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ENDEAVOR VARIABLE ANNUITY
The PFL Endeavor
Variable Annuity Account
Semi-Annual Report
June 30, 1997
LOGO
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THIS PAGE LEFT BLANK INTENTIONALLY
2
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Dear Valued Policyholder:
We are pleased to present the Semi-Annual Report of the PFL Endeavor Variable
Annuity Account for the period ending June 30, 1997. This report contains
information on the following subaccounts:
TCW Money Market
TCW Managed Asset Allocation
T. Rowe Price International Stock
Value Equity
Dreyfus Small Cap Value
Dreyfus U.S. Government Securities
T. Rowe Price Equity Income
T. Rowe Price Growth Stock
Opportunity Value
Enhanced Index
Growth
We are pleased that you have chosen the Endeavor Variable Annuity to be part of
your financial future. We look forward to serving you in the future.
Sincerely,
LOGO
William L. Busler
President
PFL Life Insurance Company
This report may be distributed only to current policyholders or to persons who
have received current prospectuses of the variable annuity and the underlying
funds.
3
<PAGE>
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THE PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
BALANCE SHEET (AMOUNTS IN THOUSANDS)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
TCW T. ROWE
TCW MANAGED PRICE
MONEY ASSET INT'L.
MARKET ALLOCATION STOCK
TOTAL SUBACCT. SUBACCT. SUBACCT.
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash................................... $ 10 -- -- 1
Investments in mutual funds, at current
market value (Note 2):
Endeavor Series Trust--TCW Money
Market Portfolio..................... 38,832 38,832 -- --
Endeavor Series Trust--TCW Managed
Asset Allocation Portfolio........... 259,074 -- 259,074 --
Endeavor Series Trust--T. Rowe Price
International Stock Portfolio........ 147,545 -- -- 147,545
Endeavor Series Trust--Value Equity
Portfolio............................ 147,076 -- -- --
Endeavor Series Trust--Dreyfus Small
Cap Value Portfolio.................. 99,692 -- -- --
Endeavor Series Trust--Dreyfus U.S.
Gov't. Securities Portfolio.......... 30,267 -- -- --
Endeavor Series Trust--T. Rowe Price
Equity Income Portfolio.............. 113,335 -- -- --
Endeavor Series Trust--T. Rowe Price
Growth Stock Portfolio............... 71,654 -- -- --
Endeavor Series Trust--Opportunity
Value Portfolio...................... 9,335 -- -- --
Endeavor Series Trust--Enhanced Index
Portfolio............................ 5,087 -- -- --
WRL Investment Management, Inc.--
Growth Portfolio..................... 304,906 -- -- --
---------- ------ ------- -------
Total investments in mutual funds..... 1,226,803 38,832 259,074 147,545
---------- ------ ------- -------
Total Assets.......................... $1,226,813 38,832 259,074 147,546
========== ====== ======= =======
LIABILITIES AND CONTRACT OWNERS' EQUITY
Liabilities:
Contract terminations payable......... $ 3 1 2 --
---------- ------ ------- -------
Total Liabilities..................... 3 1 2 --
Contract Owners' Equity:
Deferred annuity contracts terminable
by owners (Note 3)................... 1,226,810 38,831 259,072 147,546
---------- ------ ------- -------
$1,226,813 38,832 259,074 147,546
========== ====== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
4
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<TABLE>
<CAPTION>
DREYFUS DREYFUS T. ROWE T. ROWE
SMALL U.S. PRICE PRICE
VALUE CAP GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
EQUITY VALUE SECURITIES INCOME STOCK VALUE INDEX GROWTH
SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
-------- -------- ---------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
3 4 -- 1 1 -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
147,076 -- -- -- -- -- -- --
-- 99,692 -- -- -- -- -- --
-- -- 30,267 -- -- -- -- --
-- -- -- 113,335 -- -- -- --
-- -- -- -- 71,654 -- -- --
-- -- -- -- -- 9,335 -- --
-- -- -- -- -- -- 5,087 --
-- -- -- -- -- -- -- 304,906
------- ------ ------ ------- ------ ----- ----- -------
147,076 99,692 30,267 113,335 71,654 9,335 5,087 304,906
------- ------ ------ ------- ------ ----- ----- -------
147,079 99,696 30,267 113,336 71,655 9,335 5,087 304,906
======= ====== ====== ======= ====== ===== ===== =======
-- -- -- -- -- -- -- --
------- ------ ------ ------- ------ ----- ----- -------
-- -- -- -- -- -- -- --
147,079 99,696 30,267 113,336 71,655 9,335 5,087 304,906
------- ------ ------ ------- ------ ----- ----- -------
147,079 99,696 30,267 113,336 71,655 9,335 5,087 304,906
======= ====== ====== ======= ====== ===== ===== =======
</TABLE>
5
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THE PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1997, Except as Noted (Unaudited)
<TABLE>
<CAPTION>
TCW T. ROWE
TCW MANAGED PRICE
MONEY ASSET INT'L.
MARKET ALLOCATION STOCK
TOTAL SUBACCT. SUBACCT. SUBACCT.
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS)
Income:
Dividends............................... $ 27,029 856 3,313 937
Expenses (Note 5):
Administrative fee...................... 247 7 60 33
Mortality and expense risk charge....... 7,320 244 1,661 892
-------- ------ ------ ------
Net Investment income (loss).......... 19,462 605 1,592 12
-------- ------ ------ ------
NET REALIZED AND UNREALIZED CAPITAL GAIN
(LOSS) FROM INVESTMENTS
Net realized capital gain from sales of
investments:
Proceeds from sales..................... 42,444 12,083 7,405 4,451
Cost of investments sold................ 34,091 12,083 5,347 3,717
-------- ------ ------ ------
Net realized capital gain from sales of
investments............................. 8,353 -- 2,058 734
Net change in unrealized
appreciation/depreciation of
investments:
Beginning of the period................. 175,289 -- 52,892 16,143
End of the period....................... 267,906 -- 73,804 29,390
-------- ------ ------ ------
Net change in unrealized
appreciation/depreciation of
investments.......................... 92,617 -- 20,912 13,247
-------- ------ ------ ------
Net realized and unrealized capital
gain (loss) from investments......... 100,970 -- 22,970 13,981
-------- ------ ------ ------
INCREASE FROM OPERATIONS................. $120,432 605 24,562 13,993
======== ====== ====== ======
</TABLE>
/1/Period from May 1, 1997 (commencement of operations) to June 30, 1997
See accompanying Notes to Financial Statements.
6
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<TABLE>
<CAPTION>
DREYFUS DREYFUS T. ROWE T. ROWE
SMALL U.S. PRICE PRICE
VALUE CAP GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
EQUITY VALUE SECURITIES INCOME STOCK VALUE INDEX GROWTH
SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT./1/ SUBACCT.
- -------- -------- ---------- -------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
4,957 10,323 892 2,776 520 1 -- 2,454
25 19 3 15 11 -- -- 74
858 586 167 590 398 28 10 1,886
------ ------ ----- ------ ------ --- --- ------
4,074 9,718 722 2,171 111 (27) (10) 494
------ ------ ----- ------ ------ --- --- ------
2,203 1,970 1,617 2,597 3,050 213 5 6,850
1,270 1,468 1,493 1,659 2,036 206 5 4,807
------ ------ ----- ------ ------ --- --- ------
933 502 124 938 1,014 7 -- 2,043
27,439 15,836 455 9,138 7,517 -- -- 45,869
38,184 19,943 204 17,571 15,514 505 490 72,301
------ ------ ----- ------ ------ --- --- ------
10,745 4,107 (251) 8,433 7,997 505 490 26,432
------ ------ ----- ------ ------ --- --- ------
11,678 4,609 (127) 9,371 9,011 512 490 28,475
------ ------ ----- ------ ------ --- --- ------
15,752 14,327 595 11,542 9,122 485 480 28,969
====== ====== ===== ====== ====== === === ======
</TABLE>
7
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THE PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1997 and Year Ended December 31, 1996, Except as
Noted (Unaudited)
<TABLE>
<CAPTION>
TCW T. ROWE
TCW MANAGED PRICE
MONEY ASSET INT'L. VALUE
MARKET ALLOCATION STOCK EQUITY
TOTAL SUBACCT. SUBACCT. SUBACCT. SUBACCT.
------------------- --------------- ---------------- ---------------- ----------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss).................. $ 19,462 16,224 605 870 1,592 728 12 (801) 4,074 736
Net realized capital
gain.................... 8,353 10,074 -- -- 2,058 2,964 734 537 933 1,155
Net change in unrealized
appreciation/depreciation
of investments.......... 92,617 96,426 -- -- 20,912 27,771 13,247 13,507 10,745 14,877
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
Increase from
operations.............. 120,432 122,724 605 870 24,562 31,463 13,993 13,243 15,752 16,768
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase
payments................ 75,077 150,050 8,235 12,211 5,981 13,250 7,774 16,257 9,529 20,562
Transfer payments from
other subaccounts or
general account......... 109,908 78,317 5,416 5,680 8,706 2,506 8,490 10,431 14,853 13,551
Contract terminations,
withdrawals, and other
deductions.............. (38,255) (52,551) (5,967) (11,765) (9,317) (12,118) (4,414) (6,132) (3,606) (4,444)
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
Increase from contract
transactions............ 146,730 175,816 7,684 6,126 5,370 3,638 11,850 20,556 20,776 29,669
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
Net increase in contract
owners' equity.......... 267,162 298,540 8,289 6,996 29,932 35,101 25,843 33,799 36,528 46,437
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period...... 959,648 661,108 30,542 23,546 229,140 194,039 121,703 87,904 110,551 64,114
---------- ------- ------ ------- ------- ------- ------- ------- ------- -------
End of period............ $1,226,810 959,648 38,831 30,542 259,072 229,140 147,546 121,703 147,079 110,551
========== ======= ====== ======= ======= ======= ======= ======= ======= =======
</TABLE>
/1/Period from November 18, 1996 (commencement of operations) to December 31,
1996
/2/Period from May 1, 1997 (commencement of operations) to June 30, 1997
See accompanying Notes to Financial Statements.
8
<PAGE>
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<TABLE>
<CAPTION>
DREYFUS DREYFUS T. ROWE T. ROWE
SMALL U.S. PRICE PRICE
CAP GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
VALUE SECURITIES INCOME STOCK VALUE INDEX GROWTH
SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
- --------------- -------------- --------------- -------------- -------------- -------- ----------------
1997 1996 1997 1996 1997 1996 ^1997 1996 1997 1996/1/ 1997/2/ 1997 1996
- ------ ------ ------ ------ ------- ------ ------ ------ ----- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9,718 1,791 722 229 2,171 (201) 111 56 (27) -- (10) 494 12,816
502 561 124 189 938 274 1,014 418 7 -- -- 2,043 3,976
4,107 11,410 (251) (108) 8,433 6,872 7,997 5,604 505 -- 490 26,432 16,493
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
14,327 13,762 595 310 11,542 6,945 9,122 6,078 485 -- 480 28,969 33,285
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
4,771 11,126 1,972 6,793 11,744 21,213 6,744 13,844 3,269 193 1,152 13,906 34,601
6,635 5,637 8,592 4,193 27,029 19,065 8,772 10,830 5,287 166 3,455 12,673 6,258
(2,523) (3,080) (715) (980) (1,914) (1,524) (1,715) (1,233) (21) (44) -- (8,063) (11,231)
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
8,883 13,683 9,849 10,006 36,859 38,754 13,801 23,441 8,535 315 4,607 18,516 29,628
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
23,210 27,445 10,444 10,316 48,401 45,699 22,923 29,519 9,020 315 5,087 47,485 62,913
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
76,486 49,041 19,823 9,507 64,935 19,236 48,732 19,213 315 -- -- 257,421 194,508
- ------ ------ ------ ------ ------- ------ ------ ------ ----- --- ----- ------- -------
99,696 76,486 30,267 19,823 113,336 64,935 71,655 48,732 9,335 315 5,087 304,906 257,421
====== ====== ====== ====== ======= ====== ====== ====== ===== === ===== ======= =======
</TABLE>
9
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THE PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT WHERE NOTED)
June 30, 1997 (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- The PFL Endeavor Variable Annuity Account ("Mutual Fund
Account") is a segregated investment account of PFL Life Insurance Company
("PFL Life"), an indirect, wholly-owned subsidiary of AEGON USA, Inc. ("AUSA"),
a holding company. AUSA is an indirect, wholly-owned subsidiary of AEGON nv, a
holding company organized under the laws of The Netherlands.
The Enhanced Index Subaccount commenced operations on May 1, 1997. The
Opportunity Value Subaccount commenced operations on November 18, 1996.
Effective May 1, 1996, the names of the Money Market, Managed Asset Allocation,
Quest for Value Equity, and the U.S. Government Securities Portfolios and
Subaccounts were changed to TCW Money Market, TCW Managed Asset Allocation,
Value Equity, and Dreyfus U.S. Government Securities Subaccounts and
Portfolios, respectively. Effective October 29, 1996, the names of the Value
Small Cap Portfolio Subaccount was changed to Dreyfus Small Cap Value Portfolio
and Subaccount, respectively. The investment advisor of the Endeavor Series
Trust is Endeavor Investment Advisors, a general partnership between Endeavor
Management Co. and AUSA Financial Markets, Inc., an affiliate of PFL Life. The
investment advisor for the WRL Investment Management, Inc. is Western Reserve
Life Assurance Co. of Ohio, an affiliate of PFL Life.
The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940.
Investments -- Net purchase payments received by the Mutual Fund Account are
invested in the portfolios of the Endeavor Series Trust, and the Growth
Portfolio of the WRL Investment Management, Inc. (collectively the "Series
Funds"), as selected by the contract owner. Investments are stated at the
closing net asset values per share on June 30, 1997.
Realized capital gains and losses from sale of shares in the Series Funds are
determined on the first-in, first-out basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date. Unrealized gains or losses
from investments in the Series Funds are credited or charged to contract
owners' equity.
Dividend Income -- Dividends received from the Series Funds investments are
reinvested to purchase additional mutual fund shares.
10
<PAGE>
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2. INVESTMENTS
A summary of the mutual fund investment at June 30, 1997 follows:
<TABLE>
<CAPTION>
NET ASSET
NUMBER VALUE
OF SHARES PER SHARE MARKET
HELD (IN DOLLARS) VALUE COST
--------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Endeavor Series Trust
TCW Money Market Portfolio......... 38,832 $ 1.00 $ 38,832 $ 38,832
TCW Managed Asset Allocation
Portfolio......................... 12,504 20.72 259,074 185,270
T. Rowe Price International Stock
Portfolio......................... 9,550 15.45 147,545 118,155
Value Equity Portfolio............. 7,807 18.84 147,076 108,892
Dreyfus Small Cap Value Portfolio.. 6,444 15.47 99,692 79,749
Dreyfus U.S. Government Securities
Portfolio......................... 2,707 11.18 30,267 30,063
T. Rowe Price Equity Income
Portfolio......................... 6,566 17.26 113,335 95,764
T. Rowe Price Growth Stock
Portfolio......................... 3,795 18.88 71,654 56,140
Opportunity Value Portfolio........ 847 11.02 9,335 8,830
Enhanced Index Portfolio........... 455 11.19 5,087 4,597
WRL Investment Management, Inc.
Growth Portfolio................... 7,875 38.717398 304,906 232,605
---------- --------
$1,226,803 $958,897
========== ========
</TABLE>
3. CONTRACT OWNERS' EQUITY
Contract owners' equity at June 30, 1997 includes an amount of $4,558, which
represents the current value of PFL Life's capital contribution of $2,911. A
summary of the Return of Premium Death Benefit deferred annuity contracts
terminable by owners at June 30, 1997 follows:
<TABLE>
<CAPTION>
ACCUMULATION
UNIT
ACCUMULATION VALUE TOTAL
SUBACCOUNT UNITS OWNED (IN DOLLARS) CONTRACT VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
TCW Money Market...................... 33,061 $ 1.174511 $ 38,830
TCW Managed Asset Allocation.......... 127,580 2.028611 258,810
T. Rowe Price International Stock..... 99,920 1.473324 147,215
Value Equity.......................... 76,700 1.912022 146,652
Dreyfus Small Cap Value............... 56,590 1.757456 99,453
Dreyfus U.S. Government Securities.... 26,124 1.152450 30,106
T. Rowe Price Equity Income........... 65,278 1.730058 112,935
T. Rowe Price Growth Stock............ 38,196 1.869689 71,416
Opportunity Value..................... 8,475 1.092742 9,262
Enhanced Index........................ 4,512 1.116452 5,038
Growth................................ 16,209 18.786424 304,506
----------
$1,224,223
==========
</TABLE>
11
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A summary of the 5% Annually Compounding Death Benefit and the Annual Step-Up
Death Benefit deferred annuity contracts terminable by owners at June 30, 1997
follows:
<TABLE>
<CAPTION>
ACCUMULATION
ACCUMULATION UNIT VALUE TOTAL
SUBACCOUNT UNITS OWNED (IN DOLLARS) CONTRACT VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
TCW Money Market...................... 1 $ 1.174330 $ 1
TCW Managed Asset Allocation.......... 129 2.028296 262
T. Rowe Price International Stock..... 225 1.473097 331
Value Equity.......................... 223 1.911728 427
Dreyfus Small Cap Value............... 138 1.757183 243
Dreyfus U.S. Government Securities.... 140 1.152274 161
T. Rowe Price Equity Income........... 232 1.729794 401
T. Rowe Price Growth Stock............ 128 1.869400 239
Opportunity Value..................... 67 1.092575 73
Enhanced Index........................ 44 1.116281 49
Growth................................ 21 18.783533 400
------
$2,587
======
</TABLE>
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
TCW T. ROWE DREYFUS DREYFUS T. ROWE T. ROWE
TCW MANAGED PRICE SMALL U.S. PRICE PRICE
MONEY ASSET INT'L. VALUE CAP GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
MARKET ALLOCATION STOCK EQUITY VALUE SECURITIES INCOME STOCK VALUE INDEX GROWTH
SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
-------- ---------- -------- -------- -------- ---------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units
outstanding at
1/1/96......... 21,104 122,975 75,065 46,195 40,636 8,457 14,943 14,197 -- -- 13,337
Units
purchased...... 10,754 7,818 13,001 13,373 8,625 6,218 15,335 9,588 192 -- 2,158
Units redeemed
and
transferred.... (5,397) (5,794) 3,396 5,659 1,864 2,887 12,395 6,453 122 -- (321)
------ ------- ------- ------ ------ ------ ------ ------ ----- ----- ------
Units
outstanding at
12/31/96....... 26,461 124,999 91,462 65,227 51,125 17,562 42,673 30,238 314 -- 15,174
Units
purchased...... 7,082 3,109 5,719 5,382 3,005 1,729 7,254 3,984 3,156 1,139 795
Units redeemed
and
transferred.... (481) (399) 2,964 6,314 2,598 6,973 15,583 4,102 5,072 3,417 261
------ ------- ------- ------ ------ ------ ------ ------ ----- ----- ------
Units
outstanding at
6/30/97........ 33,062 127,709 100,145 76,923 56,728 26,264 65,510 38,324 8,542 4,556 16,230
====== ======= ======= ====== ====== ====== ====== ====== ===== ===== ======
</TABLE>
At June 30, 1997 contract owners' equity was comprised of:
<TABLE>
<CAPTION>
TCW T. ROWE DREYFUS DREYFUS T. ROWE T. ROWE
TCW MANAGED PRICE SMALL U.S. PRICE PRICE
MONEY ASSET INT'L. VALUE CAP GOV'T. EQUITY GROWTH OPPORTUNITY ENHANCED
MARKET ALLOCATIO STOCK EQUITY VALUE SECURITIES INCOME STOCK VALUE INDEX
TOTAL SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT. SUBACCT.
---------- -------- --------- -------- -------- -------- ---------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit
transactions,
accumulated net
investment
income and
realized
capital gains.. $ 958,904 38,831 185,268 118,156 108,895 79,753 30,063 95,765 56,141 8,830 4,597
Adjustment for
appreciation to
market value... 267,906 -- 73,804 29,390 38,184 19,943 204 17,571 15,514 505 490
---------- ------ ------- ------- ------- ------ ------ ------- ------ ----- -----
Total Contract
Owners'
Equity......... $1,226,810 38,831 259,072 147,546 147,079 99,696 30,267 113,336 71,655 9,335 5,087
========== ====== ======= ======= ======= ====== ====== ======= ====== ===== =====
<CAPTION>
GROWTH
SUBACCT.
--------
<S> <C>
Unit
transactions,
accumulated net
investment
income and
realized
capital gains.. 232,605
Adjustment for
appreciation to
market value... 72,301
--------
Total Contract
Owners'
Equity......... 304,906
========
</TABLE>
12
<PAGE>
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4. TAXES
Operations of the Mutual Fund Account form a part of PFL Life, which is taxed
as a life insurance company under Subchapter L of the Internal Revenue Code of
1986, as amended (the "Code"). The operations of the Mutual Fund Account are
accounted for separately from other operations of PFL Life for purposes of
federal income taxation. The Mutual Fund Account is not separately taxable as a
regulated investment company under Subchapter M of the Code and is not
otherwise taxable as an entity separate from PFL Life. Under existing federal
income tax laws, the income of the Mutual Fund Account, to the extent applied
to increase reserves under the variable annuity contracts, is not taxable to
PFL Life.
5. ADMINISTRATIVE, MORTALITY AND EXPENSE RISK CHARGE
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 Mutual Fund Account.
PFL Life deducts a daily charge for assuming certain mortality and expense
risks. For the 5% Annually Compounding Death Benefit and the Annual Step-up
Death Benefit, this charge is equal to an effective annual rate of 1.25% of the
value of the contract owners' individual account. For the Return of Premium
Death Benefit, the corresponding charge is equal to an effective annual rate of
1.10% of the value of the contract owners' individual account. PFL Life also
deducts a daily charge equal to an annual rate of .15% of the contract owners'
account for administrative expenses. For certain policies sold on or after May
1, 1997, during the first seven policy years, PFL deducts a daily Distribution
Finance Charge equal to an effective annual rate of .15% of the contract
owners' account.
6. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
AND YEAR ENDED DECEMBER 31, 1996
OR COMMENCEMENT OF OPERATIONS TO
DECEMBER 31, 1996
---------------------------------
1997 1996
---------------- ----------------
PURCHASES SALES PURCHASES SALES
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Endeavor Series Trust
TCW Money Market Portfolio.................. $ 20,373 12,083 31,789 24,793
TCW Managed Asset Allocation Portfolio...... 14,367 7,405 19,595 15,228
T. Rowe Price International Stock
Portfolio.................................. 16,313 4,451 24,567 4,813
Value Equity Portfolio...................... 27,053 2,203 33,901 3,499
Dreyfus Small Cap Value Portfolio........... 20,571 1,970 19,535 4,065
Dreyfus U.S. Government Securities
Portfolio.................................. 12,188 1,617 12,087 1,853
T. Rowe Price Equity Income Portfolio....... 41,626 2,597 39,523 970
T. Rowe Price Growth Stock Portfolio........ 16,962 3,050 25,124 1,628
Opportunity Value Portfolio................. 8,721 213 352 37
Enhanced Index Portfolio.................... 4,602 5 -- --
WRL Investment Management, Inc.
Growth Portfolio............................ 25,860 6,850 56,406 13,962
-------- ------ ------- ------
$208,636 42,444 262,879 70,848
======== ====== ======= ======
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