unaudited)
Growth Money Market
Portfolio Portfolio
Assets
<S> <C> <C>
Investments, at cost $110,485,560 $9,820,574
Investments, at value $169,707,005 $9,820,574
Cash 229 -
Receivables:
Fund shares sold 609,261 209,001
Dividends and interest 21,541 -
Reimbursement from administrator 7,498 16,917
Other Assets 3,980 156
170,349,514 10,046,648
Liabilities
Payables:
Securities purchased 4,044,943 -
Fund shares redeemed - 19,484
Advisory fees 191,594 5,389
Directors fees 1,615 96
Disbursement in excess of demand deposit cash - 404,444
Other accrued expenses 30,349 42,779
4,268,501 472,192
Total Net Assets $166,081,013 $9,574,456
Net Assets Consist of:
Paid in capital $105,916,127 $9,574,456
Undistributed net investment loss (363,569) -
Accumulated net realized gain on investments 1,307,010 -
Net unrealized appreciation of investments 59,221,445 -
Total Net Assets $166,081,013 $9,574,456
Shares Outstanding 7,579,265 9,574,456
Net Asset Value Per Share $21.91 $ 1.00
Statements of operations
Six months ended June 30, 1999 (unaudited)
Growth Money Market
Portfolio Portfolio
Investment Income
Interest income $103,145 $190,092
Dividend income 111,818 -
214,963 190,092
Expenses
Investment adviser fee 510,470 13,436
Custodian fees 33,107 16,656
Administration fees 30,803 25,384
Audit fees 13,895 7,597
Transfer agent fees 12,775 10,357
Printing expenses 5,583 1,013
Directors' fees 1,615 96
Other expenses 2,004 274
Total expenses before waiver and reimbursement 610,252 74,813
Reimbursed expenses and waived fees (31,720) (51,789)
Net expenses 578,532 23,024
Net Investment Income (Loss) (363,569) 167,068
Net Realized and Unrealized Gain on Investments
Net realized gain on investments 800,174 -
Net change in unrealized appreciation of investments 14,413,718 -
Net Realized and Unrealized Gain on Investments 15,213,892 -
Net Increase In Net Assets Resulting From Operations $14,850,323 $167,068
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO - STATEMENTS OF CHANGES IN NET ASSETS
Period ended Year ended
June 30, 1999 (Unaudited) December 31, 1998
Increase in Net Assets
Operations:
<S> <C> <C>
Net investment loss $ (363,569) $ (223,391)
Net realized gain on investments 800,174 7,971,054
Net change in unrealized appreciation of investments
14,413,718 18,232,158
Net increase in net assets resulting from operations
14,850,323 25,979,821
Dividends and Distributions to Shareholders:
Net realized gains - (8,918,631)
Fund Share Transactions (Note 3) 43,338,511 44,452,582
Net increase in net assets 58,188,834 61,513,772
Net Assets
Beginning of period 107,892,179 46,378,407
End of period $ 166,081,013 $ 107,892,179
MONEY MARKET PORTFOLIO - STATEMENTS OF CHANGES IN NET ASSETS
Period ended Period ended
June 30, 1999 (Unaudited) December 31, 1998*
Increase in Net Assets
Operations:
Net investment income $ 167,068 $ 161,269
Net realized gain on investments - -
Net change in unrealized appreciation of investments
- -
Net increase in net assets resulting from operations
167,068 161,269
Dividends and Distributions to Shareholders:
Net investment income (167,068) (161,269)
Fund Share Transactions (Note 3) 2,771,402 6,803,054
Net increase in net assets 2,771,402 6,803,054
Net Assets
Beginning of period 6,803,054 -
End of period $ 9,574,456 $ 6,803,054
* The Portfolio commenced operations on January 2, 1998.
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO - FINANCIAL HIGHLIGHTS
Period ended
June 30, 1999 Year ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
Net Asset Value
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $19.360 $14.750 $10.930 $8.582 $5.615 $5.239
Operations:
Net investment loss (0.002) (0.013) (0.050) (0.065) (0.069) (0.042)
Net realized and unrealized gain 2.552 6.380 5.130 2.413 3.036 0.418
Total from investment operations 2.550 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 $21.910 $19.360 $14.750 $10.930 $8.582 $5.615
Total Return (a) 13.17% 43.28% 46.50% 27.36% 52.84% 7.19%
Ratios and Supplemental Data:
Expenses to average net assets (1) 0.85% (3) 0.85% 0.85% 1.27% 1.41% 1.43%
Net investment loss to average net assets (2)
(0.53%) (3) (0.32%) (0.39%) (0.68%) (0.94%) (0.80%)
Portfolio turnover rate 13.00% 34.41% 20.54% 34.58% 18.11% 30.84%
Net Assets, end of period (in thousands)
$166,081 $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.
(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 0.90%, 0.96%, 0.98% and 1.34% for
the period ended June 30, 1999 and 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 (0.58%), (0.44%), (0.52%)
and (0.75%) for the period ended June 30, 1999 and years ended December 31, 1998
and 1997 and 1996, respectively.
(3) Annualized
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO - FINANCIAL HIGHLIGHTS
Period ended Period ended
June 30, 1999 (Unaudited) December 31, 1998*
Net Assets Value
<S> <C> <C>
Beginning of period $ 1.000 $ 1.000
Operations:
Net investment income 0.021 0.048
Dividends/Distributions to Shareholders:
Net investment income (0.021) (0.048)
Total distributions (0.021) (0.048)
Net Asset Value
End of period $ 1.000 $ 1.000
Total Return(a) 2.18% 4.93%
Ratios and Supplemental Data:
Expenses to average net assets (1)(3) 0.60% 0.60%
Net investment income to average net assets (2)(3) 4.34% 4.81%
Net Assets, end of period (in thousands) $ 9,574 $ 6,803
</TABLE>
* The Portfolio commenced operations on 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 1.94% and 3.03% for the periods
ended June 30, 1999 and December 31, 1998, respectively.
(2) If the Investment Adviser had not waived expenses, the ratio of net
investment income to average net assets would have been 2.99% and 2.38% for the
periods ended June 30, 1999 and December 31, 1998, respectively.
(3) Annualized.
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. The
Fund was established as a Maryland Corporation on June 23, 1995. The Fund
currently consists of two investment portfolios, 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 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 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 Money
Market Portfolio commenced operations on January 2, 1998.
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.
(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 $58,532,743
and $17,012,567 respectively, for the period ended June 30, 1999.
(D) Dividends and Distributions
The Growth Portfolio declares and distributes dividends from net investment
income and 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 at least annually. 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.
(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.
No officer, director, or employee of the Investment Adviser, the Administrator
or any of their respective affiliates receives any compensation from the Funds
for acting as director or officer of the Company. Each director of the Company
who is not an "interested person" (as that term is defined in the 1940 Act)
receives from the Funds a $500 annual fee, and $250 for each meeting of the
Company's Board attended, and is reimbursed for expenses incurred in connection
with such attendance. For the period ended June 30, 1999, the Funds expensed
aggregate fees of $1,711 to all directors who are not affiliated persons of the
Adviser.
3. Capital Stock Transactions
The Fund has one billion shares of $0.001 par value stock authorized. As of June
30, 1999, the Growth Portfolio was authorized to issue one hundred million
shares.
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 1999 December 31, 1998
Growth Portfolio Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Capital stock sold 2,198,382 $47,410,389 2,397,169 $43,159,237
Capital stock issued upon
reinvestment of dividends
and distributions - - 464,996 8,918,618
Capital stock redeemed (192,767) (4,071,878) (432,728) (7,625,273)
Net increase 2,005,615 $43,338,511 2,429,437 $44,452,582
As of June 30, 1999, the Money Market Portfolio was authorized to issue one
hundred million shares.
Period ended Period ended
June 30, 1999 December 31, 1998*
Money Market Portfolio Shares Amount Shares Amount
Capital stock sold 8,386,344 $8,386,344 9,566,932 $ 9,566,932
Capital stock issued upon
reinvestment of dividends
and distributions 167,068 167,068 161,266 161,266
Capital stock redeemed (5,782,010) (5,782,010) (2,925,144) (2,925,144)
Net increase 2,771,402 $2,771,402 6,803,054 $6,803,054
* Portfolio commenced operations January 2, 1998.
</TABLE>
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
On June 16, 1999, the Fund held a special meeting of its shareholders for the
purpose of approving new investment advisory and sub-advisory agreements, in
addition to certain other matters. This meeting was prompted by the acquisition
of Transamerica Corporation, the parent company of the Fund's investment
adviser, Transamerica Occidental Life Insurance Company, and the Fund's
sub-adviser, Transamerica Investment Services, Inc., by AEGON, N.V., a Dutch
insurance company. This acquisition occurred on July 21, 1999, at which time the
new investment advisory and sub-advisory agreements became effective.
<TABLE>
<CAPTION>
The following are the proposals that were presented to the shareholders and the
results of the votes:
- ------------------------------------ ----------------------------------- ---------------------------------------
Growth Portfolio Money Market Portfolio
- ------------------------------------ ----------------------------------- ---------------------------------------
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
For Against Abstain For Against Abstain
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1. To approve the 2,924,687 18,990 373,084 9,623,737 106,338 804,600
new investment advisory
agreement between the
Portfolio and Transamerica
Occidental Life Insurance
Company.
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
2. To approve the 2,943,075 634 373,052 9,595,882 113,229 825,580
new investment
sub-advisory agreement,
relating to the Portfolio,
between Transamerica
Occidental Life Insurance
Company and
Transamerica Investment
Services, Inc
- ---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
- ---------------------------- ------------------------------------------ ----------------------------------------
Growth Portfolio Money Market Portfolio
- ---------------------------- ------------------------------------------ ----------------------------------------
- ---------------------------- ----------------------- ------------------ ---------------------- -----------------
For The Nominee Abstain For The Nominee Abstain
- ---------------------------- ----------------------- ------------------ ---------------------- -----------------
- ---------------------------- ----------------------- ------------------ ---------------------- -----------------
3. To elect as Directors the nominees listed below:
Gary U. Rolle
Peter J. Sodini 3,232,186 84,571 9,506,082 1,026,608
Jon C. Strauss 3,250,511 66,250 9,321,077 1,213,615
Dr. James H. Garrity 3,070,540 252,667 9,515,626 1,019,064
3,156,470 160,290 9,362,972 1,171,719
- ---------------------------- ----------------------- ------------------ ---------------------- -----------------
.
- ---------------------------- ------------------------------------------ ----------------------------------------
Growth Portfolio Money Market Portfolio
- ---------------------------- ------------------------------------------ ----------------------------------------
- ---------------------------- ------------- ------------- -------------- ------------ ------------- -------------
For Against Abstain For Against Abstain
- ---------------------------- ------------- ------------- -------------- ------------ ------------- -------------
- ---------------------------- ------------- ------------- -------------- ------------ ------------- -------------
4. To ratify the 3,255,016 18,400 43,344 9,680,271 71,709 782,712
selection by the Board of
Directors of Ernst & Young
LLP as independent public
accountants for the fiscal
year ending December 31,
1999.
- ---------------------------- ------------- ------------- -------------- ------------ ------------- -------------
</TABLE>
PREPARING FOR YEAR 2000
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because dates are encoded using the standard six-place format
that allows entry of only the last two digits of the year. This is commonly
known as the "Year 2000 Problem." This issue could adversely impact the Fund if
the computer systems used by the Fund's Investment Advisor, Sub-Adviser,
Custodian, Transfer Agent and other service providers do not accurately process
date information after January 1, 2000. The Investment Adviser and Sub-Adviser
are addressing this issue by testing the computer systems they use to ensure
that those systems will operate properly after January 1, 2000, and they are
also seeking assurances from the Custodian, Transfer Agent and other service
providers they use that their computer systems will be adapted to address the
Year 2000 Problem in time to prevent adverse consequences after January 1, 2000.
However, especially when taking into account interaction with other systems, it
is difficult to predict with precision that there will be no disruption of
services in connection with the year 2000.
<PAGE>
