Dear Policyowner:
The U.S. stock market had another strong year in 1996. The major international
stock markets were mixed, but generally ended the year on a positive note. The
U.S. bond market was relatively flat, especially when compared to the previous
year's strong bond market. International bond markets were generally weaker as
well. Results in the subaccounts of the MEMBERS(R) Variable Universal Life are
shown below:
Percent increase
in Unit Value from
Subaccount 12/31/95 through 12/31/96
- -------------------------------------------------------------------------
Capital Appreciation Stock 20.4%
Growth and Income Stock 21.0%
Balanced 9.8%
Bond 1.9%
Money Market 4.0%
Treasury 2000 1.3%
International Stock 13.7%
World Governments 3.1%
Emerging Growth 1.1%*
- -------------------------------------------------------------------------
*The Emerging Growth subaccount was made available on May 1, 1996.
This booklet is divided into several sections. Each section contains the annual
report for a component of MEMBERS(R) Variable Universal Life. The first section
contains the following reports for the CUNA Mutual Life Variable Account:
Statement of Assets and Liabilities........................... page 2
Statement of Operations....................................... page 4
Statement of Changes in Net Assets............................ page 7
Notes to the Financial Statements..............................page 10
Independent Auditors' Report...................................page 14
The CUNA Mutual Life Variable Account invests in mutual funds. The results shown
above reflect the deduction of the separate account level charges. Returns at
the subaccount level shown above are slightly lower than at the mutual fund
level as a result of these charges.
The remaining sections of this booklet cover the mutual funds and include
discussions of the fund results and the managers' outlook. The second section
contains the report for the Ultra Series Fund which includes the Capital
Appreciation Stock Fund, Growth and Income Stock Fund, Balanced Fund, Bond Fund,
Money Market Fund, and the Treasury 2000 Fund. The third section is the report
for the International Stock Portfolio of the T. Rowe Price International Series,
Inc., and the last section has the financial information and results for the
MFS(R) World Government Series and the MFS(R) Emerging Growth Series of the
MFS(R) Variable Insurance TrustSM.
MEMBERS(R) Variable Universal Life provides you with valuable life insurance
protection. It also provides the investment alternatives you need for your long
term asset accumulation needs. We appreciate your trust in CUNA Mutual Life
Insurance Company and in MEMBERS(R) Variable Universal Life.
Sincerely,
/s/ Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
CUNA Mutual Life Insurance Company
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Assets and Liabilities
December 31, 1996
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Investments in Ultra Series Fund:
(note 2)
Capital Appreciation Stock Fund,
1,065,317 shares at net asset
value of $14.60 per share
(cost $12,699,357) $15,551,834 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
2,239,789 shares at net asset
value of $21.32 per share
(cost $36,545,346) -- 47,759,263 -- -- --
Balanced Fund, 3,424,810 shares
at net asset value of $15.29
per share (cost $46,244,830) -- -- 52,357,197 -- --
Bond Fund, 234,128 shares
at net asset value of $10.33
per share (cost $2,398,936) -- -- -- 2,417,823 --
Money Market Fund, 1,727,789
shares at net asset value of
$1.00 per share
(cost $1,727,789) -- -- -- -- 1,727,789
---------- ----------- ----------- ---------- ----------
Total assets 15,551,834 47,759,263 52,357,197 2,417,823 1,727,789
---------- ----------- ----------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 1,917 5,931 6,481 300 213
---------- ----------- ----------- ---------- ----------
Total liabilities 1,917 5,931 6,481 300 213
---------- ----------- ----------- ---------- ----------
Net assets $15,549,917 $47,753,332 $52,350,716 $2,417,523 $1,727,576
========== =========== =========== ========== ==========
Units outstanding (note 5) 953,534 1,036,605 1,567,551 97,412 97,454
========== =========== =========== ========== ==========
Net asset value per unit $16.31 $46.07 $33.40 $24.82 $17.73
========== =========== =========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Assets and Liabilities
December 31, 1996
Treasury International World Emerging
2000 Stock Governments Growth
Assets: Subaccount Subaccount Subaccount Subaccount*
<S> <C> <C> <C> <C>
Investments in Ultra Series Fund:
(note 2)
Treasury 2000 Fund, 183,351
shares at net asset value of $8.64
per share (cost $1,387,537) $1,584,741$ -- $ -- $ --
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
206,296 shares at net asset value of
$12.64 per share (cost $2,411,583) -- 2,607,576 -- --
Investments in MFSAE Variable
Insurance TrustSM:
World Governments Series,
27,255 shares at net asset value of
$10.58 per share (cost $283,514) -- -- 288,361 --
Investments in MFSAE Variable
Insurance TrustSM:
Emerging Growth Series,
89,934 shares at net asset value of
$13.24 per share (cost $1,187,932) -- -- -- 1,190,723
-------------- ---------- ---------- ----------
Total assets 1,584,741 2,607,576 288,361 1,190,723
-------------- ---------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 1,330 313 36 144
-------------- ---------- ---------- ----------
Total liabilities 1,330 313 36 144
-------------- ---------- ---------- ----------
Net assets $ 1,583,411 $2,607,263 $ 288,325 $1,190,579
============== ========== ========== ==========
Units outstanding (note 5) 196,670 216,089 24,554 117,771
============== ========== ========== ==========
Net asset value per unit $ 8.05 $ 12.07 $ 11.74 $ 10.11
============== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Years Ended December 31, 1996, 1995, and 1994
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
Investment income (loss): 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Dividend income $595,603 $349,394 $316,311 $1,830,435 $2,783,538 $920,420
Adverse mortality and
expense charges
(note 3) (111,426) (67,332) (37,923) (363,607) (253,958) (178,836)
---------- --------- -------- ---------- ---------- ----------
Net investment income (loss) 484,177 282,062 278,388 1,466,828 2,529,580 741,584
---------- --------- -------- ---------- ---------- ----------
Realized and unrealized gain
(loss)on investments:
Realized gain (loss) on
security transactions:
Proceeds from sale of
securities 855,100 2,737,741 128,916 2,017,365 1,138,163 1,347,896
Cost of securities sold (708,846) (2,416,409) (126,278) (1,615,917) (985,297) (1,257,775)
---------- --------- -------- ---------- ---------- ----------
Net realized gain (loss) on
security transactions 146,254 321,332 2,638 401,448 152,866 90,121
Net change in unrealized
appreciation or depreciation
on investments 1,662,956 1,332,754 (143,233) 6,026,093 4,764,093 (762,308)
---------- --------- -------- ---------- ---------- ----------
Net gain (loss) on investments 1,809,210 1,654,086 (140,595) 6,427,541 4,916,959 (672,187)
---------- --------- -------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations $2,293,387 $1,936,148 $137,793 $7,894,369 $7,446,539 $69,397
========== ========= ======== ========== ========== ==========
BALANCED SUBACCOUNT BOND SUBACCOUNT
Investment income (loss): 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Dividend income $2,949,493 $3,308,296 $1,934,706 $137,535 $218,461 $198,871
Adverse mortality and
expense charges(note 3) (445,353) (375,225) (311,308) (23,607) (33,879) (30,732)
---------- ---------- --------- -------- --------- --------
Net investment income (loss) 2,504,140 2,933,071 1,623,398 113,928 184,582 168,139
---------- ---------- --------- -------- --------- --------
Realized and unrealized gain
(loss)on investments:
Realized gain (loss) on
security transactions:
Proceeds from sale of
securities 3,759,491 2,989,211 2,663,000 1,799,790 885,596 498,842
Cost of securities sold (3,351,391) (2,732,488) (2,563,542) (1,748,647) (865,874) (495,991)
---------- ---------- --------- -------- --------- --------
Net realized gain (loss) on
security transactions 408,100 256,723 99,458 51,143 19,722 2,851
Net change in unrealized
appreciation or depreciation
on investments 1,724,491 4,759,298 (2,193,746) (127,295) 326,701 (308,510)
---------- ---------- --------- -------- --------- --------
Net gain (loss) on investments 2,132,591 5,016,021 (2,094,288) (76,152) 346,423 (305,659)
---------- ---------- --------- -------- --------- --------
Net increase (decrease) in net
assets resulting from
operations $4,636,731 $7,949,092 $(470,890) $37,776 $531,005 $(137,520)
========== ========== ========= ======== ========= ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Years Ended December 31, 1996, 1995, and 1994
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Investment income (loss): 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Dividend income $86,370 $116,648 $75,538 $107,339 $105,588 $96,836
Adverse mortality and expense
charges (note 3) (16,510) (20,105) (19,253) (13,847) (12,710) (11,586)
-------- -------- -------- -------- --------- --------
Net investment income (loss) 69,860 96,543 56,285 93,492 92,878 85,250
-------- -------- -------- -------- --------- --------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) on security
transactions:
Proceeds from sale of securities 4,407,707 2,670,224 1,549,906 -- -- --
Cost of securities sold (4,407,707) (2,670,224) (1,549,906) -- -- --
-------- -------- -------- -------- --------- --------
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized
appreciation or depreciation
on investments -- -- -- (74,946) 161,453 (193,888)
-------- -------- -------- -------- --------- --------
Net gain (loss) on investments -- -- -- (74,946) 161,453 (193,888)
-------- -------- -------- -------- --------- --------
Net increase (decrease) in net
assets resulting from operations $69,860 $96,543 $56,285 $18,546 $254,331 ($108,638)
======== ======== ======== ======== ========= ========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Investment income (loss): 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Dividend income $39,586 $ -- $ -- $19,972
Adverse mortality and expense
charges (note 3) (14,665) (1,492) (2,326) (1,176)
-------- ------- ------- -------
Net investment income (loss) 24,921 (1,492) (2,326) 18,796
-------- ------- ------- -------
Realized and unrealized gain
(loss)on investments:
Realized gain (loss) on security
transactions:
Proceeds from sale of securities 121,135 17,033 52,028 19,161
Cost of securities sold (113,341) (17,004) (53,136) (18,440)
-------- ------- ------- -------
Net realized gain (loss) on
security transactions 7,794 29 (1,108) 721
Net change in unrealized
appreciation or depreciation
on investments 173,915 22,078 12,525 (7,679)
-------- ------- ------- -------
Net gain (loss) on investments 181,709 22,107 11,417 (6,958)
-------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations $206,630 $20,615 $9,091 $11,838
======== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Years Ended December 31, 1996, 1995, and 1994
EMERGING GROWTH SUBACCOUNT*
Investment income (loss): 1996
Dividend income $9,859
Adverse mortality and expense charges
(note 3) (4,378)
-------
Net investment income (loss) 5,481
-------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Proceeds from sale of securities 213,154
Cost of securities sold (201,866)
-------
Net realized gain (loss) on security
transactions 11,288
Net change in unrealized appreciation
or depreciation on investments 2,792
-------
Net gain (loss) on investments 14,080
-------
Net increase (decrease) in net assets
resulting from operations $19,561
=======
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1996 (date of initial activity).
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Changes in Net Assets
Years Ended December 31, 1996, 1995, and 1994
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $484,177 $282,062 $278,388 $1,466,828 $2,529,580 $741,584
Net realized gain (loss) on
security transactions 146,254 321,332 2,638 401,448 152,866 90,121
Net change in unrealized
appreciation or depreciation
on investments 1,662,956 1,332,754 (143,233) 6,026,093 4,764,093 (762,308)
---------- ---------- --------- ----------- ----------- -----------
Change in net assets from
operations 2,293,387 1,936,148 137,793 7,894,369 7,446,539 69,397
---------- ---------- --------- ----------- ----------- -----------
Capital unit transactions(note 5):
Proceeds from sale of units 7,622,148 5,340,463 7,013,416 13,835,588 10,831,868 11,317,875
Cost of units repurchased (3,351,383) (4,440,885) (1,001,170) (8,554,478) (6,090,704) (6,776,401)
---------- ---------- --------- ----------- ----------- -----------
Change in net assets from
capital unit transactions 4,270,765 899,578 6,012,246 5,281,110 4,741,164 4,541,474
---------- ---------- --------- ----------- ----------- -----------
Increase (decrease) in net assets 6,564,152 2,835,726 6,150,039 13,175,479 12,187,703 4,610,871
Net assets:
Beginning of period 8,985,765 6,150,039 -- 34,577,853 22,390,150 17,779,279
---------- ---------- --------- ----------- ----------- -----------
End of period $15,549,917 $8,985,765 $6,150,039 $47,753,332 $34,577,853 $22,390,150
========== ========== ========= =========== =========== ===========
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Net investment income (loss) $2,504,140 $2,933,071 $1,623,398 $113,928 $184,582 $168,139
Net realized gain (loss) on
security transactions 408,100 256,723 99,458 51,143 19,722 2,851
Net change in unrealized
appreciation or depreciation
on investments 1,724,491 4,759,298 (2,193,746) (127,295) 326,701 (308,510)
----------- ----------- ----------- ---------- ---------- ----------
Change in net assets from
operations 4,636,731 7,949,092 (470,890) 37,776 531,005 (137,520)
----------- ----------- ----------- ---------- ---------- ----------
Capital unit transactions(note 5):
Proceeds from sale of units 11,796,373 11,658,626 12,682,886 700,575 1,036,840 746,339
Cost of units repurchased (10,399,963) (9,247,633) (9,582,319) (2,103,924) (1,180,288) (831,337)
----------- ----------- ----------- ---------- ---------- ----------
Change in net assets from
capital unit transactions 1,396,410 2,410,993 3,100,567 (1,403,349) (143,446) (84,998)
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net
assets 6,033,141 10,360,085 2,629,677 (1,365,573) 387,559 (222,518)
Net assets:
Beginning of period 46,317,575 35,957,490 33,327,813 3,783,096 3,395,537 3,618,055
----------- ----------- ----------- ---------- ---------- ----------
End of period $52,350,716 $46,317,575 $35,957,490 $2,417,523 $3,783,096 $3,395,537
=========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Changes in Net Assets
Years Ended December 31, 1996, 1995, and 1994
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Operations: 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $69,860 $96,543 $56,285 $93,492 $92,878 $85,250
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized
appreciation or depreciation
on investments -- -- -- (74,946) 161,453 (193,888)
--------- --------- --------- --------- ---------- ----------
Change in net assets from
operations 69,860 96,543 56,285 18,546 254,331 (108,638)
--------- --------- --------- --------- ---------- ----------
Capital unit transactions(note 5):
Proceeds from sale of units 4,325,194 2,156,885 2,460,112 794,517 550,180 558,031
Cost of units repurchased (4,801,186) (3,049,819) (1,959,931) (773,892) (531,450) (540,474)
--------- --------- --------- --------- ---------- ----------
Change in net assets from
capital unit transactions (475,992) (892,934) 500,181 20,625 18,730 17,557
--------- --------- --------- --------- ---------- ----------
Increase (decrease) in net assets (406,132) (796,391) 556,466 39,171 273,061 (91,081)
Net assets:
Beginning of period 2,133,708 2,930,099 2,373,633 1,544,240 1,271,179 1,362,260
--------- --------- --------- --------- ---------- ----------
End of period $1,727,576 $2,133,708 $2,930,099 $1,583,411 $1,544,240 $1,271,179
========= ========= ========= ========= ========== ==========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Operations: 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income (loss) $24,921 $(1,492) $(2,326) $18,796
Net realized gain (loss) on
security transactions 7,794 29 (1,108) 721
Net change in unrealized
appreciation or depreciation
on investments 173,915 22,078 12,525 (7,679)
-------- -------- -------- --------
Change in net assets from
operations 206,630 20,615 9,091 11,838
-------- -------- -------- --------
Capital unit transactions(note 5):
Proceeds from sale of units 2,207,995 825,895 144,986 244,058
Cost of units repurchased (559,568) (94,304) (84,667) (36,981)
-------- -------- -------- --------
Change in net assets from
capital unit transactions 1,648,427 731,591 60,319 207,077
-------- -------- -------- --------
Increase (decrease) in net assets 1,855,057 752,206 69,410 218,915
Net assets:
Beginning of period 752,206 -- 218,915 --
-------- -------- -------- --------
End of period $2,607,263 $752,206 $288,325 $218,915
======== ======== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Changes in Net Assets
Years Ended December 31, 1996, 1995, and 1994
EMERGING GROWTH SUBACCOUNT*
Operations: 1996
Net investment income (loss) $5,481
Net realized gain (loss) on
security transactions 11,288
Net change in unrealized appreciation
or depreciation on investments 2,792
---------
Change in net assets from
operations 19,561
---------
Capital unit transactions (note 5):
Proceeds from sale of units 1,517,927
Cost of units repurchased (346,909)
---------
Change in net assets from capital
unit transactions 1,171,018
---------
Increase (decrease) in net assets 1,190,579
Net assets:
Beginning of period --
---------
End of period $1,190,579
=========
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1996 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Notes to Financial Statements
(1) Organization
The CUNA Mutual Life Variable Account (the Account) is a unit investment
trust registered under the Investment Company Act of 1940 with the
Securities and Exchange Commission. The Account was established as a
separate investment account within CUNA Mutual Life Insurance Company,
formerly known as Century Life of America, to receive and invest net
premiums paid under flexible premium variable life insurance policies.
Although the assets of the Account are the property of CUNA Mutual Life
Insurance Company, those assets attributable to the policies are not
chargeable with liabilities arising out of any other business which CUNA
Mutual Life Insurance Company may conduct.
The net assets maintained in the Account attributable to the policies
provide the base for the periodic determination of the increased or
decreased benefits under the policies. The net assets may not be less than
the amount required under state insurance law to provide certain death
benefits and other policy benefits. Additional assets are held in CUNA
Mutual Life Insurance Company's general account to cover death benefits in
excess of the accumulated value.
(2) Significant Accounting Policies
Investments
The Account currently is divided into nine subaccounts but may, in the
future, include additional subaccounts. Each subaccount invests exclusively
in shares of a single underlying fund. (The term fund is used to mean an
investment portfolio sometimes called a series, i.e., Ultra Series Fund, T.
Rowe Price International Fund, Inc., MFSAE Variable Insurance Trusto, or
any other open-end management investment company or unit investment trust
in which a subaccount invests.) The income, gains and losses, realized or
unrealized, from the assets allocated to each subaccount are credited to or
charged against that subaccount without regard to income, gains or losses
from any other subaccount.
The Account invests in shares of Ultra Series Fund, T. Rowe Price
International Fund, Inc., and MFSAE Variable Insurance Trusto. Each is a
management investment company of the series type with one or more funds.
Each is registered with the SEC as an open-end, management investment
company. Such registration does not involve supervision of the management
or investment practices or policies of the companies or their funds by the
SEC.
Ultra Series Fund currently has six funds available as investment options
under the policies while T. Rowe Price International Fund, Inc., has one
and MFSAE Variable Insurance Trusto has two funds available as an
investment option. MFSAE Variable Insurance Trusto also has other funds
that are not available under the policies. These fund companies may, in the
future, create additional funds that may or may not be available as
investment options under the policies. Each fund has its own investment
objectives and the income, gains, and losses for each fund are determined
separately for that fund.
CIMCO Inc. (CIMCO) serves as the investment advisor to the Ultra Series
Fund and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Ultra Series Fund.
CUNA Mutual Life Insurance Company owns one half of CIMCO's outstanding
stock and one half is owned indirectly by CUNA Mutual Insurance Society.
Rowe Price-Fleming International, Inc. (RPFI) serves as the Investment
Advisor to the International Stock Portfolio and manages its assets in
accordance with general policies and guidelines established by the board of
directors of T. Rowe Price International Fund, Inc. RPFI was founded in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
Massachusetts Financial Services Company (MFS) serves as the Investment
Advisor to the MFS World Governments Series and Emerging Growth Series and
manages its assets in accordance with general policies and guidelines
established by the board of trustees of MFSAE Variable Insurance Trusto.
MFS is a subsidiary of Sun Life Assurance Company of Canada (U.S.) which,
in turn, is a subsidiary of Sun Life Assurance Company of Canada.
The assets of each fund are held separate from the assets of the other
funds, and each fund is offered at a price equal to its respective net
asset value per share, without sales charge. Dividends and capital gain
distributions from each fund are reinvested in that fund. Investments in
shares of the funds are stated at market value which is the net asset value
per share as determined by the funds. Realized gains and losses from
security transactions are reported on an average cost basis.
Dividend income is recorded on the ex-dividend date.
Federal Income Taxes
The operations of the Account form a part of the operations of CUNA Mutual
Life Insurance Company and are not taxed separately. CUNA Mutual Life
Insurance Company does not initially expect to incur any income tax upon
the earnings or the realized capital gains attributable to the Account.
Accordingly, no charge for income tax is currently being made to the
Account. If such taxes are incurred by CUNA Mutual Life Insurance Company
in the future, a charge to the Account may be assessed. Use of 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 increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Fees and Charges
Organization Costs
CUNA Mutual Life Insurance Company absorbed all organization expenses of
the Account.
Policy Charges
In addition to charges for state taxes, which reduce premiums prior to the
allocation of net premiums to the subaccounts of the Account, the following
charges may be deducted by CUNA Mutual Life Insurance Company by redeeming
an appropriate number of units for each policy. Administrative Fee: CUNA
Mutual Life Insurance Company will have primary responsibility for the
administration of the Account and the policies issued. As reimbursement for
these expenses, CUNA Mutual Life Insurance Company may assess each policy a
monthly administrative fee. For additional detail, see schedule of expenses
and charges in the prospectus. Deferred Contingent Sales and Administrative
Charges: The sales and administrative expenses incurred when a policy is
issued are deferred (Deferred Charges) until the policy is surrendered.
Such charges are not collected at all if the policy is held for nine years,
or if the insured dies during that period. In no instance will the charge
exceed 30 percent of the lesser of premiums paid or the Guideline Annual
Premium (as defined under the Investment Company Act of 1940) of the
policy. The Deferred Charges are normally built up in twelve equal
increments during the first policy year. Beginning on the second policy
anniversary, incremental amounts are released by allocations back to the
subaccounts on each anniversary until the tenth policy anniversary when all
remaining Deferred Charges are released. All amounts in the Deferred
Charges Account are held and interest credited to the policy at a minimum
rate of 4 percent with CUNA Mutual Life Insurance Company crediting
additional amounts at its discretion. Policy Fee: CUNA Mutual Life
Insurance Company will incur first-year expenses upon issue of a policy,
and will assess each policy a monthly policy fee to recover these expenses.
Cost of Insurance and Additional Benefits Provided: CUNA Mutual Life
Insurance Company will assume the responsibility for providing the
insurance benefits provided in the policy. The cost of insurance will be
determined each month based upon the applicable cost of insurance rates and
the net amount at risk. The cost of insurance can vary from month to month
since the determination of both the insurance rate and the net amount at
risk depends upon a number of variables as described in the Account's
prospectus. Variable Account Charges Mortality and Expense Risk Charge:
CUNA Mutual Life Insurance Company will deduct daily a mortality and
expense risk charge from the Account at an annual rate of .90 percent of
the average daily net asset value of the Account. These charges will be
deducted by CUNA Mutual Life Insurance Company in return for its assumption
of risks associated with adverse mortality experience or excess
administrative expenses in connection with policies issued.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the year ended December 31, 1996, was as follows:
Growth and Income Stock Fund...................... $8,768,688
Capital Appreciation Stock Fund................... 5,611,300
Balanced Fund..................................... 7,663,102
Bond Fund......................................... 510,390
Money Market Fund................................. 4,001,633
Treasury 2000 Fund................................ 7,021
International Stock Portfolio..................... 1,794,742
World Governments Series.......................... 110,041
Emerging Growth*.................................. 1,389,798
----------
$29,856,715
==========
*The data is for the period beginning May 1, 1996 (date of initial activity).
(5) Unit Activity from Contract Transactions
Transactions in units of each subaccount of the Account for the years ended
December 31, 1996, 1995, and 1994 were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1993 -- 612,819 1,310,167 164,733 149,181
Units sold 684,909 385,948 502,048 34,868 152,172
Units repurchased (96,408) (230,900) (379,178) (38,726) (121,966)
-------- -------- --------- -------- --------
Units outstanding at
December 31, 1994 588,501 767,867 1,433,037 160,875 179,387
Units sold 437,510 320,880 420,975 45,571 129,950
Units repurchased (362,742) (180,926) (331,119) (51,065) (184,225)
-------- -------- --------- ------- --------
Units outstanding at
December 31, 1995 663,269 907,821 1,522,893 155,381 125,112
Units sold 516,098 337,323 375,764 29,061 249,298
Units repurchased (225,833) (208,539) (331,106) (87,030) (276,956)
-------- -------- --------- ------- --------
Units outstanding at
December 31, 1996 953,534 1,036,605 1,567,551 97,412 97,454
======== ======== ========= ======= ========
Treasury International World Emerging
2000 Stock Governments Growth
Subaccount Subaccount Subaccount Subaccount*
<S> <C> <C> <C> <C>
Units outstanding at
December 31, 1993 189,107 -- -- --
Units sold 82,063 -- -- --
Units repurchased (79,423) -- -- --
-------- -------- --------- --------
Units outstanding at
December 31, 1994 191,747 -- -- --
Units sold 74,132 80,023 22,558 --
Units repurchased (71,746) (9,147) (3,339) --
-------- -------- --------- -------
Units outstanding at
December 31, 1995 194,133 70,876 19,219 --
Units sold 102,713 194,181 12,790 151,261
Units repurchased (100,176) (48,968) (7,455) (33,490)
-------- -------- --------- -------
Units outstanding at
December 31, 1996 196,670 216,089 24,554 117,771
======== ======== ========= =======
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
1996 1995 1994 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $13.55 $10.45 $10.00 $38.09 $29.16 $29.01 $25.73 $24.11
End of period 16.31 13.55 10.45 46.07 38.09 29.16 29.01 25.73
Percentage increase
in unit value
during period* 20.4% 29.7% 4.5% 21.0% 30.6% 0.5% 12.8% 6.7%
Number of units
outstanding at
end of period 953,534 663,269 588,501 1,036,605 907,821 767,867 612,819 588,841
<PAGE>
BALANCED SUBACCOUNT BOND SUBACCOUNT
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $30.41 $25.09 $25.44 $23.23 $21.94 $24.35 $21.11 $21.96 $20.35 $19.29
End of period 33.40 30.41 25.09 25.44 23.23 24.82 24.35 21.11 21.96 20.35
Percentage increase
in unit value
during period* 9.8% 21.2% -1.4% 9.5% 5.9% 1.9% 15.4% -3.9% 7.9% 5.5%
Number of units
outstanding at
end of period 1,567,551 1,522,893 1,433,037 1,310,167 1,186,398 97,411 155,381 160,875 164,733 171,276
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $17.05 $16.33 $15.91 $15.67 $15.33 $7.95 $6.63 $7.20 $6.29 $5.88
End of period 17.73 17.05 16.33 15.91 15.67 8.05 7.95 6.63 7.20 6.29
Percentage increase
in unit value
during period* 4.0% 4.4% 2.6% 1.5% 2.2% 1.3% 19.9% -7.9% 14.5% 7.0%
Number of units
outstanding at
end of period 97,454 125,112 179,387 149,181 201,170 196,670 194,133 191,747 189,107 186,690
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
1996 1995 1996 1995
---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C>
Beginning of period $10.61 $10.00 $11.39 $10.00
End of period 12.07 10.61 11.74 11.39
Percentage increase
in unit value
during period* 13.7% 6.1% 3.1% 13.9%
Number of units
outstanding at
end of period 216,089 70,876 24,554 19,219
EMERGING GROWTH SUBACCOUNT**
1996
Net asset value:
<S> <C>
Beginning of period $10.00
End of period 10.11
Percentage increase
in unit value
during period* 1.1%
Number of units
outstanding at
end of period 117,771
For the Money Market Subaccount, the "seven-day average yield" for the
seven days ended December 31, 1996, was 3.8% and the "effective yield" for
that period was 3.9%.
<FN>
*The amount of premium invested in CUNA Mutual Life Variable Account is the
amount remaining after the policy charges described in footnote 3 have been
deducted. The policy charges have not been taken into account in this
calculation. Inclusion of the policy charges would reduce the percentage
increase in unit value during the period.
**The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CUNA Mutual Life Insurance Company and Contract Owners of CUNA Mutual Life
Variable Account:
We have audited the statements of assets and liabilities of the Capital
Appreciation Stock Subaccount, Growth and Income Stock Subaccount, Balanced
Subaccount, Bond Subaccount, Money Market Subaccount, Treasury 2000 Subaccount,
International Stock Subaccount, World Governments Subaccount , and the Emerging
Growth Subaccount of the CUNA Mutual Life Variable Account as of December 31,
1996; the related statements of operations and changes in net assets for each of
the years in the three-year (two years for International Stock Subaccount and
World Governments Subaccount and eight months for the Emerging Growth
Subaccount) period then ended, and the condensed financial information for each
of the years in the five-year (three years for Capital Appreciation Stock
Subaccount, two years for International Stock Subaccount and World Governments
Subaccount, and one year for the Emerging Growth Subaccount) period then ended.
These financial statements and condensed financial information are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements and condensed financial information 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 and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investments owned at December 31, 1996, were verified
by audit of the statements of assets and liabilities of the underlying funds of
Ultra Series Fund and confirmation with MFS Variable Insurance Trust and T. Rowe
Price. 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 and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Capital Appreciation Stock Subaccount, Growth and Income Stock
Subaccount, Balanced Subaccount, Bond Subaccount, Money Market Subaccount,
Treasury 2000 Subaccount, International Stock Subaccount, World Governments
Subaccount, and the Emerging Growth Subaccount of the CUNA Mutual Life Variable
Account as of December 31, 1996; the results of their operations and changes in
their net assets for each of the years in the three-year (two years for
International Stock Subaccount and World Governments Subaccount, and eight
months for the Emerging Growth Subaccount) period then ended; and the condensed
financial information for each of the years in the five-year (three years for
Capital Appreciation Stock Subaccount, two years for International Stock
Subaccount and World Governments Subaccount, and one year for the Emerging
Growth Subaccount) period then ended, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Des Moines, Iowa
February 7, 1997
