<PAGE>
PFL Endeavor Target Account
Annual Report
December 31, 1998
<PAGE>
Policyholder Letter
Dear Valued Policyholder:
We are pleased to present you with the market activity information on PFL
Endeavor Target Account for the period ending December 31, 1998. We hope that
you will find the underlying investment information interesting and
informative.
This correspondence is also an opportunity to remind you that we welcome your
comments and ideas as to how we can serve you even better. If you have any
questions or comments, please call the Variable Annuity Department at 800-525-
6205.
You can be assured of our continuing commitment to providing quality products
and excellent service to our policyholders.
Sincerely yours,
/s/ Vincent J. McGuinness, Jr.
Vincent J. McGuinness, Jr.
President and Chief Executive Officer
PFL Target Account
-1-
<PAGE>
Portfolio Manager Letter
The PFL Endeavor Target Account is subadvised by First Trust Advisors L.P.
("FTA"). FTA manages assets in excess of $12 billion.
The investment philosophy seeks to take advantage of dividend yields. When a
corporation's stock price falls but its dividend remains constant, the dividend
yield rises. Consequently, FTA believes that an excellent way to invest in the
large-cap domestic equity asset class is to buy undervalued corporations with
high dividend yields. These corporations have the potential to outperform the
Dow Jones Industrial Average ("DJIA") and the S&P 500 Index when returning to
favor.
The Dow Target 5 Subaccount July Series will invest in the common stock of the
five companies with the lowest per share price of the ten companies in the DJIA
that have the highest dividend yield as of the last business day before July
1st each year and hold those stocks for the following 12 month period. The Dow
Target 10 Subaccount July Series will invest in the common stock of the ten
companies in the DJIA that have the highest dividend yield as of the last
business day before July 1st each year and hold those stocks for the following
12 month period.
In the shadow of the 3Q and 4Q 1998 "Asian Crisis", the U.S. financial markets,
as measured by the broad indexes, swooned in August and early September, but
rallied back to finish with the Dow Jones Industrial Average up 16% and the S&P
500 up 26.7% and the technology-heavy NASDAQ Composite up 39.6%. The January 4,
1999 Barron's referred to the U.S. market as the "Teflon Market" because of
above average returns in the face of tepid corporate profits, a credit crunch
caused by the Asian currency collapses and Long Term Capital, the huge hedge
fund, collapse, and the first impeachment of a U.S. president in over 100
years. The Federal Reserve, after rallying Wall Street to bail-out Long Term
Capital in late September, decreased fed fund rates, rallied the bond market,
and thereby, helped the stock market to finish the 4th quarter on an up-leg.
The market had a definite preference for growth instead of value. The Dow
Target 5 and The Dow Target 10, both value oriented strategies, were unable to
keep pace with the ever climbing DJIA Index as strategy stocks failed to keep
pace with the best performers of the DJIA index which included retailer Wal-
Mart, technology driven IBM, and fast-food chain McDonalds. While the Dow
Target 5 & Dow Target 10 had good performance relative to the mean return of
the strategy, and the DJIA, their relative return compared to the DJIA
underperformed.
First Trust Advisors, L.P.
-2-
<PAGE>
Schedule of Investments
PFL Endeavor Target Account
Dow Target 5--July Series Subaccount
December 31, 1998
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
COMMON STOCK--102.1%
Automotives--19.3%
General Motors Corporation............................... 38,515 $ 2,758,637
-----------
Consumer Products--24.5%
Philip Morris Companies, Inc............................. 65,348 3,496,118
-----------
Machinery--15.7%
Caterpillar, Inc......................................... 48,646 2,237,716
-----------
Paper & Paper Products--18.8%
International Paper Company.............................. 59,820 2,680,684
-----------
Telecommunications--23.8%
AT&T Corporation......................................... 45,032 3,388,658
-----------
Total Common Stock
(Cost $13,341,560)............................................. 14,561,813
-----------
TOTAL INVESTMENTS
(Cost $13,341,560*)....................................... 102.1% 14,561,813
OTHER ASSETS AND LIABILITIES (Net)......................... -2.1% (305,212)
------ -----------
NET ASSETS................................................. 100.0% $14,256,601
====== ===========
</TABLE>
*Aggregate cost for federal tax purposes.
See accompanying notes
-3-
<PAGE>
Schedule of Investments
PFL Endeavor Target Account
Dow Target 10--July Series Subaccount
December 31, 1998
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
COMMON STOCK--104.2%
Automotives--10.7%
General Motors Corporation............................... 15,264 $ 1,093,284
-----------
Consumer Products--13.6%
Philip Morris Companies, Inc............................. 25,890 1,385,115
-----------
Diversified Manufacturing--8.9%
Minnesota Mining & Manufacturing Company................. 12,407 905,711
-----------
Financial Services--8.9%
J.P. Morgan & Company, Inc............................... 8,701 914,149
-----------
Machinery--8.7%
Caterpillar, Inc......................................... 19,284 887,064
-----------
Miscellaneous Manufacturing Industries--9.8%
Eastman Kodak Company.................................... 13,952 1,004,544
-----------
Oil & Gas Extraction--10.2%
Exxon Corporation........................................ 14,303 1,045,907
-----------
Paper & Paper Products--10.4%
International Paper Company.............................. 23,712 1,062,594
-----------
Petroleum Refining--9.9%
Chevron Corporation...................................... 12,270 1,017,643
-----------
Telecommunications--13.1%
AT&T Corporation......................................... 17,854 1,343,513
-----------
Total Common Stock
(Cost $10,270,166)............................................. 10,659,524
-----------
TOTAL INVESTMENTS
(Cost $10,270,166*)....................................... 104.2% 10,659,524
OTHER ASSETS AND LIABILITIES (Net)......................... -4.2% (431,792)
------ -----------
NET ASSETS................................................. 100.0% $10,227,732
====== ===========
</TABLE>
*Aggregate cost for federal tax purposes.
See accompanying notes
-4-
<PAGE>
Statement of Assets and Liabilities
PFL Endeavor Target Account
December 31, 1998
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
July Series July Series
Total Subaccount Subaccount
----------- ------------ -------------
<S> <C> <C> <C>
Assets
Investment in securities, at market
value $25,221,337 $14,561,813 $10,659,524
Cash 200,014 198,522 1,492
Receivable from investment manager 8,635 1,456 7,179
Dividends and/or interest receivable 69,228 40,121 29,107
----------- ----------- -----------
Total assets $25,499,214 $14,801,912 $10,697,302
=========== =========== ===========
Liabilities and contract owners'
equity
Liabilities:
Payable for investment securities
purchased $ 817,773 $ 545,311 $ 272,462
Payable to custodian 197,108 -- 197,108
----------- ----------- -----------
Total liabilities 1,014,881 545,311 469,570
Contract owners' equity
Deferred annuity contracts terminable
by owners 24,484,333 14,256,601 10,227,732
----------- ----------- -----------
Total liabilities and contract
owner's equity $25,499,214 $14,801,912 $10,697,302
=========== =========== ===========
</TABLE>
See accompanying notes
-5-
<PAGE>
Statement of Operations
PFL Endeavor Target Account
Period from July 1, 1998 (commencement of operations) through December 31, 1998
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
July Series July Series
Total Subaccount Subaccount
---------- ------------ -------------
<S> <C> <C> <C>
Net investment income
Investment income:
Dividends $ 169,645 $ 96,171 $ 73,474
---------- ---------- --------
Total investment income 169,645 96,171 73,474
---------- ---------- --------
Expenses:
Mortality and expense risk charge 86,226 49,425 36,801
Investment management fee 41,982 24,054 17,928
Custodian fees 8,056 4,028 4,028
Transfer agent fees 6,376 2,902 3,474
Legal fees 169 58 111
Audit fees 3,491 2,046 1,445
Organization expenses 37,880 18,940 18,940
Trustee fees and expenses 5,015 3,204 1,811
Printing 1,513 762 751
Administration fee 390 232 158
---------- ---------- --------
Total gross expenses 191,098 105,651 85,447
Less:
Waiver/reimbursement from investment
manager (26,373) (11,453) (14,920)
Credits allowed by custodian (5,341) (2,848) (2,493)
---------- ---------- --------
Total net expenses 159,384 91,350 68,034
---------- ---------- --------
Net investment income 10,261 4,821 5,440
---------- ---------- --------
Net unrealized appreciation from
investments
Net change in unrealized appreciation
of investments:
Beginning of the period -- -- --
End of the period 1,609,611 1,220,253 389,358
---------- ---------- --------
Net change in unrealized appreciation
of investments 1,609,611 1,220,253 389,358
---------- ---------- --------
Increase from operations $1,619,872 $1,225,074 $394,798
========== ========== ========
</TABLE>
See accompanying notes
-6-
<PAGE>
Statement of Changes in Contract Owners' Equity
PFL Endeavor Target Account
Period from July 1, 1998 (commencement of operations) through December 31, 1998
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
July Series July Series
Total Subaccount Subaccount
----------- ------------ -------------
<S> <C> <C> <C>
Operations
Net investment income $ 10,261 $ 4,821 $ 5,440
Net change in unrealized
appreciation of investments 1,609,611 1,220,253 389,358
----------- ----------- -----------
Increase from operations 1,619,872 1,225,074 394,798
----------- ----------- -----------
Contract transactions
Net contract purchase payments 16,360,693 9,410,629 6,950,064
Transfer payments from other
subaccounts or general account 6,753,903 3,801,466 2,952,437
Contract terminations, withdrawals,
and other deductions (250,135) (180,568) (69,567)
----------- ----------- -----------
Increase from contract transactions 22,864,461 13,031,527 9,832,934
----------- ----------- -----------
Net increase in contract owners'
equity 24,484,333 14,256,601 10,227,732
Contract owner's equity
Beginning of the period -- -- --
----------- ----------- -----------
End of the period $24,484,333 $14,256,601 $10,227,732
=========== =========== ===========
</TABLE>
See accompanying notes
-7-
<PAGE>
Notes to Financial Statements
PFL Endeavor Target Account
December 31, 1998
1.Organization and Summary of Significant Accounting Policies
Organization:
The PFL Endeavor Target Account (the Target Account) is a segregated investment
subaccount of PFL Life Insurance Company (PFL Life), an indirect wholly-owned
subsidiary of AEGON N.V., a holding company organized under the laws of The
Netherlands.
The Target Account is registered with the Securities and Exchange Commission
(SEC) as an open-end management investment company pursuant to provisions of
the Investment Company Act of 1940. The SEC, however, does not supervise the
management or the investment practices or policies of the Target Account. The
Target Account is currently divided into two investment subaccounts, Dow Target
5--July Series (Target 5) and Dow Target 10--July Series (Target 10).
Investment activity in these investment subaccounts is available for investment
to contract owners of The Endeavor Variable Annuity, The Endeavor Platinum
Variable Annuity, and The Endeavor ML Variable Annuity (the Variable
Annuities), issued by PFL Life. Net purchase payments received by the Target
Account for the Variable Annuities are invested in the subaccounts as selected
by the contract owner. The Target 5 and Target 10 commenced operations on July
1, 1998.
Portfolio Valuation:
The Target Account's investments are valued at market value as determined using
the last reported sale price at the close of the New York Stock Exchange on
December 31, 1998.
Securities Transactions and Investment Income:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Unrealized gains or losses
from investments are credited or charged to contract owners equity.
Concentration of Risk:
An investment in the Target Account may be subject to additional risk due to
the relative lack of diversity in its portfolio.
Income Taxes:
Operations of the Target Account form a part of PFL Life, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Target Account are accounted for
separately from other operations of PFL Life for purposes of federal income
taxation. The Target Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from PFL Life. Under existing federal income tax laws,
the income of the Target Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to PFL Life.
2.Fees and Expenses
The Target Account is managed by Endeavor Investment Advisers (the "Investment
Manager") pursuant to a management agreement. The Investment Manager is a
general partnership of which Endeavor Management Co. is the managing partner.
The limited partner in the Investment Manager is AUSA Financial Markets, Inc.,
an affiliate of PFL Life. The Investment Manager is responsible for providing
investment management and
-8-
<PAGE>
Notes to Financial Statements
PFL Endeavor Target Account
December 31, 1998
2.Fees and Expenses (continued)
administrative services to the Target Account. First Trust Advisers L.P. (the
Adviser) is the Account's investment Adviser. As compensation for these
services, the Target Account pays the Investment Manager a monthly fee based on
a percentage of the average daily net assets at the annual rate of 0.75% for
each Subaccount. In addition, the Investment Manager pays the Adviser a fee
equal to 0.35% of the average daily net assets.
The subaccounts pay all expenses not assumed by the Investment Manager. First
Data Investor Services Group, Inc. (Investor Services Group), a wholly-owned
subsidiary of First Data Corporation, serves as Administrator to the
Subaccounts and is paid a flat fee of $10,000 per annum for each Subaccount.
Investor Services Group also serves as the Fund's transfer agent.
From time to time the Investment Manager may waive a portion or all of the fees
otherwise payable to it and/or reimburse the Target Account for expenses. The
Investment Manager has voluntarily undertaken to waive its fees and has agreed
to bear certain expenses to ensure that total expenses do not exceed 1.30% of
the Subaccount's average daily net assets. For the period ended December 31,
1998, the Investment Manager waived and reimbursed expenses of $26,373. Boston
Safe Deposit and Trust Company (BSDT), an indirect wholly-owned subsidiary of
Mellon Bank Corporation, serves as the Subaccount's custodian. BSDT has agreed
to compensate the Target Account and decrease custody fees for cash balances
left uninvested by each Subaccount. For the period ended December 31, 1998, the
Target Account's expenses were reduced by a total of $5,341.
No director, officer or employee of the Investment Manager, Endeavor Management
Co., the Advisers or Investor Services Group received any compensation from the
Fund for serving as an officer or Trustee of the Fund. The Target Account pays
each Trustee who is not a director, officer or employee of the Investment
Manager, Endeavor Management Co., the Advisers, Investor Services Group or any
of their affiliates $1,000 per annum plus $100 per regularly scheduled meeting
attended and reimburses them for travel and out-of-pocket expenses.
Administrative charges include an annual charge of the lesser of 2% of the
policy value or $35 per contract which will commence on the first policy
anniversary of each contract owner's account. For policies issued on or after
May 1, 1995, the fee is waived if the sum of the premium payments less the sum
of all partial withdrawals is at least $50,000 on the policy anniversary.
Charges for administrative fees to the variable annuity contracts are an
expense of the Target Account.
PFL Life deducts a daily charge for assuming certain mortality and expense
risks. For the 5% Annually Compounding Death Benefit and the Annual Step-Up
Death Benefit, this charge is equal to an effective annual rate of 1.25% of the
value of the contract owners' individual account. For the Return of Premium
Death Benefit, the corresponding charge is equal to an effective annual rate of
1.10% of the value of the contract owners' individual account. PFL Life also
deducts a daily administrative charge equal to an annual rate of .15% of the
contract owners' account for administrative expenses. For certain policies of
Endeavor Variable Annuity and of Endeavor ML Variable annuity sold on or after
May 1, 1997, during the first seven policy years, PFL deducts a daily
Distribution Finance Charge equal to an effective annual rate of .15% of the
contract owners' account. For certain policies of Endeavor Platinum Variable
Annuity sold on or after May 1, 1997, during the first ten policy years, PFL
deducts a daily Distribution Finance Charge equal to an effective annual rate
of .25% of the contract owners' account.
-9-
<PAGE>
Notes to Financial Statements
PFL Endeavor Target Account
December 31, 1998
3.Securities Transactions
For the period ended December 31, 1998 the aggregate cost of purchases of
securities for the Target 5 and Target 10 Subaccounts were $13,341,560 and
$10,270,166, respectively.
Net unrealized appreciation of investments at December 31, 1998 was composed of
the following:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) Appreciation
------------ -------------- ------------
<S> <C> <C> <C>
Dow Target 5--July Series Subaccount $1,294,405 $ (74,152) $1,220,253
Dow Target 10--July Series Subaccount 557,286 (167,928) 389,358
</TABLE>
4.Contract Owners' Equity
A summary of deferred annuity contracts terminable by owners at December 31,
1998 follows:
<TABLE>
<CAPTION>
5% Annually Compounding Death Benefit
Return of Premium Death Benefit or Annual Step-Up Death Benefit
------------------------------------------ -----------------------------------------
Accumulation Accumulation Total Accumulation Accumulation Total
Units Owned Unit Value Contract Value Units Owned Unit Value Contract Value
--------------------------- -------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Dow Target 5 July Series Subaccount:
PFL Endeavor Variable
Annuity 1,687,953.146 $1.122170 $1,894,170 4,444,952.078 $1.121334 $4,984,276
PFL Endeavor ML
Variable Annuity 175,737.901 1.122170 197,208 662,269.122 1.121334 742,625
Endeavor Platinum
Variable Annuity 2,070,741.956 1.121610 2,322,565 3,672,232.106 1.120778 4,115,757
---------- ----------
$4,413,943 $9,842,658
========== ==========
Dow Target 10 July Series Subaccount:
PFL Endeavor Variable
Annuity 1,692,850.632 $1.034764 $1,751,701 2,825,523.187 $1.033997 $2,921,582
PFL Endeavor ML
Variable Annuity 141,796.418 1.034764 146,726 1,304,683.807 1.033997 1,349,039
Endeavor Platinum
Variable Annuity 626,721.861 1.034250 648,187 3,299,993.019 1.033486 3,410,497
---------- ----------
$2,546,614 $7,681,118
========== ==========
</TABLE>
At December 31, 1998 contract owners' equity was comprised of:
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
July Series July Series
Total Subaccount Subaccount
----------- ------------ -------------
<S> <C> <C> <C>
Unit transactions and accumulated net
investment income $22,874,722 $13,036,348 $ 9,838,374
Adjustment for appreciation to market
value 1,609,611 1,220,253 389,358
----------- ----------- -----------
Total contract owners' equity $24,484,333 $14,256,601 $10,227,732
=========== =========== ===========
</TABLE>
-10-
<PAGE>
Notes to Financial Statements
PFL Endeavor Target Account
December 31, 1998
4.Contract Owners' Equity (continued)
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
July Series July Series
Subaccount Subaccount
------------ -------------
<S> <C> <C>
Units outstanding--beginning of period -- --
Units purchased 9,327,979 7,452,618
Units redeemed and transferred 3,385,907 2,438,951
---------- ---------
Units outstanding--end of period 12,713,886 9,891,569
========== =========
</TABLE>
5.Year 2000 (Unaudited)
The term Year 2000 Issue generally refers to the improper processing of dates
and incorrect date calculations that might occur in computer software and
hardware and embedded systems as the Year 2000 is approached. The use of
computer programs that rely on two-digit date fields to perform computations
and decision-making functions may cause systems to malfunction when processing
information involving dates after 1999. For example, any computer software that
has date-sensitive coding might recognize a code of 00 as the year 1900 rather
than the year 2000.
PFL Life has developed a Year 2000 Project Plan (the Plan) to address the Year
2000 issue as it affects PFL Life's internal IT and non-IT systems, and to
assess Year 2000 issues relating to third parties with whom PFL Life has
critical relationships.
The Plan for addressing internal systems generally includes an assessment of
internal IT and non-IT systems and equipment affected by the Year 2000 issue;
definition of strategies to address affected systems and equipment; remediation
of identified systems and equipment; internal testing and certification that
each internal system is Year 2000 compliant; and a review of existing and
revised business resumption and contingency plans to address potential Year
2000 issues. PFL Life has remediated and tested substantially all of its
mission-critical internal IT systems as of December 31, 1998. PFL Life
continues to remediate and test certain non-critical internal IT systems,
internal non-IT systems and will continue with a revalidation testing program
throughout 1999.
PFL Life's Year 2000 issues are more complex because a number of its systems
interface with other systems not under PFL Life's control. PFL Life's most
significant interfaces and uses of third-party vendor systems are in the bank,
financial services and trust areas. PFL Life utilizes various banks to handle
numerous types of financial and sales transactions. Several of these banks also
provide trustee and custodial services for PFL Life's investment holdings and
transactions. These services are critical to a financial services company such
as PFL Life as its business centers around cash receipts and disbursements to
policyholders and the investment of policyholder funds. PFL Life has received
written confirmation from its vendor banks regarding their status on Year 2000.
The banks indicate their dedication to resolving any Year 2000 issues related
to their systems and services prior to December 31, 1999. PFL Life anticipates
that a considerable effort will be necessary to ensure that its corrected or
new systems can properly interface with those business partners with whom it
transmits and receives data and other information (external systems). PFL Life
has undertaken specific testing regimes with these third-party business
partners and expects to continue working with its business partners on any
interfacing of systems. However, the timing of external system compliance
cannot currently be predicted with accuracy because the implementation of Year
2000 readiness will vary from one company to another.
-11-
<PAGE>
Notes to Financial Statements
PFL Endeavor Target Account
December 31, 1998
5.Year 2000 (Unaudited) (continued)
PFL Life does have some exposure to date sensitive embedded technology such as
micro-controllers, but PFL Life views this exposure as minimal. Unlike other
industries that may be equipment intensive, like manufacturing, PFL Life is a
life insurance, and financial services organization providing insurance,
annuities and pension products to its customers. As such, the primary equipment
and electronic devices in use are computers and telephone related equipment.
This type of hardware can have date sensitive embedded technology which could
have Year 2000 problems. Because of this exposure, PFL Life has reviewed its
computer hardware and telephone systems, with assistance from the applicable
vendors, and has upgraded, or replaced, or is in the process of replacing any
equipment that will not properly process date sensitive data in the Year 2000
or beyond. This undertaking has been substantially completed for all
operations.
For PFL Life, a reasonably likely worst case scenario might include one or more
of PFL Life's significant policyholder systems being non-compliant. Such an
event could result in a material disruption of PFL Life's operations.
Specifically, a number of PFL Life's operations could experience an
interruption in the ability to collect and process premiums or deposits,
process claim payments, accurately maintain policyholder information,
accurately maintain accounting records, and or perform adequate customer
service. Should the worst case scenario occur, it could, dependent upon its
duration, have a material impact on PFL Life's business and financial
condition. Simple failures can be repaired and returned to production within a
matter of hours with no material impact. Unanticipated failures with a longer
service disruption period could have a more serious impact. For this reason,
PFL Life is placing significant emphasis on risk management and Year 2000
business resumption contingency planning in 1999 by modifying its existing
business resumption and disaster recovery plans to address potential Year 2000
issues.
The actions taken by management under the Year 2000 Project Plans are intended
to significantly reduce PFL Life's risk of a material business interruption
based on the Year 2000 issues. It should be noted that the Year 2000 computer
problem, and its resolution, is complex and multifaceted, and any company's
success cannot be conclusively known until the Year 2000 is reached. In spite
of its efforts or results, PFL Life's ability to function unaffected to and
through the Year 2000 may be adversely affected by actions (or failure to act)
of third parties beyond our knowledge or control. It is anticipated that there
may be problems that will have to be resolved in the ordinary course of
business on and after the Year 2000. However, PFL Life does not believe that
the problems will have a material adverse affect on PFL Life's operations or
financial condition.
-12-
<PAGE>
Report of Ernst & Young, LLP, Independent Auditors
PFL Endeavor Target Account
December 31, 1998
The Board of Managers and Contract Owners of the
PFL Endeavor Target Account
We have audited the accompanying statement of assets and liabilities of the PFL
Endeavor Target Account including the schedule of investments, as of December
31, 1998, and the related statement of operations and statement of changes in
contract owners' equity for the period July 1, 1998 (commencement of
operations) through December 31, 1998. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1998,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and schedule of investments referred
to above present fairly, in all material respects, the financial position of
the PFL Endeavor Target Account at December 31, 1998, the results of its
operations and the changes in contract owners' equity for the period July 1,
1998 through December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 29, 1999
-13-
