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PFL WRIGHT VARIABLE ANNUITY
The PFL Wright
Variable Annuity Account
Annual Report
December 31, 1996
[LOGO OF PFL LIFE APPEARS HERE]
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Dear Policyholders:
Outside of some sectors of the U.S. stock market, excesses are few in today's
global economy. Allowing for some interim ups and downs, economies of the
industrialized nations are likely to achieve a 2.5% rate of growth in 1997.
International competition should keep inflation in check allowing interest
rates to remain static.
In the U.S., stock mutual funds are still attracting tens of billions of
dollars in new deposits each month. Prudence and lofty price/earnings
valuations suggests, however, that U.S. investors should prepare for a less
hospitable market climate in 1997. Economies beyond our borders are in less
mature stages of expansion, boding well for relatively superior investment
returns during the year ahead. As always, we remain particularly excited about
the prospects for high-quality issues, domestic and international, such as
those embodied in the PFL Wright Variable Annuity Portfolios.
The Annual Report of the PFL Wright Variable Annuity Account for the year
ended December 31, 1996 is presented herein. Contained in this report is
information and detail on the underlying investments in the following
Portfolios:
Wright Near Term Bond Portfolio
Wright Total Return Bond Portfolio
Wright Selected Blue Chip Portfolio
Wright International Blue Chip Portfolio
Once again, the confidence that you continue to express in the PFL Wright
Variable Annuity is greatly appreciated.
All the best in 1997.
Sincerely,
/s/ William L. Busler
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.
2
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THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND CONTRACT OWNERS OF
THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT,
PFL LIFE INSURANCE COMPANY:
We have audited the accompanying balance sheet of The PFL Wright Variable
Annuity Account (comprising, respectively, the Wright Near Term Bond, Wright
Total Return Bond, Wright Selected Blue Chip and Wright International Blue Chip
subaccounts) as of December 31, 1996, and the related statement of operations
for the year then ended and the statements of changes in contract owners'
equity for each of the two years in the period then ended. These financial
statements are the responsibility of the Variable 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 mutual fund shares owned as of December 31,
1996 by correspondence with the mutual funds' 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 each of the respective
subaccounts constituting The PFL Wright Variable Annuity Account at December
31, 1996 and the results of their operations for the year then ended and the
changes in their contract owners' equity for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
Des Moines, Iowa
January 31, 1997
3
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THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT
BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
WRIGHT
NEAR TERM
BOND
TOTAL SUBACCOUNT
----------- ----------
<S> <C> <C>
ASSETS
Cash................................................... $ 30 30
Investments in mutual funds, at current market value
(Note 2):
Wright Managed Blue Chip Series Trust
Wright Near Term Bond Portfolio...................... 652,207 652,207
Wright Total Return Bond Portfolio................... 789,905 --
Wright Selected Blue Chip Portfolio.................. 2,668,203 --
Wright International Blue Chip Portfolio............. 1,457,340 --
----------- -------
Total investments in mutual funds..................... 5,567,655 652,207
----------- -------
Total Assets........................................... $ 5,567,685 652,237
=========== =======
LIABILITIES AND CONTRACT OWNERS' EQUITY
Liabilities:
Contract terminations payable ........................ $ 3,203 --
----------- -------
Total Liabilities .................................... 3,203 --
Contract Owners' Equity:
Deferred annuity contracts terminable by owners (Notes
3 and 6)............................................. 5,564,482 652,237
----------- -------
$ 5,567,685 652,237
=========== =======
</TABLE>
See accompanying Notes to Financial Statements.
4
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<TABLE>
<CAPTION>
WRIGHT WRIGHT WRIGHT
TOTAL SELECTED INTERNATIONAL
RETURN BOND BLUE CHIP BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- -------------
<S> <C> <C>
-- -- --
-- -- --
789,905 --
-- 2,668,203 --
-- -- 1,457,340
------- --------- ---------
789,905 2,668,203 1,457,340
------- --------- ---------
789,905 2,668,203 1,457,340
======= ========= =========
375 2,675 153
------- --------- ---------
375 2,675 153
789,530 2,665,528 1,457,187
------- --------- ---------
789,905 2,668,203 1,457,340
======= ========= =========
</TABLE>
5
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THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
WRIGHT
NEAR TERM
BOND
TOTAL SUBACCOUNT
---------- ----------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS)
Income:
Dividends............................................... $ 50,184 17,742
Expenses (Note 5):
Administration fee...................................... 1,470 128
Mortality and expense risk charge....................... 48,546 3,973
---------- -------
Net Investment income (loss).......................... 168 13,641
---------- -------
NET REALIZED AND UNREALIZED CAPITAL GAIN (LOSS) FROM
INVESTMENTS
Net realized capital gain from sales of investments:
Proceeds from sales..................................... 2,032,083 257,547
Cost of investments sold................................ 1,717,286 255,550
---------- -------
Net realized capital gain from sales of investments...... 314,797 1,997
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the period................................. 343,168 7,443
End of the period....................................... 760,507 (2,476)
---------- -------
Net change in unrealized appreciation/depreciation of
investments.......................................... 417,339 (9,919)
---------- -------
Net realized and unrealized capital gain (loss) from
investments.......................................... 732,136 (7,922)
---------- -------
INCREASE FROM OPERATIONS................................. $ 732,304 5,719
========== =======
</TABLE>
See accompanying Notes to Financial Statements.
6
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<TABLE>
<CAPTION>
WRIGHT WRIGHT WRIGHT
TOTAL SELECTED INTERNATIONAL
RETURN BOND BLUE CHIP BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------- ---------- -------------
<S> <C> <C>
30,373 2,069 --
240 741 361
6,553 25,384 12,636
------- ------- -------
23,580 (24,056) (12,997)
------- ------- -------
272,022 890,962 611,552
264,605 643,034 554,097
------- ------- -------
7,417 247,928 57,455
27,893 260,715 47,117
3,238 560,002 199,743
------- ------- -------
(24,655) 299,287 152,626
------- ------- -------
(17,238) 547,215 210,081
------- ------- -------
6,342 523,159 197,084
======= ======= =======
</TABLE>
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THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
WRIGHT
NEAR TERM
BOND
TOTAL SUBACCOUNT
--------------------- -----------------
1996 1995 1996 1995
---------- --------- ------- --------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)........ $ 168 75,566 13,641 12,335
Net realized capital gain........... 314,797 36,780 1,997 1,244
Net change in unrealized
appreciation/depreciation of
investments........................ 417,339 484,501 (9,919) 18,943
---------- --------- ------- --------
Increase from operations............ 732,304 596,847 5,719 32,522
---------- --------- ------- --------
CONTRACT TRANSACTIONS
Net contract purchase payments...... 431,901 1,071,758 27,285 77,059
Transfer payments from (to) other
subaccounts or general account..... 167,183 (114,120) 292,586 (135,719)
Contract terminations, withdrawals,
and other deductions............... (235,547) (736,613) -- (99,131)
---------- --------- ------- --------
Increase (decrease) from contract
transactions....................... 363,537 221,025 319,871 (157,791)
---------- --------- ------- --------
Net increase (decrease) in contract
owners' equity..................... 1,095,841 817,872 325,590 (125,269)
---------- --------- ------- --------
CONTRACT OWNERS' EQUITY
Beginning of the period............. 4,468,641 3,650,769 326,647 451,916
---------- --------- ------- --------
End of the period................... $5,564,482 4,468,641 652,237 326,647
========== ========= ======= ========
</TABLE>
See accompanying Notes to Financial Statements.
8
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<TABLE>
<CAPTION>
WRIGHT WRIGHT WRIGHT
TOTAL SELECTED INTERNATIONAL
RETURN BOND BLUE CHIP BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- -------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
23,580 17,626 (24,056) 51,446 (12,997) (5,841)
7,417 6,744 247,928 23,057 57,455 5,735
(24,655) 45,046 299,287 305,554 152,626 114,958
------- -------- --------- --------- --------- ---------
6,342 69,416 523,159 380,057 197,084 114,852
------- -------- --------- --------- --------- ---------
30,592 166,975 248,378 513,090 125,646 314,634
259,650 (173,228) (211,360) 237,738 (173,693) (42,911)
(44,530) (45,543) (133,918) (342,677) (57,099) (249,262)
------- -------- --------- --------- --------- ---------
245,712 (51,796) (96,900) 408,151 (105,146) 22,461
------- -------- --------- --------- --------- ---------
252,054 17,620 426,259 788,208 91,938 137,313
------- -------- --------- --------- --------- ---------
537,476 519,856 2,239,269 1,451,061 1,365,249 1,227,936
------- -------- --------- --------- --------- ---------
789,530 537,476 2,665,528 2,239,269 1,457,187 1,365,249
======= ======== ========= ========= ========= =========
</TABLE>
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THE PFL WRIGHT VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- The PFL Wright Variable Annuity Account ("Variable 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 Variable 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 Variable Account are
invested in the portfolios of the Wright Managed Blue Chip Series Trust as
selected by the contract owner. Investments are stated at the closing net asset
values per share on December 31, 1996.
Realized capital gains and losses from sale of shares in the mutual 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 mutual funds are credited or charged to contract
owners' equity.
Dividend Income -- Dividends received from the mutual funds investments are
reinvested to purchase additional mutual fund shares.
2. INVESTMENTS
A summary of the mutual fund investments at December 31, 1996 follows:
<TABLE>
<CAPTION>
NUMBER NET ASSET
OF SHARES VALUE MARKET
HELD PER SHARE VALUE COST
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Wright Managed Blue Chip Series
Trust
Wright Near Term Bond Portfolio... 67,237.791 $ 9.70 $ 652,207 $ 654,683
Wright Total Return Bond
Portfolio........................ 83,411.344 9.47 789,905 786,667
Wright Selected Blue Chip
Portfolio........................ 190,585.928 14.00 2,668,203 2,108,201
Wright International Blue Chip
Portfolio........................ 123,398.782 11.81 1,457,340 1,257,597
---------- ----------
$5,567,655 $4,807,148
========== ==========
</TABLE>
3. CONTRACT OWNERS EQUITY
A summary of deferred annuity contracts terminable by owners at December 31,
1996 follows:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION TOTAL
SUBACCOUNT UNITS OWNED UNIT VALUE CONTRACT VALUE
- ---------- ------------- ------------ --------------
<S> <C> <C> <C>
Wright Near Term Bond................ 612,818.637 $1.064323 $ 652,237
Wright Total Return Bond............. 747,745.354 1.055881 789,530
Wright Selected Blue Chip............ 1,894,095.151 1.407283 2,665,528
Wright International Blue Chip....... 1,268,170.893 1.149046 1,457,187
----------
$5,564,482
==========
</TABLE>
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A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
WRIGHT WRIGHT WRIGHT WRIGHT
NEAR TERM TOTAL SELECTED INTERNATIONAL
BOND RETURN BOND BLUE CHIP BLUE CHIP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Units outstanding 1/1/95..... 474,237 569,878 1,567,081 1,360,360
Units purchased.............. 75,750 160,589 465,414 324,834
Units redeemed and trans-
ferred...................... (237,782) (221,310) (97,975) (304,261)
-------- -------- --------- ---------
Units outstanding 12/31/95... 312,205 509,157 1,934,520 1,380,933
Units purchased.............. 26,015 29,341 197,752 118,733
Units redeemed and trans-
ferred...................... 274,599 209,247 (238,177) (231,495)
-------- -------- --------- ---------
Units outstanding 12/31/96... 612,819 747,745 1,894,095 1,268,171
======== ======== ========= =========
</TABLE>
4. TAXES
Operations of the Variable 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 Variable Account are accounted
for separately from other operations of PFL Life for purposes of federal income
taxation. The Variable 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 Variable 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 $30 per contract which will
commence on the first policy anniversary of each contract owner's account.
Charges for administrative fees to the variable annuity contracts are an
expense of the Variable Account.
PFL Life deducts a daily charge equal to an annual rate of 1.00% of the value
of the contract owner's individual account as a charge for assuming certain
mortality and expense risks.
6. CONTRACT OWNERS EQUITY
At December 31, 1996 contract owners' equity was comprised of:
<TABLE>
<CAPTION>
WRIGHT WRIGHT WRIGHT WRIGHT
NEAR TERM TOTAL SELECTED INTERNATIONAL
BOND RETURN BOND BLUE CHIP BLUE CHIP
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Unit transactions, accumu-
lated net investment in-
come and realized capital
gains.................... $4,803,975 654,713 786,292 2,105,526 1,257,444
Adjustment for
appreciation/depreciation
to market value.......... 760,507 (2,476) 3,238 560,002 199,743
---------- ------- ------- --------- ---------
Total Contract Owners' Eq-
uity..................... $5,564,482 652,237 789,530 2,665,528 1,457,187
========== ======= ======= ========= =========
</TABLE>
11
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7. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
1996 1995
-------------------- -------------------
PURCHASES SALES PURCHASES SALES
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Wright Managed Blue Chip Series
Trust
Wright Near Term Bond Portfolio..... $ 591,039 257,547 157,665 302,860
Wright Total Return Bond Portfolio.. 541,699 272,022 206,065 240,590
Wright Selected Blue Chip Portfo-
lio................................ 772,445 890,962 882,068 424,039
Wright International Blue Chip Port-
folio.............................. 493,519 611,552 462,087 447,064
---------- --------- --------- ---------
$2,398,702 2,032,083 1,707,885 1,414,553
========== ========= ========= =========
</TABLE>
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