TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
SEMI-ANNUAL REPORT
Transamerica Occidental's Separate Account Fund B's total return for the first
six months of 1996 was 10.69% after fees compared to a total return of 10.10%
for the S&P 500. The Fund's investments in selected technology stocks and
financial services helped performance while investments in telecommunications
subtracted from the Fund's performance.
In the first half of 1996, a divergence in performance developed between the
stock and bond markets. Lead by strong inflows into equity mutual funds, the
stock market picked up where it left off last year. In contrast, the fixed
income markets began to worry about the strong economy and inflation. The
30-year Treasury yield increased from 6.03% to 6.80% at the end of June. The
performance divergence between stocks and bonds cannot continue. In the second
half of this year, stocks may pause or correct to bring equity valuations more
into line with interest rate levels. In addition, equity mutual fund inflows
have shown recent signs of slowing from their earlier torrid pace.
A correction or pause in the stock market would be perfectly in keeping within a
long-term bull market. The markets have been worrying about resurging inflation
since the bull market started in 1982. From time to time, certain pockets of
price or wholesale inflation have emerged, but they have also proven to be
unsustainable. For the remainder of this year, we expect economic growth to slow
from its recent level. This should calm the bond market and set the stage for
decent stock market returns in the second half of 1996.
The Fund's long-term investment strategy in high quality companies remains
intact. However, in the first half of this year, the Fund did reassess its
investments in the telecommunications sector and sold its positions in Motorola
Corp. and Telecommunications Inc. Competition in this sector has increased
markedly while investment spending continues to be heavy. Returns to
shareholders could be delayed for several years. The Fund has also stayed away
from small, aggressive growth stocks that are currently overvalued.
Gary U. Rolle
Gary U. Rolle
Chairman,
Board of Managers
Transamerica Occidental's
Separate Account Fund B
1
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
Accumulation
End of Quarter Unit Value
- ------------------------------- ------------
Accumulation
End of Quarter Unit Value
- ------------------------------- ------------
March, 1986.................... $ 2.410619
June, 1986..................... 2.416459
September, 1986................ 2.239661
December, 1986................. 2.328998
March, 1987.................... 3.107777
June, 1987..................... 3.185307
September, 1987................ 3.373161
December, 1987................. 2.412006
March, 1988.................... 2.686389
June, 1988..................... 2.933292
September, 1988................ 3.012913
December, 1988................. 2.974378
March, 1989.................... 3.222322
June, 1989..................... 3.704618
September, 1989................ 4.126660
December, 1989................. 3.975169
March, 1990.................... 3.879319
June, 1990..................... 4.124224
September, 1990................ 3.268967
December, 1990................. 3.518587
March, 1991.................... 4.337042
June, 1991..................... $ 4.288242
September, 1991................ 4.480883
December, 1991................. 4.908113
March, 1992.................... 4.895752
June, 1992..................... 4.798707
September, 1992................ 4.981578
December, 1992................. 5.580041
March, 1993.................... 5.893141
June, 1993..................... 6.139891
September, 1993................ 6.868266
December, 1993................. 6.851062
March, 1994.................... 6.629959
June, 1994..................... 6.325672
September, 1994................ 6.905430
December, 1994................. 7.364882
March, 1995.................... 8.376121
June, 1995..................... 9.806528
September, 1995................ 11.275672
December, 1995................. 11.163517
March, 1996.................... 11.495829
June, 1996..................... 12.356950
The table above covers the period from March, 1986 to June 30, 1996. The results
shown should not be considered a representation of the gain or loss which may be
realized from an investment made in the Fund today.
2
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
Number
of Market
Shares Common Stock Value (1)
- ------ ---------------------------------------------------
CONSUMER & BUSINESS SERVICES (14.9%)
40,000 Autodesk Inc............................ $ 1,195,000
40,000 Broderbund Software, Inc.*.............. 1,290,000
35,000 Intuit, Inc.*........................... 1,653,750
20,000 Microsoft Corporation*.................. 2,402,500
-----------
6,541,250
FINANCIAL SERVICES (14.0%)
35,000 Franklin Resources Inc.................. 2,135,000
85,000 Schwab (Charles) Inc.................... 2,082,500
8,000 Wells Fargo & Company................... 1,913,000
-----------
6,130,500
INDUSTRIAL TECHNOLOGY (19.8%)
40,000 Applied Materials, Inc.*................ 1,220,000
40,000 Dell Computer Corp.*.................... 2,035,000
48,000 Intel Corporation....................... 3,525,000
45,000 Millipore Corporation................... 1,884,375
-----------
8,664,375
INDUSTRIAL GROWTH/
SPECIAL SITUATIONS (20.3%)
40,000 Briggs & Stratton Corp.................. 1,645,000
30,000 Gillette Company........................ 1,871,250
33,000 McGraw-Hill Companies................... 1,509,750
74,000 Silver King Communications Inc.*........ 2,220,000
70,000 Smith's Food & Drug Centers............. 1,662,500
-----------
8,908,500
Number
of Market
Shares Common Stock Value (1)
- ------ ---------------------------------------------------
TRANSACTION PROCESSING (14.6%)
50,788 First Data Corporation.................. $ 4,050,343
35,000 Transaction Systems Architect*.......... 2,345,000
-----------
6,395,343
TRAVEL & LEISURE (15.0%)
33,000 Disney (Walt) Company................... 2,074,875
100,000 Host Marriott Corporation*.............. 1,300,000
60,000 Mirage Resorts Inc.*.................... 3,210,000
-----------
6,584,875
43,224,843
Total Common Stock (98.6%)..............
635,323
Cash, Cash Equivalents and Receivables
Less Liabilities (1.4%)................
-----------
$43,860,166
NET ASSETS (100%).......................
===========
- ------------
(1) Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities.
* Indicates non-income producing stocks.
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
June 30, 1996
ASSETS:
<S> <C> <C>
Investment in common stock -- at market value (cost $23,555,870)............... $43,224,843
Cash and cash equivalents...................................................... 676,793
Dividends and interest receivable.............................................. 20,047
Receivable for investment sold................................................. 454,339
-----------
TOTAL ASSETS.............................................................. 44,376,022
-----------
LIABILITIES:
Due to Transamerica Occidental's general account............................... 14,106
Miscellaneous account payable.................................................. 501,750
-----------
TOTAL LIABILITIES......................................................... 515,856
-----------
NET ASSETS..................................................................... $43,860,166
===========
Net assets attributable to variable annuity contractholders -- 3,512,315 units
at $12.356950 per unit....................................................... $43,401,500
Reserves for retired annuitants (Note C)....................................... 458,666
-----------
$43,860,166
===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended June 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net investment loss............................................. $ (144,437) $ (125,324)
Net realized gain from security transactions.................... 5,053,966 582,751
Net unrealized (depreciation) appreciation of investments....... (615,279) 8,640,216
----------- -----------
Net increase in Net Assets from operations...................... 4,294,250 9,097,643
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).................. 18,365 25,713
Payments to Contract Owners:
Annuity payments.............................................. (16,377) (11,494)
Terminations and withdrawals.................................. (1,035,419) (874,291)
Adjustment for mortality guarantees on retired annuitants....... 7,445 4,770
----------- -----------
Total increase in Net Assets.................................... 3,268,264 8,242,341
Balance at beginning of year.................................... 40,591,902 27,900,905
----------- -----------
Balance at end of period........................................ $43,860,166 $36,143,246
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996
NET INVESTMENT INCOME
INCOME:
<S> <C>
Dividends.................................................................. $ 107,632
Interest................................................................... 21,727
----------
Total investment income.................................................. 129,359
----------
EXPENSES (Note A):
Investment management services............................................. 63,185
Mortality and expense risk charges......................................... 210,611
----------
Total expenses........................................................... 273,796
----------
Net investment loss........................................................... (144,437)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions...................................... 5,053,966
Change in unrealized appreciation............................................. (615,279)
----------
Net realized and unrealized gain on investments............................... 4,438,687
----------
Net increase in Net Assets from operations............................... $4,294,250
==========
</TABLE>
See notes to financial statements.
5
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as an
open-end diversified investment company. The Fund's investment objective is
long-term capital growth.
Investment in Securities
Common stocks are valued at the last closing price for securities traded on
a national stock exchange and the bid price for unlisted securities. The cost of
securities purchased (excluding short-term investments) and proceeds from sales
aggregated $9,984,971 and $11,055,768 during the six months ending June 30,
1996. Realized gains and losses on investments are determined using the average
cost method.
Federal Income Taxes
Operations of the Fund will form a part of, and be taxed with, those of
Transamerica Occidental Life, which is taxed as a "life insurance company" under
the Internal Revenue Code. The Fund will not be taxed as a regulated investment
company under subchapter M of the Internal Revenue Code. As under current law,
income from assets maintained in the Fund for the exclusive benefit of
Participants is in general not subject to federal income tax. Transamerica
Occidental Life will not charge the Fund for income taxes applicable to its
investment in the Fund.
Expenses
The value of the Fund has been reduced by charges on each Valuation Date
for investment management services on the basis of an annual rate of 0.3% and
mortality and expense risks on the basis of an annual rate of 1.0%.
Other
The Fund follows industry practice and records security transactions on the
trade date. Dividend income is recognized on the ex-dividend date, and interest
income is recognized on an accrual basis.
NOTE B -- TRANSAMERICA OCCIDENTAL LIFE INVESTMENT
As of June 30, 1996, Transamerica Occidental Life had deposited $2,000,000
(current fund value of $26,412,449) in the Fund under an amendment to the
California Insurance Code which permits domestic life insurers to allocate
amounts to such accounts. Transamerica Occidental Life is entitled to withdraw
all but $100,000 of its proportionate share of the Fund, in whole or in part, at
any time.
6
<PAGE>
NOTE C -- RESERVES FOR RETIRED ANNUITANTS
Reserves for retired annuitants are computed using The Annuity Table for
1949, ultimate, one year age setback and an assumed investment earnings rate of
3 1/2%.
NOTE D -- REMUNERATION
No remuneration was paid during the six months ended June 30, 1996 by
Transamerica Occidental's Separate Account Fund B to any member of the Board of
Managers or officer of Fund B or any affiliated person of such members or
officers.
FINANCIAL HIGHLIGHTS
Selected data for an accumulation unit outstanding throughout each six
month period ended June 30 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment income.......................... $ .036 $ .020 $ .019 $ .025 $ .051
Expenses................................... .077 .054 .044 .038 .034
------- ------ ------ ------ ------
Net investment income (loss)............... (.041) (.034) (.025) (.013) .017
Net realized and unrealized gain (loss) on
investments.............................. 1.234 2.476 (.500) .573 (.126)
------- ------ ------ ------ ------
Net increase (decrease) in
accumulation unit value............. 1.193 2.442 (.525) .560 (.109)
Accumulation unit value:
Beginning of year........................ 11.164 7.365 6.851 5.580 4.908
------- ------ ------ ------ ------
End of period............................ $12.357 $9.807 $6.326 $6.140 $4.799
======= ====== ====== ====== ======
Ratio of expenses to average accumulation
fund balance............................. 1.30% 1.30% 1.31% 1.29% 1.30%
Ratio of net investment income (loss) to
average accumulation fund balance........ (0.69%) (0.81%) (0.73%) (0.44%) 0.79%
Portfolio turnover......................... 24.02% 12.09% 24.56% 20.97% 23.36%
Number of accumulation units outstanding at
end of period (000 omitted).............. 3,512 3,647 3,777 3,940 4,088
</TABLE>
7
<PAGE>
(LOGO)
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
Managers and Officers
RICHARD N. LATZER, Manager
DONALD E. CANTLAY, Manager
DeWAYNE W. MOORE, Manager
TRANSAMERICA
GARY U. ROLLE, Chairman of the
Board
OCCIDENTAL'S
PETER J. SODINI, Manager
BARBARA A. KELLEY, President
SEPARATE
MATT R. COBEN, Vice President
ACCOUNT FUND B
SALLY S. YAMADA, Treasurer and
Assistant Secretary
THOMAS M. ADAMS, Secretary
SEMI-ANNUAL FINANCIAL
REGINA M. FINK, Assistant Secretary
REPORT
Distributor:
JUNE 30, 1996
Transamerica Financial Resources,
Inc.
1150 South Olive
Los Angeles, California 90015-2211
Tel. (800) 245-8250
Custodian:
Mellon Bank Securities Trust
1 Mellon Bank Ctr.
Pittsburgh, PA 15258
Tel. (800) 234-6356
Transamerica Occidental
Life Insurance Company
Annuity Service Center
P.O. Box 31848
Charlotte, NC 28231-1848
800 258-4260
(LOGO)
This report cannot be used as sales literature.
TFM 1036 Ed. 8-96
<PAGE>
