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ANNUAL REPORT
DECEMBER 31, 1996
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WRL SERIES FUND, INC.
AND
C.A.S.E RESERVE VARIABLE ANNUITY
WESTERN RESERVE LIFE
ASSURANCE CO. OF OHIO
February 1997
ACC00008 (2/97)
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TABLE OF CONTENTS
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PAGE
Chairman's Letter ............................................. 1
Report of Independent Accountants ............................. 2
WRL SERIES FUND, INC ..........................................
Portfolio Managers' Commentary:
C.A.S.E. Growth Portfolio ................................... 4
C.A.S.E. Growth & Income Portfolio .......................... 5
C.A.S.E. Quality Growth Portfolio ........................... 6
Schedules of Investments:
C.A.S.E. Growth Portfolio ................................... 7
C.A.S.E. Growth & Income Portfolio .......................... 9
C.A.S.E. Quality Growth Portfolio ........................... 11
Statements of Assets and Liabilities ......................... 13
Statements of Operations ..................................... 14
Statements of Changes in Net Assets .......................... 15
Financial Highlights ......................................... 16
Notes to Financial Statements ................................ 17
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
Statements of Assets, Liabilities and Equity Accounts ........ 21
Statements of Operations ..................................... 21
Statements of Changes in Equity Accounts ..................... 22
Selected Per Unit Data and Ratios ............................ 23
Notes to Financial Statements ................................ 24
The Portfolios of the WRL Series Fund, Inc. are made available through variable
life insurance, variable annuity, and group annuity products issued by Western
Reserve Life Assurance Co. of Ohio and its affiliates. The availability of
certain Portfolios may vary from product to product.
<PAGE>
[Picture of John R. Kenney]
JOHN R. KENNEY
CHAIRMAN OF THE BOARD
FELLOW CONTRACT OWNERS:
ALL'S WELL THAT ENDS WELL.
YES, DESPITE A SCARY SUMMER SELL-OFF AND MORE THAN A LITTLE NERVOUSNESS IN
DECEMBER, INVESTORS STILL BID A FOND FAREWELL TO 1996, AND TO ANOTHER
OUTSTANDING YEAR FOR THE MARKETS. OFFICIALLY, THE DOW JONES INDUSTRIAL AVERAGE
GAINED 28.89% ON THE YEAR, THE S&P INDEX OF 500 COMMON STOCKS 22.96%, AND THE
NASDAQ COMPOSITE 23.2% - REMARKABLE NUMBERS IN THEIR OWN RIGHT, BUT STUNNING
WHEN CONSIDERED WITH 1995'S EXTRAORDINARY RETURNS.
NOT TOO SURPRISINGLY, EVEN AS THE MAJOR AVERAGES SEEMED TO PUSH ALMOST DAILY
INTO UNCHARTED TERRITORY, THE DEBATES RAGED AS TO HOW LONG THE GOOD TIMES WOULD
LAST. HOW LONG BEFORE STOCKS WOULD FINALLY "CORRECT." HOW LONG BEFORE THIS GREAT
"BUBBLE" WOULD BURST. HOW LONG INVESTORS WOULD HANG AROUND AFTER THE FIRST SIGN
OF TROUBLE.
SO IT GOES. IT IS, QUITE SIMPLY, THE NATURE OF THE BUSINESS FOR WELL-INTENTIONED
FOLKS TO OFFER UP THEIR PROGNOSIS OF A BULL MARKET DURING A BULL MARKET. BUT THE
FACT REMAINS, IT'S UTTERLY IMPOSSIBLE TO KNOW WHEN THE TOPS AND BOTTOMS WILL
OCCUR. AND ANYONE WHO PRETENDS TO KNOW HAS DISPLACED FAITH IN THE FUTURE WITH
SPECULATION ABOUT THE FUTURE.
THAT'S NOT TO SAY WE DON'T NEED TO PAY ATTENTION; WE DO. INDEED, PERHAPS IT'S A
KEEN PERSPECTIVE, NOT INTELLECTUAL BRILLIANCE, THAT'S THE KEY TO INVESTMENT
SUCCESS. AND IN THE END, FOR MOST INVESTORS THE IMPORTANT THING MAY BE NOT SO
MUCH THEIR ABSOLUTE RETURNS, BUT THE STABILITY AND SUITABILITY OF THEIR
PORTFOLIOS ALONG THE WAY.
THE C.A.S.E. RESERVE VARIABLE ANNUITY HAS BEEN DESIGNED TO HELP YOU CONSTRUCT
YOUR OWN "HEALTHY" PORTFOLIO. THE THREE C.A.S.E. PORTFOLIOS - GROWTH, GROWTH &
INCOME, AND QUALITY GROWTH - ARE MANAGED BY ONE OF THE INDUSTRY'S MOST UNIQUE
INVESTMENT ADVISORY GROUPS, C.A.S.E. MANAGEMENT, INC. THROUGH C.A.S.E.'S
INDEPENDENT AND FACTUAL ANALYSIS, EACH PORTFOLIO WORKS TOWARDS THE GOAL OF
ACHIEVING HIGHER RETURNS. PLEASE TAKE A FEW MINUTES AND REVIEW THE PERSONAL
COMMENTS FROM THE C.A.S.E. PORTFOLIO MANAGER ON HOW THE PORTFOLIOS HAVE BEEN
INVESTED AND WHY. I INVITE YOU TO EVALUATE THESE REPORTS AND REVIEW THE DATA,
INCLUDING MAJOR POSITIONS AND WEIGHTINGS. ALL OF THIS INFORMATION IS INTENDED TO
PROVIDE YOU WITH AN INSIGHT INTO THE PORTFOLIOS' PERFORMANCE FOR THE PERIOD.
AS WE HEAD INTO 1997, THE ECONOMIC AND POLITICAL SETTINGS ARE CLOSE TO IDEAL FOR
THE MARKETS. BUT, FOR WHAT IT'S WORTH, I WOULDN'T EXPECT TO SEE THE SAME KIND OF
HISTORIC PERFORMANCE WE'VE WITNESSED OVER THE LAST TWO YEARS. WHAT I DO EXPECT
IS FOR THE C.A.S.E. PORTFOLIOS TO STAY THE COURSE WHATEVER THE MARKET DOES AND
FOCUS SQUARELY ON LONG-TERM RESULTS.
AS ALWAYS, OUR HIGHEST PRIORITY REMAINS THE SAFETY OF THE FUNDS YOU HAVE
ENTRUSTED WITH US. OUR COMMITMENT IS TO PROVIDE YOU WITH SUPERIOR PRODUCTS AND
EXCEPTIONAL SERVICE FOR THE LONG TERM. WE RESPECT YOUR PERSONAL TASK OF
FINANCIAL PLANNING AND APPRECIATE THE OPPORTUNITY TO HELP.
SINCERELY YOURS,
/s/ JOHN R. KENNEY
---------------
JOHN R. KENNEY
CHAIRMAN OF THE BOARD CHAIRMAN OF THE BOARD,
WRL SERIES FUND, INC. CHIEF EXECUTIVE OFFICER
AND PRESIDENT
WESTERN RESERVE LIFE
ASSURANCE CO. OF OHIO
1
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WRL SERIES FUND, INC.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of the WRL Series Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the C.A.S.E. Growth, C.A.S.E.
Growth & Income and C.A.S.E. Quality Growth Portfolios (three of the portfolios
constituting the WRL Series Fund, Inc., hereafter referred to as the
"Portfolios") at December 31, 1996, the results of each of their operations for
the year then ended, and the changes in each of their net assets and the
financial highlights for the year then ended and for the period May 1, 1995
(commencement of operations) through December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
January 31, 1997
2
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Western Reserve Life Assurance Co. of Ohio and
Contract Owners of the WRL Series Annuity Account - C.A.S.E. Reserve Variable
Annuity Contracts.
In our opinion, the accompanying statements of assets, liabilities and equity
accounts and the related statements of operations and of changes in equity
accounts and the selected per unit data and ratios present fairly, in all
material respects, the financial position of each of the Sub-Accounts
constituting the C.A.S.E. Reserve Variable Annuity Contracts of the WRL Series
Annuity Account (a separate account of Western Reserve Life Assurance Co. of
Ohio, hereafter referred to as the "Annuity Account") at December 31, 1996, the
results of each of their operations for the year then ended, and the changes in
each of their equity accounts and the selected per unit data and ratios for the
year then ended and for the period May 1, 1995 (commencement of operations)
through December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements and selected per unit data and ratios
(hereafter referred to as "financial statements") are the responsibility of the
Annuity Account's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
January 31, 1997
3
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WRL SERIES FUND, INC.
C.A.S.E. GROWTH PORTFOLIO
PORTFOLIO MANAGERS' COMMENTARY
For the year ended December 31, 1996
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WRL SERIES FUND, INC.
C.A.S.E. GROWTH PORTFOLIO AND THE WILSHIRE 5000 INDEX
[GRAPH 1]
THE C.A.S.E. GROWTH PORTFOLIO WAS FUNDED MAY 1, 1995, WITH THE INVESTMENT
OBJECTIVE OF CAPITAL GROWTH THROUGH INVESTMENTS IN COMMON STOCKS OF SMALL TO
MEDIUM-SIZED COMPANIES. THE C.A.S.E. GROWTH PORTFOLIO FOR THIS PAST YEAR ENDED
DECEMBER 31, 1996, RETURNED 17.50%. THE STANDARD & POOR'S INDEX OF 500 COMMON
STOCKS GAINED 22.96% FOR THE SAME PERIOD.
GENERALLY, OUR STRATEGY IS TO INVEST IN STOCKS OF COMPANIES WITH
WELL-ABOVE-AVERAGE MANAGEMENT, SOLID BALANCE SHEETS, BELOW MARKET PRICE TO
EARNINGS RATIOS (ON BOTH A LEADING AND LAGGING BASIS), ABOVE MARKET INSIDER AND
INSTITUTIONAL BUYING, AND EARNINGS ESTIMATES THAT ARE BEING REVISED UPWARDS.
WHILE GENERALLY EMPLOYING A BUY-AND-HOLD POSTURE UNTIL FUNDAMENTALS DICTATE A
CHANGE, THE PORTFOLIO MAY USE SHORT-TERM STRATEGIES TO TAKE ADVANTAGE OF
CHANGING MARKET CONDITIONS.
THE PAST YEAR PROVED TO BE VERY DIFFICULT FOR FUNDS THAT CONCENTRATE THEIR
HOLDINGS ON MID-AND SMALL-CAPITALIZED ISSUES. MOST INVESTORS COMPARED THE
PERFORMANCE OF THESE FUNDS TO THE NASDAQ COMPOSITE THAT RECORDED A TREMENDOUS
YEAR - UP 23.2% - BUT WAS DOMINATED BY A FEW NAMES. FOR EXAMPLE, IT IS ESTIMATED
THAT IF INTEL AND MICROSOFT (TWO VERY LARGE CAPITALIZED COMPANIES) WERE NOT
INCLUDED, THE NASDAQ COMPOSITE GAINED ONLY ABOUT HALF OF ITS 22.7%. WHILE THE
C.A.S.E. GROWTH PORTFOLIO MAY HAVE LAGGED THE NASDAQ COMPOSITE LAST YEAR, ITS
PERFORMANCE WAS VERY STRONG COMPARED TO LIPPER'S EQUITY INDEX OF ALL SMALL
COMPANY GROWTH FUNDS' GAIN OF 14.5%, AND THE RUSSELL 2000'S GAIN OF 16.55%.
OUR PHILOSOPHY OF INVESTING IN COMPANIES WITH ABOVE-AVERAGE EARNINGS'
CHARACTERISTICS AND BELOW-MARKET RISK PARAMETERS BALANCED BY PROPER
DIVERSIFICATION IS PRODUCING ABOVE AVERAGE GAINS FOR OUR PARTICIPANTS. WE ARE
CONFIDENT IN OUR APPROACH AND WITH UNDERLYING MARKET FUNDAMENTALS - A GROWING
ECONOMY, CONTROLLED INFLATION, FLAT INTEREST RATES, AND HEALTHY CORPORATE
PROFITS - STILL IN PLACE, WE CAN LOOK FORWARD TO ANOTHER GOOD YEAR.
THE STOCK MARKET CONTINUES TO BE DOMINATED BY EARNINGS AS IT REACHES NEW HIGHS.
IN FACT, OF THE TWO DOZEN FUNDAMENTAL METHODOLOGIES USED PROFESSIONALLY TO
EVALUATE INVESTMENTS, THE FIVE LEADING FACTORS GOVERNING PRICE MOVEMENT ARE ALL
EARNINGS RELATED - CHANGE IN ANALYSTS' PROJECTIONS, QUARTERLY EARNINGS GROWTH
RATE, EARNINGS SURPRISE FACTORS, THE CURRENT YEAR'S EARNINGS PROJECTION, AND
HISTORICAL 5-YEAR GROWTH RATES. IN "EARNINGS" TERMS, THE MARKET APPEARS
REASONABLY PRICED AT 19 TIMES TRAILING 12 MONTHS EARNINGS. IN THE PAST, MARKET
TOPS HAVE OCCURRED AT LEVELS SLIGHTLY ABOVE THE CURRENT MULTIPLE OF 19.
STOCKS WHICH EXHIBIT FUNDAMENTALS OF EXCEPTIONAL STRENGTH WILL ORDINARILY DO
BETTER THAN THE MARKET IN GOOD AS WELL AS BAD TIMES. THE BROAD REACH AND
ECONOMIC SCOPE OF OUR STUDY DISCIPLINES LEND THEMSELVES TO INVESTING IN
SELECTIVE ECONOMIC PERIODS, WHEN VOLATILITY AND UNCERTAINTY ARE PRESENT.
THEREFORE, OUR APPROACH SEEMS WELL SUITED TO THE PERIOD AHEAD.
/s/ WILLIAM E. LANGE
[C.A.S.E. LOGO] ----------------
WILLIAM E. LANGE
C.A.S.E. GROWTH PORTFOLIO MANAGER
This material must be preceded or accompanied by the Fund's current prospectus.
4
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. GROWTH & INCOME PORTFOLIO
PORTFOLIO MANAGERS' COMMENTARY
For the year ended December 31, 1996
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WRL SERIES FUND, INC.
C.A.S.E. GROWTH & INCOME PORTFOLIO
AND THE STANDARD & POOR'S INDEX OF 500 COMMON STOCKS
[GRAPH 2]
THE C.A.S.E. GROWTH AND INCOME PORTFOLIO WAS FUNDED MAY 1, 1995, WITH AN
OBJECTIVE OF HIGH CURRENT INCOME AND MODERATE GROWTH THROUGH INVESTMENTS IN
COMMON STOCKS OF WELL-PRICED, WELL-MANAGED, LARGE, STABLE, AND GROWING
COMPANIES. THE PORTFOLIO INVESTS IN STOCKS OF COMPANIES THAT PAY ABOVE-MARKET
DIVIDENDS, HAVE POSITIVE GROWTH RATES, AND HAVE DEMONSTRATED CAPITAL
APPRECIATION THAT EXCEEDS THE RATE OF INFLATION. FOR THE CALENDAR YEAR ENDED
DECEMBER 31, 1996, THE PORTFOLIO GAINED 19.22%. THE STANDARD & POOR'S INDEX OF
500 COMMON STOCKS ADVANCED 22.96% FOR THE SAME PERIOD.
THE STOCK MARKET ORDINARILY SERVES AS A BAROMETER THAT ANTICIPATES ECONOMIC
EVENTS OCCURRING TWELVE TO EIGHTEEN MONTHS INTO THE FUTURE. DURING THIS PAST
YEAR, THE MARKET HAS BECOME CONCERNED OVER GROWTH AND NEAR-TERM FLUCTUATIONS IN
ECONOMIC DATA WITH LESS REGARD TO DIVIDENDS AND VALUATIONS. THIS ENVIRONMENT
MADE IT DIFFICULT FOR THE PORTFOLIO TO OUTPACE THE MARKET. OUR APPROACH OF
INVESTING IN LARGER CAPITALIZED COMPANIES WITH YIELDS EXCEEDING THE MARKET DID,
HOWEVER, LEAD TO A SIGNIFICANT RETURN IN BELOW MARKET RISKS AND A CONSISTENCY OF
THE ANNUAL RETURN.
OUR RESEARCH DISCIPLINES FOR THE PORTFOLIO LOOK FOR COMPANIES WITH STRONG
BALANCE SHEETS, DEPENDABLE CASH FLOWS, HIGH PROFITABILITY, FAVORABLE VALUATIONS,
AND A STRONG UPWARD TREND IN EARNINGS AND DIVIDEND GROWTH. IF THE ECONOMY SLOWS,
WE SHOULD SEE A SLOWER PACE OF GROWTH DURING 1997. IF THAT OCCURS, THE VARIETY
OF RATE-SENSITIVE EQUITIES THE PORTFOLIO SEEKS SHOULD ADVANCE AT A PACE GREATER
THAN THE OVERALL MARKET.
AFTER TWO SIGNIFICANTLY ABOVE AVERAGE YEARS FOR THE EQUITY MARKET, 1997 MAY
PROVE TO BE A GOOD YEAR, BUT LESS POSITIVE THAN THE PRIOR TWO. THE ECONOMY STILL
IS GROWING AT A HEALTHY RATE, INFLATION APPEARS CONTROLLED, AND INTEREST RATES
ARE STEADY, SO THE BIGGEST RISK MAY BE THE GROWTH OF CORPORATE PROFITS. IN
CONDITIONS SUCH AS THESE, INVESTORS MAY MOVE THEIR MONEY TO MORE STEADILY
GROWING DIVIDEND PAYING COMPANIES, LIKE THOSE OWNED IN THE C.A.S.E. GROWTH AND
INCOME PORTFOLIO.
BY DESIGN, THE PORTFOLIO INVESTS IN COMPANIES WITH PRICE/EARNINGS RATIOS WHICH
ARE NEARLY 25% LESS THAN THE MARKETS, ON BOTH A 12-MONTH LEADING AND 12-MONTH
LAGGING BASIS. THESE SAME COMPANIES EXHIBIT YEAR-OVER-YEAR EARNINGS ADVANCEMENTS
ABOVE 10%. ON A CONSERVATIVE VALUE BASIS, THEIR 10-YEAR COMPARATIVES ARE ONLY
75% OF THE S&P 500. WITH ITS STOCKS DISPLAYING STRONG FUNDAMENTAL UNDERPINNINGS,
AN AVERAGE DIVIDEND YIELD GREATER THAN THE GENERAL MARKET'S, AND EARNINGS GROWTH
RATES SIGNIFICANTLY GREATER THAN THE MARKET'S, THE PORTFOLIO APPEARS WELL-SUITED
FOR THE CURRENT INVESTMENT CLIMATE AND ITS STATED OBJECTIVES.
[C.A.S.E. LOGO] /s/ WILLIAM E. LANGE
----------------
WILLIAM E. LANGE
C.A.S.E. GROWTH AND INCOME PORTFOLIO MANAGER
This material must be preceded or accompanied by the Fund's current prospectus.
5
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. QUALITY GROWTH PORTFOLIO
PORTFOLIO MANAGERS' COMMENTARY
For the year ended December 31, 1996
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WRL SERIES FUND, INC.
C.A.S.E. QUALITY GROWTH PORTFOLIO
AND THE STANDARD & POOR'S INDEX OF 500 COMMON STOCKS
[GRAPH 3]
THE C.A.S.E. QUALITY GROWTH PORTFOLIO WAS FUNDED MAY 1, 1995, WITH THE OBJECTIVE
OF PRESERVATION AND GROWTH OF CAPITAL. THE PORTFOLIO INVESTS PRIMARILY IN COMMON
STOCKS OF LARGE, WELL-MANAGED, WELL-PRICED COMPANIES WITH DEFINED MARKETS AND
FINANCIAL STRATEGIES. IT ACHIEVED A RESPECTABLE RATE OF RETURN OF 17.54% FOR THE
YEAR ENDED DECEMBER 31, 1996. THE STANDARD & POOR'S INDEX OF 500 COMMON STOCKS
ADVANCED 22.96% FOR THE SAME PERIOD. THE MAIN DIFFERENCE IN PERFORMANCE WAS DUE
TO THE SURGE IN THE TECHNOLOGY STOCKS, AND INVESTORS RATHER CAVALIER APPROACH TO
REWARD PROFIT GROWTH WITH LITTLE OR NO REGARD TO VALUATION.
LARGE CAPITALIZED COMPANIES WERE THE STOCKS TO OWN LAST YEAR. WHILE MANY SMALLER
CAPITALIZED COMPANIES GRABBED HEADLINES, IT WAS THE BIG COMPANIES THAT LED THE
MARKET. THE C.A.S.E. PHILOSOPHY IS TO SEEK OUT COMPANIES WITH STRONG EARNINGS
CHARACTERISTICS AND BELOW MARKET VALUATIONS. COMBINING INDIVIDUAL COMPANY
REQUIREMENTS WITH A BROAD BASE OF INDUSTRIES AND SECTORS PROVIDES FOR PRUDENT
RISK MANAGEMENT. IN OTHER WORDS, OUR APPROACH IS TO TAKE ONLY ABOUT 65% TO 75%
OF MARKET RISK, WHILE ATTAINING THE POSITIVE EARNINGS FACTORS INVESTORS CHERISH.
THIS CONSERVATIVE STYLE CAN HINDER UPSIDE RETURNS OVER SHORT PERIODS, BUT
PROVIDES SOLID PROTECTION DURING DOWNTURNS. OUR BEST RECENT EVIDENCE AS TO THE
VALIDITY OF OUR PHILOSOPHY IS THE MARKET'S DOWNTURN IN DECEMBER 1996 WHEN THE
PORTFOLIO OUTPERFORMED THE S&P BY ABOUT 50%.
AS WE MOVE INTO 1997, THE TRENDS THAT PUSHED THE MARKET SO WELL IN 1996 ARE
STILL IN PLACE - A HEALTHY ECONOMY, FLAT INTEREST RATES, CONTROLLED INFLATION,
AND RISING CORPORATE PROFITS. ANY CHANGE IN THE DELICATE BALANCE BETWEEN
ECONOMIC GROWTH AND INFLATION, HOWEVER, AND THE INVESTMENT ENVIRONMENT COULD
CHANGE DRAMATICALLY. ACCORDINGLY, WE ARE CONFIDENT IN THE PHILOSOPHY OF THE
C.A.S.E. QUALITY GROWTH PORTFOLIO, AND BELIEVE WE CAN CONTINUE TO ACHIEVE
SIGNIFICANT GAINS FOR OUR INVESTORS ON A RISK-ADJUSTED RETURN BASIS. AS A MATTER
OF POLICY, WE RESIST ANY TEMPTATION TO TIME MARKETS. OUR SECTOR AND INDUSTRY
WEIGHTINGS REFLECT OUR BEST JUDGMENT OF THE NEAR AND LONG-TERM DIRECTION OF OUR
ECONOMY AS A WHOLE AND THE STOCK MARKET IN PARTICULAR.
IN TERMS OF THE STRATEGIC ALIGNMENTS OF THE PORTFOLIO, OUR PRICE/EARNINGS RATIO,
ON BOTH A 12-MONTH LEADING AND 12-MONTH LAGGING BASIS, IS MORE CONSERVATIVE THAN
THE AVERAGE OF THE S&P 500. OUR AVERAGE STOCK IS ALSO REVISING ITS EARNINGS
ESTIMATES UPWARD AND THE YEAR-OVER-YEAR GROWTH OF SALES AND EARNINGS AVERAGE IS
ABOVE 15%. STOCKS WHICH EXHIBIT SUCH "ABOVE THE MARKET" FUNDAMENTALS ORDINARILY
PERFORM BETTER THAN THE GENERAL MARKET.
THE COMPANIES WHICH WERE SELECTED ARE BROADLY DIVERSIFIED, WELL-MANAGED, AND
REFLECT BALANCE SHEETS WHICH PROVIDE A BASIS FOR FUTURE CONFIDENCE. WE MONITOR
TWO DOZEN OF THE INDUSTRY'S MOST ADVANCED AND RELIABLE STUDY DISCIPLINES. WE
BELIEVE THAT IF WE HOLD FAST TO OUR DISCIPLINE FOR UNCOVERING COMPANIES WITH
ABOVE-AVERAGE CHARACTERISTICS, WE WILL ACHIEVE ABOVE-AVERAGE RETURNS IN BOTH
GOOD AND BAD MARKET ENVIRONMENTS.
[C.A.S.E. LOGO] /s/ WILLIAM E. LANGE
----------------
WILLIAM E. LANGE
C.A.S.E. QUALITY GROWTH PORTFOLIO MANAGER
This material must be preceded or accompanied by the Fund's current prospectus.
6
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. GROWTH PORTFOLIO
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SCHEDULE OF INVESTMENTS
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- -----------
COMMON STOCKS (80.37%)
AEROSPACE (1.56%)
AAR Corporation ............................ 13,700 $ 414,425
AGRICULTURE (1.47%)
Chiquita Brands International, Inc. ........ 30,600 390,150
APPAREL PRODUCTS (1.77%)
Pillowtex .................................. 16,600 298,800
U.S. Industries, Inc. (a) .................. 5,000 171,875
APPAREL & ACCESSORY STORES (1.00%)
Gymboree Corp. (a) ......................... 11,600 265,350
BUSINESS SERVICES (1.73%)
Equifax, Inc. .............................. 15,000 459,375
CHEMICALS & ALLIED PRODUCTS (1.81%)
Ethyl Corporation .......................... 50,000 481,250
COMMERCIAL BANKS (4.92%)
City National Corporation .................. 20,500 443,313
Magna Group, Inc. .......................... 13,100 386,450
Provident Bankshares Corporation ........... 1,586 61,834
Summit Bancorp ............................. 9,500 415,625
COMMUNICATION (1.19%)
360 Communications Company (a) ............. 13,700 316,813
COMMUNICATIONS EQUIPMENT (3.84%)
C-Cube Microsystems, Inc. (a) .............. 11,000 406,313
DSC Communications Corporation (a) ......... 13,000 232,375
Picturetel Corporation (a) ................. 14,700 382,200
COMPUTER & DATA PROCESSING SERVICE (7.44%)
Banyan Systems, Inc. (a) ................... 33,100 148,950
BMC Software, Inc. (a) ..................... 6,000 248,250
Control Data Systems, Inc. (a) ............. 20,700 455,400
Oracle Corporation (a) ..................... 11,400 475,950
S3 Incorporated (a) ........................ 25,600 416,000
Sun Microsystems, Inc. (a) ................. 9,000 231,187
COMPUTER & OFFICE EQUIPMENT (2.96%)
Cisco Systems, Inc. (a) .................... 4,500 286,313
Xircom, Inc. (a) ........................... 23,000 500,250
ELECTRIC SERVICES (1.48%)
Calenergy, Inc. (a) ........................ 11,700 393,413
COMMON STOCKS (CONTINUED)
ELECTRONIC COMPONENTS & ACCESSORIES (2.92%)
Atmel Corporation (a) ...................... 11,300 $ 374,313
LSI Logic Corporation (a) .................. 15,000 401,250
FOOD & KINDRED PRODUCTS (3.23%)
Dean Foods Company ......................... 15,000 483,750
Interstate Bakeries Corporation ............ 7,600 373,350
FURNITURE & FIXTURES (1.74%)
HON Industries, Inc. ....................... 14,000 462,000
GAS PRODUCTION & DISTRIBUTION (1.24%)
National Fuel Gas Company .................. 8,000 330,000
HEALTH SERVICES (2.54%)
Chronimed, Inc. (a) ........................ 21,200 288,850
NovaCare, Inc. (a) ......................... 35,000 385,000
HOTELS & OTHER LODGING PLACES (1.29%)
Prime Hospitality Corp. (a) ................. 21,300 343,462
INDUSTRIAL MACHINERY & EQUIPMENT (4.21%)
Global Industrial Technologies, Inc. (a) ... 22,800 504,450
SPS Technologies, Inc. (a) .................. 5,800 372,650
U.S. Filter Corporation (a) ................. 7,550 239,712
INSTRUMENTS & RELATED PRODUCTS (2.80%)
GenRad, Inc. (a) ............................ 12,000 279,000
Perkin-Elmer Corporation .................... 7,900 465,112
LIFE INSURANCE (2.01%)
SunAmerica, Inc. ............................ 12,000 532,500
MACHINERY, EQUIPMENT & SUPPLIES (1.65%)
Kaman Corporation - Class A ................. 33,600 436,800
OIL & GAS EXTRACTION (6.70%)
Noble Drilling Corporation (a) .............. 16,900 335,888
Oryx Energy Company (a) ..................... 5,000 123,750
Rowan Companies, Inc. (a) ................... 24,000 543,000
Santa Fe Energy Resources, Inc. (a) ......... 29,900 414,862
Southwestern Energy Company ................. 23,900 361,487
PAPER & ALLIED PRODUCTS (1.68%)
Mosinee Paper Corporation ................... 12,600 447,300
PAPER & PAPER PRODUCTS (1.51%)
Caraustar Industries, Inc. .................. 12,100 $ 402,325
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
7
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (1.90%)
Biogen, Inc. (a) ........................... 13,000 $ 503,750
PRIMARY METAL INDUSTRIES (2.29%)
Oregon Steel Mills, Inc. ................... 19,800 331,650
Steel Technologies, Inc. ................... 20,900 276,925
RADIO & TELEVISION BROADCASTING (0.89%)
HSN Inc. (a) ............................... 9,900 235,125
RADIO, TELEVISION, & COMPUTER STORES (0.29%)
Bell Microproducts, Inc. (a) ............... 8,800 78,100
RETAIL TRADE (1.65%)
Price/Costco, Inc. (a) ..................... 17,400 437,175
SECURITY & COMMODITY BROKERS (1.51%)
Paine Webber Group, Inc. ................... 14,300 402,188
TELECOMMUNICATIONS (2.16%)
WorldCom, Inc. (a) ......................... 22,000 573,375
TEXTILE MILL PRODUCTS (1.33%)
Mohawk Industries, Inc. (a) ................ 16,000 352,000
WATER TRANSPORTATION (1.87%)
Tidewater, Inc. ............................ 11,000 497,750
WHOLESALE TRADE DURABLE GOODS (0.43%)
Wyle Electronics ........................... 2,900 114,550
WHOLESALE TRADE NONDURABLE GOODS (1.36%)
Richfood Holdings, Inc. .................... 14,900 361,325
-----------
Total Common Stocks
(cost: $19,785,427) ...................................... 21,346,585
-----------
Total Investment Securities
(cost: $19,785,427) ...................................... $21,346,585
===========
SUMMARY
Investments at value ....................... 80.37% $21,346,585
Other Assets in
Excess of Liabilities .................... 19.63% 5,212,947
----------- -----------
Net Assets ................................. 100.00% $26,559,532
=========== ===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No income dividends were paid during the preceding twelve months.
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
8
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- -----------
COMMON STOCKS (91.92%)
AEROSPACE (4.69%)
AAR Corporation ............................ 1,800 $ 54,450
Northrop Grumman Corporation ............... 500 41,374
CHEMICALS & ALLIED PRODUCTS (8.97%)
Ethyl Corporation .......................... 4,900 47,162
E.I. Dupont De Nemours & Company ........... 500 47,187
PPG Industries, Inc. ....................... 800 44,900
Quaker Chemical Corporation ................ 2,700 44,212
COMMERCIAL BANKS (9.36%)
First Chicago NBD Corporation .............. 805 43,293
MBNA Corporation ........................... 1,300 53,950
NationsBank Corporation .................... 500 48,875
PNC Bank Corporation ....................... 1,200 45,150
COMMUNICATION (0.32%)
360 Communications Company (a) ............. 283 6,544
DEPARTMENT STORES (2.88%)
Dayton Hudson Corporation .................. 1,500 58,875
ELECTRIC SERVICES (1.43%)
Unicom Corporation ......................... 1,080 29,295
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (4.23%)
General Electric Company ................... 495 48,943
Maytag Corporation ......................... 1,900 37,525
FOOD & KINDRED PRODUCTS (2.37%)
Dean Foods Company ......................... 1,500 48,375
GAS PRODUCTION & DISTRIBUTION (5.77%)
Eastern Enterprises ........................ 1,000 35,375
National Fuel Gas Company .................. 1,100 45,375
People's Energy Corporation ................ 1,100 37,263
INDUSTRIAL MACHINERY & EQUIPMENT (4.14%)
Deere & Company ............................ 900 36,563
Harris Corporation ......................... 700 48,038
INSTRUMENTS & RELATED PRODUCTS (4.31%)
Eastman Kodak Company ...................... 585 46,946
Perkin-Elmer Corporation ................... 700 41,213
LEATHER & LEATHER PRODUCTS (1.62%)
Brown Group, Inc. .......................... 1,800 33,075
LIFE INSURANCE (2.31%)
Travelers Group, Inc. ...................... 1,040 47,190
COMMON STOCKS (CONTINUED)
MACHINERY, EQUIPMENT & SUPPLIES (2.48%)
Kaman Corporation .......................... 3,900 $ 50,700
MINING (1.79%)
Vulcan Materials Company ................... 600 36,525
OIL & GAS EXTRACTION (1.97%)
Dresser Industries, Inc. ................... 1,300 40,300
PERSONAL CREDIT INSTITUTIONS (2.26%)
Household International, Inc. .............. 500 46,125
PETROLEUM REFINING (6.52%)
Chevron Corporation ........................ 800 52,000
Mobil Corporation .......................... 300 36,675
Unocal Corporation ......................... 1,100 44,688
PETROLEUM & PETROLEUM PRODUCTS (0.83%)
Pennzoil Company ............................ 300 16,950
PHARMACEUTICALS (6.35%)
Bristol-Myers Squibb Company ................ 400 43,500
Gillette Company ............................ 600 46,650
Merck & Co., Inc. ........................... 500 39,625
PRIMARY METAL INDUSTRIES (2.21%)
Oregon Steel Mills, Inc. .................... 2,700 45,225
RESIDENTIAL BUILDING CONSTRUCTION (1.95%)
Kaufman & Broad Home Corporation ............ 3,100 39,913
SECURITY & COMMODITY BROKERS (2.39%)
Merrill Lynch & Company, Inc. ............... 600 48,900
TELECOMMUNICATIONS (4.06%)
Ameritech Corporation ....................... 600 36,375
SBC Communications, Inc. .................... 900 46,575
TEXTILE MILL PRODUCTS (2.00%)
Sara Lee Corporation ........................ 1,100 40,975
TOBACCO PRODUCTS (2.20%)
Philip Morris Companies, Inc. ............... 400 45,050
WHOLESALE TRADE NONDURABLE GOODS (2.51%)
Universal Corporation ....................... 1,600 51,400
-----------
Total Common Stocks
(cost: $1,627,629) ........................................ 1,879,299
-----------
Total Investment Securities
(cost: $1,627,629) ........................................ $ 1,879,299
===========
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
9
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- -----------
SUMMARY
Investments at value ...................... 91.92% $ 1,879,299
Other Assets in
Excess of Liabilities .................... 8.08% 165,104
----------- -----------
Net Assets ................................ 100.00% $ 2,044,403
=========== ===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No income dividends were paid during the preceding twelve months.
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
10
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. QUALITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- -----------
COMMON STOCKS (99.52%)
AEROSPACE (1.79%)
Northrop Grumman Corporation ............... 400 $ 33,100
APPAREL PRODUCTS (2.23%)
U.S. Industries, Inc. (a) .................. 1,200 41,250
APPAREL & ACCESSORY STORES (1.11%)
Gymboree Corp. (a) ......................... 900 20,587
AUTOMOTIVE (2.14%)
TRW Inc. ................................... 800 39,600
BEVERAGES (1.70%)
Coca-Cola Company .......................... 600 31,574
CHEMICALS & ALLIED PRODUCTS (6.34%)
E.I. Dupont De Nemours & Company ........... 400 37,750
Morton International, Inc. ................. 900 36,674
The Procter & Gamble Company ............... 400 43,000
COMMERCIAL BANKS (9.37%)
First Chicago NBD Corporation .............. 779 41,854
MBNA Corporation ........................... 1,000 41,500
NationsBank Corporation .................... 500 48,874
PNC Bank Corporation ....................... 1,100 41,388
COMPUTER & DATA PROCESSING SERVICE (3.40%)
Computer Associates International, Inc. .... 600 29,850
Oracle Corporation (a) ..................... 800 33,300
COMPUTER & OFFICE EQUIPMENT (1.72%)
Cisco Systems, Inc. (a) ..................... 500 31,813
DEPARTMENT STORES (1.91%)
Dayton Hudson Corporation ................... 900 35,325
ELECTRICAL GOODS (2.15%)
Westinghouse Electric Corporation ........... 2,000 39,750
ELECTRONIC COMPONENTS & ACCESSORIES (2.83%)
Intel Corporation ........................... 400 52,350
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (2.13%)
General Electric Company .................... 400 39,550
GAS PRODUCTION & DISTRIBUTION (3.55%)
Eastern Enterprises ......................... 900 31,838
People's Energy Corporation ................. 1,000 33,875
COMMON STOCKS (CONTINUED)
HEALTH SERVICES (2.01%)
Tenet Healthcare Corporation (a) ............ 1,700 $ 37,188
HOTELS & OTHER LODGING PLACES (2.16%)
MGM Grand, Inc. (a) ......................... 500 17,438
Prime Hospitality Corp. (a) ................. 1,400 22,575
INDUSTRIAL MACHINERY & EQUIPMENT (5.91%)
Deere & Company ............................. 900 36,563
Harris Corporation .......................... 600 41,175
U.S. Filter Corporation (a) ................. 1,000 31,750
INSTRUMENTS & RELATED PRODUCTS (3.32%)
Eastman Kodak Company ....................... 400 32,100
Perkin-Elmer Corporation .................... 500 29,438
INSURANCE (2.46%)
MGIC Investment Corporation ................. 600 45,600
LIFE INSURANCE (4.20%)
Sunamerica, Inc. ............................ 800 35,500
Travelers Group, Inc. ....................... 933 42,349
MEDICAL INSTRUMENTS & SUPPLIES (2.14%)
Mallinckrodt, Inc. .......................... 900 39,713
OIL & GAS EXTRACTION (6.49%)
Dresser Industries, Inc. .................... 1,200 37,200
Oryx Energy Company (a) ..................... 1,900 47,025
Santa Fe Energy Resources, Inc. (a) ......... 2,600 36,075
PETROLEUM REFINING (1.97%)
Unocal Corporation .......................... 900 36,563
PETROLEUM & PETROLEUM PRODUCTS (1.52%)
Pennzoil Company ............................ 500 28,250
PHARMACEUTICALS (8.35%)
Amgen, Inc. (a) ............................. 600 32,625
Bristol-Myers Squibb Company ................ 400 43,500
Gillette Company ............................ 500 38,875
Merck & Company, Inc. ....................... 500 39,625
PRINTING & PUBLISHING (1.88%)
Times Mirror Company ........................ 700 34,825
REAL ESTATE (0.09%)
Castle & Cooke, Inc. (a) .................... 110 1,746
RETAIL TRADE (2.17%)
Price/Costco, Inc. (a) ...................... 1,600 40,200
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
11
<PAGE>
WRL SERIES FUND, INC.
C.A.S.E. QUALITY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31,1996
NUMBER OF MARKET
SHARES VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
SECURITY & COMMODITY BROKERS (2.20%)
Merrill Lynch & Company, Inc. .............. 500 $ 40,750
TELECOMMUNICATIONS (6.12%)
Ameritech Corporation ...................... 500 30,313
SBC Communications, Inc. ................... 800 41,400
WorldCom, Inc. (a) ......................... 1,600 41,700
TEXTILE MILL PRODUCTS (2.01%)
Sara Lee Corporation ....................... 1,000 37,250
WHOLESALE TRADE DURABLE GOODS (2.15%)
Johnson & Johnson .......................... 800 39,800
-----------
Total Common Stocks
(cost: $1,628,519) ........................................ 1,843,913
-----------
Total Investment Securities
(cost: $1,628,519) ........................................ $ 1,843,913
===========
SUMMARY
Investments at value ....................... 99.52% $ 1,843,913
Other Assets in
Excess of Liabilities ..................... 0.48% 8,902
----------- -----------
Net Assets ................................. 100.00% $ 1,852,815
=========== ===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) No income dividends were paid during the preceding twelve months.
See notes to schedule of investments.
The notes to the financial statements are an integral part of this report.
12
<PAGE>
WRL SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
At December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. C.A.S.E.
C.A.S.E. GROWTH GROWTH & INCOME QUALITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
ASSETS:
Investments in securities, at cost .............................. $19,785,427 $ 1,627,629 $ 1,628,519
=========== =========== ===========
Investments in securities, at market value ...................... $21,346,585 $ 1,879,299 $ 1,843,913
Short-term securities, at amortized cost ........................ 0 0 0
Cash ............................................................ 5,196,843 160,347 7,832
Cash collateral for securities on loan .......................... 0 0 0
Receivables:
Securities sold ................................................ 0 0 0
Interest ....................................................... 19,058 1,180 588
Dividends ...................................................... 18,738 6,361 2,939
Foreign receivable ............................................. 0 0 0
Foreign currency contracts ..................................... 0 0 0
Other .......................................................... 0 0 0
----------- ----------- -----------
Total assets .................................................. 26,581,224 2,047,187 1,855,272
----------- ----------- -----------
LIABILITIES:
Securities purchased ............................................ 0 0 0
Accounts payable and accrued liabilities:
Investment advisory fees ....................................... 17,354 1,485 1,311
Due to custodian ............................................... 0 0 0
Dividends to shareholders ...................................... 0 0 0
Deposits for securities on loan ................................ 0 0 0
Foreign currency contracts ..................................... 0 0 0
Other fees ..................................................... 4,338 1,299 1,146
----------- ----------- -----------
Total liabilities ............................................. 21,692 2,784 2,457
----------- ----------- -----------
Total net assets ............................................. $26,559,532 $ 2,044,403 $ 1,852,815
=========== =========== ===========
NET ASSETS:
Capital stock shares authorized ................................. 75,000,000 75,000,000 75,000,000
=========== =========== ===========
Capital stock ($.01 par value) .................................. $ 19,796 $ 1,599 $ 1,508
Additional paid-in-capital ...................................... 24,766,368 1,760,977 1,623,605
Accumulated undistributed net investment income (loss) .......... 12,212 10,157 2,308
Accumulated undistributed net realized gain (loss) on:
Investment and foreign currency transactions ................... 199,998 20,000 10,000
Net unrealized appreciation (depreciation) on:
Investment securities .......................................... 1,561,158 251,670 215,394
Foreign currency transactions .................................. 0 0 0
----------- ----------- -----------
Net assets applicable to outstanding shares of capital .......... $26,559,532 $ 2,044,403 $ 1,852,815
=========== =========== ===========
Shares outstanding at December 31, 1996 ......................... 1,979,552 159,855 150,802
=========== =========== ===========
Net asset value per share ....................................... $ 13.42 $ 12.79 $ 12.29
=========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of this report.
13
<PAGE>
WRL SERIES FUND, INC.
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. C.A.S.E.
C.A.S.E. GROWTH GROWTH & INCOME QUALITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ........................................................ $ 116,472 $ 12,188 $ 6,727
Dividends ....................................................... 91,321 39,460 24,232
Foreign tax withheld ............................................ (371) 0 0
----------- ----------- -----------
Total investment income ........................................ 207,422 51,648 30,959
----------- ----------- -----------
EXPENSES:
Investment advisory fees ........................................ 83,931 13,903 12,683
Printing and shareholder reports ................................ 52,569 6,961 7,022
Custody fees .................................................... 35,088 33,505 32,970
Legal fees ...................................................... 328 13 15
Auditing and accounting fees .................................... 3,000 3,000 3,000
Directors fees .................................................. 123 5 6
Registration fees ............................................... 102 50 50
Other fees ...................................................... 3,496 54 86
----------- ----------- -----------
Total expenses ................................................. 178,637 57,491 55,832
Less:
Advisory fee waiver and expense reimbursement .................. 73,269 33,658 34,335
Fees paid indirectly ........................................... 454 29 52
----------- ----------- -----------
Net expenses ................................................. 104,914 23,804 21,445
----------- ----------- -----------
Net investment income (loss) .................................... 102,508 27,844 9,514
----------- ----------- -----------
Net realized gain (loss) on:
Investment securities .......................................... 629,925 102,838 66,177
Foreign currency transactions .................................. 0 0 0
----------- ----------- -----------
Total net realized gain (loss) ................................ 629,925 102,838 66,177
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on:
Investment securities .......................................... 1,514,389 175,723 189,665
Foreign currency transactions .................................. 0 0 0
----------- ----------- -----------
Total change in unrealized appreciation (depreciation) ........ 1,514,389 175,723 189,665
----------- ----------- -----------
Net gain (loss) on investments ................................. 2,144,314 278,561 255,842
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations $ 2,246,822 $ 306,405 $ 265,356
=========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of this report.
14
<PAGE>
WRL SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the year or period ended
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E.
C.A.S.E. GROWTH GROWTH & INCOME
PORTFOLIO PORTFOLIO
December 31 December 31
---------------------------- ----------------------------
1996 1995 (a) 1996 1995 (a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ........................ $ 102,508 $ 11,328 $ 27,844 $ 12,927
Net realized gain (loss) on investments and
foreign currency transactions ..................... 629,925 81,032 102,838 6,401
Change in unrealized appreciation (depreciation)
on investments and foreign currency transactions .. 1,514,389 46,769 175,723 75,947
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ......................... 2,246,822 139,129 306,405 95,275
------------ ------------ ------------ ------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ............................... (95,636) (10,990) (18,112) (12,902)
In excess of net investment income .................. 0 0 0 0
Net realized gains .................................. (429,926) (76,031) (82,838) (6,001)
In excess of net realized gains ..................... 0 0 0 0
------------ ------------ ------------ ------------
Total distributions ................................ (525,562) (87,021) (100,950) (18,903)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares ................... 23,037,532 2,442,347 894,348 991,742
Dividends and distributions reinvested .............. 525,562 87,021 100,950 18,903
Cost of shares repurchased .......................... (1,303,064) (3,234) (239,812) (3,555)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from capital
share transactions ............................... 22,260,030 2,526,134 755,486 1,007,090
------------ ------------ ------------ ------------
Net increase (decrease) in net assets ............... 23,981,290 2,578,242 960,941 1,083,462
NET ASSETS:
Beginning of period .................................. 2,578,242 0 1,083,462 0
------------ ------------ ------------ ------------
End of period ........................................ $ 26,559,532 $ 2,578,242 $ 2,044,403 $ 1,083,462
============ ============ ============ ============
Undistributed net investment income ................. $ 12,212 $ 338 $ 10,157 $ 25
============ ============ ============ ============
SHARE ACTIVITY:
Shares outstanding--beginning of period .............. 221,168 0 96,056 0
------------ ------------ ------------ ------------
Shares issued ........................................ 1,821,039 213,996 74,668 94,718
Shares issued--reinvestment of dividends
and distributions .................................. 39,166 7,465 7,803 1,676
Shares redeemed ...................................... (101,821) (293) (18,672) (338)
------------ ------------ ------------ ------------
Increase (decrease) in shares outstanding ............ 1,758,384 221,168 63,799 96,056
------------ ------------ ------------ ------------
Shares outstanding--end of period .................... 1,979,552 221,168 159,855 96,056
============ ============ ============ ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
C.A.S.E.
QUALITY GROWTH
PORTFOLIO
December 31
----------------------------
1996 1995 (a)
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) .......................... $ 9,514 $ 9,295
Net realized gain (loss) on investments and
foreign currency transactions ......................... 66,177 46,323
Change in unrealized appreciation (depreciation)
on investments and foreign currency transactions ...... 189,665 25,729
------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................. 265,356 81,347
------------ ------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ................................. (9,535) (9,274)
In excess of net investment income .................... (3,925) 0
Net realized gains .................................... (52,944) (43,323)
In excess of net realized gains ....................... 0 0
------------ ------------
Total distributions ................................... (66,404) (52,597)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares ..................... 690,792 1,072,213
Dividends and distributions reinvested ................ 66,404 52,597
Cost of shares repurchased ............................ (253,304) (3,589)
------------ ------------
Increase (decrease) in net assets from capital
share transactions ............................... 503,892 1,121,221
------------ ------------
Net increase (decrease) in net assets ............... 702,844 1,149,971
NET ASSETS:
Beginning of period .................................. 1,149,971 0
------------ ------------
End of period ........................................ $ 1,852,815 $ 1,149,971
============ ============
Undistributed net investment income ................. $ 2,308 $ 21
============ ============
SHARE ACTIVITY:
Shares outstanding--beginning of period .............. 106,076 0
------------ ------------
Shares issued ........................................ 61,432 101,557
Shares issued--reinvestment of dividends
and distributions .................................. 5,367 4,852
Shares redeemed ...................................... (22,073) (333)
------------ ------------
Increase (decrease) in shares outstanding ............ 44,726 106,076
------------ ------------
Shares outstanding--end of period .................... 150,802 106,076
============ ============
</TABLE>
(a) The inception of this portfolio was May 1, 1995.
The notes to the financial statements are an integral part of this report.
15
<PAGE>
WRL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS*
For the period ended
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. C.A.S.E.
GROWTH PORTFOLIO GROWTH & INCOME PORTFOLIO
December 31 December 31
----------------------- -------------------------
1996 1995(c) 1996 1995(c)
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........ $ 11.66 $ 10.00 $ 11.28 $ 10.00
Income from operations:
Net investment income (loss) .............. 0.12 0.12 0.20 0.21
Net realized and unrealized gain (loss)
on investments .......................... 1.92 2.49 1.98 1.38
-------- -------- -------- --------
Total income (loss) from operations ...... 2.04 2.61 2.18 1.59
-------- -------- -------- --------
Distributions:
Dividends from net investment income ...... (0.05) (0.12) (0.12) (0.21)
Dividends in excess of net investment
income .................................. 0.00 0.00 0.00 0.00
Distributions from net realized gains
on investments .......................... (0.23) (0.83) (0.55) (0.10)
Distributions in excess of net realized
gains on investments .................... 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Total distributions ...................... (0.28) (0.95) (0.67) (0.31)
-------- -------- -------- --------
Net asset value, end of period .............. 13.42 $ 11.66 $ 12.79 $ 11.28
======== ======== ======== ========
Total return (a) ............................ 17.50% 20.65% 19.22% 14.80%
Ratios and supplemental data:
Net assets at end of period
(in thousands) ........................... $ 26,560 $ 2,578 $ 2,044 $ 1,083
Ratio of expenses to average
net assets (b) ........................... 1.00% 1.00% 1.50% 1.00%
Ratio of net investment income (loss) to
average net assets (b) ................... 0.94% 1.02% 1.62% 1.94%
Ratio of commissions paid to number
of shares ................................ 6.04% N/A 6.15% N/A
Portfolio turnover rate(a) ................. 160.27% 121.62% 189.22% 72.73%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
C.A.S.E.
QUALITY GROWTH
PORTFOLIO
December 31
-----------------------
1996 1995(c)
-------- --------
Net asset value, beginning of period ... $ 10.84 $ 10.00
Income from operations:
Net investment income (loss) .......... 0.07 0.14
Net realized and unrealized gain (loss)
on investments ...................... 1.83 1.50
-------- --------
Total income (loss) from operations .. 1.90 1.64
-------- --------
Distributions:
Dividends from net investment income .. (0.06) (0.14)
Dividends in excess of net investment
income .............................. (0.03) 0.00
Distributions from net realized gains
on investments ...................... (0.36) (0.66)
Distributions in excess of net realized
gains on investments ................ 0.00 0.00
-------- --------
Total distributions .................. (0.45) (0.80)
-------- --------
Net asset value, end of period ......... $ 12.29 $ 10.84
======== ========
Total return (a) ........................ 17.54% 13.61%
Ratios and supplemental data:
Net assets at end of period
(in thousands) ...................... $ 1,853 $ 1,150
Ratio of expenses to average
net assets (b) ....................... 1.50% 1.00%
Ratio of net investment income (loss) to
average net assets (b) ............... 0.61% 1.28%
Ratio of commissions paid to number
of shares ............................ 6.18% N/A
Portfolio turnover rate (a) ............ 185.87% 119.63%
* The above table illustrates the change for a share outstanding computed
using average shares outstanding throughout each period. See Note 5.
(a) For periods less than one year the total return and portfolio turnover
rate are not annualized.
(b) For periods less than one year the ratio of expenses to average net assets
and the ratio of net investment income to average net assets are annualized.
(c) The inception of this portfolio was May 1, 1995.
The notes to the financial statements are an integral part of this report.
16
<PAGE>
WRL SERIES FUND, INC.
NOTES TO THE FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The WRL Series Fund, Inc., (the "Fund") is a diversified, open-end,
investment management company registered under the Investment Company Act of
1940, as amended. The fund was incorporated on August 21,1985, as a Maryland
corporation and commenced operations on October 2, 1986.
The Fund consists of a series of investment Portfolios, including the
C.A.S.E. Growth Portfolio, the C.A.S.E. Growth & Income Portfolio, and the
C.A.S.E. Quality Growth Portfolio (the "Portfolios"). Shares of the Portfolios
are sold to the WRL Series Annuity Account (the "Annuity Account") of Western
Reserve Life Assurance Co. of Ohio ("WRL"), to fund benefits under the C.A.S.E.
Reserve Variable Annuity Contracts. The Separate Account contains three
investment options referred to as sub-accounts, each of which upon instructions
received from contract owners of C.A.S.E. Reserve Variable Annuity Contracts,
invests in a corres-ponding C.A.S.E. Portfolio.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
A. VALUATION OF INVESTMENTS
Securities held by the Portfolios are valued at market value, except for
short-term debt securities. Short-term debt securities maturing in 60 days
or less are valued on the amortized cost basis, which approximates market
value. Stocks are valued at the latest sale price on the last business day
of the fiscal period as reported by the principal securities exchange on
which the issue is traded or, if no sale is reported for a stock, the latest
bid price is used. Bonds are valued using prices quoted by a major dealer in
bonds which offers a pricing service. Certain pricing methodologies, such as
matrix pricing of bonds, may involve the use of estimates and actual sales
prices may differ. Securities for which quotations may not be readily
available are valued as determined in good faith in accordance with
procedures established by and under the general supervision of the Fund's
Board of Directors.
The value of foreign securities are translated into U.S. dollars using
foreign exchange spot rates.
B. 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 for both tax and
financial reporting purposes. Dividend income is recorded on the ex-dividend
date, and interest income, including amortization of bond premium and
accretion of discount, is accrued daily. Dividend income on foreign
securities is recorded net of foreign tax expense.
The accounting records of the Fund are maintained in U.S. dollars. For
transactions denominated in a currency other than the U.S. dollar, purchases
and sales of securities, income received, and expenses paid are translated
into U.S. dollars at the foreign exchange spot rate on the date the
transaction is recorded. Currency gain and loss is also calculated on
payables and receivables that are denominated in foreign currencies. The
payables and receivables are generally related to security transactions and
income.
The unrealized gain or loss on forward foreign currency contracts is due to
the difference between the foreign exchange contract rate and the foreign
exchange forward rate applicable to that contract at the end of the period.
This gain or loss becomes realized when the contract is closed or settled.
Futures contracts and options are valued based upon daily settlement prices
with the fluctuations in value recorded as unrealized gains and losses.
These gains and losses become realized when the position is closed. The
risks associated with the use of options and futures contracts involve the
possibilities of an illiquid market and an imperfect correlation between the
value of the instrument and the underlying security.
C. FEDERAL INCOME TAXES
It is the Fund's policy to distribute substantially all of its taxable
income and capital gains to its shareholders and otherwise qualify as a
regulated investment company under the Internal Revenue Code. Pursuant to
Code Section 4982(f), regulated investment companies serving as funding
vehicles for life
17
<PAGE>
WRL SERIES FUND, INC.
NOTES TO THE FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTES 1 (CONTINUED)
insurance company separate accounts are not subject to excise tax
distribution requirements. Accordingly, no provision for Federal income
taxes has been made.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for such items as wash sales, foreign currency
transactions, net operating losses and capital loss carryforwards.
Reclassifications between undistributed net investment income (UNII) and
undistributed realized capital gains (URCG) were made to appropriately
conform financial accounting and tax treatment of dividend distributions.
Net investment income, net realized gains and net assets were not affected
by these reclassifications. The Portfolios and the amounts of the
reclassifications are as follows:
PORTFOLIO UNII UNCG
--------- ---- ----
C.A.S.E. Growth $ 5,002 $ (5,002)
C.A.S.E. Growth & Income 400 (400)
C.A.S.E. Quality Growth 6,233 (6,233)
D. DIVIDENDS AND DISTRIBUTIONS
Dividends of the Portfolios are typically declared and reinvested
semi-annually, while capital gain distributions are typically declared and
reinvested annually. Dividends and distributions of the Fund are generally
paid to and reinvested by the Separate Accounts on the next business day
after declaration.
E. ORGANIZATION COSTS
All costs incurred in connection with the formation of the Fund and its
Portfolios were paid by WRL.
F. EXPENSE OFFSET ARRANGEMENT
Fees paid indirectly, in the accompanying Statements of Operations,
represent reductions in custody expenses in lieu of interest income earned
on incidental uninvested cash balances. Such fees have been added to custody
fees to reflect total Fund expenses.
NOTE 2--INVESTMENT ADVISORY AND TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY
The Fund has entered into an annually renewable investment advisory
agreement for the Portfolios with WRL as investment adviser. The Fund pays
to WRL, and charges to each respective Portfolio, advisory fees each month
at the following annual rate expressed as a percentage of the average daily
net assets of the respective Portfolio:
PORTFOLIO PERCENT OF ASSETS
--------- -----------------
C.A.S.E. Growth .80%
C.A.S.E. Growth & Income .80%
C.A.S.E. Quality Growth .80%
WRL has entered into a sub-advisory agreement with C.A.S.E. Management, Inc.
Pursuant to the agreement, fifty percent of the advisory fee paid to WRL is
due to C.A.S.E. Management, Inc.
WRL currently voluntarily waives its advisory fees to the extent a
Portfolio's normal operating expenses exceed the percentage of average daily
net assets on an annualized basis of the Portfolio as listed below:
PERCENT OF
PORTFOLIO ASSETS
--------- ------
C.A.S.E. Growth 1.00%
C.A.S.E. Growth & Income 1.50%
C.A.S.E. Quality Growth 1.50%
The Portfolios are charged for expenses that specifically relate to their
individual operations. All other operating expenses of the Fund that are not
attributable to a specific Portfolio are allocated based upon the
proportionate number of policy and contract owners of the underlying
sub-accounts. WRL directly incurs and pays these operating expenses relating
to the Fund, which subsequently reimburses WRL. All normal operating
expenses that exceed the established expense limit set forth above will be
borne by WRL.
At a Special Meeting of Fund shareholders on December 16, 1996, a change in
investment adviser from WRL to WRL Investment Management, Inc. (WRL
Management) was approved,
18
<PAGE>
WRL SERIES FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 2 (CONTINUED)
effective January 1, 1997. At the same meeting, shareholders also approved
new investment advisory agreements ("New Advisory Agreements") between WRL
Management and the Fund, on behalf of each Portfolio. The terms of the New
Advisory Agreements are substantially the same as the terms of the current
advisory agreements between WRL and each Portfolio. At the same Special
Meeting., Fund shareholders also approved, effective January 1, 1997, new
investment sub-advisory agreements ("New Sub-Advisory Agreements) between
the Fund, on behalf of each Portfolio, and each respective sub-adviser for
each Portfolio. The terms of the New Sub-Advisory Agreements are
substantially the same as the terms of the current sub-advisory agreements.
WRL Management is a direct, wholly-owned subsidiary of WRL.
B. AFFILIATES
WRL is an indirect wholly-owned subsidiary of AEGON USA, Inc., which is an
indirect wholly-owned subsidiary of AEGON nv, a Netherlands corporation.
C. PLAN OF DISTRIBUTION
Effective January 1, 1997, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended,
("Distribution Plan") and pursuant to the Plan, has entered into a
Distribution Agreement with InterSecurities, Inc. ("ISI").
Under the Distribution Plan, the Fund, on behalf of the Portfolios, is
authorized to pay to various service providers, as direct payment for
expenses incurred in connection with the distribution of a Portfolio's
shares, amounts equal to actual expenses associated with distributing such
Portfolio's shares, up to a maximum rate of 0.15% on an annualized basis of
the average daily net assets.
ISI has determined that it will not seek payment by the Fund of distribution
expenses with respect to any Portfolio during the fiscal year ending
December 31, 1997. Prior to ISI seeking reimbursement, Contract Owners will
be notified in advance.
D. DEFERRED COMPENSATION PLAN
Each eligible Director of the WRL Series Fund, Inc. who is not an officer or
affiliated person as defined under the Investment Company Act of 1940, as
amended, may elect to participate in the Deferred Compensation Plan for
Directors of the WRL Series Fund, Inc. (the "Plan"). Under the Plan, such
Directors may elect to defer payment of a percentage of their total fees
earned as a Director of the Fund. These deferred amounts may be invested in
any Portfolio of the IDEX Series Fund. Invested plan amounts are included in
other assets. The total liability for deferred compensation to Directors
under the Plan at December 31, 1996, is included in other liabilities in the
accompanying Statement of Assets and Liabilities.
19
<PAGE>
WRL SERIES FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3--SECURITIES TRANSACTIONS
Securities transactions are summarized as follows:
<TABLE>
<CAPTION>
C.A.S.E. GROWTH C.A.S.E. QUALITY
C.A.S.E. GROWTH & INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
For the year ended December 31, 1996:
Purchases of securities:
Long-term excluding U.S. Government.. $ 30,146,788 $ 3,315,312 $ 3,113,396
U.S. Government securities .......... 0 12,884 0
Proceeds from maturities and sales
of securities:
Long-term excluding U.S. government.. 13,395,262 2,780,350 2,663,504
U.S. Government securities .......... 0 16,276 0
</TABLE>
NOTE 4--FEDERAL INCOME TAX MATTERS
The income, expenses, gains and losses on security transactions attributed
to each Portfolio for accounting purposes are also attributed to that Portfolio
for Federal income tax purposes. Gains and losses on forward currency contracts,
if applicable, are treated as ordinary income for Federal income tax purposes
pursuant to Section 988 of the Internal Revenue Code.
Each Portfolio has and will continue to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, and
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized gains, if any, to relieve it from all Federal
and state income taxes and Federal excise taxes.
The net capital loss carryforwards noted below as of December 31, 1996, if
applicable, are available to offset future realized capital gains through the
periods listed. Each Portfolio will elect to treat the net capital losses
incurred in the two month period ended December 31, 1996, (Post-October Losses
Deferred), if applicable, as having been incurred in the following fiscal year.
<TABLE>
<CAPTION>
PRIOR YEAR NET CAPITAL
NET CAPITAL LOSS DECEMBER 31,1996 LOSS
NET CAPITAL POST-OCTOBER CARRYFORWARD NET CAPITAL LOSS CARRYFORWARD
PORTFOLIO GAINS LOSSES DEFERRED UTILIZED CARRYFORWARD AVAILABLE THROUGH
- --------- ----- --------------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
C.A.S.E. Growth .............. $629,925 $ 0 $ 0 $ 0 N/A
C.A.S.E. Growth & Income ..... 102,838 0 0 0 N/A
C.A.S.E. Quality Growth ...... 62,944 0 0 0 N/A
</TABLE>
The aggregate cost of investments and composition of unrealized appreciation
and depreciation for Federal income tax purposes as of December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST BASIS APPRECIATION DEPRECIATION (DEPRECIATION)
- --------- ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
C.A.S.E. Growth ............... $ 19,785,427 $ 2,101,782 $ 540,624 $ 1,561,158
C.A.S.E. Growth & Income ...... 1,627,629 268,393 16,723 251,670
C.A.S.E. Quality Growth ....... 1,628,519 239,704 24,310 215,394
</TABLE>
20
<PAGE>
WRL SERIES FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5--FINANCIAL HIGHLIGHTS
The total return reflects the advisory fee and all other Portfolio expenses
and includes reinvestment of dividends and capital gains; it does not reflect
the charges against the corresponding sub-accounts or the charges and deductions
under the applicable annuity contracts. Where a Portfolio's period from
inception is less than one year, the total return shown is not annualized.
The ratio of expenses to average net assets in the Financial Highlights is
net of the advisory fee waiver (see Note 2). Without the advisory fee waived by
WRL, the ratio would be as follows:
DECEMBER 31
------------------
PORTFOLIO 1996 1995 *
- --------- ---- ------
C.A.S.E. Growth ..................... 1.64% 4.15%
C.A.S.E. Growth & Income ............ 3.34% 6.17%
C.A.S.E. Quality Growth ............. 3.56% 5.91%
* The inception date of these Portfolios was May 1, 1995.
21
<PAGE>
WRL SERIES FUND, INC.
- --------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Section 270.30d-1 under the Investment Company Act of 1940, as amended,
titled "Reports to Stockholders of Management Companies," requires regulated
investment companies to report on all subject matter put to a vote of the
shareholders and provide final results.
In adherence to this Amendment, WRL solicited a vote by the policyholders
for:
1. A new investment advisory agreement between the fund, on behalf of each
portfolio, and WRL Investment Management, Inc., effective January 1, 1997;
2. A new investment sub-advisory agreement for each Portfolio between WRL
Management, Inc., on behalf of such Portfolio, and the Portfolio's current
sub-adviser(s), effective January 1, 1997;
3. A distribution plan pursuant to rule 12b-1 under the Investment Company
Act of 1940, as amended, pursuant to which the Portfolios may reimburse
InterSecurities, Inc., ("ISI") which will act as Distributor of the Fund's
shares for distribution related expenses incurred by ISI in the performance of
its duties as Distributor pursuant to a distribution agreement between ISI and
the Fund.
At a special shareholders/policyholders meeting on December 16, 1996 the
results of the resolution were as follows:
PROPOSAL 1
---------------------------------
PORTFOLIOS FOR AGAINST ABSTAIN
- ---------- ------- --------- -----------
C.A.S.E. Growth 95% 1% 4%
C.A.S.E. Growth & Income 98% 2% 0%
C.A.SE. Quality Growth 88% 6% 6%
PROPOSAL 2
---------------------------------
PORTFOLIOS FOR AGAINST ABSTAIN
- ---------- ------- --------- -----------
C.A.S.E. Growth 95% 1% 4%
C.A.S.E. Growth & Income 98% 2% 0%
C.A.S.E. Quality Growth 88% 12% 0%
PROPOSAL 3
---------------------------------
PORTFOLIOS FOR AGAINST ABSTAIN
- ---------- ------- --------- -----------
C.A.S.E. Growth 85% 11% 4%
C.A.S.E. Growth & Income 98% 2% 0%
C.A.SE. Quality Growth 88% 12% 0%
22
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
STATEMENTS OF ASSETS, LIABILITIES AND EQUITY ACCOUNTS
At December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. GROWTH C.A.S.E. QUALITY
C.A.S.E. GROWTH & INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C> <C>
ASSETS:
Investments:
Investment in WRL Series Fund, Inc.:
Shares ..................................... 439,249.001 159,855.479 150,802.243
=============== =============== ==============
Cost ....................................... $ 5,276,732 $ 1,815,854 $ 1,657,943
=============== =============== ==============
Investments, at net asset value ............. $ 5,893,378 $ 2,044,403 $ 1,852,815
Accrued transfers from (to) depositor - net . 0 0 0
--------------- --------------- --------------
Total assets ............................... 5,893,378 2,044,403 1,852,815
--------------- --------------- --------------
LIABILITIES: .................................. 0 0 0
Total net assets ........................... $ 5,893,378 $ 2,044,403 $ 1,852,815
--------------- --------------- --------------
EQUITY ACCOUNTS:
Contract Owners' equity:
Units ...................................... 374,512.007459 102,527.307380 91,681.641862
=============== =============== ==============
Unit value ................................. $ 13.882712 $ 13.403523 $ 13.077310
=============== =============== ==============
Contract Owners' equity .................... $ 5,199,242 $ 1,374,227 $ 1,198,949
--------------- --------------- --------------
Depositor's equity:
Units ...................................... 50,000.000000 50,000.000000 50,000.000000
=============== =============== ==============
Unit value ................................. $ 13.882712 $ 13.403523 $ 13.077310
=============== =============== ==============
Depositor's equity ......................... $ 694,136 $ 670,176 $ 653,866
--------------- --------------- --------------
Total equity ............................... $ 5,893,378 $ 2,044,403 $ 1,852,815
=============== =============== ==============
</TABLE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
STATEMENTS OF OPERATIONS
For the year or period ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. GROWTH C.A.S.E. QUALITY
C.A.S.E. GROWTH & INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income ...................................... $ 22,133 $ 18,113 $ 13,460
Capital gain distributions ........................... 96,604 82,838 52,944
-------- -------- --------
118,737 100,951 66,404
EXPENSES:
Mortality and expense risk ........................... (53,656) (21,667) (19,744)
-------- -------- --------
Net investment income (loss) ........................ 65,081 79,284 46,660
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from securities
transactions ....................................... 60,637 53,092 32,572
Change in unrealized appreciation (depreciation) .... 564,848 152,362 166,380
-------- -------- --------
Net gain (loss) on investments ..................... 625,485 205,454 198,952
-------- -------- --------
Net increase (decrease) in equity accounts resulting
from operations .................................. $690,566 $284,738 $245,612
======== ======== ========
</TABLE>
The notes to the financial statements are an integral part of this report.
23
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
STATEMENTS OF CHANGES IN EQUITY ACCOUNTS
For the year or period ended
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. GROWTH
C.A.S.E. GROWTH & INCOME
SUB-ACCOUNT SUB-ACCOUNT
December 31 December 31
----------------------- -----------------------
1996 1995(a) 1996 1995(a)
---- ------- ---- -------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................. $ 65,081 $ 78,129 $ 79,284 $ 13,400
Net gain (loss) on investments ............... 625,485 52,108 205,454 76,373
---------- ---------- ---------- ----------
Net increase (decrease) in equity accounts
resulting from operations .................. 690,566 130,237 284,738 89,773
EQUITY TRANSACTIONS:
Proceeds from units sold (redeemed) .......... 2,791,028 1,948,178 880,018 494,100
---------- ---------- ---------- ----------
Less cost of units redeemed:
Administrative charges ...................... 2,649 0 513 0
Policy loans ................................ 0 0 0 0
Surrender benefits .......................... 163,812 170 203,303 410
Death benefits .............................. 0 0 0 0
---------- ---------- ---------- ----------
166,461 170 203,816 410
---------- ---------- ---------- ----------
Increase (decrease) in equity accounts
from capital unit transactions ............ 2,624,567 1,948,008 676,202 493,690
---------- ---------- ---------- ----------
Net increase (decrease) in equity accounts .. 3,315,133 2,078,245 960,940 583,463
Depositors' equity contribution (redemption) . 0 500,000 0 500,000
EQUITY ACCOUNTS:
Beginning of period .......................... 2,578,245 0 1,083,463 0
---------- ---------- ---------- ----------
End of period ................................ $5,893,378 $2,578,245 $2,044,403 $1,083,463
========== ========== ========== ==========
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. QUALITY
GROWTH SUB-ACCOUNT
December 31
----------------------------
1996 1995(a)
---- -------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ....................... $ 46,660 $ 46,556
Net gain (loss) on investments ..................... 198,952 28,750
---------- ----------
Net increase (decrease) in equity accounts resulting
from operations .................................. 245,612 75,306
EQUITY TRANSACTIONS:
Proceeds from units sold (redeemed) ................ 532,594 574,835
---------- ----------
Less cost of units redeemed:
Administrative charges ............................ 691 0
Policy loans ...................................... 0 0
Surrender benefits ................................ 74,671 170
Death benefits .................................... 0 0
---------- ----------
75,362 170
---------- ----------
Increase (decrease) in equity accounts from capital
unit transactions ............................... 457,232 574,665
---------- ----------
Net increase (decrease) in equity accounts ........ 702,844 649,971
Depositors' equity contribution (redemption) ....... 0 500,000
EQUITY ACCOUNTS:
Beginning of period ................................ 1,149,971 0
---------- ----------
End of period ...................................... $1,852,815 $1,149,971
========== ==========
</TABLE>
(a) The inception date of this sub-account was May 1, 1995.
The notes to the financial statements are an integral part of this report.
24
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E RESERVE VARIABLE ANNUITY
SELECTED PER UNIT DATA AND RATIOS*
For the period ended
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E. C.A.S.E. GROWTH
GROWTH SUB-ACCOUNT & INCOME SUB-ACCOUNT
December 31 December 31
---------------------- -----------------------
1996 1995(c) 1996 1995(c)
---- ------- ---- -------
<S> <C> <C> <C> <C>
Accumulation unit value, beginning of period ................... $11.96 $10.00 $11.38 $10.00
Income from operations:
Net investment income (loss) ................................. 0.20 0.85 0.57 0.22
Net realized and unrealized gain (loss) on investments ....... 1.72 1.11 1.45 1.16
------ ------ ------ ------
Total income (loss) from operations ......................... 1.92 1.96 2.02 1.38
------ ------ ------ ------
Accumulation unit value, end of period ......................... $13.88 $11.96 $13.40 $11.38
====== ====== ====== ======
Total return (a) ............................................... 16.04% 19.64% 17.74% 13.84%
Ratios and supplemental data:
Net assets at end of period (in thousands) .................... $5,893 $2,578 $2,044 $1,083
Ratio of net investment income (loss) to average net assets (b) 1.51% 11.12% 4.57% 3.07%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
C.A.S.E QUALITY
GROWTH SUB-ACCOUNT
December 31
-------------------------
1996 1995(c)
---- -------
<S> <C> <C>
Accumulation unit value, beginning of period ................... $11.27 $10.00
Income from operations:
Net investment income (loss) ................................. 0.35 0.70
Net realized and unrealized gain (loss) on investments ....... 1.46 0.57
------ ------
Total income (loss) from operations ......................... 1.81 1.27
------ ------
Accumulation unit value, end of period ......................... $13.08 $11.27
====== ======
Total return (a) ............................................... 16.08% 12.66%
Ratios and supplemental data:
Net assets at end of period (in thousands) .................... $1,853 $1,150
Ratio of net investment income (loss) to average net assets (b) 2.95% 9.72%
</TABLE>
* The above table illustrates the change for a unit outstanding computed
using average units outstanding throughout each period.
(a) For periods less than one year the total return is not annualized.
(b) For periods less than one year the ratio of net investment income to
average net assets is annualized.
(c) The inception date of this sub-account was May 1, 1995.
25
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1996
NOTE 1--ORGANIZATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
The WRL Series Annuity Account (the "Annuity Account") was established as
a variable accumulation deferred annuity separate account of Western Reserve
Life Assurance Co. of Ohio ("WRL") and is registered as a unit investment
trust ("Trust") under the Investment Company Act of 1940, as amended.
The Annuity Account holds assets that support the benefits under flexible
payment variable accumulation deferred annuity contracts (the "Contracts")
issued by WRL, including the C.A.S.E. Reserve Variable Annuity. The Annuity
Account equity transactions are accounted for using the appropriate effective
date at the corresponding accumulation unit value.
The C.A.S.E. Reserve Variable Annuity investment options, referred to as
sub-accounts, are the C.A.S.E. Growth Sub-Account, the C.A.S.E. Growth &
Income Sub-Account, and the C.A.S.E. Quality Growth Sub-Account. Each
sub-account invests in the corresponding portfolio of the WRL Series Fund,
Inc. (the "Fund"), a registered management investment company under the
Investment Company Act of 1940, as amended. The investment manager for these
three portfolios is C.A.S.E. Management, Inc.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The following significant accounting policies, which are in conformity
with generally accepted accounting principles for unit investment trusts,
have been consistently used in preparation of the Trust's financial
statements.
A. VALUATION OF INVESTMENTS
The investments in the Fund's shares are stated at the closing net asset
value ("NAV") per share as determined by the Fund on December 31, 1996.
Investment transactions are accounted for on the trade date, using the
Fund NAV next determined after receipt of sale or redemption order without
sales charges. Dividend income, and capital gain distributions are
recorded on the ex-dividend date. The cost of investments sold is
determined on a first-in, first-out basis.
B. FEDERAL INCOME TAXES
The operations of the Annuity Account are a part of and are taxed with the
total operations of WRL, which is taxed as a life insurance company under
the Internal Revenue Code. Under current law, the investment income of the
Annuity Account, including realized and unrealized capital gains, is not
taxable to WRL. Accordingly, no provision for Federal income taxes has
been made.
NOTE 2--CHARGES AND DEDUCTIONS
Charges are assessed by WRL in connection with issuance and administration
of the Contracts.
A. CONTRACT CHARGES
No deduction for sales expenses are made from the purchase payments. A
contingent deferred sales charge may, however, be assessed against
contract values when withdrawn or surrendered.
On each anniversary through maturity date, WRL will deduct an annual
contract charge as partial compensation for providing administrative
services under the Contracts.
B. SUB-ACCOUNT CHARGES
A daily charge equal to an annual rate of 1.25% of average daily net
assets is assessed to compensate WRL for assumption of mortality and
expense risks and administrative services in connection with issuance and
administration of the Contracts. This charge (not assessed at the
individual contract level) effectively reduces the value of a unit
outstanding during the year.
NOTE 3--DIVIDENDS AND DISTRIBUTIONS
Dividends of the Portfolios are typically declared and reinvested
semiannually, while capital gain distributions are typically declared and
reinvested annually.
26
<PAGE>
WRL SERIES ANNUITY ACCOUNT
C.A.S.E. RESERVE VARIABLE ANNUITY
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 (CONTINUED)
Dividends and distributions of the Fund are generally paid to and reinvested
by the Annuity Account the next business day after declaration.
NOTE 4--OTHER MATTERS
As of December 31, 1996 the equity accounts include net unrealized
appreciation (depreciation) on investments as follows:
<TABLE>
<CAPTION>
SUB-ACCOUNT
- -----------
<S> <C>
C.A.S.E. Growth $ 616,646
C.A.S.E. Growth & Income 228,549
C.A.S.E. Quality Growth 194,872
</TABLE>
27
<PAGE>
This Page Intentionally Left Blank.
28
<PAGE>
- --------------------------------------------------------------------------------
W R L S E R I E S F U N D , I N C .
- --------------------------------------------------------------------------------
WRL SERIES ANNUITY ACCOUNT
OFFICE OF THE WRL SERIES FUND, INC.
WRL SERIES ANNUITY ACCOUNT
201 Highland Avenue
Largo, FL 33770-2597
1-800-851-9777
---------------------------
DISTRIBUTOR:
InterSecurities, Inc.
201 Highland Avenue
Largo, FL 33770-2597
---------------------------
FUND CUSTODIAN:
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
---------------------------
INVESTMENT ADVISER:
WRL Investment Management, Inc.
201 Highland Avenue
Largo, FL 33770-2957
---------------------------
SUB-ADVISER:
C.A.S.E. Management, Inc.
2255 Glades Road
Suite 221-A
Boca Raton, FL 33431
---------------------------
INSURER:
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, FL 33770-2597
---------------------------
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
<PAGE>
THIS MATERIAL IS FOR CONTRACT HOLDER'S
REPORTING PURPOSES ONLY AND SHALL NOT BE
USED IN CONNECTION WITH A SOLICITATION,
OFFER OR ANY PROPOSED SALE OR PURCHASE
OF SECURITIES. THIS MATERIAL MUST BE
PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
[C.A.S.E. LOGO]
-------------------------------------------
Western Reserve Life Assurance Co. of Ohio
Distributor: InterSecurities, Inc.
201 Highland Avenue /bullet/ Largo, FL 33770-2597
February 1997
ACC00008 (2/97)
<PAGE>
Appendix to Electronic Format Page 1 of 1
WRL Series Fund. Inc.
C.A.S.E. Reserve Variable Annuity
Page 1 (photo) Shown is John R. Kenney, Chairman of the Board
Page 4 (graph 1) Mountain graph depicting the change in value of a
$10,000 investment in the portfolio since inception versus
the Wilshire 5000 Index (Wilshire) over the same time frame.
Portfolio Wilshire Index
Inception 5/1/95 $10,000 $10,000
Period Ended 12/31/95 $12,065 $12,028
FYE 12/31/96 $14,176 $14,294
Page 5 (graph 2) Mountain graph depicting the change in value of a
$10,000 investment in the portfolio since inception versus
the Standard & Poor's Index of 500 Common Stocks (S&P) over
the same time frame.
Portfolio S&P Index
Inception 5/1/95 $10,000 $10,000
Period Ended 12/31/95 $11,480 $12,186
FYE 12/31/96 $13,686 $14,984
Page 6 (graph 3) Mountain graph depicting the change in value of a
$10,000 investment in the portfolio since inception versus
the Standard & Poor's Index of 500 Common Stocks (S&P) over
the same time frame.
Portfolio S&P Index
Inception 5/1/95 $10,000 $10,000
Period Ended 12/31/95 $11,361 $12,186
FYE 12/31/96 $13,353 $14,984
