<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
ANNUAL REPORT
Dear Investor:
We are pleased to report that the Transamerica Occidental's Separate Account
Fund B continued its excellent performance in the first half of 1998. The
Portfolio generated a total return of 24.00% for the six months ended June 30,
1998 versus the S&P 500's return of 17.71%. Leading technology names like Dell
Computer and Microsoft contributed to the Portfolio's performance. New additions
to the Portfolio such as IMS Health and Sodexho Marriott Services also helped
bolster the Portfolio's returns.
At the beginning of the year, we expected more temperate results from the stock
market based on weakening Asian economies and unsustainability of 20% plus stock
market returns. Asia continues to be a problem because of overcapacity and
weakening currencies. The stock market's recent correction reflects not only the
Asian dilemma but also some pullback from the strong first half performance. The
market is most likely discounting slower economic and profit growth. In our
view, this correction is short-term and not out of the ordinary,
Our long-term outlook is still positive given the tremendous demand for savings
and investment products and the increasing importance of technology investment
to the economy. The Portfolio continues with its positions in leading financial
services firms as well as the leading technology companies that control industry
standards. Additional stock selections has focused on companies that have a
unique position in their respective industries such as IMS Health, the leading
provider of health care information to large pharmaceutical companies and
Sodexho Marriott Services, the leading contract food service and facilities
management company in North America.
Thank you for your continued investment in the Separate Account Fund B.
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
-------------- ------------
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
Accumulation
End of Quarter Unit Value
-------------- ------------
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
September, 1997................ 22.762719
December, 1997................. 20.822981
March, 1998.................... 24.769837
June, 1998..................... 26.122076
The table above covers the period from June, 1988, to June, 1998. 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, 1998
Number
of Market
Shares Common Stock Value (1)
- ------ ------------ ---------
AGRICULTURAL BIOTECHNOLOGY (2.91%)
$ 2,482,500
Pioneer Hi-Bred International, Inc. ....
-----------
BUSINESS SERVICES (3.97%)
101,576 First Data Corporation.................. 3,383,700
-----------
CHEMICALS (2.98%)
2,543,750
Minerals Technologies, Inc. ............
-----------
COMMERCIAL SERVICES (8.63%)
3,150,000
Nielsen Media Research..................
4,205,000
Sodexho Marriott Services, Inc.*........
-----------
7,355,000
-----------
COMPUTERS & BUSINESS EQUIPMENT (14.15%)
90,000 Dell Computer Corporation*.............. 12,065,560
-----------
CONGLOMERATES (3.32%)
30,000 Gillette Company........................ 2,834,350
-----------
CONTAINERS & PACKAGING (1.94%)
1,653,750
Sealed Air Corporation*.................
-----------
ELECTRONICS (10.42%)
100,000 Applied Materials, Inc.*................ 2,950,000
80,000 Intel Corporation....................... 5,930,000
-----------
8,880,000
-----------
FINANCIAL SERVICES (10.80%)
127,500 Charles Schwab Corporation.............. 3,802,500
52,500 Franklin Resources, Inc. ............... 5,400,000
-----------
9,202,500
-----------
HOTELS & RESTAURANTS (3.13%)
120,000 Mirage Resorts, Inc.*................... 2,664,000
-----------
Number
of Market
Shares Common Stock Value (1)
- ------ ------------ ---------
LEISURE TIME (9.01%)
70,000 Pixar, Inc.*............................ $ 4,528,125
33,000 Disney (Walt) Company................... 3,151,860
-----------
7,679,985
-----------
REAL ESTATE OPERATIONS (1.62%)
45,000 CCA Prison Realty Trust................. 1,378,125
-----------
RETAIL (7.48%)
170,000 Fred Meyer, Inc.*....................... 6,375,000
-----------
SOFTWARE (12.49%)
595,000
IMS Health, Inc.*.......................
40,000 Microsoft Corporation*.................. 8,128,125
50,000 Transaction System Architects, Inc.*.... 1,925,000
-----------
10,648,125
-----------
TRANSPORTATION/RAIL (4.08%)
3,473,750
Kansas City Southern Ind., Inc. ........
-----------
82,620,095
Total Common Stock (96.93%).............
Preferred Stock
----------------------------------------
CONTAINERS & PACKAGING (.98%)
840,000
Sealed Air Corporation..................
-----------
1,777,854
Cash, Cash Equivalents and Receivables
Less Liabilities (2.09%)...............
-----------
$85,234,949
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>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
JUNE 30, 1998
ASSETS:
Investments in common stock -- at market value (cost
$33,310,997).............................................. $83,460,095
Cash and cash equivalents................................... 2,350,225
Dividends and interest receivable........................... 5,212
Miscellaneous receivable.................................... 795
-----------
TOTAL ASSETS........................................... 85,816,327
LIABILITIES:
Due to Transamerica Occidental's general account............ 578,378
-----------
NET ASSETS.................................................. $85,237,949
===========
Net assets attributable to variable annuity
contractholders -- 3,241,030 units at $26.122076 per
unit...................................................... $84,662,437
Reserves for retired annuitants (Note C).................... 575,512
-----------
$85,237,949
===========
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
Six months
ended Year ended
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Net investment loss......................................... $ (363,057) $ (565,561)
Net realized gain from security transactions................ 8,796,925 7,534,255
Change in unrealized appreciation........................... 9,011,650 15,133,358
----------- -----------
Net increase in net assets resulting from operations........ 17,445,518 22,102,052
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).............. 40,378 55,296
Payments to Contract Owners:
Annuity payments.......................................... (30,264) (48,722)
Terminations and withdrawals.............................. (1,126,662) (2,779,706)
Adjustment for mortality guarantees on retired annuitants... 18,998 14,543
----------- -----------
Total increase in net assets................................ 16,347,969 19,343,463
Net assets at beginning of period........................... 68,889,980 49,546,517
----------- -----------
Net assets at end of period................................. $85,237,949 $68,889,980
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
JUNE 30, 1998
NET INVESTMENT INCOME
INCOME:
Dividends.............................................. $ 120,086
Interest............................................... 23,689
-----------
Total investment income.............................. 143,775
-----------
EXPENSES:
Investment management services......................... 505,464
Mortality and expense risk charges..................... 1,367
-----------
Total expenses....................................... 506,831
-----------
Net investment loss....................................... (363,057)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions.............. 8,796,925
Net change in unrealized appreciation on investments...... 9,011,650
-----------
Net realized and unrealized gain on investments........... 17,808,575
-----------
Net increase in Net Assets resulting from
operations.......................................... $17,445,519
===========
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.
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 $21,872,977 and $12,762,834, respectively, in 1998. The Fund had
gross unrealized gains of $50,149,098 at June 30, 1998 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.
6
<PAGE>
NOTE B -- TRANSAMERICA OCCIDENTAL LIFE INVESTMENT
As of June 30, 1998, Transamerica Occidental Life had deposited $2,000,000
(current fund value of $55,834,813) 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 1998 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 period
are as follows:
<TABLE>
<CAPTION>
For six
months
ended
June 30,
1998 1997 1996 1995 1994 1993
-------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Investment income....................... $ 0.044 $ .077 $ .071 $ .044 $ .040 $ .046
Expenses................................ (0.154) 0.244 .163 .125 .089 .081
------- ------- ------- ------- ------ ------
Net investment loss..................... (0.110) (0.167) (.092) (.081) (.049) (.035)
Net realized and unrealized gain on
investments........................... 5.409 6.701 3.217 3.880 .563 1.306
------- ------- ------- ------- ------ ------
Net increase in accumulation unit
value............................. 5.299 6.534 3.125 3.799 .514 1.271
Accumulation unit value:
Beginning of period................... 20.823 14.289 11.164 7.365 6.851 5.580
------- ------- ------- ------- ------ ------
End of period......................... $26.122 $20.823 $14.289 $11.164 $7.365 $6.851
======= ======= ======= ======= ====== ======
Ratio of expenses to average
accumulation fund balance(a).......... (1.27)% 1.33% 1.31% 1.32% 1.31% 1.30%
Ratio of net investment loss to average
accumulation fund balance(a).......... (0.87)% (0.91)% (0.74)% (0.86)% (0.72)% (0.57)%
Portfolio turnover...................... 16.21% 15.21% 32.94% 17.17% 30.62% 41.39%
Number of accumulation units outstanding
at end of period (000's omitted)...... 3,241 3,273 3,431 3,598 3,749 3,820
</TABLE>
(a) On an annualized basis.
7
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
MANAGERS AND OFFICERS
GARY U. ROLLE, Chairman of the
Board
RICHARD N. LATZER, Manager
DONALD E. CANTLAY, Manager
PETER J. SODINI, Manager
JON C. STRAUSS, Manager
BARBARA A. KELLEY, President
(LOGO)
MATT R. COBEN, Vice President
SALLY S. YAMADA, Assistant
Secretary
THOMAS M. ADAMS, Assistant
Secretary
REGINA M. FINK, Secretary
SUSAN R. HUGHES, Treasurer
Distributor:
Transamerica Financial Resources,
Inc.
1150 South Olive
Los Angeles, California
90015-2211
Tel. (800) 245-8250
TRANSAMERICA
Custodian:
OCCIDENTAL'S
Mellon Bank Securities Trust
1 Mellon Bank Ctr.
SEPARATE
Pittsburgh, PA 15258
ACCOUNT FUND B
Tel. (800) 234-6356
SEMI-ANNUAL
Transamerica Occidental
FINANCIAL
Life Insurance Company
Annuity Service Center
REPORT
P.O. Box 31848
Charlotte, NC 28231-1848
JUNE 30, 1998
800 258-4260
(LOGO)
This report cannot be used as sales literature.
TFM 1036 Ed. 2-98
<PAGE>
