<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
SEMI-ANNUAL REPORT
We are pleased to report that the Transamerica Occidental's Separate Account
Fund B (the "Fund") produced a total return of 33.3% for the first half of 1997,
outpacing the S&P 500 total return of 20.6%. The Fund's 5-year annual compound
total return for the six month period ending June 30, 1997, was 33.1% versus
19.8% for the S&P 500. The Fund's strategy for buying and holding high-quality
growth companies has paid off. For the first half of 1997, high-quality
technology and financial services companies contributed to the Fund's
performance.
Common stocks continue to benefit from benign inflation, low interest rates and
excellent earnings growth. Another factor benefiting the stock market is the
emerging realization that American companies are dominating the global markets,
further adding to their growth prospects. American companies have proven
themselves to be the best at establishing global brands and innovating and
implementing in the fast moving world of technology. This has led to long-term
competitive advantage and higher valuations in the stock market.
We continue to be positive on the stock market. Many stock market pundits would
disagree with us. So far, they have been wrong. The reason they have been wrong
is that they continue to believe that growth and low inflation are not possible.
They also base their valuation analysis on historical measures. We feel that
growth and low inflation can co-exist and that valuation is a dynamic process
based on current and future expectations, not merely historical measures.
Companies that are capable of growing in a low inflation economy will outperform
most other investments.
The Fund will continue to emphasize its high-quality growth companies. From time
to time, however, we will sell portions of companies that have performed
extraordinarily well and use the proceeds to refresh our portfolio with new
ideas. Some of our newer ideas, such as Smith Food & Drug and MoneyGram, are
often perceived as value ideas. We believe, however, that they are just entering
their growth phase and will appreciate to a higher market valuation in the
future.
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, 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
September, 1996................ 13.007681
December, 1996................. 14.289273
March, 1997.................... 14.574090
June, 1997..................... 18.948025
The table above covers the period from March, 1987 to June, 1997. 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, 1997
Number
of Market
Shares Common Stock Value (1)
- ------ ------------ ---------
BANKING (2.6%)
6,000 Wells Fargo & Company................... $ 1,617,000
-----------
BUSINESS SERVICES (7.0%)
101,576 First Data Corporation.................. 4,462,945
-----------
CHEMICALS (3.5%)
34,000 BetzDearborn, Inc....................... 2,244,000
-----------
COMPUTERS & BUSINESS EQUIPMENT (14.8%)
80,000 Dell Computer Corporation*.............. 9,394,960
-----------
CONGLOMERATES (4.5%)
30,000 Gillette Company........................ 2,842,500
-----------
ELECTRICAL EQUIPMENT (3.1%)
45,000 Millipore Corporation................... 1,980,000
-----------
ELECTRONICS (16.3%)
50,000 Applied Materials, Inc.*................ 3,540,600
48,000 Intel Corporation....................... 6,806,976
-----------
10,347,576
-----------
FINANCIAL SERVICES (16.4%)
85,000 Charles Schwab Corporation.............. 3,458,395
52,500 Franklin Resources, Inc................. 3,809,505
200,000 Moneygram Payment Systems, Inc.*........ 3,150,000
-----------
10,417,900
-----------
Number
of Market
Shares Common Stock Value (1)
- ------ ------------ ---------
HOTELS & RESTAURANTS (7.0%)
80,000 Host Marriott Corporation*.............. $ 1,424,960
120,000 Mirage Resorts, Inc.*................... 3,030,000
-----------
4,454,960
-----------
LEISURE TIME (4.2%)
33,000 The Walt Disney Company................. 2,648,250
-----------
RETAIL GROCERY (7.6%)
90,000 Smith's Food & Drug Centers, Inc........ 4,826,250
-----------
SOFTWARE (12.6%)
50,000 Broderbund Software, Inc.*.............. 1,234,350
40,000 Microsoft Corporation*.................. 5,055,000
50,000 Transaction Systems Architects, Inc.*... 1,725,000
-----------
8,014,350
-----------
63,250,691
Total Common Stock (99.6%)..............
277,123
Other Assets Less Liabilities (0.4%)....
-----------
$63,527,814
NET ASSETS (100.0%).....................
===========
- ------------
(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>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
JUNE 30, 1997
ASSETS:
Investment in common stock -- at market value (cost
$21,560,528).............................................. $63,250,691
Cash and cash equivalents................................... 322,361
Dividends and interest receivable........................... 12,775
-----------
TOTAL ASSETS........................................... 63,585,827
-----------
LIABILITIES:
Due to Transamerica Occidental's general account............ 58,013
-----------
NET ASSETS.................................................. $63,527,814
===========
Net assets attributable to variable annuity
contractholders -- 3,316,970 units at $18.948025 per
unit...................................................... $62,850,032
Reserves for retired annuitants (Note C).................... 677,782
-----------
$63,527,814
===========
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net investment loss......................................... $ (235,484) $ (144,437)
Net realized gain from security transactions................ 329,043 5,053,966
Net unrealized appreciation (depreciation) of investments... 15,686,073 (615,279)
----------- -----------
Net increase in Net Assets resulting from operations........ 15,779,632 4,294,250
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).............. 29,787 18,365
Payments to Contract Owners:
Annuity payments.......................................... (19,111) (16,377)
Terminations and withdrawals.............................. (1,817,595) (1,035,419)
Adjustment for mortality guarantees on retired annuitants... 8,584 7,445
----------- -----------
Total increase in Net Assets................................ 13,981,297 3,268,264
Balance at beginning of year................................ 49,546,517 40,591,902
----------- -----------
Balance at end of period.................................... $63,527,814 $43,860,166
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
NET INVESTMENT INCOME
INCOME:
Dividends.............................................. $ 99,790
Interest............................................... 9,098
-----------
Total investment income.............................. 108,888
-----------
EXPENSES (Note A):
Investment management services......................... 79,567
Mortality and expense risk charges..................... 264,805
-----------
Total expenses....................................... 344,372
-----------
Net investment loss....................................... (235,484)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions.............. 329,043
Net change in unrealized appreciation on investments...... 15,686,073
-----------
Net realized and unrealized gain on investments........... 16,015,116
-----------
Net increase in Net Assets from operations........... $15,779,632
===========
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 $1,217,531 and $3,134,681, respectively during the six months ended
June 30, 1997. The Fund had gross unrealized gains of $41,690,163 at June 30,
1997 related to these investments. Realized gains and losses on investments are
determined using the average cost method.
Cash Equivalents
Cash equivalents consist of money market funds invested daily from excess
cash balances on deposit.
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. Transamerica Occidental Life will not charge the Fund
for income taxes applicable to its investment in the Fund. 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.
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%. These
charges are paid to Transamerica Occidental Life.
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, 1997, Transamerica Occidental Life had deposited $2,000,000
(current fund value of $40,500,588) in the Fund under an amendment to the
California Insurance Code which
6
<PAGE>
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.
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, 1997 by the
Fund to any member of the Board of Managers or officer of the Fund 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>
1997 1996 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment income......................... $ .032 $ .036 $ .020 $ .019 $ .025
Expenses.................................. .102 .077 .054 .044 .038
------- ------- ------ ------ ------
Net investment loss....................... (.070) (.041) (.034) (.025) (.013)
Net realized and unrealized gain (loss) on
investments............................. 4.729 1.234 2.476 (.500) .573
------- ------- ------ ------ ------
Net increase (decrease) in
accumulation unit value............ 4.659 1.193 2.442 (.525) .560
Accumulation unit value:
Beginning of year....................... 14.289 11.164 7.365 6.851 5.580
------- ------- ------ ------ ------
End of period........................... $18.948 $12.357 $9.807 $6.326 $6.140
======= ======= ====== ====== ======
Ratio of expenses to average accumulation
fund balance(a)......................... 1.30% 1.30% 1.30% 1.31% 1.29%
Ratio of net investment loss to average
accumulation fund balance(a)............ (0.87%) (0.69%) (0.81%) (0.73%) (0.44%)
Portfolio turnover........................ 0.56% 24.02% 12.09% 24.56% 20.97%
Number of accumulation units outstanding
at end of period (000 omitted).......... 3,317 3,512 3,647 3,777 3,940
</TABLE>
(a) On an annualized basis
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, 1997
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. 8-97
<PAGE>
