TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
ANNUAL REPORT
Transamerica Occidental's Separate Account Fund B concluded another successful
year in 1996. The Fund's total return for 1996 was 28.00% after fees compared to
the S&P 500's total return of 22.96%. The Fund's investments in established
growth stocks like Intel, Microsoft, Gillette, and Charles Schwab served it
particularly well.
Financial returns in the stock and bond markets diverged in 1996. Excellent
corporate earnings reports rallied the stock market while worries over the
strong economy and resurgent inflation kept bond market returns in check. In
addition, mutual fund inflows into the stock market were spectacular. Over $200
billion flowed into the stock market through equity mutual funds and this large
inflow of funds helped support higher valuation levels for common stock.
We believe the strong market in equities has occurred for very solid fundamental
reasons. American companies have restructured themselves by rationalizing their
assets and deploying new technologies. American companies have also become
extraordinary global competitors by establishing technological standards and
achieving global brand names. This has all come at a time when the baby boom
generation is in its prime savings years and the government budget deficit is
shrinking. The discrepancy between bond and stock market returns may eventually
check the stock market's advance, but these underlying fundamental trends still
add up to a positive long-term outlook for stocks.
The Fund's long-term investment strategy has generally favored companies with
established brands, superior products, large market shares, high profitability,
and smart managements. This has led to investments in large, well-known
companies like those mentioned above. These companies enjoy inherent competitive
advantages that should make them good stock market investments for years to
come.
/s/ Gary U. Rolle
Gary U. Rolle
Chairman,
Board of Managers
Transamerica Occidental's
Separate Account Fund B
<PAGE>
<TABLE>
<CAPTION>
TABLE OF ACCUMULATION UNIT VALUES
Accumulation Accumulation
End of Quarter Unit Value End of Quarter Unit Value
<S> <C> <C> <C> <C>
---------------- ------------- ---------------- ------------
December, 1986.................. $ 2.328998 March, 1992........................... $ 4.895752
March, 1987..................... 3.107777 June, 1992............................ 4.798707
June, 1987...................... 3.185307 September, 1992....................... 4.981578
September, 1987................. 3.373161 December, 1992........................ 5.580041
December, 1987.................. 2.412006 March, 1993........................... 5.893141
March, 1988..................... 2.686389 June, 1993............................ 6.139891
June, 1988...................... 2.933292 September, 1993....................... 6.868266
September, 1988................. 3.012913 December, 1993........................ 6.851062
December, 1988.................. 2.974378 March, 1994........................... 6.629959
March, 1989..................... 3.222322 June, 1994............................ 6.325672
June, 1989...................... 3.704618 September, 1994....................... 6.905430
September, 1989................. 4.126660 December, 1994........................ 7.364882
December, 1989.................. 3.975169 March, 1995........................... 8.376121
March, 1990..................... 3.879319 June, 1995............................ 9.806528
June, 1990...................... 4.124224 September, 1995....................... 11.275672
September, 1990................. 3.268967 December, 1995........................ 11.163517
December, 1990.................. 3.518587 March, 1996........................... 11.495829
March, 1991..................... 4.337042 June, 1996............................ 12.356950
June, 1991...................... 4.288242 September, 1996....................... 13.007681
September, 1991................. 4.480883 December, 1996........................ 14.289273
December, 1991.................. 4.908113
</TABLE>
The table above covers the period from December 31, 1986 to December 31, 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.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Number
of Market
Shares Common Stock Value (1)
--------- ------------------------------------------------ -----------
BANKING & FINANCIAL SERVICES (18.1%)
<S> <C> <C>
35,000 Franklin Resources, Inc........................ $ 2,393,125
125,000 Moneygram Payment Systems, Inc.*............... 1,656,250
85,000 Schwab (Charles) Corporation................... 2,720,000
8,000 Wells Fargo & Company.......................... 2,158,000
-----------
8,927,375
BROADCASTING (2.6%)
55,000 HSN, Inc.*..................................... 1,306,250
-----------
BUSINESS SERVICES (7.5%)
101,576 First Data Corporation......................... 3,707,524
-----------
CHEMICALS (4%)
34,000 BetzDearborn, Inc.............................. 1,989,000
-----------
COMPUTERS & BUSINESS EQUIPMENT (12.2%)
50,000 Applied Materials, Inc.*....................... 1,796,850
80,000 Dell Computer Corporation*..................... 4,250,000
-----------
6,046,850
ELECTRONICS & ELECTRICAL EQUIPMENT (16.4%)
48,000 Intel Corporation.............................. 6,284,976
45,000 Millipore Corporation.......................... 1,861,875
-----------
8,146,851
HOUSEHOLD PRODUCTS (4.7%)
30,000 Gillette Company............................... $ 2,332,500
-----------
RETAIL GROCERY (5%)
80,000 Smith's Food & Drug Centers, Inc.*............. 2,480,000
-----------
SOFTWARE (15.6%)
50,000 Broderbund Software, Inc.*..................... 1,487,500
35,000 Intuit, Inc.*.................................. 1,102,500
40,000 Microsoft Corporation*......................... 3,305,000
55,000 Transaction System Architects, Inc.*........... 1,828,750
-----------
7,723,750
TRAVEL & LEISURE (13.1%)
33,000 Disney (Walt) Company.......................... 2,297,625
100,000 Host Marriott Corporation*..................... 1,600,000
120,000 Mirage Resorts, Inc.*.......................... 2,595,000
-----------
6,492,625
Total Common Stock (99.2%)..................... 49,152,725
Cash, Cash Equivalents and Receivables
Less Liabilities (.8%)........................ 393,792
-----------
NET ASSETS (100%).............................. $49,546,517
-----------
</TABLE>
- ----------
(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.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
December 31, 1996
ASSETS:
<S> <C> <C>
Investment in common stock-- at market value (cost $23,148,635).................... $ 49,152,725
Cash and cash equivalents........................................................... 399,444
Dividends and interest receivable................................................... 14,006
Miscellaneous accounts receivable................................................... 6,350
------------
TOTAL ASSETS................................................................... 49,572,525
LIABILITIES:
Due to Transamerica Occidental's general account.................................... 26,008
------------
NET ASSETS.......................................................................... $ 49,546,517
============
Net assets attributable to variable annuity
contractholders-- 3,431,376 units at $14.289273 per unit......................... $ 49,031,862
Reserves for retired annuitants (Note C)............................................ 514,655
------------
$ 49,546,517
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31,
1996 1995
-------------- ---------
<S> <C> <C>
Net investment loss................................................... $ (321,912) $ (301,346)
Net realized gain from security transactions.......................... 5,630,822 1,632,093
Net unrealized gain on investments.................................... 5,719,838 12,765,938
------------ ------------
Net increase in Net Assets resulting from operations.................. 11,028,748 14,096,685
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes)........................ 47,194 57,007
Payments to Contract Owners:
Annuity payments.................................................... (33,516) (26,525)
Terminations and withdrawals........................................ (2,101,986) (1,447,179)
Adjustment for mortality guarantees on retired annuitants............. 14,175 11,009
------------ ------------
Total increase in Net Assets.......................................... 8,954,615 12,690,997
Net Assets at beginning of year....................................... 40,591,902 27,900,905
------------ ------------
Net Assets at end of year............................................. $ 49,546,517 $ 40,591,902
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
NET INVESTMENT INCOME
INCOME:
<S> <C>
Dividends........................................................................ $ 209,147
Interest......................................................................... 40,106
------------
Total investment income........................................................ 249,253
------------
EXPENSES (Note A):
Investment management services................................................... 131,807
Mortality and expense risk charges............................................... 439,358
------------
Total expenses................................................................. 571,165
------------
Net investment loss................................................................. (321,912)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions........................................ 5,630,822
Net unrealized gain on investments.................................................. 5,719,838
------------
Net realized and unrealized gain on investments..................................... 11,350,660
------------
Net increase in Net Assets resulting from
operations.................................................................... $ 11,028,748
============
</TABLE>
See notes to financial statements.
<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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
additional information becomes known which could impact the amounts reported and
disclosed herein.
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 $14,229,174 and $16,274,580, respectively, in 1996. The Fund had
gross unrealized gains of $26,004,090 at December 31, 1996 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 December 31, 1996, Transamerica Occidental Life had deposited
$2,000,000 (current fund value of $30,542,706) 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.
NOTE C -- RESERVES FOR RETIRED ANNUITANTS
Reserves for retired annuitants are computed using The Annuity Table for
1949, ultimate, one year age set back and an assumed investment earnings rate of
3 1/2%.
NOTE D -- REMUNERATION
No remuneration was paid during 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 year are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Investment income............................ $ .071 $ .044 $ .040 $ .046 $ .082
Expenses..................................... .163 .125 .089 .081 .064
--------- --------- -------- -------- --------
Net investment (loss) income................. (.092) (.081) (.049) (.035) .018
Net realized and unrealized gain on
investments................................ 3.217 3.880 .563 1.306 .654
--------- --------- -------- -------- --------
Net increase in accumulation unit
value................................. 3.125 3.799 .514 1.271 .672
Accumulation unit value:
Beginning of year.......................... 11.164 7.365 6.851 5.580 4.908
--------- --------- -------- -------- --------
End of year................................ $ 14.289 $ 11.164 $ 7.365 $ 6.851 $ 5.580
========= ========= ======== ======== ========
Ratio of expenses to average accumulation
fund balance............................... 1.31% 1.32% 1.31% 1.30% 1.30%
Ratio of net investment (loss) income to
average accumulation fund balance.......... (0.74)% (0.86)% (0.72)% (0.57)% 0.37%
Portfolio turnover........................... 32.94% 17.17% 30.62% 41.39% 43.48%
Number of accumulation units outstanding
at end of year (000 omitted)............... 3,431 3,598 3,749 3,820 4,062
</TABLE>
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
REPORT OF INDEPENDENT AUDITORS
Unitholders and Board of Managers, Transamerica Occidental's
Separate Account Fund B
Board of Directors, Transamerica Occidental Life Insurance Company
We have audited the accompanying statement of net assets of Transamerica
Occidental's Separate Account Fund B, including the portfolio of investments, as
of December 31, 1996, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements are the responsibility of
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Transamerica Occidental's
Separate Account Fund B at December 31, 1996, the results of its operations for
the year then ended, the changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Charlotte, North Carolina
February 18, 1997
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE LOGO
ACCOUNT FUND B
Managers and Officers
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
ANNUAL FINANCIAL
REPORT
DECEMBER 31, 1996
RICHARD N. LATZER, Manager
DONALD E. CANTLAY, Manager
DeWAYNE W. MOORE, Manager
GARY U. ROLLE, Chairman of the Board
PETER J. SODINI, Manager
BARBARA A. KELLEY, President
MATT R. COBEN, Vice President
SALLY S. YAMADA, Treasurer and Assistant
Secretary
THOMAS M. ADAMS, Secretary
REGINA M. FINK, Assistant Secretary
Distributor:
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
Ernst & Young LLP
One Independence Center
101 N. Tryon St., Suite 1100
Charlotte, NC 28246
Tel. (704) 372-6300
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. 2-97
