<PAGE> 1
Transamerica Income Shares, Inc.
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1995
LOGO
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<PAGE> 2
REPORT TO SHAREHOLDERS
The economy continues to grow at a steady, but moderate rate. The inflation
statistics have repeatedly shown that growth does not have to be inflationary.
Recent government reports have indicated that there is little upward pressure on
prices or wages. For these reasons, it is probable that we are in the middle of
a long recovery cycle.
Financial markets are expected to perform well in this economic environment.
The Federal Reserve will be able to lower short-term interest rates in the next
six to nine months to ensure growth doesn't stall. This bodes well for long-term
Treasury rates, which will continue to decline over the coming year.
At September 30, 1995, the Company's total net assets were $157,221,045 or
$24.88 per share compared to $147,669,572 or $23.37 per share on March 31, 1995.
The Company's net asset value was $24.67 per share on June 30, 1995. Unaudited
net investment income for the quarter ended September 30, 1995 was $3,037,162 or
48 cents per share which equals the net investment income of 48 cents per share
for the comparable quarter of 1994. The dividend, which is payable monthly,
remains at 16 cents per share, for a current annual rate of $1.92.
The Company has decided that in an effort to reduce expenses it will no
longer produce and distribute the June 30 or December 31 interim reports.
Comparable information will continue to be published and also will be available
directly from the Company.
Highlights: For the six months ended September 30:
<TABLE>
<CAPTION>
Per Share: 1995 1994
<S> <C> <C>
Net investment income............ $ 0.96 $ 0.97
Income dividends paid............ 0.96 0.96
Net asset value.................. 24.88 22.78
</TABLE>
Dividends: For the fiscal years ended March 31:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
$1.99* $2.01* $2.01 $2.16 $2.16
</TABLE>
* Includes a 5.88235 and a 7 1/4 cent per share capital gain distribution in
1995 and 1994, respectively.
Quality: Ratings used are the highest by Moody's or Standard & Poor's for bonds
owned on September 30, 1995:
<TABLE>
<CAPTION>
LOWER OR
AAA AA A BBB NON-RATED
<S> <C> <C> <C> <C>
1.3% 7.6% 27.3% 51.1% 12.7%
</TABLE>
<PAGE> 3
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Coupon % Par Market
& Maturity Value Value
----------- ---------- ------------
<S> <C> <C> <C>
BONDS &
DEBENTURES (98.0%)
DOMESTIC & FOREIGN
GOVERNMENTS (4.3%)
Commonwealth of
Australia............ 9 5/8s, '06 $4,000,000 $4,829,440
U.S. Treasury Bond.... 10 3/4s, '05 1,500,000 1,987,740
ELECTRIC & GAS UTILITIES
(19.3%)
Arizona Public
Service............. 10 1/4s, '20 2,250,000 2,368,845
Arkansas Power &
Light................ 10s, '20 3,250,000 3,395,990
Boston Edison......... 9 3/8s, '21 2,200,000 2,409,924
CTC Mansfield......... 11 1/8s, '16 1,000,000 1,026,740
Columbus Southern
Power................ 8.40s, '22 2,000,000 2,182,180
Commonwealth Edison... 9 7/8s, '20 2,000,000 2,361,520
8s, '23 900,000 906,957
Detroit Edison........ 8.21s, '22 1,000,000 1,078,350
8.24s, '23 2,000,000 2,195,420
Gulf States
Utilities........... 8.94s, '22 2,500,000 2,619,650
Hydro-Quebec.......... 8s, '13 3,000,000 3,152,700
Long Island Lighting.. 8.90s, '19 1,200,000 1,189,284
9 5/8s, '24 2,300,000 2,354,625
Niagara Mohawk
Power................ 8 3/4s, '22 2,000,000 2,063,200
Virginia Electric
& Power.............. 8 5/8s, '24 1,000,000 1,096,180
FINANCIAL (6.2%)
Barclays North
American............. 10 1/2s, '17 3,000,000 3,312,030
Citicorp.............. 8s, '03 1,000,000 1,067,400
Fleet Financial
Group............... 8 1/8s, '04 2,000,000 2,149,340
General Motors
Acceptance........... 8 1/2s, '03 3,000,000 3,272,490
FOREST & PAPER PRODUCTS
(4.8%)
Georgia-Pacific....... 9 5/8s, '22 3,000,000 3,375,720
8 1/4s, '23 3,000,000 3,049,770
James River........... 9 1/4s, '21 1,000,000 1,170,800
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Coupon % Par Market
& Maturity Value Value
----------- ---------- ------------
<S> <C> <C> <C>
INDUSTRIALS (14.1%)
Anheuser-Busch........ 10s, '18 $ 358,000 $ 381,678
Bethlehem Steel....... 9s, '00 218,000 224,540
Carpenter Technology.. 9s, '22 1,000,000 1,084,790
Caterpillar........... 9 3/4s, '19 2,500,000 2,877,650
9 3/8,s, 21 1,000,000 1,223,530
Cincinnati Milacron... 8 3/8s, '04 2,000,000 2,042,320
Conagra............... 9 3/4s, '21 3,000,000 3,691,410
General Motors Ser A.. 9.40s, '21 3,750,000 4,564,875
McDonnell Douglas..... 9 1/4s, '02 4,000,000 4,498,040
National Steel........ 8 3/8s, '06 575,000 524,688
Textron............... 8 3/4s, '22 1,000,000 1,066,560
MEDIA (8.8%)
News America
Holdings............. 9 1/4s, '13 2,500,000 2,824,200
Tele-Communications... 9.80s, '12 2,500,000 2,845,875
9 1/4s, '23 3,000,000 3,150,330
Time Warner
Entertainment........ 8 3/8s, '33 4,000,000 4,047,960
Viacom................ 7 3/4s, '05 1,000,000 1,019,320
PETROLEUM (7.8%)
Occidental Petroleum.. 10 1/8s, '09 500,000 619,480
11 3/4s, '11 5,000,000 5,350,200
Phillips Petroleum.... 8.49s, '23 4,000,000 4,182,320
7.92s '23 1,000,000 1,022,950
Union Oil of
California........... 8 3/4s, '01 1,000,000 1,097,570
PIPELINES (7.3%)
NorAm................. 8.90s, '06 3,000,000 3,217,080
Northwest Pipeline.... 9s, '22 2,000,000 2,154,760
Texas Gas
Transmission......... 8 5/8s, '04 1,000,000 1,093,980
Transcanada
Pipelines........... 8 1/2s, '23 2,000,000 2,158,060
Transco Energy........ 9 3/8s, '01 2,500,000 2,786,075
RETAIL (6.7%)
Dayton Hudson......... 10s, '11 1,000,000 1,223,140
9 1/4s, '11 2,800,000 3,214,484
8 1/2s, '22 1,000,000 1,049,470
May Department
Stores............... 9 3/4s, '21 750,000 904,950
8 3/8s '22 2,000,000 2,097,060
Pathmark Stores....... 9 5/8s, '03 2,000,000 1,970,000
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Coupon % Par Market
& Maturity Value Value
----------- ---------- ------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (4.2%)
General Telephone &
Electronics......... 10 3/4s, '17 $3,000,000 $ 3,348,420
Pacific Bell.......... 8 1/2s, '31 3,000,000 3,209,460
TRANSPORTATION (14.5%)
Burlington Northern... 9 1/4s, '06 1,000,000 1,144,390
CSX................... 9s, '06 3,000,000 3,459,360
Delta Air Lines...... 10 3/8s, '11 2,000,000 2,352,420
9 3/4s, '21 2,000,000 2,250,460
Federal Express....... 9 5/8s, '19 2,500,000 2,777,150
Kansas City Southern
Industries........... 6 5/8s, '05 3,000,000 2,910,480
8.80s, '22 2,250,000 2,385,382
Sea Containers........ 9 1/2s, '03 1,000,000 980,000
United Air Lines...... 9 3/4s, '21 4,000,000 4,512,160
------------
154,155,322
------------
CONVERTIBLE
DEBENTURE (0.6%)
Alexander & Alexander
Services............. 11s, '07 897,000 914,940
------------
TOTAL SECURITIES (98.6%)........................ 155,070,262
SHORT-TERM
INVESTMENTS (0.3%)
State Street Bank Eurodollar
Time Deposit.... 5 1/2s, 10-2-95
417,270 417,391
------------
TOTAL INVESTMENT PORTFOLIO (98.9%).............. 155,487,653
Receivables and other assets,
less liabilities (1.1%)..................... 1,733,392
------------
TOTAL NET ASSETS (100.0%)....................... $157,221,045
============
</TABLE>
See notes to financial statements.
<PAGE> 6
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investment portfolio:
Securities at market value
(Identified cost $142,460,831)..... $155,070,262
Short-term investments (at cost plus
interest earned)................... 417,391
------------
155,487,653
Interest receivable................... 2,902,857
Other assets.......................... 28,101
------------
158,418,611
------------
LIABILITIES:
Payable for:
Income dividends declared........... 1,011,003
Management fee...................... 64,610
Accrued expenses and other
liabilities......................... 121,953
------------
1,197,566
------------
Total Net Assets -- equivalent to
$24.88 per share.................... $157,221,045
============
SUMMARY OF SHAREHOLDERS' EQUITY
Common Stock -- 6,318,771 shares of $1
par value outstanding, 20,000,000
shares authorized................... $ 6,318,771
Additional capital.................... 137,464,657
------------
Capital paid in....................... 143,783,428
Capital gains retained................ 405,455
Undistributed net investment income... 229,146
Undistributed net realized gains...... 193,585
Net unrealized appreciation of
securities.......................... 12,609,431
------------
Total Net Assets...................... $157,221,045
============
</TABLE>
See notes to financial statements.
<PAGE> 7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Income:
Interest................ $ 6,576,036
Expenses:
Management fee.......... $ 387,017
Transfer agent fee and
expenses............... 23,434
Postage................. 12,762
Auditing fee............ 16,842
Reports to
shareholders.......... 4,098
Insurance............... 12,581
Custodian fee........... 10,112
Directors fees and
expenses.............. 6,471
Other................... 14,876 488,193
----------- -----------
Net investment income....... 6,087,843
Net Realized and
Unrealized Gain on
Securities:
Net realized gain from
security transactions
(excluding short-term
investments):
Proceeds from securities
sold................... 11,529,480
Cost of securities
sold................... 11,281,441
-----------
Net realized gain on
security transactions
(Note 3)................. 248,039
-----------
Unrealized appreciation of
securities:
Beginning of period..... 3,327,820
End of period........... 12,609,431
-----------
Increase in unrealized
appreciation of
securities............... 9,281,611
-----------
Net realized and unrealized
gain on securities......... 9,529,650
-----------
Net increase in total net
assets resulting from
operations................. $15,617,493
===========
</TABLE>
See notes to financial statements.
<PAGE> 8
STATEMENT OF CHANGES IN TOTAL NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
9-30-95 3-31-95
------------ ------------
<S> <C> <C>
Increase (Decrease) In
Total Net Assets:
Operations:
Net investment income... $ 6,087,843 $ 12,231,721
Net realized gain (loss)
on security
transactions........... 248,039 (54,454)
Increase (decrease) in
unrealized appreciation
of securities.......... 9,281,611 (4,632,231)
------------ ------------
Increase in total net
assets resulting from
operations............. 15,617,493 7,545,036
Dividends to shareholders
from net investment
income ($0.96 and $1.93
per share,
respectively)............ (6,066,020) (12,202,662)
Capital gain distribution
($0.06 per share)........ -- (371,693)
------------ ------------
Increase (decrease) in
total net assets......... 9,551,473 (5,029,319)
Total Net Assets:
Beginning of period
(includes undistributed
net investment income
of $207,323 and
$178,264,
respectively).......... 147,669,572 152,698,891
------------ ------------
End of period (includes
undistributed net
investment income of
$229,146 and $207,323,
respectively).......... $157,221,045 $147,669,572
============ ============
</TABLE>
See notes to financial statements.
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- The Company, which is registered under the Investment Company Act of
1940 as a diversified, closed-end management investment company, consistently
follows the following accounting policies:
A -- The Company primarily invests in debt securities such as bonds and
debentures. These securities, even though sometimes listed on a national
securities exchange, primarily trade in the over-the-counter market.
Accordingly, prices used are the current bid or similar ascertainable market
value when the over-the-counter market more accurately reflects value. U.S.
Government securities are valued at the bid price. In instances where securities
are listed and primarily trade on a national securities exchange, they are
valued at the sale price on the last business day of the period. Prices are
provided by Merrill Lynch Securities Pricing Service, a non-affiliated
securities pricing service. Short-term investments with maturities of 60 days or
less are valued at cost plus interest earned, which approximates market value.
B -- It is the Company's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and net realized capital gains to
its shareholders in accordance with the minimum distribution requirements of the
Code.
C -- Security transactions are accounted for on the transaction date and
distributions to shareholders are recorded on the ex-dividend date.
NOTE 2 -- The management fee, computed on weekly total net assets at the annual
rate of 1/2 of 1%, was paid to Transamerica Investment Services, Inc.
NOTE 3 -- The cost of securities purchased and the proceeds of securities sold
(excluding short-term investments) were $11,722,580 and $11,529,480,
respectively, for the six months ended September 30, 1995. Realized gains or
losses are based on the specific-certificate identification method. At September
30, 1995, the gross unrealized gain on securities held in the investment
portfolio was $12,847,439 and the gross unrealized loss was $238,008. The cost
of securities held at September 30, 1995 was the same for federal income tax and
financial reporting purposes.
<PAGE> 10
NOTE 4 -- Financial highlights for each share of Common Stock outstanding
throughout each period.
<TABLE>
<CAPTION>
Six Months Year ended March 31
Ended --------------------------------------------------------
9-30-95 1995 1994 1993+ 1992 1991
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per share operating
performance:
Net asset value,
beginning of
period............ $23.37 $24.17 $25.15 $24.00 $23.13 $22.30
------ ------ ------ ------ ------ ------
Net investment
income............ 0.96 1.93 1.95 2.03 2.13 2.15
Net realized and
unrealized gain
(loss) on
securities........ 1.51 (0.74) (0.92) 1.61 0.90 0.84
------ ------ ------ ------ ------ ------
Total from
investment
operations........ 2.47 1.19 1.03 3.64 3.03 2.99
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment
income............ (0.96) (1.93) (1.94) (2.01) (2.16) (2.16)
Distribution from
net realized
capital gains..... -- (0.06) (0.07) -- -- --
------ ------ ------ ------ ------ ------
Total
distributions..... (0.96) (1.99) (2.01) (2.01) (2.16) (2.16)
------ ------ ------ ------ ------ ------
Dilution resulting
from rights
offering.......... -- -- -- (0.48) -- --
------ ------ ------ ------ ------ ------
Net asset value,
end of period..... $24.88 $23.37 $24.17 $25.15 $24.00 $23.13
====== ====== ====== ====== ====== ======
Per share market
value, end of
period............ $25.50 $22.50 $23.375 $26.375 $25.50 $23.375
Total investment
return*........... 17.84% 5.07% -4.27% 11.81% 18.78% 16.18%
Ratios/supplemental
data:
Net assets, end of
period (000s)..... $157,221 $147,670 $152,699 $158,912 $126,361 $121,798
Ratio of expenses
to average net
assets............ 0.64%** 0.68% 0.69% 0.60% 0.68% 0.69%
Ratio of net
investment income
to average net
assets............ 7.93%** 8.35% 7.60% 8.27% 8.98% 9.58%
Portfolio turnover
rate.............. 15%** 15% 15% 32% 30% 17%
</TABLE>
- ---------------------------
+ Based on monthly average shares outstanding during the year.
* Based on the market price of the Company's shares. The return for the six
months ended September 30, 1995, is not annualized.
** Annualized.
The number of shares outstanding at the end of the 1993, 1994 and 1995 fiscal
years, and at September 30, 1995, was 6,318,771; and for the fiscal years ending
in 1991 and 1992 the number outstanding was 5,265,643 shares.
<PAGE> 11
ANNUAL SHAREHOLDER MEETING RESULTS
At the shareholders meeting held July 26, 1995, a total of 5,432,747 shares
were represented by proxy, 85.98% of all outstanding shares. The five current
directors were reelected. The votes for reelection of Donald E. Cantlay, Richard
N. Latzer, DeWayne W. Moore, Gary U. Rolle, and Peter J. Sodini were 5,352,336,
5,361,626, 5,340,619, 5,366,828 and 5,363,474, respectively, and the votes
withheld as to each were 80,411, 71,121, 92,128, 65,919 and 69,273,
respectively.
A proposal to continue the present Management and Investment Advisory
Agreement between the Company and Transamerica Investment Services, Inc. was
approved as follows: 5,296,037 votes for, and 32,080 votes against, with 104,630
abstentions. A proposal to ratify the selection of Ernst & Young LLP as
independent auditors for the Company was also approved as follows: 5,319,919
votes for, and 32,235 votes against, with 80,593 abstentions.
In certain circumstances, brokers and nominees can return a proxy as a
"non-vote"; however, no non-votes were received on any of the above matters.
<PAGE> 12
OFFICERS AND DIRECTORS
THOMAS M. ADAMS, Secretary
J. RICHARD ATWOOD, Treasurer
DONALD E. CANTLAY, Director
SHARON K. KILMER, Vice President
RICHARD N. LATZER, Director
DeWAYNE W. MOORE, Director
GARY U. ROLLE, President & Chairman
SUSAN A. SILBERT, Vice President
PETER J. SODINI, Director
- ----------------------------------------------------------
MANAGER
Transamerica Investment Services, Inc.
Box 2438, Los Angeles, CA 90051
TRANSFER AGENT
Chemical Mellon Shareholder Services
111 Founders Plaza, Suite 1100
East Hartford, CT 06108
1-800-288-9541
For hearing and speech impaired (TDD)
1-800-231-5469
LISTED
New York Stock Exchange
Symbol: TAI
- ----------------------------------------------------------
A dividend reinvestment plan is available.
For information, contact the plan agent:
Chemical Mellon Shareholder Services
Shareholder Investment Services
P.O. Box 750
Pittsburgh, PA 15230-0750
1-800-288-9541
- ----------------------------------------------------------
Transamerica Income Shares is a closed-end investment company which invests
primarily in debt securities. Its objective is to provide a high level of
current income.
