UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-01902
----------------------------------------------
Transamerica Occidental's Separate Account Fund B
------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
570 Carillon Parkway, St. Petersburg, Florida 33716
------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
John K. Carter, Esq., P.O. Box 5068, Clearwater, Florida 33758-5068
------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (727) 299-1800
------------------
Date of fiscal year end: 12/31/03
-----------------
Date of reporting period: 01/01/03 - 06/30/03
----------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1 (REPORT TO SHAREHOLDERS): The Semi-Annual Report is attached.
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
SEMI-ANNUAL REPORT
Dear Investor:
PERFORMANCE
Investor Class shares of Transamerica Separate Account fund B generated a total
return of 13.94% for the first half of 2003. This compares favorably to the
11.76% six-month total return for the fund's benchmark, the Standard & Poor's
500 Index.
MARKET OVERVIEW
For the initial three months of the period, domestic equity markets were
exceptionally volatile. Later, the markets staged a remarkably strong rally; the
benchmark index recouped in a single quarter more than half the value it
surrendered in 2002. Leading the market's rapid second-quarter advance were
stocks from sectors severely downtrodden in prior periods -- such as tobacco,
energy and utilities, and telecommunications. Following close on their heels
were many high-volatility, lower-quality technology stocks.
PORTFOLIO STRATEGY
Our focus on quality was a distinct advantage in the first half of the period,
and a relative disadvantage in the second half, when cyclical stocks and stocks
in highly unstable sectors dominated the market. Such stocks rarely meet our
investment criteria: defensible competitive positions; favorable, long-term
industry or demographic trends; and solid capital structures. We prefer
businesses with free cash flows that allow them to continue to operate and
invest profitably even in a slothful economy. We also favor companies that have
avoided potential pitfalls like expensive stock-option plans.
Despite our lack of high-flying technology stocks, the fund's holdings did very
well during the period. Chief among the equities making strong contributions to
performance were Expedia Inc., the Internet travel-booking company, and Echostar
Communications, a provider of satellite TV services.
Results for Schwab Corp. were less impressive. While Schwab benefited from the
market's rebound, the stock became overvalued during the quarter, and we sold
our shares.
OUTLOOK
Many stocks are currently overvalued, given the present economic and earnings
picture. Although a fair number of corporations have done a better job since
2000 of removing debt from their balance sheets and deploying their capital more
wisely, many are still in a vulnerable position. Although pent-up demand,
historically low interest rates, and optimism about a more robust economy may
keep the recent rally going for some weeks or months to come, we doubt that many
of the current market leaders will still be strong performers a year from now.
With this risk in mind, we will continue to focus on businesses with the
financial strength, competitive edge and/or pricing power to thrive in a
moderately positive economic environment.
/s/ Gary U. Rolle
Gary U. Rolle
President and
Chairman, Board of Managers
Transamerica Occidental's
Separate Account Fund B
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. VALUE WILL FLUCTUATE; CAN
LOSE PRINCIPAL.
1
TABLE OF ACCUMULATION UNIT VALUES
Accumulation
End of Quarter Unit Value
-------------- ------------
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
March, 1998.................... 24.769837
June, 1998..................... 26.122076
Accumulation
End of Quarter Unit Value
-------------- ------------
September, 1998................ 24.532238
December, 1998................. 31.039623
March, 1999.................... 36.274720
June, 1999..................... 36.182643
September, 1999................ 33.766134
December, 1999................. 43.812753
March, 2000.................... 49.902772
June, 2000..................... 46.517366
September, 2000................ 45.550563
December, 2000................. 38.753772
March, 2001.................... 32.935996
June, 2001..................... 34.566512
September, 2001................ 27.939022
December, 2001................. 31.800123
March, 2002.................... 31.249545
June, 2002..................... 26.102110
September, 2002................ 21.962538
December, 2002................. 24.139846
March, 2003.................... 24.392041
June, 2003..................... 27.210522
The table above covers the period from June, 1993, to June, 2003. 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
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
PORTFOLIO OF INVESTMENTS
JUNE 30, 2003 (UNAUDITED)
Number
of Market
Shares Common Stocks Value(1)
- ------ ------------- --------
BANKING (6.28%)
65,000 Northern Trust Corp..................... $ 2,716,350
50,000 State Street Corp....................... 1,970,000
-----------
4,686,350
-----------
BASIC INDUSTRY (3.22%)
40,000 Praxair Inc............................. 2,404,000
-----------
COMMUNICATIONS (19.05%)
75,000 Clear Channel Communications*........... 3,179,250
100,000 Cox Communications Inc*................. 3,190,000
120,000 Echostar Communications................. 4,154,400
70,000 Moody's Corporation..................... 3,689,700
-----------
14,213,350
-----------
CONSUMER CYCLICAL (23.06%)
40,000 Expedia Inc............................. 3,055,200
280,000 Liberty Media Corp...................... 3,236,800
65,000 Marriott International.................. 2,497,300
140,000 Staples Inc............................. 2,569,000
80,000 TJX Companies........................... 1,507,200
55,000 Walgreen Company........................ 1,655,500
50,000 Wal-Mart Stores......................... 2,683,500
-----------
17,204,500
-----------
Number
of Market
Shares Common Stocks Value(1)
- ------ ------------- --------
CONSUMER NON CYCLICAL (16.19%)
45,000 Allergan Inc............................ $ 3,469,500
22,000 Genentech............................... 1,586,640
90,000 Gillette Company........................ 2,867,400
60,000 Pfizer Inc.............................. 2,049,000
25,000 Wellpoint Health Networks............... 2,107,500
-----------
12,080,040
-----------
NON-CAPTIVE FINANCE (3.34%)
85,000 Paychex Inc............................. 2,491,350
-----------
OTHER INDUSTRY (5.34%)
115,000 Expeditors Intl Washington IN........... 3,983,600
-----------
TECHNOLOGY (17.73%)
105,000 First Data Corp......................... 4,351,200
100,000 Intel Corp.............................. 2,078,400
140,000 Microsoft Corp*......................... 3,585,400
90,000 QUALCOMM Inc............................ 3,217,500
-----------
13,232,500
-----------
TRANSPORTATION (3.84%)
45,000 United Parcel Service................... 2,866,500
-----------
TOTAL COMMON STOCK (98.05%)............. 73,162,190
===========
Cash, Cash Equivalents and Receivables
Less Liabilities (1.95%)............... 1,457,197
-----------
NET ASSETS (100.00%).................... $74,619,387
===========
- ------------
(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
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
ASSETS:
Investments in common stock -- at market value (cost
$65,622,180).............................................. $73,162,190
Cash and cash equivalents................................... 1,502,496
Dividends and interest receivable........................... 35,223
-----------
TOTAL ASSETS........................................... 74,699,909
LIABILITIES:
Accrued asset charges and management fee.................... 80,523
-----------
NET ASSETS.................................................. $74,619,387
===========
Net assets attributed to variable annuity
contractholders -- 2,742,299 units at $27.210522 per
unit...................................................... $74,619,387
===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
Period ended Year ended
June 30, December 31,
2003 2002
------------ ------------
Net investment loss......................................... $ (217,130) $ (594,145)
Net realized loss from security transactions................ (352,572) (5,465,983)
Net unrealized depreciation on investments.................. 9,160,614 (16,193,424)
------------ ------------
Net decrease in net assets resulting from operations........ 8,590,911 (22,253,552)
Variable annuity deposits (net of sales and administration
expenses and applicable state premium taxes).............. 41,933 42,923
Payments to Contract Owners:
Annuity payments.......................................... (9,111) (22,185)
Terminations and withdrawals.............................. (1,550,335) (3,579,701)
------------ ------------
Total decrease in net assets................................ 7,073,398 (25,812,514)
Balance at beginning of period.............................. 67,545,989 93,358,503
------------ ------------
Balance at end of period.................................... $ 74,619,387 $ 67,545,989
============ ============
See notes to financial statements.
4
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
STATEMENT OF OPERATIONS
JUNE 30, 2003 (UNAUDITED)
NET INVESTMENT LOSS
INCOME:
Dividends.............................................. $ 235,875
Interest............................................... (5,550)
------------
Total investment income.............................. 230,325
------------
EXPENSES:
Investment management services......................... 103,258
Mortality and expense risk charges..................... 344,197
------------
Total expenses....................................... 447,455
------------
Net investment loss....................................... (217,130)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions.............. (352,572)
Net change in unrealized appreciation/depreciation on
investments............................................ 9,160,614
------------
Net realized and unrealized loss on investments........... 8,808,042
------------
Net decrease in net assets resulting from
operations.......................................... $ 8,590,911
============
See notes to financial statements.
5
TRANSAMERICA OCCIDENTAL'S SEPARATE ACCOUNT FUND B
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Transamerica Occidental's Separate Account Fund B (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 accounting
principles generally accepted in the United States 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 Common Stock
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 $9,202,155 and $11,250,536, respectively, in June, 2003. The Fund had
gross unrealized gains of $4,797,282 and gross unrealized losses of $12,337,292
at June 30, 2003 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 form a part of, and are taxed with, those of
Transamerica Occidental Life Insurance Company (Transamerica Occidental Life),
which is taxed as a "life insurance company" under the Internal Revenue Code.
Under the current Internal Revenue Code law, the investment income of the Fund,
including realized and unrealized capital gains is not taxable to Transamerica
Occidental Life as long as the earnings are credited under the Contract.
Accordingly, no provision for Federal income taxes has been made.
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
NOTE B -- TRANSAMERICA OCCIDENTAL LIFE INVESTMENT
As of June 30, 2003, Transamerica Occidental Life had deposited $2,000,000
(current fund value of $58,161,319) 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 -- INVESTMENT ADVISORY ARRANGEMENTS
No remuneration was paid during 2003 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:
Period Ended
June 30,
2003 2002 2001 2000 1999
------------- ------- ------- ------- -------
Investment income......................... $ 0.083 $ 0.139 $ 0.141 $ 0.096 $ 0.097
Expenses.................................. 0.160 0.345 0.436 0.598 0.456
------- ------- ------- ------- -------
Net investment loss....................... (0.078) (0.206) (0.295) (0.502) (0.359)
Net realized and unrealized gain (loss) on
investments............................. 3.159 (7.454) (6.659) (4.558) 13.132
------- ------- ------- ------- -------
Net increase (decrease) in
accumulation unit value............. 3.071 (7.660) (6.954) (5.059) 12.773
Accumulation unit value:
Beginning of period..................... 24.140 31.800 38.754 43.813 31.040
------- ------- ------- ------- -------
End of period........................... $27.211 $24.140 $31.800 $38.754 $43.813
======= ======= ======= ======= =======
Ratio of expenses to average accumulation
fund balance............................ 1.29 % 1.28 % 1.29 % 1.33 % 1.29 %
Ratio of net investment loss to average
accumulation fund balance............... (0.62)% (0.77)% (0.87)% (1.12)% (1.02)%
Portfolio turnover........................ 13.68 % 32.69 % 58.91 % 49.87 % 34.45 %
Number of accumulation units outstanding
at end of period (000's omitted)........ 2,742 2,798 2,936 3,028 3,084
7
TRANSAMERICA
OCCIDENTAL'S SEPARATE
ACCOUNT FUND B
MANAGERS AND OFFICERS
PETER R. BROWN, Vice Chairman,
Director
DANIEL CALABRIA, Director
JANICE B. CASE, Director
(LOGO)
CHARLES C. HARRIS, Director
LEO J. HILL, Director
JOHN R. KENNEY, Chairman of the
Board, Director
RUSSELL A. KIMBALL, JR., Director
LARRY N. NORMAN, Director
WILLIAM W. SHORT, JR., Director
BRIAN C. SCOTT, President and
Chief Executive
Officer
THOMAS R. MORIARTY, Executive
Vice President,
Treasurer and Principal
Financial Officer
JOHN K. CARTER, Senior Vice
President, TRANSAMERICA
Secretary & General Counsel
OCCIDENTAL'S
WILLIAM T. DAVIS, Vice President,
Investment
Manager Oversight and Relations SEPARATE
CHRISTOPHER G. ROETZER, Vice
President and
ACCOUNT FUND B
Principal Accounting Officer
SEMI-ANNUAL
FINANCIAL
Transamerica Occidental
Life Insurance Company
Annuity Service Center REPORT
4333 Edgewood Road NE
Cedar Rapids, IA 52499 JUNE 30, 2003
877-717-8861
(LOGO)
Must be preceded by a current Separate
Account B prospectus.
TFM 1036 Ed. 2-98
FORM N-CSR(2 OF 3)
ITEM 2 (CODE OF ETHICS): Not applicable to this filing.
ITEM 3 (AUDIT COMMITTEE FINANCIAL EXPERT): Not applicable to this filing.
ITEM 4 (PRINCIPAL ACCOUNTANT FEES AND SERVICES): Not applicable to this filing.
ITEM 5 (RESERVED)
ITEM 6 (RESERVED)
ITEM 7 (DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES): Not applicable to this filing.
ITEM 8 (RESERVED)
ITEM 9 (CONTROLS AND PROCEDURES):
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company Act of
1940 (17 CFR 270.30a-2(c)) as of June 30, 2003, registrant's principal
executive officer and principal financial officer found registrant's
disclosure controls and procedures to be appropriately designed to ensure
that information required to be disclosed by registrant in the reports that
it files under the Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions
regarding required disclosure, and (b) is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms
adopted by the U.S. Securities and Exchange Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal
controls subsequent to the date of the most recent evaluation as indicated,
including no significant deficiencies or material weaknesses that required
corrective action.
ITEM 10 (EXHIBITS):
SUB-ITEM 10a - Not applicable to this filing.
SUB-ITEM 10b - Included with this filing.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Transamerica Occidental's Separate Account Fund B
By: /s/ Brian C. Scott
---------------------------------------------------------
President and Chief Executive Officer
Date September 4, 2003
---------------------------------------------------------
FORM N-CSR(3 OF 3)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities, and on the
dates indicated.
By: /s/ Brian C. Scott
---------------------------------------------------------
President and Chief Executive Officer
Date September 4, 2003
------------------------
By: /s/ Kim D. Day
---------------------------------------------------------
Vice President, Treasurer and Principal
Financial Officer
Date September 4, 2003
------------------------