<PAGE> 1
FINANCIAL STATEMENTS
PAINEWEBBER LIFE VARIABLE ANNUITY ACCOUNT
YEAR ENDED DECEMBER 31, 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 2
PaineWebber Life Variable Annuity Account
Financial Statements
Year ended December 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
Report of Independent Auditors
The Board of Directors
PaineWebber Life Insurance Company
We have audited the accompanying statement of net assets of PaineWebber Life
Variable Annuity Account [comprising, respectively, the Money Market, Strategic
Fixed Income, High Grade Fixed Income, Global Income, Balanced (terminated
January 26, 1996), Balanced, Growth and Income, Growth, Aggressive Growth and
Global Growth Divisions] as of December 31, 1997, the related statements of
operations for the year then ended and changes in net assets for each of the
two years in the period then ended. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1997,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PaineWebber Life Variable
Annuity Account at December 31, 1997, and the results of its operations for the
year then ended and the changes in its net assets for each of the two years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 14, 1998
1
<PAGE> 4
PaineWebber Life Variable Annuity Account
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
STRATEGIC HIGH GRADE
MONEY FIXED FIXED
MARKET INCOME INCOME
COMBINED DIVISION DIVISION DIVISION
------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments at net asset value:
PaineWebber Series Trust Money Market
Portfolio, 6,426,761 shares at $1.00 per
share (cost -- $6,426,761) $ 6,426,761 $6,426,761$ $ - $ -
PaineWebber Series Trust Strategic Fixed
Income Portfolio, 548,931 shares at
$10.64 per share (cost -- $6,073,645) 5,840,628 - 5,840,628 -
PaineWebber Series Trust High Grade Fixed
Income Portfolio, 785,553 shares at
$9.29 per share (cost -- $7,244,606) 7,297,783 - - 7,297,783
PaineWebber Series Trust Global Income
Portfolio, 875,407 shares at $10.81 per
share (cost -- $10,116,570) 9,463,149 - - -
PaineWebber Series Trust Balanced
Portfolio, 1,706,464 shares at $11.33
per share (cost -- $18,906,346) 19,334,234 - - -
PaineWebber Series Trust Growth and Income
Portfolio, 879,947 shares at $13.69 per
share (cost -- $10,386,975) 12,046,479 - - -
PaineWebber Series Trust Growth Portfolio,
1,160,886 shares at $15.63 per share
(cost -- $19,882,362) 18,144,648 - - -
PaineWebber Series Trust Aggressive Growth
Portfolio, 1,419,893 shares at $13.40
per share (cost -- $15,858,570) 19,026,564 - - -
PaineWebber Series Trust Global Growth
Portfolio, 1,041,015 shares at $14.62
per share (cost -- $14,535,883) 15,219,641 - - -
------------------------------------------------------------
Total investments (cost -- $109,431,718) 112,799,887 6,426,761 5,840,628 7,297,783
Dividends receivable 16,509,752 - 382,458 437,176
------------------------------------------------------------
Total net assets $129,309,639 $6,426,761 $6,223,086 $7,734,959
============================================================
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
GLOBAL GROWTH AND AGGRESSIVE GLOBAL
INCOME BALANCED INCOME GROWTH GROWTH GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 9,463,149 $ - $ - $ - $ - $ -
- 19,334,234 - - - -
- - 12,046,479 - - -
- - - 18,144,648 - -
- - - - 19,026,564 -
- - - - - 15,219,641
------------------------------------------------------------------------------------------------
9,463,149 19,334,234 12,046,479 18,144,648 19,026,564 15,219,641
629,508 4,004,313 2,250,666 5,307,083 3,389,604 108,944
------------------------------------------------------------------------------------------------
$10,092,657 $23,338,547 $14,297,145 $23,451,731 $22,416,168 $15,328,585
================================================================================================
</TABLE>
3
<PAGE> 6
PaineWebber Life Variable Annuity Account
Statement of Net Assets (continued)
<TABLE>
<S> <C>
Net assets represented by:
CURRENTLY PAYABLE ANNUITY CONTRACTS
High Grade Fixed Income Division $ 2,345
Global Income Division 3,645
Balanced Division 22,270
Growth Division 8,442
Aggressive Growth Division 3,447
Global Growth Division 12,758
-------------------
52,907
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS IN ACCUMULATION PERIOD
UNITS VALUE
----------------------
<S> <C> <C> <C>
CONTRACTS SOLD SUBJECT TO EARLY WITHDRAWAL CHARGES
Money Market Division 549,911 $11.17 6,142,582
Strategic Fixed Income Division 471,412 12.07 5,689,142
High Grade Fixed Income Division 660,282 10.66 7,037,573
Global Income Division 806,208 11.48 9,254,218
Balanced Division 1,372,735 15.73 21,594,883
Growth and Income Division 712,113 18.69 13,310,401
Growth Division 1,503,235 15.12 22,723,571
Aggressive Growth Division 1,269,202 16.54 20,998,201
Global Growth Division 1,227,994 11.58 14,215,413
-------------------
120,965,984
CONTRACTS SOLD NOT SUBJECT TO EARLY WITHDRAWAL
CHARGES
Money Market Division 25,640 $11.08 284,179
Strategic Fixed Income Division 44,493 12.00 533,944
High Grade Fixed Income Division 65,677 10.58 695,041
Global Income Division 74,370 11.22 834,794
Balanced Division 109,687 15.69 1,721,394
Growth and Income Division 51,714 19.08 986,744
Growth Division 48,307 14.89 719,718
Aggressive Growth Division 86,112 16.43 1,414,520
Global Growth Division 104,634 10.52 1,100,414
-------------------
8,290,748
-------------------
$129,309,639
===================
</TABLE>
See accompanying notes.
4
<PAGE> 7
PaineWebber Life Variable Annuity Account
Statement of Operations
Year ended December 31, 1997
<TABLE>
<CAPTION>
MONEY STRATEGIC
MARKET FIXED INCOME
COMBINED DIVISION DIVISION
----------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $ 2,390,345 $299,435 $382,458
Capital gains distributions 14,434,539 - -
Expenses (Note 2):
Mortality, distribution and expense risk and
enhanced death benefit fees (2,048,379) (108,665) (94,405)
Administrative charges (318,909) (17,999) (3,902)
----------------------------------------------
Net investment income (loss) 14,457,596 172,771 284,151
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTE 4)
Net realized gain (loss) on investments 2,329,678 - (39,174)
Change in net unrealized appreciation/depreciation of
investments (414,933) - 270,856
----------------------------------------------
Net increase in net assets resulting from operations $16,372,341 $172,771 $515,833
==============================================
</TABLE>
See accompanying notes.
5
<PAGE> 8
<TABLE>
<CAPTION>
HIGH GRADE GLOBAL GROWTH AND AGGRESSIVE GLOBAL
FIXED INCOME INCOME BALANCED INCOME GROWTH GROWTH GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$437,176 $625,266 $ 478,896 $ 91,437 $ 31,265 $ - $ 44,412
- 11,036 3,528,950 2,161,067 5,275,818 3,393,136 64,532
(128,293) (182,178) (360,552) (196,895) (366,376) (343,858) (267,157)
(26,040) (43,708) (60,017) (24,822) (43,560) (51,794) (47,067)
- --------------------------------------------------------------------------------------------------------
282,843 410,416 3,587,277 2,030,787 4,897,147 2,997,484 (205,280)
34,026 (98,445) 412,193 368,963 235,507 1,221,361 195,247
153,470 (168,651) 524,925 750,086 (2,174,005) (671,349) 899,735
- --------------------------------------------------------------------------------------------------------
$470,339 $143,320 $4,524,395 $3,149,836 $2,958,649 $3,547,496 $889,702
========================================================================================================
</TABLE>
6
<PAGE> 9
PaineWebber Life Variable Annuity Account
Statements of Changes in Net Assets
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
MONEY STRATEGIC
MARKET FIXED INCOME
COMBINED DIVISION DIVISION
-----------------------------------------------
<S> <C> <C> <C>
NET ASSETS AT JANUARY 1, 1996 $121,413,747 $6,765,008 $5,908,021
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 10,839,339 147,467 305,453
Net realized gain (loss) on investments 999,099 - (79,476)
Change in net unrealized appreciation/depreciation of
investments 1,329,316 - (129,138)
-----------------------------------------------
Net increase (decrease) in net assets resulting from
operations 13,167,754 147,467 96,839
Changes from principal transactions:
Purchase payments 2,742,324 139,328 56,446
Contract distributions and terminations (13,072,242) (1,116,546) (577,143)
Transfer payments (to) from other divisions - 624,444 305,413
Annuity payments and actuarial adjustment in reserves (5,972) - -
-----------------------------------------------
Increase (decrease) in net assets derived from principal
transactions (10,335,890) (352,774) (215,284)
-----------------------------------------------
Total increase (decrease) 2,831,864 (205,307) (118,445)
-----------------------------------------------
Net assets at December 31, 1996 124,245,611 6,559,701 5,789,576
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) 14,457,596 172,771 284,151
Net realized gain (loss) on investments 2,329,678 - (39,174)
Change in net unrealized appreciation/depreciation of
investments (414,933) - 270,856
-----------------------------------------------
Net increase in net assets resulting from operations 16,372,341 172,771 515,833
Changes from principal transactions:
Purchase payments 1,599,841 47,390 52,011
Contract distributions and terminations (12,902,998) (1,141,544) (372,108)
Transfer payments (to) from other divisions - 788,443 237,774
Annuity payments and actuarial adjustment in reserves (5,156) - -
-----------------------------------------------
Increase (decrease) in net assets derived from principal
transactions (11,308,313) (305,711) (82,323)
-----------------------------------------------
Total increase (decrease) 5,064,028 (132,940) 433,510
-----------------------------------------------
Net assets at December 31, 1997 $129,309,639 $6,426,761 $6,223,086
===============================================
</TABLE>
See accompanying notes.
7
<PAGE> 10
<TABLE>
<CAPTION>
BALANCED
HIGH GRADE DIVISION
FIXED GLOBAL (TERMINATED GROWTH AND AGGRESSIVE GLOBAL
INCOME INCOME JANUARY 26, BALANCED INCOME GROWTH GROWTH GROWTH
DIVISION DIVISION 1996) DIVISION DIVISION DIVISION DIVISION DIVISION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$9,737,225 $14,508,006 $14,673,209 $ 8,620,377 $ 7,112,994 $20,464,044 $18,197,326 $15,427,537
266,422 579,433 1,848,668 2,178,835 1,266,496 3,283,945 1,173,217 (210,597)
54,243 (72,904) (390,629) 121,068 359,036 477,251 770,725 (240,215)
(406,217) 43,467 (2,187,513) 291,955 (134,313) (487,790) 1,964,177 2,374,688
- ---------------------------------------------------------------------------------------------------------------------------
(85,552) 549,996 (729,474) 2,591,858 1,491,219 3,273,406 3,908,119 1,923,876
182,260 112,993 - 121,697 172,927 264,161 1,625,228 67,284
(1,037,936) (1,282,064) (146,801) (2,360,675) (1,023,532) (1,469,189) (2,435,221) (1,623,135)
(319,531) (`1,365,903) (13,796,934) 12,069,764 1,751,484 488,833 (544,415) 786,845
(224) (649) - (1,856) - (1,036) (258) (1,949)
- ---------------------------------------------------------------------------------------------------------------------------
(1,175,431) (2,535,623) (13,943,735) 9,828,930 900,879 (717,231) (1,354,666) (770,955)
- ---------------------------------------------------------------------------------------------------------------------------
(1,260,983) (1,985,627) (14,673,209) 12,420,788 2,392,098 2,556,175 2,553,453 1,152,921
- ---------------------------------------------------------------------------------------------------------------------------
8,476,242 12,522,379 - 21,041,165 9,505,092 23,020,219 20,750,779 16,580,458
282,843 410,416 - 3,587,277 2,030,787 4,897,147 2,997,484 (205,280)
34,026 (98,445) - 412,193 368,963 235,507 1,221,361 195,247
153,470 (168,651) - 524,925 750,086 (2,174,005) (671,349) 899,735
- ---------------------------------------------------------------------------------------------------------------------------
470,339 143,320 - 4,524,395 3,149,836 2,958,649 3,547,496 889,702
193,667 25,993 - 10,652 151,691 75,798 978,012 64,627
(1,288,374) (1,447,784) - (2,036,631) (1,129,113) (1,557,430) (2,205,439) (1,724,575)
(116,790) (1,150,609) - (199,768) 2,619,639 (1,044,504) (654,553) (479,632)
(125) (642) - (1,266) - (1,001) (127) (1,995)
- ---------------------------------------------------------------------------------------------------------------------------
(1,211,622) (2,573,042) - (2,227,013) 1,642,217 (2,527,137) (1,882,107) (2,141,575)
- ---------------------------------------------------------------------------------------------------------------------------
(741,283) (2,429,722) - 2,297,382 4,792,053 431,512 1,665,389 (1,251,873)
- ---------------------------------------------------------------------------------------------------------------------------
$7,734,959 $10,092,657 $ - $23,338,547 $14,297,145 $23,451,731 $22,416,168 $15,328,585
===========================================================================================================================
</TABLE>
8
<PAGE> 11
PaineWebber Life Variable Annuity Account
Notes to Financial Statements
December 31, 1997
1. INVESTMENT AND ACCOUNTING POLICIES
ORGANIZATION
PaineWebber Life Variable Annuity Account (the "Account") was organized by
PaineWebber Life Insurance Company (the "Company") in accordance with the
provisions of California Insurance laws and is a part of the total operations
of the Company. The Company is a wholly-owned subsidiary of PaineWebber Life
Holdings, Inc., which is a wholly-owned subsidiary of PaineWebber Group, Inc.
(the "Parent"). The assets and liabilities of the Account are clearly
identified and distinguished from the other assets and liabilities of the
Company. The Account invests solely in specified portfolios of PaineWebber
Series Trust (the "Fund"), an open-end management investment company under the
Investment Company Act of 1940, as directed by eligible contract owners. The
Fund receives investment advisory and administrative services from Mitchell
Hutchins Asset Management Inc. ("MHAM"), an indirectly wholly-owned subsidiary
of the Parent, and is charged fees pursuant to an advisory and administration
contract between the Fund and MHAM which has been approved by the Fund's board
of trustees. All series of shares are diversified except Global Income
Portfolio.
On December 28, 1995, the Company, on behalf of the Account, obtained
regulatory approval permitting it to substitute the shares of the Asset
Allocation Portfolio for the shares of the Balanced Portfolio that were held by
the Balanced Division of the Account. Contract Owners were notified and given
the opportunity to transfer Contract Values they have in the Balanced Division
to any of the other Portfolios of the Trust at no charge. On January 26, 1996,
Contract Owners from whom no instructions were received had their Contract
Values, which were invested in the Balanced Division, transferred to the
Division formerly known as the Asset Allocation Division. Also on January 26,
1996, the Division name was changed from Asset Allocation Division to Balanced
Division and the original Balanced Division was terminated.
INVESTMENT OPERATIONS
Investments are stated at the closing net asset values per share on December
31, 1997.
The average cost method is used to determine realized gains and losses.
Dividends are taken into income on an accrual basis as of the ex-dividend date.
ANNUITY RESERVES
Currently payable annuity contract reserves are computed according to the
Individual Annuity Valuation 1983 Table using an assumed interest rate of 4.0%.
If the amount paid to the contractholder is less than originally estimated,
charges paid for mortality and expense risks are reimbursed to the Company. If
additional amounts are required, the Company reimburses the Account.
9
<PAGE> 12
PaineWebber Life Variable Annuity Account
Notes to Financial Statements (continued)
1. INVESTMENT AND ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could
impact the amounts reported and disclosed herein.
2. EXPENSES
The Company is compensated for mortality, distribution and expense risks and
enhanced death benefits by a charge equivalent to an annual rate of 1.60% of
the asset value of each contract sold subject to early withdrawal charges and
1.77% of the asset value of each contract sold not subject to early withdrawal
charges. These charges amounted to $2,048,379 in 1997.
An annual contract administration charge of $30 is deducted on the first
valuation date on or after each contract anniversary prior to the annuity date.
A transfer charge of $10 will be imposed on each transfer between divisions
(portfolios) of the account in excess of twelve in any one contract year.
However, the Company has waived this charge until further notice. A withdrawal
transaction charge of the lesser of $25 or 2% of the amount withdrawn will be
imposed on each withdrawal in excess of two per contract year. Contracts sold
subject to early withdrawal charges are assessed a charge equal to 5% of the
amount withdrawn for purchase payments made within a five year period following
the date the payment was received. Total administrative charges amounted to
$318,909 in 1997.
3. FEDERAL INCOME TAXES
Operations of the Account are a part of the operations of the Company. Under
current practice, no federal income taxes are allocated by the Company to the
operations of the Account.
10
<PAGE> 13
PaineWebber Life Variable Annuity Account
Notes to Financial Statements (continued)
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------- --------------------------------
PURCHASES SALES PURCHASES SALES
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Portfolio:
Money Market $ 4,085,703 $ 4,218,643 $ 3,745,481 $ 3,950,788
Strategic Fixed Income 1,298,010 1,107,294 1,650,189 1,138,709
High Grade Fixed Income 1,428,323 2,342,666 2,242,791 3,059,118
Global Income 1,094,551 3,084,815 1,833,309 3,347,760
Balanced (terminated) - - 2,024,583 13,967,365
Balanced (formerly Asset
Allocation) 3,669,792 3,725,050 14,404,676 4,205,324
Growth and Income 4,563,931 1,723,925 2,751,912 1,927,358
Growth 4,743,713 4,005,130 4,936,900 4,296,055
Aggressive Growth 4,509,067 5,195,519 2,813,875 4,050,526
Global Growth 934,414 3,298,983 1,448,710 2,521,492
------------------------------- --------------------------------
$26,327,504 $28,702,025 $37,852,426 $42,464,495
=============================== ================================
</TABLE>
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- ----------------------------
PURCHASED REDEEMED PURCHASED REDEEMED
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
CONTRACTS SOLD SUBJECT TO EARLY
WITHDRAWAL CHARGE
Division:
Money Market 285,764 314,096 316,493 325,920
Strategic Fixed Income 71,027 66,466 71,833 94,259
High Grade Fixed Income 83,337 191,335 160,411 279,963
Global Income 24,085 242,210 138,020 360,128
Balanced (terminated) - - 2 1,180,315
Balanced (formerly Asset
Allocation) 71,633 219,615 1,106,633 298,847
Growth and Income 186,833 80,436 192,409 125,272
Growth 78,448 251,911 248,424 315,426
Aggressive Growth 173,204 264,233 168,893 285,538
Global Growth 52,997 247,190 134,533 202,967
--------------------------- ----------------------------
1,027,328 1,877,492 2,537,651 3,468,635
=========================== ============================
</TABLE>
11
<PAGE> 14
PaineWebber Life Variable Annuity Account
Notes to Financial Statements (continued)
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------- ---------------------------
PURCHASED REDEEMED PURCHASED REDEEMED
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
CONTRACTS SOLD NOT SUBJECT TO EARLY
WITHDRAWAL CHARGE
Division:
Money Market 61,096 61,502 18,382 44,661
Strategic Fixed Income 9,659 23,003 5,646 4,996
High Grade Fixed Income 12,960 26,072 13,345 17,193
Global Income 2,885 17,232 8,334 25,180
Balanced (terminated) - - - 108,366
Balanced (formerly Asset
Allocation) 2,467 16,485 100,664 36,022
Growth and Income 8,851 14,246 14,279 13,341
Growth 5,814 17,360 19,411 14,817
Aggressive Growth 20,348 65,772 20,054 20,099
Global Growth 25,232 16,414 9,462 23,758
---------------------------- ---------------------------
149,312 258,086 209,577 308,433
============================ ===========================
</TABLE>
6. NET ASSETS
Net assets at December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
STRATEGIC HIGH GRADE
MONEY FIXED FIXED
MARKET INCOME INCOME
COMBINED DIVISION DIVISION DIVISION
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit transactions $ 92,183,711 $6,017,767 $5,067,047 $6,603,158
Accumulated net investment
income 33,757,759 408,994 1,389,056 1,078,624
Net unrealized appreciation
(depreciation) of
investments 3,368,169 - (233,017) 53,177
-------------------------------------------------------------------
$129,309,639 $6,426,761 $6,223,086 $7,734,959
===================================================================
</TABLE>
12
<PAGE> 15
PaineWebber Life Variable Annuity Account
Notes to Financial Statements (continued)
6. NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL GROWTH AND
INCOME BALANCED INCOME
DIVISION DIVISION DIVISION
------------------------------------------------------
<S> <C> <C> <C>
Unit transactions $ 8,834,094 $15,396,529 $ 8,618,244
Accumulated net investment
income (loss) 1,911,984 7,514,130 4,019,397
Net unrealized appreciation (depreciation)
of investments (653,421) 427,888 1,659,504
------------------------------------------------------
$10,092,657 $23,338,547 $14,297,145
======================================================
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GLOBAL
GROWTH GROWTH GROWTH
DIVISION DIVISION DIVISION
--------------------------------------------------
<S> <C> <C> <C>
Unit transactions $14,001,512 $13,030,011 $14,615,349
Accumulated net investment
income (loss) 11,187,933 6,218,163 29,478
Net unrealized appreciation (depreciation) of
investments (1,737,714) 3,167,994 683,758
--------------------------------------------------
$23,451,731 $22,416,168 $15,328,585
==================================================
</TABLE>
7. YEAR 2000 (UNAUDITED)
Based on a study of its computer software and hardware, the Company has
determined its exposure to the Year 2000 change of the century date issue. The
Company has developed a plan to modify its information technology to be ready
for the Year 2000. Efforts began in 1996 to modify its systems. This project is
expected to be substantially completed early in 1999. While additional testing
will be conducted on its systems through the Year 2000, the Company does not
expect this project to have a significant effect on the Account's operations.
To mitigate the effect of outside influences and other dependencies relative to
the Year 2000, the Company is contacting significant customers, suppliers and
other third parties. To the extent these third parties would be unable to
transact business in the Year 2000 and thereafter, the Account's operations
could be adversely affected.
13
