TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
ANNUAL REPORT
Dear Investor:
1997 was an excellent year for the Transamerica Occidental's Separate Account
Fund B. The Fund generated an average annual total return of 45.59%, after fees
and expenses, in comparison to the benchmark S&P 500 Stock Index return of
33.36% for the year ended December 31, 1997. Over the past five years, Fund B
has returned an average annual total rate of 30.11%, after fees, relative to the
benchmark index return of 20.27%
Review of 1997
Strong corporate profits and almost non-existent inflation in the United States
provided a very positive environment for the equity markets in 1997. During the
third consecutive year of extraordinary stock market returns, several strong
economic and demographic trends led to substantial gains in the technology,
financial services, and leisure sectors of the stock market.
Throughout the economy, investments in technology grew rapidly as companies
targeted strong productivity gains and lower cost structures to remain
competitive. Unfortunately, higher pricing was not an option for most companies,
since inflation remained subdued in virtually all sectors of the economy. At the
same time, the aging of the baby-boom generation resulted in strong demand for
financial and investment services. Faced with growing uncertainty about
government retirement programs, these older, more-affluent boomers have become
increasingly more aggressive about building wealth through their own savings and
investments.
Outlook for 1998
At the end of 1997, as several Asian economies faced potentially severe
recessions, investors focused on the financial situation in the Far East. While
there is some debate about the potential impact of Asia's economic slowdown on
economic growth in the United States, domestic growth will most likely slow over
the next year as corporate profits rise at a slower rate. However, interest
rates are poised for a significant decline as inflation recedes further from the
investment landscape. Lower interest rates should serve to bolster stock market
valuations.
The Transamerica Occidental's Separate Account Fund B is invested in companies
that have superior growth prospects, strong management, and leading market share
positions. The companies that comprise our portfolio have unique and enduring
advantages over their competitors that should lead to increased returns for
shareholders over the long term. The Fund has significant assets committed to
leading companies in the technology, specialty growth, leisure, and financial
services sectors. These should remain strong growth areas throughout 1998.
Thank you for your continued investment in the Separate Account Fund B.
/s/ Gary U. Rolle
Gary U. Rolle
Chairman,
Board of Managers
Transamerica Occidental's
Separate Account Fund B
<PAGE>
TABLE OF ACCUMULATION UNIT VALUES
Accumulation
End of Quarter Unit Value
---------------- ------------
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
September, 1997 22.762719
December, 1997. 20.822981
The table above covers the period from December 31, 1987, to December 31, 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.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
Number
of Market
Shares Common Stock Value (1)
<S> <C> <C> <C>
BUSINESS SERVICES (4.31%)
101,576 First Data Corporation......................... $ 2,971,098
------------
CHEMICALS (5.35%)
34,000 BetzDearborn, Inc.............................. 2,076,108
20,000 W. R. Grace & Company.......................... 1,608,740
------------
3,684,848
COMPUTERS & BUSINESS EQUIPMENT (10.97%)
90,000 Dell Computer Corporation*..................... 7,560,000
------------
CONGLOMERATES (4.37%)
30,000 Gillette Company............................... 3,013,110
------------
CONTAINERS & PACKAGING (2.24%)
25,000 Sealed Air Corporation......................... 1,543,750
------------
ELECTRICAL EQUIPMENT (2.22%)
45,000 Millipore Corporation.......................... 1,527,165
------------
ELECTRONICS (12.53%)
100,000 Applied Materials, Inc.*....................... 3,012,500
80,000 Intel Corporation.............................. 5,620,000
------------
8,632,500
FINANCIAL SERVICES (17.51%)
127,500 Charles Schwab Corporation..................... 5,346,967
52,500 Franklin Resources, Inc........................ 4,564,193
200,000 Moneygram Payment Systems, Inc.*............... 2,150,000
------------
12,061,160
HOTELS & RESTAURANTS (6.24%)
80,000 Host Marriott Corporation*..................... $ 1,570,000
120,000 Mirage Resorts, Inc.*.......................... 2,730,000
------------
4,300,000
LEISURE TIME (6.94%)
33,000 Disney (Walt) Company.......................... 3,269,046
70,000 Pixar, Inc..................................... 1,513,750
------------
4,782,796
REAL ESTATE OPERATIONS (2.92%)
45,000 CCA Prison Realty Trust........................ 2,008,125
------------
RETAIL GROCERY (8.98%)
170,000 Fred Meyer Incorporated........................ 6,183,750
------------
SOFTWARE (10.26%)
40,000 Microsoft Corporation*......................... 5,170,000
50,000 Transaction System Architects, Inc.*........... 1,900,000
------------
7,070,000
Total Common Stock (94.84%).................... 65,338,302
Cash, Cash Equivalents and Receivables
Less Liabilities (5.16%)....................... 3,551,678
------------
NET ASSETS (100%).............................. $68,889,980
=============
</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>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investment in common stock -- at market value (cost $24,200,854).. $65,338,302
Cash and cash equivalents........................................... 1,757,875
Dividends and interest receivable................................... 39,505
Accounts receivable from sale of securities......................... 1,814,362
-----------
TOTAL ASSETS................................................... 68,950,044
LIABILITIES:
Due to Transamerica Occidental's general account.................... 60,064
-----------
NET ASSETS.......................................................... $68,889,980
===========
Net assets attributable to variable annuity contractholders --
3,273,091 units at $68,155,503
$20.822981 per unit...............................................
Reserves for retired annuitants (Note C)............................ 734,477
-----------
$68,889,980
STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31,
1997 1996
--------------- ----------
Net investment loss.............................. $ (565,561) $ (321,912)
Net realized gain from security transactions..... 7,534,255 5,630,822
Net unrealized gain on investments............... 15,133,358 5,719,838
----------- -----------
Net increase in Net Assets resulting from 22,102,052 11,028,748
operations.......................................
Variable annuity deposits (net of sales and
administration 55,296 47,194
expenses and applicable state premium taxes)...
Payments to Contract Owners:
Annuity payments............................... (48,722) (33,516)
Terminations and withdrawals................... (2,779,706) (2,101,986)
Adjustment for mortality guarantees on retired 14,543 14,175
----------- -----------
annuitants.......................................
Total increase in Net Assets..................... 19,343,463 8,954,615
Net Assets at beginning of year.................. 49,546,517 40,591,902
----------- -----------
Net Assets at end of year........................ $68,889,980 $49,546,517
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
NET INVESTMENT INCOME
INCOME:
Dividends............................................ $ 233,549
Interest............................................. 25,447
------------
Total investment income............................ 258,996
------------
EXPENSES (Note A):
Investment management services....................... 189,856
Mortality and expense risk charges................... 634,701
------------
Total expenses..................................... 824,557
------------
Net investment loss..................................... (565,561)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions............ 7,534,255
Net unrealized gain on investments...................... 15,133,358
------------
Net realized and unrealized gain on investments......... 22,667,613
------------
Net increase in Net Assets resulting from $ 22,102,052
============
operations................................................
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 $9,429,693 and $15,924,879, respectively, in 1997. The Fund had gross
unrealized gains of $41,137,448 at December 31, 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 December 31, 1997, Transamerica Occidental Life had deposited
$2,000,000 (current fund value of $44,508,226) 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.
<PAGE>
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 1997 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>
1997 1996 1995 1994 1993
---------- ---------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Investment income.................... $ .077 $ .071 $ .044 $ .040 $ .046
Expenses............................. 0.244 .163 .125 .089 .081
--------- --------- --------- -------- --------
Net investment (loss) income......... (0.167) (.092) (.081) (.049) (.035)
Net realized and unrealized gain on
investments........................ 6.701 3.217 3.880 .563 1.306
--------- --------- --------- -------- --------
Net increase in accumulation
unit 6.534 3.125 3.799 .514 1.271
value.........................
Accumulation unit value:
Beginning of year.................. 14.289 11.164 7.365 6.851 5.580
--------- --------- --------- -------- --------
End of year........................ $ 20.823 $ 14.289 $ 11.164 $ 7.365 $ 6.851
========= ========= ========= ======== ========
Ratio of expenses to average
accumulation 1.33% 1.31% 1.32% 1.31% 1.30%
fund balance.......................
Ratio of net investment (loss)
income to (0.91)% (0.74)% (0.86)% (0.72)% (0.57)%
average accumulation fund balance..
Portfolio turnover................... 15.21% 32.94% 17.17% 30.62% 41.39%
Number of accumulation units
outstanding 3,273 3,431 3,598 3,749 3,820
at end of year (000 omitted).......
</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, 1997, 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 and financial highlights are
the responsibility of Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 and financial
highlights 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, 1997, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of
Transamerica Occidental's Separate Account Fund B at December 31, 1997, 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 12, 1998
<PAGE>
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
Managers and Officers
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
[TRANSAMERICA OCCIDENTAL LIFE LOGO]
This report cannot be used as sales literature.
[INDEPENDENT EQUITY INVESTMENT FUND CONTRACTS LOGO]
TRANSAMERICA
OCCIDENTAL'S
SEPARATE
ACCOUNT FUND B
ANNUAL FINANCIAL
REPORT
DECEMBER 31, 1997
<PAGE>
