<PAGE>
AUSA Endeavor Target Account
Semi-Annual Report
June 30, 2000
(Unaudited)
<PAGE>
Policyholder Letter
Dear Valued Policyholder:
We are pleased to present you with the market activity information on AUSA
Endeavor Target Account for the period ending June 30, 2000. 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
AUSA Endeavor Target Account
<PAGE>
Portfolio Manager Letter
The Federal Reserve voted in May to increase short-term interest rates an
additional one-half percent. The federal funds rate jumped from 6.0% to 6.5%
while the discount rate moved from 5.5% to 6.0%. The combination of rising
interest rates and surging oil prices, now selling in excess of $30 per
barrel, battered many highly valued technology stocks and proved too much
for several old economy stocks in the DJIA index. In particular, AT&T,
International Paper, General Motors, Du Pont, J.P. Morgan, and Caterpillar
declined anywhere from 14% to 44% in the second quarter. Value investing
lagged growth investing in the second quarter, as measured by Standard &
Poors. The S&P Barra Growth Index was down 1.6% while the S&P Barra Value
Index declined 4.75%. Over the next six months, we believe stock valuations
will be driven by two components: corporate earnings and the successful
execution of a soft landing for the U.S. economy.
The January Target 5 Subaccount outperformed the DJIA in the second quarter
of 2000. Philip Morris, Eastman Kodak, and SBC Communication performed well
up 25.7%, 9.8%, and 2.7% respectively. International Paper and Caterpillar
were down 30.3% and 14.1% respectively.
The January Target 10 Subaccount underperformed the DJIA in the second
quarter of 2000. Philip Morris, Eastman Kodak, and SBC Communication
performed well up 25.7%, 9.8%, and 2.7% respectively. International Paper,
General Motors, Du Pont (E.I.), J.P. Morgan, and Caterpillar were down
30.3%, 30%, 17.3%, 16.4%, and 14.1% respectively.
First Trust Advisors L.P.
<PAGE>
Schedule of Investments
AUSA Endeavor Target Account
Dow Target 5 - January Series Subaccount
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value
------ -------
<S> <C> <C>
COMMON STOCK - 97.7%
Consumer Products - 26.9%
Philip Morris Companies, Inc. 479 $ 12,723
---------
Machinery - 16.9%
Caterpillar, Inc. 238 7,961
---------
Miscellaneous Manufacturing Industries--20.9%
Eastman Kodak Company 166 9,877
---------
Paper and Paper Products-12.3%
International Paper Company 195 5,813
---------
Telecommunications--20.7%
SBC Communications 226 9,775
---------
Total Common Stock
(Cost $48,685) 46,149
---------
TOTAL INVESTMENTS
(Cost $48,685*) 97.7% 46,149
OTHER ASSETS AND LIABILITIES (Net) 2.3% 1,065
-------- ---------
NET ASSETS 100.0% $ 47,214
======== =========
</TABLE>
*Aggregate cost for federal tax purposes.
<PAGE>
Schedule of Investments
AUSA Endeavor Target Account
Dow Target 10 - January Series Subaccount
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value
---------- -----------
<S> <C> <C>
COMMON STOCK - 96.8%
Automotives - 9.3% 165 $ 9,580
General Motors Corporation ---------
Consumer Products - 13.4% 521 13,839
Philip Morris Companies, Inc. ---------
Diversified Chemicals - 7.7% 182 7,962
duPont (E.I.) de Nemours & Company ---------
Diversified Manufacturing - 9.8% 123 10,147
Minnesota Mining & Manufacturing Company ---------
Financial Services - 10.1% 95 10,462
J.P. Morgan & Company, Inc. ---------
Machinery - 8.4% 255 8,638
Caterpillar, Inc. ---------
Miscellaneous Manufacturing Industries - 10.4% 181 10,770
Eastman Kodak Company ---------
Oil & Gas Extraction - 11.3% 149 11,697
Exxon Mobil Corporation ---------
Paper and Paper Products - 6.1% 212 6,320
International Paper Co. ---------
Telecommunications- 10.3% 246 10,640
SBC Communications, Inc. ---------
Total Common Stock 100,055
(Cost $112,543) ---------
TOTAL INVESTMENTS
(Cost $112,543*) 96.8% 100,055
OTHER ASSETS AND LIABILITIES (Net) 3.2% 3,306
------- ---------
NET ASSETS 100.0% $ 103,361
======= =========
</TABLE>
*Aggregate cost for federal tax purposes.
See accompanying notes
<PAGE>
Statements of Assets and Liabilities
AUSA Endeavor Target Account
June 30, 2000 (Unaudited)
Dow Target 5 Dow Target 10
January Series January Series
Subaccount Subaccount
---------- ----------
Assets
Investment in securities, at market value $ 46,149 $ 100,055
Cash 2,683 6,435
Receivable from investment securities sold 5,460 8,515
Dividends and/or interest receivable 304 429
-------------- --------------
Total assets $ 54,596 $ 115,434
============== ==============
Liabilities and contract owners' equity
Liabilities:
Payable for investment securities purchased $ 7,324 $ 11,924
Management fee payable - -
Accrued Expenses payable - -
Fund redemption payable 58 149
-------------- --------------
Total liabilities 7,382 12,073
Contract owners' equity:
Deferred annuity contracts terminable by
owners 47,214 103,361
-------------- --------------
Total liabilities and contract owners'
equity $ 54,596 $ 115,434
============== ==============
See accompanying notes
<PAGE>
Statements of Operations
AUSA Endeavor Target Account
For the Period January 3, 2000 (commencement of operations) to
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Dow Target 5 Dow Target 10
January Series January Series
Subaccount Subaccount
---------- ----------
<S> <C> <C>
Net investment income
Investment income:
Dividends $ 790 $ 1,535
Interest - -
-------------- --------------
Total investment income 790 1,535
-------------- --------------
Expenses:
Investment management fee 170 353
Administration fees 4,872 4,872
Custodian fees 564 690
Transfer agent fees 14 14
Legal fees 2,350 4,475
Audit fees 710 1,361
Trustee fees and expenses 1,549 2,860
Printing 6,102 11,716
Other 485 749
Policy Fees 2 2
Mortality and expense risk charge 323 669
-------------- --------------
Total gross expenses 17,141 27,761
Less:
Waiver/reimbursement from investment manager (16,396) (26,080)
Credits allowed by custodian (125) (398)
-------------- --------------
Total net expenses 620 1,283
-------------- --------------
Net investment income 170 252
-------------- --------------
Net realized and unrealized capital (loss)
from investments
Proceeds from sales of
investments 9,900 -
Costs of investments sold 11,326 -
-------------- --------------
Net realized capital (loss) on investments (1,427) -
Net change in unrealized appreciation/depreciation
of investments:
Beginning of the period - -
End of the period (2,536) (12,488)
-------------- --------------
Net change in unrealized appreciation/depreciation
of investments (2,536) (12,488)
-------------- --------------
Net realized and unrealized capital (loss)
from investments (3,963) (12,488)
-------------- --------------
Decrease from operations $ (3,793) $ (12,236)
============== ==============
</TABLE>
See accompanying notes
<PAGE>
Statements of Changes in Contract Owners' Equity
AUSA Endeavor Target Account
For the Period January 3, 2000 (commencement of operations) to
June 30, 2000 (Unaudited)
Dow Target 5 Dow Target 10
January Series January Series
Subaccount Subaccount
-------------- --------------
Operations 2000 2000
Net investment income $ 170 $ 252
Net realized capital (loss) (1,427) -
Net change in unrealized depreciation
of investments (2,536) (12,488)
--------- ---------
Decrease from operations (3,173) (12,236)
--------- ---------
Contract transactions
Net contract purchase payments 50,999 115,618
Transfer payments from other subaccounts
or general account 8 (21)
Contract terminations, withdrawals,
and other deductions - -
--------- ---------
Increase from contract transactions 51,007 115,597
--------- ---------
Net increase in contract owners' equity 47,214 103,361
Contract owner's equity
Beginning of the period - -
--------- ---------
End of the period $ 47,214 $ 103,361
========= =========
See accompanying notes
<PAGE>
Notes to Financial Statements
AUSA Endeavor Target Account
June 30, 2000 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization:
The AUSA Endeavor Target Account (the Target Account) is a segregated investment
subaccount of AUSA Life Insurance Company (AUSA 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 - January Series ("Target 5 - January") and DOW Target 10 - January Series
("Target 10 -January"). Investment activity in these investment subaccounts is
available for investment to contract owners of The Endeavor Variable Annuity,
issued by AUSA 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 - January and Target 10 - January commenced
operations on January 4, 2000.
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 June
30, 2000.
Income Taxes:
Operations of the Target Account form a part of AUSA 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 AUSA 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 AUSA 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 AUSA Life.
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.
2. Fees and Expenses
The Target Account is managed by Endeavor Management Company, (the Investment
Manager), an affiliate of AUSA Life, pursuant to a management agreement. The
Investment Manager is responsible for providing investment management and
administrative services to the Target Account. First Trust Advisers L.P. (the
Adviser) is the Target 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. PFPC
Inc. (PFPC), formerly First Data Investor Services Group, Inc. , a majority-
owned subsidiary of PNC Bank Corp, serves as Administrator to the Subaccounts
and is paid a flat fee of $10,000 per annum for each Subaccount. PFPC 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 June 30, 2000,
the Investment Manager waived and reimbursed expenses of $16,396 for the Target
5-January and $26,080 for the Target 10-January. Boston Safe Deposit and Trust
Company (BSDT), an indirect wholly-owned subsidiary of Mellon Bank Corporation,
serves as the Subaccounts' custodian. BSDT has agreed to compensate the Target
Account and decrease custody fees for cash balances left uninvested by the
Subaccounts. For the period ended June 30, 2000, the Target Account's expenses
were reduced as follows: Dow Target 5-January Series $125, Dow Target 10-January
Series $398.
No director, officer or employee of the Investment Manager, Endeavor Management
Co., the Advisers or PFPC 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, PFPC 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.
AUSA 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. AUSA 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, AUSA Life deducts a daily
Distribution Finance Charge equal to an effective annual rate of .15% of the
contract owners' account.
<PAGE>
AUSA Endeavor Target Account
June 30, 2000 (Unaudited)
3. Securities Transactions
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period Ended June 30,
2000
Purchases Sales
--------------- --------------
<S> <C> <C>
Dow Target 5 - January Series Subaccount $ 60,012 $ 9,900
Dow Target 10 - January Series Subaccount 112,543 -
</TABLE>
Net unrealized appreciation (depreciation) of investments at June 30, 2000 was
composed of the following:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) (Depreciation)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Dow Target 5 - January Series Subaccount 3,342 (5,878) (2,536)
Dow Target 10 - January Series Subaccount 3,383 (15,871) (12,488)
</TABLE>
4. Contract Owners' Equity
A summary of deferred annuity contracts terminable by owners at June 30, 2000
follows:
<TABLE>
<CAPTION>
Return of Premium Death Benefit
--------------------------------------------------
Accumulation Accumulation Total
Units Owned Unit Value Contract Value
---------------- -------------- ----------------
<S> <C> <C> <C>
Dow Target 5 January Series Subaccount:
PFL Endeavor Variable Annuity 50,000.000 $ 0.925814 $ 46,291
----------------
$ 46,291
================
Dow Target 10 January Series Subaccount:
PFL Endeavor Variable Annuity 100,000.000 $ 0.891049 $ 89,105
----------------
$ 89,105
================
<CAPTION>
5% Annually Compounding Death Benefit or
Annual Step-Up Death Benefit
---------------------------------------------------
Accumulation Accumulation Total
Units Owned Unit Value Contract Value
---------------- -------------- -----------------
<S> <C> <C> <C>
Dow Target 5 January Series Subaccount:
PFL Endeavor Variable Annuity 998,190 $ 0.9251620 $ 923
-----------------
$ 923
=================
Dow Target 10 January Series Subaccount:
PFL Endeavor Variable Annuity 16,009.874 $ 0.8904220 $ 14,256
-----------------
$ 14,256
=================
</TABLE>
A summary of changes in contract owners' account units follows
Dow Target 5 Dow Target 10
January Series January Series
Subaccount Subaccount
-------------- --------------
Units outstanding - January 1, 1999 - -
Units purchased - -
Units redeemed and transferred - -
-------------- --------------
Units outstanding December 31, 1999 - -
Units purchased 51,002 116,014
Units redeemed and transferred (4) (4)
-------------- --------------
Units outstanding June 30, 2000 50,998 116,010
============== ==============
