A Message
From
The Chairman of the Board
and President of
AUL American Series Fund, Inc.
To Participants in AUL American Individual Variable Life Unit Trust
The U.S. economy is exhibiting surprising strength despite the opposing forces
that exist. The Asian crisis worsened during the first half of 1998 resulting in
a decline in U.S. exports and an increase in inexpensive imports. This created a
great deal of pressure on U.S. corporate earnings and resulted in an inventory
build-up during the first quarter.
In contrast, we continue to experience the positive effects of low inflation and
low nominal interest rates. Another favorable development has been the amazing
strength in consumer spending right here at home. Consumers are benefiting from
inexpensive imports, low inflation, low mortgage rates and the wealth effect of
a rising stock market.
The stock market provided impressive returns during the first half of 1998, with
the average equity fund earning most of this return during the first quarter.
Second quarter returns were much more volatile as Asian concerns resurfaced.
Large capitalization companies continued to dominate the market as investors
searched for stability of earnings and liquidity.
Although bonds performed reasonably well in the first half of 1998, returns
still lagged the performance of the S&P 500 Index by a wide margin. Treasury
yields declined during the first half of the year with the biggest decrease
occurring in the longer maturities. The thirty year treasury bond yielded 5.63%
at the end of June, thirty basis points below the level at the beginning of the
year.
As we enter the second half of 1998, commonly used valuation measures suggest
that the stock market is expensive at current levels. It is expected that market
volatility will continue through the remainder of 1998 as investors closely
monitor economic and corporate earnings growth as well as the level of interest
rates. Bond performance will be dependent on interest rate movements and the
potential "flight to quality" in the event investors become concerned about the
stock market.
/s/James W. Murphy
James W. Murphy
Chairman of the Board of Directors and President
Indianapolis, Indiana
July 31, 1998
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF NET ASSETS
June 30, 1998
(unaudited)
Series Fund Fidelity
------------------------------------------- ---------------------
Equity Money Mkt Bond Managed High Inc. Growth
---------- --------- --------- --------- --------- ----------
Assets:
Investments
at value $ 3,779 $ 0 $ 23 $ 0 $ 9 $ 0
Net Assets $ 3,779 $ 0 $ 23 $ 0 $ 9 $ 0
Units
outstanding 768 0 5 0 2 0
Accumulation
Unit Value 4.92 1.01 5.08 4.99 4.96 5.18
The accompanying notes are an integral part of the financial statements.
2
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF NET ASSETS (continued)
June 30, 1998
(unaudited)
Fidelity
----------------------------------------------------------------
Overseas Asset Mgr Index 500 Eqty-Inc. Contrafund Money Mkt
--------- --------- --------- --------- --------- ---------
Assets:
Investments
at value $ 10 $ 3,383 $ 5,478 $ 1 $ 2,092 $ 0
Net Assets $ 10 $ 3,383 $ 5,478 $ 1 $ 2,092 $ 0
Units
outstanding 2 667 1,072 0 407 0
Accumulation
Unit Value 4.95 5.07 5.11 4.97 5.15 1.01
The accompanying notes are an integral part of the financial statements.
3
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF NET ASSETS (continued)
June 30, 1998
(unaudited)
T-Rowe
American Century Alger Price
-------------------- --------- ---------
VP Capital VP American Equity
Apprec. Int'l Growth Income
--------- --------- --------- ---------
Assets:
Investments
at value $ 19 $ 655 $ 1,065 $ 4,727
Net Assets $ 19 $ 655 $ 1,065 $ 4,727
Units
outstanding 4 125 197 964
Accumulation
Unit Value $ 4.69 $ 5.23 $ 5.41 $ 4.91
The accompanying notes are an integral part of the financial statements.
4
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
for the period from April 30, 1998 through June 30, 1998
(unaudited)
Series Fund Fidelity
------------------------------------------ --------------------
Equity Money Mkt Bond Managed High Inc. Growth
--------- --------- --------- --------- --------- ---------
Operations:
Dividend
income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net Investment
Income 0 0 0 0 0 0
Gain (Loss)
on Investments:
Net realized gain
(loss) (1) 0 0 0 0 0
Net change in
unrealized gain 36 0 0 0 0 0
Net Gain 35 0 0 0 0 0
Increase in
Net Assets
from Operations 35 0 0 0 0 0
Contract Owner
Transactions:
Proceeds from
units sold 3,880 0 23 0 9 24
Cost of units
redeemed 0 0 0 0 0 0
Operating
transfers (136) 0 0 0 0 (24)
Increase 3,744 0 23 0 9 0
Net increase 3,779 0 23 0 9 0
Net Assets,
beginning 0 0 0 0 0 0
Net Assets,
ending $ 3,779 $ 0 $ 23 $ 0 9 0
Units sold 796 0 5 0 2 5
Units redeemed (28) 0 0 0 0 (5)
Net increase 768 0 5 0 2 0
Units outstanding,
beginning 0 0 0 0 0 0
Units outstanding,
ending 768 0 5 0 2 0
The accompanying notes are an integral part of the financial statements.
5
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the period from April 30, 1998 through June 30, 1998
(unaudited)
Fidelity
-----------------------------------------------------------------
Overseas Asset Mgr Index 500 Eqty-Inc Contrafund Money Mkt
--------- --------- --------- --------- ---------- ---------
Operations:
Dividend
income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net Investment
income 0 0 0 0 0 0
Gain (Loss)
on Investments:
Net realized
gain (loss) 0 0 4 1 8 0
Net change in
unrealized gain 0 26 125 0 111 0
Net Gain 0 26 129 1 119 0
Increase
in Net Assets
from Operations 0 26 129 1 119 0
Contract Owner
Transactions
Proceeds from
units sold 10 3,368 5,497 76 2,176 0
Cost of units
redeemed 0 0 0 0 0 0
Operating
transfers 0 (11) (148) (76) (203) 0
Increase 10 3,357 5,349 0 1,973 0
Net increase 10 3,383 5,478 1 2,092 0
Net Assets,
beginning 0 0 0 0 0 0
Net Assets,
ending $ 10 $ 3,383 $ 5,478 $ 1 2,092 0
Units sold 2 669 1,101 16 447 0
Units redeemed 0 (2) (29) (16) (40) 0
Net increase 2 667 1,072 0 407 0
Units outstanding,
beginning 0 0 0 0 0 0
Units outstanding,
ending 2 667 1,072 0 407 0
The accompanying notes are an integral part of the financial statements
6
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AUL American Individual Variable Life Unit Trust
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the period from April 30, 1998 through June 30, 1998
(unaudited)
American CenturyAlgerT. Rowe Price
VP Capital VP American
Appreciation International GrowthEquity income
Operations:
Dividend
income $ 0 $ 0 $ 0 $ 24
Net Investment
Income 0 0 0 24
Gain (Loss)
on Investments:
Net realized
gain (loss) 0 1 3 0
Net change in
unrealized gain 0 25 64 12
Net Gain 0 26 67 12
Increase in
Net Assets
from Operations 0 26 67 36
Contract Owner
Transactions:
Proceeds from
units sold 24 660 1,186 4,793
Cost of units
redeemed 0 0 (188) (102)
Operating
transfers (5) (31) 0 0
Increase 19 629 998 4,691
Net increase 19 655 1,065 4,727
Net Assets,
beginning 0 0 0 0
Net Assets,
ending $ 19 $ 655 $ 1,065 $ 4,727
Units sold 5 131 233 985
Units redeemed (1) (6) (36) (21)
Net Increase 4 125 197 964
Units outstanding,
beginning 0 0 0 0
Units outstanding,
ending 4 125 197 964
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
notes to financial statements
1. Summary of Significant Accounting Policies
The AUL American Individual Variable Life Unit Trust (Variable Account) was
established by American United Life Insurance Company (AUL) on July 10, 1997,
under procedures established by Indiana law and is registered as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Variable Account commenced operations on April 30, 1998. The Variable Account is
a segregated investment account for individual variable life insurance contracts
issued by AUL and invests exclusively in shares of mutual fund portfolios
offered by the AUL American Series Fund, Inc. (Series Fund), Fidelity
Investments Variable Insurance Products Fund and Variable Insurance Products
Fund II(Fidelity), American Century Variable Portfolios, Inc. (American
Century), Alger American Fund (Alger), and T. Rowe Price Equity Series, Inc. (T.
Rowe Price).
Security Valuation Transactions and Related Income
The market value of investments is based on the closing bid prices at June 30,
1998. Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date.
Taxes
Operations of the Variable Account are part of, and are taxed with, the
operations of AUL, which is taxed as a "life insurance company" under the
Internal Revenue Code. Under current law, investment income, including realized
and unrealized capital gains of the investment accounts, is not taxed to AUL to
the extent it is applied to increase reserves under the contracts. The Variable
Account has not been charged for federal and state income taxes since none have
been imposed.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases during the reporting period.
Actual results could differ from those estimates.
2. Account Charges
With respect to variable life insurance policies funded by the Variable Account,
AUL makes certain deductions from premiums for sales load and state premium
taxes before amounts are allocated to the Variable Account. AUL also makes
certain deductions from the net assets of the Variable Account for the mortality
and expense risks AUL assumes, administrative expenses, cost of insurance,
charges for optional benefits, and any sales and underwriting surrender charges.
Charges incurred during the period from April 30, 1998 through June 30, 1998
were $923.
8
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notes to financial statements (continued)
3. Accumulation Unit Value The change in the Net Asset Value per unit for the
period from April 30, 1998 through June 30, 1998 is:
6/30/98 4/30/98 Change
--------- --------- --------
Series Fund:
Equity $ 4.922560 $ 5.000000 (1.5%)
Money Market 1.008213 1.000000 0.8%
Bond 5.077411 5.000000 1.5%
Managed 4.988405 5.000000 (0.2%)
Fidelity:
High Income 4.960722 5.000000 (0.8%)
Growth 5.179779 5.000000 (1.1%)
Overseas 4.944845 5.000000 (1.1%)
Asset Manager 5.070549 5.000000 1.4%
Index 500 5.110718 5.000000 2.2%
Equity-income 4.974307 5.000000 (0.5%)
Contrafund 5.145336 5.000000 2.9%
Money Market 1.009015 1.000000 0.9%
American Century:
VP Capital
Appreciation 4.692231 5.000000 (6.2%)
VP International 5.232165 5.000000 4.6%
Alger:
American Growth 5.407263 5.000000 8.1%
T. Rowe Price:
Equity income 4.905086 5.000000 (1.9%)
4. Cost of Investments
The cost of investments at June 30, 1998, is:
Series Fund:
Equity $ 3,743
Money Market 0
Bond 23
Managed 0
Fidelity:
High Income 9
Growth 0
Overseas 9
Asset Manager 3,357
Index 500 5,353
Equity-Income 1
Contrafund 1,982
Money Market 0
American Century:
VP Capital
Appreciation 19
VP International 630
Alger:
American Growth 1,001
T. Rowe Price:
Equity Income 4,715
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<PAGE>
notes to financial statements (continued)
5. Net Assets
Net Assets at June 30, 1998, are:
Series Fund Fidelity
--------------------------------------------------- ------------
Equity Money Mkt Bond Managed High Inc.
------------ ------------ ------------ ------------ ------------
Proceeds from
units sold $ 3,880 $ 0 $ 23 $ 0 $ 9
Cost of units
redeemed 0 0 0 0 0
Operating
transfers (136) 0 0 0 0
Net investment
income 0 0 0 0 0
Net realized
gain (loss) (1) 0 0 0 0
Unrealized
gain (loss)
on investments 36 0 0 0 0
------------ ------------ ------------ ------------ ------------
$ 3,779 $ 0 $ 23 $ 0 $ 9
Fidelity
----------------------------------------------------------------
Growth Overseas Asset Mgr Index 500 Eqty-Inc.
------------ ------------ ------------ ------------ ------------
Proceeds from
units sold $ 24 $ 10 $ 3,368 $ 5,497 $ 76
Cost of units
redeemed 0 0 0 0 0
Operating
transfers (24) 0 (11) (148) (76)
Net investment
income 0 0 0 0 0
Net realized
gain (loss) 0 0 0 4 1
Unrealized
gain (loss)
on investments 0 0 26 125 0
------------ ------------ ------------ ------------ ------------
$ 0 $ 10 $ 3,383 $ 5,478 $ 1
Fidelity American Century Alger
------------------------- ------------------------- ------------
VP Capital VP American
Contrafund Money Mkt Apprec. Int'l Growth
------------ ------------ ------------ ------------ ------------
Proceeds from
units sold $ 2,176 $ 0 $ 24 $ 660 $ 1,186
Cost of units
redeemed 0 0 0 0 (188)
Operating
transfers (203) 0 (5) (31) 0
Net investment
income 0 0 0 0 0
Net realized
gain (loss) 8 0 0 1 3
Unrealized
gain (loss)
on investments 111 0 0 25 64
------------ ------------ ------------ ------------ ------------
$ 2,092 $ 0 $ 19 $ 655 $ 1,065
T. Rowe Price
-------------
Equity Income
-------------
Proceeds from
units sold $ 4,793
Cost of units
redeemed (102)
Operating
transfers 0
Net investment
income 24
Net realized
gain (loss) 0
Unrealized
gain (loss)
on investments 12
------------
$ 4,727
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