As filed with the SEC on March 4, 2004.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04419
---------
AEGON/TRANSAMERICA SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
570 Carillon Parkway, St. Petersburg, Florida 33716
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (727) 299-1800
John K. Carter, Esq. P.O. Box 5068, Clearwater, Florida 33758-5068
------------------------------------------------------------------
(Name and Address of Agent for Service)
Date of fiscal year end: December 31
Date of reporting period: January 1, 2003 - December 31, 2003
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss.3507.
Item 1: Report(s) to Shareholders. The Annual Report is attached.
Investment Options Annual Report Winter 2003
WRL Investment Options Annual Report
A History Of Performance(R)
[LOGO] WRL(R)
INSURANCE o ANNUITIES
Western Reserve Life Assurance Co. of Ohio
Home Office: Columbus, Ohio
Administrative Office Address: P.O. Box
5068 Clearwater, Florida 33758-5068
Distributor: AFSG Securities Corporation
www.westernreserve.com
Customer Service: 1-800-851-9777
The following pages contain the most recent
annual reports for the investment options in
which you are invested. In compliance with
Securities and Exchange Commission
regulations, we present these reports on an
annual basis with the hope that they will
foster greater understanding of the
investment options' holdings, performance,
financial data, accounting policies and other
issues.
If you have any questions about these
reports, please do not hesitate to contact
your financial professional. As always, we
thank you for your trust and the opportunity
to serve you.
[Freedom LOGO]
Dear Shareholder,
After an extended bear market, the market rallies seen this past year have been
most welcome. In general, investors should expect both bear and bull markets
over any extended time period. A sound financial plan will take into account
the market's natural fluctuations by using an asset allocation that is
appropriate for your personal situation, including your age and tolerance for
market volatility.
A financial advisor can help you build a comprehensive picture of your current
and future financial needs. What's more, financial advisors are familiar with
the market's history, including long-term returns and volatility of various
asset classes. With your financial advisor, you can develop an investment
program that incorporates factors such as your goals, your investment timeline,
and your risk tolerance.
The Securities and Exchange Commission requires that an annual report be sent
to all shareholders. The following pages provide a comprehensive review of the
investments of each fund as well as the detailed performance and accounting
data. The report also provides a discussion of the accounting policies for the
funds in addition to any matters presented to the shareholders that may have
required their vote.
Please contact your financial advisor if you have any questions about the
contents of this report.
On behalf of AEGON/Transamerica Series Funds, I would like to thank you for
your continued support and confidence in our products. We look forward to
continuing to serve your investment needs in 2004.
Sincerely,
Brian C. Scott
President
AEGON/Transamerica Series Funds
The views expressed in this report reflect those of the portfolio managers only
and may not necessarily represent the views of AEGON/Transamerica Series Funds.
These views are subject to change based upon market conditions. These views
should not be relied on as investment advice and are not indicative of a
trading intent on behalf of the AEGON/Transamerica Series Funds.
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The year began with many investors in a pensive "wait-and-see" mindset but
ended on a much different note. During 2002, "flight to safety" was the
catchphrase, but in 2003, equities and high-yield bonds enjoyed a significant
rally. This came after three years of stock market declines. Reasons for the
reversal in sentiment lay in evidence of an economic recovery, which prompted
renewed hope for the prospects of asset classes that traditionally involve more
risk than cash, government bonds and high-quality, defensive corporate
securities.
Many companies reported stronger earnings during the year. Earnings are a sign
of economic health and a key factor in stock valuations. Manufacturing activity
increased, the housing market remained strong, and inflation remained benign
enough to keep the Federal Reserve Board from raising interest rates.
This is not to say the year was worry-free. War in Iraq, lingering concerns
about international terrorism and scandals within the financial industry
balanced the causes for optimism. Also, as we enter 2004, the job market
remains lukewarm as many companies relied on technology-enhanced productivity
and overseas labor to add to their bottom lines without hiring new workers.
PERFORMANCE
For the year ended December 31, 2003, Asset Allocation-Conservative Portfolio
("Asset Allocation-Conservative") returned 22.91%. By comparison its benchmark,
the Lehman Brothers Aggregate Bond Index returned 4.10%.
STRATEGY REVIEW
In the fixed-income market, a crucial element of the portfolio, corporate
bonds, especially those that involve increased credit risk in exchange for
higher yields, outpaced Treasury bonds. This is a typical pattern that occurs
when the economy grows out of a recession. To take advantage of these
developments, the portfolio reduced the amount of Treasury and government bonds
and increased the weight in lower-credit corporate bonds. This was accomplished
by keeping our position in one of the underlying AEGON/Transamerica Series
Fund, Inc. ("ATSF") portfolios, PIMCO Total Return, constant. New money was
then added to the underlying ATSF portfolios of Transamerica Convertible
Securities and MFS High-Yield.
In the stock market, the rally encompassed nearly all investment styles.
Although growth made a strong resurgence during the year, value equities also
did well. Value stocks tend to carry less risk than growth stocks, and Asset
Allocation-Conservative benefited from holdings in underlying ATSF portfolios
like Third Avenue Value, T. Rowe Price Equity Income and PBHG/NWQ Value Select.
After completing an annual review of the asset allocation process, it was
recommended to adjust strategic allocations during 2003. The key change across
the portfolio is to reduce the cash allocation in favor of fixed-income and
equity. The Investment Committee approved the recommended changes during the
fourth quarter and they are now being phased in across the portfolio. Asset
Allocation-Conservative changed from a strategic target of 30% equity, 50%
fixed income, and 20% cash, to a new target of 35% equity, 55% fixed income,
and 10% cash. Early in 2004 a rebalancing occurred to bring the assets in line
with the new targets.
The portfolio invests in nineteen underlying funds in ATSF, each with a
different management team following its unique approach to investment
selection.
Investment Committee
AEGON/Transamerica Fund Advisers, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 1
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
LB Aggregate
Initial Class Bond Index
5/1/02 $10,000 10,000
6/30/02 9,510 10,172
9/30/02 8,780 10,638
12/31/02 9,090 10,806
3/31/03 9,080 10,956
6/30/03 10,010 11,230
9/30/03 10,332 11,214
12/31/03 11,173 11,249
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 22.91% 6.88% 5/1/02
LBAB(1) 4.10% 7.30% 5/1/02
- ----- ----- ----- ------
Service Class - 17.00% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged index used
as a general measure of market performance. Calculations assume dividends
and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 2
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------------- ------------
INVESTMENT COMPANIES (100.0%) (b)
Aggressive Equity (13.4%)
Munder Net50 (a) 208,226 $ 1,724
T. Rowe Price Small Cap (a) 2,083,296 23,312
Third Avenue Value 1,183,267 20,033
Transamerica Growth Opportunities (a) 1,420,006 17,849
Capital Preservation (4.5%)
Transamerica Money Market 21,009,947 21,010
Fixed-Income (49.4%)
MFS High Yield 10,648,256 109,464
PIMCO Total Return 2,387,390 26,214
Transamerica Convertible Securities 8,318,592 95,747
Growth Equity (27.2%)
Great Companies-Technology(SM) (a) 3,329,957 13,220
Janus Growth (a) 282,620 8,535
Marsico Growth (a) 1,888,503 16,033
PBHG/NWQ Value Select 904,578 13,542
Shares Value
--------------- ------------
Growth Equity (continued)
Salomon All Cap 1,142,017 $ 14,915
T. Rowe Price Equity Income 2,230,667 42,293
Transamerica Equity (a) 1,049,721 18,926
Specialty-Real Estate (0.1%)
Clarion Real Estate Securities 37,899 572
World Equity (5.4%)
American Century International (a) 812,568 6,119
Capital Guardian Global 1,564,258 18,239
Van Kampen Active International
Allocation 105,510 1,053
---------
Total Investment Companies (cost: $394,727)
$ 468,800
=========
SUMMARY:
Investments, at value 100.0% $ 468,800
Liabilities in excess of other assets 0.0% (60)
---------- ---------
Net assets 100.0% $ 468,740
========== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The Fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of the
Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 3
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $394,727) $468,800
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 42
Distribution fees 9
Other 9
---------
60
---------
Net Assets $468,740
=========
Net Assets Consist of:
Capital stock, 150,000 shares authorized ($.01 par value) $ 420
Additional paid-in capital 385,995
Undistributed net investment income (loss) 1,626
Undistributed net realized gain (loss) from investment in
affiliated investment companies 6,626
Net unrealized appreciation (depreciation) on investment
in affiliated investment companies 74,073
---------
Net Assets $468,740
=========
Shares Outstanding:
Initial Class 40,673
Service Class 1,348
Net Asset Value and Offering Price Per Share:
Initial Class $ 11.16
Service Class 11.15
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 2,125
--------
Expenses:
Management and advisory fees 368
Transfer agent fees 2
Printing and shareholder reports 25
Custody fees 42
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 12
Other 7
Service fees:
Service Class 9
--------
Total expenses 499
--------
Net Investment Income (Loss) 1,626
--------
Net Realized Gain (Loss) from:
Investment in affiliated investment companies 7,246
Capital gain distributions from investment in affiliated
investment companies 261
--------
7,507
Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment in affiliated investment companies 73,016
--------
Net Gain (Loss) on Investment in Affiliated
Investment Companies 80,523
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 82,149
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 4
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,626 $ 469
Net realized gain (loss) from
investment in affiliated
investment companies and capital
gain distributions 7,507 (881)
Net unrealized appreciation
(depreciation) on investment
in affiliated investment companies 73,016 1,057
--------- --------
82,149 645
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (469) -
Service Class - -
--------- --------
(469) -
--------- --------
From net realized gains:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 298,028 185,764
Service Class 15,596 -
--------- --------
313,624 185,764
--------- --------
Dividends and distributions reinvested:
Initial Class 469 -
Service Class - -
--------- --------
469 -
--------- --------
Cost of shares redeemed:
Initial Class (95,399) (16,575)
Service Class (1,468) -
--------- --------
(96,867) (16,575)
--------- --------
217,226 169,189
--------- --------
Net increase (decrease) in net assets 298,906 169,834
--------- --------
Net Assets:
Beginning of year 169,834 -
--------- --------
End of year $ 468,740 $169,834
========= ========
Undistributed Net Investment
Income (Loss) $ 1,626 $ 469
========= ========
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued:
Initial Class 31,417 20,499
Service Class 1,487 -
--------- ---------
32,904 20,499
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 47 -
Service Class - -
--------- ---------
47 -
--------- ---------
Shares redeemed:
Initial Class (9,465) (1,825)
Service Class (139) -
--------- ---------
(9,604) (1,825)
--------- ---------
Net increase (decrease) in shares
outstanding 23,347 18,674
========= =========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 5
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.09 $ 0.04 $ 2.04 $ 2.08
12/31/2002 10.00 0.06 (0.97) (0.91)
- --------------- ---------- ------- -------- -------- --------
Service Class 12/31/2003 9.53 - 1.62 1.62
- --------------- ---------- ------- -------- -------- --------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 11.16
- - - 9.09
- --------------- --------- --- --------- ---------
Service Class - - - 11.15
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 22.91% $ 453,710 0.13% 0.13% 0.45% 24%
12/31/2002 (9.10) 169,834 0.19 0.19 1.07 28
- --------------- ---------- ----- --------- ---- ---- ---- --
Service Class 12/31/2003 17.00 15,030 0.38 0.38 0.03 24
- --------------- ---------- ----- --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 6
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Asset Allocation-Conservative Portfolio ("the Fund"), part of ATSF,
began operations on May 1, 2002. On May 1, 2003, the Fund changed its name from
Conservative Asset Allocation to Asset Allocation-Conservative Portfolio.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange
(generally 4:00 p.m. eastern time) on the valuation date.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date. Dividends
and net realized gain (loss) from investment securities for the Fund are from
investments in shares of affiliated investment companies.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
ATFA has entered into a consultant agreement with Morningstar Associates, LLC
to provide investment services to ATFA regarding the Fund. ATFA compensates
Morningstar Associates, LLC as described in the Prospectus.
Transamerica Investment Management, LLC and Great Companies, LLC are affiliates
of the Fund and are sub-advisors to other funds within AEGON/Transamerica
Series Fund, Inc.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.25% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 7
Asset Allocation-Conservative Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $16. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 302,578
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 86,179
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 469
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 6,620
========
Undistributed Long-term Capital Gains $ 2,095
========
Capital Loss Carryforward $ -
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 73,612
========
The capital loss carryforward utilized during the period ended December 31, 2003
was $512.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 395,188
=========
Unrealized Appreciation $ 73,612
Unrealized (Depreciation) -
---------
Net Unrealized Appreciation (Depreciation) $ 73,612
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Asset Allocation-Conservative Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Asset Allocation-Conservative
Portfolio (the "Fund") (one of the portfolios constituting AEGON/Transamerica
Series Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Conservative Portfolio 9
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After three painful years of declines, equities ruled the investment world in
2003. It was a rally that encompassed most styles and sectors, including
aggressive equities that suffered badly during the downturn. Such a widespread
bull market was by no means a sure thing at the start of the year. The United
States was bracing for war, oil prices were unstable, and lingering concerns
about the state of the economy caused many investors to start the New Year with
a wait-and-see attitude.
But as the year progressed, mounting evidence of an economic recovery provided
the backdrop for renewed vigor in the financial markets. Investors who not long
ago sought safe haven in defensive areas like cash, government securities and
real estate returned to equities and high-yield corporate bonds. This occurred
despite war in Iraq and scandals within the financial industry.
Instead, investors focused on stronger corporate earnings, a key indicator of
economic health and a driver of stock price growth. Meanwhile, the Federal
Reserve Board held its ground on interest rates, keeping its key-lending rate at
a 45-year low. Manufacturing increased, the housing market, one of the bright
spots during the years of economic decline, remained strong in 2003. A lukewarm
job market tempered some of this optimism, however, as many companies relied on
technology-enhanced productivity and overseas labor to add to their bottom lines
without hiring new workers.
PERFORMANCE
For the year ended December 31, 2003, Asset Allocation-Growth Portfolio returned
30.08%. By comparison its benchmark, the Wilshire 5000 Total Market Index
returned 29.44%.
STRATEGY REVIEW
The portfolio's diversification across a number of equity-related investments
benefited performance. In a re-emerging market, small-cap stocks tend to do
well. Third Avenue Value, a small-cap value portfolio, comprised 7.95% of the
portfolio at year's end; and T. Rowe Price Small Cap, a small-cap growth
portfolio, ended 2003 with 12.23% of the portfolio's assets.
It was a year made notable by a rebounding of growth stocks, even in aggressive
sectors like technology. But by the fourth quarter, large-cap value had
reasserted its place as a top-performing style as well. The portfolio included
both, with growth investments such as Transamerica Equity, Janus Growth, and
Great Companies-Technology(SM), as well as value-oriented holdings like PBHG/NWQ
Value Select and T. Rowe Price Equity Income. In fact, by the end of the year T.
Rowe Price Equity Income was the portfolio's largest holding, accounting for
17.93 % of assets as of December 31, 2003.
Foreign equities also performed well, and the portfolio benefited from holding
in Capital Guardian Global, Van Kampen Active International Allocation, and
American Century International.
In all, Asset Allocation-Growth consisted of fourteen underlying portfolios as
of December 31, 2003.
After completing an annual review of our asset allocation process, data, and
models, the Investment Committee approved the recommended adjustments during the
fourth quarter and they are now being phased in across the portfolio.
Investment Committee
AEGON/Transamerica Fund Advisers, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 1
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
Initial Class Wilshire 5000
5/1/02 $10,000 $10,000
6/30/02 9,090 9,162
9/30/02 7,560 7,590
12/31/02 8,170 8,146
3/31/03 7,880 7,862
6/30/03 9,080 9,122
9/30/03 9,494 9,422
12/31/03 10,686 10,544
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 30.80% 4.06% 5/1/02
Wilshire 5000(1) 29.44% 3.23% 5/1/02
- ---------------- ----- ----- ------
Service Class - 26.12% 5/1/03
- ---------------- ----- ----- ------
NOTES
(1) The Wilshire 5000 Total Market (Wilshire 5000) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc.
2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 2
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------- ------------
INVESTMENT COMPANIES (100.0%) (b)
Aggressive Equity (27.0%)
Munder Net50 (a) 825,928 $ 6,839
T. Rowe Price Small Cap (a) 5,642,595 63,140
Third Avenue Value 2,424,868 41,053
Transamerica Growth Opportunities (a) 2,260,834 28,419
Growth Equity (59.3%)
Great Companies-Technology(SM) (a) 5,752,631 22,838
Janus Growth (a) 1,060,543 32,028
Jennison Growth 4,690,534 34,429
PBHG/NWQ Value Select 2,668,112 39,942
Salomon All Cap 3,300,013 43,097
T. Rowe Price Equity Income 4,882,843 92,578
Transamerica Equity (a) 2,299,721 41,464
Shares Value
-------------- ------------
World Equity (13.7%)
American Century International (a) 2,719,076 $ 20,475
Capital Guardian Global 2,461,031 28,696
Van Kampen Active International
Allocation 2,153,483 21,492
---------
Total Investment Companies (cost: $425,481)
$ 516,490
=========
SUMMARY:
Investments, at value 100.0% $ 516,490
Liabilities in excess of other assets 0.0% (65)
--------- ---------
Net assets 100.0% $ 516,425
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The Fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 3
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $425,481) $516,490
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 45
Distribution fees 10
Other 10
---------
65
---------
Net Assets $516,425
=========
Net Assets Consist of:
Capital stock, 150,000 shares authorized ($.01 par value) $ 484
Additional paid-in capital 418,514
Undistributed net investment income (loss) 600
Undistributed net realized gain (loss) from investment
in affiliated investment companies 5,818
Net unrealized appreciation (depreciation) on
investment in affiliated investment companies 91,009
---------
Net Assets $516,425
=========
Shares Outstanding:
Initial Class 47,008
Service Class 1,396
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.67
Service Class 10.67
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 1,058
---------
Expenses:
Management and advisory fees 330
Transfer agent fees 2
Printing and shareholder reports 29
Custody fees 36
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 11
Other 6
Service fees:
Service Class 10
---------
Total expenses 458
---------
Net Investment Income (Loss) 600
---------
Net Realized Gain (Loss) from:
Investment in affiliated investment companies 6,061
Capital gain distributions from investment in affiliated
investment companies 383
---------
6,444
Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment in affiliated investment companies 93,161
---------
Net Gain (Loss) on Investment in Affiliated
Investment Companies 99,605
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 100,205
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 4
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 600 $ 533
Net realized gain (loss) from
investment in affiliated
investment companies and capital
gain distributions 6,444 (626)
Net unrealized appreciation
(depreciation) on investment
in affiliated investment companies 93,161 (2,152)
--------- --------
100,205 (2,245)
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (533) -
Service Class - -
--------- --------
(533) -
--------- --------
From net realized gains:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 272,914 161,900
Service Class 15,400 -
--------- --------
288,314 161,900
--------- --------
Dividends and distributions reinvested:
Initial Class 533 -
Service Class - -
--------- --------
533 -
--------- --------
Cost of shares redeemed:
Initial Class (26,459) (3,479)
Service Class (1,811) -
--------- --------
(28,270) (3,479)
--------- --------
260,577 158,421
--------- --------
Net increase (decrease) in net assets 360,249 156,176
--------- --------
Net Assets:
Beginning of year 156,176 -
--------- --------
End of year $ 516,425 $156,176
========= =========
Undistributed Net Investment
Income (Loss) $ 600 $ 533
========= =========
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued:
Initial Class 30,736 19,525
Service Class 1,581 -
--------- ---------
32,317 19,525
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 58 -
Service Class - -
--------- ---------
58 -
--------- ---------
Shares redeemed:
Initial Class (2,891) (420)
Service Class (185) -
--------- ---------
(3,076) (420)
--------- ---------
Net increase (decrease) in shares
outstanding 29,299 19,105
========= =========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 5
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 8.17 $ 0.02 $ 2.49 $ 2.51
12/31/2002 10.00 0.08 (1.91) (1.83)
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 8.46 - 2.21 2.21
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 10.67
- - - 8.17
- --------------- --------- --- --------- ---------
Service Class - - - 10.67
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 30.80% $ 501,532 0.14% 0.14% 0.18% 18%
12/31/2002 (18.30) 156,176 0.21 0.21 1.43 20
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 26.12 14,893 0.38 0.38 0.03 18
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 6
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Asset Allocation-Growth Portfolio ("the Fund"), part of ATSF, began
operations on May 1, 2002. On May 1, 2003, the Fund changed its name from
Aggressive Asset Allocation to Asset Allocation-Growth Portfolio.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange (generally
4:00 p.m. eastern time) on the valuation date.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date. Dividends
and net realized gain (loss) from investment securities for the Fund are from
investments in shares of affiliated investment companies.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
ATFA has entered into a consultant agreement with Morningstar Associates, LLC to
provide investment services to ATFA regarding the Fund. ATFA compensates
Morningstar Associates, LLC as described in the Prospectus.
Transamerica Investment Management, LLC and Great Companies, LLC are affiliates
of the Fund and are sub-advisors to other funds within AEGON/Transamerica Series
Fund, Inc.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.25% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 7
Asset Allocation-Growth Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $18. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 320,105
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 59,271
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 533
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 6,083
========
Undistributed Long-term Capital Gains $ 530
========
Capital Loss Carryforward $ -
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 90,813
========
The capital loss carryforward utilized during the period ended December 31, 2003
was $534.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 425,677
=========
Unrealized Appreciation $ 90,813
Unrealized (Depreciation) -
---------
Net Unrealized Appreciation (Depreciation) $ 90,813
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Asset Allocation-Growth Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Asset Allocation-Growth Portfolio
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Growth Portfolio 9
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
A wide rally during 2003 reversed three straight years of stock market declines.
Mounting evidence of an economic recovery provided the backdrop for a renewed
vigor in the financial markets as investors who began the year with a pensive
wait-and-see attitude returned to equities and high-yield corporate bonds.
Stocks climbed steadily across most styles and sectors, including those badly
bruised during the recent bear market.
This occurred despite war in Iraq, lingering concerns about international
terrorism and scandals within the financial industry, which not long ago may
have kept many investors on the sidelines. Instead, investors focused on
stronger corporate earnings, a key indicator of economic health. Meanwhile, the
Federal Reserve Board held its ground on its key rate, keeping it at a 45-year
low. Manufacturing increased, the housing market, one of the bright spots during
the years of economic decline, remained strong in 2003. A lukewarm job market
tempered some of this optimism, however, as many companies relied on
technology-enhanced productivity and overseas labor to add to their bottom lines
without hiring new workers.
PERFORMANCE
For the year ended December 31, 2003, Asset Allocation-Moderate Portfolio
returned 24.87%. By comparison its primary benchmark, the Wilshire 5000 Total
Market Index and its secondary benchmark, the Lehman Brothers Aggregate Bond
Index returned 29.44% and 4.10%, respectively.
STRATEGY REVIEW
Niche equity asset classes added to performance during the year. Small-cap value
was one of the market's favorite styles, and the portfolio's consistent
diversification and portfolio selection process enabled them to take advantage
of that trend. Third Avenue Value was one of the top equity holdings,
representing 6.10% of the portfolio as of December 31, 2003, and rose over 13%
(net of expenses) for the fourth quarter. International exposure helped as well,
Van Kampen Active International Allocation was up over 16%, Capital Guardian
Global was up more than 14%, and American Century International was up more than
14% for the same quarter. In a year made notable by the resurgence of growth
companies, large-cap value made a strong showing in the fourth quarter. The
portfolio benefited from holdings in such underlying investments as PBHG/NWQ
Value Select and T. Rowe Price Equity Income.
In the bond market, there was generally a continuation of year-long trends.
Corporate bonds, particularly high-yield bonds, did much better than Treasury
bonds during the quarter. This is the typical pattern that occurs when the
economy grows out of a recession. To take advantage of these developments, the
portfolio reduced the amount of Treasury and government bonds and increased the
weight in lower-credit corporate bonds. This was accomplished by holding the
position in PIMCO Total Return constant, and adding new money to the
Transamerica Convertible Securities and MFS High-Yield.
After completing an annual review of the asset allocation process, it was
recommended to adjust strategic allocations during 2003. The key change across
the portfolio is to reduce the cash allocation in favor of fixed-income and
equity. The Investment Committee decided to revise the models during the fourth
quarter and these changes are now being phased in across the portfolio. The
portfolio's target allocation is 50% equity, 40% fixed income, and 10% cash. To
bring the portfolio in line with these new targets, the portfolio will gradually
rebalance through the use of cash flow.
Investment Team
AEGON/Transamerica Fund Advisers, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 1
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative indices.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
LB Aggregate
Initial Class Wilshire 5000 Bond Index
5/1/02 $10,000 $10,000 $10,000
6/30/02 9,440 9,162 10,172
9/30/02 8,430 7,590 10,638
12/31/02 8,810 8,146 10,806
3/31/03 8,720 7,862 10,956
6/30/03 9,710 9,122 11,230
9/30/03 10,060 9,422 11,214
12/31/03 11,001 10,545 11,249
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date Portfolio
----------- ----------- ---------------
Initial Class 24.87% 5.89% 5/1/02
Wilshire 5000(1) 29.44% 3.23% 5/1/02
LBAB(1) 4.10% 7.30% 5/1/02
- ----- ----- ----- ------
Service Class - 19.22% 5/1/03
- ---------------- ----- ----- ------
NOTES
(1) The Wilshire 5000 Total Market (Wilshire 5000) Index and Lehman Brothers
Aggregate Bond (LBAB) Index are unmanaged indices used as a general measure
of market performance. Calculations assume dividends and capital gains are
reinvested and do not include any managerial expenses. From inception
calculation is based on life of initial class shares. Source: Standard &
Poor's Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 2
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------------- --------------
INVESTMENT COMPANIES (100.0%) (b)
Aggressive Equity (18.3%)
Munder Net50 (a) 817,909 $ 6,772
T. Rowe Price Small Cap (a) 7,572,937 84,741
Third Avenue Value 4,311,238 72,989
Transamerica Growth Opportunities (a) 4,343,348 54,596
Capital Preservation (3.5%)
Transamerica Money Market 41,879,860 41,880
Fixed-Income (35.8%)
MFS High Yield 20,310,865 208,796
PIMCO Total Return 5,649,122 62,027
Transamerica Convertible Securities 13,693,352 157,610
Growth Equity (35.7%)
Great Companies-Technology(SM) (a) 10,637,211 42,230
Janus Growth (a) 1,298,040 39,201
Marsico Growth (a) 4,794,890 40,709
PBHG/NWQ Value Select 2,735,575 40,952
Shares Value
--------------- --------------
Growth Equity (continued)
Salomon All Cap 3,140,662 $ 41,017
T. Rowe Price Equity Income 7,859,216 149,011
Transamerica Equity (a) 4,150,886 74,840
Specialty-Real Estate (0.4%)
Clarion Real Estate Securities 313,493 4,727
World Equity (6.3%)
American Century International (a) 3,357,712 25,284
Capital Guardian Global 3,325,026 38,770
Van Kampen Active International
Allocation 1,152,489 11,502
-----------
Total Investment Companies (cost: $1,004,364)
$ 1,197,654
===========
SUMMARY:
Investments, at value 100.0% $ 1,197,654
Liabilities in excess of other assets 0.0% (140)
---------- -----------
Net assets 100.0% $ 1,197,514
========== ===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 3
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $1,004,364) $1,197,654
Receivables:
Dividends 1
-----------
1,197,655
-----------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 107
Distribution fees 16
Other 18
-----------
141
-----------
Net Assets $1,197,514
===========
Net Assets Consist of:
Capital stock, 200,000 shares authorized ($.01 par value) $ 1,090
Additional paid-in capital 988,123
Undistributed net investment income (loss) 3,331
Undistributed net realized gain (loss) from investment in
affiliated investment companies 11,680
Net unrealized appreciation (depreciation) on investment
in affiliated investment companies 193,290
-----------
Net Assets $1,197,514
===========
Shares Outstanding:
Initial Class 106,449
Service Class 2,552
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.99
Service Class 10.98
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 4,396
---------
Expenses:
Management and advisory fees 867
Transfer agent fees 2
Printing and shareholder reports 29
Custody fees 67
Administration fees 20
Legal fees 10
Auditing and accounting fees 10
Directors fees 28
Other 15
Service fees:
Service Class 16
---------
Total expenses 1,064
---------
Net Investment Income (Loss) 3,332
---------
Net Realized Gain (Loss) from:
Investment in affiliated investment companies 12,181
Capital gain distributions from investment in affiliated
investment companies 757
---------
12,938
Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment in affiliated investment companies 194,934
---------
Net Gain (Loss) on Investment in Affiliated Investment
Companies 207,872
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 211,204
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 4
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 3,332 $ 935
Net realized gain (loss) from
investment in affiliated investment
companies and capital gain
distributions 12,938 (1,258)
Net unrealized appreciation
(depreciation) on investment in
affiliated investment companies 194,934 (1,644)
----------- --------
211,204 (1,967)
----------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (936) -
Service Class - -
----------- --------
(936) -
----------- --------
From net realized gains:
Initial Class - -
Service Class - -
----------- --------
- -
----------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 622,376 413,218
Service Class 28,157 -
----------- --------
650,533 413,218
----------- --------
Dividends and distributions reinvested:
Initial Class 936 -
Service Class - -
----------- --------
936 -
----------- --------
Cost of shares redeemed:
Initial Class (68,023) (5,567)
Service Class (1,884) -
----------- --------
(69,907) (5,567)
----------- --------
581,562 407,651
----------- --------
Net increase (decrease) in net assets 791,830 405,684
----------- --------
Net Assets:
Beginning of year 405,684 -
----------- --------
End of year $ 1,197,514 $405,684
=========== =========
Undistributed Net Investment
Income (Loss) $ 3,331 $ 935
=========== =========
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued:
Initial Class 67,114 46,675
Service Class 2,734 -
----------- ---------
69,848 46,675
----------- ---------
Shares issued-reinvested from distributions:
Initial Class 96 -
Service Class - -
----------- ---------
96 -
----------- ---------
Shares redeemed:
Initial Class (6,804) (632)
Service Class (182) -
----------- ---------
(6,986) (632)
----------- ---------
Net increase (decrease) in shares
outstanding 62,958 46,043
=========== =========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 5
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 8.81 $ 0.04 $ 2.15 $ 2.19
12/31/2002 10.00 0.06 (1.25) (1.19)
- --------------- ---------- -------- -------- --------- ---------
Service Class 12/31/2003 9.21 0.01 1.76 1.77
- --------------- ---------- -------- -------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 10.99
- - - 8.81
- --------------- --------- --- --------- ---------
Service Class - - - 10.98
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 24.87% $ 1,169,496 0.12% 0.12% 0.39% 16%
12/31/2002 (11.90) 405,684 0.15 0.15 1.03 21
- --------------- ---------- ------ ----------- ---- ---- ---- --
Service Class 12/31/2003 19.22 28,018 0.37 0.37 0.13 16
- --------------- ---------- ------ ----------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 6
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Asset Allocation-Moderate Portfolio ("the Fund"), part of ATSF, began
operations on May 1, 2002. On May 1, 2003, the Fund changed its name from
Moderate Asset Allocation to Asset Allocation-Moderate Portfolio.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange (generally
4:00 p.m. eastern time) on the valuation date.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date. Dividends
and net realized gain (loss) from investment securities for the Fund are from
investments in shares of affiliated investment companies.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
ATFA has entered into a consultant agreements with Morningstar Associates, LLC
to provide investment services to ATFA regarding the Fund. ATFA compensates
Morningstar Associates, LLC as described in the Prospectus.
Transamerica Investment Management, LLC and Great Companies, LLC are affiliates
of the Fund and are sub-advisors to other funds within AEGON/Transamerica Series
Fund, Inc.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.25% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 7
Asset Allocation-Moderate Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $41. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at Director
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 714,729
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 134,138
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 936
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 13,648
=========
Undistributed Long-term Capital Gains $ 1,601
=========
Capital Loss Carryforward $ -
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 193,052
=========
The capital loss carryforward utilized during the period ended December 31, 2003
was $1,258.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 1,004,602
===========
Unrealized Appreciation $ 193,052
Unrealized (Depreciation) -
-----------
Net Unrealized Appreciation (Depreciation) $ 193,052
===========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Asset Allocation-Moderate Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Asset Allocation-Moderate Portfolio
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Portfolio 9
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
A strong year in equities during 2003 reversed three straight years of stock
market declines. Mounting evidence of an economic recovery provided the backdrop
for renewed vigor in the financial markets as investors who began the year with
a pensive wait-and-see attitude returned to equities and high-yield corporate
bonds. Stocks climbed steadily across most styles and sectors, including those
badly bruised during the recent bear market.
This occurred despite war in Iraq, lingering concerns about a lukewarm job
market, international terrorism and scandals within the financial industry,
which not long ago may have kept many investors on the sidelines. Instead,
investors focused on stronger corporate earnings, a key indicator of economic
health and a driver of stock price growth. Meanwhile, the Federal Reserve Board
held its ground on its key rate, keeping it at a 45-year low. Manufacturing also
increased, and the housing market, one of the bright spots during the years of
economic decline, remained strong in 2003.
PERFORMANCE
For the year ended December 31, 2003, Asset Allocation-Moderate Growth Portfolio
returned 27.17%. By comparison its benchmark, the Wilshire 5000 Total Market
Index returned 29.44%.
STRATEGY REVIEW
Niche equity asset classes added to performance during the year. Small-cap value
was one of the market's favorite styles, and the portfolio's consistent
diversification and investment selection process enabled it to take advantage of
that trend. Third Avenue Value was one of the top equity holdings, representing
7.10% of the portfolio as of December 31, 2003, and rose over 13% (net of
expenses) for the quarter. T. Rowe Price Small Cap was another large holding,
making up 9.03% of the portfolio's assets by year's end. Unlike, Third Avenue
Value, T. Rowe Price Small Cap employs more of a growth investment style, but
benefited from the market's interest in small company stocks. International
exposure helped as well, Van Kampen Active International Allocation was up over
16%, Capital Guardian Global was up more than 14%, and American Century
International was up more than 14%, for the same quarter. In a year made notable
by the resurgence of growth companies, large-cap value made a strong showing in
the fourth quarter. The portfolio benefited from holdings in such underlying
investments as PBHG/NWQ Value Select and T. Rowe Price Equity Income, which was
the single largest holding in the portfolio by the end of the year.
In the bond market, there was generally a continuation of year-long trends.
Corporate bonds, particularly high-yield bonds, did much better than Treasury
bonds during the quarter. This is the typical pattern that occurs when the
economy grows out of a recession. To take advantage of these developments, the
portfolio reduced the amount of Treasury and government bonds and increased the
weight in lower-credit corporate bonds. This was accomplished by holding the
position in PIMCO Total Return constant, and adding new money to the
Transamerica Convertible Securities and MFS High-Yield.
After completing an annual review of the asset allocation process, it was
recommended adjusting strategic allocations during 2003. The Investment
Committee decided to revise the models during the fourth quarter and the changes
are now being phased in across the portfolio.
By the end of the year, Asset Allocation-Moderate Growth Portfolio comprised
69.23% equities, 16.25% bonds, and 14.53% short-term investments.
Investment Committee
AEGON/Transamerica Fund Advisers, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 1
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares
and its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
Initial Class Wilshire 5000
5/1/02 $10,000 $10,000
6/30/02 9,270 9,162
9/30/02 8,060 7,590
12/31/02 8,520 8,146
3/31/03 8,360 7,862
6/30/03 9,420 9,122
9/30/03 9,784 9,422
12/31/03 10,835 10,545
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 27.17% 4.93% 5/1/02
Wilshire 5000(1) 29.44% 3.23% 5/1/02
- ---------------- ----- ----- ------
Service Class - 22.10% 5/1/03
- ---------------- ----- ----- ------
NOTES
(1) The Wilshire 5000 Total Market (Wilshire 5000) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc.
2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 2
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------------- --------------
INVESTMENT COMPANIES (100.0%) (b)
Aggressive Equity (21.8%)
Munder Net50 (a) 1,358,207 $ 11,246
T. Rowe Price Small Cap (a) 9,740,310 108,994
Third Avenue Value 5,059,382 85,655
Transamerica Growth Opportunities (a) 4,585,972 57,646
Capital Preservation (0.0%)
Transamerica Money Market 504 1
Fixed-Income (21.4%)
MFS High Yield 12,275,696 126,194
PIMCO Total Return 5,003,996 54,944
Transamerica Convertible Securities 6,680,282 76,890
Growth Equity (48.6%)
Great Companies-Technology(SM) (a) 10,439,987 41,447
Janus Growth (a) 1,862,424 56,245
Jennison Growth 10,806,300 79,318
Shares Value
--------------- --------------
Growth Equity (continued)
PBHG/NWQ Value Select 4,332,573 $ 64,859
Salomon All Cap 4,572,061 59,711
T. Rowe Price Equity Income 10,354,124 196,314
Transamerica Equity (a) 4,921,988 88,743
World Equity (8.2%)
American Century International (a) 5,476,301 41,237
Capital Guardian Global 2,499,585 29,145
Van Kampen Active International
Allocation 2,855,492 28,498
-----------
Total Investment Companies (cost: $1,003,680)
$ 1,207,087
===========
SUMMARY:
Investments, at value 100.0% $ 1,207,087
Liabilities in excess of other assets 0.0% (153)
---------- -----------
Net assets 100.0% $ 1,206,934
========== ===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 3
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $1,003,680) $1,207,087
-----------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 105
Distribution fees 28
Other 20
-----------
153
-----------
Net Assets $1,206,934
===========
Net Assets Consist of:
Capital stock, 200,000 shares authorized ($.01 par value) $ 1,115
Additional paid-in capital 991,499
Undistributed net investment income (loss) 2,751
Undistributed net realized gain (loss) from investment
in affiliated investment companies 8,162
Net unrealized appreciation (depreciation) on
investment in affiliated investment companies 203,407
-----------
Net Assets $1,206,934
===========
Shares Outstanding:
Initial Class 107,839
Service Class 3,702
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.82
Service Class 10.83
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 3,781
---------
Expenses:
Management and advisory fees 822
Transfer agent fees 2
Printing and shareholder reports 33
Custody fees 65
Administration fees 20
Legal fees 9
Auditing and accounting fees 10
Directors fees 27
Other 14
Service fees:
Service Class 28
---------
Total expenses 1,030
---------
Net Investment Income (Loss) 2,751
---------
Net Realized Gain (Loss) from:
Investment in affiliated investment companies 8,735
Capital gain distributions from investment in affiliated
investment companies 961
---------
9,696
Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment in affiliated investment companies 205,986
---------
Net Gain (Loss) on Investment in Affiliated
Investment Companies 215,682
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 218,433
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 4
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 2,751 $ 1,196
Net realized gain (loss) from
investment in affiliated investment
companies and capital gain
distributions 9,696 (1,534)
Net unrealized appreciation
(depreciation) on investment
in affiliated investment companies 205,986 (2,579)
----------- --------
218,433 (2,917)
----------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (1,196) -
Service Class - -
----------- --------
(1,196) -
----------- --------
From net realized gains:
Initial Class - -
Service Class - -
----------- --------
- -
----------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 601,905 404,032
Service Class 38,069 -
----------- --------
639,974 404,032
----------- --------
Dividends and distributions reinvested:
Initial Class 1,196 -
Service Class - -
----------- --------
1,196 -
----------- --------
Cost of shares redeemed:
Initial Class (46,854) (4,507)
Service Class (1,227) -
----------- --------
(48,081) (4,507)
----------- --------
593,089 399,525
----------- --------
Net increase (decrease) in net assets 810,326 396,608
----------- --------
Net Assets:
Beginning of year 396,608 -
----------- --------
End of year $ 1,206,934 $396,608
=========== =========
Undistributed Net Investment
Income (Loss) $ 2,751 $ 1,196
=========== =========
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued:
Initial Class 66,296 47,067
Service Class 3,827 -
----------- ---------
70,123 47,067
----------- ---------
Shares issued-reinvested from distributions:
Initial Class 126 -
Service Class - -
----------- ---------
126 -
----------- ---------
Shares redeemed:
Initial Class (5,115) (535)
Service Class (125) -
----------- ---------
(5,240) (535)
----------- ---------
Net increase (decrease) in shares
outstanding 65,009 46,532
=========== =========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 5
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 8.52 $ 0.03 $ 2.28 $ 2.31
12/31/2002 10.00 0.08 (1.56) (1.48)
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 8.87 0.01 1.95 1.96
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 10.82
- - - 8.52
- --------------- --------- --- --------- ---------
Service Class - - - 10.83
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 27.17% $ 1,166,851 0.12% 0.12% 0.34% 13%
12/31/2002 (14.80) 396,608 0.15 0.15 1.33 23
- --------------- ---------- ------ ----------- ---- ---- ---- --
Service Class 12/31/2003 22.10 40,083 0.37 0.37 0.17 13
- --------------- ---------- ------ ----------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 6
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Asset Allocation-Moderate Growth Portfolio ("the Fund"), part of ATSF,
began operations on May 1, 2002. On May 1, 2003, the Fund changed its name from
Moderately Aggressive Asset Allocation to Asset Allocation-Moderate Growth
Portfolio.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange (generally
4:00 p.m. eastern time) on the valuation date.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date. Dividends
and net realized gain (loss) from investment securities for the Fund are from
investments in shares of affiliated investment companies.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
ATFA has entered into consultant agreement with Morningstar Associates, LLC to
provide investment services to ATFA regarding the Fund. ATFA compensates
Morningstar Associates, LLC as described in the Prospectus.
Transamerica Investment Management, LLC and Great Companies, LLC are affiliates
of the Fund and are sub-advisors to other funds within ATSF.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.25% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as reim
bursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 7
Asset Allocation-Moderate Growth Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $41. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 696,600
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 106,909
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 1,196
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 11,121
=========
Undistributed Long-term Capital Gains $ 1,003
=========
Capital Loss Carryforward $ -
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 202,197
=========
The capital loss carryforward utilized during the period ended December 31, 2003
was $1,513.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 1,004,890
===========
Unrealized Appreciation $ 202,197
Unrealized (Depreciation) -
-----------
Net Unrealized Appreciation (Depreciation) $ 202,197
===========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Asset Allocation-Moderate Growth Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Asset Allocation-Growth Moderate
Portfolio (the "Fund") (one of the portfolios constituting AEGON/Transamerica
Series Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Asset Allocation-Moderate Growth Portfolio 9
AEGON Bond
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Interest rates gradually moved upward during the year, primarily due to the
strengthening economy. The year started off on a positive note for the bond
market, as lingering economic weakness and the war with Iraq kept investors out
of the equity market and focused on bonds. Disappointed with the pace of
economic growth, the Federal Reserve Board cut interest rates in June 2003,
bringing the federal funds rate to 1.0%, a 45-year low.
Successes in the Iraq war led to growing optimism regarding the economy's future
growth prospects. Encouraged by improving corporate balance sheets, investors
showed renewed confidence in the stock market, and volatility took hold in the
bond market. Furthermore, an unexpected and powerful surge in economic growth
during the third quarter caused bond yields to rise throughout the end of the
year.
PERFORMANCE
For the year ended December 31, 2003, AEGON Bond returned 4.28%. By comparison
its primary benchmark, the Lehman Brothers Aggregate Bond Index ("LBAB") and its
secondary benchmark, the Lehman Brothers U.S. Government/Credit Index returned
4.10% and 4.67%, respectively.
STRATEGY REVIEW
Our security selections during the one-year period were the primary drivers of
the portfolio's excess return compared to the LBAB. For the year, the LBAB's
corporate sector was the best-performing segment, while the mortgage sector was
the worst performing area. Nevertheless, we kept the portfolio overweighted in
the mortgage sector and underweighted in the corporate sector throughout the
year. The portfolio's outperformance underscores the strength of our security
selections in these key sectors.
Within the mortgage market, we continued to focus on collateralized mortgage
obligations ("CMO"s), which generally are less sensitive to extension risk than
the low-coupon mortgage-backed securities that comprise the LB Aggregate's
mortgage component. Overall, mortgage refinancing slowed dramatically as the
year progressed, dampening mortgage volatility.
In the corporate bond market, lower-credit-quality securities outperformed
throughout the year. Our approach was to add selectively to the portfolio's
corporate allocation, purchasing higher-quality names that we believed provided
acceptable risk/reward postures.
Our overweight in the 10- to 15-year portion of the yield curve also enhanced
the portfolio's relative return. The yield curve flattened considerably more in
the two- to 10-year part of the curve. Additionally, our exposure in the 10- to
15-year segment contained U.S. Treasury STRIPS, which generally declined less in
price than the comparable-maturity coupon Treasuries the LBAB holds.
Investment Team
Banc One Investment Advisors Corporation
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 1
AEGON Bond
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
LB Aggregate Lehman
Initial Class Bond Index US Gov't/Credit
12/31/93 $10,000 $10,000 $10,000
3/31/94 9,510 9,713 9,687
6/30/94 9,312 9,613 9,566
9/30/94 9,286 9,672 9,614
12/30/94 9,306 9,708 9,649
3/31/95 9,848 10,198 10,130
6/30/95 10,655 10,819 10,787
9/30/95 10,832 11,032 10,994
12/31/95 11,445 11,502 11,506
3/31/96 11,003 11,298 11,237
6/30/96 10,968 11,362 11,290
9/30/96 11,128 11,572 11,489
12/31/96 11,462 11,919 11,840
3/31/97 11,303 11,853 11,738
6/30/97 11,679 12,288 12,165
9/30/97 12,118 12,696 12,591
12/31/97 12,511 13,070 12,995
3/31/98 12,699 13,274 13,192
6/30/98 13,010 13,584 13,537
9/30/98 13,730 14,158 14,208
12/31/98 13,677 14,206 14,226
3/31/99 13,503 14,135 14,056
6/30/99 13,322 14,011 13,902
9/30/99 13,348 14,106 13,977
12/31/99 13,275 14,089 13,921
3/31/00 13,645 14,400 14,295
6/30/00 13,750 14,651 14,502
9/30/00 14,071 15,092 14,919
12/31/00 14,720 15,727 15,570
3/31/01 15,169 16,204 16,068
6/30/01 15,182 16,296 16,117
9/30/01 15,922 17,047 16,884
12/31/01 15,909 17,055 16,894
3/31/02 15,869 17,071 16,815
6/30/02 16,520 17,701 17,446
9/30/02 17,247 18,512 18,440
12/31/02 17,495 18,804 18,759
3/31/03 17,743 19,066 19,067
6/30/03 18,130 19,542 19,740
9/30/03 18,215 19,514 19,640
12/31/03 18,244 19,576 19,634
*Inception 10/02/1986
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
---------- --------- ---------- ------------ ----------
Initial Class 4.28% 5.93% 6.20% 7.32% 10/2/86
LBAB(1) 4.10% 6.62% 6.95% 8.08% 10/2/86
LBGC(1) 4.67% 6.66% 6.98% 8.08% 10/2/86
- ----- ---- ---- ---- ---- -------
Service Class - - - 1.78% 5/1/03
- --------------- ---- ---- ---- ---- -------
NOTES
(1) The Lehman Brothers Aggregate Bond (LBAB) Index and Lehman Brothers U.S.
Government/Credit (LBGC) Index are unmanaged indices used as a general
measure of market performance. Calculations assume dividends and capital
gains are reinvested and do not include any managerial expenses. From
inception calculation is based on life of initial class shares. Source:
Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 2
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
U.S. GOVERNMENT OBLIGATIONS (11.8%)
U.S. Government Strips
Zero Coupon, due 02/15/2010 $ 1,000 $ 796
Zero Coupon, due 02/15/2011 700 526
Zero Coupon, due 05/15/2012 1,000 698
Zero Coupon, due 11/15/2013 (a) 3,000 1,915
Zero Coupon, due 02/15/2014 750 471
Zero Coupon, due 02/15/2016 1,650 909
Zero Coupon, due 05/15/2016 2,000 1,084
Zero Coupon, due 02/15/2017 (a) 8,400 4,332
Zero Coupon, due 02/15/2019 300 135
U.S. Treasury Bond
11.75%, due 11/15/2014 (a) 4,000 5,737
7.25%, due 05/15/2016 2,000 2,494
7.50%, due 11/15/2016 (a) 2,750 3,501
6.25%, due 08/15/2023 (a) 5,000 5,699
7.63%, due 02/15/2025 1,000 1,321
6.50%, due 11/15/2026 1,500 1,765
---------
Total U.S. Government Obligations (cost: $28,982) 31,383
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (52.6%)
Fannie Mae
7.00%, due 01/25/2008 1,383 1,458
8.00%, due 07/01/2009 636 681
6.50%, due 12/25/2012 875 926
6.50%, due 12/25/2012 1,111 1,122
5.00%, due 11/25/2015 1,500 1,517
7.00%, due 12/25/2016 1,220 1,310
9.50%, due 06/25/2018 675 756
5.00%, due 05/15/2023 900 923
5.50%, due 05/25/2023 500 499
6.50%, due 11/25/2025 705 712
8.00%, due 01/15/2030 2,215 2,369
7.25%, due 09/15/2030 2,000 2,105
7.25%, due 12/15/2030 1,000 1,058
7.00%, due 03/25/2031 750 790
6.50%, due 04/15/2031 4,686 4,898
7.00%, due 09/25/2031 1,000 1,053
7.00%, due 11/25/2031 582 605
6.00%, due 11/25/2031 920 965
6.50%, due 04/25/2032 2,274 2,375
5.75%, due 06/25/2033 750 714
6.50%, due 10/25/2042 432 459
7.50%, due 12/25/2042 771 844
6.50%, due 12/25/2042 1,577 1,675
Fannie Mae-Conventional Pool
7.50%, due 01/01/2008 564 598
6.50%, due 04/01/2008 628 661
6.50%, due 04/01/2009 434 461
5.50%, due 06/01/2012 508 536
5.00%, due 12/01/2016 463 473
Principal Value
----------------------- ---------------
Fannie Mae-Conventional Pool
(continued)
6.50%, due 03/01/2017 $ 485 $ 515
5.50%, due 03/01/2017 1,137 1,180
5.50%, due 09/01/2017 821 852
9.00%, due 10/01/2019 758 846
9.00%, due 06/01/2025 480 536
6.00%, due 12/01/2032 886 916
6.00%, due 03/01/2033 357 369
6.00%, due 03/01/2033 401 415
6.00%, due 03/01/2033 454 470
Fannie Mae-Series 2001-12
6.50%, due 12/25/2011 2,030 2,068
Fannie Mae-Series 2001-44
7.00%, due 09/25/2031 1,000 1,055
Fannie Mae-Series 2001-5
6.00%, due 03/25/2016 1,000 1,070
Fannie Mae-Series 2002-1
6.50%, due 02/25/2022 1,000 1,057
Fannie Mae-Series 2002-18 PC
5.50%, due 04/25/2017 1,000 1,049
Fannie Mae-Series 2002-48
6.50%, due 11/25/2032 1,000 1,052
Fannie Mae-Series 2002-59
6.50%, due 04/25/2032 1,500 1,581
Fannie Mae-Series 2002-W5
6.00%, due 07/25/2029 1,000 1,036
Fannie Mae-Series 2500
5.50%, due 12/15/2015 2,250 2,343
Fannie Mae-Series 2503
5.50%, due 11/15/2015 2,000 2,084
Fannie Mae-Series G94-13
7.00%, due 06/17/2022 1,279 1,309
Fannie Mae
12.91%, due 10/25/2008 (c) 400 437
21.48%, due 02/25/2032 (c) 297 353
10.95%, due 07/25/2033 (c) 319 266
5.98%, due 08/25/2033 (c) 382 312
10.60%, due 09/25/2033 221 219
Fannie Mae Strip
Zero Coupon, due 01/01/2033 369 291
Freddie Mac
6.50%, due 02/15/2008 422 435
6.00%, due 02/15/2013 1,327 1,414
6.50%, due 02/15/2013 1,785 1,825
5.50%, due 09/15/2013 919 961
6.50%, due 10/15/2013 190 195
6.00%, due 12/15/2013 1,500 1,606
6.00%, due 12/15/2013 4,000 4,245
6.00%, due 08/15/2015 2,000 2,092
8.50%, due 11/15/2015 171 177
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 3
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
Freddie Mac (continued)
6.00%, due 04/15/2016 $ 1,500 $ 1,567
3.50%, due 02/15/2017 1,000 1,042
6.00%, due 01/15/2019 750 784
8.50%, due 09/15/2020 628 651
5.50%, due 12/15/2022 1,000 1,035
7.50%, due 02/15/2023 2,059 2,195
7.00%, due 03/15/2024 1,000 1,078
7.50%, due 09/15/2028 521 529
7.00%, due 06/15/2029 1,000 1,081
6.00%, due 11/15/2029 547 566
6.50%, due 05/15/2030 263 265
6.00%, due 05/15/2030 500 519
7.50%, due 08/15/2030 985 1,025
6.50%, due 08/15/2031 523 560
7.00%, due 03/15/2032 5,000 5,281
6.50%, due 03/15/2032 729 763
6.38%, due 03/15/2032 1,000 1,045
7.00%, due 04/15/2032 1,000 1,058
7.00%, due 05/15/2032 1,675 1,784
6.50%, due 06/15/2032 600 634
6.50%, due 07/15/2032 822 857
6.00%, due 11/15/2032 500 509
6.00%, due 02/15/2033 500 491
7.00%, due 02/25/2043 555 598
6.50%, due 02/25/2043 1,639 1,743
7.00%, due 10/15/2030 1,247 1,333
Freddie Mac-Gold Pool
6.50%, due 05/01/2009 532 565
6.50%, due 04/01/2016 267 283
6.50%, due 12/01/2017 824 873
Freddie Mac-Series 2345 PV
6.50%, due 01/15/2024 950 992
Freddie Mac-Series 2357 VX
6.50%, due 12/15/2017 1,250 1,317
Freddie Mac-Series 2392
6.00%, due 12/15/2020 1,000 1,044
Freddie Mac-Series 2410
5.50%, due 02/15/2009 1,500 1,555
Freddie Mac-Series 2527
5.50%, due 10/15/2013 925 958
Freddie Mac-Series T-41
7.50%, due 07/25/2032 1,810 1,982
Freddie Mac-Series T-51
7.50%, due 08/25/2042 795 871
Freddie Mac (c)
6.84%, due 03/15/2032 1,314 121
10.00%, due 03/25/2032 178 195
6.39%, due 02/15/2033 2,167 280
5.84%, due 02/15/2033 3,378 370
5.94%, due 03/15/2033 3,362 384
Principal Value
----------------------- ---------------
Freddie Mac (continued)
7.26%, due 10/15/2003 $ 249 $ 209
Ginnie Mae
Zero Coupon, due 03/16/2033 251 223
Zero Coupon, due 06/16/2033 383 300
5.50%, due 12/20/2013 937 979
6.50%, due 10/16/2024 1,200 1,294
9.00%, due 05/16/2027 198 219
6.50%, due 04/20/2029 677 714
7.50%, due 11/20/2029 1,018 1,100
8.50%, due 02/16/2030 692 803
8.00%, due 06/20/2030 403 430
7.50%, due 09/20/2030 1,020 1,075
6.50%, due 03/20/2031 1,000 1,047
7.00%, due 10/20/2031 487 523
6.50%, due 12/20/2031 773 806
5.50%, due 01/20/2032 1,156 193
6.50%, due 06/20/2032 500 526
6.50%, due 06/20/2032 1,400 1,467
6.50%, due 07/16/2032 1,000 1,070
6.50%, due 07/20/2032 822 872
6.50%, due 08/20/2032 500 522
6.50%, due 06/20/2033 850 896
Ginnie Mae-FHA/VA Pool
7.50%, due 09/15/2009 850 913
8.00%, due 01/15/2016 494 535
7.00%, due 07/15/2017 658 708
6.50%, due 03/15/2023 687 729
Ginnie Mae-Series 1999-44
8.00%, due 12/20/2029 944 1,012
Ginnie Mae-Series 2000-36
7.33%, due 11/20/2030 411 436
Ginnie Mae-Series 2002-2
6.50%, due 01/20/2019 500 514
Ginnie Mae-Series 2002-29
6.50%, due 02/16/2013 625 651
Ginnie Mae-Series 2002-40
6.50%, due 07/20/2022 1,500 1,551
Ginnie Mae-Series 2002-67
6.00%, due 03/20/2013 4,556 4,760
Ginnie Mae-Series 2002-7
6.50%, due 01/20/2032 1,000 1,049
Ginnie Mae-Series 2002-71
6.00%, due 12/20/2014 932 968
Ginnie Mae (c)
7.37%, due 04/20/2030 196 197
27.52%, due 04/20/2031 330 413
6.80%, due 04/16/2032 2,050 228
---------
Total U.S. Government Agency Obligations (cost: $140,889) 139,889
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 4
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
FOREIGN GOVERNMENT OBLIGATIONS (0.4%)
United Mexican States
4.63%, due 10/08/2008 $ 330 $ 334
6.38%, due 01/16/2013 75 78
7.50%, due 04/08/2033 600 621
---------
Total Foreign Government Obligations (cost: $993) 1,033
---------
MORTGAGE-BACKED SECURITIES (13.1%)
Aetna Commercial Mortgage Trust
1997-ALIC
6.71%, due 01/15/2006 1,955 2,025
American Housing Trust
9.13%, due 04/25/2021 526 543
CBM Funding Corporation
7.08%, due 11/01/2007 1,621 1,752
Citicorp Mortgage Securities, Inc.
7.50%, due 04/25/2025 218 218
Commercial Mortgage Asset Trust
1999-C1
6.59%, due 07/17/2008 2,000 2,224
Commercial Mortgage Pass-Through
Certificate
6.30%, due 07/16/2034 4,000 4,247
Countrywide Alternative Loan
Trust-Series 2001-12
6.50%, due 01/25/2032 1,414 1,418
Countrywide Alternative Loan
Trust-Series 2001-6
7.00%, due 07/25/2031 1,054 1,063
Countrywide Alternative Loan
Trust-Series 2002-26
6.75%, due 04/25/2032 1,000 1,023
GE Capital Commercial Mortgage
Corporation
6.44%, due 08/11/2033 3,000 3,333
LB Commercial Conduit Mortgage
Trust 1999-C1
6.41%, due 06/15/2031 1,492 1,585
MASTR Asset Securitization Trust
6.50%, due 07/25/2032 500 522
Mellon Residential Funding
Corporation (c)
7.02%, due 03/25/2030 631 664
Morgan Stanley Capital I Inc. (c)
6.68%, due 11/15/2030 2,000 2,245
Norwest Intergrated Structured Assets,
Inc. 2000-1
7.50%, due 03/25/2030 823 840
Prudential Home Mortgage Securities
6.75%, due 11/25/2008 910 909
6.50%, due 02/25/2024 1,006 1,004
Principal Value
----------------------- ---------------
Prudential Securities Secured Financing
Corporation
6.51%, due 07/15/2008 $ 3,000 $ 3,325
Residential Accredit Loans, Inc.
14.24%, due 10/25/2017 (c) 306 331
7.75%, due 12/25/2030 606 617
Residential Accredit Loans, Inc.-Series
2002-QS6
6.50%, due 05/25/2032 429 435
Residential Accredit Loans, Inc.-Series
2003-QS3 (c)
14.04%, due 02/25/2018 228 243
Residential Asset Mortgage Products, Inc.
6.29%, due 10/25/2031 459 469
Structured Asset Securities Corporation
6.85%, due 02/25/2031 390 391
Vendee Mortgage Trust
7.50%, due 02/15/2027 1,667 1,786
Vendee Mortgage Trust-Series 2003-1
5.75%, due 12/15/2020 700 728
Washington Mutual Mortgage Securities
Corporation-Series 2001-4
6.63%, due 06/25/2031 703 704
Washington Mutual MSC Mortgage
Pass-Through Certificate
Zero Coupon, due 03/25/2033 328 268
---------
Total Mortgage-Backed Securities (cost: $33,731) 34,912
---------
ASSET-BACKED SECURITIES (4.4%)
AmeriCredit Automobile Receivables
Trust 2001-D
4.41%, due 11/12/2008 3,200 3,300
AmeriCredit Automobile Receivables
Trust 2002-A
4.61%, due 01/12/2009 200 208
Associates Automobile Receivables Trust
2000-1
7.83%, due 08/15/2007 1,500 1,544
CIT RV Trust 1998-A
6.09%, due 02/15/2012 813 824
MBNA Credit Card Master Note
Trust-Series 2003-C1 (c)
2.86%, due 06/15/2012 150 157
MBNA Master Credit Card Trust 1999-J
7.85%, due 02/15/2012 300 349
Nomura Asset Acceptance Corporation
7.00%, due 04/25/2033 191 193
6.00%, due 05/25/2033 500 514
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 5
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
Onyx Acceptance Auto Trust 2002-C
4.07%, due 04/15/2009 $ 1,000 $ 1,031
SYSTEMS 2001 Asset Trust Pass-
Through Certificate, Class G-144A
6.66%, due 09/15/2013 1,521 1,681
WFS Financial Owner Trust 2002-2
4.50%, due 02/20/2010 1,750 1,811
---------
Total Asset-Backed Securities (cost: $11,348) 11,612
---------
CORPORATE DEBT SECURITIES (15.7%)
Air Transportation (0.2%)
Continental Airlines, Inc.
6.90%, due 01/02/2017 380 319
Delta Air Lines, Inc.
6.42%, due 07/02/2012 250 268
Auto Repair, Services & Parking (0.0%)
PHH Corporation
7.13%, due 03/01/2013 100 112
Automotive (1.8%)
DaimlerChrysler North America
Holding Corporation
7.38%, due 09/15/2006 2,000 2,197
Ford Motor Company
6.63%, due 02/15/2028 550 506
General Motors Corporation
6.85%, due 10/15/2008 2,000 2,140
Business Credit Institutions (0.7%)
CIT Group, Inc.
6.63%, due 06/15/2005 150 160
Ford Motor Credit Company
7.38%, due 10/28/2009 1,000 1,098
National Rural Utilities Cooperative
Finance Corporation
6.00%, due 05/15/2006 300 324
Principal Life Global Funding-144A
6.25%, due 02/15/2012 250 272
Business Services (0.1%)
International Lease Finance Corporation
4.50%, due 05/01/2008 75 77
5.88%, due 05/01/2013 75 79
Chemicals & Allied Products (0.9%)
Dow Chemical Company (The)
6.13%, due 02/01/2011 260 280
DSM NV-144A
6.75%, due 05/15/2009 2,000 2,234
Commercial Banks (3.1%)
Bank of America Corporation
7.40%, due 01/15/2011 2,000 2,346
Citigroup Inc.
7.25%, due 10/01/2010 500 583
Principal Value
----------------------- ---------------
Commercial Banks (continued)
Corporacion Andina de Fomento
5.20%, due 05/21/2013 $ 100 $ 100
First Union National Bank
7.80%, due 08/18/2010 250 302
Morgan Chase & Co. (J.P.)
6.75%, due 02/01/2011 2,000 2,255
Popular North America, Inc.
4.25%, due 04/01/2008 150 153
Regions Financial Corporation
7.00%, due 03/01/2011 1,500 1,691
State Street Corporation
7.65%, due 06/15/2010 300 359
SunTrust Banks, Inc.
6.38%, due 04/01/2011 250 280
Communication (1.0%)
Comcast Corporation
5.50%, due 03/15/2011 350 364
Cox Communications, Inc.
6.75%, due 03/15/2011 1,500 1,699
Liberty Media Corporation
5.70%, due 05/15/2013 25 25
Tele-Communications, Inc.
9.80%, due 02/01/2012 500 652
Computer & Office Equipment (0.1%)
International Business Machines Corporation
6.22%, due 08/01/2027 250 265
Electric Services (0.7%)
Appalachian Power Company
4.80%, due 06/15/2005 200 208
Constellation Energy Group, Inc.
7.00%, due 04/01/2012 250 283
Dominion Resources, Inc.
6.25%, due 06/30/2012 240 260
DTE Energy Company
6.65%, due 04/15/2009 200 223
Duke Energy Corporation
4.20%, due 10/01/2008 50 50
5.63%, due 11/30/2012 200 208
Exelon Generation Company, LLC
6.95%, due 06/15/2011 250 281
Ohio Valley Electric Corporation-144A
5.94%, due 02/12/2006 125 134
PSEG Power LLC
7.75%, due 04/15/2011 115 135
Food Stores (0.1%)
Kroger Co. (The)
8.05%, due 02/01/2010 200 238
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 6
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
Gas Production & Distribution (0.0%)
Southern California Gas Company
4.80%, due 10/01/2012 $ 100 $ 101
General Obligation-State (0.2%)
Illinois State, Pension Funding,
General Obligation Bonds, 5.10%,
due 06/01/2003 600 552
Holding & Other Investment Offices (0.1%)
EOP Operating Limited Partnership
6.75%, due 02/15/2012 300 331
Insurance (0.1%)
MGIC Investment Corporation
6.00%, due 03/15/2007 150 161
Life Insurance (0.4%)
ASIF Global Financing XIX-144A
4.90%, due 01/17/2013 500 497
ASIF Global Financing XX-144A
2.65%, due 01/17/2006 200 202
John Hancock Global Funding, Ltd.-144A
7.90%, due 07/02/2010 300 357
Mortgage Bankers & Brokers (0.3%)
Captiva Finance Ltd.-144A
6.86%, due 11/30/2009 909 909
Mortgage-Backed (0.1%)
Countrywide Home Loans, Inc.
5.50%, due 02/01/2007 50 54
3.25%, due 05/21/2008 250 246
Motion Pictures (0.4%)
Time Warner Inc.
8.18%, due 08/15/2007 400 463
9.15%, due 02/01/2023 500 647
Paper & Allied Products (0.0%)
International Paper Company
6.50%, due 11/15/2007 50 55
4.25%, due 01/15/2009 65 65
Personal Credit Institutions (2.2%)
American General Finance Corporation
4.50%, due 11/15/2007 170 177
5.38%, due 10/01/2012 100 103
General Electric Capital Corporation
4.25%, due 01/15/2008 700 724
4.63%, due 09/15/2009 500 520
6.13%, due 02/22/2011 500 550
5.88%, due 02/15/2012 200 215
6.00%, due 06/15/2012 750 813
General Motors Acceptance Corporation
7.25%, due 03/02/2011 1,500 1,646
Principal Value
----------------------- ---------------
Personal Credit Institutions (continued)
Household Finance Corporation
6.40%, due 06/17/2008 $ 100 $ 111
6.75%, due 05/15/2011 760 856
Toyota Motor Credit Corporation
2.88%, due 08/01/2008 100 98
Railroads (0.1%)
Burlington Northern Santa Fe Corporation
7.13%, due 12/15/2010 200 232
Savings Institutions (0.1%)
Washington Mutual Bank, FA
6.88%, due 06/15/2011 250 283
Security & Commodity Brokers (1.1%)
Goldman Sachs Group, Inc. (The)
6.88%, due 01/15/2011 1,000 1,136
Lehman Brothers Holdings Inc.
7.88%, due 08/15/2010 1,000 1,198
Morgan Stanley & Co. Inc.
4.25%, due 05/15/2010 500 499
Telecommunications (1.9%)
AT&T Wireless Services, Inc.
7.50%, due 05/01/2007 225 252
7.88%, due 03/01/2011 100 116
BellSouth Corporation
6.00%, due 10/15/2011 250 271
BT Group PLC (d)
8.88%, due 12/15/2030 1,000 1,308
France Telecom (d)
9.00%, due 03/01/2011 200 240
NYNEX Capital Funding Company
8.23%, due 10/15/2009 400 479
NYNEX Corporation
9.55%, due 05/01/2010 262 311
Sprint Capital Corporation
6.88%, due 11/15/2028 800 781
Verizon Communications Inc.
7.51%, due 04/01/2009 475 546
8.35%, due 12/15/2030 500 624
---------
Total Corporate Debt Securities (cost: $38,766)
41,889
---------
SECURITY LENDING COLLATERAL (4.4%)
Debt (3.6%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 55 55
Fleet National Bank
1.00%, due 01/21/2004 208 208
National Bank of Commerce
1.19%, due 04/21/2004 173 173
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 7
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
Commercial Paper (0.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 104 $ 104
Delaware Funding Corporation
1.08%, due 01/07/2004 69 69
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 104 104
1.09%, due 01/13/2004 69 69
1.08%, due 02/05/2004 138 138
General Electric Capital Corporation
1.09%, due 01/08/2004 173 173
1.09%, due 01/09/2004 104 104
1.08%, due 01/16/2004 138 138
Govco Incorporated-144A
1.07%, due 02/05/2004 173 173
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 173 173
1.09%, due 02/06/2004 173 173
1.10%, due 02/09/2004 101 101
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 173 173
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 104 104
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 201 201
1.08%, due 02/17/2004 346 346
Sheffield Receivables-144A
1.09%, due 01/21/2004 69 69
Euro Dollar Overnight (0.2%)
BNP Paribas SA
0.97%, due 01/07/2004 346 346
Credit Agricole Indosuez
0.98%, due 01/02/2004 14 14
1.08%, due 01/06/2004 132 132
Euro Dollar Terms (0.9%)
Bank of Montreal
1.06%, due 01/15/2004 68 68
1.06%, due 02/17/2004 139 139
Bank of Scotland
1.06%, due 04/02/2004 104 104
Citigroup Inc.
1.10%, due 01/22/2004 104 104
1.09%, due 02/06/2004 139 139
Credit Agricole Indosuez
1.08%, due 01/28/2004 69 69
Den Danske Bank
1.08%, due 01/20/2004 346 346
1.02%, due 01/30/2004 173 173
Principal Value
----------------------- ---------------
Euro Dollar Terms (continued)
Royal Bank of Canada
1.05%, due 02/27/2004 $ 346 $ 346
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 208 208
1.08%, due 01/15/2004 69 69
1.08%, due 01/20/2004 35 35
Svenska Handelsbanken AB
1.09%, due 01/15/2004 35 35
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 208 208
Wells Fargo & Company
1.04%, due 01/30/2004 277 277
Master Notes (0.3%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 139 139
1.14%, due 09/08/2004 208 208
Morgan Stanley
1.05%, due 06/21/2004 333 333
Medium Term Notes (0.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 346 346
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 104 104
Repurchase Agreements (0.9%) (b)
Credit Suisse First Boston (USA), Inc.
1.04% Repuchase Agreement dated 12/31/2003
to be repurchased at $811 on 01/02/2004 811 811
Merrill Lynch & Co., Inc.
1.04% Repuchase Agreement dated 12/31/2003
to be repurchased at $1,101 on 01/02/2004 1,101 1,101
Morgan Stanley
1.11% Repuchase Agreement dated 12/31/2003
to be repurchased at $658 on 01/02/2004 658 658
Shares Value
--------------- ------------
Investment Companies (0.8%)
Money Market Funds (0.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 169,935 $ 170
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 414,908 415
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 1,804,157 1,804
---------
Total Security Lending Collateral (cost: $11,749) 11,749
---------
Total Investment Securities (cost: $266,458) $272,467
=========
SUMMARY:
Investments, at value 102.4 % $272,467
Liabilities in excess of other assets (2.4)% (6,484)
--------- ---------
Net assets 100.0 % $265,983
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 8
AEGON Bond
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$11,392.
(b) Cash collateral for the Repurchase Agreements, valued at $2,622, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(c) Floating or variable rate note. Rate is listed as of December 31, 2003.
(d) Securities are stepbonds. Coupon steps up or down by 25 BP for each rating
downgrade or upgrade by Standard & Poor's or Moody's for each notch below
A-/A3.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $6,286 or 2.36% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 9
AEGON Bond
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $266,458)
(including $11,392 of securities loaned) $272,467
Cash 3,446
Receivables:
Interest 1,954
Other 11
---------
277,878
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 111
Distribution fees 1
Payable for collateral for securities on loan 11,749
Other 34
---------
11,895
---------
Net Assets $265,983
=========
Net Assets Consist of:
Capital stock, 75,000 shares authorized ($.01 par value) $ 211
Additional paid-in capital 242,988
Undistributed net investment income (loss) 15,903
Undistributed net realized gain (loss) from investment
securities 872
Net unrealized appreciation (depreciation) on investment
securities 6,009
---------
Net Assets $265,983
=========
Shares Outstanding:
Initial Class 20,982
Service Class 100
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.61
Service Class 13.16
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 17,564
Income from loaned securities-net 19
--------
17,583
--------
Expenses:
Management and advisory fees 1,465
Transfer agent fees 2
Printing and shareholder reports 70
Custody fees 79
Administration fees 24
Legal fees 5
Auditing and accounting fees 12
Directors fees 14
Other 8
Service fees:
Service Class 1
--------
Total expenses 1,680
--------
Net Investment Income (Loss) 15,903
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 4,563
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities (6,785)
--------
Net Gain (Loss) on Investment Securities (2,222)
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 13,681
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 10
AEGON Bond
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 15,903 $ 14,292
Net realized gain (loss) from
investment securities 4,563 1,166
Net unrealized appreciation
(depreciation) on investment
securities (6,785) 10,363
--------- ---------
13,681 25,821
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (14,289) (10,650)
Service Class (2) -
---------- ---------
(14,291) (10,650)
---------- ---------
From net realized gains:
Initial Class - -
Service Class - -
---------- ---------
- -
---------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 57,976 131,358
Service Class 1,453 -
---------- ---------
59,429 131,358
---------- ---------
Dividends and distributions reinvested:
Initial Class 14,289 10,650
Service Class 2 -
---------- ---------
14,291 10,650
---------- ---------
Cost of shares redeemed:
Initial Class (138,710) (81,385)
Service Class (151) -
---------- ---------
(138,861) (81,385)
---------- ---------
(65,141) 60,623
---------- ---------
Net increase (decrease) in net assets (65,751) 75,794
---------- ---------
Net Assets:
Beginning of year 331,734 255,940
---------- ---------
End of year $265,983 $ 331,734
========== =========
Undistributed Net Investment
Income (Loss) $ 15,903 $ 14,291
========== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 4,539 10,563
Service Class 112 -
---------- ---------
4,651 10,563
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 1,172 872
Service Class - -
---------- ---------
1,172 872
---------- ---------
Shares redeemed:
Initial Class (10,887) (6,685)
Service Class (12) -
---------- ---------
(10,899) (6,685)
---------- ---------
Net increase (decrease) in shares
outstanding (5,076) 4,750
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 11
AEGON Bond
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 12.68 $ 0.62 $ (0.10) $ 0.52
12/31/2002 11.96 0.64 0.54 1.18
12/31/2001 11.14 0.63 0.27 0.90
12/31/2000 10.61 0.67 0.48 1.15
12/31/1999 11.59 0.64 (0.97) (0.33)
- --------------- ---------- --------- -------- ---------- --------
Service Class 12/31/2003 12.97 0.40 (0.17) 0.23
- --------------- ---------- --------- -------- ---------- --------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.59) $ - $ (0.59) $ 12.61
(0.46) - (0.46) 12.68
(0.08) - (0.08) 11.96
(0.62) - (0.62) 11.14
(0.65) - (0.65) 10.61
- --------------- -------- --- --------- ---------
Service Class (0.04) - (0.04) 13.16
- --------------- -------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 4.28% $ 264,668 0.52% 0.52% 4.88% 27%
12/31/2002 9.97 331,734 0.53 0.53 5.21 49
12/31/2001 8.07 255,940 0.55 0.55 5.42 53
12/31/2000 10.89 142,027 0.53 0.53 6.06 45
12/31/1999 (2.94) 153,885 0.53 0.53 5.67 26
- --------------- ---------- ----- --------- ---- ---- ---- --
Service Class 12/31/2003 1.78 1,315 0.80 0.80 4.57 27
- --------------- ---------- ----- --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-October 2, 1986
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 12
AEGON Bond
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. AEGON Bond ("the Fund"), part of ATSF, began operations on October 2,
1986.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Debt securities are valued by independent pricing services;
however, those that mature in sixty days or less are valued at amortized cost,
which approximates market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $8 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Interest income, including accretion of discounts and
amortization of premiums, is recorded on the accrual basis commencing on the
settlement date.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 13
AEGON Bond
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.45% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.70% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $9. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $16,536
U.S. Government 70,397
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 69,324
U.S. Government 72,843
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 14
AEGON Bond
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes.
The tax character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 10,650
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 14,291
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 15,903
--------
Undistributed Long-term Capital Gains $ 872
========
Capital Loss Carryforward $ -
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 6,009
========
The capital loss carryforward utilized during the period ended December 31,
2003 was $3,691.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 266,458
=========
Unrealized Appreciation $ 8,563
Unrealized (Depreciation) (2,554)
---------
Net Unrealized Appreciation (Depreciation) $ 6,009
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 15
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
AEGON Bond
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AEGON Bond (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
AEGON Bond 16
Alger Aggressive Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The 2003 New Year brought with it an end to the positive momentum experienced
throughout the fourth quarter of 2002. With the U.S. trade deficit reaching
record highs, and waning consumer sentiment, equity markets trended downward
during the first month of the year. The negative momentum continued into
February. Despite solid growth in the manufacturing sector, investors continued
to sell, as fear about a potential war with Iraq began to trump economic
fundamentals. With the outbreak of war in March, markets reversed course and
recouped some of the losses experienced in January and February. Preferring war
to the pre-combat uncertainty, investors pushed most indices higher during the
final month of the quarter. Mid and large-cap growth stocks lead the upturn.
Despite substantial market volatility throughout the period, the Federal Reserve
Board ("Fed") decided against any further rate cuts during the first quarter of
2003.
The second quarter of 2003 sustained the positive momentum experienced at the
end of the first quarter, with most equity indices moving substantially higher
during the three-month period. Reassured by the swift and decisive allied
victory in Iraq and better-than expected first quarter profits, investors found
good reason to get back into the market in April. Stocks of all market
capitalizations and styles surged higher during the first month of the quarter.
The positive trend continued into May. Despite terrorist attacks in Saudi Arabia
and Morocco as well as large trade deficits, investors chose to focus on rising
consumer confidence and upbeat earnings outlooks from technology giants like
Computer Associates International, Inc., International Business Machines
Corporation and Intuit Inc. Most equity indices moved higher during the
one-month period, with small-cap growth stocks leading the way. Markets
continued to stay out of the red in June. With a larger-than-expected jump in
the index of leading economic indicators as well as a 25 basis point rate cut by
the Fed on June 25th, investors pushed stocks slightly higher during the final
month of the quarter.
Equity prices continued to rise throughout the third quarter of 2003, with small
cap growth stocks leading the advance. The general market optimism continued
into August and buyers dominated the market during the second month of the
quarter, as personal income and personal spending experienced significant
growth. Furthermore, despite an electrical black-out of the Eastern Seaboard on
August 14th, investor confidence continued to rise on the perpetual strength of
the housing market and strong profit numbers from retailers such as The Home
Depot, Inc., Lowe's Companies, Inc. and Wal-Mart Stores, Inc. Unfortunately, the
positive momentum created during the first two months of the quarter failed to
continue into September. Despite an improved outlook for the semi-conductor
industry, bearish news in the labor markets and the Organization of Petroleum
Exporting Countries' (OPEC) surprise decision to cut oil output dragged stocks
down during the final month of the quarter. While the Fed decided against any
rate cuts during the three-month period, it indicated a commitment to
maintaining low interest rates for the foreseeable future.
The fourth quarter of 2003 brought with it the continued advance of most equity
indices. Fueled in part by rising consumer confidence, a bullish outlook from
the Fed and the fastest Gross Domestic Product (GDP) growth in almost twenty
years, markets trended higher during the first month of the fourth quarter. The
momentum continued into November. Despite a falling dollar, stocks continued to
rise on larger-than-expected growth in the manufacturing sector, bullish
forecasts in the technology sector and solid housing data. The upward trend did
not falter in December, as positive economic and geopolitical news captured most
of the headlines. Strong consumer spending and the largest productivity gains in
twenty years helped to propel most equity indices significantly higher during
the final month of the year. The capture of Saddam Hussein in December further
enthused investors. While stocks of all sizes performed well throughout the
quarter, small and mid cap stocks performed especially well. As equity markets
headed into the New Year, low interest rates, minimal inflation and solid
economic fundamentals appeared to eclipse fear and uncertainty.
PERFORMANCE
For the year ended December 31, 2003, Alger Aggressive Growth returned 34.98%.
By comparison its benchmark, the Standard and Poor's 500 Composite Stock Index
("S&P 500") returned 28.67%.
STRATEGY REVIEW
The portfolio benefited from strong security selection in the health care and
information technology sectors and an underweighting in the relatively weak
consumer staples sector in beating the S&P 500. As of December 31, 2003, the
portfolio held 63 stocks with semiconductors and semiconductor equipment,
communications equipment and biotechnology representing the top three
industries. EBay Inc., Yahoo! Inc., Genentech, Inc., Pfizer Inc. and PeopleSoft,
Inc. represent the portfolio's top holdings. Although there were shifts within
the portfolio, strategy remained uniform, emphasizing individual security
selection through thorough, internal research conducted by talented analysts.
Looking ahead, we will continue to seek out and invest in companies that we
believe will grow their earnings rapidly and consistently.
/s/ Frederick M. Alger
Frederick M. Alger
/s/ David Hyun
David Hyun
Co-Portfolio Managers
Fred Alger Management, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 1
Alger Aggressive Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares
and its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 3/1/94 through 12/31/03
Initial Class S&P 500
3/1/94 $10,000 $10,000
3/31/94 9,305 9,565
6/30/94 9,032 9,605
9/30/94 9,802 10,073
12/31/94 9,874 10,072
3/31/95 10,842 11,051
6/30/95 13,040 12,105
9/30/95 15,016 13,066
12/31/95 13,628 13,852
3/31/96 14,060 14,596
6/30/96 14,410 15,250
9/30/96 14,588 15,721
12/31/96 15,052 17,031
3/31/97 14,747 17,488
6/30/97 17,284 20,539
9/30/97 19,392 22,077
12/31/97 18,702 22,710
3/31/98 21,667 25,876
6/30/98 23,822 26,730
9/30/98 21,506 24,076
12/31/98 27,807 29,200
3/31/99 31,527 30,654
6/30/99 32,708 32,815
9/30/99 32,488 30,768
12/31/99 46,999 35,344
3/31/00 52,764 36,153
6/30/00 43,550 35,195
9/30/00 41,652 34,854
12/31/00 32,274 32,129
3/31/01 26,170 28,322
6/30/01 28,611 29,979
9/30/01 23,648 25,580
12/31/01 26,965 28,313
3/31/02 25,661 28,391
6/30/02 21,453 24,590
9/30/02 18,169 20,344
12/31/02 17,692 22,058
3/31/03 18,254 21,362
6/30/03 21,291 24,651
9/30/03 21,685 25,303
12/31/03 23,881 28,382
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------- ----------- ----------
Initial Class 34.98% (3.00)% 9.26% 3/1/94
S&P 500(1) 28.67% (0.57)% 11.19% 3/1/94
- --------------- ----- ----- ----- ------
Service Class - - 21.22% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc.
2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 2
Alger Aggressive Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (100.2%)
Amusement & Recreation Services (2.0%)
Disney (Walt) Company (The) 445,900 $ 10,403
Apparel & Accessory Stores (3.1%)
Gap, Inc. (The) (b) 417,300 9,686
Pacific Sunwear of California, Inc. (a) 309,600 6,539
Business Services (5.2%)
eBay Inc. (a) 357,300 23,078
Monster Worldwide, Inc. (a)(b) 171,500 3,766
Chemicals & Allied Products (0.0%)
Procter & Gamble Company (The) 1,900 190
Commercial Banks (5.6%)
Bank of New York Company, Inc. (The) 250,900 8,310
Citigroup Inc. 280,300 13,606
U.S. Bancorp 242,000 7,207
Communication (0.5%)
SpectraSite, Inc. (a) 73,000 2,537
Communications Equipment (7.1%)
Advanced Fibre Communications, Inc. (a) 560,300 11,289
Ciena Corporation (a) 1,239,600 8,231
Comverse Technology, Inc. (a) 446,900 7,861
Corning Incorporated (a)(b) 945,700 9,864
Computer & Data Processing Services (14.6%)
Activision, Inc. (a) 346,100 6,299
Cognizant Technology Solutions
Corporation (a) 114,100 5,208
Novell, Inc. (a) 552,000 5,807
Oracle Corporation (a) 435,900 5,754
PeopleSoft, Inc. (a) 749,500 17,089
United Online, Inc. (a)(b) 373,950 6,279
VERITAS Software Corporation (a) 212,200 7,885
Yahoo! Inc. (a) 493,200 22,278
Computer & Office Equipment (3.9%)
Brocade Communications Systems, Inc. (a) 1,397,500 8,078
Cisco Systems, Inc. (a) 500,800 12,164
Drug Stores & Proprietary Stores (1.3%)
Medco Health Solutions, Inc. (a) 198,200 6,737
Educational Services (0.8%)
Apollo Group, Inc.-Class A (a) 62,850 4,274
Electronic Components & Accessories (11.2%)
Broadcom Corporation-Class A (a)(b) 478,600 16,315
Intel Corporation 263,900 8,498
Intersil Corporation-Class A 339,500 8,437
Micron Technology, Inc. (a)(b) 558,000 7,516
National Semiconductor Corporation (a) 215,200 8,481
Texas Instruments Incorporated 312,900 9,193
Shares Value
-------------------- ---------------
Furniture & Home Furnishings Stores (1.6%)
Bed Bath & Beyond Inc. (a) 195,600 $ 8,479
Health Services (3.1%)
Health Management Associates, Inc.-Class A (b) 240,400 5,770
Quest Diagnostics Incorporated (a) 143,800 10,512
Industrial Machinery & Equipment (6.5%)
Applied Materials, Inc. (a) 482,000 10,820
Caterpillar, Inc. 116,500 9,672
Kulicke and Soffa Industries, Inc. (a)(b) 538,000 7,736
Novellus Systems, Inc. (a) 128,100 5,387
Insurance (1.0%)
MGIC Investment Corporation 90,700 5,164
Leather & Leather Products (1.1%)
Coach, Inc. (a) 149,000 5,625
Lumber & Other Building Materials (2.8%)
Home Depot, Inc. (The) 418,200 14,842
Manufacturing Industries (1.1%)
International Game Technology 158,100 5,644
Medical Instruments & Supplies (6.0%)
Boston Scientific Corporation (a) 458,000 16,836
Guidant Corporation 91,400 5,502
Varian Medical Systems, Inc. (a) 42,600 2,944
Zimmer Holdings, Inc. (a) 82,100 5,780
Motion Pictures (2.3%)
Time Warner Inc. (a) 668,600 12,027
Oil & Gas Extraction (1.2%)
Halliburton Company 230,900 6,003
Personal Credit Institutions (1.7%)
Capital One Financial Corporation (b) 143,900 8,820
Pharmaceuticals (13.7%)
Allergan, Inc. 35,900 2,757
Amgen Inc. (a) 127,280 7,866
Genentech, Inc. (a) 205,200 19,201
Invitrogen Corporation (a)(b) 43,000 3,010
Millennium Pharmaceuticals, Inc. (a) 451,400 8,428
Pfizer Inc. 488,700 17,266
QLT Inc. (a)(b) 254,000 4,788
Teva Pharmaceutical Industries Ltd.-ADR 139,400 7,905
Retail Trade (0.0%)
Staples, Inc. (a) 4,500 123
Security & Commodity Brokers (1.3%)
Morgan Stanley 113,000 6,539
Telecommunications (1.2%)
Nextel Communications, Inc.-Class A (a) 214,000 6,005
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 3
Alger Aggressive Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Variety Stores (0.0%)
Costco Wholesale Corporation (a) 2,200 $ 82
Water Transportation (0.3%)
Royal Caribbean Cruises Ltd. 38,500 1,339
--------
Total Common Stocks (cost: $444,481) 521,731
--------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (11.1%)
Debt (8.8%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 274 $ 274
Fleet National Bank
1.00%, due 01/21/2004 1,027 1,027
National Bank of Commerce
1.19%, due 04/21/2004 856 856
Commercial Paper (2.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 514 514
Delaware Funding Corporation
1.08%, due 01/07/2004 341 341
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 514 514
1.09%, due 01/13/2004 342 342
1.08%, due 02/05/2004 684 684
General Electric Capital Corporation
1.09%, due 01/08/2004 854 854
1.09%, due 01/09/2004 514 514
1.08%, due 01/16/2004 682 682
Govco Incorporated-144A
1.07%, due 02/05/2004 855 855
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 855 855
1.09%, due 02/06/2004 855 855
1.10%, due 02/09/2004 499 499
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 855 855
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 514 514
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 992 992
1.08%, due 02/17/2004 1,709 1,709
Sheffield Receivables-144A
1.09%, due 01/21/2004 342 342
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 1,712 1,712
Credit Agricole Indosuez
0.98%, due 01/02/2004 68 68
1.08%, due 01/06/2004 651 651
Principal Value
--------------------- ---------------
Euro Dollar Terms (2.2%)
Bank of Montreal
1.06%, due 01/15/2004 $ 334 $ 334
1.06%, due 02/17/2004 685 685
Bank of Scotland
1.06%, due 04/02/2004 514 514
Citigroup Inc.
1.10%, due 01/22/2004 514 514
1.09%, due 02/06/2004 685 685
Credit Agricole Indosuez
1.08%, due 01/28/2004 342 342
Den Danske Bank
1.08%, due 01/20/2004 1,712 1,712
1.02%, due 01/30/2004 856 856
Royal Bank of Canada
1.05%, due 02/27/2004 1,712 1,712
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/04 1,027 1,027
1.08%, due 01/15/2004 342 342
1.08%, due 01/20/2004 171 171
Svenska Handelsbanken AB
1.09%, due 01/15/2004 171 171
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,027 1,027
Wells Fargo & Company
1.04%, due 01/30/2004 1,370 1,370
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 685 685
1.14%, due 09/08/2004 1,027 1,027
Morgan Stanley
1.05%, due 06/21/2004 1,644 1,644
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,712 1,712
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 514 514
Repurchase Agreements (2.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,006 on 01/02/2004 4,006 4,006
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $5,444 on 01/02/2004 5,444 5,444
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,253 on 01/02/2004 3,253 3,253
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 4
Alger Aggressive Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ------------
Investment Companies (2.3%)
Money Market Funds (2.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 839,834 $ 840
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,050,516 2,051
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 8,916,323 8,916
---------
Total Securities Lending (cost: $58,063) 58,063
---------
Total Investment Securities (cost: $502,544) $ 579,794
=========
SUMMARY:
Investments, at value 111.3 % $ 579,794
Liabilities in excess of other assets (11.3)% (58,796)
----- ---------
Net assets 100.0 % $ 520,998
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$55,661.
(c) Cash collateral for the Repurchase Agreements, valued at $12,958, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 5
Alger Aggressive Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $502,544)
(including $55,661 of securities loaned) $579,794
Receivables:
Investment securites sold 1,272
Interest 2
Dividends 172
Other 48
--------
581,288
--------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 371
Due to custodian 1,764
Payable for collateral for securities on loan 58,063
Other 92
--------
60,290
--------
Net Assets $520,998
========
Net Assets Consist of:
Capital stock, 125,000 shares authorized ($.01 par value) $ 360
Additional paid-in capital 791,004
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (347,616)
Net unrealized appreciation (depreciation) on investment
securities 77,250
--------
Net Assets $520,998
========
Shares Outstanding:
Initial Class 35,962
Service Class 37
Net Asset Value and Offering Price Per Share:
Initial Class $ 14.47
Service Class 14.45
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 57
Dividends 2,636
Income from loaned securities-net 48
Less withholding taxes on foreign dividends (12)
---------
2,729
---------
Expenses:
Management and advisory fees 3,726
Transfer agent fees 2
Printing and shareholder reports 189
Custody fees 50
Administration fees 21
Legal fees 6
Auditing and accounting fees 13
Directors fees 17
Other 10
---------
Total expenses 4,034
---------
Net Investment Income (Loss) (1,305)
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 45,082
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 94,071
---------
Net Gain (Loss) on Investment Securities 139,153
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 137,848
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 6
Alger Aggressive Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (1,305) $ (2,596)
Net realized gain (loss) from
investment securities 45,082 (175,452)
Net unrealized appreciation
(depreciation) on investment
securities 94,071 (48,327)
--------- ---------
137,848 (226,375)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 58,804 90,105
Service Class 650 -
--------- ---------
59,454 90,105
--------- ---------
Proceeds from fund acquisition:
Initial Class 6,330 -
Service Class - -
--------- ---------
6,330 -
--------- ---------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Cost of shares redeemed:
Initial Class (85,783) (142,784)
Service Class (152) -
--------- ---------
(85,935) (142,784)
--------- ---------
(20,151) (52,679)
--------- ---------
Net increase (decrease) in net assets 117,697 (279,054)
--------- ---------
Net Assets:
Beginning of year 403,301 682,355
--------- ---------
End of year $ 520,998 $ 403,301
========= =========
Undistributed Net Investment
Income (Loss) $ - $ -
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 4,846 7,052
Service Class 48 -
--------- ---------
4,894 7,052
--------- ---------
Shares issued-on fund acquisition:
Initial Class 531 -
Service Class - -
--------- ---------
531 -
--------- ---------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Shares redeemed:
Initial Class (7,051) (11,179)
Service Class (11) -
--------- ---------
(7,062) (11,179)
--------- ---------
Net increase (decrease) in shares
outstanding (1,637) (4,127)
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 7
Alger Aggressive Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 10.72 $ (0.04) $ 3.79 $ 3.75
12/31/2002 16.34 (0.07) (5.55) (5.62)
12/31/2001 19.56 (0.03) (3.19) (3.22)
12/31/2000 33.28 (0.09) (10.03) (10.12)
12/31/1999 22.44 (0.15) 14.95 14.80
- --------------- ---------- --------- --------- ---------- ----------
Service Class 12/31/2003 11.92 (0.05) 2.58 2.53
- --------------- ---------- --------- --------- ---------- ----------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ - $ - $ - $ 14.47
- - - 10.72
- - - 16.34
(0.42) (3.18) (3.60) 19.56
(1.54) (2.42) (3.96) 33.28
- --------------- --------- --------- --------- ---------
Service Class - - - 14.45
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 34.98% $ 520,459 0.87% 0.87% (0.28)% 164%
12/31/2002 (34.39) 403,301 0.90 0.90 (0.49) 197
12/31/2001 (16.45) 682,355 0.97 0.97 (0.15) 104
12/31/2000 (31.33) 907,696 0.86 0.86 (0.31) 123
12/31/1999 69.02 1,117,511 0.89 0.89 (0.56) 102
- --------------- ---------- ------ ----------- ---- ---- ----- ---
Service Class 12/31/2003 21.22 539 1.13 1.13 (0.55) 164
- --------------- ---------- ------ ----------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-March 1, 1994
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 8
Alger Aggressive Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Alger Aggressive Growth ("the Fund"), part of ATSF, began operations
on March 1, 1994.
The fund will merge into Transamerica Equity effective the close of business on
April 30, 2004, subject to approval by Policyowners.
On May 1, 2003, the Fund acquired all the net assets of Value Line Aggressive
Growth pursuant to a plan of reorganization approved by shareholders of Value
Line Aggressive Growth on April 16, 2003. The acquisition was accomplished by a
tax-free exchange of 531 shares of the Fund for the 990 shares of Value Line
Aggressive Growth outstanding on April 30, 2003. Value Line Aggressive Growth's
net assets at that date ($6,330), including ($303) of unrealized depreciation
were combined with those of the Fund, resulting in combined net assets of
$443,273.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued at the last
quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Overdraft: At December 31, 2003 the Fund was in a cash overdraft. The amount of
the cash overdraft is included as Due to Custodian in the accompanying Statement
of Assets and Liabilities. The Fund pays monthly overdraft charges based on the
average daily overdraft balance during the month. The average balance is
multiplied by a rate equal to 0.50% plus the federal funds rate. As of December
31, 2003, this rate was 1.50%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $20 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 9
Alger Aggressive Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
IBT absorbs the loss if the collateral value is not sufficient to cover the cost
of the replacement securities. If replacement securities are not available, IBT
will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $1,390 are included in
net realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Brokerage commissions: Brokerage commissions incurred on security transactions
placed with an affiliate of the sub-adviser for the year ended December 31,
2003, were $253.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 10
Alger Aggressive Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $18. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 731,645
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 736,358
U.S. Government 130
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ 916
Undistributed net investment income (loss) 1,305
Undistributed net realized capital gains (loss) (2,221)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
===========
Undistributed Long-term Capital Gains $ -
===========
Capital Loss Carryforward $ (346,750)
===========
Post October Capital Loss $ (854)
===========
Net Unrealized Appreciation (Depreciation) $ 77,239
===========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 1,037 December 31, 2008
194,199 December 31, 2009
151,514 December 31, 2010
As part of the Fund's acquisition of Value Line Aggressive Growth, the Fund
obtained a net capital loss carryforward of approximately $2,948 from Value Line
Aggressive Growth. Utilization of this carryover is subject to limitations
imposed by the Internal Revenue Code and Treasury Regulations, significantly
reducing the carryover available.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $502,555
========
Unrealized Appreciation $ 84,436
Unrealized (Depreciation) (7,197)
========
Net Unrealized Appreciation (Depreciation) $ 77,239
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Alger Aggressive Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alger Aggressive Growth (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Alger Aggressive Growth 12
American Century Income & Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After a slow start, U.S. economic conditions improved significantly during 2003.
Growth picked up dramatically in the third quarter of 2003 due largely to low
interest rates and tax cuts. The U.S. stock market staged an impressive rally in
2003 after stumbling in the first quarter. Small- and medium-sized stocks
advanced more than large companies. Financials, technology, and
consumer-cyclicals accounted for the majority of the Standard and Poor's 500
Composite Stock Index's ("S&P 500") positive return, but every economic sector
in the index also posted gains for the year. In 2003, stocks snapped a long
losing streak -- it was the first calendar year since 1999 with positive returns
for the major U.S. indices.
PERFORMANCE
For the year ended December 31, 2003, American Century Income & Growth returned
28.79%. By comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
Our risk evaluation and sector weightings are positioned relative to the S&P
500, so the same sectors that drove the index higher, financials, tech, and
consumer cyclicals, also helped the portfolio post a solid absolute return. In
terms of relative performance, stock selection worked best in the consumer
cyclical and energy sectors. The portfolio's value orientation helped during the
year, but there were a couple of disappointments, namely, our consumer services
and technology stocks gained less than the S&P 500's holdings in those sectors.
In addition, we held a slight overweight in telecommunications because the
sector offers relatively high dividend yields and low valuations. But
telecommunications lagged, detracting from performance.
Taking a closer look, stock selection added the most value in the consumer
cyclicals sector. That is because consumer cyclicals produced two of the
portfolio's top stock picks, Ford Motor Company and Federated Department Stores,
Inc. Both were relatively cheap stocks that investors bid up upon seeing
improvement in their business fundamentals. The portfolio also held overweights
in several homebuilders, Centex Corporation, KB Home, NVR, Inc. and The Ryland
Group, Inc. Those companies performed relatively well, as demand for housing
remained solid. In addition, the portfolio held less Wal-Mart Stores, Inc. than
the S&P 500. That helped because the retailer's premium-priced stock lagged its
industry. On the downside, we held an overweight in J.C. Penney Company, Inc.,
whose shares struggled during the year. The portfolio's solid performance in
consumer cyclicals was offset by stock selection in the consumer services
sector. In that sector, portfolio pick Eastman Kodak Company missed earnings and
cut its dividend, sending its shares lower.
Energy stocks also posted solid returns, as oil prices remained stubbornly high.
Two of the portfolio's picks in the refining industry, Marathon Oil Corporation
and Sunoco, Inc., outperformed their peers, giving the portfolio an advantage
over the S&P 500. Overweights in ChevronTexaco Corporation and Occidental
Petroleum Corporation also helped.
Technology shares rallied more than any other sector, as business spending
returned after a long hiatus. The portfolio's technology stocks posted solid
absolute returns, but slightly lagged the S&P 500. That is because we entirely
avoided or underweighted some of the biggest gainers in technology, such as
eBay, Yahoo! Inc., Cisco Systems, Inc., EMC Corporation, Motorola, Inc., Corning
Incorporated and Lucent Technologies Inc. Those stocks appeared much too
expensive to our investment process, even after plummeting for the last three
years. But investors flocked back to these names in 2003, pushing them to large
gains.
Add it all up, and the portfolio slightly outperformed its benchmark in 2003.
Going forward, we will continue to apply our investment process to select
attractively valued stocks.
/s/ John Schniedwind
John Schniedwind
/s/ Kurt Borgwardt
Kurt Borgwardt
Co-Portfolio Managers
American Century Investment Management, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 1
American Century Income & Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/01 through 12/31/03
Initial Class S & P 500
5/1/01 $10,000 $10,000
6/30/01 9,870 9,822
9/30/01 8,620 8,381
12/31/01 9,480 9,277
3/31/02 9,570 9,302
6/30/02 8,490 8,057
9/30/02 7,063 6,665
12/31/02 7,643 7,227
3/31/03 7,343 6,999
6/30/03 8,533 8,076
9/30/03 8,709 8,290
12/31/03 9,843 9,299
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
Initial Class 28.79% (0.60)% 5/1/01
S&P 500(1) 28.67% (2.69)% 5/1/01
- --------------- ----- ----- ------
Service Class - 24.40% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc.
2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 2
American Century Income & Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.4%)
Automotive (0.2%)
Ford Motor Company Capital Trust II 2 $ 100
Computer & Office Equipment (0.2%)
Xerox Corporation 800 104
--------
Total Convertible Preferred Stocks (cost: $165) 204
--------
PREFERRED STOCKS (0.1%)
Automotive (0.1%)
General Motors Corporation 2,236 60
--------
Total Preferred Stocks (cost: $50) 60
--------
COMMON STOCKS (99.3%)
Aerospace (0.2%)
United Technologies Corporation 1,022 97
Air Transportation (0.4%)
Delta Air Lines, Inc. (b) 1,291 15
FedEx Corporation 1,672 113
Southwest Airlines Co. 5,276 85
Amusement & Recreation Services (1.2%)
Disney (Walt) Company (The) 25,211 588
Harrah's Entertainment, Inc. 2,162 108
Apparel & Accessory Stores (0.3%)
Claire's Stores, Inc. 2,938 55
Gap, Inc. (The) (b) 5,721 133
Automotive (2.5%)
American Axle & Manufacturing
Holdings, Inc. (a) 751 30
Ford Motor Company (b) 89,355 1,430
Honeywell International Inc. 477 16
Automotive Dealers & Service Stations (0.0%)
Advance Auto Parts, Inc. (a) 170 14
Beverages (0.4%)
Coors (Adolph) Company (b) 3,374 189
PepsiCo, Inc. 535 25
Business Services (1.0%)
CheckFree Holdings Corporation (a)(b) 1,689 47
Rent-A-Center, Inc. (a) 9,102 272
Viad Corp 11,163 279
Chemicals & Allied Products (4.8%)
Monsanto Company 34,276 986
Procter & Gamble Company (The) 13,987 1,397
RPM, Inc. 4,520 74
Sherwin-Williams Company (The) 12,569 437
Commercial Banks (12.8%)
Bank of America Corporation 30,480 2,452
Bank One Corporation 293 13
Citigroup Inc. 41,345 2,007
Shares Value
-------------------- ---------------
Commercial Banks (continued)
First Tennessee National Corporation 1,951 $ 86
FleetBoston Financial Corporation 5,845 255
MBNA Corporation 2,616 65
Morgan Chase & Co. (J.P.) 39,868 1,464
PNC Financial Services Group, Inc. (The) 3,834 210
UnionBanCal Corporation 5,389 310
Wachovia Corporation 8,212 383
Wells Fargo & Company 7,059 416
Communication (1.0%)
PanAmSat Corporation (a) 8,160 176
Viacom, Inc.-Class B 9,502 422
Communications Equipment (0.3%)
Motorola, Inc. 1,898 27
QUALCOMM Incorporated 1,464 79
Scientific-Atlanta, Inc. 1,833 50
Computer & Data Processing Services (4.8%)
Computer Associates International, Inc. 459 13
Computer Sciences Corporation (a) 5,920 262
Convergys Corporation (a) 12,426 217
EarthLink, Inc. (a) 10,800 108
Electronic Arts Inc. (a) 500 24
Electronic Data Systems Corporation (b) 5,044 124
Microsoft Corporation 57,071 1,572
Oracle Corporation (a) 14,869 196
Take-Two Interactive Software, Inc. (a)(b) 2,010 58
United Online, Inc. (a)(b) 4,957 83
VeriSign, Inc. (a) 13,549 221
Computer & Office Equipment (4.3%)
Cisco Systems, Inc. (a) 23,795 578
Dell Computer Corporation (a) 4,697 160
Hewlett-Packard Company 34,160 785
International Business Machines
Corporation 8,899 825
Storage Technology Corporation (a) 2,339 60
Western Digital Corporation (a) 14,159 167
Xerox Corporation (a)(b) 2,344 32
Construction (0.7%)
KB Home (b) 3,528 256
NVR, Inc. (a) 298 139
Department Stores (4.2%)
Federated Department Stores, Inc. 33,409 1,575
May Department Stores Company (The) (b) 23,671 688
Sears, Roebuck and Co. (b) 6,130 279
Electric Services (2.7%)
Duquesne Light Holdings, Inc. 1,569 29
Edison International (a) 40,470 888
Great Plains Energy Incorporated 10,793 343
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 3
American Century Income & Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Electric Services (continued)
OGE Energy Corp. 1,691 $ 41
TXU Corp. 14,364 341
Electric, Gas & Sanitary Services (1.7%)
Exelon Corporation 10,404 690
PG&E Corporation (a)(b) 2,418 67
Sempra Energy 4,438 133
UGI Corporation 3,740 127
Electrical Goods (1.0%)
Arrow Electronics, Inc. (a) 9,286 215
Avnet, Inc. (a)(b) 18,993 411
Electronic & Other Electric Equipment (2.1%)
Eaton Corporation 656 71
General Electric Company 30,637 949
Whirlpool Corp. 3,475 252
Electronic Components & Accessories (5.2%)
Benchmark Electronics, Inc. (a)(b) 4,305 150
Intel Corporation 72,348 2,330
Sanmina Corporation (a)(b) 19,428 245
Texas Instruments Incorporated 3,660 108
Tyco International Ltd. 10,032 266
Fabricated Metal Products (0.8%)
Fortune Brands, Inc. 6,367 455
Food & Kindred Products (3.1%)
Altria Group, Inc. 19,305 1,051
Archer Daniels Midland Co. 13,656 208
ConAgra Foods, Inc. 10,855 286
Sara Lee Corporation 2,388 52
Tyson Foods, Inc.-Class A (b) 20,474 271
Gas Production & Distribution (0.4%)
ONEOK, Inc. (b) 10,817 239
Health Services (0.2%)
LabOne, Inc. 6,806 138
Holding & Other Investment Offices (0.9%)
CBL & Associates Properties, Inc. 2,334 132
Equity Office Properties Trust 9,355 268
General Growth Properties, Inc. 2,472 69
Simon Property Group, Inc. 1,100 51
Industrial Machinery & Equipment (0.1%)
Black & Decker Corporation (The) 753 37
Briggs & Stratton Corporation 622 42
Instruments & Related Products (1.3%)
Eastman Kodak Company (b) 30,388 780
Insurance (5.7%)
ACE Limited 13,369 554
Allstate Corporation (The) 7,984 343
Shares Value
-------------------- ---------------
Insurance (continued)
Fidelity National Financial, Inc. 21,582 $ 837
First American Corporation (The) 18,973 565
Health Net Inc. (a) 10,743 351
Humana Inc. (a) 8,721 199
Principal Financial Group, Inc. 5,016 166
W.R. Berkley Corporation 12,485 436
Life Insurance (1.0%)
AmerUs Group Co. 9,290 325
Protective Life Corporation 7,734 262
Lumber & Other Building Materials (0.1%)
Home Depot, Inc. (The) 986 35
Lumber & Wood Products (0.5%)
Georgia-Pacific Corporation 418 13
Louisiana-Pacific Corporation (a) 3,881 69
Rayonier, Inc. 4,404 183
Weyerhaeuser Company 1,009 65
Motion Pictures (2.7%)
Blockbuster Inc.-Class A 8,715 156
Fox Entertainment Group, Inc.-Class A (a) 1,661 48
Netflix, Inc. (a)(b) 1,304 71
Regal Entertainment Group-Class A (b) 15,156 311
Time Warner Inc. (a) 58,865 1,058
Oil & Gas Extraction (1.3%)
ConocoPhillips 5,572 365
Occidental Petroleum Corporation 7,340 310
Schlumberger Limited 2,006 110
Paper & Allied Products (0.3%)
Bemis Company, Inc. 3,457 173
Paper & Paper Products (0.3%)
United Stationers Inc. (a) 5,075 208
Personal Services (0.5%)
Block (H&R), Inc. 3,114 172
Cendant Corporation (a) 7,067 157
Petroleum Refining (7.1%)
Amerada Hess Corporation 445 24
ChevronTexaco Corporation 17,502 1,512
Exxon Mobil Corporation 9,312 382
Marathon Oil Corporation 40,647 1,345
Sunoco, Inc. 19,569 1,001
Pharmaceuticals (9.7%)
Abbott Laboratories 3,599 168
Amgen Inc. (a) 9,987 617
Bristol-Myers Squibb Co. 31,273 894
Endo Pharmaceutical Holdings Inc. (a) 2,634 51
Invitrogen Corporation (a) 195 14
Johnson & Johnson 16,504 853
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 4
American Century Income & Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Pharmaceuticals (continued)
King Pharmaceuticals, Inc. (a) 12,925 $ 197
Kos Pharmaceuticals, Inc. (a)(b) 747 32
McKesson HBOC, Inc. 9,721 313
Merck & Co., Inc. 26,240 1,211
Pfizer Inc. 36,617 1,293
Pharmaceutical Resources, Inc. (a) 409 27
Valeant Pharmaceuticals International 2,318 58
Wyeth 2,676 114
Primary Metal Industries (0.0%)
Engelhard Corporation 806 24
Radio, Television & Computer Stores (0.1%)
RadioShack Corporation 1,253 38
Railroads (0.4%)
Burlington Northern Santa Fe
Corporation 1,995 65
CSX Corporation 1,336 48
Norfolk Southern Corporation 1,995 47
Union Pacific Corporation 1,547 107
Retail Trade (0.3%)
Barnes & Noble, Inc. (a) 5,525 181
Rubber & Misc. Plastic Products (0.2%)
Carlisle Companies Incorporated 1,897 115
Savings Institutions (0.8%)
Flagstar Bancorp, Inc. 1,864 40
Washington Mutual, Inc. 11,478 460
Security & Commodity Brokers (1.5%)
Lehman Brothers Holdings Inc. 163 13
Merrill Lynch & Co., Inc. 8,596 504
Morgan Stanley 6,384 369
Telecommunications (5.1%)
ALLTEL Corporation 8,954 417
AT&T Corp. (b) 4,846 98
BellSouth Corporation 20,858 590
Nextel Communications, Inc.-Class A (a) 18,124 509
SBC Communications Inc. 18,769 489
Sprint Corporation (FON Group) (b) 25,668 421
Verizon Communications, Inc. 16,014 562
Tobacco Products (0.3%)
R.J. Reynolds Tobacco Holdings, Inc. (b) 3,354 195
Transportation Equipment (0.0%)
General Dynamics Corporation 130 12
Trucking & Warehousing (0.8%)
United Parcel Service, Inc.-Class B 6,236 465
U.S. Government Agencies (1.1%)
Fannie Mae 8,888 667
Shares Value
-------------------- ---------------
Wholesale Trade Durable Goods (0.2%)
Fisher Scientific International Inc. (a) 2,169 $ 90
IKON Office Solutions, Inc. 4,694 56
Wholesale Trade Nondurable Goods (0.9%)
SUPERVALU INC. 18,186 520
--------
Total Common Stocks (cost: $50,858)
59,712
--------
Principal Value
----------- -----------
SECURITY LENDING COLLATERAL (10.4%)
Debt (8.3%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 30 $ 30
Fleet National Bank
1.00%, due 01/21/2004 111 111
National Bank of Commerce
1.19%, due 04/21/2004 92 92
Commercial Paper (2.1%)
Compass Securitization-144A
1.08%, due 01/22/2004 55 55
Delaware Funding Corporation
1.08%, due 01/07/2004 37 37
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 55 55
1.09%, due 01/13/2004 37 37
1.08%, due 02/05/2004 74 74
General Electric Capital Corporation
1.09%, due 01/08/2004 92 92
1.09%, due 01/09/2004 55 55
1.08%, due 01/16/2004 74 74
Govco Incorporated-144A
1.07%, due 02/05/2004 92 92
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 92 92
1.09%, due 02/06/2004 92 92
1.10%, due 02/09/2004 54 54
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 92 92
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 55 55
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 107 107
1.08%, due 02/17/2004 187 187
Sheffield Receivables-144A
1.09%, due 01/21/2004 37 37
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 187 187
Credit Agricole Indosuez
0.98%, due 01/02/2004 7 7
1.08%, due 01/06/2004 70 70
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 5
American Century Income & Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- -----------
Euro Dollar Terms (2.1%)
Bank of Montreal
1.06%, due 01/15/2004 $ 36 $ 36
1.06%, due 02/17/2004 74 74
Bank of Scotland
1.06%, due 04/02/2004 55 55
Citigroup Inc.
1.10%, due 01/22/2004 55 55
1.09%, due 02/06/2004 74 74
Credit Agricole Indosuez
1.08%, due 01/28/2004 37 37
Den Danske Bank
1.08%, due 01/20/2004 186 186
1.02%, due 01/30/2004 92 92
Royal Bank of Canada
1.05%, due 02/27/2004 185 185
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 111 111
1.08%, due 01/15/2004 37 37
1.08%, due 01/20/2004 18 18
Svenska Handelsbanken AB
1.09%, due 01/15/2004 18 18
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 111 111
Wells Fargo & Company
1.04%, due 01/30/2004 148 148
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 74 74
1.14%, due 09/08/2004 111 111
Morgan Stanley
1.05%, due 06/21/2004 178 178
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 185 185
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 55 55
Principal Value
-------------- -----------
Repurchase Agreements (2.3%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $433 on 01/02/2004 $ 433 $ 433
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $588 on 01/02/2004 588 588
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $351 on 01/02/2004 351 351
Shares Value
------------- ------------
Investment Companies (2.1%)
Money Market Funds (2.1%)
American AAdvantage Select Fund
1-day yield of 1.00% 90,736 $ 91
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 221,538 223
Merrimac Cash Series Fund Premium Class
1-day yield of 0.98% 963,322 963
--------
Total Security Lending Collateral (cost: $6,273) 6,273
--------
Total Investment Securities (cost: $57,346) $ 66,249
========
SUMMARY:
Investments, at value 110.2 % $ 66,249
Liabilities in excess of other assets (d) (10.2)% (6,122)
------- --------
Net assets 100.0 % $ 60,127
======= ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$6,004.
(c) Cash collateral for the Repurchase Agreements, valued at $1,400, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 6
American Century Income & Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $57,346)
(including $6,004 of securities loaned) $ 66,249
Cash 107
Receivables:
Dividends 94
Other 5
--------
66,455
--------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 48
Payable for collateral for securities on loan 6,273
Other 7
--------
6,328
--------
Net Assets $ 60,127
========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 61
Additional paid-in capital 51,983
Undistributed net investment income (loss) 655
Accumulated net realized gain (loss) from investment
securities and futures contracts (1,475)
Net unrealized appreciation (depreciation) on
investment securities 8,903
--------
Net Assets $ 60,127
========
Shares Outstanding:
Initial Class 6,114
Service Class 15
Net Asset Value and Offering Price Per Share:
Initial Class $ 9.81
Service Class 9.82
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 2
Dividends 1,155
Income from loaned securities-net 2
--------
1,159
--------
Expenses:
Management and advisory fees 422
Transfer agent fees 2
Printing and shareholder reports 13
Custody fees 33
Administration fees 20
Legal fees 1
Auditing and accounting fees 10
Directors fees 2
Other 1
--------
Total expenses 504
--------
Net Investment Income (Loss) 655
--------
Net Realized Gain (Loss) from:
Investment securities 785
Futures contracts 53
--------
838
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 11,137
Futures contracts 12
--------
11,149
--------
Net Gain (Loss) on Investment Securities and Futures
Contracts 11,987
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 12,642
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 7
American Century Income & Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 655 $ 150
Net realized gain (loss) from
investment securities and
futures contracts 838 (2,277)
Net unrealized appreciation
(depreciation) on investment
securities and futures contracts 11,149 (2,432)
------- -------
12,642 (4,559)
------- -------
Distributions to Shareholders:
From net investment income:
Initial Class (146) (7)
Service Class - -
------- -------
(146) (7)
------- -------
From net realized gains:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 17,204 38,726
Service Class 138 -
------- -------
17,342 38,726
------- -------
Dividends and distributions
reinvested:
Initial Class 146 7
Service Class - -
------- -------
146 7
------- -------
Cost of shares redeemed:
Initial Class (4,752) (6,054)
Service Class (3) -
------- -------
(4,755) (6,054)
------- -------
12,733 32,679
------- -------
Net increase (decrease) in net assets 25,229 28,113
------- -------
Net Assets:
Beginning of year 34,898 6,785
------- -------
End of year $60,127 $34,898
======= =======
Undistributed Net Investment Income
(Loss) $ 655 $ 146
======= =======
December 31, December 31,
2003 2002
------------------ ------------------
Share Activity:
Shares issued:
Initial Class 2,122 4,625
Service Class 15 -
--------- ---------
2,137 4,625
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 17 1
Service Class - -
--------- ---------
17 1
--------- ---------
Shares redeemed:
Initial Class (593) (774)
Service Class - -
--------- ---------
(593) (774)
--------- ---------
Net increase (decrease) in shares
outstanding 1,561 3,852
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 8
American Century Income & Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.64 $ 0.12 $ 2.08 $ 2.20
12/31/2002 9.48 0.06 (1.90) (1.84)
12/31/2001 10.00 0.03 (0.55) (0.52)
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 7.90 0.08 1.85 1.93
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ (0.03) $ - $ (0.03) $ 9.81
- - - 7.64
- - - 9.48
- --------------- --------- --- --------- --------
Service Class (0.01) - (0.01) 9.82
- --------------- --------- --- --------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 28.79% $ 59,978 1.08% 1.08% 1.41% 62%
12/31/2002 (19.38) 34,898 1.40 1.54 0.76 94
12/31/2001 (5.20) 6,785 1.40 5.95 0.50 47
- --------------- ---------- ------ -------- ---- ---- ---- --
Service Class 12/31/2003 24.40 149 1.31 1.31 1.39 62
- --------------- ---------- ------ -------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2001
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 9
American Century Income & Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. American Century Income & Growth ("the Fund"), part of ATSF, began
operations on May 1, 2001.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $1 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 10
American Century Income & Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
included in the Statement of Assets and Liabilities as well as on the Schedule
of Investments.
Real Estate Investment Trusts ("REITs"): There are certain additional risks
involved in investing in REITs. These include, but are not limited to, economic
conditions, changes in zoning laws, real estate values, property taxes and
interest rates.
Dividend income is recorded at management's estimate of the income included in
distributions from the REIT investments. Distributions received in excess of
this estimated amount are recorded as a reduction of the cost of investments.
The actual amounts of income, return of capital, and capital gains are only
determined by each REIT after the fiscal year-end, and may differ from the
estimated amounts.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following stated break points:
0.90% of the first $100 million of ANA
0.85% of the next $150 million of ANA
0.80% of ANA over $250 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.40% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There are no amounts subject to recapture at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the State-
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 11
American Century Income & Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
ment of Operations are for fees paid to external legal counsel. ATFS provides
its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $2. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 43,112
U.S. Government 507
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 28,278
U.S. Government 552
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 7
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 146
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 628
=======
Undistributed Long-term Capital Gains $ -
=======
Capital Loss Carryforward $ (771)
=======
Post October Loss $ -
=======
Net Unrealized Appreciation (Depreciation) $ 8,226
=======
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 771 December 31, 2010
The capital loss carryforward utilized during the period ended December 31, 2003
was $59.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 58,023
========
Unrealized Appreciation $ 8,899
Unrealized (Depreciation) (673)
--------
Net Unrealized Appreciation (Depreciation) $ 8,226
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
American Century Income & Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of American Century Income & Growth
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series
Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century Income & Growth 13
American Century International
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The anticipation and onset of war in Iraq, concern about the spread of a
potentially fatal virus and Korean nuclear tensions restrained many of the
world's markets during the early part of the year. But with the end of major
combat in Iraq, the outbreak of SARS under control, and encouraging economic
data from numerous nations, markets in the U.S. and abroad rebounded beginning
in April. However, the U.S. dollar continued to weaken against other currencies
during the year.
PERFORMANCE
For the year ended December 31, 2003, American Century International returned
25.29%. By comparison its benchmark, the Morgan Stanley Capital International
(EAFE) Index ("MSCI-EAFE"), returned 39.17%.
STRATEGY REVIEW
Against this backdrop, American Century International's complement of financial
holdings posted the year's largest contribution to the portfolio. The financial
sector, the portfolio's biggest stake at year end, advanced mostly on the
strength of banks, which represented the portfolio's heaviest average industry
weighting. France's Societe Generale, a top-10 holding at the end of the year,
topped the list of banks contributing to American Century International.
The financial sector, however, also detracted most from our performance against
the MSCI-EAFE. The disappointments came on several fronts, but during the second
half of the year, the portfolio's lack of Japanese banks proved especially
damaging. Japan has some of the world's largest banks by assets, but many of
them carry billions of dollars in bad debt. We had an underweight position in
many of those companies, and our portfolio's lighter position detracted from the
portfolio's relative performance when their share prices advanced during the
last six months of the year.
To a lesser degree, the portfolio's health care companies also detracted from
relative performance, although the sector contributed to the portfolio's gains
during the year. Pharmaceutical companies, which made up, on average, one of the
portfolio's largest industry stakes, accounted for most of the underperformance.
We have reduced our stake in health care, but the sector registered the
second-worst performance against the MSCI-EAFE during the year.
The performance in several other sectors was more encouraging.
Telecommunications, for example, registered the year's second-best absolute
performance. The gains came as improving business conditions lifted companies
that provide mobile-phone service. France Telecom and Vodafone Group PLC were
the top contributors among the portfolio's telecommunications holdings.
On another front, Nissan Motor Co. Ltd., a top-10 holding, made one of the
largest contributions to the portfolio during the year as the consumer cyclical
sector lifted American Century International. The commercial services sector
also boosted the portfolio, led by Yahoo Japan Corporation ("Yahoo") in the
information services industry. Yahoo made the largest contribution to the
portfolio during the year as business surged on its online auction site.
Only the industrials sector detracted from the portfolio's absolute returns,
with the industrial parts industry declining most.
On a brighter note, American Century International's technology stake advanced,
led by holdings in the electrical equipment and semiconductor industries.
Companies that make computer chips and integrated circuits benefited from higher
prices and increasing demand for chips used in digital consumer products.
Japan's Canon Inc. topped the portfolio's list of contributors in the
semiconductor industry, while Germany's Siemens AG made the largest contribution
among electrical equipment holdings.
In conclusion, we remain committed to our long-standing process of identifying
companies demonstrating fundamental strength and sustainable improvement in
their businesses.
/s/ Henrik Strabo
Henrik Strabo
/s/ Mark S. Kopinski
Mark S. Kopinski*
Co-Portfolio Managers
American Century Investment Management, Inc.
- ------------------
*As of January 20, 2004, Mark S. Kopinski is no longer portfolio manager.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 1
American Century International
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/2/97 through 12/31/03
Initial Class MSCI-(EAFE)
1/2/97 $10,000 $10,000
3/31/97 10,192 9,850
6/30/97 11,344 11,136
9/30/97 11,499 11,065
12/31/97 10,750 10,206
3/31/98 12,456 11,715
6/30/98 12,663 11,847
9/30/98 10,422 10,171
12/31/98 12,131 12,281
3/31/99 12,157 12,460
6/30/99 12,256 12,786
9/30/99 12,336 13,356
12/31/99 15,158 15,633
3/31/00 15,406 15,626
6/30/00 15,208 15,016
9/30/00 13,386 13,813
12/31/00 12,886 13,451
3/31/01 11,240 11,614
6/30/01 11,341 11,514
9/30/01 9,581 9,908
12/31/01 9,866 10,599
3/31/02 9,710 10,659
6/30/02 9,428 10,453
9/30/02 7,556 8,395
12/31/02 7,776 8,939
3/31/03 7,077 8,213
6/30/03 8,242 9,820
9/30/03 8,526 10,623
12/31/03 9,743 12,441
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 year Inception Date
----------- ------------- ----------- ----------
Initial Class 25.29% (4.29)% -0.37% 1/2/97
MSCI-EAFE(1) 39.17% 0.26% 3.17% 1/2/97
- ---------- ----- ----- ------ ------
Service Class - - 27.24% 5/1/03
- --------------- ----- ----- ------ ------
NOTES
(1) The Morgan Stanley Capital International - Europe, Asia, and Far East
(MSCI-EAFE) Index is an unmanaged index used as a general measure of market
performance. Calculations assume dividends and capital gains are reinvested
and do not include any managerial expenses. From inception calculation is
based on life of initial class shares. Source: Standard & Poor's
Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
International investing involves special risks including currency fluctuations,
political instability, and different financial accounting standards.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 2
American Century International
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.5%)
Switzerland (0.5%)
Compagnie Financiere Richemont
AG-Units 57,390 $ 1,378
---------
Total Convertible Preferred Stocks (cost: $1,370) 1,378
---------
PREFERRED STOCKS (0.7%)
Australia (0.0%)
News Corporation Limited (The)-ADR 731 22
Germany (0.7%)
Porsche AG (b) 3,460 2,046
---------
Total Preferred Stocks (cost: $1,679) 2,068
---------
COMMON STOCKS (98.1%)
Australia (1.9%)
BHP Billiton Limited 318,610 2,925
Commonwealth Bank of Australia 126,290 2,801
Austria (1.0%)
Erste Bank der oesterreichischen
Sparkassen AG 24,484 3,025
Brazil (0.1%)
Tele Norte Leste Participacoes SA-ADR 20,914 323
China (2.2%)
China Life Insurance Company
Limited-H Shares (a) 1,637,000 1,339
Huaneng Power International, Inc. 1,164,000 2,017
PetroChina Company Limited 1,982,000 1,136
SINOPEC Shanghai Petrochemical
Company Limited 5,088,000 2,261
Denmark (0.4%)
A. P. Moller-Maersk A/S 183 1,321
Finland (0.8%)
Nokia Oyj-ADR 135,670 2,306
France (14.1%)
Accor SA 77,572 3,512
AXA 161,762 3,462
Credit Agricole SA 242,176 5,781
France Telecom (a) 138,143 3,947
Groupe Danone SA 20,080 3,277
Groupe Wanadoo SA (a) 216,402 1,774
LVMH Moet Hennessy Louis Vuitton SA 49,383 3,593
Publicis Groupe SA (b) 40,300 1,306
Renault SA 29,684 2,048
Societe Generale-Class A 66,484 5,869
Total Fina Elf SA 32,490 6,039
Vinci SA 12,440 1,030
Vivendi Universal (a) 61,250 1,488
Shares Value
-------------------- ---------------
Germany (9.5%)
BASF AG (b) 18,401 $ 1,038
Commerzbank AG 43,960 862
Deutsche Borse AG 36,568 2,006
Deutsche Telekom AG (a)(b) 209,569 3,835
E.ON AG 30,399 1,991
Linde AG 26,930 1,450
METRO AG (b) 68,325 3,016
PUMA AG Rudolf Dassler Sport 9,845 1,738
SAP AG 24,638 4,156
Siemens AG-Registered Shares (b) 73,888 5,944
T-Online International AG (a) 213,431 2,772
Greece (0.6%)
Alpha Bank SA 32,600 985
Public Power Corporation 37,140 918
Hong Kong (1.2%)
Cheung Kong (Holdings) Limited 184,000 1,464
CNOOC Limited 524,000 1,026
Sun Hung Kai Properties Limited 141,000 1,167
Hungary (0.5%)
Gedeon Richter Rt. 4,860 576
OTP Bank Rt. (a) 64,230 830
Ireland (2.7%)
Anglo Irish Bank Corporation PLC 160,853 2,537
CRH PLC (GBP) 127,023 2,608
DEPFA BANK PLC 11,590 1,457
RyanAir Holdings PLC-ADR (a)(b) 31,095 1,575
Israel (1.1%)
Teva Pharmaceutical Industries Ltd.-ADR (b) 59,477 3,373
Italy (1.6%)
Autogrill SpA (a) 19,627 281
Banca Intesa SpA 587,810 2,298
Banco Popolare di Verona e Novara S.c.r.l. 127,766 2,163
Telecom Italia Mobile SpA 39,735 216
Japan (18.5%)
Bank of Yokohama, Ltd. (The) (b) 265,000 1,231
Canon Inc. 26,050 1,212
Chugai Pharmaceutical Co., Ltd. 113,996 1,638
Denso Corporation 107,000 2,106
Dentsu Inc. 176 886
FANUC LTD 62,200 3,724
Fast Retailing Co., Ltd. 18,700 1,135
Hoya Corporation 32,403 2,974
JSR Corporation 52,000 1,162
KDDI Corporation 558 3,195
Keyence Corporation 9,400 1,980
Marui Co., Ltd. 199,800 2,516
Matsushita Electric Industrial Co., Ltd. 52,000 719
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 3
American Century International
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Japan (continued)
Mitsubishi Corporation 495,000 $ 5,245
NEC Corporation 413,000 3,039
Nippon Broadcasting System,
Incorporated 27,000 1,257
Nissan Motor Co., Ltd. 417,144 4,761
Nitto Denko Corporation 25,000 1,329
NOK Corporation 29,000 1,055
ORIX Corporation 26,500 2,190
Seiko Epson Corporation 13,200 616
Sharp Corporation 181,000 2,855
Sumitomo Mitsui Financial Group, Inc. (b) 670 3,568
Tokyo Electron Limited 18,700 1,420
Tokyu Corporation 363,000 1,862
Toray Industries, Inc. 159,000 664
Toyota Motor Corporation 17,100 577
Yahoo Japan Corporation (a)(b) 120 1,612
Mexico (0.6%)
America Movil, SA de CV-Series L-ADR 68,395 1,870
Netherlands (2.2%)
ING Groep NV 155,266 3,620
Koninklijke Philips Electronics NV-NY
Registered Shares 103,510 3,011
Norway (0.5%)
Telenor ASA 224,330 1,464
Russia (0.5%)
Mobile TeleSystems OJSC-ADR (b) 18,405 1,524
South Africa (0.3%)
MTN Group Limited (a) 228,330 977
South Korea (1.3%)
Samsung Electronics Co., Ltd. 10,303 3,901
Spain (1.4%)
ACS, Actividades de Construccion y
Servicios SA 17,003 830
Telefonica Moviles, SA 7,259 76
Telefonica SA 220,850 3,242
Sweden (2.9%)
Atlas Copco AB-A Shares 41,120 1,472
ForeningsSparbanken AB 53,857 1,059
Tele2 AB-B Shares (a)(b) 36,049 1,924
Telefonaktiebolaget LM Ericsson-Class B (a) 839,430 1,505
Volvo AB-B Shares 90,070 2,754
Switzerland (9.2%)
ABB Ltd (a) 397,191 2,014
Adecco SA-Registered Shares 61,631 3,962
Clariant AG (a) 75,509 1,114
Converium Holding AG 2,100 112
Credit Suisse Group 185,943 6,803
Shares Value
-------------------- ---------------
Switzerland (continued)
Julius Baer Holding Ltd.-Class B 3,160 $ 1,065
Roche Holding AG 51,304 5,175
Swiss Life Holding (a)(b) 20,340 3,733
UBS AG-Registered Shares 43,384 2,971
Zurich Financial Services AG (a) 7,310 1,052
Taiwan (0.8%)
China Steel Corporation-GDR-144A 54,630 908
Taiwan Semiconductor Manufacturing
Company Ltd.-ADR (a) 143,870 1,473
United Kingdom (20.0%)
Abbey National PLC 272,877 2,593
Alliance & Leicester PLC 126,962 2,018
AstraZeneca PLC (a) 39,476 1,894
BP PLC 824,552 6,685
British Sky Broadcasting Group PLC (a) 255,878 3,220
BT Group PLC 128,331 432
Cadbury Schweppes PLC 183,850 1,350
Exel PLC 135,801 1,795
GlaxoSmithKline PLC 232,490 5,326
Hays PLC 891,730 1,915
HBOS PLC 94,683 1,226
HSBC Holdings PLC (a) 273,530 4,297
Man Group PLC 92,381 2,416
Marks and Spencer Group PLC 140,630 727
mmO2 PLC (a) 1,436,888 1,980
Next PLC 93,890 1,887
Rank Group PLC (The) 34,289 171
Reckitt Benckiser PLC 193,646 4,380
Rio Tinto PLC-Registered Shares 70,130 1,937
Smith & Nephew PLC 146,015 1,226
Tesco PLC 486,500 2,244
United Business Media PLC 179,330 1,573
Vodafone Group PLC 2,535,303 6,285
WPP Group PLC 342,736 3,365
United States (2.2%)
AT&T Wireless Services, Inc. (a)(b) 31,787 254
Coach, Inc. (a) 58,700 2,216
Devon Energy Corporation 16,832 964
EMC Corporation (a) 9,000 116
Hughes Electronics Corporation (a) 6,542 108
InterActiveCorp (a)(b) 24,664 837
Merrill Lynch & Co., Inc. 1,954 115
Oracle Corporation (a) 51,630 682
Pepsi Bottling Group, Inc. (The) 12,100 293
Texas Instruments Incorporated 26,378 775
Washington Post Company (The)-Class B 536 424
Wyeth 1,487 63
---------
Total Common Stocks (cost: $248,884)
298,790
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 4
American Century International
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (9.4%)
Debt (7.5%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 135 $ 135
Fleet National Bank
1.00%, due 01/21/2004 508 508
National Bank of Commerce
1.19%, due 04/21/2004 423 423
Commercial Paper (1.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 254 254
Delaware Funding Corporation
1.08%, due 01/07/2004 169 169
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 254 254
1.09%, due 01/13/2004 169 169
1.08%, due 02/05/2004 338 338
General Electric Capital Corporation
1.09%, due 01/08/2004 422 422
1.09%, due 01/09/2004 254 254
1.08%, due 01/16/2004 337 337
Govco Incorporated-144A
1.07%, due 02/05/2004 423 423
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 423 423
1.09%, due 02/06/2004 422 422
1.10%, due 02/09/2004 247 247
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 423 423
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 254 254
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 491 491
1.08%, due 02/17/2004 845 845
Sheffield Receivables-144A
1.09%, due 01/21/2004 169 169
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 846 846
Credit Agricole Indosuez
0.98%, due 01/02/2004 34 34
1.08%, due 01/06/2004 322 322
Principal Value
--------------------- ---------------
Euro Dollar Terms (1.9%)
Bank of Montreal
1.06%, due 01/15/2004 $ 165 $ 165
1.06%, due 02/17/2004 339 339
Bank of Scotland
1.06%, due 04/02/2004 254 254
Citigroup Inc.
1.10%, due 01/22/2004 254 254
1.09%, due 02/06/2004 339 339
Credit Agricole Indosuez
1.08%, due 01/28/2004 169 169
Den Danske Bank
1.08%, due 01/20/2004 846 846
1.02%, due 01/30/2004 423 423
Royal Bank of Canada
1.05%, due 02/27/2004 846 846
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 508 508
1.08%, due 01/15/2004 169 169
1.08%, due 01/20/2004 85 85
Svenska Handelsbanken AB
1.09%, due 01/15/2004 85 85
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 508 508
Wells Fargo & Company
1.04%, due 01/30/2004 677 677
Master Notes (0.5%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 339 339
1.14%, due 09/08/2004 508 508
Morgan Stanley
1.05%, due 06/21/2004 813 813
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 846 846
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 254 254
Repurchase Agreements (2.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,980 on 01/02/2004 1,980 1,980
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,691 on 01/02/2004 2,691 2,691
Morgan Stanley
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,608 on 01/02/2004 1,608 1,608
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 5
American Century International
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Shares Value
------------ ------------
Investment Companies (1.9%)
Money Market Funds (1.9%)
American AAdvantage Select Fund
1-day yield of 1.00% 415,196 $ 415
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,013,731 1,014
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 4,408,038 4,408
---------
Total Securities Lending (cost: $28,705) 28,705
---------
Total Investment Securities (cost: $280,638) $ 330,941
=========
SUMMARY:
Investments, at value 108.7 % $ 330,941
Liabilities in excess of other assets (8.7)% (26,764)
------- ---------
Net assets 100.0 % $ 304,177
======= =========
Percentage of
Net Assets Value
----------------- ---------------
INVESTMENTS BY INDUSTRY:
Commercial Banks 17.5 % $ 53,418
Telecommunications 10.9 % 33,049
Pharmaceuticals 5.9 % 18,045
Electronic & Other Electric Equipment 5.1 % 15,630
Automotive 5.0 % 15,348
Life Insurance 4.0 % 12,154
Business Services 3.8 % 11,709
Computer & Data Processing Services 3.6 % 10,997
Chemicals & Allied Products 3.3 % 10,123
Oil & Gas Extraction 3.0 % 9,165
Wholesale Trade Durable Goods 2.8 % 8,538
Industrial Machinery & Equipment 2.4 % 7,416
Petroleum Refining 2.2 % 6,685
Department Stores 2.2 % 6,667
Computer & Office Equipment 1.6 % 4,983
Electric Services 1.6 % 4,926
Metal Mining 1.6 % 4,862
Transportation & Public Utilities 1.5 % 4,494
Radio & Television Broadcasting 1.5 % 4,477
Electronic Components & Accessories 1.4 % 4,228
Beer, Wine & Distilled Beverages 1.2 % 3,593
Hotels & Other Lodging Places 1.2 % 3,512
Food & Kindred Products 1.1 % 3,277
Instruments & Related Products 1.0 % 2,974
Real Estate 0.9 % 2,631
Lumber & Construction Materials 0.9 % 2,608
Holding & Other Investment Offices 0.8 % 2,416
Percentage of
Net Assets Value
INVESTMENTS BY INDUSTRY: ----------------- ---------------
Communications Equipment 0.8 % $ 2,306
Food Stores 0.7 % 2,244
Leather & Leather Products 0.7 % 2,216
Security & Commodity Brokers 0.7 % 2,121
Mortgage Bankers & Brokers 0.7 % 2,018
Management Services 0.7 % 2,014
Printing & Publishing 0.7 % 1,997
Apparel & Accessory Stores 0.6 % 1,887
Construction 0.6 % 1,860
Manufacturing Industries 0.6 % 1,738
Beverages 0.5 % 1,643
Air Transportation 0.5 % 1,575
Motion Pictures 0.5 % 1,510
Engineering & Management Services 0.5 % 1,450
Water Transportation 0.4 % 1,321
Medical Instruments & Supplies 0.4 % 1,226
Insurance 0.4 % 1,164
Rubber & Misc. Plastic Products 0.4 % 1,162
Primary Metal Industries 0.3 % 908
Apparel Products 0.2 % 727
Textile Mill Products 0.2 % 664
Restaurants 0.1 % 281
Amusement & Recreation Services 0.1 % 171
Communication 0.0 % 108
----- ---------
Investments, at value 99.3 % $ 302,236
Short-term investments 9.4 % 28,705
Liabilities in excess of other assets (8.7) % (26,764)
------ ---------
Net assets 100.0 % $ 304,177
====== =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- ------------------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- ------------------- ----------- ------------ --------------- ---------------
Australian Dollar 247 01/05/2004 $ 186 $ --
Euro Dollar 185 01/02/2004 233 1
Euro Dollar (344) 01/05/2004 (431) (3)
British Pound 248 01/02/2004 443 2
British Pound (150) 01/05/2004 (267) (2)
Japanese Yen (1,628) 01/02/2004 (15) --
Japanese Yen (44,712) 01/05/2004 (417) (1)
Japanese Yen (6,287) 01/06/2004 (59) --
Japanese Yen 114,676 01/07/2004 1,072 (3)
Swiss Franc 142 01/05/2004 114 --
Swiss Franc 7 01/06/2004 6 --
------ ------
$ 865 $ (6)
====== ======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 6
American Century International
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$27,357.
(c) Cash collateral for the Repurchase Agreements, valued at $6,406, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
GDR Global Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $908 or 0.30% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 7
American Century International
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $280,638)
(including $27,357 of securities loaned) $330,941
Cash 3,264
Foreign cash (cost: $719) 721
Receivables:
Investment securites sold 3,877
Interest 2
Dividends 174
Dividend reclaims receivable 81
Unrealized appreciation on forward foreign
currency contracts 3
Other 24
---------
339,087
---------
Liabilities:
Investment securities purchased 5,585
Accounts payable and accrued liabilities:
Due to advisor 304
Management and advisory fees 245
Distribution fees 1
Payable for collateral for securities on loan 28,705
Unrealized depreciation on forward foreign
currency contracts 9
Other 61
---------
34,910
---------
Net Assets $304,177
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 404
Additional paid-in capital 279,068
Accumulated net investment income (loss) (434)
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (25,162)
Net unrealized appreciation (depreciation) on:
Investment securities 50,304
Translation of assets and liabilities denominated in
foreign currencies (3)
----------
Net Assets $304,177
=========
Shares Outstanding:
Initial Class 40,361
Service Class 86
Net Asset Value and Offering Price Per Share:
Initial Class $ 7.53
Service Class 7.52
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 22
Dividends 4,526
Income from loaned securities-net 171
Less withholding taxes on foreign dividends (532)
--------
4,187
--------
Expenses:
Management and advisory fees 2,095
Transfer agent fees 2
Printing and shareholder reports 49
Custody fees 378
Administration fees 24
Legal fees 2
Auditing and accounting fees 15
Directors fees 7
Recaptured expenses 304
Other 4
Service fees:
Service Class 1
--------
Total expenses 2,881
--------
Net Investment Income (Loss) 1,306
--------
Net Realized Gain (Loss) from:
Investment securities 10,610
Foreign currency transactions (2,228)
--------
8,382
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 56,517
Translation of assets and liabilities denominated in
foreign currencies 7
--------
56,524
--------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 64,906
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 66,212
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 8
American Century International
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,306 $ 122
Net realized gain (loss) from
investment securities and foreign
currency transactions 8,382 (9,717)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 56,524 (853)
--------- ---------
66,212 (10,448)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - (169)
Service Class - -
--------- ---------
- (169)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 235,106 243,825
Service Class 18,972 -
--------- ---------
254,078 243,825
--------- ---------
Proceeds from fund acquisition:
Initial Class 98,992 3,990
Service Class - -
--------- ---------
98,992 3,990
--------- ---------
Dividends and distributions reinvested:
Initial Class - 169
Service Class - -
--------- ---------
- 169
--------- ---------
Cost of shares redeemed:
Initial Class (204,161) (159,591)
Service Class (18,705) -
--------- ---------
(222,866) (159,591)
--------- ---------
130,204 88,393
--------- ---------
Net increase (decrease) in net assets 196,416 77,776
--------- ---------
Net Assets:
Beginning of year 107,761 29,985
--------- ---------
End of year $ 304,177 $ 107,761
========= =========
Accumulated Net Investment Income
(Loss) $ (434) $ (54)
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 38,024 36,570
Service Class 2,831 -
--------- ---------
40,855 36,570
--------- ---------
Shares issued-proceeds from fund acquisition:
Initial Class 16,750 556
Service Class - -
--------- ---------
16,750 556
--------- ---------
Shares issued-reinvested from distributions:
Initial Class - 26
Service Class - -
--------- ---------
- 26
--------- ---------
Shares redeemed:
Initial Class (32,336) (23,147)
Service Class (2,745) -
--------- ---------
(35,081) (23,147)
--------- ---------
Net increase (decrease) in shares
outstanding 22,524 14,005
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 9
American Century International
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 6.01 $ 0.04 $ 1.48 $ 1.52
12/31/2002 7.65 0.01 (1.63) (1.62)
12/31/2001 10.34 0.07 (2.45) (2.38)
12/31/2000 14.28 0.04 (2.15) (2.11)
12/31/1999 12.07 0.04 2.90 2.94
- --------------- ---------- ------- -------- -------- --------
Service Class 12/31/2003 5.91 (0.02) 1.63 1.61
- --------------- ---------- ------- -------- -------- --------
For a share outstanding throughout each period (a)
---------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ----------
Initial Class $ - $ - $ - $ 7.53
(0.02) - (0.02) 6.01
(0.28) (0.03) (0.31) 7.65
(0.19) (1.64) (1.83) 10.34
(0.05) (0.68) (0.73) 14.28
- --------------- --------- --------- --------- -------
Service Class - - - 7.52
- --------------- --------- --------- --------- -------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 25.29% $ 303,527 1.14% 1.14% 0.58% 219%
12/31/2002 (21.18) 107,761 1.49 1.78 0.23 261
12/31/2001 (23.44) 29,985 1.20 1.63 0.78 154
12/31/2000 (14.99) 36,651 1.30 1.66 0.29 112
12/31/1999 24.95 33,579 1.50 1.84 0.31 100
- --------------- ---------- ------ --------- ---- ---- ----- ---
Service Class 12/31/2003 27.24 650 1.39 1.39 (0.51) 219
- --------------- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund's share classes are as follows:
Initial Class-January 2, 1997
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003 the Ratio of Net Expenses to Average
Net Assets is net of fee waivers by the investment advisor, if any (see
note 2). For the year ended December 31, 2002, ratio of net expenses is net
of fees paid indirectly. For the year ended December 31, 2001 and prior
years, ratio of net expenses to average net assets is net of fees paid
indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.14%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 10
American Century International
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. American Century International ("the Fund"), part of ATSF, began
operations on January 2, 1997.
On March 1, 2002, International Equity acquired all the assets of American
Century International pursuant to a plan of reorganization approved by
shareholders of American Century International. The acquisition was accomplished
by a tax-free exchange of 4,067 shares of International Equity for the 556
shares of American Century International outstanding on February 28, 2002.
American Century International's net assets at that date ($3,990) including ($3)
of unrealized depreciation were combined with those of International Equity
resulting in combined net assets of $33,188. Upon completion of the
reorganization, the merged entity was immediately re-named American Century
International.
On May 1, 2003, the Fund acquired all the net assets of Gabelli Global Growth
pursuant to a plan of reorganization approved by shareholders of Gabelli Global
Growth on April 16, 2003. The acquisition was accomplished by a tax-free
exchange of 16,750 shares of the Fund for the 14,424 shares of Gabelli Global
Growth outstanding on April 30, 2003. Gabelli Global Growth's net assets at that
date ($98,992) including ($6,335) of unrealized depreciation were combined with
those of the Fund resulting in combined net assets of $247,331.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued at the last
quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $73 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 11
American Century International
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
agency obligations, commercial paper, money market mutual funds, repurchase
agreements and other highly rated, liquid investments.
During the life of securities loans, the collateral and securities loaned remain
subject to fluctuation in value. IBT marks to market securities loaned and the
collateral each business day. If additional collateral is due (at least $1), IBT
collects additional cash collateral from the borrowers. Although securities
loaned will be fully collateralized at all times, IBT may experience delays in,
or may be prevented from, recovering the collateral on behalf of the Fund. The
Fund may recall a loaned security position at any time from the borrower through
IBT. In the event the borrower fails to timely return a recalled security, IBT
may indemnify the Fund by purchasing replacement securities for the Fund at its
own expense and claiming the collateral to fund such a purchase. IBT absorbs the
loss if the collateral value is not sufficient to cover the cost of the
replacement securities. If replacement securities are not available, IBT will
credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement date
of investment security transactions; 2) gains and losses on forward foreign
currency contracts; and 3) the difference between the receivable amounts of
interest and dividends recorded in the accounting records in U.S. dollars and
the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (i.e. through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 6,119 2%
Asset Allocation-Growth Portfolio 20,475 7%
Asset Allocation-Moderate Growth Portfolio 41,237 14%
Asset Allocation-Moderate Portfolio 25,284 8%
Select+ Aggressive 92 -
Select+ Growth & Income 573 -
--
31%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points from
January 1, 2003 to April 30, 2003:
1.00% of the first $50 million of ANA
0.95% of the next $100 million of ANA
0.90% of the next $350 million of ANA
0.85% of ANA over $500 million
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 12
American Century International
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
From May 1, 2003 on:
1.00% of the first $50 million of ANA
0.95% of the next $100 million of ANA
0.90% of the next $350 million of ANA
0.85% of the next $500 million of ANA
0.80% of ANA over $1 billion
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the annual
limit of 1.50% through April 30, 2003. Subsequent to May 1, 2003, the operating
expense limit was reduced to 1.20%. The composite expense ratio for the year
ended December 31, 2003, was 1.30%.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Expenses Recovered Increase in Total Expenses
by Advisor to Average Net Assets
-------------------- ---------------------------
Recovered in 2003 $ 304 0.14%
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, ASFG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at a cost and is reimbursed monthly.
Brokerage commissions: Brokerage commissions incurred on security transactions
placed with an affiliate of the sub-adviser for the year ended December 31,
2003, were $55.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $10. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 555,680
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 469,970
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 13
American Century International
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ 12,123
Undistributed net investment income (loss) (1,686)
Undistributed net realized capital gains (loss) (10,437)
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 169
Long-term capital gains -
2003 Distributions paid from:
Ordinary income -
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (24,769)
=========
Post October Currency Loss $ (431)
=========
Post October Capital Loss $ (3)
=========
Net Unrealized Appreciation (Depreciation) $ 49,915
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 16,819 December 31, 2009
7,950 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $6,662.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 281,026
=========
Unrealized Appreciation $ 50,654
Unrealized (Depreciation) (739)
---------
Net Unrealized Appreciation (Depreciation) $ 49,915
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 14
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
American Century International
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of American Century International (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
American Century International 15
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After two years of bitter struggle, the equity markets surged back to life in
2003. Broadly speaking, accommodative monetary and fiscal policies spurred U.S.
economic growth, which in turn fostered improved corporate profits. At year-end,
the federal funds target rate stood at a historically low 1.0%, while stimulus
from the tax cuts continued to add momentum to the economy. Meanwhile, the
decrease in geopolitical tensions following the conclusion of major combat
operations in Iraq and the capture of Saddam Hussein significantly boosted
consumer sentiment. By the close of the fourth quarter, gross domestic product
("GDP") had grown at a strong 4.0% rate. As economic data generally improved
throughout the year, investors' risk appetite increased. Both the Dow Jones
Industrial Average and the Standard and Poor's 500 Composite Stock Index ("S&P
500") posted significant gains, rising 28.28% and 28.67%, respectively, while
the technology-laden NASDAQ Composite Index soared 50.01%.
Small capitalization issues led the market's advance, with the small cap Russell
2000 Index rising 47.25%. Mid-cap issues also posted strong gains, with the
Russell Midcap Index returning 40.06%. Large cap issues performed solidly as
well, but lagged on a relative basis, with the large cap Russell 1000 Index
gaining 29.89%. On a style-relative basis, large cap value slightly outperformed
large cap growth, as the Russell 1000 Value Index returned 30.03%, versus a
return of 29.75% for the Russell 1000 Growth Index.
On a sector basis, standout performers included information technology and
materials. As investors sought increased beta, technology shares rose in tandem,
while shares of materials producers benefited from strong demand in China.
Lagging sectors included traditionally defensive areas such as healthcare and
consumer staples.
PERFORMANCE
For the year ended December 31, 2003, BlackRock Global Science and Technology
Opportunities returned 52.03%. By comparison its benchmark, the S&P 500 returned
28.67%.
STRATEGY REVIEW
The portfolio's substantial overweight in information technology and its mixed
stock selection were the primary detractors from performance during the first
quarter. Specifically, application and systems software stocks such as Roxio,
Inc. and RSA Security, Inc. performed well, while semiconductor capital
equipment and telecommunications equipment companies were more challenging.
Furthermore, the portfolio's small- to mid-cap bias negatively impacted returns
as the market clearly favored larger, blue chip technology companies. In the
healthcare sector, the portfolio's meaningful overweight position relative to
the S&P 500 contributed positively to performance. Solid stock selection within
the pharmaceutical and medical technology sub-sectors was the key return driver
as companies such as Inspire Pharmaceuticals, Inc. and Pharmaceutical Resources,
Inc. experienced dramatic price appreciation. In contrast, the portfolio's large
exposure to biotechnology companies constrained performance despite reasonable
stock selection.
The portfolio's substantial overweight in information technology was one of the
primary contributors to outperformance during the second quarter. Specifically,
strength in semiconductors was driven by evidence of improving demand within the
personal computer ("PC") and wireless end-markets and relatively low inventory
levels in the channel. In addition, capital equipment stocks began discounting
the potential for order acceleration as capacity utilization on the leading edge
approached unsustainable levels. In terms of healthcare, the portfolio's
meaningful overweight position relative to the S&P 500 was a positive
contributor to returns, but primarily because of strong stock selection within
the biotechnology and pharmaceutical sub-sectors. During the quarter, both the
Amex Biotech Index and NASDAQ Biotech Index were up approximately 30%, while the
portfolio's holdings were up 41%. The group's re-rating was largely driven by
positive clinical data presented at various high profile medical meetings and
several important product approvals by the Food and Drug Administration ("FDA").
Furthermore, the pending Medicare prescription benefit is seen as supporting
greater product utilization over the next ten years.
During the third quarter, the information technology ("IT") sector significantly
outperformed the broader market as investors continued to favor areas levered to
cyclical earnings recovery. The portfolio's substantial overweight in the sector
and strong stock selection were the primary drivers of outperformance.
Specifically, strength in semiconductors was driven by evidence of improving
demand within the PC and wireless end-markets and relatively low inventory
levels in the channel. In addition, semiconductor capital equipment stocks began
discounting the potential for order acceleration as capacity utilization on the
leading edge approached unsustainable levels. Furthermore, investor interest in
networking and communication equipment companies increased as fundamentals
appeared to stabilize ahead of a potential fourth quarter enterprise budget
flush. In terms of healthcare, the portfolio's large relative exposure
contributed positively to returns primarily because of strong stock selection in
the pharmaceutical and healthcare services areas.
During the fourth quarter, the IT sector narrowly outperformed the broader
market as investors continued to favor areas levered to cyclical earnings
recovery. However, because of a rapid rise in technology valuations throughout
2003, investors began to realize gains in early December, particularly in
segments with aggressive expectations. The portfolio's substantial overweight in
IT relative to the S&P 500 and solid stock selection were the primary drivers of
absolute performance. Specifically, ongoing strength in semiconductor companies
was driven largely by robust demand within the PC and wireless end-markets
relative to low channel inventory levels. Furthermore, rising global GDP and low
interest rates stimulated demand from various industrial and consumer segments.
Thomas P. Callan
Daniel M. Rea
Co-Portfolio Managers
BlackRock Advisors, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 1
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 8/17/01 through 12/31/03
Initial Class S&P 500
8/17/01 10,000 10,000
9/30/01 7,860 8,983
12/31/01 10,450 9,943
3/31/02 10,000 9,970
6/30/02 8,020 8,635
9/30/02 6,290 7,144
12/31/02 6,650 7,746
3/31/03 6,440 7,502
6/30/03 8,240 8,657
9/30/03 9,060 8,886
12/31/03 10,110 9,967
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 52.03% 0.46% 8/17/01
S&P 500(1) 28.67% (0.14)% 8/17/01
- --------------- ----- ----- -------
Service Class - 43.32% 5/1/03
- --------------- ----- ----- -------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investing in technology stocks generally involves greater volatility and risks,
so an investment in the fund may not be appropriate for everyone.
International investing involves risks that include currency fluctuations,
potential instability, and different accounting standards.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 2
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (96.5%)
Bermuda (2.1%)
Accenture Ltd (a) 18,600 $ 490
Canada (1.4%)
Angiotech Pharmaceuticals, Inc. (a) 2,700 124
Biovail Corporation (a) 9,000 193
Cayman Islands (0.9%)
Seagate Technology (a) 10,500 198
Finland (1.3%)
Nokia Oyj-ADR 17,700 301
France (0.9%)
Flamel Technologies SA-ADR (a) 7,500 201
Italy (0.3%)
Tiscali SpA (a) 10,900 76
Japan (1.6%)
Brother Industries, Ltd. 3,000 28
Citizen Electronics Co., Ltd. 800 73
Nippon Electric Glass Co., Ltd. 13,800 268
SEGA Corporation (a) 1,100 10
South Korea (2.9%)
Samsung Electronics Co., Ltd. 1,500 568
Seoul Semiconductor Co., Ltd. 3,300 60
Testech Incorporated (a) 6,510 8
You Eal Electronics Co., Ltd. 1,300 37
Sweden (0.5%)
Biacore International AB 4,700 111
Taiwan (1.7%)
Phoenix Precision Technology
Corporation (a) 100,000 79
Quanta Computer Inc. 35,000 86
Taiwan Semiconductor Manufacturing
Company Ltd. (a) 120,000 225
United Kingdom (1.9%)
Bookham Technology PLC-ADR (a) 92,500 231
Shire Pharmaceuticals Group PLC-ADR (a) 7,200 209
United States (81.0%)
ACLARA BioSciences, Inc. (a) 14,600 53
ADC Telecommunications, Inc. (a) 57,800 172
Aetna Inc. 3,500 237
Agere Systems Inc. (a) 74,700 228
Alkermes, Inc. (a) 6,700 90
Altera Corporation (a) 10,700 243
Amylin Pharmaceuticals, Inc. (a) 10,800 240
Analog Devices, Inc. 6,700 306
Andrx Corporation-Andrx Group (a) 10,300 248
Applied Materials, Inc. (a) 22,400 503
ATMI, Inc. (a) 10,400 241
Shares Value
-------------------- ---------------
United States (continued)
Avaya Inc. (a) 11,200 $ 145
Avocent Corporation (a) 5,300 194
Biogen, Inc. (a) 3,150 116
Caliper Technologies Corp. (a) 13,500 89
Caremark Rx, Inc. (a) 14,100 356
Celgene Corporation (a) 2,000 90
Cisco Systems, Inc. (a) 22,900 556
Citrix Systems, Inc. (a) 9,200 195
Computer Sciences Corporation (a) 4,400 195
Digi International, Inc. (a) 25,400 244
Digitas Inc. (a) 28,000 261
EarthLink, Inc. (a) 18,400 184
EMC Corporation (a) 19,100 247
Emulex Corporation (a) 9,100 243
Endo Pharmaceutical Holdings Inc. (a) 3,700 71
General Cable Corporation (a) 26,700 218
Gilead Sciences, Inc. (a) 4,700 273
Guilford Pharmaceuticals Inc. (a) 26,500 180
Harris Corporation 6,900 262
Hewlett-Packard Company 10,800 248
Ilex Oncology, Inc. (a) 7,000 149
Impax Laboratories, Inc. (a) 5,524 79
Intel Corporation 15,400 496
International Business Machines
Corporation 5,100 473
International Rectifier Corporation (a) 6,200 306
Intersil Corporation-Class A 6,900 171
Inveresk Research Group, Inc. (a) 8,500 210
Invitrogen Corporation (a) 3,300 231
Juniper Networks, Inc. (a) 14,300 267
KLA-Tencor Corporation (a) 4,500 264
Lawson Software Inc. (a) 30,400 250
Lexicon Genetics Incorporated (a) 18,100 107
LifePoint Hospitals, Inc. (a) 3,100 91
Linear Technology Corporation 6,000 252
MasTec, Inc. (a) 12,400 184
Maxim Integrated Products 4,200 209
Maxtor Corporation (a) 24,800 275
Medimmune, Inc. (a) 7,700 196
MEMC Electronic Materials, Inc. (a) 27,000 260
Merck & Co., Inc. 8,000 370
Micron Technology, Inc. (a) 6,300 85
Microsoft Corporation 23,800 655
Molina Healthcare, Inc. (a) 2,800 71
Motorola, Inc. 11,800 166
Nabi Biopharmaceuticals (a) 11,000 140
National Semiconductor Corporation (a) 7,000 276
NetScreen Technologies, Inc. (a) 10,600 262
NitroMed, Inc. (a) 25,600 184
NPS Pharmaceuticals, Inc. (a) 3,800 117
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 3
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- --------------
United States (continued)
Oracle Corporation (a) 29,100 $ 384
OSI Pharmaceuticals, Inc. (a) 7,700 248
Pitney Bowes Inc. 6,700 272
PMC-Sierra, Inc. (a) 10,900 220
QUALCOMM Incorporated 4,700 253
Sanmina Corporation (a) 19,400 245
Schering-Plough Corporation 21,200 368
SeaChange International, Inc. (a) 9,300 143
Siebel Systems, Inc. (a) 16,700 232
Sirius Satellite Radio Inc. (a) 20,900 66
Skyworks Solutions, Inc. (a) 10,500 91
Somera Communications, Inc. (a) 23,100 37
SonicWALL, Inc. (a) 16,000 125
Symantec Corporation (a) 7,200 249
Tekelec (a) 14,800 230
Texas Instruments Incorporated 6,700 197
TIBCO Software Inc. (a) 30,800 209
TTM Technologies, Inc. (a) 6,800 115
Unisys Corporation (a) 14,000 208
VeriSign, Inc. (a) 13,600 222
Vialta, Inc. (a) 7 (b)
Vicuron Pharmaceuticals Inc. (a) 3,100 58
ViroLogic, Inc. (a) 91,000 341
Westell Technologies, Inc.-Class A (a) 9,600 61
Wireless Facilities, Inc. (a) 12,000 178
XM Satellite Radio Holdings Inc. (a) 5,000 132
--------
Total Common Stocks (cost: $19,511) 22,184
--------
Principal Value
------------- -----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS (7.4%)
Fannie Mae
0.80%, due 01/02/2004 $ 1,700 $ 1,700
--------
Total Short-Term U.S. Government Obligations
(cost: $1,700) 1,700
--------
Total Investment Securities (cost: $21,211) $ 23,884
========
SUMMARY:
Investments, at value 103.9 % $ 23,884
Liabilities in excess of other assets (3.9)% (905)
-------- --------
Net assets 100.0 % $ 22,979
======== ========
Percentage of
Net Assets Value
-------------- ------------
INVESTMENTS BY INDUSTRY:
Pharmaceuticals 20.1 % $ 4,622
Electronic Components & Accessories 19.7 % 4,531
Computer & Office Equipment 15.5 % 3,565
Computer & Data Processing Services 13.0 % 2,983
Communications Equipment 7.5 % 1,733
Business Services 4.6 % 1,054
Electronic & Other Electric Equipment 3.1 % 709
Instruments & Related Products 2.3 % 517
Industrial Machinery & Equipment 2.2 % 503
Health Services 2.0 % 448
Insurance 1.3 % 308
Chemicals & Allied Products 1.0 % 241
Primary Metal Industries 0.9 % 218
Research & Testing Services 0.9 % 210
Construction 0.8 % 184
Communication 0.6 % 132
Telecommunications 0.5 % 113
Radio & Television Broadcasting 0.3 % 66
Electrical Goods 0.2 % 37
Manufacturing Industries 0.0 % 10
----- --------
Investments, at market value 96.5 % 22,184
Short-term investments 7.4 % 1,700
Other assets in excess of liabilities (3.9) % (905)
----- --------
Net assets 100.0 % $ 22,979
====== ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) Value is less than $1.
DEFINITIONS:
ADR American Depositary Receipt
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 4
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $21,211) $ 23,884
Cash 66
Foreign cash (cost: $1,016) 1,020
Receivables:
Investment securites sold 611
Dividends 2
---------
25,583
---------
Liabilities:
Investment securities purchased 2,575
Accounts payable and accrued liabilities:
Management and advisory fees 20
Other 9
---------
2,604
---------
Net Assets $ 22,979
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 23
Additional paid-in capital 19,096
Undistributed net investment income (loss) -
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 1,183
Net unrealized appreciation (depreciation) on:
Investment securities 2,673
Translation of assets and liabilities denominated in
foreign currencies 4
---------
Net Assets $ 22,979
=========
Shares Outstanding:
Initial Class 2,251
Service Class 23
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.11
Service Class 10.09
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 17
Dividends 21
-------
38
-------
Expenses:
Management and advisory fees 102
Transfer agent fees 2
Printing and shareholder reports 12
Custody fees 14
Administration fees 21
Auditing and accounting fees 10
-------
Total expenses 161
Less:
Advisory fee waiver (4)
--------
Net expenses 157
-------
Net Investment Income (Loss) (119)
-------
Net Realized Gain (Loss) from:
Investment securities 1,586
Foreign currency transactions 1
-------
1,587
-------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 2,886
Translation of assets and liabilities denominated in
foreign currencies 4
-------
2,890
-------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 4,477
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 4,358
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 5
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (119) $ (15)
Net realized gain (loss) from
investment securities and foreign
currency transactions 1,587 (225)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 2,890 (323)
------- -------
4,358 (563)
------- -------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
From net realized gains:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 19,491 3,359
Service Class 231 -
------- -------
19,722 3,359
------- -------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Cost of shares redeemed:
Initial Class (4,719) (209)
Service Class (18) -
------- -------
(4,737) (209)
------- -------
14,985 3,150
------- -------
Net increase (decrease) in net assets 19,343 2,587
------- -------
Net Assets:
Beginning of year 3,636 1,049
------- -------
End of year $22,979 $ 3,636
======= =======
Undistributed Net Investment Income
(Loss) $ - $ -
======= =======
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 2,264 477
Service Class 25 -
------ -------
2,289 477
------ -------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
------ -------
- -
------ -------
Shares redeemed:
Initial Class (560) (30)
Service Class (2) -
------ -------
(562) (30)
------ -------
Net increase (decrease) in shares
outstanding 1,727 447
====== =======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 6
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 6.65 $ (0.09) $ 3.55 $ 3.46
12/31/2002 10.45 (0.08) (3.72) (3.80)
12/31/2001 10.00 (0.04) 0.49 0.45
- --------------- ---------- --------- --------- --------- ---------
Service Class 12/31/2003 7.04 (0.08) 3.13 3.05
- --------------- ---------- --------- --------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ - $ - $ - $ 10.11
- - - 6.65
- - - 10.45
- --------------- --- --- --- ---------
Service Class - - - 10.09
- --------------- --- --- --- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 52.03% $ 22,745 1.40% 1.43% (1.07)% 150%
12/31/2002 (36.36) 3,636 1.40 6.65 (1.10) 356
12/31/2001 4.50 1,049 1.40 10.75 (1.16) 225
- --------------- ---------- ------ -------- ---- ----- ----- ---
Service Class 12/31/2003 43.32 234 1.65 1.69 (1.33) 150
- --------------- ---------- ------ -------- ---- ----- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-August 17, 2001
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 7
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. BlackRock Global Science & Technology Opportunities ("the Fund"), part
of ATSF, began operations on August 17, 2001. On May 1, 2003, the Fund changed
its name from BlackRock Global Science & Technology to BlackRock Global Science
& Technology Opportunities.
The Fund will merge into Great Companies Technology(SM) effective the close of
business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date, or in the
case of foreign securities as soon as the Fund is informed of the ex-dividend
date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 8
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.90% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.40% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 32 12/31/2004
Fiscal Year 2002 71 12/31/2005
Fiscal Year 2003 4 12/31/2006
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect
participation in the Deferred Compensation Plan for Directors of ATSF ("the
Plan"). Under the Plan, such Directors may defer payment of a percentage of
their total fees earned as a Fund Director. These deferred amounts may be
invested in any portfolio of IDEX Mutual Funds, an affiliate of the Fund. At
December 31, 2003, the value of invested plan amounts was $1. Invested plan
amounts and the total liability for deferred compensation to the Directors
under the Plan at December 31, 2003, are included in Net assets in the
accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 29,334
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 14,638
U.S. Government -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 9
BlackRock Global Science & Technology Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) 119
Undistributed net realized capital gains (loss) (119)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 1,201
=======
Undistributed Long-term Capital Gains $ -
=======
Capital Loss Carryforward $ -
=======
Post October Loss $ -
=======
Net Unrealized Appreciation (Depreciation) $ 2,655
=======
The capital loss carryforward utilized during the period ended December 31,
2003 was $266.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $21,229
=======
Unrealized Appreciation $ 2,918
Unrealized (Depreciation) (263)
-------
Net Unrealized Appreciation (Depreciation) $ 2,655
=======
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
BlackRock Global Science & Technology Opportunities
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of BlackRock Global Science &
Technology Opportunities (the "Fund") (one of the portfolios constituting
AEGON/Transamerica Series Fund, Inc.) at December 31, 2003, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 2003 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Global Science & Technology Opportunities 11
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After two years of bitter struggle, the equity markets surged back to life in
2003. Broadly speaking, accommodative monetary and fiscal policies spurred U.S.
economic growth, which in turn fostered improved corporate profits. At
year-end, the federal funds target rate stood at a historically low 1.0%, while
stimulus from the tax cuts continued to add momentum to the economy. Meanwhile,
the decrease in geopolitical tensions following the conclusion of major combat
operations in Iraq and the capture of Saddam Hussein significantly boosted
consumer sentiment. By the close of the fourth quarter, the gross domestic
product ("GDP") had grown at a strong 4.0% rate. As economic data generally
improved throughout the year, investors' risk appetite increased. Both the Dow
Jones Industrial Average and the Standard and Poor's 500 Composite Stock Index
posted significant gains, rising 28.28% and 28.67%, respectively, while the
technology-laden NASDAQ Composite Index soared 50.01%.
Small capitalization issues led the market's advance, with the small cap
Russell 2000 Index rising 47.25%. Mid-cap issues also posted strong gains, with
the Russell Midcap Index returning 40.06%. Large cap issues performed solidly
as well, but lagged on a relative basis, with the large cap Russell 1000 Index
gaining 29.89%. On a style-relative basis, large cap value slightly
outperformed large cap growth, as the Russell 1000 Value Index returned 30.03%,
versus a return of 29.75% for the Russell 1000 Growth Index.
On a sector basis, standout performers included information technology and
materials. As investors sought increased beta, technology shares rose in
tandem, while shares of materials producers benefited from strong demand in
China. Lagging sectors included traditionally defensive areas such as
healthcare and consumer staples.
PERFORMANCE
For the year ended December 31, 2003, the BlackRock Large Cap Value returned
23.76%. By comparison its benchmark, the Russell 1000 Value Index returned
30.03%.
STRATEGY REVIEW
At the end of February, BlackRock formally announced the addition of a
quantitative equity portfolio management team. This team, led by Fred Herrmann
and David Byrket, and supported by Andrew Jones, Tim Rezvan, and Guy
Lakonishok, assumed responsibility for BlackRock Large Cap Value on March 3rd.
With a focus on quantitative techniques, the new team uses stock selection to
drive active return while minimizing market timing and sector, capitalization,
and style biases. Using a multi-factor model designed for the value stock
universe, the team identifies stocks with improving earnings expectations that
sell at attractive relative valuations when compared to their sector peers. By
combining this information with sophisticated risk measurement tools and a
manual optimization process, the management team selects stocks and portfolio
weightings to maximize expected portfolio return per unit of risk.
Although the earnings expectation factors were predictive during March, the
valuation factors struggled during the month after a period of exceptional
strength. On a relative basis, the portfolio witnessed strong performance in the
finance, telecommunications, and healthcare sectors. Disappointing performance
in the utilities, industrial, and non-cyclical sectors offset this benefit.
For the second quarter, the model was not helpful in discriminating
outperforming stocks from underperforming stocks. A further break down of our
alpha revealed a continued deterioration in the earnings expectation factors'
power. This half of our model was significantly non-predictive, while the
valuation factors continued to rebound from their March weakness. Half of our
earnings expectation factors were negative for the quarter, with forecast
estimate dispersion and price momentum being significantly non-predictive.
Forecast earnings-to-price was the primary driver of predictability on the
valuation side. On a positive note, the discriminatory power of the model
improved throughout the quarter. From a sector relative perspective, the
underperformance was spread across most sectors. Eight of our thirteen sectors
underperformed, led down by technology, basic materials, and utilities. The
healthcare and consumer non-cyclical sectors performed well in the quarter,
offsetting some of the weaker sectors. Generalized stock selection drove our
underperformance in the technology sector. (In other words, it was a collection
of small, underweight index names that drove the poor performance in these
sectors.) Some specific positions that hurt our performance included
overweighting Ball Corporation, coupled with underweighting The Dow Chemical
Company and the independent power producers like Mirant Corporation.
For the third quarter, the model was not particularly helpful in discriminating
outperforming stocks from underperforming stocks. Still, the model's predictive
power improved every month over the course of the quarter, culminating in a
very predictive month of September. The earnings expectation factors' power
continued to struggle throughout most of the quarter. This half of our model
was significantly perverse in July and August. On a positive note, the earnings
expectation factors were quite strong in September, helping to make our
performance positive for the month. In particular, the revision down factor
turned positive in September, and the price momentum factor showed further
signs of strength. The valuation factors improved through the quarter, with the
forecast earnings-to-price and cash flow-to-price factors being the most
powerful. From a sector perspective, the portfolio's underperformance was led
by financials and industrials. A few sectors outperformed for the quarter,
lessening the impact of the weaker sectors. Outperformers included technology,
basic materials, and consumer cyclicals. Poor model performance in the banking
and general manufacturing industries hurt portfolio returns, while our
overweighting Jabil Circuit, Inc., International Business Machines Corporation,
Sears, Roebuck and Co., and Ball Corporation helped performance.
The model was essentially flat for the fourth quarter, providing little to no
help in discriminating outperforming stocks from under performing stocks. As a
group, valuation factors were predictive, but the negative power from the
earnings expectation side of the model neutralized the valuation strength.
Forecast earnings-to-price was the strongest factor for the period, and cash
flow-to-price, book-to-price, return on equity, and all of our earnings
expectation factors were flat or negative for the month. Generally, the fourth
quarter proved to be a difficult period for our value model.
Frederick W. Herrmann
David E. Byrket
Co-Portfolio Managers
BlackRock Advisors, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 1
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in BlackRock Large Cap Value
and its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 8/17/01 through 12/31/03
Russell 1000
Initial Class Value Index
8/17/01 $10,000 $10,000
9/30/01 9,120 9,137
12/31/01 9,650 9,810
3/31/02 9,590 10,212
6/30/02 8,100 9,342
9/30/02 6,668 7,588
12/31/02 7,359 8,288
3/31/03 6,928 7,884
6/30/03 8,010 9,246
9/30/03 8,093 9,437
12/31/03 9,107 10,776
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
BlackRock Large Cap Value 23.76% (3.86)% 8/17/01
Russell 1000 Value(1) 30.03% 3.20% 8/17/01
- --------------------------- ----- ----- -------
NOTES
(1) The Russell 1000 Value (Russell 1000 Value) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. Source: Standard & Poor's Micropal(R)(C)- Micropal,
Inc. 2003 - 1-800-596-5323 - http:// www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than one year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives and policies of
this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 2
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (98.6%)
Aerospace (2.3%)
Lockheed Martin Corporation 125 $ 6
Northrop Grumman Corporation 75 7
United Technologies Corporation 100 9
Amusement & Recreation Services (0.8%)
Disney (Walt) Company (The) 350 8
Apparel & Accessory Stores (0.7%)
Nordstrom, Inc. 200 7
Automotive (2.0%)
American Axle & Manufacturing
Holdings, Inc. (a) 175 7
General Motors Corporation 225 12
Automotive Dealers & Service Stations (0.5%)
AutoNation, Inc. (a) 250 5
Beverages (0.9%)
Coca-Cola Enterprises Inc. 225 5
Constellation Brands, Inc. (a) 125 4
Chemicals & Allied Products (2.8%)
Cytec Industries Inc. (a) 200 8
Dial Corporation (The) 175 5
RPM, Inc. 300 5
Sherwin-Williams Company (The) 250 9
Commercial Banks (19.1%)
Bank One Corporation 425 19
Citigroup Inc. 925 45
City National Corporation 100 6
First Tennessee National Corporation 175 8
Marshall & Ilsley Corporation 125 5
MBNA Corporation 200 5
Morgan Chase & Co. (J.P.) 625 23
National City Corporation 300 10
Sky Financial Group, Inc. 175 5
U.S. Bancorp 695 21
Wachovia Corporation 400 19
Wells Fargo & Company 275 16
Communication (1.1%)
Comcast Corporation-Class A (a) 211 7
Liberty Media Corporation-Class A (a) 300 4
Communications Equipment (0.9%)
Advanced Fibre Communications, Inc. (a) 200 4
L-3 Communications Holdings, Inc. (a) 100 5
Computer & Data Processing Services (0.9%)
GTECH Holdings Corporation 100 5
Unisys Corporation (a) 300 4
Shares Value
-------------------- --------------
Computer & Office Equipment (4.0%)
Hewlett-Packard Company 325 $ 7
International Business Machines
Corporation 250 23
Lexmark International Group, Inc. (a) 100 8
Construction (1.1%)
Centex Corporation 100 11
Department Stores (0.7%)
Federated Department Stores, Inc. 150 7
Electric Services (3.7%)
Constellation Energy Group, Inc. 275 11
Entergy Corporation 200 11
PPL Corporation 150 7
TXU Corp. 250 6
Electric, Gas & Sanitary Services (2.2%)
Exelon Corporation 200 13
NiSource Inc. 375 8
Electrical Goods (0.3%)
Arrow Electronics, Inc. (a) 150 3
Electronic & Other Electric Equipment (1.8%)
Cooper Industries, Inc.-Class A 100 6
Eaton Corporation 50 5
Energizer Holdings, Inc. (a) 150 6
Electronic Components & Accessories (0.5%)
Jabil Circuit, Inc. (a) 175 5
Fabricated Metal Products (0.7%)
Fortune Brands, Inc. 100 7
Food & Kindred Products (2.9%)
Altria Group, Inc. 325 18
Kellogg Company 175 7
Smucker (J.M.) Company (The) 75 3
Food Stores (0.7%)
Albertson's, Inc. 300 7
Holding & Other Investment Offices (1.9%)
General Growth Properties, Inc. 300 8
Vornado Realty Trust 175 10
Hotels & Other Lodging Places (0.5%)
Park Place Entertainment Corporation (a) 500 5
Industrial Machinery & Equipment (2.1%)
American Standard Companies Inc. (a) 75 8
Black & Decker Corporation (The) 75 4
Deere & Company 125 8
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 3
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ---------
Insurance (5.4%)
ACE Limited 120 $ 5
Allstate Corporation (The) 200 9
American International Group, Inc. 200 13
Fidelity National Financial, Inc. 156 6
Old Republic International Corp. 225 6
W.R. Berkley Corporation 150 5
WellPoint Health Networks Inc. (a) 75 7
Life Insurance (1.9%)
John Hancock Financial Services, Inc. 100 4
Protective Life Corporation 125 4
Prudential Financial, Inc. 245 10
Lumber & Wood Products (1.4%)
Georgia-Pacific Corporation 225 7
Louisiana-Pacific Corporation (a) 350 6
Mortgage Bankers & Brokers (0.5%)
Countrywide Credit Industries, Inc. 66 5
Motion Pictures (2.2%)
Fox Entertainment Group, Inc.-Class A (a) 250 7
Time Warner Inc. (a) 800 14
Oil & Gas Extraction (4.1%)
Chesapeake Energy Corporation 550 7
ConocoPhillips 250 17
Devon Energy Corporation 125 7
Occidental Petroleum Corporation 200 8
Paper & Allied Products (0.6%)
Kimberly-Clark Corporation 100 6
Personal Credit Institutions (0.5%)
Capital One Financial Corporation 75 5
Personal Services (1.3%)
Cendant Corporation (a) 525 12
Petroleum Refining (6.4%)
ChevronTexaco Corporation 200 18
Exxon Mobil Corporation 900 37
Marathon Oil Corporation 150 5
Pharmaceuticals (2.9%)
Bristol-Myers Squibb Co. 525 15
Watson Pharmaceuticals, Inc. (a) 150 7
Wyeth 150 6
Shares Value
------------ ---------
Primary Metal Industries (1.5%)
Alcoa Inc. 240 $ 9
Engelhard Corporation 175 5
Printing & Publishing (1.0%)
Belo (A.H.) Corporation-Class A 175 5
McGraw-Hill Companies, Inc. (The) 75 5
Railroads (0.8%)
Burlington Northern Santa Fe
Corporation 250 8
Real Estate (0.7%)
Rouse Company (The) 150 7
Restaurants (0.8%)
McDonald's Corporation 325 8
Savings Institutions (1.5%)
Washington Mutual, Inc. 350 14
Security & Commodity Brokers (3.2%)
Goldman Sachs Group, Inc. (The) 75 7
Lehman Brothers Holdings Inc. 100 8
Merrill Lynch & Co., Inc. 275 16
Telecommunications (5.7%)
AT&T Corp. 225 5
BellSouth Corporation 600 17
CenturyTel, Inc. 175 6
SBC Communications Inc. 225 6
Verizon Communications, Inc. 575 20
Trucking & Warehousing (0.4%)
J.B. Hunt Transport Services, Inc. (a) 150 4
U.S. Government Agencies (0.7%)
Freddie Mac 125 7
------
Total Common Stocks (cost: $791)
945
------
Total Investment Securities (cost: $791) $ 945
======
SUMMARY:
Investments, at value 98.6% $ 945
Other assets in excess of liabilities 1.4% 12
----- ------
Net assets 100.0% $ 957
===== ======
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 4
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $791) $ 945
Cash 12
Receivables:
Dividends 1
Other 1
------
959
------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 1
Other 1
------
2
------
Net Assets $ 957
======
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 1
Additional paid-in capital 1,058
Undistributed net investment income (loss) 9
Accumulated net realized gain (loss) from investment
securities (265)
Net unrealized appreciation (depreciation) on investment
securities 154
------
Net Assets $ 957
======
Shares Outstanding 106
Net Asset Value and Offering Price Per Share $ 9.07
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends $ 19
-----
Expenses:
Management and advisory fees 8
Transfer agent fees 2
Printing and shareholder reports 5
Custody fees 6
Administration fees 21
Auditing and accounting fees 10
-----
Total expenses 52
-----
Less:
Advisory fee waiver and expense reimbursement (40)
-----
Net expenses 12
-----
Net Investment Income (Loss) 7
-----
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities (41)
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 217
-----
Net Gain (Loss) on Investment Securities 176
-----
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 183
=====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 5
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 7 $ 3
Net realized gain (loss) from
investment securities (41) (192)
Net unrealized appreciation
(depreciation) on investment
securities 217 (60)
------- --------
183 (249)
------- --------
Distributions to Shareholders:
From net investment income (2) (1)
From net realized gains - -
------- ---------
(2) (1)
------- ----------
Capital Share Transactions:
Proceeds from shares sold 12 71
Dividends and distributions reinvested 2 1
Cost of shares redeemed (13) (58)
------- ---------
1 14
------- ---------
Net increase (decrease) in net assets 182 (236)
------- ---------
Net Assets:
Beginning of year 775 1,011
------- ---------
End of year $ 957 $ 775
======= =========
Undistributed Net Investment
Income (Loss) $ 9 $ 4
======= =========
December 31, December 31,
2003 2002
------------------ ------------------
Share Activity:
Shares issued 1 8
Shares issued-reinvested from distributions - -
Shares redeemed - (8)
------- --------
Net increase (decrease) in shares
outstanding 1 -
======= =======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 6
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ----------
12/31/2003 $ 7.35 $ 0.08 $ 1.66 $ 1.74 $ (0.02) $ - $ (0.02) $ 9.07
12/31/2002 9.65 0.02 (2.31) (2.29) (0.01) - (0.01) 7.35
12/31/2001 10.00 0.01 (0.36) (0.35) - - - 9.65
- --- ---------- --------- -------- -------- -------- --------- --- --------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 23.76% $ 957 1.30% 6.10% 0.96% 130%
12/31/2002 (23.74) 775 1.30 8.79 0.28 146
12/31/2001 (3.50) 1,011 1.30 8.63 0.31 31
- --- ---------- ------ ------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund was August 17, 2001.
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 7
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. BlackRock Large Cap Value ("the Fund"), part of ATSF, began operations
on August 17, 2001.
The Fund will merge into PBHG/NWQ Value Select effective as of the close of
business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Interest income, including accretion of discounts and
amortization of premiums, is recorded on the accrual basis commencing on the
settlement date. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.30% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 26 12/31/2004
Fiscal Year 2002 65 12/31/2005
Fiscal Year 2003 40 12/31/2006
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 8
BlackRock Large Cap Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Fund is authorized under the 12b-1 plan to pay fees up to the limit of
0.15%.
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred before April 30, 2004. Prior to AFSG seeking
reimbursement of future expenses, policy and contract owners will be notified in
advance.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect
participation in the Deferred Compensation Plan for Directors of ATSF ("the
Plan"). Under the Plan, such Directors may defer payment of a percentage of
their total fees earned as a Fund Director. These deferred amounts may be
invested in any portfolio of IDEX Mutual Funds, an affiliate of the Fund. At
December 31, 2003 there was no value of invested plan amounts. Invested plan
amounts and the total liability for deferred compensation to the Directors
under the Plan at December 31, 2003, are included in Net assets in the
accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 1,086
U.S. Government 7
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 1,048
U.S. Government 17
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 1
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 2
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 8
======
Undistributed Long-term Capital Gains $ -
======
Capital Loss Carryforward $ (262)
======
Post October Loss $ -
======
Net Unrealized Appreciation (Depreciation) $ 150
======
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 24 December 31, 2009
150 December 31, 2010
88 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 795
=====
Unrealized Appreciation $ 157
Unrealized (Depreciation) (7)
-----
Net Unrealized Appreciation (Depreciation) $ 150
=====
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 9
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
BlackRock Large Cap Value
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of BlackRock Large Cap Value (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Large Cap Value 10
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After two years of bitter struggle, the equity markets surged back to life in
2003. Broadly speaking, accommodative monetary and fiscal policies spurred U.S.
economic growth, which in turn fostered improved corporate profits. At
year-end, the federal funds target rate stood at a historically low 1.0%, while
stimulus from the tax cuts continued to add momentum to the economy. Meanwhile,
the decrease in geopolitical tensions following the conclusion of major combat
operations in Iraq and the capture of Saddam Hussein significantly boosted
consumer sentiment. By the close of the fourth quarter, gross domestic product
("GDP") had grown at a strong 4.0% rate. As economic data generally improved
throughout the year, investors' risk appetite increased. Both the Dow Jones
Industrial Average and the Standard and Poor's 500 Composite Stock Index posted
significant gains, rising 28.28% and 28.67%, respectively, while the
technology-laden NASDAQ Composite Index soared 50.01%.
Small capitalization issues led the market's advance, with the small cap
Russell 2000 Index rising 47.25%. Mid-cap issues also posted strong gains, with
the Russell Midcap Index returning 40.06%. Large cap issues performed solidly
as well, but lagged on a relative basis, with the large cap Russell 1000 Index
gaining 29.89%. On a style-relative basis, large cap value slightly
outperformed large cap growth, as the Russell 1000 Value Index returned 30.03%,
versus a return of 29.75% for the Russell 1000 Growth Index.
On a sector basis, standout performers included information technology ("IT")
and materials. As investors sought increased beta, technology shares rose in
tandem, while shares of materials producers benefited from strong demand in
China. Lagging sectors included traditionally defensive areas such as
healthcare and consumer staples.
PERFORMANCE
For the year ended December 31, 2003, BlackRock Mid Cap Growth returned 29.34%.
By comparison its benchmark, the Russell Midcap Growth Index ("Russell MCG")
returned 42.71%.
STRATEGY REVIEW
During the first quarter, stock selection had a positive impact on the
portfolio's performance versus its benchmark, most notably within the IT
sector. Holdings in the IT consulting and services industry added significantly
to performance. The portfolio also benefited from strong stock selection within
the healthcare sector. Holdings in the healthcare equipment & supplies industry
such as St. Jude Medical, Inc. ("St. Jude") and Gilead Sciences, Inc. guided
returns to the upside. One area of weakness occurred within the industrial
sector as the portfolio's commercial services and supplies holdings lagged
during the period. Specifically, DST Systems, Inc. and Robert Half
International Inc. declined considerably during the quarter.
During the second quarter, stock selection contributed negatively to the
portfolio's performance versus its benchmark. Stock selection within the IT
sector was the strongest contributor to performance for the period. In
particular, the portfolio's holdings in the IT services industry added
significantly to performance. Sector selection contributed negatively to
performance during the quarter. The portfolio's overweight in the energy and
healthcare sectors detracted significantly from performance relative to the
benchmark. During the quarter, we increased our positions in the financial and
IT sectors and decreased those in the health care sector. We also decreased our
telecommunications, materials, and consumer discretionary holdings, while
increasing our consumer staples and energy holdings. In general, our sector
allocation is a function of our bottom-up stock selection process, and is
therefore dependent on where we find attractive stocks within the universe.
The lag in the portfolio's performance during the third quarter was primarily
attributable to our overweight in the energy sector and our holdings in the
health care and IT sectors. Conversely, our security selection in the consumer
discretionary and industrials sectors were the main contributors to
performance. Our commercial services and supplies holdings were one of the more
notable contributors to performance for the quarter. Specifically, Career
Education Corporation and Fluor Corporation appreciated significantly during
the quarter and added to portfolio performance. Another area of the portfolio
that benefited from our strong stock selection was the consumer discretionary
sector. Our holdings in the specialty retail and multiline retail industries
were particularly strong during the quarter, as Staples, Inc. and Dollar
General Corporation appreciated strongly. Areas of weakness occurred in the
health care and IT sectors. Our health care providers and services holdings
lagged the index as AmerisourceBergen Corporation and Laboratory Corporation of
America Holdings ("Lab Corp.") declined significantly during the quarter. Our
IT services and software holdings underperformed the Russell Midcap Growth
primarily due to the performance of The BISYS Group, Inc.
During the fourth quarter, stock selection contributed positively to the
portfolio's performance versus its benchmark. Stock selection within the health
care sector was one of the strongest contributors to performance for the
quarter. In particular, the portfolio's holdings in the health care equipment
and supplies and health care providers and services industries added
significantly to performance. Lab Corp. and St. Jude appreciated strongly
during the quarter. Another area where stock selection was strong was within
the IT. Holdings in the IT services, semiconductors and semiconductor
equipment, and software industries were particularly strong during the quarter
as Cognizant Technology Solutions Corporation, National Semiconductor
Corporation, and Siebel Systems, Inc. appreciated. One area of portfolio
weakness occurred within the consumer staples sector. Despite positive stock
returns within the consumer staples sector for the quarter, our holdings within
the sector underperformed those within the Russell MCG.
Neil D. Wagner
Brian E. Stack
Co-Portfolio Managers
BlackRock Advisors, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 1
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
inception of 8/17/01 through 12/31/03
Russell MSG
Initial Class Index
8/17/01 10,000 10,000
9/30/01 8,670 8,305
12/31/01 10,280 10,553
3/31/02 10,140 10,366
6/30/02 8,630 8,473
9/30/02 7,190 7,018
12/31/02 7,430 7,661
3/31/03 7,400 7,660
6/30/03 8,440 9,096
9/30/03 8,630 9,747
12/31/03 9,610 10,933
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
Initial Class 29.34% (1.66)% 8/17/01
Russell MCG(1) 42.71% 3.83% 8/17/01
- --------------- ----- ----- -------
Service Class - 23.87% 5/1/03
- --------------- ----- ----- -------
NOTES
(1) The Russell Midcap Growth (Russell MCG) Index is an unmanaged index used as
a general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 2
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (97.7%)
Apparel & Accessory Stores (5.1%)
Abercrombie & Fitch Co.-Class A (a) 17,500 $ 432
Limited, Inc. (The) 29,030 523
Business Services (8.4%)
BISYS Group, Inc. (The) (a) 21,400 318
ChoicePoint Inc. (a) 9,600 366
Lamar Advertising Company (a) 9,800 366
Manpower Inc. 5,600 264
SEI Investments Company 8,200 250
Chemicals & Allied Products (1.0%)
Smith International, Inc. (a) 4,500 187
Communication (0.7%)
Cablevision Systems Corporation-Class A (a) 5,600 131
Communications Equipment (1.7%)
Harris Corporation 8,500 323
Computer & Data Processing Services (10.3%)
BEA Systems, Inc. (a) 15,600 192
Ceridian Corporation (a) 21,000 440
Cognizant Technology Solutions
Corporation (a) 3,800 173
DST Systems, Inc. (a) 4,900 205
Network Associates, Inc. (a) 38,000 572
Siebel Systems, Inc. (a) 25,600 355
Computer & Office Equipment (1.9%)
Storage Technology Corporation (a) 13,700 353
Construction (1.8%)
Fluor Corporation 8,400 333
Drug Stores & Proprietary Stores (1.8%)
Omnicare, Inc. 8,500 343
Educational Services (1.3%)
Career Education Corporation (a) 5,900 236
Electronic & Other Electric Equipment (2.2%)
Energizer Holdings, Inc. (a) 10,900 409
Electronic Components & Accessories (7.3%)
AMIS Holdings, Inc. (a) 2,100 38
Fairchild Semiconductor International,
Inc.-Class A (a) 12,500 312
Intersil Corporation-Class A 8,800 219
Jabil Circuit, Inc. (a) 11,500 325
National Semiconductor Corporation (a) 9,122 359
NVIDIA Corporation (a) 4,600 107
Food & Kindred Products (2.3%)
Dean Foods Company (a) 13,050 429
Shares Value
-------------------- --------------
Health Services (4.9%)
Laboratory Corporation of America
Holdings (a) 9,400 $ 347
Triad Hospitals, Inc. (a) 6,545 218
Universal Health Services, Inc.-Class B 6,500 349
Hotels & Other Lodging Places (1.2%)
Hilton Hotels Corporation 12,700 218
Industrial Machinery & Equipment (2.5%)
Brunswick Corporation 9,200 293
Novellus Systems, Inc. (a) 4,300 181
Instruments & Related Products (1.8%)
Alcon, Inc. 3,400 206
Teradyne, Inc. (a) 5,000 127
Insurance (1.4%)
Anthem, Inc. (a) 2,900 218
AXIS Capital Holdings Limited 1,200 35
Insurance Agents, Brokers & Service (2.3%)
Willis Group Holdings Limited 12,500 426
Manufacturing Industries (0.6%)
LeapFrog Enterprises, Inc. (a) 4,500 119
Medical Instruments & Supplies (8.0%)
Bard, (C.R.) Inc. 4,900 398
St. Jude Medical, Inc. (a) 6,600 405
Varian Medical Systems, Inc. (a) 6,500 449
Zimmer Holdings, Inc. (a) 3,400 239
Motion Pictures (0.6%)
Regal Entertainment Group-Class A 5,000 103
Oil & Gas Extraction (9.2%)
Apache Corporation 126 10
BJ Services Company (a) 6,600 237
ENSCO International Incorporated 5,800 158
GlobalSantaFe Corporation 42 1
Halliburton Company 9,500 247
Nabors Industries Ltd. (a) 4,167 173
Pioneer Natural Resources Company (a) 18,100 578
Pride International, Inc. (a) 6,400 119
Talisman Energy Inc. 3,600 204
Paper & Allied Products (2.4%)
Pactiv Corporation (a) 6,300 151
Smurfit-Stone Container Corporation (a) 15,600 290
Pharmaceuticals (7.7%)
Allergan, Inc. 3,200 246
AmerisourceBergen Corporation 6,200 348
Biovail Corporation (a) 10,900 234
Gilead Sciences, Inc. (a) 2,800 163
Shire Pharmaceuticals Group PLC-ADR (a) 15,454 449
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 3
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- ----------
Primary Metal Industries (1.4%)
Andrew Corporation (a) 23,300 $ 268
Restaurants (4.0%)
Brinker International, Inc. (a) 10,200 338
Outback Steakhouse, Inc. 4,000 177
Wendy's International, Inc. 6,000 235
Retail Trade (1.7%)
Staples, Inc. (a) 11,800 322
Variety Stores (2.2%)
Dollar General Corporation 20,000 420
-------
Total Common Stocks (cost: $15,431) 18,259
-------
Principal Value
------------- ------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS (3.7%)
Fannie Mae
0.80%, due 01/02/2004 $ 700 $ 700
--------
Total Short-Term U.S. Government Obligations (cost: $700) 700
--------
Total Investment Securities (cost: $16,131) $ 18,959
========
SUMMARY:
Investments, at value 101.4 % $ 18,959
Liabilities in excess of other assets (1.4)% (262)
-------- --------
Net assets 100.0 % $ 18,697
======== ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
DEFINITIONS:
ADR American Depositary Receipt
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 4
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $16,131) $ 18,959
Cash 39
Receivables:
Dividends 5
---------
19,003
---------
Liabilities:
Investment securities purchased 285
Accounts payable and accrued liabilities:
Management and advisory fees 15
Other 6
---------
306
---------
Net Assets $ 18,697
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 19
Additional paid-in capital 15,515
Undistributed net investment income (loss) 7
Undistributed net realized gain (loss) from investment
securities 328
Net unrealized appreciation (depreciation) on investment
securities 2,828
---------
Net Assets $ 18,697
=========
Shares Outstanding:
Initial Class 1,932
Service Class 13
Net Asset Value and Offering Price Per Share:
Initial Class $ 9.61
Service Class 9.60
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 6
Dividends 94
-------
100
-------
Expenses:
Management and advisory fees 106
Transfer agent fees 2
Printing and shareholder reports 12
Custody fees 19
Administration fees 20
Auditing and accounting fees 9
Recaptured expenses 1
-------
Total expenses 169
-------
Net Investment Income (Loss) (69)
-------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 797
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 2,849
-------
Net Gain (Loss) on Investments 3,646
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 3,577
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 5
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (69) $ (19)
Net realized gain (loss) from
investment securities 797 (339)
Net unrealized appreciation
(depreciation) on investment
securities 2,849 (109)
------- -------
3,577 (467)
------- -------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
From net realized gains:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 10,037 6,619
Service Class 120 -
------- -------
10,157 6,619
------- -------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Cost of shares redeemed:
Initial Class (2,022) (219)
Service Class (6) -
------- -------
(2,028) (219)
------- -------
8,129 6,400
------- -------
Net increase (decrease) in net assets 11,706 5,933
------- -------
Net Assets:
Beginning of year 6,991 1,058
------- -------
End of year $18,697 $ 6,991
======= =======
Undistributed Net Investment Income
(Loss) $ 7 $ -
======== =======
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 1,238 866
Service Class 14 -
------- -------
1,252 866
------- -------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Shares redeemed:
Initial Class (246) (29)
Service Class (1) -
------- -------
(247) (29)
------- -------
Net increase (decrease) in shares
outstanding 1,005 837
======= =======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 6
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.43 $ (0.04) $ 2.22 $ 2.18
12/31/2002 10.28 (0.06) (2.79) (2.85)
12/31/2001 10.00 (0.03) 0.31 0.28
- --------------- ---------- ------- --------- -------- --------
Service Class 12/31/2003 7.75 (0.05) 1.90 1.85
- --------------- ---------- ------- --------- -------- --------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ - $ - $ - $ 9.61
- - - 7.43
- - - 10.28
- --------------- --- --- --- -------
Service Class - - - 9.60
- --------------- --- --- --- -------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 29.34% $18,570 1.30% 1.30% (0.53)% 102%
12/31/2002 (27.72) 6,991 1.30 4.05 (0.80) 189
12/31/2001 2.80 1,058 1.30 9.52 (0.78) 148
- --------------- ---------- ------ ------- ---- ---- ----- ---
Service Class 12/31/2003 23.87 127 1.55 1.55 (0.81) 102
- --------------- ---------- ------ ------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-August 17, 2001
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.01%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 7
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. BlackRock Mid Cap Growth ("the Fund"), part of ATSF, began operations
on August 17, 2001.
The Fund will merge into Transamerica Equity effective as of the close of
business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date, or in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.30% Expense Limit
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 8
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Increase in
Total Expenses
Expense Recovered to Average
by Advisor Net Assets
- ------------------- ---------------
$ 1 -
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 29 12/31/2004
Fiscal Year 2002 64 12/31/2005
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $1. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 21,131
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 12,758
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) 76
Undistributed net realized capital gains (loss) (76)
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 9
BlackRock Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 352
=======
Undistributed Long-term Capital Gains $ 47
=======
Capital Loss Carryforward $ -
=======
Post October Loss $ -
=======
Net Unrealized Appreciation (Depreciation) $ 2,765
=======
The capital loss carryforward utilized during the period ended December 31,
2003 was $330.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $16,194
=======
Unrealized Appreciation $ 3,099
Unrealized (Depreciation) (334)
-------
Net Unrealized Appreciation (Depreciation) $ 2,765
=======
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
BlackRock Mid Cap Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of BlackRock Mid Cap Growth (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
BlackRock Mid Cap Growth 11
Capital Guardian Global
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After a slow start, global equity markets finished the year with not only almost
every sector group posting double-digit gains, but every industry and country
ending the year in the black in U.S. dollar terms. The U.S. dollar weakened
substantially against the euro and the Australian dollar and to a lesser extent
against the Yen and other major currencies. Spot prices for industrial
commodities and precious metals surged and crude oil prices moved higher.
The U.S. economy grew much faster than anticipated, productivity increased and
an improvement in employment data finally began to materialize. The year started
off on an uneven footing with political events overshadowing economic and
corporate fundamentals. Emotions ran high among investors as stocks experienced
substantial volatility, rising and falling on the ebb and flow of news about
Iraq. High crude oil prices and terrorism concerns also helped restrain the U.S.
stock market early in 2003. Stocks began to climb in Europe just prior to the
end of major fighting in Iraq. An improvement in first-quarter earnings paved
the way for a broad-based rally that lasted the rest of the year. The best
returns in 2003 came from depressed industries such as technology and from
stocks of low-quality companies whose prospects dramatically improved as their
balance sheets recovered.
Better global economic growth helped the European economy improve, although
domestic demand in much of Europe remained problematic. Positive economic
sentiment drove strong returns in a variety of cyclicals, though consumer
staples stocks had less positive returns.
The Japanese economy showed signs of firming, based largely on export growth
and capital investment following the rebound in corporate profits. The
economies of Hong Kong and Singapore also improved as the Pacific region
continued to benefit from strong Chinese demand. Japanese bank and insurance
stocks performed well, cyclical shares rose smartly, though technology stocks
failed to extend gains made earlier in the year.
PERFORMANCE
For the year ended December 31, 2003, Capital Guardian Global returned 37.60%.
By comparison its benchmark, the Morgan Stanley Capital International World
Index returned 33.76%.
STRATEGY REVIEW
The portfolio benefited in 2003 from strong stock selection and an overweight
in information technology ("IT"). While many of these companies were challenged
in 2002, they benefited from the mild improvement in corporate spending this
year and from more positive commentary coming from market leaders. Within this
group, semiconductor-related and communications equipment companies had the
largest gains. Within consumer staples, an underweight position and good stock
selection were positive contributors during the year, as good results for
tobacco far outweighed earnings disappointments in other areas of the sector.
Overweight and stock selections were also beneficial in consumer discretionary
where the portfolio's media and retail names did well. The biggest detractor
for the year was an underweight and stock selection in financials. Primarily
positions in U.S. consumer finance, Japanese capital markets and real estate,
and European insurance and reinsurance companies that were beaten down earlier
in the year.
At the end of the year, the portfolio was overweight in IT, health care and
telecommunications service and underweight in financials and utilities. Looking
at the portfolio from a country perspective, it was underweight in the United
States, market weight in Japan and overweight in Europe.
Capital Guardian Trust Company
Portfolio Manager
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 1
Capital Guardian Global
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 2/3/98 through 12/31/03
MSCI Int'l
Initial Class World Index
2/3/98 $10,000 $10,000
3/31/98 11,140 11,131
6/30/98 11,050 11,367
9/30/98 9,070 10,014
12/31/98 10,660 12,139
3/31/99 10,710 12,583
6/30/99 12,390 13,194
9/30/99 12,030 13,010
12/31/99 15,760 15,215
3/31/00 16,630 15,382
6/30/00 15,066 14,848
9/30/00 14,370 14,113
12/31/00 13,331 13,250
3/31/01 12,159 11,557
6/30/01 12,650 11,878
9/30/01 10,344 10,179
12/31/01 11,949 11,061
3/31/02 12,074 11,108
6/30/02 10,740 10,109
9/30/02 8,587 8,259
12/31/02 9,617 8,899
3/31/03 9,074 8,459
6/30/03 10,818 9,918
9/30/03 11,542 10,408
12/31/03 13,233 11,903
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------ ----------- ----------
Initial Class 37.60% 4.42 % 4.86% 2/3/98
MSCIW(1) 33.76% (0.39)% 2.99% 2/3/98
- ------ ----- ----- ----- ------
Service Class - - 33.11% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Morgan Stanley Capital International World (MSCIW) Index is an
unmanaged index used as a general measure of market performance.
Calculations assume dividends and capital gains are reinvested and do not
include any managerial expenses. From inception calculation is based on
life of initial class shares. Source: Standard & Poor's Micropal(R)(C)-
Micropal, Inc. 2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in global securities involve risks relating to political, social
and economic developments abroad, foreign currency contracts for hedging, as
well as risks resulting from the differences between the regulations to which
U.S. and foreign issuer markets are subject.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Capital
Guardian Global Portfolio, of the Endeavor Series Trust. Capital Guardian Trust
Company has been the portfolio's sub-advisor since October 9, 2000. Prior to
that a different firm managed the portfolio and the performance set forth above
prior to October 9, 2000 is attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 2
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
CONVERTIBLE BONDS (0.7%)
Cayman Islands (0.3%)
SMFG Finance Ltd.-144A
2.25%, due 07/11/2005 $ 51,000 $ 891
United States (0.4%)
Amazon.com, Inc.
4.75%, due 02/01/2009 672 680
6.88%, due 02/16/2010 265 332
---------
Total Convertible Bonds (cost: $1,078) 1,903
---------
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.6%)
Switzerland (0.4%)
Compagnie Financiere Richemont AG-Units 42,904 $ 1,030
United States (0.2%)
Chubb Corporation 20,200 582
---------
Total Convertible Preferred Stocks (cost: $1,434) 1,612
---------
PREFERRED STOCKS (0.3%)
Australia (0.1%)
News Corporation Limited (The)-ADR 5,625 170
Brazil (0.1%)
Companhia Vale do Rio Doce-ADR 4,000 206
Telesp Celular SA 80 (d)
Germany (0.1%)
Fresenius Medical Care AG 10,900 549
---------
Total Preferred Stocks (cost: $711) 925
---------
COMMON STOCKS (92.9%)
Australia (1.6%)
Australia and New Zealand Banking
Group Limited 35,454 472
Coca-Cola Amatil Limited 121,500 570
Foster's Group Limited 137,700 467
News Corporation Limited (The) 50,817 459
Publishing & Broadcasting Limited 59,700 563
Qantas Airways Limited 241,936 600
Wesfarmers Ltd. 17,100 341
Westpac Banking Corporation 29,500 355
Woolworths Limited 58,100 516
Austria (0.4%)
Erste Bank der oesterreichischen
Sparkassen AG 4,400 544
Telekom Austria AG (a) 42,001 519
Bermuda (0.8%)
Ingersoll-Rand Company-Class A 9,500 645
PartnerRe Ltd. 10,100 586
XL Capital Ltd.-Class A 11,400 884
Shares Value
-------------------- ---------------
Brazil (0.1%)
Companhia Vale do Rio Doce-ADR 3,100 $ 181
Canada (3.5%)
Abitibi-Consolidated Inc. (b) 129,600 1,040
Alcan Inc. (a) 16,400 769
BCE Inc. (b) 29,900 669
Bombardier Inc.-Class B 471,300 1,995
Four Seasons Hotels Inc. (b) 10,500 537
Great-West Lifeco Inc. 12,400 437
Inco Limited (a) 19,000 760
Investors Group Inc. 12,000 288
Manulife Financial Corporation 13,400 434
Nexen Inc. 12,500 454
Suncor Energy Inc. 21,200 533
TELUS Corporation 29,300 549
Thomson Corporation (The) (a) 32,800 1,195
Denmark (0.3%)
H. Lundbeck A/S 4,600 76
Novo Nordisk A/S-Class B 21,000 856
Finland (0.5%)
Nokia Oyj 63,420 1,096
Nokia Oyj-ADR 8,600 146
France (6.1%)
Air Liquide 5,000 883
BNP Paribas SA 29,100 1,832
Bouygues SA 28,400 993
Carrefour SA 14,700 807
Essilor International SA 18,000 931
France Telecom (a) 47,800 1,366
Groupe Danone SA 3,700 604
L'Oreal SA 6,700 549
Renault SA 18,600 1,283
Sanofi-Synthelabo 72,200 5,435
Schneider Electric SA 7,200 471
Vivendi Universal (a) 58,600 1,424
Germany (2.7%)
Allianz AG-Registered Shares 8,500 1,073
Bayerische Motoren Werke AG (BMW) 11,500 536
DaimlerChrysler AG-Registered Shares 24,800 1,160
Deutsche Bank AG 6,800 565
Deutsche Borse AG 4,577 251
Infineon Technologies AG (a) 29,900 418
Muenchener Rueckversicherungs-
Gesellschaft AG 8,228 1,005
SAP AG 1,600 270
SAP AG-ADR 24,000 997
Siemens AG-Registered Shares (b) 13,000 1,046
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 3
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Hong Kong (1.1%)
Hang Lung Properties Limited 472,000 $ 605
Hang Seng Bank Limited 37,000 486
Hutchison Whampoa Limited 48,000 354
Johnson Electric Holdings Limited 86,000 110
Li & Fung Limited 363,000 622
Sun Hung Kai Properties Limited 113,000 935
Ireland (0.5%)
CRH PLC (GBP) 5,500 113
CRH PLC (IRE) 24,000 493
RyanAir Holdings PLC-ADR (a)(b) 13,800 699
Japan (9.5%)
AEON Co., Ltd. 45,000 1,507
Canon Inc. 14,000 652
Enplas Corporation 13,000 409
FANUC LTD 8,100 485
Fujitsu Limited (a) 98,000 578
Hirose Electric Co., Ltd. 4,200 482
Honda Motor Co., Ltd. 5,100 226
Hoya Corporation 7,500 688
Japan Telecom Co. Ltd. 86 230
Kansai Electric Power Company,
Incorporated (The) 24,300 426
Millea Holdings, Inc. 61 796
Mitsubishi Corporation 62,000 657
Mitsubishi Estate Company, Limited 65,000 616
Mitsubishi Heavy Industries, Ltd. 177,000 492
Mitsubishi Motors Corporation (a)(b) 104,000 212
Mitsui Sumitomo Insurance Co., Ltd. 84,000 689
NEC Corporation 177,000 1,302
NEC Electronics Corporation (a) 400 29
Nidec Corporation (b) 5,400 512
Nikko Cordial Corporation 59,000 329
Nikon Corporation (a) 24,000 362
Nintendo Co., Ltd. 6,400 597
Nippon Steel Corporation 227,000 487
Nissan Motor Co., Ltd. (b) 101,000 1,153
Nissin Food Products Co., Ltd. 32,600 812
Nitto Denko Corporation 11,500 611
NTT DoCoMo, Inc. 111 252
OBIC Co., Ltd. 2,200 442
ORIX Corporation 6,400 529
Ricoh Company, Ltd. 26,000 513
Rohm Company, Ltd. 3,500 410
Sekisui House, Ltd. 15,000 155
Shimamura Co., Ltd. 7,600 516
Shin-Etsu Chemical Co., Ltd. 9,400 384
Shionogi & Co., Ltd. 28,000 521
SMC Corporation 3,700 460
Sony Corporation 5,700 197
Sumitomo Chemical Company, Limited 119,000 491
Shares Value
-------------------- ---------------
Japan (continued)
Suzuki Motor Corporation 68,000 $ 1,006
Taiyo Yuden Co., Ltd. 30,000 392
Tokyo Electron Limited 18,700 1,420
Toray Industries, Inc. 58,000 242
Toyota Motor Corporation 23,000 777
Uni-Charm Corporation 7,000 344
Yahoo Japan Corporation (a)(b) 115 1,544
Yokogawa Electric Corporation 20,000 289
Mexico (0.2%)
America Movil, SA de CV-Series L-ADR 8,400 230
America Telecom, SA de CV-ADR (a) 101,300 262
Netherlands (5.1%)
ABN AMRO Holding NV 47,933 1,121
ASM Lithography Holding NV (a) 80,900 1,604
Heineken Holding NV-Class A 16,000 547
Heineken NV 40,150 1,528
ING Groep NV 16,215 378
Koninklijke KPN NV (a) 54,000 417
Koninklijke Philips Electronics NV 11,800 344
Koninklijke Philips Electronics NV-NY
Registered Shares 2,100 61
Royal Dutch Petroleum Company 68,700 3,621
Royal Dutch Petroleum Company-NY
Registered Shares 37,200 1,949
Royal Numico NV-CVA (a) 23,400 647
Unilever NV-CVA 14,500 948
Vedior NV-CVA 42,000 657
Norway (1.1%)
Norsk Hydro ASA 28,400 1,749
Norske Skogindustrier ASA 22,200 423
Statoil ASA 76,700 860
Panama (0.2%)
Carnival Corporation 16,300 648
Singapore (0.4%)
Singapore Telecommunications Limited 313,600 362
United Overseas Bank Limited 66,000 513
Venture Manufacturing (Singapore) Ltd. 23,000 271
South Africa (0.4%)
Sasol Limited 73,000 1,043
South Korea (0.2%)
Samsung Electronics Co.,
Ltd.-GDR-144A (LUX) (a)(b) 2,250 423
Samsung Electronics Co.,
Ltd.-GDR-144A (USD) 580 109
Spain (1.2%)
Banco Bilbao Vizcaya Argentaria, SA (b) 65,100 899
Inditex, SA 46,100 936
Repsol-YPF, SA 28,500 556
Telefonica SA 52,088 765
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 4
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Sweden (0.8%)
Assa Abloy AB-Class B Free 58,200 $ 692
ForeningsSparbanken AB 72,000 1,416
Switzerland (3.7%)
Chocoladefabriken Lindt & Sprungli AG 620 516
Holcim Ltd. 25,429 1,184
Nestle SA-Registered Shares 4,423 1,105
Nobel Biocare Holding AG 2,811 285
Novartis AG 65,380 2,967
Swatch Group AG (The)-Class B 5,100 612
Swiss Reinsurance Company-Registered
Shares 14,768 997
Swisscom AG-Registered Shares 5,101 1,683
UBS AG-Registered Shares 9,300 637
Taiwan (0.3%)
Taiwan Semiconductor Manufacturing
Company Ltd.-ADR (a) 88,610 907
United Kingdom (10.8%)
Amersham PLC 56,500 774
ARM Holdings PLC (a) 33,000 76
AstraZeneca PLC 132,200 6,440
AstraZeneca PLC-ADR (b) 54,500 2,637
BAE Systems PLC 19,400 58
Barclays PLC 93,500 834
BG Group PLC 234,600 1,204
BHP Billiton PLC (a) 239,047 2,088
British Sky Broadcasting Group PLC (a) 29,500 371
Corus Group PLC (a) 585,933 315
Corus Group PLC (a)(d) 413,600 -
Diageo PLC 51,000 671
HBOS PLC 42,800 554
HSBC Holdings PLC (a) 90,074 1,415
National Grid Group PLC (The) 36,600 262
Pearson PLC 97,100 1,081
Prudential PLC 39,300 332
Reckitt Benckiser PLC 22,100 500
Reed International PLC 68,400 572
Royal Bank of Scotland Group PLC (The) 58,600 1,726
Smiths Group PLC 55,100 652
Standard Chartered PLC (a) 31,600 522
Unilever PLC 68,500 638
Vodafone Group PLC 2,185,966 5,419
Wolseley PLC 38,100 539
United States (41.4%)
Advanced Micro Devices, Inc. (a) 41,600 620
AES Corporation (The) (a) 56,000 529
Agilent Technologies, Inc. (a) 51,700 1,512
Allergan, Inc. (b) 38,000 2,918
Altera Corporation (a)(b) 54,000 1,226
Altria Group, Inc. 20,600 1,121
Shares Value
-------------------- ---------------
United States (continued)
Amazon.com, Inc. (a)(b) 10,700 $ 563
American International Group, Inc. 12,550 832
American Standard Companies Inc. (a) 12,100 1,218
AmeriCredit Corp. (a)(b) 10,600 169
Amgen Inc. (a) 45,500 2,811
Anheuser-Busch Companies, Inc. 16,800 885
Applera Corporation-Applied Biosystems
Group 45,000 932
Applied Materials, Inc. (a) 151,259 3,396
Applied Micro Circuits Corporation (a) 71,900 430
AT&T Corp. (b) 71,900 1,460
Automatic Data Processing, Inc. 45,600 1,806
Avon Products, Inc. 5,500 371
Baker Hughes Incorporated 36,500 1,174
Bank One Corporation 25,900 1,181
Berkshire Hathaway Inc.-Class A (a) 28 2,359
Boise Cascade Corporation 4,500 148
Cablevision Systems Corporation-Class A (a)(b) 68,552 1,603
CheckFree Holdings Corporation (a) 17,400 481
ChevronTexaco Corporation 13,700 1,184
Cisco Systems, Inc. (a) 141,000 3,425
Citigroup Inc. 21,100 1,024
Comcast Corporation-Class A (a) 11,900 391
Costco Wholesale Corporation (a) 14,300 532
Cox Communications, Inc.-Class A (a) 20,300 699
Del Monte Foods Company (a) 54,800 570
Disney (Walt) Company (The) 24,600 574
Duke Energy Corporation 52,400 1,072
eBay Inc. (a) 18,200 1,176
Emerson Electric Co. 9,400 609
Exxon Mobil Corporation 53,300 2,185
Fannie Mae 27,600 2,072
FleetBoston Financial Corporation 39,600 1,729
Fluor Corporation 30,200 1,197
Forest Laboratories, Inc. (a) 64,100 3,961
Freddie Mac 21,400 1,248
General Electric Company 47,900 1,484
General Motors Corporation 10,200 545
Golden West Financial Corporation 21,800 2,250
Goldman Sachs Group, Inc. (The) 3,000 296
Heinz (H.J.) Company 7,000 255
Hughes Electronics Corporation (a) 50,298 832
Illinois Tool Works Inc. (b) 4,400 369
Intel Corporation 30,900 995
InterActiveCorp (a)(b) 45,200 1,534
International Business Machines
Corporation 7,200 667
JDS Uniphase Corporation (a) 60,600 221
Kinder Morgan, Inc. 8,000 473
KLA -Tencor Corporation (a)(b) 53,800 3,156
Kraft Foods, Inc.-Class A (b) 15,000 483
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 5
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------- ------------
United States (continued)
Lauder (Estee) Companies Inc. (The)-Class A 8,800 $ 345
Lilly (Eli) and Company 22,000 1,547
Lincare Holdings Inc. (a) 20,900 628
Linear Technology Corporation 12,300 517
Lowe's Companies, Inc. 33,600 1,861
Medtronic, Inc. 18,500 899
Microsoft Corporation 49,400 1,360
Monster Worldwide, Inc. (a)(b) 15,800 347
Morgan Chase & Co. (J.P.) 28,800 1,058
Navistar International Corporation (a)(b) 18,000 862
Northrop Grumman Corporation (b) 9,200 880
Novellus Systems, Inc. (a) 16,400 690
PacifiCare Health Systems, Inc. (a)(b) 8,000 541
PeopleSoft, Inc. (a) 67,200 1,532
Pepsi Bottling Group, Inc. (The) 38,300 926
PepsiCo, Inc. 14,100 657
Pfizer Inc. 91,100 3,219
PMC-Sierra, Inc. (a)(b) 45,700 921
PMI Group, Inc. (The) 13,900 517
Polycom, Inc. (a) 24,200 472
QUALCOMM Incorporated 63,100 3,403
Raytheon Company 15,400 463
Schlumberger Limited 31,000 1,696
SLM Corporation 39,300 1,481
Sprint Corporation (FON Group) 100,000 1,642
Sprint Corporation (PCS Group) (a)(b) 311,500 1,751
Starwood Hotels & Resorts Worldwide, Inc. 20,400 734
State Street Corporation 22,000 1,146
Sun Microsystems, Inc. (a) 74,900 336
Teradyne, Inc. (a) 55,700 1,418
Time Warner Inc. (a) 172,150 3,096
Thomson Corporation (The) 24,000 870
United Technologies Corporation 15,200 1,441
Unocal Corporation 44,500 1,639
Verizon Communications, Inc. 15,000 526
Washington Mutual, Inc. 48,400 1,942
Weatherford International Ltd. (a) 12,800 461
Wells Fargo & Company 23,900 1,407
Xilinx, Inc. (a) 17,700 686
---------
Total Common Stocks (cost: $197,061) 253,497
---------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (9.3%)
Debt (7.4%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 120 $ 120
Fleet National Bank
1.00%, due 01/21/2004 449 449
National Bank of Commerce
1.19%, due 04/21/2004 374 374
Principal Value
--------------------- ---------------
Commercial Paper (2.0%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 225 $ 225
Delaware Funding Corporation
1.08%, due 01/07/2004 149 149
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 225 225
1.09%, due 01/13/2004 150 150
1.08%, due 02/05/2004 299 299
General Electric Capital Corporation
1.09%, due 01/08/2004 373 373
1.09%, due 01/09/2004 225 225
1.08%, due 01/16/2004 298 298
Govco Incorporated-144A
1.07%, due 02/05/2004 374 374
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 374 374
1.09%, due 02/06/2004 374 374
1.10%, due 02/09/2004 218 218
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 374 374
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 225 225
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 434 434
1.08%, due 02/17/2004 747 747
Sheffield Receivables-144A
1.09%, due 01/21/2004 150 150
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 748 748
Credit Agricole Indosuez
0.98%, due 01/02/2004 30 30
1.08%, due 01/06/2004 284 284
Euro Dollar Terms (1.8%)
Bank of Montreal
1.06%, due 01/15/2004 146 146
1.06%, due 02/17/2004 299 299
Bank of Scotland
1.06%, due 04/02/2004 225 225
Citigroup Inc.
1.10%, due 01/22/2004 225 225
1.09%, due 02/06/2004 299 299
Credit Agricole Indosuez
1.08%, due 01/28/2004 150 150
Den Danske Bank
1.08%, due 01/20/2004 748 748
1.02%, due 01/30/2004 374 374
Royal Bank of Canada
1.05%, due 02/27/2004 749 749
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 6
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 449 $ 449
1.08%, due 01/15/2004 150 150
1.08%, due 01/20/2004 75 75
Svenska Handelsbanken AB
1.09%, due 01/15/2004 75 75
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 449 449
Wells Fargo & Company
1.04%, due 01/30/2004 599 599
Master Notes (0.5%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 299 299
1.14%, due 09/08/2004 449 449
Morgan Stanley
1.05%, due 06/21/2004 719 719
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 749 749
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 225 225
Repurchase Agreements (2.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated12/31/2003
to be repurchased at $1,751 on 01/02/2004 1,751 1,751
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,379 on 01/02/2004 2,379 2,379
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,421 on 01/02/2994 1,421 1,421
Shares Value
--------------- ------------
Investment Companies (1.9%)
Money Market Funds (1.9%)
American AAdvantage Select Fund
1-day yield of 1.00% 367,166 $ 367
Money Market Funds (continued)
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 896,463 $ 896
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 3,898,118 3,898
---------
Total Security Lending Collateral (cost: $25,384) 25,384
---------
Total Investment Securities (cost: $225,668) $283,321
=========
SUMMARY:
Investments, at value 103.8 % $283,321
Liabilities in excess of other assets (3.8)% (10,499)
--------- ---------
Net assets 100.0 % $272,822
========= =========
Percentage of
Net Assets Value
-------------- ------------
INVESTMENTS BY INDUSTRY:
Pharmaceuticals 12.5 % $ 34,034
Commercial Banks 8.3 % 22,327
Telecommunications 6.7 % 18,102
Insurance 4.0 % 10,861
Industrial Machinery & Equipment 3.9 % 10,634
Petroleum Refining 3.5 % 9,472
Instruments & Related Products 3.5 % 9,432
Electronic Components & Accessories 3.3 % 9,104
Oil & Gas Extraction 3.1 % 8,458
Computer & Office Equipment 3.1 % 8,457
Computer & Data Processing Services 2.9 % 8,027
Automotive 2.8 % 7,760
Food & Kindred Products 2.6 % 7,052
Electronic & Other Electric Equipment 2.3 % 6,321
Business Services 1.9 % 5,255
Beverages 1.9 % 5,237
Motion Pictures 1.9 % 5,150
Communications Equipment 1.7 % 4,645
Chemicals & Allied Products 1.6 % 4,478
Aerospace 1.6 % 4,374
Savings Institutions 1.5 % 4,192
Communication 1.3 % 3,525
U.S. Government Agencies 1.2 % 3,320
Metal Mining 1.2 % 3,235
Retail Trade 1.1 % 3,082
Medical Instruments & Supplies 1.1 % 2,889
Construction 0.9 % 2,345
Electric Services 0.8 % 2,289
Printing & Publishing 0.8 % 2,216
Real Estate 0.8 % 2,156
Lumber & Other Building Materials 0.7 % 1,861
Wholesale Trade Durable Goods 0.6 % 1,687
Gas Production & Distribution 0.6 % 1,677
Life Insurance 0.6 % 1,581
Primary Metal Industries 0.6 % 1,571
Transportation & Public Utilities 0.6 % 1,534
Personal Credit Institutions 0.5 % 1,481
Paper & Allied Products 0.5 % 1,463
Apparel & Accessory Stores 0.5 % 1,452
Security & Commodity Brokers 0.5 % 1,333
Food Stores 0.5 % 1,323
Air Transportation 0.5 % 1,299
Hotels & Other Lodging Places 0.5 % 1,271
Stone, Clay & Glass Products 0.4 % 1,184
Health Services 0.4 % 1,177
Lumber & Construction Materials 0.4 % 1,145
Manufacturing Industries 0.4 % 1,033
Beer, Wine & Distilled Beverages 0.4 % 1,014
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 7
Capital Guardian Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Percentage of
Net Assets Value
-------------- ------------
INVESTMENTS BY INDUSTRY (continued):
Machinery, Equipment & Supplies 0.3 % $ 931
Water Transportation 0.2 % 648
Transportation Equipment 0.2 % 622
Amusement & Recreation Services 0.2 % 574
Variety Stores 0.2 % 532
Radio & Television Broadcasting 0.1 % 371
Holding & Other Investment Offices 0.1 % 354
Textile Mill Products 0.1 % 242
Paper & Paper Products 0.1 % 148
----- ---------
Investments, at market value 94.5 % 257,937
Short-term investments 9.3 % 25,384
Other assets in excess of liabilities (3.8)% (10,499)
----- ---------
Net assets 100.0 % $ 272,822
====== =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- ---------------------------------------------------------------------------
Amount in
U.S. Dollars Net Unrealized
Bought Settlement Bought Appreciation
Currency (Sold) Date (Sold) (Depreciation)
- ----------------- ------------- ------------ -------------- ---------------
Canadian Dollar 156 01/05/2004 $ 121 $ (1)
Canadian Dollar 1,571 04/27/2004 1,199 11
Danish Krone (30) 01/02/2004 (5) --
Eruo Dollar 282 01/02/2004 354 2
Euro Dollar (5) 01/02/2004 (7) --
Euro Dollar 206 01/05/2004 261 (1)
Euro Dollar (5) 01/05/2004 (7) --
Euro Dollar 185 03/23/2004 229 4
Euro Dollar (1,016) 04/27/2004 (1,199) (79)
Japanese Yen 1,594 01/05/2004 15 --
Japanese Yen 1,075 01/06/2004 10 --
Japanese Yen (64,852) 03/04/2004 (599) (7)
Swedish Krona 493 01/07/2004 69 --
Swiss Franc 134 01/05/2004 108 --
Swiss Franc 7 01/06/2004 6 --
Swiss Franc 1,005 01/30/2004 715 98
Swiss Franc (1,005) 01/30/2004 (746) (67)
Swiss Franc (2,746) 05/12/2004 (2,018) (209)
--------- --------
$(1,494) $ (249)
========= ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$24,322.
(c) Cash collateral for the Repurchase Agreements, valued at $5,665, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) Value is less than $1.
DEFINITIONS:
ADR American Depositary Receipt
CVA Certificaaten Von Wandelen (share certificates)
GDR Global Depository Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $1,423 or 0.52% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 8
Capital Guardian Global
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $225,668)
(including $24,322 of securities loaned) $283,321
Cash 17,115
Foreign cash (cost: $45) 46
Receivables:
Investment securities sold 19
Interest 41
Dividends 220
Dividend reclaims receivable 37
Unrealized appreciation on forward foreign
currency contracts 115
Other 26
---------
300,940
---------
Liabilities:
Investment securities purchased 2,103
Accounts payable and accrued liabilities:
Management and advisory fees 235
Distribution fees 1
Payable for collateral for securities on loan 25,384
Unrealized depreciation on forward foreign
currency contracts 364
Other 31
---------
28,118
---------
Net Assets $272,822
=========
Net Assets Consist of:
Capital stock 50,000 shares authorized ($.01 par value) $ 234
Additional paid-in capital 221,247
Undistributed net investment income (loss) 1,227
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (7,299)
Net unrealized appreciation (depreciation) on:
Investment securities 57,653
Translation of assets and liabilities denominated in
foreign currencies (240)
---------
Net Assets $272,822
=========
Shares Outstanding:
Initial Class 23,295
Service Class 104
Net Asset Value and Offering Price Per Share:
Initial Class $ 11.66
Service Class 11.66
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 128
Dividends 3,230
Income from loaned securities-net 59
Less withholding taxes on foreign dividends (230)
--------
3,187
--------
Expenses:
Management and advisory fees 2,035
Transfer agent fees 2
Printing and shareholder reports 24
Custody fees 133
Administration fees 20
Legal fees 2
Auditing and accounting fees 12
Directors fees 7
Other 9
Service fees:
Service Class 1
--------
Total expenses 2,245
--------
Net Investment Income (loss) 942
--------
Net Realized Gain (Loss) from:
Investment securities 1,119
Foreign currency transactions 439
--------
1,558
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 67,475
Translation of assets and liabilities denominated in
foreign currencies (397)
--------
67,078
--------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 68,636
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 69,578
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 9
Capital Guardian Global
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 942 $ 116
Net realized gain (loss) from
investment securities and foreign
currency transactions 1,558 (5,657)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 67,078 (5,553)
--------- ---------
69,578 (11,094)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (406) (143)
Service Class - -
--------- ---------
(406) (143)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 88,443 115,699
Service Class 1,345 -
--------- ---------
89,788 115,699
--------- ---------
Dividends and distributions reinvested:
Initial Class 406 143
Service Class - -
--------- ---------
406 143
--------- ---------
Cost of shares redeemed:
Initial Class (6,730) (28,635)
Service Class (261) -
--------- ---------
(6,991) (28,635)
--------- ---------
83,203 87,207
--------- ---------
Net increase (decrease) in net assets 152,375 75,970
--------- ---------
Net Assets:
Beginning of year 120,447 44,477
--------- ---------
End of year $ 272,822 $ 120,447
========= =========
Undistributed Net Investment
Income (Loss) $ 1,227 $ 248
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 9,771 12,887
Service Class 128 -
--------- ---------
9,899 12,887
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 42 17
Service Class - -
--------- ---------
42 17
--------- ---------
Shares redeemed:
Initial Class (710) (2,921)
Service Class (24) -
--------- ---------
(734) (2,921)
--------- ---------
Net increase (decrease) in shares
outstanding 9,207 9,983
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 10
Capital Guardian Global
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 8.49 $ 0.05 $ 3.14 $ 3.19
12/31/2002 10.57 0.01 (2.07) (2.06)
12/31/2001 12.06 - (1.22) (1.22)
12/31/2000 15.77 0.02 (2.37) (2.35)
12/31/1999 10.66 (0.01) 5.12 5.11
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 8.76 (0.01) 2.91 2.90
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Year
------------ ----------- --------------- ------------
Initial Class $ (0.02) $ - $ (0.02) $ 11.66
(0.02) - (0.02) 8.49
- (0.27) (0.27) 10.57
- (1.36) (1.36) 12.06
- - - 15.77
- --------------- --------- --------- --------- ---------
Service Class - - - 11.66
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 37.60% $ 271,610 1.14% 1.14% 0.48% 20%
12/31/2002 (19.52) 120,447 1.29 1.29 0.17 33
12/31/2001 (10.36) 44,477 1.34 1.35 0.03 45
12/31/2000 (15.42) 50,351 1.28 1.30 0.08 303
12/31/1999 47.84 40,770 1.48 1.49 (0.12) 157
- --------------- ---------- ------ --------- ---- ---- ----- ---
Service Class 12/31/2003 33.11 1,212 1.39 1.39 (0.14) 20
- --------------- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-February 3, 1998
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment adviser, if any (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 11
Capital Guardian Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Capital Guardian Global ("the Fund"), part of ATSF, began operations
as Capital Guardian Global Portfolio, a part of the Endeavor Series Trust on
February 3, 1998. The Fund became part of ATSF on May 1, 2002.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $44 are included in net
realized gains in the Statement of Operations.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $25 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds,
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 12
Capital Guardian Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
repurchase agreements and other highly rated, liquid investments. During the
life of securities loans, the collateral and securities loaned remain subject
to fluctuation in value. IBT marks to market securities loaned and the
collateral each business day. If additional collateral is due (at least $1),
IBT collects additional cash collateral from the borrowers. Although securities
loaned will be fully collateralized at all times, IBT may experience delays in,
or may be prevented from, recovering the collateral on behalf of the Fund. The
Fund may recall a loaned security position at any time from the borrower
through IBT. In the event the borrower fails to timely return a recalled
security, IBT may indemnify the Fund by purchasing replacement securities for
the Fund at its own expense and claiming the collateral to fund such a
purchase. IBT absorbs the loss if the collateral value is not sufficient to
cover the cost of the replacement securities. If replacement securities are not
available, IBT will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in market value
of the underlying currencies and from the possible inability of counterparties
to meet the terms of their contracts. Open forward currency contracts at
December 31, 2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (i.e. through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 18,239 7%
Asset Allocation-Moderate Portfolio 38,770 14%
Asset Allocation-Moderate Growth Portfolio 29,145 11%
Asset Allocation-Growth Portfolio 28,696 11%
--
43%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
1.05% of the first $150 million of ANA
1.00% of the next $150 million of ANA
0.95% of the next $200 million of ANA
0.925% of ANA over $500 million
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 13
Capital Guardian Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.32% Expense Limit
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $9. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 109,534
U.S. Government 2,099
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 37,787
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (4)
Undistributed net investment income (loss) 443
Undistributed net realized capital gains (loss) (439)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 143
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 406
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 14
Capital Guardian Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 1,287
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (6,397)
========
Post October Currency Loss $ 311
========
Net Unrealized Appreciation (Depreciation) $ 56,753
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 1,687 December 31, 2009
3,505 December 31, 2010
1,205 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $226,568
=========
Unrealized Appreciation $ 58,479
Unrealized (Depreciation) (1,726)
---------
Net Unrealized Appreciation (Depreciation) $ 56,753
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 15
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Capital Guardian Global
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Capital Guardian Global (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Global 16
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The year ended with stocks climbing higher in the fourth quarter, adding
double-digit gains to an already good year. In the fourth quarter, earnings
reports were better than expected and companies began to attribute profits to
growing revenues rather than cost cutting, which had been the main source of
better profits in the previous two quarters. The year started off on an uneven
footing with political events overshadowing economic and corporate fundamentals.
Emotions ran high among investors as stocks experienced substantial volatility,
rising and falling on the ebb and flow of news about Iraq. High crude oil prices
and terrorism concerns also helped restrain the U.S. stock market early in 2003.
Following the end of major fighting in Iraq, stocks began their climb. An
improvement in first-quarter earnings paved the way for a broad-based rally that
lasted the rest of the year. The best results in 2003 came from depressed
industries such as technology and from stocks of low-quality companies whose
prospects dramatically improved as their balance sheets recovered.
The weaker U.S. currency also enhanced profits for some companies. Investors
were also encouraged by the Federal Reserve Board's reluctance to raise interest
rates during 2003 and by generally favorable economic news. The U.S. economy
grew much faster than anticipated, productivity soared and the long-awaited
improvement in employment data finally began to materialize towards the end of
2003.
PERFORMANCE
For the year ended December 31, 2003, Capital Guardian U.S. Equity returned
36.50%. By comparison its benchmark, the Standard and Poor's 500 Composite Stock
Index returned 28.67%.
STRATEGY REVIEW
The biggest contributor to relative returns during the year was the portfolio's
overweight position and strong stock selection in the information technology
("IT") sector, primarily within the communications equipment and semiconductor
capital equipment stocks. While many of these companies were challenged in
2002, they benefited from the mild improvement in corporate spending this year
and from more positive commentary coming from market leaders. Within this
group, semiconductor-related companies had the largest gains.
Similarly, large holdings in the pharmaceuticals, media, leisure, and utilities,
areas that suffered last year, surged during the year, though there were some
portfolio holdings in the consumer discretionary sectors that dampened results.
Within consumer staples, an underweight position and good stock selection were
positive contributors during the year, as good results for food products far
outweighed earnings disappointments in other areas of the sector.
The largest detractor for the year was in the energy sector where both stock
selection and an overweight position hurt relative results. While the
portfolio's holdings in the financial sector kept pace with the overall market
during the year, they underperformed the broad financial sector and detracted
from results. Generally names that underperformed came from the insurance,
consumer finance and thrifts and mortgage finance industries.
At the end of the year, the portfolio was overweight in health care, IT and
energy, and underweight in consumer staples and financials. During the year, we
reduced or eliminated a number of holdings that had recently outperformed or in
which we had lost conviction, and purchased stocks that we believed had better
prospects. In many cases these purchases were of stocks that had lagged since
the market upturn.
Capital Guardian Trust Company
Portfolio Manager
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 1
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 8/17/01 through 12/31/03
Initial Class S&P 500
10/9/00 $10,000 $10,000
12/31/00 10,100 9,398
3/31/01 9,240 8,285
6/30/01 10,039 8,769
9/30/01 8,336 7,483
12/31/01 9,758 8,282
3/31/02 9,839 8,305
6/30/02 8,125 7,193
9/30/02 6,581 5,951
12/31/02 7,436 6,452
3/31/03 7,336 6,249
6/30/03 8,684 7,211
9/30/03 8,971 7,401
12/31/03 10,150 8,302
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 36.50% 0.46% 10/9/00
S&P 500(1) 28.67% (5.59)% 10/9/00
- --------------- ----- ----- -------
Service Class - 26.51% 5/1/03
- --------------- ----- ----- -------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Capital
Guardian U.S. Equity of Endeavor Series Trust.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the history of the predecessor portfolio, Capital Guardian U.S.
Equity Portfolio of Endeavor Series Trust.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 2
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
CONVERTIBLE BONDS (0.3%)
Retail Trade (0.3%)
Amazon.com, Inc.
4.75%, due 02/01/2009 $ 834 $ 843
---------
Total Convertible Bonds (cost: $630) 843
---------
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.3%)
Primary Metal Industries (0.3%)
Phelps Dodge Corporation (b) 4,900 $ 829
---------
Total Convertible Preferred Stocks (cost: $439) 829
---------
PREFERRED STOCKS (0.1%)
Motion Pictures (0.1%)
News Corporation Limited (The)-ADR 6,178 187
---------
Total Preferred Stocks (cost: $179) 187
---------
COMMON STOCKS (97.2%)
Aerospace (1.7%)
Northrop Grumman Corporation 14,700 1,405
United Technologies Corporation 28,900 2,739
Amusement & Recreation Services (0.3%)
Disney (Walt) Company (The) 35,900 838
Automotive (0.4%)
Navistar International Corporation (a)(b) 18,400 881
Automotive Dealers & Service Stations (0.4%)
AutoNation, Inc. (a) 47,800 878
Beverages (1.6%)
Anheuser-Busch Companies, Inc. 35,500 1,870
Pepsi Bottling Group, Inc. (The) 21,100 510
PepsiCo, Inc. 33,600 1,566
Business Services (2.4%)
CheckFree Holdings Corporation (a)(b) 43,700 1,208
eBay Inc. (a) 30,800 1,989
Interpublic Group of Companies, Inc.
(The) (a)(b) 44,900 700
Monster Worldwide, Inc. (a)(b) 38,700 850
Robert Half International Inc. (a) 23,400 546
Thomson Corporation (The) 14,900 540
Chemicals & Allied Products (2.6%)
Air Products and Chemicals, Inc. 38,900 2,055
Avon Products, Inc. 6,700 452
Dow Chemical Company (The) 11,000 457
du Pont (E.I.) de Nemours and Company 32,300 1,482
Lauder (Estee) Companies Inc.
(The)-Class A 25,200 989
Procter & Gamble Company (The) 9,200 919
Shares Value
-------------------- ---------------
Commercial Banks (3.9%)
Bank One Corporation 82,200 $ 3,747
Citigroup Inc. 9,567 464
FleetBoston Financial Corporation 13,900 607
Morgan Chase & Co. (J.P.) 34,100 1,252
State Street Corporation 25,700 1,338
Wells Fargo & Company 32,000 1,884
Communication (2.4%)
Cablevision Systems Corporation-Class A
(a)(b) 76,073 1,779
Comcast Corporation-Class A (a) 13,500 444
Cox Communications, Inc.-Class A (a)(b) 51,700 1,781
Hughes Electronics Corporation (a) 55,237 914
Viacom, Inc.-Class B 17,900 794
Communications Equipment (2.5%)
Corning Incorporated (a) 22,600 236
QUALCOMM Incorporated 92,700 4,999
Siemens AG-ADR (b) 10,000 799
Computer & Data Processing Services (5.4%)
Affiliated Computer Services, Inc.-Class A
(a)(b) 16,800 915
Automatic Data Processing, Inc. 61,900 2,452
Cadence Design Systems, Inc. (a)(b) 47,500 854
Microsoft Corporation 117,800 3,244
PeopleSoft, Inc. (a) 89,300 2,036
Sabre Holdings Corporation (b) 48,500 1,047
SAP AG-ADR 32,600 1,355
VeriSign, Inc. (a) 58,100 947
Computer & Office Equipment (3.2%)
Apple Computer, Inc. (a) 21,700 464
Cisco Systems, Inc. (a) 152,700 3,709
Hewlett-Packard Company 16,057 369
International Business Machines
Corporation 15,100 1,399
Lexmark International Group, Inc. (a) 8,700 684
Sun Microsystems, Inc. (a) 247,200 1,110
Construction (0.9%)
Fluor Corporation 55,700 2,208
Electric Services (2.3%)
AES Corporation (The) (a) 222,500 2,100
American Electric Power Company, Inc. 17,700 540
Duke Energy Corporation 75,900 1,552
FirstEnergy Corp. 14,600 514
Pinnacle West Capital Corporation 18,200 728
Electric, Gas & Sanitary Services (0.3%)
NiSource Inc. 37,600 825
Electrical Goods (0.4%)
Avnet, Inc. (a) 39,000 845
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 3
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Electronic & Other Electric Equipment (2.5%)
Emerson Electric Co. 26,000 $ 1,684
General Electric Company 139,600 4,325
Electronic Components & Accessories (3.0%)
Altera Corporation (a)(b) 57,700 1,310
Applied Micro Circuits Corporation (a) 47,000 281
Intel Corporation 49,800 1,604
JDS Uniphase Corporation (a) 135,400 494
Linear Technology Corporation 17,100 719
PMC-Sierra, Inc. (a)(b) 67,000 1,350
Tyco International Ltd. 16,600 440
Xilinx, Inc. (a) 28,000 1,085
Food & Kindred Products (3.1%)
Altria Group, Inc. 49,400 2,688
Campbell Soup Company (b) 60,000 1,608
Heinz (H.J.) Company 15,700 572
Kraft Foods, Inc.-Class A (b) 28,500 918
Unilever NV-NY Shares (b) 27,100 1,759
Furniture & Home Furnishings Stores (0.5%)
Williams-Sonoma, Inc. (a)(b) 34,800 1,210
Gas Production & Distribution (0.5%)
Equitable Resources, Inc. 13,700 588
Kinder Morgan, Inc. 14 1
Williams Companies, Inc. (The) 57,100 561
Health Services (1.7%)
HCA Inc. 15,200 653
Health Management Associates, Inc.-Class A 18,000 432
Lincare Holdings Inc. (a)(b) 72,500 2,177
Triad Hospitals, Inc. (a) 22,000 732
Hotels & Other Lodging Places (0.2%)
Starwood Hotels & Resorts Worldwide, Inc. 14,300 514
Industrial Machinery & Equipment (5.1%)
American Standard Companies Inc. (a) 26,400 2,658
Applied Materials, Inc. (a) 197,900 4,443
ASM Lithography Holding NV-NY
Registered Shares (a) 40,300 808
Baker Hughes Incorporated 37,300 1,200
Illinois Tool Works Inc. 10,900 915
Ingersoll-Rand Company-Class A 23,400 1,588
Novellus Systems, Inc. (a) 13,600 572
Instruments & Related Products (4.2%)
Agilent Technologies, Inc. (a) 87,400 2,556
Applera Corporation-Applied Biosystems
Group (b) 105,700 2,189
Credence Systems Corporation (a) 9,700 128
KLA-Tencor Corporation (a) 55,100 3,233
Raytheon Company 8,800 264
Teradyne, Inc. (a) 73,000 1,858
Shares Value
-------------------- ---------------
Insurance (4.0%)
American International Group, Inc. 11,400 $ 756
Berkshire Hathaway Inc.-Class A (a) 39 3,286
Chubb Corporation 13,800 940
CIGNA Corporation 11,500 661
Cincinnati Financial Corporation 6,200 260
Everest Re Group, Ltd. 3,400 288
PMI Group, Inc. (The) 42,000 1,564
XL Capital Ltd.-Class A 20,700 1,605
Insurance Agents, Brokers & Service (0.4%)
Hartford Financial Services Group, Inc. (The) 14,399 850
Lumber & Other Building Materials (1.7%)
Lowe's Companies, Inc. 72,100 3,994
Medical Instruments & Supplies (1.0%)
Becton, Dickinson and Company 21,300 876
Guidant Corporation 18,575 1,118
Medtronic, Inc. 9,400 457
Metal Mining (0.2%)
Newmont Mining Corporation 12,200 593
Motion Pictures (1.4%)
Time Warner Inc. (a) 168,750 3,036
Vivendi Universal-ADR (a) 17,800 432
Oil & Gas Extraction (4.2%)
BJ Services Company (a) 28,900 1,038
Schlumberger Limited 63,500 3,475
Transocean Inc. (a) 31,700 761
Unocal Corporation 91,900 3,386
Weatherford International Ltd. (a) 41,900 1,508
Paper & Allied Products (0.6%)
International Paper Company 14,000 604
Kimberly-Clark Corporation 12,900 762
Paper & Paper Products (0.1%)
Boise Cascade Corporation 8,400 276
Personal Credit Institutions (2.3%)
SLM Corporation 145,600 5,486
Petroleum Refining (3.2%)
ChevronTexaco Corporation 9,700 838
Exxon Mobil Corporation 100,500 4,121
Royal Dutch Petroleum Company-NY
Registered Shares 52,800 2,766
Pharmaceuticals (14.4%)
Allergan, Inc. 77,200 5,930
Amgen Inc. (a) 50,700 3,133
AstraZeneca PLC-ADR (b) 228,300 11,045
Forest Laboratories, Inc. (a) 143,700 8,881
Lilly (Eli) and Company 35,000 2,462
Pfizer Inc. 89,300 3,155
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 4
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------- ------------
Printing & Publishing (0.2%)
Knight-Ridder, Inc. 7,000 $ 542
Radio & Television Broadcasting (0.2%)
Entercom Communications Corp. (a) 2,100 111
Radio One, Inc.-Class D (a)(b) 23,500 454
Radio, Television & Computer Stores (0.3%)
RadioShack Corporation 24,800 761
Railroads (0.2%)
Union Pacific Corporation 7,800 542
Restaurants (0.2%)
McDonald's Corporation 17,700 439
Retail Trade (0.3%)
Amazon.com, Inc. (a)(b) 15,000 790
Savings Institutions (2.1%)
Golden West Financial Corporation 17,700 1,826
Washington Mutual, Inc. 83,300 3,343
Security & Commodity Brokers (0.5%)
AmeriCredit Corp. (a)(b) 47,900 763
Goldman Sachs Group, Inc. (The) 4,900 484
Telecommunications (3.4%)
AT&T Corp. 61,600 1,250
SBC Communications Inc. 6,400 167
Sprint Corporation (FON Group) 243,600 4,000
Sprint Corporation (PCS Group) (a)(b) 350,700 1,971
Verizon Communications, Inc. 21,800 765
Transportation & Public Utilities (1.6%)
InterActiveCorp (a)(b) 62,800 2,131
Kinder Morgan Management, LLC (a) 40,955 1,759
U.S. Government Agencies (1.9%)
Fannie Mae 38,700 2,905
Freddie Mac 29,100 1,697
Variety Stores (0.8%)
Costco Wholesale Corporation (a) 53,000 1,971
Water Transportation (0.5%)
Carnival Corporation 33,100 1,315
---------
Total Common Stocks (cost: $191,501) 234,255
---------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (16.7%)
Debt (13.3%)
Bank Notes (0.6%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 191 $ 191
Fleet National Bank
1.00%, due 01/21/2004 715 715
National Bank of Commerce
1.19%, due 04/21/2004 596 596
Principal Value
--------------------- ---------------
Commercial Paper (3.4%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 358 $ 358
Delaware Funding Corporation
1.08%, due 01/07/2004 237 237
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 358 358
1.09%, due 01/13/2004 238 238
1.08%, due 02/05/2004 476 476
General Electric Capital Corporation
1.09%, due 01/08/2004 594 594
1.09%, due 01/09/2004 358 358
1.08%, due 01/16/2004 475 475
Govco Incorporated-144A
1.07%, due 02/05/2004 595 595
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 595 595
1.09%, due 02/06/2004 595 595
1.10%, due 02/09/2004 348 348
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 595 595
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 358 358
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 691 691
1.08%, due 02/17/2004 1,189 1,189
Sheffield Receivables-144A
1.09%, due 01/21/2004 238 238
Euro Dollar Overnight (0.7%)
BNP Paribas SA
0.97%, due 01/07/2004 1,191 1,191
Credit Agricole Indosuez
0.98%, due 01/02/2004 48 48
1.08%, due 01/06/2004 453 453
Euro Dollar Terms (3.3%)
Bank of Montreal
1.06%, due 01/15/2004 233 233
1.06%, due 02/17/2004 477 477
Bank of Scotland
1.06%, due 04/02/2004 358 358
Citigroup Inc.
1.10%, due 01/22/2004 358 358
1.09%, due 02/06/2004 477 477
Credit Agricole Indosuez
1.08%, due 01/28/2004 238 238
Den Danske Bank
1.08%, due 01/20/2004 1,191 1,191
1.02%, due 01/30/2004 596 596
Royal Bank of Canada
1.05%, due 02/27/2004 1,191 1,191
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 5
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 715 $ 715
1.08%, due 01/15/2004 238 238
1.08%, due 01/20/2004 119 119
Svenska Handelsbanken AB
1.09%, due 01/15/2004 119 119
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 715 715
Wells Fargo & Company
1.04%, due 01/30/2004 952 952
Master Notes (1.0%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 477 477
1.14%, due 09/08/2004 715 715
Morgan Stanley
1.05%, due 06/21/2004 1,143 1,143
Medium Term Notes (0.6%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,191 1,191
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 358 358
Repurchase Agreements (3.7%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,789 on 01/02/2004 2,789 2,789
Principal Value
-------------- ------------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,790 on 01/02/2004 $ 3,790 $ 3,790
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,264 on 01/02/2004 2,264 2,264
Shares Value
--------------- ------------
Investment Companies (3.4%)
Money Market Funds (3.4%)
American AAdvantage Select Fund
1-day yield of 1.00% 584,553 $ 585
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,427,230 1,427
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 6,206,068 6,206
---------
Total Security Lending Collateral (cost: $40,414) 40,414
---------
Total Investment Securities (cost: $233,163) $ 276,528
=========
SUMMARY:
Investments, at value 114.6 % $ 276,528
Liabilities in excess of other assets (14.6)% (35,248)
--------- ---------
Net assets 100.0 % $ 241,280
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$38,855.
(c) Cash collateral for the Repurchase Agreements, valued at $9,019, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 6
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $233,163)
(including $38,855 of securities loaned) $276,528
Cash 5,540
Receivables:
Investment securities sold 65
Interest 19
Dividends 264
Other 36
---------
282,452
---------
Liabilities:
Investment securities purchased 540
Accounts payable and accrued liabilities:
Management and advisory fees 181
Distribution fees 1
Payable for collateral for securities on loan 40,414
Other 36
---------
41,172
---------
Net Assets $241,280
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 240
Additional paid-in capital 202,776
Undistributed net investment income (loss) 729
Accumulated net realized gain (loss) from investment
securities (5,830)
Net unrealized appreciation (depreciation) on investment
securities 43,365
---------
Net Assets $241,280
=========
Shares Outstanding:
Initial Class 23,740
Service Class 232
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.07
Service Class 10.07
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 124
Dividends 2,207
Income from loaned securities-net 27
Less withholding taxes on foreign dividends (20)
--------
2,338
--------
Expenses:
Management and advisory fees 1,504
Transfer agent fees 2
Printing and shareholder reports 31
Custody fees 28
Administration fees 21
Legal fees 2
Auditing and accounting fees 10
Directors fees 6
Other 5
Service fees:
Service Class 1
--------
Total expenses 1,610
--------
Net Investment Income (Loss) 728
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities (894)
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 57,413
--------
Net Gain (Loss) on Investment Securities 56,519
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 57,247
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 7
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 728 $ 319
Net realized gain (loss) from
investment securities (894) (4,397)
Net unrealized appreciation
(depreciation) on investment
securities 57,413 (13,815)
--------- ---------
57,247 (17,893)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (318) (68)
Service Class - -
--------- ---------
(318) (68)
--------- ---------
From net realized gains:
Initial Class - (249)
Service Class - -
--------- ---------
- (249)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 79,117 91,442
Service Class 2,245 -
--------- ---------
81,362 91,442
--------- ---------
Dividends and distributions reinvested:
Initial Class 318 317
Service Class - -
--------- ---------
318 317
--------- ---------
Cost of shares redeemed:
Initial Class (13,701) (7,399)
Service Class (112) -
--------- ---------
(13,813) (7,399)
--------- ---------
67,867 84,360
--------- ---------
Net increase (decrease) in net assets 124,796 66,150
--------- ---------
Net Assets:
Beginning of year 116,484 50,334
--------- ---------
End of year $ 241,280 $ 116,484
========= =========
Undistributed Net Investment Income
(Loss) $ 729 $ 319
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 9,582 11,543
Service Class 244 -
--------- ---------
9,826 11,543
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 37 43
Service Class - -
--------- ---------
37 43
--------- ---------
Shares redeemed:
Initial Class (1,640) (994)
Service Class (12) -
--------- ---------
(1,652) (994)
--------- ---------
Net increase (decrease) in shares
outstanding 8,211 10,592
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 8
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.39 $ 0.04 $ 2.65 $ 2.69
12/31/2002 9.74 0.03 (2.35) (2.32)
12/31/2001 10.10 0.01 (0.35) (0.34)
12/31/2000 10.00 0.01 0.09 0.10
- --------------- ---------- --------- -------- --------- --------
Service Class 12/31/2003 7.96 0.01 2.10 2.11
- --------------- ---------- --------- -------- --------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 10.07
(0.01) (0.02) (0.03) 7.39
(0.01) (0.01) (0.02) 9.74
- - - 10.10
- --------------- --------- --------- --------- ---------
Service Class - - - 10.07
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 36.50% $ 238,949 0.91% 0.91% 0.41% 20%
12/31/2002 (23.80) 116,484 0.98 0.98 0.43 23
12/31/2001 (3.38) 50,334 1.08 1.09 0.19 39
12/31/2000 1.00 33,507 1.13 1.13 0.45 108
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 26.50 2,331 1.16 1.16 0.17 20
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-October 9, 2000
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment adviser, if any (see note
2). For the year ended December 31, 2002, ratio of net expenses is net of
fees paid indirectly. For the year ended December 31, 2001 and prior years,
ratio of net expenses to average net assets is net of fees paid indirectly
and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 9
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Capital Guardian U.S. Equity ("the Fund"), part of ATSF, began
operations as Capital Guardian U.S. Equity Portfolio, a part of the Endeavor
Series Trust on October 9, 2000. The Fund became a part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $11 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 10
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $36 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvestment annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.85% of the first $300 million of ANA
0.80% of the next $200 million of ANA
0.775% of ANA over $500 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.06% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 11
Capital Guardian U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
amounts was $8. Invested plan amounts and the total liability for deferred
compensation to the Directors under the Plan at December 31, 2003, are included
in Net assets in the accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 99,085
U.S. Government 3,455
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 33,867
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 317
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 318
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 729
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (4,131)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 41,667
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 2,272 December 31, 2010
1,859 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $234,861
=========
Unrealized Appreciation $ 42,893
Unrealized (Depreciation) (1,226)
---------
Net Unrealized Appreciation (Depreciation) $ 41,667
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Capital Guardian U.S. Equity
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Capital Guardian U.S. Equity (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian U.S. Equity 13
Capital Guardian Value
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The year ended with stocks continuing their nine-month climb, with almost all
sectors recording double-digit gains. In the fourth quarter, earnings reports
were better than expected and companies began to attribute profits to growing
revenues rather than cost cutting, which had been the main source of better
profits in the previous two quarters. The year started off on an uneven footing
with political events overshadowing economic and corporate fundamentals.
Emotions ran high among investors as stocks experienced substantial volatility,
rising and falling on the ebb and flow of news about Iraq. High crude oil prices
and terrorism concerns also helped restrain the U.S. stock market early in 2003.
Following the end of major fighting in Iraq, stocks began their climb. An
improvement in first-quarter earnings paved the way for a broad-based rally that
lasted the rest of the year. The best results in 2003 came from depressed
industries such as technology, automotive and transportation, and producer
durables and from stocks of low-quality companies whose prospects dramatically
improved as their balance sheets recovered. Even chemical companies, whose
earnings were diminished by higher natural gas prices, rose as investors sought
exposure to cyclical stocks. Other cyclical areas such as industrials, consumer
discretionary and information technology also had strong gains. Energy stocks
rose towards the end of the year after underperforming earlier despite record
profits.
The weaker U.S. currency also enhanced profits for some companies. Investors
were also encouraged by the Federal Reserve Board's reluctance to raise
interest rates during 2003 and by generally favorable economic news. The U.S.
economy grew much faster than anticipated, productivity soared and the
long-awaited improvement in employment data finally began to materialize
towards the end of 2003.
PERFORMANCE
For the year ended December 31, 2003, Capital Guardian Value returned 34.58%.
By comparison, its benchmark, the Russell 1000 Value Index ("Russell 1000
Value") returned 30.03%.
STRATEGY REVIEW
Portfolio returns in 2003 were driven mainly by strong stock selection in
financial services. The top contributing security for the year was Morgan Chase
& Co. (J.P.), followed by FleetBoston Financial Corporation on news of its
impending purchase by the Bank of America Corporation. Other names in the
financial area that did well included Everest Reinsurance Company and
convertible notes issued by Phelps Dodge Corporation. An overweight and strong
stock selection within producer durables, notably within the aerospace and
defense and machinery industries, were additive. Travel and media companies
within the consumer discretionary sector were helpful thanks to an improved
outlook for spending on travel and advertising. Diminishing concerns over
credit quality, funding, and liquidity helped many of the utility stocks in the
portfolio. Consumer staples names held in the portfolio added value while the
industry itself trailed the broader market as investors continued to prefer
companies leveraged to economic growth. Detracting somewhat with respect to
relative returns from a year when ten of the twelve sectors added value was
stock selection within the energy and integrated oils sectors.
The portfolio remains underweight in the largest stocks, by market
capitalization in the Russell 1000 Value, and overweight in the smallest. It
ended the year overweight in materials, producer durables and health care and
underweight in financial services and technology.
Capital Guardian Trust Company
Portfolio Manager
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 1
Capital Guardian Value
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 12/31/93 through 12/31/03
Initial Class Russell 1000 Value
12/31/93 $10,000 $10,000
3/31/94 9,835 9,649
6/30/94 10,000 9,709
9/30/94 10,350 9,958
12/31/94 10,409 9,802
3/31/95 11,402 10,735
6/30/95 12,641 11,696
9/30/95 13,477 12,718
12/31/95 14,009 13,562
3/31/96 15,289 14,330
6/30/96 15,675 14,577
9/30/96 16,330 15,001
12/31/96 17,349 16,497
3/31/97 17,439 16,920
6/30/97 19,708 19,415
9/30/97 21,193 21,348
12/31/97 21,654 22,302
3/31/98 23,976 24,902
6/30/98 24,054 25,013
9/30/98 20,272 22,115
12/31/98 23,291 25,787
3/31/99 22,990 26,157
6/30/99 25,087 29,107
9/30/99 22,342 26,255
12/31/99 22,580 27,682
3/31/00 21,958 27,814
6/30/00 21,249 26,511
9/30/00 22,144 28,596
12/31/00 23,838 29,624
3/31/01 23,838 27,889
6/30/01 24,952 29,251
9/30/01 22,739 26,047
12/31/01 25,420 27,968
3/31/02 26,534 29,112
6/30/02 22,974 26,632
9/30/02 18,120 21,633
12/31/02 20,159 23,627
3/31/03 19,009 22,477
6/30/03 23,010 26,360
9/30/03 23,684 26,904
12/31/03 27,130 30,722
*Inception 05/27/1993.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
----------- --------- ---------- ------------ ----------
Initial Class 34.58% 3.10% 10.49% 10.16% 5/27/93
Russell 1000 Value(1) 30.03% 3.56% 11.88% 11.89% 5/27/93
- --------------------- ----- ---- ----- ----- -------
Service Class - - - 29.30% 5/1/03
- --------------------- ----- ---- ----- ----- -------
NOTES
(1) The Russell 1000 Value (Russell 1000 Value) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Capital
Guardian Value Portfolio of Endeavor Series Trust. Capital Guardian has been
the portfolio's sub-adviser since October 9, 2000. Prior to that date, a
different firm managed the portfolio and the performance set forth above prior
to October 9, 2000 is attributable to that firm.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Capital
Guardian Global Portfolio, of the Endeavor Series Trust. Capital Guardian Trust
Company has been the portfolio's sub-advisor since October 9, 2000. Prior to
that a different firm managed the portfolio and the performance set forth above
prior to October 9, 2000 is attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 2
Capital Guardian Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (2.7%)
Automotive (0.8%)
Ford Motor Company Capital Trust II 68,800 $ 3,842
Business Services (0.6%)
Interpublic Group of Companies, Inc. (The) 51,000 2,925
Primary Metal Industries (1.3%)
Phelps Dodge Corporation 34,200 5,787
---------
Total Convertible Preferred Stocks (cost: $9,156) 12,554
---------
COMMON STOCKS (94.8%)
Aerospace (4.5%)
Northrop Grumman Corporation 71,000 6,788
United Technologies Corporation 149,000 14,121
Automotive (1.1%)
Ford Motor Company (b) 68,500 1,096
Navistar International Corporation (a)(b) 80,400 3,850
Automotive Dealers & Service Stations (0.6%)
AutoNation, Inc. (a) 146,500 2,691
Business Services (1.5%)
Interpublic Group of Companies, Inc.
(The) (a)(b) 282,300 4,404
Thomson Corporation (The) 73,100 2,650
Chemicals & Allied Products (6.6%)
Air Products and Chemicals, Inc. 309,200 16,335
Colgate-Palmolive Company 94,800 4,745
Dow Chemical Company (The) 56,200 2,336
du Pont (E.I.) de Nemours and Company 139,800 6,415
Commercial Banks (8.4%)
Bank One Corporation 308,500 14,065
Citigroup Inc. 49,703 2,413
FleetBoston Financial Corporation (b) 218,400 9,533
Morgan Chase & Co. (J.P.) 95,800 3,519
Wells Fargo & Company 151,400 8,915
Communications Equipment (0.5%)
Siemens AG-ADR (b) 29,200 2,334
Computer & Data Processing Services (2.3%)
Cadence Design Systems, Inc. (a)(b) 251,000 4,513
Sabre Holdings Corporation (b) 284,100 6,134
Computer & Office Equipment (1.6%)
Hewlett-Packard Company 136,492 3,135
Polycom, Inc. (a) 43,400 847
Sun Microsystems, Inc. (a) 730,000 3,278
Construction (0.6%)
Fluor Corporation 64,500 2,557
Shares Value
-------------------- ---------------
Electric Services (4.7%)
AES Corporation (The) (a) 402,300 $ 3,798
American Electric Power Company, Inc. 109,600 3,344
Duke Energy Corporation (b) 277,200 5,669
FirstEnergy Corp. 54,800 1,929
Pinnacle West Capital Corporation 175,700 7,032
Electric, Gas & Sanitary Services (1.6%)
NiSource Inc. 326,600 7,166
Electrical Goods (0.8%)
Avnet, Inc. (a) 175,600 3,803
Electronic & Other Electric Equipment (4.0%)
Emerson Electric Co. 55,300 3,581
General Electric Company 408,300 12,649
Hubbell Incorporated-Class B 52,800 2,328
Electronic Components & Accessories (0.4%)
Tyco International Ltd. 76,300 2,022
Food & Kindred Products (7.5%)
Altria Group, Inc. (b) 247,800 13,485
Campbell Soup Company 267,200 7,161
General Mills, Inc. (b) 47,000 2,129
Kraft Foods, Inc.-Class A (b) 235,200 7,578
Unilever NV-NY Shares (b) 60,400 3,920
Gas Production & Distribution (0.5%)
Equitable Resources, Inc. 49,600 2,129
Health Services (1.3%)
Lincare Holdings Inc. (a)(b) 105,400 3,165
Triad Hospitals, Inc. (a) 82,000 2,728
Holding & Other Investment Offices (1.3%)
General Growth Properties, Inc. 213,300 5,919
Hotels & Other Lodging Places (0.7%)
Starwood Hotels & Resorts Worldwide, Inc. 93,500 3,363
Industrial Machinery & Equipment (3.1%)
Baker Hughes Incorporated 153,400 4,933
Ingersoll-Rand Company-Class A 137,300 9,319
Instruments & Related Products (0.8%)
Raytheon Company 126,400 3,797
Insurance (4.7%)
Chubb Corporation 19,300 1,314
CIGNA Corporation 21,900 1,259
Everest Re Group, Ltd. 85,300 7,216
PacifiCare Health Systems, Inc. (a) 24,000 1,622
PMI Group, Inc. (The) (b) 104,000 3,872
Travelers Property Casualty Corp.-Class A 115,614 1,940
XL Capital Ltd.-Class A 56,100 4,351
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 3
Capital Guardian Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Insurance Agents, Brokers & Service (2.4%)
Hartford Financial Services Group, Inc. (The) 188,600 $ 11,133
Medical Instruments & Supplies (1.7%)
Becton, Dickinson and Company 188,600 7,759
Motion Pictures (0.7%)
Time Warner Inc. (a) 187,600 3,375
Oil & Gas Extraction (3.7%)
Transocean Inc. (a) 127,000 3,049
Unocal Corporation 306,900 11,303
Weatherford International Ltd. (a) 78,800 2,837
Paper & Allied Products (1.9%)
International Paper Company 128,700 5,548
Kimberly-Clark Corporation 58,200 3,439
Personal Credit Institutions (1.8%)
SLM Corporation 222,000 8,364
Petroleum Refining (4.1%)
ChevronTexaco Corporation 29,500 2,549
Exxon Mobil Corporation 81,066 3,324
Royal Dutch Petroleum Company-NY
Registered Shares 100,800 5,281
Shell Transport & Trading Company
PLC-ADR (b) 171,500 7,723
Pharmaceuticals (4.1%)
AstraZeneca PLC-ADR (b) 157,600 7,625
Lilly (Eli) and Company 91,000 6,400
Pfizer Inc. 141,300 4,992
Primary Metal Industries (0.7%)
Alcoa Inc. 64,000 2,432
Nucor Corporation (b) 17,000 952
Printing & Publishing (1.2%)
Knight-Ridder, Inc. 72,000 5,571
Railroads (0.8%)
Canadian National Railway Company 36,700 2,322
Union Pacific Corporation 19,500 1,355
Savings Institutions (1.7%)
Washington Mutual, Inc. 198,900 7,980
Security & Commodity Brokers (1.6%)
AmeriCredit Corp. (a)(b) 320,500 5,106
Goldman Sachs Group, Inc. (The) 25,300 2,498
Telecommunications (7.0%)
CenturyTel, Inc. 48,100 1,569
SBC Communications Inc. 166,700 4,346
Sprint Corporation (FON Group) 1,112,700 18,271
Verizon Communications, Inc. 229,500 8,051
Transportation & Public Utilities (0.8%)
Kinder Morgan Management, LLC (a) 86,284 3,707
Shares Value
-------------------- ---------------
U.S. Government Agencies (0.7%)
Fannie Mae 43,000 $ 3,228
Water Transportation (0.8%)
Carnival Corporation 97,400 3,870
---------
Total Common Stocks (cost: $364,894) 437,154
---------
Principal Value
----------- ------------
SECURITY LENDING COLLATERAL (13.7%)
Debt (10.9%)
Bank Notes (0.5%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 299 $ 299
Fleet National Bank
1.00%, due 01/21/2004 1,122 1,122
National Bank of Commerce
1.19%, due 04/21/2004 935 935
Commercial Paper (2.8%)
Compass Securitization-144A
1.08%, due 01/22/2004 561 561
Delaware Funding Corporation
1.08%, due 01/07/2004 373 373
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 561 561
1.09%, due 01/13/2004 374 374
1.08%, due 02/05/2004 747 747
General Electric Capital Corporation
1.09%, due 01/08/2004 933 933
1.09%, due 01/09/2004 561 561
1.08%, due 01/16/2004 745 745
Govco Incorporated-144A
1.07%, due 02/05/2004 934 934
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 934 934
1.09%, due 02/06/2004 933 933
1.10%, due 02/09/2004 545 545
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 934 934
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 561 561
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,084 1,084
1.08%, due 02/17/2004 1,867 1,867
Sheffield Receivables-144A
1.09%, due 01/21/2004 374 374
Euro Dollar Overnight (0.6%)
BNP Paribas SA
0.97%, due 01/07/2004 1,870 1,870
Credit Agricole Indosuez
0.98%, due 01/02/2004 75 75
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 4
Capital Guardian Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
1.08%, due 01/06/2004 711 $ 711
Euro Dollar Terms (2.7%)
Bank of Montreal
1.06%, due 01/15/2004 $ 365 $ 365
1.06%, due 02/17/2004 748 748
Bank of Scotland
1.06%, due 04/02/2004 561 561
Citigroup Inc.
1.10%, due 01/22/2004 561 561
1.09%, due 02/06/2004 748 748
Credit Agricole Indosuez
1.08%, due 01/28/2004 374 374
Den Danske Bank
1.08%, due 01/20/2004 1,870 1,870
1.02%, due 01/30/2004 935 935
Royal Bank of Canada
1.05%, due 02/27/2004 1,870 1,870
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,122 1,122
1.08%, due 01/15/2004 374 374
1.08%, due 01/20/2004 187 187
Svenska Handelsbanken AB
1.09%, due 01/15/2004 187 187
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,122 1,122
Wells Fargo & Company
1.04%, due 01/30/2004 1,496 1,496
Master Notes (0.8%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 748 748
1.14%, due 09/08/2004 1,122 1,122
Morgan Stanley
1.05%, due 06/21/2004 1,795 1,795
Principal Value
-------------- ------------
Medium Term Notes (0.5%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 $ 1,870 $ 1,870
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 561 561
Repurchase Agreements (3.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,376 on 01/02/2004 4,376 4,376
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $5,947 on 01/02/2004 5,947 5,947
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,553 on 01/02/2004 3,553 3,553
Shares Value
--------------- ------------
Investment Companies (2.8%)
Money Market Funds (2.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 917,338 $ 917
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,239,749 2,240
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 9,739,168 9,739
---------
Total Security Lending Collateral (cost: $63,421) 63,421
---------
Total Investment Securities (cost: $437,471) $ 513,129
=========
SUMMARY:
Investments, at value 111.2 % $ 513,129
Liabilities in excess of other assets (11.2)% (51,756)
--------- ---------
Net assets 100.0 % $ 461,373
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$61,015.
(c) Cash collateral for the Repurchase Agreements, valued at $14,154, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 5
Capital Guardian Value
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $437,471)
(including $61,015 of securities loaned) $513,129
Cash 12,303
Receivables:
Investment securities sold 632
Interest 5
Dividends 1,018
Other 64
---------
527,151
---------
Liabilities:
Investment securities purchased 1,955
Accounts payable and accrued liabilities:
Management and advisory fees 337
Distribution fees 1
Payable for collateral for securities on loan 63,421
Other 64
---------
65,778
---------
Net Assets $461,373
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 263
Additional paid-in capital 382,684
Undistributed net investment income (loss) 5,706
Accumulated net realized gain (loss) from
investment securities (2,938)
Net unrealized appreciation (depreciation) on investment
securities 75,658
---------
Net Assets $461,373
=========
Shares Outstanding:
Initial Class 26,152
Service Class 129
Net Asset Value and Offering Price Per Share:
Initial Class $ 17.56
Service Class 17.65
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 57
Dividends 9,122
Income from loaned securities-net 50
Less withholding taxes on foreign dividends (72)
---------
9,157
---------
Expenses:
Management and advisory fees 3,073
Transfer agent fees 2
Printing and shareholder reports 36
Custody fees 37
Administration fees 20
Legal fees 5
Auditing and accounting fees 10
Directors fees 13
Other 9
Service fees:
Service Class 1
---------
Total expenses 3,206
---------
Net Investment Income (Loss) 5,951
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 6,593
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 103,036
---------
Net Gain (Loss) on Investment Securities 109,629
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 115,580
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 6
Capital Guardian Value
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 5,951 $ 2,969
Net realized gain (loss) from
investment securities 6,593 (9,539)
Net unrealized appreciation
(depreciation) on investment
securities 103,036 (47,922)
--------- ---------
115,580 (54,492)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (2,964) (1,817)
Service Class - -
--------- ---------
(2,964) (1,817)
--------- ---------
From net realized gains:
Initial Class - (8,514)
Service Class - -
--------- ---------
- (8,514)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 78,659 135,457
Service Class 2,306 -
--------- ---------
80,965 135,457
--------- ---------
Dividends and distributions reinvested:
Initial Class 2,964 10,331
Service Class - -
--------- ---------
2,964 10,331
--------- ---------
Cost of shares redeemed:
Initial Class (21,633) (11,877)
Service Class (264) -
--------- ---------
(21,897) (11,877)
--------- ---------
62,032 133,911
--------- ---------
Net increase (decrease) in net assets 174,648 69,088
--------- ---------
Net Assets:
Beginning of year 286,725 217,637
--------- ---------
End of year $ 461,373 $ 286,725
========= =========
Undistributed Net Investment Income
(Loss) $ 5,706 $ 2,722
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 5,627 9,322
Service Class 145 -
--------- ---------
5,772 9,322
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 197 763
Service Class - -
--------- ---------
197 763
--------- ---------
Shares redeemed:
Initial Class (1,473) (826)
Service Class (16) -
--------- ---------
(1,489) (826)
--------- ---------
Net increase (decrease) in shares
outstanding 4,480 9,259
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 7
Capital Guardian Value
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 13.15 $ 0.24 $ 4.29 $ 4.53
12/31/2002 17.35 0.18 (3.75) (3.57)
12/31/2001 17.58 0.16 1.01 1.17
12/31/2000 19.99 0.15 0.68 0.83
12/31/1999 21.68 0.18 (0.72) (0.54)
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 13.66 0.15 3.85 4.00
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.12) $ - $ (0.12) $ 17.56
(0.11) (0.52) (0.63) 13.15
(0.14) (1.26) (1.40) 17.35
(0.19) (3.05) (3.24) 17.58
(0.24) (0.91) (1.15) 19.99
- --------------- --------- --------- --------- ---------
Service Class (0.01) - (0.01) 17.65
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 34.58% $ 459,102 0.88% 0.88% 1.63% 30%
12/31/2002 (20.70) 286,725 0.91 0.91 1.23 39
12/31/2001 6.64 217,637 0.94 0.95 1.01 55
12/31/2000 5.57 182,354 0.91 0.93 0.77 85
12/31/1999 (3.06) 209,653 0.88 0.95 0.77 51
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 29.30 2,271 1.13 1.13 1.37 30
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 27, 1993
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 8
Capital Guardian Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Capital Guardian Value ("the Fund"), part of ATSF, began operations
as Capital Guardian Value Portfolio, a part of the Endeavor Series Trust on May
27, 1993. The Fund became a part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
1, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $22 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 9
Capital Guardian Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $61 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.85% of the first $300 million of ANA
0.80% of the next $200 million of ANA
0.775% of ANA over $500 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.92% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds,
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 10
Capital Guardian Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
an affiliate of the Fund. At December 31, 2003, the value of invested plan
amounts was $16. Invested plan amounts and the total liability for deferred
compensation to the Directors under the Plan at December 31, 2003, are included
in Net assets in the accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 170,803
U.S. Government 2,822
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 103,434
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (3)
Undistributed net realized capital gains (loss) 3
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 10,331
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 2,964
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 5,949
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (2,938)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 75,657
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 2,938 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $159.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $437,472
========
Unrealized Appreciation $ 79,232
Unrealized (Depreciation) (3,575)
--------
Net Unrealized Appreciation (Depreciation) $ 75,657
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Capital Guardian Value
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Capital Guardian Value (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Capital Guardian Value 12
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
A spectacular year! Real estate securities returned 37% in 2003, according to
the return of the NAREIT Equity Index. It was the best showing by Real Estate
Investment Trusts ("REITs") since the 47.6% return of 1976.
PERFORMANCE
For the year ended December 31, 2003, Clarion Real Estate Securities returned
35.74%. By comparison its primary benchmark, the Wilshire Real Estate
Securities Index and its secondary benchmark, the Morgan Stanley REIT Index
returned 37.07% and 36.74%, respectively.
STRATEGY REVIEW
Cause for optimism drives expanding multiples. At the opening of the year, the
mood was melancholy and there was much cause for concern -- mired in a
recession, an impending war in the Middle East, and a third year of negative
stock returns all contributed to a cautious outlook. As the Iraq war wound down
by the end of April, however, there was a marked change in attitude. Monetary
and fiscal stimulus stoked the embers of an improving outlook for businesses
and consumers alike as war -- postponed business decisions were reinstated.
This drove an 8.2% growth rate in the gross domestic product ("GDP") for the
third quarter. Against this backdrop, investors began to incorporate a brighter
picture for future earnings, and stock price-earnings multiples expanded. REIT
multiples expanded 27% from 9.4x to 12.1x; a slightly higher expansion than the
25% for the Standard and Poor's 500 Composite Stock Index.
Against the backdrop of weak demand, real estate company earnings declined in
2003. The pressure was particularly acute in the hotel, apartment, office, and
industrial sectors. On the other hand, earnings for retail, manufactured homes,
and health care property companies increased. But aggregate dividends were
secure and growing as predicted. Despite continued softness in many property
sectors brought on by the weak economy, REIT dividends and income in aggregate
increased by about 2% in 2003.
Funds flows to real estate were strong as $4.5 billion flowed to dedicated real
estate mutual funds in 2003. Some skeptics attribute REITs' good returns in
2003 solely to funds flows. On the other hand, we believe the positive funds
flows were consistent with a general return to stocks by investors and
specifically were the result of the good value of real estate securities and
the increasingly appealing investment story of real estate in general.
The portfolio's overweights in mall and shopping center sectors plus
underweights in apartments, industrial and storage all contributed positively
to the portfolio. However, positive performance was offset by an underweight in
hotels and a premature increase in the office sector in August.
The portfolio's good stock selection in the mall, office, apartment, and hotel
sectors benefited performance.
/s/ T. Ritson Ferguson
T. Ritson Ferguson
/s/ Joseph P. Smith
Joseph P. Smith
Co-Portfolio Managers
ING Clarion Real Estate Securities
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 1
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/98 through 12/31/03
Initial Class Wilshire RES MS REIT
5/1/98 $10,000 $10,000 $10,000
6/30/98 9,785 9,852 9,912
9/30/98 8,646 8,673 8,865
12/31/98 8,507 8,591 8,677
3/31/99 8,188 8,293 8,260
6/30/99 8,939 9,173 9,078
9/30/99 8,180 8,298 8,344
12/31/99 8,186 8,317 8,282
3/31/00 8,506 8,550 8,502
6/30/00 9,433 9,582 9,384
9/30/00 10,158 10,394 10,117
12/31/00 10,611 10,873 10,502
3/31/01 10,538 10,762 10,452
6/30/01 11,556 11,935 11,593
9/30/01 11,278 11,387 11,293
12/31/01 11,784 12,010 11,849
3/31/02 12,718 13,096 12,834
6/30/02 13,382 13,581 13,455
9/30/02 12,154 12,182 12,258
12/31/02 12,208 12,327 12,280
3/31/03 12,433 12,451 12,413
6/30/03 13,823 13,988 13,982
9/30/03 15,054 15,462 15,338
12/31/03 16,571 16,897 16,792
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ----------- ----------- ----------
Initial Class 35.74% 14.26% 9.32% 5/1/98
Wilshire RES(1) 37.07% 14.49% 9.69% 5/1/98
MS REIT(1) 36.74% 13.63% 9.57% 5/1/98
- --------------- ----- ----- ----- ------
Service Class - - 28.90% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Wilshire Real Estate Securities (Wilshire RES) Index and the Morgan
Stanley REIT (MS REIT) Index are an unmanaged indicies used as a general
measure of market performance. Calculations assume dividends and capital
gains are reinvested and do not include any managerial expenses. From
inception calculation is based on life of initial class shares. For
reporting periods through December 31, 2002, the portfolio had selected the
Morgan Stanley REIT Index as its benchmark measure; however, the Wilshire
Real Estate Securities is more appropriate for comparisons to the
portfolio.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in a "non-diversified" portfolio may be subject to specific risks
such as susceptibility to single economic political, or regulatory events, and
may be subject to greater loss than investments in a diversified portfolio.
The risks of investing in REITs are similar to investing directly in real
estate. Investing in real estate presents its own risks, including declining
property values, over-building, low occupancy rates from commercial properties,
rising operating expenses and interest rates, as well as taxes and other
regulatory issues.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 2
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
PREFERRED STOCKS (0.8%)
Holding & Other Investment Offices (0.8%)
Keystone Property Trust-Series D 61,000 $ 1,656
---------
Total Preferred Stocks (cost: $1,525) 1,656
---------
COMMON STOCKS (95.8%)
Holding & Other Investment Offices (90.8%)
Apartments (14.6%)
Archstone-Smith Trust (b) 73,200 2,048
Camden Property Trust 217,300 9,626
Equity Residential 222,900 6,578
Gables Residential Trust 140,900 4,895
Home Properties of New York, Inc. 105,100 4,245
United Dominion Realty Trust, Inc. 198,100 3,804
Diversified (10.6%)
Catellus Development Corporation 144,198 3,478
iStar Financial Inc. 40,800 1,587
Keystone Property Trust 144,931 3,202
Liberty Property Trust (b) 240,200 9,344
Vornado Realty Trust 94,600 5,179
Health Care (3.7%)
Health Care REIT, Inc. 184,751 6,651
Ventas, Inc. 60,400 1,329
Hotels (3.8%)
Host Marriott Corporation (a)(b) 552,300 6,804
LaSalle Hotel Properties 75,300 1,397
Office Property (21.4%)
Arden Realty, Inc. 241,100 7,315
Boston Properties, Inc. 131,300 6,327
Brandywine Realty Trust 112,800 3,020
Corporate Office Properties Trust 49,400 1,037
Mack-Cali Realty Corporation 186,200 7,750
Maguire Properties, Inc. (b) 257,900 6,267
Prentiss Properties Trust 256,200 8,452
Trizec Properties, Inc. 378,500 5,829
Outlet Centers (2.0%)
Chelsea Property Group, Inc. 78,600 4,308
Regional Malls (16.5%)
CBL & Associates Properties, Inc. 71,900 4,062
General Growth Properties, Inc. 315,000 8,741
Macerich Company (The) (b) 210,900 9,385
Mills Corporation (The) 145,700 6,411
Simon Property Group, Inc. 144,700 6,705
Shopping Centers (13.8%)
Acadia Realty Trust 60,700 759
Developers Diversified Realty Corporation (b) 243,400 8,171
Heritage Property Investment Trust 104,700 2,979
New Plan Realty Trust, Inc. 176,000 4,342
Shares Value
-------------------- ---------------
Shopping Centers (continued)
Pennsylvania Real Estate Investment Trust 112,100 $ 4,069
Regency Centers Corporation (b) 154,100 6,141
Shurgard Storage Centers, Inc. 85,200 3,208
Warehouse (4.4%)
EastGroup Properties 50,800 1,645
ProLogis 240,600 7,721
Hotels & Other Lodging Places (5.0%)
Hotels (5.0%)
Starwood Hotels & Resorts Worldwide, Inc. 295,700 10,636
---------
Total Common Stocks (cost: $168,796) 205,447
---------
Principal Value
----------- ------------
SECURITY LENDING COLLATERAL (10.0%)
Debt (8.0%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 101 $ 101
Fleet National Bank
1.00%, due 01/21/2004 378 378
National Bank of Commerce
1.19%, due 04/21/2004 315 315
Commercial Paper (2.0%)
Compass Securitization-144A
1.08%, due 01/22/2004 189 189
Delaware Funding Corporation
1.08%, due 01/07/2004 125 125
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 189 189
1.09%, due 01/13/2004 126 126
1.08%, due 02/05/2004 251 251
General Electric Capital Corporation
1.09%, due 01/08/2004 314 314
1.09%, due 01/09/2004 189 189
1.08%, due 01/16/2004 251 251
Govco Incorporated-144A
1.07%, due 02/05/2004 314 314
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 314 314
1.09%, due 02/06/2004 314 314
1.10%, due 02/09/2004 184 184
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 314 314
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 189 189
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 365 365
1.08%, due 02/17/2004 627 627
Sheffield Receivables-144A
1.09%, due 01/21/2004 126 126
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 3
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 $ 628 $ 628
Credit Agricole Indosuez
0.98%, due 01/02/2004 25 25
1.08%, due 01/06/2004 239 239
Euro Dollar Terms (2.0%)
Bank of Montreal
1.06%, due 01/15/2004 123 123
1.06%, due 02/17/2004 252 252
Bank of Scotland
1.06%, due 04/02/2004 189 189
Citigroup Inc.
1.10%, due 01/22/2004 189 189
1.09%, due 02/06/2004 252 252
Credit Agricole Indosuez
1.08%, due 01/28/2004 126 126
Den Danske Bank
1.08%, due 01/20/2004 629 629
1.02%, due 01/30/2004 315 315
Royal Bank of Canada
1.05%, due 02/27/2004 628 628
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 378 378
1.08%, due 01/15/2004 126 126
1.08%, due 01/20/2004 63 63
Svenska Handelsbanken AB
1.09%, due 01/15/2004 63 63
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 378 378
Wells Fargo & Company
1.04%, due 01/30/2004 503 503
Principal Value
-------------- ------------
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 $ 252 $ 252
1.14%, due 09/08/2004 378 378
Morgan Stanley
1.05%, due 06/21/2004 604 604
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 629 629
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 189 189
Repurchase Agreements (2.2%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,471 on 01/02/04 1,471 1,471
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,000 on 01/02/2004 2,000 2,000
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,194 on 01/02/2004 1,194 1,194
Shares Value
--------------- ------------
Investment Companies (2.0%)
Money Market Funds (2.0%)
American AAdvantage Select Fund
1.00%, due 01/02/2004 308,635 $ 309
Merrill Lynch Premier Institutional Fund
1.04%, due 01/02/2004 753,555 754
Merrimac Cash Series Fund-Premium Class
0.98%, due 01/02/2004 3,276,708 3,277
---------
Total Security Lending Collateral (cost: $21,338) 21,338
---------
Total Investment Securities (cost: $191,659) $ 228,441
=========
SUMMARY:
Investments, at value 106.6 % $ 228,441
Liabilities in excess of other assets (6.6)% (14,210)
--------- ---------
Net assets 100.0 % $ 214,231
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$20,606.
(c) Cash collateral for the Repurchase Agreements, valued at $4,762, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 4
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $191,659)
(including $20,606 of securities loaned) $228,441
Cash 5,991
Receivables:
Investment securites sold 3,025
Interest 1
Dividends 1,642
Other 11
---------
239,111
---------
Liabilities:
Investment securities purchased 3,369
Accounts payable and accrued liabilities:
Management and advisory fees 152
Distribution fees 1
Payable for collateral for securities on loan 21,338
Other 20
---------
24,880
---------
Net Assets $214,231
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 142
Additional paid-in capital 165,214
Undistributed net investment income (loss) 6,628
Undistributed net realized gain (loss) from investment
securities 5,465
Net unrealized appreciation (depreciation) on investment
securities 36,782
---------
Net Assets $214,231
=========
Shares Outstanding:
Initial Class 14,132
Service Class 70
Net Asset Value and Offering Price Per Share:
Initial Class $ 15.08
Service Class 15.37
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 18
Dividends 7,860
Income from loaned securities-net 12
--------
7,890
--------
Expenses:
Management and advisory fees 1,305
Transfer agent fees 2
Printing and shareholder reports 39
Custody fees 36
Administration fees 20
Legal fees 2
Auditing and accounting fees 10
Directors fees 6
Other 3
Service fees:
Service Class 1
--------
Total expenses 1,424
--------
Net Investment Income (Loss) 6,466
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 8,291
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 37,703
--------
Net Gain (Loss) on Investment Securities 45,994
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 52,460
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 5
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 6,466 $ 5,116
Net realized gain (loss) from
investment securities 8,291 (3,169)
Net unrealized appreciation
(depreciation) on investment
securities 37,703 (2,314)
--------- ---------
52,460 (367)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (3,718) (1,256)
Service Class (1) -
----------- ---------
(3,719) (1,256)
---------- ---------
From net realized gains:
Initial Class (743) (669)
Service Class (2) -
----------- ---------
(745) (669)
---------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 79,755 147,154
Service Class 981 -
---------- ---------
80,736 147,154
---------- ---------
Dividends and distributions reinvested:
Initial Class 4,461 1,925
Service Class 2 -
---------- ---------
4,463 1,925
---------- ---------
Cost of shares redeemed:
Initial Class (43,164) (66,179)
Service Class (19) -
---------- ---------
(43,183) (66,179)
---------- ---------
42,016 82,900
---------- ---------
Net increase (decrease) in net assets 90,012 80,608
---------- ---------
Net Assets:
Beginning of year 124,219 43,611
---------- ---------
End of year $ 214,231 $ 124,219
========== =========
Undistributed Net Investment
Income (Loss) $ 6,628 $ 4,599
========== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 6,315 12,649
Service Class 71 -
---------- ---------
6,386 12,649
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 344 169
Service Class - -
---------- ---------
344 169
---------- ---------
Shares redeemed:
Initial Class (3,416) (5,821)
Service Class (1) -
----------- ---------
(3,417) (5,821)
---------- ---------
Net increase (decrease) in shares
outstanding 3,313 6,997
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 6
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 11.41 $ 0.51 $ 3.51 $ 4.02
12/31/2002 11.21 0.65 (0.25) 0.40
12/31/2001 10.32 0.56 0.58 1.14
12/31/2000 8.06 0.59 1.79 2.38
12/31/1999 8.51 0.49 (0.79) (0.30)
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 12.00 0.33 3.13 3.46
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ (0.29) $ (0.06) $ (0.35) $ 15.08
(0.13) (0.07) (0.20) 11.41
(0.25) - (0.25) 11.21
(0.12) - (0.12) 10.32
(0.15) - (0.15) 8.06
- --------------- --------- --------- --------- ---------
Service Class (0.03) (0.06) (0.09) 15.37
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 35.74% $ 213,159 0.87% 0.87% 3.96% 78%
12/31/2002 3.60 124,219 0.98 0.98 5.61 123
12/31/2001 11.05 43,611 1.00 1.13 5.25 172
12/31/2000 29.62 16,577 1.00 1.71 6.27 291
12/31/1999 (3.77) 3,199 1.00 2.69 5.91 190
- --------------- ---------- ----- --------- ---- ---- ---- ---
Service Class 12/31/2003 28.90 1,072 1.13 1.13 3.52 78
- --------------- ---------- ----- --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 1998
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 7
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Clarion Real Estate Securities ("the Fund"), part of ATSF, began
operations on May 1, 1998. The Fund is "non-diversified" under the 1940 Act.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are value at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investor's Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned less
than $5 of program net income for its services. When the Fund makes a security
loan, it receives cash collateral as protection against the risk that the
borrower will default on the loan, and records an asset for the cash invested
collateral and a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 8
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $82 are included in net
realized gains in the Statement of Operations.
Real Estate Investment Trusts ("REITs"): There are certain additional risks
involved in investing in REITs. These include, but are not limited to, economic
conditions, changes in zoning laws, real estate values, property taxes and
interest rates. Since the Fund invests primarily in real estate related
securities, the value of its shares may fluctuate more widely than the value of
shares of a fund that invests in a broad range of industries.
Dividend income is recorded at management's estimate of the income included in
distributions from the REIT investments. Distributions received in excess of
this estimated amount are recorded as a reduction of the cost of investments.
The actual amounts of income, return of capital, and capital gains are only
determined by each REIT after the fiscal year-end, and may differ from the
estimated amounts.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There were no amounts subject to recapture at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 9
Clarion Real Estate Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
matters. Transfer agent fees are reflected separately from Administration fees
on the Statement of Operations. The Legal fees on the Statement of Operations
are for fees paid to external legal counsel. ATFS provides its services to the
Fund at a cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $7. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 169,951
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 121,738
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (718)
Undistributed net realized capital gains (loss) 718
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 1,806
Long-term capital gains 119
2003 Distributions paid from:
Ordinary income 3,859
Long-term capital gains 604
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 8,343
========
Undistributed Long-term Capital Gains $ 4,305
========
Capital Loss Carryforward $ -
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 36,227
========
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 192,214
=========
Unrealized Appreciation $ 36,298
Unrealized (Depreciation) (71)
---------
Net Unrealized Appreciation (Depreciation) $ 36,227
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Clarion Real Estate Securities
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Clarion Real Estate Securities
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series
Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Clarion Real Estate Securities 11
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
It was a sensational year for stocks. After three consecutive years of negative
total returns, equity markets rebounded sharply in 2003. Midcap stocks fully
participated in this market rally and outperformed larger cap issues. The
return for the Standard and Poor's Midcap 400 Index ("S&P Midcap") was 35.59%
versus the return of the Standard and Poor's 500 Composite Stock Index of
28.67%. The factors that led to this boom in stock prices were a combination of
low consumer price inflation, accommodative monetary policy, rising corporate
profits, and continued weakness in the dollar. By the end of 2003, these
factors had combined to fuel economic growth that wiped away any earlier
economic skepticism and provided support for an equity market upswing.
PERFORMANCE
For the year ended December 31, 2003, Dreyfus Mid Cap returned 31.42%. By
comparison its benchmark, the S&P Midcap, returned 35.59%.
STRATEGY REVIEW
While the absolute return for the past year was strongly positive, we are
nonetheless disappointed that the portfolio's performance was less than its
benchmark, the S&P Midcap. Over the course of the year, the portfolio was
negatively impacted by the focus of many investors on rewarding low quality
issues. And to a lesser extent, the portfolio was also negatively impacted late
in the year by profit taking and the accompanying selling pressure in issues
that had performed well during the year.
The blended valuation process used by The Dreyfus Corporation looks at both
growth oriented and value type factors. During the course of the year,
investors appeared to favor low quality type stocks. Many of these types of
issues had little or no earnings as the year began, but they nonetheless
attracted the attention of many investors. Our quantitative valuation process
includes a number of value type factors, such as the price/earnings ratio, but
also includes a number of growth related and quality related factors such as
earnings growth, profits margins, and cash flow growth. Lower quality/less
profitable companies will look less attractive within our valuation process,
but these were the types of issues that performed well in 2003. We do not feel
these types of companies -- lower quality -- are equity market leaders over the
long term, and thus we remain confident in the effectiveness of our process and
the long-term performance of higher quality and more profitable companies.
When reviewing our individual stock selections, we were especially rewarded by
our selections within the energy sector. Our focus on truly midcap holdings
directed us to issues such as Patina Oil & Gas Corporation and XTO Energy, Inc.,
both of which contributed positively to performance. Both of these companies are
domestically based and explore for energy within the United States. The
combination of a strong national economy along with an uncertain geopolitical
situation caused many investors to focus on domestic energy reserves and
production. The portfolio also benefited from holding financial services firms
such as Doral Financial Corporation and Countrywide Financial Corporation. Both
of these firms provide home mortgage related products, and both saw strong
demand for their services based upon a benign interest rate environment.
Our stock selection among business services firms was disappointing. Holdings
such as WebMD Corporation, Pharmaceutical Product Development, Inc., and
Valassis Communications, Inc. experienced company specific developments over
the course of the year, which led to disappointing results. Stock selection
within the technology sector also did not meet our expectations, but in this
sector relative performance was penalized by not owning certain benchmark
names, such as Lam Research Corporation and Cypress Semiconductor Corporation,
which moved upward substantially in price during the year. A technology holding
that performed well during most of 2003 was SanDisk Corporation; but this issue
was down late in the year as profit takers appeared to ignore company
fundamentals and sold the stock after a substantial upswing in its price for
most of the year.
As we enter 2004, the portfolio remains capitalization and economic sector
neutral relative to the S&P Midcap.
/s/ John O'Toole
John O'Toole
Portfolio Manager
The Dreyfus Corporation
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 1
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class S&P Midcap 400
5/3/99 $10,000 $10,000
6/30/99 10,520 10,581
9/30/99 9,520 9,693
12/31/99 10,720 11,358
3/31/00 11,990 12,798
6/30/00 11,750 12,376
9/30/00 12,535 13,879
12/31/00 12,105 13,345
3/31/01 10,660 11,908
6/30/01 11,851 13,474
9/30/01 10,001 11,243
12/31/01 11,628 13,265
3/31/02 12,390 14,156
6/30/02 11,535 12,839
9/30/02 9,778 10,715
12/31/02 10,149 11,339
3/31/03 9,839 10,836
6/30/03 11,345 12,746
9/30/03 11,935 13,585
12/31/03 13,338 15,376
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 31.42% 6.37% 5/3/99
S&P Midcap(1) 35.59% 9.65% 5/3/99
- --------------- ----- ----- ------
Service Class - 26.54% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Standard and Poor's Midcap 400 (S&P Midcap) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 2
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (94.8%)
Agriculture (0.2%)
Fresh Del Monte Produce Inc. 6,400 $ 153
Amusement & Recreation Services (0.3%)
Aztar Corporation (a)(b) 10,300 232
Apparel & Accessory Stores (2.4%)
Abercrombie & Fitch Co.-Class A (a) 11,600 287
Chico's FAS, Inc. (a)(b) 12,400 458
Claire's Stores, Inc. 29,000 546
Ross Stores, Inc. (b) 18,600 492
Apparel Products (0.4%)
Columbia Sportswear Company (a) 5,800 316
Automotive (2.0%)
ArvinMeritor, Inc. 26,900 649
Gentex Corporation 12,400 548
Magna International Inc.-Class A 4,000 320
Automotive Dealers & Service Stations (0.4%)
Pep Boys (The)-Manny, Moe & Jack 14,200 325
Business Services (2.5%)
CheckFree Holdings Corporation (a) 9,300 257
Manpower Inc. (b) 10,300 485
Moody's Corporation 3,900 236
Rent-A-Center, Inc. (a) 10,600 317
Valassis Communications, Inc. (a) 14,200 417
Wireless Facilities, Inc. (a) 10,900 162
Chemicals & Allied Products (2.7%)
Cytec Industries Inc. (a) 10,600 407
Dial Corporation (The) 11,600 330
Lubrizol Corporation (The) 12,000 390
Monsanto Company 8,400 242
RPM, Inc. 16,900 278
Sigma-Aldrich Corporation (b) 6,400 366
Commercial Banks (7.1%)
Associated Banc-Corp 12,900 550
City National Corporation 8,600 534
Commerce Bancshares, Inc. 9,555 468
First Tennessee National Corporation 9,300 410
Hibernia Corporation-Class A 28,000 658
Marshall & Ilsley Corporation 11,000 421
National Commerce Financial Corporation 25,800 703
Popular, Inc. 9,000 404
Sky Financial Group, Inc. 16,400 425
South Financial Group, Inc. (The) 14,000 390
Zions Bancorporation 4,900 301
Shares Value
-------------------- ---------------
Communications Equipment (1.4%)
Avaya Inc. (a) 14,400 $ 186
Plantronics, Inc. (a) 16,400 535
Scientific-Atlanta, Inc. 12,400 339
Computer & Data Processing Services (5.0%)
Adobe Systems Incorporated 4,900 193
Affiliated Computer Services, Inc.-
Class A (a)(b) 10,800 588
Citrix Systems, Inc. (a) 16,400 348
Convergys Corporation (a) 14,200 248
FactSet Research Systems Inc. (b) 7,800 298
GTECH Holdings Corporation 16,000 792
Reynolds and Reynolds Company
(The)-Class A 11,600 337
SunGard Data Systems Inc. (a) 15,200 421
Take-Two Interactive Software, Inc. (a)(b) 8,100 233
United Online, Inc. (a)(b) 15,500 260
Computer & Office Equipment (2.5%)
SanDisk Corporation (a) 13,600 832
Storage Technology Corporation (a)(b) 20,900 538
Western Digital Corporation (a) 40,300 475
Construction (0.9%)
KB Home (b) 5,600 406
Ryland Group, Inc. (The) (b) 2,800 248
Department Stores (0.3%)
J.C. Penney Company, Inc. (b) 9,600 252
Educational Services (1.1%)
Corinthian Colleges, Inc. (a) 7,800 433
ITT Educational Services, Inc. (a) 7,800 366
Electric Services (1.4%)
Great Plains Energy Incorporated 18,400 585
Hawaiian Electric Industries, Inc. 10,000 474
Electric, Gas & Sanitary Services (1.6%)
SCANA Corporation 17,200 589
WPS Resources Corporation 12,300 569
Electronic & Other Electric Equipment (1.8%)
American Power Conversion Corporation (b) 14,200 347
Cooper Industries, Inc.-Class A 6,400 371
Energizer Holdings, Inc. (a) 11,900 447
Helen of Troy Limited (a) 8,100 188
Electronic Components & Accessories (5.7%)
Altera Corporation (a)(b) 13,700 311
Amkor Technology, Inc. (a)(b) 19,400 353
Benchmark Electronics, Inc. (a)(b) 12,800 446
Integrated Circuit Systems, Inc. (a) 15,600 444
International Rectifier Corporation (a) 9,000 445
MEMC Electronic Materials, Inc. (a) 21,900 211
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 3
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Electronic Components & Accessories (continued)
Microchip Technology Incorporated 14,700 $ 490
National Semiconductor Corporation (a) 12,000 473
QLogic Corporation (a)(b) 8,100 418
Sanmina Corporation (a)(b) 46,600 588
Environmental Services (0.8%)
Republic Services, Inc. 23,800 610
Fabricated Metal Products (0.9%)
Crane Co. 11,000 338
Harsco Corporation 8,200 359
Food & Kindred Products (1.3%)
Bunge Limited 5,200 171
Pilgrim's Pride Corporation 14,800 242
Sensient Technologies Corporation 13,200 261
Smithfield Foods, Inc. (a)(b) 13,800 286
Furniture & Fixtures (0.9%)
Hillenbrand Industries, Inc. 6,100 379
Hon Industries Inc. 7,500 325
Furniture & Home Furnishings Stores (0.5%)
Pier 1 Imports, Inc. 18,700 409
Gas Production & Distribution (1.2%)
Energen Corporation 8,100 332
Questar Corporation 15,200 534
Health Services (1.0%)
Apria Healthcare Group Inc. (a) 15,200 433
Select Medical Corporation 17,000 277
Industrial Machinery & Equipment (2.4%)
Briggs & Stratton Corporation 3,700 249
Engineered Support Systems, Inc. 5,600 308
Oil States International, Inc. (a) 32,000 446
Pall Corporation 10,500 282
York International Corporation 13,800 508
Instruments & Related Products (2.1%)
Avid Technology, Inc. (a) 9,000 432
Beckman Coulter Inc. 10,300 524
Garmin Ltd. (b) 7,800 425
Millipore Corporation (a) 4,500 194
Insurance (8.0%)
Aetna Inc. 6,800 460
Coventry Health Care, Inc. (a)(b) 12,400 800
Everest Re Group, Ltd. 6,400 541
Fidelity National Financial, Inc. 21,300 826
First American Corporation (The) 18,400 548
First Health Group Corp. (a) 15,200 296
Health Net Inc. (a) 19,900 651
Old Republic International Corp. 26,100 661
Oxford Health Plans, Inc. (a) 13,500 587
Shares Value
-------------------- ---------------
Insurance (continued)
Principal Financial Group, Inc. 9,300 $ 308
RenaissanceRe Holdings Ltd. (b) 6,400 314
Iron & Steel Foundries (0.8%)
Precision Castparts Corp. 12,800 581
Leather & Leather Products (1.4%)
Coach, Inc. (a) 27,000 1,019
Life Insurance (0.4%)
IPC Holdings, Ltd. 8,400 327
Management Services (0.3%)
FTI Consulting, Inc. (a)(b) 10,100 236
Medical Instruments & Supplies (1.3%)
STERIS Corporation (a) 15,200 344
Varian Medical Systems, Inc. (a) 9,000 622
Mortgage Bankers & Brokers (2.0%)
Countrywide Credit Industries, Inc. 2,100 159
Doral Financial Corporation 18,000 581
GreenPoint Financial Corp. 13,200 466
New Century Financial Corporation (b) 7,900 313
Motion Pictures (0.8%)
Macrovision Corporation (a) 17,200 389
Movie Gallery, Inc. (a)(b) 9,700 181
Oil & Gas Extraction (3.9%)
Houston Exploration Company (The) (a) 9,000 329
Patina Oil & Gas Corporation 10,600 519
Patterson-UTI Energy, Inc. (a) 13,600 448
Southwestern Energy Company (a) 14,200 339
Unit Corporation (a) 19,100 450
XTO Energy, Inc. 29,800 843
Paper & Allied Products (0.9%)
Bemis Company, Inc. 6,400 320
Pactiv Corporation (a) 15,500 370
Paper & Paper Products (0.4%)
United Stationers Inc. (a) 7,100 291
Petroleum Refining (1.6%)
Sunoco, Inc. 5,200 266
Valero Energy Corporation 20,300 941
Pharmaceuticals (4.4%)
Gilead Sciences, Inc. (a) 11,600 673
Invitrogen Corporation (a)(b) 3,300 231
Kos Pharmaceuticals, Inc. (a)(b) 10,300 443
Martek Biosciences Corp. (a)(b) 4,600 299
Mylan Laboratories Inc. 28,750 725
Pharmaceutical Resources, Inc. (a) 5,600 365
Valeant Pharmaceuticals International 23,100 581
Primary Metal Industries (0.4%)
Phelps Dodge Corporation (a)(b) 4,200 320
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 4
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Printing & Publishing (1.2%)
Deluxe Corporation (b) 7,400 $ 306
Washington Post Company (The)-Class B 700 554
Radio & Television Broadcasting (0.9%)
Cox Radio, Inc.-Class A (a) 11,000 278
Entercom Communications Corp. (a)(b) 7,400 392
Research & Testing Services (0.3%)
Pharmaceutical Product Development, Inc. (a) 9,600 259
Residential Building Construction (1.8%)
Hovnanian Enterprises, Inc.-Class A (a)(b) 4,900 427
Lennar Corporation 9,300 893
Restaurants (1.8%)
Bob Evans Farms, Inc. 11,300 367
Brinker International, Inc. (a)(b) 12,800 424
CBRL Group, Inc. 7,200 275
Ruby Tuesday, Inc. 10,400 296
Retail Trade (2.4%)
Borders Group, Inc. (a) 17,100 375
Michaels Stores, Inc. 9,900 438
Schein (Henry), Inc. (a) 8,400 568
Zale Corporation (a) 8,100 431
Rubber & Misc. Plastic Products (0.8%)
Carlisle Companies Incorporated 6,200 377
Jarden Corporation (a) 7,950 217
Savings Institutions (2.3%)
Dime Bancorp, Inc.-warrants,
Expires 11/22/2005 3,850 1
New York Community Bancorp, Inc. (b) 25,200 959
Northwest Bancorp, Inc. 9,000 192
Sovereign Bancorp, Inc. 22,600 537
Security & Commodity Brokers (3.6%)
Affiliated Managers Group, Inc. (a)(b) 6,000 418
Bear Stearns Companies Inc. (The) (b) 5,200 416
E*TRADE Group, Inc. (a)(b) 58,200 736
Knight Trading Group, Inc. (a) 6,600 97
Legg Mason, Inc. 5,800 448
Nuveen Investments, Inc.-Class A 10,600 283
T. Rowe Price Group, Inc. 6,800 322
Textile Mill Products (0.9%)
Mohawk Industries, Inc. (a)(b) 9,000 635
Transportation & Public Utilities (0.5%)
C.H. Robinson Worldwide, Inc. 10,400 394
Trucking & Warehousing (0.7%)
J.B. Hunt Transport Services, Inc. (a) 9,400 254
Landstar System, Inc. (a) 6,400 243
Shares Value
-------------------- ---------------
Wholesale Trade Durable Goods (0.2%)
Digital River, Inc. (a)(b) 6,100 $ 135
---------
Total Common Stocks (cost: $58,555)
70,788
---------
Principal Value
----------- ------------
SHORT-TERM OBLIGATIONS (5.3%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $3,940 on 01/02/2004 $ 3,939 $ 3,939
---------
Total Short-Term Obligations (cost: $3,939) 3,939
---------
SECURITY LENDING COLLATERAL (18.9%)
Debt (15.1%)
Bank Notes (0.7%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 67 $ 67
Fleet National Bank
1.00%, due 01/21/2004 250 250
National Bank of Commerce
1.19%, due 04/21/2004 208 208
Commercial Paper (3.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 125 125
Delaware Funding Corporation
1.08%, due 01/07/2004 83 83
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 125 125
1.09%, due 01/13/2004 83 83
1.08%, due 02/05/2004 166 166
General Electric Capital Corporation
1.09%, due 01/08/2004 208 208
1.09%, due 01/09/2004 125 125
1.08%, due 01/16/2004 166 166
Govco Incorporated-144A
1.07%, due 02/05/2004 208 208
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 208 208
1.09%, due 02/06/2004 208 208
1.10%, due 02/09/2004 122 122
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 208 208
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 125 125
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 242 242
1.08%, due 02/17/2004 416 416
Sheffield Receivables-144A
1.09%, due 01/21/2004 83 83
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 5
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Euro Dollar Overnight (0.8%)
BNP Paribas SA
0.97%, due 01/07/2004 $ 417 $ 417
Credit Agricole Indosuez
0.98%, due 01/02/2004 17 17
1.08%, due 01/06/2004 158 158
Euro Dollar Terms (3.7%)
Bank of Montreal
1.06%, due 01/15/2004 81 81
1.06%, due 02/17/2004 167 167
Bank of Scotland
1.06%, due 04/02/2004 125 125
Citigroup Inc.
1.10%, due 01/22/2004 125 125
1.09%, due 02/06/2004 167 167
Credit Agricole Indosuez
1.08%, due 01/28/2004 83 83
Den Danske Bank
1.08%, due 01/20/2004 417 417
1.02%, due 01/30/2004 208 208
Royal Bank of Canada
1.05%, due 02/27/2004 417 417
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 250 250
1.08%, due 01/15/2004 83 83
1.08%, due 01/20/2004 42 42
Svenska Handelsbanken AB
1.09%, due 01/15/2004 42 42
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 250 250
Wells Fargo & Company
1.04%, due 01/30/2004 333 333
Master Notes (1.1%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 167 167
1.14%, due 09/08/2004 250 250
Morgan Stanley
1.05%, due 06/21/2004 400 400
Principal Value
--------------- ------------
Medium Term Notes (0.7%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 $ 418 $ 418
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 125 125
Repurchase Agreements (4.2%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $975 on 01/02/2004 975 975
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,325 on 01/02/2004 1,325 1,325
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $793 on 01/02/2004 793 793
Shares Value
--------------- -----------
Investment Companies (3.8%)
Money Market Funds (3.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 204,440 $ 204
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 499,156 499
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 2,170,493 2,170
---------
Total Security Lending Collateral (cost: $14,134) 14,134
---------
Total Investment Securities (cost: $76,628) $ 88,861
=========
SUMMARY:
Investments, at value 119.0 % $ 88,861
Liabilities in excess of other assets (19.0)% (14,176)
--------- ---------
Net assets 100.0 % $ 74,685
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$13,684.
(c) Cash collateral for the Repurchase Agreements, valued at $3,154, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $62,677
Ginnie Mae ARM-008259 (4.75%, due 08/20/2023) with a market value and
accrued interest of $4,136.
DEFINITIONS:
ARM Adjustable Rate Mortgage
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 6
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $76,628)
(including $13,684 of securities loaned) $ 88,861
Cash 40
Receivables:
Investment securites sold 615
Dividends 39
Other 7
--------
89,562
--------
Liabilities:
Investment securities purchased 670
Accounts payable and accrued liabilities:
Management and advisory fees 57
Payable for collateral for securities on loan 14,134
Other 16
--------
14,877
--------
Net Assets $ 74,685
========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 58
Additional paid-in capital 69,565
Undistributed net investment income (loss) 56
Accumulated net realized gain (loss) from investment
securities (7,227)
Net unrealized appreciation (depreciation) on
investment securities 12,233
--------
Net Assets $ 74,685
========
Shares Outstanding:
Initial Class 5,755
Service Class 24
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.93
Service Class 12.92
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 5
Dividends 611
Income from loaned securities-net 17
Less withholding taxes on foreign dividends (2)
-------
631
-------
Expenses:
Management and advisory fees 487
Transfer agent fees 2
Printing and shareholder reports 42
Custody fees 17
Administration fees 20
Legal fees 1
Auditing and accounting fees 10
Directors fees 2
Other 1
-------
Total expenses 582
Less:
Advisory fee waiver (9)
-------
Net expenses 573
-------
Net Investment Income (Loss) 58
-------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 137
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 15,809
-------
Net Gain (Loss) on Investment Securities 15,946
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $16,004
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 7
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 58 $ 64
Net realized gain (loss) from
investment securities 137 (5,759)
Net unrealized appreciation
(depreciation) on investment
securities 15,809 (4,448)
-------- --------
16,004 (10,143)
-------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (65) (21)
Service Class - -
-------- --------
(65) (21)
-------- --------
From net realized gains:
Initial Class - -
Service Class - -
-------- --------
- -
-------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 22,377 55,981
Service Class 278 -
-------- --------
22,655 55,981
-------- --------
Dividends and distributions reinvested:
Initial Class 65 21
Service Class - -
-------- --------
65 21
-------- --------
Cost of shares redeemed:
Initial Class (14,175) (25,849)
Service Class (3) -
---------- --------
(14,178) (25,849)
--------- --------
8,542 30,153
--------- --------
Net increase (decrease) in net assets 24,481 19,989
--------- --------
Net Assets:
Beginning of year 50,204 30,215
--------- --------
End of year $74,685 $ 50,204
========= ========
Undistributed Net Investment
Income (Loss) $ 56 $ 63
========= ========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 2,026 4,887
Service Class 24 -
--------- --------
2,050 4,887
--------- --------
Shares issued-reinvested from distributions:
Initial Class 6 2
Service Class - -
--------- --------
6 2
--------- --------
Shares redeemed:
Initial Class (1,374) (2,468)
Service Class - -
--------- --------
(1,374) (2,468)
--------- --------
Net increase (decrease) in shares
outstanding 682 2,421
========= ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 8
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.85 $ 0.01 $ 3.08 $ 3.09
12/31/2002 11.29 0.01 (1.45) (1.44)
12/31/2001 11.90 0.01 (0.49) (0.48)
12/31/2000 10.72 0.03 1.36 1.39
12/31/1999 10.00 0.04 0.68 0.72
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 10.21 (0.01) 2.72 2.71
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 12.93
- - - 9.85
(0.12) (0.01) (0.13) 11.29
(0.21) - (0.21) 11.90
- - - 10.72
- --------------- --------- --------- --------- ---------
Service Class - - - 12.92
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 31.42% $ 74,375 1.00% 1.02% 0.10% 73%
12/31/2002 (12.72) 50,204 1.00 1.14 0.13 85
12/31/2001 (3.94) 30,215 1.00 1.34 0.09 78
12/31/2000 12.92 14,714 1.00 1.90 0.29 111
12/31/1999 7.20 3,384 1.00 4.89 0.58 94
- --------------- ---------- ------ -------- ---- ---- ----- ---
Service Class 12/31/2003 26.54 310 1.25 1.28 (0.14) 73
- --------------- ---------- ------ -------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 3, 1999
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 9
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Dreyfus Mid Cap ("the Fund"), part of ATSF, began operations on May 3,
1999.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $7 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 10
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $34 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.85% of the first $100 million of ANA
0.80% of ANA over $100 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 77 12/31/2004
Fiscal Year 2002 69 12/31/2005
Fiscal Year 2003 9 12/31/2006
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 11
Dreyfus Mid Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $3. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 46,615
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 40,640
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 21
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 65
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 56
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (7,203)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 12,208
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 1,280 December 31, 2009
5,118 December 31, 2010
805 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 76,653
========
Unrealized Appreciation $ 12,795
Unrealized (Depreciation) (587)
--------
Net Unrealized Appreciation (Depreciation) $ 12,208
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Dreyfus Mid Cap
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dreyfus Mid Cap (the "Fund") (one
of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Mid Cap 13
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
In a year that began under the auspice of war, global economic weakness, and a
fatal flu outbreak, equity markets across the globe staged a stunning
turnaround. The year 2003 proved to be our best year on both an absolute and
relative basis. These results, following the difficult 2002 market, reinforce
our belief in our long-term approach to value investing. The recent success of
the portfolio is clearly tied to the strong business momentum of our holdings.
Starting in the third quarter of last year, the stocks we owned have posted
much stronger than average earnings, beating consensus estimates approximately
seventy five percent of the time. That earnings success, coupled with extremely
favorable value characteristics, has been the major drivers of our good
performance. Our investing style has always been a more opportunistic one, with
a focus on the intermediate to longer-term outlook of the expectations of the
companies we analyze. We look for truly undervalued stocks where there is
potential for significant capital appreciation. At times this leads us to take
a contrarian view of the fundamental prospects of a company.
PERFORMANCE
For the year ended December 31, 2003, Dreyfus Small Cap Value returned 90.83%.
By comparison its benchmark, the Russell 2000 Index ("Russell 2000") returned
47.25%.
STRATEGY REVIEW
While the portfolio performed well across all sectors, outperforming the Russell
2000 in ten of the eleven economic sectors it was our technology, consumer
services and capital goods stocks that truly dominated performance. Returns for
these sectors ranged from seventy percent up to one hundred twenty seven percent
and accounted for over fifty percent of total contribution to return. Our health
care, financial services and basic industries stocks also performed very well,
contributing an additional twenty three percent to the total return and made up
twenty seven percent of the portfolio at year-end. Although a much lower percent
weight of the portfolio, stocks in the utilities, consumer non-durables and
durable, and transportation sectors also posted very strong results.
As we have mentioned in the past, we are bottom-up stock pickers, which has
always been the key driver of our long-term performance, notwithstanding our
disappointing results in 2002. A further review of attribution shows that
returns were broadly based with over 60 stocks contributing more than 50 basis
points (1/2 of one percentage point) to the overall results for the year.
Despite this strong performance, we believe the current portfolio is still very
attractively priced with significant price appreciation potential. Valuation
criteria such as price to estimated earnings and price to sales and book value
drive our optimism about the outlook. Even with the recent favorable
performance, our target prices, on average, remain over 100% above current price
levels.
We are disciplined sellers. As stocks appreciate to their target prices we take
profits. Many of the stocks that have added the most to our results in the past
year have been sold because they are no longer cheap. Indeed, less than 40% of
the current portfolio is invested in stocks that we owned at the beginning of
2003. We have recently reduced our emphasis in technology, as many of our
holdings were sold as they reached price targets. Our technology holdings
returned well over 100%, on average, in 2003. Our current overweight sectors
include energy, basic industries, capital goods and transportation, which are
all benefiting from the improving economy. We remain significantly underweight
in financial services where valuations and business momentum remains neutral.
Energy remains a major area of focus, as our long-term outlook for energy prices
is very positive. An improving economy should continue to benefit the portfolio.
/s/ Peter L. Higgins
Peter L. Higgins
Portfolio Manager
The Dreyfus Corporation
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 1
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Dreyfus Small Cap Value
and its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class Russell 2000
12/31/93 $10,000 $10,000
3/31/94 9,633 9,734
6/30/94 9,284 9,353
9/30/94 9,955 10,003
12/31/94 9,821 9,818
3/31/95 9,651 10,271
6/30/95 10,422 11,234
9/30/95 11,073 12,343
12/31/95 11,201 12,611
3/31/96 11,641 13,254
6/30/96 12,185 13,917
9/30/96 12,539 13,964
12/31/96 14,072 14,691
3/31/97 14,349 13,931
6/30/97 16,655 16,190
9/30/97 18,722 18,599
12/31/97 17,667 17,976
3/31/98 19,691 19,784
6/30/98 18,688 18,862
9/30/98 13,506 15,062
12/31/98 17,282 17,519
3/31/99 16,378 16,568
6/30/99 21,455 19,145
9/30/99 20,127 17,935
12/31/99 22,362 21,242
3/31/00 25,342 22,747
6/30/00 24,605 21,887
9/30/00 25,574 22,129
12/31/00 24,827 20,601
3/31/01 28,515 19,261
6/30/01 31,895 22,013
9/30/01 22,131 17,436
12/31/01 31,977 21,113
3/31/02 32,709 21,954
6/30/02 24,532 20,120
9/30/02 16,415 15,814
12/31/02 19,358 16,788
3/31/03 18,445 16,034
6/30/03 25,472 19,790
9/30/03 29,938 21,587
12/31/03 36,940 24,721
*Inception 05/04/1993.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
----------- ----------- ---------- ------------ ----------
Dreyfus Small Cap Value 90.83% 16.41% 13.96% 14.23% 5/4/93
Russell 2000(1) 47.25% 7.13% 9.47% 10.49% 5/4/93
- ------------------------- ----- ----- ----- ----- ------
NOTES
(1) The Russell 2000 (Russell 2000) Index is an unmanaged index used as a
general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http:// www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Investing in small cap stocks generally involves greater risk and volatility,
therefore an investment in the fund may not be appropriate for everyone.
Companies with small capitalization have the potential for greater volatility
than companies with larger capitalization. The limited volume and trading
frequency of small-capitalized stocks may result in substantial price deviation.
Further, companies with small capitalization may experience more significant
growth and failure rates than companies with large capitalization.
Periods less than one year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives and policies of
this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Dreyfus Small
Cap Value Portfolio, of the Endeavor Series Trust. The Dreyfus Corporation has
been the portfolio's subadvisor since September 16, 1996. Prior to that date a
different firm managed the portfolio and the performance set forth above, prior
to September 16, 1996 is attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 2
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (99.9%)
Air Transportation (2.2%)
Continental Airlines, Inc. (a)(b) 105,800 $ 1,721
ExpressJet Holdings, Inc. (a)(b) 267,800 4,017
Pinnacle Airlines Corp. (a) 164,600 2,286
Amusement & Recreation Services (1.8%)
Argosy Gaming Company (a) 75,900 1,973
Intrawest Corporation 55,000 1,017
Six Flags, Inc. (a) 442,030 3,324
Apparel & Accessory Stores (1.7%)
Abercrombie & Fitch Co.-Class A (a) 86,400 2,135
American Eagle Outfitters, Inc. (a) 107,800 1,768
Wet Seal, Inc. (The)-Class A (a) 209,100 2,068
Apparel Products (0.3%)
Playtex Products, Inc. (a) 152,000 1,175
Automotive (1.3%)
ArvinMeritor, Inc. 98,200 2,369
Federal Signal Corporation 134,900 2,363
Business Services (1.8%)
Brink's Company (The) 152,200 3,441
Quovadx, Inc. (a)(b) 229,900 1,127
Valassis Communications, Inc. (a)(b) 65,400 1,919
Chemicals & Allied Products (4.6%)
Great Lakes Chemical Corporation (b) 106,800 2,904
Hercules Incorporated (a) 200,200 2,442
IMC Global Inc. (b) 449,400 4,463
Millennium Chemicals, Inc. (b) 255,700 3,242
Olin Corporation 96,300 1,932
PolyOne Corporation (a) 219,860 1,405
Communications Equipment (1.3%)
Arris Group, Inc. (a)(b) 225,585 1,633
McDATA Corporation-Class A (a) 286,100 2,727
McDATA Corporation-Class B (a) 31,000 295
Computer & Data Processing Services (10.2%)
Acxiom Corporation (a)(b) 263,100 4,886
Art Technology Group, Inc. (a) 685,600 1,049
Borland Software Corporation (a) 336,800 3,277
EarthLink, Inc. (a) 367,300 3,673
FileNet Corporation (a) 68,700 1,860
IONA Technologies PLC-ADR (a) 558,600 2,720
Manugistics Group, Inc. (a)(b) 222,530 1,391
MRO Software, Inc. (a) 148,100 1,993
Network Associates, Inc. (a) 272,900 4,104
Parametric Technology Corporation (a) 1,170,000 4,610
Perot Systems Corporation-Class A (a) 101,500 1,368
Sabre Holdings Corporation 109,900 2,373
Sapient Corporation (a) 134,600 754
SkillSoft PLC-ADR (a) 131,300 1,136
Shares Value
-------------------- ---------------
Computer & Data Processing Services (continued)
THQ Inc. (a) 54,800 $ 927
Verity, Inc. (a) 50,800 848
Computer & Office Equipment (2.5%)
3Com Corporation (a) 167,480 1,368
Extreme Networks, Inc. (a) 238,800 1,722
NCR Corporation (a) 103,300 4,008
palmOne, Inc. (a)(b) 164,300 1,931
Construction (2.4%)
Insituform Technologies, Inc.-Class A (a) 175,300 2,892
MasTec, Inc. (a) 180,500 2,673
Quanta Services, Inc. (a)(b) 429,400 3,135
Electric Services (1.4%)
Calpine Corporation (a)(b) 1,019,700 4,905
Electronic & Other Electric Equipment (1.5%)
GrafTech International Ltd. (a) 200,700 2,709
Rayovac Corporation (a) 122,300 2,562
Electronic Components & Accessories (3.5%)
Bookham Technology PLC-ADR (a)(b) 1,521,200 3,803
Fairchild Semiconductor International,
Inc.-Class A (a) 66,300 1,656
Flextronics International Ltd. (a)(b) 151,600 2,250
Lattice Semiconductor Corporation (a) 247,400 2,395
Photronics, Inc. (a)(b) 44,782 892
Sanmina Corporation (a)(b) 119,810 1,511
Environmental Services (0.1%)
Allied Waste Industries, Inc. (a) 20,540 285
Fabricated Metal Products (1.4%)
Shaw Group Inc. (The) (a)(b) 379,100 5,163
Food & Kindred Products (0.9%)
Del Monte Foods Company (a) 183,700 1,910
Sensient Technologies Corporation 72,600 1,435
Furniture & Fixtures (1.7%)
BE Aerospace, Inc. (a) 637,980 3,445
Furniture Brands International, Inc. 88,900 2,607
Furniture & Home Furnishings Stores (1.3%)
Linens 'n Things, Inc. (a) 150,500 4,527
Health Services (1.8%)
Beverly Enterprises, Inc. (a)(b) 127,900 1,099
RehabCare Group, Inc. (a)(b) 160,525 3,413
Triad Hospitals, Inc. (a) 62,700 2,086
Industrial Machinery & Equipment (9.0%)
AGCO Corporation (a) 192,900 3,885
Axcelis Technologies, Inc. (a) 360,410 3,683
DuPont Photomasks, Inc. (a) 122,400 2,955
Flowserve Corporation (a) 166,500 3,477
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 3
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Industrial Machinery & Equipment (continued)
Grant Prideco, Inc. (a) 293,210 $ 3,818
Mattson Technology, Inc. (a) 119,720 1,463
National-Oilwell, Inc. (a) 225,100 5,033
Terex Corporation (a) 82,900 2,361
Timken Company (The) 142,100 2,851
York International Corporation 84,525 3,111
Instruments & Related Products (0.9%)
LTX Corporation (a)(b) 213,910 3,215
Insurance (1.5%)
Phoenix Companies, Inc. (The) (b) 161,100 1,940
PMI Group, Inc. (The) 46,000 1,713
UnumProvident Corporation (b) 102,400 1,615
Life Insurance (1.3%)
Scottish Annuity & Life Holdings, Ltd. 219,900 4,570
Lumber & Wood Products (0.6%)
Champion Enterprises, Inc. (a) 322,200 2,255
Management Services (1.4%)
BearingPoint, Inc. (a) 241,900 2,441
Ventiv Health, Inc. (a)(b) 265,244 2,427
Manufacturing Industries (0.8%)
Moore Wallace Incorporated (a) 145,400 2,723
Mining (1.6%)
Arch Coal, Inc. (b) 34,750 1,083
Massey Energy Company (b) 220,100 4,578
Motion Pictures (0.6%)
Hollywood Entertainment Corporation (a) 150,600 2,071
Oil & Gas Extraction (6.5%)
Chesapeake Energy Corporation 302,900 4,113
Global Industries, Ltd. (a) 478,225 2,463
Key Energy Services, Inc. (a) 589,200 6,075
Parker Drilling Company (a) 902,600 2,302
Patterson-UTI Energy, Inc. (a)(b) 205,520 6,766
Veritas DGC, Inc. (a) 202,260 2,120
Paper & Allied Products (0.4%)
Intertape Polymer Group Inc. (CAD) (a) 113,300 1,442
Personal Services (0.2%)
G&K Services, Inc.-Class A 23,300 856
Petroleum Refining (0.1%)
Tesoro Petroleum Corporation (a) 18,620 271
Pharmaceuticals (6.9%)
Alpharma Inc.-Class A 125,900 2,531
Biovail Corporation (a)(b) 225,300 4,842
Cephalon, Inc. (a)(b) 70,800 3,427
Enzon, Inc. (a)(b) 424,100 5,089
Shares Value
-------------------- ---------------
Pharmaceuticals (continued)
IVAX Corporation (a) 136,870 $ 3,268
King Pharmaceuticals, Inc. (a) 225,830 3,446
Savient Pharmaceuticals, Inc. (a) 580,975 2,678
Primary Metal Industries (3.2%)
International Steel Group Inc. (a)(b) 114,600 4,464
United States Steel Corporation (b) 204,600 7,165
Printing & Publishing (1.3%)
ProQuest Company (a)(b) 91,400 2,692
Reader's Digest Association, Inc.
(The)-Class A 146,500 2,148
Radio, Television & Computer Stores (0.3%)
Electronics Boutique Holdings Corp. (a) 39,500 904
Research & Testing Services (1.4%)
PAREXEL International Corporation (a) 57,460 934
Pharmaceutical Product Development,
Inc. (a) 158,640 4,279
Restaurants (0.6%)
O'Charley's Inc. (a) 112,400 2,018
Retail Trade (0.3%)
Finlay Enterprises, Inc. (a) 77,940 1,101
Security & Commodity Brokers (3.4%)
E*TRADE Group, Inc. (a)(b) 457,300 5,785
Knight Trading Group, Inc. (a)(b) 281,790 4,125
LaBranche & Co Inc. (b) 192,900 2,251
Shoe Stores (0.8%)
Payless ShoeSource, Inc. (a)(b) 212,400 2,845
Stone, Clay & Glass Products (0.5%)
Anchor Glass Container Corporation (b) 59,700 955
Apogee Enterprises, Inc. 60,700 689
Telecommunications (1.4%)
Alomosa Holdings, Inc. (a)(b) 892,770 3,580
Primus Telecommunications Group,
Incorporated (a)(b) 155,000 1,578
Textile Mill Products (0.8%)
Collins and Aikman Corporation (a)(b) 626,320 2,712
Transportation & Public Utilities (1.5%)
ebookers PLC-ADR (a)(b) 209,600 3,071
EGL, Inc. (a) 69,600 1,222
Orbitz, Inc.-Class A (a)(b) 46,500 1,079
Transportation Equipment (0.5%)
Fleetwood Enterprises, Inc. (a)(b) 108,000 1,108
Westinghouse Air Brake Technologies
Corporation 35,300 602
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 4
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------- ----------
Trucking & Warehousing (4.4%)
Central Freight Lines, Inc. (a) 41,600 $ 738
CNF Transportation Inc. 71,800 2,434
Overnite Corporation (a) 169,000 3,845
Quality Distribution Inc. (a) 57,600 1,126
Yellow Corporation (a) 13,200 477
Yellow Roadway Corporation (a)(b) 199,500 7,216
Variety Stores (0.7%)
Kmart Holding Corporation (a) 109,900 2,632
Water Transportation (1.1%)
Tidewater Inc. 92,600 2,767
Trico Marine Services, Inc. (a) 676,040 1,210
Wholesale Trade Durable Goods (2.2%)
Action Performance Companies, Inc. (b)212,400 4,163
IKON Office Solutions, Inc. 326,900 3,877
-------
Total Common Stocks (cost: $311,628) 359,846
-------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (26.6%)
Debt (21.2%)
Bank Notes (1.0%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 451 $ 451
Fleet National Bank
1.00%, due 01/21/2004 1,692 1,692
National Bank of Commerce
1.19%, due 04/21/2004 1,410 1,410
Commercial Paper (5.5%)
Compass Securitization-144A
1.08%, due 01/22/2004 846 846
Delaware Funding Corporation
1.08%, due 01/07/2004 562 562
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 846 846
1.09%, due 01/13/2004 564 564
1.08%, due 02/05/2004 1,126 1,126
General Electric Capital Corporation
1.09%, due 01/08/2004 1,406 1,406
1.09%, due 01/09/2004 846 846
1.08%, due 01/16/2004 1,123 1,123
Govco Incorporated-144A
1.07%, due 02/05/2004 1,408 1,408
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,408 1,408
1.09%, due 02/06/2004 1,407 1,407
1.10%, due 02/09/2004 822 822
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,408 1,408
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 846 846
Principal Value
--------------------- ---------------
Commercial Paper (continued)
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 $ 1,634 $ 1,634
1.08%, due 02/17/2004 2,815 2,814
Sheffield Receivables-144A
1.09%, due 01/21/2004 564 564
Euro Dollar Overnight (1.1%)
BNP Paribas SA
0.97%, due 01/07/2004 2,820 2,819
Credit Agricole Indosuez
0.98%, due 01/02/2004 113 113
1.08%, due 01/06/2004 1,072 1,072
Euro Dollar Terms (5.2%)
Bank of Montreal
1.06%, due 01/15/2004 551 551
1.06%, due 02/17/2004 1,128 1,128
Bank of Scotland
1.06%, due 04/02/2004 846 846
Citigroup Inc.
1.10%, due 01/22/2004 846 846
1.09%, due 02/06/2004 1,128 1,128
Credit Agricole Indosuez
1.08%, due 01/28/2004 564 564
Den Danske Bank
1.08%, due 01/20/2004 2,820 2,819
1.02%, due 01/30/2004 1,410 1,410
Royal Bank of Canada
1.05%, due 02/27/2004 2,820 2,819
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,692 1,692
1.08%, due 01/15/2004 564 564
1.08%, due 01/20/2004 282 282
Svenska Handelsbanken AB
1.09%, due 01/15/2004 282 282
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,692 1,692
Wells Fargo & Company
1.04%, due 01/30/2004 2,256 2,256
Master Notes (1.5%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,128 1,128
1.14%, due 09/08/2004 1,692 1,692
Morgan Stanley
1.05%, due 06/21/2004 2,707 2,707
Medium Term Notes (1.0%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 2,820 2,819
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 846 846
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 5
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Repurchase Agreements (5.9%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $6,598 on 01/02/2004 $ 6,598 $ 6,598
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $8,967 on 01/02/2004 8,967 8,967
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $5,358 on 01/02/2004 5,358 5,358
Shares Value
---------------- ------------
Investment Companies (5.4%)
Money Market Funds (5.4%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,383,166 $ 1,383
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 3,377,101 3,377
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 14,684,751 14,685
---------
Total Security Lending Collateral (cost: $95,626) 95,626
---------
Total Investment Securities (cost: $407,254) $ 455,472
=========
SUMMARY:
Investments, at value 126.5 % $ 455,472
Liabilities in excess of other assets (26.5)% (95,415)
---------- ---------
Net assets 100.0 % $ 360,057
========== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$89,652.
(c) Cash Collateral for the Repurchase Agreements valued at $21,341, that serve
as collateral for securities lending are invested in coporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 6
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $407,254)
(including $89,652 of securities loaned) $455,472
Cash 327
Receivables:
Investment securities sold 3,269
Interest 3
Dividends 69
Other 76
---------
459,216
---------
Liabilities:
Investment securities purchased 3,209
Accounts payable and accrued liabilities:
Management and advisory fees 254
Payable for collateral for securities on loan 95,626
Other 70
---------
99,159
---------
Net Assets $360,057
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 247
Additional paid-in capital 339,193
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (27,601)
Net unrealized appreciation (depreciation) on investment
securities 48,218
---------
Net Assets $360,057
=========
Shares Outstanding 24,731
Net Asset Value and Offering Price Per Share $ 14.56
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 2
Dividends 826
Income from loaned securities-net 152
Less withholding taxes on foreign dividends (2)
--------
978
--------
Expenses:
Management and advisory fees 2,182
Transfer agent fees 2
Printing and shareholder reports 18
Custody fees 51
Administration fees 20
Legal fees 3
Auditing and accounting fees 10
Directors fees 10
Other 7
--------
Total expenses 2,303
--------
Net Investment Income (Loss) (1,325)
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 28,998
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 154,489
--------
Net Gain (Loss) on Investment Securities 183,487
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $182,162
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 7
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (1,325) $ (1,210)
Net realized gain (loss) from
investment securities 28,998 (50,174)
Net unrealized appreciation
(depreciation) on investment
securities 154,489 (94,570)
--------- ---------
182,162 (145,954)
--------- ---------
Distributions to Shareholders:
From net investment income - -
From net realized gains - (43,563)
--------- ---------
- (45,563)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold 5,214 120,226
Dividends and distributions reinvested - 43,563
Cost of shares redeemed (51,678) (63,598)
--------- ---------
(46,464) 100,191
--------- ---------
Net increase (decrease) in net assets 135,698 (89,326)
--------- ---------
Net Assets:
Beginning of year 224,359 313,685
--------- ---------
End of year $ 360,057 $ 224,359
========= =========
Undistributed Net Investment
Income (Loss) $ - $ -
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued 514 9,134
Shares issued-reinvested from distributions - 5,968
Shares redeemed (5,188) (5,649)
--------- ---------
Net increase (decrease) in shares
outstanding (4,674) 9,453
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 8
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year (a)
--------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Year
------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ------------
12/31/2003 $ 7.63 $ (0.05) $ 6.98 $ 6.93 $ - $ - $ - $ 14.56
12/31/2002 15.72 (0.05) (6.24) (6.29) - (1.80) (1.80) 7.63
12/31/2001 15.62 (0.03) 4.66 4.63 - (4.53) (4.53) 15.72
12/31/2000 16.51 (0.03) 1.87 1.84 - (2.73) (2.73) 15.62
12/31/1999 14.14 (0.04) 4.00 3.96 - (1.59) (1.59) 16.51
- --- ---------- ------- --------- -------- -------- --- -------- -------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (e) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended Return (b)(f) (000's) Net (c) Total (d) Net Assets (e) Rate (f)
------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 90.83% $ 360,057 0.84% 0.84% (0.49)% 140%
12/31/2002 (39.46) 224,359 0.88 1.19 (0.45) 133
12/31/2001 28.79 313,685 0.91 1.18 (0.24) 172
12/31/2000 11.02 213,086 0.91 1.26 (0.23) 192
12/31/1999 29.39 187,803 0.90 1.22 (0.28) 216
- --- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(c) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001, and prior years, Ratio of Net Expenses to Average Net Assets is net
of fees paid indirectly and credits allowed by the custodian.
(d) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(e) Annualized.
(f) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 9
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Dreyfus Small Cap Value ("the Fund"), part of ATSF, began operations
as Dreyfus Small Cap Value Portfolio, a part of the Endeavor Series Trust on
May 4, 1993. The Fund became part of ATSF on May 1, 2002. The Fund is closed to
new investors.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $65 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 10
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $396 are included in
net realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.89% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
The Fund is authorized under the 12b-1 plan to pay fees up to limit of 0.15%.
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred before April 30, 2004. Prior to AFSG seeking
reimbursement of future expenses, policy and contract owners will be notified in
advance.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $12. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 11
Dreyfus Small Cap Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 380,671
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 427,808
-
U.S. Government
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (1,325)
Undistributed net investment income (loss) 1,325
-
Undistributed net realized capital gains (loss)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 43,563
Long-term capital gains -
2003 Distributions paid from:
Ordinary income -
-
Long-term capital gains
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (21,529)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 42,146
=========
The capital loss carryforwards are available to offset future realized capital
gains through the period listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 21,529 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003, was $17,919.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $413,326
========
Unrealized Appreciation $ 60,882
Unrealized (Depreciation) (18,736)
--------
Net Unrealized Appreciation (Depreciation) $ 42,146
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Dreyfus Small Cap Value
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dreyfus Small Cap Value (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Dreyfus Small Cap Value 13
Federated Growth & Income
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
It was an ebullient year for the world's stock markets, as the most
speculative, lowest quality, stocks had the highest returns. The Standard and
Poor's 500 Composite Stock Index returned 28.67%, and the more speculative
NASDAQ Composite Index returned 50.01%.
PERFORMANCE
For the year ended December 31, 2003, Federated Growth & Income returned
26.84%. By comparison its benchmark, the Russell Midcap Value Index returned
38.07%.
STRATEGY REVIEW
The mandate of this portfolio is "defensive equity," not mid-cap value. It was
an extraordinarily strong period for stocks, particularly mid-cap value. With
stock valuations higher than any time since 1929 (except for the late 1990's
unprecedented bubble), the market offers exceedingly high risks and low
probable long-term returns. An emphasis on capital preservation in this
environment seems prudent.
Our main undertaking this year was to favor investments outside the U.S. to
benefit from expected declines in the U.S. dollar. This was successful, as the
dollar has fallen to multi-year lows against most foreign currencies. In
addition to 41% held in non-U.S. stocks, the portfolio ended the year with 24%
in non-U.S. government short-term instruments. These instruments provided
higher interest yields and currency appreciation against the U.S. dollar. For
example, several key currencies had the following gains this year versus the
dollar: the Australian dollar, 33.9%; the Canadian dollar, 21%; and the euro,
20%.
The second major undertaking was to invest in gold stocks. We have thought for
three years that gold had ended its long bear market and had begun a new bull
market, unlike U.S. stocks. We continue to favor gold over the major U.S. stock
indexes, as U.S. stocks ended the year at a record low 4% of the portfolio.
Real estate stocks have been the largest investment in the portfolio over the
last several years and have had much higher returns than the U.S. stock market.
This year, we sharply reduced the stake in U.S. real estate investment trusts
from 21% of the portfolio at the start of the year to less than 2% at year-end
(though with an additional 4.4% in non-U.S. real estate companies).
The portfolio's best stock returns came from the energy sector, as Husky Energy
Inc. (Canada), Santos Limited (Australia), OMV AG (Austria), and Statoil ASA
(Norway) gained during the year. The gold sector was led by Placer Dome, Inc.,
Barrick Gold Corporation, and Harmony Gold Mining Company Limited. Mayr-Melnhof
Karton AG, Europe's largest producer of recycled cardboard boxes, also did
well.
/s/ Steven J. Lehman
Steven J. Lehman
/s/ John L. Nichol
John L. Nichol
Co-Portfolio Mangers
Federated Investment Counseling
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 1
Federated Growth & Income
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 3/1/94 through 12/31/03
Russell
Initial Class MCV
3/1/94 $10,000 $10,000
3/31/94 9,611 9,613
6/30/94 9,410 9,587
9/30/94 9,717 10,017
12/31/94 9,542 9,682
3/31/95 9,962 10,655
6/30/95 10,502 11,578
9/30/95 11,212 12,497
12/31/95 11,952 13,065
3/31/96 11,974 13,795
6/30/96 12,486 14,060
9/30/96 12,160 14,465
12/31/96 13,343 15,711
3/31/97 13,304 15,979
6/30/97 14,534 17,992
9/30/97 15,198 20,286
12/31/97 16,631 21,111
3/31/98 17,173 23,221
6/30/98 16,839 22,624
9/30/98 16,444 19,534
12/31/98 17,139 22,184
3/31/99 15,770 21,494
6/30/99 17,686 23,897
9/30/99 16,947 21,355
12/31/99 16,376 22,160
3/31/00 16,565 22,383
6/30/00 17,498 22,007
9/30/00 19,498 24,131
12/31/00 21,151 26,410
3/31/01 21,908 25,477
6/30/01 23,560 27,273
9/30/01 23,127 24,122
12/31/01 24,472 27,024
3/31/02 26,090 29,159
6/30/02 26,121 27,797
9/30/02 24,071 22,806
12/31/02 24,707 24,418
3/31/03 24,863 23,428
6/30/03 27,635 27,620
9/30/03 28,460 29,260
12/31/03 31,338 33,713
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ----------- ----------- ----------
Initial Class 26.84% 12.83% 12.31% 3/1/94
Russell MCV(1) 38.07% 8.73% 13.15% 3/1/94
- --------------- ----- ----- ----- ------
Service Class - - 20.79% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Russell Midcap Value (Russell MCV) Index is an unmanaged index used as
a general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 2
Federated Growth & Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (24.4%)
Canada
Zero Coupon, due 05/06/2004 $ 7,200 $ 5,523
Zero Coupon, due 06/17/2004 7,000 5,351
Canada Treasury Bills
Zero Coupon, due 04/22/2004 7,000 5,374
Zero Coupon, due 08/12/2004 7,200 5,481
Commonwealth of Australia
9.00%, due 09/15/2004 7,300 5,634
French Republic
3.50%, due 07/12/2004 5,450 6,923
Kingdom of Norway
Zero Coupon, due 06/16/2004 37,000 5,497
Kingdom of Sweden
5.00%, due 01/15/2004 50,000 6,954
Kingdom of Sweden
Zero Coupon, due 03/17/2004 41,000 5,669
Zero Coupon, due 06/16/2004 42,500 5,838
Zero Coupon, due 09/15/2004 43,000 5,866
Zero Coupon, due 12/15/2004 41,000 5,551
Kingdom of the Netherlands
5.75%, due 01/15/2004 4,100 5,175
New Zealand
6.50%, due 02/15/2005 21,000 13,947
New Zealand Treasury Bill
Zero Coupon, due 04/14/2004 11,300 7,323
Zero Coupon, due 05/12/2004 6,400 4,130
Zero Coupon, due 09/22/2004 8,500 5,378
Norwegian T-Bill
Zero Coupon, due 03/17/2004 38,000 5,677
---------
Total Foreign Government Obligations 111,291
(cost: $104,061) ---------
CORPORATE DEBT SECURITIES (4.1%)
Business Services (1.0%)
United Rentals, Inc. (a)
10.75%, due 04/15/2008 4,000 4,500
Electric Services (0.6%)
PSEG Energy Holdings Inc.
10.00%, due 10/01/2009 2,500 2,931
Electric, Gas & Sanitary Services (0.5%)
CMS Energy Corporation (a)
8.50%, due 04/15/2011 2,250 2,430
Gas Production & Distribution (2.0%)
El Paso Corporation (a)
6.95%, due 12/15/2007 2,300 2,211
6.75%, due 05/15/2009 3,300 3,147
Williams Companies, Inc. (The)
7.88%, due 09/01/2021 3,500 3,693
---------
Total Corporate Debt Securities (cost: $16,004) 18,912
---------
Shares Value
------------- ------------
CONVERTIBLE PREFERRED STOCKS (2.8%)
Electric Services (0.7%)
TXU Corp. (a) 91,900 $ 3,130
Holding & Other Investment Offices (2.1%)
Deutsche Office Trust 4,580,200 3,795
Westfield Trust-Units 2,122,200 5,691
---------
Total Convertible Preferred Stocks (cost: $11,367) 12,616
---------
COMMON STOCKS (45.0%)
Beer, Wine & Distilled Beverages (1.1%)
Kirin Brewery Company, Limited 613,000 5,226
Drug Stores & Proprietary Stores (1.1%)
Boots Group PLC (The)-ADR (a) 207,000 5,121
Electric Services (3.6%)
EnCana Corporation (a) 88,700 3,498
Scottish and Southern Energy PLC-ADR 66,000 7,952
Scottish Power PLC 712,300 4,746
Electric, Gas & Sanitary Services (2.3%)
Pennon Group PLC 217,656 2,649
United Utilities PLC 992,289 7,971
Food & Kindred Products (3.5%)
Bunge Limited 298,100 9,813
Tate & Lyle PLC 1,108,400 6,180
Holding & Other Investment Offices (4.2%)
CFS Gandel Retail Trust 3,538,600 3,571
General Property Trust-Units 2,159,500 4,863
Pan Pacific Retail Properties, Inc. 51,400 2,449
Regency Centers Corporation (a) 151,100 6,021
Ronin Property Group 2,621,000 2,231
Instruments & Related Products (1.1%)
Fuji Photo Film Co., Ltd.-ADR 157,100 5,153
Metal Mining (8.0%)
Anglogold Ltd.-ADR (a) 141,100 6,589
Barrick Gold Corporation (a) 207,100 4,703
Harmony Gold Mining Company
Limited-ADR (a) 632,000 10,257
Lihir Gold Limited-ADR (a) 212,500 4,641
Placer Dome, Inc. (a) 550,500 9,859
Oil & Gas Extraction (7.5%)
Husky Energy Inc. (a) 479,300 8,706
Nexen Inc. 146,000 5,302
Santos Limited-ADR 455,000 9,505
Statoil ASA (a) 649,200 7,281
Statoil ASA-ADR (a) 302,300 3,416
Paper & Allied Products (0.9%)
Carter Holt Harvey Limited 3,327,600 4,110
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 3
Federated Growth & Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------- ------------
Paperboard Containers & Boxes (0.8%)
Mayr-Melnhof Karton AG-ADR (a) 114,398 $ 3,438
Petroleum Refining (1.6%)
OMV AG-ADR (a) 239,800 7,144
Pharmaceuticals (5.2%)
Alliance UniChem PLC 103,900 965
Daiichi Pharmaceutical Co., Ltd. 222,200 4,002
GEHE AG 52,800 2,563
Takeda Chemical Industries, Ltd. 180,200 7,144
Yamanouchi Pharmaceutical Co., Ltd. 297,900 9,252
Real Estate (2.2%)
Land Securities Group PLC 332,000 5,895
Rodamco Europe NV 71,650 4,171
Telecommunications (1.9%)
Chughwa Telecom Co., Ltd.-ADR 207,000 3,002
Telestra Corporation Limited-ADR (a) 319,300 5,840
---------
Total Common Stocks (cost: $157,082) 205,229
---------
Principal Value
------------------------- ---------------
SHORT-TERM OBLIGATIONS (25.2%)
Investor's Bank & Trust Company (c)
0.72% Repurchase Agreement dated 12/31/2003
to be repurchased at $114,809 on 01/02/2004 $ 114,805 $ 114,805
---------
Total Short-Term Obligations (cost: $114,805) 114,805
---------
SECURITY LENDING COLLATERAL (14.3%)
Debt (11.3%)
Bank Notes (0.5%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 307 307
Fleet National Bank
1.00%, due 01/21/2004 1,153 1,153
National Bank of Commerce
1.19%, due 04/21/2004 961 961
Commercial Paper (2.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 577 577
Delaware Funding Corporation
1.08%, due 01/07/2004 383 383
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 576 576
1.09%, due 01/13/2004 384 384
1.08%, due 02/05/2004 767 767
General Electric Capital Corporation
1.09%, due 01/08/2004 958 958
1.09%, due 01/09/2004 577 577
1.08%, due 01/16/2004 765 765
Principal Value
------------------------- ---------------
Commercial Paper (continued)
Govco Incorporated-144A
1.07%, due 02/05/2004 $ 960 $ 960
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 959 959
1.09%, due 02/06/2004 959 959
1.10%, due 02/09/2004 560 560
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 959 959
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 576 576
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,114 1,114
1.08%, due 02/17/2004 1,918 1,918
Sheffield Receivables-144A
1.09%, due 01/21/2004 384 384
Euro Dollar Overnight (0.6%)
BNP Paribas SA
0.97%, due 01/07/2004 1,922 1,922
Credit Agricole Indosuez
0.98%, due 01/02/2004 77 77
1.08%, due 01/06/2004 730 730
Euro Dollar Terms (2.8%)
Bank of Montreal
1.06%, due 01/15/2004 375 375
1.06%, due 02/17/2004 769 769
Bank of Scotland
1.06%, due 04/02/2004 577 577
Citigroup Inc.
1.10%, due 01/22/2004 577 577
1.09%, due 02/06/2004 769 769
Credit Agricole Indosuez
1.08%, due 01/28/2004 384 384
Den Danske Bank
1.08%, due 01/20/2004 1,922 1,922
1.02%, due 01/30/2004 961 961
Royal Bank of Canada
1.05%, due 02/27/2004 1,922 1,922
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,153 1,153
1.08%, due 01/15/2004 384 384
1.08%, due 01/20/2004 192 192
Svenska Handelsbanken AB
1.09%, due 01/15/2004 192 192
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,153 1,153
Wells Fargo & Company
1.04%, due 01/30/2004 1,537 1,537
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 4
Federated Growth & Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
Master Notes (0.8%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 $ 769 $ 769
1.14%, due 09/08/2004 1,153 1,153
Morgan Stanley
1.05%, due 06/21/2004 1,845 1,845
Medium Term Notes (0.5%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,922 1,922
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 577 577
Repurchase Agreements (3.2%) (b)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,497 on 01/02/2004 4,497 4,497
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $6,111 on 01/02/2004 6,111 6,111
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,651 on 01/02/2004 3,651 3,651
Shares Value
---------------- ------------
Investment Companies (3.0%)
Money Market Funds (3.0%)
American AAdvantage Select Fund
1-day yield of 1.00% 942,658 $ 943
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,301,568 2,302
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 10,007,980 10,008
---------
Total Security Lending Collateral (cost: $65,171) 65,171
---------
Total Investment Securities (cost: $468,490) $ 528,024
=========
SUMMARY:
Investments, at value 115.8 % $ 528,024
Liabilities in excess of other assets (15.8)% (71,856)
---------- ---------
Net assets 100.0 % $ 456,168
========== =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- --------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- -------------------- -------- ------------ --------------- ---------------
New Zealand Dollar 13,474 01/06/2004 $ 8,846 $ 2
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$62,490.
(b) Cash collateral for the Repurchase Agreements, valued at $14,544, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
(c) At December 31, 2003, the collateral for the repurchase agreement excluding
collateral for securities on loan is as follows:
- --------------------------------- ---------------------
Market Value
Collateral and Accrued Interest
- --------------------------------- ---------------------
$24,950 Freddie Mac FHR 2380 F
1.61%, due 11/15/2031 $ 4,839
$58,285 Fannie Mae ARM-705623
4.30%, due 04/01/2033 50,415
$50,000 Fannie Mae ARM-712321
4.61%, due 06/01/2033 48,697
$41,000 Fannie Mae ARM-789149
5.12%, due 03/01/2032 16,310
$393 Fannie Mae ARM-683353
3.91%, due 02/01/2033 285
---------
$ 120,546
=========
DEFINITIONS:
ADR American Depositary Receipt
ARM Adjustable Rate Mortgage
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 5
Federated Growth & Income
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $468,490)
(including $62,490 of securities loaned) $528,024
Cash 65
Receivables:
Interest 1,552
Dividends 802
Dividend reclaims receivable 75
Unrealized appreciation on forward foreign
currency contracts 2
Other 53
---------
530,573
---------
Liabilities:
Investment securities purchased 8,852
Accounts payable and accrued liabilities:
Management and advisory fees 305
Distribution fees 2
Payable for collateral for securities on loan 65,171
Other 75
---------
74,405
---------
Net Assets $456,168
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 267
Additional paid-in capital 370,161
Undistributed net investment income (loss) 12,400
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 13,675
Net unrealized appreciation (depreciation) on:
Investment securities 59,534
Translation of assets and liabilities denominated in
foreign currencies 131
---------
Net Assets $456,168
=========
Shares Outstanding:
Initial Class 26,532
Service Class 160
Net Asset Value and Offering Price Per Share:
Initial Class $ 17.09
Service Class 17.57
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 4,305
Dividends 12,803
Income from loaned securities-net 170
Less withholding taxes on foreign dividends (750)
---------
16,528
---------
Expenses:
Management and advisory fees 3,144
Transfer agent fees 2
Printing and shareholder reports 83
Custody fees 100
Administration fees 24
Legal fees 6
Auditing and accounting fees 12
Directors fees 16
Other 9
Service fees:
Service Class 2
---------
Total expenses 3,398
---------
Net Investment Income (Loss) 13,130
---------
Net Realized Gain (Loss) from:
Investment securities 25,021
Foreign currency transactions (731)
---------
24,290
---------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 64,023
Translation of assets and liabilities denominated in
foreign currencies 129
---------
64,152
---------
Net Gain (Loss) on Investment Securities and
Foreign Currency Transactions 88,442
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 101,572
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 6
Federated Growth & Income
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 13,130 $ 14,583
Net realized gain (loss) from
investment securities and foreign
currency transactions 24,290 (423)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 64,152 (15,519)
--------- ---------
101,572 (1,359)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (12,753) (8,287)
Service Class (2) -
----------- ---------
(12,755) (8,287)
---------- ---------
From net realized gains:
Initial Class (12,832) (17,264)
Service Class (18) -
---------- ---------
(12,850) (17,264)
---------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 50,522 170,128
Service Class 2,878 -
---------- ---------
53,400 170,128
---------- ---------
Dividends and distributions reinvested:
Initial Class 25,586 25,551
Service Class 20 -
---------- ---------
25,606 25,551
---------- ---------
Cost of shares redeemed:
Initial Class (87,623) (61,592)
Service Class (302) -
---------- ---------
(87,925) (61,592)
---------- ---------
(8,919) 134,087
---------- ---------
Net increase (decrease) in net assets 67,048 107,177
---------- ---------
Net Assets:
Beginning of year 389,120 281,943
---------- ---------
End of year $456,168 $ 389,120
========== =========
Undistributed Net Investment
Income (Loss) $ 12,400 $ 13,493
========== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 3,337 11,037
Service Class 177 -
---------- ---------
3,514 11,037
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 1,683 1,786
Service Class 1 -
---------- ---------
1,684 1,786
---------- ---------
Shares redeemed:
Initial Class (5,613) (4,151)
Service Class (18) -
---------- ---------
(5,631) (4,151)
---------- ---------
Net increase (decrease) in shares
outstanding (433) 8,672
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 7
Federated Growth & Income
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 14.35 $ 0.48 $ 3.24 $ 3.72
12/31/2002 15.28 0.62 (0.48) 0.14
12/31/2001 13.43 0.64 1.46 2.10
12/31/2000 10.91 0.51 2.65 3.16
12/31/1999 12.28 0.48 (1.00) (0.52)
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 15.04 0.17 2.88 3.05
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ (0.49) $ (0.49) $ (0.98) $ 17.09
(0.35) (0.72) (1.07) 14.35
(0.25) - (0.25) 15.28
(0.63) (0.01) (0.64) 13.43
(0.75) (0.10) (0.85) 10.91
- --------------- --------- --------- --------- ---------
Service Class (0.03) (0.49) (0.52) 17.57
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 26.84% $ 453,361 0.81% 0.81% 3.14% 128%
12/31/2002 0.96 389,120 0.81 0.81 4.11 146
12/31/2001 15.70 281,943 0.86 0.86 4.39 117
12/31/2000 29.16 122,886 0.86 0.86 4.31 147
12/31/1999 (4.45) 76,280 0.89 0.89 4.01 117
- --------------- ---------- ----- --------- ---- ---- ---- ---
Service Class 12/31/2003 20.79 2,807 1.08 1.08 1.55 128
- --------------- ---------- ----- --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-March 1, 1994
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any. (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 8
Federated Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Federated Growth & Income ("the Fund"), part of ATSF, began
operations on March 1, 1994.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $73 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 9
Federated Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $45 are included in net
realized gains in the Statement of Operations.
Real Estate Investment Trusts ("REITs"): There are certain additional risks
involved in investing in REITs. These include, but are not limited to, economic
conditions, changes in zoning laws, real estate values, property taxes and
interest rates. Since the Fund invests in real estate related securities, the
value of its shares may fluctuate more widely than the value of shares of a
fund that invests in a broad range of industries.
Dividend income is recorded at management's estimate of the income included in
distributions from the REIT investments. Distributions received in excess of
this estimated amount are recorded as a reduction of the cost of investments.
The actual amounts of income, return of capital, and capital gains are only
determined by each REIT after the fiscal year-end, and may differ from the
estimated amounts.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 10
Federated Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $16. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 401,164
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 386,986
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (1,468)
Undistributed net realized capital gains (loss) 1,468
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 21,168
Long-term capital gains 4,383
2003 Distributions paid from:
Ordinary income 17,456
Long-term capital gains 8,149
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 18,969
========
Undistributed Long-term Capital Gains $ 7,512
========
Capital Loss Carryforward $ -
========
Post October Currency Loss $ 384
========
Net Unrealized Appreciation (Depreciation) $ 59,514
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 11
Federated Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 468,510
=========
Unrealized Appreciation $ 60,237
Unrealized (Depreciation) (723)
---------
Net Unrealized Appreciation (Depreciation) $ 59,514
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Federated Growth & Income
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Federated Growth & Income (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Federated Growth & Income 13
Great Companies-America(SM)
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
For the first time in three years the markets closed up for the year.
Unfortunately, many investors who became afraid of the market pulled out in
2002 and have missed the significant market run-up in 2003. We believe that
there are several lessons to be learned from the last three years, as follows:
1. Over the long-term, markets improve. It is important to realize that stocks
have outperformed most asset classes over time. While there will certainly
be periods characterized by corrections, over the long-term, the market has
historically moved in a positive direction.
2. It is impossible to time the market. Those who pulled out in 2002 missed a
significant opportunity to increase their net worth. It is very difficult
to do well if you are not a long-term investor.
3. It is very difficult for individuals to select stocks and manage their
portfolios. In the late 1990's a number of people left the work force and
became day traders. This is akin to taking your money to Las Vegas with the
expectation that you will break the bank. Investing in securities is
complex and a full time job best left to professionals.
4. Whenever your emotions control your stock market activities, you will lose.
Unfortunately, many investors let their emotions guide their actions. They
held speculative stocks when the market collapsed and pulled out of the
market when it began to rise. Investor emotions enable us to purchase
terrific companies at significant discounts and hold these stocks as they
turn around and rise faster than the market.
In the short-term, the economy seems well positioned to continue pushing the
market to higher levels. This is being driven by lower interest rates, higher
consumer confidence ratings, and stronger corporate earnings. We believe that
the market will slow down in the second half of 2004.
PERFORMANCE
For the year ended December 31, 2003, Great Companies- America(SM) returned
24.67%. By comparison its benchmark, the Standard and Poor's 500 Composite Stock
Index returned 28.67%.
STRATEGY REVIEW
We always want to see higher returns for our shareholders. But, we do not
intend to change our strategy because large-cap growth companies underperformed
in 2003. We continue to believe in the Great Companies-America(SM) strategy.
While the market has shown strength, we believe that market prices ultimately
will be driven by earnings and free cash flows. While many of the technology
stocks are at or above their intrinsic values, there are a number of stocks in
the Great Companies- America(SM) portfolio trading well below their intrinsic
values.
/s/ James H. Huguet
James H. Huguet
/s/ Gerald W. Bollman
Gerald W. Bollman
/s/ Matthew C. Stephani
Matthew C. Stephani
Co-Portfolio Managers
Great Companies, L.L.C.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 1
Great Companies-America(SM)
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/00 through 12/31/03
Initial Class S&P 500
5/1/00 $10,000 $10,000
6/30/00 10,420 10,037
9/30/00 10,570 9,940
12/31/00 11,380 9,162
3/31/01 9,610 8,077
6/30/01 9,950 8,549
9/30/01 8,979 7,295
12/31/01 9,992 8,074
3/31/02 10,002 8,097
6/30/02 8,377 7,012
9/30/02 7,533 5,802
12/31/02 7,925 6,290
3/31/03 7,814 6,092
6/30/03 8,810 7,030
9/30/03 9,012 7,216
12/31/03 9,880 8,094
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
Initial Class 24.67% (0.33)% 5/1/00
S&P 500(1) 28.67% (5.59)% 5/1/00
- --------------- ----- ----- ------
Service Class - 17.25 % 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in a "non-diversified" portfolio may be subject to specific risks
such as susceptibility to single economic political, or regulatory events, and
may be subject to greater loss than investments in a diversified portfolio.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 2
Great Companies-America(SM)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------- ------------
COMMON STOCKS (99.4%)
Aerospace (7.6%)
United Technologies Corporation 185,198 $ 17,551
Beverages (3.9%)
Coca-Cola Company (The) 93,000 4,720
PepsiCo, Inc. 90,000 4,196
Business Services (11.5%)
First Data Corporation (a) 371,545 15,267
Omnicom Group, Inc. 128,100 11,187
Chemicals & Allied Products (8.9%)
Colgate-Palmolive Company 187,400 9,379
Procter & Gamble Company (The) 111,000 11,087
Commercial Banks (7.6%)
Bank of New York Company, Inc. (The320,700 10,622
Citigroup Inc. 142,193 6,902
Computer & Office Equipment (3.1%)
International Business Machines
Corporation 78,000 7,229
Electronic & Other Electric Equipment (7.1%)
General Electric Company 524,530 16,250
Electronic Components & Accessories (2.9%)
Texas Instruments Incorporated 228,200 6,705
Insurance (4.4%)
American International Group, Inc. 152,885 10,132
Insurance Agents, Brokers & Service (4.6%)
Marsh & McLennan Companies, Inc. (a221,500 10,608
Medical Instruments & Supplies (4.0%)
Medtronic, Inc. 188,400 9,158
Paper & Allied Products (4.6%)
3M Company 124,954 10,625
Pharmaceuticals (19.6%)
Abbott Laboratories 322,500 15,029
Johnson & Johnson 191,480 9,892
Pfizer Inc. 300,000 10,599
Wyeth 222,400 9,441
Security & Commodity Brokers (9.6%)
Goldman Sachs Group, Inc. (The) 45,000 4,443
Lehman Brothers Holdings Inc. 136,700 10,555
Merrill Lynch & Co., Inc. 119,000 6,979
---------
Total Common Stocks (cost: $195,144) 228,556
---------
Principal Value
-------------- ------------
SECURITY LENDING COLLATERAL (7.7%)
Debt (6.1%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 83 $ 83
Fleet National Bank
1.00%, due 01/21/2004 311 311
National Bank of Commerce
1.19%, due 04/21/2004 259 259
Commercial Paper (1.6%)
Compass Securitization-144A
1.08%, due 01/22/2004 156 156
Delaware Funding Corporation
1.08%, due 01/07/2004 103 103
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 156 156
1.09%, due 01/13/2004 104 104
1.08%, due 02/05/2004 207 207
General Electric Capital Corporation
1.09%, due 01/08/2004 259 259
1.09%, due 01/09/2004 156 156
1.08%, due 01/16/2004 207 207
Govco Incorporated-144A
1.07%, due 02/05/2004 259 259
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 259 259
1.09%, due 02/06/2004 259 259
1.10%, due 02/09/2004 151 151
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 259 259
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 156 156
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 301 301
1.08%, due 02/17/2004 517 517
Sheffield Receivables-144A
1.09%, due 01/21/2004 104 104
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 518 518
Credit Agricole Indosuez
0.98%, due 01/02/2004 21 21
1.08%, due 01/06/2004 197 197
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 3
Great Companies-America(SM)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Euro Dollar Terms (1.5%)
Bank of Montreal
1.06%, due 01/15/2004 $ 101 $ 101
1.06%, due 02/17/2004 208 208
Bank of Scotland
1.06%, due 04/02/2004 156 156
Citigroup Inc.
1.10%, due 01/22/2004 156 156
1.09%, due 02/06/2004 208 208
Credit Agricole Indosuez
1.08%, due 01/28/2004 104 104
Den Danske Bank
1.08%, due 01/20/2004 519 519
1.02%, due 01/30/2004 259 259
Royal Bank of Canada
1.05%, due 02/27/2004 519 519
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 311 311
1.08%, due 01/15/2004 104 104
1.08%, due 01/20/2004 52 52
Svenska Handelsbanken AB
1.09%, due 01/15/2004 52 52
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 311 311
Wells Fargo & Company
1.04%, due 01/30/2004 415 415
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 208 208
1.14%, due 09/08/2004 311 311
Morgan Stanley
1.05%, due 06/21/2004 498 498
Principal Value
--------------- ------------
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 $ 519 $ 519
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 156 156
Repurchase Agreements (1.7%) (b)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/03
to be repurchased at $1,214 on 01/02/2004 1,214 1,214
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/03
to be repurchased at $1,650 on 01/02/2004 1,650 1,650
Morgan Stanley
1.11%, Repurchase Agreements dated 12/31/03
to be repurchased at $986 on 01/02/2004 986 986
Shares Value
--------------- ------------
Investment Companies (1.6%)
Money Market Funds (1.6%)
American AAdvantage Select Fund
1-day yield of 1.00% 254,527 $ 255
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 621,446 621
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 2,702,253 2,702
---------
Total Security Lending Collateral (cost: $17,597) 17,597
---------
Total Investment Securities (cost: $212,741) $ 246,153
=========
SUMMARY:
Investments, at value 107.1 % $ 246,153
Liabilities in excess of other assets (7.1)% (16,395)
--------- ---------
Net assets 100.0 % $ 229,758
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$17,208.
(b) Cash collateral for the Repurchase Agreements, valued at $3,927, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 4
Great Companies-America(SM)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $212,741)
(including $17,208 of securities loaned) $246,153
Cash 1,143
Receivables:
Interest 1
Dividends 234
Other 11
---------
247,542
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 164
Payable for collateral for securities on loan 17,597
Other 23
---------
17,784
---------
Net Assets $229,758
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 235
Additional paid-in capital 221,594
Undistributed net investment income (loss) 1,785
Accumulated net realized gain (loss) from investment
securities (27,268)
Net unrealized appreciation (depreciation) on investment
securities 33,412
---------
Net Assets $229,758
=========
Shares Outstanding:
Initial Class 23,428
Service Class 55
Net Asset Value and Offering Price Per Share:
Initial Class $ 9.78
Service Class 9.81
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 27
Dividends 3,845
Income from loaned securities-net 10
--------
3,882
--------
Expenses:
Management and advisory fees 1,962
Transfer agent fees 3
Printing and shareholder reports 56
Custody fees 26
Administration fees 21
Legal fees 3
Auditing and accounting fees 10
Directors fees 10
Other 6
--------
Total expenses 2,097
--------
Net Investment Income (Loss) 1,785
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities (5,244)
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 60,596
--------
Net Gain (Loss) on Investment Securities 55,352
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 57,137
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 5
Great Companies-America(SM)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,785 $ 997
Net realized gain (loss) from
investment securities (5,244) (16,136)
Net unrealized appreciation
(depreciation) on investment
securities 60,596 (27,597)
-------- ---------
57,137 (42,736)
-------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (997) (456)
Service Class - -
-------- ---------
(997) (456)
-------- ---------
From net realized gains:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 64,421 121,981
Service Class 527 -
-------- ---------
64,948 121,981
-------- ---------
Proceeds from fund acquisition:
Initial Class - 43,566
Service Class - -
-------- ---------
- 43,566
-------- ---------
Dividends and distributions reinvested:
Initial Class 997 456
Service Class - -
-------- ---------
997 456
-------- ---------
Cost of shares redeemed:
Initial Class (126,260) (41,724)
Service Class (28) -
-------- ---------
(126,288) (41,724)
-------- ---------
(60,343) 124,279
-------- ---------
Net increase (decrease) in net assets (4,203) 81,087
-------- ---------
Net Assets:
Beginning of year 233,961 152,874
-------- ---------
End of year $ 229,758 $ 233,961
========= =========
Undistributed Net Investment Income
(Loss) $ 1,785 $ 997
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 7,947 14,532
Service Class 58 -
--------- ---------
8,005 14,532
--------- ---------
Shares issued-on fund acquisition:
Initial Class - 4,749
Service Class - -
--------- ---------
- 4,749
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 113 54
Service Class - -
--------- ---------
113 54
--------- ---------
Shares redeemed:
Initial Class (14,308) (5,002)
Service Class (3) -
---------- ---------
(14,311) (5,002)
--------- ---------
Net increase (decrease) in shares
outstanding (6,193) 14,333
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 6
Great Companies-America(SM)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.88 $ 0.06 $ 1.88 $ 1.94
12/31/2002 9.96 0.05 (2.11) (2.06)
12/31/2001 11.38 0.04 (1.43) (1.39)
12/31/2000 10.00 0.04 1.34 1.38
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 8.37 0.03 1.41 1.44
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.04) $ - $ (0.04) $ 9.78
(0.02) - (0.02) 7.88
(0.03) - (0.03) 9.96
- - - 11.38
- --------------- --------- --- --------- ---------
Service Class - - - 9.81
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 24.67% $ 229,217 0.85% 0.85% 0.73% 39%
12/31/2002 (20.69) 233,961 0.88 0.88 0.54 31
12/31/2001 (12.20) 152,874 0.89 0.89 0.39 70
12/31/2000 13.80 83,121 0.91 0.91 0.52 15
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 17.25 541 1.12 1.12 0.50 39
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2000
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 7
Great Companies-America(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Great Companies-America(SM) ("the Fund"), part of ATSF, began
operations on May 1, 2000. The Fund is "non-diversified" under the 1940 Act.
The fund will acquire GE U.S. Equity effective as of the close of business on
April 30, 2004, subject to approval by owners of variable annuity contracts and
variable life policies ("Policyowners").
On April 26, 2002, the Fund acquired all the net assets of C.A.S.E. Growth
pursuant to a plan of reorganization approved by shareholders of C.A.S.E.
Growth on April 23, 2003. The acquisition was accomplished by a tax-free
exchange of 4,749 shares of the Fund for the 7,101 shares of C.A.S.E. Growth
outstanding on April 25, 2002. C.A.S.E. Growth's net assets at that date,
$43,566, were combined with those of the Fund, resulting in combined net assets
of $197,574.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $4 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from,
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 8
Great Companies-America(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
recovering the collateral on behalf of the Fund. The Fund may recall a loaned
security position at any time from the borrower through IBT. In the event the
borrower fails to timely return a recalled security, IBT may indemnify the Fund
by purchasing replacement securities for the Fund at its own expense and
claiming the collateral to fund such a purchase. IBT absorbs the loss if the
collateral value is not sufficient to cover the cost of the replacement
securities. If replacement securities are not available, IBT will credit the
equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan areincluded in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Great Companies, LLC is both an affiliate of the Fund and a sub-adviser to the
Fund.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $8. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 9
Great Companies-America(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 90,733
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 143,800
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 456
Long-term capital gains -
2003 Distributions paid from:
Ordinary income $ 997
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 1,787
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $(22,843)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 28,988
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 4,494 December 31, 2009
8,761 December 31, 2010
9,588 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 217,165
=========
Unrealized Appreciation $ 31,741
Unrealized (Depreciation) (2,753)
---------
Net Unrealized Appreciation (Depreciation) $ 28,988
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Great Companies-America(SM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Great Companies-America(SM) (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-America(SM) 11
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Technology stocks, as represented by the NASDAQ Composite Index ("NASDAQ
Composite"), advanced more than 12% in the past quarter and as much as 50% in
the past year. Yet the returns to shareholders over the past three years are
far below other widely used benchmarks for equities. In our view, the recovery
of technology stock prices this past year has largely closed the valuation gap
that had opened during the long market slide. Over the next year, we believe,
prices should generally advance in line with increases in intrinsic values.
PERFORMANCE
For the year ended December 31, 2003, Great Companies- Technology(SM) returned
50.95%. By comparison its benchmark, the NASDAQ Composite returned 50.01%.
STRATEGY REVIEW
While we do not have a comparable estimate for all stocks in the NASDAQ
Composite, we are confident that our stocks are in dominant positions
competitively, conservatively managed by excellent managers and are strong
producers of shareholder value. In 2003, performance in our benchmark came
largely from stocks which had lost most of their market value in the previous
two years; stocks that we do not own. In the long run, we believe business
levels, which exceed those represented by the NASDAQ Composite to coincide with
better-than-benchmark stock performance.
The rebound in internet-related stocks has had an outsized effect upon
technology indices in recent months. It might seem that some investors just do
not see the actual businesses represented by their stocks. For example, the
average market capitalization to sales ratio of internet stocks has risen to
slightly less than five times, versus 2.7 times for the companies in the NASDAQ
Composite. While this is mild compared to 1999 and 2000, many of these
companies have been shrinking rather than growing and thus deserve a discount.
We have two internet companies in the portfolio, both profitable, both growing
rapidly and both priced recently at a discount to their intrinsic value.
/s/ James H. Huguet
James H. Huguet
/s/ Gerald W. Bollman
Gerald W. Bollman
/s/ Mathew C. Stephani
Mathew C. Stephani
Co-Portfolio Managers
Great Companies, L.L.C.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 1
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/00 through 12/31/03
Initial Class NASDAQ Composite
5/1/00 $10,000 $10,000
6/30/00 10,410 10,273
9/30/00 9,310 9,513
12/31/00 6,740 6,399
3/31/01 4,570 4,767
6/30/01 4,820 5,596
9/30/01 3,150 3,882
12/31/01 4,250 5,052
3/31/02 4,200 4,780
6/30/02 2,990 3,790
9/30/02 2,250 3,036
12/31/02 2,630 3,459
3/31/03 2,760 3,474
6/30/03 3,240 4,203
9/30/03 3,580 4,629
12/31/03 3,970 5,189
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- -------------- ----------
Initial Class 50.95% (22.26)% 5/1/00
NASDAQ Composite(1) 50.01% (16.35)% 5/1/00
- ------------------- ----- ------ ------
Service Class - 32.33% 5/1/03
- ------------------- ----- ------ ------
NOTES
(1) The NASDAQ Composite (NASDAQ Composite) Index is an unmanaged index used as
a general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in a "non-diversified" portfolio may be subject to specific risks
such as susceptibility to single economic political, or regulatory events, and
may be subject to greater loss than investments in a diversified portfolio.
Investing in technology stocks generally involves greater volatility and risks,
so an investment in the portfolio may not be appropriate for everyone.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 2
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------- ------------
COMMON STOCKS (92.3%)
Business Services (12.2%)
eBay Inc. (a) 71,800 $ 4,638
First Data Corporation (b) 520,717 21,396
Communications Equipment (4.8%)
UTStarcom, Inc. (a)(b) 275,946 10,229
Computer & Data Processing Services (22.4%)
Electronic Arts Inc. (a)(b) 320,100 15,294
Microsoft Corporation 648,000 17,846
Symantec Corporation (a)(b) 291,200 10,090
Yahoo! Inc. (a) 103,300 4,666
Computer & Office Equipment (22.4%)
Cisco Systems, Inc. (a) 416,900 10,127
Dell Computer Corporation (a) 394,400 13,394
EMC Corporation (a) 556,000 7,184
International Business Machines
Corporation 185,600 17,201
Electronic Components & Accessories (19.4%)
Analog Devices, Inc. 173,500 7,920
Integrated Circuit Systems, Inc. (a) 152,400 4,342
Intel Corporation 259,576 8,358
Maxim Integrated Products 172,500 8,591
Texas Instruments Incorporated 266,100 7,818
Xilinx, Inc. (a) 116,400 4,509
Industrial Machinery & Equipment (1.7%)
Applied Materials, Inc. (a) 165,500 3,715
Instruments & Related Products (4.7%)
Waters Corporation (a) 305,100 10,117
Pharmaceuticals (4.7%)
Amgen Inc. (a) 162,000 10,012
---------
Total Common Stocks (cost: $160,751) 197,447
---------
Principal Value
------------------------ ---------------
SECURITY LENDING COLLATERAL (11.5%)
Debt (9.2%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 116 $ 116
Fleet National Bank
1.00%, due 01/21/2004 437 437
National Bank of Commerce
1.19%, due 04/21/2004 364 364
Commercial Paper (2.4%)
Compass Securitization-144A
1.08%, due 01/22/2004 218 218
Delaware Funding Corporation
1.08%, due 01/07/2004 145 145
Principal Value
------------------------ ---------------
Commercial Paper (continued)
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 $ 218 $ 218
1.09%, due 01/13/2004 146 146
1.08%, due 02/05/2004 291 291
General Electric Capital Corporation
1.09%, due 01/08/2004 363 363
1.09%, due 01/09/2004 218 218
1.08%, due 01/16/2004 290 290
Govco Incorporated-144A
1.07%, due 02/05/2004 364 364
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 363 363
1.09%, due 02/06/2004 363 363
1.10%, due 02/09/2004 212 212
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 363 363
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 218 218
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 422 422
1.08%, due 02/17/2004 727 727
Sheffield Receivables-144A
1.09%, due 01/21/2004 146 146
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 728 728
Credit Agricole Indosuez
0.98%, due 01/02/2004 29 29
1.08%, due 01/06/2004 277 277
Euro Dollar Terms (2.3%)
Bank of Montreal
1.06%, due 01/15/2004 142 142
1.06%, due 02/17/2004 291 291
Bank of Scotland
1.06%, due 04/02/2004 218 218
Citigroup Inc.
1.10%, due 01/22/2004 218 218
1.09%, due 02/06/2004 291 291
Credit Agricole Indosuez
1.08%, due 01/28/2004 146 146
Den Danske Bank
1.08%, due 01/20/2004 728 728
1.02%, due 01/30/2004 364 364
Royal Bank of Canada
1.05%, due 02/27/2004 728 728
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 3
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 437 $ 437
1.08%, due 01/15/2004 146 146
1.08%, due 01/20/2004 73 73
Svenska Handelsbanken AB
1.09%, due 01/15/2004 73 73
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 437 437
Wells Fargo & Company
1.04%, due 01/30/2004 582 582
Master Notes (0.7%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 291 291
1.14%, due 09/08/2004 437 437
Morgan Stanley
1.05%, due 06/21/2004 699 699
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 729 729
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 218 218
Repurchase Agreements (2.5%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,705 on 01/02/2004 1,705 1,705
Principal Value
--------------- ------------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,316 on 01/02/2004 $ 2,316 $ 2,316
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,384 on 01/02/2004 1,384 1,384
Shares Value
--------------- ------------
Investment Companies (2.3%)
Money Market Funds (2.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 357,152 $ 357
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 872,013 872
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 3,791,802 3,792
---------
Total Security Lending Collateral (cost: $24,692) 24,692
---------
Total Investment Securities (cost: $185,443) $ 222,139
=========
SUMMARY:
Investments, at value 103.8 % $ 222,139
Liabilities in excess of other assets (3.8)% (8,235)
--------- ---------
Net assets 100.0 % $ 213,904
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$23,955.
(c) Cash collateral for the Repurchase Agreements, valued at $5,511, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 4
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $185,443)
(including $23,955 of securities loaned) $222,139
Cash 16,615
Receivables:
Interest 3
Dividends 10
Other 17
---------
238,784
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 151
Due to advisor 14
Distribution fees 1
Payable for collateral for securities on loan 24,692
Other 22
---------
24,880
---------
Net Assets $213,904
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 538
Additional paid-in capital 208,726
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (32,056)
Net unrealized appreciation (depreciation) on
investment securities 36,696
---------
Net Assets $213,904
=========
Shares Outstanding:
Initial Class 53,636
Service Class 187
Net Asset Value and Offering Price Per Share:
Initial Class $ 3.97
Service Class 3.97
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 31
Dividends 357
Income from loaned securities-net 11
--------
399
--------
Expenses:
Management and advisory fees 1,091
Transfer agent fees 2
Printing and shareholder reports 28
Custody fees 16
Administration fees 20
Legal fees 1
Auditing and accounting fees 10
Directors fees 4
Other 1
Recaptured expenses 14
Service fees:
Service Class 1
--------
Total expenses 1,188
--------
Net Investment Income (loss) (789)
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 5,445
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 49,330
--------
Net Gain (Loss) on Investment Securities 54,775
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 53,986
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 5
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (789) $ (339)
Net realized gain (loss) from
investment securities 5,445 (17,165)
Net unrealized appreciation
(depreciation) on investment
securities 49,330 (3,017)
--------- --------
53,986 (20,521)
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
From net realized gains:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 137,067 55,356
Service Class 769 -
--------- --------
137,836 55,356
--------- --------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Cost of shares redeemed:
Initial Class (31,243) (38,286)
Service Class (109) -
--------- --------
(31,352) (38,286)
--------- --------
106,484 17,070
--------- --------
Net increase (decrease) in net assets 160,470 (3,451)
--------- --------
Net Assets:
Beginning of year 53,434 56,885
--------- --------
End of year $ 213,904 $ 53,434
========= ========
Undistributed Net Investment
Income (Loss) $ - $ -
========= ========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 43,188 17,939
Service Class 215 -
--------- --------
43,403 17,939
--------- --------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Shares redeemed:
Initial Class (9,878) (10,987)
Service Class (28) -
--------- --------
(9,906) (10,987)
--------- --------
Net increase (decrease) in shares
outstanding 33,497 6,952
========= ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 6
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 2.63 $ (0.02) $ 1.36 $ 1.34
12/31/2002 4.25 (0.03) (1.59) (1.62)
12/31/2001 6.74 (0.03) (2.46) (2.49)
12/31/2000 10.00 (0.01) (3.25) (3.26)
- --------------- ---------- ------- --------- -------- --------
Service Class 12/31/2003 3.00 (0.02) 0.99 0.97
- --------------- ---------- ------- --------- -------- --------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ - $ - $ - $ 3.97
- - - 2.63
- - - 4.25
- - - 6.74
- --------------- --- --- --- --------
Service Class - - - 3.97
- --------------- --- --- --- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 50.95% $ 213,164 0.87% 0.87% (0.57)% 40%
12/31/2002 (38.12) 53,434 1.00 1.01 (0.79) 86
12/31/2001 (36.94) 56,885 0.99 0.99 (0.66) 75
12/31/2000 (32.60) 24,159 1.00 1.05 (0.16) 48
- --------------- ---------- ------ --------- ---- ---- ----- --
Service Class 12/31/2003 32.33 740 1.12 1.12 (0.83) 40
- --------------- ---------- ------ --------- ---- ---- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2000
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.01%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 7
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Great Companies- Technology(SM) ("the Fund"), part of ATSF, began
operations on May 1, 2000. The Fund is "non-diversified" under the 1940 Act.
The Fund will acquire Blackrock Global Science & Technology effective the close
of business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Trustees and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $5 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 8
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Great Companies, LLC is both an affiliate of the Fund and a sub-adviser to the
Fund.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie. through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 13,220 6%
Asset Allocation-Growth Portfolio 22,838 11%
Asset Allocation-Moderate Growth
Portfolio 41,447 19%
Asset Allocation-Moderate Portfolio 42,230 20%
--
56%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Increase in
Expenses Total Expenses
Recovered to Average
by Advisor Net Assets
------------ ---------------
Recovered in 2003 $ 14 0.01%
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 9
Great Companies-Technology(SM)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $7. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 142,643
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 50,983
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (789)
Undistributed net investment income (loss) 789
Undistributed net realized capital gains (loss) -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $(29,743)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 34,382
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 7,553 December 31, 2009
22,190 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $3,253.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 187,757
=========
Unrealized Appreciation $ 35,474
Unrealized (Depreciation) (1,092)
---------
Net Unrealized Appreciation (Depreciation) $ 34,382
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Great Companies-Technology(SM)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Great Companies-Technology(SM) (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Great Companies-Technology(SM) 11
GE U.S. Equity
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The U.S. Equity markets were able to stage a sound bull market rally in 2003
after a three-year bear market that started in 2000 with the bursting of the
technology bubble. Investors were able to overlook a war, a plummeting dollar,
higher oil prices, and the potential for further terrorist acts and instead
focused on low interest rates, low inflation, strong economic growth, an
improving labor market, and better corporate profits -- not to mention the
capture of Saddam Hussein in December. The major indices were up double-digits
in the fourth quarter and year-to-date. The Dow Jones Industrial Average posted
a 13.40% return in the fourth quarter and finished the year up 28.28%, the best
return since 1996. The Standard and Poor's 500 Composite Stock Index ("S&P
500") was up 12.17% in the fourth quarter and advanced 28.67% for the year, the
best return since 1997. And the technology-led NASDAQ Composite Index posted a
12.11% return in the fourth quarter but advanced 50.01% for the year, the best
return since 1999. Most of the advance in the markets started after the March
lows in 2003, continuing to gain momentum through the rest of the year as the
economic recovery dovetailed with improving corporate profits.
Looking at sector performance for the fourth quarter showed only four sectors
underperformed the market, including utilities, consumer staples, healthcare,
and financials. On the other hand, materials, energy, industrials, consumer
discretionary, telecommunication services, and information technology ("IT")
all did better than the market as defined by the S&P 500. On a year-to-date
basis, IT led the 2003 bull market recovery with materials, consumer
discretionary, industrials, financials all beating the S&P 500 market return as
investors bid up early cyclical stocks in the face of an improving market
recovery. Telecommunication services, healthcare, consumer staples, energy, and
utilities all lagged the market. Telecommunication companies continued to have
poor fundamental visibility on earnings, healthcare companies lagged all year
due to worries over pharmaceutical pricing legislation and product pipeline
issues. The consumer staples sector lagged as revenue opportunities seemed
marginal, thereby capping valuations. Utilities also lagged, as investors were
not interested in defensive stocks.
Many of the stocks that helped fuel the gains in technology, materials,
consumer discretionary, industrials, and financials were on average smaller in
market capitalization, had higher expected growth rates, and were more
expensive in terms of P/E ratio -- companies losing money posted some of the
best returns in 2003. This trend was evident starting in the second quarter as
the market began to rally after the Iraq War was declared over. Interestingly,
investor's penchant for investing in these stocks created a "quality" schism in
the market. For example, larger capitalization companies were overlooked for
smaller, expensive, risky stocks. Stocks with a beta greater than 2.0 (risky)
were up 80% for the year 2003 where as less risky stocks or stocks with betas
less than 2.0 were up a mere 25% -- underperforming the S&P 500 by almost 4%.
In addition, stocks with P/E ratios greater than 50 or negative advanced 72%
for 2003 whereas stocks with P/E ratios less than 50 were up only 27% -- again
underperforming the S&P 500. If you classified stocks by S&P ratings (A, B, C,
or N/A) where A is the highest quality and N/A is not available or not rated,
the C's and N/A companies were up 44% and 41%, respectively whereas the A's and
B's were up only 24% and 32%, respectively. While this trend was challenging in
2003, many of these stocks have poor fundamentals and market history suggest
that it is difficult to consistently post positive relative returns with this
strategy.
PERFORMANCE
For the year ended December 31, 2003, GE U.S. Equity returned 22.95%. By
comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
As we have written over the recent past, information technology ("IT") and
healthcare have continued to be a drag on relative performance. Despite a
slight overweight in technology, almost half of the relative underperformance
for the year is due to stock selection in this sector. Many of the smaller
capitalization, more speculative, higher priced stocks did well over the year
as investors discounted negative earnings and poor fundamentals in the hopes of
catching the bounce off the bottom with these stocks. Conversely, higher
quality, larger capitalization companies lagged in terms of performance over
the year. Within technology, software, communications equipment, IT services,
semiconductors, computers and peripherals were the largest detractors.
Healthcare relative underperformance for the year was primarily due to lagging
stock performance in the healthcare provider and healthcare equipment
industries. Pharmaceuticals lagged the market and while our portfolio holdings
kept pace with the benchmark holdings, the relative underperformance of the
industry versus the market detracted from performance. In addition, having
virtually no weight in biotechnology did not help as the industry posted gains
of almost 27% for the year.
As of the year-end, the portfolio is slightly overweight in energy, financials,
consumer discretionary, and technology. These areas should have solid relative
profit growth over the next few quarters in the context of a continuing
economic recovery. The portfolio is underweight in consumer staples, utilities
and telecommunications services. Healthcare, industrials and materials are
essentially market weight.
/s/ Eugene K. Bolton
Eugene K. Bolton
Portfolio Manager
GE Asset Management Incorporated
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 1
GE U.S. Equity
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/2/97 through 12/31/03
Initial Class S&P 500
1/2/97 $10,000 $10,000
3/31/97 9,812 10,269
6/30/97 11,499 12,060
9/30/97 12,418 12,963
12/31/97 12,701 13,335
3/31/98 14,192 15,194
6/30/98 14,523 15,695
9/30/98 13,050 14,137
12/31/98 15,606 17,146
3/31/99 16,421 18,000
6/30/99 17,703 19,268
9/30/99 16,547 18,066
12/31/99 18,479 20,753
3/31/00 18,827 21,228
6/30/00 18,502 20,666
9/30/00 18,507 20,466
12/31/00 18,333 18,865
3/31/01 16,804 16,630
6/30/01 17,330 17,603
9/30/01 15,186 15,020
12/31/01 16,705 16,625
3/31/02 16,990 16,671
6/30/02 14,864 14,439
9/30/02 12,429 11,946
12/31/02 13,397 12,952
3/31/03 12,900 12,543
6/30/03 14,713 14,474
9/30/03 14,923 14,857
12/31/03 16,472 16,665
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------ ----------- ----------
Initial Class 22.95% 1.09 % 7.41% 1/2/97
S&P 500(1) 28.67% (0.57)% 7.57% 1/2/97
- --------------- ----- ----- ----- ------
Service Class - - 18.22% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 2
GE U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (98.9%)
Aerospace (2.9%)
Lockheed Martin Corporation 14,309 $ 735
Northrop Grumman Corporation (b) 7,155 684
United Technologies Corporation 27,479 2,604
Amusement & Recreation Services (0.2%)
Disney (Walt) Company (The) 12,881 301
Automotive (0.3%)
Harley-Davidson, Inc. (b) 8,520 405
Beverages (2.5%)
Anheuser-Busch Companies, Inc. (d) 13,759 725
PepsiCo, Inc. (d) 57,238 2,668
Business Services (3.8%)
Catalina Marketing Corporation (a)(b) 13,541 273
eBay Inc. (a) 3,522 227
Equifax Inc. (b) 20,914 512
First Data Corporation 93,029 3,823
Omnicom Group, Inc. 4,733 413
Chemicals & Allied Products (3.9%)
Avon Products, Inc. 1,981 134
Clorox Company (The) 24,656 1,197
Colgate-Palmolive Company 28,561 1,429
du Pont (E.I.) de Nemours and Company 4,403 202
Praxair, Inc. 24,128 922
Procter & Gamble Company (The) 10,017 1,000
Rohm and Haas Company 11,007 470
Commercial Banks (11.0%)
Bank of America Corporation 14,302 1,150
Bank of New York Company, Inc. (The) 6,690 222
Bank One Corporation 8,587 391
Citigroup Inc. 127,166 6,173
FleetBoston Financial Corporation 10,127 442
Mellon Financial Corporation 35,443 1,138
Morgan Chase & Co. (J.P.) 14,860 546
State Street Corporation 35,773 1,863
U.S. Bancorp 35,003 1,042
Wachovia Corporation 20,473 954
Wells Fargo & Company 22,014 1,296
Communication (6.1%)
Certegy Inc. 20,945 687
Comcast Corporation-Class A (a) 7,265 239
Comcast Corporation-Special Class A (a) 84,975 2,657
Liberty Media Corporation-Class A (a) 239,297 2,845
UnitedGlobalCom, Inc.-Class A (a)(b) 3,082 26
Viacom, Inc.-Class B 48,035 2,132
Computer & Data Processing Services (6.5%)
Automatic Data Processing, Inc. 20,804 824
BMC Software, Inc. (a) 22,121 413
Shares Value
-------------------- --------------
Computer & Data Processing Services (continued)
Intuit Inc. (a) 29,059 $ 1,538
Microsoft Corporation 153,441 4,226
Oracle Corporation (a) 92,215 1,217
Unisys Corporation (a) 36,766 546
WebMD Corporation (a) 6,384 57
Yahoo! Inc. (a) 4,183 189
Computer & Office Equipment (4.4%)
Cisco Systems, Inc. (a) 92,131 2,238
Dell Computer Corporation (a) 41,166 1,398
EMC Corporation (a) 6,714 87
Hewlett-Packard Company 7,924 182
International Business Machines Corporation 18,712 1,734
Pitney Bowes Inc. 9,246 376
Electric Services (1.6%)
Dominion Resources, Inc. 15,185 969
EnCana Corporation (b) 18,052 712
Entergy Corporation 8,365 478
Electric, Gas & Sanitary Services (0.5%)
Exelon Corporation 9,906 657
Electronic & Other Electric Equipment (0.5%)
Eaton Corporation 3,632 392
Emerson Electric Co. 4,403 285
Electronic Components & Accessories (3.4%)
Analog Devices, Inc. 30,710 1,402
Intel Corporation 67,915 2,187
Molex Incorporated-Class A 37,425 1,099
Environmental Services (0.6%)
Waste Management, Inc. 26,417 782
Food & Kindred Products (0.8%)
Altria Group, Inc. 4,403 240
General Mills, Inc. (b) 13,284 602
Sara Lee Corporation 10,456 227
Health Services (0.7%)
HCA Inc. 3,082 132
Lincare Holdings Inc. (a)(b) 29,059 873
Industrial Machinery & Equipment (2.4%)
Applied Materials, Inc. (a) 41,497 932
Baker Hughes Incorporated 9,136 294
Deere & Company 13,429 874
Dover Corporation 29,279 1,164
Instruments & Related Products (0.7%)
Danaher Corporation 8,390 770
Raytheon Company 6,605 198
Insurance (5.4%)
AFLAC Incorporated 9,686 350
Allstate Corporation (The) 22,494 968
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 3
GE U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
Insurance (continued)
American International Group, Inc. 70,731 $ 4,688
Berkshire Hathaway Inc.-Class B (a) 247 695
CIGNA Corporation 2,752 158
Travelers Property Casualty Corp.-Class B 10,127 172
UnitedHealth Group Incorporated 7,815 455
Insurance Agents, Brokers & Service (1.7%)
Hartford Financial Services Group, Inc. (The) 11,009 650
Marsh & McLennan Companies, Inc. 34,453 1,650
Life Insurance (0.6%)
Lincoln National Corporation 10,237 413
Prudential Financial, Inc. 9,246 386
Lumber & Other Building Materials (2.0%)
Home Depot, Inc. (The) 70,006 2,485
Lowe's Companies, Inc. 3,963 220
Lumber & Wood Products (0.5%)
Weyerhaeuser Company 10,347 662
Management Services (0.1%)
Paychex, Inc. 3,853 143
Medical Instruments & Supplies (0.4%)
DENTSPLY International Inc. 11,007 497
Metal Mining (0.9%)
Barrick Gold Corporation (b) 18,712 425
Newmont Mining Corporation 15,850 770
Motion Pictures (0.6%)
Time Warner Inc. (a) 44,029 792
Oil & Gas Extraction (3.2%)
Burlington Resources Inc. 20,881 1,156
ConocoPhillips 20,363 1,335
Devon Energy Corporation 2,539 145
Nabors Industries Ltd. (a) 13,759 571
Schlumberger Limited (b) 21,245 1,163
Paper & Allied Products (1.5%)
3M Company 10,875 925
Kimberly-Clark Corporation 19,373 1,145
Personal Credit Institutions (0.4%)
SLM Corporation 14,309 539
Petroleum Refining (3.1%)
BP PLC-ADR 4,982 246
Exxon Mobil Corporation 97,964 4,017
Pharmaceuticals (11.6%)
Abbott Laboratories 41,827 1,949
Amgen Inc. (a) 3,742 231
Cardinal Health, Inc. (b)(d) 34,783 2,127
Johnson & Johnson 59,681 3,083
Merck & Co., Inc. 12,329 570
Shares Value
-------------------- --------------
Pharmaceuticals (continued)
Pfizer Inc. 162,577 $ 5,744
Wyeth 56,511 2,399
Primary Metal Industries (0.4%)
Alcoa Inc. (b) 15,410 586
Printing & Publishing (0.2%)
Gannett Co., Inc. 2,422 216
Railroads (0.9%)
Burlington Northern Santa Fe
Corporation 14,309 463
Union Pacific Corporation 11,337 788
Security & Commodity Brokers (1.7%)
American Express Company (d) 29,764 1,436
Goldman Sachs Group, Inc. (The) 2,135 211
Morgan Stanley 12,989 752
Telecommunications (3.2%)
AT&T Corp. (b) 15,410 313
SBC Communications Inc. 25,317 660
Verizon Communications, Inc. 36,324 1,274
Vodafone Group PLC-ADR 86,737 2,172
Transportation & Public Utilities (0.1%)
InterActiveCorp (a)(b) 2,312 78
Transportation Equipment (0.6%)
General Dynamics Corporation 8,806 796
U.S. Government Agencies (2.9%)
Fannie Mae 46,349 3,479
Freddie Mac 7,485 437
Variety Stores (3.0%)
Target Corporation 52,692 2,023
Wal-Mart Stores, Inc. 38,855 2,061
Water Transportation (1.0%)
Carnival Corporation 33,022 1,312
Wholesale Trade Nondurable Goods (0.1%)
SYSCO Corporation 2,679 100
---------
Total Common Stocks (cost: $122,938)
135,902
---------
Principal Value
-------------- ------------
SECURITY LENDING COLLATERAL (6.0%)
Debt (4.8%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 39 $ 39
Fleet National Bank
1.00%, due 01/21/2004 146 146
National Bank of Commerce
1.19%, due 04/21/2004 122 122
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 4
GE U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
------------------------ ---------------
Commercial Paper (1.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 73 $ 73
Delaware Funding Corporation
1.08%, due 01/07/2004 48 48
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 73 73
1.09%, due 01/13/2004 49 49
1.08%, due 02/05/2004 97 97
General Electric Capital Corporation
1.09%, due 01/08/2004 121 121
1.09%, due 01/09/2004 73 73
1.08%, due 01/16/2004 97 97
Govco Incorporated-144A
1.07%, due 02/05/2004 121 121
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 121 121
1.09%, due 02/06/2004 121 121
1.10%, due 02/09/2004 71 71
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 121 121
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 73 73
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 141 141
1.08%, due 02/17/2004 243 243
Sheffield Receivables-144A
1.09%, due 01/21/2004 49 49
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 243 243
Credit Agricole Indosuez
0.98%, due 01/02/2004 10 10
1.08%, due 01/06/2004 92 92
Euro Dollar Terms (1.2%)
Bank of Montreal
1.06%, due 01/15/2004 47 47
1.06%, due 02/17/2004 97 97
Bank of Scotland
1.06%, due 04/02/2004 73 73
Citigroup Inc.
1.10%, due 01/22/2004 73 73
1.09%, due 02/06/2004 97 97
Principal Value
------------------------ ---------------
Euro Dollar Terms (continued)
Credit Agricole Indosuez
1.08%, due 01/28/2004 $ 49 $ 49
Den Danske Bank
1.08%, due 01/20/2004 243 243
1.02%, due 01/30/2004 122 122
Royal Bank of Canada
1.05%, due 02/27/2004 243 243
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 146 146
1.08%, due 01/15/2004 49 49
1.08%, due 01/20/2004 24 24
Svenska Handelsbanken AB
1.09%, due 01/15/2004 24 24
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 146 146
Wells Fargo & Company
1.04%, due 01/30/2004 194 194
Master Notes (0.3%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 97 97
1.14%, due 09/08/2004 146 146
Morgan Stanley
1.05%, due 06/21/2004 233 233
Medium Term Notes (0.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 243 243
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 73 73
Repurchase Agreements (1.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/03
to be repurchased at $569 on 01/02/2004 569 569
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/03
to be repurchased at $772 on 01/02/2004 772 772
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/03
to be repurchased at $462 on 01/02/2004 462 462
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 5
GE U.S. Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ------------
Investment Companies (1.2%)
Money Market Funds (1.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 119,215 $ 119
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 291,071 291
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 1,265,675 1,266
---------
Total Security Lending Collateral (cost: $8,242) 8,242
---------
Total Investment Securities (cost: $131,180) $ 144,144
=========
SUMMARY:
Investments, at value 104.9 % $144,144
Liabilities in excess of other assets (4.9)% (6,767)
----- --------
Net assets 100.0 % $137,377
===== ========
FUTURES CONTRACTS:
- -----------------------------------------------------------------
Net Unrealized
Settlement Appreciation
Contracts Date Amount (Depreciation)
----------- ------------ -------- ---------------
S&P 500 Index 1 03/18/2004 $ 268 $ 9
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$7,994.
(c) Cash collateral for the Repurchase Agreements, valued at $1,839, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, all or a portion of this security is segregated with
the custodian to cover margin requirements for open futures contracts. The
value of all securities segregated at December 31, 2003, is $1,179.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 6
GE U.S. Equity
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $131,180)
(including $7,994 of securities loaned) $144,144
Cash 1,605
Receivables:
Interest 1
Dividends 129
Variation margin 1
Other 7
---------
145,887
---------
Liabilities:
Investment securities purchased 155
Accounts payable and accrued liabilities:
Management and advisory fees 95
Payable for collateral for securities on loan 8,242
Other 18
---------
8,510
---------
Net Assets $137,377
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 104
Additional paid-in capital 154,634
Undistributed net investment income (loss) 848
Accumulated net realized gain (loss) from investment
securities and futures contracts (31,182)
Net unrealized appreciation (depreciation) on:
Investment securities 12,964
Futures contracts 9
---------
Net Assets $137,377
=========
Shares Outstanding:
Initial Class 10,403
Service Class 16
Net Asset Value and Offering Price Per Share:
Initial Class $ 13.19
Service Class 13.23
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 6
Dividends 1,944
Income from loaned securities-net 10
Less withholding taxes on foreign dividends (5)
-------
1,955
-------
Expenses:
Management and advisory fees 980
Transfer agent fees 2
Printing and shareholder reports 48
Custody fees 38
Administration fees 20
Legal fees 2
Auditing and accounting fees 10
Directors fees 5
Other 3
-------
Total expenses 1,108
-------
Net Investment Income (Loss) 847
-------
Net Realized Gain (Loss) from:
Investment securities (6,078)
Futures contracts 204
-------
(5,874)
-------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 31,190
Futures contracts 4
-------
31,194
-------
Net Gain (Loss) on Investment Securities and
Futures Contracts 25,320
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $26,167
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 7
GE U.S. Equity
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 847 $ 748
Net realized gain (loss) from
investment securities and futures
contracts (5,874) (14,103)
Net unrealized appreciation
(depreciation) on investment
securities and futures contracts 31,194 (21,565)
--------- ---------
26,167 (34,920)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (747) (643)
Service Class - -
--------- ---------
(747) (643)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 16,431 26,165
Service Class 189 -
--------- ---------
16,620 26,165
--------- ---------
Dividends and distributions reinvested:
Initial Class 747 643
Service Class - -
--------- ---------
747 643
--------- ---------
Cost of shares redeemed:
Initial Class (26,832) (42,954)
Service Class (5) -
----------- ---------
(26,837) (42,954)
---------- ---------
(9,470) (16,146)
---------- ---------
Net increase (decrease) in net assets 15,950 (51,709)
---------- ---------
Net Assets:
Beginning of year 121,427 173,136
---------- ---------
End of year $137,377 $ 121,427
========== =========
Undistributed Net Investment Income
(Loss) $ 848 $ 748
========== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 1,414 2,132
Service Class 16 -
---------- ---------
1,430 2,132
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 63 57
Service Class - -
---------- ---------
63 57
---------- ---------
Shares redeemed:
Initial Class (2,330) (3,743)
Service Class - -
---------- ---------
(2,330) (3,743)
---------- ---------
Net increase (decrease) in shares
outstanding (837) (1,554)
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 8
GE U.S. Equity
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 10.79 $ 0.08 $ 2.39 $ 2.47
12/31/2002 13.52 0.06 (2.73) (2.67)
12/31/2001 14.98 0.05 (1.38) (1.33)
12/31/2000 15.79 0.07 (0.19) (0.12)
12/31/1999 14.42 0.07 2.55 2.62
- --------------- ---------- -------- -------- -------- --------
Service Class 12/31/2003 11.20 0.04 2.00 2.04
- --------------- ---------- -------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.07) $ - $ (0.07) $ 13.19
(0.06) - (0.06) 10.79
(0.02) (0.11) (0.13) 13.52
(0.11) (0.58) (0.69) 14.98
(0.51) (0.74) (1.25) 15.79
- --------------- --------- --------- --------- ---------
Service Class (0.01) - (0.01) 13.23
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 22.95% $ 137,170 0.88% 0.88% 0.67% 30%
12/31/2002 (19.80) 121,427 0.92 0.92 0.50 33
12/31/2001 (8.88) 173,136 0.94 0.94 0.35 54
12/31/2000 (0.79) 205,761 0.88 0.88 0.42 39
12/31/1999 18.41 179,267 0.93 0.93 0.46 44
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 18.22 207 1.13 1.13 0.45 30
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-January 2, 1997
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 9
GE U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The fund will merge into Great Companies - America(SM) effective as of the close
of business on April 30, 2004, subject to approval by owners of variable
annuity contracts and variable life policies ("Policyowners").
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. GE U.S. Equity ("the Fund"), part of ATSF, began operations on
January 2, 1997.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $4 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 10
GE U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $10 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date. Interest
income, including accretion of discounts and amortization of premiums, is
recorded on the accrual basis commencing on the settlement date.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA"). On May 1, 2003, the Fund reduced its advisory
fee from 0.80% to 0.775% of ANA. The combined advisory fee for the year ended
December 31, 2003, was 0.78%.
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 11
GE U.S. Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $5. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 36,386
U.S. Government 449
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 46,571
U.S. Government 1,101
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 643
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 747
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 846
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $(25,201)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 6,995
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 7,344 December 31, 2009
12,784 December 31, 2010
5,073 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 137,149
=========
Unrealized Appreciation $ 12,865
Unrealized (Depreciation) (5,870)
----------
Net Unrealized Appreciation (Depreciation) $ 6,995
==========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
GE U.S. Equity
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of GE U.S. Equity (the "Fund") (one
of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
GE U.S. Equity 13
Janus Balanced
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Equities commanded the investing world's spotlight over the past twelve months
as the major U.S. stock market indices ended the year with gains for the first
time since 1999. The Dow Jones Industrial Average added 28.28% and the
broad-based Standard and Poor's 500 Composite Index ("S&P 500") climbed 28.67%.
Not to be outdone, the technology-dominated NASDAQ Composite Index surged
50.01% for the year. Meanwhile, Treasury yields fluctuated with the daily
headline news and fortunes of the stock market.
The year began with a brief rally that was quickly overcome by worries of a
looming conflict with Iraq. Rising unemployment, a persistent lack of new jobs
and soaring oil prices were also causes for concern. After hitting a trough in
the months leading up to the war, however, both the market and consumer
confidence bounced back sharply by the time the hostilities began in mid-March.
The Treasury market surged in early March on fears about the war, only to back
up sharply as equity markets rebounded. Later, signs that the manufacturing
sector was emerging from a two-year slump and a tax-cut-driven increase in
consumer spending also helped to lift investors' spirits. But the health of the
economy still was in doubt as job losses mounted and the Treasury market
exceeded its March highs, peaking in June on economic concerns. The Federal
Reserve Board acknowledged the mixed picture, cutting its benchmark federal
funds rate to a 45-year low of 1% in an attempt to protect against deflation.
But, the bond market again backed up sharply in July/August when unemployment
showed early signs of improvement. As the year came to a close, stocks added to
their gains. Feelings of cautious optimism, fueled by an acceleration of
quarterly earnings and better-than-expected economic growth, prevailed despite
questions about whether the positive momentum could be sustained.
PERFORMANCE
For the year ended December 31, 2003, Janus Balanced returned 13.90%. By
comparison its primary benchmark, the S&P 500 and its secondary benchmark, the
Lehman Brothers U.S. Government/
Credit Index ("LBGC") returned, 28.67% and 4.67%, respectively.
MANAGER'S OVERVIEW
Q. How did you manage the Portfolio in this environment?
In addition to feeling the lingering effects of an economic slowdown, the
consequences of war and SARS also weighed heavily on investors last year. This
kept a lid on business travel and capital spending in 2003. As such, we felt it
prudent to keep the portfolio defensively positioned. This was apparent in our
relatively high fixed-income weighting and, on the equity side of the
portfolio, a preference for companies with lower but more consistent growth
profiles. We also focused on companies that were generating high rates of cash
flow and using it to reduce debt or pay dividends. However, this strategy held
back performance as the equity market focused on higher-growth opportunities in
anticipation of a robust economic recovery.
Q. Which holdings had the greatest negative impact on performance?
Among the names that disappointed were trucking and logistics firm CNF
Transportation Inc., which topped the list of detractors, and payroll and tax
filing outsourcer Automatic Data Processing, Inc., which was hampered by the
uncertain employment environment. Also weighing on the portfolio were
Canada-based information technology consulting firm Accenture Ltd., formerly
known as Andersen Consulting, global oil services concern Schlumberger Limited,
and insurer American International Group, Inc.
Q. Which individual holdings had the greatest positive impact on performance?
Industrial conglomerate Tyco International Ltd. emerged as our single biggest
contributor to performance as the once-troubled company continued to reinvent
itself under a new management team. Online media giant Yahoo! Inc. also aided
results by registering a large gain during the year as investors displayed
renewed interest in Internet-based firms that have survived the industry's
recent turmoil in stronger competitive shape. Another technology-related
holding, chipmaker Texas Instruments Incorporated, also advanced. Meanwhile,
industrial powerhouse 3M Company and automotive interior manufacturer Lear
Corporation rounded out our list of top performers.
Q. Which sectors had the greatest impact on performance?
While in-depth research on individual companies drives our investment
decisions, a sector-level look offers an alternative perspective into the
portfolio's performance. Within the equity portion of the portfolio, the
telecommunication services and utilities sectors were the only groups that
generated negative returns, although both were considerably underweight,
relative to the S&P 500. Conversely, the consumer discretionary sector, which
collectively outweighed the S&P 500, accounted for the largest gain, followed
by the information technology sector.
While the equity portion of the portfolio represents a larger portion of assets
and therefore has a bigger impact on overall performance, we are pleased to
report that our fixed-income holdings also aided results. In fact, viewed by
itself, the fixed-income portion of the portfolio outpaced the return of its
benchmark, the LBGC. Digging deeper into fixed-income performance, both credit
selection and a shorter than benchmark duration position aided results.
Meanwhile, we continued to collect a healthy income return and benefited from
strong bond selection as a number of individual holdings gained in price.
/s/ Karen L. Reidy
Karen L. Reidy
Portfolio Manager
Janus Capital Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 1
Janus Balanced
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative indices.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
Initial Class S&P 500 LBGC
5/1/2002 $10,000 $10,000 $10,000
6/30/2002 9,710 9,220 10,178
9/30/2002 9,220 7,628 10,758
12/31/2002 9,490 8,271 10,944
3/31/2003 9,360 8,010 11,124
6/30/2003 10,040 9,242 11,516
9/30/2003 10,108 9,487 11,458
12/31/2003 10,809 10,641 11,455
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 13.90% 4.78% 5/1/02
S&P 500(1) 28.67% 3.79% 5/1/02
LBGC(1) 4.67% 8.47% 5/1/02
- ----- ----- ----- ------
Service Class - 10.93% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index and Lehman
Brothers U.S. Government/Credit (LBGC) Index are unmanaged indices used as
a general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 2
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
U.S. GOVERNMENT OBLIGATIONS (7.9%)
U.S. Treasury Bond
6.50%, due 05/15/2005 $ 260 $ 278
5.00%, due 08/15/2011 374 400
7.25%, due 05/15/2016 275 343
8.13%, due 08/15/2019 55 74
7.88%, due 02/15/2021 246 327
7.25%, due 08/15/2022 220 278
6.00%, due 02/15/2026 262 291
5.25%, due 02/15/2029 129 130
6.25%, due 05/15/2030 174 201
5.38%, due 02/15/2031 67 70
U.S. Treasury Bond (b)
3.88%, due 02/15/2013 342 335
6.25%, due 08/15/2023 406 463
U.S. Treasury Note
4.63%, due 05/15/2006 279 296
3.50%, due 11/15/2006 322 333
2.63%, due 05/15/2008 142 140
5.63%, due 05/15/2008 220 244
6.00%, due 08/15/2009 254 288
6.50%, due 02/15/2010 6 7
5.75%, due 08/15/2010 148 166
4.25%, due 11/15/2013 217 217
--------
Total U.S. Government Obligations (cost: $4,958) 4,881
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.7%)
Fannie Mae
5.50%, due 05/02/2006 319 341
4.75%, due 01/02/2007 126 133
5.00%, due 01/15/2007 401 428
5.25%, due 01/15/2009 50 54
6.25%, due 02/01/2011 143 158
5.38%, due 11/15/2011 251 267
1.88%, due 12/15/2004 545 548
2.13%, due 04/15/2006 531 531
Fannie Mae (b)
2.50%, due 06/15/2008 78 75
Federal Home Loan Bank
6.50%, due 11/15/2005 80 87
Freddie Mac
1.88%, due 01/15/2005 420 422
4.25%, due 06/15/2005 317 329
5.75%, due 04/15/2008 189 208
5.75%, due 03/15/2009 34 37
7.00%, due 03/15/2010 284 331
5.88%, due 03/21/2011 285 309
6.25%, due 07/15/2032 132 144
2.38%, due 04/15/2006 387 389
--------
Total U.S. Government Agency Obligations (cost: $4,788) 4,791
--------
Principal Value
---------------------- --------------
CORPORATE DEBT SECURITIES (24.3%)
Aerospace (0.4%)
Lockheed Martin Corporation
8.20%, due 12/01/2009 $ 125 $ 152
7.65%, due 05/01/2016 88 107
Amusement & Recreation Services (0.6%)
Disney (Walt) Company (The)
4.88%, due 07/02/2004 299 304
Mandalay Resort Group
6.50%, due 07/31/2009 95 99
Automotive (1.0%)
Dana Corporation
9.00%, due 08/15/2011 51 61
Delphi Corporation
6.13%, due 05/01/2004 26 26
Honeywell International Inc.
5.13%, due 11/01/2006 187 200
6.13%, due 11/01/2011 101 111
Tenneco Automotive Inc. (b)
11.63%, due 10/15/2009 221 239
Beer, Wine & Distilled Beverages (0.3%)
Miller Brewing Company-144A
4.25%, due 08/15/2008 90 91
5.50%, due 08/15/2013 70 72
Beverages (1.8%)
Anheuser-Busch Companies, Inc
5.75%, due 04/01/2010 25 27
5.13%, due 10/01/2008 15 16
7.55%, due 10/01/2030 102 126
6.80%, due 01/15/2031 102 116
Coca Cola Enterprises Inc.
5.38%, due 08/15/2006 199 214
6.13%, due 08/15/2011 92 102
4.38%, due 09/15/2009 145 149
7.13%, due 09/30/2009 86 100
Pepsi Bottling Group, Inc. (The)
5.63%, due 02/17/2009 229 249
Business Credit Institutions (0.3%)
Ford Motor Credit Company
7.00%, due 10/01/2013 150 158
Business Services (0.5%)
Clear Channel Communications, Inc.
6.00%, due 11/01/2006 156 169
4.63%, due 01/15/2008 91 94
Hanover Equipment Trust 2001A
8.50%, due 09/01/2008 48 51
Chemicals & Allied Products (0.4%)
International Flavors & Fragrances Inc.
6.45%, due 05/15/2006 225 244
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 3
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
Chemicals & Allied Products (continued)
Nalco Company-144A
7.75%, due 11/15/2011 $ 32 $ 34
Commercial Banks (1.0%)
Citigroup Inc.
6.63%, due 06/15/2032 121 131
7.25%, due 10/01/2010 132 154
Credit Suisse Group
3.88%, due 01/15/2009 151 151
US Bank NA
5.70%, due 12/15/2008 172 187
Communication (1.9%)
Comcast Cable Communications, Inc.
6.75%, due 01/30/2011 139 155
7.13%, due 06/15/2013 33 38
Comcast Corporation
5.85%, due 01/15/2010 109 116
6.50%, due 01/15/2015 43 47
7.05%, due 03/15/2033 121 132
Cox Communications, Inc.
7.50%, due 08/15/2004 11 11
7.13%, due 10/01/2012 29 33
Echostar DBS Corporation
9.38%, due 02/01/2009 158 166
Echostar DBS Corporation-144A
5.75%, due 10/01/2008 128 129
TCI Communications, Inc.
6.88%, due 02/15/2006 292 317
Viacom Inc.
7.75%, due 06/01/2005 53 57
Computer & Office Equipment (0.4%)
Hewlett-Packard Company
3.63%, due 03/15/2008 133 133
Sun Microsystems, Inc.
7.35%, due 08/15/2004 100 103
Department Stores (0.1%)
Meyer (Fred) Stores, Inc.
7.45%, due 03/01/2008 40 46
Drug Stores & Proprietary Stores (0.2%)
Medco Health Solutions, Inc.
7.25%, due 08/15/2013 128 140
Electric Services (0.6%)
American Electric Power Company, Inc.
5.38%, due 03/15/2010 30 31
Dominion Resources, Inc.
2.80%, due 02/15/2005 50 51
4.13%, due 02/15/2008 32 33
Duke Energy Corporation
6.25%, due 01/15/2012 44 48
Principal Value
---------------------- --------------
Electric Services (continued)
Illinova Corporation
11.50%, due 12/15/2010 $ 73 $ 88
MidAmerican Energy Holdings Company
3.50%, due 05/15/2008 134 132
Electric, Gas & Sanitary Services (0.4%)
CMS Energy Corporation
9.88%, due 10/15/2007 125 139
CMS Energy Corporation (b)
7.50%, due 01/15/2009 92 95
Electronic Components & Accessories (1.2%)
Tyco International Group SA
5.88%, due 11/01/2004 147 151
6.38%, due 02/15/2006 243 259
6.38%, due 10/15/2011 171 183
Tyco International Group SA-144A
6.00%, due 11/15/2013 152 157
Environmental Services (0.2%)
Allied Waste North America, Inc.
10.00%, due 08/01/2009 95 103
USA Waste Services, Inc.
7.00%, due 10/01/2004 23 24
Food & Kindred Products (2.3%)
Dean Foods Company
6.75%, due 06/15/2005 38 40
8.15%, due 08/01/2007 950 1,050
6.63%, due 05/15/2009 128 134
6.90%, due 10/15/2017 25 26
Kellogg Company
2.88%, due 06/01/2008 84 81
7.45%, due 04/01/2031 129 152
Furniture & Fixtures (0.5%)
Lear Corporation
7.96%, due 05/15/2005 275 294
Gas Production & Distribution (0.8%)
Coastal Corporation (The) (b)
6.20%, due 05/15/2004 99 99
El Paso Corporation (b)
7.00%, due 05/15/2011 320 295
Sonat Inc.
6.88%, due 06/01/2005 100 99
Holding & Other Investment Offices (0.1%)
Gemstone Investments Ltd.-144A
7.71%, due 10/31/2004 40 40
Hotels & Other Lodging Places (0.1%)
John Q. Hammons Hotels, Inc.-Series B
8.88%, due 05/15/2012 51 56
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 4
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
Industrial Machinery & Equipment (0.2%)
Black & Decker Corporation (The)
7.13%, due 06/01/2011 $ 57 $ 66
SPX Corporation
7.50%, due 01/01/2013 45 49
Insurance (0.3%)
UnitedHealth Group Incorporated
5.20%, due 01/17/2007 162 173
Insurance Agents, Brokers & Service (0.2%)
Marsh & McLennan Companies, Inc.
5.38%, due 03/15/2007 106 113
Life Insurance (0.1%)
AIG SunAmer Global Financing IX -144A
5.10%, due 01/17/2007 50 53
Lumber & Other Building Materials (0.4%)
Home Depot, Inc. (The)
6.50%, due 09/15/2004 224 232
Metal Cans & Shipping Containers (0.2%)
Ball Corporation
6.88%, due 12/15/2012 90 94
Motion Pictures (1.7%)
Time Warner Inc.
5.63%, due 05/01/2005 262 274
6.15%, due 05/01/2007 222 242
9.15%, due 02/01/2023 257 332
7.70%, due 05/01/2032 181 211
Oil & Gas Extraction (0.4%)
Apache Corporation
6.25%, due 04/15/2012 200 222
Burlington Resources Finance Company
7.20%, due 08/15/2031 38 44
Personal Credit Institutions (1.6%)
American General Finance Corporation
5.88%, due 07/14/2006 75 81
General Electric Capital Corporation
4.25%, due 01/28/2005 59 61
2.85%, due 01/30/2006 110 112
5.35%, due 03/30/2006 251 268
6.75%, due 03/15/2032 177 196
General Electric Capital Corporation (b)
5.38%, due 04/23/2004 54 55
General Motors Acceptance Corporation
5.36%, due 07/27/2004 117 119
5.25%, due 05/16/2005 90 93
Petroleum Refining (0.1%)
Conoco Inc.
6.95%, due 04/15/2029 75 85
Principal Value
---------------------- --------------
Pharmaceuticals (0.0%)
Pfizer Inc.
6.00%, due 01/15/2008 $ 5 $ 6
Radio & Television Broadcasting (0.3%)
British Sky Broadcasting Group PLC
6.88%, due 02/23/2009 177 199
Rubber & Misc. Plastic Products (0.3%)
Sealed Air Corporation-144A
5.63%, due 07/15/2013 135 138
6.88%, due 07/15/2033 45 48
Security & Commodity Brokers (0.3%)
American Express Company
4.88%, due 07/15/2013 117 117
Salomon Smith Barney Holdings Inc.
6.50%, due 02/15/2008 48 53
Schwab (Charles) Corporation (The)
8.05%, due 03/01/2010 20 23
Stone, Clay & Glass Products (0.3%)
Owens-Illinois, Inc.
7.15%, due 05/15/2005 152 157
Telecommunications (1.6%)
AT&T Broadband, LLC
7.88%, due 08/01/2013 31 37
AT&T Wireless Services, Inc.
7.35%, due 03/01/2006 60 66
7.50%, due 05/01/2007 68 76
Deutsche Telekom International Finance BV
3.88%, due 07/22/2008 146 146
Nextel Communications, Inc.
7.38%, due 08/01/2015 100 108
Verizon Global Funding Corp.
6.13%, due 06/15/2007 271 297
4.00%, due 01/15/2008 165 168
Verizon Maryland Inc.
5.13%, due 12/15/2033 91 78
Textile Mill Products (0.0%)
Mohawk Industries, Inc.
7.20%, due 04/15/2012 20 23
Transportation Equipment (0.3%)
Ship Finance International Ltd.-144A
8.50%, due 12/15/2013 162 160
Variety Stores (0.9%)
Target Corporation
5.50%, due 04/01/2007 91 98
Wal-Mart Stores, Inc.
5.45%, due 08/01/2006 158 170
6.88%, due 08/10/2009 244 281
--------
Total Corporate Debt Securities (cost: $14,708) 15,041
--------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 5
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- -----------
CONVERTIBLE BONDS (0.3%)
Retail Trade (0.3%)
Amazon.com, Inc.
4.75%, due 02/01/2009 $ 215 $ 217
--------
Total Convertible Bonds (cost: $206) 217
--------
Shares Value
-------------------- --------------
COMMON STOCKS (57.2%)
Aerospace (0.6%)
Lockheed Martin Corporation 6,770 $ 348
Air Transportation (0.8%)
FedEx Corporation 4,205 284
Southwest Airlines Co. 12,135 196
Automotive (1.8%)
Bayerische Motoren Werke AG (BMW) 4,598 214
Honda Motor Co., Ltd. 5,900 262
Honeywell International Inc. 18,300 612
Beer, Wine & Distilled Beverages (1.3%)
LVMH Moet Hennessy Louis Vuitton SA 11,124 809
Beverages (1.7%)
Anheuser-Busch Companies, Inc. 12,040 634
PepsiCo, Inc. 8,700 406
Business Services (0.4%)
eBay Inc. (a) 4,060 262
Chemicals & Allied Products (3.1%)
International Flavors & Fragrances Inc. 5,035 176
Potash Corporation of Saskatchewan Inc. (b) 4,045 350
Procter & Gamble Company (The) 7,305 730
Reckitt Benckiser PLC 24,977 565
Syngenta AG-ADR 8,000 108
Commercial Banks (2.4%)
Bank of America Corporation 1,580 127
Citigroup Inc. 18,955 920
HSBC Holdings PLC (a) 16,093 253
U.S. Bancorp 5,970 178
Communication (1.3%)
Comcast Corporation-Class A (a) 7,750 255
Liberty Media Corporation-Class A (a) 14,360 171
Viacom, Inc.-Class B 8,540 379
Communications Equipment (0.5%)
Nokia Oyj-ADR 16,555 281
Computer & Data Processing Services (3.3%)
Electronic Arts Inc. (a) 6,200 296
Microsoft Corporation 18,350 505
Oracle Corporation (a) 26,830 354
VERITAS Software Corporation (a) 6,460 240
Yahoo! Inc. (a) 14,500 655
Shares Value
-------------------- --------------
Computer & Office Equipment (3.3%)
Cisco Systems, Inc. (a) 24,070 $ 585
Dell Computer Corporation (a) 15,580 529
International Business Machines
Corporation 7,350 681
Lexmark International Group, Inc. (a) 3,000 236
Department Stores (0.6%)
J.C. Penney Company, Inc. (b) 14,985 394
Drug Stores & Proprietary Stores (0.6%)
Medco Health Solutions, Inc. (a) 11,364 386
Electronic & Other Electric Equipment (2.3%)
General Electric Company 24,140 748
Samsung Electronics Co.,
Ltd.-GDR-144A (USD) (b) 3,595 676
Electronic Components & Accessories (5.0%)
Intel Corporation 14,310 461
Linear Technology Corporation 3,505 147
Maxim Integrated Products 4,065 202
Texas Instruments Incorporated 24,940 733
Tyco International Ltd. (b) 60,220 1,596
Environmental Services (1.2%)
Waste Management, Inc. 24,510 725
Furniture & Fixtures (1.1%)
Lear Corporation (b) 11,220 688
Gas Production & Distribution (0.3%)
El Paso Corporation (b) 20,370 167
Health Services (0.5%)
Caremark Rx, Inc. (a)(b) 11,870 301
Hotels & Other Lodging Places (3.7%)
Fairmont Hotels & Resorts Inc. (b) 4,645 126
Four Seasons Hotels Inc. (b) 9,295 475
Marriott International, Inc.-Class A 20,505 947
Starwood Hotels & Resorts Worldwide, Inc. 20,925 752
Industrial Machinery & Equipment (0.4%)
Applied Materials, Inc. (a) 11,445 257
Insurance (2.0%)
Aetna Inc. 6,940 469
Berkshire Hathaway Inc.-Class B (a) 217 611
UnitedHealth Group Incorporated 2,435 142
Manufacturing Industries (0.3%)
Mattel, Inc. 9,665 186
Medical Instruments & Supplies (0.5%)
Medtronic, Inc. 6,795 330
Motion Pictures (2.2%)
Fox Entertainment Group, Inc.-Class A (a) 6,465 188
Time Warner Inc. (a) 66,835 1,202
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 6
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- -----------
Oil & Gas Extraction (0.9%)
Apache Corporation 2,831 $ 230
Total Fina Elf SA 1,920 357
Paper & Allied Products (1.7%)
3M Company 12,275 1,044
Petroleum Refining (1.0%)
Exxon Mobil Corporation 14,785 606
Pharmaceuticals (4.0%)
Barr Laboratories, Inc. (a)(b) 5,620 432
Neurocrine Biosciences, Inc. (a)(b) 5,035 275
Novartis AG 3,134 142
Pfizer Inc. 18,755 663
Roche Holding AG 9,992 1,008
Printing & Publishing (1.6%)
Dow Jones & Company, Inc. 6,325 315
Gannett Co., Inc. 7,495 668
Radio & Television Broadcasting (0.5%)
British Sky Broadcasting Group PLC (a) 24,178 304
Radio, Television & Computer Stores (0.5%)
Best Buy Co., Inc. 6,070 317
Railroads (0.9%)
Canadian National Railway Company 9,010 570
Retail Trade (0.5%)
Amazon.com, Inc. (a)(b) 5,625 296
Security & Commodity Brokers (1.1%)
American Express Company 7,050 340
Goldman Sachs Group, Inc. (The) 3,265 322
Textile Mill Products (0.5%)
Mohawk Industries, Inc. (a)(b) 4,185 295
Transportation Equipment (0.4%)
General Dynamics Corporation 3,035 274
U.S. Government Agencies (1.3%)
Freddie Mac 14,270 832
Variety Stores (1.1%)
Target Corporation 5,000 192
Wal-Mart Stores, Inc. 9,275 492
--------
Total Common Stocks (cost: $29,167) 35,484
--------
Principal Value
---------------------- --------------
SECURITY LENDING COLLATERAL (9.7%)
Debt (7.7%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 28 $ 28
Fleet National Bank
1.00%, due 01/21/2004 107 107
National Bank of Commerce
1.19%, due 04/21/2004 89 89
Principal Value
---------------------- --------------
Commercial Paper (2.0%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 53 $ 53
Delaware Funding Corporation
1.08%, due 01/07/2004 35 35
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 53 53
1.09%, due 01/13/2004 36 36
1.08%, due 02/05/2004 71 71
General Electric Capital Corporation
1.09%, due 01/08/2004 89 89
1.09%, due 01/09/2004 53 53
1.08%, due 01/16/2004 71 71
Govco Incorporated-144A
1.07%, due 02/05/2004 89 89
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 89 89
1.09%, due 02/06/2004 89 89
1.10%, due 02/09/2004 52 52
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 89 89
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 53 53
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 103 103
1.08%, due 02/17/2004 178 178
Sheffield Receivables-144A
1.09%, due 01/21/2004 36 36
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 178 178
Credit Agricole Indosuez
0.98%, due 01/02/2004 7 7
1.08%, due 01/06/2004 68 68
Euro Dollar Terms (1.9%)
Bank of Montreal
1.06%, due 01/15/2004 35 35
1.06%, due 02/17/2004 71 71
Bank of Scotland
1.06%, due 04/02/2004 53 53
Citigroup Inc.
1.10%, due 01/22/2004 53 53
1.09%, due 02/06/2004 71 71
Credit Agricole Indosuez
1.08%, due 01/28/2004 36 36
Den Danske Bank
1.08%, due 01/20/2004 178 178
1.02%, due 01/30/2004 89 89
Royal Bank of Canada
1.05%, due 02/27/2004 178 178
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 7
Janus Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- -----------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 107 $ 107
1.08%, due 01/15/2004 36 36
1.08%, due 01/20/2004 18 18
Svenska Handelsbanken AB
1.09%, due 01/15/2004 18 18
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 107 107
Wells Fargo & Company
1.04%, due 01/30/2004 142 142
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 71 71
1.14%, due 09/08/2004 107 107
Morgan Stanley
1.05%, due 06/21/2004 171 171
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 178 178
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 53 53
Repurchase Agreements (2.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/03
to be repurchased at $416 on 01/02/2004 416 416
Principal Value
-------------- -----------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/03
to be repurchased at $565 on 01/02/2004 $ 565 $ 565
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/03
to be repurchased at $338 on 01/02/2004 338 338
Shares Value
------------- -----------
Investment Companies (2.0%)
Money Market Funds (2.0%)
American AAdvantage Select Fund
1-day yield of 1.00% 87,263 $ 87
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 213,060 213
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 926,455 926
--------
Total Security Lending Collateral (cost: $6,033) 6,033
--------
Total Investment Securities (cost: $59,860) $ 66,447
========
SUMMARY:
Investments, at value 107.1 % $ 66,447
Liabilities in excess of other assets (7.1)% (4,437)
------- --------
Net assets 100.0 % $ 62,010
======= ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$5,842.
(c) Cash collateral for the Repurchase Agreements, valued at $1,346, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
GDR Global Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $1,598 or 2.58% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 8
Janus Balanced
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $59,860)
(including $5,842 of securities loaned) $ 66,447
Cash 1,155
Receivables:
Investment securities sold 149
Interest 372
Dividends 44
Dividend reclaims receivable 2
Other 6
---------
68,175
---------
Liabilities:
Investment securities purchased 52
Accounts payable and accrued liabilities:
Management and advisory fees 52
Due to advisor 18
Distribution fees 1
Payable for collateral for securities on loan 6,033
Other 9
---------
6,165
---------
Net Assets $ 62,010
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 57
Additional paid-in capital 54,320
Undistributed net investment income (loss) 726
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 320
Net unrealized appreciation (depreciation) on investment
securities 6,587
---------
Net Assets $ 62,010
=========
Shares Outstanding:
Initial Class 5,695
Service Class 55
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.79
Service Class 10.79
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 989
Dividends 377
Income from loaned securities-net 9
Less withholding taxes on foreign dividends (9)
------
1,366
------
Expenses:
Management and advisory fees 503
Transfer agent fees 2
Printing and shareholder reports 37
Custody fees 40
Administration fees 24
Legal fees 1
Auditing and accounting fees 12
Directors fees 2
Other 1
Recaptured expenses 18
Service fees:
Service Class 1
------
Total expenses 641
------
Net Investment Income (Loss) 725
------
Net Realized Gain (Loss) from:
Investment securities 782
Foreign currency transactions 1
------
783
------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 6,647
------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 7,430
------
Net Increase (Decrease) in Net Assets Resulting
from Operations $8,155
======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 9
Janus Balanced
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 725 $ 107
Net realized gain (loss) from
investment securities and foreign
currency transactions 783 (462)
Net unrealized appreciation
(depreciation) on investment
securities 6,647 (60)
-------- -------
8,155 (415)
-------- -------
Distributions to Shareholders:
From net investment income:
Initial Class (107) -
Service Class - -
-------- -------
(107) -
-------- -------
From net realized gains:
Initial Class - -
Service Class - -
-------- -------
- -
-------- -------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 41,653 45,216
Service Class 658 -
-------- -------
42,311 45,216
-------- -------
Dividends and distributions reinvested:
Initial Class 107 -
Service Class - -
-------- -------
107 -
-------- -------
Cost of shares redeemed:
Initial Class (25,584) (7,568)
Service Class (105) -
-------- -------
(25,689) (7,568)
-------- -------
16,729 37,648
-------- -------
Net increase (decrease) in net assets 24,777 37,233
-------- -------
Net Assets:
Beginning of year 37,233 -
-------- -------
End of year $ 62,010 $37,233
======== ========
Undistributed Net Investment Income
(Loss) $ 726 $ 107
======== ========
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued:
Initial Class 4,324 4,748
Service Class 65 -
-------- --------
4,389 4,748
-------- --------
Shares issued-reinvested from distributions:
Initial Class 11 -
Service Class - -
-------- --------
11 -
-------- --------
Shares redeemed:
Initial Class (2,565) (823)
Service Class (10) -
-------- --------
(2,575) (823)
-------- --------
Net increase (decrease) in shares
outstanding 1,825 3,925
======== ========
a) Commenced operations on May 1, 2002
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 10
Janus Balanced
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.49 $ 0.13 $ 1.19 $ 1.32
12/31/2002 10.00 0.07 (0.58) (0.51)
- --------------- ---------- ------- -------- --------- ---------
Service Class 12/31/2003 9.73 0.08 0.98 1.06
- --------------- ---------- ------- -------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.02) $ - $ (0.02) $ 10.79
- - - 9.49
- --------------- --------- --- --------- ---------
Service Class - - - 10.79
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 13.90% $ 61,419 1.15% 1.15% 1.31% 65%
12/31/2002 (5.10) 37,233 1.40 1.59 1.08 42
- --------------- ---------- ----- -------- ---- ---- ---- --
Service Class 12/31/2003 10.93 591 1.38 1.38 1.14 65
- --------------- ---------- ----- -------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.03%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 11
Janus Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Janus Balanced ("the Fund"), part of ATSF, began operations on May 1,
2002.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $4 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 12
Janus Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $6 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.90% of the first $500 million of ANA
0.85% of the next $500 million of ANA
0.80% of ANA over $1 billion
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.40% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Increase in
Expenses Recovered Total Expenses to
by Advisor Average Net Assets
-------------------- -------------------
Recovered in 2003 $18 0.03%
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 13
Janus Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $2. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 43,366
U.S. Government 10,290
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 27,412
U.S. Government 5,084
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) 1
Undistributed net realized capital gains (loss) (1)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 107
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 756
=======
Undistributed Long-term Capital Gains $ 345
=======
Capital Loss Carryforward $ -
=======
Post October Loss $ -
=======
Net Unrealized Appreciation (Depreciation) $ 6,532
=======
The capital loss carryforward utilized during the period ended December 31,
2003 was $356.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 14
Janus Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $59,915
=======
Unrealized Appreciation $ 6,803
Unrealized (Depreciation) (271)
-------
Net Unrealized Appreciation (Depreciation) $ 6,532
=======
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 15
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Janus Balanced
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Janus Balanced (the "Fund") (one
of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Balanced 16
Janus Global
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
As 2003 began, the march toward military conflict between the U.S. and Iraq
dominated action in markets around the world, pressuring stocks and delaying
any potential progress in the tepid global economic recovery. Later, equity
markets bounced back handsomely as major hostilities in Iraq came to an end.
Markets in Europe were further aided by the European Central Bank's decision in
June to cut its key-lending rate by a half-point to 2%, the third reduction
since December, 2002. At the conclusion of the period, signs of a worldwide
economic rebound continued to emerge and markets built on earlier gains.
Meanwhile, the U.S. dollar weakened against a number of foreign currencies,
most notably the euro and Japanese Yen, which remained a source of volatility
despite the brighter economic outlook.
Turning to individual countries, Japan joined other industrialized markets in a
broad recovery as the country's long-moribund economy gained momentum and
reform efforts seemed finally to take root. Germany also registered a
substantial gain, while markets in France and the United Kingdom followed with
healthy returns of their own. In the U.S., the NASDAQ Composite Index led a
strong recovery that came as welcome relief after three years of persistent
losses. None, however, performed as well as less-developed markets. In
particular, emerging market stocks in Latin America, Europe and Asia climbed
significantly higher.
PERFORMANCE
For the year ended December 31, 2003, Janus Global returned 22.72%. By
comparison its benchmark, the Morgan Stanley Capital International World Index
returned 33.76%.
MANAGER'S OVERVIEW
Q. How did you manage the Portfolio in this environment?
Over the past year, investor focus has swung radically from concerns over
global deflation and economic stagnation to widely shared anticipation of
strong and globally synchronized economic growth. Not surprisingly, companies
with the most to gain in this environment, such as cyclical and technology
businesses, performed well. But perhaps more than anything, 2003 was
characterized by the massive outperformance of smaller-cap and "lower-quality"
stocks such as those with high financial leverage and relatively low returns on
equity. Our traditional emphasis on strong franchises with historically high
consistency of results was therefore out of synch with investor preferences.
More recently, we have begun to position the portfolio more aggressively. For
example, we have actively sought out select technology firms that have emerged
from the massive industry shake-out in a stronger competitive position and have
looked for firms that are benefiting from growth in new end markets such as
digital photography and high-functioning cellular phones. We also increased our
weighting in Japan in response to fundamental improvements economically and
have increased our exposure to emerging markets in an effort to participate in
the enormous economic growth-taking place in areas such as India. One
particularly noteworthy theme is our desire to invest in companies with
leverage to China's continued development as a world economic power through
investments that, for example, utilize its low-cost production base or supply
the raw materials that fuel the country's economic engine.
Q. Which individual holdings had the greatest negative impact on performance?
Japanese consumer electronics and media company Sony Corporation was our single
biggest detractor followed by Dutch publishing company Wolters Kluwer NV. Hon
Hai Precision Industry Co., Ltd., a company that manufactures cable and other
connectivity products for personal computers, also slipped. Elsewhere, Swedish
lock maker Assa Abloy AB also turned in a disappointing performance while U.S.
aerospace and defense contractor General Dynamics Corporation also slipped
lower.
Q. Which individual holdings had the greatest positive impact on performance?
Indian industrial conglomerate Reliance Industries Limited ("Reliance"), which
produces goods across a wide range of sectors including energy, chemicals and
textiles, was our top performer during the year. Reliance has also been
successful in its efforts to capitalize on the opportunities presented by
India's fast-growing wireless communications market. Swiss pharmaceutical Roche
Holding AG ("Roche") also performed well, as did South Korean electronics
producer Samsung Electronics Co., Ltd. Meanwhile, U.S.-based Citigroup Inc.
gained as global financial markets finally turned higher after a long period of
lagging performance. Finally, Bermuda-based conglomerate Tyco International
Ltd. rounded out our list of top performers.
Q. Which sectors had the greatest impact on the Portfolio's performance?
Our exposure to the financial services and information technology ("IT")
sectors provided the greatest boost to performance as those sectors benefited
from a general improvement in worldwide markets. When viewed as a group,
however, the strong performance of our individual picks within the technology
sector was not enough to keep pace with the rapid rise of the technology stocks
represented in our benchmark. That made IT our weakest-performing sector when
viewed on a relative basis.
Meanwhile, although no single sector contributed negatively to absolute
performance, our investments in the consumer staples, telecommunication
services and utilities areas turned in only a modestly positive performance.
That, together with our relatively small exposure to these sectors, made them
our biggest laggards.
Q. Which countries had the greatest impact on the Portfolio's performance?
The U.S. was by far the largest geographic exposure in the portfolio. That,
together with the relatively strong performance of U.S. markets, naturally made
the U.S. the single biggest contributor to overall performance. Our exposure to
Switzerland, characterized by top-performing holdings such as Roche and UBS
Finance (Delaware) LLC, made that country our second biggest contributor. Only
two countries detracted from performance during the year, Taiwan and Finland.
/s/ Laurence Chang
Laurence Chang
Portfolio Manager
Janus Capital Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 1
Janus Global
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
10-year period of 12/31/93 through 12/31/03
Initial Class MSCI
12/31/93 $10,000 $10,000
3/31/94 9,759 10,073
6/30/94 9,606 10,388
9/30/94 10,114 10,623
12/31/94 10,025 10,558
3/31/95 9,928 11,066
6/30/95 10,904 11,553
9/30/95 11,825 12,213
12/31/95 12,337 12,809
3/31/96 13,763 13,345
6/30/96 14,839 13,748
9/30/96 15,100 13,947
12/31/96 15,759 14,602
3/31/97 16,492 14,659
6/30/97 18,434 16,883
9/30/97 19,520 17,382
12/31/97 18,714 16,971
3/31/98 22,105 19,419
6/30/98 24,123 19,831
9/30/98 20,139 17,471
12/31/98 24,331 21,179
3/31/99 26,189 21,953
6/30/99 27,714 23,020
9/30/99 28,493 22,697
12/31/99 41,631 26,546
3/31/00 46,961 26,837
6/30/00 42,361 25,905
9/30/00 39,755 24,622
12/31/00 34,327 23,116
3/31/01 28,426 20,163
6/30/01 29,715 20,723
9/30/01 23,550 17,759
12/31/01 26,485 19,297
3/31/02 26,254 19,380
6/30/02 22,986 17,637
9/30/02 18,908 14,410
12/31/02 19,593 15,526
3/31/03 17,955 14,759
6/30/03 20,828 17,304
9/30/03 21,394 18,159
12/31/03 24,148 20,768
*Inception 12/03/1992.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
----------- ------------- ---------- ------------ ----------
Initial Class 22.72% (0.24)% 9.17% 11.38% 12/3/92
MSCIW(1) 33.76% (0.39)% 7.58% 8.92% 12/3/92
- ------ ----- ----- ---- ----- -------
Service Class - - - 24.52% 5/1/03
- --------------- ----- ----- ---- ----- -------
NOTES
(1) The Morgan Stanley Capital International World (MSCIW) Index is an
unmanaged index used as a general measure of market performance.
Calculations assume dividends and capital gains are reinvested and do not
include any managerial expenses. From inception calculation is based on
life of initial class shares. Source: Standard & Poor's Micropal(R)(C)-
Micropal, Inc. 2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in global securities involve risks relating to political, social
and economic developments abroad, foreign currency contracts for hedging, as
well as risks resulting from the differences between the regulations to which
U.S. and foreign issuer markets are subject.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 2
Janus Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (96.5%)
Austria (0.0%)
Erste Bank der oesterreichischen
Sparkassen AG 1,359 $ 168
Bermuda (2.8%)
Tyco International Ltd. (b) 678,265 17,974
Brazil (1.5%)
Companhia Vale do Rio Doce-ADR (b) 136,415 7,980
Unibanco-Union of Brazilian Banks
SA-GDR 65,490 1,634
Canada (1.4%)
Canadian Natural Resources Ltd. (b) 54,101 2,737
EnCana Corporation 88,311 3,486
Suncor Energy Inc. 109,401 2,752
China (0.6%)
China Life Insurance Company
Limited-H Shares (a) 4,760,000 3,894
Finland (0.7%)
Nokia Oyj 254,834 4,406
France (4.8%)
Aventis SA 34,556 2,283
Credit Agricole SA 154,567 3,690
Hermes International 3,405 659
LVMH Moet Hennessy Louis Vuitton SA 150,035 10,918
Sanofi-Synthelabo 95,317 7,176
Total Fina Elf SA 31,452 5,846
Germany (1.3%)
Altana AG 43,005 2,596
Deutsche Telekom AG (a)(b) 173,187 3,169
SAP AG 13,791 2,327
Hong Kong (2.3%)
Cheung Kong (Holdings) Limited 199,000 1,583
China Mobile (Hong Kong) Limited 1,484,770 4,562
CNOOC Limited 2,139,955 4,190
Sun Hung Kai Properties Limited 546,000 4,519
India (4.3%)
Housing Development Finance
Corporation Limited 128,731 1,814
Infosys Technologies Limited 52,298 6,384
Reliance Industries Limited 1,266,092 15,849
Tata Iron and Steel Company Limited 351,510 3,427
Indonesia (0.1%)
ICICI Bank Limited 86,607 562
Ireland (0.4%)
Anglo Irish Bank Corporation PLC 160,374 2,530
Shares Value
-------------------- ---------------
Israel (0.9%)
Check Point Software Technologies, Ltd. (a)(b) 247,910 $ 4,170
Teva Pharmaceutical Industries Ltd.-ADR (b) 32,005 1,815
Italy (1.2%)
Banca Intesa SpA 993,076 3,882
UniCredito Italiano SpA 705,096 3,805
Japan (16.4%)
Canon Inc. 242,000 11,263
Chugai Pharmaceutical Co., Ltd. 180,100 2,588
FANUC LTD 32,700 1,958
Hirose Electric Co., Ltd. 16,000 1,835
Honda Motor Co., Ltd. 114,700 5,092
JSR Corporation 91,000 2,033
Kao Corporation 214,000 4,351
Komatsu Ltd. 1,020,000 6,469
Matsushita Electric Works, Ltd. (b) 235,000 2,111
Millea Holdings, Inc. 221 2,886
Mitsubishi Corporation 145,000 1,536
Mitsubishi Tokyo Financial Group, Inc. 1,795 13,996
Mitsui Sumitomo Insurance Co., Ltd. 200,000 1,641
Mizuho Financial Group, Inc. (a) 1,091 3,307
NEC Electronics Corporation (a) 16,100 1,177
Nikko Cordial Corporation 616,000 3,430
Nitto Denko Corporation 90,800 4,827
Nomura Securities Co., Ltd. (The) 474,000 8,068
NTT DoCoMo, Inc. 1,690 3,830
Omron Corporation 163,400 3,315
Pioneer Corporation 139,900 3,862
Sumitomo Mitsui Financial Group, Inc. (b) 556 2,961
Takeda Chemical Industries, Ltd. 54,300 2,152
Tokyo Electron Limited 51,900 3,940
Tokyo Gas Co., Ltd. 519,000 1,849
Toyota Motor Corporation (b) 109,900 3,710
Mexico (1.6%)
Grupo Televisa SA de CV-ADR 184,915 7,371
Wal-Mart de Mexico SA de CV-Series V 972,500 2,773
Netherlands (2.6%)
ING Groep NV 168,494 3,929
Royal Numico NV-CVA (a) 79,714 2,202
STMicroelectronics NV (a) 381,867 10,354
Russia (2.7%)
Lukoil Oil Company-ADR (a) 76,210 7,095
Mining and Metallurgical Company
Norilsk Nickel-ADR 75,818 4,940
YUKOS Oil Company-ADR 124,754 5,314
Singapore (1.0%)
DBS Group Holdings Ltd. 718,000 6,216
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 3
Janus Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
South Korea (5.8%)
Kookmin Bank 81,580 $ 3,058
POSCO 58,980 8,072
Samsung Electronics Co., Ltd. 57,520 21,781
Shinsegae Co., Ltd. 6,860 1,670
SK Telecom Co., Ltd. 15,420 2,576
Sweden (1.1%)
Atlas Copco AB-A Shares (b) 124,900 4,470
Autoliv, Inc.-SDR 66,500 2,523
Switzerland (7.9%)
Credit Suisse Group 231,452 8,468
Givaudan SA-Registered Shares 5,880 3,052
Roche Holding AG 213,077 21,492
Serono SA-Class B 2,604 1,857
UBS AG-Registered Shares 225,389 15,435
Taiwan (3.6%)
China Steel Corporation 2,278,000 1,894
China Steel Corporation-GDR-144A 133,000 2,209
Fubon Financial Holding Co., Ltd. 2,669,000 2,558
Hon Hai Precision Indusry Co., Ltd. 1,701,000 6,697
Quanta Computer Inc. 1,448,100 3,566
United Microelectronics Corporation (a) 7,196,000 6,175
United Kingdom (9.8%)
Amdocs Limited (a) 149,965 3,371
British Sky Broadcasting Group PLC (a) 887,088 11,163
Compass Group PLC 934,862 6,358
HSBC Holdings PLC (a) 1,000,627 15,724
Reckitt Benckiser PLC 180,757 4,089
Rio Tinto PLC-Registered Shares 233,352 6,444
Standard Chartered PLC (a) 482,083 7,960
Tesco PLC 1,061,984 4,899
Vedanta Resources PLC (a) 382,651 2,520
United States (21.7%)
Amgen Inc. (a) 33,720 2,084
Anthem, Inc. (a)(b) 127,140 9,536
Applied Materials, Inc. (a) 136,720 3,069
Bank of New York Company, Inc. (The) 105,015 3,478
Baxter International Inc. 75,800 2,313
Boeing Company (The) 46,035 1,940
CarMax, Inc. (a)(b) 68,970 2,133
Cendant Corporation (a) 143,990 3,207
Cisco Systems, Inc. (a) 456,690 11,094
Citigroup Inc. 347,265 16,856
Clear Channel Communications, Inc. 66,530 3,116
Dell Computer Corporation (a) 72,050 2,447
eBay Inc. (a) 28,185 1,820
Hewlett-Packard Company 157,685 3,622
InterActiveCorp (a)(b) 70,295 2,385
KLA-Tencor Corporation (a)(b) 71,505 4,195
Shares Value
-------------------- ---------------
United States (continued)
Liberty Media Corporation-Class A (a) 171,331 $ 2,037
McDonald's Corporation 143,435 3,561
Medco Health Solutions, Inc. (a) 124,595 4,235
Medtronic, Inc. 192,040 9,335
Microsoft Corporation 79,930 2,201
Northern Trust Corporation 40,960 1,901
Northrop Grumman Corporation (b) 42,380 4,052
SanDisk Corporation (a) 35,880 2,194
Texas Instruments Incorporated 151,040 4,438
Time Warner Inc. (a) 885,320 15,927
United Technologies Corporation 46,485 4,405
UnitedHealth Group Incorporated 166,595 9,693
Walgreen Co. 1,890 69
----------
Total Common Stocks (cost: $523,128)
614,592
----------
Principal Value
-------------- ------------
SECURITY LENDING COLLATERAL (7.6%)
Debt (6.1%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 229 $ 229
Fleet National Bank
1.00%, due 01/21/2004 857 857
National Bank of Commerce
1.19%, due 04/21/2004 714 714
Commercial Paper (1.6%)
Compass Securitization-144A
1.08%, due 01/22/2004 429 429
Delaware Funding Corporation
1.08%, due 01/07/2004 285 285
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 429 429
1.09%, due 01/13/2004 286 286
1.08%, due 02/05/2004 570 570
General Electric Capital Corporation
1.09%, due 01/08/2004 712 712
1.09%, due 01/09/2004 429 429
1.08%, due 01/16/2004 569 569
Govco Incorporated-144A
1.07%, due 02/05/2004 713 713
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 713 713
1.09%, due 02/06/2004 713 713
1.10%, due 02/09/2004 417 417
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 713 713
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 429 429
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 4
Janus Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------------------- ---------------
Commercial Paper (continued)
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 $ 828 $ 828
1.08%, due 02/17/2004 1,426 1,426
Sheffield Receivables-144A
1.09%, due 01/21/2004 286 286
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 1,428 1,428
Credit Agricole Indosuez
0.98%, due 01/02/2004 57 57
1.08%, due 01/06/2004 543 543
Euro Dollar Terms (1.5%)
Bank of Montreal
1.06%, due 01/15/2004 279 279
1.06%, due 02/17/2004 571 571
Bank of Scotland
1.06%, due 04/02/2004 429 429
Citigroup Inc.
1.10%, due 01/22/2004 429 429
1.09%, due 02/06/2004 571 571
Credit Agricole Indosuez
1.08%, due 01/28/2004 286 286
Den Danske Bank
1.08%, due 01/20/2004 1,428 1,428
1.02%, due 01/30/2004 714 714
Royal Bank of Canada
1.05%, due 02/27/2004 1,428 1,428
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 857 857
1.08%, due 01/15/2004 286 286
1.08%, due 01/20/2004 143 143
Svenska Handelsbanken AB
1.09%, due 01/15/2004 143 143
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 857 857
Wells Fargo & Company
1.04%, due 01/30/2004 1,143 1,143
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 571 571
1.14%, due 09/08/2004 857 857
Morgan Stanley
1.05%, due 06/21/2004 1,371 1,371
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,428 1,428
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 429 429
Principal Value
----------------------- ---------------
Repurchase Agreements (1.7%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,341 on 01/02/2004 $ 3,341 $ 3,341
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,541 on 01/02/2004 4,541 4,541
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,713 on 01/02/2004 2,713 2,713
Shares Value
--------------- ------------
Investment Companies (1.5%)
Money Market Funds (1.5%)
American AAdvantage Select Fund
1-day yield of 1.00% 700,666 $ 701
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,710,729 1,711
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 7,438,813 7,439
---------
Total Security Lending Collateral (cost: $48,441) 48,441
---------
Total Investment Securities (cost: $571,569) $663,033
=========
SUMMARY:
Investments, at value 104.1 % $663,033
Liabilities in excess of other assets (4.1)% (28,689)
--------- ---------
Net assets 100.0 % $634,344
========= =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- -----------------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- ------------------ ----------- ------------ --------------- ---------------
Canadian Dollar - 01/02/2004 $ - $ -
Euro Dollar 405 01/02/2004 504 8
Euro Dollar 20 01/07/2004 25 0
British Pound (748) 01/05/2004 (1,331) (8)
Hong Kong Dollar (3,549) 01/05/2004 (457) -
Taiwan Dollar (6,750) 01/02/2004 (198) (1)
--------- -----
$ (1,457) $ (1)
========= =====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 5
Janus Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Percentage of
Net Assets Value
----------------- ------------
INVESTMENTS BY INDUSTRY:
Commercial Banks 18.2 % $ 115,636
Electronic Components & Accessories 7.3 % 46,814
Pharmaceuticals 6.9 % 43,962
Electronic & Other Electric Equipment 6.1 % 38,802
Computer & Office Equipment 5.4 % 34,185
Chemicals & Allied Products 5.0 % 32,058
Oil & Gas Extraction 4.0 % 25,182
Insurance 3.7 % 23,755
Metal Mining 3.4 % 21,884
Telecommunications 3.4 % 21,508
Computer & Data Processing Services 2.9 % 18,453
Motion Pictures 2.5 % 15,927
Primary Metal Industries 2.4 % 15,602
Industrial Machinery & Equipment 2.2 % 14,008
Medical Instruments & Supplies 1.8 % 11,648
Security & Commodity Brokers 1.8 % 11,498
Automotive 1.8 % 11,325
Radio & Television Broadcasting 1.8 % 11,162
Beer, Wine & Distilled Beverages 1.7 % 10,917
Aerospace 1.6 % 10,397
Restaurants 1.6 % 9,919
Life Insurance 1.2 % 7,823
Real Estate 1.0 % 6,102
Percentage of
Net Assets Value
INVESTMENTS BY INDUSTRY: ----------------- ------------
Electric Services 0.8 % $ 5,335
Business Services 0.8 % 4,936
Food Stores 0.8 % 4,899
Communications Equipment 0.7 % 4,406
Drug Stores & Proprietary Stores 0.7 % 4,304
Instruments & Related Products 0.7 % 4,195
Personal Services 0.5 % 3,207
Food & Kindred Products 0.5 % 3,052
Variety Stores 0.4 % 2,773
Petroleum Refining 0.4 % 2,752
Finance 0.4 % 2,558
Transportation & Public Utilities 0.4 % 2,385
Automotive Dealers & Service Stations 0.3 % 2,133
Communication 0.3 % 2,037
Rubber & Misc. Plastic Products 0.3 % 2,033
Mortgage Bankers & Brokers 0.3 % 1,814
Department Stores 0.3 % 1,670
Wholesale Trade Durable Goods 0.2 % 1,536
----- ---------
Investments, at market value 96.5 % 614,592
Short-term investments 7.6 % 48,441
Liabilities in excess of other assets (4.1)% (28,689)
----- ---------
Net assets 100.0 % $ 634,344
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$46,630.
(c) Cash collateral for the Repurchase Agreements, valued at $10,811, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
GDR Global Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $2,209 or 0.35% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 6
Janus Global
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $571,569)
(including $46,630 of securities loaned) $663,033
Cash 18,096
Foreign cash (cost: $302) 303
Receivables:
Investment securites sold 4,273
Interest 5
Dividends 864
Dividend reclaims receivable 155
Due from adviser 199
Unrealized appreciation on forward foreign
currency contracts 8
Other 38
--------
686,974
--------
Liabilities:
Investment securities purchased 649
Accounts payable and accrued liabilities:
Management and advisory fees 446
Distribution fees 1
Deferred foreign taxes 2,948
Payable for collateral for securities on loan 48,441
Unrealized depreciation on forward foreign
currency contracts 9
Other 136
--------
52,630
--------
Net Assets $634,344
========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 393
Additional paid-in capital 980,690
Accumulated net investment income (loss) (33)
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (435,237)
Net unrealized appreciation (depreciation) on:
Investment securities (Net of deferred foreign taxes
of $2,948) 88,516
Translation of assets and liabilities denominated in
foreign currencies 15
--------
Net Assets $634,344
========
Shares Outstanding:
Initial Class 39,268
Service Class 15
Net Asset Value and Offering Price Per Share:
Initial Class $ 16.15
Service Class 16.15
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 123
Dividends 11,389
Income from loaned securities-net 209
Less withholding taxes on foreign dividends (1,054)
---------
10,667
---------
Expenses:
Management and advisory fees 4,882
Transfer agent fees 2
Printing and shareholder reports 204
Custody fees 548
Administration fees 24
Legal fees 8
Auditing and accounting fees 13
Directors fees 24
Other 14
Service fees:
Service Class 1
---------
Total expenses 5,720
---------
Net Investment Income (Loss) 4,947
---------
Net Realized Gain (Loss) from:
Investment securities (37,384)
Foreign currency transactions (8,072)
---------
(45,456)
---------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities (Net of deferred foreign taxes
of $2,948) 161,851
Translation of assets and liabilities denominated in
foreign currencies 6,172
---------
168,023
---------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 122,567
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 127,514
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 7
Janus Global
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 4,947 $ 5,065
Net realized gain (loss) from
investment securities and foreign
currency transactions (45,456) (188,454)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 168,023 (73,753)
--------- ---------
127,514 (257,142)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - (21,431)
Service Class - -
--------- ---------
- (21,431)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 534,696 196,686
Service Class 20,846 -
--------- ---------
555,542 196,686
--------- ---------
Dividends and distributions reinvested:
Initial Class - 21,431
Service Class - -
--------- ---------
- 21,431
--------- ---------
Cost of shares redeemed:
Initial Class (663,298) (386,379)
Service Class (20,771) -
--------- ---------
(684,069) (386,379)
--------- ---------
(128,527) (168,262)
--------- ---------
Net increase (decrease) in net assets (1,013) (446,835)
--------- ---------
Net Assets:
Beginning of year 635,357 1,082,192
--------- ---------
End of year $ 634,344 $ 635,357
========= =========
Accumulated Net Investment Income
(Loss) $ (33) $ 549
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 39,422 12,628
Service Class 1,396 -
--------- ---------
40,818 12,628
--------- ---------
Shares issued-reinvested from distributions:
Initial Class - 1,498
Service Class - -
--------- ---------
- 1,498
--------- ---------
Shares redeemed:
Initial Class (48,446) (24,921)
Service Class (1,381) -
--------- ---------
(49,827) (24,921)
--------- ---------
Net increase (decrease) in shares
outstanding (9,009) (10,795)
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 8
Janus Global
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 13.16 $ 0.11 $ 2.88 $ 2.99
12/31/2002 18.32 0.09 (4.82) (4.73)
12/31/2001 23.97 0.10 (5.57) (5.47)
12/31/2000 37.46 0.02 (6.06) (6.04)
12/31/1999 23.71 (0.04) 16.42 16.38
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 12.97 (0.04) 3.22 3.18
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ - $ - $ - $ 16.15
(0.43) - (0.43) 13.16
(0.18) - (0.18) 18.32
(0.90) (6.55) (7.45) 23.97
- (2.63) (2.63) 37.46
- --------------- --------- --------- --------- ---------
Service Class - - - 16.15
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 22.72% $ 634,110 0.94% 0.94% 0.81% 131%
12/31/2002 (26.02) 635,357 0.92 0.92 0.60 67
12/31/2001 (22.84) 1,082,192 0.95 0.95 0.50 83
12/31/2000 (17.55) 1,717,573 0.89 0.89 0.06 82
12/31/1999 71.10 1,926,210 0.92 0.92 (0.14) 68
- --------------- ---------- ------ ----------- ---- ---- ----- ---
Service Class 12/31/2003 24.52 234 1.19 1.19 (0.39) 131
- --------------- ---------- ------ ----------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial class-December 3, 1992
Service class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of net expenses to average net assets is net of fee waivers by the
investment adviser, if any, (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 9
Janus Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Janus Global ("the Fund"), part of ATSF, began operations on December
3, 1992.
The fund will acquire Templeton Great Companies Global and be renamed Templeton
Great Companies Global, effective the close of business on April 30, 2004,
subject to approval by Policyowners.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $90 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at the inception of the loan, and not less
then 100% thereafter. The Fund may invest cash collateral in short-term money
market instruments including: U.S. Treasury Bills, U.S. agency obligations,
commercial paper, money market mutual funds, repurchase agreements and other
highly rated, liquid investments. During the life of securities loans, the
collateral and securities loaned remain subject to fluctuation in value. IBT
marks to market securities loaned and the collateral each business day. If
additional collateral is due (at least $1), IBT collects additional cash
collateral from the borrowers. Although securities loaned will be fully
collateralized at all times, IBT may experience delays in, or may be prevented
from, recovering the collateral on behalf of the Fund. The Fund may recall a
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 10
Janus Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
loaned security position at any time from the borrower through IBT. In the
event the borrower fails to timely return a recalled security, IBT may
indemnify the Fund by purchasing replacement securities for the Fund at its own
expense and claiming the collateral to fund such a purchase. IBT absorbs the
loss if the collateral value is not sufficient to cover the cost of the
replacement securities. If replacement securities are not available, IBT will
credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $208 are included in
net realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Foreign capital gains taxes: The Fund may be subject to taxes imposed by
countries in which it invests, with respect to its investment in issuers
existing or operating in such countries. Such taxes are generally based on
income earned or repatriated and capital gains realized on the sale of such
investments. The Fund accrues such taxes when the related income or capital
gains are earned. Some countries require governmental approval for the
repatriation of investment income, capital or the proceeds of sales earned by
foreign investors. In addition, if there is a deterioration in a country's
balance of payments or for other reasons, a country may impose temporary
restrictions on foreign capital remittances abroad.
The Fund's investments in India are subject to a 30% governmental short-term
capital gains tax. The Indian government has elected to waive the long-term
capital gains tax of 10% on equities securities held for longer than one year.
This waiver of tax is effective through March of 2007. Such taxes are due upon
sale of individual securities. The Fund accrues for taxes on the capital gains
throughout the holding period of the underlying securities. The amount of
short-term capital gains tax that would have been realized if all the India
securities were sold at 12/31/2003 was $2,948, a 7 cent (not in thousands)
reduction to the funds net asset value per share. If however, the Fund holds
the securities for at least one year, no capital gains tax will be realized. At
12/31/2003, there are $129 in carryforward losses available to be offset
against future gains.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in market value
of the underlying currencies and from the possible inability of counterparties
to meet the terms of their contracts. Open forward currency contracts at
December 31, 2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 11
Janus Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
wholly owned subsidiary of WRL. AUSA and WRL are wholly owned indirect
subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
The sub-advisor, Janus Capital Management, LLC, has agreed to a pricing
discount based on the aggregate assets that they manage in the ATSF and IDEX
mutual funds. The amount of the discount received by the fund at December 31,
2003 was $5.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $22. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 758,264
U.S. Government 4,243
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 866,701
U.S. Government 13,192
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (2,543)
Undistributed net investment income (loss) (5,529)
Undistributed net realized capital gains (loss) 8,072
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 12
Janus Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 21,431
Long-term capital gains -
2003 Distributions paid from:
Ordinary income -
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
===========
Undistributed Long-term Capital Gains $ -
===========
Capital Loss Carryforward $ (424,311)
===========
Post October Currency Loss $ 32
===========
Post October Capital Loss $ 7,090
===========
Net Unrealized Appreciation (Depreciation) $ 87,627
===========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- ---------------- ------------------
$ 181,151 December 31, 2009
198,150 December 31, 2010
45,010 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $575,406
========
Unrealized Appreciation $ 97,928
Unrealized (Depreciation) (10,301)
--------
Net Unrealized Appreciation (Depreciation) $ 87,627
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 13
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Janus Global
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Janus Global (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Global 14
Janus Growth
- --------------------------------------------------------------------------------
MARKET ENVIRNOMENT
For the first time since 1999, the major U.S. stock market indices ended the
year with gains. The Dow Jones Industrial Average added 28.28% and the
broad-based Standard and Poor's 500 Composite Stock Index ("S&P 500") climbed
28.67%. Not to be outdone, the technology-dominated NASDAQ Composite Index
surged 50.01% for the year. Meanwhile, Treasury yields fluctuated with the
daily headline news and fortunes of the stock market.
The year began with a brief rally that was quickly overcome by worries of a
looming conflict with Iraq. Rising unemployment, a persistent lack of new jobs
and soaring oil prices also were causes for concern. After hitting a trough in
the months leading up to the war, however, both the market and consumer
confidence bounced back sharply by the time the hostilities began in mid-March.
Later, signs that the manufacturing sector was emerging from a two-year slump
and a tax-cut-driven increase in consumer spending also helped to lift
investors' spirits. But the health of the economy still was in doubt as job
losses mounted. The Federal Reserve Board acknowledged the mixed picture,
cutting its benchmark federal funds rate to a 45-year low of 1% in an attempt
to spur corporate investment and hiring. As the year came to a close, however,
stocks added to their gains. Feelings of cautious optimism, fueled by an
acceleration of quarterly earnings and better-than-expected economic growth,
prevailed despite questions about whether the positive momentum could be
sustained.
PERFORMANCE
For the year ended December 31, 2003, Janus Growth returned 31.99%. By
comparison its benchmark, the S&P 500, returned 28.67%.
MANAGER'S OVERVIEW
Q. How did you manage the Portfolio in this environment?
Through the first nine months of the year, geopolitical strife, a persistent
lack of job creation and a demonstrated lack of willingness by corporations to
spend placed the sustainability of the economic recovery very much in question.
As a result, we attempted to position the portfolio somewhere in the middle of
the spectrum by balancing our position in cyclical stocks we believed were
leveraged to a robust economic recovery against more historically consistent
growth stocks. More recently, however, a discernable improvement in the labor
market has, we believe, suggested that the recovery is on the verge of becoming
self-sustaining. That has encouraged us to become somewhat more aggressive, and
we have increased the portfolio's exposure toward companies we believe have a
greater sensitivity to both capital spending and the market at large.
Q. Which individual holdings had the greatest positive impact on performance?
Biotechnology's Genentech, Inc. was the single biggest contributor to results.
Also providing solid gains were a trio of Internet-related companies including
web portal Yahoo! Inc., Internet retailer Amazon.com, Inc. and auction site
eBay Inc. All three of these companies benefited from a renewed preference for
high-growth business models among investors and their status as survivors in
the massive shake-out of the technology industry that has taken place over the
last several years. Meanwhile, Liberty Media Corporation, which holds a broad
collection of media assets spanning both content and distribution, also
performed well.
Q. Which individual holdings had the greatest negative impact on performance?
Healthcare software and technology provider Cerner Corporation, which provides
integrated systems designed to function across the continuum of patient care,
was our biggest disappointment after the company missed its first-quarter
earnings target by a substantial margin. Media's Viacom Inc. also detracted
from results, as did hospital operator HCA Inc. Meanwhile, cellular phone giant
Nokia Oyj gave ground while retailer Kohl's Corporation, a relatively new
addition to the portfolio, rounded out our list of detractors.
Q. Which sectors had the greatest impact on the Portfolio's performance?
Although it's possible to view the portfolio's results on a sector-by-sector
basis, we would like to reiterate that our focus has always been limited to
finding first-rate growth companies -- not making sector bets or chasing
industry performance. That said, our holdings in the consumer discretionary
area, where we had exposure more than triple that of the S&P 500, was our
single most profitable sector. Our healthcare investments also worked to our
advantage as we were able to select those companies that outperformed the
category as a whole. Meanwhile, our positions in energy and consumer staples
were our two weakest performing groups, although consumer staples actually made
a positive contribution on an absolute basis.
/s/ Edward Keely
Edward Keely
Portfolio Manager
Janus Capital Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 1
Janus Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class S&P 500
12/31/93 $10,000 $10,000
3/31/94 9,516 9,622
6/30/94 8,949 9,662
9/30/94 9,264 10,133
12/30/94 9,169 10,132
3/31/95 9,766 11,117
6/30/95 11,332 12,177
9/30/95 12,844 13,144
12/31/95 13,490 13,934
3/31/96 14,154 14,682
6/30/96 15,547 15,340
9/30/96 15,813 15,814
12/31/96 15,913 17,132
3/31/97 15,230 17,592
6/30/97 17,744 20,661
9/30/97 19,432 22,208
12/31/97 18,705 22,845
3/31/98 22,388 26,029
6/30/98 25,445 26,889
9/30/98 23,899 24,219
12/31/98 30,764 29,373
3/31/99 36,034 30,836
6/30/99 36,828 33,009
9/30/99 36,911 30,950
12/31/99 49,121 35,553
3/31/00 54,385 36,368
6/30/00 48,157 35,404
9/30/00 47,773 35,061
12/31/00 34,905 32,319
3/31/01 26,249 28,490
6/30/01 29,323 30,156
9/30/01 19,964 25,732
12/31/01 25,061 28,481
3/31/02 24,009 28,560
6/30/02 19,358 24,735
9/30/02 16,403 20,465
12/31/02 17,562 22,189
3/31/03 18,076 21,489
6/30/03 20,640 24,797
9/30/03 20,878 25,453
12/31/03 23,180 28,550
*Inception 10/02/1986.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
----------- ------------- ---------- ------------ ----------
Initial Class 31.99% (5.50)% 8.77% 12.58% 10/2/86
S&P 500(1) 28.67% (0.57)% 11.06% 12.20% 10/2/86
- --------------- ----- ----- ----- ----- -------
Service Class - - - 21.43% 5/1/03
- --------------- ----- ----- ----- ----- -------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 2
Janus Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------------- -----------------
COMMON STOCKS (90.0%)
Air Transportation (1.3%)
FedEx Corporation 327,060 $ 22,077
Amusement & Recreation Services (2.3%)
Mandalay Resort Group (b) 884,515 39,557
Automotive Dealers & Service Stations (1.5%)
Advance Auto Parts, Inc. (a)(b) 320,430 26,083
Beer, Wine & Distilled Beverages (0.9%)
LVMH Moet Hennessy Louis Vuitton SA 199,746 14,533
Business Services (7.6%)
Clear Channel Communications, Inc. (b) 1,965,535 92,046
eBay Inc. (a) 564,290 36,447
Chemicals & Allied Products (1.3%)
Procter & Gamble Company (The) 216,055 21,580
Commercial Banks (4.9%)
Citigroup Inc. 551,220 26,756
MBNA Corporation 1,673,560 41,588
Northern Trust Corporation 333,850 15,497
Communication (4.7%)
Liberty Media Corporation-Class A (a) 6,690,937 79,555
Communications Equipment (1.6%)
Avaya Inc. (a) 840,005 10,870
Nokia Oyj-ADR 913,395 15,528
Computer & Data Processing Services (8.9%)
Check Point Software Technologies, Ltd. (a)(b) 1,017,875 17,121
Electronic Arts Inc. (a)(b) 796,410 38,052
VERITAS Software Corporation (a) 698,420 25,953
Yahoo! Inc. (a) 1,542,015 69,653
Computer & Office Equipment (4.1%)
Cisco Systems, Inc. (a) 1,974,790 47,968
Lexmark International Group, Inc. (a) 269,800 21,217
Department Stores (1.5%)
Kohl's Corporation (a) 579,860 26,059
Electronic Components & Accessories (4.8%)
Intel Corporation 800,850 25,787
Maxim Integrated Products 629,971 31,373
Xilinx, Inc. (a) 630,272 24,417
Food Stores (1.0%)
Krispy Kreme Doughnuts, Inc. (a)(b) 467,045 17,094
Hotels & Other Lodging Places (2.2%)
Marriott International, Inc.-Class A 415,590 19,200
Starwood Hotels & Resorts Worldwide, Inc. 491,770 17,689
Instruments & Related Products (1.7%)
Alcon, Inc. 168,855 10,222
Teradyne, Inc. (a) 740,170 18,837
Shares Value
------------------- -----------------
Insurance (3.8%)
UnitedHealth Group Incorporated 1,111,685 $ 64,678
Manufacturing Industries (2.1%)
International Game Technology 1,020,285 36,424
Medical Instruments & Supplies (6.9%)
Biomet, Incorporated 535,310 19,491
Boston Scientific Corporation (a)(b) 310,560 11,416
Medtronic, Inc. 1,790,760 87,049
Paper & Allied Products (1.1%)
3M Company 223,325 18,989
Personal Credit Institutions (1.0%)
SLM Corporation 457,930 17,255
Personal Services (1.7%)
Cendant Corporation (a) 1,305,185 29,066
Pharmaceuticals (15.2%)
Amgen Inc. (a) 916,165 56,619
Celgene Corporation (a) 384,015 17,288
Forest Laboratories, Inc. (a) 924,940 57,161
Genentech, Inc. (a) 679,250 63,557
Genzyme Corporation-General Division (a) 416,660 20,558
Roche Holding AG 251,445 25,362
Teva Pharmaceutical Industries Ltd.-ADR (b) 319,958 18,145
Restaurants (1.5%)
McDonald's Corporation 1,037,020 25,749
Retail Trade (4.6%)
Amazon.com, Inc. (a)(b) 688,695 36,253
Staples, Inc. (a) 1,196,355 32,660
Tiffany & Co. 219,305 9,913
Security & Commodity Brokers (0.8%)
Legg Mason, Inc. 186,150 14,367
U.S. Government Agencies (1.0%)
Fannie Mae (b) 217,540 16,329
-----------
Total Common Stocks (cost: $1,227,954) 1,531,088
-----------
Principal Value
--------------- --------------
SECURITY LENDING COLLATERAL (7.2%)
Debt (5.7%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 577 $ 577
Fleet National Bank
1.00%, due 01/21/2004 2,165 2,165
National Bank of Commerce
1.19%, due 04/21/2004 1,804 1,804
Commercial Paper (1.5%)
Compass Securitization-144A
1.08%, due 01/22/2004 1,082 1,082
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 3
Janus Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
------------------------ -----------------
Commercial Paper (continued)
Delaware Funding Corporation
1.08%, due 01/07/2004 $ 719 $ 719
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 1,082 1,082
1.09%, due 01/13/2004 722 722
1.08%, due 02/05/2004 1,440 1,440
General Electric Capital Corporation
1.09%, due 01/08/2004 1,799 1,799
1.09%, due 01/09/2004 1,082 1,082
1.08%, due 01/16/2004 1,437 1,437
Govco Incorporated-144A
1.07%, due 02/05/2004 1,802 1,802
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,801 1,801
1.09%, due 02/06/2004 1,801 1,801
1.10%, due 02/09/2004 1,052 1,052
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,801 1,801
Liberty Street Funding
Company-144A
1.08%, due 01/20/2004 1,082 1,082
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 2,091 2,091
1.08%, due 02/17/2004 3,601 3,601
Sheffield Receivables-144A
1.09%, due 01/21/2004 722 722
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 3,608 3,608
Credit Agricole Indosuez
0.98%, due 01/02/2004 144 144
1.08%, due 01/06/2004 1,371 1,371
Euro Dollar Terms (1.4%)
Bank of Montreal
1.06%, due 01/15/2004 705 705
1.06%, due 02/17/2004 1,443 1,443
Bank of Scotland
1.06%, due 04/02/2004 1,082 1,082
Citigroup Inc.
1.10%, due 01/22/2004 1,082 1,082
1.09%, due 02/06/2004 1,443 1,443
Credit Agricole Indosuez
1.08%, due 01/28/2004 722 722
Den Danske Bank
1.08%, due 01/20/2004 3,608 3,608
1.02%, due 01/30/2004 1,804 1,804
Royal Bank of Canada
1.05%, due 02/27/2004 3,608 3,608
Principal Value
------------------------ -----------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 2,165 $ 2,165
1.08%, due 01/15/2004 722 722
1.08%, due 01/20/2004 361 361
Svenska Handelsbanken AB
1.09%, due 01/15/2004 361 361
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 2,165 2,165
Wells Fargo & Company
1.04%, due 01/30/2004 2,886 2,886
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,443 1,443
1.14%, due 09/08/2004 2,165 2,165
Morgan Stanley
1.05%, due 06/21/2004 3,464 3,464
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 3,608 3,608
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 1,082 1,082
Repurchase Agreements (1.5%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $8,442 on 01/02/2004 8,442 8,442
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at$11,473 on 01/02/2004 11,473 11,473
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $6,855 on 01/02/2004 6,855 6,855
Shares Value
--------------- -------------
Investment Companies (1.5%)
Money Market Funds (1.5%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,769,756 $ 1,770
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 4,320,990 4,321
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 18,789,093 18,789
-----------
Total Security Lending Collateral (cost: $122,354) 122,354
-----------
Total Investment Securities (cost: $1,350,308) $ 1,653,442
===========
SUMMARY:
Investments, at value 97.2% $ 1,653,442
Other assets in excess of liabilities 2.8% 47,082
---------- -----------
Net assets 100.0% $ 1,700,524
========== ===========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 4
Janus Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$118,012.
(c) Cash collateral for the Repurchase Agreements, valued at $27,306, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 5
Janus Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $1,350,308)
(including $118,012 of securities loaned) $1,653,442
Cash 170,439
Receivables:
Investment securites sold 1,210
Interest 37
Dividends 1,086
Dividend reclaims receivable 11
Other 124
----------
1,826,349
----------
Liabilities:
Investment securities purchased 2,072
Accounts payable and accrued liabilities:
Management and advisory fees 1,191
Distribution fees 1
Payable for collateral for securities on loan 122,354
Other 207
----------
125,825
----------
Net Assets $1,700,524
==========
Net Assets Consist of:
Capital stock, 850,000 shares authorized ($.01 par value) $ 563
Additional paid-in capital 2,385,669
Undistributed net investment income -
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (988,843)
Net unrealized appreciation (depreciation) on:
Investment securities 303,134
Translation of assets and liabilities denominated in
foreign currencies 1
----------
Net Assets $1,700,524
==========
Shares Outstanding:
Initial Class 56,277
Service Class 27
Net Asset Value and Offering Price Per Share:
Initial Class $ 30.20
Service Class 30.15
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 505
Dividends 7,189
Income from loaned securities-net 118
Less withholding taxes on foreign dividends (72)
---------
7,740
---------
Expenses:
Management and advisory fees 11,497
Transfer agent fees 2
Printing and shareholder reports 272
Custody fees 137
Administration fees 20
Legal fees 18
Auditing and accounting fees 15
Directors fees 51
Other 29
Service fees:
Service Class 1
---------
Total expenses 12,042
---------
Net Investment Income (Loss) (4,302)
---------
Net Realized Gain (Loss) from:
Investment securities (72,277)
Foreign currency transactions (22)
---------
(72,299)
---------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 475,137
Translation of assets and liabilities denominated in
foreign currencies 1
---------
475,138
---------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 402,839
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 398,537
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 6
Janus Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ---------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (4,302) $ (4,726)
Net realized gain (loss) from
investment securities and foreign
currency transactions (72,299) (283,393)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translations 475,138 (259,319)
----------- -----------
398,537 (547,438)
----------- -----------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
----------- -----------
- -
----------- -----------
From net realized gains:
Initial Class - -
Service Class - -
----------- -----------
- -
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 180,078 91,681
Service Class 814 -
----------- -----------
180,892 91,681
----------- -----------
Proceeds from fund acquisition:
Initial Class 246,159 -
Service Class - -
----------- -----------
246,159 -
----------- -----------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
----------- -----------
- -
----------- -----------
Cost of shares redeemed:
Initial Class (234,533) (327,289)
Service Class (71) -
----------- -----------
(234,604) (327,289)
----------- -----------
192,447 (235,608)
----------- -----------
Net increase (decrease) in net assets 590,984 (783,046)
----------- -----------
Net Assets:
Beginning of year 1,109,540 1,892,586
----------- -----------
End of year $ 1,700,524 $ 1,109,540
=========== ===========
Undistributed Net Investment Income
(Loss) $ - $ -
=========== ===========
December 31, December 31,
2003 2002
------------------ ---------------
Share Activity:
Shares issued:
Initial Class 6,871 3,446
Service Class 29 -
--------- -----------
6,900 3,446
--------- -----------
Shares issued-on fund acquisition:
Initial Class 9,914 -
Service Class - -
--------- -----------
9,914 -
--------- -----------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- -----------
- -
--------- -----------
Shares redeemed:
Initial Class (9,012) (12,900)
Service Class (2) -
--------- -----------
(9,014) (12,900)
--------- -----------
Net increase (decrease) in shares
outstanding 7,800 (9,454)
========= ===========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 7
Janus Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 22.88 $ (0.08) $ 7.40 $ 7.32
12/31/2002 32.65 (0.09) (9.68) (9.77)
12/31/2001 47.34 (0.12) (13.24) (13.36)
12/31/2000 78.00 (0.14) (21.10) (21.24)
12/31/1999 59.94 (0.04) 34.02 33.98
- --------------- ---------- --------- --------- ---------- ----------
Service Class 12/31/2003 24.83 (0.08) 5.40 5.32
- --------------- ---------- --------- --------- ---------- ----------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ - $ - $ - $ 30.20
- - - 22.88
- (1.33) (1.33) 32.65
(0.10) (9.32) (9.42) 47.34
(1.17) (14.75) (15.92) 78.00
- --------------- --------- ---------- ---------- ---------
Service Class - - - 30.15
- --------------- --------- ---------- ---------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 31.99% $ 1,699,707 0.84% 0.84% (0.30)% 64%
12/31/2002 (29.92) 1,109,540 0.86 0.86 (0.33) 68
12/31/2001 (28.20) 1,892,586 0.89 0.89 (0.33) 60
12/31/2000 (28.94) 2,957,087 0.82 0.82 (0.18) 49
12/31/1999 59.67 4,141,240 0.82 0.82 (0.05) 71
- --------------- ---------- ------ ----------- ---- ---- ----- --
Service Class 12/31/2003 21.43 817 1.10 1.10 (0.56) 64
- --------------- ---------- ------ ----------- ---- ---- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-October 2, 1986
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 8
Janus Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Janus Growth ("the Fund"), part of ATSF, began operations on October
2, 1986.
On May 1, 2003, the Fund acquired all the net assets of Janus Growth II
pursuant to a plan of reorganization approved by shareholders of Janus Growth
II on April 16, 2003. The acquisition was accomplished by a tax-free exchange
of 9,914 shares of the Fund for the 6,961 shares of Janus Growth II outstanding
on April 30, 2003. Janus Growth II's net assets at that date $246,159,
including $4,068 of unrealized depreciation were combined with those of the
Fund, resulting in combined net assets of $1,411,921.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $248 are included in
net realized gains in the Statement of Operations.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $51 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 9
Janus Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
records an asset for the cash invested collateral and a liability for the
return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit of 1.00% through April 30, 2003. Subsequent to
May 1, 2003, the operating expense limit was reduced to 0.85%. The combined
expense limit for the year ended December 31, 2003,was 0.90%.
The sub-advisor, Janus Capital Management, LLC, has agreed to a pricing
discount based on the aggregate assets that they manage in the ATSF and IDEX
mutual funds. The amount of the discount received by the fund at December 31,
2003 was $14.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 10
Janus Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $58. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 810,764
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 857,092
U.S. Government 8,315
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ 82,697
Undistributed net investment income (loss) 4,302
Undistributed net realized capital gains (loss) (86,999)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
===========
Undistributed Long-term Capital Gains $ -
===========
Capital Loss Carryforward $ (974,092)
===========
Post October Currency Loss $ 1
===========
Post October Capital Loss $ 10,044
===========
Net Unrealized Appreciation (Depreciation) $ 298,427
===========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- ---------------- ------------------
$ 599,605 December 31, 2009
293,625 December 31, 2010
80,862 December 31, 2011
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 11
Janus Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
As part of the Fund's acquisition of Janus Growth II, the fund obtained a net
capital loss carryforward of approximately $356,488 from Janus Growth II.
Utilization of this carry over is subject to limitations imposed by the
Internal Revenue Code and Treasury Regulations, significantly reducing the
carry over available.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $1,355,015
==========
Unrealized Appreciation $ 326,401
Unrealized (Depreciation) (27,974)
----------
Net Unrealized Appreciation (Depreciation) $ 298,427
==========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Janus Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Janus Growth (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Janus Growth 13
Jennison Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The gross domestic product ("GDP") growth reported for the third quarter jumped
8.2%, the biggest gain in nearly two decades. Consumer spending, spurred by tax
cuts and low interest rates, provided the bulk of growth, however, business
investment also rose sharply. Real business fixed investment, led by outlays
for equipment and software, had its largest gain since early 2000, adding to
GDP. Surging final sales depleted inventories further in the third quarter
lowering the inventory to sales ratio, ex-automobiles, to near record lows.
Rising new order backlog and exceptional strength in the production components
of regional and national manufacturing surveys indicate the process of
restocking and greater capital spending is well underway. We believe the GDP
growth will be around 4% in the fourth quarter.
Meaningful job creation is still a hurdle for the economy. Continuing
unemployment claims are falling and temporary employment has been steadily
increasing, however, the overall unemployment level remains high. We have
argued that, for most of the recovery, tight cost controls and impressive
productivity growth lie at the heart of companies' ability to expand margins.
We believe further operating leverage should be driven by revenue growth amidst
accelerating demand. As output increases and cash flows build, we anticipate
firms that have been holding back on adding inputs, particularly labor, will
reverse course. Therefore, the outsized gain in GDP in the second half of 2003
should induce renewed hiring and inventory building. This should increase
businesses' contribution to growth in 2004.
PERFORMANCE
For the year ended December 31, 2003, Jennison Growth returned 28.77%. By
comparison its benchmark, the Standard and Poor's 500 Composite Stock Index
returned 28.67%.
STRATEGY REVIEW
Information technology stocks contributed significantly to the portfolio's
return, led by our emphasis in semiconductor and semiconductor equipment stocks
including Intel Corporation, Texas Instruments Incorporated and KLA-Tencor
Corporation. Among our other technology holdings, Cisco Systems, Inc. was a
notable contributor. So far, earnings growth for many of our holdings in this
area is primarily a result of cost cutting. We believe that as revenue growth
accelerates, these companies should demonstrate impressive operating leverage
leading to upward earnings revisions and positive earnings surprises.
Healthcare stocks were among the largest contributors to the portfolio's
absolute returns. Biotechnology holdings such as Amgen Inc. ("Amgen") and
Genentech, Inc. ("Genentech") advanced on the back of a stream of encouraging
product developments. We favor Amgen and expect strong demand for the company's
existing multi-billion dollar product portfolio, which should generate robust
earnings and sales growth in markets that are largely under penetrated.
Genentech has an impressive pipeline of potential medicines, some of which have
passed important regulatory milestones. We believe the company's exceptional
cancer franchise and continued success of its current product line should
generate earnings and revenue growth acceleration. Within pharmaceuticals,
AstraZeneca PLC and Teva Pharmaceuticals Industries Ltd. also helped returns.
The portfolio's financial holdings performed well led by capital markets stocks
such as Merrill Lynch & Co., Inc. American Express Company also moved higher
alongside an improving outlook for corporate spending and travel as well as
favorable developments in the government's Visa/MasterCard antitrust case.
Within the consumer related areas of the portfolio, Starbucks Corporation, and
Tiffany & Co. advanced. Holdings such as Harley-Davidson, Inc. and Kohl's
Corp.("Kohl's") have offset these returns. We have been disappointed with
Kohl's erratic sales growth, poor inventory control and store-level execution.
We also anticipate difficult same-store sales comparables over the next several
quarters. These concerns led us to eliminate the entire position.
Spiros Segales
Kathleen A. McCarragher
Michael A. Del Balso
Co-Portfolio Managers
Jennison Associates, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 1
Jennison Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 11/18/96 through 12/31/03
Initial Class S&P 500
11/18/96 $10,000 $10,000
12/31/96 10,060 10,080
3/31/97 10,020 10,351
6/30/97 11,021 12,156
9/30/97 11,651 13,066
12/31/97 11,751 13,442
3/31/98 12,741 15,315
6/30/98 12,855 15,821
9/30/98 11,075 14,250
12/31/98 12,360 17,283
3/31/99 12,299 18,143
6/30/99 13,240 19,422
9/30/99 12,436 18,211
12/31/99 12,952 20,919
3/31/00 12,735 21,398
6/30/00 12,586 20,831
9/30/00 13,120 20,629
12/31/00 11,452 19,016
3/31/01 9,551 16,763
6/30/01 9,952 17,743
9/30/01 8,025 15,140
12/31/01 9,328 16,758
3/31/02 9,068 16,804
6/30/02 7,559 14,554
9/30/02 6,267 12,041
12/31/02 6,461 13,056
3/31/03 6,348 12,643
6/30/03 7,187 14,590
9/30/03 7,504 14,976
12/31/03 8,320 16,798
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------- ------------- ----------
Initial Class 28.77% (7.61)% (2.55)% 11/18/96
S&P 500(1) 28.67% (0.57)% 7.55% 11/18/96
- --------------- ----- ----- ----- --------
Service Class - - 21.36% 5/1/03
- --------------- ----- ----- ----- --------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Jennison
Growth Portfolio of Endeavor Series Trust. Jennison Associates LLC has been the
sub-adviser since October 9, 2000. Prior to that date, a different firm managed
the portfolio and the performance set forth prior to October 9, 2000 is
attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 2
Jennison Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (97.9%)
Automotive (0.9%)
Harley-Davidson, Inc. (b) 31,200 $ 1,483
Automotive Dealers & Service Stations (0.1%)
CarMax, Inc. (a)(b) 6,800 210
Beverages (0.9%)
Anheuser-Busch Companies, Inc. 25,900 1,364
Business Services (2.4%)
Clear Channel Communications, Inc. 35,000 1,639
eBay Inc. (a) 33,600 2,170
Chemicals & Allied Products (1.9%)
Avon Products, Inc. 24,500 1,654
Procter & Gamble Company (The) 13,600 1,358
Commercial Banks (3.9%)
Citigroup Inc. 78,733 3,822
State Street Corporation 47,400 2,469
Communication (3.5%)
Hughes Electronics Corporation (a) 62,729 1,038
Viacom, Inc.-Class B 101,600 4,509
Communications Equipment (0.8%)
Motorola, Inc. 19,700 277
Nokia Oyj-ADR 31,000 527
QUALCOMM Incorporated 8,800 475
Computer & Data Processing Services (8.2%)
Electronic Arts Inc. (a) 31,500 1,505
Microsoft Corporation 178,400 4,913
PeopleSoft, Inc. (a) 57,100 1,302
SAP AG-ADR (b) 70,000 2,909
Yahoo! Inc. (a) 54,300 2,453
Computer & Office Equipment (10.0%)
Cisco Systems, Inc. (a) 224,100 5,443
Dell Computer Corporation (a) 109,000 3,702
EMC Corporation (a) 168,500 2,177
Hewlett-Packard Company 70,400 1,617
International Business Machines Corporation 31,200 2,892
Educational Services (1.0%)
Apollo Group, Inc.-Class A (a) 22,900 1,557
Electronic & Other Electric Equipment (2.7%)
General Electric Company 129,500 4,012
Harman International Industries, Incorporated 4,600 340
Electronic Components & Accessories (8.4%)
Altera Corporation (a)(b) 82,700 1,877
Analog Devices, Inc. 29,100 1,328
Intel Corporation 179,300 5,773
Marvell Technology Group Ltd. (a) 10,700 406
Texas Instruments Incorporated 141,100 4,146
Shares Value
-------------------- --------------
Food Stores (1.1%)
Whole Foods Market, Inc. (a)(b) 27,000 $ 1,813
Furniture & Home Furnishings Stores (2.3%)
Bed Bath & Beyond Inc. (a) 85,800 3,718
Health Services (0.5%)
Caremark Rx, Inc. (a)(b) 31,300 793
Hotels & Other Lodging Places (0.5%)
Marriott International, Inc.-Class A 17,300 799
Industrial Machinery & Equipment (0.6%)
Applied Materials, Inc. (a) 44,000 988
Instruments & Related Products (3.7%)
Agilent Technologies, Inc. (a) 105,100 3,073
Alcon, Inc. 7,700 466
KLA-Tencor Corporation (a) 41,400 2,429
Insurance (1.5%)
American International Group, Inc. 37,200 2,466
Lumber & Other Building Materials (1.0%)
Lowe's Companies, Inc. 29,500 1,634
Medical Instruments & Supplies (1.2%)
Medtronic, Inc. 38,900 1,891
Oil & Gas Extraction (4.9%)
BJ Services Company (a) 43,600 1,565
Schlumberger Limited 58,800 3,218
Total Fina Elf SA-ADR 33,000 3,053
Paper & Allied Products (1.0%)
3M Company 19,100 1,624
Pharmaceuticals (16.8%)
Abbott Laboratories 2,700 126
Allergan, Inc. 19,600 1,505
Amgen Inc. (a) 82,900 5,123
AstraZeneca PLC-ADR (b) 39,800 1,926
Forest Laboratories, Inc. (a) 14,900 921
Genentech, Inc. (a) 32,800 3,069
Gilead Sciences, Inc. (a) 39,500 2,297
Medimmune, Inc. (a) 39,200 996
Novartis AG-ADR 41,800 1,918
Pfizer Inc. 108,840 3,845
Roche Holding AG-ADR 22,800 2,300
Teva Pharmaceutical Industries Ltd.-ADR 48,700 2,762
Radio & Television Broadcasting (1.5%)
Univision Communications Inc.-Class A (a) 62,500 2,481
Restaurants (3.2%)
McDonald's Corporation 77,600 1,927
Starbucks Corporation (a)(b) 95,500 3,157
Retail Trade (2.0%)
Tiffany & Co. 72,100 3,259
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 3
Jennison Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- ------------
Security & Commodity Brokers (6.2%)
American Express Company 85,400 $ 4,119
Goldman Sachs Group, Inc. (The) 30,900 3,051
Merrill Lynch & Co., Inc. 47,400 2,780
Telecommunications (1.4%)
Vodafone Group PLC-ADR 92,700 2,321
Transportation & Public Utilities (0.9%)
InterActiveCorp (a)(b) 44,100 1,496
Variety Stores (2.9%)
Costco Wholesale Corporation (a) 42,900 1,595
Wal-Mart Stores, Inc. 59,100 3,135
---------
Total Common Stocks (cost: $132,223) 156,986
---------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (7.7%)
Debt (6.1%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 58 $ 58
Fleet National Bank
1.00%, due 01/21/2004 219 219
National Bank of Commerce
1.19%, due 04/21/2004 182 182
Commercial Paper (1.6%)
Compass Securitization-144A
1.08%, due 01/22/2004 109 109
Delaware Funding Corporation
1.08%, due 01/07/2004 73 73
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 109 109
1.09%, due 01/13/2004 73 73
1.08%, due 02/05/2004 146 146
General Electric Capital Corporation
1.09%, due 01/08/2004 182 182
1.09%, due 01/09/2004 109 109
1.08%, due 01/16/2004 145 145
Govco Incorporated-144A
1.07%, due 02/05/2004 182 182
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 182 182
1.09%, due 02/06/2004 182 182
1.10%, due 02/09/2004 106 106
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 182 182
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 109 109
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 211 211
1.08%, due 02/17/2004 364 364
Principal Value
--------------------- ---------------
Commercial Paper (continued)
Sheffield Receivables-144A
1.09%, due 01/21/2004 $ 73 $ 73
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 365 365
Credit Agricole Indosuez
0.98%, due 01/02/2004 15 15
1.08%, due 01/06/2004 139 139
Euro Dollar Terms (1.5%)
Bank of Montreal
1.06%, due 01/15/2004 71 71
1.06%, due 02/17/2004 146 146
Bank of Scotland
1.06%, due 04/02/2004 109 109
Citigroup Inc.
1.10%, due 01/22/2004 109 109
1.09%, due 02/06/2004 146 146
Credit Agricole Indosuez
1.08%, due 01/28/2004 73 73
Den Danske Bank
1.08%, due 01/20/2004 365 365
1.02%, due 01/30/2004 182 182
Royal Bank of Canada
1.05%, due 02/27/2004 365 365
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 219 219
1.08%, due 01/15/2004 73 73
1.08%, due 01/20/2004 36 36
Svenska Handelsbanken AB
1.09%, due 01/15/2004 36 36
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 219 219
Wells Fargo & Company
1.04%, due 01/30/2004 292 292
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 146 146
1.14%, due 09/08/2004 219 219
Morgan Stanley
1.05%, due 06/21/2004 350 350
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 365 365
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 109 109
Repurchase Agreements (1.7%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $855 on 01/02/2004 855 855
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 4
Jennison Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,161 on 01/02/2004 $ 1,161 $ 1,161
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $693 on 01/02/2004 693 693
Shares Value
--------------- ------------
Investment Companies (1.6%)
Money Market Funds (1.6%)
American AAdvantage Select Fund
1-day yield of 1.00% 178,922 $ 179
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 436,850 437
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 1,899,569 1,900
---------
Total Security Lending Collateral (cost: $12,370) 12,370
---------
Total Investment Securities (cost: $144,593) $ 169,356
=========
SUMMARY:
Investments, at value 105.6 % $ 169,356
Liabilities in excess of other assets (5.6)% (8,970)
--------- ---------
Net assets 100.0 % $ 160,386
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$11,931.
(c) Cash collateral for the Repurchase Agreements, valued at $2,761, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 5
Jennison Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $144,593)
(including $11,931 of securities loaned) 169,356
Cash 4,528
Receivables:
Investment securities sold 869
Interest 1
Dividends 96
Other 13
---------
174,863
---------
Liabilities:
Investment securities purchased 1,968
Accounts payable and accrued liabilities:
Management and advisory fees 122
Payable for collateral for securities on loan 12,370
Other 17
---------
14,477
---------
Net Assets $160,386
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 218
Additional paid-in capital 143,049
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (7,644)
Net unrealized appreciation (depreciation) on investment
securities 24,763
---------
Net Assets $160,386
=========
Shares Outstanding:
Initial Class 21,823
Service Class 17
Net Asset Value and Offering Price Per Share:
Initial Class $ 7.34
Service Class 7.33
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 28
Dividends 1,378
Income from loaned securities-net 17
Less withholding taxes on foreign dividends (25)
--------
1,398
--------
Expenses:
Management and advisory fees 1,380
Transfer agent fees 2
Printing and shareholder reports 12
Custody fees 29
Administration fees 20
Legal fees 2
Auditing and accounting fees 10
Directors fees 6
Other 5
--------
Total expenses 1,466
--------
Net Investment Income (Loss) (68)
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 13,465
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 31,086
--------
Net Gain (Loss) on Investment Securities 44,551
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 44,483
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 6
Jennison Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (68) $ (55)
Net realized gain (loss) from
investment securities 13,465 (10,056)
Net unrealized appreciation
(depreciation) on investment
securities 31,086 (6,146)
-------- ---------
44,483 (16,257)
-------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
From net realized gains:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 88,226 102,129
Service Class 114 -
-------- ---------
88,340 102,129
-------- ---------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
Cost of shares redeemed:
Initial Class (87,571) (4,979)
Service Class (4) -
-------- ---------
(87,575) (4,979)
-------- ---------
765 97,150
-------- ---------
Net increase (decrease) in net assets 45,248 80,893
-------- ---------
Net Assets:
Beginning of year 115,138 34,245
-------- ---------
End of year $160,386 $ 115,138
======== =========
Accumulated Net Investment
Income (Loss) $ - $ -
======== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 15,163 16,796
Service Class 18 -
-------- ---------
15,181 16,796
-------- ---------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
Shares redeemed:
Initial Class (13,541) (754)
Service Class (1) -
-------- ---------
(13,542) (754)
-------- ---------
Net increase (decrease) in shares
outstanding 1,639 16,042
======== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 7
Jennison Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 5.70 $ - $ 1.64 $ 1.64
12/31/2002 8.23 (0.01) (2.52) (2.53)
12/31/2001 10.30 (0.02) (1.87) (1.89)
12/31/2000 12.56 0.20 (1.56) (1.36)
12/31/1999 12.22 0.18 0.41 0.59
- --------------- ---------- --------- ---------- -------- --------
Service Class 12/31/2003 6.04 (0.02) 1.31 1.29
- --------------- ---------- --------- ---------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ - $ - $ - $ 7.34
- - - 5.70
(0.18) - (0.18) 8.23
(0.18) (0.72) (0.90) 10.30
(0.13) (0.12) (0.25) 12.56
- --------------- --------- --------- --------- ---------
Service Class - - - 7.33
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 28.77% $ 160,265 0.90% 0.90% (0.04)% 132%
12/31/2002 (30.74) 115,138 0.99 1.04 (0.10) 68
12/31/2001 (18.54) 34,245 1.01 1.01 (0.13) 78
12/31/2000 (11.58) 36,458 0.93 1.00 1.60 166
12/31/1999 4.79 44,900 0.85 0.91 1.34 48
- --------------- ---------- ------ --------- ---- ---- ----- ---
Service Class 12/31/2003 21.36 121 1.17 1.17 (0.36) 132
- --------------- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-November 18, 1996
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment adviser, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 8
Jennison Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Jennison Growth ("the Fund"), part of ATSF, began operations as
Jennison Growth Portfolio, a part of the Endeavor Series Trust on November 18,
1996. The Fund became part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $7 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 9
Jennison Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
security position at any time from the borrower through IBT. In the event the
borrower fails to timely return a recalled security, IBT may indemnify the Fund
by purchasing replacement securities for the Fund at its own expense and
claiming the collateral to fund such a purchase. IBT absorbs the loss if the
collateral value is not sufficient to cover the cost of the replacement
securities. If replacement securities are not available, IBT will credit the
equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $53 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the assets allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Moderate Growth
Portfolio $ 79,318 49%
Asset Allocation-Growth Portfolio 34,429 21%
--
70%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.85% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.99% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 10
Jennison Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $5. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 210,266
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 200,044
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (68)
Undistributed net investment income (loss) 68
Undistributed net realized capital gains (loss) -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (4,640)
========
Post October Capital Loss $ (459)
========
Net Unrealized Appreciation (Depreciation) $ 22,216
========
The capital loss carryforwards are available to offset future realized capital
gains through the period listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 4,640 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $11,991.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $147,140
========
Unrealized Appreciation $ 22,988
Unrealized (Depreciation) (772)
--------
Net Unrealized Appreciation (Depreciation) $ 22,216
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Jennison Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Jennison Growth (the "Fund") (one
of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Jennison Growth 12
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
In 2003, the Standard and Poor's 500 Composite Stock Index ("S&P 500") soared
28.67%. Investors responded enthusiastically to lower quality, higher beta
investments, bidding up price/
earnings multiples for the most beaten- down stocks, particularly in the
technology, financial and industrial sectors. On the flip side of this same
coin, the stocks of stable, dividend-paying, high-quality companies did not
fare as well overall. A benign interest rate environment, supported by steady
corporate profit improvement, put a floor on valuation. However, uncertainty
surrounding employment growth and consumer spending remained, nagging reminders
that potential pitfalls remain in today's euphoric market environment. As for
ourselves, we spent the past year wondering when and/or if corporate capital
spending would ever kick in to take some of the pressure off consumer spending,
which thus far has kept the economic recovery chugging along. The end of the
year finished with a real New Year's bang. Instead of the portfolio window
dressing that one would expect from a normally quiet December, investors
responded to positive economic data, the capture of Saddam Hussein and other
good news by driving major indices ever higher.
PERFORMANCE
For the year ended December 31, 2003, J.P. Morgan Enhanced Index returned
28.94%. By comparison its benchmark, the S&P 500 returned 28.67%
STRATEGY REVIEW
For the full year 2003, the portfolio was supported by strong stock selection
across a number of sectors. The top contributors were stocks identified by our
dividend discount methodology as having strong potential, but low valuations.
Examples included Countrywide Credit Industries, Inc. ("Countrywide") and
Capital One Financial Corporation in the financial services sector, Guidant
Corporation ("Guidant") in the healthcare sector, and PG&E Corporation in the
utilities sector. Guidant outperformed its peers on the back of significant
market share gains and strong 2004 earnings per share ("EPS") forecast.
Countrywide outpaced the company's financial peers as it benefited from various
bullish analyst reports, increased 2003 and 2004 earnings guidance, market
share gains and continued low interest rates.
On the other hand, an overweight in retailer Kohl's Corp. detracted from
results, as it fell on disappointing same-store sales. However, we remain
overweight in the stock believing that the company's struggling women's apparel
area will show improvement over the next few quarters. We also believe that the
company's pricing as a whole will stabilize and that its inventory strategy
will be more efficient. An overweight position in media concern Viacom Inc. and
an underweight in wireless service provider Nextel Communications, Inc. also
detracted from results.
J.P. Morgan Investment Management, Inc.
Portfolio Manager
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 1
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/2/97 through 12/31/03
Initial Class S&P 500
5/2/97 $10,000 $10,000
6/30/97 11,190 11,083
9/30/97 12,010 11,913
12/31/97 12,290 12,255
3/31/98 14,060 13,963
6/30/98 14,601 14,424
9/30/98 13,195 12,992
12/31/98 16,148 15,757
3/31/99 16,720 16,542
6/30/99 18,281 17,708
9/30/99 17,062 16,603
12/31/99 19,079 19,073
3/31/00 19,374 19,509
6/30/00 18,703 18,992
9/30/00 18,343 18,808
12/31/00 16,996 17,338
3/31/01 14,985 15,284
6/30/01 16,044 16,177
9/30/01 13,457 13,804
12/31/01 14,959 15,279
3/31/02 14,824 15,321
6/30/02 12,643 13,269
9/30/02 10,408 10,978
12/31/02 11,281 11,903
3/31/03 10,929 11,528
6/30/03 12,620 13,302
9/30/03 12,869 13,654
12/31/03 14,546 15,316
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------- ----------- ----------
Initial Class 28.94% (2.07)% 5.78% 5/2/97
S&P 500(1) 28.67% (0.57)% 6.60% 5/2/97
- --------------- ----- ----- ----- ------
Service Class - - 22.71% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the
back of this report. Please see your company's website for the most recent
month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the history of the predecessor portfolio, Endeavor Enhanced Index
Portfolio of the Endeavor Series Trust.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 2
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
U.S. GOVERNMENT OBLIGATIONS (0.1%)
U.S. Treasury Note (d)
3.00%, due 02/29/2004 $ 285 $ 286
---------
Total U.S. Government Obligations 286
(cost: $286) ---------
Shares Value
-------------------- ---------------
COMMON STOCKS (99.0%)
Aerospace (1.7%)
Boeing Company (The) 900 $ 38
Lockheed Martin Corporation 25,400 1,306
Northrop Grumman Corporation (b) 5,100 488
United Technologies Corporation 22,700 2,151
Amusement & Recreation Services (0.7%)
Disney (Walt) Company (The) 65,600 1,530
Apparel & Accessory Stores (0.3%)
Abercrombie & Fitch Co.-Class A (a) 15,900 393
Gap, Inc. (The) (b) 17,800 413
Apparel Products (0.5%)
Cintas Corporation (b) 2,100 105
Jones Apparel Group, Inc. 29,100 1,025
Automotive (1.0%)
Ford Motor Company (b) 40,600 650
General Motors Corporation 11,100 593
Harley-Davidson, Inc. (b) 23,700 1,126
Honeywell International Inc. 800 27
Beverages (2.5%)
Coca-Cola Company (The) 101,200 5,136
Coca-Cola Enterprises Inc. 5,300 116
PepsiCo, Inc. 14,000 653
Business Credit Institutions (0.3%)
CIT Group, Inc. 19,700 708
Business Services (1.7%)
eBay Inc. (a) 28,000 1,809
First Data Corporation 54,300 2,231
Chemicals & Allied Products (3.5%)
Air Products and Chemicals, Inc. 13,900 734
du Pont (E.I.) de Nemours and Company 300 14
Eastman Chemical Company 21,800 862
Praxair, Inc. 36,000 1,375
Procter & Gamble Company (The) 48,000 4,794
Rohm and Haas Company 10,600 453
Commercial Banks (8.9%)
Bank of America Corporation 30,900 2,485
Citigroup Inc. 155,600 7,553
Compass Bancshares, Inc. 4,800 189
Concord EFS, Inc. (a) 8,300 123
First Tennessee National Corporation 2,100 93
Shares Value
-------------------- ---------------
Commercial Banks (continued)
FleetBoston Financial Corporation 23,400 $1,021
KeyCorp 27,400 803
MBNA Corporation 18,000 447
Mellon Financial Corporation 7,500 241
SunTrust Banks, Inc. 31,600 2,259
U.S. Bancorp 126,100 3,755
Wachovia Corporation 39,800 1,854
Wells Fargo & Company 400 24
Communication (1.7%)
Liberty Media Corporation-Class A (a) 15,000 178
Viacom, Inc.-Class B 83,700 3,716
Communications Equipment (0.8%)
Lucent Technologies Inc. (a) 72,100 205
QUALCOMM Incorporated 21,000 1,133
Tellabs, Inc. (a) 55,400 467
Computer & Data Processing Services (4.8%)
BMC Software, Inc. (a) 7,300 136
Computer Sciences Corporation (a) 26,600 1,177
Mercury Interactive Corporation (a)(b) 19,900 968
Microsoft Corporation 227,800 6,274
Oracle Corporation (a) 58,500 772
SunGard Data Systems Inc. (a) 40,600 1,125
Take-Two Interactive Software, Inc. (a)(b) 13,000 375
VERITAS Software Corporation (a) 10,100 375
Computer & Office Equipment (6.1%)
Cisco Systems, Inc. (a) 222,900 5,414
Dell Computer Corporation (a) 48,900 1,661
EMC Corporation (a) 64,600 835
Hewlett-Packard Company 102,800 2,361
International Business Machines
Corporation 29,600 2,743
Juniper Networks, Inc. (a)(b) 18,700 349
Lexmark International Group, Inc. (a) 1,600 126
NCR Corporation (a) 23,600 916
Seagate Technology, Inc. (a)(f) 8,700 (e)
Sun Microsystems, Inc. (a) 700 3
Construction (0.3%)
Centex Corporation (b) 7,200 775
Department Stores (0.8%)
Federated Department Stores, Inc. 14,800 698
Kohl's Corporation (a) 25,100 1,128
May Department Stores Company (The) (b) 1,000 29
Drug Stores & Proprietary Stores (0.7%)
CVS Corporation 45,800 1,654
Electric Services (1.5%)
American Electric Power Company, Inc. 14,500 442
Edison International (a) 30,000 658
Entergy Corporation 11,900 680
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 3
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Electric Services (continued)
Pinnacle West Capital Corporation 18,800 $ 752
PPL Corporation 18,700 818
TXU Corp. 4,100 97
Electric, Gas & Sanitary Services (1.2%)
Consolidated Edison, Inc. 8,700 374
PG&E Corporation (a) 42,200 1,172
SCANA Corporation 3,900 134
Wisconsin Energy Corporation 3,400 114
Xcel Energy Inc. 56,200 954
Electronic & Other Electric Equipment (4.1%)
Cooper Industries, Inc.-Class A 4,800 278
Eaton Corporation 6,100 659
General Electric Company 277,700 8,603
Electronic Components & Accessories (5.0%)
Altera Corporation (a)(b) 53,700 1,219
Analog Devices, Inc. 19,800 904
Intel Corporation 89,200 2,872
Intersil Corporation-Class A 9,200 229
Maxim Integrated Products 100 5
Micron Technology, Inc. (a)(b) 22,100 298
QLogic Corporation (a) 6,300 325
Texas Instruments Incorporated 58,600 1,722
Tyco International Ltd. (b) 90,900 2,409
Xilinx, Inc. (a) 45,300 1,755
Fabricated Metal Products (0.9%)
Gillette Company (The) 59,500 2,185
Food & Kindred Products (2.0%)
Altria Group, Inc. 66,600 3,624
General Mills, Inc. (b) 1,000 45
Kellogg Company 7,900 301
Kraft Foods, Inc.-Class A (b) 2,700 87
Sara Lee Corporation 25,300 549
Furniture & Fixtures (0.8%)
Johnson Controls, Inc. 11,500 1,335
Lear Corporation 7,800 478
Furniture & Home Furnishings Stores (0.2%)
Bed Bath & Beyond Inc. (a) 9,400 407
Gas Production & Distribution (0.1%)
El Paso Corporation (b) 16,100 132
Health Services (0.3%)
HCA Inc. 17,200 739
Holding & Other Investment Offices (0.3%)
CarrAmerica Realty Corporation 6,000 179
Equity Office Properties Trust 5,200 149
Highwoods Properties, Inc. 500 13
Mills Corporation (The) 300 13
ProLogis 13,900 446
Shares Value
-------------------- ---------------
Industrial Machinery & Equipment (1.4%)
Baker Hughes Incorporated 13,200 $ 425
Black & Decker Corporation (The) 2,300 113
Cooper Cameron Corporation (a)(b) 15,100 704
Ingersoll-Rand Company-Class A 7,300 496
ITT Industries, Inc. 8,700 646
Novellus Systems, Inc. (a) 16,700 702
SPX Corporation (a)(b) 2,200 129
Instruments & Related Products (0.7%)
Agilent Technologies, Inc. (a) 2,800 82
Danaher Corporation 800 73
Raytheon Company 47,000 1,412
Insurance (5.1%)
Aetna Inc. 15,500 1,047
Allstate Corporation (The) 70,700 3,042
Ambac Financial Group, Inc. 21,300 1,478
American International Group, Inc. 21,200 1,405
Anthem, Inc. (a)(b) 15,400 1,155
CIGNA Corporation 14,800 851
MBIA, Inc. 12,700 752
St. Paul Companies, Inc. (The) (b) 11,200 444
Travelers Property Casualty Corp.-Class A 61,600 1,034
Travelers Property Casualty Corp.-Class B 3,100 53
UnitedHealth Group Incorporated 6,100 355
UnumProvident Corporation (b) 21,800 344
WellPoint Health Networks Inc. (a) 1,200 116
Insurance Agents, Brokers & Service (0.7%)
Hartford Financial Services Group, Inc. (The) 26,800 1,582
MetLife, Inc. 4,300 145
Life Insurance (0.2%)
Protective Life Corporation 4,400 149
Torchmark Corporation 5,900 269
Lumber & Other Building Materials (1.7%)
Home Depot, Inc. (The) 82,700 2,935
Lowe's Companies, Inc. 20,700 1,147
Lumber & Wood Products (0.4%)
Georgia-Pacific Corporation (b) 10,600 325
Masco Corporation 23,400 641
Manufacturing Industries (0.7%)
Hasbro Inc. 17,300 368
Mattel, Inc. 66,700 1,285
Medical Instruments & Supplies (1.7%)
Baxter International Inc. 38,200 1,166
Boston Scientific Corporation (a) 200 7
Guidant Corporation 47,100 2,835
Mortgage Bankers & Brokers (1.0%)
Countrywide Credit Industries, Inc. 22,533 1,709
GreenPoint Financial Corp. 19,200 678
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 4
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Motion Pictures (0.8%)
Fox Entertainment Group, Inc.-Class A (a) 44,100 $ 1,286
Time Warner Inc. (a) 37,700 678
Oil & Gas Extraction (2.7%)
Anadarko Petroleum Corporation 25,500 1,301
ConocoPhillips 41,300 2,708
Devon Energy Corporation 10,500 601
Dynegy Inc. (a) 49,700 213
Pride International, Inc. (a)(b) 33,700 628
Rowan Companies, Inc. (a)(b) 28,700 665
Unocal Corporation 4,000 147
Paper & Allied Products (0.8%)
3M Company 14,400 1,224
Bowater Incorporated 12,400 574
Personal Credit Institutions (0.4%)
Capital One Financial Corporation (b) 16,800 1,030
Personal Services (0.1%)
Cendant Corporation (a) 7,400 165
Petroleum Refining (2.8%)
ChevronTexaco Corporation 30,400 2,626
Exxon Mobil Corporation 88,800 3,641
Valero Energy Corporation 4,800 222
Pharmaceuticals (9.6%)
Abbott Laboratories 22,000 1,025
Amgen Inc. (a) 45,100 2,787
Bristol-Myers Squibb Co. 25,600 732
Forest Laboratories, Inc. (a) 24,100 1,489
Gilead Sciences, Inc. (a) 8,900 517
Human Genome Sciences, Inc. (a) 8,500 113
Johnson & Johnson 37,600 1,942
Lilly (Eli) and Company 38,500 2,708
Medimmune, Inc. (a) 21,400 544
Merck & Co., Inc. 46,500 2,148
Pfizer Inc. 169,100 5,974
Sepracor Inc. (a)(b) 14,600 349
Wyeth 54,600 2,318
Primary Metal Industries (1.2%)
Alcoa Inc. 44,500 1,691
United States Steel Corporation (b) 33,100 1,159
Printing & Publishing (1.3%)
Gannett Co., Inc. 16,600 1,480
McGraw-Hill Companies, Inc. (The) 2,800 196
Scripps (E.W.) Company (The) 6,100 574
Tribune Company 13,300 686
Shares Value
-------------------- ---------------
Railroads (0.4%)
Burlington Northern Santa Fe
Corporation 900 $ 29
CSX Corporation 2,500 90
Norfolk Southern Corporation 20,900 494
Union Pacific Corporation 6,000 417
Real Estate (0.1%)
Rouse Company (The) 3,600 169
Restaurants (0.9%)
McDonald's Corporation 50,200 1,246
YUM! Brands, Inc. (a) 24,800 853
Rubber & Misc. Plastic Products (0.5%)
NIKE, Inc.-Class B 18,000 1,232
Savings Institutions (0.4%)
Washington Mutual, Inc. 21,000 843
Security & Commodity Brokers (2.6%)
Goldman Sachs Group, Inc. (The) 21,600 2,133
Legg Mason, Inc. 1,800 139
Merrill Lynch & Co., Inc. 7,100 416
Morgan Stanley 51,100 2,957
Schwab (Charles) Corporation (The) 31,600 374
Telecommunications (3.4%)
AT&T Wireless Services, Inc. (a) 1,400 11
BellSouth Corporation 12,000 340
Nextel Communications, Inc.-Class A (a) 19,200 539
Qwest Communications International Inc. (a) 29,800 129
SBC Communications Inc. 94,400 2,461
Sprint Corporation (PCS Group) (a)(b) 106,500 599
Verizon Communications, Inc. 114,300 4,010
Trucking & Warehousing (0.3%)
United Parcel Service, Inc.-Class B 9,300 693
U.S. Government Agencies (1.8%)
Fannie Mae 33,400 2,507
Freddie Mac 29,700 1,732
Variety Stores (2.2%)
Family Dollar Stores, Inc. 9,800 352
Target Corporation 29,000 1,114
Wal-Mart Stores, Inc. 71,700 3,804
Water Transportation (0.3%)
Carnival Corporation (b) 19,400 771
Wholesale Trade Nondurable Goods (0.1%)
SYSCO Corporation 8,700 324
---------
Total Common Stocks (cost: $203,789)
232,343
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 5
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS (0.8%)
U.S. Treasury Bill
0.86%, due 03/11/2004 $ 1,176 $ 1,174
0.85%, due 03/18/2004 374 373
0.86%, due 03/18/2004 178 178
0.87%, due 03/25/2004 41 41
0.88%, due 03/25/2004 5 5
---------
Total Short-Term U.S. Government Obligations (cost: $1,771) 1,771
---------
SECURITY LENDING COLLATERAL (6.3%)
Debt (5.0%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 70 70
Fleet National Bank
1.00%, due 01/21/2004 261 261
National Bank of Commerce
1.19%, due 04/21/2004 217 217
Commercial Paper (1.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 130 130
Delaware Funding Corporation
1.08%, due 01/07/2004 87 87
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 130 130
1.09%, due 01/13/2004 87 87
1.08%, due 02/05/2004 173 173
General Electric Capital Corporation
1.09%, due 01/08/2004 217 217
1.09%, due 01/09/2004 130 130
1.08%, due 01/16/2004 173 173
Govco Incorporated-144A
1.07%, due 02/05/2004 217 217
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 217 217
1.09%, due 02/06/2004 217 217
1.10%, due 02/09/2004 127 127
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 217 217
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 130 130
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 252 252
1.08%, due 02/17/2004 434 434
Sheffield Receivables-144A
1.09%, due 01/21/2004 87 87
Principal Value
--------------------- ---------------
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 $ 435 $ 435
Credit Agricole Indosuez
0.98%, due 01/02/2004 17 17
1.08%, due 01/06/2004 165 165
Euro Dollar Terms (1.2%)
Bank of Montreal
1.06%, due 01/15/2004 85 85
1.06%, due 02/17/2004 174 174
Bank of Scotland
1.06%, due 04/02/2004 130 130
Citigroup Inc.
1.10%, due 01/22/2004 130 130
1.09%, due 02/06/2004 174 174
Credit Agricole Indosuez
1.08%, due 01/28/2004 87 87
Den Danske Bank
1.08%, due 01/20/2004 435 435
1.02%, due 01/30/2004 217 217
Royal Bank of Canada
1.05%, due 02/27/2004 435 435
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 261 261
1.08%, due 01/15/2004 87 87
1.08%, due 01/20/2004 43 43
Svenska Handelsbanken AB
1.09%, due 01/15/2004 43 43
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 261 261
Wells Fargo & Company
1.04%, due 01/30/2004 348 348
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 174 174
1.14%, due 09/08/2004 261 261
Morgan Stanley
1.05%, due 06/21/2004 417 417
Medium Term Notes (0.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 435 435
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 130 130
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 6
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Repurchase Agreements (1.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,017 on 01/02/2004 $ 1,017 $ 1,017
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,381 on 01/02/2004 1,381 1,381
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $826 on 01/02/2004 826 826
Shares Value
------------ ------------
Investment Companies (1.3%)
Money Market Funds (1.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 213,163 $ 213
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 520,454 520
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 2,263,105 2,263
---------
Total Security Lending Collateral (cost: $14,737) 14,737
---------
Total Investment Securities (cost: $220,583) $ 249,137
=========
SUMMARY:
Investments, at value 106.2 % $ 249,137
Liabilities in excess of other assets (6.2)% (14,471)
----- ---------
Net assets 100.0 % $ 234,666
===== =========
FUTURES CONTRACTS:
- -----------------------------------------------------------------
Net Unrealized
Settlement Appreciation
Contracts Date Amount (Depreciation)
----------- ------------ -------- ---------------
S&P 500 Index 8 3/18/2004 $2,137 $85
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$14,144.
(c) Cash collateral for the Repurchase Agreements, valued at $3,289, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, all or a portion of this security is segregated with
the custodian to cover open futures contracts. The value of all securities
segregated at December 31, 2003, is $286.
(e) Value is less than $1.
(f) Security value is determined in good faith in accordance with procedures
approved by the Fund's Board of Directors. Security is delisted.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 7
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $220,583)
(including $14,144 of securities loaned) $249,137
Cash 51
Receivables:
Interest 3
Dividends 365
Variation margin 6
Other 13
---------
249,575
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 155
Distribution fees 1
Payable for collateral for securities on loan 14,737
Other 16
---------
14,909
---------
Net Assets $234,666
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 184
Additional paid-in capital 247,681
Undistributed net investment income (loss) 1,755
Accumulated net realized gain (loss) from investment
and futures contracts (43,593)
Net unrealized appreciation (depreciation) on:
Investment securities 28,554
Futures contracts 85
---------
Net Assets $234,666
=========
Shares Outstanding:
Initial Class 18,327
Service Class 72
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.75
Service Class 12.79
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 28
Dividends 3,309
Income from loaned securities-net 10
--------
3,347
--------
Expenses:
Management and advisory fees 1,461
Transfer agent fees 2
Printing and shareholder reports 37
Custody fees 44
Administration fees 20
Legal fees 3
Auditing and accounting fees 10
Directors fees 7
Other fees 6
Service fees:
Service Class 1
--------
Total expenses 1,591
--------
Net Investment Income (Loss) 1,756
--------
Net Realized Gain (Loss) from:
Investment securities (2,848)
Futures contracts 359
--------
(2,489)
--------
Net Unrealized Appreciation (Depreciation) on:
Investment securities 52,572
Futures contracts 106
--------
52,678
--------
Net Gain (Loss) on Investments and Futures Contracts 50,189
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 51,945
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 8
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,756 $ 1,047
Net realized gain (loss) from
investment securities and futures
contracts (2,489) (23,146)
Net unrealized appreciation
(depreciation) on investment
securities and futures contracts 52,678 (19,206)
--------- ---------
51,945 (41,305)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (1,047) (609)
Service Class - -
--------- ---------
(1,047) (609)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 55,773 80,485
Service Class 1,170 -
--------- ---------
56,943 80,485
--------- ---------
Dividends and distributions reinvested:
Initial Class 1,047 609
Service Class - -
--------- ---------
1,047 609
--------- ---------
Cost of shares redeemed:
Initial Class (33,157) (30,700)
Service Class (322) -
--------- ---------
(33,479) (30,700)
--------- ---------
24,511 50,394
--------- ---------
Net increase (decrease) in net assets 75,409 8,480
--------- ---------
Net Assets:
Beginning of year 159,257 150,777
--------- ---------
End of year $ 234,666 $ 159,257
========= =========
Undistributed Net Investment
Income (Loss) $ 1,755 $ 1,048
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 5,216 7,381
Service Class 98 -
--------- ---------
5,314 7,381
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 94 58
Service Class - -
--------- ---------
94 58
--------- ---------
Shares redeemed:
Initial Class (3,010) (2,798)
Service Class (26) -
--------- ---------
(3,036) (2,798)
--------- ---------
Net increase (decrease) in shares
outstanding 2,372 4,641
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 9
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.94 $ 0.10 $ 2.77 $ 2.87
12/31/2002 13.24 0.08 (3.33) (3.25)
12/31/2001 15.13 0.06 (1.86) (1.80)
12/31/2000 18.16 0.07 (1.99) (1.92)
12/31/1999 16.08 0.08 2.78 2.86
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 10.43 0.06 2.31 2.37
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.06) $ - $ (0.06) $ 12.75
(0.05) - (0.05) 9.94
(0.09) - (0.09) 13.24
(0.08) (1.03) (1.11) 15.13
(0.03) (0.75) (0.78) 18.16
- --------------- --------- --------- --------- ---------
Service Class (0.01) - (0.01) 12.79
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 28.94% $ 233,744 0.82% 0.82% 0.91% 52%
12/31/2002 (24.59) 159,257 0.85 0.85 0.72 56
12/31/2001 (11.98) 150,777 0.87 0.87 0.43 56
12/31/2000 (10.92) 156,517 0.87 0.87 0.53 68
12/31/1999 18.16 153,967 0.78 0.78 0.73 56
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 22.71% 922 1.06% 1.06% 0.74% 52
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 2, 1997
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, ratio of net expenses is net of
fees paid indirectly. For the year ended December 31, 2001 and prior years,
ratio of net expenses to average net assets is net of fees paid indirectly
and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 10
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. J.P. Morgan Enhanced Index ("the Fund"), part of ATSF, began
operations as Endeavor Enhanced Index Portfolio, a part of the Endeavor Series
Trust, on May 2, 1997. The Fund became part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last quoted bid
price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $4 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may indemnify the Fund by
purchasing replacement securities for the Fund at its own expense and claiming
the collateral to fund such a purchase. IBT absorbs the loss if the collateral
value is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 11
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including
accretion of discounts and amortization of premiums, is recorded on the accrual
basis commencing on the settlement date.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.85% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 12
J.P. Morgan Enhanced Index
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $8. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 124,257
U.S. Government 1,396
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 99,418
U.S. Government 390
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (14)
Undistributed net investment income (loss) (2)
Undistributed net realized capital gains (loss) 16
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 609
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 1,048
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 1,756
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (39,249)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 24,290
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 909 December 31, 2008
13,533 December 31, 2009
21,375 December 31, 2010
3,432 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $224,847
========
Unrealized Appreciation $ 30,644
Unrealized (Depreciation) (6,350)
--------
Net Unrealized Appreciation (Depreciation) $ 24,290
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 13
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
J.P. Morgan Enhanced Index
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of J.P. Morgan Enhanced Index (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
J.P. Morgan Enhanced Index 14
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
MARKET ENVIRNOMENT
The recovery in the equity markets which began in the final calendar quarter of
2002 continued in the year ended December, 2003. The markets remained volatile,
including a negative return from the Standard and Poor's 500 Composite Stock
Index ("S&P 500") in the first quarter. This volatility, though, was
considerably less than had been seen over the past three years, and the
prevailing direction for equities was decidedly positive from mid-March through
year-end. Overall, financial markets were encouraged by reduced uncertainty
about Iraq early in the year, fewer corporate accounting scandals, and
continued low levels of inflation and interest rates relative to historical
levels. In addition, there have been growing indications of an economic rebound
in recent months, which bodes well for corporate profit growth in 2004. All ten
S&P 500 economic sectors had positive returns in 2003, with the best performers
in areas expected to benefit from the expanding economy, such as the technology
and industrial sectors.
PERFORMANCE
For the year ended December 31, 2003, LKCM Strategic Total Return returned
22.62%. By comparison, its primary benchmark, the S&P 500 and its secondary
benchmark, the Lehman Brothers Intermediate U.S. Government/Credit Index,
returned 28.67% and 4.31%, respectively.
STRATEGY REVIEW
The portfolio continued to be guided by Luther King Capital Management's
("LKCM") investment philosophy, which emphasizes diversification across asset
classes, and holdings in the best positioned large and medium-capitalized
stocks. The equity portion of the portfolio benefited from overweighted
positions, compared to the S&P 500, in materials, information technology, and
industrials, all of which share sensitivity to recoveries in corporate spending
and overall economic activity. Importantly, our individual stock selection
remained strong for the year, further testament to LKCM's bottom-up investment
discipline and the in-depth fundamental analysis underlying each of our
holdings. In the technology sector, exposure to semiconductor companies, Intel
Corporation and Texas Instruments Incorporated, was especially profitable.
Honeywell International Inc. was a standout contributor in the industrial
sector, and our best consumer discretionary investment was The Home Depot, Inc.,
a long-standing holding in the portfolio. In healthcare, we continue to
de-emphasize larger pharmaceutical companies in favor of
competitively-advantaged companies in higher growth niche areas of healthcare
delivery, and 2003 saw excellent returns from Alcon, Inc. and Teva
Pharmaceutical Industries Ltd. Among financials, The Bank of New York Company
Inc. and Citigroup Inc. posted outstanding returns as the capital markets
stabilized. In addition to equities, fixed income securities continue to provide
current income and a cushion against portfolio volatility, although it should be
noted that we lowered our exposure to the fixed income sector early in the year.
This decision was based on our belief that interest rates would not drop
further, and that the equity market provided more attractive investment
opportunities. We remain confident in our sector positioning and individual
equity holdings entering 2004.
/s/ Luther King, Jr.
Luther King, Jr.
/s/ Scot C. Hollman
Scot C. Hollman
Co-Portfolio Managers
Luther King Capital Management Corporation
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 1
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative indices.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class S&P 500 LBIGC
12/31/93 $10,000 $10,000 $10,000
3/31/94 9,679 9,622 9,797
6/30/94 9,519 9,662 9,738
9/30/94 10,062 10,133 9,818
12/31/94 9,947 10,132 9,807
3/31/95 10,604 11,117 10,237
6/30/95 11,107 12,177 10,749
9/30/95 11,736 13,144 10,926
12/31/95 12,400 13,934 11,311
3/31/96 12,977 14,682 11,216
6/30/96 13,257 15,340 11,287
9/30/96 13,460 15,814 11,487
12/31/96 14,259 17,132 11,768
3/31/97 14,346 17,592 11,755
6/30/97 16,220 20,661 12,101
9/30/97 17,200 22,208 12,428
12/31/97 17,375 22,845 12,694
3/31/98 18,662 26,029 12,892
6/30/98 18,522 26,889 13,135
9/30/98 17,031 24,219 13,725
12/31/98 19,050 29,373 13,766
3/31/99 19,497 30,836 13,739
6/30/99 20,333 33,009 13,685
9/30/99 19,180 30,950 13,811
12/31/99 21,349 35,553 13,819
3/31/00 20,971 36,368 14,026
6/30/00 20,877 35,404 14,264
9/30/00 20,739 35,061 14,674
12/31/00 20,546 32,319 15,217
3/31/01 19,250 28,490 15,732
6/30/01 20,146 30,156 15,838
9/30/01 18,788 25,732 16,567
12/31/01 20,097 28,481 16,581
3/31/02 20,041 28,560 16,544
6/30/02 18,927 24,735 17,132
9/30/02 17,315 20,465 17,908
12/31/02 17,976 22,189 18,211
3/31/03 17,430 21,489 18,486
6/30/03 19,472 24,797 18,989
9/30/03 19,973 25,453 18,985
12/31/03 22,041 28,550 18,996
*Inception 03/01/1993.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
- --------------------------------------------------------------------------------
Initial Class 22.62% 2.96 % 8.22% 8.83% 3/1/93
S&P 500(1) 28.67% (0.57)% 11.06% 10.91% 3/1/93
LBIGC(1) 4.31% 6.65 % 6.63% 6.58% 3/1/93
- --------------------------------------------------------------------------------
Service Class - - - 19.16% 5/1/03
- --------------------------------------------------------------------------------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index and Lehman
Brothers Intermediate U.S. Government/Credit (LBIGC) Index are unmanaged
indices used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 2
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES (5.4%)
Business Services (0.9%)
First Data Corporation
4.70%, due 11/01/2006 $ 3,000 $ 3,163
Personal Credit Institutions (1.0%)
General Electric Capital Corporation
8.85%, due 04/01/2005 3,000 3,254
Printing & Publishing (1.0%)
Gannett Co., Inc.
5.50%, due 04/01/2007 3,000 3,252
Telecommunications (1.4%)
ALLTEL Corporation
7.25%, due 04/01/2004 4,500 4,564
Variety Stores (1.1%)
Wal-Mart Stores, Inc.
6.55%, due 08/10/2004 3,600 3,714
-------
Total Corporate Debt Securities (cost: $17,730) 17,947
-------
CONVERTIBLE BONDS (1.4%)
Printing & Publishing (1.4%)
Tribune Company-PHONES
2.00%, due 05/15/2029 57 4,631
-------
Total Convertible Bonds (cost: $7,107) 4,631
-------
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (3.5%)
Instruments & Related Products (1.5%)
Raytheon Company (b) 94,600 $ 5,135
Life Insurance (2.0%)
Prudential Financial, Inc.-Units 99,000 6,445
---------
Total Convertible Preferred Stocks (cost: $10,404) 11,580
---------
COMMON STOCKS (89.2%)
Automotive (1.5%)
Honeywell International Inc. 154,000 5,148
Beverages (3.3%)
Coca-Cola Company (The) 121,000 6,141
PepsiCo, Inc. 107,000 4,988
Business Services (3.6%)
Clear Channel Communications, Inc. 153,000 7,165
First Data Corporation 121,200 4,980
Chemicals & Allied Products (3.3%)
Colgate-Palmolive Company 108,800 5,445
du Pont (E.I.) de Nemours and Company 125,000 5,736
Commercial Banks (10.4%)
Bank of America Corporation 59,000 4,745
Bank of New York Company, Inc. (The) 160,000 5,299
Shares Value
- --------------------------------------------------------------------------------
Commercial Banks (continued)
Citigroup Inc. 106,333 $ 5,161
Cullen/Frost Bankers, Inc. 163,000 6,613
Mellon Financial Corporation 188,000 6,037
Wells Fargo & Company 110,000 6,478
Communication (1.6%)
Viacom, Inc.-Class B 120,250 5,337
Communications Equipment (2.4%)
Harris Corporation (b) 139,000 5,275
Motorola, Inc. 189,000 2,659
Computer & Data Processing Services (6.1%)
Automatic Data Processing, Inc. 120,000 4,753
Microsoft Corporation 256,000 7,050
Oracle Corporation (a) 360,000 4,752
SunGard Data Systems Inc. (a) 139,300 3,860
Computer & Office Equipment (4.4%)
Cisco Systems, Inc. (a) 177,500 4,311
Dell Computer Corporation (a) 163,000 5,535
International Business Machines Corporation 51,000 4,727
Electronic & Other Electric Equipment (1.9%)
General Electric Company 202,000 6,258
Electronic Components & Accessories (5.1%)
Intel Corporation 184,000 5,925
Texas Instruments Incorporated 204,000 5,994
Tyco International Ltd. 195,000 5,168
Environmental Services (3.4%)
Allied Waste Industries, Inc. (a)(b) 400,000 5,552
Waste Management, Inc. 192,000 5,683
Food & Kindred Products (2.8%)
Altria Group, Inc. 97,000 5,279
Kraft Foods, Inc.-Class A (b) 130,000 4,189
Health Services (1.8%)
Triad Hospitals, Inc. (a) 185,700 6,179
Instruments & Related Products (1.6%)
Alcon, Inc. 90,500 5,479
Insurance (1.6%)
American International Group, Inc. 78,925 5,231
Lumber & Other Building Materials (1.8%)
Home Depot, Inc. (The) 172,001 6,104
Lumber & Wood Products (1.5%)
Masco Corporation (b) 188,000 5,153
Medical Instruments & Supplies (2.0%)
Medtronic, Inc. 139,400 6,776
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 3
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
- --------------------------------------------------------------------------------
Oil & Gas Extraction (6.2%)
Anadarko Petroleum Corporation 124,000 $ 6,325
EOG Resources, Inc. 100,000 4,617
Schlumberger Limited 103,000 5,636
Unocal Corporation 117,000 4,309
Paper & Allied Products (3.1%)
Kimberly-Clark Corporation 95,000 5,614
Temple-Inland Inc. (b) 75,000 4,700
Paper & Paper Products (1.7%)
Boise Cascade Corporation 176,000 5,783
Personal Services (1.1%)
Block (H&R), Inc. (b) 63,400 3,510
Petroleum Refining (3.6%)
BP PLC-ADR 110,000 5,429
Exxon Mobil Corporation 164,600 6,749
Pharmaceuticals (6.4%)
Abbott Laboratories 63,000 2,936
Pfizer Inc. 195,000 6,889
Schering-Plough Corporation 169,000 2,939
Teva Pharmaceutical Industries Ltd.-ADR (b) 81,500 4,622
Wyeth 91,000 3,863
Savings Institutions (1.7%)
Charter One Financial, Inc. 160,000 5,528
Telecommunications (3.5%)
ALLTEL Corporation 129,900 6,051
Verizon Communications, Inc. 162,000 5,683
Variety Stores (1.8%)
Wal-Mart Stores, Inc. 112,000 5,942
---------
Total Common Stocks (cost: $250,138) 298,290
---------
Principal Value
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (0.8%)
Investor's Bank & Trust Company (d)
0.72% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,510 on 01/02/2004 $ 2,509 $ 2,509
---------
Total Short-Term Obligations (cost: $2,509) 2,509
---------
SECURITY LENDING COLLATERAL (6.3%)
Debt (5.0%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 101 101
Fleet National Bank
1.00%, due 01/21/2004 380 380
National Bank of Commerce
1.19%, due 04/21/2004 317 317
Principal Value
- --------------------------------------------------------------------------------
Commercial Paper (1.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 190 $ 190
Delaware Funding Corporation
1.08%, due 01/07/2004 126 126
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 190 190
1.09%, due 01/13/2004 127 127
1.08%, due 02/05/2004 253 253
General Electric Capital Corporation
1.09%, due 01/08/2004 316 316
1.09%, due 01/09/2004 190 190
1.08%, due 01/16/2004 252 252
Govco Incorporated-144A
1.07%, due 02/05/2004 316 316
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 316 316
1.09%, due 02/06/2004 316 316
1.10%, due 02/09/2004 185 185
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 316 316
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 190 190
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 367 367
1.08%, due 02/17/2004 632 632
Sheffield Receivables-144A
1.09%, due 01/21/2004 127 127
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 633 633
Credit Agricole Indosuez
0.98%, due 01/02/2004 25 25
1.08%, due 01/06/2004 241 241
Euro Dollar Terms (1.3%)
Bank of Montreal
1.06%, due 01/15/2004 124 124
1.06%, due 02/17/2004 253 253
Bank of Scotland
1.06%, due 04/02/2004 190 190
Citigroup Inc.
1.10%, due 01/22/2004 190 190
1.09%, due 02/06/2004 253 253
Credit Agricole Indosuez
1.08%, due 01/28/2004 127 127
Den Danske Bank
1.08%, due 01/20/2004 633 633
1.02%, due 01/30/2004 317 317
Royal Bank of Canada
1.05%, due 02/27/2004 633 633
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 4
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 380 $ 380
1.08%, due 01/15/2004 127 127
1.08%, due 01/20/2004 63 63
Svenska Handelsbanken AB
1.09%, due 01/15/2004 63 63
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 380 380
Wells Fargo & Company
1.04%, due 01/30/2004 507 507
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 253 253
1.14%, due 09/08/2004 380 380
Morgan Stanley
1.05%, due 06/21/2004 608 608
Medium Term Notes (0.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 634 634
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 190 190
Principal Value
- --------------------------------------------------------------------------------
Repurchase Agreements (1.3%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,483 on 01/02/2004 $ 1,483 $ 1,483
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,016 on 01/02/2004 2,016 2,016
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,205 on 01/02/2004 1,205 1,205
Shares Value
- --------------------------------------------------------------------------------
Investment Companies (1.3%)
Money Market Funds (1.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 310,749 $ 311
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 758,716 759
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 3,299,149 3,299
---------
Total Security Lending Collateral (cost: $21,484) 21,484
---------
Total Investment Securities (cost: $309,372) $ 356,441
=========
SUMMARY:
Investments, at value 106.6 % $ 356,441
Liabilities in excess of other assets (6.6)% (22,223)
--------- ---------
Net assets 100.0 % $ 334,218
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see Note
1). The value at December 31, 2003, of all securities on loan is $20,698.
(c) Cash collateral for the Repurchase Agreements, valued at $4,795, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $2,499
Small Business Administration Pool-506370 (4.625%, due 09/25/2016) with a
market value and accrued interest of $2,635.
DEFINITIONS:
ADR American Depositary Receipt
PHONES Participation Hybrid Option Note Exchangeable Securities
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 5
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $309,372)
(including $20,698 of securities loaned) $ 356,441
Cash 50
Receivables:
Interest 306
Dividends 366
Other 22
---------
357,185
---------
Liabilities:
Investment securities purchased 1,206
Accounts payable and accrued liabilities:
Management and advisory fees 236
Payable for collateral for securities on loan 21,484
Other 41
---------
22,967
---------
Net Assets $ 334,218
=========
Net Assets Consist of:
Capital stock, 75,000 shares authorized ($.01 par value) $ 224
Additional paid-in capital 280,852
Undistributed net investment income (loss) 4,755
Undistributed net realized gain (loss) from investment
securities 1,318
Net unrealized appreciation (depreciation) on investment
securities 47,069
---------
Net Assets $ 334,218
=========
Shares Outstanding:
Initial Class 22,379
Service Class 18
Net Asset Value and Offering Price Per Share:
Initial Class $ 14.92
Service Class 15.27
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 2,311
Dividends 5,146
Income from loaned securities-net 24
Less withholding taxes on foreign dividends (32)
--------
7,449
--------
Expenses:
Management and advisory fees 2,523
Transfer agent fees 3
Printing and shareholder reports 80
Custody fees 33
Administration fees 21
Legal fees 4
Auditing and accounting fees 10
Directors fees 12
Other 7
--------
Total expenses 2,693
--------
Net Investment Income (Loss) 4,756
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 7,908
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 52,215
--------
Net Gain (Loss) on Investment Securities 60,123
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 64,879
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 6
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------ ------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 4,756 $ 8,855
Net realized gain (loss) from
investment securities 7,908 (5,778)
Net unrealized appreciation
(depreciation) on investment
securities 52,215 (48,566)
--------- ---------
64,879 (45,489)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (8,485) (11,352)
Service Class - -
--------- ---------
(8,485) (11,352)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 7,472 24,717
Service Class 262 -
--------- ---------
7,734 24,717
--------- ---------
Dividends and distributions reinvested:
Initial Class 8,485 11,352
Service Class - -
--------- ---------
8,485 11,352
--------- ---------
Cost of shares redeemed:
Initial Class (64,176) (105,015)
Service Class (9) -
----------- ---------
(64,185) (105,015)
---------- ---------
(47,966) (68,946)
---------- ---------
Net increase (decrease) in net assets 8,428 (125,787)
---------- ---------
Net Assets:
Beginning of year 325,790 451,577
---------- ---------
End of year $ 334,218 $ 325,790
========== ==========
Undistributed Net Investment
Income (Loss) $ 4,755 $ 9,790
========== ==========
December 31, December 31,
2003 2002
------------ ------------
Share Activity:
Shares issued:
Initial Class 565 1,792
Service Class 19 -
---------- ---------
584 1,792
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 637 884
Service Class - -
---------- ---------
637 884
---------- ---------
Shares redeemed:
Initial Class (4,894) (7,904)
Service Class (1) -
----------- ---------
(4,895) (7,904)
---------- ---------
Net increase (decrease) in shares
outstanding (3,674) (5,228)
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 7
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
- --------------------------------------------------------------------------------------
Initial Class 12/31/2003 $ 12.50 $ 0.20 $ 2.58 $ 2.78
12/31/2002 14.43 0.31 (1.82) (1.51)
12/31/2001 14.90 0.34 (0.66) (0.32)
12/31/2000 16.85 0.35 (0.97) (0.62)
12/31/1999 16.40 0.34 1.59 1.93
- --------------------------------------------------------------------------------------
Service Class 12/31/2003 12.84 0.09 2.37 2.46
- --------------------------------------------------------------------------------------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
- --------------------------------------------------------------------
Initial Class $ (0.36) $ - $ (0.36) $ 14.92
(0.42) - (0.42) 12.50
(0.07) (0.08) (0.15) 14.43
(0.32) (1.01) (1.33) 14.90
(0.35) (1.13) (1.48) 16.85
- --------------------------------------------------------------------
Service Class (0.03) - (0.03) 15.27
- --------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- ------------------------------------------------------------------------------------------------------------------------
Initial Class 12/31/2003 22.62% $ 333,939 0.85% 0.85% 1.52% 34%
12/31/2002 (10.55) 325,790 0.87 0.87 2.28 14
12/31/2001 (2.18) 451,577 0.89 0.89 2.37 16
12/31/2000 (3.76) 558,924 0.85 0.85 2.20 52
12/31/1999 12.07 624,416 0.86 0.86 2.02 45
- ------------------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 19.16 279 1.11 1.11 1.00 34
- ------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows: Initial
Class-March 1, 1993 Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 8
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. LKCM Strategic Total Return ("the Fund"), part of ATSF, began
operations on March 1, 1993.
The fund will merge into Transamerica Value Balanced effective the close of
business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $10 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recov-ering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 9
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $152 are included in
net realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.80% of the first $250 million of ANA
0.775% of the next $250 million of ANA
0.75% of the next $250 million of ANA
0.70% of the next $250 million of ANA
0.60% of ANA over $1billion
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 10
LKCM Strategic Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $11. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 104,328
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 149,091
U.S. Government 3,768
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (1,306)
Undistributed net realized capital gain (loss) 1,306
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 11,352
Long-term capital gains -
2003 Distributions paid from:
Ordinary income $ 8,485
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 4,756
========
Undistributed Long-term Capital Gains $ 1,701
========
Capital Loss Carryforward $ -
========
Post October Capital Loss $ (384)
========
Net Unrealized Appreciation (Depreciation) $ 47,069
========
The capital loss carryforward utilized during the period ended December 31,
2003 was $7,897.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $309,372
========
Unrealized Appreciation $ 64,556
Unrealized (Depreciation) (17,487)
--------
Net Unrealized Appreciation (Depreciation) $ 47,069
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
LKCM Strategic Total Return
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of LKCM Strategic Total Return (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
LKCM Strategic Total Return 12
Marsico Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The New York Times (January 2, 2004) reported 2003 "was the year that almost
every stock went up." The Times noted that of the 499 stocks in the Standard
and Poor's 500 Composite Stock Index ("S&P 500") that traded for the entire
year, 92% had a positive return. Periodically the Standard & Poor's Corporation
("S&P"), which maintains the S&P 500, will make changes to the membership. All
ten economic sectors that comprise the S&P 500 Index had a positive return last
year -- something that last occurred in calendar year 1997. That was a
testament to the breadth of the strength that prevailed in U.S. equity markets
last year. The NASDAQ Composite Index, which includes many technology and
telecommunications related companies, had a 50.01% rise for the complete year
- -- a major turnaround from the 31.53% loss it absorbed in 2002. International
equities, as represented by the performance of the Morgan Stanley Capital
International (EAFE) Index, climbed 39.17% for the full year.
Equity gains in 2003 seemed to be buoyed by several factors: growing evidence
that a U.S. economic recovery was taking place, encouraging profit reports from
U.S. companies, continued low interest rates, stimulative fiscal policy (e.g.,
tax cuts, spending increases), and improving business and consumer confidence.
While last year's investment result for the Marsico Growth was quite good on an
absolute basis, it did modestly trail the S&P 500 performance. To some extent,
the portfolio's performance was attributable to it being invested primarily in
companies that we consider being high quality in nature. These are companies
with characteristics such as: established business franchises, proven business
models, good earnings growth, good free cash flow generation, strong balance
sheets, strong profit margins, and significant market share in the
product(s)/service(s) they provide.
It has been our view that, given the severity of the collapse in share prices of
many technology, telecommunications, and Internet companies that occurred in the
2000-2002 period, equity investors would be more likely to favor "quality"
companies as opposed to companies that might be considered higher risk in
nature. In retrospect, we may have been somewhat off-target in that assessment
in 2003.
One way of further examining company "quality" is through stock ratings issued
by S&P. S&P rates more than 3,000 U.S. stocks using a letter "grading" system
of A to D based on its assessment of the issuing company's overall financial
strength. During 2003, S&P's A-rated stocks (i.e., its top-rated companies)
gained 30% on average. B-rated stocks rose 57%. C-rated stocks, a category that
essentially represents financially distressed companies, surged by a remarkable
118% on average. Finally, D-rated companies, i.e., organizations that have
actually defaulted on their debt obligations, were up 44% last year. In other
words, the financially weakest companies had the best returns last year.
During 2003, taxes on cash dividends paid by U.S. corporations were
considerably reduced. Many observers, including us, thought at the time the
reduced taxes were made effective that dividend-paying companies, or
organizations that initiated a dividend payment, would be rewarded by investors
in the form of higher share prices. Here, too, it would be fair to say our
assessment, in hindsight, apparently was somewhat off-the-mark. During 2003, in
the S&P 500, according to S&P, stock prices of dividend-paying companies rose,
on average, about half as much as companies that did not pay dividends.
Why did the performance of "quality" companies, while having positive returns
in 2003, still lag that of companies that, by various objective measures,
appeared riskier in nature? One possible answer, was that historically low
interest rates in 2003 may have in effect provided a lifeline to financially
challenged companies, allowing them to "live another day." Long-term interest
rates (measured by the 10-year U.S. Treasury bond) reached 50-year lows in
mid-2003 (3.11%) before rising to about 4.40% at year-end 2003 -- still
relatively low by historical standards.
PERFORMANCE
For the year ended December 31, 2003, Marsico Growth returned of 26.34%. By
comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
In reviewing the Marsico Growth 2003 investment results, there were a number of
significant factors -- both positive and negative -- that impacted performance
as compared to the S&P 500.
The portfolio's positions in the pharmaceutical and biotechnology industries
within the health care sector gained more than 57% during the year. Throughout
much of the year, the portfolio had a substantial position in a biotechnology
company, Genentech, Inc., whose stock rose by more than 139% during the year.
The company's stock price was buoyed by promising data related to a trial of
Avastin, which demonstrated effectiveness in treating colon cancer. Other
strong performers for the year were Zimmer Holdings, Inc., UnitedHealth Group
Incorporated, and Amgen Inc.
Within the consumer discretionary sector, the portfolio's stock selection in
the consumer durables and retailing industries, including Tiffany & Co., Lowes
Companies, Inc., Amazon.com,
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 1
Marsico Growth
- --------------------------------------------------------------------------------
Inc. and eBay Inc. had a positive impact on performance. Lennar Corporation and
Echostar DBS Corporation also contributed to performance.
Other areas that helped the portfolio's performance included strong stock
selection in telecommunications sector and underweight positions in the energy,
consumer staples, and utilities sectors. For the year, the telecommunications
sector in the portfolio gained 80%, led by Nextel Communications, Inc., while
the same area in the S&P 500 gained only 7%. Select investments in financial
stocks such as Citigroup Inc. performed well during the year.
Several factors negatively impacted performance for the portfolio during the
period:
The portfolio's investment results in the financial services sector were less
positive than the industry's benchmark performance because of stock selection
within the banks and diversified financials industries. While the portfolio's
holdings in these two industries collectively generated a strong return of 30%
during the period, it significantly lagged the benchmark industry returns of
69%.
All three industries within the industrial sector had a negative affect on
performance. Lockheed Martin Corporation and Monster Worldwide, Inc. traded down
during the year. Stock selection in the communication services industry was a
large detractor for the year. The industry in the portolio lost 21% for the
year, while the comparable industry in the S&P 500 gained over 36%.
In contrast to the positive effects of underweights in the energy, consumer
staples, and utilities sectors, the portfolio's underweight in materials
detracted from performance. The materials sector of the S&P 500 Index gained 38%
for the year.
The information technology ("IT") sector had mixed results for the year. While
Electronic Arts Inc., Intel Corporation and Cisco Systems, Inc. were among the
best performers during the year, Hewlett-Packard Company, Intuit Inc., Nokia
Oyj and Microsoft Corporation were among the worst performers.
In addition to the above sector-level factors, certain individual positions had
a negative effect on the portfolio. These included HCA Inc., MGM Mirage, and
Eli Lilly & Company were among the worst performers for the year.
As of December 31, 2003, the portfolio's investment posture emphasized five
sector allocations: health care, IT, financials, industrials, and consumer
discretionary.
James A. Hillary
Thomas F. Marsico
Co-Portfolio Managers
Banc of America Capital Management, LLC*
- ------------------
*Sub-adviser - Banc of America Capital Management, LLC has entered into an
agreement with Marsico Capital Management, LLC under which Marsico will provide
portfolio management to the portfolio.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 2
Marsico Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class S&P 500
5/3/99 $10,000 $10,000
6/30/99 10,360 10,306
9/30/99 9,780 9,663
12/31/99 11,750 11,100
3/31/00 12,000 11,354
6/30/00 11,910 11,053
9/30/00 11,764 10,946
12/31/00 10,808 10,090
3/31/01 9,420 8,895
6/30/01 10,058 9,415
9/30/01 8,437 8,034
12/31/01 9,285 8,892
3/31/02 9,090 8,916
6/30/02 7,743 7,723
9/30/02 6,484 6,389
12/31/02 6,873 6,928
3/31/03 6,914 6,709
6/30/03 7,712 7,742
9/30/03 8,039 7,947
12/31/03 8,683 8,913
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
- --------------------------------------------------------------------------------
Initial Class 26.34% (2.99)% 5/3/99
S&P 500(1) 28.67% (2.43)% 5/3/99
- --------------------------------------------------------------------------------
Service Class -- 20.11% 5/1/03
- --------------------------------------------------------------------------------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 3
Marsico Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
- -------------------------------------------------------------------------
COMMON STOCKS (95.9%)
Aerospace (1.3%)
Lockheed Martin Corporation 33,536 $ 1,724
Air Transportation (4.5%)
FedEx Corporation 69,335 4,680
RyanAir Holdings PLC-ADR (a)(b) 28,650 1,451
Amusement & Recreation Services (0.4%)
Disney (Walt) Company (The) 24,737 577
Automotive (1.8%)
Bayerische Motoren Werke AG (BMW) 38,677 1,802
Honeywell International Inc. 20,015 669
Beverages (0.9%)
Anheuser-Busch Companies, Inc. 24,108 1,270
Chemicals & Allied Products (2.4%)
Procter & Gamble Company (The) 32,927 3,289
Commercial Banks (5.2%)
Citigroup Inc. 146,377 7,105
Communications Equipment (2.6%)
QUALCOMM Incorporated 64,724 3,491
Computer & Data Processing Services (4.1%)
Electronic Arts Inc. (a) 117,176 5,599
Computer & Office Equipment (9.1%)
Cisco Systems, Inc. (a) 242,920 5,901
Dell Computer Corporation (a) 125,757 4,271
EMC Corporation (a) 172,158 2,224
Electronic & Other Electric Equipment (2.1%)
General Electric Company 90,470 2,803
Electronic Components & Accessories (7.7%)
Intel Corporation 253,985 8,178
Maxim Integrated Products 35,620 1,774
Tyco International Ltd. 21,834 579
Health Services (2.7%)
Caremark Rx, Inc. (a)(b) 147,850 3,745
Industrial Machinery & Equipment (4.1%)
Caterpillar, Inc. 66,481 5,519
Insurance (5.1%)
UnitedHealth Group Incorporated 119,998 6,981
Lumber & Other Building Materials (3.6%)
Lowe's Companies, Inc. 88,474 4,901
Medical Instruments & Supplies (7.6%)
Boston Scientific Corporation (a) 128,976 4,741
Medtronic, Inc. 39,365 1,914
Zimmer Holdings, Inc. (a) 53,091 3,738
Mortgage Bankers & Brokers (1.1%)
Countrywide Credit Industries, Inc. 19,632 1,489
Shares Value
- -------------------------------------------------------------------------
Personal Credit Institutions (5.5%)
SLM Corporation 197,183 $ 7,429
Pharmaceuticals (8.8%)
Amgen Inc. (a) 42,257 2,611
Genentech, Inc. (a) 76,520 7,159
Lilly (Eli) and Company 30,711 2,160
Residential Building Construction (2.1%)
Lennar Corporation (b) 29,614 2,843
Retail Trade (2.9%)
Tiffany & Co. 87,117 3,938
Rubber & Misc. Plastic Products (1.5%)
NIKE, Inc.-Class B 29,274 2,004
Security & Commodity Brokers (3.2%)
Merrill Lynch & Co., Inc. (b) 74,651 4,378
Telecommunications (2.1%)
Nextel Communications, Inc.-
Class A (a) 102,771 2,884
U.S. Government Agencies (3.5%)
Fannie Mae 63,981 4,802
----------
Total Common Stocks (cost: $106,495)
130,623
----------
Principal Value
- ----------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (4.2%)
Investor's Bank & Trust Company (d)
0.72% Repurchase Agreement dated 12/31/2003
to be repurchased at $5,660 on 01/02/2004 $ 5,660 $ 5,660
----------
Total Short-Term Obligations (cost: $5,660) 5,660
----------
SECURITY LENDING COLLATERAL (8.7%)
Debt (6.9%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 56 $ 56
Fleet National Bank
1.00%, due 01/21/2004 210 210
National Bank of Commerce
1.19%, due 04/21/2004 175 175
Commercial Paper (1.8%)
Compass Securitization-144A
1.08%, due 01/22/2004 105 105
Delaware Funding Corporation
1.08%, due 01/07/2004 70 70
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 105 105
1.09%, due 01/13/2004 70 70
1.08%, due 02/05/2004 140 140
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 4
Marsico Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
General Electric Capital Corporation
1.09%, due 01/08/2004 $ 175 $ 175
1.09%, due 01/09/2004 105 105
1.08%, due 01/16/2004 139 139
Govco Incorporated-144A
1.07%, due 02/05/2004 175 175
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 175 175
1.09%, due 02/06/2004 175 175
1.10%, due 02/09/2004 102 102
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 175 175
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 105 105
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 203 203
1.08%, due 02/17/2004 350 350
Sheffield Receivables-144A
1.09%, due 01/21/2004 70 70
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 350 350
Credit Agricole Indosuez
0.98%, due 01/02/2004 14 14
1.08%, due 01/06/2004 133 133
Euro Dollar Terms (1.7%)
Bank of Montreal
1.06%, due 01/15/2004 68 68
1.06%, due 02/17/2004 140 140
Bank of Scotland
1.06%, due 04/02/2004 105 105
Citigroup Inc.
1.10%, due 01/22/2004 105 105
1.09%, due 02/06/2004 140 140
Credit Agricole Indosuez
1.08%, due 01/28/2004 70 70
Den Danske Bank
1.08%, due 01/20/2004 350 350
1.02%, due 01/30/2004 175 175
Royal Bank of Canada
1.05%, due 02/27/2004 351 351
Royal Bank of Scotland Group PLC
(The)
1.08%, due 01/09/2004 210 210
1.08%, due 01/15/2004 70 70
1.08%, due 01/20/2004 35 35
Principal Value
- --------------------------------------------------------------------------------
Euro Dollar Terms (continued)
Svenska Handelsbanken AB
1.09%, due 01/15/2004 $ 35 $ 35
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 210 210
Wells Fargo & Company
1.04%, due 01/30/2004 280 280
Master Notes (0.5%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 140 140
1.14%, due 09/08/2004 210 210
Morgan Stanley
1.05%, due 06/21/2004 336 336
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 350 350
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 105 105
Repurchase Agreements (1.9%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $819 on 01/02/2004 819 819
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,114 on 01/02/2004 1,114 1,114
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $665 on 01/02/2004 665 665
Shares Value
- --------------------------------------------------------------------------------
Investment Companies (1.8%)
Money Market Funds (1.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 171,764 $ 172
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 419,373 419
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 1,823,574 1,824
---------
Total Security Lending Collateral (cost: $11,875) 11,875
---------
Total Investment Securities (cost: $124,030) $ 148,158
=========
SUMMARY:
Investments, at value 108.8 % $ 148,158
Liabilities in excess of other assets (8.8)% (12,023)
--------- ---------
Net assets 100.0 % $ 136,135
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 5
Marsico Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
FORWARD FOREIGN CURRENCY CONTRACTS:
- ----------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- ----------------------------------------------------------------------
Euro Dollar (1,343) 03/17/2004 $ (1,659) $ (31)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$11,461.
(c) Cash collateral for the Repurchase Agreements, valued at $2,650, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $24,970
Fannie Mae Series 2001-50F (1.64%, due 04/25/2029) with a market value and
accrued interest of $5,944.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 6
Marsico Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $124,030)
(including $11,461 of securities loaned) $148,158
Cash 51
Receivables:
Dividends 62
Other 46
---------
148,317
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 96
Due to advisor 130
Payable for collateral for securities on loan 11,875
Unrealized depreciation on forward foreign
currency contracts 31
Other 50
---------
12,182
---------
Net Assets $136,135
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 160
Additional paid-in capital 126,329
Undistributed net investment income (loss) 5
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (14,456)
Net unrealized appreciation (depreciation) on:
Investment securities 24,128
Translation of assets and liabilities denominated in
foreign currencies (31)
---------
Net Assets $136,135
=========
Shares Outstanding:
Initial Class 15,947
Service Class 90
Net Asset Value and Offering Price Per Share:
Initial Class $ 8.49
Service Class 8.48
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 35
Dividends 962
Income from loaned securities-net 14
Less withholding taxes on foreign dividends (11)
--------
1,000
--------
Expenses:
Management and advisory fees 1,015
Transfer agent fees 2
Printing and shareholder reports 35
Custody fees 23
Administration fees 20
Legal fees 2
Auditing and accounting fees 10
Directors fees 5
Recaptured expenses 130
Other 3
--------
Total expenses 1,245
--------
Net Investment Income (Loss) (245)
--------
Net Realized Gain (Loss) from:
Investment securities 3,087
Foreign currency transactions 5
--------
3,092
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 29,121
Translation of assets and liabilities denominated in
foreign currencies (31)
--------
29,090
--------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 32,182
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 31,937
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 7
Marsico Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
----------- ------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (245) $ (15)
Net realized gain (loss) from
investment securities and foreign
currency transactions 3,092 (14,883)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 29,090 (2,568)
--------- ---------
31,937 (17,466)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class -- (51)
Service Class -- --
--------- ---------
-- (51)
--------- ---------
From net realized gains:
Initial Class -- --
Service Class -- --
--------- ---------
--------- ---------
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 73,160 100,534
Service Class 765 --
--------- ---------
73,925 100,534
--------- ---------
Dividends and distributions reinvested:
Initial Class -- 51
Service Class -- --
--------- ---------
-- 51
--------- ---------
Cost of shares redeemed:
Initial Class (72,258) (25,876)
Service Class (43) --
--------- ---------
(72,301) (25,876)
--------- ---------
1,624 74,709
--------- ---------
Net increase (decrease) in net assets 33,561 57,192
--------- ---------
Net Assets:
Beginning of year 102,574 45,382
--------- ---------
End of year $ 136,135 $ 102,574
========= =========
Accumulated Net Investment
Income (Loss) $ 5 $ --
========= =========
December 31, December 31,
2003 2002
------------ ------------
Share Activity:
Shares issued:
Initial Class 10,137 13,855
Service Class 95 -
------- -------
10,232 13,855
------- -------
Shares issued-reinvested from distributions:
Initial Class - 7
Service Class - -
------- -------
- 7
------- -------
Shares redeemed:
Initial Class (9,463) (3,583)
Service Class (5) -
------- -------
(9,468) (3,853)
------- -------
Net increase (decrease) in shares
outstanding 764 10,279
======= =======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 8
Marsico Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
- -------------------------------------------------------------------------------------
Initial Class 12/31/2003 $ 6.72 $ (0.01) $ 1.78 $ 1.77
12/31/2002 9.09 - (2.36) (2.36)
12/31/2001 10.67 0.02 (1.52) (1.50)
12/31/2000 11.75 0.02 (0.95) (0.93)
12/31/1999 10.00 0.01 1.74 1.75
- -------------------------------------------------------------------------------------
Service Class 12/31/2003 7.06 (0.03) 1.45 1.42
- -------------------------------------------------------------------------------------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
- -------------------------------------------------------------------
Initial Class $ - $ - $ - $ 8.49
(0.01) - (0.01) 6.72
(0.07) (0.01) (0.08) 9.09
(0.10) (0.05) (0.15) 10.67
- - - 11.75
- -------------------------------------------------------------------
Service Class - - - 8.48
- -------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- -----------------------------------------------------------------------------------------------------------------------
Initial Class 12/31/2003 26.34% $ 135,376 0.98% 0.98% (0.19)% 111%
12/31/2002 (25.98) 102,574 1.00 1.06 (0.03) 103
12/31/2001 (14.09) 45,382 1.00 1.21 0.16 17
12/31/2000 (8.02) 20,185 1.00 1.37 0.15 37
12/31/1999 17.50 8,204 1.00 2.68 0.12 40
- ----------------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 20.11 759 1.25 1.25 (0.47) 111
- ----------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows: Initial
Class-May 3, 1999 Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.10%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 9
Marsico Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Marsico Growth ("the Fund"), part of ATSF, began operations on May 3,
1999.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or are valued at amortized cost, which approximates market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $6 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required at all times to be secured by collateral at
least equal to 102% of the value of the securities at inception of the loan,
and not less then 100% thereafter. The Fund may invest cash collateral in
short-term money market instruments including: U.S. Treasury Bills, U.S. agency
obligations, commercial paper, money market mutual funds, repurchase agreements
and other highly rated, liquid investments. During the life of securities
loans, the collateral and securities loaned remain subject to fluctuation in
value. IBT marks to mar-ket securities loaned and the collateral each business
day. If additional collateral is due (at least $1), IBT collects additional
cash collateral from the borrowers. Although securities loaned will be fully
collateralized at all times, IBT may experience delays in, or may be prevented
from, recovering the collateral on behalf of the Fund. The Fund may recall a
loaned security position at any time from the borrower through IBT. In the
event the borrower fails to timely return a recalled security, IBT may
indemnify the Fund by purchasing replacement securities for the Fund at its own
expense and claiming the collateral to fund such a purchase. IBT absorbs the
loss if the collateral value is not sufficient to cover the cost of the
replacement securities. If replacement securities are not available, IBT will
credit the equivalent cash value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 10
Marsico Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $61 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
------ ----------
Asset Allocation-Conservative Portfolio $ 16,033 12%
Asset Allocation-Moderate Portfolio 40,709 30%
----------
42%
==========
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.80% of the first $250 million ANA
0.75% of the next $250 million of ANA
0.70% of the next $500 million of ANA
0.60% of ANA over $1 billion
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 11
Marsico Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Increase in
Expenses Total Expenses
Recovered to Average
by Advisor Net Assets
---------- --------------
Recovered in 2003 $ 130 0.10%
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $5. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 133,408
U.S. Government 1,771
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 127,835
U.S. Government 431
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (245)
Undistributed net investment income (loss) 250
Undistributed net realized capital gains (loss) (5)
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 51
Long-term capital gains -
2003 Distributions paid from:
Ordinary income -
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 12
Marsico Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (13,918)
=========
Post October Capital Loss $ (195)
=========
Post October Currency Loss $ (27)
=========
Net Unrealized Appreciation (Depreciation) $ 23,785
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
------------ -----------------
$ 1,890 December 31, 2009
6,745 December 31, 2010
5,283 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $124,373
========
Unrealized Appreciation $ 24,040
Unrealized (Depreciation) (255)
--------
Net Unrealized Appreciation (Depreciation) $ 23,785
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 13
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Marsico Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Marsico Growth (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Marsico Growth 14
MFS High Yield
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Throughout the year, the bond market was influenced by interest rate cuts in
the United States and Europe, near record-low mortgage rates, and a weak U.S.
dollar. It proved to be a positive period for almost all bond investors and for
high-yield investors in particular. Investors showed reinvigorated interest in
U.S. corporate bonds of all quality levels. This interest was sparked by the
historically low yields offered by U.S. Treasury securities, improvement in the
balance-sheet quality of corporate issuers, and increased investor confidence.
Low yields on U.S. Treasury securities made high-yield corporate issues more
attractive to investors, as evidenced by record inflows into the high-yield
sector. This came at a time when there was only a modest supply of new
high-yield issues. The result of this supply/demand imbalance was significant
appreciation in high-yield bond prices. High-grade corporate bonds also
performed well for the year, but not nearly as well as high-yield corporate
issues. Over the year, yield spreads between below-investment-grade bonds and
their higher-quality counterparts narrowed in dramatic fashion.
The bond rally in 2003 was spurred by two key factors. One was the
unprecedented $135 billion in fallen angels in 2002 that shifted the
composition of the high-yield market by significantly increasing the distressed
utility and telecommunication sectors. (Fallen angels are investment grade
bonds that are downgraded to high-yield ratings.) The second was the record
flows into the bond market during the year. This situation enabled many
distressed companies to refinance their debt and improve their credit outlooks.
PERFORMANCE
For the year ended December 31, 2003, MFS High Yield returned 17.74%. By
comparison its benchmark, the Lehman Brothers High Yield Bond Index returned
28.97%.
STRATEGY REVIEW
Overall, the portfolio's holdings were decidedly defensive relative to the
high-yield market at large. While the portfolio's defensiveness served
investors well in recent years, it contributed to its underperformance during
this year, as investors favored riskier options. The portfolio continued to
have significant underweight exposure to the wire line segment of the
telecommunications industry, which still faced many fundamental challenges,
including significant overcapacity. The portfolio also had an underweight
exposure to the utilities sector, which proved to be one of the leaders of the
high-yield rally during the year. In general, our strategy is to focus on
credit issuers with improving fundamentals and to not take excessive risk. We
continue to remain true to our discipline focus because we believe fundamentals
drive performance over the long term.
The telecommunications, utilities, and media sectors led the rebound in the
high-yield market. While we were underweight in some of these sectors, or
portions of them, we were able to strategically take advantage of the rally in
the utilities sector and in the wire line segment of the telecommunications
sector by choosing select names we felt were attractive from fundamental and
valuation standpoints.
We had an overweight exposure to the media sector, where we also favored
companies with the ability to generate strong free cash flow. Many of these
were broadcasting companies, which have tended to benefit from an increase in
advertising revenue in past economic recoveries.
/s/ Bernard Scozzafava
Bernard Scozzafava
Portfolio Manager
MFS Investment Management
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 1
MFS High Yield
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 6/1/98 through 12/31/03
LB High Yield
Initial Class Bond Index
6/1/98 $10,000 $10,000
6/30/98 9,990 10,036
9/30/98 9,340 9,579
12/31/98 9,690 9,783
3/31/99 10,100 9,964
6/30/99 10,061 9,998
9/30/99 9,959 9,856
12/31/99 10,254 10,017
3/31/00 10,213 9,783
6/30/00 10,335 9,896
9/30/00 10,281 9,952
12/31/00 9,723 9,430
3/31/01 10,249 10,030
6/30/01 9,977 9,800
9/30/01 9,501 9,386
12/31/01 10,091 9,928
3/31/02 10,193 10,095
6/30/02 10,034 9,447
9/30/02 9,962 9,170
12/31/02 10,300 9,788
3/31/03 10,650 10,533
6/30/03 11,257 11,598
9/30/03 11,502 11,919
12/31/03 12,127 12,624
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- --------- ----------- ----------
Initial Class 17.74% 4.59% 3.52% 6/1/98
LBHY(1) 28.97% 5.23% 4.26% 6/1/98
- ----- ----- ---- ---- ------
Service Class - - 9.74% 5/1/03
- --------------- ----- ---- ---- ------
NOTES
(1) The Lehman Brothers High Yield Bond (LBHY) Index is an unmanaged index used
as a general measure of market performance. Calculations assume dividends
and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Investments in high-yield bonds ("junk bonds") may be subject to greater
volatility and risks as the income derived from these securities is not
guaranteed and may be unpredictable.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Endeavor High
Yield Portfolio of Endeavor Series Trust.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 2
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
FOREIGN GOVERNMENT OBLIGATIONS (0.5%)
Federative Republic of Brazil
8.00%, due 04/15/2014 $ 1,412 $ 1,384
8.88%, due 04/15/2024 1,771 1,727
---------
Total Foreign Government Obligations (cost: $2,917) 3,111
---------
MORTGAGE-BACKED SECURITIES (0.4%)
Commercial Mortgage Acceptance
Corporation
5.44%, due 09/15/2030 230 204
First Union-Lehman Brothers
Commercial Mortgage Trust
7.00%, due 04/18/2029 800 752
7.50%, due 11/18/2029 1,940 1,804
---------
Total Mortgage-Backed Securities (cost: $2,793) 2,760
---------
ASSET-BACKED SECURITIES (0.1%)
Falcon Franchise Loan LLC
3.87%, due 01/05/2025 4,379 835
---------
Total Asset-Backed Securities (cost: $815) 835
---------
CORPORATE DEBT SECURITIES (91.3%)
Aerospace (0.3%)
K & F Industries, Inc.
9.25%, due 10/15/2007 149 154
9.63%, due 12/15/2010 1,340 1,502
Agriculture (0.1%)
Seminis Vegatable Seeds-144A
10.25%, due 10/01/2013 380 409
Air Transportation (0.6%)
Continental Airlines, Inc.
6.90%, due 01/02/2017 556 466
6.75%, due 03/15/2017 539 445
6.80%, due 08/02/2018 1,449 1,223
7.57%, due 03/15/2020 1,688 1,423
Delta Air Lines, Inc.
7.92%, due 11/18/2010 515 466
Amusement & Recreation Services (2.6%)
Ameristar Casinos, Inc.
10.75%, due 02/15/2009 60 69
Argosy Gaming Company
9.00%, due 09/01/2011 645 714
Aztar Corporation
8.88%, due 05/15/2007 1,275 1,331
9.00%, due 08/15/2011 660 724
Hollywood Park Inc.
9.25%, due 02/15/2007 235 243
Mandalay Resort Group (b)
9.38%, due 02/15/2010 1,700 1,981
MGM MIRAGE
8.50%, due 09/15/2010 765 878
Principal Value
------------------------- ---------------
Amusement & Recreation Services (continued)
MGM MIRAGE (b)
8.38%, due 02/01/2011 $ 1,790 $ 2,027
Pinnacle Entertainment, Inc. (b)
8.75%, due 10/01/2013 2,905 2,956
Premier Parks Inc. (b)
9.75%, due 06/15/2007 201 211
Six Flags, Inc. (b)
9.75%, due 04/15/2013 3,150 3,315
Six Flags, Inc.-144A
9.63%, due 06/01/2014 1,030 1,076
Station Casinos, Inc.
9.88%, due 07/01/2010 165 182
Vail Resorts, Inc.
8.75%, due 05/15/2009 390 411
Vail Resorts, Inc.-144A
8.75%, due 05/15/2009 1,150 1,213
Apparel & Accessory Stores (0.4%)
J. Crew Intermediate LLC (g)
0.00%, due 05/15/2008 1,268 1,008
J. Crew Operating Corp. (b)
10.38%, due 10/15/2007 1,540 1,573
Apparel Products (0.3%)
Oxford Industries, Inc.-144A
8.88%, due 06/01/2011 1,005 1,099
WestPoint Stevens Inc. (b)(e)
7.88%, due 06/15/2005 5,060 658
7.88%, due 06/15/2008 1,220 159
Automotive (2.5%)
Advanced Accessory Systems, LLC -144A
10.75%, due 06/15/2011 485 534
ArvinMeritor, Inc.
8.75%, due 03/01/2012 1,950 2,233
Dana Corporation
6.50%, due 03/01/2009 500 531
10.13%, due 03/15/2010 1,045 1,217
9.00%, due 08/15/2011 720 868
Dura Operating Corporation (b)
9.00%, due 05/01/2009 1,525 1,525
Eagle-Picher, Inc.-144A
9.75%, due 09/01/2013 915 988
Metaldyne Corporation
11.00%, due 06/15/2012 2,065 1,900
Metaldyne Corporation-144A
10.00%, due 11/01/2013 1,025 1,035
Navistar International Corporation
9.38%, due 06/01/2006 805 889
Tenneco Automotive Inc.
11.63%, due 10/15/2009 1,330 1,436
10.25%, due 07/15/2013 1,795 2,042
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 3
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Automotive (continued)
Tenneco Automotive Inc.-144A
10.25%, due 07/15/2013 $ 1,130 $ 1,285
Venture Holdings Trust (e)
9.50%, due 07/01/2005 180 5
Beverages (0.3%)
Merisant Company-144A
9.50%, due 07/15/2013 2,070 2,205
Business Credit Institutions (1.0%)
eircom Funding
8.25%, due 08/15/2013 835 925
Ford Motor Credit Company
7.00%, due 10/01/2013 3,118 3,288
PCA LLC (PCA Finance Corp.)
11.88%, due 08/01/2009 1,910 2,091
Business Services (2.6%)
Hanover Compressor Company
0.00%, due 03/31/2007 285 209
8.63%, due 12/15/2010 460 478
Hanover Equipment Trust 2001B
8.75%, due 09/01/2011 2,305 2,443
Lamar Media Corp.
7.25%, due 01/01/2013 2,905 3,123
Muzak LLC (Muzak Finance
Corporation)-144A
10.00%, due 02/15/2009 2,045 2,178
NDCHealth Corporation
10.50%, due 12/01/2012 355 399
R.H. Donnelley Financial Corporation I
8.88%, due 12/15/2010 945 1,063
10.88%, due 12/15/2012 (b) 850 1,008
R.H. Donnelley Financial
Corporation I-144A
10.88%, due 12/15/2012 220 261
United Rentals, Inc.
10.75%, due 04/15/2008 3,210 3,611
Williams Scotsman, Inc.
9.88%, due 06/01/2007 1,755 1,777
10.00%, due 08/15/2008 560 614
Chemicals & Allied Products (4.7%)
Acetex Corporation
10.88%, due 08/01/2009 2,815 3,125
Compass Minerals Group, Inc.
10.00%, due 08/15/2011 420 470
Equistar Chemicals, LP
10.63%, due 05/01/2011 3,085 3,409
Equistar Chemicals, LP-144A
10.63%, due 05/01/2011 780 862
Principal Value
------------------------- ---------------
Chemicals & Allied Products (continued)
Huntsman ICI Chemicals LLC
9.88%, due 03/01/2009 $ 2,040 $ 2,234
10.13%, due 07/01/2009 (b) 3,315 3,414
IMC Global Inc.-144A (b)
10.88%, due 08/01/2013 2,290 2,508
JohnsonDiversey, Inc.
9.63%, due 05/15/2012 4,545 5,074
JohnsonDiversey, Inc.-144A (h)
0.00%, due 05/15/2013 1,520 1,163
Lyondell Chemical Company
9.88%, due 05/01/2007 180 190
9.50%, due 12/15/2008 160 167
11.13%, due 07/15/2012 465 516
Nalco Company-144A
7.75%, due 11/15/2011 675 722
8.88%, due 11/15/2013 1,265 1,341
Noveon, Inc.
11.00%, due 02/28/2011 50 58
Resolution Performance Products LLC-144A
8.00%, due 12/15/2009 630 652
Revlon Consumer Products
Corporation
12.00%, due 12/01/2005 745 745
Rhodia SA-144A (b)
8.88%, due 06/01/2011 2,930 2,696
Rockwood Specialties, Inc.-144A
10.63%, due 05/15/2011 1,400 1,561
Sovereign Specialty Chemicals, Inc.
11.88%, due 03/15/2010 80 80
Sterling Chemicals, Inc. (a)(m)
0.00%, due 08/15/2006 (b) 40 (d)
11.25%, due 04/01/2007 50 (d)
Commercial Banks (0.0%)
ASPropulsion Capital BV-144A
9.63%, due 10/01/2013 150 199
Communication (6.3%)
American Tower Corporation (b)
9.38%, due 02/01/2009 750 799
Charter Communications
Holdings LLC (b)
8.25%, due 04/01/2007 415 390
8.63%, due 04/01/2009 10,555 9,209
Charter Communications
Holdings LLC-144A
8.75%, due 11/15/2013 950 967
Colt Telecom Group PLC
7.63%, due 12/15/2009 600 757
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 4
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Communication (continued)
Crown Castle International
Corp.-144A
7.50%, due 12/01/2013 $ 1,985 $ 1,995
CSC Holdings, Inc.
8.13%, due 07/15/2009 1,000 1,075
CSC Holdings, Inc.-Series M
8.13%, due 08/15/2009 7,395 7,950
DIRECTTV Holdings Finance
8.38%, due 03/15/2013 1,940 2,250
Echostar DBS Corporation
9.38%, due 02/01/2009 1,960 2,060
Innova S. de R.L.-144A (b)
9.38%, due 09/19/2013 1,650 1,693
Insight Midwest LP (b)
9.75%, due 10/01/2009 2,150 2,274
Mediacom Broadband LLC (b)
11.00%, due 07/15/2013 3,135 3,519
Mediacom LLC
9.50%, due 01/15/2013 670 710
Renaissance Media Group LLC
10.00%, due 04/15/2008 945 977
Telenet Communication NV-144A
9.00%, due 12/15/2013 1,280 1,663
Telewest Communications PLC
0.00%, due 04/15/2009 (j) 255 133
0.00%, due 02/01/2010 15 7
XM Satellite Radio Holdings Inc.
0.00%, due 12/31/2009 (k) 590 527
12.00%, due 06/15/2010 2,540 2,870
Communications Equipment (1.7%)
Alamosa (Delaware), Inc.
0.00%, due 07/31/2009 (f) 152 137
11.00%, due 07/31/2010 1,657 1,798
American Towers, Inc.-144A
7.25%, due 12/01/2011 2,500 2,544
CC V Holdings Finance, Inc.
11.88%, due 12/01/2008 662 698
L-3 Communications Corporation
7.63%, due 06/15/2012 2,600 2,818
L-3 Communications
Corporation-Series B
8.00%, due 08/01/2008 50 52
Lucent Technologies Inc. (b)
5.50%, due 11/15/2008 3,470 3,227
Computer & Data Processing Services (0.6%)
Kronos Incorporated
8.88%, due 06/30/2009 100 136
Unisys Corporation
8.13%, due 06/01/2006 3,435 3,710
Principal Value
------------------------- ---------------
Computer & Office Equipment (0.7%)
General Binding Corporation
9.38%, due 06/01/2008 $ 1,305 $ 1,318
Xerox Corporation
7.63%, due 06/15/2013 2,995 3,235
Construction (1.0%)
D.R. Horton, Inc.
8.00%, due 02/01/2009 2,550 2,882
Technical Olympic USA, Inc.
9.00%, due 07/01/2010 650 699
WCI Communities, Inc.-144A
7.88%, due 10/01/2013 3,000 3,165
Department Stores (0.2%)
Saks Incorporated-144A
7.00%, due 12/01/2013 1,514 1,544
Drug Stores & Proprietary Stores (1.0%)
Rite Aid Corporation
12.50%, due 09/15/2006 755 876
9.50%, due 02/15/2011 1,585 1,787
9.25%, due 06/01/2013 (b) 3,885 4,263
Electric Services (5.5%)
AES Corporation (The)-144A
8.75%, due 05/15/2013 3,000 3,353
9.00%, due 05/15/2015 1,600 1,808
10.00%, due 07/15/2005 (b) 435 443
8.88%, due 02/15/2011 (b) 2,900 3,161
Allegheny Energy Supply Company,
LLC-144A (b)
8.75%, due 04/15/2012 2,000 1,885
Calpine Corporation (b)
8.50%, due 02/15/2011 3,060 2,421
Calpine Corporation-144A (b)
8.75%, due 07/15/2013 3,445 3,359
CenterPoint Energy Resources
Corp.-144A
7.88%, due 04/01/2013 2,330 2,638
Dynegy Holdings Inc.-144A
9.88%, due 07/15/2010 2,475 2,784
Empresa Nacional de Electricidad SA
8.35%, due 08/01/2013 1,700 1,911
Illinova Corporation
11.50%, due 12/15/2010 860 1,032
MSW Energy Holdings LLC-144A
7.38%, due 09/01/2010 1,200 1,254
NRG Energy, Inc.-144A
8.00%, due 12/15/2013 930 978
PSEG Energy Holdings Inc.
8.63%, due 02/15/2008 800 873
PSEG Energy Holdings LLC
7.75%, due 04/16/2007 2,035 2,160
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 5
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Electric Services (continued)
Reliant Resources, Inc.-144A
9.25%, due 07/15/2010 $ 1,870 $ 1,982
9.50%, due 07/15/2013 1,270 1,359
TECO Energy, Inc.
10.50%, due 12/01/2007 635 741
7.50%, due 06/15/2010 2,050 2,194
Electric, Gas & Sanitary Services (0.8%)
CMS Energy Corporation (b)
8.50%, due 04/15/2011 3,300 3,564
PG&E Corporation-144A
6.88%, due 07/15/2008 410 444
Vivendi Universal SA-144A
6.25%, due 07/15/2008 925 979
Electronic & Other Electric Equipment (0.3%)
Motors and Gears, Inc.
10.75%, due 11/15/2006 2,105 1,789
Electronic Components & Accessories (0.7%)
Flextronics International Ltd. (b)
6.50%, due 05/15/2013 1,395 1,444
Tyco International Group SA
6.75%, due 02/15/2011 2,900 3,168
Environmental Services (1.3%)
Allied Waste North America, Inc.
8.88%, due 04/01/2008 1,875 2,100
7.88%, due 04/15/2013 (b) 4,895 5,299
Allied Waste North America, Inc.-144A (b)
6.50%, due 11/15/2010 1,340 1,374
Fabricated Metal Products (1.7%)
Alliant Techsystems, Inc.
8.50%, due 05/15/2011 160 176
Atrium Companies, Inc.
10.50%, due 05/01/2009 2,060 2,204
Atrium Companies, Inc.-144A
10.50%, due 05/01/2009 900 963
Blount, Inc.
7.00%, due 06/15/2005 2,985 3,000
13.00%, due 08/01/2009 1,275 1,374
Jacuzzi Brands, Inc.-144A
9.63%, due 07/01/2010 1,595 1,755
TriMas Corporation
9.88%, due 06/15/2012 1,830 1,908
Food & Kindred Products (1.0%)
Burns, Philp & Company
Limited-144A
9.75%, due 07/15/2012 3,100 3,317
Michael Foods, Inc.-144A
8.00%, due 11/15/2013 1,405 1,465
Principal Value
------------------------- ---------------
Food & Kindred Products (continued)
Premier International Foods PLC
12.00%, due 09/01/2009 $ 670 $ 734
United Biscuits Finance PLC
10.63%, due 04/15/2011 900 1,299
Furniture & Fixtures (1.3%)
BE Aerospace, Inc. (b)
8.88%, due 05/01/2011 1,300 1,219
BE Aerospace, Inc.-144A
8.50%, due 10/01/2010 320 343
Sealy Mattress Company (b)
9.88%, due 12/15/2007 5,250 5,434
Tempur-Pedic, Inc. (Tempur
Production USA Inc) -144A
10.25%, due 08/15/2010 1,695 1,890
Gas Production & Distribution (3.0%)
ANR Pipeline Company
8.88%, due 03/15/2010 1,520 1,710
9.63%, due 11/01/2021 1,600 1,902
El Paso Natural Gas Company
7.63%, due 08/01/2010 2,955 3,036
Northwest Pipeline Corporation
8.13%, due 03/01/2010 330 366
Southern Natural Gas Company
8.88%, due 03/15/2010 2,165 2,436
Williams Companies, Inc. (The)
8.63%, due 06/01/2010 730 819
7.13%, due 09/01/2011 (b) 9,385 9,925
Health Services (3.4%)
Alliance Imaging, Inc. (b)
10.38%, due 04/15/2011 2,700 2,862
Beverly Enterprises, Inc. (b)
9.63%, due 04/15/2009 1,920 2,117
Genesis HealthCare Corporation-144A
8.00%, due 10/15/2013 280 292
HCA Inc.
7.88%, due 02/01/2011 7,860 8,964
Insight Health Services Corp. (b)
9.88%, due 11/01/2011 1,675 1,776
Mariner Health Care, Inc.-144A
8.25%, due 12/15/2013 1,555 1,571
Prime Medical Services, Inc.
8.75%, due 04/01/2008 40 39
Tenet Healthcare Corporation
6.50%, due 06/01/2012 1,825 1,750
Triad Hospitals, Inc.
8.75%, due 05/01/2009 710 769
Triad Hospitals, Inc.-144A
7.00%, due 11/15/2013 2,075 2,091
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 6
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Holding & Other Investment Offices (0.4%)
Arch Western Finance LLC-144A
6.75%, due 07/01/2013 $ 1,340 $ 1,377
Corrections Corporation of America
9.88%, due 05/01/2009 315 352
7.50%, due 05/01/2011 440 462
Corrections Corporation of
America-144A
7.50%, due 05/01/2011 610 641
Hotels & Other Lodging Places (2.4%)
Coast Hotels & Casinos, Inc.
9.50%, due 04/01/2009 1,560 1,650
Hilton Hotels Corporation
7.63%, due 12/01/2012 5,240 5,888
HMH Properties, Inc.
8.45%, due 12/01/2008 2,490 2,596
Las Vegas Sands, Inc. (Venetian Casino
Resort LLC)
11.00%, due 06/15/2010 1,300 1,508
Park Place Entertainment Corporation
8.88%, due 09/15/2008 70 79
8.13%, due 05/15/2011 (b) 2,450 2,747
Starwood Hotels & Resorts Worldwide, Inc.
7.88%, due 05/01/2012 1,350 1,519
Industrial Machinery & Equipment (4.1%)
AGCO Corporation
8.50%, due 03/15/2006 1,000 1,000
9.50%, due 05/01/2008 1,530 1,675
American Standard Companies Inc.
7.38%, due 02/01/2008 1,260 1,392
AMSTED Industries Incorporated- 144A
10.25%, due 10/15/2011 1,845 2,039
Case New Holland, Inc. -144A
9.25%, due 08/01/2011 1,635 1,831
CNH New Holland, Inc.-144A
9.25%, due 08/01/2011 1,115 1,249
Columbus McKinnon Corporation
8.50%, due 04/01/2008 40 37
10.00%, due 08/01/2010 1,630 1,736
Cummins Inc.-144A (b)
9.50%, due 12/01/2010 2,130 2,450
Gulfmark Offshore, Inc.
8.75%, due 06/01/2008 1,925 1,992
JLG Industries, Inc.
8.25%, due 05/01/2008 2,630 2,857
Joy Global Inc.
8.75%, due 03/15/2012 235 262
Manitowoc Company, Inc. (The)
10.38%, due 05/15/2011 120 168
10.50%, due 08/01/2012 1,880 2,141
Principal Value
------------------------- ---------------
Industrial Machinery & Equipment (continued)
Rexnord Corporation
10.13%, due 12/15/2012 $ 1,280 $ 1,402
SPX Corporation
7.50%, due 01/01/2013 1,390 1,512
Terex Corporation (b)
10.38%, due 04/01/2011 2,855 3,198
Instruments & Related Products (0.1%)
Dresser, Inc.
9.38%, due 04/15/2011 900 979
Insurance (0.2%)
Willis Corroon Corporation
9.00%, due 02/01/2009 1,080 1,134
Leather & Leather Products (0.2%)
Samsonite Corporation
10.75%, due 06/15/2008 1,585 1,640
Lumber & Wood Products (2.0%)
Georgia-Pacific Corporation
9.38%, due 02/01/2013 7,140 8,211
Koppers Inc. -144A
9.88%, due 10/15/2013 425 469
Nortek, Inc.
9.25%, due 03/15/2007 3,775 3,878
8.88%, due 08/01/2008 175 183
9.88%, due 06/15/2011 240 265
Management Services (0.1%)
Wackenhut Corrections
Corporation-144A
8.25%, due 07/15/2013 760 806
Manufacturing Industries (0.8%)
Remington Arms Company, Inc.
10.50%, due 02/01/2011 3,370 3,589
TD Funding Corporation
8.38%, due 07/15/2011 1,300 1,383
Metal Cans & Shipping Containers (1.3%)
Crown European Holdings SA
9.50%, due 03/01/2011 3,760 4,257
10.88%, due 03/01/2013 3,815 4,486
Mining (0.3%)
Peabody Energy Corporation
6.88%, due 03/15/2013 1,850 1,952
Motion Pictures (1.2%)
AMC Entertainment, Inc.
9.50%, due 02/01/2011 3,475 3,649
Regal Cinemas, Inc.
9.38%, due 02/01/2012 2,715 3,068
Vivendi Universal-144A
9.25%, due 04/15/2010 1,055 1,250
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 7
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Motor Vehicles, Parts & Supplies (0.5%)
TRW Automotive Inc.
9.38%, due 02/15/2013 $ 1,480 $ 1,691
11.00%, due 02/15/2013 (b) 1,115 1,313
Oil & Gas Extraction (2.8%)
Belden & Blake Corporation
9.88%, due 06/15/2007 265 261
Chesapeake Energy Corporation
8.13%, due 04/01/2011 2,665 2,958
Chesapeake Energy Corporation-144A (b)
6.88%, due 01/15/2016 1,000 1,030
Dynegy Inc. (b)
6.88%, due 04/01/2011 3,620 3,335
Encore Acquisition Company
8.38%, due 06/15/2012 930 1,007
Gulfterra Energy Partner, L.P.
8.50%, due 06/01/2010 1,811 2,055
Magnum Hunter Resources, Inc.
9.60%, due 03/15/2012 795 902
OAO Gazprom-144A
9.63%, due 03/01/2013 1,310 1,444
Ocean Rig ASA
10.25%, due 06/01/2008 1,515 1,424
Parker Drilling Company-144A
9.63%, due 10/01/2013 480 499
Pioneer Natural Resources Company
9.63%, due 04/01/2010 55 68
7.50%, due 04/15/2012 930 1,069
SESI, LLC
8.88%, due 05/15/2011 95 104
Stone Energy Corporation
8.25%, due 12/15/2011 60 65
Vintage Petroleum, Inc.
8.25%, due 05/01/2012 580 631
Westport Resources Corporation
8.25%, due 11/01/2011 1,150 1,265
Westport Resources Corporation-144A
8.25%, due 11/04/2011 615 677
Paper & Allied Products (3.4%)
Abitibi-Consolidated Inc.
8.55%, due 08/01/2010 4,115 4,581
Appleton Papers, Inc.
12.50%, due 12/15/2008 535 605
Buckeye Technologies, Inc.
8.00%, due 10/15/2010 650 637
8.50%, due 10/01/2013 1,745 1,867
Corporacion Durango, SA de CV-144A (e)
13.75%, due 07/15/2009 720 432
Fibermark, Inc. (b)
10.75%, due 04/15/2011 2,480 1,538
Principal Value
------------------------- ---------------
Paper & Allied Products (continued)
Graphic Packaging Corporation-144A
8.50%, due 08/15/2011 $ 570 $ 624
9.50%, due 08/15/2013 2,940 3,249
Huntsman Packaging Corporation
13.00%, due 06/01/2010 1,505 1,377
Mail-Well I Corporation
9.63%, due 03/15/2012 2,190 2,431
Norske Skog Canada Limited
8.63%, due 06/15/2011 2,385 2,504
Pliant Corporation
13.00%, due 06/01/2010 1,310 1,199
Smurfit-Stone Container Corporation
8.25%, due 10/01/2012 1,135 1,231
Paper & Paper Products (0.8%)
Boise Cascade Corporation
7.00%, due 11/01/2013 1,970 2,048
MDP Acquisitions PLC
9.63%, due 10/01/2012 2,620 2,934
Paperboard Containers & Boxes (0.3%)
Greif Bros. Corporation
8.88%, due 08/01/2012 845 930
Kappa Beheer BV
10.63%, due 07/15/2009 1,195 1,279
Petroleum & Petroleum Products (0.3%)
Barrett Resources Corporation
7.55%, due 02/01/2007 2,120 2,268
Petroleum Refining (0.6%)
CITGO Petroleum Corporation
11.38%, due 02/01/2011 1,075 1,247
Premcor Refining Group Inc.
(The)-144A (b)
7.75%, due 02/01/2012 790 814
Tesoro Petroleum Corporation
8.00%, due 04/15/2008 1,505 1,599
Pharmaceuticals (0.4%)
Alpharma Inc.-144A
8.63%, due 05/01/2011 1,480 1,499
AmerisourceBergen Corporation
7.25%, due 11/15/2012 790 851
Primary Metal Industries (0.7%)
Commonwealth Industries, Inc.
10.75%, due 10/01/2006 735 750
Kaiser Aluminum & Chemical
Corporation (e)
9.88%, due 02/15/2049 80 72
MMI Products, Inc.
11.25%, due 04/15/2007 550 448
Russell Metals, Inc.
10.00%, due 06/01/2009 55 58
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 8
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Primary Metal Industries (continued)
Steel Dynamics, Inc.
9.50%, due 03/15/2009 $ 1,600 $ 1,776
United States Steel Corporation
9.75%, due 05/15/2010 1,440 1,620
Printing & Publishing (2.8%)
Dex Media, Inc.-144A
8.00%, due 11/15/2013 1,800 1,890
Dex Media East LLC (Dex Media
Finance Co.)
9.88%, due 11/15/2009 2,730 3,126
Dex Media West LLC (Dex Media
Finance Co.)-144A
8.50%, due 08/15/2010 230 256
9.88%, due 08/15/2013 2,600 3,023
Hollinger Inc.-144A
11.88%, due 03/01/2011 655 711
Hollinger International Publishing
Inc.-144A
9.00%, due 12/15/2010 2,000 2,125
MediaNews Group, Inc.-144A
6.88%, due 10/01/2013 1,900 1,933
Moore North America Finance,
Inc.-144A
7.88%, due 01/15/2011 845 957
Primedia Inc.
8.88%, due 05/15/2011 1,280 1,350
Primedia Inc.-144A
8.00%, due 05/15/2013 2,000 2,040
TransWestern Publishing Company LLC
9.63%, due 11/15/2007 950 983
Radio & Television Broadcasting (3.4%)
Allbritton Communications Company
7.75%, due 12/15/2012 3,170 3,289
CanWest Media Inc.
10.63%, due 05/15/2011 805 920
7.63%, due 04/15/2013 495 542
Emmis Communications Corporation (l)
0.00%, due 03/15/2011 2,606 2,414
Granite Broadcasting Corporation
10.38%, due 05/15/2005 939 940
Granite Broadcasting
Corporation-144A (b)
9.75%, due 12/01/2010 3,230 3,222
Paxson Communications Corporation
10.75%, due 07/15/2008 (b) 850 928
0.00%, due 01/15/2009 (i) 2,525 2,216
Radio One, Inc.
8.88%, due 07/01/2011 800 882
Spanish Broadcasting System, Inc.
9.63%, due 11/01/2009 3,485 3,719
Principal Value
------------------------- ---------------
Radio & Television Broadcasting (continued)
Videotron Ltee-144A
6.88%, due 01/15/2014 $ 2,355 $ 2,432
Young Broadcasting Inc.
8.50%, due 12/15/2008 1,215 1,306
Railroads (0.2%)
Kansas City Southern
7.50%, due 06/15/2009 1,105 1,133
TFM, S.A. de C.V.
12.50%, due 06/15/2012 394 449
Real Estate (0.3%)
CBRE Escrow, Inc.-144A
9.75%, due 05/15/2010 1,620 1,798
Forest City Enterprises, Inc.
7.63%, due 06/01/2015 230 244
Retail Trade (1.4%)
Alimentation Couche-Tard Inc.-144A
7.50%, due 12/15/2013 455 477
AmeriGas Partners, L.P.
8.88%, due 05/20/2011 1,810 1,991
Cole National Group
8.88%, due 05/15/2012 1,885 2,017
Cole National Group, Inc.
8.63%, due 08/15/2007 1,485 1,515
Finlay Enterprises, Inc.
9.00%, due 05/01/2008 1,875 1,920
Finlay Fine Jewelry Corporation
8.38%, due 05/01/2008 1,322 1,368
Rubber & Misc. Plastic Products (0.8%)
Foamex L.P. (Foamex Capital Corporation)
10.75%, due 04/01/2009 1,780 1,695
Formica Corporation (e)
10.88%, due 03/01/2009 100 18
Graham Packaging Holdings Company
(GPC Capital Corp.)-144A
8.75%, due 01/15/2008 2,200 2,250
Plastipak Holdings, Inc.
10.75%, due 09/01/2011 980 1,090
Social Services (0.5%)
Kindercare Learning Centers, Inc.
9.50%, due 02/15/2009 3,485 3,537
Stone, Clay & Glass Products (2.0%)
Hexcel Corporation
9.88%, due 10/01/2008 470 530
9.75%, due 01/15/2009 (b) 2,820 2,954
Owens-Brockway Glass Container Inc.
8.88%, due 02/15/2009 3,230 3,541
8.75%, due 11/15/2012 2,300 2,562
8.25%, due 05/15/2013 3,120 3,350
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 9
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
------------------------- --------------
Telecommunications (8.0%)
Centennial Communications Corp.
10.75%, due 12/15/2008 (b) $ 175 $ 185
10.13%, due 06/15/2013 2,565 2,815
Cincinnati Bell Inc.-144A
7.25%, due 07/15/2013 1,230 1,292
8.38%, due 01/15/2014 710 763
Dobson Communications
Corporation-144A (b)
8.88%, due 10/01/2013 2,970 3,007
Energis PLC (e)
0.00%, due 06/15/2009 70 1
Esprit Telecom Group PLC
10.88%, due 06/15/2008 15 (d)
FairPoint Communications, Inc.
11.88%, due 03/01/2010 625 728
Millicom International Cellular-Series 144A
10.00%, due 12/01/2013 1,255 1,324
Nextel Communications, Inc.
7.38%, due 08/01/2015 8,515 9,154
Qwest Capital Funding, Inc. (b)
7.25%, due 02/15/2011 5,000 4,924
Qwest Corporation-144A
13.50%, due 12/15/2010 7,555 9,179
9.13%, due 03/15/2012 2,800 3,213
Rural Cellular Corporation (b)
9.75%, due 01/15/2010 1,770 1,730
9.88%, due 02/01/2010 2,255 2,402
Time Warner Telecom Inc. (b)
10.13%, due 02/01/2011 2,000 2,130
Triton PCS, Inc.
8.75%, due 11/15/2011 (b) 1,935 1,906
8.50%, due 06/01/2013 1,365 1,467
Western Wireless Corporation-Class A
9.25%, due 07/15/2013 2,900 3,060
WorldCom, Inc.
7.50%, due 05/15/2011 9,775 3,275
Textile Mill Products (0.6%)
Collins and Aikman Products
10.75%, due 12/31/2011 2,092 2,055
Interface, Inc. (b)
10.38%, due 02/01/2010 1,763 1,864
Transportation & Public Utilities (0.8%)
El Paso Production Holding Co.-144A
7.75%, due 06/01/2013 4,105 4,042
Plains All American Pipeline, L.P.
7.75%, due 10/15/2012 1,105 1,275
Transportation Equipment (0.1%)
Bombardier Recreational Products-144A
8.38%, due 12/15/2013 760 794
Principal Value
------------------------- --------------
Trucking & Warehousing (0.5%)
Iron Mountain Incorporated
8.63%, due 04/01/2013 $ 1,585 $ 1,712
7.75%, due 01/15/2015 1,770 1,854
Variety Stores (0.1%)
Dollar General Corporation
8.63%, due 06/15/2010 390 438
Wholesale Trade Durable Goods (0.5%)
Fisher Scientific International Inc.
8.13%, due 05/01/2012 3,075 3,298
Jorgensen (Earle M.) Company
9.75%, due 06/01/2012 175 194
Wholesale Trade Nondurable Goods (0.5%)
Pinnacle Foods, Inc.-144A
8.25%, due 12/01/2013 310 321
Roundy's, Inc.
8.88%, due 06/15/2012 2,890 3,085
---------
Total Corporate Debt Securities (cost: $565,771)
604,335
---------
CONVERTIBLE BONDS (0.1%)
Communication (0.0%)
CSC Holdings, Inc.
11.13%, due 04/01/2008 173 182
Telecommunications (0.1%)
Jazztel PLC (e)
12.00%, due 10/30/2012 9 6
Nextel Communications, Inc.
5.25%, due 01/15/2010 400 406
---------
Total Convertible Bonds (cost: $629)
594
---------
Shares Value
-------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.1%)
Communications Equipment (0.1%)
Alamosa PCS Holdings, Inc. 2,742 $ 946
---------
Total Convertible Preferred Stocks (cost: $0) 946
---------
PREFERRED STOCKS (0.0%)
Automotive (0.0%)
Hayes Lemmerz International, Inc. 12 1
Printing & Publishing (0.0%)
Primedia Inc.-Series H 1,400 127
Telecommunications (0.0%)
NTL Europe, Inc. 2 (d)
---------
Total Preferred Stocks (cost: $127) 128
--------
COMMON STOCKS (0.0%)
Automotive (0.0%)
Hayes Lemmerz International, Inc. (a) 3,536 64
Hayes Lemmerz International, Inc. (a) 80,000 (d)
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 10
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- --------------
Chemicals & Allied Products (0.0%)
Sterling Chemicals, Inc.-warrants, (a)(m)
Expires 12/31/2008 183 $ (d)
Sterling Chemicals, Inc. (a) 113 3
Communication (0.0%)
XM Satellite Radio Inc.-warrants,
Expires 03/15/2010 65 1
Fabricated Metal Products (0.0%)
Oxford Automotive, Inc. (a) 21 5
Industrial Machinery & Equipment (0.0%)
Simonds Industries, Inc. (a) 206 1
Thermadyne Holdings
Corporation-Series A-warrants,
Expires 05/23/2004 279 (d)
Thermadyne Holdings
Corporation-Series B-warrants,
Expires 05/23/2006 169 (d)
Thermadyne Holdings Corporation (a) 177 2
Paper & Allied Products (0.0%)
Pliant Corporation-warrants, Expires
06/01/2010 40 (d)
Telecommunications (0.0%)
Allstream Inc.-Class A 4 (d)
Allstream Inc.-Class B 215 12
CompleTel Europe NV (a) 642 23
GT Group Telecom Inc.-warrants,
Expires 02/01/2010 200 (d)
ITC DeltaCom, Inc. (a) 3,475 21
Jazztel PLC (a) 28,006 12
NTL Incorporated (a) 1,521 106
VersaTel Telecom International NV (a) 972 2
-------
Total Common Stocks (cost: $499) 252
-------
Principal Value
------------------------- ---------------
SECURITY LENDING COLLATERAL (17.8%)
Debt (14.2%)
Bank Notes (0.7%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 553 $ 553
Fleet National Bank
1.00%, due 01/21/2004 2,075 2,075
National Bank of Commerce
1.19%, due 04/21/2004 1,729 1,729
Commercial Paper (3.6%)
Compass Securitization-144A
1.08%, due 01/22/2004 1,037 1,037
Delaware Funding Corporation
1.08%, due 01/07/2004 689 689
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 1,037 1,037
Principal Value
------------------------- ---------------
Commercial Paper (continued)
1.09%, due 01/13/2004 $ 692 $ 692
1.08%, due 02/05/2004 1,380 1,380
General Electric Capital Corporation
1.09%, due 01/08/2004 1,724 1,724
1.09%, due 01/09/2004 1,037 1,037
1.08%, due 01/16/2004 1,377 1,377
Govco Incorporated-144A
1.07%, due 02/05/2004 1,727 1,727
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,726 1,726
1.09%, due 02/06/2004 1,726 1,726
1.10%, due 02/09/2004 1,008 1,008
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,726 1,726
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 1,037 1,037
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 2,004 2,004
1.08%, due 02/17/2004 3,451 3,451
Sheffield Receivables-144A
1.09%, due 01/21/2004 692 692
Euro Dollar Overnight (0.7%)
BNP Paribas SA
0.97%, due 01/07/2004 3,458 3,458
Credit Agricole Indosuez
0.98%, due 01/02/2004 138 138
1.08%, due 01/06/2004 1,314 1,314
Euro Dollar Terms (3.5%)
Bank of Montreal
1.06%, due 01/15/2004 675 675
1.06%, due 02/17/2004 1,383 1,383
Bank of Scotland
1.06%, due 04/02/2004 1,037 1,037
Citigroup Inc.
1.10%, due 01/22/2004 1,037 1,037
1.09%, due 02/06/2004 1,383 1,383
Credit Agricole Indosuez
1.08%, due 01/28/2004 692 692
Den Danske Bank
1.08%, due 01/20/2004 3,458 3,458
1.02%, due 01/30/2004 1,729 1,729
Royal Bank of Canada
1.05%, due 02/27/2004 3,458 3,458
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 2,075 2,075
1.08%, due 01/15/2004 692 692
1.08%, due 01/20/2004 346 346
Svenska Handelsbanken AB
1.09%, due 01/15/2004 346 346
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 11
MFS High Yield
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Euro Dollar Terms (continued)
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 $ 2,075 $ 2,075
Wells Fargo & Company
1.04%, due 01/30/2004 2,766 2,766
Master Notes (1.0%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,383 1,383
1.14%, due 09/08/2004 2,075 2,075
Morgan Stanley
1.05%, due 06/21/2004 3,319 3,318
Medium Term Notes (0.7%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 3,458 3,457
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 1,037 1,037
Repurchase Agreements (4.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $8,091 on 01/02/2004 8,091 8,091
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $10,995 on 01/02/2004 10,995 10,995
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $6,569 on 01/02/2004 6,569 6,569
Shares Value
---------------- ------------
Investment Companies (3.6%)
Money Market Funds (3.6%)
American AAdvantage Select Fund
1-day yield 1.00% 1,696,040 $ 1,696
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 4,141,008 4,141
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 18,006,471 18,006
---------
Total Security Lending Collateral (cost: $117,257) 117,257
---------
Total Investment Securities (cost: $690,808) $ 730,218
=========
SUMMARY:
Investments, at value 110.3 % $ 730,218
Liabilities in excess of other assets (10.3)% (67,922)
---------- ---------
Net assets 100.0 % $ 662,296
========== =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- -------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- ------------- -------- ------------ --------------- ---------------
Euro Dollar (195) 01/13/2004 $ (228) $ (18)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$114,380.
(c) Cash collateral for the Repurchase Agreements, valued at $26,168, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
(d) Value is less than $1.
(e) Securities are currently in default on interest payments.
(f) Securities are stepbonds. Alamosa (Delaware), Inc. has a coupon rate 0.00%
until 07/31/2005, thereafter the coupon rate will be 12.00%.
(g) Securities are stepbonds. J. Crew Intermediate LLC has a coupon rate 0.00%
until 11/15/2005, thereafter the coupon rate will be 16.00%.
(h) Securities are stepbonds. JohnsonDiversey, Inc.has a coupon rate 0.00%
until 05/15/2007, thereafter the coupon rate will be 10.67%.
(i) Securities are stepbonds. Paxson Communications Corporation has a coupon
rate 0.00% until 01/15/2006, thereafter the coupon rate will be 12.25%.
(j) Securities are stepbonds. Telewest Communications PLC has a coupon rate
0.00% until 04/15/2004, thereafter the coupon rate will be 9.25%.
(k) Securities are stepbonds. XM Satellite Radio Holdings Inc. has a coupon
rate 0.00% until 12/31/2005, thereafter the coupon rate will be 14.00%.
(l) Securities are stepbonds. Emmis Communications Corporation has a coupon
rate 0.00% until 03/15/2006, thereafter the coupon rate will be 12.50%.
(m) Security value is determined in good faith in accordance with procedures by
the Fund's Board of Directors. Securities are illiquid.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $148,475 or 22.42% of the net assets of
the fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 12
MFS High Yield
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $690,808)
(including $114,380 of securities loaned) $730,218
Cash 36,872
Foreign cash (cost: $6) 6
Receivables:
Interest 12,911
Dividends 3
Other 103
---------
780,113
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 452
Distribution fees 2
Payable for collateral for securities on loan 117,257
Unrealized depreciation on forward foreign
currency contracts 18
Other 88
---------
117,817
---------
Net Assets $662,296
=========
Net Assets Consist of:
Capital stock, 150,000 shares authorized ($.01 par value) $ 644
Additional paid-in capital 580,594
Undistributed net investment income (loss) 39,742
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 1,921
Net unrealized appreciation (depreciation) on:
Investment securities 39,410
Translation of assets and liabilities denominated in
foreign currencies (15)
---------
Net Assets $662,296
=========
Shares Outstanding:
Initial Class 64,292
Service Class 123
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.28
Service Class 10.37
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $43,690
Dividends 16
Income from loaned securities-net 229
-------
43,935
-------
Expenses:
Management and advisory fees 4,060
Transfer agent fees 2
Printing and shareholder reports 23
Custody fees 89
Administration fees 20
Legal fees 6
Auditing and accounting fees 12
Directors fees 18
Other 15
Service fees:
Service Class 2
-------
Total Expenses 4,247
-------
Net Investment Income (Loss) 39,688
-------
Net Realized Gain (Loss) from:
Investment securities 7,543
Foreign currency transactions (61)
-------
7,482
-------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 40,052
Translation of assets and liabilities denominated in
foreign currencies (7)
-------
40,045
-------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 47,527
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $87,215
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 13
MFS High Yield
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 39,688 $ 6,110
Net realized gain (loss) from
investment securities and foreign
currency transactions 7,482 (3,291)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 40,045 2,010
-------- ---------
87,215 4,829
-------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (6,088) (2,283)
Service Class (1) -
-------- ---------
(6,089) (2,283)
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 407,988 251,640
Service Class 6,089 -
-------- ---------
414,077 251,640
-------- ---------
Dividends and distributions reinvested:
Initial Class 6,088 2,283
Service Class 1 -
-------- ---------
6,089 2,283
-------- ---------
Cost of shares redeemed:
Initial Class (90,433) (32,929)
Service Class (4,934) -
-------- ---------
(95,367) (32,929)
-------- ---------
324,799 220,994
-------- ---------
Net increase (decrease) in net assets 405,925 223,540
-------- ---------
Net Assets:
Beginning of year 256,371 32,831
-------- ---------
End of year $662,296 $ 256,371
======== =========
Undistributed Net Investment
Income (Loss) $ 39,742 $ 6,083
======== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 44,087 28,846
Service Class 618 -
---------- ---------
44,705 28,846
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 657 271
Service Class - -
---------- ---------
657 271
---------- ---------
Shares redeemed:
Initial Class (9,513) (3,747)
Service Class (495) -
---------- ---------
(10,008) (3,747)
---------- ---------
Net increase (decrease) in shares
outstanding 35,354 25,370
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 14
MFS High Yield
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 8.83 $ 0.72 $ 0.83 $ 1.55
12/31/2002 8.90 0.60 (0.43) 0.17
12/31/2001 9.06 0.69 (0.34) 0.35
12/31/2000 10.09 0.68 (1.18) (0.50)
12/31/1999 9.69 0.47 0.09 0.56
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 9.48 0.50 0.42 0.92
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Year
------------ ---------- --------------- ------------
Initial Class $ (0.10) $ - $ (0.10) $ 10.28
(0.24) - (0.24) 8.83
(0.51) - (0.51) 8.90
(0.53) - (0.53) 9.06
(0.16) - (0.16) 10.09
- --------------- --------- --- --------- ---------
Service Class (0.03) - (0.03) 10.37
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 17.74% $ 661,026 0.81% 0.81% 7.58% 64%
12/31/2002 2.07 256,371 0.91 0.91 6.85 38
12/31/2001 3.78 32,831 1.10 1.12 7.57 50
12/31/2000 (5.18) 21,733 1.13 1.14 7.87 57
12/31/1999 5.82 20,015 1.22 1.27 7.07 77
- --------------- ---------- ----- --------- ---- ---- ---- --
Service Class 12/31/2003 9.74 1,270 1.03 1.03 7.45 64
- --------------- ---------- ----- --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-June 1, 1998
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 15
MFS High Yield
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. MFS High Yield ("the Fund"), part of ATSF, began operations as
Endeavor High Yield Portfolio, a part of the Endeavor Series Trust, on June 1,
1998. The Fund became part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as a
result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $98 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 16
MFS High Yield
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the assets allocation funds):
Net % of
Assets Net Assets
------------ -----------
Asset Allocation-Conservative
Portfolio $ 109,464 17%
Asset Allocation-Moderate Growth
Portfolio 126,194 19%
Asset Allocation-Moderate Portfolio 208,796 32%
Select+ Conservative 570 0%
Select+ Growth & Income 516 0%
--
68%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.775% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit implemented on January 1, 2003:
1.08% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 17
MFS High Yield
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
insurance companies for provid-ing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $23. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 646,949
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 303,815
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from GAAP. These
differences are primarily due to differing treatments for items including, but
not limited to, wash sales, foreign currency transactions, net operating losses
and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (4)
Undistributed net investment income (loss) 60
Undistributed net realized capital gains (loss) (56)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 2,283
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 6,089
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 42,778
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ -
========
Post October Currency Loss $ (20)
========
Post October Capital Loss $ (447)
========
Net Unrealized Appreciation (Depreciation) $ 39,038
========
The capital loss carryforward utilized during the period December 31, 2003, was
$4,612.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $691,180
========
Unrealized Appreciation $ 43,100
Unrealized (Depreciation) (4,062)
--------
Net Unrealized Appreciation (Depreciation) $ 39,038
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 18
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
MFS High Yield
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of MFS High Yield (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
MFS High Yield 19
Munder Net50
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Internet and technology stocks continued their strong performance from the
fourth quarter of 2002 into 2003. The fundamental drivers of the share price
movement were strong and accelerating. Further, revenue and earnings estimates
continued to improve.
Broadband adoption continued in 2003 both domestically and internationally.
While we are still a long way from saturation, we are moving rapidly toward 30%
domestic broadband penetration. This should be a key milestone for the Internet
as broadband drives usage growth and draws the attention of advertisers.
Going forward we believe the strength of online advertising to continue to
accelerate. Yahoo! Inc. ("Yahoo"), on their quarterly call, indicated that they
expect better than 25% growth in 2004. While Yahoo takes at least their share of
this renewed interest in advertising, we believe that other companies will
participate in the resurgence in optimism that the online media can deliver a
branded and targeted message.
PERFORMANCE
For the year ended December 31, 2003, Munder Net50 returned 66.60%. By
comparison, its primary benchmark, the Standard and Poor's 500 Composite Stock
Index and its secondary benchmark, the Inter@active Week Internet Index returned
28.67% and 73.12%, respectively.
STRATEGY REVIEW
The key driver for revenues on the Web is usage, specifically broadband usage.
We are pleased that both telecommunication and cable companies are engaged in a
healthy competition for the consumer. Yahoo and SBC Communications Inc. offer a
branded broadband offering at only $26.95 per month. Dial up pricing is also
hotly contested by companies such as United Online, Inc. The growth in usage is
not only domestic, but also international. Both Europe and the Asia Pacific have
demonstrated strong dialup and broadband growth. eMarketer, Inc. is estimating
there will be 30 million broadband households domestically with an additional 87
million internationally.
This growing population of increasingly broadband connected Internet users
provides a fertile environment for businesses. Where once we counted page-views
and eyeballs, we can now turn our analytic abilities to the more traditional
study of income statement analysis.
Companies engaged in e-commerce saw accelerating growth into and through the
holiday season. Consumers are looking to the online marketplace not only because
it is convenient, but also there are perceived cost savings available. According
to eMarketer.com online commerce should grow to more than $110 billion dollars
domestically in 2004. Companies are starting to become aware of the impact
online marketing has on offline commerce. Jupiter Research Ltd. predicts that in
2004, the Internet will influence fully 20% or $352 billion dollars of retail
sales. As a testament to the growing popularity of online shopping, eBay, Inc.
is now the largest used car dealer on the planet.
Advertising is the second revenue stream to be aware of when looking at online
companies. Analysts are looking for 20% growth or better in 2004. We believe
this type of growth will continue for the next several years as the disparity
between media consumption habits and the allocation of advertising dollars
closes. In 2004 U.S. Bancorp is looking for $8.1 billion dollars in online
advertising spending, a 21% increase over 2003. This should approximate
something less than 2% of all advertising dollars domestically. Media
consumption online represents 15% and online media influences 20% of all
commerce. Clearly there is some room for growth in 2004 and beyond.
It is important for investors to recognize that subscription revenues are
increasingly a growing part of the investment case for Internet companies.
Yahoo announced on their 4th quarter call that they had increased their paying
subscribers 120% during 2003 to 4.9 million. While this is less than 2% of
unique visitors it is their fastest growing category of Yahoo user metrics.
These metrics provide an attractive backdrop for investing in online companies.
The impact of the emerging digital economy is undeniable. A quick look at the
transformation going on in recruiting, digital media and the travel industry
will reveal companies like Monster Worldwide, Inc., Apple Computer, Inc. and
InterActiveCorp completely unseating the incumbents of entire industries. We
believe this transformation will continue over the next several decades until
companies are measured not only by their balance sheets and income statements
but also by how they deploy technology and embrace their employees, suppliers
and consumers.
/s/ Paul T. Cook
Paul T. Cook
Portfolio Manager
Munder Capital Management
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 1
Munder Net50
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class S&P 500 Inter@active
5/3/99 $10,000 $10,000 $10,000
6/30/99 10,700 10,306 9,415
9/30/99 10,090 9,663 9,728
12/31/99 11,782 11,100 17,260
3/31/00 12,295 11,354 18,708
6/30/00 12,159 11,053 14,910
9/30/00 12,226 10,946 15,128
12/31/00 11,709 10,090 8,417
3/31/01 10,870 8,895 5,042
6/30/01 11,881 9,415 5,689
9/30/01 6,298 8,034 3,081
12/31/01 8,733 8,892 4,394
3/31/02 7,716 8,916 3,637
6/30/02 5,443 7,723 2,470
9/30/02 4,307 6,389 1,889
12/31/02 5,379 6,928 2,498
3/31/03 5,639 6,709 2,527
6/30/03 7,717 7,742 3,361
9/30/03 8,150 7,947 3,594
12/31/03 8,961 8,913 4,324
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
Initial Class 66.60% (2.33)% 5/3/99
S&P 500(1) 28.67% (2.43)% 5/3/99
IIX(1) 73.12% (16.43)% 5/3/99
- ---- ----- ------ ------
Service Class - 39.39% 5/1/03
- --------------- ----- ------ ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index and
Inter@active Week Internet (IIX) Index are unmanaged indices used as a
general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares. For
the S&P 500 Index only, Source: Standard & Poor's Micropal(R)(C)- Micropal,
Inc. 2003 - 1-800-596-5323 - http:// www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
Munder Net50 had extensive technology holdings, which had exceptional growth
during the past 12 months. Investing in technology stocks generally involves
greater volatility and risks so an investment in the portfolio may not be
appropriate for everyone.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
Investing in Internet-related businesses involves special risks, including
aggressive product pricing, short product cycles, product obsolescence and high
price volatility due to a rapidly changing technology.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 2
Munder Net50
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (94.7%)
Business Services (22.2%)
Akamai Technologies, Inc. (a) 9,500 $ 102
aQuantive, Inc. (a) 27,000 277
Ask Jeeves, Inc. (a)(b) 19,600 355
Bankrate, Inc. (a) 11,300 140
Ctrip.com International, Ltd.-ADR (a) 1,500 51
Digital Insight Corporation (a) 87,600 2,181
DoubleClick Inc. (a) 239,600 2,450
eBay Inc. (a) 65,000 4,198
FindWhat.com (a)(b) 8,200 154
Getty Images, Inc. (a) 43,700 2,192
Monster Worldwide, Inc. (a)(b) 168,500 3,700
NetEase.com, Inc.-ADR (a)(b) 13,800 509
Websense, Inc. (a)(b) 17,800 520
Communications Equipment (0.5%)
Nokia Oyj-ADR 18,600 316
QUALCOMM Incorporated (b) 1,800 97
Computer & Data Processing Services (30.1%)
Check Point Software Technologies, Ltd. (a) 97,300 1,637
Groupe Wanadoo SA (a) 26,700 219
Internet Security Systems, Inc. (a) 11,900 224
lastminute.com plc (a) 199,000 792
Macromedia, Inc. (a) 10,000 178
Micromuse Inc. (a) 64,700 446
Microsoft Corporation 122,400 3,371
MicroStrategy Incorporated-Class A (a) 54 3
MicroStrategy Incorporated-warrants,
Expires 06/24/2007 35 (e)
Network Associates, Inc. (a) 19,600 295
Oracle Corporation (a) 164,100 2,166
Red Hat, Inc. (a) 85,300 1,601
SINA Corporation (a)(b) 14,300 483
Sohu.com Inc. (a)(b) 11,300 339
SportsLine.com, Inc. (a) 98,700 125
Symantec Corporation (a)(b) 7,600 263
TIBCO Software Inc. (a) 116,700 790
T-Online International AG (a)(b) 15,700 204
United Online, Inc. (a)(b) 49,538 832
VeriSign, Inc. (a) 160,900 2,623
VERITAS Software Corporation (a) 34,919 1,298
webMethods, Inc. (a) 53,500 490
Yahoo! Inc. (a) 98,000 4,427
Computer & Office Equipment (14.2%)
Apple Computer, Inc. (a) 40,100 857
Cisco Systems, Inc. (a) 120,000 2,915
Dell Computer Corporation (a) 56,900 1,932
EMC Corporation (a) 118,600 1,532
Shares Value
-------------------- --------------
Computer & Office Equipment (continued)
Extreme Networks, Inc. (a) 65,400 $ 472
Lexmark International Group, Inc. (a)(b) 17,500 1,376
NetScreen Technologies, Inc. (a) 27,300 676
Network Appliance, Inc. (a)(b) 35,900 737
SurfControl PLC (a) 16,400 220
Educational Services (0.6%)
University of Phoenix Online (a) 6,800 469
Electronic Components & Accessories (0.1%)
Applied Micro Circuits Corporation (a) 15,700 94
Holding & Other Investment Offices (0.7%)
InterDitgital Communications
Corporation (a) 25,200 520
Management Services (1.0%)
DiamondCluster International, Inc.-
Class A (a) 48,400 494
Harris Interactive Inc. (a) 27,600 229
Motion Pictures (6.6%)
CNET Networks, Inc. (a) 170,400 1,162
Macrovision Corporation (a) 6,700 151
Netflix, Inc. (a)(b) 20,800 1,138
Time Warner Inc. (a) 140,600 2,529
Retail Trade (4.4%)
1-800-FLOWERS.COM, Inc. (a) 109,300 1,209
Amazon.com, Inc. (a)(b) 20,600 1,084
Autobytel, Inc. (a)(b) 60,000 545
priceline.com Incorporated (a)(b) 15,400 276
RedEnvelope, Inc. (a)(b) 12,000 200
Savings Institutions (0.9%)
Bank United Corp.-litigation rights 600 (e)
NetBank, Inc. 48,400 646
Security & Commodity Brokers (5.7%)
Ameritrade Holding Corporation-
Class A (a)(b) 150,200 2,113
E*TRADE Group, Inc. (a) 171,700 2,172
Transportation & Public Utilities (6.2%)
ebookers PLC (a) 42,200 299
InterActiveCorp-warrants,
Expires 02/04/2009 652 28
InterActiveCorp (a)(b) 119,227 4,045
Orbitz, Inc.-Class A (a)(b) 14,100 327
Wholesale Trade Durable Goods (1.5%)
Digital River, Inc. (a)(b) 52,600 1,162
--------
Total Common Stocks (cost: $60,851)
71,657
--------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 3
Munder Net50
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
SHORT-TERM OBLIGATIONS (5.3%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $4,041 on 01/02/2004 $ 4,041 $ 4,041
----------
Total Short-Term Obligations (cost: $4,041) 4,041
----------
SECURITY LENDING COLLATERAL (23.0%)
Debt (18.3%)
Bank Notes (0.9%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 82 82
Fleet National Bank
1.00%, due 01/21/2004 308 308
National Bank of Commerce
1.19%, due 04/21/2004 257 257
Commercial Paper (4.7%)
Compass Securitization-144A
1.08%, due 01/22/2004 154 154
Delaware Funding Corporation
1.08%, due 01/07/2004 102 102
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 154 154
1.09%, due 01/13/2004 103 103
1.08%, due 02/05/2004 205 205
General Electric Capital Corporation
1.09%, due 01/08/2004 256 256
1.09%, due 01/09/2004 154 154
1.08%, due 01/16/2004 204 204
Govco Incorporated-144A
1.07%, due 02/05/2004 256 256
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 256 256
1.09%, due 02/06/2004 256 256
1.10%, due 02/09/2004 150 150
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 256 256
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 154 154
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 298 298
1.08%, due 02/17/2004 512 512
Sheffield Receivables-144A
1.09%, due 01/21/2004 103 103
Euro Dollar Overnight (1.0%)
BNP Paribas SA
0.97%, due 01/07/2004 513 513
Credit Agricole Indosuez
0.98%, due 01/02/2004 21 21
1.08%, due 01/06/2004 195 195
Principal Value
--------------------- ---------------
Euro Dollar Terms (4.5%)
Bank of Montreal
1.06%, due 01/15/2004 $ 100 $ 100
1.06%, due 02/17/2004 205 205
Bank of Scotland
1.06%, due 04/02/2004 154 154
Citigroup Inc.
1.10%, due 01/22/2004 154 154
1.09%, due 02/06/2004 205 205
Credit Agricole Indosuez
1.08%, due 01/28/2004 103 103
Den Danske Bank
1.08%, due 01/20/2004 513 513
1.02%, due 01/30/2004 257 257
Royal Bank of Canada
1.05%, due 02/27/2004 513 513
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 308 308
1.08%, due 01/15/2004 103 103
1.08%, due 01/20/2004 51 51
Svenska Handelsbanken AB
1.09%, due 01/15/2004 51 51
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 308 308
Wells Fargo & Company
1.04%, due 01/30/2004 411 411
Master Notes (1.3%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 205 205
1.14%, due 09/08/2004 308 308
Morgan Stanley
1.05%, due 06/21/2004 493 493
Medium Term Notes (0.9%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 513 513
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 154 154
Repurchase Agreements (5.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,202 on 01/02/2004 1,202 1,202
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $1,634 on 01/02/2004 1,634 1,634
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $975 on 01/02/2004 975 975
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 4
Munder Net50
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ -----------
Investment Companies (4.7%)
Money Market Funds (4.7%)
American AAdvantage Select Fund
1-day yield of 1.00% 251,825 $ 252
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 614,849 615
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 2,673,565 2,674
--------
Total Security Lending Collateral (cost: $17,410) 17,410
--------
Total Investment Securities (cost: $82,302) $ 93,108
========
SUMMARY:
Investments, at value 123.0 % $ 93,108
Liabilities in excess of other assets (23.0)% (17,417)
----- ---------
Net assets 100.0 % $ 75,691
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$16,700.
(c) Cash collateral for the Repurchase Agreements, valued at $3,885, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $22,142
Fannie Mae ARM-313915 (4.14%, due 10/01/2024) with a market value and
accrued interest of $4,243.
(e) Value is less than $1.
DEFINITIONS:
ADR American Depositary Receipt
ARM Adjustable Rate Mortgage
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 5
Munder Net50
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $82,302)
(including $16,700 of securities loaned) $93,108
Cash 52
Receivables:
Investment securites sold 5
Interest 1
Other 12
--------
93,178
--------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 60
Distribution fees 1
Payable for collateral for securities on loan 17,410
Other 16
--------
17,487
--------
Net Assets $75,691
========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 91
Additional paid-in capital 73,369
Accumulated net investment income (loss) (2)
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (8,573)
Net unrealized appreciation (depreciation) on investment
securities 10,806
---------
Net Assets $75,691
=========
Shares Outstanding:
Initial Class 9,050
Service Class 91
Net Asset Value and Offering Price Per Share:
Initial Class $ 8.28
Service Class 8.28
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 8
Dividends 23
Income from loaned securities-net 12
Less withholding taxes on foreign dividends (1)
-------
42
-------
Expenses:
Management and advisory fees 304
Transfer agent fees 2
Printing and shareholder reports 15
Custody fees 12
Administration fees 21
Auditing and accounting fees 10
Directors fees 1
Service fees:
Service Class 1
-------
Total expenses 366
Less:
Advisory fee waiver (27)
-------
Net expenses 339
-------
Net Investment Income (Loss) (297)
-------
Net Realized Gain (Loss) from:
Investment securities (3,202)
Foreign currency transactions (20)
-------
(3,222)
-------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 14,888
-------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 11,666
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $11,369
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 6
Munder Net50
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (297) $ (80)
Net realized gain (loss) from
investment securities and foreign
currency transactions (3,222) (2,811)
Net unrealized appreciation
(depreciation) on investment
securities 14,888 (2,243)
------- -------
11,369 (5,134)
------- -------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
From net realized gains:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 68,245 15,952
Service Class 1,228 -
------- -------
69,473 15,952
------- -------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
------- -------
- -
------- -------
Cost of shares redeemed:
Initial Class (18,214) (8,467)
Service Class (533) -
-------- -------
(18,747) (8,467)
-------- -------
50,726 7,485
-------- -------
Net increase (decrease) in net assets 62,095 2,351
-------- -------
Net Assets:
Beginning of year 13,596 11,245
-------- -------
End of year $75,691 $13,596
======= =======
Accumulated Net Investment
Income (Loss) $ (2) $ -
======= =======
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 9,279 2,811
Service Class 160 -
-------- --------
9,439 2,811
-------- --------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
-------- --------
- -
-------- --------
Shares redeemed:
Initial Class (2,965) (1,468)
Service Class (69) -
-------- --------
(3,034) (1,468)
-------- --------
Net increase (decrease) in shares
outstanding 6,405 1,343
======== ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 7
Munder Net50
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 4.97 $ (0.06) $ 3.37 $ 3.31
12/31/2002 8.07 (0.05) (3.05) (3.10)
12/31/2001 10.88 - (2.76) (2.76)
12/31/2000 11.25 0.08 (0.14) (0.06)
12/31/1999 10.00 0.03 1.74 1.77
- --------------- ---------- ------- ---------- -------- --------
Service Class 12/31/2003 5.94 (0.06) 2.40 2.34
- --------------- ---------- ------- ---------- -------- --------
For a share outstanding throughout each period (a)
---------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ----------
Initial Class $ - $ - $ - $ 8.28
- - - 4.97
(0.05) - (0.05) 8.07
(0.26) (0.05) (0.31) 10.88
(0.52) - (0.52) 11.25
- --------------- --------- --------- --------- --------
Service Class - - - 8.28
- --------------- --------- --------- --------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 66.60% $ 74,941 1.00% 1.08% (0.88)% 29%
12/31/2002 (38.41) 13,596 1.00 1.77 (0.92) 52
12/31/2001 (25.42) 11,245 1.00 1.72 0.05 208
12/31/2000 (0.62) 6,451 1.00 2.44 0.71 110
12/31/1999 17.82 2,783 1.00 5.57 0.50 341
- --------------- ---------- ------ -------- ---- ---- ----- ---
Service Class 12/31/2003 39.39 750 1.25 1.38 (1.14) 29
- --------------- ---------- ------ -------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 3, 1999
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 8
Munder Net50
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Munder Net50 ("the Fund"), part of ATSF, began operations on May 3,
1999.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price.
Repurchase agreements involve the risk that the seller will fail to repurchase
the security, as agreed. In that case, the Fund will bear the risk of value
fluctuations until the security can be sold and may encounter delays and incur
costs in liquidating the security. In the event of bankruptcy or insolvency of
the seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $5 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 9
Munder Net50
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
--------- -----------
Asset Allocation-Conservative Portfolio $1,724 2%
Asset Allocation-Growth Portfolio 6,839 9%
Asset Allocation-Moderate Portfolio 6,772 9%
Asset Allocation-Moderate Growth Portfolio 11,246 15%
--
35%
==
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.90% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 80 12/31/2004
Fiscal Year 2002 44 12/31/2005
Fiscal Year 2003 27 12/31/2006
Plan of Distribution fees: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 10
Munder Net50
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $3. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 55,990
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 9,099
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (315)
Undistributed net investment income (loss) 295
Undistributed net realized capital gains (loss) 20
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (8,229)
========
Post October Capital Loss $ (1)
========
Net Unrealized Appreciation (Depreciation) $ 10,463
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 2,061 December 31, 2009
2,914 December 31, 2010
3,254 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 82,645
========
Unrealized Appreciation $ 11,557
Unrealized (Depreciation) (1,094)
--------
Net Unrealized Appreciation (Depreciation) $ 10,463
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Munder Net50
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Munder Net50 (the "Fund") (one of
the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Munder Net50 12
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The year 2003 brought many encouraging signs of an improving global economy as
well as impressive gains for U.S. stock markets. Skepticism was prevalent during
the start of the year due to rising energy prices, talk of war and weak economic
data. However, the release of strong first quarter earnings reports combined
with a quick end to major combat in Iraq helped propel the stock market forward.
Massive monetary and fiscal stimulus acted as economic adrenaline, fending off
recession relapse, boosting the financial system, driving corporate profits
higher and pulling stock prices with them. It appears that corporate managements
are more optimistic now that customers are willing to spend and this confidence
has translated into an increase in the number of companies providing improved
financial outlooks. Only a year ago many of these companies were still reducing
their level of forward-looking statements. And although the year did not end as
strong as some would have hoped, it certainly did well enough to cap a very
favorable investing year.
PERFORMANCE
For the year ended December 31, 2003, PBHG Mid Cap Growth returned 28.08%. By
comparison its benchmark, the Russell Midcap Growth Index ("Russell Midcap")
returned 42.71%.
STRATEGY REVIEW
While the portfolio posted a solid gain for the year, it underperformed compared
to its benchmark. It was the first time in three years that the Russell Midcap
outperformed its value counterpart for a calendar year. Technology was the
strongest performing sector in 2003 for both the Russell Midcap and the
portfolio. The portfolio's technology weighting increased substantially during
the year, due to a combination of stock performance appreciation and new
investments. Some strong performing holdings in technology included SanDisk
Corporation and OmniVision Technologies, Inc. We were overweight to the
benchmark in this sector for most of the year due to our belief that a
technology spending recovery was and remains underway, which should create
incremental growth opportunities; however, poor stock selection caused the
sector to detract from portfolio performance overall. Mercury Computer Systems,
Inc. and Websense, Inc. were among those technology holdings that hurt
performance during the year relative to the benchmark.
The health care sector made significant positive contributions to the
portfolio's overall performance for the year. Also a sizeable weighting for the
portfolio, we had several strong stock selections in this area. Our top
performers in health care were Coventry Healthcare, Inc. and Gilead Sciences,
Inc. Within the sector, we believe that managed care, pharmacy benefit managers
and the specialty pharmaceutical areas have the best earnings outlook for the
foreseeable future. Unfortunately, we also held some poor health care selections
such as LifePoint Hospitals, Inc. and Accredo Health, Incorporated, which led
the sector to underperform overall relative to the benchmark.
The movement by investors into more cyclically oriented stocks over the course
of the year was evident by the strong performance of the consumer cyclical
sector for the benchmark. Our underweight position combined with the poor
performance of some our selections in this area caused us to underperform the
benchmark. The reverse can be said about the services sector, in which our
overweight position contributed substantial gains to the portfolio throughout
the year. Several long-time holdings including education company, Career
Education Corporation helped the portfolio to outperform the benchmark in this
sector.
/s/ Michael S. Sutton
Michael S. Sutton
/s/ Peter J. Niedland
Peter J. Niedland
Co-Portfolio Managers
Pilgrim Baxter & Associates, Ltd.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 1
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class Russell Midcap Growth
5/3/99 $10,000 $10,000
6/30/99 11,090 10,561
9/30/99 11,750 10,032
12/31/99 17,799 13,992
3/31/00 21,089 16,947
6/30/00 21,841 15,692
9/30/00 23,332 16,088
12/31/00 15,239 12,348
3/31/01 9,562 9,251
6/30/01 11,576 10,747
9/30/01 8,287 7,760
12/31/01 9,765 9,860
3/31/02 9,177 9,686
6/30/02 8,217 7,917
9/30/02 6,921 6,557
12/31/02 6,993 7,158
3/31/03 6,892 7,157
6/30/03 7,924 8,499
9/30/03 8,480 9,107
12/31/03 8,957 10,215
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ------------- ----------
Initial Class 28.08% (2.34)% 5/3/99
Russell MCG(1) 42.71% 0.46 % 5/3/99
- --------------- ----- ----- ------
Service Class - 23.15 % 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Russell Midcap Growth (Russell MCG) Index is an unmanaged index used as
a general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 2
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------------------- ---------------
COMMON STOCKS (92.1%)
Apparel & Accessory Stores (3.7%)
Chico's FAS, Inc. (a)(b) 57,200 $ 2,114
Hot Topic, Inc. (a) 43,100 1,270
Pacific Sunwear of California, Inc. (a) 35,250 744
Ross Stores, Inc. (b) 44,000 1,163
Automotive Dealers & Service Stations (1.0%)
O'Reilly Automotive, Inc. (a) 39,000 1,496
Business Services (0.5%)
Ask Jeeves, Inc. (a)(b) 43,000 779
Communications Equipment (0.9%)
ADTRAN, Inc. 44,000 1,364
Computer & Data Processing Services (14.7%)
Adobe Systems Incorporated 35,900 1,411
Anteon International Corporation (a) 38,500 1,388
CACI International Inc.-Class A (a) 30,500 1,483
Citrix Systems, Inc. (a) 39,000 827
Cognizant Technology Solutions
Corporation (a) 61,500 2,807
Cognos Incorporated (a) 79,500 2,434
Network Associates, Inc. (a) 61,000 917
PeopleSoft, Inc. (a) 142,200 3,242
Siebel Systems, Inc. (a) 111,500 1,547
Sonus Networks, Inc. (a) 104,300 789
Symantec Corporation (a)(b) 123,000 4,262
Computer & Office Equipment (5.9%)
Emulex Corporation (a)(b) 74,700 1,993
Foundry Networks, Inc. (a) 84,000 2,298
Juniper Networks, Inc. (a)(b) 60,500 1,130
Network Appliance, Inc. (a)(b) 84,000 1,725
Polycom, Inc. (a) 23,000 449
SanDisk Corporation (a) 10,600 648
Symbol Technologies, Inc. 20,900 353
Construction (1.2%)
Chicago Bridge & Iron Company NV-
NY Shares 44,000 1,272
Jacobs Engineering Group Inc. (a) 10,000 480
Drug Stores & Proprietary Stores (1.5%)
Omnicare, Inc. 54,500 2,201
Educational Services (5.5%)
Apollo Group, Inc.-Class A (a) 11,250 765
Career Education Corporation (a) 64,634 2,590
Corinthian Colleges, Inc. (a) 44,838 2,491
University of Phoenix Online (a) 30,100 2,075
Electronic Components & Accessories (14.4%)
Broadcom Corporation-Class A (a)(b) 82,300 2,806
Cypress Semiconductor Corporation (a)(b) 73,500 1,570
Shares Value
---------------------- ---------------
Electronic Components & Accessories (continued)
Intersil Corporation-Class A 32,400 $ 805
Jabil Circuit, Inc. (a) 56,700 1,605
Linear Technology Corporation 37,800 1,590
Marvell Technology Group Ltd. (a) 77,300 2,932
Microchip Technology Incorporated 58,500 1,952
OmniVision Technologies, Inc. (a)(b) 22,500 1,243
QLogic Corporation (a)(b) 57,100 2,946
Silicon Laboratories Inc. (a)(b) 38,500 1,664
Vishay Intertechnology, Inc. (a)(b) 74,500 1,706
Environmental Services (1.1%)
Stericycle, Inc. (a)(b) 33,400 1,560
Furniture & Home Furnishings Stores (1.5%)
Cost Plus, Inc. (a) 14,900 611
Williams-Sonoma, Inc. (a)(b) 44,500 1,547
Health Services (2.9%)
Caremark Rx, Inc. (a)(b) 26,400 669
Lincare Holdings Inc. (a) 25,800 775
Odyssey HealthCare, Inc. (a)(b) 51,375 1,503
Select Medical Corporation 81,000 1,319
Industrial Machinery & Equipment (4.5%)
Lam Research Corporation (a)(b) 63,700 2,058
Varian Semiconductor Equipment
Associates, Inc. (a) 37,500 1,638
Zebra Technologies Corporation-Class A (a) 42,600 2,827
Instruments & Related Products (1.9%)
Avid Technology, Inc. (a) 32,500 1,560
Cognex Corporation 44,500 1,257
Insurance (0.7%)
AMERIGROUP Corporation (a) 13,300 567
Everest Re Group, Ltd. 5,600 474
Leather & Leather Products (1.8%)
Coach, Inc. (a) 70,000 2,642
Management Services (2.3%)
Corporate Executive Board Company
(The) (a) 71,500 3,337
Medical Instruments & Supplies (5.0%)
DENTSPLY International Inc. 32,900 1,486
ResMed Inc. (a) 34,300 1,425
Respironics, Inc. (a) 18,600 839
St. Jude Medical, Inc. (a) 12,000 736
Varian Medical Systems, Inc. (a) 40,500 2,799
Pharmaceuticals (6.7%)
AmerisourceBergen Corporation (b) 11,200 629
Celgene Corporation (a) 41,500 1,868
Integra LifeSciences Holdings
Corporation (a) 12,500 358
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 3
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- -------------
Pharmaceuticals (continued)
Invitrogen Corporation (a)(b) 37,200 $ 2,604
Martek Biosciences Corp. (a)(b) 10,500 682
Medicines Company (The) (a)(b) 18,000 530
Taro Pharmaceutical Industries Ltd. (a) 27,000 1,742
Techne Corporation (a) 32,500 1,228
Radio & Television Broadcasting (0.2%)
Univision Communications Inc.-Class A (a) 9,000 357
Research & Testing Services (1.1%)
Affymetrix, Inc. (a)(b) 43,000 1,058
Gen-Probe Incorporated (a) 15,800 576
Restaurants (1.9%)
Applebee's International, Inc. 36,500 1,433
Cheesecake Factory Incorporated (The) (a) 28,600 1,259
Retail Trade (7.1%)
Barnes & Noble, Inc. (a) 36,100 1,186
CDW Corporation (b) 35,000 2,022
PETCO Animal Supplies, Inc. (a) 41,000 1,248
PETsMART, Inc. 44,500 1,059
Schein (Henry), Inc. (a) 25,000 1,690
Staples, Inc. (a) 45,500 1,242
Tiffany & Co. 39,500 1,785
Savings Institutions (2.3%)
New York Community Bancorp, Inc. (b) 85,766 3,263
Variety Stores (0.6%)
Family Dollar Stores, Inc. 25,900 929
Water Transportation (0.3%)
Royal Caribbean Cruises Ltd. 12,400 431
Wholesale Trade Nondurable Goods (0.9%)
Tractor Supply Company (a) 35,300 1,373
----------
Total Common Stocks (cost: $111,103) 133,507
----------
Principal Value
----------------------- ---------------
SHORT-TERM OBLIGATIONS (7.4%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $10,727 on 01/02/2004 $ 10,727 $ 10,727
---------
Total Short-Term Obligations (cost: $10,727) 10,727
---------
SECURITY LENDING COLLATERAL (23.7%)
Debt (18.9%)
Bank Notes (0.9%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 162 162
Fleet National Bank
1.00%, due 01/21/2004 607 607
National Bank of Commerce
1.19%, due 04/21/2004 506 506
Principal Value
----------------------- ---------------
Commercial Paper (4.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 304 $ 304
Delaware Funding Corporation
1.08%, due 01/07/2004 202 202
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 304 304
1.09%, due 01/13/2004 202 202
1.08%, due 02/05/2004 404 404
General Electric Capital Corporation
1.09%, due 01/08/2004 505 505
1.09%, due 01/09/2004 304 304
1.08%, due 01/16/2004 403 403
Govco Incorporated-144A
1.07%, due 02/05/2004 506 506
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 505 505
1.09%, due 02/06/2004 505 505
1.10%, due 02/09/2004 295 295
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 505 505
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 304 304
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 587 587
1.08%, due 02/17/2004 1,011 1,011
Sheffield Receivables-144A
1.09%, due 01/21/2004 202 202
Euro Dollar Overnight (1.0%)
BNP Paribas SA
0.97%, due 01/07/2004 1,012 1,012
Credit Agricole Indosuez
0.98%, due 01/02/2004 40 40
1.08%, due 01/06/2004 385 385
Euro Dollar Terms (4.7%)
Bank of Montreal
1.06%, due 01/15/2004 198 198
1.06%, due 02/17/2004 405 405
Bank of Scotland
1.06%, due 04/02/2004 304 304
Citigroup Inc.
1.10%, due 01/22/2004 304 304
1.09%, due 02/06/2004 405 405
Credit Agricole Indosuez
1.08%, due 01/28/2004 202 202
Den Danske Bank
1.08%, due 01/20/2004 1,012 1,012
1.02%, due 01/30/2004 506 506
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 4
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Euro Dollar Terms (continued)
Royal Bank of Canada
1.05%, due 02/27/2004 $ 1,012 $ 1,012
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 607 607
1.08%, due 01/15/2004 202 202
1.08%, due 01/20/2004 101 101
Svenska Handelsbanken AB
1.09%, due 01/15/2004 101 101
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 607 607
Wells Fargo & Company
1.04%, due 01/30/2004 810 810
Master Notes (1.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 405 405
1.14%, due 09/08/2004 607 607
Morgan Stanley
1.05%, due 06/21/2004 972 972
Medium Term Notes (0.9%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,013 1,013
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 304 304
Principal Value
--------------- ------------
Repurchase Agreements (5.1%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,370 on 01/02/2004 $ 2,370 $ 2,370
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $3,220 on 01/02/2004 3,220 3,220
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,925 on 01/02/2004 1,925 1,925
Shares Value
--------------- -----------
Investment Companies (4.8%)
Money Market Funds (4.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 496,615 $ 497
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,212,522 1,213
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 5,272,449 5,272
---------
Total Security Lending Collateral (cost: $34,334) 34,334
---------
Total Investment Securities (cost: $156,164) $ 178,568
=========
SUMMARY:
Investments, at value 123.2 % $ 178,568
Liabilities in excess of other assets (23.2)% (33,636)
--------- ---------
Net assets 100.0 % $ 144,932
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$33,308.
(c) Cash collateral for the Repurchase Agreements, valued at $7,662, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $37,413
Fannie Mae ARM-654444 (5.54%, due 07/01/2032) with a market value and
accrued interest of $11,263.
DEFINITIONS:
ARM Adjustable Rate Mortgage
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 5
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $156,164)
(including $33,308 of securities loaned) $178,568
Cash 52
Receivables:
Investment securites sold 1,157
Interest 1
Dividends 10
Other 29
--------
179,817
--------
Liabilities:
Investment securities purchased 388
Accounts payable and accrued liabilities:
Management and advisory fees 115
Due to advisor 9
Payable for collateral for securities on loan 34,334
Other 39
--------
34,885
--------
Net Assets $144,932
========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 164
Additional paid-in capital 311,741
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (189,377)
Net unrealized appreciation (depreciation) on investment
securities 22,404
--------
Net Assets $144,932
========
Shares Outstanding:
Initial Class 16,327
Service Class 56
Net Asset Value and Offering Price Per Share:
Initial Class $ 8.85
Service Class 8.83
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 31
Dividends 167
Income from loaned securities-net 55
Less withholding taxes on foreign dividends (1)
----------
252
---------
Expenses:
Management and advisory fees 1,084
Transfer agent fees 2
Printing and shareholder reports 67
Custody fees 26
Administration fees 20
Legal fees 2
Auditing and accounting fees 10
Directors fees 4
Recaptured expenses 9
Other 2
---------
Total expenses 1,226
---------
Net Investment Income (Loss) (974)
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 11,624
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 18,735
---------
Net Gain (Loss) on Investment Securities 30,359
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 29,385
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 6
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (974) $ (897)
Net realized gain (loss) from
investment securities 11,624 (33,553)
Net unrealized appreciation
(depreciation) on investment
securities 18,735 (5,780)
-------- ---------
29,385 (40,230)
-------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
From net realized gains:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 64,244 111,794
Service Class 505 -
-------- ---------
64,749 111,794
-------- ---------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
-------- ---------
- -
-------- ---------
Cost of shares redeemed:
Initial Class (51,977) (108,042)
Service Class (40) -
-------- ---------
(52,017) (108,042)
-------- --------
12,732 3,752
-------- --------
Net increase (decrease) in net assets 42,117 (36,478)
-------- --------
Net Assets:
Beginning of year 102,815 139,293
-------- --------
End of year $144,932 $ 102,815
======== =========
Undistributed Net Investment
Income (Loss) $ - $ -
======== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 8,381 13,604
Service Class 60 -
------- ---------
8,441 13,604
------- ---------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
------- ---------
- -
------- ---------
Shares redeemed:
Initial Class (6,926) (13,161)
Service Class (4) -
------- ---------
(6,930) (13,161)
------- ---------
Net increase (decrease) in shares
outstanding 1,511 443
======= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 7
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 6.91 $ (0.06) $ 2.00 $ 1.94
12/31/2002 9.65 (0.06) (2.68) (2.74)
12/31/2001 15.06 (0.05) (5.36) (5.41)
12/31/2000 17.75 (0.03) (2.46) (2.49)
12/31/1999 10.00 (0.03) 7.83 7.80
- --------------- ---------- --------- --------- -------- --------
Service Class 12/31/2003 7.17 (0.06) 1.72 1.66
- --------------- ---------- --------- --------- -------- --------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ - $ - $ - $ 8.85
- - - 6.91
- - - 9.65
(0.20) - (0.20) 15.06
(0.05) - (0.05) 17.75
- --------------- -------- --- -------- --------
Service Class - - - 8.83
- --------------- -------- --- -------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 28.08% $ 144,438 1.00% 1.00% (0.79)% 202%
12/31/2002 (28.39) 102,815 1.00 1.05 (0.78) 175
12/31/2001 (35.92) 139,293 1.00 1.08 (0.47) 177
12/31/2000 (14.39) 217,307 0.92 0.92 (0.14) 133
12/31/1999 78.00 37,201 1.00 1.40 (0.30) 156
- --------------- ---------- ------ --------- ---- ---- ----- ---
Service Class 12/31/2003 23.15 494 1.25 1.25 (1.08) 202
- --------------- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 3, 1999
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized. The impact of recaptured expenses on the Ratio of Expenses to
Average Net Assets was 0.01%.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 8
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. PBHG Mid Cap Growth ("the Fund"), part of ATSF, began operations on
May 3, 1999.
The fund will merge into Transamerica Growth Opportunities effective as of the
close of business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $24 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional
collateral is due (at least $1), IBT collects additional cash collateral from
the borrowers. Although securities loaned will be fully collateralized at all
times, IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security
position at any time from the borrower through IBT. In the event the borrower
fails to timely return a recalled security, IBT may
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 9
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
indemnify the Fund by purchasing replacement securities for the Fund at its own
expense and claiming the collateral to fund such a purchase. IBT absorbs the
loss if the collateral value is not sufficient to cover the cost of the
replacement securities. If replacement securities are not available, IBT will
credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $91 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following stated break points:
0.90% of the first $100 million of ANA
0.80% of ANA over $100 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Increase in Total
Expenses Recovered Expenses to
by Advisor Average Net Assets
-------------------- -------------------
Recovered in 2003 $ 9 0.01%
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2001 $ 109 12/31/2004
Fiscal Year 2002 57 12/31/2005
Plan of Distribution fees: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 10
PBHG Mid Cap Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $5. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 234,271
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 232,049
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (974)
Undistributed net investment income (loss) 974
Undistributed net realized capital gains (loss) -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
===========
Undistributed Long-term Capital Gains $ -
===========
Capital Loss Carryforward $ (189,114)
===========
Post October Loss $ -
===========
Net Unrealized Appreciation (Depreciation) $ 22,140
===========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- ---------------- ------------------
$ 156,269 December 31, 2009
32,845 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $8,190.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $156,428
========
Unrealized Appreciation $ 23,810
Unrealized (Depreciation) (1,670)
--------
Net Unrealized Appreciation (Depreciation) $ 22,140
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
PBHG Mid Cap Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PBHG Mid Cap Growth (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG Mid Cap Growth 12
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
NWQ Investment Management Company, Inc.:
The U.S. stock market turned decisively bullish in 2003, breaking its three-year
streak of negative returns. The heightened enthusiasm for stocks was generated
by compelling valuations early in the year, increases in earnings, and
confidence in the strength and sustainability of the current economic expansion.
All of the major market indices posted 25 percent plus gains for the year,
notwithstanding a slow start and negative index returns for the first quarter of
2003. Small capitalization stocks significantly outperformed large
capitalization stocks for the year, while the large capitalization growth and
value indices appreciated almost equally.
Although stock valuations are no longer the bargains they were leading up to
the Iraq War nine months ago, market sentiment has improved with lessened
geopolitical uncertainty and a broadening global economic recovery. U.S.
corporate earnings have recovered from their recessionary lows as increased
revenue growth is being leveraged against tight cost controls, flexibility in
the labor markets, and decreased capital costs.
Pilgrim Baxter & Associates, Ltd.:
The twelve-month period ended December 31, 2003 began with fluctuations in stock
prices, as uncertainty about the direction of the economy combined with concerns
over international tensions to create a volatile environment. But overall the
year saw many changes across the political and economic landscapes that served
to fuel a dramatic rally in the U.S. equity markets. During the year, the United
States and its allies took military action against Iraq and ousted the regime of
Saddam Hussein. Despite growing concern over the slow moving reconstruction
process, the American public was relieved to hear in December that U.S. forces
had captured the ever-elusive Saddam. On the home front, investor optimism
received further impetus when Congress passed a $350 billion tax cut and the
Federal Reserve Board ("Fed") trimmed short-term rates by another quarter
percentage point, bringing rates to 45-year lows. During the final quarter of
the year, the Fed reported that economic expansion had increased and consumer
spending was still going strong, although the job market continued to remain
weak. Despite lingering concerns about the sustainability of economic recovery
and stock market rally, stocks ended 2003 with a bang, with the Dow Jones
Industrial Average, NASDAQ Composite Stock Index and Standard and Poor's 500
Composite Stock Index ("S&P 500") all posting two year highs.
The rally during the second half of the year tended to be dominated by what we
consider to be more speculative stocks, notably from the technology sector.
While our stock selection for the PBHG portion of the portfolio tended to be
good, we were underweight relative to technology and other cyclical sectors. We
continue to focus on what we believe are high quality companies that generate
strong cash flows, have healthy balance sheets and strong prospects for stable
earnings growth. Our lack of exposure to what we consider lower quality issues
proved to be a handicap to performance in the technology sector as we believe
investors have been speculating over which stocks will benefit most from an
economic recovery, bidding up their prices to levels that we consider overdone.
We believe this emphasis resulted in most of the underperformance of the PBHG
portion relative to the S&P 500 for the period.
PERFORMANCE
For the year ended December 31, 2003, PBHG/NWQ Value Select returned 29.78%. By
comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
NWQ Investment Management Company, Inc.:
Gains for the full year were led by significant contributions from the
technology and financial holdings. For the most recent quarter, performance
results benefited from the market's strong rotation into energy stocks, as well
as several portfolio positions in finance, technology, and food products.
Energy stocks appreciated as compelling valuations attracted investor attention
and commodity prices remained resilient. With oil prices remaining stubbornly
above $30 and recently trading above the pre-Iraq War highs, Wall Street
analysts have begun to raise target equilibrium prices for crude oil from the
low to the mid $20's or higher.
Continued strength in the housing market benefited many mortgage-related
stocks, which have been exceptional performers all year. We opportunistically
added to our existing mortgage-related holdings, Fannie Mae, Countrywide Credit
Industries, Inc., IndyMac Bancorp, Inc., and MGIC Investment Corporation,
throughout the year.
In the technology sector, improving business conditions and renewed investor
interest contributed to strong gains for many industry groups within this
market segment. We increased our investment in the sector during the early part
of 2003 and reduced it later following strong performance.
Pilgrim Baxter & Associates, Ltd.:
Throughout the year, we maintained our disciplined approach, focusing on what
we believe are better quality companies with stable earnings outlooks. We
tended to emphasize industries such
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 1
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
STRATEGY REVIEW (continued)
as energy, health care, consumer staples and financial services, with our most
noteworthy overweight positions in health care and consumer staples. At the same
time, we underweighted technology. This strategy was not rewarded in the rally
that began in March and continued through most of the year, but we believe it
offers the best opportunity to be successful in the long term. Despite the fact
that we have found a number of good performers within the technology sector, we
believe the overall valuations of many technology companies and other more
speculative areas of the market have risen to excessive levels.
Early in the year, our emphasis on consumer staples and health care stocks
supported performance. Our consumer staples selections continued to perform
well as the year progressed, with companies such as ConAgra Foods, Inc. and
Sara Lee Corporation gaining strongly. Our health care holdings were volatile
throughout the period but some strong stock selection and our overweight
position relative to the benchmark proved to be one of the primary drivers of
performance. In particular, Aetna Inc. ("Aetna") and Bristol-Myers Squibb Co.
("Bristol-Myers") both posted strong results. Aetna benefited from some
favorable pricing trends and some restructuring throughout the year.
Bristol-Myers bounced back nicely from a difficult 2002 as they put some
challenging inventory issues behind them.
The biggest disappointment during the first three quarters of the year was in
our energy position. These stocks lagged the market, despite rising oil and
natural gas prices and strong operating results from industry leaders. Although
our energy position detracted from performance during most of the period, we
saw the tide turn in the fourth quarter as our holdings in this sector boosted
performance. As oil and natural gas prices continue to remain stubbornly high,
energy holdings that had some of the best growth profiles and earnings, seemed
to have finally caught investors' favor.
/s/ Raymond J. McCaffrey
Raymond J. McCaffrey
Portfolio Manager
Pilgrim Baxter Associates, Ltd.
/s/ E. C. Friedel
E. C. Friedel
Portfolio Manager
NWQ Investment Management Company, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 2
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/96 through 12/31/03
Initial Class S&P 500
5/1/96 $10,000 $10,000
6/30/96 10,077 9,469
9/30/96 10,624 8,891
12/31/96 11,319 7,755
3/31/97 11,441 7,970
6/30/97 12,979 6,830
9/30/97 14,182 14,906
12/31/97 14,153 15,334
3/31/98 15,552 17,471
6/30/98 15,028 18,048
9/30/98 12,331 16,256
12/31/98 13,477 19,716
3/31/99 13,736 20,698
6/30/99 15,966 22,156
9/30/99 13,659 20,774
12/31/99 14,548 23,864
3/31/00 15,539 24,411
6/30/00 14,810 23,764
9/30/00 15,600 23,533
12/31/00 16,758 21,693
3/31/01 16,548 19,123
6/30/01 17,259 20,241
9/30/01 15,521 17,272
12/31/01 16,455 19,117
3/31/02 17,343 19,170
6/30/02 15,685 16,603
9/30/02 12,442 13,736
12/31/02 14,117 14,894
3/31/03 13,230 14,424
6/30/03 15,780 16,644
9/30/03 16,179 17,084
12/31/03 18,321 19,163
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------ ----------- ----------
Initial Class 29.78% 6.33 % 8.22% 5/1/96
S&P 500(1) 28.67% (0.57)% 8.85% 5/1/96
- --------------- ----- ----- ----- ------
Service Class - - 28.03% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 3
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- --------------
COMMON STOCKS (92.2%)
Aerospace (1.5%)
Northrop Grumman Corporation (b) 60,000 $ 5,736
Chemicals & Allied Products (1.8%)
du Pont (E.I.) de Nemours and Company 149,800 6,874
Commercial Banks (6.9%)
Citigroup Inc. 268,000 13,009
Morgan Chase & Co. (J.P.) 366,700 13,469
Communication (4.8%)
Liberty Media Corporation-Class A (a) 900,000 10,701
Viacom, Inc.-Class A 178,100 7,884
Computer & Data Processing Services (5.4%)
Computer Associates International, Inc. (b) 500,000 13,670
Microsoft Corporation 253,700 6,987
Computer & Office Equipment (3.6%)
Cisco Systems, Inc. (a) 280,000 6,801
Hewlett-Packard Company 305,100 7,008
Electronic & Other Electric Equipment (1.9%)
General Electric Company 230,700 7,147
Food & Kindred Products (6.0%)
Altria Group, Inc. 181,100 9,856
ConAgra Foods, Inc. 238,000 6,281
Sara Lee Corporation (b) 325,000 7,056
Health Services (6.2%)
HCA Inc. 410,000 17,614
Tenet Healthcare Corporation (a) 382,300 6,136
Instruments & Related Products (4.0%)
Agilent Technologies, Inc. (a) 275,000 8,041
Raytheon Company 240,360 7,220
Insurance (4.1%)
Aon Corporation 390,000 9,337
MGIC Investment Corporation 110,000 6,263
Insurance Agents, Brokers & Service (2.0%)
Hartford Financial Services Group, Inc. (The) 130,000 7,674
Metal Mining (2.7%)
Barrick Gold Corporation (b) 450,000 10,220
Mortgage Bankers & Brokers (3.8%)
Countrywide Credit Industries, Inc. 193,333 14,664
Oil & Gas Extraction (10.4%)
Anadarko Petroleum Corporation 146,900 7,493
ConocoPhillips 233,300 15,297
Kerr-McGee Corporation 180,000 8,368
Transocean Inc. (a) 375,000 9,004
Paper & Allied Products (2.3%)
Kimberly-Clark Corporation 150,000 8,864
Shares Value
-------------------- --------------
Petroleum Refining (3.6%)
ChevronTexaco Corporation 64,200 $ 5,546
Exxon Mobil Corporation 204,100 8,368
Pharmaceuticals (5.5%)
Bristol-Myers Squibb Co. 232,300 6,644
Merck & Co., Inc. 139,600 6,450
Pfizer Inc. 225,000 7,949
Savings Institutions (2.6%)
IndyMac Bancorp, Inc. (b) 340,000 10,129
Telecommunications (5.8%)
AT&T Corp. (b) 374,500 7,602
SBC Communications Inc. 316,400 8,249
Sprint Corporation (FON Group) 260,000 4,269
Telephone and Data Systems, Inc. 34,100 2,133
U.S. Government Agencies (7.3%)
Fannie Mae 276,100 20,724
Freddie Mac 128,300 7,482
---------
Total Common Stocks (cost: $298,938) 354,219
---------
Principal Value
-------------- ------------
SHORT-TERM OBLIGATIONS (7.6%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $29,378 on 01/02/2004 $ 29,378 $ 29,378
---------
Total Short-Term Obligations (cost: $29,378) 29,378
---------
SECURITY LENDING COLLATERAL (10.9%)
Debt (8.7%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 198 $ 198
Fleet National Bank
1.00%, due 01/21/2004 743 743
National Bank of Commerce
1.19%, due 04/21/2004 619 619
Commercial Paper (2.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 371 371
Delaware Funding Corporation
1.08%, due 01/07/2004 247 247
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 371 371
1.09%, due 01/13/2004 248 248
1.08%, due 02/05/2004 494 494
General Electric Capital Corporation
1.09%, due 01/08/2004 617 617
1.09%, due 01/09/2004 371 371
1.08%, due 01/16/2004 494 494
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 4
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
------------------------ ---------------
Commercial Paper (continued)
Govco Incorporated-144A
1.07%, due 02/05/2004 $ 618 $ 618
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 584 584
1.09%, due 02/06/2004 618 618
1.10%, due 02/09/2004 396 396
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 618 618
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 371 371
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 718 718
1.08%, due 02/17/2004 1,236 1,236
Sheffield Receivables-144A
1.09%, due 01/21/2004 248 248
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 1,238 1,238
Credit Agricole Indosuez
0.98%, due 01/02/2004 50 50
1.08%, due 01/06/2004 470 470
Euro Dollar Terms (2.2%)
Bank of Montreal
1.06%, due 01/15/2004 242 242
1.06%, due 02/17/2004 495 495
Bank of Scotland
1.06%, due 04/02/2004 371 371
Citigroup Inc.
1.10%, due 01/22/2004 371 371
1.09%, due 02/06/2004 496 496
Credit Agricole Indosuez
1.08%, due 01/28/2004 248 248
Den Danske Bank
1.08%, due 01/20/2004 1,238 1,238
1.02%, due 01/30/2004 619 619
Royal Bank of Canada
1.05%, due 02/27/2004 1,238 1,238
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 743 743
1.08%, due 01/15/2004 248 248
1.08%, due 01/20/2004 124 124
Svenska Handelsbanken AB
1.09%, due 01/15/2004 124 124
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 743 743
Wells Fargo & Company
1.04%, due 01/30/2004 991 991
Principal Value
------------------------ ---------------
Master Notes (0.7%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 $ 495 $ 495
1.14%, due 09/08/2004 743 743
Morgan Stanley
1.05%, due 06/21/2004 1,189 1,189
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,238 1,238
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 371 371
Repurchase Agreements (2.3%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,897 on 01/02/2004 2,897 2,897
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $3,937 on 01/02/2004 3,937 3,937
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,352 on 01/02/2004 2,352 2,352
Shares Value
--------------- ------------
Investment Companies (2.2%)
Money Market Funds (2.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 607,347 $ 607
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,482,882 1,483
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 6,448,061 6,448
---------
Total Security Lending Collateral (cost: $41,989) 41,989
---------
Total Investment Securities (cost: $370,305) $425,586
=========
SUMMARY:
Investments, at value 110.7 % $425,586
Liabilities in excess of other assets (10.7)% (41,296)
--------- ---------
Net assets 100.0 % $384,290
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 5
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$40,265.
(c) Cash collateral for the Repurchase Agreements, valued at $9,371, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, collateral for repurchase agreements excluding
collateral for securities on loan is as follows:
Market Value
Collateral and Accrued Interest
- ----------------------------------------------- ---------------------
$25,000 Fannie Mae Floating Rate Note
Series 2002-W6-Class 2F
1.54%, due 06/25/2042 $ 16,937
$3,385 SBA-505506
4.38%, due 04/25/2014 2,678
$13,166 Fannie Mae-Conventional Pool #671018
5.50%, due 01/01/2033 11,232
--------
$ 30,847
========
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 6
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $370,305)
(including $40,265 of securities loaned) $425,586
Cash 104
Receivables:
Interest 2
Dividends 867
Other 36
---------
426,595
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 269
Distribution fees 1
Payable for collateral for securities on loan 41,989
Other 46
---------
42,305
---------
Net Assets $384,290
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 257
Additional paid-in capital 319,612
Undistributed net investment income (loss) 4,185
Undistributed net realized gain (loss) from
investment securities 4,955
Net unrealized appreciation (depreciation) on
investment securities 55,281
---------
Net Assets $384,290
=========
Shares Outstanding:
Initial Class 25,604
Service Class 61
Net Asset Value and Offering Price Per Share:
Initial Class $ 14.97
Service Class 15.06
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 41
Dividends 6,800
Income from loaned securities-net 35
Less withholding taxes on foreign dividends (36)
--------
6,840
--------
Expenses:
Management and advisory fees 2,524
Transfer agent fees 2
Printing and shareholder reports 45
Custody fees 32
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 12
Other 6
Service fees:
Service Class 1
--------
Total expenses 2,656
--------
Net Investment Income (Loss) 4,184
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 17,606
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 65,852
--------
Net Gain (Loss) on Investment Securities 83,458
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 87,642
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 7
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 4,184 $ 2,653
Net realized gain (loss) from
investment securities 17,606 (10,728)
Net unrealized appreciation
(depreciation) on investment
securities 65,852 (19,339)
-------- ---------
87,642 (27,414)
-------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (2,653) (1,667)
Service Class - -
-------- ---------
(2,653) (1,667)
-------- ---------
From net realized gains:
Initial Class - (5,140)
Service Class - -
-------- ---------
- (5,140)
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 111,588 153,715
Service Class 892 -
-------- ---------
112,480 153,715
-------- ---------
Dividends and distributions reinvested:
Initial Class 2,653 6,807
Service Class - -
-------- ---------
2,653 6,807
-------- ---------
Cost of shares redeemed:
Initial Class (57,904) (49,832)
Service Class (80) -
-------- ---------
(57,984) (49,832)
-------- ---------
57,149 110,690
-------- ---------
Net increase (decrease) in net assets 142,138 76,469
-------- ---------
Net Assets:
Beginning of year 242,152 165,683
-------- ---------
End of year $384,290 $ 242,152
======== =========
Undistributed Net Investment
Income (Loss) $ 4,185 $ 2,654
======== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 9,291 12,332
Service Class 67 -
--------- ---------
9,358 12,332
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 205 568
Service Class - -
--------- ---------
205 568
--------- ---------
Shares redeemed:
Initial Class (4,713) (3,841)
Service Class (6) -
---------- ---------
(4,719) (3,841)
--------- ---------
Net increase (decrease) in shares
outstanding 4,844 9,059
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 8
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 11.63 $ 0.17 $ 3.28 $ 3.45
12/31/2002 14.09 0.18 (2.17) (1.99)
12/31/2001 14.37 0.15 (0.41) (0.26)
12/31/2000 12.77 0.15 1.78 1.93
12/31/1999 12.12 0.10 0.85 0.95
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 11.77 0.11 3.19 3.30
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.11) $ - $ (0.11) $ 14.97
(0.12) (0.35) (0.47) 11.63
(0.02) - (0.02) 14.09
(0.18) (0.15) (0.33) 14.37
(0.10) (0.20) (0.30) 12.77
- --------------- --------- --------- --------- ---------
Service Class (0.01) - (0.01) 15.06
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 29.78% $ 383,372 0.84% 0.84% 1.33% 145%
12/31/2002 (14.21) 242,152 0.89 0.89 1.40 200
12/31/2001 (1.81) 165,683 0.94 0.94 1.07 31
12/31/2000 15.19 144,818 0.88 0.88 1.10 46
12/31/1999 7.95 137,158 0.90 0.90 0.77 34
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 28.03 918 1.10 1.10 1.19 145
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 1996
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 9
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. PBHG/NWQ Value Select ("the Fund"), part of ATSF, began operations on
May 1, 1996.
The Fund will acquire BlackRock Large Cap Value effective as of the close of
business on April 30, 2004, subject to approval by Policyowners.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes
of shares, an Initial Class and a Service Class. The Service Class was opened
on May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $15 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 10
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $353 are included in
net realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 13,542 4%
Asset Allocation-Growth Portfolio 39,942 10%
Asset Allocation-Moderate Growth Portfolio 64,859 17%
Asset Allocation-Moderate Portfolio 40,952 11%
--
42%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution fees: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 11
PBHG/NWQ Value Select
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $13. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 445,991
U.S. Government 28,796
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 421,089
U.S. Government 12,074
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 4,103
Long-term capital gains 2,703
2003 Distributions paid from:
Ordinary income 2,653
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 11,676
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ -
========
Post October Capital Loss $ (1,703)
========
Net Unrealized Appreciation (Depreciation) $ 54,449
========
The capital loss carryforward utilized during the period ended December 31,
2003 was $8,837.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $371,137
=========
Unrealized Appreciation $ 55,924
Unrealized (Depreciation) (1,475)
---------
Net Unrealized Appreciation (Depreciation) $ 54,449
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
PBHG/NWQ Value Select
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PBHG/NWQ Value Select (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PBHG/NWQ Value Select 13
PIMCO Total Return
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Bonds gained ground in 2003 despite volatile interest rates, led by higher
yielding corporate and emerging market assets. Although Treasury yields rose
only 20 to 50 basis points for the year, the markets were far from calm. Yields
moved lower through the first half of the year as deflation risks dominated the
news and were the primary drivers of the market's view of future Federal Reserve
Board ("Fed") policy. The Fed cut the federal funds rate to 1% in June and the
10-year Treasury yield plunged to a 45-year low near 3 percent. Rates then
reversed course dramatically, jumping more than 130 basis points in July, the
worst month in the U.S. government bond market in more than 23 years. This
reversal was mainly fueled by investors' growing confidence that growth would
accelerate. Economic performance in the second half of the year met investors'
expectations. Business investment revived while massive fiscal stimulus and the
lagged impact of the mortgage-refinancing boom sustained consumption, leading to
8.2% annual growth in the third quarter, the fastest pace in almost two decades.
The 10-year Treasury yield finished the year at 4.25%, up 43 basis points for
the full period. Inflation was well behaved even in the face of surging
commodity prices and a falling U.S. dollar helping to mitigate the rise in
interest rates.
PERFORMANCE
For the year ended December 31, 2003, PIMCO Total Return returned 4.90%. By
comparison its benchmark, the Lehman Brothers Aggregate Bond Index returned
4.10%.
STRATEGY REVIEW
Active management across a wide spectrum of strategies -- "rolling down" a steep
yield curve, select mortgages and corporates, Treasury Inflation-Indexed
Securities ("TIPS"), municipals, Eurozone issues and emerging markets -- added
value amid volatile markets in 2003. Given the steep yield curve, we took
advantage of the "roll down," or price appreciation of bonds that were revalued
at lower yields over the course of 2003.
Interest rate strategies were modestly positive for the year; on the whole, an
above index duration hurt as rates rose, but was positively offset by a
favorable maturity focus that benefited the portfolio as a rather steep yield
curve flattened modestly.
A corporate underweight was negative as profits and margins improved but
positive security selection of energy, pipeline, and telecommunication issuers
mitigated this impact. Despite the mortgage sector's underperformance for 2003,
positive security selection helped strengthen returns as we kept the portfolio's
allocation near its benchmark. Allocations to real return and municipal bonds
helped returns; these less volatile assets outperformed amid rising rates.
Emerging market bonds strongly boosted returns as credit fundamentals within the
asset class continued to improve. Non-U.S. exposure, mainly to Eurozone issues,
had minimal impact as rates rose comparably in major developed markets. Finally,
modest currency exposure to the euro and Yen helped returns as the dollar fell
amid concern about the U.S. trade deficit.
/s/ William H. Gross
William H. Gross
Portfolio Manager
Pacific Investment Management Company LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 1
PIMCO Total Return
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
LB Aggregate
Initial Class Bond Index
5/1/02 $10,000 $10,000
6/30/02 10,040 10,172
9/30/02 10,380 10,638
12/31/02 10,620 10,806
3/31/03 10,780 10,956
6/30/03 11,060 11,230
9/30/03 11,060 11,214
12/31/03 11,140 11,249
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
---------- ----------- ----------
Initial Class 4.90% 6.70% 5/1/02
LBAB(1) 4.10% 7.30% 5/1/02
- ----- ---- ---- ------
Service Class - 2.14% 5/1/03
- --------------- ---- ---- ------
NOTES
(1) The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged index used
as a general measure of market performance. Calculations assume dividends
and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 2
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
U.S. GOVERNMENT OBLIGATIONS (5.0%)
U.S. Treasury Inflation Index
3.50%, due 01/15/2011 $ 1,116 $ 1,254
3.38%, due 01/15/2012 17,702 19,808
3.88%, due 04/15/2029 4,670 6,051
U.S.Treasury Note
3.38%, due 11/15/2008 800 806
---------
Total U.S. Government Obligations (cost: $28,085) 27,919
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (25.5%)
Fannie Mae
3.00%, due 08/25/2009 700 703
6.00%, due 11/25/2027 1,330 1,347
6.50%, due 06/25/2028 1,697 1,705
Fannie Mae-Conventional Pool
5.50%, due 03/01/2016 662 688
5.50%, due 07/01/2016 811 842
5.50%, due 11/01/2016 738 766
5.50%, due 12/01/2016 491 509
6.00%, due 01/01/2017 15 16
5.50%, due 02/01/2017 2,929 3,039
5.50%, due 03/01/2017 466 484
5.50%, due 04/01/2017 922 956
5.50%, due 05/01/2017 161 167
6.00%, due 05/01/2017 12 12
5.50%, due 06/01/2017 149 154
6.00%, due 06/01/2017 488 512
5.50%, due 08/01/2017 301 312
5.50%, due 09/01/2017 3,121 3,238
5.50%, due 11/01/2017 3,212 3,332
5.50%, due 01/01/2018 516 535
5.00%, due 02/01/2018 40 41
5.50%, due 02/01/2018 861 893
5.00%, due 05/01/2018 939 959
5.50%, due 06/01/2018 919 953
5.00%, due 08/01/2018 447 456
6.50%, due 07/01/2032 1,238 1,295
6.00%, due 09/01/2032 414 428
6.00%, due 01/01/2033 4,902 5,069
6.00%, due 03/01/2033 4,824 4,988
5.39%, due 04/01/2033 505 516
6.00%, due 07/01/2033 8,240 8,520
6.00%, due 09/01/2033 500 517
5.50%, due 10/01/2033 10,409 10,548
6.00%, due 10/01/2033 5,000 5,171
5.50%, due 11/01/2033 9,291 9,417
5.50%, due 12/01/2033 6,500 6,590
Fannie Mae (d)
3.70%, due 01/01/2028 295 306
1.54%, due 11/25/2032 1,136 1,138
Principal Value
------------------------- ---------------
Freddie Mac
5.00%, due 09/15/2016 $ 1,123 $ 1,157
6.00%, due 08/15/2026 182 184
6.00%, due 11/15/2027 44 44
6.00%, due 04/15/2028 541 543
4.50%, due 08/15/2031 110 109
6.50%, due 07/25/2043 560 581
6.00%, due 12/15/2007 337 346
6.00%, due 03/15/2027 88 88
6.00%, due 04/15/2027 733 736
6.00%, due 08/15/2027 821 828
6.50%, due 02/15/2028 486 488
6.50%, due 12/15/2028 1,510 1,528
6.50%, due 02/15/2030 435 445
Freddie Mac-Conventional Pool (d)
3.51%, due 08/01/2023 385 398
Freddie Mac-Gold Pool
6.50%, due 08/01/2032 4,825 5,054
Freddie Mac-Series 2434 TA
5.63%, due 07/15/2028 333 335
Freddie Mac (d)
1.51%, due 12/15/2029 627 625
Ginnie Mae-FHA/VA Pool
6.50%, due 02/15/2029 335 354
6.50%, due 03/15/2029 501 530
6.50%, due 04/15/2029 22 23
6.50%, due 05/15/2029 38 40
6.50%, due 07/15/2029 17 17
6.50%, due 09/15/2029 292 308
6.50%, due 03/15/2031 46 48
6.50%, due 04/15/2031 1,041 1,098
6.50%, due 06/15/2031 558 589
6.50%, due 07/15/2031 497 524
6.50%, due 08/15/2031 250 264
6.50%, due 09/15/2031 254 268
6.50%, due 10/15/2031 528 557
6.50%, due 11/15/2031 1,122 1,184
6.50%, due 12/15/2031 334 352
6.50%, due 01/15/2032 532 561
6.50%, due 02/15/2032 274 289
6.50%, due 04/15/2032 594 627
6.50%, due 05/15/2032 852 899
6.50%, due 08/15/2032 91 96
6.50%, due 09/15/2032 439 463
6.50%, due 10/15/2032 28 30
6.50%, due 11/15/2032 45 47
6.50%, due 01/15/2033 746 786
5.00%, due 03/15/2033 248 246
5.00%, due 05/15/2033 716 711
5.00%, due 06/15/2033 251 249
5.00%, due 07/15/2033 2,515 2,496
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 3
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Ginnie Mae-FHA/VA Pool (continued)
5.00%, due 08/15/2033 $ 7,260 $ 7,202
5.00%, due 09/15/2033 2,844 2,821
Ginnie Mae-January TBA
5.50%, due 01/01/2034 26,250 26,684
6.50%, due 01/01/2034 500 527
Ginnie Mae-Series 2002-40
6.50%, due 06/20/2032 11 12
---------
Total U.S. Government Agency Obligations (cost: $141,093) 141,513
---------
FOREIGN GOVERNMENT OBLIGATIONS (5.6%)
European Investment Bank
0.88%, due 11/08/2004 144,000 1,353
Federal Republic of Germany
3.25%, due 09/24/2004 457 581
4.50%, due 07/04/2009 6,000 7,874
Federative Republic of Brazil
2.00%, due 04/15/2006 1,560 1,541
11.50%, due 03/12/2008 84 97
2.06%, due 04/15/2009 2,103 1,990
11.00%, due 01/11/2012 350 406
8.00%, due 04/15/2014 292 286
8.88%, due 04/15/2024 350 339
12.25%, due 03/06/2030 350 436
11.00%, due 08/17/2040 1,789 1,968
Republic of Chile
7.13%, due 01/11/2012 2,700 3,082
Republic of Panama
8.25%, due 04/22/2008 10 11
9.63%, due 02/08/2011 610 705
1.94%, due 07/17/2016 573 495
9.38%, due 01/16/2023 1,600 1,744
Republic of Peru
9.13%, due 02/21/2012 120 134
9.88%, due 02/06/2015 2,000 2,320
4.50%, due 03/07/2017 750 668
Republic of South Africa
5.25%, due 05/16/2013 1,650 1,987
Russian Federation (e)
5.00%, due 03/31/2030 1,710 1,639
United Mexican States
8.38%, due 01/14/2011 1,270 1,508
---------
Total Foreign Government Obligations (cost: $27,897) 31,164
---------
MORTGAGE-BACKED SECURITIES (3.2%)
Amortizing Residential Collateral Trust (d)
1.41%, due 07/25/2032 240 240
Bank of America Mortgage
Securities, Inc. (d)
5.74%, due 10/20/2032 471 487
Principal Value
------------------------- ---------------
Bear Stearns Adjustable Rate Mortgage Trust (d)
5.98%, due 06/25/2032 $ 149 $ 154
4.39%, due 01/25/2034 2,899 2,933
4.83%, due 01/25/2034 1,586 1,597
4.95%, due 01/25/2034 1,199 1,205
CDC Mortgage Capital Trust (d)
1.41%, due 01/25/2033 237 236
Chase Mortgage Finance Corporation
6.50%, due 02/25/2029 469 468
Citicorp Mortgage Securities, Inc.
6.50%, due 04/25/2029 1,478 1,488
Countrywide Alternative Loan Trust
Series 2003-J1 (d)
6.00%, due 10/25/2032 506 519
Countrywide Home Loan Trust-
Series 2002-1 (d)
5.80%, due 03/19/2032 171 176
Countrywide Home Loans, Inc. (d)
4.99%, due 09/19/2032 563 570
CS First Boston Mortgage Securities Corp.
2.14%, due 03/25/2032 329 328
1.59%, due 09/27/2032 1,365 1,358
GSMPS Mortage Loan Trust
7.00%, due 06/25/2043 835 886
Home Equity Asset Trust (d)
1.42%, due 11/25/2032 240 239
Residential Funding Mortgage
Securities I, Inc.
6.50%, due 03/25/2032 361 372
Sequoia Mortgage Funding
Corporation-Series 10 (d)
1.50%, due 10/20/2027 1,318 1,321
Small Business Administration
Participation Certificates
5.13%, due 09/01/2023 650 658
Structured Asset Mortgage Investments Inc. (d)
1.45%, due 09/19/2032 519 514
Structured Asset Securities
Corporation (d)
1.43%, due 01/25/2033 21 21
Washington Mutual (d)
3.17%, due 02/27/2034 547 556
Washington Mutual Mortgage
Securities Corporation (d)
2.84%, due 12/25/2040 686 691
Wells Fargo Mortgage Backed
Securities Trust
6.25%, due 05/25/2031 680 679
Wells Fargo Mortgage Backed
Securities Trust-Series 2002-E (d)
5.02%, due 09/25/2032 201 204
---------
Total Mortgage-Backed Securities (cost: $17,931) 17,900
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 4
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
ASSET-BACKED SECURITIES (0.9%)
Bear Stearns Asset Backed
Securities, Inc. (d)
1.47%, due 10/25/2032 $ 295 $ 296
EFSI, Federated Student Finance
Corporation (d)
1.14%, due 06/01/2039 2,100 2,098
Morgan Stanley Capital I Inc. Series
2003-HE2 (d)
1.48%, due 08/25/2033 1,545 1,544
RACERS SER 1997-R-8-3-144A (d)
1.48%, due 08/15/2007 1,100 1,088
Vanderbilt Acquistion Loan Trust (d)
3.28%, due 01/07/2013 70 70
---------
Total Asset-Backed Securities (cost: $5,094) 5,096
---------
CORPORATE DEBT SECURITIES (12.5%)
Air Transportation (0.6%)
Continental Airlines, Inc.
7.06%, due 09/15/2009 1,000 1,019
Delta Air Lines, Inc.
7.57%, due 11/18/2010 300 311
7.11%, due 09/18/2011 1,300 1,311
UAL Corporation
6.20%, due 09/01/2008 700 612
6.60%, due 09/01/2013 200 171
United Air Lines, Inc.
7.73%, due 07/01/2010 150 124
Automotive (0.3%)
DaimlerChrysler North America
Holding Corporation
6.50%, due 11/15/2013 940 990
Ford Motor Company
7.45%, due 07/16/2031 700 707
Business Credit Institutions (0.5%)
Ford Motor Credit Company
7.38%, due 10/28/2009 1,030 1,131
1.41%, due 04/26/2004 (d) 500 500
1.60%, due 07/18/2005 (d) 400 397
National Rural Utilities Cooperative
Finance Corporation (d)
2.16%, due 04/26/2004 1,000 1,003
Business Services (0.1%)
Clear Channel Communications, Inc.
7.25%, due 10/15/2027 300 339
Commercial Banks (0.0%)
HSBC Capital Funding LP-144A (d)(k)
10.18%, due 12/31/2049 100 146
Principal Value
------------------------- ---------------
Communication (0.1%)
Comcast Cable Communications, Inc.
6.75%, due 01/30/2011 $ 210 $ 234
Comcast Corporation
6.50%, due 01/15/2015 200 217
CSC Holdings, Inc.
7.63%, due 04/01/2011 220 232
TCI Communications, Inc.
8.65%, due 09/15/2004 100 105
Electric Services (1.9%)
AEP Texas Central Co.
6.65%, due 02/15/2033 3,775 3,986
Columbus Southern Power Company
5.50%, due 03/01/2013 100 104
Florida Power Corporation
4.80%, due 03/01/2013 1,960 1,947
Ohio Power Company
5.50%, due 02/15/2013 100 103
Oncor Electric Delivery Company
6.38%, due 01/15/2015 600 652
Progress Energy, Inc.
6.55%, due 03/01/2004 600 604
6.85%, due 04/15/2012 1,600 1,783
PSEG Power LLC
6.95%, due 06/01/2012 921 1,039
Electric, Gas & Sanitary Services (0.2%)
Niagara Mohawk Power Corporation
7.75%, due 10/01/2008 825 957
Electronic Components & Accessories (0.3%)
Tyco International Group SA
6.38%, due 10/15/2011 1,510 1,614
Environmental Services (0.2%)
Waste Management, Inc.
7.38%, due 08/01/2010 700 809
6.38%, due 11/15/2012 375 407
Food Stores (0.4%)
Kroger Co. (The)
6.20%, due 06/15/2012 1,900 2,038
Gas Production & Distribution (0.5%)
El Paso Corporation
7.80%, due 08/01/2031 500 426
7.75%, due 01/15/2032 425 362
Sonat Inc.
7.63%, due 07/15/2011 1,000 926
Southern Natural Gas Company
8.00%, due 03/01/2032 820 847
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 5
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
General Obligation-County (0.3%)
Cook County, Illinois Public
Improvements, General Obligation Bonds,
5.13%, due 11/15/2026 $ 1,400 $ 1,429
General Obligation-State (0.1%)
Illinois State, Pension Funding,
General Obligation Bonds,
5.10%, due 06/01/2033 800 736
Health Services (0.2%)
HEALTHSOUTH Corporation (b)
7.63%, due 06/01/2012 1,330 1,244
Holding & Other Investment Offices (0.3%)
Premium Asset Trust-144A (d)
1.30%, due 06/28/2004 720 720
Rabobank Nederland-Series 144A
5.26%, due 12/31/2049 1,000 1,001
Hotels & Other Lodging Places (0.3%)
Harrah's Operating Company, Inc.
8.00%, due 02/01/2011 50 59
Hilton Hotels Corporation
7.00%, due 07/15/2004 500 513
Park Place Entertainment Corporation
7.50%, due 09/01/2009 800 880
Starwood Hotels & Resorts Worldwide, Inc.
7.88%, due 05/01/2012 350 394
Life Insurance (0.0%)
Protective Life Corporation-144A (d)
1.24%, due 09/26/2005 260 260
Motion Pictures (0.1%)
Time Warner Inc.
8.11%, due 08/15/2006 150 170
6.88%, due 05/01/2012 410 461
Oil & Gas Extraction (0.3%)
Kerr-McGee Corporation-144A (d)
1.89%, due 06/28/2004 5 5
Pemex Project Funding Master Trust
7.38%, due 12/15/2014 1,300 1,388
Personal Credit Institutions (1.6%)
General Motors Acceptance Corporation
6.88%, due 08/28/2012 150 161
1.88%, due 01/20/2004 (d) 500 500
2.41%, due 10/20/2005 (d) 4,410 4,443
Household Finance Corporation
6.38%, due 11/27/2012 800 878
2.42%, due 03/11/2004 (d) 700 702
1.47%, due 06/17/2005 (d) 1,000 1,004
Principal Value
------------------------- ---------------
Personal Credit Institutions (continued)
SLM Corporation (d)
1.37%, due 09/15/2006 $ 230 $ 230
VW Credit Leasing, Ltd. (d)
1.45%, due 01/21/2005 360 360
Primary Metal Industries (0.1%)
Alcan Inc.-144A (d)
1.43%, due 12/08/2004 800 798
Radio & Television Broadcasting (0.1%)
Turner Broadcasting System, Inc.
7.40%, due 02/01/2004 500 502
Railroads (0.1%)
Norfolk Southern Corporation
6.75%, due 02/15/2011 550 626
Revenue-Building Authority (0.2%)
Michigan State Building Authority,
Revenue Bonds, Series I,
5.25%, due 10/15/2013 950 1,087
Revenue-Education (1.0%)
Brazos-Texas Higher Education
Authority Inc., Revenue Bonds,
1.15%, due 01/01/2038 800 800
1.18%, due 05/01/2030 (d) 1,700 1,700
1.23%, due 07/01/2036 700 700
Michigan State Higher Educational
Student Loan Authority, Revenue
Bonds, Series X11-Z2(d)
1.14%, due 09/01/2033 1,100 1,100
Pennsylvania State Higher Educational
Assistance Agency, Revenue Bonds,
Series F3, 1.19%, due 10/01/2040 1,300 1,300
Revenue-Pollution Control (0.2%)
New York State Environmental
Facilities, Revenue Bonds,
5.00%, due 06/15/2032 240 246
5.00%, due 06/15/2033 80 82
5.00%, due 07/15/2033 70 72
Rhode Island Clean Water Financing
Agency, Revenue Bonds, Series A,
5.00%, due 10/01/2028 610 615
Revenue-Special (0.1%)
Tobacco Settlement Financing
Corporation, New Jersey,
Revenue Bonds,
6.00%, due 06/01/2037 770 688
Revenue-Tobacco (0.6%)
Golden State Tobacco Securitization
Corporation, California,
Revenue Bonds, Series 2003-A-1,
6.75%, due 06/01/2039 460 453
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 6
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
------------------------- ---------------
Revenue-Tobacco (continued)
Golden State Tobacco Securitization
Corporation, California,
Revenue Bonds, Series A-2,
7.90%, due 06/01/2042 $ 195 $ 210
Iowa Tobacco Settlement Authority,
Revenue Bonds, Series B,
5.60%, due 06/01/2035 705 595
Tobacco Settlement Financing
Corporation, New Jersey,
Revenue Bonds,
6.38%, due 06/01/2032 2,175 2,110
Revenue-Transportation (0.2%)
Florida State Turnpike Authority,
Revenue Bonds, Series C,
5.00%, due 07/01/2033 140 144
New Jersey State Transit Authority,
Revenue Bonds, Series C,
5.00%, due 06/15/2011 690 768
Revenue-Utilities (0.4%)
De Kalb County Georgia Water &
Sewer, Revenue Bonds, Series A,
5.00%, due 10/01/2035 610 626
New York City Municipal Water
Finance Authority,
Revenue Bonds, Series A,
5.00%, due 06/15/2035 340 347
San Antonio, Texas Water Utility
Improvements, Revenue Bonds, Series A,
5.00%, due 05/15/2032 1,400 1,425
South Central Connecticut Regional
Water Authority, Revenue Bonds, Series A,
5.00%, due 08/01/2033 70 72
Security & Commodity Brokers (0.1%)
Bear Stearns Companies Inc. (The)
7.63%, due 12/07/2009 560 661
Telecommunications (1.1%)
AT&T Corp. (h)
7.25%, due 11/15/2006 850 940
Cingular Wireless
6.50%, due 12/15/2011 560 612
Deutsche Telekom AG (i)
7.75%, due 06/15/2005 325 353
Deutsche Telekom International (i)
Finance BV
8.50%, due 06/15/2010 600 725
France Telecom (j)
9.75%, due 03/01/2031 1,635 2,172
Sprint Capital Corporation
5.88%, due 05/01/2004 950 961
7.63%, due 01/30/2011 50 56
Principal Value
------------------------- ---------------
Telecommunications (continued)
Sprint Capital Corporation-144A
8.75%, due 03/15/2032 $ 200 $ 236
Verizon Global Funding Corp.
7.60%, due 03/15/2007 25 28
---------
Total Corporate Debt Securities (cost: $66,223)
69,501
---------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS (22.7%)
Fannie Mae
1.08%, due 02/18/2004 8,700 8,687
1.08%, due 02/23/2004 6,800 6,789
1.08%, due 02/25/2004 5,600 5,591
1.05%, due 03/17/2004 2,800 2,794
1.05%, due 03/24/2004 1,700 1,696
1.04%, due 03/31/2004 1,000 997
Federal Home Loan Bank
1.04%, due 03/12/2004 2,100 2,096
Freddie Mac
1.07%, due 01/29/2004 2,000 1,998
1.08%, due 02/05/2004 8,700 8,691
1.08%, due 02/12/2004 12,200 12,185
U.S. Treasury Bill
0.88%, due 03/18/2004 (a) 3,185 3,179
0.99%, due 04/15/2004 19,200 19,146
1.00%, due 04/15/2004 5,700 5,683
1.01%, due 04/22/2004 23,200 23,127
1.02%, due 05/06/2004 7,800 7,772
1.01%, due 05/27/2004 13,700 13,643
1.03%, due 06/03/2004 2,000 1,991
---------
Total Short-Term U.S. Government Obligations (cost: $126,065)
126,065
---------
COMMERCIAL PAPER (21.8%)
ABN-AMRO North America Finance, Inc.
1.07%, due 01/26/2004 1,600 1,599
1.08%, due 02/03/2004 9,100 9,090
Alcon Capital Corporation-144A
1.08%, due 01/29/2004 10,000 9,993
Commonwealth Bank of Australia
(Delaware) Finance, Inc.
1.07%, due 02/17/2004 3,400 3,395
1.08%, due 02/20/2004 8,500 8,487
du Pont (E.I.) de Nemours and Company
1.07%, due 03/02/2004 5,700 5,690
General Electric Capital Corporation
1.11%, due 03/12/2004 1,800 1,796
1.10%, due 03/16/2004 900 898
1.11%, due 04/08/2004 10,000 9,969
HBOS Treasury Services PLC
1.11%, due 03/19/2004 1,900 1,895
1.08%, due 04/01/2004 3,400 3,391
KfW International Finance Inc.-144A
1.08%, due 02/24/2004 15,000 14,977
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 7
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------- ------------
Nestle Capital Corp-144A
1.06%, due 02/09/2004 $ 1,000 $ 999
Nestle Captial Corp-144A
1.08%, due 02/02/2004 10,000 9,990
Rabobank USA Finance Corp
1.06%, due 01/30/2004 6,300 6,295
Royal Bank of Scotland Group PLC (The)
1.08%, due 02/03/2004 2,500 2,498
Shell Finance (UK) PLC
1.07%, due 03/10/2004 10,000 9,978
UBS Finance (Delaware) LLC
1.06%, due 01/20/2004 1,900 1,899
1.07%, due 04/05/2004 2,500 2,493
Westpac Capital Corporation
1.10%, due 04/07/2004 15,700 15,654
---------
Total Commercial Paper (cost: $120,986) 120,986
---------
CERTIFICATES OF DEPOSITS (4.5%)
Morgan Chase & Co. (J.P.)
1.07%, due 02/09/2004 12,000 12,000
Wells Fargo Bank, NA
1.07%, due 01/13/2004 13,000 13,000
---------
Total Certificates of Deposits (cost: $25,000) 25,000
---------
Total Investment Securities (cost: $558,374) $ 565,144
=========
Notional Amount Value
-------------------- --------------
WRITTEN SWAPTIONS (0.1%)
Covered Call Swaptions (0.1%)
LIBOR Rate Swaption (l)
Call Strike 3.25%
Expires 03/03/2004 19,000 $ (36)
LIBOR Rate Swaption (l)
Call Strike 4.00%
Expires 03/03/2004 17,100 (18)
LIBOR Rate Swaption (l)
Call Strike 4.00%
Expires 01/07/2005 7,000 (82)
LIBOR Rate Swaption (l)
Call Strike 3.80%
Expires 10/07/2004 37,600 (307)
Put Swaptions (0.0%)
LIBOR Rate Swaption (m)
Put Strike 7.00%
Expires 01/07/2005 7,000 (33)
Notional Amount Value
-------------------- --------------
Put Swaptions (continued)
LIBOR Rate Swaption (m)
Put Strike 6.00%
Expires 10/07/2004 37,600 $ (287)
---------
Total Written Swaptions (premium: $1,586)
(763)
=========
SUMMARY:
Investments, at value 101.7 % $ 565,144
Written swaptions (0.1)% (763)
Liabilities in excess of other assets (1.6)% (8,843)
------- ---------
Net assets 100.0 % $ 555,538
======= =========
SWAP AGREEMENTS:
- ------------------------------------------------------------------------------
Net Unrealized
Expiration Notional Appreciation
Date Amount (Depreciation)
------------ ------------ ---------------
Receive a fixed rate equal to 5.00%
and pay floating rate based on
3-month LIBOR.
Counterparty: Merrill Lynch Capital
Services, Inc. 06/16/2014 $ 5,700 $ 13
Receive a fixed rate equal to 1.07%
and pay floating rate based on
6-month Japanese Yen - LIBOR.
Counterparty: Morgan Stanley
Capital Services Inc. 06/02/2012 670,000 151
Receive a fixed rate equal to 1.50%
and pay floating rate based on
3-month Swiss Franc - LIBOR.
Counterparty: J.P. Morgan
Chase Bank 03/29/2005 77,000 120
Receive a fixed rate equal to 1.31%
and the Fund will pay to the
counterparty at par in the event of
default of United Mexican States,
11.50%, due 05/15/2026.
Counterparty: Goldman Sachs
Capital Markets, L.P. 01/29/2005 800 9
--------- -----
Total Swap Agreements
(premium: $292) $ 753,500 $ 293
========= =====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 8
PIMCO Total Return
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
FORWARD FOREIGN CURRENCY CONTRACTS:
- -------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- -------------- ------------- ------------ --------------- ---------------
Euro Dollar (12) 01/02/2004 $ (16) $ --
Euro Dollar (8,418) 01/07/2004 (10,303) (311)
Japanese Yen (160,000) 01/15/2004 (1,485) (8)
----------- ----------
$ (11,804) $ (319)
=========== =========
FUTURES CONTRACTS:
- ---------------------------------------------------------------------------
Net Unrealized
Settlement Appreciation
Contracts (c) Date Amount (Depreciation)
--------------- ------------ ------------ ---------------
Euro Dollar 14 03/14/2005 $ 3,381 $ 29
Euro Dollar 126 06/13/2005 30,594 (35)
Euro-BOBL (f) 20 03/10/2004 2,682 20
IMM Euro Dollar 14 09/13/2004 3,412 27
U.S. Treasury
Long Bond 22 03/31/2004 2,393 12
3 Month Euro
Euribor (g) 205 03/14/2005 56,994 (23)
5-Year U.S.
Treasury Note 437 03/31/2004 48,476 305
10-Year U.S.
Treasury Note 792 03/31/2004 88,028 886
90-Day Euro
Dollar 239 12/13/2004 58,343 117
--------- -------
$ 294,303 $ 1,338
========= =======
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is segregated with
the custodian to cover margin requirements for open swaption and futures
contracts. The value of all securities segregated at December 31, 2003, is
$3,179.
(b) Securities are currently in default on interest payments.
(c) Contract Amounts are not in thousands.
(d) Floating or variable rate note. Rate is listed as of December 31, 2003.
(e) Securities are stepbonds. Russian Federation has a coupon rate 5.00% until
03/31/2007, thereafter the coupon rate will be 7.50%.
(f) Notional medium-term debt instrument issues by the German Federal
Government.
(g) Euro Interbank Offered Rate.
(h) Securities are stepbonds. Coupon steps up by 25 BP for each rating
downgrade by Standard and Poor's or Moody's for each notch below BBB+/A3.
Coupon steps down by 25 BP for each rating upgrade.
(i) Securities are stepbonds. Coupon steps up by 50 BP if rating is downgraded
below Standard and Poor's single A Rating. Coupon steps down by 50 BP if
rating is raised above Standard and Poor's or Moody's BBB/Baa rating.
(j) Coupon steps up or down by 25 BP for each rating upgrade or downgrade by
Standard and Poor's or Moody's for each notch below A-/A3.
(k) Securities are stepbonds. HSBC Capital Funding LP-144A has a coupon rate of
10.18% until 6/30/2030, thereafter the coupon rate will become the 3 month
LIBOR plus 498 B.P.
(l) An option on an interest rate swap. If exercised, the fund will pay the
strike rate in order to receive the 3 Month LIBOR (London Interbank Offer
Rate).
(m) An option on an interest rate swap. If exercised the fund will pay the 3
Month LIBOR (London Interbank Offer Rate) in order to receive the strike
rate.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $40,213 or 7.24% of the net assets of the
fund.
TBA Mortgage-backed securities traded under delayed delivery commitments.
Income on TBA's are not earned until settlement date.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 9
PIMCO Total Return
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $558,374) $565,144
Cash 4,380
Foreign cash (cost: $1,846) 1,921
Receivables:
Investment securities sold 23,781
Interest 2,587
Variation margin 167
Swap agreements at value (premium $292) 585
---------
598,565
---------
Liabilities:
Investment securities purchased 41,577
Accounts payable and accrued liabilities:
Management and advisory fees 347
Distribution fees 3
Unrealized depreciation on forward foreign
currency contracts 319
Written options and swaptions (premium: $1,586) 763
Other 18
---------
43,027
---------
Net Assets $555,538
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 506
Additional paid-in capital 525,733
Undistributed net investment income (loss) 10,856
Undistributed net realized gain (loss) from investment
securities, futures/options/swaption contracts, swaps
and foreign currency transactions 9,452
Net unrealized appreciation (depreciation) on:
Investment securities 6,770
Futures contracts 1,338
Written option and swaption contracts 823
Swap agreements 293
Translation of assets and liabilities denominated in
foreign currencies (233)
---------
Net Assets $555,538
=========
Shares Outstanding:
Initial Class 50,312
Service Class 276
Net Asset Value and Offering Price Per Share:
Initial Class $ 10.98
Service Class 11.02
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 14,880
Income from loaned securities-net 16
--------
14,896
--------
Expenses:
Management and advisory fees 3,712
Transfer agent fees 2
Printing and shareholder reports 65
Custody fees 110
Administration fees 24
Legal fees 7
Auditing and accounting fees 12
Directors fees 20
Other 11
Service fees:
Service Class 3
--------
Total Expenses 3,966
--------
Net Investment Income (Loss) 10,930
--------
Net Realized Gain (Loss) from:
Investment securities 7,569
Futures contracts 2,795
Written option and swaption contracts 878
Swap agreements (67)
Foreign currency transactions (81)
--------
11,094
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 1,644
Futures contracts (754)
Written option and swaption contracts 804
Swap agreements 293
Translation of assets and liabilities denominated in
foreign currency (270)
--------
1,717
--------
Net Gain (Loss) on Investment Securities, Futures/
Option/Swaption Contracts, Swap Agreements and
Foreign Currency Transactions 12,811
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 23,741
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 10
PIMCO Total Return
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
------------------ ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 10,930 $ 3,132
Net realized gain (loss) from
investment securities, futures/
option/swaption contracts, swap
agreements and foreign currency
transactions 11,094 2,707
Net unrealized appreciation
(depreciation) on investment
securities, futures/option/swaption
contracts, swap agreements and
foreign currency translation 1,717 7,274
--------- --------
23,741 13,113
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (3,130) -
Service Class (1) -
--------- --------
(3,131) -
--------- --------
From net realized gains:
Initial Class (4,413) -
Service Class (11) -
--------- --------
(4,424) -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 325,747 383,456
Service Class 3,857 -
--------- --------
329,604 383,456
--------- --------
Dividends and distributions
reinvested:
Initial Class 7,543 -
Service Class 12 -
--------- --------
7,555 -
--------- --------
Cost of shares redeemed:
Initial Class (182,365) (11,164)
Service Class (847) -
--------- --------
(183,212) (11,164)
--------- --------
153,947 372,292
--------- --------
Net increase (decrease) in net assets 170,133 385,405
--------- --------
Net Assets:
Beginning of year 385,40 -
--------- --------
End of year $ 555,538 $385,405
========= ========
Undistributed Net Investment Income
(Loss) $ 10,856 $ 3,138
========= ========
December 31, December 31,
2003 2002(a)
------------------ ------------------
Share Activity:
Shares issued:
Initial Class 30,210 37,366
Service Class 353 -
---------- ---------
30,563 37,366
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 718 -
Service Class 1 -
---------- ---------
719 -
---------- ---------
Shares redeemed:
Initial Class (16,894) (1,088)
Service Class (78) -
---------- ---------
(16,972) (1,088)
---------- ---------
Net increase (decrease) in shares
outstanding 14,310 36,278
========== =========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 11
PIMCO Total Return
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 10.62 $ 0.22 $ 0.29 $ 0.51
12/31/2002 10.00 0.20 0.42 0.62
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 10.89 0.12 0.11 0.23
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ (0.06) $ (0.09) $ (0.15) $ 10.98
- - - 10.62
- --------------- --------- --------- --------- ---------
Service Class (0.01) (0.09) (0.10) 11.02
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 4.90% $ 552,494 0.75% 0.75% 2.06% 430%
12/31/2002 6.20 385,405 0.78 0.78 2.86 302
- --------------- ---------- ---- --------- ---- ---- ---- ---
Service Class 12/31/2003 2.14 3,044 0.99 0.99 1.67 430
- --------------- ---------- ---- --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 12
PIMCO Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. PIMCO Total Return ("the Fund"), part of ATSF, began operations on May
1, 2002.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $7 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 13
PIMCO Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
TBA purchase commitments: The Fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed price at a future date,
typically not to exceed 45 days. TBA purchase commitments are considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to settlement date, in addition to the
risk of decline in the value of the Fund's other assets. Unsettled TBA purchase
commitments are valued at the current value of the underlying securities,
according to the procedures described under Security Valuations. TBA purchase
commitments are included in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Interest income, including accretion of discounts and
amortization of premiums, is recorded on the accrual basis commencing on the
settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in market value
of the underlying currencies and from the possible inability of counterparties
to meet the terms of their contracts. Open forward currency contracts at
December 31, 2003, are listed in the Schedule of Investments.
Swap Agreements: The Fund may invest in swap agreements. A swap is an agreement
to exchange the return generated by one instrument for the return generated by
another instrument. The Fund may enter into interest rate and credit default
swap agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest. To the extent
the total return of the security or index underlying the transaction exceeds or
falls short of the offsetting interest rate obligation, the Fund will receive a
payment from or make a payment to the counterparty. In a credit default swap,
one party makes a stream of payments to another party in exchange for the right
to receive a specified return in the event of a default by a third party,
typically corporate issues or sovereign issues of an emerging country, on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of sovereign issuers (i.e., to reduce risk where the
Fund owns or has exposure to the sovereign issuer) or to take an active long or
short position with respect to the likelihood of a particular issuer's default.
Swaps are marked to market daily based upon quotations from market makers and
vendors and the change in value, if any, is recorded as unrealized gain or loss
in the Statement of Operations. Payments received or made at the beginning of
the measurement period are reflected as such on the Statement of Assets and
Liabilities. A liquidation payment received or made at the termination of the
swap is recorded as realized gain or loss in the Statement of Operations. Net
periodic payments are included as part of interest income on the Statement of
Operations.
Entering into these agreements involves, to varying degrees, elements of
credit, market and documentation risk in excess of the amounts recognized on
the Statement of Assets and Liabilities. Such risks involve the possibility
that there will be no liquid market for these agreements, that the counterparty
to the agreements may default on its obligation to perform or disagree as to
the meaning of contractual terms in the agreements, and that there may be
unfavorable changes in interest rates. Open Swap Agreements at December 31,
2003, are listed in the Schedule of Investments.
Futures, options and swaptions contracts: The Fund may enter into futures
and/or options contracts to manage exposure to market, interest rate or
currency fluctuations. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded. Option contracts are valued at the average of the bid and ask ("Mean
Quote") established each day at the close of the board of trade or exchange on
which they are traded. The primary risks associated with futures contracts and
options are imperfect correlation between the change in value of the securities
held and the prices of futures contracts and options; the possibility of an
illiquid market and inability of the counterparty to meet the contract terms.
When the Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 14
PIMCO Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Assets and Liabilities as an asset and as an equivalent liability. The amount
of the liability is subsequently marked-to-market to reflect the current value
of the option written.
The Fund is authorized to write swaption contracts to manage exposure to
fluctuations in interest rates and to enhance portfolio yield. Swaption
contracts written by the Fund represents an option that gives the purchaser the
right, but not the obligation, to enter into a previously agreed upon swap
contract on a future date. If a written call option is exercised, the writer
will enter a swap and is obligated to pay the fixed rate and receive a fixed
rate in exchange. Swaptions are marked-to-market daily based upon quotations
from market makers.
When the Fund writes a swaption, the premium received is recorded as a
liability and is subsequently adjusted to the current value of the swaption.
Changes in the value of the swaption are reported as Unrealized gains or losses
in written options in the Statement of Assets and Liabilities. Gain or loss is
recognized when the swaption contract expires or is closed. Premiums received
from writing swaptions that expire or are exercised are treated by the
portfolio as realized gains from written options. The difference between the
premium and the amount paid on effecting a closing purchase transaction is also
treated as a realized gain, or if the premium is less than the amount paid for
the closing purchase, as a realized loss.
Entering into a swaption contract involves, to varying degrees, the elements of
credit, market and interest rate risk in excess of the amounts reported in the
Statement of Assets and Liabilities, associated with both option contracts and
swap contracts. To reduce credit risk from potential counterparty default, the
portfolio enters into swaption contracts with counterparties whose
creditworthiness has been approved by the Board of Trustees. The portfolio bears
the market risk arising from any changes in index values or interest rates.
The underlying face amounts of open futures, option, and swaption contracts at
December 31, 2003, are listed in the Schedule of Investments. The variation
margin receivable is included in the accompanying Statement of Assets and
Liabilities. The variation margin receivable or payable, as applicable, is
included in the accompanying Statement of Assets and Liabilities. Variation
margin represents the additional payments due or excess deposits made in order
to maintain the equity account at the required margin level.
Transactions in written options were as follows:
Premium Contracts*
--------- -----------
Balance at 12/31/2002 $ 75 125
Sales 648 1,230
Closing Buys (36) (49)
Expirations (687) (1,306)
---- ------
Balance at 12/31/2003 $ - -
==== ======
* Contracts not in thousands.
Transactions in swaptions were as follows:
Notional
Premium Amount
----------- ------------
Beginning Balance at 12/31/2002 859 85,400
Sales 1,376 111,300
Closing Buys (336) (36,100)
Expirations (313) (35,300)
----- -------
Ending Balance at 12/31/2003 $ 1,586 125,300
======= =======
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
---------- -----------
Asset Allocation-Conservative Portfolio $26,214 5%
Asset Allocation-Moderate Growth Portfolio 54,944 10%
Asset Allocation-Moderate Portfolio 62,027 11%
Select+ Conservative 1,396 0%
Select+ Growth & Income 1,175 0%
----
26%
====
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.70% of ANA
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 15
PIMCO Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.20% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $19. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 131,755
U.S. Government 1,378,658
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 170,701
U.S. Government 1,359,020
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (81)
Undistributed net realized capital gains (loss) 81
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 6,289
Long-term capital gains 1,266
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 16
PIMCO Total Return
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 19,712
========
Undistributed Long-term Capital Gains $ 2,146
========
Capital Loss Carryforward $ -
========
Post October Currency Loss $ 344
========
Net Unrealized Appreciation (Depreciation) $ 6,748
========
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $558,396
========
Unrealized Appreciation $ 7,417
Unrealized (Depreciation) (669)
--------
Net Unrealized Appreciation (Depreciation) $ 6,748
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 17
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
PIMCO Total Return
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PIMCO Total Return (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
PIMCO Total Return 18
Salomon All Cap
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Salomon All Cap outperformed its benchmark, the Russell 3000 Index ("Russell
3000") in 2003. Contributing to the positive results in the recently completed
year were sector and security positions that benefited from an improving
economy. Early in 2003 we determined that a pro-cyclical tilt was appropriate in
constructing portfolios. In addition, we believed that 2003, like 1975, would
experience a pronounced "beta trade", that is the tendency for smaller companies
to outperform larger ones. Historically, the first year after a severe bear
market ends is one in which the "beta trade" occurs. The 1974 bear market ended
in December of that year and the most recent severe bear market ended in early
October 2002. These are the only two severe bear markets in the last 30 years.
Salomon All Cap had approximately 35% of its holdings in smaller and mid-cap
companies and benefited from the outperformance from the small company segment
of the stock market.
High levels of liquidity at the corporate and individual levels and stimulative
monetary and fiscal policy were critical factors leading to outstanding stock
market performance. Early in 2003, money market fund assets were equal to 29% of
the value of the Wilshire 5000 Total Market Index, a broad measure of aggregate
common stock values. This percentage was a record by a wide margin over the last
25 years. We believe this also indicated that investors were pessimistic in
early 2003. In a sense this was the ideal climate for above average equity
returns. It is relatively rare that tremendous liquidity, fuel for the stock
market, investor pessimism and lower valuations, exist side by side.
After the market turned in March of last year, it seemed to us that better
economic results lay immediately ahead. The stock market was particularly
favorable for companies leveraged by prospects for an improving economy.
PERFORMANCE
For the year ended December 31, 2003, Salomon All Cap returned 35.15%. By
comparison its benchmark, the Russell 3000 returned 31.06%.
STRATEGY REVIEW
During 2003, the portfolio was overweighted in information technology ("IT"),
consumer discretionary and the basic materials sectors because we believed these
included companies most sensitive to an improving economy. As a result of these
commitments, those sectors along with the telecommunications services sectors
contributed positively to the portfolio's performance. During the year, we were
underweight in financial services. This detracted from performance. We have been
reducing our IT position to market weight and have increased our holdings in
healthcare to market weight. Previously healthcare had been underweight.
The five largest contributors to performance during 2003 were Maxtor Corporation
("Maxtor"), Telefonaktiebolaget LM Ericsson, Hasbro Inc., 3Com Corporation, and
Lucent Technologies Inc. The position in Maxtor was sold late in 2003.
The five worst performers during the year were Eastman Kodak Company,
Schering-Plough Corporation ("Schering-Plough"), Federated Department Stores,
Inc., St. Paul Companies, Inc. and Clayton Homes, Inc. All, except
Schering-Plough and Eastman Kodak, have been sold.
/s/ John G. Goode
John G. Goode
/s/ Peter J. Hable
Peter J. Hable
Co-Portfolio Managers
Salomon Brothers Asset Management, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 1
Salomon All Cap
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class Russell 3000
5/3/99 $10,000 $10,000
6/30/99 10,750 10,306
9/30/99 10,210 9,627
12/31/99 11,557 11,188
3/31/00 13,014 11,699
6/30/00 13,438 11,295
9/30/00 13,654 11,378
12/31/00 13,672 10,354
3/31/01 13,672 9,095
6/30/01 14,409 9,721
9/30/01 12,493 8,203
12/31/01 13,958 9,167
3/31/02 13,957 9,256
6/30/02 11,799 8,045
9/30/02 9,436 6,658
12/31/02 10,509 7,193
3/31/03 10,140 6,974
6/30/03 11,885 8,107
9/30/03 12,517 8,384
12/31/03 14,203 9,426
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 35.15% 7.81% 5/3/99
Russell 3000(1) 31.06% (1.26)% 5/3/99
- --------------- ----- ----- ------
Service Class - 29.12% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Russell 3000 (Russell 3000) Index is an unmanaged index used as a
general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Investments in a "non-diversified" portfolio may be subject to specific risks
such as susceptibility to single economic political, or regulatory events, and
may be subject to greater loss than investments in a diversified portfolio.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 2
Salomon All Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
----------------------- ---------------
PREFERRED STOCKS (1.1%)
Motion Pictures (1.1%)
News Corporation Limited (The)-ADR (b) 223,400 $ 6,758
---------
Total Preferred Stocks (cost: $6,583) 6,758
---------
COMMON STOCKS (91.6%)
Aerospace (0.9%)
Boeing Company (The) 60,000 2,528
Goodrich Corporation 95,000 2,821
Amusement & Recreation Services (1.0%)
Disney (Walt) Company (The) 263,600 6,150
Apparel & Accessory Stores (0.3%)
Gap, Inc. (The) (b) 87,400 2,029
Automotive (0.8%)
Honeywell International Inc. 150,000 5,015
Business Services (0.8%)
Catalina Marketing Corporation (a)(b) 110,000 2,218
NDCHealth Corporation (b) 94,800 2,429
Chemicals & Allied Products (4.3%)
Cabot Corporation 200,000 6,368
Crompton Corporation 417,500 2,993
Dow Chemical Company (The) 175,000 7,275
Olin Corporation 165,500 3,320
Potash Corporation of Saskatchewan Inc. (b) 67,700 5,855
Commercial Banks (3.4%)
Bank One Corporation 125,000 5,699
Mitsubishi Tokyo Financial Group,
Inc.-ADR (b) 824,000 6,452
Morgan Chase & Co. (J.P.) 81,800 3,005
State Street Corporation 100,000 5,208
Communication (3.0%)
Comcast Corporation-Special Class A (a) 300,000 9,384
Liberty Media Corporation-Class A (a) 728,400 8,661
Communications Equipment (5.6%)
Lucent Technologies Inc. (a)(b) 2,500,000 7,100
Motorola, Inc. 800,000 11,256
Nokia Oyj-ADR 515,500 8,764
Telefonaktiebolaget LM Ericsson-ADR (a)(b) 379,620 6,719
Computer & Data Processing Services (4.5%)
IMS Health Incorporated 160,000 3,978
Micromuse Inc. (a) 518,000 3,574
Microsoft Corporation 214,500 5,907
RealNetworks, Inc. (a) 602,000 3,437
Sabre Holdings Corporation (b) 202,500 4,372
Unisys Corporation (a) 400,000 5,940
Shares Value
----------------------- ---------------
Computer & Office Equipment (2.8%)
3Com Corporation (a) 1,500,000 $ 12,255
Hewlett-Packard Company 201,300 4,624
Construction (0.3%)
Fluor Corporation 47,100 1,867
Drug Stores & Proprietary Stores (0.0%)
Medco Health Solutions, Inc. (a) 5,897 200
Electronic & Other Electric Equipment (0.9%)
Sony Corporation-ADR 150,000 5,201
Electronic Components & Accessories (4.9%)
Intel Corporation 195,800 6,305
Lattice Semiconductor Corporation (a) 215,200 2,083
Solectron Corporation (a) 1,977,400 11,686
Taiwan Semiconductor Manufacturing
Company Ltd.-ADR (a) 600,000 6,144
Texas Instruments Incorporated 100,000 2,938
Environmental Services (1.5%)
Waste Management, Inc. 300,700 8,901
Fabricated Metal Products (0.1%)
Shaw Group Inc. (The) (a)(b) 52,000 708
Food & Kindred Products (1.0%)
Archer Daniels Midland Co. 400,000 6,088
Food Stores (1.3%)
Safeway Inc. (a)(b) 350,000 7,669
Gas Production & Distribution (0.7%)
Williams Companies, Inc. (The) 400,000 3,928
Health Services (0.3%)
Enzo Biochemical, Inc. (a)(b) 105,000 1,881
Holding & Other Investment Offices (0.3%)
Friedman, Billings, Ramsey Group, Inc. 70,300 1,623
Hotels & Other Lodging Places (0.7%)
Extended Stay America, Inc. 280,000 4,054
Industrial Machinery & Equipment (1.7%)
Caterpillar, Inc. 60,000 4,981
Deere & Company 36,100 2,348
Ingersoll-Rand Company-Class A 38,500 2,613
Instruments & Related Products (3.1%)
Agilent Technologies, Inc. (a) 224,700 6,570
Eastman Kodak Company (b) 117,100 3,006
Raytheon Company 300,000 9,011
Insurance (5.1%)
Ambac Financial Group, Inc. 81,400 5,648
Chubb Corporation 100,000 6,810
CNA Surety Corporation (a) 303,300 2,884
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 3
Salomon All Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
----------------------- ---------------
Insurance (continued)
MBIA, Inc. 54,600 $ 3,234
MGIC Investment Corporation (b) 88,500 5,039
Radian Group, Inc. 150,000 7,313
Insurance Agents, Brokers & Service (1.6%)
Hartford Financial Services Group, Inc. (The) 61,700 3,642
Marsh & McLennan Companies, Inc. 126,700 6,068
Life Insurance (0.1%)
Scottish Annuity & Life Holdings, Ltd. 38,200 794
Lumber & Other Building Materials (0.6%)
Home Depot, Inc. (The) 102,800 3,648
Lumber & Wood Products (2.2%)
Georgia-Pacific Corporation (b) 169,400 5,195
Weyerhaeuser Company 125,000 8,000
Manufacturing Industries (1.2%)
Hasbro Inc. 344,800 7,337
Metal Mining (1.6%)
Newmont Mining Corporation (b) 200,000 9,722
Motion Pictures (3.2%)
Metro-Goldwyn-Mayer Inc. (a)(b) 239,607 4,095
News Corporation Limited (The)-ADR (b) 128,200 4,628
Time Warner Inc. (a) 583,000 10,488
Oil & Gas Extraction (3.0%)
Anadarko Petroleum Corporation 68,300 3,484
GlobalSantaFe Corporation 200,000 4,966
Halliburton Company 228,600 5,944
Schlumberger Limited 65,000 3,557
Paper & Allied Products (0.7%)
Smurfit-Stone Container Corporation (a) 174,500 3,240
St. Joe Company (The) 22,300 832
Petroleum Refining (2.6%)
Amerada Hess Corporation 50,000 2,659
ChevronTexaco Corporation 100,000 8,639
Murphy Oil Corporation 70,500 4,604
Pharmaceuticals (12.4%)
Abbott Laboratories 200,000 9,319
Aphton Corporation (a)(b) 150,000 900
Bristol-Myers Squibb Co. 250,000 7,150
Elan Corporation PLC-ADR (a)(b) 847,800 5,841
Genelabs Technologies, Inc. (a) 300,600 842
Johnson & Johnson 175,000 9,040
McKesson HBOC, Inc. 51,000 1,640
Merck & Co., Inc. 180,000 8,316
Novartis AG-ADR 182,800 8,389
Pfizer Inc. 325,000 11,482
Schering-Plough Corporation 155,000 2,695
Wyeth 150,000 6,368
XOMA Ltd. (a) 426,300 2,814
Shares Value
----------------------- ---------------
Primary Metal Industries (3.5%)
Alcoa Inc. 275,000 $ 10,450
Allegheny Technologies Incorporated 372,800 4,928
Brush Engineered Materials Inc. (a) 60,000 919
Engelhard Corporation 59,600 1,785
Nucor Corporation (b) 52,100 2,918
Restaurants (1.0%)
McDonald's Corporation 242,800 6,029
Security & Commodity Brokers (2.3%)
American Express Company 150,600 7,263
Merrill Lynch & Co., Inc. 82,700 4,850
Morgan Stanley 30,000 1,736
Telecommunications (3.5%)
Nippon Telegraph and Telephone
Corporation-ADR 200,000 4,912
SBC Communications Inc. 325,000 8,473
Vodafone Group PLC-ADR 296,500 7,424
Transportation Equipment (0.2%)
Fleetwood Enterprises, Inc. (a)(b) 99,000 1,016
Variety Stores (1.4%)
Costco Wholesale Corporation (a)(b) 223,800 8,321
Wholesale Trade Durable Goods (1.2%)
IKON Office Solutions, Inc. 600,000 7,116
----------
Total Common Stocks (cost: $469,553) 550,547
----------
Principal Value
-------------- ------------
SHORT-TERM OBLIGATIONS (7.8%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $46,841 on 01/02/2004 $ 46,839 $ 46,839
---------
Total Short-Term Obligations (cost: $46,839) 46,839
---------
SECURITY LENDING COLLATERAL (11.4%)
Debt (9.1%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 323 323
Fleet National Bank
1.00%, due 01/21/2004 1,212 1,212
National Bank of Commerce
1.19%, due 04/21/2004 1,010 1,010
Commercial Paper (2.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 606 606
Delaware Funding Corporation
1.08%, due 01/07/2004 402 402
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 606 606
1.09%, due 01/13/2004 404 404
1.08%, due 02/05/2004 806 806
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 4
Salomon All Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
------------------------- ---------------
Commercial Paper (continued)
General Electric Capital Corporation
1.09%, due 01/08/2004 $ 1,007 $ 1,007
1.09%, due 01/09/2004 606 606
1.08%, due 01/16/2004 804 804
Govco Incorporated-144A
1.07%, due 02/05/2004 1,009 1,009
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,008 1,008
1.09%, due 02/06/2004 1,008 1,008
1.10%, due 02/09/2004 589 589
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,008 1,008
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 606 606
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,170 1,170
1.08%, due 02/17/2004 2,016 2,016
Sheffield Receivables-144A
1.09%, due 01/21/2004 404 404
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 2,019 2,019
Credit Agricole Indosuez
0.98%, due 01/02/2004 81 81
1.08%, due 01/06/2004 767 767
Euro Dollar Terms (2.2%)
Bank of Montreal
1.06%, due 01/15/2004 394 394
1.06%, due 02/17/2004 808 808
Bank of Scotland
1.06%, due 04/02/2004 606 606
Citigroup Inc.
1.10%, due 01/22/2004 606 606
1.09%, due 02/06/2004 808 808
Credit Agricole Indosuez
1.08%, due 01/28/2004 404 404
Den Danske Bank
1.08%, due 01/20/2004 2,019 2,019
1.02%, due 01/30/2004 1,010 1,010
Royal Bank of Canada
1.05%, due 02/27/2004 2,019 2,019
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,212 1,212
1.08%, due 01/15/2004 404 404
1.08%, due 01/20/2004 202 202
Svenska Handelsbanken AB
1.09%, due 01/15/2004 202 202
Principal Value
------------------------- ---------------
Euro Dollar Terms (continued)
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 $ 1,212 $ 1,212
Wells Fargo & Company
1.04%, due 01/30/2004 1,615 1,615
Master Notes (0.7%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 808 808
1.14%, due 09/08/2004 1,212 1,212
Morgan Stanley
1.05%, due 06/21/2004 1,939 1,939
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 2,018 2,018
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 606 606
Repurchase Agreements (2.6%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $4,724 on 01/02/2004 4,724 4,724
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $6,421 on 01/02/2004 6,421 6,421
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $3,836 on 01/02/2004 3,836 3,836
Shares Value
---------------- ------------
Investment Companies (2.3%)
Money Market Funds (2.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 990,559 $ 991
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,418,524 2,419
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 10,516,540 10,517
---------
Total Security Lending Collateral (cost: $68,483) 68,483
---------
Total Investment Securities (cost: $591,458) $672,627
=========
SUMMARY:
Investments, at value 111.9 % $672,627
Liabilities in excess of other assets (11.9)% (71,656)
---------- ---------
Net assets 100.0% $600,971
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 5
Salomon All Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$65,250.
(c) Cash collateral for the Repurchase Agreements, valued at $15,283, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
(d) At December 31, 2003, the collateral for the repurchase agreement
(excluding collateral for securities on loan) is as follows:
Market Value
Collateral and Accrued Interest
- ------------------------------ ---------------------
$77,731 Fannie Mae
Conventional Pool #620048
3.16%, due 08/01/2037 $ 36,489
$20,122 Ginnie Mae ARM
3.50%, due 05/20/2032 12,692
--------
$ 49,181
========
DEFINITIONS:
ADR American Depositary Receipt
ARM Adjustable Rate Mortgage
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 6
Salomon All Cap
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $591,458)
(including $65,250 of securities loaned) $672,627
Cash 56
Receivables:
Interest 3
Dividends 684
Other 63
---------
673,433
---------
Liabilities:
Investment securities purchased 3,477
Accounts payable and accrued liabilities:
Management and advisory fees 427
Distribution fees 1
Payable for collateral for securities on loan 68,483
Other 74
---------
72,462
---------
Net Assets $600,971
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 460
Additional paid-in capital 562,325
Undistributed net investment income (loss) 1,404
Accumulated net realized gain (loss) from investment
securities (44,387)
Net unrealized appreciation (depreciation) on investment
securities 81,169
---------
Net Assets $600,971
=========
Shares Outstanding:
Initial Class 45,938
Service Class 95
Net Asset Value and Offering Price Per Share:
Initial Class $ 13.06
Service Class 13.08
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 306
Dividends 4,825
Income from loaned securities-net 67
Less withholding taxes on foreign dividends (62)
---------
5,136
---------
Expenses:
Management and advisory fees 3,555
Transfer agent fees 2
Printing and shareholder reports 67
Custody fees 43
Administration fees 24
Legal fees 5
Auditing and accounting fees 12
Directors fees 15
Other 8
Service fees:
Service Class 1
---------
Total expenses 3,732
---------
Net Investment Income (Loss) 1,404
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities (515)
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 138,124
---------
Net Gain (Loss) on Investment Securities 137,609
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 139,013
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 7
Salomon All Cap
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,404 $ 1,713
Net realized gain (loss) from
investment securities (515) (39,017)
Net unrealized appreciation
(depreciation) on investment
securities 138,124 (55,709)
--------- ---------
139,013 (93,013)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (1,713) (2,854)
Service Class - -
--------- ---------
(1,713) (2,854)
--------- ---------
From net realized gains:
Initial Class - (983)
Service Class - -
--------- ---------
- (983)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 201,048 199,671
Service Class 1,263 -
--------- ---------
202,311 199,671
--------- ---------
Dividends and distributions reinvested:
Initial Class 1,713 3,837
Service Class - -
--------- ---------
1,713 3,837
--------- ---------
Cost of shares redeemed:
Initial Class (49,032) (85,716)
Service Class (144) -
--------- ---------
(49,176) (85,716)
--------- ---------
154,848 117,792
--------- ---------
Net increase (decrease) in net assets 292,148 20,942
--------- ---------
Net Assets:
Beginning of year 308,823 287,881
--------- ---------
End of year $ 600,971 $ 308,823
========= =========
Undistributed Net Investment Income
(Loss) $ 1,404 $ 1,713
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 18,572 17,376
Service Class 107 -
--------- ---------
18,679 17,376
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 153 380
Service Class - -
--------- ---------
153 380
--------- ---------
Shares redeemed:
Initial Class (4,614) (7,972)
Service Class (12) -
--------- ---------
(4,626) (7,972)
--------- ---------
Net increase (decrease) in shares
outstanding 14,206 9,784
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 8
Salomon All Cap
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.70 $ 0.04 $ 3.36 $ 3.40
12/31/2002 13.06 0.06 (3.28) (3.22)
12/31/2001 12.99 0.19 0.09 0.28
12/31/2000 11.18 0.14 1.90 2.04
12/31/1999 10.00 0.08 1.48 1.56
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 10.13 0.01 2.94 2.95
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.04) $ - $ (0.04) $ 13.06
(0.10) (0.04) (0.14) 9.70
(0.20) (0.01) (0.21) 13.06
(0.20) (0.03) (0.23) 12.99
(0.38) - (0.38) 11.18
- --------------- --------- --------- --------- ---------
Service Class - - - 13.08
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 35.15% $ 599,732 0.86% 0.86% 0.32% 17%
12/31/2002 (24.71) 308,823 0.91 0.91 0.56 134
12/31/2001 2.09 287,881 1.00 1.00 1.43 83
12/31/2000 18.30 85,730 1.00 1.25 1.11 118
12/31/1999 15.57 6,686 1.00 2.87 1.09 216
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 29.12 1,239 1.12 1.12 0.14 17
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 3, 1999
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 9
Salomon All Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Salomon All Cap ("the Fund"), part of ATSF, began operations on May
3, 1999. The fund is "non-diversified" under the 1940 Act.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $86 are included in net
realized gains in the Statement of Operations.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $29 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 10
Salomon All Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (i.e.: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 14,915 2%
Asset Allocation-Growth Portfolio 43,098 7%
Asset Allocation-Moderate Growth Portfolio 59,711 10%
Asset Allocation-Moderate Portfolio 41,017 7%
--
26%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated break points:
0.90% of the first $100 million of ANA
0.80% of ANA over $100 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There were no amounts recaptured at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the State-
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 11
Salomon All Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
ment of Operations are for fees paid to external legal counsel. ATFS provides
its services to the Fund at cost and is reimbursed monthly.
Brokerage commissions: Brokerage commissions incurred on security transactions
placed with an affiliate of the sub-adviser for the year ended December 31,
2003, were $18.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $20. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 219,478
U.S. Government 1,884
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 59,555
U.S. Government 1,802
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 3,269
Long-term capital gains 569
2003 Distributions paid from:
Ordinary income 1,713
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 1,404
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (44,255)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 81,037
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 36,471 December 31, 2010
7,784 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $591,590
========
Unrealized Appreciation $ 87,900
Unrealized (Depreciation) (6,863)
--------
Net Unrealized Appreciation (Depreciation) $ 81,037
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Salomon All Cap
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Salomon All Cap (the "Fund") (one
of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at December
31, 2003, and the results of its operations, the changes in its net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Salomon All Cap 13
Select+ Aggressive
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The improvement in economic growth during the last three quarters of 2003
helped to contribute to attractive returns in financial markets for the year.
The strength in economic growth continues and the final revision of third
quarter gross domestic product ("GDP") showed growth at an 8.2% pace annualized
for the quarter and 3.6% growth year-over year. The above trend growth on a
year-over-year basis was last achieved in the third quarter of 2000.
Year-over-year growth for the fourth quarter was 4.3%.
The December Institute for Supply Management ("ISM") PMI Manufacturing
Composite Index once again exceeded expectations, rising to 66.2%. Both the New
Orders and Production indices remained at high levels, and the Employment index
remained above 50% for the second straight month. (An index reading above 50%
indicates expansion).
Chain store sales increased 4.2% in December according to the International
Council of Shopping Centers (ICSC) chain store index, the best December (and
holiday season) sales growth since 1999. Sales generally exceeded recent
projections as the month ended strongly.
Global semiconductor sales have continued strong. November chip sales rose 4.5%
over the previous month and are up 17.4% year-to-date supported by strong
consumer electronics demand and computer sales.
The rise in mortgage rates continues to negatively affect the housing and
mortgage businesses. Sales of new homes softened further in November falling by
2.4%, near expectations, and following a trend that has generally been in place
since July. Slightly less favorable mortgage interest rates, combined with
slower demand, are slowing sales. Despite the weakening, new home sales continue
at impressive levels of 1.08 million annualized units.
The employment situation, a lagging indicator, is still struggling to attain
sustained improvement. Although the unemployment rate fell from 5.9% to 5.7% in
December, only 1,000 new jobs were created, far below consensus estimates.
The unemployment situation seems to be stabilizing. Initial and continuing
unemployment claims have fallen below the 400,000 mark, a sign that more new
jobs are being created. The number of people who filed for first-time
unemployment benefits which was 353,000 at the beginning of the year, at
year-end was near 339,000.
The consumer's outlook is improving, as The Conference Board's Consumer
Confidence Index, advanced to 96.8 for January, up from 91.7 in December. The
more favorable job market is a factor in the improved confidence.
U.S. companies are still downsizing, albeit at a slower rate despite the solid
rebound in the nation's economy. The number of announced job cuts fell to 93,020
in December, down from 99,452.
The Index of Leading Economic Indicators (LEI) continues to move higher and is
now at 114.2 confirming the growth rate of the economy remains above trend. The
LEI is a leading indicator of corporate profits and is pointing to substantial
increases in earnings for the next two quarters. As the "earnings season"
begins in mid-January, we believe we will see record profits for the companies
that make up the Standard and Poor's 500 Composite Stock Index.
Low short-term interest rates and improved confidence have resulted in a shift
from cash to stocks by investors. Money has been flowing into equity mutual
funds since April, yet money market assets are above normal levels, so the
trend, we believe, will continue.
Also, as a result of recent tax cuts, investments, particularly in stocks, are
more attractive on an after-tax basis. Reduced marginal rates for individuals
have been a plus for consumer spending, and accelerated depreciation benefits
result in more capital spending by businesses.
PERFORMANCE
For the year ended December 31, 2003, Select+ Aggressive returned 27.25%. By
comparison its benchmark, the Wilshire 5000 Total Market Index returned 29.44%.
STRATEGY REVEIW
The Select+ Aggressive portfolio is structured for long-term, risk tolerant
investors seeking a diversified equity portfolio for the purpose of taking
advantage of the potential economic turnaround and recovery in corporate
earnings. We have selected the general targets for the portfolio of 95% in
equities diversified within the broad asset class and 5% in cash. Equities are
the asset of choice particularly as the economy grows above trend.
Investment Team
Union Planters Investment Advisers, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 1
Select+Aggressive
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Select+Aggressive and its
comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 12/5/02 through 12/31/03
Initial Class Wilshire 5000
12/5/02 $10,000 $10,000
12/31/02 9,760 9,431
3/31/03 9,420 9,102
6/30/03 10,770 10,561
9/30/03 11,100 10,908
12/31/03 12,420 12,208
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Select+Aggressive 27.25% 22.49% 12/5/02
Wilshire 5000(1) 29.44% 20.14% 12/5/02
- ------------------- ----- ----- -------
NOTES
(1) The Wilshire 5000 Total Market (Wilshire 5000) Index is an unmanaged index
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives and policies of
this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 2
Select+ Aggressive
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
----------- -------
INVESTMENT COMPANIES (100.0%) (b)
Aggressive Equity (10.4%)
Third Avenue Value 2,793 $ 47
Capital Preservation (4.4%)
Transamerica Money Market 19,649 20
Growth Equity (64.9%)
BlackRock Mid Cap Growth (a) 4,711 45
T. Rowe Price Equity Income 5,953 113
T. Rowe Price Growth Stock 6,911 136
World Equity (20.3%)
American Century International (a) 12,171 92
-----
Total Investment Companies (cost: $394) $ 453
=====
SUMMARY:
Investment companies, at value 100.0% $ 453
Liabilities in excess of other assets 0.0% -
------ -----
Net assets 100.0% $ 453
====== =====
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 3
Select+ Aggressive
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $394) $ 453
Other 4
-----
457
-----
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 1
Other 3
-----
4
-----
Net Assets $ 453
=====
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ -
Additional paid-in capital 392
Accumulated net investment income (loss) (1)
Undistributed net realized gain (loss) from investment in
affiliated investment companies 3
Net unrealized appreciation (depreciation) on investment
in affiliated investment companies 59
-------
Net Assets $ 453
=======
Shares Outstanding: 36
Net Asset Value and Offering Price Per Share: $ 12.42
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 1
----
Expenses:
Transfer agent fees 2
Printing and shareholder reports 4
Custody fees 8
Administration fees 21
Auditing and accounting fees 20
----
Total expenses 55
Less:
Advisory fee waiver and expense reimbursement (53)
----
Net expenses 2
----
Net Investment Income (Loss) (1)
----
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment in affiliated
investment companies 3
Increase (decrease) in unrealized appreciation
(depreciation) on investment in affiliated
investment companies 61
----
Net Gain (Loss) on Investment in Affiliated
Investment Companies 64
----
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 63
====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 4
Select+ Aggressive
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
------------------ ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (1) $ -
Net realized gain (loss) from
investment in affiliated investment
companies 3 -
Net unrealized appreciation
(depreciation) on investment in
affiliated investment companies 61 (2)
----- -----
63 (2)
----- -----
Distributions to Shareholders:
From net investment income - -
From net realized gains - -
----- -----
- -
----- -----
Capital Share Transactions:
Proceeds from shares sold 316 100
Dividends and distributions reinvested - -
Cost of shares redeemed (24) -
----- -----
292 100
----- -----
Net increase (decrease) in net assets 355 100
----- -----
Net Assets:
Beginning of year 98 -
----- ------
End of year $ 453 $ 98
===== =====
Accumulated Net Investment Income
(Loss) $ (1) $ -
===== =====
December 31, December 31,
2003 2002(a)
------------------ ------------------
Share Activity:
Shares issued 28 10
Shares issued-reinvested from distributions - -
Shares redeemed (2) -
------- ------
Net increase (decrease) in shares
outstanding 26 10
====== ======
(a) Commenced operations on December 5, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 5
Select+ Aggressive
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
--------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- ------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ------------
12/31/2003 $ 9.76 $ (0.03) $ 2.69 $ 2.66 $ - $ - $ - $ 12.42
12/31/2002 10.00 - (0.24) (0.24) - - - 9.76
- ---------- --------- --------- -------- -------- --- --- --- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- ------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 27.25% $ 453 0.55% 25.81% (0.25)% 23%
12/31/2002 (2.40) 98 0.55 77.92 (0.49) -
- ---------- ----- ------- ---- ----- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund is December 5, 2002.
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 6
Select+ Aggressive
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Select+ Aggressive ("the Fund"), part of ATSF, began operations on
December 5, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange
(generally 4:00 p.m. eastern time) on the valuation date.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is an affiliate of the Fund and
subadviser to other funds within ATSF.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.55% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There were no amounts recaptured at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
The Fund is authorized under the 12b-1 plan to pay fees up to the following
limit of 0.15%.
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred before April 30, 2004. Prior to AFSG seeking
reimbursement of future expenses, policy and contract owners will be notified
in advance.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal
counsel. ATFS provides its services to the Fund at cost and is reimbursed
monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 7
Select+ Aggressive
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
percentage of their total fees earned as a Fund Director. These deferred
amounts may be invested in any portfolio of IDEX Mutual Funds, an affiliate of
the Fund. At December 31, 2003, there was no value of invested plan amounts.
Invested plan amounts and the total liability for deferred compensation to the
Directors under the Plan at December 31, 2003, are included in Net assets in
the accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 341
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 50
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to
short-term gains being treated as ordinary income for tax purposes.
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 2
====
Undistributed Long-term Capital Gains $ -
====
Capital Loss Carryforward $ -
====
Post October Loss $ -
====
Net Unrealized Appreciation (Depreciation) $ 58
====
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 395
=====
Unrealized Appreciation $ 58
Unrealized (Depreciation) -
-----
Net Unrealized Appreciation (Depreciation) $ 58
=====
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Select+ Aggressive Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Select+ Aggressive Growth (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Aggressive 9
Select+ Conservative
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The improvement in economic growth during the last three quarters of 2003
helped to contribute to attractive returns in financial markets for the year.
The strength in economic growth continues and the final revision of third
quarter gross domestic product ("GDP") showed growth at an 8.2% pace annualized
for the quarter and 3.6% growth year-over year. The above trend growth on a
year-over-year basis was last achieved in the third quarter of 2000.
Year-over-year growth for the fourth quarter was 4.3%.
The December Institute for Supply Management ("ISM") PMI Manufacturing
Composite Index once again exceeded expectations, rising to 66.2%. Both the New
Orders and Production indices remained at high levels, and the Employment index
remained above 50% for the second straight month. (An index reading above 50%
indicates expansion).
Chain store sales increased 4.2% in December according to the International
Council of Shopping Centers (ICSC) chain store index, the best December (and
holiday season) sales growth since 1999. Sales generally exceeded recent
projections as the month ended strongly.
Global semiconductor sales have continued strong. November chip sales rose 4.5%
over the previous month and are up 17.4% year-to-date supported by strong
consumer electronics demand and computer sales.
The rise in mortgage rates continues to negatively affect the housing and
mortgage businesses. Sales of new homes softened further in November falling by
2.4%, near expectations, and following a trend that has generally been in place
since July. Slightly less favorable mortgage interest rates, combined with
slower demand, are slowing sales. Despite the weakening, new home sales continue
at impressive levels of 1.08 million annualized units.
The employment situation, a lagging indicator, is still struggling to attain
sustained improvement. Although the unemployment rate fell from 5.9% to 5.7% in
December, only 1,000 new jobs were created, far below consensus estimates.
The unemployment situation seems to be stabilizing. Initial and continuing
unemployment claims have fallen below the 400,000 mark, a sign that more new
jobs are being created. The number of people who filed for first-time
unemployment benefits which was 353,000 at the beginning of the year, at
year-end was near 339,000.
The consumer's outlook is improving, as The Conference Board's Consumer
Confidence Index, advanced to 96.8 for January, up from 91.7 in December. The
more favorable job market is a factor in the improved confidence.
U.S. companies are still downsizing, albeit at a slower rate despite the solid
rebound in the nation's economy. The number of announced job cuts fell to 93,020
in December, down from 99,452.
The Index of Leading Economic Indicators ("LEI") continues to move higher and
is now at 114.2 confirming that the growth rate of the economy remains above
trend. The LEI is a leading indicator of corporate profits and is pointing to
substantial increases in earnings for the next two quarters. As the "earnings
season" begins in mid-January, we believe we will see record profits for the
companies that make up the Standard and Poor's 500 Composite Stock Index.
Low short-term interest rates and improved confidence have resulted in a shift
from cash to stocks by investors. Money has been flowing into equity mutual
funds since April, yet money market assets are above normal levels, so the
trend, we believe, will continue.
Also, as a result of recent tax cuts, investments, particularly in stocks, are
more attractive on an after-tax basis. Reduced marginal rates for individuals
have been a plus for consumer spending, and accelerated depreciation benefits
result in more capital spending by businesses.
PERFORMANCE
For the year ended December 31, 2003, Select+ Conservative returned 12.06%. By
comparison its benchmark, the Lehman Brothers Aggregate Bond Index returned
4.10%.
STRATEGY REVIEW
For conservative investors, a large exposure in bonds can provide relatively
higher current income along with less volatile returns. This kind of approach is
utilized for the Select+ Conservative portfolio. However, in addition to the
general targets of keeping 70% of the portfolio in bonds and an additional 5% in
cash, we have allocated a target of 25% for equities. The purpose of the
allocation to equities is to serve as a hedge in the event of superior relative
performance of stocks compared to bonds as occurred in 2003.
Investment Team
Union Planters Investment Advisors, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 1
Select+Conservative
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Select+Conservative and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 12/5/02 through 12/31/03
Initial Class LB Aggregate Bond
12/5/02 $10,000 $10,000
12/31/02 10,030 10,207
3/31/03 10,060 10,349
6/30/03 10,670 10,607
9/30/03 10,780 10,592
12/31/03 11,240 10,625
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Select+Conservative 12.06% 11.56% 12/5/02
LBAB(1) 4.10% 5.74% 12/5/02
- ----- ----- ----- -------
NOTES
(1) The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged index used
as a general measure of market performance. Calculations assume dividends
and capital gains are reinvested and do not include any managerial
expenses. From inception calculation is based on life of initial class
shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives and policies of
this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 2
Select+ Conservative
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ -------------
INVESTMENT COMPANIES (100.0%) (a)
Aggressive Equity (6.0%)
Third Avenue Value 13,105 $ 221
Capital Preservation (4.6%)
Transamerica Money Market 170,027 170
Fixed-Income (66.9%)
MFS High Yield 55,417 570
PIMCO Total Return 127,147 1,396
Transamerica U.S. Government Securities 41,605 517
Growth Equity (22.5%)
T. Rowe Price Equity Income 21,846 414
T. Rowe Price Growth Stock 21,225 419
------
Total Investment Companies (cost: $3,423) $3,707
======
SUMMARY:
Investments, at value 100.0% $3,707
Liabilities in excess of other assets 0.0% (1)
------- ------
Net assets 100.0% $3,706
======= ======
NOTES TO SCHEDULE OF INVESTMENTS:
(a) The fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 3
Select+ Conservative
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $3,423) $3,707
Other 1
------
3,708
------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 1
Other 1
------
2
------
Net Assets $3,706
======
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 3
Additional paid-in capital 3,392
Undistributed net investment income (loss) 18
Undistributed net realized gain (loss) from investment in
affiliated investment companies 9
Net unrealized appreciation (depreciation) on investment
in affiliated investment companies 284
------
Net Assets $3,706
======
Shares Outstanding 330
Net Asset Value and Offering Price Per Share $11.24
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 31
-----
Expenses:
Management and advisory fees 3
Transfer agent fees 2
Printing and shareholder reports 3
Custody fees 12
Administration fees 20
Auditing and accounting fees 20
-----
Total expenses 60
-----
Less:
Advisory fee waiver and expense reimbursement (47)
-----
Net expenses 13
-----
Net Investment Income (Loss) 18
-----
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment in affiliated
investment companies 9
Increase (decrease) in unrealized appreciation
(depreciation) on investment
in affiliated investment companies 284
-----
Net Gain (Loss) on Investment in Affiliated Investment
Companies 293
-----
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 311
=====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 4
Select+ Conservative
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 18 $ -
Net realized gain (loss) from
investment in affiliated investment
companies 9 -
Net unrealized appreciation
(depreciation) on investment in
affiliated investment companies 284 -
------- ----
311 -
------- ----
Distributions to Shareholders:
From net investment income - -
From net realized gains - -
------- ----
- -
------- ----
Capital Share Transactions:
Proceeds from shares sold 3,417 112
Dividends and distributions reinvested - -
Cost of shares redeemed (134) -
------- ----
3,283 112
------- ----
Net increase (decrease) in net assets 3,594 112
------- ----
Net Assets:
Beginning of year 112 -
------- ----
End of year $ 3,706 $112
======= ====
Undistributed Net Investment Income
(Loss) $ 18 $ -
======= ====
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued 332 11
Shares issued-reinvested from
distributions - -
Shares redeemed (13) -
------- -----
Net increase (decrease) in shares
outstanding 319 11
======= =====
(a) Commenced operations on December 5, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 5
Select+ Conservative
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
--------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- ------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ------------
12/31/2003 $ 10.03 $ 0.08 $ 1.13 $ 1.21 $ - $ - $ - $ 11.24
12/31/2002 10.00 - 0.03 0.03 - - - 10.03
- ---------- --------- ------- -------- -------- --- --- --- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 12.06% $ 3,706 0.55% 2.49% 0.73% 6%
12/31/2002 0.30 112 0.55 72.67 (0.49) -
---------- ----- ------- ---- ----- ----- -
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund is December 5, 2002.
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 6
Select+ Conservative
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Select+ Conservative ("the Fund"), part of ATSF, began operations on
December 5, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange
(generally 4:00 p.m. eastern time) on the valuation date.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is an affiliate of the Fund and
subadviser to other funds within ATSF.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.55% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There were no amounts recaptured at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
The Fund is authorized under the 12b-1 plan to pay fees up to the limit of
0.15%.
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred before April 30, 2004. Prior to AFSG seeking
reimbursement of future expenses, policy and contract owners will be notified in
advance.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 7
Select+ Conservative
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
percentage of their total fees earned as a Fund Director. These deferred
amounts may be invested in any portfolio of IDEX Mutual Funds, an affiliate of
the Fund. At December 31, 2003 there was no value in invested plan amounts.
Invested plan amounts and the total liability for deferred compensation to the
Directors under the Plan at December 31, 2003, are included in Net assets in
the accompanying Statement of Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 3,416
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 144
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 22
=====
Undistributed Long-term Capital Gains $ 4
=====
Capital Loss Carryforward $ -
=====
Post October Loss $ -
=====
Net Unrealized Appreciation (Depreciation) $ 284
=====
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 3,423
=======
Unrealized Appreciation $ 284
Unrealized (Depreciation) -
-------
Net Unrealized Appreciation (Depreciation) $ 284
=======
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Select+ Conservative
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Select+ Conservative (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Conservative 9
Select+ Growth & Income
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The improvement in economic growth during the last three quarters of 2003
helped to contribute to attractive returns in financial markets for the year.
The strength in economic growth continues and the final revision of third
quarter gross domestic product ("GDP") showed growth at an 8.2% pace annualized
for the quarter and 3.6% growth year-over year. The above trend growth on a
year-over-year basis was last achieved in the third quarter of 2000.
Year-over-year growth for the fourth quarter was 4.3%.
The December Institute for Supply Management ("ISM") PMI Manufacturing
Composite Index once again exceeded expectations, rising to 66.2%. Both the New
Orders and Production indices remained at high levels, and the Employment index
remained above 50% for the second straight month. (An index reading above 50%
indicates expansion).
Chain store sales increased 4.2% in December according to the International
Council of Shopping Centers (ICSC) chain store index, the best December (and
holiday season) sales growth since 1999. Sales generally exceeded recent
projections as the month ended strongly.
Global semiconductor sales have continued strong. November chip sales rose 4.5%
over the previous month and are up 17.4% year-to-date supported by strong
consumer electronics demand and computer sales.
The rise in mortgage rates continues to negatively affect the housing and
mortgage businesses. Sales of new homes softened further in November falling by
2.4%, near expectations, and following a trend that has generally been in place
since July. Slightly less favorable mortgage interest rates, combined with
slower demand, are slowing sales. Despite the weakening, new home sales continue
at impressive levels of 1.08 million annualized units.
The employment situation, a lagging indicator, is still struggling to attain
sustained improvement. Although the unemployment rate fell from 5.9% to 5.7% in
December, only 1,000 new jobs were created, far below consensus estimates.
The unemployment situation seems to be stabilizing. Initial and continuing
unemployment claims have fallen below the 400,000 mark, a sign that more new
jobs are being created. The number of people who filed for first-time
unemployment benefits which was 353,000 at the beginning of the year, at
year-end was near 339,000.
The consumer's outlook is improving, as The Conference Board's Consumer
Confidence Index, advanced to 96.8 for January, up from 91.7 in December. The
more favorable job market is a factor in the improved confidence.
U.S. companies are still downsizing, albeit at a slower rate despite the solid
rebound in the nation's economy. The number of announced job cuts fell to 93,020
in December, down from 99,452.
The Index of Leading Economic Indicators ("LEI") continues to move higher and
is now at 114.2 confirming that the growth rate of the economy remains above
trend. The LEI is a leading indicator of corporate profits and is pointing to
substantial increases in earnings for the next two quarters. As the "earnings
season" begins in mid-January, we believe we will see record profits for the
companies that make up the Standard and Poor's 500 Composite Stock Index.
Low short-term interest rates and improved confidence have resulted in a shift
from cash to stocks by investors. Money has been flowing into equity mutual
funds since April, yet money market assets are above normal levels, so the
trend, we believe, will continue.
Also, as a result of recent tax cuts, investments, particularly in stocks, are
more attractive on an after-tax basis. Reduced marginal rates for individuals
have been a plus for consumer spending, and accelerated depreciation benefits
result in more capital spending by businesses.
PERFORMANCE
For the year ended December 31, 2003, Select+ Growth & Income returned 20.95%.
By comparison its primary benchmark, the Wilshire 5000 Total Market Index and
its secondary benchmark, the Lehman Brothers Aggregate Bond Index returned
29.44% and 4.10%, respectively.
STRATEGY REVIEW
The Select+ Growth & Income portfolio is structured for investors seeking a
larger exposure in equities yet with a desire for relatively higher income and
less volatile returns. We have selected the general targets for the portfolio of
60% in equities, 35% in bonds, and an additional 5% in cash. The purpose of the
higher allocation to equities relative to fixed income is to potentially take
advantage of accelerating economic growth. However, lower returns from the
allocations to bonds and cash reduced performance for the Select+ Growth &
Income portfolio in 2003.
Investment Team
Union Planters Investment Advisors, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 1
Select+Growth & Income
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Select+Growth & Income
and its comparative indices.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 12/5/02 through 12/31/03
Initial Class Wilshire 5000 LB Aggregate Bond
12/5/02 $10,000 $10,000 $10,000
12/31/02 9,880 9,431 10,207
3/31/03 9,770 9,102 10,349
6/30/03 10,760 10,561 10,607
9/30/03 11,030 10,908 10,592
12/31/03 11,950 12,208 10,625
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Select+Growth & Income 20.95% 18.14% 12/5/02
Wilshire 5000(1) 29.44% 20.14% 12/5/02
LBAB(1) 4.10% 5.74% 12/5/02
- ----- ----- ----- -------
NOTES
(1) The Wilshire 5000 Total Market (Wilshire 5000) Index and Lehman Brothers
Aggregate Bond (LBAB) Index are unmanaged indices used as a general measure
of market performance. Calculations assume dividends and capital gains are
reinvested and do not include any managerial expenses. Source: Standard &
Poor's Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives and policies of
this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 2
Select+ Growth & Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------- -------------
INVESTMENT COMPANIES (100.1%) (b)
Aggressive Equity (11.3%)
Third Avenue Value 35,776 $ 606
Capital Preservation (4.2%)
Transamerica Money Market 227,776 228
Fixed-Income (31.5%)
MFS High Yield 50,214 516
PIMCO Total Return 107,056 1,175
Growth Equity (42.4%)
BlackRock Mid Cap Growth (a) 29,570 284
T. Rowe Price Equity Income 29,634 562
T. Rowe Price Growth Stock 72,465 1,429
World Equity (10.7%)
American Century International (a) 76,065 573
------
Total Investment Companies (cost: $4,577) $5,373
======
SUMMARY:
Investments, at value 100.1% $5,373
Liabilities in excess of other assets (0.1)% (3)
------- ------
Net assets 100.0% $5,370
======= ======
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) The fund invests its assets in Initial Class shares of underlying
portfolios of AEGON/Transamerica Series Fund, Inc., which are affiliates of
the Fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 3
Select+ Growth & Income
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment in affiliated investment companies, at value
(cost: $4,577) $5,373
------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 2
Other 1
------
3
------
Net Assets $5,370
======
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 4
Additional paid-in capital 4,542
Undistributed net investment income (loss) 3
Undistributed net realized gain (loss) from investment
in affiliated investment companies 25
Net unrealized appreciation (depreciation) on investment
in affiliated investment companies 796
------
Net Assets $5,370
======
Shares Outstanding: 450
Net Asset Value and Offering Price Per Share $11.95
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Dividends from affiliated investment companies $ 24
-----
Expenses:
Management and advisory fees 4
Transfer agent fees 2
Printing and shareholder reports 3
Custody fees 13
Administration fees 21
Auditing and accounting fees 20
-----
Total expenses 63
Less:
Advisory fee waiver and expense reimbursement (42)
-----
Net expenses 21
-----
Net Investment Income (Loss) 3
-----
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment in affiliated
investment companies 25
Increase (decrease) in unrealized appreciation
(depreciation) on investment in affiliated
investment companies 799
-----
Net Gain (Loss) on Investment in Affiliated
Investment Companies 824
-----
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 827
=====
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 4
Select+ Growth & Income
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
---------------- ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 3 $ -
Net realized gain (loss) from
investment in affiliated investment
companies 25 -
Net unrealized appreciation
(depreciation) on investment in
affiliated investment companies 799 (3)
------- -------
827 (3)
------- -------
Distributions to Shareholders:
From net investment income - -
From net realized gains - -
------- ------
- -
------- ------
Capital Share Transactions:
Proceeds from shares sold 3,708 1,048
Dividends and distributions reinvested - -
Cost of shares redeemed (210) -
------- ------
3,498 1,048
------- ------
Net increase (decrease) in net assets 4,325 1,045
------- ------
Net Assets:
Beginning of year 1,045 -
------- ------
End of year $ 5,370 $ 1,045
======= =======
Undistributed Net Investment
Income (Loss) $ 3 $ -
======= =======
December 31, December 31,
2003 2002(a)
---------------- ------------------
Share Activity:
Shares issued 364 106
Shares issued-reinvested from distributions - -
Shares redeemed (20) -
------- --------
Net increase (decrease) in shares
outstanding 344 106
======= ========
(a) Commenced operations on December 5, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 5
Select+ Growth & Income
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
--------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- ------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ------------
12/31/2003 $ 9.88 $ 0.01 $ 2.06 $ 2.07 $ - $ - $ - $ 11.95
12/31/2002 10.00 - (0.12) (0.12) - - - 9.88
- ---------- -------- ------- -------- -------- --- --- --- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- ------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 20.95% $ 5,370 0.55% 1.64% 0.07% 15%
12/31/2002 (1.20) 1,045 0.55 17.63 (0.49) -
- ---------- ----- ------- ---- ----- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund is December 5, 2002.
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 6
Select+ Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Select+ Growth & Income ("the Fund"), part of ATSF, began operations
on December 5, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: The Fund's investments are valued at the net asset values
of the underlying portfolios of ATSF. The net asset values of the underlying
portfolios are determined at the close of the New York Stock Exchange
(generally 4:00 p.m. eastern time) on the valuation date.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are
typically declared and reinvested annually and are generally paid and
reinvested on the business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is an affiliate of the Fund and a
sub-advisor to other funds within ATSF.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.10% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.55% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
There were no amounts subject to recapture at December 31, 2003.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
The Fund is authorized under the 12b-1 plan to pay fees up to the limit of
0.15%.
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred before April 30, 2004. Prior to AFSG seeking
reimbursement of future expenses, policy and contract owners will be notified
in advance.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 7
Select+ Growth & Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
there was no value of invested plan amounts. Invested plan amounts and the
total liability for deferred compensation to the Directors under the Plan at
December 31, 2003, are included in Net assets in the accompanying Statement of
Assets and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 4,042
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 570
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 23
=====
Undistributed Long-term Capital Gains $ 5
=====
Capital Loss Carryforward $ -
=====
Post October Loss $ -
=====
Net Unrealized Appreciation (Depreciation) $ 795
=====
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 4,578
=======
Unrealized Appreciation $ 795
Unrealized (Depreciation) -
-------
Net Unrealized Appreciation (Depreciation) $ 795
=======
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 8
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Select+ Growth & Income
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Select+ Growth & Income (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Select+ Growth & Income 9
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The year ended December 31, 2003, started with a sizable dose of considerable
economic and political uncertainty, and ended with much geopolitical uncertainty
and considerable economic momentum. Along the way, yields on Treasury rose,
reflecting a growing conviction among investors that a surging economy will
eventually lead to higher interest rates.
Rising yields, and thus falling prices, in the Treasury sector were more than
offset by extremely strong results for corporate bonds and improved performance
in mortgage-backed securities. Driving the corporate sector were rising levels
of corporate profitability and credit improvements. With those developments,
corporate yield spreads increased less than Treasury yields. As the gap between
corporate and Treasury yields narrowed, prices in the corporate sector rose
relative to Treasury prices. In the mortgage sector, performance was driven by a
decline in volatility.
PERFORMANCE
For the year ended December 31, 2003, Transamerica U.S. Government Securities
returned 2.95%. By comparison its primary benchmark, the Lehman Brothers U.S.
Government Index and its secondary benchmark, the Lehman Brothers Aggregate Bond
Index returned 2.36% and 4.10%, respectively.
STRATEGY REVIEW
The portfolio may invest up to 80% of assets in Treasury securities and up to
20% in corporate bonds. Throughout the year, we invested as extensively as
possible under our investment guidelines in corporate securities. Within that
sector, we began the year with above-average exposures to telecommunications and
media companies and utilities, all industries that had become noticeably
undervalued in 2002. By late summer 2003, these three industries showed marked
signs of improvement (e.g., deleveraging of their balance sheets) and had
performed far better than the corporate bond market in general. As valuations
climbed and became more commensurate with the risks involved, we sold many of
our telecommunications, media and utilities holdings for a profit, reinvesting
in bonds from cyclical sectors of the corporate world. More specifically, by the
end of the third calendar quarter, we initiated or added to positions in
businesses that stand to benefit from a global industrial rebound, including
metals, mining and basic materials companies. This shift worked well,
contributing handsomely to the portfolio's total return in the final months of
the year.
Also contributing to results were a relative short duration (compared to the
index), which helped to limit the price depreciation associated with higher
Treasury yields, and our investments in mortgage-backed securities.
/s/ Heidi Y. Hu
Heidi Y. Hu
Peter O. Lopez
Co-Portfolio Managers
Transamerica Investment Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 1
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/13/94 through 12/31/03
Initial Class LBG LBAB
5/13/94 $10,000 $10,000 $10,000
6/30/94 9,950 9,964 9,977
9/30/94 9,970 10,006 10,037
12/31/94 9,960 10,041 10,075
3/31/95 10,340 10,514 10,583
6/30/95 10,911 11,166 11,228
9/30/95 11,073 11,364 11,449
12/31/95 11,518 11,883 11,937
3/31/96 11,214 11,614 11,725
6/30/96 11,226 11,670 11,792
9/30/96 11,414 11,866 12,010
12/31/96 11,727 12,212 12,370
3/31/97 11,654 12,113 12,301
6/30/97 12,056 12,533 12,753
9/30/97 12,433 12,953 13,176
12/31/97 12,800 13,383 13,564
3/31/98 12,961 13,585 13,775
6/30/98 13,287 13,943 14,097
9/30/98 13,745 14,714 14,693
12/31/98 13,745 14,702 14,742
3/31/99 13,678 14,492 14,669
6/30/99 13,519 14,368 14,540
9/30/99 13,637 14,463 14,639
12/31/99 13,625 14,373 14,621
3/31/00 13,968 14,854 14,944
6/30/00 14,252 15,087 15,204
9/30/00 14,618 15,503 15,662
12/31/00 15,010 16,277 16,321
3/31/01 15,389 16,686 16,817
6/30/01 15,443 16,646 16,911
9/30/01 15,748 17,558 17,691
12/31/01 15,775 17,454 17,699
3/31/02 15,629 17,343 17,716
6/30/02 15,895 18,113 18,370
9/30/02 16,381 19,320 19,212
12/31/02 16,692 19,460 19,514
3/31/03 16,896 19,668 19,786
6/30/03 17,343 20,166 20,281
9/30/03 17,169 20,006 20,251
12/31/03 $17,184 $19,919 $20,315
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
- --------------------------------------------------------------------------------
Initial Class 2.95% 4.57% 5.78% 5/13/94
LBG(1) 2.36% 6.26% 7.38% 5/13/94
LBAB(1) 4.10% 6.62% 7.60% 5/13/94
- --------------------------------------------------------------------------------
Service Class - - 0.68% 5/1/03
- --------------------------------------------------------------------------------
NOTES
(1) The Lehman Brothers U.S. Government (LBG) Index and Lehman Brothers
Aggregate Bond (LBAB) Index are unmanaged indices used as a general measure
of market performance. Calculations assume dividends and capital gains are
reinvested and do not include any managerial expenses. From inception
calculation is based on life of initial class shares. Source: Standard &
Poor's Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Dreyfus U.S.
Government Portfolio of Endeavor Series Trust. Transamerica has been the
portfolio's sub-adviser since May 1, 2002. Prior to that date, a different firm
managed the portfolio and the performance set forth above prior to May 1, 2002
is attributable to that firm.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 2
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
- -------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (45.1%)
U.S. Treasury Bond (a)
5.38%, due 02/15/2031 $ 28,100 $ 29,304
U.S. Treasury Note
1.63%, due 01/31/2005 9,000 9,035
1.63%, due 03/31/2005 (a) 35,900 36,023
1.50%, due 07/31/2005 (a) 6,500 6,496
3.50%, due 11/15/2006 (a) 13,000 13,437
4.38%, due 05/15/2007 (a) 11,000 11,648
3.00%, due 02/15/2008 (a) 9,000 9,042
2.63%, due 05/15/2008 2,000 1,970
3.25%, due 08/15/2008 (a) 3,500 3,521
5.00%, due 02/15/2011 (a) 4,000 4,296
---------
Total U.S. Government Obligations (cost: $124,284) 124,772
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (32.6%)
Fannie Mae
2.38%, due 03/17/2006 (a) 10,000 10,003
4.75%, due 01/02/2007 7,000 7,374
4.25%, due 07/15/2007 10,000 10,444
5.25%, due 08/01/2012 10,000 10,254
4.38%, due 03/15/2013 (a) 3,000 2,946
Fannie Mae-Conventional Pool
5.00%, due 05/01/2018 3,875 3,957
5.00%, due 06/01/2018 3,799 3,880
6.00%, due 10/01/2032 2,626 2,715
6.00%, due 11/01/2032 1,099 1,136
6.00%, due 01/01/2033 293 303
6.00%, due 02/01/2033 617 638
6.00%, due 05/01/2033 1,113 1,150
6.00%, due 10/01/2033 7,133 7,377
Fannie Mae-Gold Pool
5.00%, due 04/01/2018 6,946 7,085
Freddie Mac-Gold Pool
6.00%, due 11/01/2032 2,480 2,563
6.00%, due 09/01/2033 2,851 2,948
Ginnie Mae-FHA/VA Pool
6.50%, due 11/15/2028 8,456 8,928
6.00%, due 10/15/2032 6,313 6,567
---------
Total U.S. Government Agency Obligations
(cost: $89,299) 90,268
---------
CORPORATE DEBT SECURITIES (17.9%)
Automotive (0.5%)
Hyundai Motor Company Limited-144A (a)
5.30%, due 12/19/2008 1,400 1,404
Business Credit Institutions (0.6%)
eircom Funding
8.25%, due 08/15/2013 1,500 1,661
Chemicals & Allied Products (1.8%)
Dow Chemical Company (The)
7.00%, due 08/15/2005 4,540 4,856
Principal Value
- -------------------------------------------------------------------
Commercial Banks (3.5%)
Morgan Chase & Co. (J.P.)
5.75%, due 01/02/2013 $ 5,000 $ 5,272
RBS Capital Trust I (c)
4.71%, due 12/31/2049 5,000 4,781
Electric Services (2.5%)
Commonwealth Edison Company
4.70%, due 04/15/2015 1,250 1,217
FirstEnergy Corp
7.38%, due 11/15/2031 3,000 3,069
TXU Energy Company LLC
7.00%, due 03/15/2013 2,500 2,765
Hotels & Other Lodging Places (0.6%)
Park Place Entertainment Corporation
7.00%, due 04/15/2013 1,500 1,601
Insurance (0.5%)
ACE Capital Trust II
9.70%, due 04/01/2030 1,000 1,304
Lumber & Wood Products (1.0%)
Weyerhaeuser Company
7.38%, due 03/15/2032 2,500 2,718
Motion Pictures (2.1%)
Time Warner Inc.
7.63%, due 04/15/2031 5,000 5,770
Paper & Allied Products (0.4%)
MeadWestvaco Corporation
6.80%, due 11/15/2032 1,000 1,028
Paperboard Containers & Boxes (0.5%)
Norampac Inc.
6.75%, due 06/01/2013 1,350 1,407
Personal Credit Institutions (1.0%)
General Motors Acceptance Corporation
7.00%, due 02/01/2012 2,500 2,688
Petroleum Refining (2.1%)
Conoco Funding Company
7.25%, due 10/15/2031 3,000 3,540
Suncor Energy Inc.
5.95%, due 12/01/2034 2,400 2,382
Telecommunications (0.8%)
Sprint Capital Corporation
7.90%, due 03/15/2005 2,000 2,131
---------
Total Corporate Debt Securities (cost: $48,015) 49,594
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 3
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
- ------------------------------------------------------------------------------
SECURITY LENDING COLLATERAL (31.0%)
Debt (24.7%)
Bank Notes (1.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 404 $ 404
Fleet National Bank
1.00%, due 01/21/2004 1,516 1,516
National Bank of Commerce
1.19%, due 04/21/2004 1,263 1,263
Commercial Paper (6.4%)
Compass Securitization-144A
1.08%, due 01/22/2004 758 758
Delaware Funding Corporation
1.08%, due 01/07/2004 504 504
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 758 758
1.09%, due 01/13/2004 505 505
1.08%, due 02/05/2004 1,009 1,009
General Electric Capital Corporation
1.09%, due 01/08/2004 1,260 1,260
1.09%, due 01/09/2004 758 758
1.08%, due 01/16/2004 1,006 1,006
Govco Incorporated-144A
1.07%, due 02/05/2004 1,262 1,262
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,262 1,262
1.09%, due 02/06/2004 1,261 1,261
1.10%, due 02/09/2004 737 737
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,261 1,261
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 758 758
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,464 1,464
1.08%, due 02/17/2004 2,522 2,522
Sheffield Receivables-144A
1.09%, due 01/21/2004 505 505
Euro Dollar Overnight (1.3%)
BNP Paribas SA
0.97%, due 01/07/2004 2,527 2,527
Credit Agricole Indosuez
0.98%, due 01/02/2004 101 101
1.08%, due 01/06/2004 960 960
Euro Dollar Terms (6.1%)
Bank of Montreal
1.06%, due 01/15/2004 493 493
1.06%, due 02/17/2004 1,011 1,011
Principal Value
- ------------------------------------------------------------------------------
Euro Dollar Terms (continued)
Bank of Scotland
1.06%, due 04/02/2004 $ 758 $ 758
Citigroup Inc.
1.10%, due 01/22/2004 758 758
1.09%, due 02/06/2004 1,011 1,011
Credit Agricole Indosuez
1.08%, due 01/28/2004 505 505
Den Danske Bank
1.08%, due 01/20/2004 2,527 2,527
1.02%, due 01/30/2004 1,263 1,263
Royal Bank of Canada
1.05%, due 02/27/2004 2,527 2,527
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,516 1,516
1.08%, due 01/15/2004 505 505
1.08%, due 01/20/2004 253 253
Svenska Handelsbanken AB
1.09%, due 01/15/2004 253 253
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,516 1,516
Wells Fargo & Company
1.04%, due 01/30/2004 2,022 2,022
Master Notes (1.8%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,011 1,011
1.14%, due 09/08/2004 1,516 1,516
Morgan Stanley
1.05%, due 06/21/2004 2,426 2,426
Medium Term Notes (1.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 2,527 2,527
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 758 758
Repurchase Agreements (6.7%) (b)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $5,914 on 01/02/2004 5,914 5,914
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/21/2003
to be repurchased at $8,037 on 01/02/2004 8,037 8,037
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $4,801 on 01/02/2004 4,801 4,801
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 4
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
- -----------------------------------------------------------------------
Investment Companies (6.3%)
Money Market Funds (6.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,239,522 $ 1,240
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 3,026,385 3,026
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 13,159,723 13,160
---------
Total Security Lending Collateral (cost: $85,695) 85,695
---------
Total Investment Securities (cost: $347,293) $ 350,329
=========
- -----------------------------------------------------------------------
SUMMARY:
Investments, at value 126.6 % $ 350,329
Liabilities in excess of other assets (26.6)% (73,700)
----- ---------
Net assets 100.0 % $ 276,629
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$83,810.
(b) Cash collateral for the Repurchase Agreements, valued at $19,125, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
(c) Floating or variable rate note. Rate is listed as of December 31, 2003.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $1,404 or 0.40% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 5
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $347,293)
(including $83,810 of securities loaned) $350,329
Cash 9,146
Receivables:
Interest 3,014
Other 67
---------
362,556
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 163
Distribution fees 1
Payable for collateral for securities on loan 85,695
Other 68
---------
85,927
---------
Net Assets $276,629
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 223
Additional paid-in capital 263,001
Undistributed net investment income (loss) 9,191
Undistributed net realized gain (loss) from investment
securities 1,178
Net unrealized appreciation (depreciation) on investment
securities 3,036
---------
Net Assets $276,629
=========
Shares Outstanding:
Initial Class 22,152
Service Class 112
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.42
Service Class 12.64
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 11,198
Income from loaned securities-net 171
--------
11,369
--------
Expenses:
Management and advisory fees 2,063
Transfer agent fees 2
Printing and shareholder reports 19
Custody fees 37
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 13
Other 9
Service fees:
Service Class 1
--------
Total expenses 2,178
--------
Net Investment Income (Loss) 9,191
--------
Net Realized and Unrealized Gain (Loss):
Realized gain(loss) from investment securities 2,888
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities (3,091)
--------
Net Gain (Loss) on Investment Securities (203)
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 8,988
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 6
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
----------- ------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 9,191 $ 6,504
Net realized gain (loss) from
investment securities 2,888 515
Net unrealized appreciation
(depreciation) on investment
securities (3,091) 5,636
---------- ---------
8,988 12,655
---------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (6,503) (4,291)
Service Class (1) -
---------- ---------
(6,504) (4,291)
---------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 101,339 189,400
Service Class 5,617 -
---------- ---------
106,956 189,400
---------- ---------
Dividends and distributions reinvested:
Initial Class 6,503 4,291
Service Class 1 -
---------- ---------
6,504 4,291
---------- ---------
Cost of shares redeemed:
Initial Class (119,683) (38,361)
Service Class (4,201) -
---------- ---------
(123,884) (38,361)
---------- ---------
(10,424) 155,330
---------- ---------
Net increase (decrease) in net assets (7,940) 163,694
---------- ---------
Net Assets:
Beginning of year 284,569 120,875
---------- ---------
End of year $ 276,629 $ 284,569
========== =========
Undistributed Net Investment
Income (Loss) $ 9,191 $ 6,504
========== =========
December 31, December 31,
2003 2002
----------- ------------
Share Activity:
Shares issued:
Initial Class 8,166 15,767
Service Class 451 -
---------- ---------
8,617 15,767
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 542 363
Service Class - -
---------- ---------
542 363
---------- ---------
Shares redeemed:
Initial Class (9,646) (3,207)
Service Class (339) -
---------- ---------
(9,985) (3,207)
---------- ---------
Net increase (decrease) in shares
outstanding (826) 12,923
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 7
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
-------------------------------------------------------------------------------------------------------
Investment Operations Distributions
----------------------------------------- -------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- -------------------------------------------------------------------------------- ------------------------------------- -----------
Initial Class 12/31/2003 $ 12.32 $ 0.36 $ (0.01) $ 0.35 $ (0.25) $ - $ (0.25) $ 12.42
12/31/2002 11.89 0.42 0.26 0.68 (0.25) - (0.25) 12.32
12/31/2001 11.88 0.36 0.23 0.59 (0.58) - (0.58) 11.89
12/31/2000 11.53 0.74 0.36 1.10 (0.75) - (0.75) 11.88
12/31/1999 12.32 0.62 (0.73) (0.11) (0.46) (0.22) (0.68) 11.53
- ---------------------------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 12.58 0.38 (0.29) 0.09 (0.03) - (0.03) 12.64
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
----------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- --------------------------------------------------------------------------------------------------------------
Initial Class 12/31/2003 2.95% $ 275,208 0.69% 0.69% 2.89% 124%
12/31/2002 5.81 284,569 0.71 0.71 3.50 379
12/31/2001 5.10 120,875 0.75 0.79 4.64 760
12/31/2000 10.16 75,182 0.74 0.76 5.38 1,109
12/31/1999 (0.87) 83,777 0.73 0.77 5.52 596
- --------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 0.68 1,421 0.96 0.96 4.53 124
- --------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 13, 1994
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fee paid indirectly. For the year ended December 31,
2001, and prior years, Ratio of Net Expenses to Average Net Assets is net
of fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 8
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica U.S. Government Securities ("the Fund"), part of ATSF,
began operations as Dreyfus U.S. Government Securities Portfolio, a part of the
Endeavor Series Trust, on May 13, 1994. The Fund became part of ATSF on May 1,
2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $73 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 9
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.65% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.73% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $9. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 87,779
U.S. Government 294,701
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 78,628
U.S. Government 307,668
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 10
Transamerica U.S. Government Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 4,291
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 6,504
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 9,751
=======
Undistributed Long-term Capital Gains $ 698
=======
Capital Loss Carryforward $ -
=======
Post October Loss $ -
=======
Net Unrealized Appreciation (Depreciation) $ 2,956
=======
The capital loss carryforward utilized during the period ended December 31, 2003
was $900.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 347,373
=========
Unrealized Appreciation $ 4,212
Unrealized (Depreciation) (1,256)
---------
Net Unrealized Appreciation (Depreciation) $ 2,956
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica U.S. Government Securities
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica U.S. Government
Securities (the "Fund") (one of the portfolios constituting AEGON/Transamerica
Series Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica U.S. Government Securities 12
Templeton Great Companies Global
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Great Companies, L.L.C.:
Sentiment in the market appears to be moving from a market dominated by scandals
such as the corporate malfeasance at Enron Corp. and WoldCom, Inc. and
accounting fraud such as Parmalat Finanziaria SpA and Tenet Healthcare
Corporation to one dominated by short-term economic data. By in large, the
economic data has been quite favorable particularly in the latter half of 2003,
as tax cuts fueled economic growth and investment. Gross domestic product
("GDP") growth in the third quarter topped 8% in the United States, a surprise
to many investors and economists. However, increased efficiency in the U.S.
economy has allowed the economy to accelerate with the need to add more jobs.
Eventually, as the economy utilizes available capacity, job growth will follow
economic growth.
We believe the economy is currently in the midst of a significant recovery, and
that GDP will continue to grow at above average rates spurred primarily by tax
cuts in 2003. Though the election news and continued war on terrorism updates
will likely dominate short-term market performance, the economic strength of the
economic recovery will determine long-term trends of the markets.
Templeton Investment Counsel, LLC:
In March 2003, equity investors sparked a rally in global markets that reversed
the course of the previous three years and resulted in the strongest annual
gains in global equities since 1986. The rally's main catalyst was an improving
global economy, underpinned by years of expansionary fiscal and monetary
policies, corporate restructuring and consolidation, and declining equity
valuations that created investment opportunities in Asia, Europe, and the
Americas. On the macro side, the fourth quarter continued to provide evidence of
a synchronized global economic recovery. On the microeconomic side, global
corporate restructuring has now addressed, and eliminated to a large extent,
much of the overcapacity and over leverage of the Internet bubble years.
Aggressive cost cutting coupled with strong consumer spending have allowed many
companies to expand margins and report better profits.
PERFORMANCE
For the year ended December 31, 2003, Templeton Great Companies Global returned
26.73%. By comparison, its benchmark the Morgan Stanley Capital International
World Index returned 33.76%.
STRATEGY REVIEW
Great Companies, L.L.C.:
Though the portfolio increased over last year's performance, the portfolio
underperformed its benchmark. Stocks in commodity-type businesses such as basic
materials significantly outperformed the market as they rose from previously
depressed levels. Our lack of investment in commodity-type businesses limited
our participation in some of the upswing in the market, though our overweighting
in industrial companies such as United Technologies Corporation partly offset
this effect. The domestic portion of the portfolio was overweighted in
healthcare and consumer staples stocks, which we believe, have qualities of
great companies. During 2003, these stocks did not appreciate in line with U.S.
markets as they had been more stable and declined less in the bear market of
2000 to 2002.
Some terrific changes were made in the portfolio to enhance the performance. In
September, 2003, Templeton Investment Counsel, LLC ("Templeton") was added as a
sub-adviser charged with selection of foreign stocks while Great Companies,
L.L.C. remains the manager of the domestic portion of the portfolio. We believe
this change will help investors capture above average returns as we combine a
domestic manager with expertise in growth stocks with world-renowned
international stock research capabilities focusing on value.
Domestically, we are focusing on a select list of companies that meet our strict
initial criteria of being considered a great company. From the list of stocks
that we believe meet the criteria of a great company, we include in the
portfolio those that trade at the deepest discount to their intrinsic value, or
have the most likelihood of increasing their intrinsic value.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 1
Templeton Great Companies Global
- --------------------------------------------------------------------------------
Templeton Investment Counsel, LLC:
With over 60 years of investing experience, Templeton has become recognized as a
leader for its global investments. Templeton's strategy seeks to find stocks
that are selling at a substantial discount to our determination of their fair
market value based on earnings and cash flow growth. Research analysts employ
fundamental valuation techniques and five-year earnings and cash flow forecasts
to identify the most attractive stocks globally.
/s/ James H. Huguet /s/ Tina Hellmer
James H. Huguet Tina Hellmer
/s/ Gerald W. Bollman /s/Mark Beveridge
Gerald W. Bollman Mark Beveridge
/s/ Matthew C. Stephani /s/ Gary Motyl
Matthew C. Stephani Gary Motyl
Co-Portfolio Managers Co-Portfolio Managers
Great Companies, L.L.C. Templeton Investment Counsel, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 2
Templeton Great Companies Global
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 9/1/00 through 12/31/03
Initial Class MSCI World
9/1/2000 $10,000 $10,000
9/30/2000 9,180 9,469
12/31/2000 8,540 8,891
3/31/2001 7,000 7,755
6/30/2001 7,240 7,970
9/30/2001 6,162 6,830
12/31/2001 7,102 7,422
3/31/2002 6,992 7,454
6/30/2002 6,062 6,783
9/30/2002 5,134 5,542
12/31/2002 5,574 5,971
3/31/2003 5,354 5,676
6/30/2003 6,054 6,655
9/30/2003 6,303 6,984
12/31/2003 $7,064 $7,988
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
- --------------------------------------------------------------------------------
Initial Class 26.73% (9.91)% 9/1/00
MSCIW(1) 33.76% (6.52)% 9/1/00
- --------------------------------------------------------------------------------
Service Class - 21.63 % 5/1/03
- --------------------------------------------------------------------------------
NOTES
(1) The Morgan Stanley Capital International World (MSCIW) Index is an
unmanaged index used as a general measure of market performance.
Calculations assume dividends and capital gains are reinvested and do not
include any managerial expenses. From inception calculation is based on
life of initial class shares. Source: Standard & Poor's Micropal(R)(C)-
Micropal, Inc. 2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Investments in global securities involve risks relating to political, social and
economic developments abroad, foreign currency contracts for hedging, as well as
risks resulting from the differences between the regulations to which U.S. and
foreign issuer markets are subject.
The management of this fund is based on a specific philosophy and on proprietary
systems and methodology. There is no guarantee the fund will meet its
objectives.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 3
Templeton Great Companies Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (0.0%)
France (0.0%)
AXA-Zero Coupons $ 1 $ 15
--------
Total Convertible 15
--------
Bonds (cost: $10)
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (0.4%)
Brazil (0.4%)
Companhia Vale do Rio Doce-ADR 4,350 $ 224
--------
Total Preferred Stocks (cost: $160) 224
--------
COMMON STOCKS (93.7%)
Australia (1.5%)
Alumina Limited 40,120 199
Australia and New Zealand Banking
Group Limited 18,320 244
BHP Billiton Limited-ADR 13,410 245
Mayne Group Limited 62,000 152
Bermuda (0.8%)
ACE Limited 5,610 232
XL Capital Ltd.-Class A (b) 3,280 254
Canada (1.0%)
Alcan Inc. (a) 6,930 325
BCE Inc. (b) 10,770 241
China (0.1%)
China Life Insurance Company
Limited-ADR (a)(b) 1,800 59
Denmark (1.0%)
ISS A/S 5,260 259
Vestas Wind Systems A/S (b) 18,930 308
Finland (0.9%)
Stora Enso Oyj-R Shares 14,350 193
UPM-Kymmene Oyj 15,830 302
France (2.7%)
Accor SA 4,940 224
Aventis SA 4,730 312
AXA 12,090 259
Compagnie Generale des Etablissements
Michelin-Class B 3,730 171
Suez SA-ADR 8,350 169
Total Fina Elf SA 1,210 225
Valeo SA 4,290 172
Germany (3.2%)
BASF AG-ADR 4,940 275
Bayer AG-ADR (b) 9,020 265
Deutsche Post AG-Registered Shares 16,480 340
E.ON AG-ADR 5,610 367
SAP AG-ADR 8,680 361
Volkswagen AG-ADR 18,800 210
Shares Value
- --------------------------------------------------------------------------------
Hong Kong (0.6%)
Cheung Kong (Holdings) Limited 27,000 $ 215
Hutchison Whampoa Limited 19,000 140
India (0.5%)
Satyam Computer Services Limited-
ADR (b) 8,980 263
Israel (0.4%)
Check Point Software Technologies, Ltd. (a) 12,420 209
Italy (1.0%)
Eni SpA.-ADR 4,270 406
Riunione Adriatica di Sicurta SpA 9,450 161
Japan (3.3%)
Canon Inc.-ADR 4,350 207
Denso Corporation 8,700 171
East Japan Railway Company 40 188
Hitachi, Ltd. 16,000 96
NEC Corporation 13,000 96
Nintendo Co., Ltd. 3,300 308
Nippon Telegraph and Telephone
Corporation 62 299
Nomura Securities Co., Ltd. (The) 5,000 85
Sony Corporation-ADR 7,470 259
Yasuda Fire & Marine Insurance
Company, Limited (The) 26,000 214
Mexico (0.8%)
Cemex, SA de CV-ADR 3,620 95
Kimberly-Clark de Mexico, S.A. de C.V.-
A Shares 38,040 98
Telefonos de Mexico SA de CV-ADR 7,690 254
Netherlands (2.5%)
Akzo Nobel NV-ADR 6,930 265
Elsevier NV 25,330 315
IHC Caland N.V. 4,530 246
ING Groep NV-ADR 11,320 265
Koninklijke Philips Electronics NV 10,990 321
New Zealand (0.3%)
Telecom Corporation of New Zealand
Limited 47,250 167
Portugal (0.5%)
Portugal Telecom, SGPS, SA-Registered
Shares 28,910 291
Singapore (0.4%)
DBS Group Holdings Limited-ADR 5,940 206
South Korea (1.7%)
Kookmin Bank-ADR 6,380 241
Korea Electric Power Corporation-ADR (b) 14,120 147
KT Corp.-ADR 12,400 236
Samsung Electronics Co.,
Ltd.-GDR-144A (USD) 1,950 367
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 4
Templeton Great Companies Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
- --------------------------------------------------------------------------------
Spain (1.6%)
Antena 3 Television, SA (a) 47 $ 2
Endesa SA 9,020 173
Iberdrola SA 13,850 274
Repsol-YPF, SA 11,220 219
Telefonica SA 15,250 224
Sweden (2.4%)
Atlas Copco AB-A Shares 7,260 260
Electrolux AB-Series B 4,060 89
Nordea AB-FDR 41,980 313
Securitas AB-Class B 17,150 231
Svenska Cellulosa AB-B Shares 6,200 253
Volvo AB-B Shares 7,260 222
Switzerland (1.8%)
Nestle SA-ADR 4,840 302
Novartis AG-ADR 5,320 244
Swiss Reinsurance Company-Registered
Shares 4,280 289
UBS AG-Registered Shares 3,280 223
Taiwan (0.3%)
Chughwa Telecom Co., Ltd.-ADR 13,400 194
United Kingdom (6.3%)
Abbey National PLC 21,330 203
BAE Systems PLC 63,310 191
BP PLC-ADR 6,590 325
Brambles Industries PLC 65,790 240
British Airways PLC (a) 31,430 131
Cadbury Schweppes PLC 44,950 330
GlaxoSmithKline PLC 10,380 238
HSBC Holdings PLC-ADR 2,620 207
Marks and Spencer Group PLC 48,060 249
National Grid Group PLC (The) 31,980 229
Pearson PLC 18,580 207
Rolls-Royce Group PLC 49,120 156
Shell Transport & Trading Company PLC 29,350 218
Smiths Group PLC 21,090 250
Standard Chartered PLC 13,630 225
Unilever PLC 29,120 271
United States (58.1%)
Abbott Laboratories 47,000 2,190
American International Group, Inc. 21,800 1,445
Amgen Inc. (a) 16,700 1,032
Anheuser-Busch Companies, Inc. 19,600 1,033
Autoliv, Inc. 3,720 140
Avon Products, Inc. 15,400 1,039
Berkshire Hathaway Inc.-Class B (a) 500 1,408
Cintas Corporation (b) 20,900 1,048
Clear Channel Communications, Inc. 32,800 1,536
Shares Value
- --------------------------------------------------------------------------------
United States (continued)
Colgate-Palmolive Company 20,800 $ 1,041
Dell Computer Corporation (a) 28,900 981
eBay Inc. (a) 16,600 1,072
First Data Corporation (b) 23,000 945
General Electric Company 32,200 998
Genzyme Corporation-
General Division (a) 21,200 1,046
International Business Machines
Corporation 10,100 936
Johnson & Johnson 20,250 1,046
Lehman Brothers Holdings Inc. 18,200 1,405
Marsh & McLennan Companies, Inc. 28,400 1,360
Mattel, Inc. 76,500 1,474
Merrill Lynch & Co., Inc. (b) 22,700 1,331
Microsoft Corporation 34,400 947
Moody's Corporation 22,100 1,338
Omnicom Group, Inc. (b) 17,100 1,493
Pfizer Inc. 29,800 1,053
Procter & Gamble Company (The) 9,700 969
United Technologies Corporation 22,300 2,113
UTStarcom, Inc. (a)(b) 24,800 919
--------
Total Common Stocks (cost: $48,482) 53,714
--------
Principal Value
- --------------------------------------------------------------------------------
SECURITY LENDING COLLATERAL (10.9%)
Debt (8.5%)
Bank Notes (0.6%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 30 $ 30
Fleet National Bank
1.00%, due 01/21/2004 110 110
National Bank of Commerce
1.19%, due 04/21/2004 92 92
Commercial Paper (2.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 55 55
Delaware Funding Corporation
1.08%, due 01/07/2004 37 37
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 55 55
1.09%, due 01/13/2004 37 37
1.08%, due 02/05/2004 73 73
General Electric Capital Corporation
1.09%, due 01/08/2004 93 93
1.09%, due 01/09/2004 55 55
1.08%, due 01/16/2004 73 73
Govco Incorporated-144A
1.07%, due 02/05/2004 92 92
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 5
Templeton Great Companies Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 $ 92 $ 92
1.09%, due 02/06/2004 92 92
1.10%, due 02/09/2004 54 54
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 92 92
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 55 55
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 107 107
1.08%, due 02/17/2004 184 184
Sheffield Receivables-144A
1.09%, due 01/21/2004 37 37
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 184 184
Credit Agricole Indosuez
0.98%, due 01/02/2004 7 7
1.08%, due 01/06/2004 70 70
Euro Dollar Terms (2.2%)
Bank of Montreal
1.06%, due 01/15/2004 36 36
1.06%, due 02/17/2004 74 74
Bank of Scotland
1.06%, due 04/02/2004 55 55
Citigroup Inc.
1.10%, due 01/22/2004 55 55
1.09%, due 02/06/2004 74 74
Credit Agricole Indosuez
1.08%, due 01/28/2004 37 37
Den Danske Bank
1.08%, due 01/20/2004 184 184
1.02%, due 01/30/2004 92 92
Royal Bank of Canada
1.05%, due 02/27/2004 184 184
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 110 110
1.08%, due 01/15/2004 37 37
1.08%, due 01/20/2004 18 18
Svenska Handelsbanken AB
1.09%, due 01/15/2004 18 18
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 110 110
Wells Fargo & Company
1.04%, due 01/30/2004 147 147
Principal Value
- --------------------------------------------------------------------------------
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 $ 74 $ 74
1.14%, due 09/08/2004 110 110
Morgan Stanley
1.05%, due 06/21/2004 177 177
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 184 184
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 55 55
Repurchase Agreements (2.1%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $431 on 01/02/2004 431 431
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $586 on 01/02/2004 586 586
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $350 on 01/02/2004 350 350
Shares Value
- --------------------------------------------------------------------------------
Investment Companies (2.4%)
Money Market Funds (2.4%)
American AAdvantage Select Fund
1-day yield of 1.00% 90,294 $ 90
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 220,460 220
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 958,631 959
--------
Total Security Lending Collateral (cost: $6,243) 6,243
--------
Total Investment Securities (cost: $54,895) $60,196
========
SUMMARY:
Investments, at value 105.0% $60,196
Liabilities in excess of other assets (5.0)% (2,904)
------- --------
Net assets 100.0% $57,292
======= ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 6
Templeton Great Companies Global
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Percentage of
Net Assets Value
- --------------------------------------------------------------------------------
INVESTMENTS BY INDUSTRY:
Business Services 12.0% $ 6,873
Pharmaceuticals 12.0% 6,849
Insurance 7.3% 4,249
Chemicals & Allied Products 7.3% 4,167
Security & Commodity Brokers 4.9% 2,821
Aerospace 4.3% 2,460
Electronic & Other Electric Equipment 4.1% 2,342
Computer & Office Equipment 4.0% 2,316
Telecommunications 3.3% 1,906
Commercial Banks 3.3% 1,862
Computer & Data Processing Services 3.1% 1,780
Manufacturing Industries 2.6% 1,474
Beverages 2.4% 1,363
Insurance Agents, Brokers & Service 2.4% 1,360
Apparel Products 2.3% 1,297
Electric Services 2.1% 1,190
Communications Equipment 1.6% 919
Automotive 1.6% 915
Oil & Gas Extraction 1.5% 850
Paper & Allied Products 1.5% 846
Life Insurance 1.0% 598
Food & Kindred Products 1.0% 573
Industrial Machinery & Equipment 1.0% 568
Petroleum Refining 0.9% 543
Primary Metal Industries 0.9% 524
Printing & Publishing 0.9% 522
Percentage of
Net Assets Value
- -------------------------------------------------------------------------------
INVESTMENTS BY INDUSTRY: (continued)
Trucking & Warehousing 0.9% $ 492
Metal Mining 0.8% 469
Transportation & Public Utilities 0.7% 428
Electronic Components & Accessories 0.4% 250
Hotels & Other Lodging Places 0.4% 224
Real Estate 0.4% 215
Rubber & Misc. Plastic Products 0.3% 171
Electric, Gas & Sanitary Services 0.3% 169
Holding & Other Investment Offices 0.2% 140
Air Transportation 0.2% 131
Stone, Clay & Glass Products 0.2% 95
Radio & Television Broadcasting 0.0% 2
----- --------
Investments, at market value 94.1% 53,953
Short-term investments 10.9% 6,243
Other assets in excess of liabilities (5.0)% (2,904)
----- --------
Net assets 100.0% $ 57,292
====== ========
FORWARD FOREIGN CURRENCY CONTRACTS:
- --------------------------------------------------------------------------------
Amount in
U.S. Dollars Net Unrealized
Bought Settlement Bought Appreciation
Currency (Sold) Date (Sold) (Depreciation)
- --------------------------------------------------------------------------------
Euro Dollar 5 01/02/2004 $ 6 $ -
Euro Dollar - 01/05/2004 (d) -
--- ---
6 -
=== ===
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$6,039.
(c) Cash collateral for the Repurchase Agreements, valued at $1,393, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) Amount is less than $1.
DEFINITIONS:
ADR American Depositary Receipt
FDR Finnish Depositary Receipt
GDR Global Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $367 or 0.64% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 7
Templeton Great Companies Global
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $54,895)
(including $6,039 of securities loaned) $ 60,196
Cash 3,338
Receivables:
Interest 1
Dividends 51
Dividend reclaims receivable 5
Other 6
--------
63,597
--------
Liabilities:
Investment securities purchased 6
Accounts payable and accrued liabilities:
Management and advisory fees 41
Payable for collateral for securities on loan 6,243
Other 15
--------
6,305
--------
Net Assets $ 57,292
========
Net Assets Consist of:
Capital stock, 50,000 shares authorized
($.01 par value) $ 81
Additional paid-in capital 53,919
Undistributed net investment income (loss) 19
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (2,029)
Net unrealized appreciation (depreciation) on:
Investment securities 5,301
Translation of assets and liabilities denominated in
foreign currencies 1
--------
Net Assets $ 57,292
========
Shares Outstanding:
Initial Class 8,078
Service Class 52
Net Asset Value and Offering Price Per Share:
Initial Class $ 7.05
Service Class 7.03
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 7
Dividends 611
Income from loaned securities-net 10
Less withholding taxes on foreign dividends (43)
--------
585
--------
Expenses:
Management and advisory fees 307
Transfer agent fees 2
Printing and shareholder reports 29
Custody fees 21
Administration fees 20
Auditing and accounting fees 10
Directors fees 1
Other 1
--------
Total expenses 391
--------
Less:
Advisory fee waiver (6)
--------
Net expenses 385
--------
Net Investment Income (Loss) 200
--------
Net Realized Gain (Loss) from:
Investment securities 890
Foreign currency transactions (183)
--------
707
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 8,927
Translation of assets and liabilities denominated in
foreign currencies 1
--------
8,928
--------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 9,635
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 9,835
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 8
Templeton Great Companies Global
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 200 $ 52
Net realized gain (loss) from
investment securities and foreign
currency transactions 707 (1,375)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 8,928 (3,970)
-------- --------
9,835 (5,293)
-------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (51) (11)
Service Class - -
-------- --------
(51) (11)
-------- --------
From net realized gains:
Initial Class - -
Service Class - -
-------- --------
- -
-------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 28,502 23,199
Service Class 5,487 -
-------- --------
33,989 23,199
-------- --------
Dividends and distributions reinvested:
Initial Class 51 11
Service Class - -
-------- --------
51 11
-------- --------
Cost of shares redeemed:
Initial Class (6,845) (8,471)
Service Class (5,182) -
-------- --------
(12,027) (8,471)
-------- --------
22,013 14,739
-------- --------
Net increase (decrease) in net assets 31,797 9,435
-------- --------
Net Assets:
Beginning of year 25,495 16,060
-------- --------
End of year $ 57,292 $ 25,495
======== ========
Undistributed Net Investment Income $ 19 $ 53
======== ========
December 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
Share Activity:
Shares issued:
Initial Class 4,638 3,778
Service Class 829 -
-------- --------
5,467 3,778
-------- --------
Shares issued-reinvested from distributions:
Initial Class 8 2
Service Class - -
-------- --------
8 2
-------- --------
Shares redeemed:
Initial Class (1,145) (1,464)
Service Class (777) -
-------- --------
(1,922) (1,464)
-------- --------
Net increase (decrease) in shares
outstanding 3,553 2,316
======== ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 9
Templeton Great Companies Global
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
-----------------------------------------------------------------------------------------------------
Investment Operations Distributions
----------------------------------------- ----------------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- -----------------------------------------------------------------------------------------------------------------------------------
Initial Class 12/31/2003 $ 5.57 $ 0.03 $ 1.46 $ 1.49 $ (0.01) $ - $ (0.01) $ 7.05
12/31/2002 7.10 0.01 (1.54) (1.53) - - - 5.57
12/31/2001 8.54 0.01 (1.45) (1.44) - - - 7.10
12/31/2000 10.00 0.02 (1.48) (1.46) - - - 8.54
- -----------------------------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 5.78 - 1.25 1.25 - - - 7.03
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- --------------------------------------------------------------------------------------------------------------------
Initial Class 12/31/2003 26.73% $ 56,924 1.00% 1.02% 0.53% 97%
12/31/2002 (21.51) 25,495 1.00 1.20 0.24 42
12/31/2001 (16.84) 16,060 1.00 1.59 0.12 106
12/31/2000 (14.60) 5,057 1.00 3.93 0.53 6
- --------------------------------------------------------------------------------------------------------------------
Service Class 12/31/2003 21.63 368 1.25 1.27 0.04 97
- --------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-September 1, 2000
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 10
Templeton Great Companies Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Templeton Great Companies Global ("the Fund"), part of ATSF, began
operations on September 1, 2000 as Great Companies-Global2. On September 15,
2003, the Fund changed its name from Great Companies-Global2 to Templeton Great
Companies Global.
The Fund will merge into Janus Global and be renamed Templeton Great Companies
Global, effective the close of business on April 30, 2004, subject to approval
by Policyowners.
On September 15th, 2003, Templeton Investment Counsel LLC became a co-subadviser
of the Fund, managing the foreign portion of the fund.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as a
result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $4 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 11
Templeton Great Companies Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
due (at least $1), IBT collects additional cash collateral from the borrowers.
Although securities loaned will be fully collateralized at all times, IBT may
experience delays in, or may be prevented from, recovering the collateral on
behalf of the Fund. The Fund may recall a loaned security position at any time
from the borrower through IBT. In the event the borrower fails to timely return
a recalled security, IBT may indemnify the Fund by purchasing replacement
securities for the Fund at its own expense and claiming the collateral to fund
such a purchase. IBT absorbs the loss if the collateral value is not sufficient
to cover the cost of the replacement securities. If replacement securities are
not available, IBT will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund are
maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement date
of investment security transactions; 2) gains and losses on forward foreign
currency contracts; and 3) the difference between the receivable amounts of
interest and dividends recorded in the accounting records in U.S. dollars and
the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Great Companies, LLC is both an affiliate of the Fund and a co-sub-adviser of
the Fund, managing the domestic portion of the fund.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
------------ -----------------
Fiscal Year 2001 $ 58 12/31/2004
Fiscal Year 2002 42 12/31/2005
Fiscal Year 2003 6 12/31/2006
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 12
Templeton Great Companies Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
service providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $2. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 54,621
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 35,031
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (183)
Undistributed net realized capital gains (loss) 183
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 11
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 51
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 13
Templeton Great Companies Global
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 33
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (1,863)
========
Post October Currency Loss $ 14
========
Net Unrealized Appreciation (Depreciation) $ 5,135
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
------------ -----------------
$ 546 December 31, 2009
1,317 December 31, 2010
The capital loss carryforward utilized during the period ended December 31, 2003
was $743.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $55,061
========
Unrealized Appreciation $ 5,497
Unrealized (Depreciation) (362)
--------
Net Unrealized Appreciation (Depreciation) $ 5,135
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 14
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Templeton Great Companies Global
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton Great Companies Global
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Templeton Great Companies Global 15
Third Avenue Value
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
For long-term fundamental investors like Third Avenue Value, the general market
is relatively unimportant. In the long run, the performance of the Third Avenue
Value portfolio will be driven by the merits of the investments not by general
market considerations.
PERFORMANCE
For the year ended December 31, 2003, Third Avenue Value returned 37.26%. By
comparison its benchmark, the Standard and Poor's 500 Composite Stock Index
returned 28.67%.
STRATEGY REVIEW
Performance was favorably driven by selected technology, financial, Japanese,
natural resources and real estate related holdings.
Third Avenue Value strives to deliver superior absolute returns with limited
investment risk over time; we do not manage for short-term performance or
against benchmarks. We are fundamental bottom-up value investors. We invest in
the securities of companies that meet our criteria of what is "safe and cheap."
As such, we make no attempt to allocate the portfolio assets among industry
sectors based on any macro-economic view or index-related considerations. Our
diligent "safe and cheap" criteria cannot shield us from short-term market
fluctuations, but hopefully enables the portfolio to prosper over the long-term.
During the year, we added nineteen new positions to the portfolio (eighteen
common stock holdings and one preferred), increased our positions in twenty
existing holdings, eliminated holdings in the common stock of seven companies
and the debt of one company, and reduced our holdings in six positions. The new
names to the portfolio are engaged in a wide range of businesses, including real
estate related and energy related.
In addition to benefiting from general market price improvements, our investment
strategy has other avenues for creating value for shareholders. Since Third
Avenue Value invests in companies that are extremely well capitalized and have
high-quality assets, our portfolio companies frequently participate in resource
conversion activities. Resource conversions can happen in a number of different
ways. For example, a cash-rich company might convert its liquid assets into
higher and better uses by purchasing the assets or operations of another
company. It might involve a massive share repurchase, extraordinary dividend or
a tender offer at a premium to the market. Resource conversion also happens when
businesses of our portfolio companies get acquired, thereby monetizing our
investment, or when the company divests assets, liquifying its balance sheet.
As an example, during the fourth quarter, the portfolio received a special
dividend from Catellus Development Corporation ("Catellus") when the company
converted from a C Corporation to a Real Estate Investment Trust ("REIT").
Shareholders had the option of receiving the special dividend of $3.83 per share
in common stock, cash or a combination thereof; we elected to receive the entire
dividend in common stock. We have generally favored real estate operating
companies over REITs because of their ability to retain and reinvest cash flow,
thereby enabling the companies to grow without the need to constantly seek new
equity capital. Catellus has achieved substantial growth over the last five
years due, in large part, to its ability to reinvest its free cash flow.
Catellus is in the unique position of having a substantial portfolio of
properties that will not be included in the REIT. These properties will be held
in a "taxable REIT subsidiary" with the intention that they will be sold off, at
a substantial profit, over the next few years. The "after-tax" cash flow will be
distributed to the REIT, which will enable Catellus to fund its development
projects without the need to raise additional equity capital.
We continue to be pleased with the overall quality of names in the portfolio. We
will continue to strive to find additional investment opportunities that meet
our "safe and cheap" criteria today that will enable us to achieve long-term
growth into the future.
/s/ Martin J. Whitman
Martin J. Whitman
Yang Lie
Co-Portfolio Managers
Third Avenue Management LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 1
Third Avenue Value
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/2/98 through 12/31/03
Initial Class S&P 500
1/2/98 $10,000 $10,000
3/31/98 10,358 11,394
6/30/98 9,591 11,770
9/30/98 7,906 10,601
12/31/98 9,316 12,858
3/31/99 8,446 13,498
6/30/99 9,693 14,449
9/30/99 9,514 13,548
12/31/99 10,780 15,563
3/31/00 13,240 15,919
6/30/00 13,276 15,497
9/30/00 13,797 15,347
12/31/00 14,604 14,147
3/31/01 14,284 12,471
6/30/01 15,712 13,200
9/30/01 13,764 11,264
12/31/01 15,505 12,467
3/31/02 16,552 12,501
6/30/02 15,472 10,827
9/30/02 12,364 8,958
12/31/02 13,665 9,713
3/31/03 13,080 9,406
6/30/03 14,878 10,854
9/30/03 16,563 11,141
12/31/03 $18,757 $12,497
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
- --------------------------------------------------------------------------------
Initial Class 37.26% 15.02% 11.06% 1/2/98
S&P 500(1) 28.67% (0.57)% 3.79% 1/2/98
- --------------------------------------------------------------------------------
Service Class - - 35.85% 5/1/03
- --------------------------------------------------------------------------------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Investments in a "non-diversified" portfolio may be subject to specific risks
such as susceptibility to single economic political, or regulatory events, and
may be subject to greater loss than investments in a diversified portfolio.
Investments in global securities involve risks relating to political, social and
economic developments abroad, foreign currency contracts for hedging, as well as
risks resulting from the differences between the regulations to which U.S. and
foreign issuer markets are subject.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 2
Third Avenue Value
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (5.4%)
U.S. Treasury Note
2.13%, due 10/31/2004 $ 25,000 $ 25,194
---------
Total U.S. Government Obligations (cost: $25,046) 25,194
---------
CORPORATE DEBT SECURITIES (0.3%)
Business Credit Institutions (0.3%)
CIT Group, Inc.
5.63%, due 05/17/2004 1,500 1,524
---------
Total Corporate Debt Securities (cost: $1,451) 1,524
---------
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (2.5%)
Holding & Other Investment Offices (0.8%)
SFK Pulp Fund 611,800 $ 3,599
Mining (1.7%)
Fording Canadian Coal Trust-Units (b) 235,000 8,347
---------
Total Convertible Preferred Stocks (cost: $7,514) 11,946
---------
PREFERRED STOCKS (0.5%)
Holding & Other Investment Offices (0.5%)
Koger Equity, Inc. 92,300 2,492
---------
Total Preferred Stocks (cost: $2,308) 2,492
---------
COMMON STOCKS (77.9%)
Agriculture (1.2%)
Tejon Ranch Co. (a) 137,305 5,631
Automotive (2.6%)
Toyota Industries Corporation 565,000 11,988
Business Credit Institutions (1.1%)
CIT Group, Inc. 138,100 4,965
Business Services (1.3%)
Cross Country Healthcare, Inc. (a)(b) 397,900 5,937
Chemicals & Allied Products (1.7%)
Agrium, Inc. (b) 481,000 7,917
Communications Equipment (4.3%)
Comverse Technology, Inc. (a) 488,200 8,587
Sycamore Networks, Inc. (a) 450,000 2,358
Tellabs, Inc. (a) 918,300 7,741
Ulticom, Inc. (a) 139,900 1,350
Computer & Data Processing Services (0.8%)
Geac Computer Corporation Limited (a) 689,300 3,584
Computer & Office Equipment (0.1%)
NCR Corporation (a) 17,600 683
Construction (0.9%)
Quanta Services, Inc. (a)(b) 594,600 4,341
Electronic & Other Electric Equipment (4.8%)
American Power Conversion Corporation 454,300 11,108
Electro Scientific Industries, Inc. (a) 482,800 11,491
Shares Value
-------------------- ---------------
Electronic Components & Accessories (7.4%)
AVX Corporation 592,600 $ 9,849
Bel Fuse Inc.-Class A 121,800 3,642
Bel Fuse Inc.-Class B 69,300 2,261
KEMET Corporation (a) 329,500 4,511
TriQuint Semiconductor, Inc. (a)(b) 1,047,900 7,409
Vishay Intertechnology, Inc. (a)(b) 310,000 7,099
Finance (0.3%)
JZ Equity Partners PLC 612,100 1,334
Health Services (0.7%)
AMN Healthcare Services, Inc. (a)(b) 178,675 3,066
Holding & Other Investment Offices (4.4%)
Capital Southwest Corporation 30,941 1,918
Hutchison Whampoa Limited 1,345,800 9,925
Investor AB-Class A 465,000 4,460
Koger Equity, Inc. 199,000 4,165
Hotels & Other Lodging Places (0.0%)
Lodgian, Inc.-Class A warrants, 32,370 24
Expires 11/25/2007
Lodgian, Inc.-Class B warrants, 6,456 3
Expires 11/25/2009
Lodgian, Inc. (a) 22,320 117
Industrial Machinery & Equipment (3.6%)
Alamo Group Inc. 386,900 5,904
Applied Materials, Inc. (a) 294,000 6,600
FSI International, Inc. (a) 186,500 1,376
Lindsay Manufacturing Co. 113,900 2,876
Instruments & Related Products (3.2%)
Agilent Technologies, Inc. (a) 165,000 4,825
Analogic Corporation 31,100 1,275
Coherent, Inc. (a) 100,000 2,380
Credence Systems Corporation (a)(b) 369,400 4,861
CyberOptics Corporation (a) 135,400 1,462
Insurance (12.4%)
Aioi Insurance Company, Limited 761,400 3,025
Arch Capital Group Inc. (a) 285,900 11,396
BRiT Insurance Holdings PLC (a) 2,000,000 2,604
First American Corporation (The) 48,800 1,453
Leucadia National Corporation 59,400 2,738
MBIA, Inc. 109,400 6,480
Millea Holdings, Inc.-ADR (b) 266,200 17,942
Mitsui Sumitomo Insurance Co., Ltd. 757,000 6,213
Phoenix Companies, Inc. (The) (b) 225,800 2,719
Radian Group, Inc. 72,464 3,533
Insurance Agents, Brokers & Service (0.3%)
E-L Financial Corporation Limited 6,100 1,393
Life Insurance (0.4%)
MONY Group Inc. (The) (a)(b) 66,900 2,093
Lumber & Wood Products (0.6%)
Modtech Holdings, Inc. (a) 359,700 3,025
Manufacturing Industries (1.3%)
JAKKS Pacific, Inc. (a)(b) 469,253 6,175
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ------------
Metal Mining (1.6%)
Brascan Corporation-Class A (a)(b) 239,600 $ 7,317
Oil & Gas Extraction (3.7%)
Nabors Industries Ltd. (a) 126,500 5,250
Smedvig ASA-A Shares (b) 977,700 7,407
Willbros Group, Inc. (a) 385,700 4,636
Paper & Allied Products (2.7%)
St. Joe Company (The) 343,700 12,817
Pharmaceuticals (1.4%)
Sankyo Company, Ltd. 360,000 6,766
Railroads (0.1%)
Florida East Coast Industries, Inc. 20,429 676
Real Estate (7.1%)
Catellus Development Corporation 345,407 8,331
Forest City Enterprises, Inc.-Class A 216,650 10,293
HomeFed Corporation (a) 1,418 41
LNR Property Corporation (b) 191,900 9,501
Trammell Crow Company (a) 400,800 5,311
Research & Testing Services (1.3%)
PAREXEL International Corporation (a) 368,800 5,997
Pharmaceutical Product Development,
Inc. (a) 12,400 334
Savings Institutions (1.2%)
Brookline Bancorp, Inc. 366,943 5,629
Security & Commodity Brokers (3.5%)
Instinet Group Incorporated (a) 1,161,300 5,981
Legg Mason, Inc. 71,200 5,495
SWS Group, Inc. (b) 169,100 3,010
Westwood Holdings Group, Inc. 106,675 1,898
Transportation Equipment (1.5%)
Trinity Industries, Inc. (b) 221,600 6,834
Water Transportation (0.4%)
Alexander & Baldwin, Inc. 63,300 2,133
---------
Total Common Stocks (cost: $269,991) 365,469
---------
Principal Value
------------------------ ---------------
SHORT-TERM OBLIGATIONS (13.3%)
Investor's Bank & Trust Company (d)
0.72%, Repurchase Agreement dated 12/31/2003
to be repurchased at $62,563 on 01/02/2004 $ 62,561 $ 62,561
---------
Total Short-Term Obligations (cost: $62,561) 62,561
---------
SECURITY LENDING COLLATERAL (15.5%)
Debt (12.4%)
Bank Notes (0.6%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 342 342
Fleet National Bank
1.00%, due 01/21/2004 1,284 1,284
National Bank of Commerce
1.19%, due 04/21/2004 1,070 1,070
Principal Value
------------------------ ---------------
Commercial Paper (3.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 642 $ 642
Delaware Funding Corporation
1.08%, due 01/07/2004 426 426
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 642 642
1.09%, due 01/13/2004 428 428
1.08%, due 02/05/2004 854 854
General Electric Capital Corporation
1.09%, due 01/08/2004 1,067 1,067
1.09%, due 01/09/2004 642 642
1.08%, due 01/16/2004 852 852
Govco Incorporated-144A
1.07%, due 02/05/2004 1,068 1,068
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,068 1,068
1.09%, due 02/06/2004 1,068 1,068
1.10%, due 02/09/2004 624 624
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,068 1,068
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 642 642
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,240 1,240
1.08%, due 02/17/2004 2,136 2,136
Sheffield Receivables-144A
1.09%, due 01/21/2004 428 428
Euro Dollar Overnight (0.6%)
BNP Paribas SA
0.97%, due 01/07/2004 2,139 2,139
Credit Agricole Indosuez
0.98%, due 01/02/2004 86 86
1.08%, due 01/06/2004 813 813
Euro Dollar Terms (3.1%)
Bank of Montreal
1.06%, due 01/15/2004 418 418
1.06%, due 02/17/2004 856 856
Bank of Scotland
1.06%, due 04/02/2004 642 642
Citigroup Inc.
1.10%, due 01/22/2004 642 642
1.09%, due 02/06/2004 856 856
Credit Agricole Indosuez
1.08%, due 01/28/2004 428 428
Den Danske Bank
1.08%, due 01/20/2004 2,139 2,139
1.02%, due 01/30/2004 1,070 1,070
Royal Bank of Canada
1.05%, due 02/27/2004 2,139 2,139
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ------------
Commercial Paper (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 1,284 $ 1,284
1.08%, due 01/15/2004 428 428
1.08%, due 01/20/2004 214 214
Svenska Handelsbanken AB
1.09%, due 01/15/2004 214 214
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,284 1,284
Wells Fargo & Company
1.04%, due 01/30/2004 1,712 1,712
Master Notes (0.9%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 856 856
1.14%, due 09/08/2004 1,284 1,284
Morgan Stanley
1.05%, due 06/21/2004 2,054 2,054
Medium Term Notes (0.6%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 2,139 2,139
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 642 642
Repurchase Agreements (3.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $5,005 on 01/02/2004 5,005 5,005
Principal Value
--------------- ------------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $6,802 on 01/02/2004 $ 6,802 $ 6,802
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $4,064 on 01/02/2004 4,064 4,064
Shares Value
---------------- ------------
Investment Companies (3.1%)
Money Market Funds (3.1%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,049,431 $ 1,049
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,562,263 2,561
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 11,141,565 11,142
---------
Total Security Lending Collateral (cost: $72,553) 72,553
---------
Total Investment Securities (cost: $441,424) $ 541,739
=========
SUMMARY:
Investments, at value 115.4 % $ 541,739
Liabilities in excess of other assets (15.4)% (72,230)
---------- ---------
Net assets 100.0 % $ 469,509
========== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$69,711.
(c) Cash collateral for the Repurchase Agreements, valued at $16,192, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
(d) At December 31, 2003, the collateral for the repurchase agreement
(excluding collateral for securities on loan) is as follows:
Market Value
Collateral and Accrued Interest
- ---------------------------------------------- ---------------------
$79,103 Fannie Mae Conventional Pool-618128
3.17%, due 08/01/2033 $ 36,825
$39,250 Fannie Mae Floating Rate Note
Series 2002-92 Class FA
1.69%, due 01/25/2033 28,865
--------
$ 65,690
========
DEFINITIONS:
ADR American Depositary Receipt
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 5
Third Avenue Value
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $441,424)
(including $69,711 of securities loaned) $541,739
Cash 56
Receivables:
Interest 104
Dividends 505
Dividend reclaims receivable 3
Other 61
---------
542,468
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 331
Distribution fees 1
Payable for collateral for securities on loan 72,553
Other 74
---------
72,959
---------
Net Assets $469,509
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 277
Additional paid-in capital 367,821
Undistributed net investment income (loss) 2,208
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (1,115)
Net unrealized appreciation (depreciation) on:
Investment securities 100,315
Translation of assets and liabilities denominated in
foreign currencies 3
---------
Net Assets $469,509
=========
Shares Outstanding:
Initial Class 27,673
Service Class 65
Net Asset Value and Offering Price Per Share:
Initial Class $ 16.93
Service Class 16.96
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 1,109
Dividends 4,508
Income from loaned securities-net 112
Less withholding taxes on foreign dividends (192)
---------
5,537
---------
Expenses:
Management and advisory fees 2,770
Transfer agent fees 2
Printing and shareholder reports 57
Custody fees 56
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 12
Other fees 7
Service fees:
Service Class 1
---------
Total expenses 2,939
---------
Net Investment Income (Loss) 2,598
---------
Net Realized Gain (Loss) from:
Investment securities (1,117)
Foreign currency transactions (116)
---------
(1,233)
---------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment Securities 117,134
Translation of assets and liabilities denominated in
foreign currencies 3
---------
117,137
---------
Net Gain (Loss) on Investments and Foreign
Currency Transactions 115,904
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 118,502
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 6
Third Avenue Value
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 2,598 $ 918
Net realized gain (loss) from
investment securities and foreign
currency transactions (1,233) 449
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 117,137 (27,071)
--------- ---------
118,502 (25,704)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (1,165) (1,017)
Service Class - -
--------- ---------
(1,165) (1,017)
--------- ---------
From net realized gains:
Initial Class (459) (4,985)
Service Class - -
--------- ---------
(459) (4,985)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 127,153 151,200
Service Class 1,033 -
--------- ---------
128,186 151,200
--------- ---------
Dividends and distributions reinvested:
Initial Class 1,624 6,002
Service Class - -
--------- ---------
1,624 6,002
--------- ---------
Cost of shares redeemed:
Initial Class (29,126) (37,398)
Service Class (46) -
--------- ---------
(29,172) (37,398)
--------- ---------
100,638 119,804
--------- ---------
Net increase (decrease) in net assets 217,516 88,098
--------- ---------
Net Assets:
Beginning of year 251,993 163,895
--------- ---------
End of year $469,509 $ 251,993
========= =========
Undistributed Net Investment
Income (Loss) $ 2,208 $ 893
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 9,379 11,448
Service Class 68 -
--------- ---------
9,447 11,448
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 116 480
Service Class - -
--------- ---------
116 480
--------- ---------
Shares redeemed:
Initial Class (2,167) (2,873)
Service Class (3) -
--------- ---------
(2,170) (2,873)
--------- ---------
Net increase (decrease) in shares
outstanding 7,393 9,055
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 7
Third Avenue Value
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 12.39 $ 0.11 $ 4.50 $ 4.61
12/31/2002 14.52 0.06 (1.78) (1.72)
12/31/2001 13.71 0.11 0.73 0.84
12/31/2000 10.45 0.20 3.50 3.70
12/31/1999 9.29 0.16 1.28 1.44
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 12.50 0.10 4.38 4.48
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ (0.05) $ (0.02) $ (0.07) $ 16.93
(0.07) (0.34) (0.41) 12.39
(0.01) (0.02) (0.03) 14.52
(0.12) (0.32) (0.44) 13.71
(0.28) - (0.28) 10.45
- --------------- --------- --------- --------- ---------
Service Class - (0.02) (0.02) 16.96
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 37.26% $ 468,411 0.85% 0.85% 0.75% 20%
12/31/2002 (11.87) 251,993 0.89 0.89 0.47 5
12/31/2001 6.17 163,895 0.92 0.92 0.76 18
12/31/2000 35.47 92,742 0.92 0.92 1.56 24
12/31/1999 15.72 19,217 1.00 1.06 1.76 10
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 35.85 1,098 1.11 1.11 0.93 20
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial class-January 2, 1998
Service class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 8
Third Avenue Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Third Avenue Value ("the Fund"), part of ATSF, began operations on
January 2, 1998. The Fund is "non-diversified" under the 1940 Act.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $48 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 9
Third Avenue Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
IBT absorbs the loss if the collateral value is not sufficient to cover the cost
of the replacement securities. If replacement securities are not available, IBT
will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $12 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund are
maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement date
of investment security transactions; 2) gains and losses on forward foreign
currency contracts; and 3) the difference between the receivable amounts of
interest and dividends recorded in the accounting records in U.S. dollars and
the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (i.e. through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 20,033 4%
Asset Allocation-Growth Portfolio 41,053 9%
Asset Allocation-Moderate Growth Portfolio 85,655 18%
Asset Allocation-Moderate Portfolio 72,989 16%
Select+ Aggressive 47 0%
Select+ Conservative 222 0%
Select+ Growth & Income 606 0%
--
47%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 10
Third Avenue Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Plan of Distribution fees: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Brokerage commissions: Brokerage commissions incurred on security transactions
placed with an affiliate of the sub-adviser for the year ended December 31,
2003, were $446.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $16. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 122,276
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 35,818
U.S. Government 25,749
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (118)
Undistributed net realized capital gains (loss) 118
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 3,522
Long-term capital gains 2,480
2003 Distributions paid from:
Ordinary income 1,624
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 11
Third Avenue Value
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 3,437
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (257)
========
Post October Capital Loss $ 530
========
Post October Currency Loss $ 38
========
Net Unrealized Appreciation (Depreciation) $ 98,796
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 257 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 442,943
=========
Unrealized Appreciation $ 102,018
Unrealized (Depreciation) (3,222)
---------
Net Unrealized Appreciation (Depreciation) $ 98,796
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 12
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Third Avenue Value
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Third Avenue Value (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Third Avenue Value 13
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
2003 was a year for aggressive investors. Driven by investor confidence in an
economic recovery, U.S. equities markets staged a rebound in the twelve months
ended December 31, 2003; the Standard and Poor's 500 Composite Stock Index rose
28.67%. Convertible securities, which are quite sensitive to movements in equity
prices, closely followed the stock market's lead. Spearheading the advance for
convertibles were industries where credit quality was, initially at least, the
lowest and credit improvements during the year were most visible -- a category
that included everything from technology and airlines to retailers and
automobiles.
PERFORMANCE
For the year ended December 31, 2003, Transamerica Convertible Securities
returned 23.66%. By comparison its benchmark, the Merrill Lynch All U.S.
Convertibles Index ("ML U.S. Conv.") returned 27.15%.
STRATEGY REVIEW
Throughout the year, the portfolio was aggressively positioned for recovery in
the economy, with roughly 80% of assets invested in lower-quality convertibles
in such areas as technology, consumer products, healthcare, and transportation.
All of these investments, plus our investments in gaming-related convertibles,
worked out as we anticipated, making substantial contributions to performance.
On the other hand, we did not invest in all sectors with strong momentum. For
instance, we avoided automobiles, an industry where the participants rarely meet
our investment criteria; in our view, there is no catalyst for long-term growth
of U.S. automotive manufacturers and therefore little upside potential to the
equity component of their convertible securities.
We held back approximately 20% of assets for investment in higher-quality
securities. While these more stable investments generated positive results, they
certainly did not perform as well as our more aggressive positions. This bit of
conservatism, plus an underweighting in automotives, which excelled in the
fourth quarter, were the primary reasons for the portfolio's underperformance
versus the ML U.S. Conv.
/s/ Kirk J. Kim
Kirk J. Kim
/s/ Gary U. Rolle
Gary U. Rolle
Co-Portfolio Managers
Transamerica Investment Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 1
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/1/02 through 12/31/03
Merrill Lynch
Initial Class All U.S. Convert
5/1/2002 $10,000 $10,000
6/30/2002 9,810 9,388
9/30/2002 9,170 8,609
12/31/2002 9,320 9,365
3/31/2003 9,450 9,653
6/30/2003 10,550 10,679
9/30/2003 10,824 10,976
12/31/2003 $11,525 $11,907
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 23.66% 8.90% 5/1/02
ML U.S. Conv.(1) 27.15% 11.02% 5/1/02
- ---------------- ----- ----- ------
Service Class - 16.69% 5/1/03
- ---------------- ----- ----- ------
NOTES
(1) The Merrill Lynch All U.S. Convertibles (ML U.S. Conv.) Index is an
unmanaged index used as a general measure of market performance.
Calculations assume dividends and capital gains are reinvested and do not
include any managerial expenses. From inception calculation is based on
life of initial class shares. Source: Standard & Poor's Micropal(R)(C)-
Micropal, Inc. 2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Because convertible securities are primarily long-term debt obligations and for
that reason influenced by increases and decreases in interest rates, they may be
subject to credit risk.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 2
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
CORPORATE DEBT SECURITIES (1.6%)
Communications Equipment (1.6%)
ADC Telecommunications, Inc.-144A (c)
1.61%, due 06/15/2013 $ 6,000 $ 6,195
---------
Total Corporate Debt Securities (cost: $6,000) 6,195
---------
CONVERTIBLE BONDS (78.9%)
Air Transportation (10.1%)
American Airlines, Inc-144A
4.25%, due 09/23/2023 7,750 7,895
Delta Air Lines, Inc.-144A
8.00%, due 06/03/2023 9,000 8,156
ExpressJet Holdings, Inc.-144A
4.25%, due 08/01/2023 7,800 8,706
JetBlue Airways Corporation-144A
3.50%, due 07/15/2033 6,950 7,289
Northwest Airlines Corporation (d)
7.63%, due 11/15/2023 6,750 6,396
Business Credit Institutions (1.7%)
Structured Investment Corporation-144A
0.25%, due 08/05/2013 7,000 6,580
Business Services (2.1%)
Fair Issac Corporation-144A
1.50%, due 08/15/2023 3,500 3,609
MemberWorks Incorporated-144A
5.50%, due 10/01/2010 4,400 4,406
Commercial Banks (2.6%)
Deutsche Bank Luxembourg SA-144A (c)
1.36%, due 05/01/2012 6,000 9,960
Communication (3.2%)
Crown Castle International Corp. (a)
4.00%, due 07/15/2010 4,500 6,036
Liberty Media Corporation (a)
3.25%, due 03/15/2031 5,900 6,136
Communications Equipment (1.9%)
ADC Telecommunications, Inc.-144A
1.00%, due 06/15/2008 2,000 2,028
McDATA Corporation-144A
2.25%, due 02/15/2010 4,250 5,174
Computer & Data Processing Services (7.1%)
DST Systems, Inc.-144A (a)
3.63%, due 08/15/2023 5,000 5,700
GTECH Holdings Corporation
1.75%, due 12/15/2021 4,950 9,119
Openwave Systems, Inc.-144A
2.75%, due 09/09/2008 10,400 9,971
SERENA Software, Inc.-144A
1.50%, due 12/15/2023 2,250 2,422
Principal Value
--------------------- ---------------
Computer & Office Equipment (4.2%)
Maxtor Corporation-144A
6.80%, due 04/30/2010 $ 4,500 $ 6,429
Quantum Corporation-144A
4.38%, due 08/01/2010 3,850 4,033
RadiSys Corporation-144A
1.38%, due 11/15/2023 5,800 5,684
Department Stores (2.9%)
J.C. Penney Company, Inc.
5.00%, due 10/15/2008 10,050 11,030
Electronic Components & Accessories (1.9%)
Micron Technology, Inc.-144A (a)
2.50%, due 02/01/2010 5,500 7,274
Hotels & Other Lodging Places (1.7%)
Fairmont Hotels & Resorts Inc.-144A
3.75%, due 12/01/2023 6,000 6,293
Industrial Machinery & Equipment (6.3%)
ASM Lithography Holding NV-144A (a)
5.75%, due 10/15/2006 6,500 8,571
DuPont Photomasks, Inc.
1.25%, due 05/15/2008 2,000 2,340
DuPont Photomasks, Inc.-144A
1.25%, due 05/15/2008 4,500 5,265
Kulicke and Soffa Industries, Inc.-144A
0.50%, due 11/30/2008 8,000 7,680
Manufacturing Industries (4.9%)
International Game Technology-144A
Zero Coupon, due 01/29/2033 10,000 7,963
K2 Corporation-144A
5.00%, due 06/15/2010 8,000 10,900
Motion Pictures (2.2%)
Lions Gate Entertainment Corp.-144A
4.88%, due 12/15/2010 7,500 8,222
Pharmaceuticals (8.3%)
Corixa Corporation-144A
4.25%, due 07/01/2008 6,850 6,662
Gilead Sciences, Inc.
2.00%, due 12/15/2007 6,500 8,872
Indevus Pharmacuticals, Inc.-144A
6.25%, due 07/15/2008 4,100 4,843
Teva Pharmaceutical Finance BV-144A
0.38%, due 11/15/2022 3,500 4,856
Watson Pharmaceuticals, Inc.-144A
1.75%, due 03/15/2023 4,750 6,252
Printing & Publishing (2.8%)
Bowne & Co. Inc-144A
5.00%, due 10/01/2033 10,250 10,737
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 3
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Radio, Television & Computer Stores (4.2%)
Best Buy Co., Inc.
2.25%, due 01/15/2022 $ 5,800 $ 6,308
Guitar Center, Inc.
4.00%, due 07/15/2013 8,250 9,869
Retail Trade (1.5%)
Alloy, Inc.-144A
5.38%, due 08/01/2023 5,700 5,558
Security & Commodity Brokers (3.2%)
Morgan Stanley (c)
0.00%, due 08/15/2033 11,500 12,212
Telecommunications (6.1%)
Millicom International Cellular-144A
10.00%, due 11/20/2008 7,750 11,780
Nextel Partners, Inc.-144A
1.50%, due 11/15/2008 9,100 11,625
---------
Total Convertible Bonds (cost: $275,826) 300,841
---------
Shares Value
---------- ------------
CONVERTIBLE PREFERRED STOCKS (16.5%)
Commercial Banks (1.3%)
State Street Corporation 20,000 $ 4,860
Communications Equipment (2.8%)
Motorola, Inc.-Units (a) 245,000 10,640
Computer & Office Equipment (1.9%)
Xerox Corporation 55,000 7,136
Drug Stores & Proprietary Stores (1.7%)
Omnicare, Inc. 102,000 6,503
Environmental Services (1.5%)
Allied Waste Industries, Inc. 75,000 5,738
Insurance (3.4%)
Anthem, Inc. (a) 75,500 6,661
Chubb Corporation (a) 233,000 6,715
Life Insurance (1.7%)
Prudential Financial, Inc.-Units 99,800 6,497
Mortgage Bankers & Brokers (2.2%)
Doral Financial Corporation-144A 32,000 8,330
---------
Total Convertible Preferred Stocks (cost: $54,566) 63,080
---------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (11.4%)
Debt (9.1%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 205 $ 205
Fleet National Bank
1.00%, due 01/21/2004 767 767
National Bank of Commerce
1.19%, due 04/21/2004 639 639
Principal Value
--------------------- ---------------
Commercial Paper (2.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 $ 383 $ 383
Delaware Funding Corporation
1.08%, due 01/07/2004 255 255
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 383 383
1.09%, due 01/13/2004 256 256
1.08%, due 02/05/2004 510 510
General Electric Capital Corporation
1.09%, due 01/08/2004 637 637
1.09%, due 01/09/2004 383 383
1.08%, due 01/16/2004 509 509
Govco Incorporated-144A
1.07%, due 02/05/2004 638 638
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 638 638
1.09%, due 02/06/2004 638 638
1.10%, due 02/09/2004 373 373
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 638 638
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 383 383
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 741 741
1.08%, due 02/17/2004 1,276 1,276
Sheffield Receivables-144A
1.09%, due 01/21/2004 256 256
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 1,278 1,278
Credit Agricole Indosuez
0.98%, due 01/02/2004 51 51
1.08%, due 01/06/2004 486 486
Euro Dollar Terms (2.2%)
Bank of Montreal
1.06%, due 01/15/2004 250 250
1.06%, due 02/17/2004 511 511
Bank of Scotland
1.06%, due 04/02/2004 383 383
Citigroup Inc.
1.10%, due 01/22/2004 383 383
1.09%, due 02/06/2004 511 511
Credit Agricole Indosuez
1.08%, due 01/28/2004 256 256
Den Danske Bank
1.08%, due 01/20/2004 1,278 1,278
1.02%, due 01/30/2004 639 639
Royal Bank of Canada
1.05%, due 02/27/2004 1,278 1,278
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 4
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- ------------
Euro Dollar Terms (continued)
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 $ 767 $ 767
1.08%, due 01/15/2004 256 256
1.08%, due 01/20/2004 128 128
Svenska Handelsbanken AB
1.09%, due 01/15/2004 128 128
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 767 767
Wells Fargo & Company
1.04%, due 01/30/2004 1,023 1,023
Master Notes (0.7%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 511 511
1.14%, due 09/08/2004 767 767
Morgan Stanley
1.05%, due 06/21/2004 1,227 1,227
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,279 1,279
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 383 383
Repurchase Agreements (2.6%) (b)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,991 on 01/02/2004 2,991 2,991
Principal Value
-------------- ------------
Repurchase Agreements (continued)
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $4,065 on 01/02/2004 $ 4,065 $ 4,065
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,429 on 01/02/2004 2,429 2,429
Shares Value
--------------- ------------
Investment Companies (2.3%)
Money Market Funds (2.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 626,994 $ 627
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,530,851 1,531
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 6,656,647 6,657
---------
Total Security Lending Collateral (cost: $43,348) 43,348
---------
Total Investment Securities (cost: $379,740) $ 413,464
=========
SUMMARY:
Investments, at value 108.4 % $ 413,464
Liabilities in excess of other assets (8.4)% (32,194)
--------- ---------
Net assets 100.0 % $ 381,270
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$42,046.
(b) Cash collateral for the Repurchase Agreements, valued at $9,674, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(c) Floating or variable rate note. Rate is listed as of December 31, 2003.
(d) Securities are stepbonds. Northwest Airlines has a coupon rate 7.63% until
11/15/2008, then accretes as principal at 7.63%.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $237,048 or 62.17% of the net assets of
the fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 5
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $379,740)
(including $42,046 of securities loaned) $413,464
Cash 5,317
Receivables:
Investment securities sold 4,337
Interest 2,275
Dividends 145
Other 52
---------
425,590
---------
Liabilities:
Investment securities purchased 650
Accounts payable and accrued liabilities:
Management and advisory fees 271
Distribution fees 1
Payable for collateral for securities on loan 43,348
Other 50
---------
44,320
---------
Net Assets $381,270
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 331
Additional paid-in capital 324,557
Undistributed net investment income (loss) 7,629
Undistributed net realized gain (loss) from investment
securities 15,029
Net unrealized appreciation (depreciation) on investment
securities 33,724
---------
Net Assets $381,270
=========
Shares Outstanding:
Initial Class 33,047
Service Class 77
Net Asset Value and Offering Price Per Share:
Initial Class $ 11.51
Service Class 11.50
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 6,333
Dividends 3,430
Income from loaned securities-net 89
--------
9,852
--------
Expenses:
Management and advisory fees 2,118
Transfer agent fees 2
Printing and shareholder reports 25
Custody fees 32
Administration fees 20
Legal fees 3
Auditing and accounting fees 10
Directors fees 8
Other 4
Service fees:
Service Class 1
--------
Total expenses 2,223
--------
Net Investment Income (Loss) 7,629
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 15,517
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 33,800
--------
Net Gain (Loss) on Investment Securities 49,317
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 56,946
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 6
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
(all amounts in thousands)
December 31, December 31,
2003 2002(a)
------------------ ------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 7,629 $ 422
Net realized gain (loss) from
investment securities 15,517 (488)
Net unrealized appreciation
(depreciation) on investment
securities 33,800 (76)
--------- --------
56,946 (142)
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class (422) -
Service Class - -
--------- --------
(422) -
--------- --------
From net realized gains:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 262,280 84,886
Service Class 884 -
--------- --------
263,164 84,886
--------- --------
Dividends and distributions reinvested:
Initial Class 422 -
Service Class - -
--------- --------
422 -
--------- --------
Cost of shares redeemed:
Initial Class (20,929) (2,596)
Service Class (59) -
--------- --------
(20,988) (2,596)
--------- --------
242,598 82,290
--------- --------
Net increase (decrease) in net assets 299,122 82,148
--------- --------
Net Assets:
Beginning of year 82,148 -
--------- --------
End of year $381,270 $82,148
========= ========
Undistributed Net Investment
Income (Loss) $ 7,629 $ 422
========= ========
December 31, December 31,
2003 2002(a)
------------------ ------------------
Share Activity:
Shares issued:
Initial Class 26,207 9,092
Service Class 82 -
--------- --------
26,289 9,092
--------- --------
Shares issued-reinvested from distributions:
Initial Class 40 -
Service Class - -
--------- --------
40 -
--------- --------
Shares redeemed:
Initial Class (2,012) (280)
Service Class (5) -
---------- --------
(2,017) (280)
--------- --------
Net increase (decrease) in shares
outstanding 24,312 8,812
========= ========
(a) Commenced operations on May 1, 2002.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 7
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.32 $ 0.31 $ 1.89 $ 2.20
12/31/2002 10.00 0.17 (0.85) (0.68)
- --------------- ---------- -------- -------- -------- --------
Service Class 12/31/2003 9.86 0.18 1.46 1.64
- --------------- ---------- -------- -------- -------- --------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 11.51
- - - 9.32
- --------------- --------- --- --------- ---------
Service Class - - - 11.50
- --------------- --------- --- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 23.66% $ 380,387 0.84% 0.84% 2.88% 139%
12/31/2002 (6.80) 82,148 1.08 1.08 2.73 72
- --------------- ---------- ----- --------- ---- ---- ---- ---
Service Class 12/31/2003 16.69 883 1.09 1.09 2.41 139
- --------------- ---------- ----- --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 1, 2002
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 8
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica Convertible Securities ("the Fund"), part of ATSF, began
operations on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust ("IBT"). IBT has been contracted on behalf of the Fund
to invest the excess cash into a savings account, which at December 31, 2003,
was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $38 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 9
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
ex-dividend date or, in the case of foreign securities, as soon as the Fund is
informed of the ex-dividend date. Interest income, including accretion of
discounts and amortization of premiums, is recorded on the accrual basis
commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
------------ -----------
Asset Allocation-Conservative Portfolio $ 95,747 25%
Asset Allocation-Moderate Growth Portfolio 76,890 20%
Asset Allocation-Moderate Portfolio 157,610 41%
--
86%
==
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following stated break points:
0.80% of the first $500 million of ANA
0.70% of ANA over $500 million
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.30% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $13. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 10
Transamerica Convertible Securities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 599,535
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 356,804
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ -
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 422
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 22,654
========
Undistributed Long-term Capital Gains $ 28
========
Capital Loss Carryforward $ -
========
Post October Capital Loss $ 26
========
Net Unrealized Appreciation (Depreciation) $ 33,725
========
The capital loss carryforward utilized during the period ended December 31,
2003 was $488.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $379,739
=========
Unrealized Appreciation $ 38,280
Unrealized (Depreciation) (4,555)
---------
Net Unrealized Appreciation (Depreciation) $ 33,725
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica Convertible Securities
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Convertible Securities
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Convertible Securities 12
Transamerica Equity
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
After a disappointing start, U.S. equity markets began a broad rally in March
that ultimately embraced all but a few industries. Initially, the rebound was
fueled primarily by anticipation of a stronger economy and earnings
improvements. Much of corporate America has spent the past several years cutting
operating costs and removing debt from its balance sheet. As the economic
expansion picked up steam, investors expected to see the fruits of this
corporate restructuring, in the form of more revenues flowing to the bottom
line.
By the final quarter of the year, earnings by and large met or exceeded
expectations. Investors concluded that corporate profitability had finally
turned the proverbial corner, and the market surged. The Standard and Poor's 500
Composite Stock Index ("S&P 500") rose for the year, led by industries
associated with electronics, the Internet and telecommunications and, to a
lesser extent, by economically sensitive industries like metals and mining,
hotels/restaurants, and automobiles.
PERFORMANCE
For the year ended December 31, 2003, Transamerica Equity returned 31.22%. By
comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
When selecting securities, we look for businesses benefiting from broad secular
trends. We stress substantial free cash flow and skilled management that
effectively utilizes capital to enhance return on investment. We also look for a
reasonably attractive entry price relative to a stock's appreciation potential.
We have rarely found technology- and telecommunications-related companies that
meet all these criteria. However, the few that did make the cut in recent years
were among the portfolio's largest contributors to performance in 2003, thanks
to the market's enthusiasm for technology and our concentrated positions. They
included QUALCOMM Incorporated ("QUALCOMM"), a manufacturer of communications
equipment; Expedia, Inc., an online travel-booking enterprise; and
semiconductor-chip maker Intel Corporation. Each is a good example of our
investment strategy.
For instance, QUALCOMM makes computer chips used in wideband code division
multiple access ("CDMA") based telecommunications devices, such as SANYO
Electric Co., Ltd. cell phones. We began purchasing shares at attractive prices
when the market was concerned about QUALCOMM's inconsistent earnings from
quarter to quarter. More recently, QUALCOMM exceeded earnings expectations,
largely on the strength of demand for its chips. In addition, it is generally
accepted at this point that providers of the technology for Global System for
Mobile communications ("GSM") (i.e., most European wireless providers) will
migrate to wideband CDMA technology, opening up an enormous market for
QUALCOMM's products.
A large overweighting in, and a good selection of, media companies helped
performance as well. We are particularly pleased with our investment in XM
Satellite Radio Inc. ("XM"). Via satellite, XM delivers to a customer's home or
car a large number and variety of radio channels and a very clear signal, all
for just $10 per month. The company has few competitors, since the number of
available satellite spots is very limited. We purchased the stock in mid-year on
signs of weakness. Since then, the price has risen sharply as XM's unique
business and improving balance sheet came to Wall Street's attention.
At the other end of the performance spectrum were grocery store chain Safeway
Inc. ("Safeway") and credit-card issuer MBNA Corporation ("MBNA"). At Safeway,
poor management decisions compounded a less-than-favorable environment for food
retailers. As for MBNA, we sold our shares, as we became concerned about the
growing consumer credit bubble that could eventually lead to slower growth and
asset-quality problems. As borne out in the bear market of 2000-2002, excess
liquidity leads to poor capital allocation. This area of the economy is of
concern to us.
/s/ Jeffrey S. Van Harte
Jeffrey S. Van Harte
/s/ Gary U. Rolle
Gary U. Rolle
Co-Portfolio Managers
Transamerica Investment Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 1
Transamerica Equity
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class S&P 500
12/31/93 $10,000 $10,000
3/31/94 9,683 9,622
6/30/94 9,246 9,662
9/30/94 10,092 10,133
12/31/94 10,763 10,132
3/31/95 12,268 11,117
6/30/95 14,412 12,177
9/30/95 16,663 13,144
12/31/95 16,520 13,934
3/31/96 16,799 14,682
6/30/96 18,266 15,340
9/30/96 19,260 15,814
12/31/96 21,113 17,132
3/31/97 21,558 17,592
6/30/97 27,990 20,661
9/30/97 33,592 22,208
12/31/97 30,931 22,845
3/31/98 36,656 26,029
6/30/98 38,354 26,889
9/30/98 35,440 24,219
12/31/98 44,316 29,373
3/31/99 50,589 30,836
6/30/99 50,154 33,009
9/30/99 45,621 30,950
12/31/99 61,062 35,553
3/31/00 70,378 36,368
6/30/00 64,504 35,404
9/30/00 63,609 35,061
12/31/00 55,146 32,319
3/31/01 46,664 28,490
6/30/01 49,044 30,156
9/30/01 40,030 25,732
12/31/01 45,427 28,481
3/31/02 44,835 28,560
6/30/02 37,843 24,735
9/30/02 32,213 20,465
12/31/02 35,323 22,189
3/31/03 35,786 21,489
6/30/03 39,848 24,797
9/30/03 41,313 25,453
12/31/03 $46,352 $28,550
*Inception 12/31/1980.
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception* Date
----------- ------------ ---------- ------------ ----------
Initial Class 31.22% 0.90 % 16.58% 16.22% 12/31/80
S&P 500(1) 28.67% (0.57)% 11.06% 12.88% 12/31/80
- --------------- ----- ----- ----- ----- --------
Service Class - - - 22.55% 5/1/03
- --------------- ----- ----- ----- ----- --------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, Growth
Portfolio of Transamerica Variable Insurance Fund, Inc.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 2
Transamerica Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (99.2%)
Apparel & Accessory Stores (2.4%)
TJX Companies, Inc. (The) 700,000 $ 15,435
Business Services (8.7%)
First Data Corporation (b) 750,000 30,818
Moody's Corporation 425,000 25,734
Viad Corp 4,300 108
Chemicals & Allied Products (3.9%)
Praxair, Inc. 650,000 24,830
Commercial Banks (6.7%)
Northern Trust Corporation 500,000 23,210
State Street Corporation 375,000 19,530
Communication (15.1%)
Cox Communications, Inc.-Class A (a)(b) 750,000 25,838
Echostar Communications
Corporation-Class A (a) 750,000 25,500
Liberty Media Corporation-Class A (a) 1,915,000 22,769
XM Satellite Radio Holdings Inc. (a)(b) 900,000 23,723
Communications Equipment (5.5%)
QUALCOMM Incorporated 650,000 35,055
Computer & Data Processing Services (4.3%)
Microsoft Corporation 1,000,000 27,540
Drug Stores & Proprietary Stores (2.3%)
Walgreen Co. 400,000 14,552
Electronic Components & Accessories (2.3%)
Intel Corporation 450,000 14,490
Fabricated Metal Products (3.4%)
Gillette Company (The) 600,000 22,038
Hotels & Other Lodging Places (2.5%)
Marriott International, Inc.-Class A 350,000 16,170
Insurance (4.2%)
WellPoint Health Networks Inc. (a) 275,000 26,672
Management Services (3.8%)
Paychex, Inc. 650,000 24,180
Medical Instruments & Supplies (2.5%)
Zimmer Holdings, Inc. (a) 225,000 15,840
Personal Services (2.4%)
Weight Watchers International, Inc. (a)(b) 395,000 15,156
Pharmaceuticals (10.7%)
Allergan, Inc. 300,000 23,043
Genentech, Inc. (a) 290,000 27,135
Pfizer Inc. 550,000 19,431
Retail Trade (4.5%)
Staples, Inc. (a) 1,050,000 28,665
Shares Value
-------------------- ---------------
Transportation & Public Utilities (6.1%)
Expeditors International of
Washington, Inc. 595,000 $ 22,408
InterActiveCorp (a) (b) 484,687 16,445
Trucking & Warehousing (4.6%)
United Parcel Service, Inc.-Class B 400,000 29,820
Variety Stores (3.3%)
Wal-Mart Stores, Inc. 400,000 21,220
---------
Total Common Stocks (cost: $505,276) 637,355
---------
Principal Value
--------------- ------------
SECURITY LENDING COLLATERAL (16.0%)
Debt (12.8%)
Bank Notes (0.6%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 484 $ 484
Fleet National Bank
1.00%, due 01/21/2004 1,816 1,816
National Bank of Commerce
1.19%, due 04/21/2004 1,513 1,513
Commercial Paper (3.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 908 908
Delaware Funding Corporation
1.08%, due 01/07/2004 603 603
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 908 908
1.09%, due 01/13/2004 605 605
1.08%, due 02/05/2004 1,208 1,208
General Electric Capital Corporation
1.09%, due 01/08/2004 1,509 1,509
1.09%, due 01/09/2004 908 908
1.08%, due 01/16/2004 1,205 1,205
Govco Incorporated-144A
1.07%, due 02/05/2004 1,511 1,511
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,511 1,511
1.09%, due 02/06/2004 1,510 1,510
1.10%, due 02/09/2004 883 883
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,511 1,511
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 908 908
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,754 1,754
1.08%, due 02/17/2004 3,021 3,021
Sheffield Receivables-144A
1.09%, due 01/21/2004 605 605
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 3
Transamerica Equity
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- -------------
Euro Dollar Overnight (0.7%)
BNP Paribas SA
0.97%, due 01/07/2004 $ 3,026 $ 3,026
Credit Agricole Indosuez
0.98%, due 01/02/2004 121 121
1.08%, due 01/06/2004 1,150 1,150
Euro Dollar Terms (3.2%)
Bank of Montreal
1.06%, due 01/15/2004 591 591
1.06%, due 02/17/2004 1,211 1,211
Bank of Scotland
1.06%, due 04/02/2004 908 908
Citigroup Inc.
1.10%, due 01/22/2004 908 908
1.09%, due 02/06/2004 1,211 1,211
Credit Agricole Indosuez
1.08%, due 01/28/2004 605 605
Den Danske Bank
1.08%, due 01/20/2004 3,026 3,026
1.02%, due 01/30/2004 1,513 1,513
Royal Bank of Canada
1.05%, due 02/27/2004 3,026 3,026
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,816 1,816
1.08%, due 01/15/2004 605 605
1.08%, due 01/20/2004 303 303
Svenska Handelsbanken AB
1.09%, due 01/15/2004 303 303
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,816 1,816
Wells Fargo & Company
1.04%, due 01/30/2004 2,421 2,421
Master Notes (0.9%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,211 1,211
1.14%, due 09/08/2004 1,816 1,816
Morgan Stanley
1.05%, due 06/21/2004 2,905 2,905
Principal Value
--------------- -------------
Medium Term Notes (0.6%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 $ 3,026 $ 3,026
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 908 908
Repurchase Agreements (3.5%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated
12/31/2003 to be repurchaed at $7,082
on 01/02/2004 7,082 7,082
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated
12/31/2003 to be repurchased at $9,624
on 01/02/2004 9,624 9,624
Morgan Stanley
1.11%, Repurchase Agreement dated
12/31/2003 to be repurchased at $5,750
on 01/02/2004 5,750 5,750
Shares Value
----------------- ------------
Investment Companies (3.2%)
Money Market Funds (3.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,484,482 $ 1,484
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 3,624,472 3,624
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 15,760,401 15,760
---------
Total Security Lending Collateral (cost: $102,631) 102,631
---------
Total Investment Securities (cost: $607,907) $ 739,986
=========
SUMMARY:
Investments, at value 115.2 % $ 739,986
Liabilities in excess of other assets (15.2)% (97,831)
---------- ---------
Net assets 100.0 % $ 642,155
========== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$98,884.
(c) Cash collateral for the Repurchase Agreements, valued at $22,904, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 4
Transamerica Equity
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $607,907)
(including $98,884 of securities loaned) $739,986
Cash 4,913
Receivables:
Interest 4
Dividends 330
Other 82
---------
745,315
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 422
Distribution fees 1
Payable for collateral for securities on loan 102,631
Other 106
---------
103,160
---------
Net Assets $642,155
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 356
Additional paid-in capital 557,570
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (47,850)
Net unrealized appreciation (depreciation) on investment
securities 132,079
---------
Net Assets $642,155
=========
Shares Outstanding:
Initial Class 35,536
Service Class 89
Net Asset Value and Offering Price Per Share:
Initial Class $ 18.03
Service Class 17.99
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 85
Dividends 3,295
Income from loaned securities-net 137
---------
3,517
---------
Expenses:
Management and advisory fees 3,923
Transfer agent fees 2
Printing and shareholder reports 42
Custody fees 48
Administration fees 20
Legal fees 6
Auditing and accounting fees 15
Directors fees 19
Other 10
Service fees:
Service Class 1
---------
Total expenses 4,086
---------
Net Investment Income (Loss) (569)
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities (3,824)
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 152,201
---------
Net Gain (Loss) on Investment Securities 148,377
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 147,808
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 5
Transamerica Equity
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (569) $ (645)
Net realized gain (loss) from
investment securities (3,824) (21,383)
Net unrealized appreciation
(depreciation) on investment
securities 152,201 (40,391)
--------- ---------
147,808 (62,419)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 176,766 222,628
Service Class 1,563 -
--------- ---------
178,329 222,628
--------- ---------
Proceeds from fund acquisition:
Initial Class 4,995 -
Service Class - -
--------- ---------
4,995 -
--------- ---------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Cost of shares redeemed:
Initial Class (59,107) (34,728)
Service Class (86) -
--------- ---------
(59,193) (34,728)
--------- ---------
124,131 187,900
--------- ---------
Net increase (decrease) in net assets 271,939 125,481
--------- ---------
Net Assets:
Beginning of year 370,216 244,735
--------- ---------
End of year $ 642,155 $ 370,216
========= =========
Undistributed Net Investment
Income (Loss) $ - $ -
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 12,164 15,487
Service Class 94 -
--------- ---------
12,258 15,487
--------- ---------
Shares issued-on fund acquisition:
Initial Class 340 -
Service Class - -
--------- ---------
340 -
--------- ---------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Shares redeemed:
Initial Class (3,907) (2,402)
Service Class (5) -
--------- ---------
(3,912) (2,402)
--------- ---------
Net increase (decrease) in shares
outstanding 8,686 13,085
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 6
Transamerica Equity
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 13.74 $ (0.02) $ 4.31 $ 4.29
12/31/2002 17.67 (0.04) (3.89) (3.93)
12/31/2001 21.78 (0.07) (3.77) (3.84)
12/31/2000 26.61 (0.14) (2.23) (2.37)
12/31/1999 19.36 (0.09) 7.40 7.31
- --------------- ---------- --------- --------- -------- --------
Service Class 12/31/2003 14.68 (0.04) 3.35 3.31
- --------------- ---------- --------- --------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ - $ - $ - $ 18.03
- - - 13.74
- (0.27) (0.27) 17.67
- (2.46) (2.46) 21.78
- (0.06) (0.06) 26.61
- --------------- --- --------- --------- ---------
Service Class - - - 17.99
- --------------- --- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 31.22% $ 640,555 0.78% 0.78% (0.11)% 19%
12/31/2002 (22.24) 370,216 0.82 0.82 (0.24) 23
12/31/2001 (17.63) 244,735 0.85 0.91 (0.39) 51
12/31/2000 (9.69) 254,920 0.85 0.86 (0.60) 38
12/31/1999 37.79 238,655 0.85 0.90 (0.49) 29
- --------------- ---------- ------ --------- ---- ---- ----- --
Service Class 12/31/2003 22.55 1,600 1.05 1.05 (0.34) 19
- --------------- ---------- ------ --------- ---- ---- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-December 31, 1980
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses is net of
fees paid indirectly. For the year ended December 31, 2001 and prior years,
Ratio of Net Expenses to Average Net Assets is net of fees paid indirectly
and credits allowed by the custodian, if any. (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 7
Transamerica Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica Equity ("the Fund"), part of ATSF, began operations as
Growth Portfolio, a part of the Transamerica Variable Insurance Fund, Inc. on
November 1, 1996. The Growth Portfolio was the successor to Transamerica
Occidental's Separate Account Fund C. The Fund became a part of ATSF on May 1,
2002.
The fund will acquire BlackRock Mid Cap Growth and Alger Aggressive Growth
effective as of the close of business on April 30, 2004, subject to approval by
Policyowners.
On May 1, 2003, the Fund acquired all the net assets of LKCM Capital Growth
pursuant to a plan of reorganization approved by shareholders of LKCM Capital
Growth on April 16, 2003. The acquisition was accomplished by a tax-free
exchange of 340 shares of the Fund for the 1,622 shares of LKCM Capital Growth
outstanding on April 30, 2003. LKCM Capital Growth's net assets at that date
($4,995), including ($268) of unrealized appreciation were combined with those
of the Fund, resulting in combined net assets of $496,001.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank and Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $16 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 8
Transamerica Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
due (at least $1), IBT collects additional cash collateral from the borrowers.
Although securities loaned will be fully collateralized at all times, IBT may
experience delays in, or may be prevented from, recovering the collateral on
behalf of the Fund. The Fund may recall a loaned security position at any time
from the borrower through IBT. In the event the borrower fails to timely return
a recalled security, IBT may indemnify the Fund by purchasing replacement
securities for the Fund at its own expense and claiming the collateral to fund
such a purchase. IBT absorbs the loss if the collateral value is not sufficient
to cover the cost of the replacement securities. If replacement securities are
not available, IBT will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $77 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 18,926 3%
Asset Allocation-Growth Portfolio 41,464 6%
Asset Allocation-Moderate Growth Portfolio 88,743 14%
Asset Allocation-Moderate Portfolio 74,840 12%
--
35%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following stated rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.85% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires AFSG to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 9
Transamerica Equity
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $22. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 241,891
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 95,770
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ 1,169
Undistributed net investment income (loss) 569
Undistributed net realized capital gains (loss) (1,738)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (46,177)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 130,407
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- -------------------
$ 21,334 December 31, 2009
18,009 December 31, 2010
6,834 December 31, 2011
As part of the Fund's acquisition of LKCM Capital Growth, the fund obtained a
net capital loss carryforward of approximately $5,588 from LKCM Capital Growth.
Utilization of this carry over is subject to limitations imposed by the Internal
Revenue Code and Treasury Regulations, significantly reducing the carry over
available.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 609,579
=========
Unrealized Appreciation $ 132,559
Unrealized (Depreciation) (2,152)
---------
Net Unrealized Appreciation (Depreciation) $ 130,407
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica Equity
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Equity (the "Fund")
(one of the portfolios constituting AEGON/Transamerica Series Fund, Inc.) at
December 31, 2003, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity 11
Transamerica Equity II
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ -----------
COMMON STOCKS (98.7%)
Apparel & Accessory Stores (2.1%)
TJX Companies, Inc. (The) 80,000 $ 1,764
Business Services (8.9%)
First Data Corporation 100,000 4,109
Moody's Corporation 60,000 3,633
Chemicals & Allied Products (3.6%)
Praxair, Inc. 80,000 3,056
Commercial Banks (6.5%)
Northern Trust Corporation 65,000 3,017
State Street Corporation 50,000 2,604
Communication (15.5%)
Cox Communications, Inc.-Class A (a) 100,000 3,445
Echostar Communications
Corporation-Class A (a) 105,000 3,570
Liberty Media Corporation-Class A (a) 255,000 3,032
XM Satellite Radio Holdings Inc. (a) 125,000 3,295
Communications Equipment (5.7%)
QUALCOMM Incorporated 90,000 4,854
Computer & Data Processing Services (4.0%)
Microsoft Corporation 125,000 3,443
Drug Stores & Proprietary Stores (2.3%)
Walgreen Co. 55,000 2,001
Electronic Components & Accessories (2.1%)
Intel Corporation 55,000 1,771
Fabricated Metal Products (3.4%)
Gillette Company (The) 80,000 2,938
Hotels & Other Lodging Places (2.7%)
Marriott International, Inc.-Class A 50,000 2,310
Shares Value
------------ -----------
Insurance (4.0%)
WellPoint Health Networks Inc. (a) 35,000 $ 3,394
Management Services (3.7%)
Paychex, Inc. 85,000 3,162
Medical Instruments & Supplies (2.5%)
Zimmer Holdings, Inc. (a) 30,000 2,112
Personal Services (2.5%)
Weight Watchers International, Inc. (a) 55,000 2,110
Pharmaceuticals (10.8%)
Allergan, Inc. 45,000 3,456
Genentech, Inc. (a) 40,000 3,743
Pfizer Inc. 60,000 2,120
Retail Trade (4.5%)
Staples, Inc. (a) 140,000 3,822
Transportation & Public Utilities (6.9%)
Expeditors International of
Washington, Inc. 95,000 3,578
InterActiveCorp (a) 67,856 2,302
Trucking & Warehousing (3.9%)
United Parcel Service, Inc.-Class B 45,000 3,355
Variety Stores (3.1%)
Wal-Mart Stores, Inc. 50,000 2,653
--------
Total Common Stocks (cost: $67,103)
84,649
--------
Total Investment Securities (cost: $67,103) $ 84,649
========
SUMMARY:
Investments, at value 98.7% $ 84,649
Other assets in excess of liabilities 1.3% 1,074
------- --------
Net assets 100.0% $ 85,723
======= ========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 1
Transamerica Equity II
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $67,103) $ 84,649
Cash 1,055
Receivables:
Dividends 42
---------
85,746
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 23
---------
23
---------
Net Assets $ 85,723
=========
Net Assets Consist of:
Capital stock, 75,000 shares authorized ($.01 par value) $ 86
Additional paid-in capital 68,091
Undistributed net investment income (loss) -
Undistributed net realized gain (loss) from investment
securities -
Net unrealized appreciation (depreciation) on investment
securities 17,546
---------
Net Assets $ 85,723
=========
Shares Outstanding 8,557
Net Asset Value and Offering Price Per Share $ 10.02
STATEMENT OF OPERATIONS
For the period ended December 31, 2003 (a)
(all amounts in thousands)
Investment Income:
Interest $ -
Expenses:
Management and advisory fees 1
-----
Net investment income (loss) (1)
-----
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities -
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 157
-----
Net Gain (Loss) on Investment Securities 157
-----
Net Increase (Decrease) in Net Assets Resulting
from Operations $156
=====
(a) Commenced operations December 30, 2003.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 2
Transamerica Equity II
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the period ended
(all amounts in thousands)
December 31,
2003 (a)
------------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (1)
Net realized gain (loss) from investment
securities -
Net unrealized appreciation (depreciation) on
investment securities 157
-------
156
-------
Distributions to Shareholders:
From net investment income -
From net realized gains -
Capital Share Transactions
Proceeds from shares sold -
Proceeds from fund conversion 85,567
Dividends and distributions reinvested -
Cost of shares redeemed -
-------
85,567
-------
85,723
-------
Net increase (decrease) in net assets
Net Assets:
Beginning of year -
-------
End of year $85,723
=======
Undistributed Net Investment Income (Loss) $ -
=======
December 31,
2003 (a)
------------------
Share Activity:
Shares issued -
Shares issued-fund conversion 8,557
Shares issued-reinvested from distributions -
Shares redeemed -
--------
Net increase (decrease) in shares outstanding 8,557
========
(a) Commenced operations on December 30, 2003.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 3
Transamerica Equity II
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
--------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
--------------------------------------------- ---------------------------------------
Net Asset Net Asset
For the Value, Net Net Realized From Net From Net Value,
Period Beginning Investment and Unrealized Total Investment Realized Total End
Ended (b) of Period Income (Loss) Gain (Loss) Operations Income Gains Distributions of Period
- ------------ ----------- --------------- ---------------- ------------ ------------ ---------- --------------- ------------
12/31/2003 $ 10.00 $ (0.03) $ 0.05 $ 0.02 $ - $ - $ - $ 10.02
- ---------- -------- ------------- ------- ------- ------- ------ --------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
- ------------ --------------- ------------- --------- ----------- ---------------- ----------
12/31/2003 0.20% $ 85,723 0.30% 0.34% (0.30)% -%
- ---------- ---- -------- ---- ---- ----- ----------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception date of the Fund is December 30, 2003.
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 4
Transamerica Equity II
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable annuity products. Transamerica Equity II ("the Fund"), part
of ATSF, began operations on December 30, 2003.
On December 30, 2003, all investments held by Transamerica Occidental's Separate
Account Fund B (the "Separate Account") with a fair value of $84,492 and a cost
basis of $67,103 were transferred to the Fund. In exchange for these
investments, the Separate Account received all of the outstanding shares (8,557)
of the Fund. Thereafter, the Separate Account's only investment is an investment
in the Fund.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank and Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following stated rate:
0.30% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.30% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 5
Transamerica Equity II
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Under the Distribution Plan and Distribution Agreement, AFSG, on behalf of the
Fund, is authorized to pay various service providers, as direct payment for
expenses incurred in connection with distribution of the Fund's shares, amounts
equal to actual expenses associated with distributing the shares.
The Fund is authorized under the 12b-1 plan to pay fees up to the following
limit:
0.15%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
there was no value in invested plan amounts. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the period ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ -
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government -
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, and net operating losses.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (1)
Undistributed net investment income (loss) 1
Undistributed net realized capital gains (loss) -
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 67,103
========
Unrealized Appreciation $ 18,989
Unrealized (Depreciation) (1,443)
--------
Net Unrealized Appreciation (Depreciation) $ 17,546
========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 6
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
RESULTS OF SHAREHOLDER PROXY (unaudited)
Section 270.30d-1 under the Investment Company Act of 1940, as amended, titled
"Reports to Stockholders of Management Companies," requires regulated investment
companies to report on all subject matters put to the vote of shareholders and
provide final results. Accordingly, the Board of Managers of the Fund solicited
a vote by the shareholders for the following items.
Each vote reported represents one outstanding dollar held on the record date for
the meeting.
At a special meeting of shareholders held on December 16, 2003, the results of
Proposal 1 were as follows:
Proposal 1: Approval of an Agreement and Plan of Reorganization providing for
the reorganization of Fund B as a unit investment trust that will invest in
Transamerica Equity II, a series of AEGON/Transamerica Series Fund, Inc.
For Against Abstain
- -------------- --------- ----------
98.296% .997% .707%
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 7
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
Transamerica Equity II
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Equity II (the
"Fund") (one of the portfolios constituting the AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for the period December 30, 2003
(commencement of operations) through December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Equity II 8
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Historically, as the U.S. economy has entered the early stages of economic
expansion, small- and mid-cap growth stocks have outperformed the equity market
as a whole. The year ended December 31, 2003, was no exception. While evidence
of more rapid economic growth mounted and corporate earnings reports improved,
the Russell 2500 Growth Index ("Russell 2500") leaped 46.31%, compared to a
28.67% advance for the Standard and Poor's 500 Composite Stock Index. A look
beneath the surface of the Russell 2500 shows that the year's leading industries
were either economically sensitive (e.g., metals and mining and utilities) or
full of high-flying, volatile (i.e., high-Beta) stocks that had been beaten down
in prior years. This included wireless telecommunications and any industry
related to computers, electronics and the Internet.
PERFORMANCE
For the year ended December 31, 2003, Transamerica Growth Opportunities returned
31.21%. By comparison its primary benchmark, the Russell 2500 and its secondary
benchmark, the Russell 2000 Index, returned 46.31% and 47.25%, respectively.
STRATEGY REVIEW
Even though Transamerica Growth Opportunities owned few high-Beta stocks and was
underweighted in nine of the year's ten leading industries, it nonetheless
generated a positive return for the year. A relative lack of high-flying
Internet stocks was at least partially offset by our concentrated approach,
which magnified the impact of double- and triple-digit gains in the stocks from
a wide variety of other industries. Among the top contributors were SkillSoft
PLC ("SkillSoft"), online training, RadioShack Corporation ("RadioShack"),
specialty retail, XM Satellite Radio Inc., media, Gentex Corporation, auto
parts, and GTECH Holdings Corporation, lottery systems.
As always, the portfolio comprised stocks of high-quality companies with strong
balance sheets and cash-generating power. These companies have the ability to
gain market share, focus on growing end markets, and enhance assets. Also, they
possess management teams with the acumen to effectively allocate resources and
capital and thereby create wealth for shareholders.
A prime example is online training and education company SkillSoft, the
portfolio's top performing holding for the year. We hold SkillSoft's management
team in high regard. Conservative and intensely focused on executing their
business plan, they have done an impressive job of consolidating their position
in the education and training industry, which is rapidly moving in their
direction of online delivery.
Another example of outstanding management executing well is RadioShack. This
specialty retailer of consumer electronics (e.g., wireless communications,
electronic parts, batteries, accessories and other digital technology products)
was struggling before new management took over the helm a few years ago.
Management has imposed greater financial discipline, reining in expansion
efforts and focusing on the profitability and productivity of RadioShack's
existing stores. The strategy is paying off handsomely, in the form of higher
free cash flow and enhanced return on invested capital.
Only one stock, Investment Technology Group, Inc. ("ITG") significantly
detracted from performance for the year. ITG is a provider of specialized
software for large-volume securities traders. While we continue to believe in
the quality of the company's management, it is fair to say that we overestimated
the strength of trading volumes and underestimated the intensity of competition
in the industry. Realizing that ITG's profits were deteriorating, we sold the
stock early in the year.
/s/ Christopher J. Bonavico
Christopher J. Bonavico
/s/ Kenneth F. Broad
Kenneth F. Broad
Co-Portfolio Managers
Transamerica Investment Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 1
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/2/01 through 12/31/03
Initial Class Russell 2500 Russell 2000
5/2/01 $10,000 $10,000 $10,000
6/30/01 10,200 10,523 10,600
9/30/01 9,020 7,674 8,396
12/31/01 11,180 9,661 10,166
3/31/02 12,090 9,376 10,571
6/30/02 10,890 7,817 9,688
9/30/02 9,060 6,327 7,615
12/31/02 9,580 6,850 8,084
3/31/03 9,190 6,631 7,721
6/30/03 10,610 8,138 9,529
9/30/03 11,330 8,949 10,394
12/31/03 $12,570 $10,023 $11,904
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 31.21% 9.00% 5/2/01
Russell 2500(1) 46.31% 0.09% 5/2/01
Russell 2000(1) 47.25% 6.75% 5/2/01
- --------------- ----- ----- ------
Service Class - 27.05% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Russell 2500 Growth (Russell 2500) Index and Russell 2000 (Russell
2000) Index are unmanaged indices used as a general measure of market
performance. Calculations assume dividends and capital gains are reinvested
and do not include any managerial expenses. From inception calculation is
based on life of initial class shares. For reporting periods through
December 31, 2002, the fund has selected the Russell 2000 Index as its
benchmark measure; however, the Russell 2500 Growth is more appropriate for
comparison to the fund. Source: Standard & Poor's Micropal(R)(C)- Micropal,
Inc. 2003 - 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
Investing in small cap stocks generally involves greater risk and volatility,
therefore an investment in the fund may not be appropriate for everyone.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2002, has been
derived from the predecessor portfolio, Small Company Portfolio of Transamerica
Variable Insurance Fund, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 2
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ------------
COMMON STOCKS (89.0%)
Automotive (4.7%)
Gentex Corporation (b) 260,000 $ 11,482
Business Credit Institutions (4.0%)
Financial Federal Corporation (a) 315,000 9,623
Business Services (3.0%)
Moody's Corporation 120,000 7,266
Communication (6.7%)
Global Payments Inc. 185,000 8,717
XM Satellite Radio Holdings Inc. (a)(b) 290,000 7,644
Computer & Data Processing Services (12.8%)
BARRA, Inc. 121,000 4,294
GTECH Holdings Corporation 250,000 12,373
SkillSoft PLC-ADR (a) 1,683,400 14,561
Educational Services (4.4%)
DeVRY Inc. (a)(b) 423,400 10,640
Electronic & Other Electric Equipment (2.9%)
Gemstar-TV Guide International, Inc. (a) 1,400,000 7,070
Industrial Machinery & Equipment (1.5%)
Graco Inc. 90,800 3,641
Management Services (4.9%)
ServiceMaster Company (The) (b) 1,020,000 11,883
Oil & Gas Extraction (4.7%)
EOG Resources, Inc. 250,000 11,543
Paper & Allied Products (2.1%)
Pactiv Corporation (a) 210,000 5,019
Paperboard Containers & Boxes (4.8%)
Packaging Corporation of America 530,900 11,605
Personal Services (5.1%)
Weight Watchers International, Inc. (a)(b) 320,000 12,278
Pharmaceuticals (5.1%)
Techne Corporation (a)(b) 330,000 12,467
Radio, Television & Computer Stores (4.5%)
RadioShack Corporation 360,000 11,046
Restaurants (4.1%)
IHOP Corp. 257,200 9,897
Security & Commodity Brokers (4.0%)
BlackRock, Inc. 181,000 9,613
Transportation & Public Utilities (9.7%)
C.H. Robinson Worldwide, Inc. 310,000 11,752
Expeditors International of
Washington, Inc. 315,000 11,863
---------
Total Common Stocks (cost: $166,240) 216,277
---------
Principal Value
----------- ----------
SECURITY LENDING COLLATERAL (10.6%)
Debt (8.4%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 121 $ 121
Fleet National Bank
1.00%, due 01/21/2004 455 455
National Bank of Commerce
1.19%, due 04/21/2004 379 379
Commercial Paper (2.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 227 227
Delaware Funding Corporation
1.08%, due 01/07/2004 151 151
Falcon Asset Securitization Corporation-144A
1.09%, due 01/08/2004 227 227
1.09%, due 01/13/2004 152 152
1.08%, due 02/05/2004 303 303
General Electric Capital Corporation
1.09%, due 01/08/2004 378 378
1.09%, due 01/09/2004 227 227
1.08%, due 01/16/2004 302 302
Govco Incorporated-144A
1.07%, due 02/05/2004 379 379
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 378 378
1.09%, due 02/06/2004 378 378
1.10%, due 02/09/2004 221 221
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 378 378
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 227 227
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 439 439
1.08%, due 02/17/2004 757 757
Sheffield Receivables-144A
1.09%, due 01/21/2004 152 152
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 758 758
Credit Agricole Indosuez
0.98%, due 01/02/2004 30 30
1.08%, due 01/06/2004 288 288
Euro Dollar Terms (2.1%)
Bank of Montreal
1.06%, due 01/15/2004 148 148
1.06%, due 02/17/2004 303 303
Bank of Scotland
1.06%, due 04/02/2004 227 227
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 3
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
-------------- -----------
Euro Dollar Terms (continued)
Citigroup Inc.
1.10%, due 01/22/2004 $ 227 $ 227
1.09%, due 02/06/2004 303 303
Credit Agricole Indosuez
1.08%, due 01/28/2004 152 152
Den Danske Bank
1.08%, due 01/20/2004 758 758
1.02%, due 01/30/2004 379 379
Royal Bank of Canada
1.05%, due 02/27/2004 758 758
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 455 455
1.08%, due 01/15/2004 152 152
1.08%, due 01/20/2004 76 76
Svenska Handelsbanken AB
1.09%, due 01/15/2004 76 76
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 455 455
Wells Fargo & Company
1.04%, due 01/30/2004 606 606
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 303 303
1.14%, due 09/08/2004 455 455
Morgan Stanley
1.05%, due 06/21/2004 728 728
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 759 759
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 227 227
Principal Value
-------------- -----------
Repurchase Agreements (2.3%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,774 on 01/02/2004 $ 1,774 $ 1,774
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,411 on 01/02/2004 2,411 2,411
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,440 on 01/02/2004 1,440 1,440
Shares Value
-------------- ------------
Investment Companies (2.2%)
Money Market Funds (2.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 371,816 $ 372
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 907,816 908
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 3,947,483 3,947
---------
Total Security Lending Collateral (cost: $25,706) 25,706
---------
Total Investment Securities (cost: $191,946) $ 241,983
=========
SUMMARY:
Investments, at value 99.6% $ 241,983
Other assets in excess of liabilities 0.4% 1,069
--------- ---------
Net assets 100.0% $ 243,052
========= =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$24,815.
(c) Cash collateral for the Repurchase Agreements, valued at $5,737, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 4
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $191,946)
(including $24,815 of securities loaned) $241,983
Cash 29,995
Receivables:
Investment securities sold 107
Interest 7
Dividends 249
Other 22
---------
272,363
---------
Liabilities:
Investment securities purchased 3,396
Accounts payable and accrued liabilities:
Management and advisory fees 185
Payable for collateral for securities on loan 25,706
Other 24
---------
29,311
---------
Net Assets $243,052
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 193
Additional paid-in capital 194,410
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (1,588)
Net unrealized appreciation (depreciation) on investment
securities 50,037
---------
Net Assets $243,052
=========
Shares Outstanding:
Initial Class 19,294
Service Class 49
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.57
Service Class 12.54
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 86
Dividends 1,165
Income from loaned securities-net 38
--------
1,289
--------
Expenses:
Management and advisory fees 1,484
Transfer agent fees 2
Printing and shareholder reports 22
Custody fees 20
Administration fees 20
Legal fees 2
Auditing and accounting fees 12
Directors fees 6
Other 3
--------
Total expenses 1,571
--------
Net Investment Income (Loss) (282)
--------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 208
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 52,546
--------
Net Gain (Loss) on Investment Securities 52,754
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 52,472
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 5
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (282) $ (154)
Net realized gain (loss) from
investment securities 208 (1,768)
Net unrealized appreciation
(depreciation) on investment
securities 52,546 (3,105)
--------- --------
52,472 (5,027)
--------- --------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
From net realized gains:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 109,571 101,649
Service Class 581 -
--------- --------
110,152 101,649
--------- --------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Cost of shares redeemed:
Initial Class (15,160) (6,590)
Service Class (25) -
--------- --------
(15,185) (6,590)
--------- --------
94,967 95,059
--------- --------
Net increase (decrease) in net assets 147,439 90,032
--------- --------
Net Assets:
Beginning of year 95,613 5,581
--------- --------
End of year $ 243,052 $ 95,613
========= ========
Undistributed Net Investment Income
(Loss) $ - $ -
========= ========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 10,754 10,133
Service Class 51 -
--------- --------
10,805 10,133
--------- --------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- --------
- -
--------- --------
Shares redeemed:
Initial Class (1,443) (649)
Service Class (2) -
---------- --------
(1,445) (649)
--------- --------
Net increase (decrease) in shares
outstanding 9,360 9,484
========= ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 6
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 9.58 $ (0.02) $ 3.01 $ 2.99
12/31/2002 11.18 (0.05) (1.55) (1.60)
12/31/2001 10.00 (0.01) 1.19 1.18
- --------------- ---------- -------- --------- --------- ---------
Service Class 12/31/2003 9.87 (0.02) 2.69 2.67
- --------------- ---------- -------- --------- --------- ---------
For a share outstanding throughout each period (a)
----------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ------------
Initial Class $ - $ - $ - $ 12.57
- - - 9.58
- - - 11.18
- --------------- --- --- --- ---------
Service Class - - - 12.54
- --------------- --- --- --- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 31.21% $ 242,433 0.90% 0.90% (0.16)% 23%
12/31/2002 (14.31) 95,613 1.12 1.12 (0.49) 14
12/31/2001 11.80 5,581 1.20 5.89 (0.47) 4
- --------------- ---------- ------ --------- ---- ---- ----- --
Service Class 12/31/2003 27.05 619 1.15 1.15 (0.22) 23
- --------------- ---------- ------ --------- ---- ---- ----- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 2, 2001
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any, (see note 2). For the year ended December 31,
2002, Ratio of Net Expenses to Average Net Assets is net of fees paid
indirectly. For the year ended December 31, 2001, Ratio of Net Expenses to
Average Net Assets is net of fees paid indirectly and credits allowed by
the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 7
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica Growth Opportunities ("the Fund"), part of ATSF, began
operations as Small Company Portfolio, a part of the Transamerica Variable
Insurance Fund, Inc. on May 2, 2001. The Fund became a part of ATSF on May 1,
2002.
The fund will acquire PBHG Midcap Growth effective as of the close of business
on April 30, 2004, subject to approval by Policyowners.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $59 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required at all times to be secured by collateral at
least equal to 102% of the value of the securities at inception of the loan, and
not less then 100% thereafter. The Fund may invest cash collateral in short-term
money market instruments including: U.S. Treasury Bills, U.S. agency
obligations, commercial paper, money market mutual funds, repurchase agreements
and other highly rated, liquid investments. During the life of securities loans,
the collateral and secu- rities loaned remain subject to fluctuation in value.
IBT marks to market securities loaned and the collateral each business day. If
additional collateral is due (at least $1), IBT collects additional cash
collateral from the borrowers. Although securities loaned will be fully
collateralized at all times, IBT may experience delays in, or may be prevented
from, recovering the collateral on behalf of the Fund. The Fund may recall a
loaned security position at any time from the borrower through IBT. In the event
the borrower fails to timely return a recalled security, IBT may indemnify the
Fund by purchasing replacement securities for the Fund at its own expense and
claiming the collateral to fund such a purchase.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 8
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
IBT absorbs the loss if the collateral value is not sufficient to cover the cost
of the replacement securities. If replacement securities are not available, IBT
will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Direct Brokerage Program is any arrangement under
which a broker/dealer applies a portion of the commissions received by such
broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $23 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 17,849 7%
Asset Allocation-Growth Portfolio 28,419 12%
Asset Allocation-Moderate Portfolio 54,596 22%
Asset Allocation-Moderate Growth Portfolio 57,646 24%
--
65%
==
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following stated rate:
0.85% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.20% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 9
Transamerica Growth Opportunities
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $8. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 111,002
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 33,598
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (282)
Undistributed net investment income (loss) 282
Undistributed net realized capital gains (loss) -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
========
Undistributed Long-term Capital Gains $ -
========
Capital Loss Carryforward $ (1,587)
========
Post October Loss $ -
========
Net Unrealized Appreciation (Depreciation) $ 50,037
========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 1,587 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $173.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $191,946
=========
Unrealized Appreciation $ 51,173
Unrealized (Depreciation) (1,136)
---------
Net Unrealized Appreciation (Depreciation) $ 50,037
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 10
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica Growth Opportunities
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Growth Opportunities
(the "Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Growth Opportunities 11
Transamerica Money Market
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS (1.9%)
Fannie Mae
1.07%, due 02/19/2004 $ 5,000 $ 4,993
Fannie Mae
1.05%, due 01/07/2004 3,200 3,199
1.06%, due 02/18/2004 3,500 3,495
---------
Total Short-Term U.S. Government Obligations
(cost: $11,687) 11,687
---------
COMMERCIAL PAPER (87.7%)
Asset Backed (19.9%)
Asset Securitization Cooperative
Corporation-144A
1.08%, due 01/09/2004 7,800 7,798
1.08%, due 01/13/2004 8,500 8,497
1.10%, due 01/16/2004 7,200 7,197
1.08%, due 01/22/2004 11,600 11,593
CAFCO LLC-144A
1.07%, due 01/15/2004 9,000 8,996
1.09%, due 01/27/2004 8,700 8,693
1.08%, due 02/10/2004 9,250 9,239
1.08%, due 02/17/2004 7,000 6,990
Delaware Funding Corporation-144A
1.08%, due 01/06/2004 3,300 3,300
1.08%, due 01/07/2004 6,100 6,099
1.08%, due 01/08/2004 10,750 10,747
1.09%, due 02/03/2004 11,000 10,989
Receivables Capital Corporation-144A
1.07%, due 01/02/2004 5,500 5,500
1.08%, due 01/21/2004 3,900 3,898
1.17%, due 06/01/2004 11,000 10,946
Beverages (2.1%)
Coca-Cola Company (The)
1.03%, due 01/22/2004 8,000 7,995
1.03%, due 02/02/2004 4,450 4,446
Business Credit Institutions (4.2%)
Caterpillar Financial Services Corporation
1.04%, due 01/05/2004 9,000 8,999
1.06%, due 01/20/2004 10,000 9,994
1.06%, due 02/17/2004 5,300 5,293
1.11%, due 03/22/2004 1,270 1,267
Chemicals & Allied Products (3.4%)
du Pont (E.I.) de Nemours and Company
1.05%, due 02/24/2004 8,000 7,987
1.06%, due 03/02/2004 6,000 5,989
1.06%, due 03/05/2004 6,500 6,488
Principal Value
--------------------- ---------------
Commercial Banks (13.1%)
Abbey National North America PLC
1.03%, due 01/07/2004 $ 7,500 $ 7,499
1.05%, due 02/13/2004 7,700 7,690
1.05%, due 02/20/2004 9,500 9,486
1.06%, due 03/03/2004 9,000 8,984
Toronto Dominion Holdings (USA), Inc.
1.08%, due 02/06/2004 5,300 5,294
1.07%, due 02/11/2004 3,400 3,396
1.08%, due 02/27/2004 7,000 6,988
UBS Finance (Delaware) LLC
1.04%, due 01/13/2004 8,500 8,497
1.05%, due 02/05/2004 3,500 3,496
1.05%, due 02/25/2004 10,500 10,483
1.06%, due 04/27/2004 7,100 7,076
Food & Kindred Products (1.0%)
Unilever Capital Corporation-144A
1.03%, due 01/07/2004 5,950 5,949
Insurance Agents, Brokers & Service (5.9%)
MetLife Funding, Inc.
1.06%, due 01/14/2004 7,500 7,497
1.07%, due 01/14/2004 10,600 10,596
1.07%, due 02/04/2004 2,950 2,947
1.08%, due 02/04/2004 7,100 7,093
1.07%, due 03/04/2004 7,350 7,336
Life Insurance (3.2%)
AIG Funding, Inc.
1.06%, due 01/06/2004 8,000 7,999
1.07%, due 01/16/2004 5,900 5,897
1.05%, due 01/26/2004 5,400 5,396
Personal Credit Institutions (13.3%)
American Honda Finance Corporation
1.06%, due 01/12/2004 3,100 3,099
1.05%, due 01/21/2004 9,000 8,995
1.05%, due 01/28/2004 8,000 7,994
General Electric Capital Corporation
1.08%, due 01/12/2004 7,000 6,997
1.07%, due 01/16/2004 4,000 3,998
1.10%, due 02/11/2004 10,000 9,987
1.09%, due 02/23/2004 7,000 6,989
1.08%, due 03/15/2004 4,000 3,991
Toyota Motor Credit Corporation-144A
1.03%, due 01/06/2004 6,000 5,999
1.06%, due 01/08/2004 9,500 9,498
1.06%, due 01/20/2004 2,500 2,499
1.07%, due 03/03/2004 4,000 3,993
1.06%, due 03/19/2004 6,300 6,286
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 1
Transamerica Money Market
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
-------------- ------------
Petroleum Refining (4.3%)
BP America Inc.
1.05%, due 03/09/2004 $ 9,350 $ 9,331
BP Capital Markets PLC
1.04%, due 03/02/2004 3,600 3,594
1.07%, due 03/02/2004 5,000 4,991
1.03%, due 03/26/2004 7,925 7,906
Pharmaceuticals (5.3%)
Pfizer Inc.-144A
1.03%, due 01/05/2004 9,000 8,999
1.04%, due 01/06/2004 3,875 3,874
1.04%, due 01/08/2004 5,627 5,626
1.02%, due 01/28/2004 8,000 7,994
1.03%, due 02/02/2004 5,600 5,595
Printing & Publishing (2.6%)
Gannett Co., Inc.-144A
1.02%, due 01/12/2004 5,350 5,348
1.03%, due 01/29/2004 10,600 10,592
Public Administration (6.0%)
Canadian Wheat Board
1.03%, due 01/15/2004 7,500 7,497
Province of Quebec
1.05%, due 01/23/2004 7,157 7,152
1.11%, due 03/29/2004 11,700 11,668
1.14%, due 06/08/2004 10,000 9,950
Security & Commodity Brokers (3.4%)
Goldman Sachs Group, Inc. (The)
1.04%, due 01/05/2004 500 500
1.14%, due 05/24/2004 6,600 6,570
1.14%, due 05/25/2004 8,950 8,909
1.17%, due 05/28/2004 4,700 4,677
---------
Total Commercial Paper (cost: $529,637) 529,637
---------
Principal Value
-------------- ------------
SHORT-TERM OBLIGATIONS (2.2%)
Security & Commodity Brokers (2.2%)
Goldman Sachs Group, Inc. (The) (a)
1.35%, due 01/09/2004 $ 13,350 $ 13,351
---------
Total Short-Term Obligations (cost: $13,351)
13,351
---------
CERTIFICATES OF DEPOSITS (8.2%)
Canadian Imperial Bank of Commerce
1.09%, due 02/09/2004 8,000 8,000
1.09%, due 02/10/2004 8,500 8,500
1.08%, due 03/01/2004 8,000 8,000
1.10%, due 04/01/2004 4,000 4,000
Wells Fargo & Company
1.04%, due 02/20/2004 9,600 9,600
Wells Fargo Bank, NA
1.07%, due 01/23/2004 5,000 5,000
1.05%, due 02/27/2004 6,400 6,400
---------
Total Certificates of Deposits (cost: $49,500)
49,500
---------
Total Investment Securities (cost: $604,175)
$ 604,175
=========
SUMMARY:
Investments, at value 100.0% $ 604,175
Other assets in excess of liabilities 0.0% (72)
----- ---------
Net assets 100.0% $ 604,103
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Floating or variable rate note. Rate is listed as of December 31, 2003.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $202,734 or 33.56% of the net assets of
the fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 2
Transamerica Money Market
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $604,175) $604,175
Cash 107
Receivables:
Interest 84
---------
604,366
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 210
Distribution fees 19
Dividends to shareholders 10
Other 24
---------
263
---------
Net Assets $604,103
=========
Net Assets Consist of:
Capital stock, 2,500,000 shares authorized
($.01 par value) $ 6,041
Additional paid-in capital 598,062
---------
Net Assets $604,103
=========
Shares Outstanding:
Initial Class 597,512
Service Class 6,591
Net Asset Value and Offering Price Per Share:
Initial Class $ 1.00
Service Class 1.00
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 9,155
-------
Expenses:
Management and advisory fees 2,761
Transfer agent fees 2
Printing and shareholder reports 59
Custody fees 75
Administration fees 20
Legal fees 10
Auditing and accounting fees 15
Directors fees 30
Other 17
Service fees:
Service Class 19
-------
Total Expenses 3,008
-------
Net Investment Income (Loss) 6,147
-------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 6,147
=======
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 3
Transamerica Money Market
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 6,147 $ 7,464
------------ ---------
6,147 7,464
------------ ---------
Distributions to Shareholders:
From net investment income:
Initial Class (6,112) (7,464)
Service Class (35) -
------------ ---------
(6,147) (7,464)
------------ ---------
From net realized gains:
Initial Class - -
Service Class - -
------------ ---------
- -
------------ ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 1,170,506 956,417
Service Class 93,866 -
------------ ---------
1,264,372 956,417
------------ ---------
Proceeds from fund acquisition:
Initial Class 409,429 25,864
Service Class - -
------------ ---------
409,429 25,864
------------ ---------
Dividends and distributions reinvested:
Initial Class 6,112 7,464
Service Class 35 -
------------ ---------
6,147 7,464
------------ ---------
Cost of shares redeemed:
Initial Class (1,572,597) (872,995)
Service Class (87,309) -
------------ ---------
(1,659,906) (872,995)
------------ ---------
20,042 116,750
------------ ---------
Net increase (decrease) in net assets 20,042 116,750
------------ ---------
Net Assets:
Beginning of year 584,061 467,311
------------ ---------
End of year $ 604,103 $ 584,061
============ =========
Undistributed Net Investment Income
(Loss) $ - $ -
============ =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 1,170,506 956,417
Service Class 93,866 -
------------ ---------
1,264,372 956,417
------------ ---------
Shares issued-on fund acquisition:
Initial Class 409,429 25,864
Service Class - -
------------ ---------
409,429 25,864
------------ ---------
Shares issued-reinvested from distributions:
Initial Class 6,112 7,464
Service Class 35 -
------------ ---------
6,147 7,464
------------ ---------
Shares redeemed:
Initial Class (1,572,597) (872,995)
Service Class (87,309) -
------------ ---------
(1,659,906) (872,995)
------------ ---------
Net increase (decrease) in shares
outstanding 20,042 116,750
============ =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 4
Transamerica Money Market
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 1.00 $ 0.01 $ - $ 0.01
12/31/2002 1.00 0.01 - 0.01
12/31/2001 1.00 0.04 - 0.04
12/31/2000 1.00 0.06 - 0.06
12/31/1999 1.00 0.05 - 0.05
- --------------- ---------- -------- ------- --- -------
Service Class 12/31/2003 1.00 - - -
- --------------- ---------- -------- ------- --- -------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ (0.01) $ - $ (0.01) $ 1.00
(0.01) - (0.01) 1.00
(0.04) - (0.04) 1.00
(0.06) - (0.06) 1.00
(0.05) - (0.05) 1.00
- --------------- -------- --- -------- --------
Service Class - - - 1.00
- --------------- -------- --- -------- --------
Ratios/Supplemental Data
---------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss)
Period Total Period ----------------------- to Average
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f)
------------ --------------- ------------- --------- ----------- ---------------
Initial Class 12/31/2003 0.81% $ 597,512 0.38% 0.38% 0.78%
12/31/2002 1.44 584,061 0.41 0.41 1.42
12/31/2001 4.01 467,311 0.44 0.44 3.70
12/31/2000 6.15 319,945 0.44 0.44 5.97
12/31/1999 4.63 429,811 0.44 0.44 4.81
- --------------- ---------- ---- --------- ---- ---- ----
Service Class 12/31/2003 0.30 6,591 0.64 0.64 0.44
- --------------- ---------- ---- --------- ---- ---- ----
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-October 2, 1986
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 5
Transamerica Money Market
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica Money Market ("the Fund"), part of ATSF, began operations
on October 2, 1986.
On May 1, 2002, the Fund acquired all the net assets of Money Market Portfolio
from the Transamerica Variable Insurance Fund, Inc. pursuant to a plan of
reorganization approved by shareholders of Money Market Portfolio on April 17,
2002. The acquisition was accomplished by a tax-free exchange of 25,864 shares
of the Fund for the 25,864 shares of Money Market Portfolio outstanding on April
30, 2002. Money Market Portfolio's net assets at that date, $25,864, were
combined with those of the Fund, resulting in combined net assets of $457,787.
On May 1, 2003, the Fund acquired all the net assets of Van Kampen Money Market
pursuant to a plan of reorganization approved by shareholders of Van Kampen
Money Market on April 16, 2003. The acquisition was accomplished by a tax-free
exchange of 409,429 shares of the Fund for the 409,429 shares of Van Kampen
Money Market outstanding on April 30, 2003. Van Kampen Money Market's net assets
at that date $409,429 were combined with those of the Fund, resulting in
combined net assets of $1,017,937.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: As permitted under Rule 2a-7 of the 1940 Act, the
securities held by the Fund are valued on the basis of amortized cost, which
approximates market value.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Interest income, including accretion of discounts and
amortization of premiums, is recorded on the accrual basis commencing on the
settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (i.e.: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 21,010 3%
Asset Allocation-Moderate Portfolio 41,880 7%
Asset Allocation-Moderate Growth Portfolio 1 0%
Select+ Aggressive 20 0%
Select+ Conservative 170 0%
Select+ Growth & Income 228 0%
-
10%
==
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 6
Transamerica Money Market
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.35% of ANA
ATFA voluntarily waived its advisory fee and reimbursed the Fund to the extent
that operating expenses, excluding 12b-1 fees, exceed the following stated
annual limit of 0.70% through April 30, 2003. Subsequent to May 1, 2003, the
operating expense limit was reduced to 0.57%. The combined expense limit for the
year ended December 31, 2003, was 0.61%.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $21. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 7,464
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 6,147
Long-term capital gains -
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 604,175
=========
Unrealized Appreciation $ -
Unrealized (Depreciation) -
---------
Net Unrealized Appreciation (Depreciation) $ -
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 7
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica Money Market
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Money Market (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Money Market 8
Transamerica Value Balanced
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The twelve months ended December 31, 2003, were a positive period for U.S.
securities markets. After a rough start to the year, the equity market began a
long advance. While the rally was broad based, cyclical and economically
sensitive areas (e.g. construction, metals and automotive) and various
technology- or Internet-related industries (e.g., electronics) fared best.
Fixed-income markets performed exceptionally well in the first half of the year
and lagged in the second half, in response to economic data suggesting that
interest rates may rise.
PERFORMANCE
For the year ended December 31, 2003, Transamerica Value Balanced returned
20.16%. By comparison, its primary benchmark, the Russell 1000 Value Index and
its secondary benchmark, the Lehman Brothers Intermediate U.S. Government/Credit
Index returned 30.03% and 4.31%, respectively.
STRATEGY REVIEW
The economic recovery, although strong, was gradual in its effects on
employment, profitability and business activity in 2003. We chose to wait
patiently for some concrete confirmation of an expanding U.S. economy and
improving corporate profitability before considering any change in our portfolio
posture. Throughout the year, we maintained a neutral asset allocation of
approximately 60% equities and 40% bonds and cash. Likewise, we positioned the
equity portfolio somewhat defensively, overweighting healthcare, and financial
holdings and underweighting economically sensitive areas like industrials and
technology. Given the combination of a neutral asset allocation and a defensive
equity position, we should have underperformed the benchmark overall and the
equity markets specifically. Instead, our patience with undervalued companies
that have strong franchises, decent balance sheets, and above-average dividend
yields paid off handsomely.
Making the largest contribution to performance was FleetBoston Financial
Corporation ("FleetBoston"), a prime example of our approach to investing. We
seek to invest early and, we hope, at reasonable cost in companies the market
perceives as troubled or problematic. In FleetBoston's case, we began buying
several years ago when the stock sold at a deep discount due to concerns over
FleetBoston's restructuring efforts. Looking past the immediate issues, we saw a
solid franchise, a management focused on rebuilding shareholder value and making
what we viewed as sound decisions to divest underperforming subsidiaries and
reduce risk in its foreign loan portfolio, albeit slowly. Further, FleetBoston
had significant cash flow, and the stock paid an attractive dividend. Buying on
price declines, we built a large position at a relatively low cost basis. Our
foresight and patience were rewarded when Bank of America Corporation agreed in
November 2003 to purchase FleetBoston at a price significantly above our cost.
Shares of another bank holding, Washington Mutual, Inc., rose also, reflecting
the company's well executed retail-oriented business plan.
Likewise, our perseverance with food products company Altria Group, Inc. paid
off this year.
More recent purchases in the pharmaceutical industry, Schering-Plough
Corporation and Merck & Co., Inc., are now testing our patience and foresight as
their contribution has not yet proven productive. It appears we have initiated
these positions a little early in the process of setting the companies right.
Both negatively impacted returns in 2003. Despite negative news about expiring
patents and thin pipelines of new medicines, we plan to maintain our exposure.
Both companies have strong franchises, our cost bases are low, and we are
collecting attractive dividends.
As for the portfolio's fixed-income portfolio, we shortened its duration (i.e.,
its sensitivity to interest rate movements) during the year, in anticipation of
a stronger economy and, eventually, higher interest rates. The shorter duration
helped to limit price depreciation when Treasury yields rose in the second half
of the year. Throughout the year, we overweighted corporate bonds. Within that
sector, we initially emphasized beaten-down industries leveraged to an improving
economy (e.g., telecommunications and utilities) and later shifted our focus to
more cyclical industries (e.g., basic-materials providers). This approach worked
well; corporate bonds outperformed Treasuries, and our chosen industries
outpaced the corporate sector in general.
/s/ John C. Riazzi
John C. Riazzi
/s/ Heidi T. Hu
Heidi T. Hu
/s/ Gary U. Rolle
Gary U. Rolle
Co-Portfolio Managers
Transamerica Investment Management, LLC
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 1
Transamerica Value Balanced
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/3/95 through 12/31/03
Initial Class Russell 1000 Value LBIGC
1/3/95 $10,000 $10,000 $10,000
3/31/95 10,441 10,952 10,439
6/30/95 11,022 11,932 10,960
9/30/95 11,394 12,975 11,142
12/31/95 12,009 13,836 11,533
3/31/96 12,477 14,619 11,437
6/30/96 12,587 14,871 11,509
9/30/96 12,871 15,303 11,713
12/31/96 13,741 16,830 12,000
3/31/97 13,679 17,261 11,986
6/30/97 14,914 19,806 12,340
9/30/97 15,994 21,778 12,673
12/31/97 16,020 22,751 12,944
3/31/98 17,317 25,404 13,146
6/30/98 17,164 25,517 13,394
9/30/98 16,133 22,561 13,995
12/31/98 17,354 26,307 14,037
3/31/99 17,071 26,684 14,010
6/30/99 17,586 29,693 13,955
9/30/99 16,203 26,784 14,083
12/31/99 16,375 28,240 14,091
3/31/00 16,890 28,375 14,302
6/30/00 16,581 27,045 14,544
9/30/00 17,928 29,172 14,963
12/31/00 19,249 30,221 15,516
3/31/01 19,498 28,451 16,042
6/30/01 20,313 29,840 16,150
9/30/01 18,614 26,572 16,893
12/31/01 19,665 28,532 16,907
3/31/02 19,443 29,699 16,869
6/30/02 17,504 27,169 17,469
9/30/02 15,262 22,069 18,260
12/31/02 16,947 24,103 18,570
3/31/03 16,628 22,930 18,850
6/30/03 18,632 26,891 19,363
9/30/03 18,789 27,446 19,359
12/31/03 $20,364 $31,341 $19,370
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- --------- ----------- ----------
Initial Class 20.16% 3.25% 8.23% 1/3/95
Russell 1000 Value(1) 30.03% 3.56% 13.53% 1/3/95
LBIGC(1) 4.31% 6.65% 7.62% 1/3/95
- ------ ----- ---- ----- ------
Service Class - - 15.40% 5/1/03
- --------------------- ----- ---- ----- ------
NOTES
(1) The Russell 1000 Value (Russell 1000) Index and Lehman Brothers
Intermediate U.S. Government/Credit (LBIGC) Index are unmanaged indices
used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 2
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
--------------------- ---------------
U.S. GOVERNMENT OBLIGATIONS (4.5%)
U.S. Treasury Bond (b)(d)
5.38%, due 02/15/2031 $ 5,700 $ 5,943
U.S. Treasury Note
3.88%, due 02/15/2013 (b)(d) 1,000 979
3.63%, due 05/15/2013 (b)(d) 3,580 3,441
4.25%, due 08/15/2013 (d) 800 801
---------
Total U.S. Government Obligations (cost: $11,296) 11,164
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (11.0%)
Fannie Mae-Conventional Pool
5.00%, due 05/01/2018 1,993 2,035
5.00%, due 06/01/2018 1,954 1,996
6.00%, due 11/01/2032 1,571 1,625
6.00%, due 11/01/2032 1,587 1,641
6.00%, due 01/01/2033 841 869
6.00%, due 02/01/2033 1,772 1,833
6.00%, due 05/01/2033 1,568 1,622
6.00%, due 05/01/2033 1,628 1,683
6.00%, due 10/01/2033 2,058 2,129
Fannie Mae-Gold Pool
5.00%, due 04/01/2018 3,606 3,678
Freddie Mac-Gold Pool
7.00%, due 10/01/2028 1,665 1,764
6.50%, due 04/01/2029 1,710 1,792
6.00%, due 09/01/2033 2,601 2,689
Ginnie Mae-FHA/VA Pool
6.50%, due 10/15/2027 1,922 2,033
---------
Total U.S. Government Agency Obligations (cost: $27,214) 27,389
---------
CORPORATE DEBT SECURITIES (20.9%)
Amusement & Recreation Services (1.6%)
Disney (Walt) Company (The)
4.88%, due 07/02/2004 2,000 2,035
5.62%, due 12/01/2008 1,000 1,051
MGM MIRAGE
6.00%, due 10/01/2009 1,000 1,028
Automotive (1.3%)
General Motors Corporation
7.70%, due 04/15/2016 1,000 1,115
Honeywell International Inc.
6.88%, due 10/03/2005 2,000 2,173
Beverages (0.9%)
Bottling Group, LLC
2.45%, due 10/16/2006 2,000 1,991
Cia Brasileira de Bebidas-144A
8.75%, due 09/15/2013 250 265
Business Credit Institutions (1.9%)
Deere (John) Capital Corporation
3.90%, due 01/15/2008 2,000 2,033
Principal Value
--------------------- ---------------
Business Credit Institutions (continued)
eircom Funding
8.25%, due 08/15/2013 $ 500 $ 554
Ford Motor Credit Company
6.70%, due 07/16/2004 2,000 2,051
Business Services (0.4%)
International Lease Finance Corporation
5.63%, due 06/01/2007 1,000 1,077
Chemicals & Allied Products (2.0%)
Dow Chemical Company (The)
5.25%, due 05/14/2004 3,000 3,032
ICI Wilmington Inc.
5.63%, due 12/01/2013 1,100 1,105
Nalco Company-144A
7.75%, due 11/15/2011 500 535
Commercial Banks (2.6%)
Abbey National PLC
7.35%, due 10/29/2049 2,000 2,207
Bank One Corporation
6.88%, due 08/01/2006 1,000 1,106
CS First Boston-144A (f)
7.90%, due 05/01/2007 2,000 2,234
Wells Fargo & Company
6.25%, due 04/15/2008 530 591
Communication (0.6%)
Echostar DBS Corporation-144A
5.75%, due 10/01/2008 550 556
Liberty Media Corporation
5.70%, due 05/15/2013 1,000 1,011
Electric Services (0.4%)
FirstEnergy Corp.
6.45%, due 11/15/2011 1,000 1,036
Food & Kindred Products (0.4%)
Sara Lee Corporation
6.95%, due 10/09/2006 1,000 1,110
Health Services (0.5%)
HCA Inc.
7.13%, due 06/01/2006 1,250 1,354
Holding & Other Investment Offices (0.9%)
EOP Operating Limited Partnership
8.38%, due 03/15/2006 2,000 2,239
Hotels & Other Lodging Places (0.2%)
Park Place Entertainment Corporation
7.00%, due 04/15/2013 450 480
Insurance (1.9%)
St. Paul Companies, Inc. (The)
5.75%, due 03/15/2007 2,000 2,161
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 3
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
----------- ------------
Insurance (continued)
WellPoint Health Networks Inc.
6.38%, due 06/15/2006 $ 2,400 $ 2,617
Insurance Agents, Brokers & Service (0.4%)
Hartford Financial Services Group, Inc.
(The)-144A
4.63%, due 07/15/2013 1,000 962
Motion Pictures (1.3%)
News Corporation Limited (The)
7.75%, due 12/01/2045 1,700 2,010
Time Warner Inc.
9.13%, due 01/15/2013 1,000 1,270
Personal Credit Institutions (0.9%)
General Motors Acceptance Corporation
6.75%, due 01/15/2006 2,000 2,147
Household Finance Corporation
6.00%, due 05/01/2004 150 152
Primary Metal Industries (0.4%)
Noranda Inc.
6.00%, due 10/15/2015 1,100 1,122
Restaurants (0.5%)
YUM! Brands, Inc.
7.70%, due 07/01/2012 1,000 1,151
Security & Commodity Brokers (0.5%)
Lehman Brothers Holdings Inc.
7.88%, due 08/15/2010 1,000 1,198
Telecommunications (1.1%)
Millicom International Cellular-Series 144A
10.00%, due 12/01/2013 500 528
Sprint Capital Corporation
7.90%, due 03/15/2005 2,125 2,264
Transportation Equipment (0.2%)
Bombardier Recreational Products-144A
8.38%, due 12/15/2013 500 523
---------
Total Corporate Debt Securities (cost: $50,183) 52,074
---------
Shares Value
-------------------- ---------------
COMMON STOCKS (57.8%)
Air Transportation (0.7%)
FedEx Corporation (d) 25,400 $ 1,715
Amusement & Recreation Services (2.7%)
Disney (Walt) Company (The) 286,100 6,675
Chemicals & Allied Products (2.0%)
du Pont (E.I.) de Nemours and Company 110,000 5,048
Commercial Banks (9.7%)
Bank of America Corporation 40,000 3,217
BB&T Corporation (b) 46,000 1,777
Shares Value
-------------------- ---------------
Commercial Banks (continued)
FleetBoston Financial Corporation (b)(d) 388,840 $ 16,973
Wells Fargo & Company (d) 42,000 2,473
Communication (2.8%)
Cox Communications, Inc.-Class A (a)(b) 200,000 6,890
Computer & Data Processing Services (0.8%)
Microsoft Corporation 68,000 1,873
Drug Stores & Proprietary Stores (0.2%)
Medco Health Solutions, Inc. (a) 16,160 549
Electronic & Other Electric Equipment (0.9%)
Cooper Industries, Inc.-Class A 40,000 2,317
Electronic Components & Accessories (2.6%)
Intel Corporation (d) 200,000 6,440
Food & Kindred Products (3.3%)
Altria Group, Inc. (b) 125,000 6,803
Sara Lee Corporation 60,700 1,318
Insurance (1.3%)
St. Paul Companies, Inc. (The) (b)(d) 80,000 3,172
Travelers Property Casualty Corp.-Class A 507 9
Travelers Property Casualty Corp.-Class B 1,089 18
Life Insurance (1.2%)
John Hancock Financial Services, Inc. (d) 80,000 3,000
Lumber & Wood Products (1.1%)
Louisiana-Pacific Corporation (a)(b)(d) 160,000 2,861
Motion Pictures (0.3%)
Time Warner Inc. (a) 40,000 720
Oil & Gas Extraction (0.4%)
Schlumberger Limited 20,000 1,094
Petroleum Refining (1.2%)
ChevronTexaco Corporation 16,000 1,382
Exxon Mobil Corporation 37,000 1,517
Pharmaceuticals (7.0%)
Bristol-Myers Squibb Co. (d) 230,000 6,578
Merck & Co., Inc. (d) 134,000 6,191
Schering-Plough Corporation 287,420 4,998
Savings Institutions (5.2%)
Washington Mutual, Inc. (d) 321,000 12,879
Security & Commodity Brokers (3.8%)
Raymond James Financial, Inc. (d) 140,350 5,291
T. Rowe Price Group, Inc. (d) 89,200 4,229
Telecommunications (5.5%)
ALLTEL Corporation 77,000 3,587
Sprint Corporation (FON Group) 541,080 8,885
Verizon Communications, Inc. (d) 38,000 1,333
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 4
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Shares Value
--------------------- ---------------
U.S. Government Agencies (5.1%)
Fannie Mae 170,000 $ 12,760
---------
Total Common Stocks (cost: $132,458) 144,572
---------
Principal Value
--------------------- ---------------
SECURITY LENDING COLLATERAL (10.8%)
Debt (8.6%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 127 $ 127
Fleet National Bank
1.00%, due 01/21/2004 475 475
National Bank of Commerce
1.19%, due 04/21/2004 396 396
Commercial Paper (2.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 237 237
Delaware Funding Corporation
1.08%, due 01/07/2004 158 158
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 237 237
1.09%, due 01/13/2004 158 158
1.08%, due 02/05/2004 316 316
General Electric Capital Corporation
1.09%, due 01/08/2004 395 395
1.09%, due 01/09/2004 237 237
1.08%, due 01/16/2004 315 315
Govco Incorporated-144A
1.07%, due 02/05/2004 395 395
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 395 395
1.09%, due 02/06/2004 395 395
1.10%, due 02/09/2004 231 231
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 395 395
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 237 237
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 459 459
1.08%, due 02/17/2004 790 790
Sheffield Receivables-144A
1.09%, due 01/21/2004 158 158
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 792 792
Credit Agricole Indosuez
0.98%, due 01/02/2004 32 32
1.08%, due 01/06/2004 301 301
Principal Value
--------------------- ---------------
Euro Dollar Terms (2.1%)
Bank of Montreal
1.06%, due 01/15/2004 $ 155 $ 155
1.06%, due 02/17/2004 317 317
Bank of Scotland
1.06%, due 04/02/2004 237 237
Citigroup Inc.
1.10%, due 01/22/2004 237 237
1.09%, due 02/06/2004 317 317
Credit Agricole Indosuez
1.08%, due 01/28/2004 158 158
Den Danske Bank
1.08%, due 01/20/2004 792 792
1.02%, due 01/30/2004 396 396
Royal Bank of Canada
1.05%, due 02/27/2004 792 792
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 475 475
1.08%, due 01/15/2004 158 158
1.08%, due 01/20/2004 79 79
Svenska Handelsbanken AB
1.09%, due 01/15/2004 79 79
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 475 475
Wells Fargo & Company
1.04%, due 01/30/2004 633 633
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 317 317
1.14%, due 09/08/2004 475 475
Morgan Stanley
1.05%, due 06/21/2004 760 760
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 792 792
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 237 237
Repurchase Agreements (2.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,853 on 01/02/2004 1,853 1,853
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,518 on 01/02/2004 2,518 2,518
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,504 on 01/02/2004 1,504 1,504
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 5
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Shares Value
------------ ------------
Investment Companies (2.2%)
Money Market Funds (2.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 388,300 $ 388
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 948,064 948
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 4,122,496 4,122
---------
Total Security Lending Collateral (cost: $26,845) 26,845
---------
Total Investment Securities (cost: $247,996) $ 262,044
=========
Contracts (e) Value
--------------- --------------
WRITTEN OPTIONS (-1.2%)
Covered Call Options (-0.7%)
American International Group, Inc.
Call Strike $70.00,
Expires 01/17/2004 350 $ (5)
Cox Communications Inc-Class A
Call Strike $40.00,
Expires 01/17/2004 400 (2)
FedEx Corporation
Call Strike $60.00,
Expires 01/17/2004 104 (80)
FleetBoston Financial Corporation
Call Strike $45.00,
Expires 01/22/2005 3,800 (969)
Intel Corporation
Call Strike $30.00,
Expires 01/17/2004 325 (74)
Intel Corporation
Call Strike $40.00,
Expires 07/17/2004 1,000 (65)
John Hancock Financial Services, Inc.
Call Strike $40.00,
Expires 01/17/2004 350 (4)
John Hancock Financial Services, Inc.
Call Strike $40.00,
Expires 06/19/2004 272 (22)
Louisiana-Pacific Corporation
Call Stike $20.00,
Expires 05/22/2004 400 (31)
Merck & Co., Inc.
Call Strike $75.00,
Expires 01/17/2004 350 (2)
Raymond James Financial, Inc.
Call Strike $40.00,
Expires 02/21/2004 653 (37)
Raymond James Financial, Inc.
Call Strike $40.00,
Expires 05/22/2004 100 (16)
Contracts (e) Value
--------------- --------------
Covered Call Options (continued)
St. Paul Companies, Inc. (The)
Call Strike $40.00,
Expires 04/19/2003 200 $ (31)
St. Paul Companies, Inc. (The)
Call Strike $40.00,
Expires 04/17/2004 150 (23)
T. Rowe Price Group, Inc.
Call Strike $40.00,
Expires 01/17/2004 192 (142)
T. Rowe Price Group, Inc.
Call Strike $40.00,
Expires 04/17/2004 500 (200)
Verizon Communications, Inc.
Call Strike $50.00,
Expires 01/17/2004 380 (2)
Washington Mutual, Inc.
Call Strike $45.00,
Expires 01/17/2004 310 (1)
Wells Fargo & Company
Call Strike $60.00,
Expires 07/17/2004 210 (41)
Put Options (-0.5%)
ALLTEL Corporation
Put Strike $40.00,
Expires 01/17/2004 650 (3)
Altria Group, Inc.
Put Strike $30.00,
Expires 01/22/2005 900 (40)
Bank of America Corporation
Put Strike $65.00,
Expires 01/22/2005 200 (37)
Bank of America Corporation
Put Strike $65.00,
Expires 05/22/2004 800 (28)
Bristol-Myers Squibb Co.
Put Strike $22.50,
Expires 03/20/2004 710 (7)
ChevronTexaco Corporation
Put Strike $60.00,
Expires 01/22/2005 160 (8)
ChevronTexaco Corporation
Put Strike $75.00,
Expires 06/19/2004 120 (10)
Disney (Walt) Company (The)
Put Strike $15.00,
Expires 01/17/2004 1,000 (5)
Dominion Resources, Inc.
Put Strike $50.00,
Expires 01/22/2005 635 (62)
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 6
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Contracts (e) Value
------------------ ---------------
Put Options (continued)
du Pont (E.I.) de Nemours and Company
Put Strike $35.00,
Expires 01/22/2005 300 $ (24)
Duke Energy Corporation
Put Strike $12.50,
Expires 01/17/2004 2,600 (13)
Duke Energy Corporation
Put Strike $17.50,
Expires 04/17/2004 1,000 (32)
Exxon Mobil Corporation
Put Strike $35.00,
Expires 04/17/2004 370 (5)
Fannie Mae
Put Strike $70.00,
Expires 01/17/2004 500 (11)
Fannie Mae
Put Strike $60.00,
Expires 01/22/2005 250 (52)
FleetBoston Financial Corporation
Put Strike $20.00,
Expires 01/17/2004 1,100 (6)
Heinz (H.J.) Company
Put Strike $40.00,
Expires 01/17/2004 800 (20)
Kimberly-Clark Corporation
Put Strike $45.00,
Expires 01/22/2005 800 (48)
Merck & Co., Inc.
Put Strike $40.00,
Expires 04/17/2004 600 (21)
Merck & Co., Inc.
Put Strike $45.00,
Expires 04/17/2004 300 (49)
Microsoft Corporation
Put Strike $22.50,
Expires 01/17/2004 1,200 (6)
Microsoft Corporation
Put Strike $25.00,
Expires 04/17/2004 820 (41)
Microsoft Corporation
Put Strike $25.00,
Expires 07/17/2004 50 (4)
Microsoft Corporation
Put Strike $15.00,
Expires 01/22/2005 600 (6)
Plum Creek Timber Company, Inc.
Put Strike $22.50,
Expires 05/22/2004 700 (17)
Contracts (e) Value
------------------ ---------------
Put Options (continued)
Sara Lee Corporation
Put Strike $20.00,
Expires 07/17/2004 40 $ (3)
Sara Lee Corporation
Put Strike $15.00,
Expires 01/22/2005 1,865 (93)
Schering-Plough Corporation
Put Strike $20.00,
Expires 01/17/2004 575 (151)
Schering-Plough Corporation
Put Strike $12.50,
Expires 05/22/2004 350 (4)
Schlumberger Limited
Put Strike $40.00,
Expires 01/17/2004 801 (4)
Schlumberger Limited
Put Strike $45.00,
Expires 02/21/2004 800 (12)
Sprint Corporation (FON Group)
Put Strike $15.00,
Expires 01/17/2004 1,300 (20)
Time Warner Inc.
Put Strike $7.50,
Expires 01/17/2004 2,000 (10)
Time Warner Inc.
Put Strike $10.00,
Expires 01/17/2004 1,400 (7)
Time Warner Inc.
Put Strike $12.50,
Expires 01/22/2005 740 (20)
Union Pacific Corporation
Put Strike $60.00,
Expires 02/21/2004 675 (7)
Verizon Communications, Inc.
Put Strike $40.00,
Expires 01/17/2004 400 (212)
Wilmington Trust Corporation
Put Strike $30.00,
Expires 05/22/2004 1,700 (38)
Wilmington Trust Corporation
Put Strike $32.50,
Expires 05/22/2004 300 (16)
----------
Total Written Options (premium: $7,250)
(2,899)
----------
SUMMARY:
Investments, at value 105.0 % $262,044
Written options (1.2)% (2,899)
Liabilities in excess of other assets (3.8)% (9,499)
--------- ----------
Net assets 100.0 % $249,646
========= ==========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 7
Transamerica Value Balanced
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$26,008.
(c) Cash collateral for the Repurchase Agreements, valued at $5,991, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, all or a portion of this security is segregated with
the custodian to cover margin requirements for open option contracts. The
value of all securities segregated at December 31, 2003, is $50,160.
(e) Contract Amounts are not in thousands.
(f) Securities are stepbonds. CS First Boston-144A, has a coupon rate 7.90%
until 05/01/2007, thereafter the coupon rate will reset every 5 years at
the 5-year current month treasury rate + 200BP, if not called.
DEFINITIONS:
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $7,867 or 3.15% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 8
Transamerica Value Balanced
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $247,996)
(including $26,008 of securities loaned) $262,044
Cash 15,892
Receivables:
Interest 1,102
Dividends 533
Other 26
---------
279,597
---------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 167
Payable for collateral for securities on loan 26,845
Written options (premium: $7,250) 2,899
Other 40
---------
29,951
---------
Net Assets $249,646
=========
Net Assets Consist of:
Capital stock, 75,000 shares authorized ($.01 par value) $ 201
Additional paid-in capital 254,357
Undistributed net investment income (loss) 6,374
Accumulated net realized gain (loss) from investment
securities and written option contracts (29,685)
Net unrealized appreciation (depreciation) on:
Investment securities 14,048
Written option contracts 4,351
---------
Net Assets $249,646
=========
Shares Outstanding:
Initial Class 20,077
Service Class 36
Net Asset Value and Offering Price Per Share:
Initial Class $ 12.41
Service Class 12.74
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 4,321
Dividends 3,949
Income from loaned securities-net 67
--------
8,337
--------
Expenses:
Management and advisory fees 1,786
Transfer agent fees 3
Printing and shareholder reports 82
Custody fees 39
Administration fees 25
Legal fees 3
Auditing and accounting fees 12
Directors fees 9
Other 5
--------
Total expenses 1,964
--------
Net Investment Income (Loss) 6,373
--------
Net Realized Gain (Loss) from:
Investment securities (3,993)
Written option contracts 1,617
--------
(2,376)
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 34,321
Written option contracts 5,794
--------
40,115
--------
Net Gain (Loss) on Investment Securities and Option
Contracts 37,739
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 44,112
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 9
Transamerica Value Balanced
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 6,373 $ 7,283
Net realized gain (loss) from
investment securities and written
option contracts (2,376) (26,860)
Net unrealized appreciation
(depreciation) on investment
securities and written option
contracts 40,115 (18,633)
--------- ---------
44,112 (38,210)
--------- ---------
Distribution to Shareholders:
From net investment income:
Initial Class (7,249) (6,370)
Service Class - -
--------- ---------
(7,249) (6,370)
--------- ---------
From net realized gains:
Initial Class - (10,909)
Service Class - -
--------- ---------
- (10,909)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 16,535 29,492
Service Class 437 -
--------- ---------
16,972 29,492
--------- ---------
Proceeds from fund acquisition:
Initial Class - 97,116
Service Class - -
--------- ---------
- 97,116
--------- ---------
Dividends and distributions reinvested:
Initial Class 7,249 17,279
Service Class - -
--------- ---------
7,249 17,279
--------- ---------
Cost of shares redeemed:
Initial Class (58,895) (76,294)
Service Class (2) -
----------- ---------
(58,897) (76,294)
---------- ---------
(34,676) 67,593
---------- ---------
Net increase (decrease) in net assets 2,187 12,104
---------- ---------
Net Assets:
Beginning of year 247,459 235,355
---------- ---------
End of year $249,646 $ 247,459
========== =========
Undistributed Net Investment
Income (Loss) $ 6,374 $ 7,275
========== =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 1,473 2,481
Service Class 36 -
---------- ---------
1,509 2,481
---------- ---------
Shares issued-on fund acquisition:
Initial Class - 8,088
Service Class - -
---------- ---------
- 8,088
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 650 1,681
Service Class - -
---------- ---------
650 1,681
---------- ---------
Shares redeemed:
Initial Class (5,260) (6,751)
Service Class - -
---------- ---------
(5,260) (6,751)
---------- ---------
Net increase (decrease) in shares
outstanding (3,101) 5,499
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 10
Transamerica Value Balanced
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 10.66 $ 0.30 $ 1.81 $ 2.11
12/31/2002 13.29 0.33 (2.20) (1.87)
12/31/2001 13.19 0.36 (0.07) 0.29
12/31/2000 12.13 0.43 1.68 2.11
12/31/1999 13.35 0.39 (1.14) (0.75)
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 11.08 0.18 1.52 1.70
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.36) $ - $ (0.36) $ 12.41
(0.28) (0.48) (0.76) 10.66
(0.19) - (0.19) 13.29
(0.55) (0.50) (1.05) 13.19
(0.41) (0.06) (0.47) 12.13
- --------------- --------- --------- --------- ---------
Service Class (0.04) - (0.04) 12.74
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 20.16% $ 249,184 0.82% 0.82% 2.68% 53%
12/31/2002 (13.82) 247,459 0.83 0.83 2.84 123
12/31/2001 2.16 235,355 0.89 0.89 2.70 54
12/31/2000 17.55 215,675 0.87 0.87 3.42 20
12/31/1999 (5.64) 261,707 0.87 0.87 2.99 89
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 15.40 462 1.09 1.09 2.26 53
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-January 3, 1995
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 11
Transamerica Value Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Transamerica Value Balanced ("the Fund"), part of ATSF, began
operations on January 3, 1995.
The fund will acquire LKCM Strategic Total Return effective the close of
business on April 30, 2004, subject to approval by Policyowners.
On April 26, 2002, the Fund acquired all the net assets of AEGON Balanced
pursuant to a plan of reorganization approved by shareholders of AEGON Balanced
on April 16, 2003. The acquisition was accomplished by a tax-free exchange of
8,088 shares of the Fund for the 8,583 shares of AEGON Balanced outstanding on
April 25, 2002. AEGON Balanced's net assets at that date ($103,815, including
$6,699 of unrealized depreciation) were combined with those of the Fund,
resulting in combined net assets of $331,767.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Option contracts are valued at the average of the bid and ask ("Mean Quote")
established each day at the close of the board of trade or exchange in which
they are traded.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $29 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and
a liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 12
Transamerica Value Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
remain subject to fluctuation in value. IBT marks to market securities loaned
and the collateral each business day. If additional collateral is due (at least
$1), IBT collects additional cash collateral from the borrowers. Although
securities loaned will be fully collateralized at all times, IBT may experience
delays in, or may be prevented from, recovering the collateral on behalf of the
Fund. The Fund may recall a loaned security position at any time from the
borrower through IBT. In the event the borrower fails to timely return a
recalled security, IBT may indemnify the Fund by purchasing replacement
securities for the Fund at its own expense and claiming the collateral to fund
such a purchase. IBT absorbs the loss if the collateral value is not sufficient
to cover the cost of the replacement securities. If replacement securities are
not available, IBT will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $7 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Option contracts: The Fund may enter into options contracts to manage exposure
to market fluctuations. Option contracts are valued at the average of the bid
and ask ("Mean Quote") established each day at the close of the board of trade
or exchange on which they are traded. The primary risks associated with options
are imperfect correlation between the change in value of the securities held and
the prices of the options contracts; the possibility of an illiquid market and
inability of the counterparty to meet the contract terms. When the Fund writes a
covered call or put option, an amount equal to the premium received by the Fund
is included in the Fund's Statement of Assets and Liabilities as an asset and as
an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current value of the option written.
The underlying face amounts of open option contracts at December 31, 2003, are
listed in the Schedule of Investments.
Transactions in written call and put options were as follows:
Premium Contracts*
----------- -----------
Balance at 12/31/2002 $ 4,752 19,251
Sales 5,691 36,536
Closing Buys (338) (2,090)
Expirations (1,486) (7,987)
Exercised (1,370) (5,553)
------- ------
Balance at 12/31/2003 $ 7,250 40,157
======= ======
*Contracts not in thousands
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Transamerica Investment Management, LLC is both an affiliate of the Fund and a
sub-adviser to the Fund.
Investment advisory fees: The fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 13
Transamerica Value Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $8. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, were as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 58,227
U.S. Government 63,160
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 110,319
U.S. Government 41,200
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (25)
Undistributed net realized capital gains (loss) 25
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 6,370
Long-term capital gains 10,909
2003 Distributions paid from:
Ordinary income 7,249
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 14
Transamerica Value Balanced
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 6,374
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (29,685)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 14,061
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 203 December 31, 2007
277 December 31, 2008
26,432 December 31, 2010
2,773 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 247,983
=========
Unrealized Appreciation $ 24,021
Unrealized (Depreciation) (9,960)
---------
Net Unrealized Appreciation (Depreciation) $ 14,061
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 15
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Transamerica Value Balanced
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Transamerica Value Balanced (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Transamerica Value Balanced 16
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
U.S. stocks bounced back from a three-year bear market in 2003, with several
major indexes finishing the year at their highest levels in nearly two years.
After a dismal first quarter blanketed by concern about a double-dip recession
and pending war with Iraq, the market began to climb in late March in the midst
of the war. A new round of tax cuts and a late-June reduction in the fed funds
target rate encouraged investors that the economy would begin to improve. The
rally accelerated as the year progressed, aided by stronger corporate earnings
growth, mounting evidence of a self-sustaining economic recovery, and repeated
assurances from Federal Reserve Board officials that short-term interest rates
could remain low "for a considerable period" due to low inflation. Rising
commodity prices were a boon for energy and various industrial and materials
companies.
PERFORMANCE
For the year ended December 31, 2003, T. Rowe Price Equity Income returned
25.59%. By comparison its benchmark, the Standard and Poor's 500 Composite Stock
Index ("S&P 500") returned 28.67%.
STRATEGY REVIEW
Small- and mid-cap shares outperformed large-caps by a substantial margin for
the year. Though growth outperformed value substantially among small- and
mid-caps, value edged out growth for the year among large-caps. Most S&P 500
sectors rose strongly, led by information technology, consumer discretionary,
and materials. Consumer staples, telecommunications services, and health care
gained more modestly.
The portfolio posted a strong gain for the year but lagged the broad S&P 500.
Overweighting the strong industrials sector added the most to relative results.
Top contributors in the sector, and for the portfolio, included Cooper
Industries, Ltd., which posted better-than-expected sales, and Rockwell
Automation, Inc. and Honeywell International Inc., which were helped by a better
outlook for defense spending and improved sentiment toward the aerospace
industry.
In financials, portfolio performance was hurt by underweighting market-sensitive
companies such as brokers and diversified financials. However, we added value
with stock selection among banks. Top contributors in the group, and for the
portfolio overall, included FleetBoston Financial Corporation, which surged
after agreeing to be acquired by Bank of America Corporation ("BOA") at a
significant premium, and BOA itself.
Continued concern about generic competition and limited product pipelines
weighed on Merck & Co., Inc. and Schering-Plough Corporation, which detracted
from results. We believe these pharmaceutical leaders have good business models
and attractive valuations relative to the market, as well as strong and safe
dividend yields.
Stock selection in consumer discretionary was negative. Eastman Kodak Company
detracted for the year even after a strong rebound in the fourth quarter.
Telecommunication holdings Qwest Communications International Inc. and AT&T
Corp. struggled throughout the year, hurting the portfolio's relative results.
/s/ Brian C. Rogers
Brian C. Rogers
Portfolio Manager
T. Rowe Price Associates, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 1
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/3/95 through 12/31/03
Initial Class S&P 500
1/3/95 $10,000 $10,000
3/31/95 10,560 10,973
6/30/95 11,230 12,019
9/30/95 12,060 12,973
12/31/95 13,050 13,753
3/31/96 13,660 14,491
6/30/96 14,069 15,141
9/30/96 14,554 15,609
12/31/96 15,644 16,909
3/31/97 16,099 17,363
6/30/97 17,909 20,392
9/30/97 19,300 21,919
12/31/97 20,068 22,548
3/31/98 21,863 25,691
6/30/98 21,268 26,540
9/30/98 19,667 23,905
12/31/98 21,835 28,992
3/31/99 21,639 30,436
6/30/99 24,527 32,581
9/30/99 22,407 30,549
12/31/99 22,593 35,092
3/31/00 21,967 35,895
6/30/00 21,890 34,944
9/30/00 23,294 34,606
12/31/00 25,374 31,900
3/31/01 24,737 28,120
6/30/01 26,125 29,765
9/30/01 24,061 25,398
12/31/01 25,924 28,111
3/31/02 27,128 28,189
6/30/02 25,022 24,414
9/30/02 20,711 20,199
12/31/02 22,603 21,901
3/31/03 21,242 21,210
6/30/03 24,791 24,475
9/30/03 25,139 25,122
12/31/03 $28,387 $28,179
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------ ----------- ----------
Initial Class 25.59% 5.39% 12.30% 1/3/95
S&P 500(1) 28.67% (0.57)% 12.20% 1/3/95
- --------------- ----- ----- ----- ------
Service Class - - 22.74% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, T. Rowe Price
Equity Income Portfolio of the Endeavor Series Trust.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 2
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- --------------
CONVERTIBLE BONDS (0.2%)
Communications Equipment (0.2%)
Lucent Technologies Inc. (b)
8.00%, due 08/01/2031 $ 1,965 $ 2,105
-----------
Total Convertible Bonds (cost: $1,491) 2,105
-----------
Shares Value
------------------- -----------------
CONVERTIBLE PREFERRED STOCKS (0.1%)
Automotive (0.1%)
Ford Motor Company Capital Trust II 16 $ 894
-----------
Total Convertible Preferred Stocks (cost: $800) 894
-----------
COMMON STOCKS (96.3%)
Aerospace (1.0%)
Boeing Company (The) 133,100 5,609
Lockheed Martin Corporation 96,000 4,934
Amusement & Recreation Services (1.2%)
Disney (Walt) Company (The) 545,500 12,727
Automotive (2.3%)
Ford Motor Company (b) 349,200 5,587
Honeywell International Inc. 559,100 18,691
Beverages (0.2%)
Brown-Forman Corporation-Class B 26,800 2,504
Business Services (0.4%)
D&B (a) 93,150 4,724
Chemicals & Allied Products (4.2%)
Clorox Company (The) 126,200 6,128
Dow Chemical Company (The) 269,500 11,202
du Pont (E.I.) de Nemours and Company 231,700 10,633
Great Lakes Chemical Corporation (b) 207,900 5,653
Hercules Incorporated (a) 356,500 4,349
International Flavors & Fragrances Inc. (b) 180,500 6,303
Commercial Banks (9.0%)
Bank of America Corporation 115,600 9,298
Bank One Corporation 331,282 15,103
Citigroup Inc. 193,959 9,415
FleetBoston Financial Corporation (b) 369,758 16,140
Mellon Financial Corporation 311,780 10,011
Mercantile Bankshares Corporation 149,900 6,832
Morgan Chase & Co. (J.P.) 253,630 9,316
National City Corporation 159,900 5,427
Northern Trust Corporation 119,900 5,566
Wells Fargo & Company 99,120 5,837
Wilmington Trust Corporation 72,100 2,596
Communication (1.6%)
Comcast Corporation-Class A (a) 292,938 9,629
Viacom, Inc.-Class B 154,300 6,848
Shares Value
------------------- -----------------
Communications Equipment (2.5%)
Lucent Technologies Inc. (a) (b) 864,900 $ 2,456
Motorola, Inc. 598,000 8,414
Nokia Oyj-ADR 342,400 5,821
Rockwell Collins, Inc. 331,900 9,967
Computer & Data Processing Services (0.8%)
Microsoft Corporation 319,000 8,785
Computer & Office Equipment (1.2%)
Hewlett-Packard Company 531,585 12,211
Department Stores (0.8%)
J.C. Penney Company, Inc. (b) 58,300 1,532
May Department Stores Company (The) (b) 229,250 6,664
Electric Services (3.3%)
Constellation Energy Group, Inc. 228,900 8,964
Duke Energy Corporation 555,600 11,361
FirstEnergy Corp. 189,150 6,658
TECO Energy, Inc. (b) 74,700 1,076
TXU Corp. 313,000 7,424
Electric, Gas & Sanitary Services (0.8%)
NiSource Inc. 368,500 8,085
Electronic & Other Electric Equipment (4.0%)
Cooper Industries, Inc.-Class A 266,507 15,439
Emerson Electric Co. 87,000 5,633
General Electric Company 532,950 16,511
Hubbell Incorporated-Class B 107,100 4,723
Electronic Components & Accessories (0.7%)
Agere Systems Inc. (a) 520,465 1,587
Texas Instruments Incorporated 212,100 6,231
Environmental Services (1.0%)
Waste Management, Inc. 347,062 10,273
Fabricated Metal Products (1.7%)
Fortune Brands, Inc. 149,900 10,716
Gillette Company (The) 196,700 7,225
Food & Kindred Products (3.5%)
Altria Group, Inc. 131,000 7,129
Campbell Soup Company (b) 342,800 9,187
ConAgra Foods, Inc. 152,800 4,032
General Mills, Inc. (b) 132,800 6,016
McCormick & Company, Incorporated 29,000 873
Unilever NV-CVA 151,700 9,919
Food Stores (0.1%)
Winn-Dixie Stores, Inc. (b) 78,100 777
Gas Production & Distribution (0.3%)
El Paso Corporation (b) 347,300 2,844
Holding & Other Investment Offices (0.7%)
Janus Capital Group, Inc. 103,300 1,695
Simon Property Group, Inc. 129,432 5,998
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 3
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------------- -----------------
Hotels & Other Lodging Places (1.6%)
Hilton Hotels Corporation 423,500 $ 7,255
Starwood Hotels & Resorts Worldwide, Inc. 264,226 9,504
Industrial Machinery & Equipment (1.5%)
Baker Hughes Incorporated 88,500 2,846
Black & Decker Corporation (The) 75,700 3,734
Pall Corporation 347,700 9,329
Instruments & Related Products (2.7%)
Eastman Kodak Company (b) 456,800 11,726
Raytheon Company 321,500 9,658
Rockwell International Corporation 209,200 7,448
Insurance (5.1%)
American International Group, Inc. 100,152 6,638
Chubb Corporation 123,900 8,438
CIGNA Corporation 158,200 9,097
SAFECO Corporation 256,700 9,993
St. Paul Companies, Inc. (The) (b) 159,774 6,335
Travelers Property Casualty Corp.-Class B 335,000 5,685
UnumProvident Corporation (b) 493,900 7,789
Insurance Agents, Brokers & Service (1.2%)
Marsh & McLennan Companies, Inc. (b) 268,100 12,839
Life Insurance (1.1%)
John Hancock Financial Services, Inc. 78,510 2,944
Lincoln National Corporation 216,566 8,743
Lumber & Other Building Materials (1.0%)
Home Depot, Inc. (The) 302,500 10,736
Manufacturing Industries (0.7%)
Hasbro Inc. 324,050 6,896
Medical Instruments & Supplies (1.3%)
Baxter International Inc. 339,500 10,362
Becton, Dickinson and Company 95,700 3,937
Motion Pictures (1.4%)
Time Warner Inc. (a) 796,200 14,324
Motor Vehicles, Parts & Supplies (0.6%)
Genuine Parts Company (b) 192,450 6,389
Oil & Gas Extraction (1.3%)
Anadarko Petroleum Corporation 153,800 7,845
Schlumberger Limited 110,600 6,052
Paper & Allied Products (2.5%)
International Paper Company 313,193 13,502
Kimberly-Clark Corporation 165,800 9,797
MeadWestvaco Corporation 108,500 3,228
Petroleum Refining (8.0%)
Amerada Hess Corporation 268,830 14,294
BP PLC-ADR (b) 236,174 11,655
ChevronTexaco Corporation 228,975 19,781
Exxon Mobil Corporation 518,438 21,256
Shares Value
------------------- -----------------
Petroleum Refining (continued)
Marathon Oil Corporation 161,100 $ 5,331
Royal Dutch Petroleum Company-NY
Registered Shares 242,200 12,689
Pharmaceuticals (7.3%)
Abbott Laboratories 170,300 7,936
Bristol-Myers Squibb Co. 614,500 17,575
Johnson & Johnson 224,800 11,613
Merck & Co., Inc. 422,800 19,533
Schering-Plough Corporation 497,400 8,650
Wyeth 283,100 12,018
Primary Metal Industries (1.1%)
Alcoa Inc. 149,800 5,692
Nucor Corporation (b) 115,500 6,468
Printing & Publishing (3.4%)
Dow Jones & Company, Inc. 243,100 12,119
Knight-Ridder, Inc. (b) 138,900 10,747
New York Times Company (The)-Class A 246,800 11,795
Reader's Digest Association, Inc.
(The)-Class A 89,300 1,309
Railroads (2.0%)
Norfolk Southern Corporation 329,000 7,781
Union Pacific Corporation 197,100 13,695
Restaurants (1.1%)
McDonald's Corporation 481,100 11,946
Retail Trade (0.4%)
Toys "R" Us, Inc. (a)(b) 375,500 4,746
Rubber & Misc. Plastic Products (1.0%)
Newell Financial Trust I (b) 462,900 10,540
Security & Commodity Brokers (1.8%)
American Express Company 236,100 11,386
Morgan Stanley 133,200 7,708
Telecommunications (5.4%)
ALLTEL Corporation 170,300 7,933
AT&T Corp. (b) 313,610 6,366
Qwest Communications International Inc. (a) 1,807,900 7,810
SBC Communications Inc. 457,874 11,937
Sprint Corporation (FON Group) 453,000 7,438
Verizon Communications, Inc. 456,442 16,012
Tobacco Products (0.7%)
UST Inc. 204,000 7,281
U.S. Government Agencies (0.8%)
Fannie Mae 108,700 8,159
-----------
Total Common Stocks (cost: $891,069)
1,021,556
-----------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 4
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
-------------------- -----------------
SECURITY LENDING COLLATERAL (10.9%)
Debt (8.7%)
Bank Notes (0.4%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 543 $ 543
Fleet National Bank
1.00%, due 01/21/2004 2,038 2,038
National Bank of Commerce
1.19%, due 04/21/2004 1,698 1,698
Commercial Paper (2.2%)
Compass Securitization-144A
1.08%, due 01/22/2004 1,019 1,019
Delaware Funding Corporation
1.08%, due 01/07/2004 677 677
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 1,019 1,019
1.09%, due 01/13/2004 679 679
1.08%, due 02/05/2004 1,356 1,356
General Electric Capital Corporation
1.09%, due 01/08/2004 1,694 1,694
1.09%, due 01/09/2004 1,019 1,019
1.08%, due 01/16/2004 1,353 1,353
Govco Incorporated-144A
1.07%, due 02/05/2004 1,696 1,696
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,696 1,696
1.09%, due 02/06/2004 1,695 1,695
1.10%, due 02/09/2004 991 991
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 1,695 1,695
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 1,019 1,019
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,968 1,968
1.08%, due 02/17/2004 3,390 3,390
Sheffield Receivables-144A
1.09%, due 01/21/2004 679 679
Euro Dollar Overnight (0.5%)
BNP Paribas SA
0.97%, due 01/07/2004 3,396 3,396
Credit Agricole Indosuez
0.98%, due 01/02/2004 136 136
1.08%, due 01/06/2004 1,291 1,291
Euro Dollar Terms (2.1%)
Bank of Montreal
1.06%, due 01/15/2004 663 663
1.06%, due 02/17/2004 1,359 1,359
Principal Value
-------------------- -----------------
Euro Dollar Terms (continued)
Bank of Scotland
1.06%, due 04/02/2004 $ 1,019 $ 1,019
Citigroup Inc.
1.10%, due 01/22/2004 1,019 1,019
1.09%, due 02/06/2004 1,359 1,359
Credit Agricole Indosuez
1.08%, due 01/28/2004 679 679
Den Danske Bank
1.08%, due 01/20/2004 3,396 3,396
1.02%, due 01/30/2004 1,698 1,698
Royal Bank of Canada
1.05%, due 02/27/2004 3,396 3,396
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 2,038 2,038
1.08%, due 01/15/2004 679 679
1.08%, due 01/20/2004 340 340
Svenska Handelsbanken AB
1.09%, due 01/15/2004 340 340
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 2,038 2,038
Wells Fargo & Company
1.04%, due 01/30/2004 2,717 2,717
Master Notes (0.6%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,359 1,359
1.14%, due 09/08/2004 2,038 2,038
Morgan Stanley
1.05%, due 06/21/2004 3,261 3,261
Medium Term Notes (0.4%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 3,396 3,396
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 1,019 1,019
Repurchase Agreements (2.5%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $7,948 on 01/02/2004 7,948 7,948
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $10,801 on 01/02/2004 10,800 10,800
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $6,453 on 01/02/2004 6,453 6,453
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 5
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Shares Value
------------ --------------
Investment Companies (2.2%)
Money Market Funds (2.2%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,666,036 $ 1,666
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 4,067,752 4,068
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 17,687,929 17,688
-----------
Total Security Lending Collateral (cost: $115,183) 115,183
-----------
Total Investment Securities (cost: $1,008,543) $ 1,139,738
===========
SUMMARY:
Investments, at value 107.5 % $ 1,139,738
Liabilities in excess of other assets (7.5)% (79,461)
----- ------------
Net assets 100.0 % $ 1,060,277
===== ============
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$110,853.
(c) Cash collateral for the Repurchase Agreements, valued at $25,705, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
CVA Certificaaten van aadelen (share certificates)
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 6
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $1,008,543)
(including $110,853 of securities loaned) $1,139,738
Cash 33,270
Receivables:
Investment securities sold 324
Interest 26
Dividends 2,769
Other 98
-----------
1,176,225
-----------
Liabilities:
Accounts payable and accrued liabilities:
Management and advisory fees 654
Distribution fees 1
Payable for collateral for securities on loan 115,183
Other 110
-----------
115,948
-----------
Net Assets $1,060,277
===========
Net Assets Consist of:
Capital stock, 150,000 shares authorized ($.01 par value) $ 559
Additional paid-in capital 909,451
Undistributed net investment income (loss) 14,397
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 4,675
Net unrealized appreciation (depreciation) on
investment securities 131,195
-----------
Net Assets $1,060,277
===========
Shares Outstanding:
Initial Class 55,850
Service Class 77
Net Asset Value and Offering Price Per Share:
Initial Class $ 18.96
Service Class 19.05
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 112
Dividends 20,535
Income from loaned securities-net 72
Less withholding taxes on foreign dividends (117)
---------
20,602
---------
Expenses:
Management and advisory fees 6,049
Transfer agent fees 2
Printing and shareholder reports 18
Custody fees 79
Administration fees 21
Legal fees 10
Auditing and accounting fees 13
Directors fees 28
Other 17
Service fees:
Service Class 1
Total expenses 6,238
---------
Net Investment Income (Loss) 14,364
---------
Net Realized Gain (Loss) from:
Investment securities 9,993
Foreign currency transactions (29)
---------
9,964
---------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 181,511
---------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 191,475
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 205,839
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 7
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
----------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 14,364 $ 6,111
Net realized gain (loss) from
investment securities and foreign
currency transactions 9,964 4,659
Net unrealized appreciation
(depreciation) on investment
securities 181,511 (54,274)
----------- ---------
205,839 (43,504)
----------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (6,057) (3,890)
Service Class - -
----------- ---------
(6,057) (3,890)
----------- ---------
From net realized gains:
Initial Class (4,937) (6,745)
Service Class (2) -
----------- ---------
(4,939) (6,745)
----------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 329,794 289,505
Service Class 1,377 -
----------- ---------
331,171 289,505
----------- ---------
Proceeds from fund acquisition:
Initial Class 54,542 -
Service Class - -
----------- ---------
54,542 -
----------- ---------
Dividends and distributions reinvested:
Initial Class 10,994 10,635
Service Class 2 -
----------- ---------
10,996 10,635
----------- ---------
Cost of shares redeemed:
Initial Class (51,433) (15,217)
Service Class (46) -
----------- ---------
(51,479) (15,217)
----------- ---------
345,230 284,923
----------- ---------
Net increase (decrease) in net assets 540,073 230,784
----------- ---------
Net Assets:
Begining of year 520,204 289,420
----------- ---------
End of year $1,060,277 $ 520,204
=========== =========
Undistributed Net Investment Income
(Loss) $ 14,397 $ 6,221
=========== =========
December 31, December 31,
2003 2002
----------------- ----------------
Share Activity:
Shares issued:
Initial Class 20,792 18,292
Service Class 80 -
------------ ---------
20,872 18,292
------------ ---------
Shares issued-on fund acquisition:
Initial Class 3,492 -
Service Class - -
------------ ---------
3,492 -
------------ ---------
Shares issued-reinvested from distributions:
Initial Class 662 680
Service Class - -
------------ ---------
662 680
------------ ---------
Shares redeemed:
Initial Class (3,120) (944)
Service Class (3) -
------------- ---------
(3,123) (944)
------------ ---------
Net increase (decrease) in shares
outstanding 21,903 18,028
============ =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 8
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 15.29 $ 0.30 $ 3.59 $ 3.89
12/31/2002 18.09 0.28 (2.58) (2.30)
12/31/2001 19.52 0.24 0.24 0.48
12/31/2000 19.50 0.39 1.78 2.17
12/31/1999 20.04 0.38 0.42 0.80
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 15.62 0.19 3.35 3.54
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
------------------------------------------------------
Distributions
-----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ------------ --------------- ------------
Initial Class $ (0.12) $ (0.10) $ (0.22) $ 18.96
(0.18) (0.32) (0.50) 15.29
(0.35) (1.56) (1.91) 18.09
(0.39) (1.76) (2.15) 19.52
(0.40) (0.94) (1.34) 19.50
- --------------- --------- --------- --------- ---------
Service Class (0.01) (0.10) (0.11) 19.05
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 25.59% $ 1,058,801 0.78% 0.78% 1.80% 14%
12/31/2002 (12.81) 520,204 0.85 0.85 1.72 12
12/31/2001 2.17 289,420 0.90 0.90 1.48 19
12/31/2000 12.31 257,343 0.90 0.90 1.98 38
12/31/1999 3.47 264,718 0.87 0.88 1.89 35
- --------------- ---------- ------ ----------- ---- ---- ---- --
Service Class 12/31/2003 22.74 1,476 1.03 1.03 1.64 14
- --------------- ---------- ------ ----------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-January 3, 1995
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001, and prior years, Ratio of Net Expenses to Average Net Assets is net
of fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 9
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. T. Rowe Price Equity Income ("the Fund"), part of ATSF, began
operations as T. Rowe Price Equity Income Portfolio, a part of the Endeavor
Series Trust, on January 3, 1995. The Fund became part of ATSF on May 1, 2002.
On May 1, 2003, the Fund acquired all the net assets of T. Rowe Price Dividend
Growth pursuant to a plan of reorganization approved by shareholders of T. Rowe
Price Dividend Growth on April 16, 2003. The acquisition was accomplished by a
tax-free exchange of 3,492 shares of the Fund for the 6,852 shares of T. Rowe
Price Dividend Growth outstanding on April 30, 2003. T. Rowe Price Dividend
Growth's net assets at that date ($54,542, including $7,191 of unrealized
depreciation) were combined with those of the Fund resulting in combined net
assets of $747,561.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as a
result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $31 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 10
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
During the life of securities loans, the collateral and securities loaned remain
subject to fluctuation in value. IBT marks to market securities loaned and the
collateral each business day. If additional collateral is due (at least $1), IBT
collects additional cash collateral from the borrowers. Although securities
loaned will be fully collateralized at all times, IBT may experience delays in,
or may be prevented from, recovering the collateral on behalf of the Fund. The
Fund may recall a loaned security position at any time from the borrower through
IBT. In the event the borrower fails to timely return a recalled security, IBT
may indemnify the Fund by purchasing replacement securities for the Fund at its
own expense and claiming the collateral to fund such a purchase. IBT absorbs the
loss if the collateral value is not sufficient to cover the cost of the
replacement securities. If replacement securities are not available, IBT will
credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $58 are included in net
realized gains in the Statement of Operations.
Real Estate Investment Trusts ("REITs"): There are certain additional risks
involved in investing in REITs. These include, but are not limited to, economic
conditions, changes in zoning laws, real estate values, property taxes and
interest rates. Since the Fund invests in real estate related securities, the
value of its shares may fluctuate more widely than the value of shares of a
fund that invests in a broad range of industries.
Dividend income is recorded at management's estimate of the income included in
distributions from the REIT investments. Distributions received in excess of
this estimated amount are recorded as a reduction of the cost of investments.
The actual amounts of income, return of capital, and capital gains are only
determined by each REIT after the fiscal year-end, and may differ from the
estimated amounts.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund are
maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement date
of investment security transactions; 2) gains and losses on forward foreign
currency contracts; and 3) the difference between the receivable amounts of
interest and dividends recorded in the accounting records in U.S. dollars and
the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 11
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
----------- -----------
Asset Allocation-Conservative Portfolio $ 42,293 4%
Asset Allocation-Growth Portfolio 92,579 9%
Asset Allocation-Moderate Portfolio 149,011 14%
Asset Allocation-Moderate Growth Portfolio 196,314 19%
Select+ Aggressive 113 0%
Select+ Conservative 414 0%
Select+ Growth & Income 562 0%
--
46%
==
Investment advisory fees: On May 1, 2003, the Fund reduced its advisory fee from
0.80% of average daily net assets ("ANA") to 0.75% of ANA. The combined advisory
fee for the year ended December 31, 2003, was 0.76%.
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
0.88% Expense Limit
The sub-advisor, T. Rowe Price, has agreed to a pricing discount based on the
aggregate assets that they manage in the ATSF and IDEX mutual funds. The amount
of the discount received by the fund at December 31, 2003 was $37.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to
the insurance companies for providing services and account maintenance for
their policyholders who invest in the variable insurance products which invest
in the Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $36. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 388,860
U.S. Government 1,888
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 108,919
U.S. Government 973
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 12
T. Rowe Price Equity Income
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ 4,547
Undistributed net investment income (loss) (131)
Undistributed net realized capital gains (loss) (4,416)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 4,254
Long-term capital gains 6,381
2003 Distributions paid from:
Ordinary income 6,059
Long-term capital gains 4,937
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 20,852
=========
Undistributed Long-term Capital Gains $ 2,802
=========
Capital Loss Carryforward $ (3,775)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 130,390
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 63 December 31, 2006
336 December 31, 2007
98 December 31, 2008
1,358 December 31, 2009
1,920 December 31, 2010
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 1,009,348
===========
Unrealized Appreciation $ 152,241
Unrealized (Depreciation) (21,852)
-----------
Net Unrealized Appreciation (Depreciation) $ 130,390
===========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 13
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
T. Rowe Price Equity Income
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Equity Income (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Equity Income 14
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
U.S. stocks rose sharply in the year ended December 31, 2003. The Standard and
Poor's 500 Composite Stock Index ("S&P 500") sprinted more than 12% in the final
quarter, boosting full-year results to more than 28%, and marked the first
positive year for stocks since 1999. Investors bid up equities -- large and
small, growth and value, and just about everything in between -- buoyed by
favorable economic data, stronger earnings growth, signs of job market
stabilization, and rising global demand. In the large-cap universe, value shares
edged growth. The market sectors with the strongest gains were information
technology, consumer discretionary, and materials. The telecommunication
services and consumer staples sectors posted positive results but lagged for the
year.
PERFORMANCE
For the year ended December 31, 2003, T. Rowe Price Growth Stock returned
30.76%. By comparison its benchmark, the S&P 500 returned 28.67%.
STRATEGY REVIEW
For the year, the portfolio posted a strong gain that outperformed the S&P 500.
Superior stock selection in the telecommunication services sector produced the
strongest contribution to the portfolio's relative results versus the S&P 500.
Vodafone Group PLC ("Vodafone") and Nextel Communications, Inc. ("Nextel") were
top absolute and relative performance contributors. We were significantly
overweight in Nextel (up more than 140% for the year) versus the S&P 500.
Vodafone released positive earnings results and the threat of competition from
Hutchinson Whampoa Limited has not materialized as expected.
Boosted by strong stock selection, the health care sector also contributed to
relative returns despite our overweight position, which limited gains. Strength
came mostly from pharmaceuticals and biotechnologys during the year. Large-cap
pharmaceuticals rallied sharply in the fourth quarter as investors sought their
perceived safety near year end. Not owning Merck & Co., Inc. and eliminating
Schering-Plough Corporation early in the year aided relative performance. After
posting strong gains for much of 2003, biotechnology holdings, Gilead Sciences,
Inc. and Genentech, Inc. struggled as the year progressed, but they posted solid
twelve-month contributions.
The information technology ("IT") sector was the largest drag on relative
results due to stock selection in IT services and semiconductors. In general,
the stocks that we held generated positive absolute returns, but lagged the
technology group. Affiliated Computer Services, Inc. was the IT sector's largest
detractor to relative performance after struggling most of the year with
contract disputes.
/s/ Robert W. Smith
Robert W. Smith
Portfolio Manager
T. Rowe Price Associates, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 1
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 1/3/95 through 12/31/03
Initial Class S&P 500
1/3/1995 $10,000 $10,000
3/31/1995 11,380 10,973
6/30/1995 12,210 12,019
9/30/1995 13,080 12,973
12/31/1995 13,720 13,753
3/31/1996 14,310 14,491
6/30/1996 14,809 15,141
9/30/1996 15,501 15,609
12/31/1996 16,569 16,909
3/31/1997 16,538 17,363
6/30/1997 19,355 20,392
9/30/1997 20,678 21,919
12/31/1997 21,303 22,548
3/31/1998 24,645 25,691
6/30/1998 25,000 26,540
9/30/1998 22,218 23,905
12/31/1998 27,411 28,992
3/31/1999 28,021 30,436
6/30/1999 29,613 32,581
9/30/1999 27,924 30,549
12/31/1999 33,494 35,092
3/31/2000 36,303 35,895
6/30/2000 36,135 34,944
9/30/2000 36,473 34,606
12/31/2000 33,325 31,900
3/31/2001 28,317 28,120
6/30/2001 30,775 29,765
9/30/2001 26,223 25,398
12/31/2001 29,978 28,111
3/31/2002 29,549 28,189
6/30/2002 25,104 24,414
9/30/2002 21,359 20,199
12/31/2002 23,140 21,901
3/31/2003 22,772 21,210
6/30/2003 26,468 24,475
9/30/2003 27,113 25,122
12/31/2003 $30,258 $28,179
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years Inception Date
----------- ------------ ----------- ----------
Initial Class 30.76% 2.00% 13.10% 1/3/95
S&P 500(1) 28.67% (0.57)% 12.20% 1/3/95
- --------------- ----- ----- ----- ------
Service Class - - 22.51% 5/1/03
- --------------- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index is an unmanaged
index used as a general measure of market performance. Calculations assume
dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical financial information for periods prior to May 1, 2000 has been
derived from the financial history of the predecessor portfolio, T. Rowe Price
Growth Stock of the Endeavor Series Trust.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 2
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
COMMON STOCKS (96.9%)
Amusement & Recreation Services (0.4%)
MGM MIRAGE (a) 31,900 $ 1,200
Apparel & Accessory Stores (0.3%)
Inditex, SA 45,800 930
Automotive (1.0%)
Harley-Davidson, Inc. (b) 67,900 3,227
Beverages (1.4%)
Coca-Cola Company (The) 62,000 3,147
PepsiCo, Inc. 27,400 1,277
Business Services (5.5%)
Accenture Ltd (a) 93,200 2,453
Adecco SA-Registered Shares 33,700 2,166
Clear Channel Communications, Inc. 93,300 4,369
eBay Inc. (a) 37,100 2,396
First Data Corporation 131,400 5,399
Omnicom Group, Inc. 12,400 1,083
Chemicals & Allied Products (0.5%)
Hermes International 9,000 1,741
Commercial Banks (9.0%)
Citigroup Inc. 253,608 12,310
Credit Suisse Group 69,200 2,532
MBNA Corporation 37,900 942
Mellon Financial Corporation 98,500 3,163
Northern Trust Corporation 58,600 2,720
State Street Corporation 84,800 4,416
U.S. Bancorp 113,700 3,386
Communication (5.4%)
Comcast Corporation-Special Class A (a) 156,000 4,880
Crown Castle International Corp. (a)(b) 115,900 1,278
Echostar Communications
Corporation-Class A (a) 100,600 3,420
Liberty Media Corporation-Class A (a) 292,256 3,475
Viacom, Inc.-Class B 101,270 4,495
Computer & Data Processing Services (9.3%)
Adobe Systems Incorporated 38,400 1,509
Affiliated Computer Services, Inc.-Class A (a)(b) 79,100 4,308
Fiserv, Inc. (a) 82,700 3,267
Intuit Inc. (a) 57,200 3,026
Mercury Interactive Corporation (a) 11,600 564
Microsoft Corporation 361,800 9,964
Siebel Systems, Inc. (a) 93,000 1,290
SunGard Data Systems Inc. (a) 55,400 1,535
Symantec Corporation (a)(b) 31,000 1,074
Synopsys, Inc. (a) 38,700 1,307
Yahoo! Inc. (a) 51,400 2,322
Computer & Office Equipment (3.0%)
Cisco Systems, Inc. (a) 224,300 5,448
Dell Computer Corporation (a) 127,700 4,337
Shares Value
-------------------- ---------------
Department Stores (0.4%)
Kohl's Corporation (a) 25,600 $ 1,150
Drug Stores & Proprietary Stores (1.1%)
Medco Health Solutions, Inc. (a) 36,000 1,224
Walgreen Co. 67,900 2,470
Educational Services (1.1%)
Apollo Group, Inc.-Class A (a)(b) 50,600 3,441
Electronic & Other Electric Equipment (2.0%)
General Electric Company 153,200 4,746
Samsung Electronics Co., Ltd. 5,000 1,893
Electronic Components & Accessories (3.5%)
Analog Devices, Inc. 33,600 1,534
Intel Corporation 78,900 2,541
Maxim Integrated Products 24,000 1,195
Tyco International Ltd. 169,244 4,486
Xilinx, Inc. (a) 42,400 1,643
Fabricated Metal Products (0.4%)
Gillette Company (The) 35,400 1,300
Food & Kindred Products (1.5%)
Altria Group, Inc. (b) 48,600 2,645
General Mills, Inc. (b) 22,800 1,033
Unilever PLC 134,700 1,255
Industrial Machinery & Equipment (1.6%)
Applied Materials, Inc. (a) 101,300 2,274
Baker Hughes Incorporated (b) 92,800 2,984
Instruments & Related Products (1.0%)
Danaher Corporation (b) 35,500 3,257
Insurance (8.3%)
ACE Limited 55,400 2,295
American International Group, Inc. 118,500 7,854
Travelers Property Casualty Corp.-Class A 129,766 2,177
UnitedHealth Group Incorporated 177,900 10,350
WellPoint Health Networks Inc. (a) 44,800 4,345
Insurance Agents, Brokers & Service (1.5%)
Hartford Financial Services Group, Inc. (The) 49,300 2,910
Marsh & McLennan Companies, Inc. 40,000 1,916
Life Insurance (0.2%)
China Life Insurance Company
Limited-ADR (a)(b) 18,800 620
Lumber & Other Building Materials (1.2%)
Home Depot, Inc. (The) 113,000 4,010
Manufacturing Industries (1.0%)
International Game Technology 91,300 3,259
Medical Instruments & Supplies (1.2%)
Biomet, Incorporated (b) 40,700 1,482
Boston Scientific Corporation (a) 21,600 794
Medtronic, Inc. 32,200 1,565
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 3
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Metal Mining (0.5%)
Rio Tinto PLC-Registered Shares 54,700 $ 1,511
Motion Pictures (0.7%)
Time Warner Inc. (a) 132,400 2,382
Oil & Gas Extraction (1.0%)
Schlumberger Limited 62,000 3,393
Personal Credit Institutions (0.9%)
SLM Corporation 78,900 2,973
Personal Services (0.8%)
Cendant Corporation (a) 123,900 2,759
Petroleum Refining (1.8%)
ChevronTexaco Corporation 34,300 2,963
Exxon Mobil Corporation 74,590 3,058
Pharmaceuticals (9.2%)
Abbott Laboratories 45,700 2,130
Amgen Inc. (a) 66,800 4,128
Cardinal Health, Inc. (b) 22,400 1,370
Forest Laboratories, Inc. (a) 51,000 3,152
Genentech, Inc. (a) 9,900 926
Gilead Sciences, Inc. (a) 32,300 1,878
Johnson & Johnson 60,200 3,110
Lilly (Eli) and Company 9,000 633
Medimmune, Inc. (a) 34,800 884
Pfizer Inc. 247,995 8,762
Sanofi-Synthelabo 11,800 888
Wyeth 45,900 1,948
Primary Metal Industries (0.8%)
Nucor Corporation (b) 48,500 2,716
Printing & Publishing (0.7%)
Scripps (E.W.) Company (The) 24,500 2,306
Radio & Television Broadcasting (1.6%)
British Sky Broadcasting Group PLC (a) 123,700 1,556
Univision Communications Inc.-Class A (a) 94,700 3,759
Radio, Television & Computer Stores (0.7%)
Best Buy Co., Inc. 46,000 2,403
Restaurants (1.2%)
Compass Group PLC 338,100 2,299
Starbucks Corporation (a)(b) 47,700 1,577
Retail Trade (0.5%)
Kingfisher PLC 319,500 1,593
Security & Commodity Brokers (3.2%)
American Express Company 35,600 1,717
Goldman Sachs Group, Inc. (The) 10,900 1,076
Merrill Lynch & Co., Inc. (b) 72,200 4,235
Morgan Stanley 36,700 2,124
Schwab (Charles) Corporation (The) 104,300 1,235
Shares Value
-------------------- ---------------
Telecommunications (3.6%)
Nextel Communications, Inc.-Class A (a) 141,700 $ 3,976
NTT DoCoMo, Inc. 155 351
Vodafone Group PLC 2,274,504 5,638
Vodafone Group PLC-ADR 70,800 1,773
Transportation & Public Utilities (0.6%)
InterActiveCorp (a) 9,800 333
InterActiveCorp (a)(b) 48,300 1,639
Trucking & Warehousing (0.3%)
United Parcel Service, Inc.-Class B 14,400 1,074
U.S. Government Agencies (1.9%)
Fannie Mae 60,200 4,520
Freddie Mac 26,900 1,569
Variety Stores (3.4%)
Family Dollar Stores, Inc. 29,200 1,048
Target Corporation 123,800 4,754
Wal-Mart de Mexico SA de CV-ADR 43,400 1,237
Wal-Mart de Mexico SA de CV-Series V 223,800 638
Wal-Mart Stores, Inc. 63,100 3,347
Water Transportation (0.9%)
Carnival Corporation 70,900 2,817
Wholesale Trade Nondurable Goods (0.8%)
SYSCO Corporation 65,900 2,453
---------
Total Common Stocks (cost: $259,092)
315,615
---------
Principal Value
----------- ------------
SECURITY LENDING COLLATERAL (6.6%)
Debt (5.3%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 102 $ 102
Fleet National Bank
1.00%, due 01/21/2004 383 383
National Bank of Commerce
1.19%, due 04/21/2004 319 319
Commercial Paper (1.4%)
Compass Securitization-144A
1.08%, due 01/22/2004 191 191
Delaware Funding Corporation
1.08%, due 01/07/2004 127 127
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 191 191
1.09%, due 01/13/2004 128 128
1.08%, due 02/05/2004 255 255
General Electric Capital Corporation
1.09%, due 01/08/2004 318 318
1.09%, due 01/09/2004 191 191
1.08%, due 01/16/2004 254 254
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 4
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------------- ---------------
Commercial Paper (continued)
Govco Incorporated-144A
1.07%, due 02/05/2004 $ 319 $ 319
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 318 318
1.09%, due 02/06/2004 318 318
1.10%, due 02/09/2004 186 186
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 318 318
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 191 191
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 370 370
1.08%, due 02/17/2004 637 637
Sheffield Receivables-144A
1.09%, due 01/21/2004 128 128
Euro Dollar Overnight (0.3%)
BNP Paribas SA
0.97%, due 01/07/2004 638 638
Credit Agricole Indosuez
0.98%, due 01/02/2004 26 26
1.08%, due 01/06/2004 242 242
Euro Dollar Terms (1.3%)
Bank of Montreal
1.06%, due 01/15/2004 125 125
1.06%, due 02/17/2004 255 255
Bank of Scotland
1.06%, due 04/02/2004 191 191
Citigroup Inc.
1.10%, due 01/22/2004 191 191
1.09%, due 02/06/2004 255 255
Credit Agricole Indosuez
1.08%, due 01/28/2004 128 128
Den Danske Bank
1.08%, due 01/20/2004 638 638
1.02%, due 01/30/2004 319 319
Royal Bank of Canada
1.05%, due 02/27/2004 638 638
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 383 383
1.08%, due 01/15/2004 128 128
1.08%, due 01/20/2004 64 64
Svenska Handelsbanken AB
1.09%, due 01/15/2004 64 64
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 383 383
Wells Fargo & Company
1.04%, due 01/30/2004 510 510
Principal Value
--------------------- ---------------
Master Notes (0.4%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 $ 255 $ 255
1.14%, due 09/08/2004 383 383
Morgan Stanley
1.05%, due 06/21/2004 612 612
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 638 638
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 191 191
Repurchase Agreements (1.4%) (c)
Credit Suisse First Boston (USA), Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,491 on 01/02/2004 1,491 1,491
Merrill Lynch & Co., Inc.
1.04%, Repurchase Agreement dated 12/31/2003
to be repurchased at $2,027 on 01/02/2004 2,027 2,027
Morgan Stanley
1.11%, Repurchase Agreement dated 12/31/2003
to be repurchased at $1,212 on 01/02/2004 1,212 1,212
Shares Value
--------------- ------------
Investment Companies (1.3%)
Money Market Funds (1.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 312,854 $ 313
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 763,856 764
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 3,321,500 3,321
---------
Total Security Lending Collateral (cost: $21,629) 21,629
---------
Total Investment Securities (cost: $280,721) $337,244
=========
SUMMARY:
Investments, at value 103.5 % $337,244
Liabilities in excess of other assets (3.5)% (11,531)
--------- ---------
Net assets 100.0 % $325,713
========= =========
FORWARD FOREIGN CURRENCY CONTRACTS:
- -----------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- --------------- -------- ------------ --------------- ---------------
British Pound 117 01/02/2004 $210 $ (1)
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 5
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$20,929.
(c) Cash collateral for the Repurchase Agreements, valued at $4,827, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 6
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $280,721)
(including $20,929 of securities loaned) $337,244
Cash 9,520
Receivables:
Investment securities sold 856
Interest 3
Dividends 295
Dividend reclaims receivable 4
Other 23
---------
347,945
---------
Liabilities:
Investment securities purchased 355
Accounts payable and accrued liabilities:
Management and advisory fees 217
Payable for collateral for securities on loan 21,629
Unrealized depreciation on forward foreign
currency contracts 1
Other 30
---------
22,232
---------
Net Assets $325,713
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 165
Additional paid-in capital 309,299
Undistributed net investment income (loss) 444
Accumulated net realized gain (loss) from investment
securities and foreign currency transactions (40,717)
Net unrealized appreciation (depreciation) on:
Investment securities 56,521
Translation of assets and liabilities denominated in
foreign currencies 1
---------
Net Assets $325,713
=========
Shares Outstanding:
Initial Class 16,480
Service Class 34
Net Asset Value and Offering Price Per Share:
Initial Class $ 19.72
Service Class 19.70
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 25
Dividends 2,834
Income from loaned securities-net 25
Less withholding taxes on foreign dividends (39)
--------
2,845
--------
Expenses:
Management and advisory fees 2,164
Transfer agent fees 2
Printing and shareholder reports 15
Custody fees 50
Administration fees 20
Legal fees 4
Auditing and accounting fees 10
Directors fees 10
Other 7
--------
Total expenses 2,282
--------
Net Investment Income (Loss) 563
--------
Net Realized Gain (Loss) from:
Investment securities (967)
Foreign currency transactions (103)
--------
(1,070)
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 75,787
Translation of assets and liabilities denominated in
foreign currency (3)
--------
75,784
--------
Net Gain (Loss) on Investment Securities and Foreign
Currency Transactions 74,714
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $75,277
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 7
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 563 $ 249
Net realized gain (loss) from
investment securities and foreign
currency transactions (1,070) (19,200)
Net unrealized appreciation
(depreciation) on investment
securities and foreign currency
translation 75,784 (37,509)
--------- ---------
75,277 (56,460)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (168) (101)
Service Class - -
--------- ---------
(168) (101)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 46,089 72,688
Service Class 650 -
--------- ---------
46,739 72,688
--------- ---------
Dividends and distributions reinvested:
Initial Class 168 101
Service Class - -
--------- ---------
168 101
--------- ---------
Cost of shares redeemed:
Initial Class (19,202) (23,067)
Service Class (13) -
--------- ---------
(19,215) (23,067)
--------- ---------
27,692 49,722
--------- ---------
Net increase (decrease) in net assets 102,801 (6,839)
--------- ---------
Net Assets:
Beginning of year 222,912 229,751
--------- ---------
End of year $ 325,713 $ 222,912
========= =========
Undistributed Net Investment
Income (Loss) $ 444 $ 151
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 2,843 4,449
Service Class 35 -
--------- ---------
2,878 4,449
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 10 6
Service Class - -
--------- ---------
10 6
--------- ---------
Shares redeemed:
Initial Class (1,148) (1,426)
Service Class (1) -
--------- ---------
(1,149) (1,426)
--------- ---------
Net increase (decrease) in shares
outstanding 1,739 3,029
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 8
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 15.09 $ 0.03 $ 4.61 $ 4.64
12/31/2002 19.56 0.02 (4.48) (4.46)
12/31/2001 25.62 0.02 (2.37) (2.35)
12/31/2000 28.73 - (0.15) (0.15)
12/31/1999 25.60 0.03 5.28 5.31
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 16.08 - 3.62 3.62
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.01) $ - $ (0.01) $ 19.72
(0.01) - (0.01) 15.09
- (3.71) (3.71) 19.56
(0.03) (2.93) (2.96) 25.62
(0.07) (2.11) (2.18) 28.73
- --------------- --------- --------- --------- ---------
Service Class - - - 19.70
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 30.76% $ 325,035 0.84% 0.84% 0.20% 38%
12/31/2002 (22.81) 222,912 0.87 0.92 0.12 48
12/31/2001 (10.04) 229,751 0.91 0.93 0.11 67
12/31/2000 (0.51) 269,983 0.90 0.91 0.01 80
12/31/1999 22.19 257,879 0.87 0.88 0.21 66
- --------------- ---------- ------ --------- ---- ---- ---- --
Service Class 12/31/2003 22.51 678 1.12 1.12 0.01 38
- --------------- ---------- ------ --------- ---- ---- ---- --
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-January 3, 1995
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 9
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. T. Rowe Price Growth Stock ("the Fund"), part of ATSF, began
operations as T. Rowe Price Growth Stock Portfolio, a part of the Endeavor
Series Trust, on January 3, 1995. The Fund became a part of ATSF on May 1, 2002.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's
Valuation Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as
a result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of
the Fund to invest the excess cash into a savings account, which at December
31, 2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Fund will bear the risk of value fluctuations until
the security can be sold and may encounter delays and incur costs in
liquidating the security. In the event of bankruptcy or insolvency of the
seller, delays and costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $11 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 10
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
IBT absorbs the loss if the collateral value is not sufficient to cover the
cost of the replacement securities. If replacement securities are not
available, IBT will credit the equivalent cash value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amounts of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $18 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign currency denominated investments: The accounting records of the Fund
are maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement
date of investment security transactions; 2) gains and losses on forward
foreign currency contracts; and 3) the difference between the receivable
amounts of interest and dividends recorded in the accounting records in U.S.
dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in value of the
underlying currencies and from the possible inability of counterparties to meet
the terms of their contracts. Open forward currency contracts at December 31,
2003, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit implemented January 1, 2003:
0.89% Expense Limit
The sub-advisor, T. Rowe Price, has agreed to a pricing discount based on the
aggregate assets that they manage in the ATSF and IDEX mutual funds. The amount
of the discount received by the fund at December 31, 2003 was $12.
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 11
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for provid-ing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at a cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $11. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets
and Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 121,344
U.S. Government 2,724
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 93,195
U.S. Government 6,359
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ -
Undistributed net investment income (loss) (102)
Undistributed net realized capital gains (loss) 102
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 101
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 168
Long-term capital gains -
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 12
T. Rowe Price Growth Stock
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 462
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (34,262)
=========
Post October Currency Loss $ 19
=========
Net Unrealized Appreciation (Depreciation) $ 50,068
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 18,759 December 31, 2009
11,175 December 31, 2010
4,328 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 287,176
=========
Unrealized Appreciation $ 53,330
Unrealized (Depreciation) (3,262)
---------
Net Unrealized Appreciation (Depreciation) $ 50,068
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 13
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
T. Rowe Price Growth Stock
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Growth Stock (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Growth Stock 14
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Small-cap growth stocks rose strongly and outperformed other investment styles
in 2003 -- the first positive year for the U.S. equity market since 1999. After
declining for most of the first quarter, shares surged and investor sentiment
abruptly turned bullish as a swift U.S.-led invasion of Iraq was followed by a
new round of tax cuts and a late-June reduction in the fed funds target rate to
stimulate the economy. The rally accelerated as the year progressed because of
stronger corporate earnings growth, meaningful evidence of economic improvement,
and repeated assurances from Federal Reserve Board officials that short-term
interest rates could remain low "for a considerable period" due to low
inflation.
All major sectors within the small-cap growth universe produced gains. The
information technology ("IT") sector fared among the best, thanks to a
remarkable recovery in semiconductor stocks, though all underlying industries
performed very well. Health care stocks posted healthy returns, led by providers
and service companies. Consumer discretionary shares also performed well, with
specialty retailers outpacing other industries. The main laggards were stocks in
the consumer staples, and utilities sectors, which generally produced modest
gains.
PERFORMANCE
For the year ended December 31, 2003, T. Rowe Price Small Cap returned 40.40%.
By comparison its benchmark, the Russell 2000 Index returned 47.25%.
STRATEGY REVIEW
The IT sector, 28% of assets as of December 31, 2003, contributed the most to
our results in 2003. Semiconductor stocks Intersil Corporation, Integrated
Silicon Solution, Inc., and Semtech Corporation were among our top performers in
this area. Traditional software companies generally produced strong returns, but
Borland Software Corporation and Radiant Systems, Inc. were disappointing.
Our holdings in the health care sector, which represented 22% of assets, greatly
added value over the last year. Health care providers and service companies
fared best, led by Coventry Health Care, Inc., United Surgical Partners
International, Inc., and Omnicare, Inc. Our pharmaceutical and biotechnology
holdings generally helped portfolio performance, but equipment and supply
companies lagged somewhat due to weakness in Thoratec Corporation and ICU
Medical, Inc., which were among our largest detractors.
In the consumer discretionary sector, representing 18% of assets, most of our
specialty retailers, particularly Cost Plus, Inc. and O'Reilly Automotive, Inc.,
contributed to our favorable results. Shares of restaurant operators were also
robust, led by CEC Entertainment Inc., whose Chuck E. Cheese restaurants have
done very well. Our media holdings lagged somewhat due to poor performance of
Insight Communications Company, Inc. and Scholastic Corporation.
In the industrials and business services category, which represents 14% of
assets, education-related stocks such as University of Phoenix Online and
Education Management Corporation enjoyed a meteoric rise in 2003. Such companies
have benefited from rising tuition costs, as well as increased demand from
workers who, in a sluggish job market, have been seeking to upgrade their skills
and enhance their career prospects.
/s/ Paul W. Wojcik
Paul W. Wojcik
Portfolio Manager
T. Rowe Price Associates, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 1
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Inception of 5/3/99 through 12/31/03
Initial Class Russell 2000
5/3/99 $10,000 $10,000
6/30/99 11,200 10,605
9/30/99 10,930 9,934
12/31/99 13,849 11,767
3/31/00 15,532 12,600
6/30/00 14,830 12,124
9/30/00 14,295 12,258
12/31/00 12,679 11,411
3/31/01 10,163 10,669
6/30/01 12,156 12,193
9/30/01 9,099 9,658
12/31/01 11,448 11,695
3/31/02 11,342 12,161
6/30/02 9,528 11,145
9/30/02 7,723 8,760
12/31/02 8,317 9,299
3/31/03 8,014 8,882
6/30/03 9,841 10,962
9/30/03 10,446 11,957
12/31/03 $11,671 $13,694
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year Inception Date
----------- ----------- ----------
Initial Class 40.40% 3.38% 5/3/99
Russell 2000(1) 47.25% 6.96% 5/3/99
- --------------- ----- ----- ------
Service Class - 34.42% 5/1/03
- --------------- ----- ----- ------
NOTES
(1) The Russell 2000 (Russell 2000) Index is an unmanaged index used as a
general measure of market performance. Calculations assume dividends and
capital gains are reinvested and do not include any managerial expenses.
From inception calculation is based on life of initial class shares.
Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003 -
1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Investing in small cap stocks generally involves greater risk and volatility,
therefore an investment in the fund may not be appropriate for everyone.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 2
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------------------- ---------------
COMMON STOCKS (98.9%)
Air Transportation (1.6%)
Atlantic Coast Airlines Holdings, Inc. (a) 96,500 $ 955
ExpressJet Holdings, Inc. (a) 72,500 1,088
Frontier Airlines, Inc. (a) 264,900 3,777
SkyWest, Inc. 170,900 3,097
Amusement & Recreation Services (1.2%)
Alliance Gaming Corporation (a) 87,900 2,167
International Speedway
Corporation-Class A 10,900 487
Mandalay Resort Group 25,800 1,154
Station Casinos, Inc. 61,500 1,884
Westwood One, Inc. (a) 24,700 845
Apparel & Accessory Stores (1.9%)
AnnTaylor, Inc. (a) 42,650 1,663
Christopher & Banks Corporation 117,100 2,287
Hot Topic, Inc. (a) 72,400 2,133
Pacific Sunwear of California, Inc. (a) 73,493 1,552
Ross Stores, Inc. (b) 86,200 2,278
Talbots, Inc. (The) 15,900 489
Apparel Products (0.3%)
Too, Inc. (a)(b) 94,300 1,592
Auto Repair, Services & Parking (0.4%)
Dollar Thrifty Automotive Group, Inc. (a) 79,700 2,067
Automotive (1.0%)
Gentex Corporation 61,000 2,694
Oshkosh Truck Corporation 57,700 2,944
Automotive Dealers & Service Stations (1.0%)
Group 1 Automotive, Inc. (a) 54,500 1,972
O'Reilly Automotive, Inc. (a) 77,600 2,977
Sonic Automotive, Inc. 25,300 580
Beverages (0.2%)
Boston Beer Company, Inc. (The)-Class A (a) 48,800 885
Business Services (3.2%)
Catalina Marketing Corporation (a) 28,600 577
ChoicePoint Inc. (a) 77,600 2,956
Digital Insight Corporation (a)(b) 151,600 3,775
Fair, Isaac and Company, Incorporated 72,356 3,557
Getty Images, Inc. (a) 42,100 2,110
Rent-A-Center, Inc. (a) 75,950 2,269
Valassis Communications, Inc. (a) 22,900 672
Websense, Inc. (a)(b) 52,600 1,538
Chemicals & Allied Products (0.3%)
ATMI, Inc. (a) 73,300 1,696
Commercial Banks (2.3%)
Boston Private Financial Holdings, Inc. 98,600 2,449
Community First Bankshares, Inc. 53,600 1,551
Shares Value
---------------------- ---------------
Commercial Banks (continued)
East West Bancorp, Inc. 34,700 $ 1,863
Silicon Valley Bancshares (a) 35,900 1,295
Southwest Bancorporation of Texas, Inc. (b) 48,900 1,900
UCBH Holdings, Inc. 91,900 3,581
Communication (0.5%)
Global Payments Inc. 44,760 2,109
Insight Communications Company, Inc. (a)(b) 43,800 452
Communications Equipment (2.4%)
Advanced Fibre Communications, Inc. (a) 98,300 1,981
Anaren Microwave, Inc. (a) 70,100 990
Centillium Communications, Inc. (a) 413,700 2,329
Inter-Tel, Incorporated 106,600 2,663
Plantronics, Inc. (a) 131,600 4,297
Powerwave Technologies, Inc. (a)(b) 92,000 704
Computer & Data Processing Services (8.8%)
Activision, Inc. (a) 106,400 1,936
Actuate Corporation (a) 178,200 554
Affiliated Computer Services, Inc.-
Class A (a)(b) 25,200 1,372
BARRA, Inc. 55,500 1,970
Borland Software Corporation (a) 187,200 1,821
CACI International Inc.-Class A (a) 50,500 2,455
Cognizant Technology Solutions
Corporation (a) 29,300 1,337
Computer Programs and Systems, Inc. 217,800 4,382
Concord Communications, Inc. (a) 55,500 1,108
EarthLink, Inc. (a) 139,200 1,392
EPIQ Systems, Inc. (a) 31,300 536
F5 Networks, Inc. (a) 29,000 728
FactSet Research Systems Inc. (b) 68,100 2,602
Henry (Jack) & Associates, Inc. 76,300 1,570
Hyperion Solutions Corporation (a) 74,400 2,242
Informatica Corporation (a) 94,700 975
InterCept, Inc. (a)(b) 43,800 495
Macromedia, Inc. (a) 18,900 337
MatrixOne, Inc. (a) 90,200 556
Mercury Interactive Corporation (a) 6,500 316
MTC Technologies, Inc. (a) 67,600 2,178
National Instruments Corporation (b) 45,000 2,046
Netegrity, Inc. (a)(b) 86,700 894
Network Associates, Inc. (a) 51,100 769
Packeteer, Inc. (a) 116,700 1,982
Radiant Systems, Inc. (a) 68,650 577
Red Hat, Inc. (a)(b) 65,900 1,237
SERENA Software, Inc. (a)(b) 151,900 2,787
SkillSoft PLC-ADR (a) 65,400 566
SRA International, Inc.-Class A (a) 80,000 3,448
Symantec Corporation (a)(b) 52,400 1,816
Titan Corporation (The) (a) 50,800 1,108
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 3
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------------------- ---------------
Computer & Office Equipment (1.8%)
Avocent Corporation (a) 55,850 $ 2,040
Maxtor Corporation (a) 217,100 2,410
Polycom, Inc. (a) 114,712 2,239
SanDisk Corporation (a) 53,100 3,247
Construction (1.4%)
D.R. Horton, Inc. 25,661 1,110
Insituform Technologies, Inc.-Class A (a)(b) 82,800 1,366
M.D.C. Holdings, Inc. (b) 29,990 1,934
Standard Pacific Corp. 20,000 971
Toll Brothers, Inc. (a) 58,500 2,326
Drug Stores & Proprietary Stores (0.7%)
Omnicare, Inc. 95,300 3,849
Educational Services (3.3%)
Career Education Corporation (a) 75,100 3,009
Corinthian Colleges, Inc. (a) 48,700 2,706
DeVRY Inc. (a) 106,000 2,664
Education Management Corporation (a) 128,800 3,998
ITT Educational Services, Inc. (a) 40,300 1,893
University of Phoenix Online (a) 54,333 3,745
Electrical Goods (0.1%)
Hughes Supply, Inc. 12,100 600
Electronic & Other Electric Equipment (0.3%)
Harman International Industries,
Incorporated 25,400 1,879
Electronic Components & Accessories (6.5%)
Aeroflex Incorporated (a) 308,800 3,610
AMIS Holdings, Inc. (a) 35,000 640
Exar Corporation (a) 103,100 1,761
Integrated Circuit Systems, Inc. (a) 78,400 2,234
Integrated Silicon Solution, Inc. (a) 123,800 1,940
Intersil Corporation-Class A 135,360 3,364
KEMET Corporation (a) 65,600 898
Kopin Corporation (a) 89,800 603
Lattice Semiconductor Corporation (a) 102,800 995
Mercury Computer Systems, Inc. (a) 116,700 2,906
Micrel, Incorporated (a) 66,600 1,038
Microchip Technology Incorporated 9,637 321
OmniVision Technologies, Inc. (a) 37,200 2,055
Pericom Semiconductor Corporation (a) 93,400 996
Plexus Corp. (a)(b) 140,400 2,411
REMEC, Inc. (a) 63,700 536
Semtech Corporation (a) 102,100 2,321
Silicon Storage Technology, Inc. (a) 111,200 1,223
Skyworks Solutions, Inc. (a) 75,000 653
Technitrol, Inc. (a) 72,000 1,493
Tessera Technologies, Inc. (a) 72,000 1,354
TriQuint Semiconductor, Inc. (a) 99,161 701
Zoran Corporation (a)(b) 71,882 1,250
Shares Value
---------------------- ---------------
Environmental Services (0.7%)
Stericycle, Inc. (a)(b) 40,700 $ 1,901
Waste Connections, Inc. (a) 54,100 2,043
Fabricated Metal Products (0.2%)
Simpson Manufacturing Co., Inc. (a) 22,000 1,119
Food & Kindred Products (0.3%)
American Italian Pasta Company-
Class A (a)(b) 6,300 264
Horizon Organic Holding Corporation (a) 39,500 946
Peet's Coffee & Tea, Inc. (a) 29,700 517
Food Stores (0.3%)
Whole Foods Market, Inc. (a)(b) 25,100 1,685
Furniture & Fixtures (0.2%)
La-Z-Boy Incorporated 57,700 1,211
Furniture & Home Furnishings Stores (1.4%)
Cost Plus, Inc. (a)(b) 86,650 3,553
Pier 1 Imports, Inc. 89,400 1,954
Williams-Sonoma, Inc. (a) 54,800 1,905
Health Services (4.1%)
Accredo Health, Incorporated (a) 120,450 3,807
AMN Healthcare Services, Inc. (a)(b) 42,749 734
AmSurg Corp. (a) 47,400 1,796
Caremark Rx, Inc. (a)(b) 51,200 1,297
Community Health Systems, Inc. (a) 44,500 1,183
DaVita Inc. (a) 70,300 2,742
Hooper Holmes, Inc. 14,000 87
LifePoint Hospitals, Inc. (a)(b) 93,500 2,754
Manor Care, Inc. (b) 44,300 1,531
Odyssey HealthCare, Inc. (a)(b) 33,400 977
Renal Care Group, Inc. (a) 34,000 1,401
Triad Hospitals, Inc. (a) 27,900 928
United Surgical Partners International,
Inc. (a)(b) 96,600 3,234
Holding & Other Investment Offices (0.3%)
4Kids Entertainment, Inc. (a) 10,600 276
Redwood Trust, Inc. (b) 25,600 1,302
Industrial Machinery & Equipment (3.7%)
Cooper Cameron Corporation (a) 7,100 331
Cymer, Inc. (a)(b) 73,100 3,376
Engineered Support Systems, Inc. 76,900 4,235
FMC Technologies, Inc. (a) 29,900 697
National-Oilwell, Inc. (a) 51,400 1,149
Oil States International, Inc. (a) 79,500 1,108
Varco International Inc. (a) 77,200 1,593
Varian Semiconductor Equipment
Associates, Inc. (a) 72,000 3,146
Zebra Technologies Corporation-
Class A (a) 68,050 4,516
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 4
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------------------- ---------------
Instruments & Related Products (4.8%)
August Technology Corporation (a) 51,800 $ 961
Avid Technology, Inc. (a) 50,700 2,434
Cognex Corporation 63,300 1,788
Coherent, Inc. (a) 44,600 1,061
Cohu, Inc. 54,200 1,038
Cytyc Corporation (a) 66,600 916
Dionex Corporation (a) 55,750 2,566
FLIR Systems, Inc. (a)(b) 83,900 3,062
Fossil, Inc. (a) 42,275 1,184
Herley Industries, Inc. (a) 61,300 1,269
Mettler-Toledo International Inc. (a) 23,100 975
Newport Corporation (a) 17,200 284
Pinnacle Systems, Inc. (a) 217,700 1,857
Rudolph Technologies, Inc. (a)(b) 24,700 606
SBS Technologies, Inc. (a) 56,800 836
STAAR Surgical Company (a) 165,000 1,858
Varian, Inc. (a) 79,300 3,309
Insurance (3.5%)
Coventry Health Care, Inc. (a) 55,800 3,599
First Health Group Corp. (a) 121,400 2,362
Max Re Capital Ltd. 87,600 1,966
PMI Group, Inc. (The) 27,400 1,020
RenaissanceRe Holdings Ltd. (b) 56,400 2,766
StanCorp Financial Group, Inc. 27,600 1,735
Triad Guaranty Inc. (a) 70,900 3,570
WellChoice, Inc. (a) 59,900 2,067
Insurance Agents, Brokers & Service (0.6%)
AdvancePCS (a) 34,700 1,827
Brown & Brown, Inc. (b) 42,300 1,379
Leather & Leather Products (0.2%)
Timberland Company (The)-Class A (a) 22,400 1,166
Management Services (1.6%)
Advisory Board Company (The) (a) 57,500 2,007
Corporate Executive Board Company
(The) (a)(b) 101,500 4,737
Exult, Inc. (a)(b) 296,300 2,110
Manufacturing Industries (0.2%)
JAKKS Pacific, Inc. (a) 50,400 663
Marvel Enterprises, Inc. (a)(b) 20,500 597
Medical Instruments & Supplies (3.8%)
Advanced Neuromodulation Systems,
Inc. (a)(b) 24,500 1,127
Apogent Technologies, Inc. (a) 64,800 1,493
Conceptus, Inc. (a)(b) 41,000 435
Cyberonics, Inc. (a)(b) 11,800 378
DENTSPLY International Inc. 43,600 1,969
ICU Medical, Inc. (a)(b) 70,400 2,413
INAMED Corporation (a) 71,650 3,443
Shares Value
---------------------- ---------------
Medical Instruments & Supplies (continued)
Mentor Corporation 21,800 $ 525
Respironics, Inc. (a) 70,100 3,161
STERIS Corporation (a) 162,200 3,666
Thoratec Corporation (a) 178,800 2,326
Mortgage Bankers & Brokers (0.2%)
Doral Financial Corporation 40,425 1,305
Motion Pictures (0.9%)
CNET Networks, Inc. (a) 82,100 560
Macrovision Corporation (a) 181,700 4,105
Oil & Gas Extraction (4.8%)
Atwood Oceanics, Inc. (a) 7,400 236
Brown (Tom), Inc. (a) 106,300 3,428
Cabot Oil & Gas Corporation-Class A 54,100 1,588
Cal Dive International, Inc. (a) 106,800 2,575
Core Laboratories NV (a) 16,300 272
Evergreen Resources, Inc. (a)(b) 86,900 2,825
Global Industries, Ltd. (a) 210,400 1,084
Grey Wolf, Inc. (a) 664,500 2,485
Helmerich & Payne, Inc. 43,900 1,226
Key Energy Services, Inc. (a) 29,200 301
Patterson-UTI Energy, Inc. (a) 86,700 2,854
Pride International, Inc. (a)(b) 27,600 514
Spinnaker Exploration Company (a)(b) 56,700 1,830
Stone Energy Corporation (a) 58,100 2,466
Unit Corporation (a) 115,100 2,711
Personal Credit Institutions (0.1%)
First Marblehead Corporation (a) 26,700 584
Pharmaceuticals (9.1%)
Abgenix, Inc. (a) 78,900 983
Albany Molecular Research, Inc. (a) 79,200 1,190
Alkermes, Inc. (a) 64,000 864
Andrx Corporation-Andrx Group (a) 32,200 774
Bradley Pharmaceuticals, Inc. (a)(b) 20,300 516
Celgene Corporation (a) 41,200 1,855
Cephalon, Inc. (a)(b) 27,914 1,351
Charles River Laboratories, Inc. (a) 101,800 3,495
Digene Corporation (a) 44,900 1,800
Eon Labs, Inc. (a)(b) 57,700 2,940
Gilead Sciences, Inc. (a) 21,200 1,233
Human Genome Sciences, Inc. (a) 91,300 1,210
ICOS Corporation (a)(b) 49,400 2,039
IDEXX Laboratories, Inc. (a)(b) 16,500 764
Invitrogen Corporation (a) 45,800 3,206
K-V Pharmaceutical Company-
Class A (a)(b) 90,700 2,313
Martek Biosciences Corp. (a)(b) 43,100 2,800
Medicis Pharmaceutical
Corporation-Class A (b) 52,900 3,772
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 5
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
---------------------- ---------------
Pharmaceuticals (continued)
Neurocrine Biosciences, Inc. (a)(b) 47,300 $ 2,580
Noven Pharmaceuticals, Inc. (a) 151,700 2,307
Pharmaceutical Resources, Inc. (a) 16,700 1,088
Priority Healthcare Corporation-
Class B (a) 85,700 2,066
Protein Design Labs, Inc. (a)(b) 37,000 662
SICOR Inc. (a) 76,600 2,084
Taro Pharmaceutical Industries Ltd. (a) 44,200 2,851
Techne Corporation (a) 63,100 2,384
Vertex Pharmaceuticals Incorporated (a) 33,650 344
Primary Metal Industries (0.5%)
Lone Star Technologies, Inc. (a) 45,700 730
Maverick Tube Corporation (a) 104,900 2,019
Printing & Publishing (0.7%)
Scholastic Corporation (a)(b) 110,700 3,768
Radio & Television Broadcasting (1.9%)
Cox Radio, Inc.-Class A (a) 79,300 2,001
Emmis Communications
Corporation-Class A (a) 85,500 2,313
Entercom Communications Corp. (a) 17,800 943
Radio One, Inc.-Class D (a)(b) 157,400 3,038
Regent Communications, Inc. (a) 126,600 804
Spanish Broadcasting System, Inc. (a) 103,600 1,088
Radio, Television & Computer Stores (0.3%)
GameStop Corp. (a) 39,100 603
Tweeter Home Entertainment Group,
Inc. (a) 96,700 914
Ultimate Electronics, Inc. (a) 17,100 130
Research & Testing Services (1.2%)
Forrester Research, Inc. (a) 124,800 2,230
Pharmaceutical Product
Development, Inc. (a) 72,800 1,963
Symyx Technologies, Inc. (a) 111,700 2,295
Restaurants (2.6%)
CEC Entertainment Inc. (a) 69,200 3,279
Cheesecake Factory Incorporated
(The) (a)(b) 42,300 1,862
P.F. Chang's China Bistro, Inc. (a) 65,100 3,312
RARE Hospitality International, Inc. (a) 95,475 2,333
Ruby Tuesday, Inc. 59,100 1,684
Sonic Corp. (a) 54,175 1,659
Retail Trade (1.8%)
A.C. Moore Arts & Crafts, Inc. (a) 125,800 2,423
Insight Enterprises, Inc. (a) 119,100 2,239
Michaels Stores, Inc. 36,900 1,631
PETsMART, Inc. 115,600 2,751
Schein (Henry), Inc. (a) 10,200 689
Shares Value
---------------------- ---------------
Rubber & Misc. Plastic Products (0.5%)
Entegris, Inc. (a) 152,200 $ 1,956
VANS, INC. (a) 79,700 909
Savings Institutions (0.4%)
IndyMac Bancorp, Inc. (b) 70,800 2,109
Security & Commodity Brokers (2.2%)
Affiliated Managers Group, Inc. (a)(b) 45,200 3,145
Eaton Vance Corp. 44,400 1,627
Investment Technology Group, Inc. (a) 65,450 1,057
Investors Financial Services Corp. 90,800 3,488
Legg Mason, Inc. 12,400 957
Waddell & Reed Financial, Inc.-Class A 70,450 1,653
Social Services (0.5%)
Bright Horizons Family Solutions, Inc. (a) 65,000 2,730
Stone, Clay & Glass Products (0.2%)
Cabot Microelectronics Corporation (a)(b) 23,781 1,165
Telecommunications (0.9%)
Nextel Partners, Inc.-Class A (a)(b) 316,400 4,256
NII Holdings, Inc. (a)(b) 6,500 485
Transportation & Public Utilities (1.2%)
Expeditors International of
Washington, Inc. 9,000 339
Forward Air Corporation (a) 96,900 2,665
UTI Worldwide, Inc. 91,000 3,452
Trucking & Warehousing (1.2%)
Covenant Transport, Inc.-Class A (a)(b) 66,400 1,262
Iron Mountain Incorporated (a)(b) 113,400 4,484
Swift Transportation Co., Inc. (a) 43,900 923
Variety Stores (0.5%)
Dollar Tree Stores, Inc. (a) 29,650 891
Family Dollar Stores, Inc. 13,900 499
Fred's, Inc. (b) 39,350 1,219
Wholesale Trade Durable Goods (1.2%)
Patterson Dental Company (a)(b) 46,300 2,971
SCP Pool Corporation (a) 113,425 3,707
Wholesale Trade Nondurable Goods (0.9%)
Performance Food Group Company (a)(b) 38,400 1,389
SunOpta Inc. (a) 125,800 1,161
United Natural Foods, Inc. (a) 59,000 2,119
---------
Total Common Stocks (cost: $455,984)
539,810
---------
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 6
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
----------------------- ---------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS (0.1%)
U.S. Treasury Bill
1.02%, due 02/12/2004 $ 100 $ 100
0.99%, due 03/04/2004 200 200
---------
Total Short-Term U.S. Government Obligations (cost: $300) 300
---------
SECURITY LENDING COLLATERAL (16.0%)
Debt (12.7%)
Bank Notes (0.6%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 412 412
Fleet National Bank
1.00%, due 01/21/2004 1,543 1,543
National Bank of Commerce
1.19%, due 04/21/2004 1,286 1,286
Commercial Paper (3.3%)
Compass Securitization-144A
1.08%, due 01/22/2004 772 772
Delaware Funding Corporation
1.08%, due 01/07/2004 513 513
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 772 772
1.09%, due 01/13/2004 514 514
1.08%, due 02/05/2004 1,027 1,027
General Electric Capital Corporation
1.09%, due 01/08/2004 1,283 1,283
1.09%, due 01/09/2004 772 772
1.08%, due 01/16/2004 1,024 1,024
Govco Incorporated-144A
1.07%, due 02/05/2004 1,285 1,285
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 1,284 1,284
1.09%, due 02/06/2004 1,284 1,284
1.10%, due 02/09/2004 750 750
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 1,284 1,284
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 772 772
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,491 1,491
1.08%, due 02/17/2004 2,566 2,566
Sheffield Receivables-144A
1.09%, due 01/21/2004 514 514
Euro Dollar Overnight (0.7%)
BNP Paribas SA
0.97%, due 01/07/2004 2,572 2,571
Credit Agricole Indosuez
0.98%, due 01/02/2004 103 103
1.08%, due 01/06/2004 977 977
Principal Value
----------------------- ---------------
Euro Dollar Terms (3.2%)
Bank of Montreal
1.06%, due 01/15/2004 $ 502 $ 502
1.06%, due 02/17/2004 1,029 1,029
Bank of Scotland
1.06%, due 04/02/2004 772 772
Citigroup Inc.
1.10%, due 01/22/2004 772 772
1.09%, due 02/06/2004 1,029 1,029
Credit Agricole Indosuez
1.08%, due 01/28/2004 514 514
Den Danske Bank
1.08%, due 01/20/2004 2,572 2,571
1.02%, due 01/30/2004 1,286 1,286
Royal Bank of Canada
1.05%, due 02/27/2004 2,572 2,572
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,543 1,543
1.08%, due 01/15/2004 514 514
1.08%, due 01/20/2004 257 257
Svenska Handelsbanken AB
1.09%, due 01/15/2004 257 257
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,543 1,543
Wells Fargo & Company
1.04%, due 01/30/2004 2,058 2,058
Master Notes (0.9%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 1,029 1,029
1.14%, due 09/08/2004 1,543 1,543
Morgan Stanley
1.05%, due 06/21/2004 2,469 2,469
Medium Term Notes (0.6%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 2,572 2,572
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 772 772
Repurchase Agreements (3.4%)(c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $6,018 on 01/02/2004 6,018 6,018
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $8,179 on 01/02/2004 8,179 8,179
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,887 on 01/02/2004 4,887 4,887
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 7
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
------------ ------------
Investment Companies (3.3%)
Money Market Funds (3.3%)
American AAdvantage Select Fund
1-day yield of 1.00% 1,261,619 $ 1,262
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 3,080,336 3,080
Merrimac Cash Series Fund-
Premium Class
1-day yield of 0.98% 13,394,321 13,394
---------
Total Security Lending Collateral (cost: $87,223) 87,223
---------
Total Investment Securities (cost: $543,507) $ 627,333
=========
SUMMARY:
Investments, at value 115.0 % $ 627,333
Liabilities in excess of other assets (15.0)% (81,853)
----- ---------
Net assets 100.0 % $ 545,480
===== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$84,168.
(c) Cash collateral for the Repurchase Agreements, valued at $19,466, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 8
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $543,507)
(including $84,168 of securities loaned) $627,333
Cash 6,322
Receivables:
Investment securites sold 780
Interest 4
Dividends 110
Other 83
---------
634,632
---------
Liabilities:
Investment securities purchased 1,496
Accounts payable and accrued liabilities:
Management and advisory fees 348
Distribution fees 1
Payable for collateral for securities on loan 87,223
Other 84
---------
89,152
---------
Net Assets $545,480
=========
Net Assets Consist of:
Capital stock, 100,000 shares authorized ($.01 par value) $ 488
Additional paid-in capital 474,816
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities and futures contracts (13,650)
Net unrealized appreciation (depreciation) on investment
securities 83,826
---------
Net Assets $545,480
=========
Shares Outstanding:
Initial Class 48,620
Service Class 138
Net Asset Value and Offering Price Per Share:
Initial Class $ 11.19
Service Class 11.17
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 27
Dividends 685
Income from loaned securities-net 64
Less withholding taxes on foreign dividends (2)
--------
774
--------
Expenses:
Management and advisory fees 2,169
Transfer agent fees 2
Printing and shareholder reports 57
Custody fees 44
Administration fees 20
Legal fees 3
Auditing and accounting fees 10
Directors fees 8
Other 4
Service fees:
Service Class 1
--------
Total expenses 2,318
--------
Net Investment Income (Loss) (1,544)
--------
Net Realized Gain (Loss) from:
Investment securities (744)
Futures contracts 770
--------
26
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 98,000
Futures contracts 12
--------
98,012
--------
Net Gain (Loss) on Investment Securities and Futures
Contracts 98,038
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $96,494
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 9
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (1,544) $ (589)
Net realized gain (loss) from
investment securities and futures
contracts 26 (9,409)
Net unrealized appreciation
(depreciation) on investment
securities and futures contracts 98,012 (14,089)
--------- ---------
96,494 (24,087)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 390,168 128,054
Service Class 1,574 -
--------- ---------
391,742 128,054
--------- ---------
Dividends and distributions reinvested:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Cost of shares redeemed:
Initial Class (57,908) (46,757)
Service Class (157) -
--------- ---------
(58,065) (46,757)
--------- ---------
333,677 81,297
--------- ---------
Net increase (decrease) in net assets 430,171 57,210
--------- ---------
Net Assets:
Beginning of year 115,309 58,099
--------- ---------
End of year $ 545,480 $ 115,309
========= =========
Undistributed Net Investment
Income (Loss) $ - $ -
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 40,429 14,455
Service Class 153 -
--------- ---------
40,582 14,455
--------- ---------
Shares issued-reinvested from distributions:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Shares redeemed:
Initial Class (6,272) (5,289)
Service Class (15) -
--------- ---------
(6,287) (5,289)
--------- ---------
Net increase (decrease) in shares
outstanding 34,295 9,166
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 10
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.97 $ (0.05) $ 3.27 $ 3.22
12/31/2002 10.97 (0.07) (2.93) (3.00)
12/31/2001 12.15 (0.08) (1.10) (1.18)
12/31/2000 13.41 (0.08) (1.04) (1.12)
12/31/1999 10.00 (0.03) 3.87 3.84
- --------------- ---------- ------- ------- -------- --------
Service Class 12/31/2003 8.31 (0.05) 2.91 2.86
- --------------- ---------- ------- ------- -------- --------
For a share outstanding throughout each period (a)
--------------------------------------------------
Distributions
---------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ---------- --------------- ----------
Initial Class $ - $ - $ - $ 11.19
- - - 7.97
- - - 10.97
(0.14) - (0.14) 12.15
(0.43) - (0.43) 13.41
- --------------- --------- --- --------- --------
Service Class - - - 11.17
- --------------- --------- --- --------- --------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 40.40% $ 543,942 0.80% 0.80% (0.54)% 17%
12/31/2002 (27.35) 115,309 0.96 0.96 (0.75) 39
12/31/2001 (9.71) 58,099 1.00 1.05 (0.73) 42
12/31/2000 (8.45) 30,024 1.00 1.14 (0.57) 65
12/31/1999 38.49 9,824 1.00 2.46 (0.44) 159
- --------------- ---------- ------ --------- ---- ---- ----- ---
Service Class 12/31/2003 34.42 1,538 1.05 1.05 (0.74) 17
- --------------- ---------- ------ --------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-May 3, 1999
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 11
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. T. Rowe Price Small Cap ("the Fund"), part of ATSF, began operations
on May 3, 1999.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $27 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as on the Schedule of Investments.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 12
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $37 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
if any, are listed in the Schedule of Investments.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
---------- -----------
Asset Allocation-Conservative Portfolio $ 23,312 4%
Asset Allocation-Growth Portfolio 63,141 12%
Asset Allocation-Moderate Portfolio 84,741 16%
Asset Allocation-Moderate Growth Portfolio 108,994 20%
--
52%
==
Investment advisory fees: The Fund pays management fees to ATFA based on average
daily net assets ("ANA") at the following rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
The sub-advisor, T. Rowe Price, has agreed to a pricing discount based on the
aggregate assets that they manage in the ATSF and IDEX mutual funds. The amount
of the discount received by the fund at December 31, 2003 was $16.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Pursuant to the Distribution Plan, ATSF entered into a Distribution
Agreement with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 13
T. Rowe Price Small Cap
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $19. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 379,359
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 49,694
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (1,581)
Undistributed net investment income (loss) 1,544
Undistributed net realized capital gains (loss) 37
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (12,124)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 82,300
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 11 December 31, 2008
2,730 December 31, 2009
8,881 December 31, 2010
502 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 545,033
=========
Unrealized Appreciation $ 90,160
Unrealized (Depreciation) (7,860)
---------
Net Unrealized Appreciation (Depreciation) $ 82,300
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 14
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
T. Rowe Price Small Cap
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Small Cap (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
T. Rowe Price Small Cap 15
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
World financial markets ended the year with one of the best performances in
three years despite a turbulent first half marked by geopolitical fears,
economic uncertainties and the threat of SARS. Equity markets staged an
impressive rally during the second half on a wave of investor enthusiasm
following the end of the Iraq war and massive liquidity stimulus. The rally was
further supported by evidence of a synchronized global recovery, as stronger
demand emerged in Asia and Europe. Even news of Wall Street scandals in the
fourth quarter, which in prior years would have sent markets reeling, could not
deflate investor enthusiasm. In a reversal of fortune, the three-year bond rally
came to an end when bond and equity returns decoupled in the third quarter. The
10-Year Treasury yield rose to 4.3% by year-end from a historic low of 3.1% in
June as the specter of deflation faded. Defying most analysts' forecasts of
single-digit equity returns for 2003, the Standard and Poor's 500 Composite
Stock Index ("S&P 500") rose over 28%, while the Lehman Brothers Aggregate Bond
Index returned 4.10% for the year.
PERFORMANCE
For the year ended December 31, 2003, Van Kampen Asset Allocation returned
21.08%. By comparison its primary benchmark, the S&P 500 and its secondary
benchmark, the Lehman Brothers Intermediate U.S. Government/Credit Index
returned 28.67% and 4.31%, respectively.
STRATEGY REVIEW
The portfolio provides active asset allocation management using equity and
fixed-income strategies in a single portfolio. We shift assets as relative
opportunities change by using as a starting point a neutral allocation of 65%
equity, 30% fixed-income and 5% U.S. Treasury Bills. Our asset allocation team
utilizes a variety of quantitative and qualitative measures to determine the
relative attractiveness of global asset classes, markets, sectors, and styles.
The portfolio's asset allocation decision was the largest contributor to
performance. We entered the year with a overweight to equities based on
attractive valuations and oversold sentiment. Overall, our constructive stance
on equities was favorable for the year, as equities outperformed.
The portfolio's opportunistic investments, particularly in Asia and emerging
markets contributed strongly to results, as these regions outperformed the U.S.
in the second half. These opportunistic regions benefited from excess liquidity
and improved global growth.
Within fixed income, exposure to high yield added significantly to returns. High
yield bonds delivered stellar returns, highlighting investors' increased risk
appetite and stronger economic growth.
U.S. sector selection was the largest detractor from results. We approached the
year with a pro-cyclical orientation, particularly overweight in technology that
benefited the portfolio given technology's outperformance. However, during the
second half we rotated from cyclicals to defensive sectors. Our sector
allocation decision was not rewarded, as cyclicals remained the market leaders
for the year.
The current environment of strong growth accompanied by high liquidity
historically has proven supportive for the economy, corporate profits and
equities. While the Federal Reserve Board typically tightens monetary policy
following such robust periods of growth, we believe a longer reprieve will be
granted in this cycle given remaining uncertainties, particularly the weak labor
market. With both valuations and economic dynamics favoring equities relative to
bonds, we remain overweight in equities and underweight in bonds relative to the
benchmark. We continue to search for areas outside the U.S. that offer favorable
valuations and are more attractively priced for a moderate growth environment.
We prefer Europe, except the United Kingdom, Japan, Hong Kong, and the emerging
markets. Within U.S. sectors we have reduced exposure to higher beta sectors in
favor of groups that offer more stable growth supported by high free cash flows,
solid return on equity, strong sales growth, and relatively cheap valuations.
/s/ Francine J. Bovich
Francine J. Bovich
/s/ Que T. Nguyen
Que T. Nguyen
Co-Portfolio Managers
Morgan Stanley Investment Management Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 1
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class S&P 500 LBIGC
12/31/93 $10,000 $10,000 $10,000
3/31/94 9,699 9,622 9,797
6/30/94 9,331 9,662 9,738
9/30/94 9,584 10,133 9,818
12/31/94 9,472 10,132 9,807
3/31/95 9,879 11,117 10,237
6/30/95 10,898 12,177 10,749
9/30/95 11,584 13,144 10,926
12/31/95 11,642 13,934 11,311
3/31/96 12,157 14,682 11,216
6/30/96 12,653 15,340 11,287
9/30/96 13,075 15,814 11,487
12/31/96 13,716 17,132 11,768
3/31/97 13,483 17,592 11,755
6/30/97 15,283 20,661 12,101
9/30/97 16,264 22,208 12,428
12/31/97 16,478 22,845 12,694
3/31/98 18,234 26,029 12,892
6/30/98 18,741 26,889 13,135
9/30/98 16,944 24,219 13,725
12/31/98 19,508 29,373 13,766
3/31/99 20,497 30,836 13,739
6/30/99 21,437 33,009 13,685
9/30/99 21,318 30,950 13,811
12/31/99 24,658 35,553 13,819
3/31/00 26,511 36,368 14,026
6/30/00 25,983 35,404 14,264
9/30/00 25,792 35,061 14,674
12/31/00 23,195 32,319 15,217
3/31/01 20,539 28,490 15,732
6/30/01 21,777 30,156 15,838
9/30/01 19,968 25,732 16,567
12/31/01 21,558 28,481 16,581
3/31/02 21,146 28,560 16,544
6/30/02 19,146 24,735 17,132
9/30/02 16,764 20,465 17,908
12/31/02 18,027 22,189 18,211
3/31/03 17,634 21,489 18,486
6/30/03 19,766 24,797 18,989
9/30/03 20,196 25,453 18,985
12/31/03 $21,827 $28,550 $18,996
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception Date
----------- ------------ ---------- ----------- ----------
Initial Class 21.08% 2.27% 8.12% 9.45% 4/8/91
S&P 500(1) 28.67% (0.57)% 11.06% 11.16% 4/8/91
LBIGC(1) 4.31% 6.65% 6.63% 7.38% 4/8/91
- ------ ----- ----- ----- ----- ------
Service Class - - - 16.14% 5/1/03
- --------------- ----- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index and Lehman
Brothers Intermediate U.S. Government/Credit (LBIGC) Index are unmanaged
indices used as a general measure of market performance. Calculations
assume dividends and capital gains are reinvested and do not include any
managerial expenses. From inception calculation is based on life of initial
class shares. Source: Standard & Poor's Micropal(R)(C)- Micropal, Inc. 2003
- 1-800-596-5323 - http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
The historical information of periods prior to May 1, 2002 has been derived from
the financial history of the predecessor portfolio, Endeavor Asset Allocation
Portfolio of Endeavor Series Trust. Van Kampen has been the portfolio's
sub-advisor since May 1, 1998. Prior to that date, a different firm managed the
portfolio. Performance prior to May 1, 1998 is attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 2
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
U.S. GOVERNMENT OBLIGATIONS (7.5%)
U.S. Government Strips
0.00%, due 05/15/2011 $ 2,400 $ 1,778
U.S. Treasury Bond
5.00%, due 08/15/2011 3,400 3,638
8.13%, due 08/15/2019 1,200 1,621
8.13%, due 08/15/2021 875 1,193
7.63%, due 02/15/2025 150 198
6.13%, due 08/15/2029 150 170
U.S. Treasury Note
5.63%, due 05/15/2008 800 886
6.50%, due 02/15/2010 2,000 2,324
U.S. Treasury Note (b)
7.88%, due 11/15/2004 3,650 3,858
3.50%, due 11/15/2006 2,750 2,841
---------
Total U.S. Government Obligations (cost: $18,402) 18,507
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (15.2%)
Fannie Mae
2.12%, due 10/25/2042 191 190
Fannie Mae-Conventional Pool
10.00%, due 11/01/2018 142 159
11.00%, due 09/01/2019 141 159
9.00%, due 07/01/2025 122 136
9.00%, due 04/01/2026 149 166
8.00%, due 10/01/2029 226 245
8.00%, due 01/01/2030 232 251
7.50%, due 02/01/2030 132 141
8.00%, due 03/01/2030 3 3
8.00%, due 03/01/2030 37 40
8.00%, due 04/01/2030 1 2
9.50%, due 04/01/2030 297 332
7.50%, due 05/01/2030 205 219
7.50%, due 06/01/2030 1 1
7.50%, due 06/01/2030 4 4
8.00%, due 06/01/2030 5 6
8.00%, due 06/01/2030 89 96
8.00%, due 07/01/2030 5 5
7.50%, due 07/01/2030 5 5
8.00%, due 07/01/2030 6 7
8.50%, due 07/01/2030 13 15
8.50%, due 07/01/2030 36 39
8.00%, due 07/01/2030 53 57
8.50%, due 07/01/2030 157 169
8.00%, due 08/01/2030 2 2
8.00%, due 08/01/2030 48 51
8.00%, due 09/01/2030 40 43
8.50%, due 09/01/2030 62 67
8.00%, due 10/01/2030 80 87
8.50%, due 10/01/2030 91 98
8.00%, due 12/01/2030 15 16
Principal Value
---------------------- --------------
8.50%, due 12/01/2030 $ 31 $ 34
7.50%, due 12/01/2030 67 71
8.50%, due 12/01/2030 202 218
8.00%, due 01/01/2031 17 18
8.00%, due 01/01/2031 42 46
8.50%, due 01/01/2031 101 109
8.00%, due 01/01/2031 184 199
8.00%, due 02/01/2031 45 48
8.00%, due 02/01/2031 176 191
7.50%, due 03/01/2031 6 6
8.00%, due 04/01/2031 91 98
7.50%, due 07/01/2031 14 15
8.00%, due 08/01/2031 12 13
8.00%, due 11/01/2031 177 192
7.00%, due 02/01/2032 1,408 1,490
7.00%, due 04/01/2032 305 323
7.00%, due 04/01/2032 349 369
7.50%, due 05/01/2032 8 9
7.00%, due 05/01/2032 123 130
6.00%, due 01/01/2034 500 517
Fannie Mae-January TBA
5.00%, due 01/01/2019 1,200 1,224
4.50%, due 01/01/2019 1,200 1,201
5.50%, due 01/01/2019 1,450 1,502
5.50%, due 01/01/2034 1,650 1,671
6.00%, due 01/01/2034 2,350 2,429
7.00%, due 01/01/2034 2,925 3,096
6.50%, due 01/01/2034 8,500 8,888
Freddie Mac
5.13%, due 11/07/2013 555 553
6.50%, due 08/01/2029 623 653
6.50%, due 08/01/2033 369 386
Freddie Mac-Conventional Pool
9.50%, due 01/01/2017 117 130
Freddie Mac-Gold Pool
11.50%, due 05/01/2020 141 158
7.50%, due 06/01/2027 6 7
7.50%, due 11/01/2029 80 86
8.50%, due 03/01/2030 110 118
8.00%, due 06/01/2030 10 11
7.50%, due 07/01/2030 166 178
8.50%, due 08/01/2030 14 15
8.50%, due 08/01/2030 31 33
8.00%, due 09/01/2030 25 27
8.50%, due 10/01/2030 54 59
8.00%, due 11/01/2030 83 89
7.50%, due 01/01/2031 341 366
7.50%, due 06/01/2031 585 628
8.50%, due 07/01/2031 211 227
7.50%, due 09/01/2031 248 267
7.50%, due 12/01/2031 47 50
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 3
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
Freddie Mac-Gold Pool (continued)
7.50%, due 03/01/2032 $ 248 $ 266
7.50%, due 04/01/2032 70 76
7.50%, due 05/01/2032 97 105
7.50%, due 06/01/2032 173 185
7.50%, due 10/01/2032 13 14
6.50%, due 11/01/2032 719 753
7.50%, due 11/01/2032 1,222 1,312
6.50%, due 08/01/2033 919 962
Freddie Mac-January TBA
5.00%, due 01/01/2019 600 611
7.50%, due 01/01/2031 150 161
Ginnie Mae-FHA/VA Pool
10.50%, due 12/15/2014 92 104
9.50%, due 04/15/2017 13 15
9.50%, due 05/15/2017 27 31
9.50%, due 08/15/2017 74 83
10.00%, due 08/15/2017 136 152
9.50%, due 10/15/2017 26 30
9.50%, due 11/15/2017 17 18
9.50%, due 12/15/2017 110 123
9.50%, due 07/15/2018 35 39
9.50%, due 10/15/2018 103 116
9.50%, due 09/15/2019 50 56
9.00%, due 12/15/2019 93 104
9.50%, due 06/15/2020 117 131
10.00%, due 12/15/2020 154 172
9.50%, due 12/15/2021 129 145
10.00%, due 07/15/2022 122 136
10.00%, due 02/15/2025 77 86
Ginnie Mae (g)
4.38%, due 02/20/2025 45 46
4.38%, due 03/20/2025 128 130
4.38%, due 04/20/2025 15 15
4.38%, due 05/20/2025 17 17
4.38%, due 06/20/2025 75 76
4.38%, due 06/20/2025 134 137
4.75%, due 07/20/2025 56 57
4.75%, due 09/20/2027 32 33
5.63%, due 10/20/2027 22 22
5.63%, due 11/20/2027 46 47
5.63%, due 12/20/2027 15 15
---------
Total U.S. Government Agency Obligations (cost: $37,190) 37,540
---------
ASSET-BACKED SECURITIES (1.7%)
American Express Credit Account Master Trust
5.53%, due 10/15/2008 450 481
Chase Credit Card Master Trust
5.50%, due 11/17/2008 525 564
Citibank Credit Card Issuance Trust
7.45%, due 09/15/2007 185 200
Principal Value
---------------------- --------------
Citibank Credit Card Issuance Trust
6.88%, due 11/16/2009 $ 770 $ 877
DaimlerChrysler Auto Trust
7.23%, due 01/06/2005 129 129
DaimlerChrysler Auto Trust 2002-A
2.90%, due 12/06/2004 5 5
Harley-Davidson Motorcycle Trust
1.56%, due 05/15/2007 164 164
Honda Auto Receivables Owner
Trust-Series 2003-1
1.46%, due 09/19/2005 236 236
MBNA Master Credit Card Trust 1999-B
5.90%, due 08/15/2011 285 314
MBNA Master Credit Card Trust 2000-A
7.35%, due 07/16/2007 540 574
MBNA Master Credit Card Trust 2000-I
6.90%, due 01/15/2008 270 291
Nissan Auto Receivables 2001-C Owner Trust
4.80%, due 02/15/2007 325 332
---------
Total Asset-Backed Securities (cost: $3,899) 4,167
---------
CORPORATE DEBT SECURITIES (5.9%)
Aerospace (0.1%)
Boeing Company (The)
6.63%, due 02/15/2038 70 73
Boeing Company (The) (b)
6.10%, due 03/01/2011 30 32
Goodrich Corporation
7.63%, due 12/15/2012 40 46
Lockheed Martin Corporation
8.50%, due 12/01/2029 15 20
7.75%, due 05/01/2026 35 42
Air Transportation (0.3%)
America West Airlines, Inc.
7.10%, due 04/02/2021 261 277
Continental Airlines, Inc.
6.65%, due 09/15/2017 82 80
6.55%, due 02/02/2019 152 150
Southwest Airlines Co.
5.50%, due 11/01/2006 105 112
Automotive (0.3%)
DaimlerChrysler North America Holding
Corporation
7.30%, due 01/15/2012 115 128
8.50%, due 01/18/2031 100 119
Ford Motor Company
6.63%, due 10/01/2028 380 350
Honeywell International Inc.
6.13%, due 11/01/2011 95 104
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 4
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
Business Credit Institutions (0.1%)
CIT Group Inc.
2.88%, due 09/29/2006 $ 65 $ 65
Ford Motor Credit Company
7.25%, due 10/25/2011 80 87
Business Services (0.1%)
Clear Channel Communications, Inc.
7.65%, due 09/15/2010 70 82
International Lease Finance Corporation
3.75%, due 08/01/2007 60 61
Chemicals & Allied Products (0.0%)
ICI Wilmington Inc.
4.38%, due 12/01/2008 45 45
Commercial Banks (0.5%)
Bank of New York Company, Inc. (The)
5.20%, due 07/01/2007 35 37
Bank One Corporation
6.00%, due 02/17/2009 185 203
Citicorp
6.75%, due 08/15/2005 70 76
6.38%, due 11/15/2008 285 315
FleetBoston Financial Corporation
7.25%, due 09/15/2005 130 141
MBNA Corporation
6.13%, due 03/01/2013 150 161
Morgan Chase & Co. (J.P.)
6.00%, due 02/15/2009 175 192
Wachovia Corporation
4.95%, due 11/01/2006 85 90
Communication (0.1%)
Comcast Cable Communications, Inc.
6.75%, due 01/30/2011 30 33
Comcast Corporation
6.50%, due 01/15/2015 55 60
TCI Communications, Inc.
7.88%, due 02/15/2026 130 152
Computer & Data Processing Services (0.0%)
Electronic Data Systems Corporation
7.13%, due 10/15/2009 35 37
Electronic Data Systems Corporation (h)
6.00%, due 08/01/2013 55 54
Construction (0.0%)
Centex Corporation
7.88%, due 02/01/2011 50 59
Pulte Homes, Inc.
6.38%, due 05/15/2033 40 39
Department Stores (0.1%)
Federated Department Stores, Inc.
8.50%, due 06/01/2010 80 98
Principal Value
---------------------- --------------
Department Stores (continued)
May Department Stores Company (The)
9.75%, due 02/15/2021 $ 13 $ 17
6.70%, due 09/15/2028 145 150
Saks Incorporated
8.25%, due 11/15/2008 1 1
Saks Incorporated-144A
7.00%, due 12/01/2013 22 22
Drug Stores & Proprietary Stores (0.0%)
CVS Corporation-144A
6.20%, due 10/10/2025 30 31
Electric Services (0.2%)
Appalachian Power Company
5.95%, due 05/15/2033 20 19
Carolina Power & Light Company
5.13%, due 09/15/2013 90 91
Columbus Southern Power Company
4.40%, due 12/01/2010 10 10
6.60%, due 03/01/2033 50 54
Constellation Energy Group, Inc.
7.60%, due 04/01/2032 55 64
Detroit Edison Company (The)
6.13%, due 10/01/2010 55 60
Duke Energy Corporation
4.50%, due 04/01/2010 60 61
Entergy Gulf States, Inc.-144A
3.60%, due 06/01/2008 40 39
Ohio Power Company
6.60%, due 02/15/2033 35 38
TXU Energy Company LLC
7.00%, due 03/15/2013 45 50
Electric, Gas & Sanitary Services (0.1%)
Cincinnati Gas & Electric Company (The)
5.70%, due 09/15/2012 50 53
5.40%, due 06/15/2033 25 23
5.38%, due 06/15/2033 20 18
Exelon Corporation
6.75%, due 05/01/2011 70 78
Public Service Electric and Gas Company
5.00%, due 01/01/2013 60 61
South Carolina Electric & Gas Company
5.30%, due 05/15/2033 30 28
Wisconsin Energy Corporation
6.20%, due 04/01/2033 25 25
Electronic & Other Electric Equipment (0.0%)
Cooper Industries, Ltd.
5.25%, due 07/01/2007 85 91
Environmental Services (0.0%)
Waste Management, Inc.
6.88%, due 05/15/2009 65 73
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 5
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Principal Value
---------------------- --------------
Food & Kindred Products (0.1%)
Altria Group, Inc.
7.00%, due 11/04/2013 $ 35 $ 37
7.75%, due 01/15/2027 70 76
Kraft Foods, Inc.
5.63%, due 11/01/2011 15 16
6.25%, due 06/01/2012 55 60
Food Stores (0.0%)
Albertson's, Inc.
7.50%, due 02/15/2011 55 63
Kroger Co. (The)
7.70%, due 06/01/2029 25 29
Gas Production & Distribution (0.1%)
Consolidated Natural Gas Company
6.25%, due 11/01/2011 80 88
Texas Eastern Transmission Corporation
7.00%, due 07/15/2032 40 44
Holding & Other Investment Offices (1.1%)
EOP Operating Limited Partnership
7.25%, due 06/15/2028 100 109
7.50%, due 04/19/2029 45 50
Simon Property Group, Inc.
6.38%, due 11/15/2007 55 61
TRAINS HY-2003-1-144A (g)
0.00%, due 05/15/2013 1,881 2,124
Vornado Realty Trust
5.63%, due 06/15/2007 60 64
Hotels & Other Lodging Places (0.1%)
Hyatt Equities LLC-144A
6.88%, due 06/15/2007 95 102
Marriott International, Inc. (g)
7.00%, due 01/15/2008 140 156
Instruments & Related Products (0.0%)
Raytheon Company
8.30%, due 03/01/2010 50 60
Insurance (0.2%)
Aetna Inc.
7.88%, due 03/01/2011 160 189
CIGNA Corporation
7.00%, due 01/15/2011 55 62
Farmers Exchange Capital Insurance-144A
7.05%, due 07/15/2028 285 267
WellPoint Health Networks Inc.
6.38%, due 06/15/2006 90 98
Life Insurance (0.8%)
AIG SunAmerica Global Financing VI-144A
6.30%, due 05/10/2011 390 432
AXA Financial, Inc.
6.50%, due 04/01/2008 170 189
Principal Value
---------------------- --------------
Life Insurance (continued)
Hartford Life, Inc.
7.65%, due 06/15/2027 $ 205 $ 245
Nationwide Mutual Life Insurance
Company-144A
8.25%, due 12/01/2031 300 361
Prudential Holdings LLC-144A
7.25%, due 12/18/2023 415 467
8.70%, due 12/18/2023 210 259
Lumber & Other Building Materials (0.0%)
Lowe's Companies, Inc.
6.88%, due 02/15/2028 55 62
Lumber & Wood Products (0.1%)
Weyerhaeuser Company
6.00%, due 08/01/2006 25 27
6.75%, due 03/15/2012 145 158
Mortgage-Backed (0.0%)
Countrywide Home Loans, Inc.
3.25%, due 05/21/2008 125 123
Motion Pictures (0.0%)
Time Warner Inc.
6.63%, due 05/15/2029 35 36
7.70%, due 05/01/2032 45 53
Oil & Gas Extraction (0.1%)
Chesapeake Energy Corporation
8.13%, due 04/01/2011 29 32
Kerr-McGee Corporation
5.88%, due 09/15/2006 20 21
6.88%, due 09/15/2011 40 45
7.88%, due 09/15/2031 50 57
Paper & Allied Products (0.1%)
International Paper Company
4.25%, due 01/15/2009 60 60
MeadWestvaco Corporation
6.85%, due 04/01/2012 105 115
Personal Credit Institutions (0.5%)
American General Finance Corporation
4.63%, due 09/01/2010 90 91
General Electric Capital Corporation
4.25%, due 12/01/2010 50 50
6.75%, due 03/15/2032 170 188
General Motors Acceptance Corporation
4.50%, due 07/15/2006 45 46
6.88%, due 09/15/2011 310 334
8.00%, due 11/01/2031 35 39
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 6
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
---------------------- --------------
Personal Credit Institutions (continued)
Household Finance Corporation
6.40%, due 06/17/2008 $ 70 $ 78
4.13%, due 12/15/2008 50 50
5.88%, due 02/01/2009 60 65
6.75%, due 05/15/2011 40 45
6.38%, due 10/15/2011 35 39
SLM Corporation
5.00%, due 10/01/2013 90 89
Personal Services (0.0%)
Cendant Corporation
7.38%, due 01/15/2013 65 75
Petroleum Refining (0.1%)
Amerada Hess Corporation
7.88%, due 10/01/2029 120 132
Conoco Inc.
6.95%, due 04/15/2029 135 153
Marathon Oil Corporation
6.80%, due 03/15/2032 65 70
Pharmaceuticals (0.0%)
Schering-Plough Corporation (i)
5.30%, due 12/01/2013 40 41
Printing & Publishing (0.1%)
News America Incorporated
7.30%, due 04/30/2028 200 223
Real Estate (0.2%)
Rouse Company (The)
5.38%, due 11/26/2013 20 20
World Financial Properties, Inc.-144A
6.95%, due 09/01/2013 357 395
Rubber & Misc. Plastic Products (0.0%)
Sealed Air Corporation-144A
5.63%, due 07/15/2013 60 61
Savings Institutions (0.1%)
Washington Mutual, Inc.
8.25%, due 04/01/2010 205 246
Security & Commodity Brokers (0.1%)
Goldman Sachs Group, Inc. (The)
6.88%, due 01/15/2011 160 182
5.25%, due 10/15/2013 60 61
Telecommunications (0.2%)
AT&T Corp.
8.75%, due 11/15/2031 80 93
AT&T Wireless Services, Inc.
8.75%, due 03/01/2031 80 99
Verizon Communications Inc.
6.94%, due 04/15/2028 235 247
Principal Value
---------------------- --------------
Textile Mill Products (0.0%)
Mohawk Industries, Inc.
7.20%, due 04/15/2012 $ 70 $ 80
---------
Total Corporate Debt Securities (cost: $13,642)
14,566
---------
Shares Value
-------- ----------
PREFERRED STOCKS (0.1%)
Motion Pictures (0.1%)
News Corporation Limited (The)-ADR 4,300 $ 130
---------
Total Preferred Stocks (cost: $123) 130
---------
COMMON STOCKS (71.3%)
Aerospace (0.7%)
Boeing Company (The) 10,100 426
Lockheed Martin Corporation 4,900 252
Northrop Grumman Corporation 2,300 220
Textron Inc. 7,300 417
United Technologies Corporation 5,600 531
Air Transportation (0.2%)
FedEx Corporation 3,500 236
Southwest Airlines Co. 9,800 158
Amusement & Recreation Services (0.3%)
Disney (Walt) Company (The) 33,430 780
Harrah's Entertainment, Inc. 200 10
Apparel & Accessory Stores (0.2%)
Abercrombie & Fitch Co.-Class A (a) 4,400 109
Chico's FAS, Inc. (a) 2,781 103
Gap, Inc. (The) 1,800 42
Limited, Inc. (The) 1,000 18
TJX Companies, Inc. (The) 6,250 138
Apparel Products (0.1%)
Cintas Corporation 2,400 120
V.F. Corporation 300 13
Automotive (0.6%)
Delphi Corporation 1,200 12
Ford Motor Company 3,700 59
General Motors Corporation 1,100 59
Harley-Davidson, Inc. (b) 600 29
Honda Motor Co., Ltd.-ADR 18,770 422
Honeywell International Inc. 10,600 354
Magna International Inc.-Class A 4,560 365
PACCAR Inc. 1,600 136
Automotive Dealers & Service Stations (0.0%)
AutoNation, Inc. (a) 600 11
AutoZone, Inc. (a) 200 17
Beverages (2.0%)
Anheuser-Busch Companies, Inc. 16,036 845
Cadbury Schweppes PLC-ADR 9,570 286
Coca-Cola Company (The) 46,004 2,335
Coca-Cola Enterprises Inc. 6,210 136
PepsiCo, Inc. 29,780 1,388
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 7
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Business Services (1.3%)
Accenture Ltd (a) 12,250 $ 322
Clear Channel Communications, Inc. 13,550 635
eBay Inc. (a) 11,800 762
Equifax Inc. (b) 22,680 556
First Data Corporation 9,976 410
Interpublic Group of Companies, Inc.
(The) (a)(b) 17,070 266
Moody's Corporation 2,100 127
Omnicom Group, Inc. 300 26
Robert Half International Inc. (a) 3,400 79
Chemicals & Allied Products (2.7%)
Air Products and Chemicals, Inc. 2,400 127
Avon Products, Inc. 3,456 233
Bayer AG-ADR (b) 20,990 617
Clorox Company (The) 3,132 152
Colgate-Palmolive Company 11,664 584
Dow Chemical Company (The) 17,990 748
du Pont (E.I.) de Nemours and Company 14,990 688
Eastman Chemical Company 800 32
Ecolab Inc. 3,000 82
International Flavors & Fragrances Inc. 1,100 38
Monsanto Company 2,700 78
PPG Industries, Inc. 1,700 109
Praxair, Inc. 3,400 130
Procter & Gamble Company (The) 23,715 2,369
Rohm and Haas Company 2,200 94
Sherwin-Williams Company (The) 400 14
Sigma-Aldrich Corporation 800 46
Smith International, Inc. (a) 6,710 279
Commercial Banks (4.4%)
AmSouth Bancorporation 2,300 56
Bank of America Corporation 9,500 764
Bank of New York Company, Inc. (The) 12,650 419
Bank One Corporation 13,190 601
Citigroup Inc. 79,848 3,876
Comerica Incorporated 4,400 247
Concord EFS, Inc. (a) 2,984 44
Fifth Third Bancorp 2,000 118
FleetBoston Financial Corporation 500 22
Marshall & Ilsley Corporation 1,300 50
MBNA Corporation 29,850 742
Mellon Financial Corporation 8,000 257
Morgan Chase & Co. (J.P.) 19,030 699
National City Corporation 1,700 58
Northern Trust Corporation 700 32
PNC Financial Services Group, Inc. (The) 12,280 672
Regions Financial Corporation 1,800 67
SouthTrust Corporation 2,000 65
State Street Corporation 1,900 99
SunTrust Banks, Inc. 1,000 72
Synovus Financial Corp. 1,900 55
U.S. Bancorp 12,500 372
Wachovia Corporation 12,100 564
Wells Fargo & Company 13,150 774
Shares Value
-------------------- ---------------
Communication (0.4%)
Comcast Corporation-Class A (a) 4,300 $ 141
Echostar Communications
Corporation-Class A (a) 7,200 245
Viacom, Inc.-Class B 12,640 561
Communications Equipment (0.5%)
Avaya Inc. (a) 2,765 36
Corning Incorporated (a)(b) 8,238 86
Lucent Technologies Inc. (a)(b) 17,937 51
Motorola, Inc. 15,273 215
Nokia Oyj-ADR 21,220 361
QUALCOMM Incorporated 9,342 504
Rockwell Collins, Inc. 2,300 69
Scientific-Atlanta, Inc. 1,253 34
Computer & Data Processing Services (3.1%)
Adobe Systems Incorporated 1,475 58
Automatic Data Processing, Inc. 11,449 453
BMC Software, Inc. (a) 1,286 24
Citrix Systems, Inc. (a) 1,121 24
Computer Associates International, Inc. 3,542 97
Computer Sciences Corporation (a) 6,758 299
Electronic Arts Inc. (a) 1,804 86
Electronic Data Systems Corporation 3,025 74
Fiserv, Inc. (a) 1,121 44
Intuit Inc. (a) 1,282 68
Mercury Interactive Corporation (a)(b) 7,400 360
Microsoft Corporation 134,831 3,712
Novell, Inc. (a) 20,900 220
Oracle Corporation (a) 56,594 747
PeopleSoft, Inc. (a) 9,600 219
Sabre Holdings Corporation 1,112 24
Siebel Systems, Inc. (a) 3,420 47
SunGard Data Systems Inc. (a) 1,685 47
Symantec Corporation (a) 1,944 67
Unisys Corporation (a) 1,972 29
VERITAS Software Corporation (a) 8,810 327
Yahoo! Inc. (a) 11,550 522
Computer & Office Equipment (2.5%)
Apple Computer, Inc. (a) 2,319 50
Cisco Systems, Inc. (a) 79,855 1,940
Dell Computer Corporation (a) 30,191 1,025
EMC Corporation (a) 24,654 319
Hewlett-Packard Company 39,990 919
International Business Machines
Corporation 14,570 1,350
Juniper Networks, Inc. (a)(b) 4,300 80
Lexmark International Group, Inc. (a) 963 76
NCR Corporation (a) 685 27
Network Appliance, Inc. (a) 12,839 264
Pitney Bowes Inc. 3,200 130
SanDisk Corporation (a) 1,300 79
Seagate Technology, Inc. (a)(j) 36,900 (f)
Sun Microsystems, Inc. (a) 21,272 96
Xerox Corporation (a)(b) 4,999 69
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 8
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Construction (0.0%)
Centex Corporation 200 $ 22
Pulte Corporation 200 19
Department Stores (0.0%)
Federated Department Stores, Inc. 400 19
J.C. Penney Company, Inc. (b) 500 13
Kohl's Corporation (a) 600 27
May Department Stores Company (The) 500 15
Sears, Roebuck and Co. 500 23
Drug Stores & Proprietary Stores (0.3%)
CVS Corporation 5,707 206
Medco Health Solutions, Inc. (a) 1,810 62
Walgreen Co. 16,271 592
Educational Services (0.1%)
Apollo Group, Inc.-Class A (a) 5,250 357
Electric Services (0.5%)
AES Corporation (The) (a) 1,700 16
American Electric Power Company, Inc. 1,100 34
Constellation Energy Group, Inc. 400 16
Dominion Resources, Inc. 1,100 70
DTE Energy Company 400 16
Duke Energy Corporation 2,800 57
Edison International (a) 13,610 298
Entergy Corporation 5,300 303
FirstEnergy Corp. 7,920 279
FPL Group, Inc. 400 26
PPL Corporation 400 18
Progress Energy, Inc. 600 27
Southern Company (The) 2,100 64
TXU Corp. 1,100 26
Electric, Gas & Sanitary Services (0.2%)
Ameren Corporation 400 18
Cinergy Corp. 400 16
Consolidated Edison, Inc. 600 26
Exelon Corporation 5,790 384
NiSource Inc. 800 18
PG&E Corporation (a)(b) 1,300 36
Public Service Enterprise Group
Incorporated 600 26
Sempra Energy 600 18
Xcel Energy Inc. 1,100 19
Electronic & Other Electric Equipment (2.6%)
American Power Conversion Corporation 3,700 90
Cooper Industries, Inc.-Class A 1,400 81
Eaton Corporation 1,100 119
Emerson Electric Co. 9,000 583
General Electric Company 175,725 5,444
Whirlpool Corp. 200 15
Electronic Components & Accessories (2.4%)
Advanced Micro Devices, Inc. (a) 1,712 26
Altera Corporation (a) 2,830 64
Amphenol Corporation-Class A (a) 1,900 121
Shares Value
-------------------- ---------------
Electronic Components & Accessories (continued)
Analog Devices, Inc. 12,495 $ 570
Broadcom Corporation-Class A (a)(b) 4,752 162
Intel Corporation 72,681 2,340
Jabil Circuit, Inc. (a) 1,488 42
JDS Uniphase Corporation (a) 10,195 37
Linear Technology Corporation 9,306 392
LSI Logic Corporation (a)(b) 1,797 16
Marvell Technology Group Ltd. (a) 5,500 209
Maxim Integrated Products 4,335 216
Micron Technology, Inc. (a) 4,010 54
Molex Incorporated 1,559 54
National Semiconductor Corporation (a) 1,310 52
QLogic Corporation (a) 832 43
Sanmina Corporation (a)(b) 970 12
Solectron Corporation (a) 4,915 29
Texas Instruments Incorporated 21,847 642
Tyco International Ltd. 24,000 636
Xilinx, Inc. (a) 4,366 169
Environmental Services (0.1%)
Waste Management, Inc. 7,300 216
Fabricated Metal Products (0.4%)
Fortune Brands, Inc. 300 21
Gillette Company (The) 14,156 520
Parker-Hannifin Corporation 8,040 478
Finance (9.1%)
iShares MSCI Emerging Markets Index (b) 36,700 6,016
iShares MSCI EMU Index Fund-ETF (b) 62,800 3,846
iShares MSCI Hong Kong Index Fund (b) 247,900 2,478
iShares MSCI Japan Index Fund (b) 850,200 8,196
iShares S&P 500 Europe 350 Fund (b) 24,600 1,582
Food & Kindred Products (1.9%)
Altria Group, Inc. (b) 43,449 2,364
Archer Daniels Midland Co. 10,092 154
Campbell Soup Company 5,675 152
ConAgra Foods, Inc. 7,390 195
General Mills, Inc. 4,898 222
Heinz (H.J.) Company 5,424 198
Hershey Foods Corporation 1,899 146
Kellogg Company 5,952 227
Kraft Foods, Inc.-Class A (b) 7,630 246
Nestle SA-ADR 3,980 249
Sara Lee Corporation 10,805 235
Wrigley (Wm.) Jr. Company 3,295 185
Food Stores (0.3%)
Albertson's, Inc. (b) 5,303 120
Kroger Co. (The) (a) 30,283 561
Safeway Inc. (a) 6,489 142
Furniture & Fixtures (0.0%)
Johnson Controls, Inc. 200 23
Furniture & Home Furnishings Stores (0.1%)
Bed Bath & Beyond Inc. (a) 5,150 223
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 9
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Gas Production & Distribution (0.0%)
El Paso Corporation 1,700 $ 14
KeySpan Corporation 400 15
Kinder Morgan, Inc. 400 24
Williams Companies, Inc. (The) 1,700 17
Health Services (0.2%)
Caremark Rx, Inc. (a)(b) 5,300 134
Tenet Healthcare Corporation (a) 29,120 467
Holding & Other Investment Offices (0.1%)
Equity Office Properties Trust 6,500 186
Equity Residential 4,400 130
Hotels & Other Lodging Places (0.6%)
Hilton Hotels Corporation 40,060 686
Marriott International, Inc.-Class A 5,000 231
Starwood Hotels & Resorts Worldwide, Inc. 17,530 631
Industrial Machinery & Equipment (1.1%)
American Standard Companies Inc. (a) 900 91
Applied Materials, Inc. (a) 23,802 534
Baker Hughes Incorporated 10,599 341
Caterpillar, Inc. 4,400 365
Deere & Company 2,800 182
Dover Corporation 2,800 111
Illinois Tool Works Inc. 4,000 336
Ingersoll-Rand Company-Class A 8,740 593
ITT Industries, Inc. 1,100 82
Novellus Systems, Inc. (a) 4,109 173
Instruments & Related Products (0.5%)
Agilent Technologies, Inc. (a) 3,032 89
Bausch & Lomb Incorporated 9,630 500
Danaher Corporation 1,900 174
Eastman Kodak Company 500 13
KLA-Tencor Corporation (a) 1,361 80
Raytheon Company 5,900 177
Rockwell International Corporation 2,800 100
Teradyne, Inc. (a) 1,223 31
Thermo Electron Corporation (a) 950 24
Waters Corporation (a) 996 33
Insurance (2.9%)
ACE Limited 9,900 410
Aetna Inc. 1,100 74
Allstate Corporation (The) 9,000 387
American International Group, Inc. 44,125 2,924
Anthem, Inc. (a)(b) 4,080 306
Chubb Corporation 13,200 899
CIGNA Corporation 3,410 196
Principal Financial Group, Inc. 2,900 96
Progressive Corporation (The) 4,100 343
St. Paul Companies, Inc. (The) (b) 6,000 238
Travelers Property Casualty Corp.-Class A 31,651 531
Travelers Property Casualty Corp.-Class B 10,300 175
UnitedHealth Group Incorporated 7,950 463
WellPoint Health Networks Inc. (a) 400 39
Shares Value
-------------------- ---------------
Insurance Agents, Brokers & Service (0.6%)
Hartford Financial Services Group, Inc.
(The) 11,470 $ 677
Marsh & McLennan Companies, Inc. 11,000 527
MetLife, Inc. 10,630 358
Life Insurance (0.2%)
Prudential Financial, Inc. 12,440 520
Lumber & Other Building Materials (0.4%)
Home Depot, Inc. (The) 19,950 708
Lowe's Companies, Inc. 4,650 258
Lumber & Wood Products (0.2%)
Georgia-Pacific Corporation 2,600 80
Masco Corporation 5,600 153
Weyerhaeuser Company 2,300 147
Management Services (0.1%)
Paychex, Inc. 5,512 205
Manufacturing Industries (0.1%)
International Game Technology 7,400 264
Mattel, Inc. 1,000 19
Medical Instruments & Supplies (0.9%)
Baxter International Inc. 2,700 82
Becton, Dickinson and Company 1,400 58
Biomet, Incorporated (b) 900 33
Boston Scientific Corporation (a) 13,300 489
Guidant Corporation 4,200 253
INAMED Corporation (a) 1,635 79
Medtronic, Inc. 9,363 455
St. Jude Medical, Inc. (a) 3,950 242
Stryker Corporation 1,400 119
Zimmer Holdings, Inc. (a) 6,200 436
Metal Cans & Shipping Containers (0.0%)
Ball Corporation 600 36
Metal Mining (0.3%)
Freeport-McMoRan Copper & Gold
Inc.-Class B 1,800 76
Newmont Mining Corporation 13,410 652
Mining (0.0%)
Vulcan Materials Company 1,000 48
Motion Pictures (0.5%)
Time Warner Inc. (a) 64,690 1,164
Motor Vehicles, Parts & Supplies (0.0%)
Genuine Parts Company 500 17
Oil & Gas Extraction (2.0%)
Anadarko Petroleum Corporation 4,754 243
Apache Corporation 3,851 312
BJ Services Company (a) 3,200 115
Burlington Resources Inc. 5,673 314
ConocoPhillips 18,825 1,234
Devon Energy Corporation 2,875 165
EOG Resources, Inc. 6,968 322
Halliburton Company 6,809 177
Kerr-McGee Corporation 100 5
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 10
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Oil & Gas Extraction (continued)
Nabors Industries Ltd. (a) 2,800 $ 116
Occidental Petroleum Corporation 8,800 372
Schlumberger Limited 20,933 1,145
Transocean Inc. (a) 5,796 139
Unocal Corporation 5,015 185
Paper & Allied Products (1.2%)
3M Company 17,100 1,454
Avery Dennison Corporation (b) 1,600 90
International Paper Company 4,900 211
Kimberly-Clark Corporation 10,958 648
MeadWestvaco Corporation 2,100 62
Pactiv Corporation (a) 1,800 43
Temple-Inland Inc. 9,190 576
Personal Credit Institutions (0.1%)
Capital One Financial Corporation (b) 5,100 313
Personal Services (0.2%)
Block (H&R), Inc. (b) 2,300 127
Cendant Corporation (a) 13,400 298
Petroleum Refining (3.4%)
Amerada Hess Corporation 300 16
BP PLC-ADR 18,610 918
ChevronTexaco Corporation 17,500 1,512
Exxon Mobil Corporation 131,900 5,408
Marathon Oil Corporation 7,300 242
Valero Energy Corporation 7,170 332
Pharmaceuticals (6.7%)
Abbott Laboratories 20,788 969
Allergan, Inc. (b) 2,200 169
Amgen Inc. (a) 23,745 1,467
AstraZeneca PLC-ADR (b) 6,240 302
Biogen, Inc. (a) 5,310 195
Bristol-Myers Squibb Co. 54,520 1,559
Cardinal Health, Inc. 3,000 183
Chiron Corporation (a) 4,985 284
Forest Laboratories, Inc. (a) 4,900 303
Genzyme Corporation-General Division (a) 6,328 312
Gilead Sciences, Inc. (a) 1,875 109
Johnson & Johnson 42,675 2,205
King Pharmaceuticals, Inc. (a) 2,500 38
Lilly (Eli) and Company 13,600 956
McKesson HBOC, Inc. 1,700 55
Medimmune, Inc. (a) 6,100 155
Merck & Co., Inc. 25,075 1,158
Pfizer Inc. 119,336 4,216
Roche Holding AG-ADR 5,800 585
Schering-Plough Corporation 28,220 491
Wyeth 14,183 602
Primary Metal Industries (0.4%)
Alcoa Inc. 9,100 346
Engelhard Corporation 1,500 45
Nucor Corporation 800 45
Phelps Dodge Corporation (a) 8,420 641
Shares Value
-------------------- ---------------
Printing & Publishing (0.1%)
Gannett Co., Inc. 500 $ 45
Knight-Ridder, Inc. 200 15
McGraw-Hill Companies, Inc. (The) 300 21
New York Times Company (The)-Class A 300 14
Tribune Company 600 31
Radio & Television Broadcasting (0.1%)
Univision Communications Inc.-Class A (a) 6,175 245
Radio, Television & Computer Stores (0.0%)
Best Buy Co., Inc. 600 31
RadioShack Corporation 400 12
Railroads (0.6%)
Burlington Northern Santa Fe Corporation 4,400 142
CSX Corporation 3,100 111
Norfolk Southern Corporation (b) 30,530 722
Union Pacific Corporation 8,320 578
Restaurants (0.7%)
McDonald's Corporation 41,380 1,027
Starbucks Corporation (a) 8,500 281
YUM! Brands, Inc. (a) 10,765 370
Retail Trade (0.1%)
Office Depot, Inc. (a) 600 10
Staples, Inc. (a) 1,000 27
Tiffany & Co. 4,310 195
Rubber & Misc. Plastic Products (0.0%)
Newell Financial Trust I 500 11
NIKE, Inc.-Class B 500 34
Sealed Air Corporation (a) 900 49
Savings Institutions (0.1%)
Washington Mutual, Inc. 4,000 160
Security & Commodity Brokers (2.4%)
A.G. Edwards, Inc. 6,220 225
American Express Company 17,450 842
Bear Stearns Companies Inc. (The) 2,300 184
Franklin Resources, Inc. 4,700 245
Goldman Sachs Group, Inc. (The) 12,425 1,227
Lehman Brothers Holdings Inc. 18,800 1,452
Merrill Lynch & Co., Inc. (b) 20,500 1,202
Schwab (Charles) Corporation (The) 35,800 424
Telecommunications (3.8%)
ALLTEL Corporation 8,100 377
AT&T Corp. (b) 18,900 384
AT&T Wireless Services, Inc. (a) 65,300 522
BellSouth Corporation 44,200 1,251
CenturyTel, Inc. 3,900 127
Nextel Communications, Inc.-Class A (a) 25,000 702
Qwest Communications International Inc. (a) 41,000 177
SBC Communications Inc. 79,000 2,060
Sprint Corporation (FON Group) 37,120 610
Sprint Corporation (PCS Group) (a) 25,300 142
Verizon Communications, Inc. 80,290 2,816
Tobacco Products (0.0%)
UST Inc. 2,587 92
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 11
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------- ---------
Transportation & Public Utilities (0.1%)
InterActiveCorp (a)(b) 10,600 $ 360
Transportation Equipment (0.1%)
General Dynamics Corporation 2,400 217
Trucking & Warehousing (0.5%)
United Parcel Service, Inc.-Class B 16,800 1,252
U.S. Government Agencies (0.5%)
Fannie Mae 9,750 732
Freddie Mac 10,580 617
Variety Stores (2.1%)
Costco Wholesale Corporation (a) 6,342 236
Dollar General Corporation 600 13
Dollar Tree Stores, Inc. (a) 10,310 310
Family Dollar Stores, Inc. 400 14
Target Corporation 14,582 560
Wal-Mart Stores, Inc. 74,758 3,966
Water Transportation (0.3%)
Carnival Corporation 18,000 715
Wholesale Trade Durable Goods (0.0% )
Grainger (W.W.), Inc. 1,100 52
Wholesale Trade Nondurable Goods (0.1%)
SYSCO Corporation 9,392 350
---------
Total Common Stocks (cost: $152,935) 175,879
---------
Principal Value
--------------------- ---------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS (0.2%)
U.S. Treasury Bill (e)
1.00%, due 03/25/2004 $ 460 $ 459
---------
Total Short-Term U.S. Government Obligations (cost: $459) 459
---------
SHORT-TERM OBLIGATIONS (5.3%)
Morgan Chase & Co. (J.P.)-Repurchase
Agreement (d)
0.70%, due 01/02/2004 13,114 13,114
---------
Total Short-Term Obligations (cost: $13,114) 13,114
---------
SECURITY LENDING COLLATERAL (14.6%)
Debt (11.6%)
Bank Notes (0.5%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 170 170
Fleet National Bank
1.00%, due 01/21/2004 639 639
National Bank of Commerce
1.19%, due 04/21/2004 532 532
Commercial Paper (3.0%)
Compass Securitization-144A
1.08%, due 01/22/2004 319 319
Delaware Funding Corporation
1.08%, due 01/07/2004 212 212
Principal Value
--------------------- ---------------
Commercial Paper (continued)
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 $ 319 $ 319
1.09%, due 01/13/2004 213 213
1.08%, due 02/05/2004 425 425
General Electric Capital Corporation
1.09%, due 01/08/2004 531 531
1.09%, due 01/09/2004 319 319
1.08%, due 01/16/2004 424 424
Govco Incorporated-144A
1.07%, due 02/05/2004 531 531
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 531 531
1.09%, due 02/06/2004 531 531
1.10%, due 02/09/2004 310 310
Jupiter Securitization Corporation-144A
1.08%, due 02/02/2004 531 531
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 319 319
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 617 617
1.08%, due 02/17/2004 1,062 1,062
Sheffield Receivables-144A
1.09%, due 01/21/2004 213 213
Euro Dollar Overnight (0.6%)
BNP Paribas SA
0.97%, due 01/07/2004 1,064 1,064
Credit Agricole Indosuez
0.98%, due 01/02/2004 43 43
1.08%, due 01/06/2004 404 404
Euro Dollar Terms (2.9%)
Bank of Montreal
1.06%, due 01/15/2004 208 208
1.06%, due 02/17/2004 426 426
Bank of Scotland
1.06%, due 04/02/2004 319 319
Citigroup Inc.
1.10%, due 01/22/2004 319 319
1.09%, due 02/06/2004 426 426
Credit Agricole Indosuez
1.08%, due 01/28/2004 213 213
Den Danske Bank
1.08%, due 01/20/2004 1,064 1,064
1.02%, due 01/30/2004 532 532
Royal Bank of Canada
1.05%, due 02/27/2004 1,064 1,064
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 639 639
1.08%, due 01/15/2004 213 213
1.08%, due 01/20/2004 106 106
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 12
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------- ------------
Euro Dollar Terms (continued)
Svenska Handelsbanken AB
1.09%, due 01/15/2004 $ 106 $ 106
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 639 639
Wells Fargo & Company
1.04%, due 01/30/2004 851 851
Master Notes (0.8%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 426 426
1.14%, due 09/08/2004 639 639
Morgan Stanley
1.05%, due 06/21/2004 1,022 1,022
Medium Term Notes (0.6%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,064 1,064
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 319 319
Repurchase Agreements (3.2%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,490 on 01/02/2004 2,490 2,490
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,385 on 01/02/2004 3,385 3,385
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $2,022 on 01/02/2004 2,022 2,022
Shares Value
------------ -----------
Investment Companies (3.0%)
Money Market Funds (3.0%)
American AAdvantage Select Fund
1-day yield of 1.00% 522,022 $ 522
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 1,274,555 1,275
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 5,542,188 5,542
--------
Total Security Lending Collateral (cost: $36,090) 36,090
--------
Total Investment Securities (cost: $275,854) $300,452
========
SUMMARY:
Investments, at value 121.8 % $ 300,452
Liabilities in excess of other assets (21.8)% (53,725)
----- ---------
Net assets 100.0 % $ 246,727
===== =========
FUTURES CONTRACTS:
- ----------------------------------------------------------------------------------
Net
Unrealized
Settlement Appreciation
Contracts Date Amount (Depreciation)
----------- ------------ -------------- ---------------
CME E-Mini
S&P 500 4 03/19/2004 $ 213 $ 9
LIFFE 10-Year
U.S. Swap Note (31) 03/15/2004 (3,400) (1)
S&P 500 Index (24) 03/18/2004 (6,411) (253)
U.S. Treasury
Long Bond 11 03/31/2004 1,193 9
U.S. Treasury
Long Bond (4) 03/31/2004 (436) (1)
2-Year U.S.
Treasury Note (25) 04/01/2004 (5,340) (11)
5-Year U.S.
Treasury Note (161) 03/31/2004 (17,858) (114)
10-Year U.S.
Treasury Note 28 03/31/2004 3,120 23
10-Year U.S.
Treasury Note (18) 03/31/2004 (2,018) (3)
--------- --------
$ (30,937) $ (342)
========= ========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 13
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$34,813.
(c) Cash collateral for the Repurchase Agreements, valued at $8,054, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, repurchase agreements are collateralized by $9,908
U.S. Treasury Note (7.625%, due 02/15/2025) with a market value and accrued
interest of $13,376.
(e) At December 31, 2003, all or a portion of this security is segregated with
the custodian to cover margin requirements for open futures contracts. The
value of all securities segregated at December 31, 2003, is $454, in
addition, cash in the amount of $112,000 is also segregated.
(f) Value is less than $1.
(g) Floating or variable rate note. Rate is listed as of December 31, 2003.
(h) Security is stepbond. Coupon steps up or down by 50BP for each rating
upgrade or downgrade by Standard and Poor's or Moody's for each notch below
BBB+/A3.
(i) Security is stepbond. Coupon steps up or down by 25BP for each rating
upgrade or downgrade by Standard and Poor's or Moody's for each notch below
A3/A-.
(j) Security value is determined in good faith in accordance with procedures by
the Fund's Board of Directors. Security is delisted.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $4,560 or 1.85% of the net assets of the
fund.
ETF Exchange-Traded Fund
TBA Mortgage-backed securities traded under delayed delivery commitments.
Income on TBA's are not earned until settlement date.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 14
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $275,854)
(including $34,813 of securities loaned) $300,452
Cash 178
Receivables:
Investment securities sold 3,513
Interest 549
Dividends 386
Other 30
---------
305,108
---------
Liabilities:
Investment securities purchased 22,047
Accounts payable and accrued liabilities:
Management and advisory fees 167
Payable for collateral for securities on loan 36,090
Variation margin 40
Other 37
---------
58,381
---------
Net Assets $246,727
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 162
Additional paid-in capital 252,560
Undistributed net investment income (loss) 3,909
Accumulated net realized gain (loss) from investment
securities and futures contracts (34,160)
Net unrealized appreciation (depreciation) on:
Investment securities 24,598
Futures contracts (342)
---------
Net Assets $246,727
=========
Shares Outstanding:
Initial Class 16,155
Service Class 14
Net Asset Value and Offering Price Per Share:
Initial Class $ 15.26
Service Class 15.51
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 2,880
Dividends 2,991
Income from loaned securities-net 49
Less withholding taxes on foreign dividends (4)
--------
5,916
--------
Expenses:
Management and advisory fees 1,816
Transfer agent fees 2
Printing and shareholder reports 22
Custody fees 107
Administration fees 25
Legal fees 3
Auditing and accounting fees 12
Directors fees 10
Other 7
--------
Total expenses 2,004
--------
Net Investment Income (Loss) 3,912
--------
Net Realized Gain (Loss) from:
Investment securities (3,702)
Futures contracts (1,081)
--------
(4,783)
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities 46,470
Futures contracts 776
--------
47,246
--------
Net Gain (Loss) on Investment Securities and
Futures Contracts 42,463
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $46,375
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 15
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 3,912 $ 4,603
Net realized gain (loss) from
investment securities and
futures contracts (4,783) (17,176)
Net unrealized appreciation
(depreciation) on investment
securities and futures contracts 47,246 (36,798)
--------- ---------
46,375 (49,371)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (4,602) (5,872)
Service Class - -
--------- ---------
(4,602) (5,872)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 7,084 38,284
Service Class 209 -
--------- ---------
7,293 38,284
--------- ---------
Dividends and distributions reinvested:
Initial Class 4,602 5,872
Service Class - -
--------- ---------
4,602 5,872
--------- ---------
Cost of shares redeemed:
Initial Class (50,293) (36,649)
Service Class (3) -
--------- ---------
(50,296) (36,649)
--------- ---------
(38,401) 7,507
--------- ---------
Net increase (decrease) in net assets 3,372 (47,736)
--------- ---------
Net Assets:
Beginning of year 243,355 291,091
--------- ---------
End of year $246,727 $ 243,355
========= =========
Undistributed Net Investment Income
(Loss) $ 3,909 $ 4,602
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 531 2,665
Service Class 14 -
---------- ---------
545 2,665
---------- ---------
Shares issued-reinvested from distributions:
Initial Class 332 447
Service Class - -
---------- ---------
332 447
---------- ---------
Shares redeemed:
Initial Class (3,640) (2,683)
Service Class - -
---------- ---------
(3,640) (2,683)
---------- ---------
Net increase (decrease) in shares
outstanding (2,763) 429
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 16
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 12.85 $ 0.22 $ 2.46 $ 2.68
12/31/2002 15.73 0.24 (2.81) (2.57)
12/31/2001 19.47 0.35 (1.64) (1.29)
12/31/2000 22.89 0.35 (1.60) (1.25)
12/31/1999 23.89 0.34 4.80 5.14
- --------------- ---------- --------- -------- -------- --------
Service Class 12/31/2003 13.37 0.13 2.03 2.16
- --------------- ---------- --------- -------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.27) $ - $ (0.27) $ 15.26
(0.31) - (0.31) 12.85
(0.37) (2.08) (2.45) 15.73
(0.33) (1.84) (2.17) 19.47
(0.43) (5.71) (6.14) 22.89
- --------------- --------- --------- --------- ---------
Service Class (0.02) - (0.02) 15.51
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 21.08% $ 246,502 0.83% 0.83% 1.62% 180%
12/31/2002 (16.38) 243,355 0.84 0.85 1.73 251
12/31/2001 (7.06) 291,091 0.86 0.92 1.95 221
12/31/2000 (5.93) 352,333 0.85 0.87 1.50 158
12/31/1999 26.39 414,926 0.84 0.87 1.58 220
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 16.14 225 1.08 1.08 1.31 180
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-April 8, 1991
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment advisor, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 17
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Van Kampen Asset Allocation ("the Fund"), part of ATSF, began
operations as Endeavor Asset Allocation, a part of the Endeavor Series Trust, on
April 8, 1991. The Fund became part of ATSF on May 1, 2002.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $21 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 18
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $14 are included in net
realized gains in the Statement of Operations.
TBA purchase commitments: The Fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed price at a future date,
typically not to exceed 45 days. TBA purchase commitments are considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to settlement date, in addition to the
risk of decline in the value of the Fund's other assets. Unsettled TBA purchase
commitments are valued at the current value of the underlying securities,
according to the procedures described under Security Valuations. TBA purchase
commitments are included in the Schedule of Investments.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
are listed in the Schedule of Investments. Variation margin payable represents
additional payments due in order to maintain the equity account at the required
margin level.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.75% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit implemented on January 1, 2003:
0.84% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 19
Van Kampen Asset Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $8. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 148,356
U.S. Government 299,749
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 193,147
U.S. Government 297,574
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (66)
Undistributed net investment income (loss) (3)
Undistributed net realized capital gains (loss) 69
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 5,872
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 4,602
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 3,926
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (24,446)
=========
Post October Loss $ -
=========
Net Unrealized Appreciation (Depreciation) $ 14,541
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 5,141 December 31, 2009
7,473 December 31, 2010
11,832 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 285,911
=========
Unrealized Appreciation $ 19,357
Unrealized (Depreciation) (4,816)
---------
Net Unrealized Appreciation (Depreciation) $ 14,541
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 20
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Van Kampen Asset Allocation
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Asset Allocation (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Asset Allocation 21
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
Investor optimism marked the start of 2003, as the stock market advanced sharply
in the early weeks of January. Unfortunately, the gains proved unsustainable as
concerns about economic strength and accelerating global tensions heightened
investors' risk aversion. The stock market languished through much of the first
quarter until it became clear in mid-March that a U.S. led invasion of Iraq was
imminent. Optimism that the war would be short and successful spurred an equity
rally that would continue virtually uninterrupted through the end of 2003.
Initially, this long awaited rally was driven largely by the beaten down
technology and telecommunications sectors and by individual stocks that had
suffered severe declines during the prolonged bear market.
Accommodative monetary policy and fiscal stimuli that included a substantial tax
reduction led to a more favorable economic environment. As the year progressed,
economic data continued to improve, culminating in third quarter gross domestic
product ("GDP") growth that was the strongest since 1984. As year-end
approached, better-than-expected third quarter corporate earnings reports and
improving consumer confidence also supported the stock market's continued
advance.
PERFORMANCE
For the year ended December 31, 2003, Van Kampen Emerging Growth returned
28.15%. By comparison its primary benchmark, the Russell 1000 Growth Index and
its secondary benchmark, the Standard and Poor's 500 Composite Stock Index
returned 29.75% and 28.67%, respectively.
STRATEGY REVIEW
The portfolio's return was driven primarily by sector allocations. Stock
selection also added to relative return. The most significant contribution to
relative results came from the portfolio's consumer discretionary position where
very strong performance from individual stocks was only slightly offset by the
negative impact of the portfolio's overweight in the sector. The portfolio's
healthcare holdings also had a positive effect on relative performance, mainly
due to stock selection that far outpaced the index sector.
Other favorable performance factors included an overweight and strong stock
selection in telecommunications and an underweight in consumer staples stocks.
Stock selection was weakest in the information technology sector; however, this
was partially mitigated by the positive effect of the portfolio's substantial
technology overweight. An overweight in the energy sector, as well as stock
selection in the consumer staples, financial, and industrials sectors also
detracted from relative return during the period.
In the final quarter of the year, we slightly reduced the portfolio's average
market capitalization and trimmed some of the portfolio's larger positions. We
also increased the number of holdings, believing this would better position the
portfolio for the fourth quarter. Specifically, we modestly reduced our
allocation to biotechnology because we think growth in this sector could be
slowing. Semi-conductors remained the portfolio's largest industry allocation, a
position that has been reinforced by the sector's substantial gains this year.
Finally, we reduced the portfolio's cyclical exposure due to our expectation
that recent strong performance may not be sustained in upcoming quarters.
Gary M. Lewis
Portfolio Manager
Van Kampen Asset Management, Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 1
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class Russell 1000 S&P 500
12/31/93 $10,000 $10,000 $10,000
3/31/94 9,482 9,559 9,622
6/30/94 8,779 9,460 9,662
9/30/94 9,379 10,188 10,133
12/31/94 9,264 10,262 10,132
3/31/95 10,058 11,239 11,117
6/30/95 11,331 12,344 12,177
9/30/95 13,135 13,464 13,144
12/31/95 13,599 14,077 13,934
3/31/96 14,564 14,833 14,682
6/30/96 16,060 15,777 15,340
9/30/96 16,837 16,345 15,814
12/31/96 16,167 17,332 17,132
3/31/97 14,782 17,425 17,592
6/30/97 17,561 20,721 20,661
9/30/97 20,741 22,278 22,208
12/31/97 19,636 22,617 22,845
3/31/98 22,834 26,043 26,029
6/30/98 24,050 27,226 26,889
9/30/98 21,036 24,752 24,219
12/31/98 26,966 31,371 29,373
3/31/99 30,793 33,365 30,836
6/30/99 32,609 34,649 33,009
9/30/99 33,998 33,379 30,950
12/31/99 55,324 41,773 35,553
3/31/00 69,853 44,749 36,368
6/30/00 61,584 43,541 35,404
9/30/00 65,676 41,200 35,061
12/31/00 48,731 32,405 32,319
3/31/01 37,082 25,633 28,490
6/30/01 37,575 27,791 30,156
9/30/01 29,659 22,396 25,732
12/31/01 32,538 25,787 28,481
3/31/02 30,797 25,120 28,560
6/30/02 26,429 20,429 24,735
9/30/02 22,367 17,355 20,465
12/31/02 21,781 18,597 22,189
3/31/03 21,915 18,398 21,489
6/30/03 24,797 21,030 24,797
9/30/03 25,400 21,853 25,453
12/31/03 $27,913 $24,129 $28,550
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception Date
----------- ------------ ---------- ----------- ----------
Initial Class 28.15% 0.69% 10.81% 12.20% 3/1/93
Russell 1000 Growth(1) 29.75% (5.11)% 9.21% 9.03% 3/1/93
S&P 500(1) 28.67% (0.57)% 11.06% 10.91% 3/1/93
- ---------------------- ----- ----- ----- ----- ------
Service Class - - - 20.25% 5/1/03
- ---------------------- ----- ----- ----- ----- ------
NOTES
(1) The Standard and Poor's 500 Composite Stock (S&P 500) Index and Russell
1000 Growth (Russell 1000) Index are unmanaged indices used as a general
measure of market performance. Calculations assume dividends and capital
gains are reinvested and do not include any managerial expenses. From
inception calculation is based on life of initial class shares. For
reporting periods through December 31, 2002, the portfolio had selected S&P
500 Index as its benchmark measure; however, the Russell 1000 Growth is
more appropriate for comparisons to the portfolio. Source: Standard &
Poor's Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate.
Past performance does not guarantee future results. Investor's units when
redeemed, may be worth more or less than their original cost.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
Investing in emerging markets involves special considerations. These may
include risks related to market and currency volatility, adverse social and
political developments, and the relatively small size and lesser liquidity of
these markets.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 2
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------------------- ---------------
COMMON STOCKS (95.8%)
Aerospace (0.9%)
United Technologies Corporation 75,000 $ 7,108
Amusement & Recreation Services (1.6%)
Disney (Walt) Company (The) 310,000 7,232
Mandalay Resort Group 105,000 4,696
Apparel & Accessory Stores (1.2%)
Chico's FAS, Inc. (a)(b) 50,000 1,848
Gap, Inc. (The) (b) 305,000 7,079
Automotive (1.1%)
General Motors Corporation 155,000 8,277
Automotive Dealers & Service Stations (0.4%)
Advance Auto Parts, Inc. (a) 35,000 2,849
Beverages (1.0%)
Coca-Cola Company (The) 155,000 7,866
Business Services (1.7%)
eBay Inc. (a) 205,000 13,241
Chemicals & Allied Products (2.9%)
Dow Chemical Company (The) 180,000 7,483
Procter & Gamble Company (The) 75,000 7,491
Smith International, Inc. (a) 180,000 7,474
Communications Equipment (2.3%)
ADTRAN, Inc. 100,000 3,100
Corning Incorporated (a)(b) 720,000 7,510
QUALCOMM Incorporated 130,000 7,011
Computer & Data Processing Services (9.1%)
Adobe Systems Incorporated 180,000 7,074
Cognizant Technology Solutions
Corporation (a) 75,000 3,423
Electronic Arts Inc. (a)(b) 105,000 5,017
Microsoft Corporation 275,000 7,574
MicroStrategy Incorporated-Class A (a)(b) 4,253 223
MicroStrategy Incorporated-warrants,
Expires 06/24/2007 3,216 1
SAP AG-ADR (b) 180,000 7,481
Symantec Corporation (a)(b) 260,000 9,009
VERITAS Software Corporation (a) 415,000 15,421
Yahoo! Inc. (a) 310,000 14,003
Computer & Office Equipment (7.6%)
Cisco Systems, Inc. (a) 930,000 22,590
Dell Computer Corporation (a) 465,000 15,791
EMC Corporation (a) 615,000 7,946
Foundry Networks, Inc. (a) 155,000 4,241
Juniper Networks, Inc. (a)(b) 415,000 7,752
Construction (0.7%)
Centex Corporation (b) 50,000 5,383
Shares Value
--------------------- ---------------
Drug Stores & Proprietary Stores (1.4%)
CVS Corporation 105,000 $ 3,793
Walgreen Co. 180,000 6,548
Educational Services (1.0%)
Apollo Group, Inc.-Class A (a) 107,500 7,310
Electronic & Other Electric Equipment (0.4%)
Harman International Industries,
Incorporated 40,000 2,959
Electronic Components & Accessories (13.3%)
Analog Devices, Inc. 260,000 11,868
Broadcom Corporation-Class A (a)(b) 360,000 12,272
Intel Corporation 620,000 19,964
International Rectifier Corporation (a) 105,000 5,188
Linear Technology Corporation 180,000 7,573
Microchip Technology Incorporated 205,000 6,839
National Semiconductor Corporation (a) 210,000 8,276
OmniVision Technologies, Inc. (a)(b) 50,000 2,763
PMC-Sierra, Inc. (a)(b) 205,000 4,131
Texas Instruments Incorporated 415,000 12,192
Xilinx, Inc. (a) 260,000 10,071
Furniture & Home Furnishings Stores (1.1%)
Bed Bath & Beyond Inc. (a) 130,000 5,636
Williams-Sonoma, Inc. (a) 80,000 2,782
Industrial Machinery & Equipment (4.4%)
Applied Materials, Inc. (a) 515,000 11,561
Deere & Company 130,000 8,457
Lam Research Corporation (a) 155,000 5,007
Novellus Systems, Inc. (a) 205,000 8,620
Insurance (1.0%)
UnitedHealth Group Incorporated 130,000 7,563
Leather & Leather Products (1.0%)
Coach, Inc. (a) 210,000 7,928
Lumber & Other Building Materials (1.9%)
Home Depot, Inc. (The) 210,000 7,453
Lowe's Companies, Inc. 130,000 7,201
Manufacturing Industries (2.0%)
International Game Technology 420,000 14,994
Medical Instruments & Supplies (3.2%)
Boston Scientific Corporation (a) 260,000 9,557
Stryker Corporation 50,000 4,251
Zimmer Holdings, Inc. (a) 155,000 10,911
Metal Mining (1.0%)
Newmont Mining Corporation 155,000 7,535
Mortgage Bankers & Brokers (1.1%)
Countrywide Credit Industries, Inc. 106,666 8,091
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 3
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
--------------------- ---------------
Motion Pictures (0.5%)
News Corporation Limited (The)-ADR (b) 105,000 $ 3,791
Oil & Gas Extraction (2.5%)
Apache Corporation 95,000 7,705
Schlumberger Limited 155,000 8,482
XTO Energy, Inc. 105,000 2,972
Paper & Allied Products (1.2%)
3M Company 105,000 8,928
Personal Services (0.8%)
Cendant Corporation (a) 285,000 6,347
Petroleum Refining (1.1%)
ChevronTexaco Corporation 95,000 8,207
Pharmaceuticals (9.3%)
Abbott Laboratories 55,000 2,563
Amgen Inc. (a) 65,000 4,017
Celgene Corporation (a) 130,000 5,853
Chiron Corporation (a)(b) 205,000 11,682
Forest Laboratories, Inc. (a) 105,000 6,489
Genentech, Inc. (a) 155,000 14,503
Genzyme Corporation-General Division (a) 105,000 5,181
Glaxo Wellcome PLC-ADR 70,000 3,263
Invitrogen Corporation (a) 60,000 4,200
Pfizer Inc. 205,000 7,243
Teva Pharmaceutical Industries Ltd.-ADR (b) 105,000 5,955
Primary Metal Industries (1.3%)
Alcoa Inc. 260,000 9,879
Radio & Television Broadcasting (0.5%)
Univision Communications Inc.-Class A (a) 100,000 3,969
Radio, Television & Computer Stores (1.4%)
Best Buy Co., Inc. 205,000 10,708
Residential Building Construction (0.9%)
Lennar Corporation (b) 75,000 7,200
Restaurants (2.6%)
McDonald's Corporation 360,000 8,939
Starbucks Corporation (a) 205,000 6,777
Wendy's International, Inc. 105,000 4,120
Retail Trade (2.6%)
Amazon.com, Inc. (a)(b) 210,000 11,053
Staples, Inc. (a) 260,000 7,098
Tiffany & Co. 40,000 1,808
Rubber & Misc. Plastic Products (1.2%)
NIKE, Inc.-Class B 130,000 8,900
Security & Commodity Brokers (4.2%)
American Express Company 105,000 5,064
Ameritrade Holding Corporation-
Class A (a)(b) 210,000 2,955
Shares Value
--------------------- ---------------
Security & Commodity Brokers (continued)
Goldman Sachs Group, Inc. (The) (b) 70,000 $ 6,911
Lehman Brothers Holdings Inc. 105,000 8,108
Merrill Lynch & Co., Inc. 155,000 9,091
Telecommunications (2.4%)
Nextel Communications, Inc.-Class A (a) 660,000 18,520
---------
Total Common Stocks (cost: $589,406) 730,969
---------
Principal Value
----------- ------------
SECURITY LENDING COLLATERAL (8.7%)
Debt (6.9%)
Bank Notes (0.3%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 313 $ 313
Fleet National Bank
1.00%, due 01/21/2004 1,173 1,173
National Bank of Commerce
1.19%, due 04/21/2004 977 977
Commercial Paper (1.8%)
Compass Securitization-144A
1.08%, due 01/22/2004 586 586
Delaware Funding Corporation
1.08%, due 01/07/2004 390 390
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 586 586
1.09%, due 01/13/2004 391 391
1.08%, due 02/05/2004 780 780
General Electric Capital Corporation
1.09%, due 01/08/2004 975 975
1.09%, due 01/09/2004 586 586
1.08%, due 01/16/2004 779 779
Govco Incorporated-144A
1.07%, due 02/05/2004 976 976
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 976 976
1.09%, due 02/06/2004 976 976
1.10%, due 02/09/2004 570 570
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 976 976
Liberty Street Funding
Company-144A
1.08%, due 01/20/2004 586 586
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 1,133 1,133
1.08%, due 02/17/2004 1,951 1,951
Sheffield Receivables-144A
1.09%, due 01/21/2004 391 391
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 4
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
--------------- ---------------
Euro Dollar Overnight (0.4%)
BNP Paribas SA
0.97%, due 01/07/2004 $ 1,956 $ 1,956
Credit Agricole Indosuez
0.98%, due 01/02/2004 78 78
1.08%, due 01/06/2004 743 743
Euro Dollar Terms (1.7%)
Bank of Montreal
1.06%, due 01/15/2004 382 382
1.06%, due 02/17/2004 782 782
Bank of Scotland
1.06%, due 04/02/2004 586 586
Citigroup Inc.
1.10%, due 01/22/2004 586 586
1.09%, due 02/06/2004 782 782
Credit Agricole Indosuez
1.08%, due 01/28/2004 391 391
Den Danske Bank
1.08%, due 01/20/2004 1,956 1,956
1.02%, due 01/30/2004 977 977
Royal Bank of Canada
1.05%, due 02/27/2004 1,955 1,955
Royal Bank of Scotland Group PLC (The)
1.08%, due 01/09/2004 1,173 1,173
1.08%, due 01/15/2004 391 391
1.08%, due 01/20/2004 195 195
Svenska Handelsbanken AB
1.09%, due 01/15/2004 195 195
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 1,173 1,173
Wells Fargo & Company
1.04%, due 01/30/2004 1,564 1,564
Master Notes (0.5%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 782 782
1.14%, due 09/08/2004 1,173 1,173
Principal Value
--------------- ---------------
Master Notes (continued)
Morgan Stanley
1.05%, due 06/21/2004 $ 1,877 $ 1,877
Medium Term Notes (0.3%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 1,956 1,956
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 586 586
Repurchase Agreements (1.9%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $4,576 on 01/02/2004 4,576 4,576
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $6,218 on 01/02/2004 6,218 6,218
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $3,715 on 01/02/2004 3,715 3,715
Shares Value
---------------- ------------
Investment Companies (1.8%)
Money Market Funds (1.8%)
American AAdvantage Select Fund
1-day yield of 1.00% 958,976 $ 959
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 2,341,411 2,341
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 10,181,230 10,181
---------
Total Security Lending Collateral (cost: $66,300) 66,300
---------
Total Investment Securities (cost: $655,706) $ 797,269
=========
SUMMARY:
Investments, at value 104.5 % $ 797,269
Liabilities in excess of other assets (4.5)% (33,989)
---------- ---------
Net assets 100.0 % $ 763,280
========== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$64,173.
(c) Cash collateral for the Repurchase Agreements, valued at $14,796, that
serve as collateral for securities lending are invested in corporate bonds
with interest rates ranging from 0.00%-10.18% and maturity dates ranging
from 04/01/2004-03/01/2043, including some issues having a perpetual
maturity.
DEFINITIONS:
ADR American Depositary Receipt
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 5
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $655,706)
(including $64,173 of securities loaned) $ 797,269
Cash 32,537
Receivables:
Investment securites sold 3,104
Interest 9
Dividends 255
Other 73
-----------
833,247
-----------
Liabilities:
Investment securities purchased 2,999
Accounts payable and accrued liabilities:
Management and advisory fees 546
Payable for collateral for securities on loan 66,300
Other 122
-----------
69,967
-----------
Net Assets $ 763,280
===========
Net Assets Consist of:
Capital stock, 75,000 shares authorized ($.01 par value) $ 458
Additional paid-in capital 1,338,256
Undistributed net investment income (loss) -
Accumulated net realized gain (loss) from investment
securities (716,997)
Net unrealized appreciation (depreciation) on investment
securities 141,563
-----------
Net Assets $ 763,280
===========
Shares Outstanding:
Initial Class 45,781
Service Class 33
Net Asset Value and Offering Price Per Share:
Initial Class $ 16.66
Service Class 16.63
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 128
Dividends 3,081
Income from loaned securities-net 93
Less withholding taxes on foreign dividends (10)
---------
3,292
---------
Expenses:
Management and advisory fees 5,625
Transfer agent fees 2
Printing and shareholder reports 241
Custody fees 70
Administration fees 20
Legal fees 9
Auditing and accounting fees 10
Directors fees 27
Other 15
---------
Total expenses 6,019
---------
Net Investment Income (Loss) (2,727)
---------
Net Realized and Unrealized Gain (Loss):
Realized gain (loss) from investment securities 34,818
Increase (decrease) in unrealized appreciation
(depreciation) on investment securities 141,288
---------
Net Gain (Loss) on Investment Securities 176,106
---------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 173,379
=========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 6
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
------------------ ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ (2,727) $ (2,265)
Net realized gain (loss) from
investment securities 34,818 (271,665)
Net unrealized appreciation
(depreciation) on investment
securities 141,288 (70,457)
--------- ---------
173,379 (344,387)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class - (748)
Service Class - -
--------- ---------
- (748)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 57,182 141,441
Service Class 515 -
--------- ---------
57,697 141,441
--------- ---------
Dividends and distributions reinvested:
Initial Class - 748
Service Class - -
--------- ---------
- 748
--------- ---------
Cost of shares redeemed:
Initial Class (120,214) (222,304)
Service Class (9) -
--------- ---------
(120,223) (222,304)
--------- ---------
(62,526) (80,115)
--------- ---------
Net increase (decrease) in net assets 110,853 (425,250)
--------- ---------
Net Assets:
Beginning of year 652,427 1,077,677
--------- ---------
End of year $ 763,280 $ 652,427
========= =========
Undistributed Net Investment Income
(Loss) $ - $ -
========= =========
December 31, December 31,
2003 2002
------------------ ----------------
Share Activity:
Shares issued:
Initial Class 4,016 8,856
Service Class 34 -
---------- ---------
4,050 8,856
---------- ---------
Shares issued-reinvested from distributions:
Initial Class - 52
Service Class - -
---------- ---------
- 52
---------- ---------
Shares redeemed:
Initial Class (8,416) (14,158)
Service Class (1) -
----------- ---------
(8,417) (14,158)
---------- ---------
Net increase (decrease) in shares
outstanding (4,367) (5,250)
========== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 7
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 13.00 $ (0.06) $ 3.72 $ 3.66
12/31/2002 19.44 (0.04) (6.39) (6.43)
12/31/2001 29.66 0.01 (9.84) (9.83)
12/31/2000 46.01 (0.13) (4.55) (4.68)
12/31/1999 26.92 (0.15) 26.83 26.68
- --------------- ---------- --------- ---------- -------- --------
Service Class 12/31/2003 13.83 (0.06) 2.86 2.80
- --------------- ---------- --------- ---------- -------- --------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ - $ - $ - $ 16.66
(0.01) - (0.01) 13.00
(0.02) (0.37) (0.39) 19.44
(0.41) (11.26) (11.67) 29.66
(0.21) ( 7.38) (7.59) 46.01
- --------------- --------- --------- --------- ---------
Service Class - - - 16.63
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 28.15% $ 762,732 0.86% 0.86% (0.39)% 171%
12/31/2002 (33.06) 652,427 0.88 0.88 (0.27) 231
12/31/2001 (33.23) 1,077,677 0.92 0.92 0.06 178
12/31/2000 (11.92) 1,840,848 0.85 0.85 (0.26) 121
12/31/1999 105.16 1,916,025 0.87 0.87 (0.44) 118
- --------------- ---------- ------ ----------- ---- ---- ----- ---
Service Class 12/31/2003 20.25 548 1.12 1.12 (0.61) 171
- --------------- ---------- ------ ----------- ---- ---- ----- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-March 1, 1993
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) Ratio of Net Expenses to Average Net Assets is net of fee waivers by the
investment adviser, if any (see note 2).
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 8
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Van Kampen Emerging Growth ("the Fund"), part of ATSF, began
operations on March 1, 1993.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued at the last quoted bid price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $40 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 9
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $308 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Dividend income is recorded on the ex-dividend date or, in the
case of foreign securities, as soon as the Fund is informed of the ex-dividend
date. Interest income, including accretion of discounts and amortization of
premiums, is recorded on the accrual basis commencing on the settlement date.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.80% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit:
1.00% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Brokerage commissions: Brokerage commissions incurred on security transactions
placed with an affiliate of the sub-adviser for the year ended December 31,
2003, were $45.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $26. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 10
Van Kampen Emerging Growth
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 1,140,035
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 1,175,520
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, net operating losses and capital loss carryforwards.
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (2,727)
Undistributed net investment income (loss) 2,727
Undistributed net realized capital gains (loss) -
The tax character of distributions paid may differ from the character of
distributions shown in the Statement of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 748
Long-term capital gains -
2003 Distributions paid from:
Ordinary income -
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ -
===========
Undistributed Long-term Capital Gains $ -
===========
Capital Loss Carryforward $ (714,273)
===========
Post October Loss $ -
===========
Net Unrealized Appreciation (Depreciation) $ 138,838
===========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- ---------------- ------------------
$ 429,131 December 31, 2009
285,142 December 31, 2010
The capital loss carryforward utilized during the period ended December 31,
2003 was $6,322.
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $ 658,431
=========
Unrealized Appreciation $ 141,937
Unrealized (Depreciation) (3,099)
---------
Net Unrealized Appreciation (Depreciation) $ 138,838
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 11
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Van Kampen Emerging Growth
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Emerging Growth (the
"Fund") (one of the portfolios constituting AEGON/Transamerica Series Fund,
Inc.) at December 31, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Emerging Growth 12
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
In 2003, global equities posted their strongest gain in over 15 years. The
Morgan Stanley Capital International World Index ("MSCI World") rose more than
33% and every MSCI country (20+) and sector (10) had positive performance. That
said, gains came in spurts. In the first quarter, Europe, Japan and Hong Kong
hit multi-year lows, followed by an amazingly strong second quarter and a third
quarter pause, except for Japan and Asia. This was followed by a whopping 31%
increase in Germany in the fourth quarter (20% for Europe overall) while Japan
ended in line with its second quarter highs.
PERFORMANCE
For the year ended December 31, 2003, Van Kampen Active International Allocation
returned 32.81%. By comparison its benchmark, the Morgan Stanley Capital
International (EAFE) Index ("MSCI-EAFE") returned 39.17%.
STRATEGY REVIEW
For the year, the portfolio performed strongly but trailed the MSCI-EAFE.
Basically, the portfolio, while we switched rapidly in late March/early April to
being fully invested and more cyclical, was not able to make up the ground lost
by being too defensively positioned when the global markets sprang out of the
doldrums just prior to the beginnings of the Iraq War.
For the fourth quarter, our overweight position in developed Asia, specifically
Japan, Hong Kong and Singapore, detracted from relative returns while an
allocation of roughly 3% of the total portfolio to some of the Asian emerging
markets (Thailand, China and India) somewhat offset this, and contributed to
performance. In Europe, an above benchmark allocation to Germany was positive,
but was not enough to overcome the drag from an underweight position in the
United Kingdom. From a sector perspective, overweight positions in materials and
energy added to returns; underweight allocations to financials and
telecommunication services detracted from portfolio performance.
We reduced our overweight position in Asia except Japan over the course of the
fourth quarter. We added to our positions in Continental Europe, particularly
France and Germany. This resulted in a large part from a trip to Germany,
wherein it became clear from policy leaders (and from the Morgan Stanley
Economics team on the ground) that Germany was serious about the reform Agenda
2010. This was not yet reflected in our investor thinking (the big Bundesrat
vote was in October) and in hindsight we only regret not piling on more. In the
fourth quarter, economic growth in Europe steadily accelerated out of its mild
early recession and business confidence surveys (e.g. German IFO and Belgian
BNB) improved quite dramatically.
As noted above, Japan's performance in the fourth quarter was choppy from
mid-October to mid-November and then rallied 11% into year-end. The big news in
Japan this year was the apparent halving of non-performing loans and record
corporate profitability. Japanese banks rallied 119% from the bottom and AIA
participated in most of that run. Economic data and business surveys have
improved quite nicely, but it has been mostly export-led, specifically to China.
Mild deflation continues (about 0.5% a year) and impact of the Yen's strength is
definitely a concern. A recent trip to Japan did reveal the Bank of Japan is
fully committed to beating deflation through means such as adding liquidity to
its balance sheet. It was an impressive statement, but the continued deflation,
albeit mild and the strength of the Yen, in the face of massive intervention, is
an indication of how difficult their task. The portfolio is slightly overweight.
Japan remains cheap and may be the big story of 2004-or it could be one more
cyclical recovery-partly driven by corporate restructuring and rising return of
equity and partly due to China.
/s/ Ann D. Thivierge
Ann D. Thivierge
Portfolio Manager
Morgan Stanley Investment Management Inc.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 1
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in Initial Class shares and
its comparative index.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED REPORT]
Growth of $10,000
Invested 12/31/93 through 12/31/03
Initial Class MSCI (EAFE)
12/31/1993 $10,000 $10,000
3/31/1994 9,733 10,356
6/30/1994 9,625 10,892
9/30/1994 10,025 10,910
12/31/1994 9,433 10,806
3/31/1995 9,433 11,016
6/30/1995 9,693 11,105
9/30/1995 10,120 11,576
12/31/1995 10,410 12,054
3/31/1996 10,957 12,412
6/30/1996 11,394 12,617
9/30/1996 11,437 12,611
12/31/1996 11,996 12,821
3/31/1997 11,988 12,629
6/30/1997 13,375 14,278
9/30/1997 13,271 14,187
12/31/1997 12,310 13,085
3/31/1998 13,946 15,020
6/30/1998 13,982 15,189
9/30/1998 11,999 13,040
12/31/1998 14,210 15,746
3/31/1999 14,386 15,976
6/30/1999 14,746 16,393
9/30/1999 15,259 17,124
12/31/1999 18,808 20,044
3/31/2000 18,745 20,034
6/30/2000 17,877 19,252
9/30/2000 16,438 17,710
12/31/2000 15,374 17,246
3/31/2001 13,002 14,891
6/30/2001 12,839 14,762
9/30/2001 10,861 12,703
12/31/2001 11,844 13,589
3/31/2002 11,857 13,666
6/30/2002 11,443 13,402
9/30/2002 9,406 10,764
12/31/2002 9,834 11,461
3/31/2003 9,030 10,530
6/30/2003 10,482 12,590
9/30/2003 11,241 13,620
12/31/2003 $13,060 $15,950
Average Annual Total Return for Periods Ended 12/31/03
- --------------------------------------------------------------------------------
From Inception
1 year 5 years 10 years Inception Date
----------- ------------- ---------- ----------- ----------
Initial Class 32.81% (1.67)% 2.71% 3.60% 4/8/91
MSCI-EAFE(1) 39.17% 0.26% 4.78% 5.41% 4/8/91
- ---------- ----- ----- ---- ----- ------
Service Class - - - 33.36% 5/1/03
- --------------- ----- ----- ---- ----- ------
NOTES
(1) The Morgan Stanley Capital International - Europe, Asia, and Far East
(MSCI-EAFE) Index is an unmanaged index used as a general measure of market
performance. Calculations assume dividends and capital gains are reinvested
and do not include any managerial expenses. From inception calculation is
based on life of initial class shares. Source: Standard & Poor's
Micropal(R)(C)- Micropal, Inc. 2003 - 1-800-596-5323 -
http://www.micropal.com.
The performance data presented represents past performance, future results may
vary. The portfolio's investment return and net asset value will fluctuate. Past
performance does not guarantee future results. Investor's units when redeemed,
may be worth more or less than their original cost.
International investing involves special risks including currency fluctuations,
political instability, and different financial accounting standards.
Periods less than 1 year represent total return and are not annualized.
This material must be preceded or accompanied by a current prospectus, which
includes specific contents regarding the investment objectives, explanation of
share classes and policies of this portfolio.
This performance information must be accompanied by the quarterly performance
reports as of the most recent calendar quarter for the appropriate variable
annuity and/or Life Series Account showing the average annual total returns of
the respective products, net of fees and charges, including the mortality and
expense risk charge. Please see the standardized performance located at the back
of this report. Please see your company's website for the most recent month-end.
On March 24, 1995 the portfolio changed its name from Global Growth Portfolio to
T. Rowe Price International Stock Portfolio. On March 24, 1995, the investment
restrictions, strategy and investment objective were also changed.
The historical financial information for periods prior to May 1, 2002 has been
derived from the financial history of the predecessor portfolio, T. Rowe Price
International Stock Portfolio of Endeavor Series Trust. Van Kampen has been the
Portfolio's sub-adviser since May 1, 2002, prior to that date T. Rowe Price
Associates, Inc. managed the portfolio and the performance prior to May 1, 2002
is attributable to that firm.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 2
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
CONVERTIBLE PREFERRED STOCKS (0.1%)
Australia (0.1%)
Westfield Trust-Units 32,445 $ 87
---------
Total Convertible Preferred Stocks (cost: $68) 87
---------
PREFERRED STOCKS (0.2%)
Australia (0.1%)
News Corporation Limited (The) 29,896 225
Germany (0.1%)
Henkel KGaA 156 12
Porsche AG (b) 130 77
ProSiebenSat.1 Media AG 1,000 16
Volkswagen AG 1,882 68
Thailand (0.0%)
Siam Commercial Bank PCL (foreign) 34,681 47
---------
Total Preferred Stocks (cost: $359) 445
---------
COMMON STOCKS (77.1%)
Australia (2.5%)
Alumina Limited 17,251 85
Amcor Limited 12,588 78
AMP Limited 19,690 74
Ansell Limited 2,054 10
Australia and New Zealand Banking
Group Limited 21,408 285
Australian Gas Light Company (The) 6,884 58
BHP Billiton Limited 52,774 485
BHP Steel 13,031 55
Boral Limited 9,291 36
Brambles Industries Limited 14,657 58
Centro Properties Group 10,075 30
CFS Gandel Retail Trust 22,387 23
Coca-Cola Amatil Limited 7,463 35
Coles Myer Limited 15,904 91
Commonwealth Bank of Australia 17,690 392
CSL Limited 1,046 14
CSR Limited 19,624 27
Foster's Group Limited 30,225 102
General Property Trust-Units 29,314 66
Insurance Australia Group Limited 25,163 81
Investa Property Group 18,992 28
James Hardie Industries NV (a) 7,367 38
John Fairfax Holdings Limited 14,188 38
Leighton Holdings Limited 2,659 24
Lend Lease Corporation Limited 6,139 46
Macquarie Bank Limited 3,094 83
Macquarie Infrastructure Group 28,304 72
Mayne Group Limited 13,331 33
Mirvac Group 11,108 36
National Australia Bank Limited 21,694 489
Newcrest Mining Limited 5,434 53
Shares Value
-------------------- ---------------
News Corporation Limited (The) 21,026 $ 190
Orica Limited 4,540 48
Origin Energy Limited 4,586 16
PaperlinX Limited 6,286 24
Patrick Corporation Limited 2,762 30
QBE Insurance Group Limited 9,496 76
Rinker Group Limited 14,451 71
Rio Tinto Limited 4,552 128
Santos Limited 9,254 48
Sonic Healthcare Limited 2,031 11
Southcorp Limited 10,545 21
Stockland Trust Group 13,734 54
Stockland Trust Group-new 471 2
Suncorp-Metway Limited 7,947 74
TABCORP Holdings Limited 5,686 48
Telestra Corporation Limited 31,960 116
Transurban Group 7,968 27
Wesfarmers Ltd. 5,563 111
Westfield Holdings Limited 6,330 67
Westfield Trust-Units (a) 1,194 3
Westpac Banking Corporation 25,017 301
WMC Resources Ltd. (a) 17,328 73
Woodside Petroleum Ltd. 7,058 79
Woolworths Limited 14,634 130
Austria (0.4%)
Bank Austria Creditanstalt (a) 902 46
Boehler-Uddeholm AG 321 22
Erste Bank der oesterreichischen
Sparkassen AG 1,577 195
Flughafen Wien AG 600 28
Mayr-Melnhof Karton AG-ADR 369 44
OMV AG 546 81
RHI AG (a) 678 13
Telekom Austria AG (a) 10,448 129
VA Technologie AG (a) 507 16
voestalpine AG 1,364 56
Wienerberger AG 2,467 66
Belgium (0.5%)
Agfa-Gevaert N.V. 3,385 96
Bekaert NV 125 8
Dexia 14,624 252
Electrabel SA 274 86
Fortis 17,429 350
Interbrew 161 4
Kredietbank SA Luxembourgeoise 1,287 60
Solvay SA 1,109 96
UCB SA 636 24
China (1.4%)
Aluminum Corporation of China
Limited-H Shares 200,000 152
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 3
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
China (continued)
Beijing Capital International Airport
Company Limited-H Shares 98,000 $ 33
Beijing Datang Power Generation
Company Limited-H Shares 104,000 74
China Petroleum & Chemical
Corporation (Sinopec)-H Shares 1,224,000 548
China Shipping Development Co., Ltd.-
H Shares 94,000 70
China Southern Airlines Company
Limited-H Shares (a) 86,000 37
China Telecom Corporation, Ltd. 586,000 242
Guangshen Railway Company Limited-
H Shares 104,000 29
Huaneng Power International, Inc. 112,000 194
Jiangsu Expressway Company Limited-
H Shares 90,000 48
Jiangxi Copper Co. Ltd.-H Shares 84,000 46
PetroChina Company Limited 1,284,000 736
Qingling Motors Company Limited-
H Shares 90,000 18
Shandong International Power
Development Company Limited-
H Shares 178,000 75
SINOPEC Shanghai Petrochemical
Company Limited 170,000 76
Sinopec Yizheng Chemical Fibre Co.
Ltd.-H Shares 102,000 26
Sinotrans Limited-H Shares 130,000 59
Travelsky Technology Limited-H Shares 23,000 25
Tsingtao Brewery Company Limited-
H Shares 30,000 35
Yanzhou Coal Mining Company
Limited-H Shares 74,000 75
Zhejiang Expressway Company
Limited-H Shares 105,000 74
Denmark (0.3%)
Danske Bank A/S 13,439 315
Group 4 Falck A/S 400 8
ISS A/S 300 15
Novo Nordisk A/S-Class B 2,800 114
Novozymes A/S-B Shares 436 16
Vestas Wind Systems A/S (b) 700 11
Finland (0.7%)
Fortum Oyj 5,628 58
Kesko Oyj-B Shares 2,781 49
KONE Oyj-B Shares 1,164 67
Metso Corporation 5,420 66
Nokia Oyj 26,443 457
Outokumpu Oyj 3,274 44
Sampo PLC-A Shares 5,200 54
Stora Enso Oyj-R Shares 12,525 169
Shares Value
-------------------- ---------------
Finland (continued)
TietoEnator Corporation 2,227 $ 61
UPM-Kymmene Oyj 9,430 180
Uponor Oyj 390 12
Wartsila Oyj-B Shares 878 17
France (5.6%)
Accor SA 3,391 154
Air France 1,354 21
Air Liquide 1,869 330
Alcatel-Class A (a)(b) 8,817 114
Alstom (a) 1,315 2
Aventis SA 12,012 794
AXA 21,773 466
BNP Paribas SA 12,061 759
Bouygues SA 6,152 215
Business Objects S.A. (a) 331 12
Cap Gemini SA (a) 1,788 79
Carrefour SA 4,594 252
CNP Assurances SA 1,743 91
Compagnie de Saint-Gobain 9,900 485
Compagnie Generale des Etablissements
Michelin-Class B 2,321 106
Credit Agricole SA 2,789 67
Dassault Systemes SA 414 19
Essilor International SA 151 8
Etablissements Economiques du Casino
Guichard-Perrachon SA 605 59
France Telecom (a) 17,259 493
Groupe Danone SA 1,264 206
Groupe Wanadoo SA (a) 4,032 33
Imerys 288 61
Lafarge SA 2,772 247
Lagardere SCA 2,115 122
LVMH Moet Hennessy Louis Vuitton SA 6,210 452
PSA Peugeot Citroen SA 3,176 162
Publicis Groupe SA 1,521 49
Renault SA 2,864 198
Sagem SA 117 13
Sanofi-Synthelabo 6,219 468
Schneider Electric SA 5,539 363
Societe BIC 884 41
Societe Generale-Class A 4,515 399
Sodexho Alliance 1,802 54
Suez 9,895 199
Technip SA 70 8
Television Francaise 1 1,890 66
Thales SA 3,611 121
Total Fina Elf SA 12,589 2,340
Valeo SA 1,270 51
Vinci SA 1,308 108
Vivendi Environnement 1,228 33
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 4
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
France (continued)
Vivendi Universal (a) 15,997 $ 389
Zodiac SA 202 6
Germany (4.9%)
adidas-Salomon AG 107 12
Allianz AG-Registered Shares 6,598 833
Altana AG 274 17
BASF AG 8,942 505
Bayer AG 11,026 325
Bayerische Hypo-und Vereinsbank AG (a) 13,993 326
Beiersdorf AG 1,270 156
Commerzbank AG 16,585 325
Continental AG 2,200 83
DaimlerChrysler AG-Registered Shares 14,459 676
Deutsche Bank AG 12,336 1,025
Deutsche Borse AG 3,545 194
Deutsche Lufthansa AG-Registered Shares 11,133 186
Deutsche Post AG-Registered Shares 7,470 154
Deutsche Telekom AG (a)(b) 35,473 649
Douglas Holding AG 543 15
E.ON AG 9,573 627
EPCOS AG (a)(b) 176 4
Fresenius Medical Care AG 607 43
GEHE AG 426 21
HeidelbergCement AG (a) 583 25
KarstadtQuelle AG 461 11
Linde AG 1,791 96
MAN AG 1,769 54
Merck KGaA 692 29
METRO AG (b) 1,281 57
Muenchener
Rueckversicherungs-Gesellschaft AG 1,636 200
Preussag AG 2,202 46
PUMA AG Rudolf Dassler Sport 93 16
RWE AG 5,405 215
SAP AG 2,444 412
Schering AG 1,717 87
Siemens AG-Registered Shares (b) 18,864 1,519
ThyssenKrupp AG 5,293 105
Volkswagen AG (b) 3,847 215
Greece (0.1%)
Alpha Bank SA 1,400 42
EFG Eurobank Ergasias SA 400 8
National Bank of Greece SA 4,671 122
Titan Cement Company SA 400 16
Hong Kong (1.5%)
Bank of East Asia, Limited 34,451 106
Boc Hong Kong (Holdings) Limited 65,500 123
Cathay Pacific Airways Limited 25,000 48
Cheung Kong (Holdings) Limited 37,000 294
Shares Value
-------------------- ---------------
Hong Kong (continued)
Cheung Kong Infrastructure Holdings
Limited 14,000 $ 31
China Eastern Airlines Corporation
Limited-H Shares (a) 114,000 19
CLP Holdings Limited 43,000 205
Esprit Holdings Limited 21,500 72
Hang Lung Properties Limited 30,000 38
Hang Seng Bank Limited 17,300 227
Henderson Land Development Company
Limited 17,000 75
Hong Kong and China Gas Company
Limited (The) 95,000 145
Hong Kong Exchanges & Clearing Limited 25,000 54
Hongkong Electric Holdings Limited 34,000 134
Hopewell Holdings Limited 8,000 12
Hutchison Whampoa Limited 53,900 398
Hysan Development Company Limited 6,000 9
Johnson Electric Holdings Limited 36,000 46
Li & Fung Limited 40,000 69
MTR Corporation 33,598 44
New World Development Company
Limited 33,665 27
PCCW Limited (a) 77,200 50
SCMP Group Limited 10,000 4
Shangri-La Asia Limited 22,600 21
Sino Land Company Limited 24,290 14
Sun Hung Kai Properties Limited 33,000 273
Swire Pacific Limited-Class A 23,000 142
Techtronic Industries Company Limited 12,000 33
Television Broadcasts Limited 4,000 20
Wharf (Holdings) Limited (The) 30,000 83
Yue Yuen Industrial (Holdings) Limited 11,500 32
India (0.9%)
Bajaj Auto Limited-GDR (a) 4,587 111
Dr. Reddy's Laboratories Limited-ADR 3,400 108
Gail India Limited-GDR 2,367 79
HDFC Bank Limited-ADR 900 27
Hindalco Industries Limited-GDR 144A 3,851 119
ICICI Bank Limited-ADR 6,400 110
Infosys Technologies Limited-ADR (b) 2,300 220
Larsen & Toubro Ltd.-GDR (LUX) 2,929 68
Larsen & Toubro Ltd.-GDR (GBP) (a) 2,281 52
Ranbaxy Laboratories Ltd.-GDR (USD) 241 6
Ranbaxy Laboratories Ltd.-GDR (GBP) (a) 2,100 54
Reliance Industries Limited-GDR-144A 15,503 481
Satyam Computer Services Limited-ADR (b) 3,000 88
State Bank of India-GDR 3,584 120
Tata Motors Limited-GDR (EUR) 3,742 37
Tata Motors Limited-GDR (GBP) (a) 2,914 29
Wipro Limited-ADR (b) 700 34
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 5
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Ireland (0.3%)
Allied Irish Banks, PLC 11,569 $ 185
Bank of Ireland 12,798 175
CRH PLC (IRE) 4,175 86
DCC PLC 700 10
Grafton Group PLC 1,500 10
Independent News & Media PLC 4,300 10
Irish Life & Permanent PLC 6,149 99
Italy (1.6%)
Alleanza Assicurazioni SpA 4,855 53
Assicurazioni Generali SpA 10,801 286
Autogrill SpA (a) 1,380 20
Banca Fideuram SpA 2,009 12
Banca Intesa SpA 56,005 219
Banca Intesa SpA-RNC 3,509 10
Banca Monte dei Paschi di Siena SpA 3,766 12
Banca Nazionale del Lavoro SpA (a) 5,244 13
Banca Popolare di Milano Scarl 1,378 9
Banco Popolare di Verona e Novara S.c.r.l. 5,903 100
Benetton Group SpA 1,244 14
Enel SpA 16,907 115
ENI-Ente Nazionale Idrocarburi 26,131 493
Fiat SpA (a) 4,419 34
Finmeccanica SpA 32,484 25
Italcementi SpA 1,085 14
Mediaset S.p.A. 9,397 112
Mediobanca-Banca di Credito Finanziario SpA 3,148 34
Mediolanum SpA 1,510 12
Pirelli & C. Accomandita per Azioni 25,170 26
Riunione Adriatica di Sicurta SpA 1,994 34
Sanpaolo IMI SpA 21,793 284
SEAT Pagine Gialle SpA (a) 28,748 27
Snia SpA 2,727 7
Telecom Italia Mobile SpA 40,095 218
Telecom Italia-RNC (a) 64,981 132
Telecom Italia SpA (a) 111,128 329
Tiscali SpA (a) 316 2
UniCredito Italiano SpA 73,160 395
Japan (20.8%)
Advantest Corporation 800 63
AEON Co., Ltd. 4,000 134
Ajinomoto Co., Inc. 22,000 253
Alps Electric Co., Ltd. 3,000 44
Amada Co., Ltd. 6,000 31
Asahi Breweries, Ltd. 11,000 100
Asahi Glass Company, Limited 37,000 304
Asahi Kasie Corporation 37,000 201
Asatsu-DK Inc. 1,000 26
BELLSYSTEM24, Inc. 80 16
Benesse Corporation 1,900 46
Shares Value
-------------------- ---------------
Japan (continued)
Bridgestone Corporation 24,000 $ 323
Canon Inc. 17,000 791
CASIO Computer Co., Ltd. 13,000 137
Central Japan Railway Company 47 406
Chubu Electric Power Company,
Incorporated 5,500 115
Chugai Pharmaceutical Co., Ltd. 9,500 137
Citizen Watch Co., Ltd. 6,000 55
CSK Corporation 1,300 47
Dai Nippon Printing Co., Ltd. 14,000 197
Daicel Chemical Industries, Ltd. 4,000 16
Daiichi Pharmaceutical Co., Ltd. 5,800 104
Daikin Industries, Ltd. 4,000 92
Dainippon Ink and Chemicals,
Incorporated 22,000 42
Daito Trust Construction Co., Ltd. 3,400 101
Daiwa House Industry Co., Ltd. 19,000 202
Daiwa Securities Group Inc. 74,000 503
Denki Kagaku Kogyo Kabushiki Kaisha 13,000 42
Denso Corporation 19,800 390
Dowa Mining Co., Ltd. 6,000 32
East Japan Railway Company 104 490
Ebara Corporation 10,000 43
Eisai Company, Ltd. 7,700 208
FANUC LTD 5,600 335
Fast Retailing Co., Ltd. 100 6
Fuji Photo Film Co., Ltd. 14,000 452
Fuji Television Network, Inc. 3 16
Fujikura Ltd. 5,000 29
Fujisawa Pharmaceutical Company
Limited 4,000 85
Fujitsu Limited (a) 34,000 200
Furukawa Electric Co., Ltd. (The) 17,000 56
Hankyu Department Stores, Inc. 1,000 7
Hirose Electric Co., Ltd. 600 69
Hitachi, Ltd. 59,000 355
Honda Motor Co., Ltd. 25,500 1,132
Hoya Corporation 2,200 202
Isetan Co., Ltd. 3,000 33
Ishikawajima-Harima Heavy Industries
Co., Ltd. 24,000 34
ITOCHU Corporation 34,000 112
Ito-Yokado Co., Ltd. 5,000 157
Japan Airlines Company, Ltd. 28,000 74
Japan Tobacco Inc. 17 124
JFE Holdings, Inc. 13,600 371
JGC Corporation 3,000 31
JSR Corporation 4,000 89
Kajima Corporation 34,000 110
Kaken Pharmaceutical Co., Ltd. 1,000 5
Kaneka Corporation 6,000 45
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 6
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Japan (continued)
Kansai Electric Power Company,
Incorporated (The) 27,800 $ 487
Kao Corporation 19,000 386
Kawasaki Heavy Industries, Ltd. 23,000 28
Kawasaki Kisen Kaisha, Ltd. 1,000 5
Keihin Electric Express Railway Co., Ltd. 11,000 65
Keio Electric Railway Co., Ltd. 5,000 26
Keyence Corporation 560 118
Kikkoman Corporation 3,000 21
Kinki Nippon Railway Co., Ltd. (a)(b) 47,000 141
Kirin Brewery Company, Limited 29,000 247
Kokuyo Co., Ltd. 3,000 33
Komatsu Ltd. 33,000 209
Konami Company Ltd. 2,700 79
Konica Corporation 4,000 54
Kubota Corporation 46,000 190
Kuraray Co., Ltd. 11,000 93
Kurita Water Industries Ltd. 1,000 12
Kyocera Corporation 3,400 226
Kyowa Hakko Kogyo Co., Ltd. 11,000 70
Kyushu Electric Power Company,
Incorporated 3,700 64
Lawson, Inc. 100 3
Mabuchi Motor Co., Ltd. 600 46
Marubeni Corporation 37,000 71
Marui Co., Ltd. 10,000 126
Matsushita Electric Industrial Co., Ltd. 57,902 800
Matsushita Electric Works, Ltd. (b) 4,000 36
Meiji Seika Kaisha, Ltd. 5,000 20
Meitec Corporation 900 35
Millea Holdings, Inc. 38 496
Minebea Co., Ltd. 6,000 30
Mitsubishi Chemical Corporation 50,000 130
Mitsubishi Corporation 34,000 360
Mitsubishi Electric Corporation 58,000 241
Mitsubishi Estate Company, Limited 29,000 275
Mitsubishi Heavy Industries, Ltd. 102,000 283
Mitsubishi Logistics Corporation 3,000 25
Mitsubishi Rayon Company, Limited 15,000 56
Mitsubishi Tokyo Financial Group, Inc. 123 959
Mitsui & Co., Ltd. 36,000 290
Mitsui Chemicals, Inc. 15,000 87
Mitsui Fudosan Co., Ltd. 19,000 172
Mitsui Mining & Smelting Co., Ltd. 18,000 75
Mitsui O.S.K. Lines, Ltd. 3,000 15
Mitsui Sumitomo Insurance Co., Ltd. 71,000 583
Mitsui Trust Holdings, Inc. (a) 48,000 268
Murata Manufacturing Company, Ltd. 4,700 254
NEC Corporation 31,000 228
NGK Insulators, Ltd. 13,000 97
NGK Spark Plug Co., Ltd. 9,000 73
Shares Value
-------------------- ---------------
Japan (continued)
Nidec Corporation (b) 700 $ 66
Nikko Cordial Corporation 27,000 150
Nikon Corporation (a) 3,000 45
Nintendo Co., Ltd. 3,400 317
Nippon Express Co., Ltd. 28,000 132
Nippon Meat Packers, Inc. 5,000 49
Nippon Mining Holdings, Inc. 9,500 33
Nippon Oil Corporation 51,000 260
Nippon Sheet Glass Company, Limited 10,000 29
Nippon Steel Corporation 192,000 412
Nippon Telegraph and Telephone
Corporation 170 820
Nippon Unipac Holding 25 129
Nippon Yusen Kabushiki Kaisha 36,000 163
Nissan Chemical Industries, Ltd. 4,000 36
Nissan Motor Co., Ltd. 74,000 845
Nisshin Seifun Group Inc. 3,000 27
Nissin Food Products Co., Ltd. 1,900 47
Nitto Denko Corporation 4,400 234
Nomura Securities Co., Ltd. (The) 56,000 953
NSK Ltd. 20,000 73
NTN Corporation 11,000 52
NTT DATA Corporation 32 121
NTT DoCoMo, Inc. 230 521
Obayashi Corporation 14,000 63
Oji Paper Co., Ltd. 36,000 232
Oki Electric Industry Company, Limited (a) 14,000 55
Olympus Optical Co., Ltd. 3,000 65
Omron Corporation 5,000 101
Onward Kashiyama Co., Ltd. 5,000 61
Oracle Corporation Japan 1,100 57
Oriental Land Co., Ltd. 2,200 136
Osaka Gas Co., Ltd. 69,000 187
Pioneer Corporation 5,100 141
Ricoh Company, Ltd. 12,000 237
Rohm Company, Ltd. 1,400 164
Sankyo Company, Ltd. 15,700 295
SANYO Electric Co., Ltd. 52,000 272
Secom Co., Ltd. 5,000 187
Sekisui Chemical Co., Ltd. 9,000 46
Sekisui House, Ltd. 20,000 206
Seven-Eleven Japan Co., Ltd. 4,240 129
Sharp Corporation 25,000 394
Shimamura Co., Ltd. 400 27
Shimano, Inc. 3,100 64
Shimizu Corporation 27,000 103
Shin-Etsu Chemical Co., Ltd. 9,800 400
Shionogi & Co., Ltd. 10,000 186
Shiseido Company, Limited 11,000 134
Showa Denko K.K. 3,000 7
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 7
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Japan (continued)
Showa Shell Sekiyu K.K. 5,000 $ 41
Skylark Co., Ltd. 4,000 66
SMC Corporation 1,900 236
SOFTBANK Corp. (b) 5,600 171
Sony Corporation 21,900 758
Stanley Electric Co., Ltd. 1,000 19
Sumitomo Bakelite Company Limited 4,000 26
Sumitomo Chemical Company, Limited 42,000 173
Sumitomo Corporation 22,000 164
Sumitomo Electric Industries, Ltd. 15,000 134
Sumitomo Metal Industries, Ltd. 8,000 8
Sumitomo Metal Mining Co., Ltd. 14,000 104
Sumitomo Realty & Development Co., Ltd. 1,000 9
Sumitomo Trust and Banking Company,
Limited (The) (b) 48,000 282
Taiheiyo Cement Corporation 3,000 8
Taisei Corporation 3,000 11
Taisho Pharmaceutical Co., Ltd. 10,000 179
Taiyo Yuden Co., Ltd. 2,000 26
Takara Holdings Inc. 3,000 28
Takashimaya Company, Limited 4,000 29
Takeda Chemical Industries, Ltd. 29,300 1,161
Takuma Co., Ltd. 1,000 5
TDK Corporation 2,300 166
Teijin Limited 25,000 73
Teikoku Oil Co., Ltd. 4,000 20
Terumo Corporation 6,200 118
THK Co., Ltd. 500 10
Tobu Railway Co., Ltd. 28,000 100
Toho Co., Ltd. 2,400 31
Tohoku Electric Power Company,
Incorporated 13,500 224
Tokyo Broadcasting System, Inc. 2,000 32
Tokyo Electron Limited 1,900 144
Tokyo Gas Co., Ltd. 75,000 267
Tokyu Corporation 29,000 149
TonenGeneral Sekiyu K.K. 3,000 25
Toppan Printing Co., Ltd. 13,000 135
Toray Industries, Inc. 36,000 150
Toshiba Corporation 63,000 239
Tosoh Corporation 15,000 50
Tostem Inax Holding Corporation 5,000 97
TOTO LTD. 15,000 127
Toyko Electric Power Company,
Incorporated (The) 39,400 864
Toyo Seikan Kaisha, Ltd. 4,000 56
Toyoda Gosei Co., Ltd. 300 9
Toyota Industries Corporation 2,300 49
Toyota Motor Corporation (b) 80,000 2,701
Trend Micro Incorporated (a) 500 13
Shares Value
-------------------- ---------------
Japan (continued)
UFJ Holdings, Inc. (a)(b) 137 $ 658
Uni-Charm Corporation 1,100 54
UNY Co., Ltd. 1,000 10
Wacoal Corp. 1,000 8
West Japan Railway Company 10 39
World Co., Ltd. 800 25
Yakult Honsha Co., Ltd. 3,000 47
Yamada Denki Co., Ltd. 100 3
Yamaha Corporation 3,000 59
Yamaha Motor Co., Ltd. 1,000 11
Yamanouchi Pharmaceutical Co., Ltd. 14,300 444
Yamato Transport Co., Ltd. 8,000 94
Yamazaki Baking Co., Ltd. 3,000 25
Yasuda Fire & Marine Insurance
Company, Limited (The) 25,000 205
Yokogawa Electric Corporation 1,000 14
Luxembourg (0.1%)
Arcelor 6,623 115
Netherlands (4.5%)
ABN AMRO Holding NV 39,843 932
Akzo Nobel NV 7,207 278
DSM NV 1,255 62
Elsevier NV 14,528 180
Euronext NV 2,098 53
European Aeronautic Defence and Space
Company EADS NV (b) 5,283 126
Hagemeyer NV 2,128 5
Heineken NV 11,103 423
ING Groep NV 31,462 734
Koninklijke KPN NV (a) 35,468 274
Koninklijke Philips Electronics NV 31,243 912
Oce NV 431 7
Royal Dutch Petroleum Company 57,594 3,036
TPG NV 14,829 347
Unilever NV-CVA 11,711 766
Vedior NV-CVA 4,957 78
VNU NV 3,764 119
Wolters Kluwer NV 8,014 125
New Zealand (0.0%)
Carter Holt Harvey Limited 14,900 18
Telecom Corporation of New Zealand
Limited 4,830 17
Norway (0.2%)
Dnb Holding ASA 5,004 33
Norsk Hydro ASA 2,838 175
Norske Skogindustrier ASA 2,100 40
Orkla ASA 2,230 50
Statoil ASA 1,100 12
Tandberg ASA (a) 400 3
Tomra Systems ASA 2,281 14
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 8
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Portugal (0.1%)
Banco Comercial Portugues SA 7,113 $ 16
EDP-Electricidade de Portugal, SA 548 1
Portugal Telecom, SGPS, SA-Registered
Shares 15,878 160
PT Multimedia (a) 238 5
Russia (1.1%)
AO Mosenergo-ADR 12,200 82
Lukoil Oil Company-ADR 3,800 353
Mining and Metallurgical Company
Norilsk Nickel-ADR (b) 5,300 345
OAO Gazprom-ADR (b) 2,300 60
OAO Rostelecom-ADR 3,370 42
RAO Unified Energy System of
Russia-ADR 20,100 561
Surgutneftegaz-ADR (b) 10,500 309
Vimpel-Communications-ADR (a) 800 59
YUKOS Oil Company-ADR 4,276 182
Singapore (0.3%)
City Developments Limited 3,484 12
ComfortDelGro Corporation Limited 16,598 8
Creative Technology Limited (a) 351 4
DBS Group Holdings Ltd. 9,788 85
Oversea-Chinese Banking Corporation
Limited 8,784 63
Overseas Union Enterprises Ltd. 1,494 6
SembCorp Industries Limited 15,508 12
Singapore Exchange Limited 15,713 16
Singapore Press Holdings Limited 4,264 47
Singapore Technologies Engineering
Limited 29,184 35
Singapore Telecommunications Limited 76,064 88
United Overseas Bank Limited 9,219 72
United Overseas Land Limited 10,630 12
Venture Manufacturing (Singapore) Ltd. 1,879 22
Spain (4.9%)
Acciona SA 2,560 156
Acerinox, SA 1,933 91
Acesa Infraestructuras, SA 18,774 284
ACS, Actividades de Construccion y
Servicios SA 8,956 437
Altadis, SA 18,300 519
Amadeus Global Travel Distribution SA 14,512 94
Antena 3 Television, SA (a) 451 20
Banco Bilbao Vizcaya Argentaria, SA (b) 72,069 995
Banco Popular Espanol SA 1,680 100
Banco Santander Central Hispano SA (b) 88,803 1,051
Endesa SA 26,435 508
Fomento de Construcciones y Contratas, SA 6,349 234
Gas Natural SDG, SA 39,059 914
Grupo Ferrovial, SA 5,764 202
Shares Value
-------------------- ---------------
Spain (continued)
Iberdrola SA 22,869 452
Iberia, Lineas Aereas de Espana SA 57,006 164
Indra Sistemas, SA 802 10
Repsol-YPF, SA 34,003 663
Sociedad General de Aguas de Barcelona, SA 5,874 88
Telefonica SA 134,243 1,970
Union Electrica Fenosa, SA 5,901 111
Vallehermoso, SA 9,849 149
Sweden (2.1%)
Alfa Laval AB 500 8
Assa Abloy AB-Class B Free 6,127 73
Atlas Copco AB-A Shares 5,473 196
Atlas Copco AB-B Shares 2,899 94
Electrolux AB-Series B 9,240 203
Eniro AB 2,200 21
H & M Hennes & Mauritz AB 9,430 224
Holmen AB-B Shares 2,400 85
Modern Times Group MTG AB (a) 600 13
Nordea AB (b) 57,737 433
Sandvik AB 10,691 369
SAS AB (a) 1,563 15
Securitas AB-Class B 12,206 165
Skandia Insurance Company, Ltd. 26,722 97
Skandinaviska Enskilda Banken AB 8,371 123
Skanska AB-Class B 19,044 168
SKF AB-Class B 3,408 132
SSAB Svenstkt Stal AB 2,800 50
Svenska Cellulosa AB-B Shares 4,800 196
Svenska Handelsbanken AB-A Shares 17,560 359
Swedish Match AB 6,100 62
Tele2 AB-B Shares (a) 1,100 59
Telefonaktiebolaget LM Ericsson-Class B (a) 91,273 164
Telia AB 42,035 220
Volvo AB-A Shares 2,662 78
Volvo AB-B Shares (b) 8,942 273
WM-Data AB-B Shares (a) 4,125 9
Switzerland (5.1%)
ABB Ltd (a) 17,831 90
Adecco SA-Registered Shares 4,506 290
Ciba Specialty Chemicals Holding
Inc.-Registered Shares (a) 1,498 116
Clariant AG (a) 2,996 44
Credit Suisse Group 22,334 817
Geberit AG 35 17
Givaudan SA-Registered Shares 230 119
Holcim Ltd. 3,111 145
Kudelski SA-Bearer (a) 223 7
Logitech International SA (a) 542 23
Lonza Group Ltd.-Registered Shares 912 52
Nestle SA-Registered Shares 6,599 1,650
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 9
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
Switzerland (continued)
Novartis AG 40,316 $ 1,830
Roche Holding AG-Genusschein 12,041 1,215
Roche Holding AG-Bearer 775 107
Schindler Holding AG-Participation
Certificates (a) 75 18
Serono SA-Class B 170 121
SGS Societe Generale de Surveillance
Holding SA 199 125
Swatch Group AG (The) 691 16
Swatch Group AG (The)-Class B 691 83
Swiss Reinsurance Company-Registered
Shares 3,598 243
Swisscom AG-Registered Shares 565 186
Syngenta AG 2,305 155
UBS AG-Registered Shares 26,549 1,818
Valora Holding AG 58 14
Zurich Financial Services AG (a) 2,532 364
Thailand (1.6%)
Advanced Info Service Public Company
Limited (foreign) 129,600 277
Bangkok Bank Public Company
Limited-Registered Shares (a) (foreign) 98,600 286
Bangkok Bank Public Company Limited (a) 51,300 141
BEC World Public Company Limited
(foreign) 13,000 74
Charoen Pokphand Foods Public
Company Limited (foreign) 324,965 36
Delta Electronics (Thailand) Public
Company Limited (foreign) 46,100 31
Electricity Generating Public Company
Limited 24,911 57
Hana Microelectronics Public Company
Limited (foreign) 5,563 18
Kasikornbank Public Company
Limited-Foreign Registered Shares (a) 123,658 219
Kasikornbank Public Company Limited
(a) (foreign) 82,500 135
Land and Houses Public Co., Ltd. 254,040 79
Land and Houses Public Co.,
Ltd.-Registered Shares (foreign) 189,881 61
National Finance Public Company
Limited (foreign) 93,200 39
PTT Exploration and Production Public
Company Limited (foreign) 14,977 100
PTT Public Company Limited (foreign) 108,100 505
Sahaviriya Steel Industries Public
Company Limited (a) (foreign) 61,400 54
Shin Corporation Public Company
Limited (foreign) 168,100 166
Siam Cement Public Company Limited 24,780 159
Shares Value
-------------------- ---------------
Thailand (continued)
Siam Cement Public Company
Limited-Registered Shares (foreign) 44,700 $ 312
Siam City Cement Public Company
Limited (foreign) 14,500 84
Siam Commercial Bank PCL-Registered
Shares (a) (foreign) 73,100 100
TISCO Finance Public Company Limited
(a) (foreign) 55,900 46
United Kingdom (15.6%)
Aegis Group Plc 15,599 28
AMEC PLC 4,804 22
Amersham PLC 12,836 176
AstraZeneca PLC (a) 29,010 1,393
BAA PLC 21,357 190
BAE Systems PLC 120,660 363
Balfour Beatty PLC 2,965 12
Barclays PLC 62,510 557
Barratt Developments PLC 3,218 31
BG Group PLC 53,511 275
BHP Billiton PLC (a) 44,242 386
BOC Group PLC (The) 9,166 140
Boots Group PLC (The) 8,154 101
BP PLC 442,269 3,586
BPB PLC 7,336 46
Brambles Industries PLC 18,844 69
British Airways PLC (a) 35,409 147
British American Tobacco, PLC 23,977 330
British Sky Broadcasting Group PLC (a) 22,414 282
BT Group PLC 131,635 444
Bunzl PLC 6,320 48
Cable & Wireless PLC 25,850 62
Cadbury Schweppes PLC 29,176 214
Capita Group PLC (The) 20,583 90
Carlton Communications, PLC 9,616 40
Carnival PLC (a) 2,872 116
Centrica PLC 34,734 131
CGNU PLC 36,705 322
Cobham PLC 791 17
Compass Group PLC 36,216 246
Daily Mail and General Trust PLC 4,779 56
Davis Service Group PLC (The) 1,238 8
De La Rue PLC 10,089 50
Diageo PLC 55,254 727
Dixons Group PLC 34,209 85
Electrocomponents PLC 5,381 31
EMAP PLC 4,093 63
EMI Group PLC 11,650 33
Enterprise Inns PLC 3,042 55
Exel PLC 5,580 74
FKI PLC 3,497 7
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 10
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Shares Value
-------------------- ---------------
United Kingdom (continued)
Friends Provident PLC 14,386 $ 34
George Wimpey PLC 8,155 54
GKN PLC 13,059 62
GlaxoSmithKline PLC 96,932 2,221
Granada PLC 46,194 101
GUS PLC 21,555 298
Hanson PLC 13,388 98
Hays PLC 49,509 106
HBOS PLC 36,220 469
HHG PLC-CDI (a) 19,690 14
Hilton Group PLC 27,550 111
HSBC Holdings PLC (a) 182,415 2,867
IMI PLC 5,542 33
Imperial Chemical Industries PLC 21,829 78
Imperial Tobacco Group PLC 10,130 199
InterContinental Hotels Group PLC 12,967 123
Invensys PLC 23,914 8
J Sainsbury PLC 19,080 107
Johnson Matthey PLC 4,361 77
Kelda Group PLC 8,558 72
Kesa Electricals PLC 4,682 22
Kidde PLC 9,174 17
Kingfisher PLC 20,487 102
Legal & General Group PLC 90,403 162
Lloyds TSB Group PLC 53,408 428
Logica PLC 10,185 47
Marks and Spencer Group PLC 44,854 232
MFI Furniture Group PLC 5,381 15
Misys PLC 7,877 30
Mitchells & Butlers PLC 12,746 51
National Grid Group PLC (The) 52,827 378
Pearson PLC 13,022 145
Peninsular and Oriental Steam
Navagation Company (The) 11,605 48
Persimmon PLC 4,287 41
Pilkington PLC 10,228 18
Prudential PLC 27,501 232
Rank Group PLC (The) 11,308 57
Reckitt Benckiser PLC 15,595 353
Reed International PLC 20,396 171
Rentokil Initial PLC 56,430 192
Reuters Group PLC 23,961 101
Rexam PLC 8,743 67
Rio Tinto PLC-Registered Shares 19,521 539
RMC Group PLC 4,162 52
Rolls-Royce Group PLC 57,078 181
Royal & Sun Alliance Insurance Group PLC 12,004 19
Royal Bank of Scotland Group PLC (The) 26,731 787
Sage Group PLC (The) 16,201 51
Scottish and Southern Energy PLC 13,131 158
Shares Value
-------------------- ---------------
United Kingdom (continued)
Scottish Power PLC 28,775 $ 192
Securicor PLC 2,907 5
Serco Group PLC 13,726 42
Severn Trent PLC 7,570 101
Shell Transport & Trading Company PLC 179,949 1,339
Smith & Nephew PLC 7,881 66
Smiths Group PLC 7,109 84
Tesco PLC 69,997 323
Tomkins PLC 6,695 32
Unilever PLC 46,635 435
United Business Media PLC 5,174 45
Vodafone Group PLC 1,320,609 3,274
Whitbread PLC 6,271 81
William Hill PLC 9,571 73
Wolseley PLC 13,101 185
WPP Group PLC 20,359 200
Yell Group PLC 6,733 37
---------
Total Common Stocks (cost: $124,872) 145,088
---------
Principal Value
----------- ------------
SECURITY LENDING COLLATERAL (4.6%)
Debt (3.7%)
Bank Notes (0.2%)
Credit Suisse First Boston (USA), Inc.
1.14%, due 09/08/2004 $ 41 $ 41
Fleet National Bank
1.00%, due 01/21/2004 153 153
National Bank of Commerce
1.19%, due 04/21/2004 127 127
Commercial Paper (0.9%)
Compass Securitization-144A
1.08%, due 01/22/2004 76 76
Delaware Funding Corporation
1.08%, due 01/07/2004 51 51
Falcon Asset Securitization
Corporation-144A
1.09%, due 01/08/2004 76 76
1.09%, due 01/13/2004 51 51
1.08%, due 02/05/2004 102 102
General Electric Capital Corporation
1.09%, due 01/08/2004 127 127
1.09%, due 01/09/2004 76 76
1.08%, due 01/16/2004 101 101
Govco Incorporated-144A
1.07%, due 02/05/2004 127 127
Greyhawk Funding LLC-144A
1.09%, due 01/29/2004 127 127
1.09%, due 02/06/2004 127 127
1.10%, due 02/09/2004 74 74
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 11
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts except share amounts in thousands)
Principal Value
----------------------- ---------------
Commercial Paper (continued)
Jupiter Securitization
Corporation-144A
1.08%, due 02/02/2004 $ 127 $ 127
Liberty Street Funding Company-144A
1.08%, due 01/20/2004 76 76
Preferred Receivables Funding-144A
1.09%, due 01/16/2004 148
1.08%, due 02/17/2004 254 254
Sheffield Receivables-144A
1.09%, due 01/21/2004 51 51
Euro Dollar Overnight (0.2%)
BNP Paribas SA
0.97%, due 01/07/2004 255 255
Credit Agricole Indosuez
0.98%, due 01/02/2004 10 10
1.08%, due 01/06/2004 97 97
Euro Dollar Terms (0.9%)
Bank of Montreal
1.06%, due 01/15/2004 50 50
1.06%, due 02/17/2004 102 102
Bank of Scotland
1.06%, due 04/02/2004 76 76
Citigroup Inc.
1.10%, due 01/22/2004 76 76
1.09%, due 02/06/2004 102 102
Credit Agricole Indosuez
1.08%, due 01/28/2004 51 51
Den Danske Bank
1.08%, due 01/20/2004 255 255
1.02%, due 01/30/2004 127 127
Royal Bank of Canada
1.05%, due 02/27/2004 255 255
Royal Bank of Scotland Group PLC
(The)
1.08%, due 01/09/2004 153 153
1.08%, due 01/15/2004 51 51
1.08%, due 01/20/2004 25 25
Svenska Handelsbanken AB
1.09%, due 01/15/2004 25 25
Toronto-Dominion Bank (The)
1.10%, due 01/08/2004 153 153
Principal Value
----------------------- ---------------
Euro Dollar Terms (continued)
Wells Fargo & Company
1.04%, due 01/30/2004 $ 204 $ 204
Master Notes (0.3%)
Bear Stearns Companies Inc. (The)
1.14%, due 06/10/2004 102 102
1.14%, due 09/08/2004 153 153
Morgan Stanley
1.05%, due 06/21/2004 244 244
Medium Term Notes (0.2%)
Goldman Sachs Group, Inc. (The)
1.02%, due 03/23/2004 255 255
Liberty Lighthouse Funding-144A
1.14%, due 01/15/2004 76 76
Repurchase Agreements (1.0%) (c)
Credit Suisse First Boston (USA), Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $596 on 01/02/2004 596 596
Merrill Lynch & Co., Inc.
1.04% Repurchase Agreement dated 12/31/2003
to be repurchased at $809 on 01/02/2004 809 809
Morgan Stanley
1.11% Repurchase Agreement dated 12/31/2003
to be repurchased at $484 on 01/02/2004 484 484
Shares Value
-------------- ------------
Investment Companies (0.9%)
Money Market Funds (0.9%)
American AAdvantage Select Fund
1-day yield of 1.00% 124,887 $ 125
Merrill Lynch Premier Institutional Fund
1-day yield of 1.04% 304,921 305
Merrimac Cash Series Fund-Premium Class
1-day yield of 0.98% 1,325,899 1,326
---------
Total Security Lending Collateral (cost: $8,634) 8,634
---------
Total Investment Securities (cost: $133,933) $ 154,254
=========
SUMMARY:
Investments, at value 82.0% $ 154,254
Other assets in excess of liabilities 18.0% 33,811
--------- ---------
Net assets 100.0% $ 188,065
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 12
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
Percentage of
Net Assets Value
---------------- ---------------
INVESTMENTS BY INDUSTRY:
Commercial Banks 12.1% $ 22,801
Pharmaceuticals 5.7% 10,718
Telecommunications 5.7% 10,707
Petroleum Refining 4.6% 8,688
Automotive 3.9% 7,320
Oil & Gas Extraction 3.4% 6,422
Chemicals & Allied Products 3.4% 6,383
Electric Services 3.2% 6,020
Electronic & Other Electric Equipment 2.8% 5,349
Insurance 2.4% 4,489
Food & Kindred Products 2.0% 3,791
Industrial Machinery & Equipment 2.0% 3,721
Construction 1.4% 2,620
Metal Mining 1.2% 2,286
Transportation & Public Utilities 1.2% 2,278
Computer & Office Equipment 1.1% 2,112
Security & Commodity Brokers 1.1% 2,107
Stone, Clay & Glass Products 0.9% 1,741
Life Insurance 0.9% 1,671
Primary Metal Industries 0.9% 1,641
Real Estate 0.9% 1,636
Gas Production & Distribution 0.9% 1,600
Computer & Data Processing Services 0.8% 1,567
Printing & Publishing 0.8% 1,565
Beverages 0.8% 1,403
Business Services 0.7% 1,378
Tobacco Products 0.7% 1,234
Electronic Components & Accessories 0.7% 1,220
Paper & Allied Products 0.6% 1,121
Holding & Other Investment Offices 0.6% 1,082
Instruments & Related Products 0.6% 1,082
Wholesale Trade Durable Goods 0.6% 1,081
Food Stores 0.5% 1,003
Beer, Wine & Distilled Beverages 0.5% 957
Aerospace 0.5% 874
Motion Pictures 0.5% 844
Electric, Gas & Sanitary Services 0.4% 817
Retail Trade 0.4% 815
Air Transportation 0.4% 711
Machinery, Equipment & Supplies 0.4% 682
Radio & Television Broadcasting 0.3% 651
Communications Equipment 0.3% 644
Trucking & Warehousing 0.3% 623
Restaurants 0.3% 620
Percentage of
Net Assets Value
INVESTMENTS BY INDUSTRY: ---------------- ---------------
Rubber & Misc. Plastic Products 0.3% $ 566
Fabricated Metal Products 0.3% 537
Communication 0.2% 461
Amusement & Recreation Services 0.2% 425
Apparel Products 0.2% 399
Medical Instruments & Supplies 0.2% 375
Water Transportation 0.2% 364
Manufacturing Industries 0.2% 343
Railroads 0.2% 305
Hotels & Other Lodging Places 0.2% 304
Residential Building Construction 0.2% 297
Lumber & Construction Materials 0.1% 271
Department Stores 0.1% 269
Apparel & Accessory Stores 0.1% 251
Textile Mill Products 0.1% 248
Wholesale Trade Nondurable Goods 0.1% 205
Personal Services 0.1% 192
Management Services 0.1% 186
Mining 0.1% 173
Engineering & Management Services 0.1% 161
Transportation Equipment 0.1% 133
Research & Testing Services 0.1% 125
Lumber & Wood Products 0.1% 124
Metal Cans & Shipping Containers 0.1% 123
Drug Stores & Proprietary Stores 0.1% 101
Variety Stores 0.1% 91
Paperboard Containers & Boxes 0.1% 90
Motor Vehicles, Parts & Supplies 0.0% 62
Health Services 0.0% 54
Environmental Services 0.0% 50
Educational Services 0.0% 46
Agriculture 0.0% 36
Petroleum & Petroleum Products 0.0% 33
Automotive Dealers & Service Stations 0.0% 32
Leather & Leather Products 0.0% 32
Services, Not Elsewhere Classified 0.0% 31
Radio, Television & Computer Stores 0.0% 25
Furniture & Home Furnishings Stores 0.0% 15
Lumber & Other Building Materials 0.0% 10
----- ---------
Investments, at market value 77.4% 145,620
Short-term investments 4.6% 8,634
Other assets in excess of liabilities 18.0% 33,811
----- ---------
Net assets 100.0% $ 188,065
===== =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 13
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2003
(all amounts in thousands)
FORWARD FOREIGN CURRENCY CONTRACTS:
- -----------------------------------------------------------------------------
Amount in Net Unrealized
Bought Settlement U.S. Dollars Appreciation
Currency (Sold) Date Bought (Sold) (Depreciation)
- ------------------- ------------ ------------ --------------- ---------------
Australian Dollar 2,187 03/18/2004 $ 1,603 $ 29
Euro Dollar (30) 01/05/2004 (37) -
Euro Dollar (60) 01/06/2004 (75) -
Euro Dollar 103 01/07/2004 129 1
Euro Dollar 18,717 03/18/2004 22,946 606
British Pound 6,036 03/18/2004 10,455 285
Japanese Yen 465,730 03/18/2004 4,353 2
Japanese Yen (28,050) 03/18/2004 (262) -
Singapore Dollar 1,250 03/18/2004 731 6
Singapore Dollar (1,250) 03/18/2004 (732) (5)
-------- -------
$ 39,111 $ 924
======== ======
FUTURES CONTRACTS (d):
- -----------------------------------------------------------------------
Net Unrealized
Settlement Appreciation
Contracts Date Amount (Depreciation)
----------- ------------ ---------- ---------------
CAC 40 10 Euro 198 03/31/2004 $ 8,642 $ 137
The German
Stock Index 81 03/19/2004 9,740 242
Dow Jones Euro
STOXX 50 121 03/19/2004 4,056 71
FTSE 100 Index 138 03/21/2004 10,501 297
SPI 200 Index 27 03/18/2004 1,626 33
Tokyo Price Index 44 03/11/2004 4,091 192
-------- ---------
$ 38,656 $ 972
======== =========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No dividends were paid during the preceding twelve months.
(b) At December 31, 2003, all or a portion of this security is on loan (see
Note 1). The value at December 31, 2003, of all securities on loan is
$8,197.
(c) Cash collateral for the Repurchase Agreements, valued at $1,927, that serve
as collateral for securities lending are invested in corporate bonds with
interest rates ranging from 0.00%-10.18% and maturity dates ranging from
04/01/2004-03/01/2043, including some issues having a perpetual maturity.
(d) At December 31, 2003, cash in the amount of $2,800 is segregated with the
custodian to cover margin requirements for open futures contracts.
DEFINITIONS:
ADR American Depositary Receipt
CDI Chess Depositary Interests
CVA Certificaaten van aandelen (share certificates)
GDR Global Depositary Receipt
RNC Saving Non-Convertible Shares
144A Securities are registered pursuant to Rule 144A of the Securities Act of
1933. These securities may be resold as transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, these securities aggregated $600 or 0.32% of the net assets of the
fund.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 14
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 2003
(all amounts except per share amounts in thousands)
Assets:
Investment securities, at value (cost: $133,933)
(including $8,197 of securities loaned) $154,254
Cash 37,477
Foreign cash (cost: $3,909) 4,038
Receivables:
Investment securities sold 2,324
Interest 7
Dividends 136
Dividend reclaims receivable 57
Unrealized appreciation on forward foreign
currency contracts 929
Variation margin 101
Other 20
---------
199,343
---------
Liabilities:
Investment securities purchased 2,346
Accounts payable and accrued liabilities:
Management and advisory fees 146
Deferred foreign taxes 115
Payable for collateral for securities on loan 8,635
Unrealized depreciation on forward foreign
currency contracts 5
Other 31
---------
11,278
---------
Net Assets $188,065
=========
Net Assets Consist of:
Capital stock, 50,000 shares authorized ($.01 par value) $ 189
Additional paid-in capital 205,833
Undistributed net investment income (loss) 3,750
Accumulated net realized gain (loss) from investment
securities, futures and foreign currency transactions (43,957)
Net unrealized appreciation (depreciation) on:
Investment securities (Net of deferred foreign taxes
of $115) 20,206
Futures contracts 972
Translation of assets and liabilities denominated in
foreign currencies 1,072
---------
Net Assets $188,065
=========
Shares Outstanding:
Initial Class 18,852
Service Class 12
Net Asset Value and Offering Price Per Share:
Initial Class $ 9.98
Service Class 10.00
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(all amounts in thousands)
Investment Income:
Interest $ 27
Dividends 2,932
Income from loaned securities-net 37
Less withholding taxes on foreign dividends (329)
--------
2,667
--------
Expenses:
Management and advisory fees 1,095
Transfer agent fees 2
Printing and shareholder reports 23
Custody fees 252
Administration fees 24
Legal fees 2
Auditing and accounting fees 14
Directors fees 4
Other 4
--------
Total expenses 1,420
Less:
Advisory fee waiver (215)
--------
Net expenses 1,205
--------
Net Investment Income (Loss) 1,462
--------
Net Realized Gain (Loss) from:
Investment securities (3,828)
Futures contracts 2,023
Foreign currency transactions 2,310
--------
505
--------
Net Increase (Decrease) in Unrealized Appreciation
(Depreciation) on:
Investment securities (Net of deferred foreign taxes
of $115) 35,786
Futures contracts 1,025
Translation of assets and liabilities denominated in
foreign currency 947
--------
37,758
--------
Net Gain (Loss) on Investment Securities, Futures and
Foreign Currency Transactions 38,263
--------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 39,725
========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 15
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended
(all amounts in thousands)
December 31, December 31,
2003 2002
---------------- ----------------
Increase (Decrease) In Net Assets From:
Operations:
Net investment income (loss) $ 1,462 $ 1,135
Net realized gain (loss) from
investment securities, futures and
foreign currency transactions 505 (29,874)
Net unrealized appreciation
(depreciation) on investment
securities, futures and foreign
currency translation 37,758 9,461
--------- ---------
39,725 (19,278)
--------- ---------
Distributions to Shareholders:
From net investment income:
Initial Class (1,244) (218)
Service Class - -
--------- ---------
(1,244) (218)
--------- ---------
From net realized gains:
Initial Class - -
Service Class - -
--------- ---------
- -
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
Initial Class 97,218 201,897
Service Class 3,297 -
--------- ---------
100,515 201,897
--------- ---------
Dividends and distributions reinvested:
Initial Class 1,244 218
Service Class - -
--------- ---------
1,244 218
--------- ---------
Cost of shares redeemed:
Initial Class (49,958) (205,549)
Service Class (3,273) -
--------- ---------
(53,231) (205,549)
--------- ---------
48,528 (3,434)
--------- ---------
Net increase (decrease) in net assets 87,009 (22,930)
--------- ---------
Net Assets:
Beginning of year 101,056 123,986
--------- ---------
End of year $ 188,065 $ 101,056
========= =========
Undistributed Net Investment
Income (Loss) $ 3,750 $ 1,101
========= =========
December 31, December 31,
2003 2002
---------------- ----------------
Share Activity:
Shares issued:
Initial Class 11,654 23,402
Service Class 379 -
--------- ---------
12,033 23,402
--------- ---------
Shares issued-reinvested from distributions:
Initial Class 151 27
Service Class - -
--------- ---------
151 27
--------- ---------
Shares redeemed:
Initial Class (6,269) (23,652)
Service Class (367) -
--------- ---------
(6,636) (23,652)
--------- ---------
Net increase (decrease) in shares
outstanding 5,548 (223)
========= =========
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 16
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period (a)
---------------------------------------------------------
Investment Operations
---------------------------------------------
Net Asset
For the Value, Net Net Realized
Period Beginning Investment and Unrealized Total
Ended (b) of Period Income (Loss) Gain (Loss) Operations
------------ ----------- --------------- ---------------- ------------
Initial Class 12/31/2003 $ 7.59 $ 0.10 $ 2.37 $ 2.47
12/31/2002 9.16 0.08 (1.63) (1.55)
12/31/2001 15.18 0.03 (3.09) (3.06)
12/31/2000 20.88 0.03 (3.68) (3.65)
12/31/1999 16.19 0.10 5.02 5.12
- --------------- ---------- --------- -------- --------- ---------
Service Class 12/31/2003 7.50 - 2.50 2.50
- --------------- ---------- --------- -------- --------- ---------
For a share outstanding throughout each period (a)
-----------------------------------------------------
Distributions
----------------------------------------
Net Asset
From Net From Net Value,
Investment Realized Total End
Income Gains Distributions of Period
------------ ----------- --------------- ------------
Initial Class $ (0.08) $ - $ (0.08) $ 9.98
(0.02) - (0.02) 7.59
- (2.96) (2.96) 9.16
(0.03) (2.02) (2.05) 15.18
(0.26) (0.17) (0.43) 20.88
- --------------- --------- --------- --------- ---------
Service Class - - - 10.00
- --------------- --------- --------- --------- ---------
Ratios/Supplemental Data
-----------------------------------------------------------------------
Ratio of Expenses
Net Assets, to Average Net Investment
For the End of Net Assets (f) Income (Loss) Portfolio
Period Total Period ----------------------- to Average Turnover
Ended (b) Return (c)(g) (000's) Net (d) Total (e) Net Assets (f) Rate (g)
------------ --------------- ------------- --------- ----------- ---------------- ----------
Initial Class 12/31/2003 32.81% $ 187,949 0.99% 1.17% 1.20% 53%
12/31/2002 (16.97) 101,056 1.17 1.17 1.01 118
12/31/2001 (22.96) 123,986 1.01 1.09 0.26 39
12/31/2000 (18.26) 186,664 0.98 1.07 0.15 63
12/31/1999 32.35 228,655 0.91 1.00 0.73 30
- --------------- ---------- ------ --------- ---- ---- ---- ---
Service Class 12/31/2003 33.36 116 1.24 1.49 0.05 53
- --------------- ---------- ------ --------- ---- ---- ---- ---
NOTES TO FINANCIAL HIGHLIGHTS:
(a) Per share information is calculated based on average number of shares
outstanding.
(b) The inception dates of the Fund's share classes are as follows:
Initial Class-April 8, 1991
Service Class-May 1, 2003
(c) Total Return reflects all portfolio expenses and includes reinvestment of
dividends and capital gains; it does not reflect the charges and deductions
under the policies or annuity contracts.
(d) For the year ended December 31, 2003, Ratio of Net Expenses to Average Net
Assets is net of fee waivers by the investment adviser, if any, (see note
2). For the year ended December 31, 2002, Ratio of Net Expenses to Average
Net Assets is net of fees paid indirectly. For the year ended December 31,
2001 and prior years, Ratio of Net Expenses to Average Net Assets is net of
fees paid indirectly and credits allowed by the custodian.
(e) Ratio of Total Expenses to Average Net Assets includes all expenses before
reimbursements by the investment adviser.
(f) Annualized.
(g) Not annualized for periods of less than one year.
The notes to the financial statements are an integral part of this report.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 17
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 2003
(all amounts in thousands)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The AEGON/Transamerica Series Fund, Inc. ("ATSF") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. ATSF serves as a funding
vehicle for variable life insurance, variable annuity and group annuity
products. Van Kampen Active International Allocation ("the Fund"), part of ATSF,
began operations as T. Rowe Price International Stock Portfolio, a part of the
Endeavor Series Trust, on April 8, 1991. The Fund became part of ATSF on May 1,
2002.
In the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties, which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
See the Prospectus and Statement of Additional Information for a description of
the Fund's investment objective.
In preparing the Fund's financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
estimates or assumptions (which could differ from actual results) may be used
that affect reported amounts and disclosures. The following policies were
consistently followed by the Fund, in accordance with GAAP.
Multiple class operations and expenses: The Fund currently offers two classes of
shares, an Initial Class and a Service Class. The Service Class was opened on
May 1, 2003. Income, non-class specific expenses and realized and unrealized
gains and losses, are allocated daily to each class, based upon the value of
shares outstanding method as permitted under Rule 18f-3 of the 1940 Act. Each
class bears its own specific expenses as well as a portion of general, common
expenses.
Security valuations: Fund investments traded on an exchange are valued at the
closing price on the day of valuation on the exchange where the security is
principally traded. With respect to securities traded on the NASDAQ INMS, such
closing price may be the last reported sales price or the NASDAQ Official
Closing Price.
Debt securities are valued by independent pricing services; however, those that
mature in sixty days or less are valued at amortized cost, which approximates
market.
Investment company securities are valued at the net asset value of the
underlying portfolio.
Other securities for which quotations are not readily available are valued at
fair value determined in good faith, in accordance with procedures established
by and, under the supervision of the Board of Directors and the Fund's Valuation
Committee.
The Fund values its investment securities at fair value based upon procedures
approved by the Board of Directors on days when significant events occur after
the close of the principal exchange on which the securities are traded, and as a
result, are expected to materially affect the value of investments.
Cash: The Fund may leave cash overnight in its cash account with the custodian,
Investors Bank & Trust Company ("IBT"). IBT has been contracted on behalf of the
Fund to invest the excess cash into a savings account, which at December 31,
2003, was paying an interest rate of 0.75%.
Repurchase agreements: The Fund is authorized to enter into repurchase
agreements. The Fund, through IBT, receives delivery of the underlying
securities, the value of which at the time of purchase is required to be in an
amount equal to at least 100% of the resale price. Repurchase agreements involve
the risk that the seller will fail to repurchase the security, as agreed. In
that case, the Fund will bear the risk of value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security. In the event of bankruptcy or insolvency of the seller, delays and
costs are incurred.
Securities lending: The Fund may lend securities to enhance fund earnings from
investing cash collateral received in making such loans to qualified borrowers
(typically broker/dealers). The Fund has engaged its custodian bank, IBT, as a
lending agent to administer its securities lending program. IBT earned $16 of
program net income for its services. When the Fund makes a security loan, it
receives cash collateral as protection against the risk that the borrower will
default on the loan, and records an asset for the cash invested collateral and a
liability for the return of the collateral.
Loans of securities are required to be secured by collateral at least equal to
102% of the value of the securities at inception of the loan, and not less then
100% thereafter. The Fund may invest cash collateral in short-term money market
instruments including: U.S. Treasury Bills, U.S. agency obligations, commercial
paper, money market mutual funds, repurchase agreements and other highly rated,
liquid investments. During the life of securities loans, the collateral and
securities loaned remain subject to fluctuation in value. IBT marks to market
securities loaned and the collateral each business day. If additional collateral
is due (at least $1), IBT collects additional cash collateral from the
borrowers. Although securities loaned will be fully collateralized at all times,
IBT may experience delays in, or may be prevented from, recovering the
collateral on behalf of the Fund. The Fund may recall a loaned security position
at any time from the borrower through IBT. In the event the borrower fails to
timely return a recalled security, IBT may indemnify the Fund by purchasing
replacement securities for the Fund at its own expense and claiming the
collateral to fund such a purchase. IBT absorbs the loss if the collateral value
is not sufficient to cover the cost of the replacement securities. If
replacement securities are not available, IBT will credit the equivalent cash
value to the Fund.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 18
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 1-(continued)
Income from securities lending is included in the Statement of Operations. The
amount of collateral and value of securities on loan are included in the
Statement of Assets and Liabilities as well as in the Schedule of Investments.
Directed brokerage: The sub-adviser, to the extent consistent with the best
execution and usual commission rate policies and practices, may place security
transactions of the Fund with broker/dealers with which ATSF has established a
Directed Brokerage Program. A Directed Brokerage Program is any arrangement
under which a broker/dealer applies a portion of the commissions received by
such broker/dealer on the security transactions to the Fund. In no event will
commissions paid by the Fund be used to pay expenses that would otherwise be
borne by any other funds within ATSF, or by any other party. Directed
commissions during the year ended December 31, 2003, of $3 are included in net
realized gains in the Statement of Operations.
Security transactions and investment income: Security transactions are recorded
on the trade date. Security gains and losses are calculated on the first-in,
first-out basis. Interest income, including accretion of discounts and
amortization of premiums, is recorded on the accrual basis commencing on the
settlement date.
Foreign currency denominated investments: The accounting records of the Fund are
maintained in U.S. dollars. Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing exchange rate each day. The cost of foreign securities is translated at
the exchange rate in effect when the investment was acquired. The Fund combines
fluctuations from currency exchange rates and fluctuations in value when
computing net realized and unrealized gains or losses from investments.
Foreign capital gains taxes: The Fund may be subject to taxes imposed by
countries in which it invests, with respect to its investment in issuers
existing or operating in such countries. Such taxes are generally based on
income earned or repatriated and capital gains realized on the sale of such
investments. The Fund accrues such taxes when the related income or capital
gains are earned. Some countries require governmental approval for the
repatriation of investment income, capital or the proceeds of sales earned by
foreign investors. In addition, if there is a deterioration in a country's
balance of payments or for other reasons, a country may impose temporary
restrictions on foreign capital remittances abroad.
The Fund's investments in Thailand are subject to a 15% governmental capital
gains tax. Such taxes are due upon sale of individual securities. The Fund
accrues for taxes on the capital gains throughout the holding period of the
underlying securities.
Net foreign currency gains and losses resulting from changes in exchange rates
include: 1) foreign currency fluctuations between trade date and settlement date
of investment security transactions; 2) gains and losses on forward foreign
currency contracts; and 3) the difference between the receivable amounts of
interest and dividends recorded in the accounting records in U.S. dollars and
the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated
with domestic transactions, including unanticipated movements in exchange
currency rates, the degree of government supervision and regulation of security
markets, and the possibility of political or economic instability.
Forward foreign currency contracts: The Fund may enter into forward foreign
currency contracts to hedge against exchange rate risk arising from investments
in securities denominated in foreign currencies. Contracts are valued at the
contractual forward rate and are marked to market daily, with the change in
value recorded as an unrealized gain or loss. When the contracts are closed a
realized gain or loss is incurred. Risks may arise from changes in market value
of the underlying currencies and from the possible inability of counterparties
to meet the terms of their contracts. Open forward currency contracts at
December 31, 2003, are listed in the Schedule of Investments.
Futures contracts: The Fund may enter into futures contracts to manage exposure
to market, interest rate or currency fluctuations. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are traded. The primary risks associated with futures contracts
are imperfect correlation between the change in market value of the securities
held and the prices of futures contracts; the possibility of an illiquid market
and inability of the counterparty to meet the contract terms.
The underlying face amounts of any open futures contracts at December 31, 2003,
are listed in the Schedule of Investments. Variation margin payable represents
additional payments due in order to maintain the equity account at the required
margin level.
Dividend distributions: Dividends and capital gains distributions are typically
declared and reinvested annually and are generally paid and reinvested on the
business day following the ex-date.
NOTE 2. RELATED PARTY TRANSACTIONS
AEGON/Transamerica Fund Advisers, Inc. ("ATFA") is the Fund's investment
adviser. AEGON/Transamerica Fund Services, Inc. ("ATFS") is the Fund's
administrator and transfer agent. AFSG Securities Corp. ("AFSG") is the Fund's
distributor. AFSG is 100% owned by AUSA Holding Company ("AUSA"). ATFA is a
directly owned subsidiary of Western Reserve Life Assurance Co. of Ohio (78%)
("WRL") and AUSA (22%). ATFS is a wholly owned subsidiary of WRL. AUSA and WRL
are wholly owned indirect subsidiaries of AEGON NV, a Netherlands corporation.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 19
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 2-(continued)
The following schedule reflects the percentage of fund assets owned by
affiliated mutual funds (ie: through the asset allocation funds):
Net % of
Assets Net Assets
--------- -----------
Asset Allocation-Conservative Portfolio $1,053 1%
Asset Allocation-Growth Portfolio 21,492 11%
Asset Allocation-Moderate Portfolio 11,502 6%
Asset Allocation-Moderate Growth
Portfolio 28,498 15%
--
33%
==
Investment advisory fees: The Fund pays management fees to ATFA based on
average daily net assets ("ANA") at the following rate:
0.90% of ANA
ATFA currently voluntarily waives its advisory fee and will reimburse the Fund
to the extent that operating expenses, excluding 12b-1 fees, exceed the
following stated annual limit implemented on January 1, 2003:
0.99% Expense Limit
If total Fund expenses fall below the annual expense limitations agreed to by
the adviser within the succeeding three years, the Fund may be required to pay
the advisor a portion or all of the waived advisory fees.
Advisory Fee Available for
Waived Recapture Through
-------------- ------------------
Fiscal Year 2003 $ 215 12/31/2006
Plan of Distribution: The Fund adopted a distribution plan ("Distribution Plan")
pursuant to Rule 12b-1 under the Investment company Act of 1940, as amended.
Pursuant to the Distribution Plan, ATSF entered into a Distribution Agreement
with AFSG effective May 1, 1999.
Under the Distribution Plan and Distribution Agreement on the Initial Class
shares, AFSG, on behalf of the Fund, is authorized to pay various service
providers, as direct payment for expenses incurred in connection with
distribution of the Fund's shares, amounts equal to actual expenses associated
with distributing the shares.
The Distribution Plan on the Service Class shares requires ATSF to pay
distribution fees to AFSG as compensation for its activities, not as
reimbursement for specific expenses. The fee on the Service Class is paid to the
insurance companies for providing services and account maintenance for their
policyholders who invest in the variable insurance products which invest in the
Service Class shares.
The Fund is authorized under the 12b-1 plan to pay fees on each class up to the
following limits:
Initial Class 0.15%
Service Class 0.25%
AFSG has determined that it will not seek payment by the Fund of the
distribution expenses incurred with respect to the Initial Class shares before
April 30, 2004. Prior to AFSG seeking reimbursement of future expenses, policy
and contract owners will be notified in advance. The Fund pays fees relating to
Service Class shares.
Administrative services: The Fund has entered into an agreement with ATFS for
financial and legal fund administration services, which include such items as
compliance, expenses, financial statements and other reporting, distributions,
tax returns, prospectus preparation, board of directors meeting support,
transfer agency and other legal matters. Transfer agent fees are reflected
separately from Administration fees on the Statement of Operations. The Legal
fees on the Statement of Operations are for fees paid to external legal counsel.
ATFS provides its services to the Fund at cost and is reimbursed monthly.
Deferred compensation plan: Each eligible Fund Director may elect participation
in the Deferred Compensation Plan for Directors of ATSF ("the Plan"). Under the
Plan, such Directors may defer payment of a percentage of their total fees
earned as a Fund Director. These deferred amounts may be invested in any
portfolio of IDEX Mutual Funds, an affiliate of the Fund. At December 31, 2003,
the value of invested plan amounts was $6. Invested plan amounts and the total
liability for deferred compensation to the Directors under the Plan at December
31, 2003, are included in Net assets in the accompanying Statement of Assets and
Liabilities.
NOTE 3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the year ended December 31, 2003, are as follows:
Purchases of securities:
Long-Term excluding U.S. Government $ 75,489
U.S. Government -
Proceeds from maturities and sales of securities:
Long-Term excluding U.S. Government 56,611
U.S. Government -
NOTE 4. FEDERAL INCOME TAX MATTERS
The Fund has not made any provision for federal income taxes due to its policy
to distribute all of its taxable income and capital gains to its shareholders
and otherwise qualify as a regulated investment company under the Internal
Revenue Code. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments for items including, but not limited to,
wash sales, foreign currency transactions, net operating losses and capital loss
carryforwards.
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 20
Van Kampen Active International Allocation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2003
(all amounts in thousands)
NOTE 4-(continued)
Reclassifications between Undistributed net investment income (loss),
Undistributed net realized capital gains (loss) and Additional paid-in capital
are made to reflect income and gains available for distribution under federal
tax regulations. Results of operations and net assets are not effected by these
reclassifications. These reclassifications are as follows:
Additional paid-in capital $ (14)
Undistributed net investment income (loss) 2,431
Undistributed net realized capital gains (loss) (2,417)
The tax character of distributions paid may differ from the character of
distributions shown in the Statements of Changes in Net Assets due to short-term
gains being treated as ordinary income for tax purposes. The tax character of
distributions paid during 2002 and 2003 was as follows:
2002 Distributions paid from:
Ordinary income $ 218
Long-term capital gains -
2003 Distributions paid from:
Ordinary income 1,244
Long-term capital gains -
The tax basis components of distributable earnings as of December 31, 2003, are
as follows:
Undistributed Ordinary Income $ 4,908
=========
Undistributed Long-term Capital Gains $ -
=========
Capital Loss Carryforward $ (39,210)
=========
Post October Capital Loss $ 561
=========
Net Unrealized Appreciation (Depreciation) $ 16,120
=========
The capital loss carryforwards are available to offset future realized capital
gains through the periods listed:
Capital Loss
Carryforward Available through
- -------------- ------------------
$ 5,281 December 31, 2009
28,603 December 31, 2010
5,326 December 31, 2011
The aggregate cost of investments and composition of unrealized appreciation
(depreciation) for federal income tax purposes as of December 31, 2003, are as
follows:
Federal Tax Cost Basis $138,134
=========
Unrealized Appreciation $ 21,253
Unrealized (Depreciation) (5,133)
---------
Net Unrealized Appreciation (Depreciation) $ 16,120
=========
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 21
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
Van Kampen Active International Allocation
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Active International
Allocation (the "Fund") (one of the portfolios constituting AEGON/Transamerica
Series Fund, Inc.) at December 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Tampa, Florida
February 19, 2004
AEGON/Transamerica Series Fund, Inc. Annual Report 2003
Van Kampen Active International Allocation 22
Term of
Position(s) Office and
Held with Length of
Name, Address and Age Fund* Time Served
- ---------------------------- --------------------- --------------
DIRECTORS
Peter R. Brown Chairman, Indefinite**
11180 6th Street East Director From 1986
Treasure Island, FL 33706 to present
(DOB 5/10/28)
Daniel Calabria Director Indefinite**
7068 S. Shore Drive S. From 2001
South Pasadena, FL 33707 to present
(DOB 3/05/36)
Janice B. Case Director Indefinite**
205 Palm Island NW From 2001
Clearwater, Florida 33767 to present
(DOB 9/27/52)
Charles C. Harris Director Indefinite**
2 Seaside Lane #304 From 1986
Belleair, FL 33756 to present
(DOB 1/15/30)
Leo J. Hill Director Indefinite**
2201 N. Main St. From 2001
Gainesville, Florida 32609 to present
(DOB 3/27/56)
Russell A. Kimball, Jr. Director Indefinite**
1160 Gulf Boulevard From 1986
Clearwater Beach, FL 34630 to present
(DOB 8/17/44)
Larry N. Norman*** Director Indefinite**
4333 Edgewood Road NE From 2002
Cedar Rapids, IA 52499 to present
(DOB 1/8/53)
Thomas P. O'Neill*** Director Indefinite**
2003-present
Brian C. Scott*** President & Chief Indefinite**
(DOB 9/29/43) Executive Officer From 2002
and Director to present
William W. Short, Jr. Vice Chairman, Indefinite**
6911 Bryan Dairy Road Director From 2000
Suite 210 to present
Largo, FL 33777
(DOB 2/25/36)
OFFICERS*
John K. Carter Senior Vice From 1999
(DOB 4/24/61) President, General to present
Counsel & Secretary
Kim D. Day Vice President, From 2003
(DOB 8/2/55) Treasurer & to present
Principal Financial
Officer
- --------
* The business address of each officer is 570 Carillon Parkway, St.
Petersburg, FL 33716. No officer of the Fund receives any compensation paid
by the Fund.
** Directors serve an indefinite term until his/her successor is elected or
(in some cases) until he/she reaches the mandatory retirement age.
*** May be deemed as "interested person" of the Fund as defined in the 1940 Act
due to employment with an affiliate of ATFA.
Number
of Funds Other
in Complex Directorships
Principal Occupation(s) Overseen Held by
Name, Address and Age During Past 5 Years by Director Director
- ---------------------------- -------------------------------------------------------------- ------------- --------------
DIRECTORS
Peter R. Brown Chairman of the Board, Peter Brown Construction 91 N/A
11180 6th Street East Company (1963-2000); Vice Chairman & Manager, Fund
Treasure Island, FL 33706 B; Vice Chairman & Director, TIS; Chairman & Trustee,
(DOB 5/10/28) IDEX; Director, TIF; Rear Admiral (Ret.) U.S. Navy
Reserve, Civil Engineer Corps
Daniel Calabria Director, TIS; Manager, Fund B; Trustee, IDEX; Trustee 90 N/A
7068 S. Shore Drive S. (1993-present) & President (1993-1995), Florida Tax
South Pasadena, FL 33707 Free Funds
(DOB 3/05/36)
Janice B. Case Director, TIS; Trustee, IDEX ; Manager, Fund B; Senior 90 N/A
205 Palm Island NW Vice President (1996-2000), Vice President
Clearwater, Florida 33767 (1990-1996), Director of Customer Service & Marketing
(DOB 9/27/52) (1987-1990), Florida Power Corporation; Director,
Central Vermont Public Service Co. (Audit Committee);
Director, Western Electricity Coordinating Council
(Chairman, Human Resources and Compensation
Committee)
Charles C. Harris Director TIS; Manager, Fund B; Trustee, IDEX 90 N/A
2 Seaside Lane #304
Belleair, FL 33756
(DOB 1/15/30)
Leo J. Hill Director, TIS; Manager, Fund B; Owner & President, 90 N/A
2201 N. Main St. Prestige Automotive Group (2001-present); Market
Gainesville, Florida 32609 President (1997-1998), NationsBank; President & CEO
(DOB 3/27/56) (1994-1998), Barnett Bank of the Treasure Coast, FL
Russell A. Kimball, Jr. Director, TIS; Manager, Fund B; Trustee, IDEX; General 90 N/A
1160 Gulf Boulevard Manager, Sheraton Sand Key Resort (1975-present)
Clearwater Beach, FL 34630
(DOB 8/17/44)
Larry N. Norman*** President & Chairman, Transamerica Life Insurance 91 N/A
4333 Edgewood Road NE Company; Director, ATFA; Director, TIS; Director ATIS;
Cedar Rapids, IA 52499 Director, ATFS; Director, ATSF; Manager, Fund B; Director,
(DOB 1/8/53) TIF; IDEX Trustees; President, AFSG Securities Corp. (AFSG)
Thomas P. O'Neill*** President, AEGON Financial Services Group, Inc., Financial 90 N/A
Institution Division; Director, ATSF; Director, TIS; Trustee,
IDEX; Director, National Aquarium of Baltimore
Brian C. Scott*** President & Chief Executive Officer, AEGON/Transamerica 91 N/A
(DOB 9/29/43) Series Fund, Inc. (ATSF), President & Chief Executive
Officer IDEX Mutual Funds (IDEX); Transamerica
Occidental's Separate Account Fund B (Fund B),
Transamerica Income Shares, Inc. (TIS); President,
Transamerica Index Funds, Inc. (TIF); Manager,
Transamerica Investment Management, LLC; President,
Director & Chief Executive Officer, AEGON/Transamerica
Fund Advisers, Inc. (ATFA), AEGON/Transamerica Investor
Services, Inc. (ATIS) & AEGON Transamerica Fund
Services, Inc. (ATFS); Chief Executive Officer,
Transamerica Investors, Inc.; Director, President & Chief
Executive Officer, Endeavor Management Co. (2001-2002)
William W. Short, Jr. Vice Chairman, IDEX; Director, TIS; Manager, Fund B; 90 N/A
6911 Bryan Dairy Road President & majority shareholder of Shorts, Inc.;
Suite 210 Chairman, Southern Apparel Corporation, S.A.S. Apparel
Largo, FL 33777 Corporation and S.A.C. Distributors
(DOB 2/25/36)
OFFICERS*
John K. Carter General Counsel, Sr. Vice President & Secretary, ATSF, N/A N/A
(DOB 4/24/61) Fund B & TIS; Vice President & Secretary, TIF; Vice
President & Senior Counsel, Western Reserve Life
Assurance Co. of Ohio ("WRL"); Director, General
Counsel, Sr. Vice President & Secretary, ATFA, ATIS &
ATFS; Vice President, AFSG; Vice President, Secretary &
Anti-Money Laundering Officer, Transamerica Investors,
Inc.; Vice President & Counsel (March 1997-May, 1999),
Salomon Smith Barney.
Kim D. Day Vice President, Treasurer & Principal Financial Officer, N/A N/A
(DOB 8/2/55) ATSF, TIS, Fund B; Vice President & Treasurer, ATFS,
ATFA & ATIS & Transamerica Investors, Inc.; Asst. Vice
President, WRL
- --------
* The business address of each officer is 570 Carillon Parkway, St.
Petersburg, FL 33716. No officer of the Fund receives any compensation paid
by the Fund.
** Directors serve an indefinite term until his/her successor is elected or
(in some cases) until he/she reaches the mandatory retirement age.
*** May be deemed as "interested person" of the Fund as defined in the 1940 Act
due to employment with an affiliate of ATFA.
A History Of Performance(R)
[LOGO] WRL(R)
INSURANCE o ANNUITIES
Home Office: Columbus, Ohio
Administrative Office Address: P.O. Box
5068 Clearwater, Florida 33758-5068
Distributor: AFSG Securities Corporation
www.westernreserve.com
Customer Service: 1-800-851-9777
Item 2: Code of Ethics.
(a) Registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, and any other officers who
serve a similar function.
(c) During the period covered by the report, no amendments were made to the
provisions of this code of ethics.
(d) During the period covered by the report, Registrant did not grant any
waivers, including implicit waivers, from the provisions of this code of
ethics.
(f) (1) Registrant has filed this code of ethics as an exhibit pursuant to Item
10(a)(1) of Form N-CSR.
Item 3: Audit Committee Financial Expert.
Registrant's Board of Directors has determined that Peter Brown and William
Short are "audit committee financial experts," as such term is defined in Item 3
of Form N-CSR. Mr. Brown and Mr. Short are "independent" under the standards set
forth in Item 3 of Form N-CSR. The designation of Mr. Brown and Mr. Short as
"audit committee financial experts" pursuant to Item 3 of Form N-CSR does not
(i) impose upon them any duties, obligations, or liabilities that are greater
than the duties, obligations and liabilities imposed upon them as members of the
Registrant's audit committee or Board of Directors in the absence of such
designation; or (ii) affect the duties, obligations or liabilities of any other
member of the registrant's audit committee or Board of Directors.
Item 4: Principal Accountant Fees and Services.
Fiscal Year Ended 12/31
-----------------------
2002 2003
---- ----
(in thousands)
(a) Audit Fees 456 546
(b) Audit-related Fees 93 25
(c) Tax Fees 44 51
(d) All Other Fees N/A N/A
(e)(1) Pre-approval policy * (see below)
(e)(2) % of above that were pre-approved 0% 0%
(f) If greater than 50%, disclose hours N/A N/A
(g) Non-audit fees rendered to Adviser
(or affiliate that provided services to
Registrant) N/A N/A
(h) Disclose whether the Audit Committee
has considered whether the provisions
of non-audit services rendered to the
Adviser that were NOT pre-approved is
Compatible with maintaining the auditor's
Independence. Yes Yes
*(e)(1) The Audit Committee may delegate any portion of its authority, including
the authority to grant pre-approvals of audit and permitted non-audit
services, to one or more members or a subcommittee. Any decision of the
subcommittee to grant pre-approvals shall be presented to the full Audit
Committee at its next regularly scheduled meeting.
2
Item 5: [Reserved].
Item 6: [Reserved].
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8: [Reserved].
Item 9: Controls and Procedures.
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(c)) as of December 31, 2003, registrant's
principal executive officer and principal financial officer found
registrant's disclosure controls and procedures to be appropriately
designed to ensure that information required to be disclosed by
registrant in the reports that it files under the Securities Exchange
Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required
disclosure, and (b) is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms adopted by the
U.S. Securities and Exchange Commission.
(b) There have been no significant changes in registrant's internal controls
or in other factors that could significantly affect registrant's
internal controls subsequent to the date of the most recent evaluation
as indicated, including no significant deficiencies or material
weaknesses that required corrective action.
Item 10: Exhibits.
(a)(1) Registrant's code of ethics (that is the subject of the disclosure
required by Item 2(a)) is attached.
(2) Separate certifications for Registrant's principal executive officer
and principal financial officer, as required by Rule 30a-2(a) under the
1940 Act, are attached.
(b) A certification for Registrant's principal executive officer and
principal financial officer, as required by Rule 30a-2(b) under the 1940
Act, is attached. This certification is being furnished to the
Securities and Exchange Commission solely pursuant to 18 U.S.C. section
1350 and is not being filed as part of the Form N-CSR with the
Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
AEGON/Transamerica Series Fund, Inc.
------------------------------------
(Registrant)
By: /s/ Brian C. Scott
------------------
President and Chief Executive Officer
Date: March 4, 2004
3
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Brian C. Scott
------------------
President and Chief Executive Officer
Date: March 4, 2004
By: /s/ Kim D. Day
--------------
Vice President, Treasurer and Principal Financial Officer
Date: March 4, 2004
4
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
10(b)(1) Code of Ethics for Principal Executive and Senior Financial Officers
10(b)(2) Section 302 N-CSR Certification of Principal Executive Officer
10(b)(3) Section 302 N-CSR Certification of Principal Financial Officer
10(b)(4) Section 906 N-CSR Certification of Principal Executive Officer,
Principal Financial Officer & General Counsel
5