Table of Contents
As filed with the Securities and Exchange Commission on March 9, 2017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07717
TRANSAMERICA ASSET ALLOCATION VARIABLE FUNDS
(Exact Name of Registrant as Specified in Charter)
1801 California St., Suite 5200, Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (720) 482-8991
Tané T. Tyler, Esq., 1801 California St., Suite 5200, Denver, Colorado 80202
(Name and Address of Agent for Service)
Date of fiscal year end: December 31
Date of reporting period: January 1, 2016 – December 31, 2016
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| Item 1: | Report(s) to Shareholders. |
The Annual Report is attached.
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TRANSAMERICA PARTNERS VARIABLE FUNDS
TRANSAMERICA ASSET
ALLOCATION VARIABLE FUNDS
Annual Report
December 31, 2016
Table of Contents
| Proxy Voting Policies and Procedures and Quarterly Portfolio Holdings |
1 | |||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Transamerica Asset Allocation – Intermediate Horizon Subaccount |
7 | |||
| Transamerica Asset Allocation – Intermediate/Long Horizon Subaccount |
8 | |||
| 9 | ||||
| 9 | ||||
| 10 | ||||
| 11 | ||||
| 12 | ||||
| 16 | ||||
| 17 | ||||
| Appendix A | ||||
| Appendix B |
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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This report is not to be construed as an offering for sale of any contracts participating in the Subaccounts (Series) of the Transamerica Partners Variable Funds or the Transamerica Asset Allocation Variable Funds, or as a solicitation of an offer to buy contracts unless preceded by or accompanied by a current prospectus which contains complete information about charges and expenses.
This report consists of the annual report of the Transamerica Asset Allocation Variable Funds and the annual reports of the Transamerica Partners Portfolios and the Calvert VP SRI Balanced Portfolio, the underlying portfolios in which the Transamerica Partners Variable Funds invest.
Proxy Voting Policies and Procedures
A description of the proxy voting policies and procedures of the Transamerica Asset Allocation Variable Funds and Transamerica Partners Portfolios is included in the Statement of Additional Information (“SAI”), which is available without charge, upon request: (i) by calling 1-888-233-4339; (ii) on the Subaccounts’ website at www.transamericapartners.com; or (iii) on the SEC’s website at www.sec.gov. In addition, the Transamerica Asset Allocation Variable Funds and the Transamerica Partners Portfolios are required to file Form N-PX, with the complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. Form N-PX for the twelve months ended June 30, 2016, is available without charge, upon request by calling 1-800-851-9777 and on the SEC’s website at http://www.sec.gov.
Quarterly Portfolios
Transamerica Asset Allocation Variable Funds will file their portfolios of investments on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Subaccounts’ Form N-Q is available on the SEC’s website at www.sec.gov. The Subaccounts’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. For information on the operation of the SEC’s Public Reference Room, call 1-800-SEC-0330. You may also obtain a copy of Form N-Q without charge, upon request, by calling 1-888-233-4339. Form N-Q for the corresponding Transamerica Partners Portfolios is also available without charge on the SEC website, at the SEC’s Public Reference Room, or by calling 1-888-233-4339.
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TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY
440 Mamaroneck Avenue
Harrison, New York 10528
December 31, 2016
To Contract Holders with Interests in
the Transamerica Partners Variable Funds:
We are pleased to present the most recent annual reports for the Transamerica Partners Portfolios and for the Calvert VP SRI Balanced Portfolio. As required under applicable law, we are sending these annual reports to contract holders of Group Variable Annuity Contracts issued by Transamerica Financial Life Insurance Company with unit interests in one or more of the subaccounts of Transamerica Partners Variable Funds. Each subaccount available within the Transamerica Partners Variable Funds, other than the Calvert Subaccount, invests its assets in a corresponding mutual fund that is a series of Transamerica Partners Portfolios. The Calvert Subaccount invests in the Calvert VP SRI Balanced Portfolio, a series of Calvert Variable Series, Inc.
Please call your retirement plan administrator, Transamerica Retirement Solutions Corporation, at (800) 755-5801 if you have any questions regarding these reports.
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On behalf of Transamerica Asset Allocation Variable Funds, we would like to thank you for your continued support and confidence in our products as we look forward to continuing to serve you and your financial adviser in the future. We value the trust you have placed in us.
This annual report is provided to you to show the investments of your Subaccount(s). The Securities and Exchange Commission requires that annual and semi-annual reports be sent to all Contract Holders, and we believe it to be an important part of the investment process. This report provides detailed information about your Subaccount(s) for the 12-month period ending December 31, 2016.
We believe it is important to understand market conditions over the last year to provide a context for reading this report. The year of 2016 began with volatility in the markets as fears of a pending recession sent stock, commodity and energy prices broadly lower. By mid-February most major U.S. stock indexes had declined by more than 10%, fixed income credit spreads had widened considerably and crude oil prices reached a multi-year low. However, in the months to follow, when it became apparent that the U.S. would not be at risk of recession, stock, energy and credit driven fixed income markets rebounded considerably and moved higher into the spring.
In late June, Great Britain’s surprise referendum vote in favor of a departure from the European Union (“Brexit”) stunned global markets, and a fast but fierce selloff in stocks ensued, and in a flight to safety, the U.S. 10-year Treasury bond yield fell to 1.37% during early July, its lowest level in history. In the weeks to follow, markets interpreted the overall global risks of Brexit to be more manageable than originally feared, and equity markets rallied to new all-time highs only weeks later.
In the third quarter, equity and fixed income markets awaited both the path of U.S. Federal Reserve (“Fed”) interest rate policy and the pending Presidential election. While it became apparent the Fed would not hike short term rates prior to the election, longer term rates nonetheless began to move higher in anticipation of a potential December rate increase. Corporate earnings trends also began to see improvement in the third quarter, and it became evident that positive profit growth for most companies would likely soon be back on the horizon.
The fourth quarter saw a dramatic shift across the markets. Following the surprise election of Donald Trump stocks began to rally again based on the perception of a more favorable business environment consisting of lower taxes, less regulation and greater infrastructure spending. Longer term bond yields also jumped to their highest levels in more than two years (2.60% on the 10-year Treasury) as the market quickly interpreted the pending Trump economic agenda to be more inflationary. As the year concluded, the Fed also raised interest rates for the first time in a year, taking the Fed Funds Rate up 0.25% to a range of 0.50% - 0.75%. This move was fully expected by the market and was perceived to be confirmation that the central bank was seeing an improving economy and higher inflationary pressures.
For the one-year period ending December 31, 2016, the S&P 500® returned 11.96% while the MSCI EAFE Index, representing international developed market equities, gained 1.51%. During the same period, the Bloomberg Barclays U.S. Aggregate Bond Index returned 2.65%. Please keep in mind that it is important to maintain a diversified portfolio as investment returns have historically been difficult to predict.
In addition to your active involvement in the investment process, we firmly believe that a financial adviser is a key resource to help you build a complete picture of your current and future financial needs. Financial advisers are familiar with the market’s history, including long-term returns and volatility of various asset classes. With your adviser, you can develop an investment program that incorporates factors such as your goals, your investment timeline and your risk tolerance.
Please contact your financial adviser if you have any questions about the contents of this report, and thanks again for the confidence you have placed in us.
Sincerely,
The views expressed in this report reflect those of the portfolio managers only and may not necessarily represent the views of the Transamerica Partners Funds. These views are subject to change based upon market conditions. These views should not be relied upon as investment advice and are not indicative of trading intent on behalf of the Transamerica Partners Funds.
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Understanding Your Subaccounts’ Expenses
(unaudited)
UNIT HOLDER EXPENSES
Transamerica Asset Allocation Variable Funds (each individually, a “Subaccount” and collectively, the “Subaccounts”) is a separate investment account established by Transamerica Financial Life Insurance Company, Inc. (“TFLIC”), and is used as an investment vehicle under certain tax-deferred annuity contracts issued by TFLIC. Each Subaccount invests in underlying subaccounts of Transamerica Partners Variable Funds (“TPVF”), a unit investment trust. Subaccount contract holders bear the cost of operating the Subaccount (such as the advisory fee).
The following examples are intended to help you understand your ongoing costs (in dollars and cents) of investing in the Subaccounts and to compare these costs with the ongoing costs of investing in other funds.
The examples are based on an investment of $1,000 invested at July 1, 2016, and held for the entire period until December 31, 2016.
ACTUAL EXPENSES
The information in the table under the heading “Actual Expenses” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the number in the appropriate column for your share class titled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading “Hypothetical Expenses” provides information about hypothetical account values and hypothetical expenses based on the Subaccounts’ actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Subaccounts’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Subaccount versus other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
| Actual Expenses |
Hypothetical Expenses (A) |
|||||||||||||||||||||||
| Subaccount | Beginning Account Value |
Ending Account Value |
Expenses Paid During Period (B) |
Ending Account Value |
Expenses Paid During Period (B) |
Annualized Expense Ratio (C) (D) |
||||||||||||||||||
| Transamerica Asset Allocation - |
$ | 1,000.00 | $ | 1,001.30 | $ | 1.01 | $ | 1,024.10 | $ | 1.02 | 0.20 | |||||||||||||
| Transamerica Asset Allocation - |
1,000.00 | 1,044.10 | 1.03 | 1,024.10 | 1.02 | 0.20 | ||||||||||||||||||
| Transamerica Asset Allocation - |
1,000.00 | 1,063.00 | 1.04 | 1,024.10 | 1.02 | 0.20 | ||||||||||||||||||
| (A) | 5% return per year before expenses. |
| (B) | Expenses are calculated using the Subaccounts’ annualized expense ratios (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (366 days). |
| (C) | Expense ratios are based on the most recent six-months; the percentage may differ from the expense ratio displayed in the Financial Highlights which covers a twelve-month period. |
| (D) | Expense ratios (as disclosed in the table) do not include the expenses of the underlying funds in which the Subaccounts invest. The annualized expense ratios, as stated in the fee table of the Prospectus, may differ from the expense ratios disclosed in this report. |
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
Page 4
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Schedules of Investments Composition
At December 31, 2016
(unaudited)
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
Page 5
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Transamerica Asset Allocation — Short Horizon Subaccount
SCHEDULE OF INVESTMENTS
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Investment Companies |
$ | 5,755,373 | $ | — | $ | — | $ | 5,755,373 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 5,755,373 | $ | — | $ | — | $ | 5,755,373 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | Investment in shares of an affiliated fund of Transamerica Partners Variable Funds. |
| (C) | Aggregate cost for federal income tax purposes is $5,348,777. Aggregate gross unrealized appreciation and depreciation for all securities is $419,044 and $12,448, respectively. Net unrealized appreciation for tax purposes is $406,596. |
| (D) | Percentage rounds to less than 0.1% or (0.1)%. |
| (E) | The Subaccount recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
Page 6
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Transamerica Asset Allocation — Intermediate Horizon Subaccount
SCHEDULE OF INVESTMENTS
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Investment Companies |
$ | 17,253,016 | $ | — | $ | — | $ | 17,253,016 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 17,253,016 | $ | — | $ | — | $ | 17,253,016 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | Investment in shares of an affiliated fund of Transamerica Partners Variable Funds. |
| (C) | Aggregate cost for federal income tax purposes is $13,157,844. Aggregate gross unrealized appreciation for all securities is $4,095,172. |
| (D) | Percentage rounds to less than 0.1% or (0.1)%. |
| (E) | The Subaccount recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
Page 7
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Transamerica Asset Allocation — Intermediate/Long Horizon Subaccount
SCHEDULE OF INVESTMENTS
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Investment Companies |
$ | 28,230,228 | $ | — | $ | — | $ | 28,230,228 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 28,230,228 | $ | — | $ | — | $ | 28,230,228 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | Investment in shares of an affiliated fund of Transamerica Partners Variable Funds. |
| (C) | Aggregate cost for federal income tax purposes is $19,537,638. Aggregate gross unrealized appreciation for all securities is $8,692,590. |
| (D) | Percentage rounds to less than 0.1% or (0.1)%. |
| (E) | The Subaccount recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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STATEMENTS OF ASSETS AND LIABILITIES
At December 31, 2016
| Short Horizon |
Intermediate Horizon |
Intermediate/ Long Horizon |
||||||||||
| Assets: |
||||||||||||
| Affiliated investments, at value (A) |
$ | 5,755,373 | $ | 17,253,016 | $ | 28,230,228 | ||||||
| Receivables and other assets: |
||||||||||||
| Units sold |
3,415 | 10,430 | 18,463 | |||||||||
| Affiliated investments sold |
— | 18,343 | — | |||||||||
| Total assets |
5,758,788 | 17,281,789 | 28,248,691 | |||||||||
| Liabilities: |
||||||||||||
| Payables and other liabilities: |
||||||||||||
| Units redeemed |
1,001 | 1,484 | 1,897 | |||||||||
| Affiliated investments purchased |
2,414 | 27,289 | 16,567 | |||||||||
| Investment advisory fees |
975 | 2,931 | 4,801 | |||||||||
| Total liabilities |
4,390 | 31,704 | 23,265 | |||||||||
| Net assets |
$ | 5,754,398 | $ | 17,250,085 | $ | 28,225,426 | ||||||
| Net assets consist of: |
||||||||||||
| Costs of accumulation units |
$ | 601,693 | $ | 3,098,334 | $ | 10,651,708 | ||||||
| Undistributed (distributions in excess of) net investment income (loss) |
(294,542 | ) | (822,918 | ) | (1,163,884 | ) | ||||||
| Accumulated net realized gain (loss) |
5,040,651 | 10,879,497 | 10,045,012 | |||||||||
| Net unrealized appreciation (depreciation) on: |
||||||||||||
| Affiliated investments |
406,596 | 4,095,172 | 8,692,590 | |||||||||
| Net assets |
$ | 5,754,398 | $ | 17,250,085 | $ | 28,225,426 | ||||||
| Accumulation units |
266,921 | 710,501 | 1,107,672 | |||||||||
| Unit value |
$ | 21.56 | $ | 24.28 | $ | 25.48 | ||||||
|
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|
|
|
|||||||
|
(A) Affiliated investments, at cost |
$ | 5,348,777 | $ | 13,157,844 | $ | 19,537,638 | ||||||
For the year ended December 31, 2016
| Short Horizon |
Intermediate Horizon |
Intermediate/ Long Horizon |
||||||||||
| Expenses: |
||||||||||||
| Investment advisory fees |
$ | 12,316 | $ | 34,666 | $ | 56,217 | ||||||
| Net investment income (loss) |
(12,316 | ) | (34,666 | ) | (56,217 | ) | ||||||
| Net realized gain (loss) on: |
||||||||||||
| Affiliated investments |
286,548 | 921,204 | 812,273 | |||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Affiliated investments |
(50,678 | ) | (61,772 | ) | 788,204 | |||||||
| Net realized and change in unrealized gain (loss) |
235,870 | 859,432 | 1,600,477 | |||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 223,554 | $ | 824,766 | $ | 1,544,260 | ||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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STATEMENTS OF CHANGES IN NET ASSETS
For the years ended:
| Short Horizon | Intermediate Horizon | Intermediate/Long Horizon | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | (12,316 | ) | $ | (13,835 | ) | $ | (34,666 | ) | $ | (38,556 | ) | $ | (56,217 | ) | $ | (60,601 | ) | ||||||
| Net realized gain (loss) |
286,548 | 431,392 | 921,204 | 632,543 | 812,273 | 712,896 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
(50,678 | ) | (521,782 | ) | (61,772 | ) | (857,813 | ) | 788,204 | (1,050,874 | ) | |||||||||||||
| Net increase (decrease) in net assets resulting from operations |
223,554 | (104,225 | ) | 824,766 | (263,826 | ) | 1,544,260 | (398,579 | ) | |||||||||||||||
| Unit transactions: |
||||||||||||||||||||||||
| Units sold |
659,188 | 1,263,812 | 1,354,796 | 1,676,110 | 2,866,062 | 2,174,999 | ||||||||||||||||||
| Units redeemed |
(1,513,634 | ) | (1,842,736 | ) | (3,125,071 | ) | (2,651,505 | ) | (5,177,857 | ) | (3,410,087 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from unit transactions |
(854,446 | ) | (578,924 | ) | (1,770,275 | ) | (975,395 | ) | (2,311,795 | ) | (1,235,088 | ) | ||||||||||||
| Net increase (decrease) in net assets |
(630,892 | ) | (683,149 | ) | (945,509 | ) | (1,239,221 | ) | (767,535 | ) | (1,633,667 | ) | ||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
6,385,290 | 7,068,439 | 18,195,594 | 19,434,815 | 28,992,961 | 30,626,628 | ||||||||||||||||||
| End of year |
$ | 5,754,398 | $ | 6,385,290 | $ | 17,250,085 | $ | 18,195,594 | $ | 28,225,426 | $ | 28,992,961 | ||||||||||||
| Undistributed (distributions in excess of) net investment income (loss) |
$ | (294,542 | ) | $ | (282,226 | ) | $ | (822,918 | ) | $ | (788,252 | ) | $ | (1,163,884 | ) | $ | (1,107,667 | ) | ||||||
| Unit transactions - shares: |
||||||||||||||||||||||||
| Units sold |
30,758 | 59,609 | 57,889 | 70,464 | 117,631 | 87,644 | ||||||||||||||||||
| Units redeemed |
(70,633 | ) | (86,796 | ) | (134,375 | ) | (111,600 | ) | (211,482 | ) | (137,523 | ) | ||||||||||||
| Net increase (decrease) |
(39,875 | ) | (27,187 | ) | (76,486 | ) | (41,136 | ) | (93,851 | ) | (49,879 | ) | ||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
Page 10
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For a unit outstanding during the years indicated:
| Short Horizon | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Unit value, beginning of year |
$ | 20.81 | $ | 21.16 | $ | 20.52 | $ | 20.37 | $ | 18.99 | ||||||||||
| Investment operations: |
||||||||||||||||||||
| Net investment income (loss) (A) |
(0.04 | ) | (0.04 | ) | (0.04 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
| Net realized and unrealized gain (loss) |
0.79 | (0.31 | ) | 0.68 | 0.19 | 1.42 | ||||||||||||||
| Total investment operations |
0.75 | (0.35 | ) | 0.64 | 0.15 | 1.38 | ||||||||||||||
| Unit value, end of year |
$ | 21.56 | $ | 20.81 | $ | 21.16 | $ | 20.52 | $ | 20.37 | ||||||||||
| Total return (B) |
3.58% | (1.66)% | 3.13% | 0.73% | 7.30% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 5,754 | $ | 6,385 | $ | 7,068 | $ | 6,832 | $ | 8,227 | ||||||||||
| Expenses to average net assets (C) |
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||||||||
| Net investment income (loss) to average net assets |
(0.20)% | (0.20)% | (0.20)% | (0.20)% | (0.20)% | |||||||||||||||
| Portfolio turnover rate (D) |
33% | 51% | 36% | 63% | 51% | |||||||||||||||
| (A) | Calculated based on average number of units outstanding. |
| (B) | Total return reflects Subaccount expenses. |
| (C) | Does not include expenses of the underlying funds in which the Subaccount invests. |
| (D) | Does not include portfolio activity of the underlying funds in which the Subaccount invests. |
| Intermediate Horizon | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Unit value, beginning of year |
$ | 23.12 | $ | 23.47 | $ | 22.73 | $ | 20.10 | $ | 18.17 | ||||||||||
| Investment operations: |
||||||||||||||||||||
| Net investment income (loss) (A) |
(0.05 | ) | (0.05 | ) | (0.05 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
| Net realized and unrealized gain (loss) |
1.21 | (0.30 | ) | 0.79 | 2.67 | 1.97 | ||||||||||||||
| Total investment operations |
1.16 | (0.35 | ) | 0.74 | 2.63 | 1.93 | ||||||||||||||
| Unit value, end of year |
$ | 24.28 | $ | 23.12 | $ | 23.47 | $ | 22.73 | $ | 20.10 | ||||||||||
| Total return (B) |
5.01% | (1.48)% | 3.24% | 13.07% | 10.67% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 17,250 | $ | 18,196 | $ | 19,435 | $ | 20,774 | $ | 19,718 | ||||||||||
| Expenses to average net assets (C) |
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||||||||
| Net investment income (loss) to average net assets |
(0.20)% | (0.20)% | (0.20)% | (0.20)% | (0.20)% | |||||||||||||||
| Portfolio turnover rate (D) |
26% | 23% | 29% | 54% | 37% | |||||||||||||||
| (A) | Calculated based on average number of units outstanding. |
| (B) | Total return reflects Subaccount expenses. |
| (C) | Does not include expenses of the underlying funds in which the Subaccount invests. |
| (D) | Does not include portfolio activity of the underlying funds in which the Subaccount invests. |
| Intermediate/Long Horizon | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Unit value, beginning of year |
$ | 24.13 | $ | 24.47 | $ | 23.70 | $ | 19.93 | $ | 17.70 | ||||||||||
| Investment operations: |
||||||||||||||||||||
| Net investment income (loss) (A) |
(0.05 | ) | (0.05 | ) | (0.05 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
| Net realized and unrealized gain (loss) |
1.40 | (0.29 | ) | 0.82 | 3.81 | 2.27 | ||||||||||||||
| Total investment operations |
1.35 | (0.34 | ) | 0.77 | 3.77 | 2.23 | ||||||||||||||
| Unit value, end of year |
$ | 25.48 | $ | 24.13 | $ | 24.47 | $ | 23.70 | $ | 19.93 | ||||||||||
| Total return (B) |
5.60% | (1.40)% | 3.28% | 18.93% | 12.60% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 28,225 | $ | 28,993 | $ | 30,627 | $ | 30,602 | $ | 27,794 | ||||||||||
| Expenses to average net assets (C) |
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||||||||
| Net investment income (loss) to average net assets |
(0.20)% | (0.20)% | (0.20)% | (0.20)% | (0.20)% | |||||||||||||||
| Portfolio turnover rate (D) |
21% | 16% | 17% | 32% | 30% | |||||||||||||||
| (A) | Calculated based on average number of units outstanding. |
| (B) | Total return reflects Subaccount expenses. |
| (C) | Does not include expenses of the underlying funds in which the Subaccount invests. |
| (D) | Does not include portfolio activity of the underlying funds in which the Subaccount invests. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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Table of Contents
At December 31, 2016
1. ORGANIZATION
Transamerica Asset Allocation Variable Funds (the “Separate Account”), is a non-diversified separate account of Transamerica Financial Life Insurance Company (“TFLIC”), and is registered as a management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Separate Account applies investment company accounting and reporting guidance. The Separate Account is composed of three different subaccounts (each, a “Subaccount” and collectively, the “Subaccounts”) that are separate investment funds and are listed below. Each Subaccount invests substantially all of its investable assets among certain Transamerica Partners Variable Funds (“TPVF”). Certain TPVF subaccounts invest substantially all of their investable assets in the Transamerica Partners Portfolios (each a “Portfolio” and collectively, the “Portfolios”).
| Subaccount |
| Transamerica Asset Allocation-Short Horizon Subaccount (“Short Horizon”) |
| Transamerica Asset Allocation-Intermediate Horizon Subaccount (“Intermediate Horizon”) |
| Transamerica Asset Allocation-Intermediate/Long Horizon Subaccount (“Intermediate/Long Horizon”) |
Transamerica Asset Management, Inc. (“TAM”) serves as investment manager for the Subaccounts. TAM provides continuous and regular investment management services to the Subaccounts.
For each of the Portfolios, TAM currently acts as a “manager of managers” and hires sub-advisers to furnish day-to-day investment advice and recommendations to the Portfolios. TAM may, in the future, determine to provide the day-to-day management of a Portfolio without the use of a sub-adviser. When acting as a manager of managers, TAM provides investment management services that include, without limitation, the design and development of the Portfolios and their investment strategies and the ongoing review and evaluation of those investment strategies including recommending changes in strategy where it believes appropriate or advisable; the selection of one or more sub-advisers for the Portfolios employing a combination of quantitative and qualitative screens, research, analysis and due diligence; oversight and monitoring of sub-advisers and recommending changes to sub-advisers where it believes appropriate or advisable; recommending Portfolio combinations and liquidations where it believes appropriate or advisable; regular supervision of the Portfolios’ investments; regular review and evaluation of sub-adviser performance; daily monitoring of the sub-advisers’ buying and selling of securities for the Portfolios; regular review of holdings; ongoing trade oversight and analysis; regular monitoring to ensure adherence to investment process; risk management oversight and analysis; design, development, implementation and regular monitoring of the valuation process; design, development, implementation and regular monitoring of the compliance process; review of proxies voted by sub-advisers; oversight of preparation, and review, of materials for meetings of the Portfolios’ Board of Trustees (the “Board”), participation in these meetings and preparation of regular communications with the Board; oversight of preparation, and review, of prospectuses, shareholder reports and other disclosure materials and regulatory filings for the Portfolios; oversight of other service providers to the Portfolios, such as the custodian, the transfer agent, the Portfolios’ independent accounting firm and legal counsel; supervision of the performance of recordkeeping and shareholder relations functions for the Portfolios; and ongoing cash management services. TAM uses a variety of quantitative and qualitative tools to carry out its investment management services. TAM’s investment management services include the provision of supervisory and administrative services to the Portfolios. TAM, not the Portfolios, is responsible for paying the sub-advisers for their services, and sub-advisory fees are TAM’s expense.
2. SIGNIFICANT ACCOUNTING POLICIES
In preparing the Subaccounts’ financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America, estimates or assumptions (which could differ from actual results) may be used that affect reported amounts and disclosures. The following is a summary of significant accounting policies followed by the Subaccounts.
Security transactions: Security transactions are recorded on the trade date. Security gains and losses are calculated on the specific identification basis. Net realized gain (loss) is from investments in units of investment companies.
Operating expenses: The Separate Account accounts separately for the assets, liabilities, and operations of each Subaccount. Each Subaccount will indirectly bear the fees and expenses reflected in the corresponding TPVF unit value. These expenses are not reflected in the expenses within the Statements of Operations of the Subaccount and are not included in the ratios to Average Net Assets (“ANA”) shown within the Financial Highlights.
Indemnification: In the normal course of business, the Subaccounts enter into contracts that contain a variety of representations that provide general indemnifications. The Subaccounts’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Subaccounts and/or their affiliates that have not yet occurred. However, based on experience, the Subaccounts expect the risk of loss to be remote.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
3. SECURITY VALUATION
All investments in securities are recorded at their estimated fair value. The value of each Subaccount’s investment in a corresponding subaccount of the TPVF is valued at the unit value per share of each Subaccount at the official close of the New York Stock Exchange (“NYSE”) each day the NYSE is open for business.
The Subaccounts utilize various methods to measure the fair value of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The three levels (“Levels”) of inputs of the fair value hierarchy are defined as follows:
Level 1—Unadjusted quoted prices in active markets for identical securities.
Level 2—Inputs, other than quoted prices included in Level 1, which are observable, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
Level 3—Unobservable inputs, which may include TAM’s internal valuation committee’s (the “Valuation Committee”) own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the sub-adviser, issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy that is assigned to the fair value measurement of a security is determined based on the lowest Level input that is significant to the fair value measurement in its entirety. Certain investments that are measured at fair value using Net Asset Value (“NAV”) per share, or its equivalent, practical expedient have not been classified in the fair value Levels. The hierarchy classification of inputs used to value the Subaccounts’ investments, at December 31, 2016, is disclosed within the Security Valuation section of each Subaccount’s Schedule of Investments.
Under supervision and approval of the Board, TAM provides day-to-day valuation functions. TAM formed the Valuation Committee to monitor and implement the fair valuation policies and procedures as approved by the Board. These policies and procedures are reviewed at least annually by the Board. The Valuation Committee, among other tasks, monitors for when market quotations are not readily available or are unreliable and determines in good faith the fair value of the portfolio investments. For instances in which daily market quotes are not readily available, securities may be valued, pursuant to procedures adopted by the Board, with reference to other instruments or indices. Depending on the relative significance of valuation inputs, these instruments may be classified in either Level 2 or Level 3 of the fair value hierarchy.
The Valuation Committee may employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the security to determine the fair value of the security. An income-based valuation approach may also be used in which the anticipated future cash flows of the security are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the securities. When the Subaccounts use fair value methods that rely on significant unobservable inputs to determine a security’s value, the Valuation Committee will choose the method that is believed to accurately reflect fair value. These securities are categorized in Level 3 of the fair value hierarchy. The Valuation Committee reviews fair value measurements on a regular and ad hoc basis and may, as deemed appropriate, update the security valuations as well as the fair valuation guidelines. The Board reviews and considers Valuation Committee determinations at its regularly scheduled meetings.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, but not limited to, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is generally greatest for instruments categorized in Level 3. Due to the inherent uncertainty of valuation, the Valuation Committee’s determination of values may differ significantly from values that would have been realized had a ready market for investments existed, and the differences could be material. The Valuation Committee employs various methods for calibrating these valuation approaches, including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing, and reviews of any market related activity.
Fair value measurements: Each Subaccount invests substantially all of its investable assets among certain TPVF subaccounts and the TPVF subaccounts invest all of their investable assets in the Portfolios. The summary of the inputs used for valuing each Portfolio’s
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
3. SECURITY VALUATION (continued)
assets carried at fair value is discussed in the Security Valuation section of the Portfolios’ Notes to Financial Statements, which are attached to this report. Descriptions of the valuation techniques applied to the Subaccounts’ significant categories of assets and liabilities measured at fair value on a recurring basis are as follows:
Investment companies: Investment companies are valued at the NAV of the underlying subaccounts. These investments are actively traded and no valuation adjustments are applied. Investment companies are categorized in Level 1 of the fair value hierarchy.
4. FEES AND OTHER AFFILIATED TRANSACTIONS
TAM, the Subaccounts’ investment adviser, is directly owned by Transamerica Premier Life Insurance Company (“TPLIC”) and AUSA Holding Company (“AUSA”), both of which are indirect, wholly owned subsidiaries of Aegon NV. TPLIC is owned by Commonwealth General Corporation (“Commonwealth”) and Aegon USA, LLC (“Aegon USA”). Commonwealth and AUSA are wholly owned by Aegon USA. Aegon USA is wholly owned by Aegon US Holding Corporation, which is wholly owned by Transamerica Corporation (DE). Transamerica Corporation (DE) is wholly owned by The Aegon Trust, which is wholly owned by Aegon International B.V., which is wholly owned by Aegon NV, a Netherlands corporation, and a publicly traded international insurance group.
TAM is also investment adviser of TPVF. The unit values of TPVF will reflect the fees and other expenses paid by TPVF to TAM and its affiliates. TAM directly pays all other ordinary expenses, which include fees related to audit, custody, legal, printing, trustees, and registration.
All Subaccount holdings in investment companies are considered affiliated. Realized and unrealized gains (losses) are broken out within the Statements of Operations.
Investment advisory fees: TAM provides general investment advice to each Subaccount pursuant to the investment advisory agreement. For its services, each Subaccount pays management fees accrued daily and payable monthly, at an annual rate equal to 0.20% of each Subaccount’s daily ANA.
TFLIC is the legal holder of the assets in the Subaccounts and will at all times maintain assets in the Subaccounts with a total market value of at least equal to the contract liabilities for the Subaccounts.
Certain managing board members and officers of TFLIC are also trustees, officers, or employees of TAM or its affiliates. No interested managing board member, who is deemed an interested person due to current or former service with TAM or an affiliate of TAM, receives compensation from the Separate Account. Similarly, none of the Separate Account’s officers or interested trustees receive compensation from the Subaccounts. The independent board members of TFLIC are also trustees of the Portfolios, for which they receive fees.
Deferred compensation plan: Under a non-qualified deferred compensation plan effective January 1, 2008, as amended and restated January 1, 2010, available to the trustees, compensation may be deferred that would otherwise be payable by the Separate Account to an independent trustee on a current basis for services rendered as trustee. Deferred compensation amounts will accumulate based on the value of the investment option, as elected by the trustee.
Brokerage commissions: The Subaccounts incurred no brokerage commissions on security transactions placed with affiliates of the adviser or sub-advisers for the year ended December 31, 2016.
5. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 2016, the cost of securities purchased and proceeds from securities sold (excluding short-term securities) are as follows:
| Subaccount | Purchases of Securities |
Sales of Securities |
||||||||||
| Short Horizon |
$ | 2,001,545 | $ | 2,868,422 | ||||||||
| Intermediate Horizon |
4,468,394 | 6,273,515 | ||||||||||
| Intermediate/Long Horizon |
6,052,047 | 8,420,221 | ||||||||||
6. FEDERAL INCOME TAXES
The operations of the Separate Account form a part of, and are taxed with, the operations of TFLIC, a wholly-owned subsidiary of Aegon USA. TFLIC does not expect, based upon current tax law, to incur any income tax upon the earnings or realized capital gains
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
6. FEDERAL INCOME TAXES (continued)
attributable to the Separate Account. Based upon this expectation, no charges are currently being deducted from the Separate Account for federal income tax purposes. The Subaccounts recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Subaccounts’ federal and state tax returns remain subject to examination by the Internal Revenue Service and state tax authorities for the prior three years. Management has evaluated the Subaccounts’ tax provisions taken for all open tax years, and has concluded that no provision for income tax is required in the Subaccounts’ financial statements. If applicable, the Subaccounts recognize interest accrued related to unrecognized tax benefits in interest and penalties expense in Other within the Statements of Operations. The Subaccounts identify their major tax jurisdictions as U.S. Federal, the state of Colorado and foreign jurisdictions where the Subaccounts make significant investments; however, the Subaccounts are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
7. NEW ACCOUNTING PRONOUNCEMENTS
In October 2016, the Securities and Exchange Commission adopted new rules and amended existing rules (together the, “Final Rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the Final Rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the implication, if any, of the additional disclosure requirements and its impact on the Subaccounts’ financial statements.
In December 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-19 (“ASU 2016-19”), “Technical Corrections and Improvements”. The guidance includes an amendment to Topic 820, Fair Value Measurement, which clarifies the difference between a valuation approach and a valuation technique when applying the guidance in that Topic. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. The transition guidance for the amendment must be applied prospectively because it could potentially involve the use of hindsight that includes fair value measurements. The guidance is effective for interim periods beginning after December 15, 2016. Management is currently evaluating the implication, if any, of the additional disclosure requirements and its impact on the Subaccounts’ financial statements.
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Transamerica Financial Life Insurance Company and the Contract holders of Transamerica Asset Allocation Variable Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Transamerica Asset Allocation Variable Funds (comprising, respectively, Transamerica Asset Allocation – Short Horizon Subaccount, Transamerica Asset Allocation – Intermediate Horizon Subaccount and Transamerica Asset Allocation – Intermediate/Long Horizon Subaccount) (collectively, the “Subaccounts”) as of December 31, 2016, and the related statements 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 the Subaccounts’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Subaccounts’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Subaccounts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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 each of the aforementioned Subaccounts comprising Transamerica Asset Allocation Variable Funds at December 31, 2016, the results of their operations for the year then ended, the changes in their 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 U.S. generally accepted accounting principles.
Boston, Massachusetts
February 24, 2017
| Transamerica Asset Allocation Variable Funds | Annual Report 2016 |
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Board Members and Officers
(unaudited)
The Board Members and executive officers of each Trust are listed below.
Interested Board Member means a board member who may be deemed an “interested person” (as that term is defined in the 1940 Act) of each Trust because of his current or former service with TAM or an affiliate of TAM. Interested Board Members may also be referred to herein as “Interested Trustees.” Independent Board Member means a Board Member who is not an “interested person” (as defined under the 1940 Act) of each Trust and may also be referred to herein as an “Independent Trustee.”
The Board governs each Subaccount and is responsible for protecting the interests of the shareholders. The Board Members are experienced executives who meet periodically throughout the year to oversee the business affairs of each Subaccount and the operation of each Subaccount by its officers. The Board also reviews the management of each Subaccount’s assets by the investment manager and its respective sub-adviser.
The Subaccounts are among the portfolios advised and sponsored by TAM (collectively, “Transamerica Mutual Funds”). The Transamerica Mutual Funds consist of Transamerica Funds (“TF”), Transamerica Series Trust (“TST”), Transamerica Partners Funds Group (“TPFG”), Transamerica Partners Funds Group II (“TPFG II”), Transamerica Partners Portfolios (“TPP”) and Transamerica Asset Allocation Variable Funds (“TAAVF”) and consists of 184 funds as of the date of this annual report.
The mailing address of each Board Member is c/o Secretary, 1801 California Street, Suite 5200, Denver, Colorado 80202.
The Board Members of each Trust and each Portfolio Trust, their age, their positions with the Trusts, and their principal occupations for the past five years (their titles may have varied during that period) the number of funds in Transamerica Mutual Funds the Board oversees, and other board memberships they hold are set forth in the table below. The length of time served is provided from the date a Trustee became a Trustee of either of the Trusts or Transamerica Partners Portfolios.
| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships Held By Board Member | |||||
|
INTERESTED BOARD MEMBERS | ||||||||||
| Marijn P. Smit (43) |
Chairman of the Board, President and Chief Executive Officer | Since 2014 | Chairman of the Board, President and Chief Executive Officer, TF, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Chairman of the Board, President and Chief Executive Officer, Transamerica Income Shares, Inc. (“TIS”) (2014 – 2015);
Director, Chairman of the Board, President and Chief Executive Officer, Transamerica Asset Management, Inc. (“TAM”) and Transamerica Fund Services, Inc. (“TFS”) (2014 – present);
President, Investment Solutions, Transamerica Investments & Retirement (2014 – 2016);
Vice President, Transamerica Premier Life Insurance Company (2010 – 2016);
Vice President, Transamerica Life Insurance Company |
184 | Director, Massachusetts Fidelity Trust Company (since 2014); Director, Aegon Global Funds (since 2016) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships Held By Board Member | |||||
| INTERESTED BOARD MEMBERS — continued |
||||||||||
| Marijn P. Smit (continued) |
Senior Vice President, Transamerica Financial Life Insurance Company (2013 – 2016);
Senior Vice President, Transamerica Retirement Advisors, Inc. (2013 – 2016);
Senior Vice President, Transamerica Retirement Solutions Corporation (2012 – present); and
President and Director, Transamerica Stable Value Solutions, Inc. (2010 – 2016). |
|||||||||
| Alan F. Warrick (68) |
Board Member | Since 2012 | Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF
Board Member, TIS (2012 – 2015); Consultant, Aegon USA
Senior Advisor, Lovell Minnick Equity Partners (2010 – present);
Retired (2010 – present); and
Managing Director for Strategic Business Development, Aegon USA (1994 – 2010). |
184 | N/A | |||||
|
INDEPENDENT BOARD MEMBERS | ||||||||||
| Sandra N. Bane (64) |
Board Member | Since 2008 | Retired (1999 – present);
Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF
Board Member, TIS (2008 – 2015);
Board Member, Transamerica Investors, Inc. (“TII”) (2003 – 2010); and
Partner, KPMG (1975 – 1999). |
184 | Big 5 Sporting Goods (2002 – present); Southern Company Gas (energy services holding company) (2008 – present) | |||||
| Leo J. Hill (60) |
Lead Independent Board Member |
Since 2007 | Principal, Advisor Network Solutions, LLC (business consulting) (2006 – present);
Board Member, TST
Board Member, TF
Board Member, TIS (2002 – 2015);
Board Member, TPP, TPFG, TPFG II and TAAVF
Board Member, TII (2008 – 2010);
Market President, Nations Bank of Sun Coast Florida (1998 – 1999); |
184 | Ameris Bancorp (2013 – present); Ameris Bank (2013 – present) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships Held By Board Member | |||||
|
INDEPENDENT BOARD MEMBERS — continued | ||||||||||
| Leo J. Hill (continued) |
Chairman, President and Chief Executive Officer, Barnett Banks of
Treasure Coast Florida
Executive Vice
President and Senior Credit Officer, Barnett Banks of Jacksonville, Florida
Senior Vice President and Senior Loan Administration Officer, Wachovia Bank of Georgia |
|||||||||
| David W. Jennings (70) |
Board Member | Since 2009 | Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF
Board Member, TIS (2009 – 2015);
Board Member, TII (2009 – 2010);
Managing Director, Hilton Capital Management, LLC (2010 – present);
Principal, Maxam Capital Management, LLC (2006 – 2008); and
Principal, Cobble Creek Management LP (2004 – 2006). |
184 | N/A | |||||
| Russell A. Kimball, Jr. (72) |
Board Member | Since 2007 | General Manager, Sheraton Sand Key Resort (1975 – present);
Board Member, TST
Board Member, TF, (1986 – 1990), (2002 – present);
Board Member, TIS (2002 – 2015);
Board Member, TPP, TPFG, TPFG II and TAAVF (2007 – present); and
Board Member, TII (2008 – 2010). |
184 | N/A | |||||
| Patricia L. Sawyer (66) |
Board Member | Since 1993 | Retired (2007 – present);
President/Founder, Smith & Sawyer LLC (management consulting) (1989 – 2007);
Board Member, TF and TST
Board Member, TIS (2007 – 2015);
Board Member, TII (2008 – 2010);
Board Member, TPP, TPFG, TPFG II and TAAVF (1993 – present); and |
184 | Honorary Trustee, Bryant University (1996 – present) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships Held By Board Member | |||||
|
INDEPENDENT BOARD MEMBERS — continued | ||||||||||
| Patricia L. Sawyer (continued) |
Trustee, Chair of Finance Committee and Chair of Nominating Committee (1987 – 1996), Bryant University. |
|||||||||
| John W. Waechter (64) |
Board Member | Since 2007 | Partner, Englander Fischer (2016 – present); Attorney, Englander Fischer (2008 – 2015);
Retired (2004 – 2008);
Board Member, TST
Board Member, TIS (2004 – 2015);
Board Member, TF
Board Member, TPP, TPFG, TPFG II and TAAVF (2007 – present);
Board Member, TII (2008 – 2010);
Employee, RBC Dain Rauscher (securities dealer) (2004);
Executive Vice President, Chief Financial Officer and Chief Compliance Officer, William R. Hough & Co. (securities dealer) (1979 – 2004); and
Treasurer, The Hough Group of Funds (1993 – 2004). |
184 | Operation PAR, Inc. (non-profit organization) (2008 – present); Remember | |||||
| * | Each Board Member shall hold office until: 1) his or her successor is elected and qualified or 2) he or she resigns, retires or his or her term as a Board Member is terminated in accordance with the Trust’s Declaration of Trust. |
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Officers
The mailing address of each officer is c/o Secretary, 1801 California Street, Suite 5200, Denver, CO 80202. The following table shows information about the officers, including their age, their positions held with each Trust and their principal occupations during the past five years (their titles may have varied during that period). Each officer will hold office until his or her successor has been duly elected or appointed or until his or her earlier death, resignation or removal.
| Name and Age | Position | Term of Office and Length of Time Served* |
Principal Occupation(s) or Employment During Past Five Years | |||
| Marijn P. Smit (43) |
Chairman of the Board, President and Chief Executive Officer | Since 2014 | See previous table. | |||
| Tané T. Tyler (51) |
Vice President, Associate General Counsel, Chief Legal Officer and Secretary | Since 2014 | Vice President, Associate General Counsel, Chief Legal Officer and Secretary, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Assistant General Counsel, Chief Legal Officer and Secretary, TIS (2014 – 2015);
Director, Vice President, Assistant General Counsel, Chief Legal Officer and Secretary, TAM and TFS (2014 – present);
Senior Vice President, Secretary and General Counsel, ALPS, Inc., ALPS Fund Services, Inc. and ALPS Distributors, Inc. (2004 – 2013); and
Secretary, Liberty All-Star Funds (2005-2013). | |||
| Christopher A. Staples (46) |
Vice President and Chief Investment Officer, Advisory Services |
Since 2007 | Vice President and Chief Investment Officer,
Advisory Services (2007 – present), Senior Vice President – Investment Management (2006 – 2007), Vice President – Investment Management
Vice President and Chief Investment Officer, Advisory Services (2007 – 2015), Senior Vice President – Investment Management (2006 – 2007), Vice President – Investment Management (2005 – 2006), TIS;
Senior Director, Investments, TPP, TPFG, TPFG II and TAAVF (2007 – present);
Vice President and Chief Investment Officer
Vice President – Investment Administration (2005 – 2007), TII;
Director (2005 – present), Senior Vice President (2006 – present), TAM;
Director, TFS (2005 – present); and
Assistant Vice President, Raymond James & Associates (1999 – 2004). | |||
| Thomas R. Wald (55) |
Chief Investment Officer | Since 2014 | Chief Investment Officer, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Chief Investment Officer, TIS (2014 – 2015);
Senior Vice President and Chief Investment Officer, TAM (2014 – present); |
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Table of Contents
| Name and Age | Position | Term of Office and Length of Time Served* |
Principal Occupation(s) or Employment During Past Five Years | |||
| Thomas R. Wald (continued) |
Chief Investment Officer, Transamerica Investments & Retirement (2014 – present);
Vice President and Client Portfolio Manager, Curian Capital, LLC (2012 – 2014);
Portfolio Manager, Tactical Allocation Group, LLC (2010 – 2011);
Mutual Fund Manager, Munder Capital Management (2005 – 2008); and
Mutual Fund Manager, Invesco Ltd. (1997 – 2004). | |||||
| Vincent J. Toner (46) |
Vice President and Treasurer | Since 2014 | Vice President and Treasurer (2014 – present) Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF;
Vice President and Treasurer, TIS (2014 – 2015);
Vice President and Treasurer, TAM and TFS (2014 – present);
Senior Vice President and Vice President, Fund Administration, Brown Brothers Harriman (2010 – 2014); and
Vice President Fund Administration & Fund Accounting, Oppenheimer Funds (2007 – 2010) | |||
| Matthew H. Huckman, Sr. (48) |
Tax Manager | Since 2014 | Tax Manager, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Tax Manager, TIS (2014 – 2015);
Tax Manager, TFS (2012 – present); and
Assistant Mutual Fund Tax Manager, Invesco (2007 – 2012). | |||
| Scott M. Lenhart (55) |
Chief Compliance Officer and Anti-Money Laundering Officer | Since 2014 | Chief Compliance Officer and Anti-Money Laundering Officer, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present), TIS (2014 – 2015);
Chief Compliance Officer and Anti-Money Laundering Officer (2014 – present), Senior Compliance Officer (2008 – 2014), TAM;
Vice President and Chief Compliance Officer, TFS (2014 – present);
Director of Compliance, Transamerica Investments & Retirement (2014 – present);
Vice President and Chief Compliance Officer, Transamerica Financial Advisors, Inc. (1999 – 2006); and
Assistant Chief Compliance Officer, Raymond James Financial, Inc., Robert Thomas Securities, Inc. (1989 – 1998). |
| * | Elected and serves at the pleasure of the Board of each Trust. |
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Table of Contents
Transamerica Partners Portfolios
Table of Contents
Transamerica Partners High Quality Bond Portfolio
(unaudited)
MARKET ENVIRONMENT
The year ended with generally positive returns to the fixed income markets, as the Bloomberg Barclays U.S. Aggregate Bond Index and BofA Merrill Lynch U.S. Corporate & Government 1-3 Years Index returned 2.65% and 1.28%, respectively. However, these returns masked volatility experienced during the year. The first half of the year was characterized by gradually declining interest rates. Rates ended the year higher than where they started after a significant increase in rates following the U.S. presidential election. Interest rates moved higher in the fourth quarter on the expectation of policies from the new administration that could benefit economic growth, but also drive inflation higher. Rates also moved higher as the U.S. Federal Reserve raised its target federal funds rate to a range of 0.5% - 0.75% in December.
After a tumultuous first quarter, spreads on credit sector securities tightened the remainder of the year, ending near two-year lows. Spread moves were typically led by the corporate bond sector. Much of the high-grade fixed income market was the beneficiary of investments from non-domestic buyers during 2016. Given very low rates, and in many cases negative rates, in other fixed income markets, international buyers were happy to purchase high-quality, dollar-denominated assets with significantly higher yields than what they could find domestically. These flows helped to fuel the spread tightening of dollar-denominated fixed income securities. Levels of new issuance varied across the fixed income sectors. Investment grade corporate new issuance set a new record, while issuance in the structured sectors was more muted.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners High Quality Bond Portfolio returned 1.51%. By comparison, its benchmark, the BofA Merrill Lynch U.S. Corporate & Government 1-3 Years Index, returned 1.28%.
STRATEGY REVIEW
With the tightening of the spread sectors in 2016, the primary driver of performance was an overweight to the spread sectors, particularly the structured sectors. Both asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”) contributed substantially to relative performance. Contribution from overweight positions in industrials and financials was also positive, while underweighting utilities hurt returns.
Specific security selection was also an important factor in performance. The Portfolio’s energy holdings aided performance, as the energy sector rallied significantly after widening in the first quarter. The Portfolio’s specific real estate investment trust and brokerage holdings also contributed to relative performance.
Curve positioning had a modest negative impact. The Treasury curve flattened in 2016; short rates rose more than longer rates. The Portfolio’s overweight to the 0 to 1-year and 2 to 3-year duration buckets weighed.
Allocation within sectors changed during the year. In ABS, an allocation to auto loan subordinated tranches increased. These tranches have well-enhanced credit support, well-performing collateral and provide a significant increase in yield relative to the senior tranches. In CMBS, we trimmed holdings of mezzanine CMBS in the second half of the year, preferring to move into agency CMBS, as the spreads between non-agency and agency paper had compressed. At year end, the Portfolio’s yield to maturity was higher and duration was lower than the benchmark.
Jennifer K. Wynn, CFA
Peter S. Kaplan, CFA
Co-Portfolio Managers
Merganser Capital Management, LLC
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Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
(unaudited)
MARKET ENVIRONMENT
In 2016, the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities Index and the Bloomberg Barclays World Government Inflation-Linked Bond Index posted returns of 4.68% and 10.22%, respectively. The U.S. 10-year, break-even inflation rate widened by approximately 25%, closing at 1.97%. This marked a sharp rebound from the energy induced sell-off at the start of the year, when break-evens reached the lows of 1.2% in February. The reflationary narrative began in the middle of the year, with consistent core consumer price index between the 2.2% and 2.3% year-over-year level, but there was diffusion of strength within index components, such as apparel, shelter and medical care.
Immediately following the results of the U.S. election, markets generally perceived Donald Trump’s political agenda as supportive of the reflationary narrative, as nominal rates sold off to near-term highs; the 10-year U.S. Treasury closed at 2.4%. The U.S. Federal Reserve (“Fed”) hiked the policy rate by 25 basis points (“bps”) at the December Federal Open Market Committee meeting. The median forecast of the federal funds rate showed a slightly faster pace of hiking in 2017, by three times, against two contained in the September projections.
Globally, the June 23 U.K. referendum resulted in a leave vote from the European Union (“Brexit”), resulting in over 7% depreciation of the sterling to multidecade lows against the U.S. dollar. Following the initial Brexit shock, U.K. break-evens plunged 16-20 bps across the curve, but retraced to close the year higher. Yields on German bunds rallied into negative territory for the first time ever on June 14. The Bank of Japan left its policy rate unchanged at (0.10)%, and it introduced quantitative and qualitative easing. The bank scrapped the average maturity targeting for Japanese government bonds and stated that it will buy them so that 10-year yields remain around the current level.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Inflation-Protected Securities Portfolio returned 4.03%. By comparison, its benchmark, the Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index, returned 4.68%.
STRATEGY REVIEW
Long U.S. break-even positioning was a detractor over the first half of year. In the first six weeks, long U.S. break-even positioning was a detractor as energy prices plummeted, but the retracement higher in break-evens in March contributed marginally to performance. Long break-even positioning continued to detract as inflation expectations narrowed in the latter portion of the second quarter.
Over the second half of the year, break-even positioning benefited performance, especially in the wake of the U.S. election as inflation expectations rose meaningfully. Detractors included the Portfolio’s aggregate European and short Japanese nominal bond positioning. Long New Zealand real rate positioning was a contributor. Within currencies, short British pound vs. Australian dollar and Japanese yen proved beneficial surrounding Brexit, although aggregate currency positioning detracted.
During the period, the Portfolio used derivatives. These positions detracted from performance.
Martin Hegarty
Gargi Chaudhuri
Co-Portfolio Managers
BlackRock Financial Management, Inc.
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Table of Contents
Transamerica Partners Core Bond Portfolio
(unaudited)
MARKET ENVIRONMENT
In December 2016, the Conference Board reported that consumer confidence was at the highest levels since 2001. The Institute for Supply Management’s December Purchasing Manager’s Index put U.S. factory activity at a two-year high. Riskier assets in the U.S., like high-yield debt and equities, the latter of which reached all-time highs, had double-digit total returns for the year, landing both in the top-20 returning asset classes. More broadly, some $3 trillion of value rotated out of U.S. fixed income and into U.S. equities—and that was just in the two months following the election. Inflation expectations also surged in November to the highest levels in a year, as nominal interest rates leapt higher.
The end of a raucous election season helped end a long period of policy uncertainty. Donald Trump’s victory, and the Republican Party’s singular control of the Congress and the White House, buoyed the markets on the prospects of substantive tax reforms and the possibility of infrastructure spending.
The U.S. Federal Reserve’s (“Fed”) commitment to keeping interest rates historically low helped fuel risk taking. Another factor was concerns that continued economic improvement and steadily rising inflation would accelerate the Fed’s move to higher rates in 2017 and led market participants to move in 2016, while yields were low and spreads compressed.
In December, when the Fed raised rates for just the second time in two years, its own projections suggested roughly three hikes in 2017, a more aggressive pace than previously forecast. Short-term interest rates, like three-month LIBOR for example, rose to the highest levels since the financial crisis. The period of historically low rates may be coming to an end, which is raising concerns over how tighter financial conditions—especially the stronger U.S. dollar, which may have been the biggest story of 2016—may impact borrowers globally, from emerging-market corporates to developed-market sovereigns.
Commodity prices rebounded during the year. Crude oil, which was boosted by the Organization of Petroleum Exporting Countries’ (“OPEC”) December decision to cut production, closed near its high for the year. Also supporting commodity prices was China’s top line economic growth, which stabilized at 6.7%. Partly due to concerted fiscal stimulus, this was a welcomed sign after years of steadily declining growth from the world’s largest commodities importer.
Overall, 2016 was a volatile year that started on the wrong foot with a 10% decline in the S&P 500® in the first six weeks. Crude oil prices reached depths not seen in over a decade, and the 10-year U.S. Treasury yield hit an all-time low by July of 1.37%. Geopolitical risks—like Great Britain’s referendum to leave the European Union (“Brexit”), turmoil in Syria, deadly terror attacks in the West, and an attempted coup in Turkey—proved to be momentous social and political events, but they had little lasting impact on the year’s financial market performance.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Core Bond Portfolio returned 3.46%. By comparison, its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, returned 2.65%.
STRATEGY REVIEW
Throughout the year, the Portfolio was positioned to capture additional yield by underweighting Treasury and agency mortgage-backed securities and overweighting spread asset classes, including investment grade corporate bonds, commercial mortgage-backed securities, asset-backed securities and non-agency, mortgage-backed securities. Overall, this asset class positioning contributed positively to performance relative to the benchmark. The largest benefits came from spread tightening within the spread asset classes and strong current income generation.
Partially offsetting this positive relative performance was a negative contribution from yield-curve positioning. Rates shifted higher across the curve, particularly in the fourth quarter, and although the overall portfolio duration was slightly shorter than the benchmark, positioning at certain points on the curve led to negative relative performance as curve shifts varied across the maturity spectrum. Security selection within investment grade corporate bonds was also a detractor.
Brian W. Westhoff, CFA
Doug Weih, CFA
Matthew Q. Buchanan, CFA
Bradley D. Doyle, CFA
Tyler A. Knight, CFA
Co-Portfolio Managers
Aegon USA Investment Management, LLC
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Table of Contents
Transamerica Partners High Yield Bond Portfolio
(unaudited)
MARKET ENVIRONMENT
U.S. high-yield debt had a blockbuster year in 2016. Total returns, as measured by the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index, exceeded 17%, making it the best performing fixed-income asset class, and with relatively low volatility, the sector offered some of the best risk-adjusted returns available to investors.
The start of the year was dominated by concerns over China’s weakening growth outlook, continued deterioration in commodity prices—crude oil prices fell to the lowest levels in over a decade—and increased default expectations for the high-yield sector. Concerns over China faded quickly as their government’s late-2015 fiscal stimulus resulted in a higher demand for hard metals by the first quarter. While defaults did materialize early in the year, an improving commodity outlook and change in tone from the Organization of Petroleum Exporting Countries (“OPEC”) led to a significant rally in commodity prices as well as high-yield commodity bonds, setting the stage for the rally that followed. During the period, strength was sustained even as defaults weighed on the market.
The market’s supply/demand balance was a dominant theme over the year; demand consistently outstripped new-issue supply. Even though total fixed-income issuance breached record levels, high-yield new issues declined year-over-year, for the third consecutive year. Still, 2016’s $280 billion in gross new issuance was the sixth largest on record. Of 2016’s issuance, the bulk was in the BBB-to-B range of the credit spectrum. CCC (and lower) volumes were the lowest since 2003. New issue loan volume totaled $441 billion, a 36% increase from 2015’s total issuance of $325.8 billion and the third largest annual volume on record, trailing only 2013’s record high $670 billion and 2014’s $467 billion.
Interestingly, the use of proceeds for 2016’s issuance reveals that refinancing activity dominated, amid record low interest rates and tight spreads. Acquisition-related issuance fell to a seven-year low, accounting for only 15% of total issuance.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners High Yield Bond Portfolio returned 15.44%. By comparison, its benchmark, the BofA Merrill Lynch High Yield Master II Index, returned 17.49%.
STRATEGY REVIEW
At the ratings level, performance was driven by selection decisions in B and CCC-rated credits, which detracted the most from excess returns, yet holding a core underweight to BBs provided a positive offset. BB-rated holdings provided the largest active contribution to returns, though a small allocation to not-rated bonds was also additive to returns.
At the sector level, communications, consumer cyclical and capital goods were the largest contributors to excess returns, but these positives were more than offset by the largest detractors—energy, transports and utilities. Energy was an underweight during the year due to our view that potential risks in the sector outweighed the potential rewards. Even so, the sector—led by many of the most leveraged names—rallied strongly.
Kevin Bakker, CFA
Benjamin D. Miller, CFA
James K. Schaeffer, Jr.
Derek Thoms
Co-Portfolio Managers
Aegon USA Investment Management, LLC
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
Transamerica Partners Balanced Portfolio
(unaudited)
MARKET ENVIRONMENT
Aegon USA Investment Management, LLC
In December 2016, the Conference Board reported that consumer confidence was at the highest levels since 2001. The Institute for Supply Management’s December Purchasing Manager’s Index put U.S. factory activity at a two-year high. Riskier assets in the U.S., like high-yield debt and equities, the latter of which reached all-time highs, had double-digit total returns for the year, landing both in the top-20 returning asset classes. More broadly, some $3 trillion of value rotated out of U.S. fixed income and into U.S. equities—and that was just in the two months following the election. Inflation expectations also surged in November to the highest levels in a year, as nominal interest rates leapt higher.
The end of a raucous election season helped end a long period of policy uncertainty. Donald Trump’s victory, and the Republican Party’s singular control of the Congress and the White House, buoyed the markets on the prospects of substantive tax reforms and the possibility of infrastructure spending.
The U.S. Federal Reserve’s (“Fed”) commitment to keeping interest rates historically low helped fuel risk taking. Another factor was concerns that continued economic improvement and steadily rising inflation would accelerate the Fed’s move to higher rates in 2017 and led market participants to move in 2016, while yields were low and spreads compressed.
In December, when the Fed raised rates for just the second time in two years, its own projections suggested roughly three hikes in 2017, a more aggressive pace than previously forecast. Short-term interest rates, like three-month LIBOR for example, rose to the highest levels since the financial crisis. The period of historically low rates may be coming to an end, which is raising concerns over how tighter financial conditions—especially the stronger U.S. dollar, which may have been the biggest story of 2016—may impact borrowers globally, from emerging-market corporates to developed-market sovereigns.
Commodity prices rebounded during the year. Crude oil, which was boosted by the Organization of Petroleum Exporting Countries’ (“OPEC”) December decision to cut production, closed near its high for the year. Also supporting commodity prices was China’s top line economic growth, which stabilized at 6.7%. Partly due to concerted fiscal stimulus, this was a welcomed sign after years of steadily declining growth from the world’s largest commodities importer.
Overall, 2016 was a volatile year that started on the wrong foot with a 10% decline in the S&P 500® in the first six weeks. Crude oil prices reached depths not seen in over a decade, and the 10-year U.S. Treasury yield hit an all-time low by July (1.37%). Geopolitical risks—like Great Britain’s referendum to leave the European Union (“Brexit”), turmoil in Syria, deadly terror attacks in the West, and an attempted coup in Turkey—proved to be momentous social and political events, but they had little lasting impact on the year’s financial market performance.
J.P. Morgan Investment Management, Inc.
U.S. equity markets in 2016 can be best described as a tale of two halves. In the first half, volatility was attributable to several factors including the sudden devaluation of the Chinese renminbi, crude oil prices falling below $30 a barrel, fears of a global economic slowdown and the unexpected Brexit. However, improvement in global economic growth, recovering commodity prices and the realization that the Brexit vote was a political crisis rather than a financial crisis contributed to equity markets stabilizing. Improving sentiment led to a shift in market leadership from the defensive to the cyclical sectors. The rotation into cyclicals intensified when in a surprising turn of events, Donald J. Trump was elected the 45th president of the U.S.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Balanced Portfolio returned 8.29%. By comparison, its primary and secondary benchmarks, the S&P 500® and the Bloomberg Barclays U.S. Aggregate Bond Index, returned 11.96% and 2.65%, respectively.
STRATEGY REVIEW
Aegon USA Investment Management, LLC
Throughout the year, the Portfolio was positioned to capture additional yield by underweighting Treasury and agency mortgage-backed securities and overweighting spread asset classes, including investment grade corporate bonds, commercial mortgage-backed securities, asset-backed securities, and non-agency, mortgage-backed securities. Overall, this asset class positioning contributed positively to relative performance compared to the benchmark. The largest benefits came from spread tightening within the spread asset classes and strong current income generation.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 6
Table of Contents
Transamerica Partners Balanced Portfolio
(unaudited)
STRATEGY REVIEW (continued)
Partially offsetting this positive relative performance was a negative contribution from yield-curve positioning. Rates shifted higher across the curve, particularly in the fourth quarter, and although the overall portfolio duration was slightly shorter than the benchmark, positioning at certain points on the curve led to negative relative performance as curve shifts varied across the maturity spectrum. Security selection within investment grade corporate bonds was also a detractor.
J.P. Morgan Investment Management, Inc.
Stock selection in the media, health services and systems and technology sectors helped results, while stock selection in the pharmaceutical /medical technology, insurance and consumer cyclical sectors weighed on returns.
Among positives, an overweight in Time Warner, Inc. in the media sector contributed to returns after AT&T offered to acquire the company. Due to valuable content assets like HBO and its Warner Brothers film unit, Time Warner, Inc. may provide AT&T with new sources of growth amid efforts to diversify its revenue base as its wireless business matures.
In health services/systems, an overweight in UnitedHealth Group, Inc. bolstered returns after better-than-expected cost control and strong premium growth allowed the company to sidestep broader pressures within the sector. J.P. Morgan Investment Management, Inc. remains positive due to what is seen as the high potential of the company’s Optum Health platform, improving medical loss ratios and positive exposure to the broad stabilization of Medicare Advantage cost trends. An underweight in Walt Disney Co. contributed amid concerns about ESPN subscribers and tough film comparisons after its successful 2015 film slate. However, J.P. Morgan Investment Management, Inc. reduced the underweight as investor focus shifted to Walt Disney Co.’s 2018 fiscal year.
On the negative side, an underweight in NVIDIA Corp. within the semiconductors/hardware sector weighed on performance; the company continued to show tremendous strength in its gaming segment while developing new markets in automotive content and deep learning. While these new markets may be commoditized in the future, its gaming growth led us to shift to a neutral stance in the near-term.
Within financials, not holding JPMorgan Chase & Co. weighed on performance. Strong earnings growth was enabled by continued strength in cost control, along with fixed income, currencies and commodities performance and asset quality. The broader, post-election rally for financials further boosted the bank due to expected rises in loan growth and interest rates. J.P. Morgan Investment Management, Inc. is unable to hold JPMorgan Chase & Co. due to regulatory restrictions.
In pharmaceutical/medical technology, the Portfolio’s underweight in Johnson & Johnson detracted, as the company reported market share gains in several key pharmaceutical products, lowered interest rate expenses and improved cost management. While J.P. Morgan Investment Management, Inc. finds the strength in its pharmaceutical unit to be incrementally positive, there were concerns about the impact of broader pricing pressures on Johnson & Johnson and were skeptical about its capital allocation execution.
During the period, the Portfolio used derivatives. These positions added to performance.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
Transamerica Partners Large Value Portfolio
(unaudited)
MARKET ENVIRONMENT
U.S. stocks were up across the board, led by small cap value (the Russell 2000® Value Index returned a staggering 31.74%). It was a tale of two periods. At the beginning of the year, performance was negatively impacted by the “cult” of stability, which led to an indifference to valuations and AJO, LP’s inability to participate in the momentum rally. Value stocks’ recovery in the second half of the year boosted the Portfolio’s returns, evident in the industrial, energy and financial sectors.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Large Value Portfolio returned 9.43%. By comparison, its primary and secondary benchmarks, the Russell 1000® Value Index and the S&P 500®, returned 17.34% and 11.96%, respectively.
STRATEGY REVIEW
We remain true to our systematic approach that focuses on low-priced companies with proven and confident management, positive earnings and price momentum and favorable investor sentiment. The Portfolio invests in a broadly diversified selection of large-cap stocks using our disciplined investment approach—we are fully invested in U.S. equities, avoid broad sector bets, and take only modest industry-level and stock-specific bets. Our goal is to outperform the benchmark with incremental gains across many holdings.
Using bottom-up stock selection, we evaluate companies relative to their industry peers using four broad categories of measures: value, management, momentum and sentiment. Value refers to the somewhat traditional ratios of price to fundamental value; management means we look for evidence that a company’s management team has and will continue to emphasize earning power; momentum indicates when stocks might begin to rise toward full valuation; and sentiment captures the buying and selling behavior of key investor segments in various markets. As we search for opportunities, we keep a sharp eye on minimizing transaction costs, helping us maximize profits in our stock-selection effort.
The Portfolio underperformed its benchmark, the Russell 1000® Value Index, due to lagging significantly in the first half of the year. Our performance rebounded somewhat in the second half of the year, as value stocks began outperforming. Industrial and energy holdings disappointed in the first half of the year, but contributed at the end. A valuation-driven bet for banks paid off in the fourth quarter, as a result of investors expecting a steeping yield curve in 2017.
For the full year, our energy and industrial holdings weighed the most on relative performance. Within energy, underweights in integrated energy companies Exxon Mobil Corp. and Chevron Corp. weighed the most, followed by our holdings in Marathon Petroleum Corp. (no longer held at period end) and Ensco PLC. In industrials, American Airlines Group, Inc. (no longer held at period end) and Alaska Air Group, Inc. (no longer held at period end) were the largest individual detractors. Relative contributors were led by our real estate investment trust holdings, which significantly outperformed the Index’s holdings.
Theodore R. Aronson
Stefani Cranston
Gina Marie N. Moore
Gregory J. Rogers
Christopher J.W. Whitehead
Co-Portfolio Managers
AJO, LP
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
Transamerica Partners Large Core Portfolio
(unaudited)
MARKET ENVIRONMENT
U.S. stocks were up across the board, led by small cap value (the Russell 2000® Value Index returned a staggering 31.74%). It was a tale of two periods. At the beginning of the year, performance was negatively impacted by the “cult” of stability, which led to an indifference to valuations and AJO, LP’s inability to participate in the momentum rally. Value stocks’ recovery in the second half of the year boosted the Portfolio’s returns, evident in the industrial, energy and financial sectors.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Large Core Portfolio returned 8.13%. By comparison, its primary and secondary benchmarks, the Russell 1000® Index and the S&P 500®, returned 12.05% and 11.96%, respectively.
STRATEGY REVIEW
We remain true to our systematic approach that focuses on low-priced companies with proven and confident management, positive earnings and price momentum and favorable investor sentiment. The Portfolio invests in a broadly diversified selection of large-cap stocks using our disciplined investment approach—we are fully invested in U.S. equities, avoid broad sector bets, and take only modest industry-level and stock-specific bets. Our goal is to outperform the benchmark with incremental gains across many holdings.
Using bottom-up stock selection, we evaluate companies relative to their industry peers using four broad categories of measures: value, management, momentum and sentiment. Value refers to the somewhat traditional ratios of price to fundamental value; management means we look for evidence that a company’s management team has and will continue to emphasize earning power; momentum indicates when stocks might begin to rise toward full valuation; and sentiment captures the buying and selling behavior of key investor segments in various markets. As we search for opportunities, we keep a sharp eye on minimizing transaction costs, helping us maximize profits in our stock-selection effort.
The Portfolio lagged significantly in the first half of the year. Our performance rebounded somewhat in the second half of the year, as value stocks began outperforming. Industrial and energy holdings disappointed in the first half of the year, but contributed at the end. A valuation-driven bet for banks paid off in the fourth quarter, as a result of investors expecting a steeping yield curve in 2017.
For the full year, energy and industrial holdings weighed the most on relative performance. Within energy, an underweight in Index heavyweight Exxon Mobil Corp. weighed the most, followed by holdings in Marathon Petroleum Corp. (no longer held at period end) and Ensco PLC. In industrials, an overweight in the transportation industry was the largest detractor.
Contributors were led by holdings in consumer discretionary, real estate and health care. Best Buy Co., Inc. was the top individual contributor in consumer discretionary, while our holdings in real estate investment trusts significantly outperformed those within the Index.
Theodore R. Aronson
Stefani Cranston
Gina Marie N. Moore
Gregory J. Rogers
Christopher J.W. Whitehead
Co-Portfolio Managers
AJO, LP
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
Transamerica Partners Large Growth Portfolio
(unaudited)
MARKET ENVIRONMENT
Jennison Associates LLC
2016 was a year of volatility and surprises. Decelerating economic growth in China, concerns that emerging economies might face balance-sheet risks, the negative effect of lower energy prices on industrial sectors, fears of slowing economic growth in the U.S., uncertainty about the course of future U.S. Federal Reserve (“Fed”) monetary tightening, the United Kingdom’s vote to leave the European Union (“Brexit”), and the highly unconventional U.S. presidential election all contributed to volatility. Risk aversion in this global market environment affected how investors valued different securities. Low-volatility, high-dividend-paying stocks were significant drivers of market returns with dividend-paying and other “safety” stocks outperforming, and stocks of higher-growth companies, such as those held in the Portfolio, generally underperforming. In the wake of the November U.S. election, speculation about potential policy initiatives of the new administration favored companies—many of them exhibiting little secular growth—that investors expected to benefit from a less onerous regulatory environment, lower corporate tax rates, and infrastructure and defense spending.
Wellington Management Company LLP
U.S. equities rose over the period, as measured by the S&P 500®, notwithstanding significant volatility during the year. Early in the first quarter of 2016, stocks plunged and moved in virtual lockstep with the price of oil as fears of a recession and weakness in China weighed on investors’ minds. However, equities surged in late February and March as solid economic data, a stabilization in oil prices, and accommodative commentary from the Fed helped to calm the market’s early-year jitters. A better-than-feared U.S. corporate earnings season in the second quarter and an encouraging economic backdrop helped to sustain the rally. At its June meeting, the Fed left rates unchanged and reduced its U.S. growth and long-run policy rate forecasts, citing mixed U.S. economic data and uncertainty about global economic and financial developments. After plunging in the two trading days following Brexit, U.S. stocks staged an impressive comeback in the days following.
U.S. equities continued to climb in July, following a solid start to the corporate earnings season and encouraging housing and employment data releases. Stocks were essentially flat in August and September as investors remained focused on the Fed’s actions, specifically on the timing of the next rate hike. A confluence of worries contributed to increased volatility during September, including uncertainty surrounding the U.S. presidential election, tepid economic data, and valuation concerns. Stocks rose following Donald Trump’s victory on hopes of increased fiscal stimulus, reduced regulatory restrictions, and lower corporate taxes. Economic data released during the quarter was generally encouraging, as third quarter gross domestic product (“GDP”) growth was revised slightly higher and the U.S. housing market continued to display healthy trends. In December, the Fed raised rates by 0.25%, a well-telegraphed move and only the second hike in the last decade.
Returns varied by market capitalization; small- and mid-cap stocks, as measured by the Russell 2000® Index and S&P MidCap 400, outperformed large-cap stocks, as measured by the S&P 500®.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Large Growth Portfolio returned 1.06%. By comparison, its primary and secondary benchmarks, the Russell 1000® Growth Index and the S&P 500®, returned 7.08% and 11.96%, respectively.
STRATEGY REVIEW
Jennison Associates LLC
Investor risk aversion hurt higher-growth, and therefore higher-valuation, stocks. Health-care companies faced the additional headwind of growing concerns about drug pricing. Companies that sell innovative, high-priced drugs sold off, among them portfolio holdings Alexion Pharmaceuticals, Inc. (blood and metabolic disorders), Regeneron Pharmaceuticals, Inc. (eye diseases, high cholesterol), and Vertex Pharmaceuticals, Inc. (cystic fibrosis) (no longer held at period end). Healthcare companies in which acquired growth played a greater role, such as Allergan PLC, declined as regulatory changes threatened to remove many of the tax benefits of mergers between U.S. and offshore companies.
Information technology positions advanced but lagged the benchmark sector, with declines in LinkedIn Corp. (no longer held at period end) and salesforce.com, Inc. having the effect of tempering strong gains in NVIDIA Corp. and Tencent Holdings, Ltd. LinkedIn Corp’s decline reflected signs of significant deceleration in recent high growth rates. Salesforce.com, Inc. faced concerns that its growth rate, too, might slow. NVIDIA Corp.’s revenue, gross margin and earnings exceeded forecasts. The company has transformed itself from a personal-computer-centric graphics provider to a company focused on key high-growth markets, where we believe it can leverage its graphics expertise to offer high-value-added solutions. Tencent Holdings Ltd., China’s largest and most visited internet service portal, continued to perform well fundamentally, driven by its dominant position in China’s online gaming and instant messaging markets and its growing advertising and payment service efforts.
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Transamerica Partners Large Growth Portfolio
(unaudited)
STRATEGY REVIEW (continued)
In consumer discretionary, NIKE, Inc.’s decline partially offset solid advances in Amazon.com, Inc., Marriott International, Inc. and Time Warner, Inc. NIKE, Inc. declined on inventory overhang, declining average selling prices and increased competition. Amazon.com, Inc. benefited from continued strong execution, margin expansion and development of a meaningfully important business opportunity in cloud infrastructure. The company continued to invest to drive unit growth in its core retail business and through the proliferation of digital commerce via the mobile market. Marriott International, Inc., which acquired Starwood Hotels, benefited from increased demand and limited supply growth in the U.S., which led to accelerating revenue and operating income growth. Time Warner, Inc. rose on news that AT&T was acquiring it at a significant premium to the stock’s closing price on the day before the announcement.
Concho Resources, Inc. was a strong performer in the energy sector. It announced a series of deals that consolidated its core acreage and shed noncore positions, improving its balance sheet and efficiency.
Financials, including portfolio holding Goldman Sachs Group, Inc., benefited as the market reacted favorably to the new U.S. administration, which is widely thought to favor a less onerous regulatory environment. We believe Goldman Sachs Group, Inc.’s strong capital base and leading global positions in investment banking, capital markets, trading and asset management provide attractive exposure to long-term global economic expansion.
Wellington Management Company LLP
The portfolio management team adheres to a disciplined portfolio construction process that allows them to assess risk, weight individual positions accordingly, and in the process, build a portfolio that focuses largely on stock selection for generating benchmark-relative outperformance.
During the period, poor stock selection in the information technology sector was the primary driver of underperformance. Security selection within health care and consumer staples also detracted. This was partially offset by positive security selection within consumer discretionary and energy. The Portfolio’s underweight allocation in telecommunication services detracted, while an underweight in real estate and health care sectors partially offset negative results.
The Portfolio’s largest relative detractors included Allergan PLC, an Ireland-based specialty pharmaceutical company; Regeneron Pharmaceuticals, Inc., a biopharmaceutical company that develops medicines for the treatment of serious medical conditions; and NIKE, Inc., a company which sells athletic footwear and apparel.
The Portfolio’s largest contributors to relative performance included Netflix, Inc., an Internet television network; Gilead Sciences, Inc., a research-based biopharmaceutical company (no longer held at period end); and Valspar Corp., a company that manufacturers paints and coatings (no longer held at period end).
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Table of Contents
Transamerica Partners Mid Value Portfolio
(unaudited)
MARKET ENVIRONMENT
J.P. Morgan Investment Management, Inc.
U.S. equity markets in 2016 can be best described as a tale of two halves. In the first half, volatility was attributable to several factors including the sudden devaluation of the Chinese renminbi, crude oil prices falling below $30 per barrel, fears of a global economic slowdown and the unexpected vote by the citizens of the United Kingdom to withdraw from the European Union (“Brexit”). However, improvement in global economic growth, recovering commodity prices and the realization that the Brexit vote was a political crisis rather than a financial crisis contributed to the stabilization of equity markets. Improving sentiment led to a shift in market leadership from defensive to cyclical sectors. The rotation into cyclicals intensified when in a surprising turn of events, Donald J. Trump was elected the 45th President of the United States.
Thompson, Siegel & Walmsley LLC
Over the last 12 months, equity markets in the U.S. have been driven by uncertainty over a fragile economic recovery coupled with investor concerns about the U.S. Federal Reserve’s (“Fed”) monetary policy and the surprise outcome of the presidential election. Global issues further exacerbated the situation, including turmoil in the Middle East, China growth concerns, and persistent disinflation. As a result, there were a number of rotations that occurred throughout the year, such as a defensive, yield-oriented backdrop for much of the first half of the year, followed by a more risk-on environment to close out 2016.
During the fourth quarter, there was a distinct rotation that led to a continued overall rally in equities. Specifically, the market was decisively declining over the first five weeks of the quarter, with every sector in the index posting negative returns. This sentiment shifted dramatically immediately preceding the election and continuing through the end of the quarter. In this environment, pro-cyclical stocks ran considerably with the expectation that a Trump presidency would result in significant growth in infrastructure, defense, energy, banks and capital markets, and pockets of health care such as biotechnology. The sell-off in yield that had begun in the third quarter of 2016 continued with real estate investment trusts (“REITs”) and utilities underperforming the broad market.
Overall, valuations have risen significantly over the last three years, making the market more vulnerable to news like the United Kingdom’s decision to leave the European Union, the surprise outcome of the U.S. election, a more hawkish Fed and difficulties in emerging markets.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Mid Value Portfolio returned 15.96%. By comparison, its benchmark, the Russell Midcap® Value Index, returned 20.00%.
STRATEGY REVIEW
J.P. Morgan Investment Management, Inc.
The combination of weak stock selection as well as our overweight position in the consumer discretionary sector detracted from results. In the more cyclical areas of the market, such as industrials and materials, the underperformance was mainly a story of what we didn’t own, rather than what we did own. We seek a less-risky approach to these cyclical parts of the market by investing in companies with relatively steadier earnings patterns, healthy balance sheets, high levels of sustainable free cash flow and management teams with an eyes toward capital allocation. Strong stock selection in utilities and information technology contributed to the Portfolio’s results.
Two stock-specific detractors from performance for the year were Coty, Inc. and Kroger Co. Coty, Inc. slid following weak third-quarter earnings results. The company attributed weakness to the acquisition of several Procter & Gamble beauty brands, coupled with a previously-announced management transition. In our view, Coty, Inc. has an attractive portfolio of brands, including OPI, CoverGirl and Calvin Klein fragrances. We are impressed with management and believe that the company has the ability to grow its top and bottom line over time.
As for Kroger Co., investors were concerned that the combination of deflation in food-at-home pricing and rising labor costs may create a difficult operating environment for grocers. Amid this backdrop, the firm’s shares were under pressure for most of the year. However, Kroger Co. enjoyed a relief rally following the election as investors began to believe in reflation. We remained positive on Kroger Co., as the company has been investing in its omni-channel platform, growing its organic food selection and successfully winning market share from its main competitors.
On the positive side, we benefited from exposure to financials, which represent the largest absolute weight in the Portfolio. M&T Bank Corp. rallied along with other financials toward year-end as shares reacted positively to the U.S. presidential election. Investors were
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Transamerica Partners Mid Value Portfolio
(unaudited)
STRATEGY REVIEW (continued)
optimistic about higher interest rates, a less burdensome regulatory environment and corporate tax reform under the new administration. While we trimmed the position slightly to reflect higher valuation levels, we continued to own shares, given that we consider M&T Bank Corp. an extremely high-quality franchise. The bank’s fortress balance sheet, strong management and commitment to generating strong returns to shareholders keep us optimistic.
On a stock-specific basis, Energen Corp. was also a top contributor. Energen Corp.’s shares benefited from the recovery in crude oil prices. Over the past five years, Energen Corp. has transitioned from a strategy of growth by acquisition to a focus on growing organically. After the sale of its distribution business, Energen Corp. became a pure-play Permian Basin upstream business. We continued to have an optimistic view of Energen Corp., given its excellent acreage and inventory depth in the well-located Permian Basin.
Thompson, Siegel & Walmsley LLC
The utilities and financial services sectors were the most notable contributors to relative performance. Within utilities, the Portfolio benefited from strong stock selection. Top contributors were regulated utility holding company Alliant Energy Corp. and independent power producer Talen Energy Corp. (no longer held at period end). In financial services, a broad array of stocks outperformed. Companies such as property and casualty reinsurer Alleghany Corp., mortgage REIT Annaly Capital Management, Inc., student loan servicer Navient Corp. (no longer held at period end), and commercial bank First Republic Bank made meaningful contributions.
Consumer discretionary and energy were the two most notable detractors from relative return. In consumer discretionary, the primary detractor was tax preparation servicer H&R Block, Inc., due to ongoing industry headwinds and a strategic shift that had what we believe a short-term negative impact on earnings. Cable television network AMC Networks, Inc. also declined due to a challenged industry backdrop, combined with concerns that viewership for the network’s best performing show had peaked and that new strategic initiatives may not achieve desired results. In energy, Chesapeake Energy Corp. (no longer held at period end) was the main driver of underperformance, as fears that the company faced a higher probability of bankruptcy due to counterparty margin calls weighed on the stock.
Consumer discretionary was the Portfolio’s largest overweight relative to the Russell Midcap® Value Index. This is a broadly diverse group, where we continue to identify companies with opportunities to exploit certain consumer trends or that have compelling business initiatives. We also remain overweight in health care, where we have found compelling valuation cases with company specific catalysts across a diversified group of companies ranging from drug distributors to a biotechnology company.
At the industry level, the Portfolio is most overweight in media, where we have uncovered a variety of companies that we feel have been overlooked or incorrectly valued due to their unique characteristics, wide moats, consistent revenue growth and sometimes complex corporate structures relative to other areas within consumer discretionary.
The Portfolio is most underweight in producer durables, where sustainability of margins and stretched valuations are a general concern. We also remain underweight financial services, reflecting muted loan growth and an unattractive risk-reward outlook for most banks, and unattractive valuations for REITs.
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Table of Contents
Transamerica Partners Mid Growth Portfolio
(unaudited)
MARKET ENVIRONMENT
The start of 2016 was one of the most challenging beginnings of a new year in recent history, with the domestic market experiencing a double-digit decline during the first quarter. Throughout the year, there was consistent uncertainty from unexpected events such as the United Kingdom’s vote to leave the European Union (“Brexit”), the European Central Bank extending its quantitative easing stimulus program, the results of the U.S. presidential election and the post-election equity rally, along with numerous geopolitical events. In deference to these events and others, the U.S. equity market, as measured by the S&P 500®, finished the year on an upbeat note with a gain of 11.96% based on expectations of future tax reform and a less onerous regulatory environment.
Domestically, third quarter gross domestic product (“GDP”) was revised upward to 3.50% due to stronger consumer and capital spending. Recent indications are that the fourth quarter reading of GDP will be softer than expected. Both labor force participation and unemployment rose in December. Wage pressure is also rising. The U.S. Federal Reserve (“Fed”), in its December 2016 meeting, increased interest rates by a quarter of a point and also indicated that they may increase rates at a faster pace than previously indicated if appropriate. Currently, the Fed is maintaining its 2.00% target inflation rate and recognizes that its monetary policy remains accommodative. In recent months, the majority of business and consumer confidence measures rose. This was partly due to rising post-election expectations that equities, employment and income will materially improve due to the change to a new administration.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Mid Growth Portfolio returned 12.32%. By comparison, its benchmark, the Russell Midcap® Growth Index, returned 7.33%.
STRATEGY REVIEW
Stock selection in the financial services, materials, energy, industrials, and consumer staples sectors positively impacted relative performance, while stock selection in the consumer discretionary, health care and utilities sectors detracted during the year.
Top contributors included Micron Technology, Inc., SVB Financial Group (no longer held at period end), WhiteWave Foods, Co. (no longer held at period end), F5 Networks, Inc. and IAC/InterActiveCorp. The information technology sector was well represented in this list. Micron Technology, Inc. is a leading provider of memory semiconductors. The Portfolio used weakness in the stock to initiate a position at a valuation near book value, which has historically been an attractive entry point. The stock performed well since purchase as memory prices firmed. F5 Networks, Inc. performed strongly due largely to a refresh of the company’s product portfolio, as new product cycles historically have driven accelerating revenue growth for F5 Networks, Inc. Though IAC/InterActiveCorp reported weak financial results in early February, we continued to like the company’s growth businesses, namely HomeAdvisor and Vimeo.
In financials, SVB Financial Group reported a solid third quarter. Earnings were slightly above estimates, with lower-than-expected provisions, higher-than-expected warrant and equity gains and loan growth slightly below estimates. Concerns about the credit quality of the company’s early-stage venture book have largely disappeared. More importantly, the Presidential election cast an entirely new light on the banks generally—expectations shifted toward more frequent rate hikes and a lower regulatory burden were extremely positive for banks during the fourth quarter. In consumer staples, WhiteWave Foods, Co. announced in July that it had agreed to be acquired by Danone.
Top detractors included Acadia Healthcare (no longer held at period end), TreeHouse Foods, Inc., Sabre Corp., Perrigo Co. PLC and Universal Health Services, Inc. Many of these companies are in health care. Acadia Healthcare was a weak performer in the fourth quarter. Earnings were less than stellar, but the stock’s poor performance was more likely due to uncertainty around the company’s merger-and-acquisition activity in the United Kingdom as well as worsening sentiment across the health-care services industry.
Perrigo Co. PLC is the leading U.S. provider of over-the-counter drugs in addition to producing a line of branded drugs sold primarily in Europe. We purchased Perrigo Co. PLC after the stock declined significantly due to integration issues with a recently acquired company. We believe these issues are transitory and used the stock’s weakness to build a position in a dominant supplier in the markets it serves. We re-initiated a position in Universal Health Services, Inc. after exiting the stock earlier in the year. We know the business and believe that concerns related to the repeal of the Affordable Care Act and to a tight labor market in behavioral health created an attractive entry point.
In consumer staples, TreeHouse Foods, Inc. reported a weak third quarter and reduced guidance for the year. After an initial bout of enthusiasm surrounding the Conagra Private Brands acquisition in early 2016, the company experienced growing pains and integration difficulties over the summer, but the earnings growth trajectory still seems quite compelling to us. The rotation away from low-volatility stocks in the second half of the year, particularly in the post-election rally, hurt food stocks generally. In information technology, Sabre
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Table of Contents
Transamerica Partners Mid Growth Portfolio
(unaudited)
STRATEGY REVIEW (continued)
Corp. shares lagged on the combination of weaker-than-expected quarterly earnings and a CEO transition. With the company indicating business momentum improved in early fourth quarter and a new CEO in place, we believe the stock’s current risk/reward profile is attractive.
Howard B. Aschwald, CFA
Timothy D. Chatard, CFA
Co-Portfolio Managers
Quantum Capital Management
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Table of Contents
Transamerica Partners Small Value Portfolio
(unaudited)
MARKET ENVIRONMENT
The fiscal year began with equities mired in a sell-off, which began in July 2015. Once that decline ran its course, equities in general, particularly small cap stocks, rallied strongly through the end of the year. The Russell 2000® Value Index performed well from its low on February 11.
The period was marked by difficult cross-currents, including the uncertainty around timing of a directional change in interest rate policy, Great Britain’s referendum to leave the European Union (“Brexit”), and a contentious U.S. election between two candidates with very different agendas. These dynamics, as well as industry-specific money flows, led to traditional fundamental factors having an uncharacteristically poor year.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Small Value Portfolio returned 19.48%. By comparison, its benchmark,
the Russell 2000® Value Index, returned 31.74%.
STRATEGY REVIEW
The Portfolio underperformed the benchmark due to poor stock selection.
Two of the biggest detractors were from the technology sector. J2 Global, Inc. fell sharply in the first quarter after an analyst’s negative report, and VASCO Data Security International, Inc. fell in October after cutting its forward guidance. Other negative contributors were: American Equity Investment Life Holding Co., Alon USA Energy, Inc. and Molina Healthcare, Inc., the last of which fell on fears of the potential repeal of the Affordable Care Act. None of these holdings were still held at year-end.
Central Garden & Pet Co., DuPont Fabros Technology, Inc., Banc of California, Inc., AK Steel Holding Corp. and Rudolph Technologies, Inc. contributed to relative performance.
On a sector basis, the Portfolio’s real estate holdings were the top contributors, followed closely by utilities. The Portfolio’s information technology holdings detracted the most. All three of the information technology industry groups detracted, driven by a combination of holding some stocks that had poor returns from unexpected negative events and by not holding stocks with extraordinary returns from events like acquisitions.
The value factor was the only major factor to contribute positively, all of which occurred in November and December. The momentum factor weighed the most; stocks that had done well early reversed during the fourth quarter and performed poorly. Additionally, size exposure detracted because the Portfolio had a slightly larger capitalization than the benchmark and small caps outperformed large caps.
David Hanna
Michael J. Vogelzang, CFA
James W. Gaul, CFA
Douglas A. Riley, CFA
Co-Portfolio Managers
Boston Advisors, LLC
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Table of Contents
Transamerica Partners Small Core Portfolio
(unaudited)
MARKET ENVIRONMENT
During 2016, investors shook off multiple periods of economic and geopolitical uncertainty, both internationally and in the U.S., before bidding stocks materially higher in the second half of the year. Overseas, concern about contagion from a slowdown in China in the first calendar quarter was followed by a sharp correction in June, when financial markets contemplated the fallout of Great Britain’s referendum to leave the European Union (“Brexit”). Fears regarding both proved unfounded, much like the result of the presidential election in November. Indeed, the global macroeconomic picture stabilized during the year, enhancing confidence in the domestic economy and stock market.
Although stocks pulled back ahead of the presidential vote, investor sentiment shifted after Donald Trump’s victory. The policy regime heading to Washington calls for lower taxes, less regulation, and higher spending on domestic infrastructure—all of which are supportive of an economic environment that had already been strengthening in recent months. A better economic picture, coupled with higher inflation expectations, led the U.S. Federal Reserve (“Fed”) to lift the federal funds rate by 25 basis points in December. The confluence of these factors drove a powerful market rotation into cyclical stocks, with banks and other financials being the biggest beneficiaries. The energy sector also did well, reflecting the recovery in oil prices from their lows earlier in 2016.
From a style perspective, small-cap investors went back and forth in their preference for “value” and “growth” stocks for much of the year. For the time frame as a whole, “value” stocks outperformed in keeping with longer term historical precedent. This reversed the trend that had been in place for the last several years and provided a tailwind for the Portfolio.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Small Core Portfolio returned 23.33%. By comparison, its primary and
secondary benchmarks, the Russell 2000® Index and the S&P 500®, returned 21.31% and 11.96%, respectively.
STRATEGY REVIEW
The Portfolio outperformed its benchmark, Russell 2000® Index, due to stock selection. The Portfolio’s holdings in nine of the 11 economic sectors outpaced their benchmark counterparts. Sector allocation detracted from relative results primarily due to our overweight in health care and underweight in financials.
Stock selection added the most value in consumer discretionary and health care. In consumer discretionary, it was our holdings in the education industry that led. In health care, the Portfolio’s substantial underweight in the biotechnology industry was a primary driver, as these issues within the benchmark collectively underperformed. The Portfolio’s health-care holdings are more profitable, produce higher free cash flow yields and earn superior returns on capital when compared to the biotechnology stocks in the benchmark.
Eoin E. Middaugh, CFA
D. Kevin McCreesh, CFA
Co-Portfolio Managers
Systematic Financial Management, L.P.
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Table of Contents
Transamerica Partners Small Growth Portfolio
(unaudited)
MARKET ENVIRONMENT
Once again the past year can be best characterized as a market roller coaster. A bullish end to calendar year 2015 was followed by a deep correction during the first six weeks of 2016. Since the market low on February 11, smaller stocks led the market.
Despite many warnings from market prognosticators, the November 8 election proved to be a catalytic event for the market. The stock market responded with unabashed bullishness as investors look forward to more favorable tax rates and tax reform, pro-growth fiscal policies and less governmental regulation. Obvious concerns about higher rates, as evidenced by the significant increase in yields, could also signal a significant shift by investors in the fixed income market away from bonds to equities.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners Small Growth Portfolio returned 20.67%. By comparison, its benchmark, the Russell 2000® Growth Index, returned 11.32%.
STRATEGY REVIEW
The Portfolio outperformed its benchmark. Higher volatility and high-quality factors performing better created an environment more favorable for our performance. Factor analysis demonstrated that companies with low-quality and high-valuation attributes underperformed the benchmark.
From a sector perspective, health care, financials and energy provided the strongest relative outperformance versus the benchmark. Meanwhile, consumer discretionary, materials and processing sectors underperformed.
Supernus Pharmaceuticals, Inc., a specialty pharmaceutical company that develops and markets drugs for the treatment of central nervous system diseases, was the largest contributor. Strength was driven by the release of preliminary results, which showed strong revenue and solid pipeline progress.
G-III Apparel Group, Ltd., a specialty designer and manufacturer of women’s and men’s apparel under licensed brands, was the largest detractor. There were two primary reasons. First, the company’s financial results throughout 2016 fell below expectations due to continued slow sales and orders in its outwear segment. Because of last winter’s historically warm weather, retailers were reluctant to place orders into the fall and winter seasons. Second, on July 25, the company announced the large acquisition of Donna Karen from LVMH, which was dilutive.
W. Conrad Doenges
Portfolio Manager
Ranger Investment Management, L.P.
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Table of Contents
Transamerica Partners International Equity Portfolio
(unaudited)
MARKET ENVIRONMENT
The MSCI All Country World Index ex-U.S. rose 5.01% in U.S. dollar terms in 2016, as strong gains in the Index’s constituents offset the negative impact post-election dollar strength had on returns. Regional performance was generally positive, with North America posting the largest gain, up 24.40% on strength in the Canadian market. Europe remained a challenging environment and was the only materially negative region. The United Kingdom, which rallied following the referendum to leave the European Union (“Brexit”) in June, finished roughly flat for the year. Sector level returns were varied with energy up 30.95%, and materials up 27.35%, leading the Index as a result of sensitivity to price increases in oil and other commodities. Health care was the largest drag, with a (12.95)% return, on growing concern around drug price erosion in the pharmaceutical industry. Traditionally defensive telecommunication services was also in negative territory, as investors rotated away from yield-seeking opportunities.
2016 ended with global stock market sentiment on a positive note. Energy, materials, financials and industrials led markets higher last year, while utilities, telecoms, health care and consumer staples underperformed. This suggested that the market consensus was anticipating better growth, rising prices and higher interest rates in the year ahead, reducing the relative appeal of stocks offering higher yields and more defensive profits. The course of stock markets in 2017 may be significantly affected by how these expectations are borne out. Gradually improving economic growth that gently lifts wages and prices causing interest rates to work higher would be welcomed by global stock investors especially since many markets are reasonably valued. On the other hand, either disappointing economic growth leading to renewed deflationary pressure in the U.S., Europe, the United Kingdom, Japan and elsewhere, or a surprise burst of inflation that could send interest rates up sharply, could puncture recent optimism.
Much like 2016, political events like the negotiations over Brexit and the evolution of Donald Trump’s policies are likely to spark bouts of market volatility in the year ahead. We believe the current market environment produces good opportunities for an active value investment approach, as changes in investor sentiment and macroeconomic events create attractive divergence between upside opportunity and downside risk. While the markets will undoubtedly remain turbulent, Thompson, Siegel & Walmsley LLC’s patient approach seeks to take advantage of price movements that reflect changes in sentiment more than underlying value.
PERFORMANCE
For the year ended December 31, 2016, Transamerica Partners International Equity Portfolio returned 2.30%. By comparison, its benchmark, the MSCI All Country World Index ex-U.S., returned 5.01%.
STRATEGY REVIEW
The Portfolio underperformed its benchmark. Holdings in Europe were the primary regional detractor from relative return. Israel-based Teva Pharmaceutical Industries, Ltd. was the largest underperformer. Following a negative patent ruling on its multiple sclerosis treatment Copaxone in the summer, the company’s shares continued to trade lower on industry concerns that drug price erosion could lead to lower profitability. Telefonaktiebolaget LM Ericsson (no longer held at period end) was another notable laggard. The telecom equipment company faced profitability headwinds as a result of weak sales and lack of progress on cost restructuring initiatives. We sold our position because recent results did not support our investment thesis.
On a regional basis, stock selection in Japan was the top relative contributor. Wireless telecommunications company SoftBank Group Corp. was among top individual contributors, as it acquired multinational semiconductor designer ARM Holdings PLC. SoftBank Group Corp. management also announced growth initiatives comprising substantial planned investments in the U.S., India and South Korea. Specialty chemicals manufacturer Kuraray Co., Ltd., another top performer in Japan, saw recovering demand for many of its LCD-panel related products in the second half of 2016. Kuraray Co., Ltd. is focused on realizing synergies in vinyl acetate operations the company acquired from DuPont in 2014.
On a sector basis, information technology and utilities were the largest detractors. A position in Telefonaktiebolaget LM Ericsson weighed the most in information technology, while French holdings Veolia Environnement SA and Engie SA were the primary laggards in utilities. Shares of water and waste manager Veolia Environnement SA were pressured due to adverse currency movements and lower economic growth assumptions. Engie SA, an electric utility, faced a challenging operating environment caused by low power and gas prices.
Telecommunications services was the top sector contributor largely resulting from a position in SoftBank Group Corp. Consumer staples also contributed, led by Danish beer brewer Carlsberg A/S, which posted notably strong performance prior to our eliminating the position in the second quarter of 2016. The business saw success improving margins through cost-saving synergies; however, valuation was no longer compelling.
Brandon H. Harrell, CFA
Portfolio Manager
Thompson, Siegel & Walmsley LLC
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Table of Contents
Schedules of Investments Composition
At December 31, 2016
(unaudited)
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
Schedules of Investments Composition (continued)
At December 31, 2016
(unaudited)
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Table of Contents
Transamerica Partners Government Money Market Portfolio
(formerly, Transamerica Partners Money Market Portfolio)
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
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Transamerica Partners Government Money Market Portfolio
(formerly, Transamerica Partners Money Market Portfolio)
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (F)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| U.S. Government Agency Obligations |
$ | — | $ | 164,541,992 | $ | — | $ | 164,541,992 | ||||||||
| Short-Term U.S. Government Agency Obligations |
— | 288,833,166 | — | 288,833,166 | ||||||||||||
| Short-Term U.S. Government Obligations |
— | 71,393,497 | — | 71,393,497 | ||||||||||||
| Repurchase Agreements |
— | 414,520,588 | — | 414,520,588 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | — | $ | 939,289,243 | $ | — | $ | 939,289,243 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Floating or variable rate securities. The rates disclosed are as of December 31, 2016. |
| (B) | Rates disclosed reflect the yields at December 31, 2016. |
| (C) | Illiquid security. At December 31, 2016, value of the illiquid security is $34,000,000, representing 3.6% of the Portfolio’s net assets. |
| (D) | Aggregate cost for federal income tax purposes is $939,289,243. |
| (E) | Percentage rounds to less than 0.1% or (0.1)%. |
| (F) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 23
Table of Contents
Transamerica Partners High Quality Bond Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 24
Table of Contents
Transamerica Partners High Quality Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 25
Table of Contents
Transamerica Partners High Quality Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 26
Table of Contents
Transamerica Partners High Quality Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Asset-Backed Securities |
$ | — | $ | 109,900,541 | $ | — | $ | 109,900,541 | ||||||||
| Corporate Debt Securities |
— | 90,016,406 | — | 90,016,406 | ||||||||||||
| Mortgage-Backed Securities |
— | 43,895,008 | — | 43,895,008 | ||||||||||||
| U.S. Government Agency Obligations |
— | 32,105,400 | — | 32,105,400 | ||||||||||||
| U.S. Government Obligations |
— | 48,349,404 | — | 48,349,404 | ||||||||||||
| Repurchase Agreement |
— | 3,876,289 | — | 3,876,289 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | — | $ | 328,143,048 | $ | — | $ | 328,143,048 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Securities are registered pursuant to Rule 144A of the Securities Act of 1933. Unless otherwise indicated, the securities are deemed to be liquid for purposes of compliance limitations on holdings of illiquid securities and may be resold as transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2016, the total value of 144A securities is $34,213,777, representing 10.4% of the Portfolio’s net assets. |
| (B) | Floating or variable rate securities. The rates disclosed are as of December 31, 2016. |
| (C) | Rate disclosed reflects the yield at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $331,488,034. Aggregate gross unrealized appreciation and depreciation for all securities is $445,198 and $3,790,184, respectively. Net unrealized depreciation for tax purposes is $3,344,986. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
PORTFOLIO ABBREVIATION:
| MTN | Medium Term Note |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 27
Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 28
Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
EXCHANGE-TRADED OPTIONS WRITTEN:
| Description | Exercise Price |
Expiration Date |
Number of Contracts |
Premiums (Received) |
Value | |||||||||||||||
| Put - 10-Year U.S. Treasury Note Futures |
USD 122.00 | 01/27/2017 | 199 | $ | (109,409 | ) | $ | (21,766 | ) | |||||||||||
| OVER-THE-COUNTER FOREIGN EXCHANGE OPTIONS WRITTEN: (G) | ||||||||||||||||||||||||||||||||
| Description | Counterparty | Exercise Price |
Expiration Date |
Notional Amount |
Premiums (Received) |
Value | ||||||||||||||||||||||||||
| Put - CHF vs. NOK |
UBS | CHF | 7.90 | 02/17/2017 | CHF | 2,560,000 | $ | (13,232 | ) | $ | (616 | ) | ||||||||||||||||||||
| Put - EUR vs. USD |
DUB | EUR | 1.07 | 01/30/2017 | EUR | 4,720,000 | (30,590 | ) | (79,794 | ) | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total |
$ | (43,822 | ) | $ | (80,410 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| OVER-THE-COUNTER INFLATION-CAPPED OPTIONS WRITTEN: (G) | ||||||||||||||||||||||||||||||||
| Description | Counterparty | Initial Index |
Floating Rate |
Expiration Date |
Notional Amount |
Premiums (Received) |
Value | |||||||||||||||||||||||||
| Call - Eurostat Eurozone HICP |
DUB | 2.50 | % | HICP Index | 04/26/2022 | EUR | 1,070,000 | $ | (74,168 | ) | $ | (228 | ) | |||||||||||||||||||
| OVER-THE-COUNTER INTEREST RATE SWAPTIONS WRITTEN: (G) | ||||||||||||||||||||||||||||||||||||
| Description | Counterparty | Floating Rate Index | Floating Rate | Exercise Rate |
Expiration Date |
Notional Amount |
Premiums (Received) |
Value | ||||||||||||||||||||||||||||
|
Call - 2-Year |
DUB | 3-Month USD-LIBOR | Receive | 0.90 | % | 06/07/2018 | USD | 16,100,000 | $ | (79,851 | ) | $ | (11,392 | ) | ||||||||||||||||||||||
| Put - 2-Year |
DUB | 3-Month USD-LIBOR | Pay | 1.90 | 06/07/2018 | USD | 16,100,000 | (68,279 | ) | (143,517 | ) | |||||||||||||||||||||||||
|
Put - 20-Year |
DUB | 6-Month EUR-EURIBOR | Pay | 4.50 | 06/08/2022 | EUR | 3,200,000 | (150,269 | ) | (31,313 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Total |
$ | (298,399 | ) | $ | (186,222 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||||||
CENTRALLY CLEARED SWAP AGREEMENTS: (J)
| Interest Rate Swap Agreements - Fixed Rate Payable | ||||||||||||||||||||||||||||
| Floating Rate Index | Fixed Rate | Expiration Date |
Notional |
Fair Value |
Premiums Paid (Received) |
Net Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||
| 3-Month USD-LIBOR |
1.73 | % | 08/31/2046 | USD | 415,000 | $ | 77,940 | $ | — | $ | 77,940 | |||||||||||||||||
| 3-Month USD-LIBOR |
1.75 | 05/31/2021 | USD | 10,290,000 | 85,607 | — | 85,607 | |||||||||||||||||||||
| 3-Month USD-LIBOR |
1.80 | 08/19/2046 | USD | 972,000 | 166,517 | — | 166,517 | |||||||||||||||||||||
| 3-Month USD-LIBOR |
2.51 | 08/15/2026 | USD | 2,740,000 | (33,622 | ) | — | (33,622 | ) | |||||||||||||||||||
| 3-Month USD-LIBOR |
2.78 | 11/15/2043 | USD | 1,300,000 | (38,199 | ) | — | (38,199 | ) | |||||||||||||||||||
| 1-Year OIS Federal Funds Rate |
1.42 | 05/31/2021 | USD | 2,940,000 | 22,632 | — | 22,632 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total |
$ | 280,875 | $ | — | $ | 280,875 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
OVER-THE-COUNTER SWAP AGREEMENTS: (G)
| Interest Rate Swap Agreements - Fixed Rate Payable | ||||||||||||||||||||||||||||||||
| Floating Rate Index | Counterparty | Fixed Rate | Expiration Date |
Notional |
Fair Value |
Premiums Paid (Received) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
| Eurostat Eurozone HICP ex Tobacco NSA |
DUB | 1.13 | % | 12/08/2021 | EUR | 2,090,000 | $ | 9,588 | $ | — | $ | 9,588 | ||||||||||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 29
Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
OVER-THE-COUNTER SWAP AGREEMENTS (continued): (G)
| Interest Rate Swap Agreements - Fixed Rate Receivable | ||||||||||||||||||||||||||||
| Floating Rate Index | Counterparty | Fixed Rate | Expiration Date |
Notional Amount |
Fair Value |
Premiums Paid (Received) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| Eurostat Eurozone HICP ex Tobacco NSA |
DUB | 1.41 | % | 12/08/2026 | EUR | 2,090,000 | $ | (15,477 | ) | $ | — | $ | (15,477 | ) | ||||||||||||||
| FUTURES CONTRACTS: | ||||||||||||||||||||
| Description | Long/Short | Number of Contracts |
Expiration Date |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||||
| 90-Day Eurodollar |
Short | (56 | ) | 12/17/2018 | $ | 127,350 | $ | — | ||||||||||||
| 90-Day Eurodollar |
Long | 153 | 09/17/2018 | — | (287,045 | ) | ||||||||||||||
| 90-Day Eurodollar |
Long | 56 | 12/18/2017 | — | (77,790 | ) | ||||||||||||||
| 2-Year U.S. Treasury Note |
Short | (71 | ) | 03/31/2017 | 12,734 | — | ||||||||||||||
| 5-Year U.S. Treasury Note |
Long | 318 | 03/31/2017 | — | (32,612 | ) | ||||||||||||||
| 10-Year Australia Treasury Bond |
Short | (10 | ) | 03/15/2017 | — | (3,429 | ) | |||||||||||||
| 10-Year U.S. Treasury Bond |
Long | 13 | 03/22/2017 | 19,683 | — | |||||||||||||||
| 10-Year U.S. Treasury Note |
Long | 60 | 03/22/2017 | 5,069 | — | |||||||||||||||
| Euro-BTP Italy Government Bond |
Short | (8 | ) | 03/08/2017 | — | (11,768 | ) | |||||||||||||
| German Euro Bund |
Long | 2 | 03/08/2017 | 7,493 | — | |||||||||||||||
| German Euro BUXL |
Short | (1 | ) | 03/08/2017 | — | (2,948 | ) | |||||||||||||
| German Euro Schatz |
Short | (152 | ) | 03/08/2017 | — | (22,019 | ) | |||||||||||||
| U.K. Gilt |
Short | (4 | ) | 03/29/2017 | — | (10,454 | ) | |||||||||||||
| U.S. Treasury Bond |
Short | (21 | ) | 03/22/2017 | — | (45,296 | ) | |||||||||||||
| U.S. Treasury Bond |
Short | (40 | ) | 03/22/2017 | 41,442 | — | ||||||||||||||
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 213,771 | $ | (493,361 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| FORWARD FOREIGN CURRENCY CONTRACTS: (G) | ||||||||||||||||||||||||||||
| Counterparty | Settlement Date |
Currency Purchased |
Currency Sold |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||||||||||||
| BOA |
02/01/2017 | USD | 1,304,964 | EUR | 1,175,000 | $ | 66,003 | $ | — | |||||||||||||||||||
| CBA |
01/05/2017 | USD | 2,375,794 | NZD | 3,337,000 | 58,009 | — | |||||||||||||||||||||
| CITI |
01/27/2017 | USD | 652,678 | GBP | 525,000 | 5,152 | — | |||||||||||||||||||||
| CITI |
02/01/2017 | EUR | 1,155,000 | USD | 1,277,554 | — | (59,681 | ) | ||||||||||||||||||||
| DUB |
02/01/2017 | EUR | 1,155,000 | USD | 1,281,091 | — | (63,219 | ) | ||||||||||||||||||||
| GSB |
01/05/2017 | USD | 1,148,567 | EUR | 1,080,000 | 11,280 | — | |||||||||||||||||||||
| GSB |
02/01/2017 | USD | 1,301,110 | EUR | 1,155,000 | 83,237 | — | |||||||||||||||||||||
| HSBC |
01/05/2017 | USD | 295,183 | AUD | 400,000 | 6,566 | — | |||||||||||||||||||||
| MSCS |
02/03/2017 | USD | 104,676 | EUR | 100,000 | — | (776 | ) | ||||||||||||||||||||
| NAB |
01/05/2017 | USD | 97,385 | AUD | 131,000 | 2,863 | — | |||||||||||||||||||||
| SSB |
01/05/2017 | EUR | 302,000 | USD | 314,941 | 3,078 | — | |||||||||||||||||||||
| UBS |
01/27/2017 | GBP | 1,040,000 | USD | 1,272,024 | 10,693 | — | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Total | $ | 246,881 | $ | (123,676 | ) | |||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 30
Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (K)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Foreign Government Obligations |
$ | — | $ | 3,590,429 | $ | — | $ | 3,590,429 | ||||||||
| U.S. Government Obligations |
— | 232,800,195 | — | 232,800,195 | ||||||||||||
| Exchange-Traded Options Purchased |
120,750 | — | — | 120,750 | ||||||||||||
| Over-the-Counter Foreign Exchange Options Purchased |
— | 82,548 | — | 82,548 | ||||||||||||
| Over-the-Counter Interest Rate Swaptions Purchased |
— | 552,281 | — | 552,281 | ||||||||||||
| Short-Term Investment Company |
314,050 | — | — | 314,050 | ||||||||||||
| Securities Lending Collateral |
3,710,264 | — | — | 3,710,264 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 4,145,064 | $ | 237,025,453 | $ | — | $ | 241,170,517 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other Financial Instruments |
||||||||||||||||
| Centrally Cleared Interest Rate Swap Agreements |
$ | — | $ | 352,696 | $ | — | $ | 352,696 | ||||||||
| Over-the-Counter Interest Rate Swap Agreements |
— | 9,588 | — | 9,588 | ||||||||||||
| Futures Contracts (L) |
213,771 | — | — | 213,771 | ||||||||||||
| Forward Foreign Currency Contracts (L) |
— | 246,881 | — | 246,881 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Other Financial Instruments |
$ | 213,771 | $ | 609,165 | $ | — | $ | 822,936 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES |
||||||||||||||||
| Other Financial Instruments |
||||||||||||||||
| Exchange-Traded Options Written |
$ | (21,766 | ) | $ | — | $ | — | $ | (21,766 | ) | ||||||
| Over-the-Counter Foreign Exchange Options Written |
— | (80,410 | ) | — | (80,410 | ) | ||||||||||
| Over-the-Counter Inflation-Capped Options Written |
— | (228 | ) | — | (228 | ) | ||||||||||
| Over-the-Counter Interest Rate Swaptions Written |
— | (186,222 | ) | — | (186,222 | ) | ||||||||||
| Centrally Cleared Interest Rate Swap Agreements |
— | (71,821 | ) | — | (71,821 | ) | ||||||||||
| Over-the-Counter Interest Rate Swap Agreements |
— | (15,477 | ) | — | (15,477 | ) | ||||||||||
| Futures Contracts (L) |
(493,361 | ) | — | — | (493,361 | ) | ||||||||||
| Forward Foreign Currency Contracts (L) |
— | (123,676 | ) | — | (123,676 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Other Financial Instruments |
$ | (515,127 | ) | $ | (477,834 | ) | $ | — | $ | (992,961 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Securities are exempt from registration under Regulation S of the Securities Act of 1933, which exempts from registration securities offered and sold outside the United States. Securities may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. At December 31, 2016, the total value of Regulation S securities is $3,589,447, representing 1.5% of the Portfolio’s net assets. |
| (B) | Percentage rounds to less than 0.1% or (0.1)%. |
| (C) | Floating or variable rate security. The rate disclosed is as of December 31, 2016. |
| (D) | Percentage rounds to less than 0.01% or (0.01)%. |
| (E) | All or a portion of the security has been segregated by the custodian as collateral to cover margin requirements for open futures contracts. The value of the security segregated as collateral to cover margin requirements for open futures contracts is $520,664. |
| (F) | All or a portion of the security is on loan. The value of the security on loan is $3,636,230. The amount on loan indicated may not correspond with the security on loan identified because a security with pending sales are in the process of recall from the brokers. |
| (G) | Cash in the amount of $580,000 has been segregated by the broker as collateral for open options, over-the-counter swap agreements, swaptions and/or forward foreign currency contracts. |
| (H) | Rate disclosed reflects the yield at December 31, 2016. |
| (I) | Aggregate cost for federal income tax purposes is $243,784,921. Aggregate gross unrealized appreciation and depreciation for all securities is $2,969,676 and $5,584,080, respectively. Net unrealized depreciation for tax purposes is $2,614,404. |
| (J) | Cash in the amount of $589,220 has been segregated by the custodian as collateral for centrally cleared swap agreements. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 31
Table of Contents
Transamerica Partners Inflation-Protected Securities Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
FOOTNOTES TO SCHEDULE OF INVESTMENTS (continued):
| (K) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
| (L) | Futures contracts and/or forward foreign currency contracts are valued at unrealized appreciation (depreciation). |
CURRENCY ABBREVIATIONS:
| AUD | Australian Dollar | |
| CHF | Swiss Franc | |
| EUR | Euro | |
| GBP | Pound Sterling | |
| NOK | Norwegian Krone | |
| NZD | New Zealand Dollar | |
| USD | United States Dollar |
COUNTERPARTY ABBREVIATIONS:
| BOA | Bank of America, N.A. | |
| CBA | Commonwealth Bank of Australia | |
| CITI | Citibank N.A. | |
| DUB | Deutsche Bank AG | |
| GSB | Goldman Sachs Bank | |
| HSBC | HSBC Bank USA | |
| MSCS | Morgan Stanley Capital Services Inc. | |
| NAB | National Australia Bank | |
| SSB | State Street Bank & Trust Co. | |
| UBS | UBS AG |
PORTFOLIO ABBREVIATIONS:
| BTP | Buoni del Tesoro Poliennali (Italian Treasury Bonds) | |
| BUXL | Bundesanleihen (German Long-Term Debt) | |
| EURIBOR | Euro Interbank Offer Rate | |
| HICP | Harmonized Indices of Consumer Prices | |
| LIBOR | London Interbank Offered Rate | |
| NSA | Not Seasonally Adjusted | |
| OIS | Overnight Indexed Swap | |
| Schatz | Bundesschatzanweisungen (German Federal Government 2-Year Securities) |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 32
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 33
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 34
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 35
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 36
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 37
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 38
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 39
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 40
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 41
Table of Contents
Transamerica Partners Core Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (L)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
| |||||||||||||||
| Asset-Backed Securities |
$ | — | $ | 73,679,370 | $ | — | $ | 73,679,370 | ||||||||
| Corporate Debt Securities |
— | 453,034,817 | — | 453,034,817 | ||||||||||||
| Foreign Government Obligations |
— | 16,115,823 | — | 16,115,823 | ||||||||||||
| Mortgage-Backed Securities |
— | 132,739,131 | — | 132,739,131 | ||||||||||||
| Municipal Government Obligations |
— | 8,218,496 | — | 8,218,496 | ||||||||||||
| U.S. Government Agency Obligations |
— | 186,047,162 | — | 186,047,162 | ||||||||||||
| U.S. Government Obligations |
— | 252,198,263 | — | 252,198,263 | ||||||||||||
| Preferred Stocks |
3,734,539 | — | — | 3,734,539 | ||||||||||||
| Short-Term U.S. Government Agency Obligations |
— | 126,808,439 | — | 126,808,439 | ||||||||||||
| Short-Term U.S. Government Obligations |
— | 22,604,811 | — | 22,604,811 | ||||||||||||
| Securities Lending Collateral |
22,718,865 | — | — | 22,718,865 | ||||||||||||
| Repurchase Agreement |
— | 10,300,540 | — | 10,300,540 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 26,453,404 | $ | 1,281,746,852 | $ | — | $ | 1,308,200,256 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Securities are registered pursuant to Rule 144A of the Securities Act of 1933. Unless otherwise indicated, the securities are deemed to be liquid for purposes of compliance limitations on holdings of illiquid securities and may be resold as transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2016, the total value of 144A securities is $274,330,431, representing 24.0% of the Portfolio’s net assets. |
| (B) | Floating or variable rate securities. The rates disclosed are as of December 31, 2016. |
| (C) | All or a portion of the securities are on loan. The total value of all securities on loan is $22,253,813. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (D) | Perpetual maturity. The date displayed is the next call date. |
| (E) | Percentage rounds to less than 0.1% or (0.1)%. |
| (F) | Securities on a when-issued, delayed-delivery, or forward commitment basis. Securities to be settled and delivered after December 31, 2016. |
| (G) | Cash in the amount of $557,000 has been segregated by the custodian as collateral for open TBA commitment transactions. |
| (H) | Non-income producing securities. |
| (I) | Percentage rounds to less than 0.01% or (0.01)%. |
| (J) | Rates disclosed reflect the yields at December 31, 2016. |
| (K) | Aggregate cost for federal income tax purposes is $1,318,198,885. Aggregate gross unrealized appreciation and depreciation for all securities is $12,053,461 and $22,052,090, respectively. Net unrealized depreciation for tax purposes is $9,998,629. |
| (L) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
PORTFOLIO ABBREVIATIONS:
| MTN | Medium Term Note | |
| STRIPS | Separate Trading of Registered Interest and Principal of Securities | |
| TBA | To Be Announced |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 42
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 43
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 44
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 45
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 46
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 47
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 48
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (P)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs (Q) |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Corporate Debt Securities |
$ | — | $ | 760,528,681 | $ | 13,825 | $ | 760,542,506 | ||||||||
| Loan Assignments |
— | 10,937,627 | — | 10,937,627 | ||||||||||||
| Common Stocks |
— | — | 3,299,490 | 3,299,490 | ||||||||||||
| Preferred Stock |
9,443,720 | — | — | 9,443,720 | ||||||||||||
| Warrant |
— | — | — | (J) | — | (J) | ||||||||||
| Repurchase Agreement |
— | 34,258,125 | — | 34,258,125 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 9,443,720 | $ | 805,724,433 | $ | 3,313,315 | $ | 818,481,468 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Transfers (P)
| Investments | Transfers from Level 1 to Level 2 |
Transfers from Level 2 to Level 1 |
Transfers from Level 2 to Level 3 |
Transfers from Level 3 to Level 2 |
||||||||||||
| Corporate Debt Securities (L) |
$ | — | $ | — | $ | 13,825 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 49
Table of Contents
Transamerica Partners High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Securities are registered pursuant to Rule 144A of the Securities Act of 1933. Unless otherwise indicated, the securities are deemed to be liquid for purposes of compliance limitations on holdings of illiquid securities and may be resold as transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2016, the total value of 144A securities is $338,302,770, representing 40.7% of the Portfolio’s net assets. |
| (B) | Floating or variable rate securities. The rates disclosed are as of December 31, 2016. |
| (C) | Perpetual maturity. The date displayed is the next call date. |
| (D) | Securities in default. |
| (E) | Illiquid securities. At December 31, 2016, total value of illiquid securities is $3,392,830, representing 0.4% of the Portfolio’s net assets. |
| (F) | Non-income producing securities. |
| (G) | Payment in-kind. Security pays interest or dividends in the form of additional bonds or preferred stock. If the security makes a cash payment in addition to in-kind, the cash rate is disclosed separately. |
| (H) | Fair valued as determined in good faith in accordance with procedures established by the Board. At December 31, 2016, total value of securities is $3,313,315, representing 0.4% of the Portfolio’s net assets. |
| (I) | Securities are Level 3 of the fair value hierarchy. |
| (J) | Securities deemed worthless. |
| (K) | Escrow positions. Positions represents remaining escrow balances expected to be received upon finalization of restructuring. |
| (L) | Transferred from Level 2 to 3 due to utilizing significant unobservable inputs, as of prior reporting period the security utilized significant observable inputs. |
| (M) | Percentage rounds to less than 0.1% or (0.1)%. |
| (N) | Rate disclosed reflects the yield at December 31, 2016. |
| (O) | Aggregate cost for federal income tax purposes is $821,172,929. Aggregate gross unrealized appreciation and depreciation for all securities is $26,776,669 and $29,468,130, respectively. Net unrealized depreciation for tax purposes is $2,691,461. |
| (P) | The Portfolio recognizes transfers between Levels at the end of the reporting year. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
| (Q) | Level 3 securities were not considered significant to the Portfolio. |
PORTFOLIO ABBREVIATION:
| MTN | Medium Term Note |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 50
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 51
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 52
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 53
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 54
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 55
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 56
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 57
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 58
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 59
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 60
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
| FUTURES CONTRACTS: | ||||||||||||||||||||
| Description | Long/Short | Number of Contracts |
Expiration Date |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||||
| S&P 500® E-Mini |
Long | 6 | 03/17/2017 | $ | — | $ | (6,112 | ) | ||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 61
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (P)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs (Q) |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
| |||||||||||||||
| Common Stocks |
$ | 89,195,455 | $ | — | $ | — | $ | 89,195,455 | ||||||||
| Preferred Stocks |
342,963 | — | — | 342,963 | ||||||||||||
| Asset-Backed Securities |
— | 3,800,504 | — | 3,800,504 | ||||||||||||
| Corporate Debt Securities |
— | 23,053,289 | — | (K) | 23,053,289 | |||||||||||
| Foreign Government Obligations |
— | 884,524 | — | 884,524 | ||||||||||||
| Mortgage-Backed Securities |
— | 6,955,903 | — | 6,955,903 | ||||||||||||
| Municipal Government Obligations |
— | 560,780 | — | 560,780 | ||||||||||||
| U.S. Government Agency Obligations |
— | 9,805,990 | — | 9,805,990 | ||||||||||||
| U.S. Government Obligations |
— | 13,083,644 | — | 13,083,644 | ||||||||||||
| Short-Term U.S. Government Agency Obligations |
— | 6,841,090 | — | 6,841,090 | ||||||||||||
| Short-Term U.S. Government Obligations |
— | 1,190,453 | — | 1,190,453 | ||||||||||||
| Securities Lending Collateral |
469,545 | — | — | 469,545 | ||||||||||||
| Repurchase Agreement |
— | 1,693,806 | — | 1,693,806 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 90,007,963 | $ | 67,869,983 | $ | — | (K) | $ | 157,877,946 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES |
| |||||||||||||||
| Other Financial Instruments |
| |||||||||||||||
| Futures Contracts (R) |
$ | (6,112 | ) | $ | — | $ | — | $ | (6,112 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Other Financial Instruments |
$ | (6,112 | ) | $ | — | $ | — | $ | (6,112 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $456,457. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Percentage rounds to less than 0.1% or (0.1)%. |
| (D) | Floating or variable rate securities. The rates disclosed are as of December 31, 2016. |
| (E) | Percentage rounds to less than 0.01% or (0.01)%. |
| (F) | Securities are registered pursuant to Rule 144A of the Securities Act of 1933. Unless otherwise indicated, the securities are deemed to be liquid for purposes of compliance limitations on holdings of illiquid securities and may be resold as transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2016, the total value of 144A securities is $14,753,066, representing 9.8% of the Portfolio’s net assets. |
| (G) | Perpetual maturity. The date displayed is the next call date. |
| (H) | Fair valued as determined in good faith in accordance with procedures established by the Board. At December 31, 2016, value of the security is $0, representing less than 0.1% of the Portfolio’s net assets. |
| (I) | Security is Level 3 of the fair value hierarchy. |
| (J) | Illiquid security. At December 31, 2016, value of the illiquid security is $0, representing less than 0.1% of the Portfolio’s net assets. |
| (K) | Security deemed worthless. |
| (L) | Securities on a when-issued, delayed-delivery, or forward commitment basis. Securities to be settled and delivered after December 31, 2016. |
| (M) | Rates disclosed reflect the yields at December 31, 2016. |
| (N) | All or a portion of the security has been segregated by the custodian as collateral to cover margin requirements for open futures contracts. The value of the security segregated as collateral to cover margin requirements for open futures contracts is $114,863. |
| (O) | Aggregate cost for federal income tax purposes is $144,499,282. Aggregate gross unrealized appreciation and depreciation for all securities is $16,450,870 and $3,072,206, respectively. Net unrealized appreciation for tax purposes is $13,378,664. |
| (P) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
| (Q) | Level 3 securities were not considered significant to the Portfolio. |
| (R) | Futures contracts and/or forward foreign currency contracts are valued at unrealized appreciation (depreciation). |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 62
Table of Contents
Transamerica Partners Balanced Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
PORTFOLIO ABBREVIATIONS:
| MTN | Medium Term Note | |
| STRIPS | Separate Trading of Registered Interest and Principal of Securities | |
| TBA | To Be Announced |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 63
Table of Contents
Transamerica Partners Large Value Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 64
Table of Contents
Transamerica Partners Large Value Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 771,380,041 | $ | — | $ | — | $ | 771,380,041 | ||||||||
| Exchange-Traded Fund |
9,892,249 | — | — | 9,892,249 | ||||||||||||
| Securities Lending Collateral |
26,484,752 | — | — | 26,484,752 | ||||||||||||
| Repurchase Agreement |
— | 12,187,879 | — | 12,187,879 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 807,757,042 | $ | 12,187,879 | $ | — | $ | 819,944,921 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 65
Table of Contents
Transamerica Partners Large Value Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $25,905,789. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $716,409,857. Aggregate gross unrealized appreciation and depreciation for all securities is $114,744,426 and $11,209,362, respectively. Net unrealized appreciation for tax purposes is $103,535,064. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 66
Table of Contents
Transamerica Partners Large Core Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 67
Table of Contents
Transamerica Partners Large Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 283,683,052 | $ | — | $ | — | $ | 283,683,052 | ||||||||
| Securities Lending Collateral |
7,149,063 | — | — | 7,149,063 | ||||||||||||
| Repurchase Agreement |
— | 3,560,871 | — | 3,560,871 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 290,832,115 | $ | 3,560,871 | $ | — | $ | 294,392,986 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 68
Table of Contents
Transamerica Partners Large Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $6,997,240. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $256,017,290. Aggregate gross unrealized appreciation and depreciation for all securities is $42,992,516 and $4,616,820, respectively. Net unrealized appreciation for tax purposes is $38,375,696. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 69
Table of Contents
Transamerica Partners Large Growth Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 70
Table of Contents
Transamerica Partners Large Growth Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 71
Table of Contents
Transamerica Partners Large Growth Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 769,901,265 | $ | 26,340,785 | $ | — | $ | 796,242,050 | ||||||||
| Securities Lending Collateral |
13,873,997 | — | — | 13,873,997 | ||||||||||||
| Repurchase Agreement |
— | 7,964,588 | — | 7,964,588 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 783,775,262 | $ | 34,305,373 | $ | — | $ | 818,080,635 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $13,584,516. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $672,992,642. Aggregate gross unrealized appreciation and depreciation for all securities is $158,798,330 and $13,710,337, respectively. Net unrealized appreciation for tax purposes is $145,087,993. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
PORTFOLIO ABBREVIATION:
| ADR | American Depositary Receipt |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 72
Table of Contents
Transamerica Partners Mid Value Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 73
Table of Contents
Transamerica Partners Mid Value Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 74
Table of Contents
Transamerica Partners Mid Value Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 829,203,948 | $ | — | $ | — | $ | 829,203,948 | ||||||||
| Securities Lending Collateral |
20,756,987 | — | — | 20,756,987 | ||||||||||||
| Repurchase Agreement |
— | 40,302,611 | — | 40,302,611 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 849,960,935 | $ | 40,302,611 | $ | — | $ | 890,263,546 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $20,304,333. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $765,624,222. Aggregate gross unrealized appreciation and depreciation for all securities is $144,335,799 and $19,696,475, respectively. Net unrealized appreciation for tax purposes is $124,639,324. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 75
Table of Contents
Transamerica Partners Mid Growth Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 76
Table of Contents
Transamerica Partners Mid Growth Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 100,812,884 | $ | — | $ | — | $ | 100,812,884 | ||||||||
| Securities Lending Collateral |
1,861,200 | — | — | 1,861,200 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 102,674,084 | $ | — | $ | — | $ | 102,674,084 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the security is on loan. The value of the security on loan is $1,819,464. The amount on loan indicated may not correspond with the security on loan identified because a security with pending sales are in the process of recall from the brokers. |
| (C) | Rate disclosed reflects the yield at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $95,767,558. Aggregate gross unrealized appreciation and depreciation for all securities is $9,566,961 and $2,660,435, respectively. Net unrealized appreciation for tax purposes is $6,906,526. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 77
Table of Contents
Transamerica Partners Small Value Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 78
Table of Contents
Transamerica Partners Small Value Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (F)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 68,121,468 | $ | — | $ | — | $ | 68,121,468 | ||||||||
| Master Limited Partnerships |
1,337,441 | — | — | 1,337,441 | ||||||||||||
| Securities Lending Collateral |
6,273,175 | — | — | 6,273,175 | ||||||||||||
| Repurchase Agreement |
— | 572,515 | — | 572,515 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 75,732,084 | $ | 572,515 | $ | — | $ | 76,304,599 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $6,125,428. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $64,239,806. Aggregate gross unrealized appreciation and depreciation for all securities is $12,357,565 and $292,772, respectively. Net unrealized appreciation for tax purposes is $12,064,793. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 79
Table of Contents
Transamerica Partners Small Core Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 80
Table of Contents
Transamerica Partners Small Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 81
Table of Contents
Transamerica Partners Small Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 82
Table of Contents
Transamerica Partners Small Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 83
Table of Contents
Transamerica Partners Small Core Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 248,735,293 | $ | — | $ | — | $ | 248,735,293 | ||||||||
| Securities Lending Collateral |
16,227,648 | — | — | 16,227,648 | ||||||||||||
| Repurchase Agreement |
— | 4,652,951 | — | 4,652,951 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 264,962,941 | $ | 4,652,951 | $ | — | $ | 269,615,892 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $15,816,814. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $240,290,969. Aggregate gross unrealized appreciation and depreciation for all securities is $37,570,937 and $8,246,014, respectively. Net unrealized appreciation for tax purposes is $29,324,923. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 84
Table of Contents
Transamerica Partners Small Growth Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 85
Table of Contents
Transamerica Partners Small Growth Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
SECURITY VALUATION:
Valuation Inputs (E)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
||||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 68,039,317 | $ | — | $ | — | $ | 68,039,317 | ||||||||
| Securities Lending Collateral |
6,711,735 | — | — | 6,711,735 | ||||||||||||
| Repurchase Agreement |
— | 2,905,202 | — | 2,905,202 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 74,751,052 | $ | 2,905,202 | $ | — | $ | 77,656,254 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | Non-income producing securities. |
| (B) | All or a portion of the securities are on loan. The total value of all securities on loan is $6,562,872. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (C) | Rates disclosed reflect the yields at December 31, 2016. |
| (D) | Aggregate cost for federal income tax purposes is $66,652,215. Aggregate gross unrealized appreciation and depreciation for all securities is $11,615,349 and $611,310, respectively. Net unrealized appreciation for tax purposes is $11,004,039. |
| (E) | The Portfolio recognizes transfers between Levels at the end of the reporting year. There were no transfers between Levels 1, 2 and 3 during the year ended December 31, 2016. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 86
Table of Contents
Transamerica Partners International Equity Portfolio
SCHEDULE OF INVESTMENTS
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 87
Table of Contents
Transamerica Partners International Equity Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 88
Table of Contents
Transamerica Partners International Equity Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
INVESTMENTS BY INDUSTRY (unaudited):
| Industry | Percentage of Total Investments |
Value | ||||||
| Banks |
9.3 | % | $ | 35,256,889 | ||||
| Oil, Gas & Consumable Fuels |
5.1 | 19,344,071 | ||||||
| Insurance |
5.0 | 19,159,506 | ||||||
| Capital Markets |
5.0 | 19,062,995 | ||||||
| Pharmaceuticals |
5.0 | 18,986,288 | ||||||
| Industrial Conglomerates |
4.8 | 18,057,297 | ||||||
| Technology Hardware, Storage & Peripherals |
3.6 | 13,735,470 | ||||||
| Diversified Financial Services |
3.5 | 13,343,576 | ||||||
| Auto Components |
2.8 | 10,542,667 | ||||||
| Food Products |
2.7 | 10,244,599 | ||||||
| Electronic Equipment, Instruments & Components |
2.6 | 10,013,237 | ||||||
| Chemicals |
2.6 | 9,741,519 | ||||||
| Machinery |
2.5 | 9,537,105 | ||||||
| Multi-Utilities |
2.4 | 8,968,379 | ||||||
| Media |
2.3 | 8,928,409 | ||||||
| Transportation Infrastructure |
2.3 | 8,668,173 | ||||||
| Hotels, Restaurants & Leisure |
2.3 | 8,562,696 | ||||||
| Diversified Telecommunication Services |
1.8 | 6,893,415 | ||||||
| Beverages |
1.7 | 6,595,346 | ||||||
| Road & Rail |
1.7 | 6,447,420 | ||||||
| Trading Companies & Distributors |
1.7 | 6,349,695 | ||||||
| Household Durables |
1.7 | 6,322,488 | ||||||
| Semiconductors & Semiconductor Equipment |
1.7 | 6,307,612 | ||||||
| Wireless Telecommunication Services |
1.7 | 6,303,296 | ||||||
| Airlines |
1.5 | 5,809,760 | ||||||
| Software |
1.3 | 4,951,177 | ||||||
| Automobiles |
1.3 | 4,871,749 | ||||||
| Containers & Packaging |
1.2 | 4,478,723 | ||||||
| Food & Staples Retailing |
1.2 | 4,473,854 | ||||||
| Metals & Mining |
1.1 | 4,073,606 | ||||||
| Specialty Retail |
0.9 | 3,372,170 | ||||||
| Electrical Equipment |
0.9 | 3,298,888 | ||||||
| Water Utilities |
0.8 | 3,066,256 | ||||||
| Multiline Retail |
0.7 | 2,851,866 | ||||||
| Personal Products |
0.7 | 2,789,977 | ||||||
| Tobacco |
0.7 | 2,737,080 | ||||||
| Real Estate Management & Development |
0.7 | 2,679,650 | ||||||
| Health Care Providers & Services |
0.7 | 2,538,881 | ||||||
| Distributors |
0.6 | 2,354,820 | ||||||
| Construction & Engineering |
0.6 | 2,198,007 | ||||||
| Household Products |
0.6 | 2,126,525 | ||||||
| Energy Equipment & Services |
0.5 | 2,010,998 | ||||||
| Internet Software & Services |
0.5 | 1,808,510 | ||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 89
Table of Contents
Transamerica Partners International Equity Portfolio
SCHEDULE OF INVESTMENTS (continued)
At December 31, 2016
INVESTMENTS BY INDUSTRY (unaudited) (continued):
| Industry | Percentage of Total Investments |
Value | ||||||
| Aerospace & Defense |
0.4 | % | $ | 1,561,106 | ||||
| Equity Real Estate Investment Trusts |
0.4 | 1,440,652 | ||||||
| Independent Power & Renewable Electricity Producers |
0.4 | 1,431,598 | ||||||
| Internet & Direct Marketing Retail |
0.3 | 1,272,000 | ||||||
| Consumer Finance |
0.2 | 936,202 | ||||||
| Air Freight & Logistics |
0.2 | 825,456 | ||||||
| Communications Equipment |
0.1 | 565,607 | ||||||
|
|
|
|
|
|||||
| Investments, at Value |
94.3 | 357,897,266 | ||||||
| Short-Term Investments |
5.7 | 21,625,788 | ||||||
|
|
|
|
|
|||||
| Total Investments |
100.0 | % | $ | 379,523,054 | ||||
|
|
|
|
|
|||||
SECURITY VALUATION:
Valuation Inputs (G)
| Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Value | |||||||||||||
| ASSETS |
| |||||||||||||||
| Investments |
||||||||||||||||
| Common Stocks |
$ | 54,205,812 | $ | 294,613,924 | $ | — | $ | 348,819,736 | ||||||||
| Preferred Stocks |
1,359,468 | 7,718,062 | — | 9,077,530 | ||||||||||||
| Securities Lending Collateral |
18,081,194 | — | — | 18,081,194 | ||||||||||||
| Repurchase Agreement |
— | 3,544,594 | — | 3,544,594 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 73,646,474 | $ | 305,876,580 | $ | — | $ | 379,523,054 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Transfers (G)
| Investments | Transfers from Level 1 to Level 2 |
Transfers from Level 2 to Level 1 |
Transfers from Level 2 to Level 3 |
Transfers from Level 3 to Level 2 |
||||||||||||
| Common Stocks (B) |
$ | — | $ | 4,657,539 | $ | — | $ | — | ||||||||
| Preferred Stocks (B) |
— | 1,359,468 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | 6,017,007 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
FOOTNOTES TO SCHEDULE OF INVESTMENTS:
| (A) | All or a portion of the securities are on loan. The total value of all securities on loan is $16,866,432. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
| (B) | Transferred from Level 2 to 1 due to utilizing quoted market prices in active markets at December 31, 2016. At December 31, 2015, fair value factors were applied to reflect events that occurred after the close of the primary market. |
| (C) | Non-income producing securities. |
| (D) | Securities are registered pursuant to Rule 144A of the Securities Act of 1933. Unless otherwise indicated, the securities are deemed to be liquid for purposes of compliance limitations on holdings of illiquid securities and may be resold as transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2016, the total value of 144A securities is $4,944,472, representing 1.4% of the Portfolio’s net assets. |
| (E) | Rates disclosed reflect the yields at December 31, 2016. |
| (F) | Aggregate cost for federal income tax purposes is $398,670,747. Aggregate gross unrealized appreciation and depreciation for all securities is $27,972,784 and $47,120,477, respectively. Net unrealized depreciation for tax purposes is $19,147,693. |
| (G) | The Portfolio recognizes transfers between Levels at the end of the reporting year. Please reference the Security Valuation section of the Notes to Financial Statements for more information regarding security valuation and pricing inputs. |
PORTFOLIO ABBREVIATIONS:
| ADR | American Depositary Receipt | |
| REIT | Real Estate Investment Trust |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 90
Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES
At December 31, 2016
| Government Money Market (F) |
High Quality Bond |
Inflation- Protected Securities |
Core Bond | High Yield Bond |
||||||||||||||||
| Assets: |
||||||||||||||||||||
| Investments, at value (A) (B) |
$ | 524,768,655 | $ | 324,266,759 | $ | 241,170,517 | $ | 1,297,899,716 | $ | 784,223,343 | ||||||||||
| Repurchase agreements, at value (C) |
414,520,588 | 3,876,289 | — | 10,300,540 | 34,258,125 | |||||||||||||||
| Cash |
— | — | — | 1,863 | 46,196 | |||||||||||||||
| Cash collateral on deposit with broker |
— | — | 589,220 | 557,000 | — | |||||||||||||||
| Foreign currency, at value (D) |
— | — | 152,453 | — | — | |||||||||||||||
| Receivables and other assets: |
||||||||||||||||||||
| Investments sold |
— | 24,089 | 2,034,240 | 37,113 | — | |||||||||||||||
| Interest |
173,664 | 1,219,986 | 874,441 | 8,421,690 | 13,325,065 | |||||||||||||||
| Net income from securities lending |
— | 374 | 47 | 8,339 | — | |||||||||||||||
| OTC swap agreements, at value |
— | — | 9,588 | — | — | |||||||||||||||
| Unrealized appreciation on forward foreign currency contracts |
— | — | 246,881 | — | — | |||||||||||||||
| Total assets |
939,462,907 | 329,387,497 | 245,077,387 | 1,317,226,261 | 831,852,729 | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Due to custodian |
5 | 1 | 1 | — | — | |||||||||||||||
| Cash deposit due to broker |
— | — | 580,000 | — | — | |||||||||||||||
| Payables and other liabilities: |
||||||||||||||||||||
| Investments purchased |
— | — | 1,668,733 | — | — | |||||||||||||||
| When-issued, delayed-delivery, and forward commitment securities purchased |
— | — | — | 149,193,491 | — | |||||||||||||||
| Investment advisory fees |
189,369 | 97,150 | 73,380 | 340,644 | 385,195 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
644 | 254 | 183 | 853 | 682 | |||||||||||||||
| Audit and tax fees |
19,280 | 25,036 | 22,101 | 30,298 | 26,512 | |||||||||||||||
| Custody and accounting fees |
45,620 | 9,861 | 38,569 | 31,234 | 21,586 | |||||||||||||||
| Legal fees |
7,208 | 2,766 | 2,148 | 10,212 | 6,264 | |||||||||||||||
| Printing and shareholder reports fees |
9,498 | 3,929 | 2,977 | 14,176 | 8,693 | |||||||||||||||
| Variation margin payable |
— | — | 17,440 | — | — | |||||||||||||||
| Other |
23,822 | 348,460 | 18,606 | 22,141 | 20,441 | |||||||||||||||
| Collateral for securities on loan |
— | — | 3,710,264 | 22,718,865 | — | |||||||||||||||
| Written options and swaptions, at value (E) |
— | — | 288,626 | — | — | |||||||||||||||
| OTC swap agreements, at value |
— | — | 15,477 | — | — | |||||||||||||||
| Unrealized depreciation on forward foreign currency contracts |
— | — | 123,676 | — | — | |||||||||||||||
| Total liabilities |
295,446 | 487,457 | 6,562,181 | 172,361,914 | 469,373 | |||||||||||||||
| Net assets |
$ | 939,167,461 | $ | 328,900,040 | $ | 238,515,206 | $ | 1,144,864,347 | $ | 831,383,356 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(A) Investments, at cost |
$ | 524,768,655 | $ | 327,477,686 | $ | 241,114,608 | $ | 1,307,735,616 | $ | 786,783,654 | ||||||||||
|
(B) Securities on loan, at value |
$ | — | $ | — | $ | 3,636,230 | $ | 22,253,813 | $ | — | ||||||||||
|
(C) Repurchase agreements, at cost |
$ | 414,520,588 | $ | 3,876,289 | $ | — | $ | 10,300,540 | $ | 34,258,125 | ||||||||||
|
(D) Foreign currency, at cost |
$ | — | $ | — | $ | 156,681 | $ | — | $ | — | ||||||||||
|
(E) Premium received on written options and swaptions |
$ | — | $ | — | $ | (525,798 | ) | $ | — | $ | — | |||||||||
(F) Formerly, Money Market.
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 91
Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES (continued)
At December 31, 2016
| Balanced |
Large Value | Large Core | Large Growth | Mid Value | ||||||||||||||||
| Assets: |
||||||||||||||||||||
| Investments, at value (A) (B) |
$ | 156,184,140 | $ | 807,757,042 | $ | 290,832,115 | $ | 810,116,047 | $ | 849,960,935 | ||||||||||
| Repurchase agreements, at value (C) |
1,693,806 | 12,187,879 | 3,560,871 | 7,964,588 | 40,302,611 | |||||||||||||||
| Cash |
975 | 4,539 | — | — | — | |||||||||||||||
| Foreign currency, at value (D) |
— | — | — | 1 | — | |||||||||||||||
| Receivables and other assets: |
||||||||||||||||||||
| Investments sold |
453 | 1,030,863 | 63,083 | 21,517,318 | — | |||||||||||||||
| Interest |
432,332 | 20 | 6 | 13 | 67 | |||||||||||||||
| Dividends |
106,653 | 830,832 | 438,485 | 311,160 | 1,763,846 | |||||||||||||||
| Tax reclaims |
— | — | 711 | 198,542 | — | |||||||||||||||
| Net income from securities lending |
185 | 9,168 | 2,917 | 902 | 10,365 | |||||||||||||||
| Total assets |
158,418,544 | 821,820,343 | 294,898,188 | 840,108,571 | 892,037,824 | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Due to custodian |
— | — | 2 | 6 | 170 | |||||||||||||||
| Payables and other liabilities: |
||||||||||||||||||||
| Investments purchased |
— | 1,267,001 | — | 2,639,214 | — | |||||||||||||||
| When-issued, delayed-delivery, and forward commitment securities purchased |
7,875,816 | — | — | — | — | |||||||||||||||
| Investment advisory fees |
45,852 | 282,280 | 140,979 | 436,637 | 496,279 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
112 | 651 | 231 | 640 | 712 | |||||||||||||||
| Audit and tax fees |
28,139 | 20,311 | 21,395 | 21,395 | 19,460 | |||||||||||||||
| Custody and accounting fees |
16,452 | 18,951 | 8,300 | 30,730 | 24,130 | |||||||||||||||
| Legal fees |
1,206 | 6,219 | 2,397 | 7,040 | 8,759 | |||||||||||||||
| Printing and shareholder reports fees |
1,599 | 9,318 | 3,542 | 10,037 | 9,369 | |||||||||||||||
| Variation margin payable |
2,670 | — | — | — | — | |||||||||||||||
| Other |
18,997 | 20,712 | 20,808 | 20,784 | 21,350 | |||||||||||||||
| Collateral for securities on loan |
469,545 | 26,484,752 | 7,149,063 | 13,873,997 | 20,756,987 | |||||||||||||||
| Total liabilities |
8,460,388 | 28,110,195 | 7,346,717 | 17,040,480 | 21,337,216 | |||||||||||||||
| Net assets |
$ | 149,958,156 | $ | 793,710,148 | $ | 287,551,471 | $ | 823,068,091 | $ | 870,700,608 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(A) Investments, at cost |
$ | 142,061,650 | $ | 702,895,226 | $ | 251,597,031 | $ | 661,680,489 | $ | 714,297,247 | ||||||||||
|
(B) Securities on loan, at value |
$ | 456,457 | $ | 25,905,789 | $ | 6,997,240 | $ | 13,584,516 | $ | 20,304,333 | ||||||||||
|
(C) Repurchase agreements, at cost |
$ | 1,693,806 | $ | 12,187,879 | $ | 3,560,871 | $ | 7,964,588 | $ | 40,302,611 | ||||||||||
|
(D) Foreign currency, at cost |
$ | — | $ | — | $ | — | $ | 1 | $ | — | ||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES (continued)
At December 31, 2016
| Mid Growth | Small Value | Small Core | Small Growth |
International |
||||||||||||||||
| Assets: |
||||||||||||||||||||
| Investments, at value (A) (B) |
$ | 102,674,084 | $ | 75,732,084 | $ | 264,962,941 | $ | 74,751,052 | $ | 375,978,460 | ||||||||||
| Repurchase agreements, at value (C) |
— | 572,515 | 4,652,951 | 2,905,202 | 3,544,594 | |||||||||||||||
| Foreign currency, at value (D) |
— | — | — | — | 1,304,655 | |||||||||||||||
| Receivables and other assets: |
||||||||||||||||||||
| Investments sold |
2,874,818 | 724,552 | — | — | — | |||||||||||||||
| Interest |
— | 1 | 8 | 5 | 6 | |||||||||||||||
| Dividends |
81,976 | 85,958 | 464,719 | 24,569 | 268,381 | |||||||||||||||
| Tax reclaims |
— | — | — | — | 725,578 | |||||||||||||||
| Net income from securities lending |
462 | 1,653 | 2,819 | 2,943 | 7,115 | |||||||||||||||
| Total assets |
105,631,340 | 77,116,763 | 270,083,438 | 77,683,771 | 381,828,789 | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Due to custodian |
51,337 | 1 | 2 | — | 1 | |||||||||||||||
| Payables and other liabilities: |
||||||||||||||||||||
| Investments purchased |
2,643,260 | 121,481 | — | — | 64 | |||||||||||||||
| Investment advisory fees |
54,866 | 42,228 | 172,718 | 48,041 | 227,419 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
90 | 58 | 227 | 56 | 319 | |||||||||||||||
| Audit and tax fees |
19,460 | 19,460 | 19,550 | 19,460 | 30,365 | |||||||||||||||
| Custody and accounting fees |
6,240 | 5,048 | 8,459 | 5,022 | 63,511 | |||||||||||||||
| Legal fees |
810 | 530 | 1,850 | 527 | 3,081 | |||||||||||||||
| Printing and shareholder reports fees |
1,266 | 769 | 2,855 | 735 | 5,039 | |||||||||||||||
| Other |
18,408 | 18,486 | 19,495 | 18,055 | 68,865 | |||||||||||||||
| Foreign capital gains tax |
— | — | — | — | 44,322 | |||||||||||||||
| Collateral for securities on loan |
1,861,200 | 6,273,175 | 16,227,648 | 6,711,735 | 18,081,194 | |||||||||||||||
| Total liabilities |
4,656,937 | 6,481,236 | 16,452,804 | 6,803,631 | 18,524,180 | |||||||||||||||
| Net assets |
$ | 100,974,403 | $ | 70,635,527 | $ | 253,630,634 | $ | 70,880,140 | $ | 363,304,609 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(A) Investments, at cost |
$ | 95,235,195 | $ | 63,596,062 | $ | 234,200,272 | $ | 62,982,433 | $ | 394,328,049 | ||||||||||
|
(B) Securities on loan, at value |
$ | 1,819,464 | $ | 6,125,428 | $ | 15,816,814 | $ | 6,562,872 | $ | 16,866,432 | ||||||||||
|
(C) Repurchase agreements, at cost |
$ | — | $ | 572,515 | $ | 4,652,951 | $ | 2,905,202 | $ | 3,544,594 | ||||||||||
|
(D) Foreign currency, at cost |
$ | — | $ | — | $ | — | $ | — | $ | 1,297,426 | ||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
For the year ended December 31, 2016
| Government Money Market (A) |
High Quality Bond |
Inflation- Protected Securities |
Core Bond | High Yield Bond |
||||||||||||||||
| Investment Income: |
||||||||||||||||||||
| Dividend income |
$ | — | $ | — | $ | — | $ | 152,701 | $ | 568,086 | ||||||||||
| Interest income |
4,010,771 | 6,689,132 | 4,537,049 | 33,335,859 | 51,725,420 | |||||||||||||||
| Net income (loss) from securities lending |
— | 16,211 | 9,944 | 120,473 | — | |||||||||||||||
| Withholding taxes on foreign income |
— | (5 | ) | — | — | — | ||||||||||||||
| Total investment income |
4,010,771 | 6,705,338 | 4,546,993 | 33,609,033 | 52,293,506 | |||||||||||||||
| Expenses: |
||||||||||||||||||||
| Investment advisory fees |
2,202,730 | 1,181,338 | 916,907 | 4,341,746 | 4,336,939 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
14,097 | 5,575 | 4,392 | 20,717 | 13,675 | |||||||||||||||
| Audit and tax fees |
21,967 | 32,911 | 25,162 | 41,222 | 35,295 | |||||||||||||||
| Custody and accounting fees |
172,880 | 33,706 | 158,038 | 99,175 | 64,928 | |||||||||||||||
| Legal fees |
31,401 | 11,040 | 8,545 | 40,687 | 24,668 | |||||||||||||||
| Printing and shareholder reports fees |
6,597 | 2,618 | 1,940 | 9,220 | 5,463 | |||||||||||||||
| Other |
44,424 | 28,200 | 28,470 | 42,790 | 34,679 | |||||||||||||||
| Total expenses before waiver and/or reimbursement |
2,494,096 | 1,295,388 | 1,143,454 | 4,595,557 | 4,515,647 | |||||||||||||||
| Expenses waived and/or reimbursed |
— | — | (71,229 | ) | — | — | ||||||||||||||
| Reimbursement of custody fees (B) |
(98,456 | ) | (42,051 | ) | (54,508 | ) | (232,471 | ) | (141,117 | ) | ||||||||||
| Net expenses |
2,395,640 | 1,253,337 | 1,017,717 | 4,363,086 | 4,374,530 | |||||||||||||||
| Net investment income (loss) |
1,615,131 | 5,452,001 | 3,529,276 | 29,245,947 | 47,918,976 | |||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||||||
| Investments |
24,824 | (1,671,282 | ) | (545,943 | ) | 10,838,388 | (21,464,156 | ) | ||||||||||||
| Written options and swaptions |
— | — | 1,086,526 | — | — | |||||||||||||||
| Swap agreements |
— | — | (659,014 | ) | — | — | ||||||||||||||
| Futures contracts |
— | — | (518,710 | ) | — | — | ||||||||||||||
| Foreign currency transactions |
— | — | (225,921 | ) | — | — | ||||||||||||||
| Net realized gain (loss) |
24,824 | (1,671,282 | ) | (863,062 | ) | 10,838,388 | (21,464,156 | ) | ||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||
| Investments |
— | 1,327,891 | 7,635,645 | 4,039,422 | 86,742,266 | |||||||||||||||
| Written options and swaptions |
— | — | (267,207 | ) | — | — | ||||||||||||||
| Swap agreements |
— | — | 587,131 | — | — | |||||||||||||||
| Futures contracts |
— | — | (301,696 | ) | — | — | ||||||||||||||
| Translation of assets and liabilities denominated in foreign currencies |
— | — | 459,552 | — | — | |||||||||||||||
| Net change in unrealized appreciation (depreciation) |
— | 1,327,891 | 8,113,425 | 4,039,422 | 86,742,266 | |||||||||||||||
| Net realized and change in unrealized gain (loss) |
24,824 | (343,391 | ) | 7,250,363 | 14,877,810 | 65,278,110 | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 1,639,955 | $ | 5,108,610 | $ | 10,779,639 | $ | 44,123,757 | $ | 113,197,086 | ||||||||||
| (A) | Formerly, Money Market. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
STATEMENTS OF OPERATIONS (continued)
For the year ended December 31, 2016
| Balanced |
Large Value | Large Core | Large Growth | Mid Value | ||||||||||||||||
| Investment Income: |
||||||||||||||||||||
| Dividend income |
$ | 1,764,482 | $ | 18,845,992 | $ | 7,280,075 | $ | 8,494,562 | $ | 14,517,617 | ||||||||||
| Interest income |
1,544,328 | 1,830 | 671 | 1,653 | 11,406 | |||||||||||||||
| Net income (loss) from securities lending |
16,036 | 400,167 | 60,739 | 378,366 | 392,253 | |||||||||||||||
| Withholding taxes on foreign income |
(11,228 | ) | (29,119 | ) | (14,463 | ) | (70,416 | ) | (79,126 | ) | ||||||||||
| Total investment income |
3,313,618 | 19,218,870 | 7,327,022 | 8,804,165 | 14,842,150 | |||||||||||||||
| Expenses: |
||||||||||||||||||||
| Investment advisory fees |
670,027 | 3,406,861 | 1,728,202 | 5,295,714 | 5,588,438 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
2,515 | 12,919 | 4,826 | 13,909 | 14,515 | |||||||||||||||
| Audit and tax fees |
40,730 | 25,185 | 26,393 | 26,600 | 25,123 | |||||||||||||||
| Custody and accounting fees |
46,941 | 63,459 | 31,518 | 106,490 | 83,442 | |||||||||||||||
| Legal fees |
4,856 | 24,004 | 9,307 | 28,059 | 32,836 | |||||||||||||||
| Printing and shareholder reports fees |
1,088 | 5,814 | 2,220 | 6,591 | 5,855 | |||||||||||||||
| Other |
25,155 | 34,421 | 27,355 | 36,119 | 35,678 | |||||||||||||||
| Total expenses before waiver and/or reimbursement |
791,312 | 3,572,663 | 1,829,821 | 5,513,482 | 5,785,887 | |||||||||||||||
| Expenses waived and/or reimbursed |
(23,968 | ) | (18,757 | ) | (7,012 | ) | — | — | ||||||||||||
| Reimbursement of custody fees (A) |
(70,736 | ) | (97,014 | ) | (28,961 | ) | (197,510 | ) | (87,746 | ) | ||||||||||
| Net expenses |
696,608 | 3,456,892 | 1,793,848 | 5,315,972 | 5,698,141 | |||||||||||||||
| Net investment income (loss) |
2,617,010 | 15,761,978 | 5,533,174 | 3,488,193 | 9,144,009 | |||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||||||
| Investments |
4,372,761 | (9,281,745 | ) | 1,253,199 | 68,601,920 | 52,483,443 | ||||||||||||||
| Futures contracts |
92,868 | — | — | — | — | |||||||||||||||
| Foreign currency transactions |
(25 | ) | 806 | 460 | (1,521 | ) | (101 | ) | ||||||||||||
| Net realized gain (loss) |
4,465,604 | (9,280,939 | ) | 1,253,659 | 68,600,399 | 52,483,342 | ||||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||
| Investments |
4,740,971 | 58,777,503 | 14,669,388 | (64,963,741 | ) | 62,484,089 | ||||||||||||||
| Futures contracts |
(15,080 | ) | — | — | — | — | ||||||||||||||
| Translation of assets and liabilities denominated in foreign currencies |
7 | (517 | ) | (164 | ) | 893 | — | |||||||||||||
| Net change in unrealized appreciation (depreciation) |
4,725,898 | 58,776,986 | 14,669,224 | (64,962,848 | ) | 62,484,089 | ||||||||||||||
| Net realized and change in unrealized gain (loss) |
9,191,502 | 49,496,047 | 15,922,883 | 3,637,551 | 114,967,431 | |||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 11,808,512 | $ | 65,258,025 | $ | 21,456,057 | $ | 7,125,744 | $ | 124,111,440 | ||||||||||
| (A) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 95
Table of Contents
STATEMENTS OF OPERATIONS (continued)
For the year ended December 31, 2016
| Mid Growth | Small Value | Small Core | Small Growth |
International |
||||||||||||||||
| Investment Income: |
||||||||||||||||||||
| Dividend income |
$ | 828,206 | $ | 1,112,687 | $ | 4,246,735 | $ | 366,107 | $ | 12,476,913 | ||||||||||
| Interest income |
60 | 376 | 781 | 551 | 10,929 | |||||||||||||||
| Net income (loss) from securities lending |
22,918 | 46,517 | 74,221 | 46,586 | 326,294 | |||||||||||||||
| Withholding taxes on foreign income |
(6,362 | ) | (1,274 | ) | (810 | ) | — | (1,401,790 | ) | |||||||||||
| Total investment income |
844,822 | 1,158,306 | 4,320,927 | 413,244 | 11,412,346 | |||||||||||||||
| Expenses: |
||||||||||||||||||||
| Investment advisory fees |
710,771 | 535,057 | 1,840,003 | 551,294 | 2,750,917 | |||||||||||||||
| Trustees, CCO and deferred compensation fees |
1,714 | 1,141 | 4,065 | 1,122 | 6,354 | |||||||||||||||
| Audit and tax fees |
23,909 | 23,900 | 25,051 | 22,403 | 32,901 | |||||||||||||||
| Custody and accounting fees |
22,153 | 16,737 | 35,300 | 19,636 | 246,959 | |||||||||||||||
| Legal fees |
3,035 | 2,626 | 6,926 | 2,115 | 11,990 | |||||||||||||||
| Printing and shareholder reports fees |
764 | 490 | 1,674 | 501 | 3,019 | |||||||||||||||
| Other |
24,354 | 23,860 | 26,313 | 23,863 | 98,527 | |||||||||||||||
| Total expenses before waiver and/or reimbursement |
786,700 | 603,811 | 1,939,332 | 620,934 | 3,150,667 | |||||||||||||||
| Expenses waived and/or reimbursed |
(23,445 | ) | (26,309 | ) | — | (7,392 | ) | — | ||||||||||||
| Reimbursement of custody fees (A) |
(24,928 | ) | (18,977 | ) | (83,412 | ) | (10,688 | ) | (95,879 | ) | ||||||||||
| Net expenses |
738,327 | 558,525 | 1,855,920 | 602,854 | 3,054,788 | |||||||||||||||
| Net investment income (loss) |
106,495 | 599,781 | 2,465,007 | (189,610 | ) | 8,357,558 | ||||||||||||||
| Net realized gain (loss) on: |
||||||||||||||||||||
| Investments |
3,873,528 | 309,831 | 4,381,753 | 9,312,204 | (16,941,048 | ) | ||||||||||||||
| Foreign currency transactions |
— | — | — | — | (208,437 | ) | ||||||||||||||
| Net realized gain (loss) |
3,873,528 | 309,831 | 4,381,753 | 9,312,204 | (17,149,485 | ) | ||||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||
| Investments |
7,069,005 | 10,866,927 | 42,117,063 | 3,260,756 | 16,862,073 | (B) | ||||||||||||||
| Translation of assets and liabilities denominated in foreign currencies |
— | — | — | — | (4,417 | ) | ||||||||||||||
| Net change in unrealized appreciation (depreciation) |
7,069,005 | 10,866,927 | 42,117,063 | 3,260,756 | 16,857,656 | |||||||||||||||
| Net realized and change in unrealized gain (loss) |
10,942,533 | 11,176,758 | 46,498,816 | 12,572,960 | (291,829 | ) | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 11,049,028 | $ | 11,776,539 | $ | 48,963,823 | $ | 12,383,350 | $ | 8,065,729 | ||||||||||
| (A) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. |
| (B) | Net change in foreign capital gains tax of $44,322. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
Page 96
Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended:
| Government Money Market (A) | High Quality Bond | Inflation-Protected Securities | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | 1,615,131 | $ | 122,920 | $ | 5,452,001 | $ | 4,722,092 | $ | 3,529,276 | $ | 590,888 | ||||||||||||
| Net realized gain (loss) |
24,824 | 3,909 | (1,671,282 | ) | (836,409 | ) | (863,062 | ) | (836,980 | ) | ||||||||||||||
| Net change in unrealized appreciation (depreciation) |
— | — | 1,327,891 | (1,252,420 | ) | 8,113,425 | (5,260,333 | ) | ||||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
1,639,955 | 126,829 | 5,108,610 | 2,633,263 | 10,779,639 | (5,506,425 | ) | |||||||||||||||||
| From transactions in investors’ beneficial interests: |
||||||||||||||||||||||||
| Contributions |
681,778,794 | 681,666,419 | 133,752,933 | 178,165,153 | 19,825,234 | 41,488,372 | ||||||||||||||||||
| Withdrawals |
(617,308,024 | ) | (671,104,556 | ) | (160,471,173 | ) | (201,443,124 | ) | (60,195,081 | ) | (50,802,329 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from transactions in investors’ beneficial interests |
64,470,770 | 10,561,863 | (26,718,240 | ) | (23,277,971 | ) | (40,369,847 | ) | (9,313,957 | ) | ||||||||||||||
| Net increase (decrease) in net assets |
66,110,725 | 10,688,692 | (21,609,630 | ) | (20,644,708 | ) | (29,590,208 | ) | (14,820,382 | ) | ||||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
873,056,736 | 862,368,044 | 350,509,670 | 371,154,378 | 268,105,414 | 282,925,796 | ||||||||||||||||||
| End of year |
$ | 939,167,461 | $ | 873,056,736 | $ | 328,900,040 | $ | 350,509,670 | $ | 238,515,206 | $ | 268,105,414 | ||||||||||||
| (A) | Formerly, Money Market. |
| Core Bond | High Yield Bond | Balanced | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | 29,245,947 | $ | 30,744,309 | $ | 47,918,976 | $ | 48,392,946 | $ | 2,617,010 | $ | 2,541,177 | ||||||||||||
| Net realized gain (loss) |
10,838,388 | 2,912,066 | (21,464,156 | ) | (13,293,618 | ) | 4,465,604 | 7,637,138 | ||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
4,039,422 | (26,836,815 | ) | 86,742,266 | (67,991,992 | ) | 4,725,898 | (9,520,478 | ) | |||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
44,123,757 | 6,819,560 | 113,197,086 | (32,892,664 | ) | 11,808,512 | 657,837 | |||||||||||||||||
| From transactions in investors’ beneficial interests: |
||||||||||||||||||||||||
| Contributions |
236,182,849 | 206,524,514 | 69,539,786 | 88,025,013 | 9,979,291 | 31,301,309 | ||||||||||||||||||
| Withdrawals |
(418,390,428 | ) | (284,871,593 | ) | (100,340,395 | ) | (182,920,525 | ) | (23,422,150 | ) | (27,931,083 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from transactions in investors’ beneficial interests |
(182,207,579 | ) | (78,347,079 | ) | (30,800,609 | ) | (94,895,512 | ) | (13,442,859 | ) | 3,370,226 | |||||||||||||
| Net increase (decrease) in net assets |
(138,083,822 | ) | (71,527,519 | ) | 82,396,477 | (127,788,176 | ) | (1,634,347 | ) | 4,028,063 | ||||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
1,282,948,169 | 1,354,475,688 | 748,986,879 | 876,775,055 | 151,592,503 | 147,564,440 | ||||||||||||||||||
| End of year |
$ | 1,144,864,347 | $ | 1,282,948,169 | $ | 831,383,356 | $ | 748,986,879 | $ | 149,958,156 | $ | 151,592,503 | ||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the years ended:
| Large Value | Large Core | Large Growth | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | 15,761,978 | $ | 13,256,969 | $ | 5,533,174 | $ | 4,376,578 | $ | 3,488,193 | $ | 3,158,645 | ||||||||||||
| Net realized gain (loss) |
(9,280,939 | ) | 88,003,967 | 1,253,659 | 37,746,692 | 68,600,399 | 57,294,575 | |||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
58,776,986 | (103,060,022 | ) | 14,669,224 | (44,445,300 | ) | (64,962,848 | ) | 22,395,409 | |||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
65,258,025 | (1,799,086 | ) | 21,456,057 | (2,322,030 | ) | 7,125,744 | 82,848,629 | ||||||||||||||||
| From transactions in investors’ beneficial interests: |
||||||||||||||||||||||||
| Contributions |
52,668,047 | 75,369,693 | 15,345,861 | 30,264,680 | 37,026,945 | 75,723,926 | ||||||||||||||||||
| Withdrawals |
(150,638,006 | ) | (167,401,036 | ) | (72,619,655 | ) | (51,955,709 | ) | (146,542,203 | ) | (159,696,818 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from transactions in investors’ beneficial interests |
(97,969,959 | ) | (92,031,343 | ) | (57,273,794 | ) | (21,691,029 | ) | (109,515,258 | ) | (83,972,892 | ) | ||||||||||||
| Net increase (decrease) in net assets |
(32,711,934 | ) | (93,830,429 | ) | (35,817,737 | ) | (24,013,059 | ) | (102,389,514 | ) | (1,124,263 | ) | ||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
826,422,082 | 920,252,511 | 323,369,208 | 347,382,267 | 925,457,605 | 926,581,868 | ||||||||||||||||||
| End of year |
$ | 793,710,148 | $ | 826,422,082 | $ | 287,551,471 | $ | 323,369,208 | $ | 823,068,091 | $ | 925,457,605 | ||||||||||||
| Mid Value | Mid Growth | Small Value | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | 9,144,009 | $ | 11,079,019 | $ | 106,495 | $ | (147,804 | ) | $ | 599,781 | $ | 738,234 | |||||||||||
| Net realized gain (loss) |
52,483,342 | 60,079,786 | 3,873,528 | 18,401,108 | 309,831 | 16,642,277 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
62,484,089 | (73,933,778 | ) | 7,069,005 | (18,808,529 | ) | 10,866,927 | (21,880,090 | ) | |||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
124,111,440 | (2,774,973 | ) | 11,049,028 | (555,225 | ) | 11,776,539 | (4,499,579 | ) | |||||||||||||||
| From transactions in investors’ beneficial interests: |
||||||||||||||||||||||||
| Contributions |
94,075,966 | 78,244,993 | 5,794,851 | 16,866,894 | 3,724,363 | 7,541,849 | ||||||||||||||||||
| Withdrawals |
(149,340,490 | ) | (142,550,405 | ) | (23,614,143 | ) | (34,696,316 | ) | (12,686,813 | ) | (11,813,901 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from transactions in investors’ beneficial interests |
(55,264,524 | ) | (64,305,412 | ) | (17,819,292 | ) | (17,829,422 | ) | (8,962,450 | ) | (4,272,052 | ) | ||||||||||||
| Net increase (decrease) in net assets |
68,846,916 | (67,080,385 | ) | (6,770,264 | ) | (18,384,647 | ) | 2,814,089 | (8,771,631 | ) | ||||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
801,853,692 | 868,934,077 | 107,744,667 | 126,129,314 | 67,821,438 | 76,593,069 | ||||||||||||||||||
| End of year |
$ | 870,700,608 | $ | 801,853,692 | $ | 100,974,403 | $ | 107,744,667 | $ | 70,635,527 | $ | 67,821,438 | ||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the years ended:
| Small Core | Small Growth | International Equity | ||||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||||||||||||
| From operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
$ | 2,465,007 | $ | 2,973,127 | $ | (189,610 | ) | $ | 10,467 | $ | 8,357,558 | $ | 10,541,686 | |||||||||||
| Net realized gain (loss) |
4,381,753 | 2,718,783 | 9,312,204 | 3,668,577 | (17,149,485 | ) | (11,755,775 | ) | ||||||||||||||||
| Net change in unrealized appreciation (depreciation) |
42,117,063 | (31,373,612 | ) | 3,260,756 | (1,411,721 | ) | 16,857,656 | (5,916,289 | ) | |||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
48,963,823 | (25,681,702 | ) | 12,383,350 | 2,267,323 | 8,065,729 | (7,130,378 | ) | ||||||||||||||||
| From transactions in investors’ beneficial interests: |
||||||||||||||||||||||||
| Contributions |
13,128,423 | 25,637,900 | 4,771,995 | 10,940,976 | 26,586,505 | 58,103,998 | ||||||||||||||||||
| Withdrawals |
(40,080,379 | ) | (74,628,736 | ) | (13,217,360 | ) | (12,727,271 | ) | (75,623,272 | ) | (145,878,162 | ) | ||||||||||||
| Net increase (decrease) in net assets resulting from transactions in investors’ beneficial interests |
(26,951,956 | ) | (48,990,836 | ) | (8,445,365 | ) | (1,786,295 | ) | (49,036,767 | ) | (87,774,164 | ) | ||||||||||||
| Net increase (decrease) in net assets |
22,011,867 | (74,672,538 | ) | 3,937,985 | 481,028 | (40,971,038 | ) | (94,904,542 | ) | |||||||||||||||
| Net assets: |
||||||||||||||||||||||||
| Beginning of year |
231,618,767 | 306,291,305 | 66,942,155 | 66,461,127 | 404,275,647 | 499,180,189 | ||||||||||||||||||
| End of year |
$ | 253,630,634 | $ | 231,618,767 | $ | 70,880,140 | $ | 66,942,155 | $ | 363,304,609 | $ | 404,275,647 | ||||||||||||
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
For the years ended:
| Government Money Market (formerly, Money Market) | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
0.19% | 0.01% | (0.05)% | (0.07)% | (0.11)% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ 939,167 | $ 873,057 | $ 862,368 | $ 986,862 | $ 948,358 | |||||||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.28% | 0.28% | 0.28% | 0.29% | 0.28% | |||||||||||||||
| Including waiver and/or reimbursement |
0.27% | (B)(C) | 0.28% | 0.28% | 0.29% | 0.28% | ||||||||||||||
| Net investment income (loss) to average net assets |
0.18% | (B) | 0.01% | (0.05)% | (0.07)% | (0.11)% | ||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.01% higher and 0.01% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| High Quality Bond | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
1.51% | 0.69% | 0.81% | 0.41% | 2.95% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 328,900 | $ | 350,510 | $ | 371,154 | $ | 399,858 | $ | 386,046 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.38% | 0.38% | 0.38% | 0.39% | 0.38% | |||||||||||||||
| Including waiver and/or reimbursement |
0.37% | (B)(C) | 0.38% | 0.38% | 0.39% | 0.38% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.62% | (B) | 1.29% | 1.47% | 1.81% | 2.10% | ||||||||||||||
| Portfolio turnover rate |
92% | 70% | 92% | 77% | 68% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.01% higher and 0.01% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| Inflation-Protected Securities | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
4.03% | (1.94)% | 3.00% | (8.26)% | 7.06% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 238,515 | $ | 268,105 | $ | 282,926 | $ | 274,788 | $ | 341,136 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.44% | 0.43% | 0.42% | 0.41% | 0.40% | |||||||||||||||
| Including waiver and/or reimbursement |
0.39% | (B)(C) | 0.40% | 0.40% | 0.40% | 0.40% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.35% | (B) | 0.21% | 1.17% | 0.48% | 1.43% | ||||||||||||||
| Portfolio turnover rate |
52% | 54% | 81% | 99% | 103% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.02% higher and 0.02% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
FINANCIAL HIGHLIGHTS (continued)
For the years ended:
| Core Bond | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
3.46% | 0.46% | 6.32% | (0.96)% | 8.28% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 1,144,864 | $ | 1,282,948 | $ | 1,354,476 | $ | 1,336,211 | $ | 1,470,033 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.37% | 0.37% | 0.38% | 0.39% | 0.39% | |||||||||||||||
| Including waiver and/or reimbursement |
0.35% | (B)(C) | 0.37% | 0.38% | 0.39% | 0.39% | ||||||||||||||
| Net investment income (loss) to average net assets |
2.36% | (B) | 2.27% | 2.58% | 2.64% | 3.03% | ||||||||||||||
| Portfolio turnover rate |
50% | 46% | 184% | 200% | 297% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.02% higher and 0.02% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| High Yield Bond | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
15.44% | (4.13)% | 3.16% | 7.48% | 15.14% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 831,383 | $ | 748,987 | $ | 876,775 | $ | 856,906 | $ | 819,993 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.57% | 0.58% | 0.58% | (B) | 0.59% | (B) | 0.59% | (B) | ||||||||||||
| Including waiver and/or reimbursement |
0.55% | (C)(D) | 0.58% | 0.58% | (B) | 0.59% | (B) | 0.59% | (B) | |||||||||||
| Net investment income (loss) to average net assets |
6.08% | (C) | 5.72% | 5.87% | (E) | 6.37% | (E) | 7.23% | (E) | |||||||||||
| Portfolio turnover rate |
38% | 44% | 97% | (F) | 51% | (F) | 102% | (F) | ||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Does not include expenses of the investment companies and/or ETFs in which the Portfolio invests. |
| (C) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.02% higher and 0.02% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (D) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| (E) | Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the investment companies and/or ETFs in which the Portfolio invests. |
| (F) | Does not include portfolio activity of the investment companies and/or ETFs in which the Portfolio invests. |
| Balanced | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
8.29% | 0.57% | 10.99% | 18.33% | 13.47% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 149,958 | $ | 151,593 | $ | 147,564 | $ | 123,270 | $ | 109,602 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.53% | 0.54% | 0.58% | 0.63% | 0.61% | |||||||||||||||
| Including waiver and/or reimbursement |
0.47% | (B)(C) | 0.50% | 0.50% | 0.50% | 0.50% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.76% | (B) | 1.60% | 1.69% | 1.44% | 1.82% | ||||||||||||||
| Portfolio turnover rate |
37% | 50% | 92% | 123% | 150% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.05% higher and 0.05% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
The Notes to Financial Statements are an integral part of this report.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
FINANCIAL HIGHLIGHTS (continued)
For the years ended:
| Large Value | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
9.43% | (0.36)% | 9.82% | 38.08% | 17.39% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 793,710 | $ | 826,422 | $ | 920,253 | $ | 924,277 | $ | 785,039 | ||||||||||
| Expenses to average net assets (B) |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.47% | 0.47% | 0.47% | 0.48% | 0.48% | |||||||||||||||
| Including waiver and/or reimbursement |
0.46% | (C)(D) | 0.47% | 0.47% | 0.48% | 0.48% | ||||||||||||||
| Net investment income (loss) to average net assets (E) |
2.08% | (C) | 1.48% | 1.24% | 1.69% | 2.08% | (F) | |||||||||||||
| Portfolio turnover rate (G) |
48% | 65% | 69% | 99% | 48% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Does not include expenses of the investment companies and/or ETFs in which the Portfolio invests. |
| (C) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.01% higher and 0.01% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (D) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| (E) | Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the investment companies and/or ETFs in which the Portfolio invests. |
| (F) | Includes litigation proceeds received during the year that represented 0.15%. |
| (G) | Does not include portfolio activity of the investment companies and/or ETFs in which the Portfolio invests. |
| Large Core | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
8.13% | (0.78)% | 15.16% | 37.28% | 17.30% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 287,551 | $ | 323,369 | $ | 347,382 | $ | 309,735 | $ | 244,984 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.64% | 0.63% | 0.63% | 0.64% | 0.64% | |||||||||||||||
| Including waiver and/or reimbursement |
0.62% | (B)(C) | 0.63% | 0.63% | 0.64% | 0.64% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.92% | (B) | 1.27% | 1.02% | 1.41% | 1.68% | ||||||||||||||
| Portfolio turnover rate |
47% | 64% | 70% | 116% | 54% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.01% higher and 0.01% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| Large Growth | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
1.06% | 9.17% | 10.75% | 35.32% | 14.91% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 823,068 | $ | 925,458 | $ | 926,582 | $ | 942,018 | $ | 825,014 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.65% | 0.64% | (B) | 0.65% | (B) | 0.66% | (B) | 0.66% | (B) | |||||||||||
| Including waiver and/or reimbursement |
0.63% | (C)(D) | 0.64% | (B) | 0.65% | (B) | 0.65% | (B) | 0.65% | (B) | ||||||||||
| Net investment income (loss) to average net assets |
0.41% | (C) | 0.33% | (E) | 0.42% | (E) | 0.57% | (E) | 0.75% | (E) | ||||||||||
| Portfolio turnover rate |
36% | 33% | (F) | 73% | (F) | 49% | (F) | 53% | (F) | |||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Does not include expenses of the investment companies and/or ETFs in which the Portfolio invests. |
| (C) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.02% higher and 0.02% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (D) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| (E) | Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the investment companies and/or ETFs in which the Portfolio invests. |
| (F) | Does not include portfolio activity of the investment companies and/or ETFs in which the Portfolio invests. |
The Notes to Financial Statements are an integral part of this report.
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FINANCIAL HIGHLIGHTS (continued)
For the years ended:
| Mid Value | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
15.96% | (0.46)% | 12.97% | 32.99% | 19.50% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 870,701 | $ | 801,854 | $ | 868,934 | $ | 975,081 | $ | 777,964 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.69% | 0.69% | 0.70% | 0.70% | 0.70% | |||||||||||||||
| Including waiver and/or reimbursement |
0.68% | (B)(C) | 0.69% | 0.70% | 0.70% | 0.70% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.10% | (B) | 1.28% | 1.32% | 0.93% | 1.36% | ||||||||||||||
| Portfolio turnover rate |
50% | 37% | 92% | 53% | 71% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.01% higher and 0.01% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| Mid Growth | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
12.32% | (1.37)% | 8.04% | 30.35% | 13.93% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 100,974 | $ | 107,745 | $ | 126,129 | $ | 150,143 | $ | 164,933 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.80% | 0.76% | 0.76% | 0.77% | 0.76% | |||||||||||||||
| Including waiver and/or reimbursement |
0.75% | (B)(C) | 0.75% | 0.75% | 0.75% | 0.75% | ||||||||||||||
| Net investment income (loss) to average net assets |
0.11% | (B) | (0.12)% | 0.60% | (0.00)% | (D) | 0.10% | |||||||||||||
| Portfolio turnover rate |
79% | 70% | 60% | 234% | 178% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.03% higher and 0.03% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| (D) | Rounds to less than 0.01% or (0.01)%. |
| Small Value | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
19.48% | (6.12)% | 7.38% | 34.10% | 16.11% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 70,636 | $ | 67,821 | $ | 76,593 | $ | 82,298 | $ | 70,183 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.93% | 0.90% | 0.88% | 0.88% | 0.88% | |||||||||||||||
| Including waiver and/or reimbursement |
0.86% | (B)(C) | 0.85% | 0.85% | 0.85% | 0.85% | ||||||||||||||
| Net investment income (loss) to average net assets |
0.92% | (B) | 0.97% | 0.99% | 0.57% | 1.41% | ||||||||||||||
| Portfolio turnover rate |
89% | 133% | 18% | 16% | 15% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.03% higher and 0.03% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
The Notes to Financial Statements are an integral part of this report.
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FINANCIAL HIGHLIGHTS (continued)
For the years ended:
| Small Core | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
23.33% | (9.47)% | 4.21% | 33.62% | 15.04% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 253,631 | $ | 231,619 | $ | 306,291 | $ | 334,182 | $ | 296,936 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.84% | 0.84% | 0.83% | 0.84% | 0.84% | |||||||||||||||
| Including waiver and/or reimbursement |
0.81% | (B)(C) | 0.84% | 0.83% | 0.84% | 0.84% | ||||||||||||||
| Net investment income (loss) to average net assets |
1.07% | (B) | 1.08% | 1.05% | 0.74% | 1.07% | ||||||||||||||
| Portfolio turnover rate |
122% | 132% | 148% | 195% | 59% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.04% higher and 0.04% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| Small Growth | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
20.67% | 3.55% | 3.13% | 37.97% | 1.30% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 70,880 | $ | 66,942 | $ | 66,461 | $ | 73,064 | $ | 58,300 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.95% | 0.91% | 0.91% | 0.93% | 0.94% | |||||||||||||||
| Including waiver and/or reimbursement |
0.92% | (B)(C) | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||
| Net investment income (loss) to average net assets |
(0.29)% | (B) | 0.01% | (0.37)% | (0.46)% | (0.20)% | ||||||||||||||
| Portfolio turnover rate |
75% | 53% | 78% | 72% | 209% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.02% higher and 0.02% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
| International Equity | ||||||||||||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||
| Total return (A) |
2.30% | (2.47)% | (7.74)% | 13.92% | 17.35% | |||||||||||||||
| Ratio and supplemental data: |
||||||||||||||||||||
| Net assets end of year (000’s) |
$ | 363,305 | $ | 404,276 | $ | 499,180 | $ | 612,105 | $ | 614,432 | ||||||||||
| Expenses to average net assets |
||||||||||||||||||||
| Excluding waiver and/or reimbursement |
0.85% | 0.82% | 0.83% | 0.85% | 0.82% | |||||||||||||||
| Including waiver and/or reimbursement |
0.82% | (B)(C) | 0.82% | 0.83% | 0.85% | 0.82% | ||||||||||||||
| Net investment income (loss) to average net assets |
2.25% | (B) | 2.32% | 2.80% | 1.31% | 1.65% | ||||||||||||||
| Portfolio turnover rate |
23% | 23% | 28% | 116% | 23% | |||||||||||||||
| (A) | Total return reflects all Portfolio expenses. |
| (B) | Please reference the Custody Out-of-Pocket Expense section of the Notes to Financial Statements for more information regarding the reimbursement of custody fees. The Expenses to average net assets including waiver and/or reimbursement and recapture ratio, and Net investment income (loss) to average net assets ratio would have been 0.03% higher and 0.03% lower, respectively, had the custodian not reimbursed the Portfolio. |
| (C) | Includes reorganization expenses incurred outside the Portfolio’s operating expense limit. Please reference the Organization section of the Notes to Financial Statements for more information regarding the reorganization. |
The Notes to Financial Statements are an integral part of this report.
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At December 31, 2016
1. ORGANIZATION
Transamerica Partners Portfolios (the “Series Portfolio”) is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and was organized as a series trust under the laws of the State of New York. The Series Portfolio applies investment company accounting and reporting guidance. The Series Portfolio is composed of fifteen different series that are, in effect, separate investment funds. The portfolios (each, a “Portfolio” and collectively, the “Portfolios”) are listed below. Each Portfolio issues shares of beneficial interest only in private placement transactions that do not involve a public offering within the meaning of Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”). Only “accredited investors”, as defined in Regulation D under the Securities Act, may invest in the Portfolios. Accredited investors include investment companies, insurance company separate accounts, common or commingled trust funds, or other similar organizations or entities.
| Portfolio |
| Transamerica Partners Government Money Market Portfolio (“Government Money Market”) (A) |
| Transamerica Partners High Quality Bond Portfolio (“High Quality Bond”) |
| Transamerica Partners Inflation-Protected Securities Portfolio (“Inflation-Protected Securities”) |
| Transamerica Partners Core Bond Portfolio (“Core Bond”) |
| Transamerica Partners High Yield Bond Portfolio (“High Yield Bond”) |
| Transamerica Partners Balanced Portfolio (“Balanced”) |
| Transamerica Partners Large Value Portfolio (“Large Value”) |
| Transamerica Partners Large Core Portfolio (“Large Core”) |
| Transamerica Partners Large Growth Portfolio (“Large Growth”) |
| Transamerica Partners Mid Value Portfolio (“Mid Value”) |
| Transamerica Partners Mid Growth Portfolio (“Mid Growth”) |
| Transamerica Partners Small Value Portfolio (“Small Value”) |
| Transamerica Partners Small Core Portfolio (“Small Core”) |
| Transamerica Partners Small Growth Portfolio (“Small Growth”) |
| Transamerica Partners International Equity Portfolio (“International Equity”) |
| (A) | Formerly, Transamerica Partners Money Market Portfolio. The Portfolio transitioned from a “prime” money market portfolio to a “government” money market portfolio on May 1, 2016. |
The Portfolios’ Board of Trustees (the “Board”) approved the reorganization of each Portfolio (the “Target Portfolios”) into a new and existing series of Transamerica Funds (the “Destination Funds”).
The proposed reorganizations into existing Destination Funds are as follows:
| Target Portfolio | Destination Fund | |
| Government Money Market |
Transamerica Government Money Market | |
| Core Bond |
Transamerica Intermediate Bond | |
| High Yield Bond |
Transamerica High Yield Bond | |
| Mid Value |
Transamerica Mid Cap Value Opportunities | |
| Mid Growth |
Transamerica Mid Cap Growth | |
| Small Value |
Transamerica Small Cap Value | |
| Small Core |
Transamerica Small Cap Core | |
| Small Growth |
Transamerica Small Cap Growth | |
| International Equity |
Transamerica International Equity |
The proposed reorganizations into newly organized Destination Funds are as follows:
| Target Portfolio | Destination Fund | |
| High Quality Bond |
Transamerica High Quality Bond | |
| Inflation-Protected Securities |
Transamerica Inflation-Protected Securities | |
| Balanced |
Transamerica Balanced II | |
| Large Value |
Transamerica Large Value Opportunities | |
| Large Core |
Transamerica Large Core | |
| Large Growth |
Transamerica Large Growth |
Each proposed reorganization is subject to Target Portfolio shareholder approval and other closing conditions. If the reorganizations are consummated, Target Portfolio shareholders will receive newly-issued Class I3 shares of the corresponding Destination Fund.
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
1. ORGANIZATION (continued)
Transamerica Asset Management, Inc. (“TAM”) serves as investment manager for the Portfolios. TAM provides continuous and regular investment management services to the Portfolios.
TAM currently acts as a “manager of managers” and hires sub-advisers to furnish day-to-day investment advice and recommendations. TAM may, in the future, determine to provide the day-to-day management of a Portfolio without the use of a sub-adviser. When acting as a manager of managers, TAM provides investment management services that include, without limitation, the design and development of the Portfolios and their investment strategies and the ongoing review and evaluation of those investment strategies including recommending changes in strategy where it believes appropriate or advisable; the selection of one or more sub-advisers for the Portfolios employing a combination of quantitative and qualitative screens, research, analysis and due diligence; oversight and monitoring of sub-advisers and recommending changes to sub-advisers where it believes appropriate or advisable; recommending Portfolio combinations and liquidations where it believes appropriate or advisable; regular supervision of the Portfolios’ investments; regular review and evaluation of sub-adviser performance; daily monitoring of the sub-advisers’ buying and selling of securities for the Portfolios; regular review of holdings; ongoing trade oversight and analysis; regular monitoring to ensure adherence to investment process; risk management oversight and analysis; design, development, implementation and regular monitoring of the valuation process; design, development, implementation and regular monitoring of the compliance process; review of proxies voted by sub-advisers; oversight of preparation, and review, of materials for meetings of the Board, participation in these meetings and preparation of regular communications with the Board; oversight of preparation, and review, of prospectuses, shareholder reports and other disclosure materials and regulatory filings for the Portfolios; oversight of other service providers to the Portfolios, such as the custodian, the transfer agent, the Portfolios’ independent accounting firm and legal counsel; supervision of the performance of recordkeeping and shareholder relations functions for the Portfolios; and ongoing cash management services. TAM uses a variety of quantitative and qualitative tools to carry out its investment management services. TAM’s investment management services include the provision of supervisory and administrative services to the Portfolios. TAM, not the Portfolios, is responsible for paying the sub-advisers for their services, and sub-advisory fees are TAM’s expense.
2. SIGNIFICANT ACCOUNTING POLICIES
In preparing the Portfolios’ financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America, estimates or assumptions (which could differ from actual results) may be used that affect reported amounts and disclosures. The following is a summary of significant accounting policies followed by the Portfolios.
Foreign currency denominated investments: The accounting records of the Portfolios are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the closing exchange rate each day. The cost of foreign securities purchased and any realized gains or losses are translated at the prevailing exchange rates in effect on the date of the respective transaction. Each Portfolio combines fluctuations from currency exchange rates and fluctuations in value when computing net realized and unrealized gains or losses from investments.
Net foreign currency gains and losses resulting from changes in exchange rates include, foreign currency fluctuations between trade date and settlement date of investment security transactions, gains and losses on forward foreign currency contracts, and the difference between the receivable amounts of interest and dividends recorded in the accounting records in U.S. dollars and the amounts actually received.
Foreign currency denominated assets may involve risks not typically associated with domestic transactions. These risks include revaluation of currencies, adverse fluctuations in foreign currency values, and possible adverse political, social, and economic developments, including those particular to a specific industry, country or region.
Security transactions and investment income: Security transactions are recorded on the trade date. Security gains and losses are calculated on the first-in, first-out basis. Dividend income, if any, is recorded on the ex-dividend date or, in the case of foreign securities, as soon as the Portfolios are informed of the ex-dividend dates, net of foreign taxes. Interest income, including accretion of discounts and amortization of premiums, is recorded on the accrual basis commencing on the settlement date.
Foreign taxes: The Portfolios may be subjected to taxes imposed by the countries in which they invest, with respect to their investments in issuers existing or operating in such countries. The Portfolios may also be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Portfolios accrue such taxes and recoveries as applicable when the related income or capital gains are earned or unrealized, and based upon the current interpretation of tax rules and regulations that exist in the markets in which the Portfolios invest. Some countries require governmental approval for the repatriation of investment income, capital, or the proceeds of sales earned by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions of foreign capital remittances abroad.
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash overdraft: Throughout the year, the Portfolios may have cash overdraft balances. A fee is incurred on these overdrafts, calculated by multiplying the overdraft by a rate based on the federal funds rate.
Payables, if any, are reflected as Due to custodian within the Statements of Assets and Liabilities. Expenses, if any, from U.S. cash overdrafts are reflected in Custody fees within the Statements of Operations. Expenses, if any, from foreign cash overdrafts are reflected in Other expenses within the Statements of Operations.
Commission recapture: The sub-adviser, to the extent consistent with the best execution and usual commission rate policies and practices, may elect to place security transactions of the Portfolios with broker/dealers with which other funds or portfolios advised by TAM have established a Commission Recapture Program. A Commission Recapture Program is any arrangement under which a broker/dealer applies a portion of the commissions received by such broker/dealer on the security transactions to the Portfolios. In no event will commissions paid by the Portfolios be used to pay expenses that would otherwise be borne by any other funds or portfolios advised by TAM, or by any other party.
Commissions recaptured are included in Net realized gain (loss) within the Statements of Operations. For the year ended December 31, 2016, commissions recaptured are listed in the subsequent table. Portfolios not listed do not have any commissions recaptured during the year ended December 31, 2016.
| Portfolio | Commissions Recaptured |
|||
| Large Growth |
$ | 20,287 | ||
| Mid Value |
36,984 | |||
| Small Growth |
6,048 | |||
| International Equity |
10,164 | |||
Indemnification: In the normal course of business, the Portfolios enter into contracts that contain a variety of representations that provide general indemnifications. The Portfolios’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Portfolios and/or their affiliates that have not yet occurred. However, based on experience, the Portfolios expect the risk of loss to be remote.
3. SECURITY VALUATION
All investments in securities are recorded at their estimated fair value. The Portfolios value their investments at the official close of the New York Stock Exchange (“NYSE”) each day the NYSE is open for business.
The Portfolios utilize various methods to measure the fair value of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The three levels (“Levels”) of inputs of the fair value hierarchy are defined as follows:
Level 1—Unadjusted quoted prices in active markets for identical securities.
Level 2—Inputs, other than quoted prices included in Level 1, which are observable, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
Level 3—Unobservable inputs, which may include TAM’s internal valuation committee’s (the “Valuation Committee”) own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the sub-adviser, issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy that is assigned to the fair value measurement of a security is determined based on the lowest Level input that is significant to the fair value measurement in its entirety. Certain investments that are measured at fair value using Net Asset Value (“NAV”) per share, or its equivalent, practical expedient have not been classified in the fair value Levels. The hierarchy classification of inputs used to value the Portfolios’ investments, at December 31, 2016, is disclosed within the Security Valuation section of each Portfolio’s Schedule of Investments.
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
3. SECURITY VALUATION (continued)
Under supervision and approval of the Board, TAM provides day-to-day valuation functions. TAM formed the Valuation Committee to monitor and implement the fair valuation policies and procedures as approved by the Board. These policies and procedures are reviewed at least annually by the Board. The Valuation Committee, among other tasks, monitors for when market quotations are not readily available or are unreliable and determines in good faith the fair value of the portfolio investments. For instances in which daily market quotes are not readily available, securities may be valued, pursuant to procedures adopted by the Board, with reference to other instruments or indices. Depending on the relative significance of valuation inputs, these instruments may be classified in either Level 2 or Level 3 of the fair value hierarchy.
The Valuation Committee may employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the security to determine the fair value of the security. An income-based valuation approach may also be used in which the anticipated future cash flows of the security are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the securities. When the Portfolios use fair value methods that rely on significant unobservable inputs to determine a security’s value, the Valuation Committee will choose the method that is believed to accurately reflect fair value. These securities are categorized in Level 3 of the fair value hierarchy. The Valuation Committee reviews fair value measurements on a regular and ad hoc basis and may, as deemed appropriate, update the security valuations as well as the fair valuation guidelines. The Board reviews and considers Valuation Committee determinations at its regularly scheduled meetings.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, but not limited to, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is generally greatest for instruments categorized in Level 3. Due to the inherent uncertainty of valuation, the Valuation Committee’s determination of values may differ significantly from values that would have been realized had a ready market for investments existed, and the differences could be material. The Valuation Committee employs various methods for calibrating these valuation approaches, including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing, and reviews of any market related activity.
Fair value measurements: Descriptions of the valuation techniques applied to the Portfolios’ significant categories of assets and liabilities measured at fair value on a recurring basis are as follows:
Equity securities: Securities are stated at the last reported sales price or closing price on the day of valuation taken from the primary exchange where the security is principally traded. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Equities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or Level 3 if inputs are unobservable.
Exchange-traded funds (“ETF”): ETFs are stated at the last reported sale price or closing price on the day of valuation taken from the primary exchange where the ETF is principally traded. ETFs are generally categorized in Level 1 of the fair value hierarchy.
Foreign equity securities: Securities in which the primary trading market closes at the same time or after the NYSE, are valued based on quotations from the primary market in which they are traded and are categorized in Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, ETF and the movement of the certain indices of securities based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.
Securities lending collateral: Securities lending collateral is invested in a money market fund which is valued at the NAV of the underlying securities and no valuation adjustments are applied. Securities lending collateral is categorized in Level 1 of the fair value hierarchy.
Asset-backed securities: The fair value of asset-backed securities is estimated based on models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield, and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. To the extent the inputs are observable and timely, the values would generally be categorized in Level 2 of the fair value hierarchy; otherwise they would be categorized in Level 3.
Corporate debt securities: The fair value of corporate debt securities is estimated using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
3. SECURITY VALUATION (continued)
instruments. While most corporate debt securities are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3.
Foreign government securities: Foreign government securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued by principally using dealer quotations. Foreign government securities generally are categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Loan assignments: Loan assignments are normally valued using an income approach, which projects future cash flows and converts those future cash flows to a present value using a discount rate. The resulting present value reflects the likely fair value of the loan. To the extent the inputs are observable and timely, the values would generally be categorized in Level 2 of the fair value hierarchy; otherwise are categorized in Level 3.
Mortgage-backed securities: The fair value of mortgage-backed securities is estimated based on models that consider issuer type, coupon, cash flows, mortgage prepayment projection tables and adjustable rate mortgage evaluations that incorporate index data, periodic life caps and the next coupon reset date. To the extent the inputs are observable and timely, the values would generally be categorized in Level 2 of the fair value hierarchy; otherwise they are categorized in Level 3.
Municipal government obligations and variable rate notes: The fair value of municipal government obligations and variable rate notes is estimated based on models that consider, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the liquidity of the bond, state of issuance, benchmark yield curves, and bond or note insurance. To the extent the inputs are observable and timely, the values would generally be categorized in Level 2 of the fair value hierarchy; otherwise they are categorized in Level 3.
Repurchase agreements: Repurchase agreements are valued at cost, which approximates fair value. To the extent the inputs are observable and timely, the values are generally categorized in Level 2 of the fair value hierarchy.
Short-term notes: The Portfolios, with the exception of Government Money Market, normally value short-term government and U.S. government agency securities using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers and reference data. Certain securities are valued by principally using dealer quotations. Short-term government and U.S. government agency securities generally are categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Government Money Market values all security positions using amortized cost, which approximates fair value. To the extent the inputs are observable and timely, the values are generally categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
U.S. government obligations: U.S. government obligations are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued by principally using dealer quotations. U.S. government obligations generally are categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
U.S. government agency obligations: U.S. government agency obligations are comprised of two main categories consisting of agency issued debt and mortgage pass-throughs. Generally, agency issued debt securities are valued in a manner similar to U.S. government obligations. Mortgage pass-throughs include to be announced (“TBA”) securities and mortgage pass-through certificates. Generally, TBA securities and mortgage pass-throughs are valued using dealer quotations. Depending on market activity levels and whether quotations or other observable data are used, these securities are typically categorized in Level 2 of the fair value hierarchy; otherwise they would be categorized in Level 3.
Warrants: Warrants may be priced intrinsically using a model that incorporates the subscription or strike price, the daily market price for the underlying security, and a subscription ratio. If the inputs are unavailable, or if the subscription or strike price is higher than the market price, then the warrants are priced at zero. Warrants are generally categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Derivative instruments: Centrally cleared or listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) derivative contracts include forward, swap, swaption, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many
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At December 31, 2016
3. SECURITY VALUATION (continued)
pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case of interest rate swap and option contracts. The majority of OTC derivative products valued by the Portfolios using pricing models fall into this category and are categorized within Level 2 of the fair value hierarchy or Level 3 if inputs are unobservable.
4. SECURITIES AND OTHER INVESTMENTS
Loan participations and assignments: The Portfolios may invest in direct debt instruments which are interests in amounts owed to lenders or lending syndicates by corporate, governmental, or other borrowers, either in the form of participations at the time the loan is originated (“Participations”) or buying an interest in the loan in the secondary market from a financial institution or institutional investor (“Assignments”). Participations and Assignments in commercial loans may be secured or unsecured. These investments may include standby financing commitments, including revolving credit facilities that obligate the Portfolios to supply additional cash to the borrowers on demand. Loan Participations and Assignments involve risks of insolvency of the lending banks or other financial intermediaries. As such, the Portfolios assume the credit risks associated with the corporate borrowers and may assume the credit risks associated with the interposed banks or other financial intermediaries.
Each Portfolio, based on its ability to invest in Loan Participations and Assignments, may be contractually obligated to receive approval from the agent banks and/or borrowers prior to the sale of these investments. The Portfolios that participate in such syndications, or that can buy a portion of the loans, become part lenders. Loans are often administered by agent banks acting as agents for all holders.
The agent banks administer the terms of the loans, as specified in the loan agreements. In addition, the agent banks are normally responsible for the collection of principal and interest payments from the corporate borrowers and the apportionment of these payments to the credit of all institutions that are parties to the loan agreements. Unless the Portfolios have direct recourse against the corporate borrowers under the terms of the loans or other indebtedness, the Portfolios may have to rely on the agent banks or other financial intermediaries to apply appropriate credit remedies against corporate borrowers.
The Portfolios held no unsecured loan participations at December 31, 2016. Open secured loan participations and assignments at December 31, 2016, if any, are included within the Schedule of Investments.
Payment in-kind (“PIK”) securities: PIKs give the issuer the option of making interest payments in either cash or additional debt securities at each interest payment date. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a “dirty price”) and require a pro-rata adjustment from Net unrealized appreciation (depreciation) on investments to Interest receivable within the Statements of Assets and Liabilities.
PIKs held at December 31, 2016, if any, are identified within the Schedule of Investments.
Real estate investment trusts (“REIT”): REITs are pooled investment vehicles which invest primarily in income producing real estate, or real estate related loans or interests. Dividend income related to a REIT is recorded at management’s estimate of the income and capital gains included in distributions from the REIT investments. Distributions received in excess of the estimated amount are recorded as a reduction of the cost of investments. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after the fiscal year end and may differ from the estimated amounts. There are certain additional risks involved in investing in REITs. These include, but are not limited to, economic conditions, changes in zoning laws, real estate values, property taxes, and interest rates.
REITs held at December 31, 2016, if any, are identified within the Schedule of Investments.
Restricted and illiquid securities: The Portfolios may invest in unregulated restricted securities. Restricted and illiquid securities are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration under the Securities Act of 1933. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult.
Restricted and illiquid securities held at December 31, 2016, if any, are identified within the Schedule of Investments.
To be announced (“TBA”) commitments: TBA commitments are entered into to purchase or sell securities for a fixed price at a future date, typically not to exceed 45 days. TBAs are considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines, or the value of the security sold increases, prior to settlement date, in addition to the risk of decline in the value of the Portfolios’ other assets. Unsettled TBA commitments are valued at the current value of the underlying securities.
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At December 31, 2016
4. SECURITIES AND OTHER INVESTMENTS (continued)
TBA commitments held at December 31, 2016, if any, are identified within the Schedule of Investments. Open balances at December 31, 2016, if any, are included in When-issued, delayed-delivery, and forward commitment purchased or sold within the Statements of Assets and Liabilities.
Treasury inflation-protected securities (“TIPS”): Certain Portfolios may invest in TIPS, which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation/deflation. If the index measuring inflation/deflation rises or falls, the principal value of TIPS will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds and notes. For bonds and notes that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
TIPS held at December 31, 2016, if any, are included within the Schedule of Investments. The adjustments, if any, to principal due to inflation/deflation are reflected as increases/decreases to Interest income within the Statements of Operations, with a corresponding adjustment to Investments, at cost within the Statement of Assets and Liabilities.
When-issued, delayed-delivery, and forward commitment transactions: The Portfolios may purchase or sell securities on a when-issued, delayed-delivery, and forward commitment basis. When-issued and forward commitment transactions are made conditionally because a security, although authorized, has not yet been issued in the market. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Portfolios engage in when-issued and forward commitment transactions to obtain an advantageous price and yield at the time of the transaction. The Portfolios engage in when-issued and forward commitment transactions for the purpose of acquiring securities, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Portfolios may be required to pay more at settlement than the security is worth. In addition, the Portfolios are not entitled to any of the interest earned prior to settlement.
Delayed-delivery transactions involve a commitment by the Portfolios to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery transactions are outstanding, the Portfolios will segregate with their custodian either cash, U.S. government securities, or other liquid assets at least equal to the value or purchase commitments until payment is made. When purchasing a security on a delayed-delivery basis, the Portfolios assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. These transactions also involve a risk to the Portfolios if the other party to the transaction defaults on its obligation to make payment or delivery, and the Portfolios are delayed or prevented from completing the transaction. The Portfolios may dispose of or renegotiate a delayed-delivery transaction after it is entered into, which may result in a realized gain or loss. When the Portfolios sell a security on a delayed-delivery basis, the Portfolios do not participate in future gains and losses on the security.
When-issued, delayed-delivery, and forward commitment transactions held at December 31, 2016, if any, are identified within the Schedule of Investments. Open trades, if any, are reflected as When-issued, delayed-delivery, and forward commitment securities purchased or sold within the Statements of Assets and Liabilities.
5. BORROWINGS AND OTHER FINANCING TRANSACTIONS
The Portfolios may engage in borrowing transactions as a means of raising cash to satisfy redemption requests, for other temporary or emergency purposes or, to the extent permitted by their investment policies, to raise additional cash to be invested in other securities or instruments. When the Portfolios invest borrowing proceeds in other securities, the Portfolios will bear the risk that the market value of the securities in which the proceeds are invested goes down and is insufficient to repay borrowed proceeds. The Portfolios may borrow on a secured or on an unsecured basis. If the Portfolios enter into a secured borrowing arrangement, a portion of the Portfolios’ assets will be used as collateral. The 1940 Act requires the Portfolios to maintain asset coverage of at least 300% of the amount of their borrowings. Asset coverage means the ratio that the value of the Portfolios’ total assets, minus liabilities other than borrowings, bears to the aggregate amount of all borrowings. Although complying with this guideline would have the effect of limiting the amount that the Portfolios may borrow, it does not otherwise mitigate the risks of entering into borrowing transactions.
Securities lending: Securities are lent to qualified financial institutions and brokers. State Street serves as securities lending agent to the Portfolios pursuant to a Securities Lending Agreement. The lending of securities exposes the Portfolios to risks such as, the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the Portfolios may experience delays in recovery of the loaned securities or delays in access to collateral, or the Portfolios may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge cash collateral with a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities loaned. The lending agent has agreed to indemnify the Portfolios in the case of default of any securities borrower.
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At December 31, 2016
5. BORROWINGS AND OTHER FINANCING TRANSACTIONS (continued)
Cash collateral received is invested in the State Street Navigator Securities Lending Trust-Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The TAM family of mutual funds is a significant shareholder of the Navigator as of December 31, 2016. No individual fund has a significant holding in the Navigator. By lending securities, the Portfolios seek to increase their net investment income through the receipt of interest and fees. Such income is reflected separately within the Statements of Operations. Net income from securities lending within the Statements of Operations is net of fees and rebates earned by the lending agent for its services.
The value of loaned securities and related collateral outstanding at December 31, 2016, if any, are shown on a gross basis within the Schedule of Investments and Statements of Assets and Liabilities.
Repurchase agreements: In a repurchase agreement, the Portfolios purchase a security and simultaneously commit to resell that security to the seller at an agreed-upon price on an agreed-upon date. Securities purchased subject to a repurchase agreement are held at the Portfolios’ custodian, or designated sub-custodian related to tri-party repurchase agreements, and, pursuant to the terms of the repurchase agreement, must be collateralized by securities with an aggregate market value greater than or equal to 100% of the resale price. The Portfolios will bear the risk of value fluctuations until the securities can be sold and may encounter delays and incur costs in liquidating the securities. In the event of bankruptcy or insolvency of the seller, delays and costs may be incurred.
Repurchase agreements are subject to netting agreements, which are agreements between the Portfolios and their counterparties that provide for the net settlement of all transactions and collateral with the Portfolios, through a single payment, in the event of default or termination. Amounts presented within the Schedule of Investments, and as part of Repurchase agreements, at value within the Statements of Assets and Liabilities are shown on a gross basis. The value of the related collateral for each repurchase agreement, as reflected within the Schedule of Investments, exceeds the value of each repurchase agreement at December 31, 2016.
Repurchase agreements at December 31, 2016, if any, are included within the Schedule of Investments and Statements of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of December 31, 2016.
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight and Continuous |
Less Than 30 Days |
Between 30 & 90 Days |
Greater Than 90 Days |
Total | ||||||||||||||||
| Inflation-Protected Securities |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| U.S. Government Obligations |
$ | 3,710,264 | $ | — | $ | — | $ | — | $ | 3,710,264 | ||||||||||
| Total Borrowings |
$ | 3,710,264 | $ | — | $ | — | $ | — | $ | 3,710,264 | ||||||||||
| Core Bond |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Corporate Debt Securities |
$ | 8,789,054 | $ | — | $ | — | $ | — | $ | 8,789,054 | ||||||||||
| Foreign Government Obligations |
4,663,360 | — | — | — | 4,663,360 | |||||||||||||||
| U.S. Government Obligations |
9,263,823 | — | — | — | 9,263,823 | |||||||||||||||
| Preferred Stocks |
2,628 | — | — | — | 2,628 | |||||||||||||||
| Total Securities Lending Transactions |
$ | 22,718,865 | $ | — | $ | — | $ | — | $ | 22,718,865 | ||||||||||
| Total Borrowings |
$ | 22,718,865 | $ | — | $ | — | $ | — | $ | 22,718,865 | ||||||||||
| Balanced |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 181,561 | $ | — | $ | — | $ | — | $ | 181,561 | ||||||||||
| Corporate Debt Securities |
195,614 | — | — | — | 195,614 | |||||||||||||||
| U.S. Government Obligations |
92,370 | — | — | — | 92,370 | |||||||||||||||
| Total Securities Lending Transactions |
$ | 469,545 | $ | — | $ | — | $ | — | $ | 469,545 | ||||||||||
| Total Borrowings |
$ | 469,545 | $ | — | $ | — | $ | — | $ | 469,545 | ||||||||||
| Large Value |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 26,484,752 | $ | — | $ | — | $ | — | $ | 26,484,752 | ||||||||||
| Total Borrowings |
$ | 26,484,752 | $ | — | $ | — | $ | — | $ | 26,484,752 | ||||||||||
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At December 31, 2016
5. BORROWINGS AND OTHER FINANCING TRANSACTIONS (continued)
| Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
| Overnight and Continuous |
Less Than 30 Days |
Between 30 & 90 Days |
Greater Than 90 Days |
Total | ||||||||||||||||
| Large Core |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 7,149,063 | $ | — | $ | — | $ | — | $ | 7,149,063 | ||||||||||
| Total Borrowings |
$ | 7,149,063 | $ | — | $ | — | $ | — | $ | 7,149,063 | ||||||||||
| Large Growth |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 13,873,997 | $ | — | $ | — | $ | — | $ | 13,873,997 | ||||||||||
| Total Borrowings |
$ | 13,873,997 | $ | — | $ | — | $ | — | $ | 13,873,997 | ||||||||||
| Mid Value |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 20,756,987 | $ | — | $ | — | $ | — | $ | 20,756,987 | ||||||||||
| Total Borrowings |
$ | 20,756,987 | $ | — | $ | — | $ | — | $ | 20,756,987 | ||||||||||
| Mid Growth |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 1,861,200 | $ | — | $ | — | $ | — | $ | 1,861,200 | ||||||||||
| Total Borrowings |
$ | 1,861,200 | $ | — | $ | — | $ | — | $ | 1,861,200 | ||||||||||
| Small Value |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 6,273,175 | $ | — | $ | — | $ | — | $ | 6,273,175 | ||||||||||
| Total Borrowings |
$ | 6,273,175 | $ | — | $ | — | $ | — | $ | 6,273,175 | ||||||||||
| Small Core |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 16,227,648 | $ | — | $ | — | $ | — | $ | 16,227,648 | ||||||||||
| Total Borrowings |
$ | 16,227,648 | $ | — | $ | — | $ | — | $ | 16,227,648 | ||||||||||
| Small Growth |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 6,711,735 | $ | — | $ | — | $ | — | $ | 6,711,735 | ||||||||||
| Total Borrowings |
$ | 6,711,735 | $ | — | $ | — | $ | — | $ | 6,711,735 | ||||||||||
| International Equity |
| |||||||||||||||||||
| Securities Lending Transactions |
| |||||||||||||||||||
| Common Stocks |
$ | 18,081,194 | $ | — | $ | — | $ | — | $ | 18,081,194 | ||||||||||
| Total Borrowings |
$ | 18,081,194 | $ | — | $ | — | $ | — | $ | 18,081,194 | ||||||||||
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS
The Portfolios’ investment objectives allow the Portfolios to use various types of derivative contracts, including option contracts, swap agreements, futures contracts, and forward foreign currency contracts. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or OTC.
Market Risk Factors: In pursuit of the Portfolios’ investment objectives, the Portfolios may seek to use derivatives to increase or decrease their exposure to the following market risks:
Interest rate risk: Interest rate risk relates to the fluctuations in the value of fixed income securities due to changes in the prevailing levels of market interest rates.
Foreign exchange rate risk: Foreign exchange rate risk relates to fluctuations in the value of an asset or liability due to changes in the currency exchange rates.
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At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
Equity risk: Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Credit risk: Credit risk relates to the ability of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to the Portfolios.
Commodity risk: Commodity risk relates to the change in value of commodities or commodity indices as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
The Portfolios are also exposed to additional risks from investing in derivatives, such as liquidity and counterparty credit risk. Liquidity risk is the risk that the Portfolios will be unable to sell or close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligations to the Portfolios. Investing in derivatives may also involve greater risks than investing directly in the underlying assets, such as losses in excess of any initial investment and collateral received. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
The Portfolios’ exposure to market risk factors and other associated risks are discussed by derivative type as follows:
Option contracts: The Portfolios are subject to equity risk, interest rate risk, and foreign exchange rate risk in the normal course of pursuing their investment objectives. The Portfolios, with the exception of Government Money Market, may enter into option contracts to manage exposure to various market fluctuations. The Portfolios may purchase or write call and put options on securities and derivative instruments in which each Portfolio owns or may invest. Options are valued at the average of the bid and ask price established each day at the close of the board of trade or exchange on which they are traded. Options are marked-to-market daily to reflect the current value of the option. The primary risks associated with options are an imperfect correlation between the change in value of the securities held and the prices of the option contracts, the possibility of an illiquid market, and an inability of the counterparty to meet the contract terms. Options can be traded through an exchange or through privately negotiated arrangements with a dealer in an OTC transaction. Options traded on an exchange are generally cleared through a clearinghouse such as the Options Clearing Corp.
Options on futures: The Portfolios may purchase or write options on futures. Purchasing or writing options on futures gives the Portfolios the right, but not obligation to buy or sell a position on a futures contract at the specified option exercise price at any time during the period of the option.
Inflation-capped options: The Portfolios may purchase or write inflation-capped options. Purchasing or writing inflation-capped options gives the Portfolios the right, but not the obligation to buy or sell an option which applies a cap to protect the Portfolios from inflation erosion above a certain rate on a given notional exposure. A floor can be used to give downside protection to the investments in inflation-linked products.
Options on foreign currency: The Portfolios may purchase or write foreign currency options. Purchasing or writing options on foreign currency gives the Portfolios the right, but not the obligation to buy or sell the currency and will specify the amount of currency and a rate of exchange that may be exercised by a specified date.
Interest rate swaptions: The Portfolios may purchase or write interest rate swaption agreements which are options to enter into a pre-defined swap agreement by some specific date in the future. The writer of the swaption becomes the counterparty to the swap if the buyer exercises. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer upon exercise.
Purchased options: Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Portfolios pay premiums, which are included within the Statements of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid from options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying instrument to determine the realized gain or loss.
Written options: Writing call options tends to decrease exposure to the underlying instrument. Writing put options tends to increase exposure to the underlying instrument. When the Portfolios write a covered call or put option, the premium received is recorded as a liability within the Statements of Assets and Liabilities and is subsequently marked-to-market to reflect the current market value of the option written. Premiums received from written options which expire unexercised are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying instrument to determine the realized gain or loss. In writing an option, the Portfolios bear the market risk of an unfavorable change in the price of the
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At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
security or currency underlying the written option. Exercise of an option written by the Portfolios could result in the Portfolios selling or buying a security or currency at a price different from the current market value.
As of December 31, 2016, transactions in written options are as follows:
| Call Options | Put Options | |||||||||||||||||||
| Inflation-Protected Securities | Amount of Premiums |
Number of Contracts |
Amount of Premiums |
Number of Contracts |
||||||||||||||||
| Balance at December 31, 2015 |
$ | — | — | $ | — | — | ||||||||||||||
| Options written |
72,649 | 515 | 233,602 | 1,124 | ||||||||||||||||
| Options closed |
(25,838 | ) | (83 | ) | (27,944 | ) | (86 | ) | ||||||||||||
| Options expired |
(46,811 | ) | (432 | ) | (96,249 | ) | (839 | ) | ||||||||||||
| Options exercised |
— | — | — | — | ||||||||||||||||
| Balance at December 31, 2016 |
$ | — | — | $ | 109,409 | 199 | ||||||||||||||
As of December 31, 2016, transactions in written foreign exchange options, inflation-capped options, and swaptions are as follows:
| Call Options | ||||||||||||||||||||||||||||
| Inflation-Protected Securities |
Amount of Premiums |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
|||||||||||||||||||||
| Balance at |
$ | 724,955 | AUD | — | CHF | 2,950,000 | EUR | 3,545,000 | GBP | 1,820,000 | NZD | 4,105,000 | USD | 53,140,000 | ||||||||||||||
| Options written |
1,264,882 | 21,540,000 | — | 14,690,000 | 9,045,000 | 7,860,000 | 106,920,000 | |||||||||||||||||||||
| Options closed |
(633,094 | ) | (14,270,000 | ) | — | (4,895,000 | ) | (5,660,000 | ) | — | (43,280,000 | ) | ||||||||||||||||
| Options expired |
(639,892 | ) | (7,270,000 | ) | (2,950,000 | ) | (12,270,000 | ) | (5,205,000 | ) | (11,965,000 | ) | (46,320,000 | ) | ||||||||||||||
| Options exercised |
(562,832 | ) | — | — | — | — | — | (54,360,000 | ) | |||||||||||||||||||
| Balance at |
$ | 154,019 | AUD | — | CHF | — | EUR | 1,070,000 | GBP | — | NZD | — | USD | 16,100,000 | ||||||||||||||
| Put Options | ||||||||||||||||||||||||||||||||
| Inflation-Protected Securities |
Amount of Premiums |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
Notional Amount |
||||||||||||||||||||||||
| Balance at |
$ | 681,358 | AUD | — | CAD | 21,675,000 | CHF | — | EUR | 5,675,000 | GBP | — | NZD | — | USD | 20,020,000 | ||||||||||||||||
| Options written |
1,376,036 | 7,270,000 | 13,995,000 | 2,560,000 | 20,035,000 | 20,880,000 | 3,930,000 | 67,935,000 | ||||||||||||||||||||||||
| Options closed |
(952,013 | ) | (3,625,000 | ) | (7,225,000 | ) | — | (3,585,000 | ) | (12,290,000 | ) | — | (44,870,000 | ) | ||||||||||||||||||
| Options expired |
(595,873 | ) | (3,645,000 | ) | (28,445,000 | ) | — | (14,205,000 | ) | (8,590,000 | ) | (3,930,000 | ) | (5,375,000 | ) | |||||||||||||||||
| Options exercised |
(247,138 | ) | — | — | — | — | — | — | (21,610,000 | ) | ||||||||||||||||||||||
| Balance at |
$ | 262,370 | AUD | — | CAD | — | CHF | 2,560,000 | EUR | 7,920,000 | GBP | — | NZD | — | USD | 16,100,000 | ||||||||||||||||
Open option contracts at December 31, 2016, if any, are included within the Schedule of Investments.
Swap agreements: Swap agreements are bilaterally negotiated agreements between the Portfolios and a counterparty to exchange or swap investments, cash flows, assets, foreign currencies, or market-linked returns at specified, future intervals. Swap agreements can be executed in a bi-lateral privately negotiated arrangement with a dealer in an OTC transaction or executed on a regular market. Certain swaps regardless of the venue of execution are required to be cleared through a clearinghouse (“centrally cleared swap agreements”). Centrally cleared swap agreements listed or traded on a multilateral platform, are valued at the daily settlement price determined by the corresponding exchange. For centrally cleared credit default swap agreements the clearing exchange requires all members to provide applicable levels across complete term levels. Centrally cleared interest rate swap agreements are valued using a pricing model that references the underlying rates including but not limited to the overnight index swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to calculate the daily settlement price. The Portfolios, with the exception of Government Money Market, may enter into credit default, cross-currency, interest rate, total return, and other forms of swap agreements to manage exposure to credit, currency, interest rate, and commodity risks. In connection with these agreements, securities or cash may be identified as collateral or margin in accordance with the terms of the respective swap agreements to provide assets of value and
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At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
recourse in the event of default or bankruptcy/insolvency. Swap agreements are marked-to-market daily based upon values from third party vendors, which may include a registered exchange, or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss within the Statements of Assets and Liabilities.
For OTC swap agreements, payments received or made at the beginning of the measurement period are reflected as such within the Statements of Assets and Liabilities and represent payments made or received upon entering into the swap agreements to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as Net realized gain (loss) within the Statements of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as Net realized gain (loss) within the Statements of Operations. Net periodic payments received or paid by the Portfolios are included as part of Net realized gain (loss) within the Statements of Operations.
Interest rate swap agreements: The Portfolios are subject to interest rate risk exposure in the normal course of pursuing their investment objectives. Because the Portfolios hold fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk, the Portfolios enter into interest rate swap agreements. Under an interest rate swap agreement, two parties will exchange cash flows based on a notional principal amount. Portfolios with interest rate agreements can elect to pay a fixed rate and receive a floating rate, or receive a fixed rate and pay a floating rate, on a notional principal amount. The risks of interest rate swap agreements include changes in market conditions which will affect the value of the contract or the cash flows, and the possible inability of the counterparty to fulfill its obligations under the agreement. The Portfolios’ maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparties over the contracts’ remaining lives, to the extent that that amount is positive. This risk is mitigated by having a master netting arrangement between the Portfolios and the counterparty, and by the posting of collateral.
Open centrally cleared swap agreements at December 31, 2016, if any, are listed within the Schedule of Investments. Centrally cleared swap agreements are marked-to-market daily and an appropriate payable or receivable for the variation margin is recorded, if applicable, and is shown in Variation margin receivable or payable within the Statements of Assets and Liabilities.
Open OTC swap agreements at December 31, 2016, if any, are listed within the Schedule of Investments. The value, as applicable, is shown in OTC Swap agreements, at value within the Statements of Assets and Liabilities.
Futures contracts: The Portfolios are subject to equity and commodity risk, interest rate risk, and foreign exchange rate risk in the normal course of pursuing their investment objectives. The Portfolios, with the exception of Government Money Market, use futures contracts to gain exposure to, or hedge against, changes in the value of equities and commodities, interest rates, or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Upon entering into such contracts, the Portfolios are required to deposit with the broker, either in cash or in securities, an initial margin in an amount equal to a certain percentage of the contract amount. Subsequent payments (variation margin) are paid or received by the Portfolios, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolios. Upon entering into such contracts, the Portfolios bear the risk of equity and commodity prices, interest rates, or exchange rates moving unexpectedly, in which case, the Portfolios may not achieve the anticipated benefits of the futures contracts and may realize losses. With futures, there is minimal counterparty credit risk to the Portfolios since futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. Futures contracts are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.
Open futures contracts at December 31, 2016, if any, are listed within the Schedule of Investments. Variation margin, if applicable, is shown in Variation margin receivable or payable within the Statements of Assets and Liabilities.
Forward foreign currency contracts: The Portfolios are subject to foreign exchange rate risk exposure in the normal course of pursuing their investment objectives. The Portfolios, with the exception of Government Money Market, may enter into forward foreign currency contracts to hedge against exchange rate risk arising from investments in securities denominated in foreign currencies. Forward foreign currency contracts are marked-to-market daily, with the change in value recorded as an unrealized gain or loss. When the contracts are settled, a realized gain or loss is incurred. Risks may arise from changes in market value of the underlying currencies and from the possible inability of counterparties to meet the terms of their contracts. Forward foreign currency contracts are traded in the OTC inter-bank currency dealer market.
Open forward foreign currency contracts at December 31, 2016, if any, are listed within the Schedule of Investments.
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
The following is a summary of the location and each Portfolio’s fair values of derivative investments disclosed, if any, within the Statements of Assets and Liabilities, categorized by primary market risk exposure as of December 31, 2016. Portfolios not listed in the subsequent tables do not have any derivative investments during the year ended December 31, 2016.
| Asset Derivatives | ||||||||||||||||||||||||
| Portfolio/Location | Interest Rate Contracts |
Foreign Exchange Contracts |
Equity Contracts |
Credit Contracts |
Commodity Contracts |
Total | ||||||||||||||||||
| Inflation-Protected Securities |
||||||||||||||||||||||||
| Purchased options and swaptions (A) (B) |
$ | 673,031 | $ | 82,548 | $ | — | $ | — | $ | — | $ | 755,579 | ||||||||||||
| Centrally cleared swap agreements, at value (B) (C) |
352,696 | — | — | — | — | 352,696 | ||||||||||||||||||
| OTC swap agreements, at value |
9,588 | — | — | — | — | 9,588 | ||||||||||||||||||
| Net unrealized appreciation on futures contracts (B) (D) |
213,771 | — | — | — | — | 213,771 | ||||||||||||||||||
| Unrealized appreciation on forward foreign currency contracts |
— | 246,881 | — | — | — | 246,881 | ||||||||||||||||||
| Total |
$ | 1,249,086 | $ | 329,429 | $ | — | $ | — | $ | — | $ | 1,578,515 | ||||||||||||
| Liability Derivatives |
||||||||||||||||||||||||
| Portfolio/Location | Interest Rate Contracts |
Foreign Exchange Contracts |
Equity Contracts |
Credit Contracts |
Commodity Contracts |
Total | ||||||||||||||||||
| Inflation-Protected Securities |
||||||||||||||||||||||||
| Written options and swaptions, at value (B) |
$ | (208,216 | ) | $ | (80,410 | ) | $ | — | $ | — | $ | — | $ | (288,626 | ) | |||||||||
| Centrally cleared swap agreements, at value (B) (C) |
(71,821 | ) | — | — | — | — | (71,821 | ) | ||||||||||||||||
| OTC swap agreements, at value |
(15,477 | ) | — | — | — | — | (15,477 | ) | ||||||||||||||||
| Net unrealized depreciation on futures contracts (B) (D) |
(493,361 | ) | — | — | — | — | (493,361 | ) | ||||||||||||||||
| Unrealized depreciation on forward foreign currency contracts |
— | (123,676 | ) | — | — | — | (123,676 | ) | ||||||||||||||||
| Total |
$ | (788,875 | ) | $ | (204,086 | ) | $ | — | $ | — | $ | — | $ | (992,961 | ) | |||||||||
| Balanced |
||||||||||||||||||||||||
| Net unrealized depreciation on futures contracts (B) (D) |
$ | — | $ | — | $ | (6,112 | ) | $ | — | $ | — | $ | (6,112 | ) | ||||||||||
| Total |
$ | — | $ | — | $ | (6,112 | ) | $ | — | $ | — | $ | (6,112 | ) | ||||||||||
| (A) | Included within Investments, at value on the Statements of Assets and Liabilities. |
| (B) | May include exchange-traded derivatives which are not subject to a master netting arrangement, or another similar arrangement. |
| (C) | Included within fair value of centrally cleared swap agreements as reported within the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
| (D) | Included within cumulative appreciation (depreciation) on futures contracts as reported within the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location and the effect of derivative investments, if any, within the Statements of Operations, categorized by primary market risk exposure as of December 31, 2016.
| Realized Gain (Loss) on Derivative Instruments |
||||||||||||||||||||||||
| Portfolio/Location | Interest Rate Contracts |
Foreign Exchange Contracts |
Equity Contracts |
Credit Contracts |
Commodity Contracts |
Total | ||||||||||||||||||
| Inflation-Protected Securities |
||||||||||||||||||||||||
| Purchased options and swaptions (A) |
$ | (332,104 | ) | $ | (1,448,552 | ) | $ | — | $ | — | $ | — | $ | (1,780,656 | ) | |||||||||
| Written options and swaptions |
12,905 | 1,073,621 | — | — | — | 1,086,526 | ||||||||||||||||||
| Swap agreements |
(659,014 | ) | — | — | — | — | (659,014 | ) | ||||||||||||||||
| Futures contracts |
(518,710 | ) | — | — | — | — | (518,710 | ) | ||||||||||||||||
| Forward foreign currency contracts (B) |
— | (1,094,433 | ) | — | — | — | (1,094,433 | ) | ||||||||||||||||
| Total |
$ | (1,496,923 | ) | $ | (1,469,364 | ) | $ | — | $ | — | $ | — | $ | (2,966,287 | ) | |||||||||
| Balanced |
||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 92,868 | $ | — | $ | — | $ | 92,868 | ||||||||||||
| Total |
$ | — | $ | — | $ | 92,868 | $ | — | $ | — | $ | 92,868 | ||||||||||||
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
| Net Change in Unrealized Appreciation (Depreciation) on Derivative Instruments |
||||||||||||||||||||||||
| Portfolio/Location | Interest Rate Contracts |
Foreign Exchange Contracts |
Equity Contracts |
Credit Contracts |
Commodity Contracts |
Total | ||||||||||||||||||
| Inflation-Protected Securities |
||||||||||||||||||||||||
| Purchased options and swaptions (C) |
$ | 2,564 | $ | (20,014 | ) | $ | — | $ | — | $ | — | $ | (17,450 | ) | ||||||||||
| Written options and swaptions |
(147,145 | ) | (120,062 | ) | — | — | — | (267,207 | ) | |||||||||||||||
| Swap agreements |
587,131 | — | — | — | — | 587,131 | ||||||||||||||||||
| Futures contracts |
(301,696 | ) | — | — | — | — | (301,696 | ) | ||||||||||||||||
| Forward foreign currency contracts (D) |
— | 470,121 | — | — | — | 470,121 | ||||||||||||||||||
| Total |
$ | 140,854 | $ | 330,045 | $ | — | $ | — | $ | — | $ | 470,899 | ||||||||||||
| Balanced |
||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | (15,080 | ) | $ | — | $ | — | $ | (15,080 | ) | ||||||||||
| Total |
$ | — | $ | — | $ | (15,080 | ) | $ | — | $ | — | $ | (15,080 | ) | ||||||||||
| (A) | Included within Net realized gain (loss) on transactions from Investments within the Statements of Operations. |
| (B) | Included within Net realized gain (loss) on transactions from Foreign currency transactions within the Statements of Operations. |
| (C) | Included within Net change in unrealized appreciation (depreciation) on Investments within the Statements of Operations. |
| (D) | Included within Net change in unrealized appreciation (depreciation) on Translation of assets and liabilities denominated in foreign currencies within Statements of Operations. |
The following is a summary of the ending monthly average volume on derivative activity during the year ended December 31, 2016.
| Purchased Options and Swaptions at value |
Written Options and Swaptions at value |
Swap Agreements at Notional Amount |
Futures Contracts at Notional Amount |
Forward Foreign Currency Contracts at Contract Amount |
||||||||||||||||||||||||||||||||||||
| Portfolio | Calls | Puts | Calls | Puts | Long | Short | Purchased | Sold | Cross Currency |
|||||||||||||||||||||||||||||||
| Inflation- Protected Securities |
$ | 634,540 | $ | 779,789 | $ | (417,962 | ) | $ | (468,498 | ) | $ | 26,360,892 | 49,480,769 | (185,365,385 | ) | $ 9,277,672 | $ | 20,736,937 | $ | 7,246,083 | ||||||||||||||||||||
| Balanced | — | — | — | — | — | 454 | — | — | — | — | ||||||||||||||||||||||||||||||
The Portfolios typically enter into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) or similar master agreements (collectively, “Master Agreements”) with their contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties.
ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolios typically may offset with the counterparty certain OTC derivative financial instruments payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty.
Various Master Agreements govern the terms of certain transactions with counterparties and typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolios and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Portfolios exercise their right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Portfolios’ net liability may be delayed or denied.
Collateral or margin requirements are set by the broker or exchange clearing house for exchange-traded derivatives (futures contracts, exchange-traded options, and exchange-traded swap agreements) while collateral terms are contract specific for OTC derivatives (forward foreign currency exchange contracts, OTC options, and OTC swap agreements). For OTC derivatives, under standard derivatives agreements, the Portfolios may be required to post collateral on derivatives if the Portfolios are in a net liability position with the counterparty exceeding certain amounts. Additionally, counterparties may immediately terminate derivatives contracts if the Portfolios fail to maintain sufficient asset coverage for its contracts or its net assets decline by stated percentages.
The following is a summary of the Portfolios’ OTC derivative assets and liabilities by counterparty net of amounts available for offset under a master netting agreement and net of the related collateral received/pledged by the Portfolios as of December 31, 2016. For
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
6. RISK EXPOSURES AND THE USE OF DERIVATIVE INSTRUMENTS (continued)
financial reporting purposes, the Portfolios do not offset assets and liabilities that are subject to a master netting agreement or similar arrangement within the Statements of Assets and Liabilities. See the Repurchase agreement section within these notes for offsetting and collateral information pertaining to repurchase agreements that are subject to master netting agreements. Portfolios not listed in the subsequent tables do not have master netting agreements for open derivative positions.
| Gross Amounts of Assets Presented within Statements of Assets and Liabilities (A) |
Gross Amounts Not Offset within the Statements of Assets and Liabilities |
Gross Amounts of Liabilities Presented within Statements of Assets and Liabilities (A) |
Gross Amounts Not Offset within the Statements of Assets and Liabilities |
|||||||||||||||||||||||||||||||||
| Counterparty | Financial Instruments |
Collateral Received (B) |
Net Amount | Financial Instruments |
Collateral Pledged (B) |
Net Amount | ||||||||||||||||||||||||||||||
| Assets | Liabilities | |||||||||||||||||||||||||||||||||||
| Inflation-Protected Securities |
||||||||||||||||||||||||||||||||||||
| Bank of America, N.A. |
$ | 66,003 | $ | — | $ | — | $ | 66,003 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
| Citibank N.A. |
5,152 | (5,152 | ) | — | — | 59,681 | (5,152 | ) | — | 54,529 | ||||||||||||||||||||||||||
| Commonwealth Bank of Australia |
58,009 | — | — | 58,009 | — | — | — | — | ||||||||||||||||||||||||||||
| Deutsche Bank AG |
640,486 | (344,940 | ) | (295,546 | ) | — | 344,940 | (344,940 | ) | — | — | |||||||||||||||||||||||||
| Goldman Sachs Bank |
94,517 | — | — | 94,517 | — | — | — | — | ||||||||||||||||||||||||||||
| HSBC Bank USA |
6,566 | — | — | 6,566 | — | — | — | — | ||||||||||||||||||||||||||||
| Morgan Stanley Capital Services Inc. |
— | — | — | — | 776 | — | — | 776 | ||||||||||||||||||||||||||||
| National Australia Bank |
2,863 | — | — | 2,863 | — | — | — | — | ||||||||||||||||||||||||||||
| UBS AG |
14,624 | (616 | ) | — | 14,008 | 616 | (616 | ) | — | — | ||||||||||||||||||||||||||
| Other Derivatives (C) |
690,295 | — | — | 690,295 | 586,948 | — | — | 586,948 | ||||||||||||||||||||||||||||
| Total |
$ | 1,578,515 | $ | (350,708 | ) | $ | (295,546 | ) | $ | 932,261 | $ | 992,961 | $ | (350,708 | ) | $ | — | $ | 642,253 | |||||||||||||||||
| (A) | Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset within the Statements of Assets and Liabilities. |
| (B) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (C) | Other Derivatives are not subject to a master netting arrangement or another similar arrangement. The amount presented is intended to permit reconciliation to the amount presented in the Schedules of Investments. |
7. RISK FACTORS
Investing in the Portfolios may involve certain risks, as discussed in the Portfolios’ prospectuses, including but not limited to the following:
Fixed income risk: The market prices of fixed income securities may go up or down, sometimes rapidly and unpredictably, due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. In addition, the market value of a fixed income security may decline if the issuer or other obligor of the security fails to pay principal and/or interest, otherwise defaults or has its credit rating downgraded or is perceived to be less creditworthy, or the credit quality or value of any underlying assets declines.
Foreign investment risk: Investing in securities of foreign issuers or issuers with significant exposure to foreign markets involves additional risk. Foreign countries may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of investments may decline because of factors affecting a particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, political or financial instability or other adverse economic or political developments. Lack of information and weaker accounting standards also may affect the value of these securities.
High-yield debt risk: High-yield debt securities, commonly referred to as “junk bonds,” are securities that are rated below “investment grade” (securities rated below Baa/BBB) or, if unrated, determined to be below investment grade by the sub-adviser. Changes in interest rates, the market’s perception of the issuers and the creditworthiness of the issuers may significantly affect the value of these bonds. Junk bonds are considered speculative, have a higher risk of default, tend to be less liquid and may be more difficult to value than higher grade securities. Junk bonds tend to be volatile and more susceptible to adverse events and negative sentiments.
Inflation-protected security risk: Inflation-protected debt securities may react differently from other types of debt securities and tend to react to changes in “real” interest rates. Real interest rates represent nominal (stated) interest rates reduced by the expected impact of inflation. In general, the price of an inflation-protected debt security can fall when real interest rates rise, and can rise when real interest rates fall. Interest payments on inflation-protected debt securities can be unpredictable and will vary as the principal and/or interest is adjusted for inflation. Also, the inflation index utilized by a particular inflation-protected security may not accurately reflect the true rate of inflation, in which case the market value of the security could be adversely affected.
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
7. RISK FACTORS (continued)
Money market reform risk: The Portfolio operates as a “government” money market portfolio under new federal regulations. The Portfolio continues to use the special pricing and valuation conventions that currently facilitate a stable share price of $1.00, although there is no guarantee that the Portfolio will be able to maintain a $1.00 share price. The Portfolio does not currently intend to avail itself of the ability to impose “liquidity fees” and/or “gates” on Portfolio redemptions, as permitted under the new regulations. However, the Board reserves the right, with notice to shareholders, to change this policy, thereby permitting the Portfolio to impose such fees and gates in the future.
Money market risk: There is no assurance a money market fund will avoid principal losses if its holdings default or are downgraded or if interest rates rise sharply in an unusually short period. In addition, a money market fund’s yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of an investment, it is possible to lose money by investing in it.
Small and medium capitalization risk: Small or medium capitalization companies may be more at risk than large capitalization companies because, among other things, they may have limited product lines, operating history, market or financial resources, or because they may depend on a limited management group. The prices of securities of small and medium capitalization companies generally are more volatile than those of large capitalization companies and are more likely to be adversely affected by changes in earnings results and investor expectations or poor economic or market conditions than large capitalization companies. Securities of small and medium capitalization companies may underperform large capitalization companies, may be harder to sell at times and at prices the portfolio managers believe appropriate, and may offer greater potential for losses.
8. FEES AND OTHER AFFILIATED TRANSACTIONS
TAM, the Portfolios’ investment adviser, is directly owned by Transamerica Premier Life Insurance Company (“TPLIC”) and AUSA Holding Company (“AUSA”), both of which are indirect, wholly owned subsidiaries of Aegon NV. TPLIC is owned by Commonwealth General Corporation (“Commonwealth”) and Aegon USA, LLC (“Aegon USA”). Commonwealth and AUSA are wholly owned by Aegon USA. Aegon USA is wholly owned by Aegon US Holding Corporation, which is wholly owned by Transamerica Corporation (DE). Transamerica Corporation (DE) is wholly owned by The Aegon Trust, which is wholly owned by Aegon International B.V., which is wholly owned by Aegon NV, a Netherlands corporation, and a publicly traded international insurance group.
Aegon USA Investment Management LLC (“AUIM”) is both an affiliate and a sub-adviser of Government Money Market, Core Bond, High Yield Bond and Balanced. TAM and AUIM are affiliates of Aegon NV.
Certain officers and trustees of the Series Portfolio and of the entities that invest in the Series Portfolio are also officers and/or trustees of TAM or its affiliates. No interested trustee, who is deemed an interested person due to current or former service with TAM or an affiliate of TAM, receives compensation from the Series Portfolio or from the entities that invest in the Series Portfolio.
As of December 31, 2016, the percentage of each Portfolio owned by an affiliated investment company or subsidiary are reflected in the following tables.
Transamerica Partners Funds Group (“TPFG”) is an open-end management investment company. As of December 31, 2016, the percentage of each Portfolio that is owned by TPFG is as follows:
| TPFG | Investments in Portfolio |
|||
| Government Money Market |
67.25 | % | ||
| High Quality Bond |
31.36 | |||
| Inflation-Protected Securities |
48.77 | |||
| Core Bond |
31.98 | |||
| High Yield Bond |
14.77 | |||
| Balanced |
60.17 | |||
| Large Value |
29.38 | |||
| Stock Index |
2.90 | |||
| Large Core |
27.75 | |||
| Large Growth |
28.34 | |||
| Mid Value |
15.10 | |||
| Mid Growth |
50.07 | |||
| Small Value |
52.71 | |||
| Small Core |
27.67 | |||
| Small Growth |
58.49 | |||
| International Equity |
37.93 | |||
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
8. FEES AND OTHER AFFILIATED TRANSACTIONS (continued)
Transamerica Partners Funds Group II (“TPFG II”) is an open-end management investment company. As of December 31, 2016, the percentage of each Portfolio that is owned by TPFG II is as follows:
| TPFG II | Investments in Portfolio |
|||
| Government Money Market |
22.04 | % | ||
| High Quality Bond |
17.12 | |||
| Inflation-Protected Securities |
26.68 | |||
| Core Bond |
28.43 | |||
| High Yield Bond |
43.64 | |||
| Balanced |
3.63 | |||
| Large Value |
12.49 | |||
| Stock Index |
5.74 | |||
| Large Core |
3.70 | |||
| Large Growth |
12.29 | |||
| Mid Value |
51.95 | |||
| Mid Growth |
16.61 | |||
| Small Value |
10.02 | |||
| Small Core |
5.63 | |||
| Small Growth |
16.25 | |||
| International Equity |
11.29 | |||
Transamerica Financial Life Insurance Company (“TFLIC”) is a wholly-owned subsidiary of Aegon USA. As of December 31, 2016, the percentage of each Portfolio that is owned by TFLIC sub-accounts is as follows:
| TFLIC Sub-accounts | Investments in Portfolio |
|||
| Government Money Market |
2.85 | % | ||
| High Quality Bond |
15.05 | |||
| Inflation-Protected Securities |
10.01 | |||
| Core Bond |
13.57 | |||
| High Yield Bond |
5.63 | |||
| Balanced |
35.49 | |||
| Large Value |
40.51 | |||
| Large Core |
58.33 | |||
| Large Growth |
44.13 | |||
| Mid Value |
7.92 | |||
| Mid Growth |
0.53 | |||
| Small Value |
0.77 | |||
| Small Core |
56.73 | |||
| Small Growth |
0.79 | |||
| International Equity |
29.38 | |||
Transamerica Retirement Solutions Collective Trust (“CIT”) is managed by Massachusetts Fidelity Trust Company, which is a wholly-owned subsidiary of Aegon USA. As of December 31, 2016, the percentage of each Portfolio that is owned by CIT sub-accounts is as follows:
| CIT Sub-accounts | Investments in Portfolio |
|||
| Government Money Market |
7.84 | % | ||
| High Quality Bond |
28.22 | |||
| Inflation-Protected Securities |
9.90 | |||
| Core Bond |
21.21 | |||
| High Yield Bond |
17.70 | |||
| Balanced |
0.46 | |||
| Large Value |
13.42 | |||
| Large Core |
5.43 | |||
| Large Growth |
12.79 | |||
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
8. FEES AND OTHER AFFILIATED TRANSACTIONS (continued)
| CIT Sub-accounts | Investments in Portfolio |
|||
| Mid Value |
4.01 | % | ||
| Mid Growth |
18.48 | |||
| Small Value |
29.66 | |||
| Small Core |
8.58 | |||
| Small Growth |
17.64 | |||
| International Equity |
15.93 | |||
Transamerica Partners Collective Trust Funds (“CTF”) is managed by Massachusetts Fidelity Trust Company, which is a wholly-owned subsidiary of Aegon USA. As of December 31, 2016, the percentage of each Portfolio that is owned by CTF sub-accounts is as follows:
| CTF Sub-accounts | Investments in Portfolio |
|||
| Government Money Market |
0.02 | % | ||
| High Quality Bond |
8.25 | |||
| Inflation-Protected Securities |
4.64 | |||
| Core Bond |
4.80 | |||
| High Yield Bond |
18.26 | |||
| Large Value |
4.02 | |||
| Large Core |
4.79 | |||
| Large Growth |
2.36 | |||
| Mid Value |
21.02 | |||
| Mid Growth |
14.31 | |||
| Small Value |
6.84 | |||
| Small Core |
1.39 | |||
| Small Growth |
6.83 | |||
| International Equity |
5.47 | |||
Investment advisory fees: TAM manages the assets of each Portfolio of the Series Portfolio pursuant to the investment advisory agreement with the Series Portfolio. Each Portfolio pays an advisory fee to TAM based on daily Average Net Assets (“ANA”) at the following annual rates:
| Portfolio | Rate | |||
| Government Money Market |
||||
| Effective May 2, 2016 |
||||
| First $1 billion |
0.2500 | % | ||
| Over $1 billion up to $3 billion |
0.2400 | |||
| Over $3 billion |
0.2300 | |||
| Prior to May 2, 2016 |
0.2500 | |||
| High Quality Bond |
0.3500 | |||
| Inflation-Protected Securities |
0.3500 | |||
| Core Bond |
||||
| First $2 billion |
0.3500 | |||
| Over $2 billion |
0.3350 | |||
| High Yield Bond |
||||
| First $1.25 billion |
0.5500 | |||
| Over $1.25 billion up to $2 billion |
0.5250 | |||
| Over $2 billion |
0.5000 | |||
| Balanced |
0.4500 | |||
| Large Value (A) |
0.4500 | |||
| Large Core (A) |
0.6000 | |||
| Large Growth |
||||
| First $2 billion |
0.6200 | |||
| Over $2 billion up to $3 billion |
0.6100 | |||
| Over $3 billion up to $4 billion |
0.6000 | |||
| Over $4 billion |
0.5800 | |||
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
8. FEES AND OTHER AFFILIATED TRANSACTIONS (continued)
| Portfolio | Rate | |||
| Mid Value |
||||
| First $750 million |
0.6700 | % | ||
| Over $750 million up to $1.5 billion |
0.6650 | |||
| Over $1.5 billion up to $2 billion |
0.6550 | |||
| Over $2 billion |
0.6475 | |||
| Mid Growth |
0.7200 | |||
| Small Value |
||||
| First $250 Million |
0.8200 | |||
| Over $250 million up to $500 million |
0.7800 | |||
| Over $500 million up to $750 million |
0.7500 | |||
| Over $750 million |
0.7250 | |||
| Small Core |
||||
| First $300 million |
0.8000 | |||
| Over $300 million |
0.7700 | |||
| Small Growth |
||||
| First $300 million |
0.8400 | |||
| Over $300 million |
0.8000 | |||
| International Equity |
||||
| First $500 million |
0.7400 | |||
| Over $500 million up to $1 billion |
0.7200 | |||
| Over $1 billion up to $2 billion |
0.6900 | |||
| Over $2 billion |
0.6600 | |||
| (A) | TAM has voluntarily agreed to waive 0.05% of its management fee through May 1, 2017. These amounts are not subject to recapture by TAM in future years. |
TAM has voluntarily agreed to waive and/or reimburse Portfolio expenses to the extent that the total operating expenses based on daily ANAs exceed the following stated annual operating expense limits. The expenses waived and/or reimbursed, if any, are included in Expenses waived and/or reimbursed within the Statements of Operations. Fee waivers and/or reimbursements are not subject to recapture by TAM in future years.
| Portfolio | Operating Expense Limit |
Operating Expense Limit Effective Through | ||||
| Government Money Market |
0.30 | % | May 1, 2017 | |||
| High Quality Bond |
0.40 | May 1, 2017 | ||||
| Inflation-Protected Securities |
0.40 | May 1, 2017 | ||||
| Core Bond |
0.40 | May 1, 2017 | ||||
| High Yield Bond |
0.60 | May 1, 2017 | ||||
| Balanced |
0.50 | May 1, 2017 | ||||
| Large Value |
0.50 | May 1, 2017 | ||||
| Large Core |
0.65 | May 1, 2017 | ||||
| Large Growth |
0.65 | May 1, 2017 | ||||
| Mid Value |
0.70 | May 1, 2017 | ||||
| Mid Growth |
0.75 | May 1, 2017 | ||||
| Small Value |
0.85 | May 1, 2017 | ||||
| Small Core |
0.85 | May 1, 2017 | ||||
| Small Growth |
0.90 | May 1, 2017 | ||||
| International Equity |
0.90 | May 1, 2017 | ||||
TAM also may waive and/or reimburse additional fees from time to time to help maintain competitive expense ratios. These arrangements are voluntary and may be terminated at any time. Expenses waived and/or reimbursed that are unsettled at year end are included in Due from adviser within the Statements of Assets and Liabilities.
Deferred compensation plan: Under a non-qualified deferred compensation plan effective January 1, 2008, as amended and restated January 1, 2010, available to the trustees, compensation may be deferred that would otherwise be payable by the Series Portfolio to an independent trustee on a current basis for services rendered as trustee. Deferred compensation amounts will accumulate based on the value of the investment option, as elected by the trustee. Balances pursuant to deferred compensation plan are recorded in Trustees,
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
8. FEES AND OTHER AFFILIATED TRANSACTIONS (continued)
Chief Compliance Officer (“CCO”) and deferred compensation fees within the Statements of Assets and Liabilities. For the year ended December 31, 2016, amounts included in Trustees, CCO and deferred compensation fees within the Statements of Operations reflect total compensation paid to the independent Board members.
Brokerage commissions: The Portfolios incurred no brokerage commissions on security transactions placed with affiliates of the adviser or sub-advisers for the year ended December 31, 2016.
Cross-trades: The Portfolios are authorized to purchase or sell securities from and to other Portfolios within the Series Portfolios, or between the Portfolio and other mutual funds or accounts advised by TAM or the sub-adviser, in each case in accordance with Rule 17a-7 under the 1940 Act, when it is in the best interest of each Portfolio participating in the transaction.
For the year ended December 31, 2016, the Portfolios engaged in the following net cross-trade transactions, which resulted in net realized gains/(losses) listed below. Portfolios not listed in the subsequent table did not have any 17a-7 transactions during the year.
| Portfolio | Purchases | Sales | Net Realized Gains (Losses) | |||||||||
| Large Growth |
$ | 98,702 | $ | — | $ | — | ||||||
9. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 2016, the cost of securities purchased and proceeds from securities sold (excluding short-term securities) are as follows:
| Purchases of Securities | Sales/Maturities of Securities | |||||||||||||||
| Portfolio | Long-Term | U.S. Government | Long-Term | U.S. Government | ||||||||||||
| High Quality Bond |
$ | 164,034,941 | $ | 138,971,403 | $ | 194,131,072 | $ | 121,426,005 | ||||||||
| Inflation-Protected Securities |
9,016,601 | 125,485,890 | 17,956,409 | 156,061,650 | ||||||||||||
| Core Bond |
255,396,193 | 268,089,467 | 356,103,350 | 288,250,858 | ||||||||||||
| High Yield Bond |
297,966,733 | — | 290,893,657 | — | ||||||||||||
| Balanced |
42,266,328 | 9,828,941 | 53,411,097 | 9,141,105 | ||||||||||||
| Large Value |
360,602,891 | — | 440,473,572 | — | ||||||||||||
| Large Core |
134,519,269 | — | 184,553,801 | — | ||||||||||||
| Large Growth |
308,334,804 | — | 431,873,536 | — | ||||||||||||
| Mid Value |
399,981,752 | — | 443,857,427 | — | ||||||||||||
| Mid Growth |
78,595,903 | — | 95,838,247 | — | ||||||||||||
| Small Value |
57,381,491 | — | 65,575,457 | — | ||||||||||||
| Small Core |
278,698,723 | — | 304,906,312 | — | ||||||||||||
| Small Growth |
48,249,927 | — | 57,119,693 | — | ||||||||||||
| International Equity |
83,217,424 | — | 120,954,136 | — | ||||||||||||
10. FEDERAL INCOME TAXES
The Series Portfolio has received rulings from the Internal Revenue Service that each Portfolio will be treated as a separate partnership for federal income tax purposes. Income taxes are not provided for by the Portfolios because taxable income/(loss) of each Portfolio is included in the income tax returns of the investors. It is intended that the Portfolios’ assets will be managed so an investor in the Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code. The Portfolios recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Portfolios’ federal tax returns remain subject to examination by the Internal Revenue Service and state tax authorities for the prior three years. Management has evaluated the Portfolios’ tax provisions taken for all open tax years, and has concluded that no provision for income tax is required in the Portfolios’ financial statements. If applicable, the Portfolios recognize interest accrued related to unrecognized tax benefits in interest and penalties expense in Other within the Statements of Operations. The Portfolios identify their major tax jurisdictions as U.S. Federal, the states of Colorado and New York, and foreign jurisdictions where the Portfolios make significant investments; however, the Portfolios are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. For tax purposes, each component of the Portfolios’ net assets are reported at the investor level; therefore, the Statements of Assets and Liabilities do not present the components of net assets. Each investor in the Portfolio will be subject to taxation on its share of the Portfolio’s ordinary income and capital gains; which may differ from GAAP. These differences are primarily due to different treatment for items including, but not limited to, wash sales, structured notes, foreign bonds, swaps, net operating losses, distribution reclasses for REITs, passive foreign investment companies, foreign currency transactions, capital loss carryforwards, Late Year Ordinary Loss Deferrals, paydown gain/loss, foreign capital gains tax, and return of capital distributions from underlying investments.
| Transamerica Partners Portfolios | Annual Report 2016 |
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NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2016
11. NEW ACCOUNTING PRONOUNCEMENTS
In October 2016, the Securities and Exchange Commission adopted new rules and amended existing rules (together the, “Final Rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the Final Rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the implication, if any, of the additional disclosure requirements and its impact on the Portfolios’ financial statements.
In December 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-19 (“ASU 2016-19”), “Technical Corrections and Improvements”. The guidance includes an amendment to Topic 820, Fair Value Measurement, which clarifies the difference between a valuation approach and a valuation technique when applying the guidance in that Topic. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. The transition guidance for the amendment must be applied prospectively because it could potentially involve the use of hindsight that includes fair value measurements. The guidance is effective for interim periods beginning after December 15, 2016. Management is currently evaluating the implication, if any, of the additional disclosure requirements and its impact on the Portfolios’ financial statements.
12. CUSTODY OUT-OF-POCKET EXPENSE
In December 2015, State Street Bank and Trust Co., the Portfolios’ custodian, identified inconsistencies in the way in which clients were invoiced for categories of expenses, particularly those deemed out-of-pocket costs, during an 18-year period going back to 1998. The issue was the result of inaccurate billing rates that were not subsequently reviewed or adjusted. The amount of the difference in what was charged and what should have been charged, plus interest, was paid back to the Portfolios in September 2016 as a reimbursement. The amounts applicable to each Portfolio, if any, were recognized as a change in accounting estimate and are reflected in Reimbursement of custody fees within the Statements of Operations. This resulted in a decrease in Net expenses and an overall increase in Net assets.
| Transamerica Partners Portfolios | Annual Report 2016 |
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Owners of Beneficial Interests of the Transamerica Partners Portfolios:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Transamerica Partners Portfolios (comprising, respectively, Government Money Market Portfolio (formerly, Money Market Portfolio), High Quality Bond Portfolio, Inflation-Protected Securities Portfolio, Core Bond Portfolio, High Yield Bond Portfolio, Balanced Portfolio, Large Value Portfolio, Large Core Portfolio, Large Growth Portfolio, Mid Value Portfolio, Mid Growth Portfolio, Small Value Portfolio, Small Core Portfolio, Small Growth Portfolio and International Equity Portfolio) (collectively, the “Portfolios”) as of December 31, 2016, and the related statements 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 the Portfolios’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Portfolios’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolios’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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 each of the respective portfolios comprising Transamerica Partners Portfolios at December 31, 2016, the results of their operations for the year then ended, the changes in their 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 U.S. generally accepted accounting principles.
Boston, Massachusetts
February 23, 2017
| Transamerica Partners Portfolios | Annual Report 2016 |
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Board Members and Officers
(unaudited)
The Board Members and executive officers of each Trust are listed below.
Interested Board Member means a board member who may be deemed an “interested person” (as that term is defined in the 1940 Act) of each Trust because of his current or former service with TAM or an affiliate of TAM. Interested Board Members may also be referred to herein as “Interested Trustees.” Independent Board Member means a Board Member who is not an “interested person” (as defined under the 1940 Act) of each Trust and may also be referred to herein as an “Independent Trustee.”
The Board governs each Portfolio and is responsible for protecting the interests of the shareholders. The Board Members are experienced executives who meet periodically throughout the year to oversee the business affairs of each Portfolio and the operation of each Portfolio by its officers. The Board also reviews the management of each Portfolio’s assets by the investment manager and its respective sub-adviser.
The Portfolios are among the portfolios advised and sponsored by TAM (collectively, “Transamerica Mutual Funds”). The Transamerica Mutual Funds consist of Transamerica Funds (“TF”), Transamerica Series Trust (“TST”), Transamerica Partners Funds Group (“TPFG”), Transamerica Partners Funds Group II (“TPFG II”), Transamerica Partners Portfolios (“TPP”) and Transamerica Asset Allocation Variable Funds (“TAAVF”) and consists of 184 funds as of the date of this annual report.
The mailing address of each Board Member is c/o Secretary, 1801 California Street, Suite 5200, Denver, Colorado 80202.
The Board Members of each Trust and each Portfolio Trust, their age, their positions with the Trusts, and their principal occupations for the past five years (their titles may have varied during that period) the number of funds in Transamerica Mutual Funds the Board oversees, and other board memberships they hold are set forth in the table below. The length of time served is provided from the date a Trustee became a Trustee of either of the Trusts or Transamerica Partners Portfolios.
| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships | |||||
|
INTERESTED BOARD MEMBERS | ||||||||||
| Marijn P. Smit (43) |
Chairman of the Board, President and Chief Executive Officer | Since 2014 | Chairman of the Board, President and Chief Executive Officer, TF, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Chairman of the Board, President and Chief Executive Officer, Transamerica Income Shares, Inc. (“TIS”) (2014 – 2015);
Director, Chairman of the Board, President and Chief Executive Officer, Transamerica Asset Management, Inc. (“TAM”) and Transamerica Fund Services, Inc. (“TFS”) (2014 – present);
President, Investment Solutions, Transamerica Investments & Retirement (2014 – 2016);
Vice President, Transamerica Premier Life Insurance Company (2010 – 2016);
Vice President, Transamerica Life Insurance Company (2010 – present); |
184 | Director, Massachusetts Fidelity Trust Company (since 2014); Director, Aegon Global Funds (since 2016) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships | |||||
|
INTERESTED BOARD MEMBERS — continued | ||||||||||
| Marijn P. Smit (continued) |
Senior Vice President, Transamerica Financial Life Insurance Company (2013 – 2016);
Senior Vice President, Transamerica Retirement Advisors, Inc. (2013 – 2016);
Senior Vice President, Transamerica Retirement Solutions Corporation (2012 – present); and
President and Director, Transamerica Stable Value Solutions, Inc. (2010 – 2016). |
|||||||||
| Alan F. Warrick (68) |
Board Member | Since 2012 | Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF (2012 – present);
Board Member, TIS (2012 – 2015);
Consultant, Aegon USA (2010 – 2011);
Senior Advisor, Lovell Minnick Equity Partners (2010 – present);
Retired (2010 – present); and
Managing Director for Strategic Business Development, Aegon USA (1994 – 2010). |
184 | N/A | |||||
|
INDEPENDENT BOARD MEMBERS | ||||||||||
| Sandra N. Bane (64) |
Board Member | Since 2008 | Retired (1999 – present);
Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF (2008 – present);
Board Member, TIS (2008 – 2015);
Board Member, Transamerica Investors, Inc. (“TII”) (2003 – 2010); and
Partner, KPMG (1975 – 1999). |
184 | Big 5 Sporting Goods (2002 – present); Southern Company Gas (energy services holding company) (2008 – present) | |||||
| Leo J. Hill (60) |
Lead Independent Board Member | Since 2007 | Principal, Advisor Network Solutions, LLC (business consulting) (2006 – present);
Board Member, TST (2001 –present);
Board Member, TF (2002 – present);
Board Member, TIS (2002 – 2015);
|
184 | Ameris Bancorp (2013 – present); Ameris Bank (2013 – present) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships | |||||
|
INDEPENDENT BOARD MEMBERS — continued | ||||||||||
| Leo J. Hill (continued) |
Board Member, TPP, TPFG, TPFG II and TAAVF (2007 – present);
Board Member, TII (2008 – 2010);
Market President, Nations Bank of Sun Coast Florida (1998 – 1999);
Chairman, President and Chief Executive Officer, Barnett Banks of Treasure Coast Florida (1994 – 1998);
Executive Vice President and Senior Credit Officer, Barnett Banks of Jacksonville, Florida (1991 – 1994); and
Senior Vice President and Senior Loan Administration Officer, Wachovia Bank of Georgia (1976 – 1991). |
|||||||||
| David W. Jennings (70) |
Board Member | Since 2009 | Board Member, TF, TST, TPP, TPFG, TPFG II and TAAVF (2009 – present);
Board Member, TIS (2009 – 2015);
Board Member, TII (2009 – 2010);
Managing Director, Hilton Capital Management, LLC (2010 – present);
Principal, Maxam Capital Management, LLC (2006 – 2008); and
Principal, Cobble Creek Management LP (2004 – 2006). |
184 | N/A | |||||
| Russell A. Kimball, Jr. (72) |
Board Member | Since 2007 | General Manager, Sheraton Sand Key Resort (1975 – present);
Board Member, TST (1986 – present);
Board Member, TF, (1986 – 1990), (2002 – present);
Board Member, TIS (2002 – 2015);
Board Member, TPP, TPFG, TPFG II and TAAVF (2007 – present); and
Board Member, TII (2008 – 2010). |
184 | N/A | |||||
| Patricia L. Sawyer (66) |
Board Member | Since 1993 | Retired (2007 – present);
President/Founder, Smith & Sawyer LLC (management consulting) (1989 – 2007);
Board Member, TF and TST (2007 – present); |
184 | Honorary Trustee, Bryant University (1996 – present) | |||||
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| Name and Age | Position(s) Held with Trust |
Term of Office and Length of Time Served* |
Principal Occupation(s) During Past Five Years |
Number of Funds in Complex Overseen by Board Member |
Other Directorships | |||||
|
INDEPENDENT BOARD MEMBERS — continued | ||||||||||
| Patricia L. Sawyer (continued) |
Board Member, TIS (2007 – 2015);
Board Member, TII (2008 – 2010);
Board Member, TPP, TPFG, TPFG II and TAAVF (1993 – present); and
Trustee, Chair of Finance Committee and Chair of Nominating Committee (1987 – 1996), Bryant University. |
|||||||||
| John W. Waechter (64) |
Board Member | Since 2007 | Partner, Englander Fischer
(2016 – present);
Retired (2004 – 2008);
Board Member, TST (2004 – present);
Board Member, TIS (2004 – 2015);
Board Member, TF (2005 – present);
Board Member, TPP, TPFG, TPFG II and TAAVF (2007 – present);
Board Member, TII (2008 – 2010);
Employee, RBC Dain Rauscher (securities dealer) (2004);
Executive Vice President, Chief Financial Officer and Chief Compliance Officer, William R. Hough & Co. (securities dealer) (1979 – 2004); and
Treasurer, The Hough Group of Funds (1993 – 2004). |
184 | Operation PAR, Inc. (non-profit organization) (2008 – present); Remember Honor Support, Inc. (non-profit organization) (2013 – present) Board Member, WRH Income Properties, Inc. (real estate) (2014 – present) | |||||
| * | Each Board Member shall hold office until: 1) his or her successor is elected and qualified or 2) he or she resigns, retires or his or her term as a Board Member is terminated in accordance with the Trust’s Declaration of Trust. |
| Transamerica Partners Portfolios | Annual Report 2016 |
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Officers
The mailing address of each officer is c/o Secretary, 1801 California Street, Suite 5200, Denver, CO 80202. The following table shows information about the officers, including their age, their positions held with each Trust and their principal occupations during the past five years (their titles may have varied during that period). Each officer will hold office until his or her successor has been duly elected or appointed or until his or her earlier death, resignation or removal.
| Name and Age | Position | Term of Office and Length of Time Served* |
Principal Occupation(s) or Employment During Past Five Years | |||
| Marijn P. Smit (43) |
Chairman of the Board, President and Chief Executive Officer | Since 2014 | See previous table. | |||
| Tané T. Tyler (51) |
Vice President, Associate General Counsel, Chief Legal Officer and Secretary | Since 2014 | Vice President, Associate General Counsel, Chief Legal Officer and Secretary, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Assistant General Counsel, Chief Legal Officer and Secretary, TIS (2014 – 2015);
Director, Vice President, Assistant General Counsel, Chief Legal Officer and Secretary, TAM and TFS (2014 – present);
Senior Vice President, Secretary and General Counsel, ALPS, Inc., ALPS Fund Services, Inc. and ALPS Distributors, Inc. (2004 – 2013); and
Secretary, Liberty All-Star Funds (2005-2013). | |||
| Christopher A. Staples (46) |
Vice President and Chief Investment Officer, Advisory Services |
Since 2007 | Vice President and Chief Investment Officer,
Advisory Services (2007 – present), Senior Vice President – Investment Management (2006 – 2007), Vice President – Investment Management
Vice President and Chief Investment Officer, Advisory Services (2007 – 2015), Senior Vice President – Investment Management (2006 – 2007), Vice President – Investment Management (2005 – 2006), TIS;
Senior Director, Investments, TPP, TPFG, TPFG II and TAAVF (2007 – present);
Vice President and Chief Investment Officer
Director (2005 – present), Senior Vice President (2006 – present), TAM;
Director, TFS (2005 – present); and
Assistant Vice President, Raymond James & Associates (1999 – 2004). | |||
| Thomas R. Wald (55) |
Chief Investment Officer | Since 2014 | Chief Investment Officer, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Chief Investment Officer, TIS (2014 – 2015);
Senior Vice President and Chief Investment Officer, TAM (2014 – present);
Chief Investment Officer, Transamerica Investments & Retirement (2014 – present); |
| Transamerica Partners Portfolios | Annual Report 2016 |
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| Name and Age | Position | Term of Office and Length of Time Served* |
Principal Occupation(s) or Employment During Past Five Years | |||
| Thomas R. Wald (continued) |
Vice President and Client Portfolio Manager, Curian Capital, LLC (2012 – 2014);
Portfolio Manager, Tactical Allocation Group, LLC (2010 – 2011);
Mutual Fund Manager, Munder Capital Management (2005 – 2008); and
Mutual Fund Manager, Invesco Ltd. (1997 – 2004). | |||||
| Vincent J. Toner (46) |
Vice President and Treasurer | Since 2014 | Vice President and Treasurer (2014 – present) Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF;
Vice President and Treasurer, TIS (2014 – 2015);
Vice President and Treasurer, TAM and TFS (2014 – present);
Senior Vice President and Vice President, Fund Administration, Brown Brothers Harriman (2010 – 2014); and
Vice President Fund Administration & Fund Accounting, OppenheimerFunds (2007 – 2010) | |||
| Matthew H. Huckman, Sr. (48) |
Tax Manager | Since 2014 | Tax Manager, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present);
Tax Manager, TIS (2014 – 2015);
Tax Manager, TFS (2012 – present); and
Assistant Mutual Fund Tax Manager, Invesco (2007 – 2012). | |||
| Scott M. Lenhart (55) |
Chief Compliance Officer and Anti-Money Laundering Officer | Since 2014 | Chief Compliance Officer and Anti-Money Laundering Officer, Transamerica Funds, TST, TPP, TPFG, TPFG II and TAAVF (2014 – present), TIS (2014 – 2015);
Chief Compliance Officer and Anti-Money Laundering Officer (2014 – present), Senior Compliance Officer (2008 – 2014), TAM;
Vice President and Chief Compliance Officer, TFS (2014 – present);
Director of Compliance, Transamerica Investments & Retirement (2014 – present);
Vice President and Chief Compliance Officer, Transamerica Financial Advisors, Inc. (1999 – 2006); and
Assistant Chief Compliance Officer, Raymond James Financial, Inc., Robert Thomas Securities, Inc. (1989 – 1998). |
| * | Elected and serves at the pleasure of the Board of each Trust. |
| Transamerica Partners Portfolios | Annual Report 2016 |
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TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY
c/o Transamerica Retirement Solutions
440 Mamaroneck Avenue
Harrison, NY 10528
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| Item 2: | Code of Ethics. |
| (a) | The Registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and any other officers who serve a similar function. |
| (b) | The Registrant’s code of ethics is reasonably designed as described in this Form N-CSR. |
| (c) | During the period covered by the report no amendments were made to the provisions of this code of ethics. |
| (d) | During the period covered by the report, the Registrant did not grant any waivers, including implicit waivers, from the provisions of this code of ethics. |
| (e) | Not Applicable. |
| (f) | The Registrant has filed this code of ethics as an exhibit pursuant to Item 12(a)(1) of Form N-CSR. |
| Item 3: | Audit Committee Financial Experts. |
The Registrant’s Board of Trustees has determined that Sandra N. Bane and John W. Waechterare “audit committee financial experts,” as such term is defined in Item 3 of Form N CSR. Ms. Bane and Mr. Waechter are “independent” under the standards set forth in Item 3 of Form N-CSR. The designation of Ms. Bane and Mr. Waechter as “audit committee financial experts” pursuant to Item 3 of Form N CSR does not (i) impose upon them any duties, obligations, or liabilities that are greater than the duties, obligations and liabilities imposed upon them as a member of the Registrant’s audit committee or Board of Trustees in the absence of such designation; or (ii) affect the duties, obligations or liabilities of any other member of the Registrant’s audit committee or Board of Trustees.
| Item 4: | Principal Accountant Fees and Services. |
| Fiscal Year Ended 12/31 (in thousands) |
||||||||||
| 2016 | 2015 | |||||||||
| (a) |
Audit Fees | $ | 17 | $ | 14 | |||||
| (b) |
Audit Related Fees(1) | $ | 0 | $ | 0 | |||||
| (c) |
Tax Fees(2) | $ | 0 | $ | 0 | |||||
| (d) |
All Other Fees(3) | $ | 0 | $ | 0 | |||||
| (1) | Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the funds comprising the Registrant, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. |
| (2) | Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of the distributions for excise tax purposes, fiscal year end taxable income calculations and certain fiscal year end shareholder reporting items on behalf of the funds comprising the Registrant. |
| (3) | All Other Fees represent permissible non-audit services for the Registrant that it believes are routine and recurring services, and would not impair the independence of the accountant. |
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| (e)(1) | Audit Committee Pre-Approval Policies and Procedures. Generally, the Registrant’s Audit Committee must preapprove (i) all audit and non-audit services performed for the Registrant by the independent accountant and (ii) all non-audit services performed by the Registrant’s independent accountant for the Registrant’s investment adviser, and certain of the adviser’s affiliates that provide ongoing services to the Registrant, if the services to be provided by the accountant relate directly to the operations and financial reporting of the Registrant. |
The Audit Committee may delegate preapproval authority to one or more of its members. The member or members to whom such authority is delegated shall report any preapproval decisions to the Audit Committee at its next scheduled meeting.
In accordance with the Procedures, the annual audit services engagement terms and fees for the Registrant will be subject to the preapproval of the Audit Committee. In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may grant preapproval for other audit services, which are those services that only the independent accountant reasonably can provide.
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by both the independent accountant and the Registrant’s treasurer, and must include a joint statement as to whether, in their view, the request or application is consistent with the Securities and Exchange Commissions’ rules on auditor independence.
Management will promptly report to the Chair of the Audit Committee any violation of this Procedure of which it becomes aware.
| (e)(2) | The percentage of services described in paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X for fiscal years ended 2015 and 2016 was zero. |
| (f) | Not Applicable. |
| (g) | Not Applicable. |
| (h) | The Registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to the Registrant’s Adviser, and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintain the principal accountant’s independence. |
| Item 5: | Audit Committee of Listed Registrants. |
The following individuals comprise the standing Audit Committee: Sandra N. Bane, Leo J. Hill, David W. Jennings, Russell A. Kimball, Jr., Patricia L. Sawyer and John W. Waechter.
| Item 6: | Investments. |
| (a) | The schedules of investments are included in the Annual Report to shareholders filed under Item 1 of this Form N-CSR. |
| (b) | Not applicable. |
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| Item 7: | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8: | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9: | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10: | Submission of Matters to a Vote of Security Holders |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that have been implemented since the Registrant last provided disclosure in response to the requirements of this Item.
| Item 11: | Controls and Procedures. |
| (a) | The Registrant’s principal executive officer and principal financial officer evaluated the Registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are appropriately designed to ensure that information required to be disclosed by the Registrant in the reports that it files on Form N-CSR (a) is accumulated and communicated to the 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) | The Registrant’s principal executive officer and principal financial officer are aware of no change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| Item 12: | Exhibits. |
| (a)(1) | The Registrant’s code of ethics (that is the subject of the disclosure required by Item 2(a)) is attached. | |
| (a)(2) | Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the 1940 Act, are attached. | |
| (a)(3) | Not applicable. | |
| (b) | A certification for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the 1940 Act, is attached. The certification furnished pursuant to this paragraph is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference. | |
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SIGNATURES
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 Asset Allocation Variable Funds | ||
| (Registrant) | ||
| By: | /s/ Marijn P. Smit | |
| Marijn P. Smit | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: | March 8, 2017 | |
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/ Marijn P. Smit | |||
| Marijn P. Smit | ||||
| Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | March 8, 2017 | |||
| By: | /s/ Vincent J. Toner | |||
| Vincent J. Toner | ||||
| Treasurer | ||||
| (Principal Financial Officer) | ||||
| Date: | March 8, 2017 | |||
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EXHIBIT INDEX
| Exhibit No. |
Description of Exhibit | |
| 12(a)(1) | Code of Ethics for Principal Executive and Principal Financial Officers | |
| 12(a)(2)(i) | Section 302 N-CSR Certification of Principal Executive Officer | |
| 12(a)(2)(ii) | Section 302 N-CSR Certification of Principal Financial Officer | |
| 12(b) | Section 906 N-CSR Certification of Principal Executive Officer and Principal Financial Officer | |