<PAGE> 1
Transamerica Income Shares, Inc.
ANNUAL REPORT
MARCH 31, 1999
LOGO
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- -------------------------------------------------------------------
<PAGE> 2
REPORT TO SHAREHOLDERS:
During the first quarter of 1999, U.S. economic growth maintained its brisk
pace, extending the longest period of uninterrupted growth since the Vietnam
War. This strength in the economy was reflected in equity prices and in a high
employment and income growth rates, which continued to fuel consumer spending.
The high rate of economic growth was especially surprising given economic
conditions overseas. In the aftermath of the 1997 Asian currency crisis, Russia
devalued its currency in August of 1998, followed by a Brazilian currency
devaluation in January, 1999. These events increased the probability of a global
recession, creating substantial volatility in the financial markets. In
response, between late September and mid-November, the Federal Reserve cut the
Federal Funds rate 75 basis points, while central banks in other developed
countries eased as well. These actions were successful in averting a global
credit crunch. By the latter part of 1998, the Asian economies had begun to show
tentative signs of recovery. And although U.S. exports plummeted in 1998,
domestic demand was able to take up the slack.
Against a backdrop of strong domestic growth, no further Fed easing is
expected. Despite brisk economic growth, the Fed is unlikely to tighten monetary
policy by raising interest rates until there is real evidence of a rise in
inflation. Given excess global capacity and its disinflationary impact, we
expect Treasury yields to remain mostly unchanged. Assuming that China does not
devalue, and the stock market can avoid extreme and prolonged downward moves, we
are cautiously optimistic for continued, but more moderate growth in the U.S.
economy.
During the fall of 1998, when the financial markets were extremely volatile,
our focus was on domestic non financial securities. As the global economies
began to show signs of stabilization, we shifted our focus to more cyclical and
globally oriented credits, since valuation differentials between these and the
more defensive credits had become extreme. Going forward, with little change
expected in long-term interest rates, we favor corporate bonds over government
bonds for their superior return potential. Accordingly we have reduced our
position in U.S. Treasuries. Finally, given our relatively neutral view on
rates, positioning for changes in interest rates has not been a big component of
our strategy.
<PAGE> 3
At March 31, 1999, the Company's total net assets were $158,030,821 or
$25.01 per share compared to $159,926,576 or $25.31 per share on March 31, 1998.
Net investment income for the year ended March 31, 1999 was $11,922,401 or $1.89
per share compared to $1.93 per share for the comparable period in 1998.
PORTFOLIO MANAGEMENT
Management of the Fund's portfolio, including the day-to-day portfolio
decisions are made by a team of fixed income professionals led by Heidi Y. Hu,
the primary portfolio manager who is also a Vice President of the Fund and of
Transamerica Investment Services, Inc., the Fund's Investment Adviser (the
"Adviser").
Highlights: For the years ended March 31:
<TABLE>
<CAPTION>
1999 1998
Per Share: ------ ------
<S> <C> <C>
Net investment income............. $ 1.89 $ 1.93
Income dividends paid............. $ 1.88 $ 1.94
Capital gain distribution......... $ 0.12 $ 0.04
Net asset value................... $25.01 $25.31
</TABLE>
Distributions*: For the fiscal years ended March 31:
<TABLE>
<S> <C>
1999................................. $2.00
1998................................. $1.98
1997................................. $1.93
1996................................. $1.93
1995................................. $1.99
</TABLE>
* Includes a distribution of $0.12, $0.04, $0.03 and $0.06 from realized gains
in 1999, 1998, 1997 and 1995, respectively.
Quality: Ratings used are the highest by Moody's or Standard & Poor's for bonds
owned on March 31, 1999:
<TABLE>
<S> <C>
AAA...................................... 0.8%
AA....................................... 12.6%
A........................................ 23.2%
BBB...................................... 43.7%
Lower or non-rated....................... 19.7%
</TABLE>
<PAGE> 4
TRANSAMERICA INCOME SHARES, INC.
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS & DEBENTURES -- 95.6%
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AUTOMOBILES -- 3.1%
General Motors Corporation
9.400% 07/15/21 $3,750,000 $ 4,861,601
- ---------------------------------------------------------------------
BUILDING MATERIALS -- 0.7%
USG Corporation
9.250% 09/15/01 1,025,000 1,087,874
- ---------------------------------------------------------------------
DOMESTIC, FOREIGN GOVERNMENTS & AGENCIES -- 6.6%
Commonwealth of Australia
9.625% 02/01/06 4,000,000 4,829,560
Korea Development Bank
9.600% 12/01/00 4,250,000 4,359,680
U.S. Treasury Bond
10.750% 08/15/05 925,000 1,188,042
----------
10,377,282
- ---------------------------------------------------------------------
ELECTRIC UTILITIES -- 9.1%
Boston Edison Company
9.375% 08/15/21 2,200,000 2,437,820
Commonwealth Edison Company
9.875% 06/15/20 2,000,000 2,349,680
Connecticut Light & Power Company
7.875% 10/01/24 1,000,000 1,045,070
Detroit Edison Company
8.210% 08/01/22 1,000,000 1,076,200
Gulf States Utilities Company
8.940% 01/01/22 2,500,000 2,647,950
Long Island Lighting Company
9.000% 11/01/22 1,500,000 1,704,660
Niagara Mohawk Power Corporation
7.625% 10/01/05 2,000,000 2,070,908
Virginia Electric & Power Company
8.625% 10/01/24 1,000,000 1,115,100
----------
14,447,388
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</TABLE>
<PAGE> 5
TRANSAMERICA INCOME SHARES, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ENERGY -- EXPLORATION & DISTRIBUTION -- 11.4%
Arkla, Inc.
8.900% 12/15/06 $1,000,000 $ 1,145,432
Northwest Pipeline Corporation
9.000% 08/01/22 2,000,000 2,220,540
Occidental Petroleum Corporation
10.125% 09/15/09 500,000 584,385
Oryx Energy Company
10.000% 04/01/01 4,500,000 4,772,160
Phillips Petroleum Company
8.490% 01/01/23 4,000,000 4,366,720
TransCanada Pipeline, Ltd.
8.500% 03/20/23 2,000,000 2,199,120
Transco Energy Company
9.375% 08/15/01 2,500,000 2,679,075
----------
17,967,432
- ---------------------------------------------------------------------
FINANCIAL -- 2.4%
Citigroup Capital II
7.750% 12/01/36 1,600,000 1,644,800
General Motors Acceptance Corporation
8.500% 01/01/03 2,000,000 2,173,380
----------
3,818,180
- ---------------------------------------------------------------------
FOOD & BEVERAGE -- 5.5%
ConAgra, Inc.
9.750% 03/01/21 3,000,000 3,865,740
Tricon Global Restaurants
7.650% 05/15/08 4,700,000 4,882,962
----------
8,748,702
- ---------------------------------------------------------------------
HEALTHCARE -- 1.5%
Kaiser Foundation Hospitals
9.000% 11/01/01 2,200,000 2,355,320
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 6
TRANSAMERICA INCOME SHARES, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIALS -- 11.6%
Carpenter Technology Corporation
9.000% 03/15/22 $1,000,000 $ 1,098,308
Caterpillar Corporation
9.750% 06/01/19 2,500,000 2,639,925
9.375% 03/15/21 1,000,000 1,292,648
Cincinnati Milacron, Inc.
8.375% 03/15/04 2,000,000 2,031,600
Federal Mogul Corporation
7.500% 01/15/09 4,250,000 4,146,895
Lear Corporation
9.500% 07/15/06 1,000,000 1,096,250
McDonnell Douglas Corporation
9.250% 04/01/02 4,000,000 4,391,560
National Steel Corporation
8.375% 08/01/06 575,000 573,562
Textron, Inc.
8.750% 07/01/22 1,000,000 1,095,010
----------
18,365,758
- ---------------------------------------------------------------------
MEDIA & ENTERTAINMENT -- 12.9%
CF Cable TV, Inc.
9.125% 07/15/07 1,000,000 1,073,290
Continental Cablevision, Inc.
9.500% 08/01/13 1,000,000 1,172,529
Lamar Advertising Company
8.625% 09/15/07 3,000,000 3,157,500
News America Holdings, Inc.
9.250% 02/01/13 3,500,000 4,249,563
Premier Parks, Inc.
9.750% 01/15/07 2,000,000 2,127,500
Rogers Cable Systems
10.000% 03/15/05 2,000,000 2,255,000
Time Warner, Inc.
9.125% 01/15/13 2,000,000 2,443,760
Valassis Communications, Inc.
9.550% 12/01/03 3,500,000 3,921,015
----------
20,400,157
- ---------------------------------------------------------------------
PAPER & PACKAGING -- 4.1%
Georgia Pacific Corporation
9.625% 03/15/22 3,000,000 3,314,550
James River Corporation
9.250% 11/15/21 1,000,000 1,225,600
Owens-Illinois Inc.
7.800% 05/15/18 2,000,000 1,924,840
----------
6,464,990
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</TABLE>
<PAGE> 7
TRANSAMERICA INCOME SHARES, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
RETAIL -- 11.0%
Dayton Hudson Corporation
10.000% 01/01/11 $1,000,000 $ 1,302,585
9.250% 08/15/11 2,800,000 3,482,108
8.500% 12/01/22 1,000,000 1,095,530
May Department Stores Company
9.750% 02/15/21 750,000 946,590
8.375% 10/01/22 2,000,000 2,183,540
Fred Meyer, Inc.
7.450% 03/01/08 2,000,000 2,107,400
Saks, Inc.
7.375% 02/15/19 750,000 728,265
Shoppers Foods Warehouse Corporation
9.750% 06/15/04 2,000,000 2,172,500
Stater Brothers Holdings, Inc.
11.000% 03/01/01 3,350,000 3,433,750
----------
17,452,268
- ---------------------------------------------------------------------
TELECOMMUNICATIONS -- 5.6%
Pacific Bell, Inc.
8.500% 08/15/31 3,000,000 3,253,980
TeleCommunications, Inc.
9.800% 02/01/12 2,500,000 3,277,050
9.250% 01/15/23 2,000,000 2,284,678
----------
8,815,708
- ---------------------------------------------------------------------
TRANSPORTATION -- 10.1%
Burlington Northern Railroad, Inc.
9.250% 10/01/06 1,000,000 1,175,500
Delta Air Lines, Inc.
10.375% 02/01/11 2,000,000 2,553,800
9.750% 05/15/21 2,000,000 2,487,560
Federal Express Corporation
9.625% 10/15/19 2,500,000 2,642,475
Kansas City Southern Industries, Inc.
8.800% 07/01/22 2,250,000 2,373,475
United Airlines, Inc.
9.750% 08/15/21 4,000,000 4,781,520
----------
16,014,330
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 8
TRANSAMERICA INCOME SHARES, INC.
SCHEDULE OF INVESTMENTS (CONCLUDED)
MARCH 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL BONDS & DEBENTURES (cost $138,112,746) $151,176,990
- ----------------------------------------------------------------------
PREFERRED STOCK 3.2%
Centaur Funding Corporation
(cost of $4,500,000) 4,500 5,013,077
- ----------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.8%
(cost $142,612,746)* 156,190,067
OTHER ASSETS LESS LIABILITIES -- 1.2% 1,840,754
- ----------------------------------------------------------------------
NET ASSETS -- 100.0% $158,030,821
- ----------------------------------------------------------------------
</TABLE>
* 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 $14,157,490 and $580,169,
respectively. Net unrealized appreciation for tax purposes is $13,577,321.
See notes to financial statements
<PAGE> 9
TRANSAMERICA INCOME SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified
cost -- $142,612,746) $156,190,067
Cash 16,422
Receivables:
Interest 2,954,617
Dividends 32,417
Other assets 17,902
------------
159,211,425
------------
LIABILITIES
Payables:
Income dividends declared 1,011,003
Investment advisory fees 67,252
Accrued expenses and other liabilities 102,349
------------
1,180,604
------------
NET ASSETS applicable to 6,318,771
capital shares outstanding, $1.00
par value (authorized 20,000,000
shares) $158,030,821
------------
------------
NET ASSET VALUE PER SHARE $ 25.01
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital $144,188,883
Undistributed net investment income 183,565
Accumulated net realized gain on
investments 81,052
Net unrealized appreciation on
investments 13,577,321
------------
NET ASSETS $158,030,821
------------
------------
</TABLE>
See notes to financial statements
<PAGE> 10
TRANSAMERICA INCOME SHARES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest and discount
earned $12,723,385
Dividend income 208,588
-----------
Total Income $12,931,973
-----------
EXPENSES:
Investment advisory fee 800,335
Transfer agent fees and
expenses 45,960
Audit fees 34,786
Postage 30,689
Custodian fees 21,578
Printing 18,000
Directors' fees and
expenses 15,000
Insurance 11,538
Other 31,686
-----------
Total expenses 1,009,572
-----------
NET INVESTMENT INCOME 11,922,401
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on
investments 81,052
Change in net unrealized
appreciation on
investments (1,296,591)
-----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (1,215,539)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $10,706,862
===========
</TABLE>
See notes to financial statements
<PAGE> 11
TRANSAMERICA INCOME SHARES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED MARCH 31,
<TABLE>
<S> <C> <C>
1999 1998
---- ----
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income $ 11,922,401 $ 12,165,782
Net realized gain on
investments 81,052 1,129,840
Net change in
unrealized
appreciation on
investments (1,296,591) 7,926,709
------------ ------------
Net increase in net
assets resulting from
operations 10,706,862 21,222,331
------------ ------------
DIVIDENDS/DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income (11,879,289) (12,239,459)
Net realized gains (723,328) (252,751)
------------ ------------
Net decrease in net
assets resulting from
distributions (12,602,617) (12,492,210)
------------ ------------
Net increase (decrease)
in net assets (1,895,755) 8,730,121
NET ASSETS:
Beginning of year 159,926,576 151,196,455
------------ ------------
End of year(1) $158,030,821 $159,926,576
------------ ------------
------------ ------------
(1) Includes
undistributed net
investment income of: $ 183,565 $ 140,453
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
<PAGE> 12
TRANSAMERICA INCOME SHARES, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year $25.31 $23.93 $24.58 $23.37 $24.17
-------- -------- -------- -------- --------
OPERATIONS:
Net investment income 1.89 1.93 1.89 1.94 1.93
Net realized and unrealized
gain (loss) (0.19) 1.43 (0.61) 1.20 (0.74)
-------- -------- -------- -------- --------
Total from investment
operations 1.70 3.36 1.28 3.14 1.19
-------- -------- -------- -------- --------
DIVIDENDS/DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income (1.88) (1.94) (1.90) (1.93) (1.93)
Net realized gains (0.12) (0.04) (0.03) -- (0.06)
-------- -------- -------- -------- --------
Total dividends/ distributions (2.00) (1.98) (1.93) (1.93) (1.99)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of year $25.01 $25.31 $23.93 $24.58 $23.37
======== ======== ======== ======== ========
MARKET VALUE PER SHARE
End of year $25.188 $26.000 $24.375 $24.375 $22.500
======== ======== ======== ======== ========
TOTAL RETURN(1) 4.44% 15.31% 8.22% 17.08% 5.07%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Expenses to average net assets 0.63% 0.63% 0.62% 0.62% 0.68%
Net investment income to
average net assets 7.45% 7.73% 7.77% 7.83% 8.35%
Portfolio turnover 33% 21% 16% 14% 15%
Net assets, end of year (in
thousands) $158,031 $159,927 $151,196 $155,294 $147,670
======== ======== ======== ======== ========
The number of shares outstanding at the end of each period was 6,318,771
</TABLE>
- ---------------------------
1 Based on the market price of the Fund's shares and including the reinvestment
of dividends and distributions at prices obtained by the Fund's dividend
reinvestment plan.
See notes to financial statements
<PAGE> 13
TRANSAMERICA INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES -- Transamerica Income Shares, Inc. (the
"Company") is registered under the Investment Company Act of 1940 as a
diversified, closed-end management investment company. The Company's investment
objective is to seek a high level of current income consistent with prudent
investment, with capital appreciation as only a secondary objective. The Company
consistently employs the following accounting policies in the preparation of its
financial statements:
(A) Valuation of Securities -- Debt securities with a maturity of 61 days or
more are valued on the basis of valuations obtained from a commercial pricing
service or dealer supplied quotations. Debt securities with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
(B) Securities Transactions, Investment Income and Expenses -- Security
transactions are recorded on trade date. Gains and losses on sales of
investments are determined on the identified cost basis for both financial
statement and Federal income tax purposes. Interest income, dividend income and
operating expenses are recorded on an accrual basis. Discounts on securities
purchased are accreted over the life of the respective securities. Distributions
from net investment income are determined and paid monthly.
(C) Federal Income Taxes -- It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income or excise tax provision is required.
(D) 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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
<PAGE> 14
2. INVESTMENT ADVISORY FEES AND TRANSACTIONS WITH AFFILIATES -- The Company has
entered into a Management and Investment Advisory Agreement with Transamerica
Investment Services, Inc., (the "Adviser") a wholly owned subsidiary of
Transamerica Corporation. For its services to the Company, the Adviser receives
a fee of 0.50% of the average weekly net assets of the Company. This fee is paid
to the Adviser monthly. The Adviser has agreed to reimburse the Company if the
Company's total operating expenses (exclusive of brokerage commissions, interest
and taxes) exceed 1.50% of the average daily net assets of the Company up to $30
million and 1.00% of the average net assets of the Company in excess of $30
million. No such reimbursements were necessary during the year ended March 31,
1999.
Officers and certain directors of the Adviser or its affiliates are also
officers and directors of the Company; however, they receive no compensation
from the Company. An officer of the Company is also a partner of the legal
counsel for the Company.
As of March 31, 1999, an affiliate of Transamerica Corporation held 7.6% of
the outstanding shares of the Company.
3. SECURITY TRANSACTIONS -- The aggregate cost of securities purchased and the
proceeds from securities sold (excluding short-term investments) were
$52,443,389 and $52,256,863, respectively, for the year ended March 31, 1999.
4. YEAR 2000 (UNAUDITED) -- Like other investment companies, financial and
business organizations around the world, the Fund could be adversely affected if
the computer systems it uses and those used by the Fund's Adviser, Custodian,
Transfer Agent and other major service providers do not properly process and
calculate date-related information and data from and after January 1, 2000. This
is commonly known as the "Year 2000 Issue."
The Fund has assessed its computer systems and the systems compliance of its
Adviser, Custodian, Transfer Agent and other major service providers. The Fund
has taken steps that it believes are reasonably designed to address the Year
2000 issue with respect to the computer systems it uses and has obtained
satisfactory assurances that comparable steps are being taken by its Adviser,
Custodian, Transfer Agent and other major service providers. At this time,
however, there can be
<PAGE> 15
no assurance that these steps will be sufficient to address all Year 2000
Issues. The inability of the Fund or its third party providers to timely
complete all necessary procedures to address the Year 2000 Issue could have a
material adverse effect on the Fund's operations. Management will continue to
monitor the status of and its exposure to this issue. For the year ended March
31, 1999, the Fund incurred no significant Year 2000 related expenses and it
does not expect to incur significant Year 2000 expenses in the future.
The Fund is in the process of establishing a contingency plan to address
recovery from unavoided or unavoidable Year 2000 problems, if any.
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Transamerica Income Shares, Inc.
We have audited the accompanying statement of assets and liabilities of
Transamerica Income Shares, Inc. (the "Fund"), including the schedule of
investments, as of March 31, 1999 and the related statement of operations for
the year then ended and the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's 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 March 31, 1999, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Transamerica Income Shares, Inc. as of March 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
April 20, 1999
<PAGE> 17
AUTOMATIC REINVESTMENT PLAN
Holders of 50 shares or more of the Fund's common stock are offered the
opportunity to reinvest dividends and other distributions in shares of the
common stock of the Fund through participation in the Automatic Reinvestment
Plan. Under the Plan, ChaseMellon Shareholder Services, LLC, as administrator
(the "Administrator"), automatically invests dividends and other distributions
in shares of the Fund's common stock by making purchases in the open market.
Plan participants may also deposit cash in amounts between $25 and $2,500 with
the Administrator for the purchase of additional shares. Dividends,
distributions and cash deposits are invested in, and each participant's account
credited with, full and fractional shares.
The price at which the Administrator is deemed to have acquired shares for a
participant's account is the average price (including brokerage commissions and
any other costs of purchase) of all shares purchased by it for all participants
in the Plan.
Your dividends and distributions, even though automatically reinvested, continue
to be taxable as though received in cash.
A newer feature of the Plan is the "Optional Cash Only" feature. You can make
additional investments only, without reinvesting your monthly dividend. If you
own 50 shares or more, registered in your name and currently in your Plan
account, and desire to periodically send additional contributions between $25
and $2,500 for investment, you may do so. The shares you own and the new shares
acquired through this feature will not participate in automatic reinvestment of
dividends and distributions. Rather, the shares you acquire if you participate
in the "Optional Cash Only" feature of the Plan will be held for safekeeping in
your Plan account. Each investment will be made on or near the next dividend
payment date. All other procedures for the purchase and sale of shares described
above will apply.
The Administrator charges a service fee of $1.75 for each investment, including
both dividend reinvestment and optional cash investment.
Shareholders interested in obtaining a copy of the Plan should contact the
Administrator:
ChaseMellon Shareholder Services, LLC
Shareholder Investment Services
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
<PAGE> 18
OFFICERS AND DIRECTORS
GARY U. ROLLE, President & Chairman
DONALD E. CANTLAY, Director
RICHARD N. LATZER, Director
PETER J. SODINI, Director
JON C. STRAUSS, Director
SUSAN A. SILBERT, Vice President
HEIDI Y. HU, Vice President
SUSAN R. HUGHES, Treasurer
THOMAS M. ADAMS, Secretary
- ----------------------------------------------------------
INVESTMENT ADVISER
Transamerica Investment Services, Inc.
1150 S. Olive Street, 27th Floor
Los Angeles, CA 90015
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-288-9541
For hearing and speech impaired (TDD)
1-800-231-5469
www.chasemellon.com
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
LISTED
New York Stock Exchange
Symbol: TAI
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Transamerica Income Shares, Inc. is a closed-end investment company which
invests primarily in debt securities. Its objective is to provide a high level
of current income.
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