Dear Policyowner:
Investors in U.S. Stocks earned double digit returns for the first six months of
1998 as the market continued its run of exceptional returns. The U.S. bond
market also continued to be strong. The turbulence in Asian markets in 1997 has
spilled over into 1998 and affected returns in the emerging international
markets. More established international markets, like those in Europe, saw
strong returns in the first half of 1998. Results in the subaccounts of
MEMBERS(R) Variable Universal Life are reflective of these market forces:
Percent increase
in Unit Value from
Subaccount 12/31/97 through 6/30/98
- -------------------------------------------------------------------------------
Capital Appreciation Stock 13.3%
Growth and Income Stock 11.7%
Balanced 7.1%
Bond 2.9%
Money Market 2.1%
Treasury 2000 2.7%
International Stock 13.2%
World Governments 1.7%
Emerging Growth 21.1%
- -------------------------------------------------------------------------------
This booklet contains the semiannual reports for the various components 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
The subaccounts of CUNA Mutual Life Variable Account invests in mutual funds.
The returns shown above reflect the deduction of the separate account level
charges. Returns at the separate account 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 which include
discussions of the funds' results and the managers' outlooks. 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 contains the
report for the International Stock Portfolio of the T. Rowe Price International
Series, Inc., and the last section contains the reports for the MFS(R) World
Government SeriesSM and the MFS(R) Emerging Growth SeriesSM of the MFS(R)
Variable Insurance TrustSM.
We at CUNA Mutual Life Insurance Company believe that MEMBERS(R) Variable
Universal Life is an excellent way for you to provide for your life insurance
protection needs. In addition, it provides the investment alternatives you need
for your long term asset accumulation needs. We have seen a continuing
unprecedented string of impressive returns in the major U.S. market indices over
the past three and a half years. We encourage you to keep this in mind as you
set your long-term return expectations. Once again, we believe that successful
investing requires time in the markets, not timing the markets.
Sincerely,
/s/ Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
CUNA Mutual Life Insurance Company
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C>
Capital Appreciation Stock Fund,
1,417,440 shares at net asset value of
$21.42 per share (cost $19,642,400) $30,362,345 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
2,623,544 shares at net asset value
of $30.45 per share (cost $48,099,601) -- 79,882,199 -- -- --
Balanced Fund,
3,614,981 shares at net asset value
of $18.17 per share (cost $50,639,808) -- -- 65,693,037 -- --
Bond Fund,
307,099 shares at net asset value
of $10.74 per share (cost $3,185,316) -- -- -- 3,296,856 --
Money Market Fund,
2,355,530 shares at net asset value
of $1.00 per share (cost $2,355,530) -- -- -- -- 2,355,530
----------- ----------- ----------- ----------- -----------
Total assets 30,362,345 79,882,199 65,693,037 3,296,856 2,355,530
----------- ----------- ----------- ----------- -----------
Liabilities:
Accrued adverse mortality and
expense charges 66,616 179,085 146,296 7,298 5,545
----------- ----------- ----------- ----------- -----------
Total liabilities 66,616 179,085 146,296 7,298 5,545
----------- ----------- ----------- ----------- -----------
Net assets $30,295,729 $79,703,114 $65,546,741 $ 3,289,558 $ 2,349,985
=========== =========== =========== =========== ===========
Units outstanding (note 5) 1,257,514 1,188,465 1,581,501 120,947 124,640
=========== =========== =========== =========== ===========
Net asset value per unit $ 24.09 $ 67.06 $ 41.45 $ 27.20 $ 18.85
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Treasury International World Emerging
2000 Stock Governments Growth
Assets: Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C>
Treasury 2000 Fund, 184,138
shares at net asset value of $9.53
per share (cost $1,501,627) $1,755,110 -- -- --
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
388,103 shares at net asset value of
$14.49 per share (cost $4,870,809) -- 5,623,609 -- --
Investments in MFS(R) Variable Insurance TrustSM:
World Governments Series,
69,566 shares at net asset value of
$10.30 per share (cost $711,298) -- -- 716,531 --
Investments in MFS(R) Variable Insurance TrustSM:
Emerging Growth Series,
305,354 shares at net asset value of
$19.45 per share (cost $4,701,614) -- -- -- 5,939,132
---------- ---------- ---------- ----------
Total assets 1,755,110 5,623,609 716,531 5,939,132
---------- ---------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 9,159 12,377 1,607 12,292
---------- ---------- ---------- ----------
Total liabilities 9,159 12,377 1,607 12,292
---------- ---------- ---------- ----------
Net assets $1,745,951 $5,611,232 $ 714,924 $5,926,840
========== ========== ========== ==========
Units outstanding (note 5) 199,220 401,898 61,095 400,935
========== ========== ========== ==========
Net asset value per unit $ 8.76 $ 13.96 $ 11.70 $ 14.78
========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Six Months Ended June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 30,728 $ 119,794 $ 595,603 $ 214,038 $ 778,858 $ 1,830,435
Adverse mortality and expense charges
(note 3) (126,452) (182,627) (111,426) (341,339) (527,025) (363,607)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) (95,724) (62,833) 484,177 (127,301) 251,833 1,466,828
------------ ------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- 317,275 -- 360 1,145,587 --
Proceeds from sale of securities 678,597 1,795,596 855,100 1,602,189 3,033,581 2,017,365
Cost of securities sold (440,029) (1,354,057) (708,846) (965,534) (2,103,099) (1,615,917)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on security
transactions 238,568 758,814 146,254 637,015 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 3,304,158 4,563,309 1,662,956 7,716,226 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 3,542,726 5,322,123 ,809,210 8,353,241 14,928,524 6,427,541
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 3,447,002 $ 5,259,290 $ 2,293,387 $ 8,225,940 $ 15,180,357 $ 7,894,369
============ ============ ============ ============ ============ ============
BALANCED SUBACCOUNT BOND SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 505,202 $ 2,062,026 $ 2,949,493 $ 48,974 $ 136,739 $ 137,535
Adverse mortality and expense charges
(note 3) (284,788) (509,762) (445,353) (14,312) (23,285) (23,607)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 220,414 1,552,264 2,504,140 34,662 113,454 113,928
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 3,745 758,320 -- -- 379 --
Proceeds from sale of securities 1,695,600 4,525,247 3,759,491 180,857 402,615 1,799,790
Cost of securities sold (1,316,628) (3,785,014) (3,351,391) (175,166) (394,979) (1,748,647)
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions 382,717 1,498,553 408,100 5,691 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 3,738,796 5,202,066 1,724,491 50,960 41,691 (127,295)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments 4,121,513 6,700,619 2,132,591 56,651 49,706 (76,152)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 4,341,927 $ 8,252,883 $ 4,636,731 $ 91,313 $ 163,160 $ 37,776
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Six Months Ended June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 63,096 $ 85,594 $ 86,370 $ -- $ 106,851 $ 107,339
Adverse mortality and expense charges
(note 3) (11,234) (15,448) (16,510) (7,708) (14,583) (13,847)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 51,862 70,146 69,860 (7,708) 92,268 93,492
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities 1,428,909 4,634,860 4,407,707 -- -- --
Cost of securities sold (1,428,909) 4,634,860) (4,407,707) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 54,433 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments -- -- -- 54,433 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 51,862 $ 70,146 $ 69,860 $ 46,725 $ 94,114 $ 18,546
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ -- $ 99,113 $ 39,586 $ 8,822 $ 7,143 $ --
Adverse mortality and expense
charges (note 3) (23,269) (32,130) (14,665) (3,207) (3,401) (2,326)
--------- --------- --------- --------- --------- ---------
Net investment income (loss) (23,269) 66,983 24,921 5,615 3,742 (2,326)
--------- --------- --------- --------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- -- --
Proceeds from sale of securities 142,363 235,721 121,135 43,530 65,919 52,028
Cost of securities sold (124,451) (211,895) (113,341) (43,243) (66,515) (53,136)
--------- --------- --------- --------- --------- ---------
Net realized gain (loss) on security
transactions 17,912 23,826 7,794 287 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 619,258 (62,452) 173,915 6,182 (5,796) 12,525
--------- --------- --------- --------- --------- ---------
Net gain (loss) on investments 637,170 (38,626) 181,709 6,469 (6,392) 11,417
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $ 613,901 $ 28,357 $ 206,630 $ 12,084 $ (2,650) $ 9,091
========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Operations
Six MonthsEnded June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
EMERGING GROWTH SUBACCOUNT
Investment income (loss): 1998 1997 1996*
--------- --------- ---------
Dividend income $ 45,310 $ -- $ 9,859
Adverse mortality and expense charges
(note 3) (22,504) (21,660) (4,378)
--------- --------- ---------
Net investment income (loss) 22,806 (21,660) 5,481
--------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- --
Proceeds from sale of securities 255,975 234,899 213,154
Cost of securities sold (208,052) (222,640) (201,866)
--------- --------- ---------
Net realized gain (loss) on security
transactions 47,923 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 850,338 384,388 2,792
--------- --------- ---------
Net gain (loss) on investments 898,261 396,647 14,080
--------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $ 921,067 $ 374,987 $ 19,561
========= ========= =========
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
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (95,724) $ (62,833) $ 484,177 $ (127,301) $ 251,833 $ 1,466,828
Net realized gain (loss) on
security transactions 238,568 758,814 146,254 637,015 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 3,304,158 4,563,309 1,662,956 7,716,226 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 3,447,002 5,259,290 2,293,387 8,225,940 15,180,357 7,894,369
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 4,014,753 9,240,958 7,622,148 8,136,862 16,677,681 13,835,588
Cost of units repurchased (2,516,772) (4,699,419) (3,351,383) (5,988,326) (10,282,732) (8,554,478)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 1,497,981 4,541,539 4,270,765 2,148,536 6,394,949 5,281,110
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 4,944,983 9,800,829 6,564,152 10,374,476 21,575,306 13,175,479
Net assets:
Beginning of period 25,350,746 15,549,917 8,985,765 69,328,638 47,753,332 34,577,853
------------ ------------ ------------ ------------ ------------ ------------
End of period $ 30,295,729 $ 25,350,746 $ 15,549,917 $ 79,703,114 $ 69,328,638 $ 47,753,332
============ ============ ============ ============ ============ ============
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 220,414 $ 1,552,264 $ 2,504,140 $ 34,662 $ 113,454 $ 113,928
Net realized gain (loss) on
security transactions 382,717 1,498,553 408,100 5,691 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 3,738,796 5,202,066 1,724,491 50,960 41,691 (127,295)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 4,341,927 8,252,883 4,636,731 91,313 163,160 37,776
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 5,706,407 10,763,242 11,796,373 524,365 1,162,322 700,575
Cost of units repurchased (5,204,518) (10,663,916) (10,399,963) (363,762) (705,363) (2,103,924)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 501,889 99,326 1,396,410 160,603 456,959 (1,403,349)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 4,843,816 8,352,209 6,033,141 251,916 620,119 (1,365,573)
Net assets:
Beginning of period 60,702,925 52,350,716 46,317,575 3,037,642 2,417,523 3,783,096
------------ ------------ ------------ ------------ ------------ ------------
End of period $ 65,546,741 $ 60,702,925 $ 52,350,716 $ 3,289,558 $ 3,037,642 $ 2,417,523
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 51,862 $ 70,146 $ 69,860 $ (7,708) $ 92,268 $ 93,492
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 54,433 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 51,862 70,146 69,860 46,725 94,114 18,546
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,500,907 6,190,640 4,325,194 153,743 621,004 794,517
Cost of units repurchased (1,823,902) (5,367,244) (4,801,186) (153,743) (599,303) (773,892)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions (322,995) 823,396 (475,992) -- 21,701 20,625
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets (271,133) 893,542 (406,132) 46,725 115,815 39,171
Net assets:
Beginning of period 2,621,118 1,727,576 2,133,708 1,699,226 1,583,411 1,544,240
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 2,349,985 $ 2,621,118 $ 1,727,576 $ 1,745,951 $ 1,699,266 $ 1,583,411
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (23,369) $ 66,983 $ 24,921 $ 5,615 $ 3,742 $ (2,326)
Net realized gain (loss) on
security transactions 17,912 23,826 7,794 287 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 619,258 (62,452) 173,915 6,182 (5,796) 12,525
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 613,901 28,357 206,630 12,084 (2,650) 9,091
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,121,005 2,721,533 2,207,995 42,396 530,877 144,986
Cost of units repurchased (576,805) (904,022) (559,568) (60,685) (95,423) (84,667)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 544,200 1,817,511 1,648,427 (18,289) 435,454 60,319
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 1,158,101 1,845,868 1,855,057 (6,205) 432,804 69,410
Net assets:
Beginning of period 4,453,131 2,607,263 752,206 721,129 288,325 218,915
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 5,611,232 $ 4,453,131 $ 2,607,263 $ 714,924 $ 721,129 $ 288,325
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Years Ended December 31, 1997 and 1996
(Unaudited)
EMERGING GROWTH SUBACCOUNT
Operations: 1998 1997 1996*
----------- ----------- -----------
Net investment income (loss) $ 22,806 $ (21,660) $ 5,481
Net realized gain (loss) on
security transactions 47,923 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 850,338 384,388 2,792
----------- ----------- -----------
Change in net assets from
operations 921,067 374,987 19,561
----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,626,925 3,238,087 1,517,927
Cost of units repurchased (675,392) (749,413) (346,909)
----------- ----------- -----------
Change in net assets from capital
unit transactions 951,533 2,488,674 1,171,018
----------- ----------- -----------
Increase (decrease) in net assets 1,872,600 2,863,661 1,190,579
Net assets:
Beginning of period 4,054,240 1,190,579 --
----------- ----------- -----------
End of period $ 5,926,840 $ 4,054,240 $ 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 (SEC). The Account was established as a
separate investment account within CUNA Mutual Life Insurance Company 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., MFS(R) Variable
Insurance Trust(SM), 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 MFS(R) Variable Insurance Trust(SM). 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 MFS(R) Variable Insurance Trust(SM) has two funds available as an
investment option. MFS(R) Variable Insurance Trust(SM) 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 MFS(R) Variable Insurance
Trust(SM). 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 six months ended June 30, 1998, was as follows:
Growth and Income Stock Fund....................... 3,794,454
Capital Appreciation Stock Fund.................... 2,144,410
Balanced Fund...................................... 2,560,517
Bond Fund.......................................... 383,028
Money Market Fund.................................. 1,162,999
Treasury 2000 Fund................................. --
International Stock Portfolio...................... 675,124
World Governments Series........................... 32,373
Emerging Growth.................................... 1,242,119
----------
11,995,024
==========
(5) Unit Activity from Contract Transactions
Transactions in units of each subaccount of the Account for the years
ended December 31, 1997, 1996, and 1995 were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Subaccount Subaccount Subaccount Subaccount Subaccount
Units outstanding at
<S> <C> <C> <C> <C> <C>
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
Units sold 490,480 313,426 297,548 45,022 342,456
Units repurchased (252,149) (194,852) (296,125) (27,507) (298,002)
-------- -------- --------- ------- --------
Units outstanding at
December 31, 1997 1,191,865 1,155,179 1,568,974 114,927 141,908
Units sold 173,974 124,897 140,847 19,588 80,407
Units repurchased (108,325) (91,611) (128,320) (13,568) (97,675)
-------- -------- --------- ------- --------
Units outstanding at
June 30, 1998 1,257,514 1,188,465 1,581,501 120,947 124,640
======== ======== ========= ======= ========
Treasury International World Emerging
2000 Stock Governments Growth
Subaccount Subaccount Subaccount Subaccount*
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
Units sold 77,604 216,687 46,412 280,804
Units repurchased (75,054) (71,570) (8,295) (66,642)
-------- -------- --------- -------
Units outstanding at
December 31, 1997 199,220 361,206 62,671 331,933
Units sold 17,750 83,243 3,652 117,910
Units repurchased (17,750) (42,551) 5,227) (48,909)
-------- -------- --------- -------
Units outstanding at
June 30, 1998 199,220 401,898 61,096 400,934
======== ======== ========= =======
<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
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $21.27 $16.31 $13.55 $10.45 $10.00 $60.02 $46.07 $38.09 $29.16 $29.01
End of period 24.09 21.27 16.31 13.55 10.45 67.06 60.02 46.07 38.09 29.16
Percentage increase
in unit value
during period* 13.3% 30.4% 20.4% 29.7% 4.5% 11.7% 30.3% 21.0% 30.6% 0.5%
Number of units
outstanding at
end of period 1,257,514 1,191,865 953,534 663,269 588,501 1,188,465 1,155,179 1,036,605 907,821 767,867
BALANCED SUBACCOUNT BOND SUBACCOUNT
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $38.69 $33.40 $30.41 $25.09 $25.44 $26.43 $24.82 $24.35 $21.11 $21.96
End of period 41.45 38.69 33.40 30.41 25.09 27.20 26.43 24.82 24.35 21.11
Percentage increase
in unit value
during period* 7.1% 15.8% 9.8% 21.2% -1.4% 2.9% 6.5% 1.9% 15.4% -3.9%
Number of units
outstanding at
end of period 1,581,501 1,568,974 1,567,551 1,522,893 1,433,037 120,947 114,927 97,411 155,381 160,875
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $18.47 $17.73 $17.05 $16.33 $15.91 $8.53 $8.05 $7.95 $6.63 $7.20
End of period 18.85 18.47 17.73 17.05 16.33 8.76 8.53 8.05 7.95 6.63
Percentage increase
in unit value
during period* 2.1% 4.1% 4.0% 4.4% 2.6% 2.7% 6.0% 1.3% 19.9% -7.9%
Number of units
outstanding at
end of period 124,640 141,908 97,454 125,112 179,387 199,220 199,220 196,670 194,133 191,747
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
1998 1997 1996 1995 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $12.33 $12.07 $10.61 $10.00 $11.51 $11.74 $11.39 $10.00
End of period 13.96 12.33 12.07 10.61 11.70 11.51 11.74 11.39
Percentage increase
in unit value
during period* 13.2% 2.2% 13.7% 6.1% 1.7% (2.0%) 3.1% 13.9%
Number of units
outstanding at
end of period 401,898 361,206 216,089 70,876 61,096 62,671 24,554 19,219
EMERGING GROWTH SUBACCOUNT**
1998 1997 1996
---- ---- ----
Net asset value:
<S> <C> <C> <C>
Beginning of period $12.21 $10.11 $10.00
End of period 14.78 12.21 10.11
Percentage increase
in unit value
during period* 21.1% 20.8% 1.1%
Number of units
outstanding at
end of period 400,934 331,933 117,771
For the Money Market Subaccount, the "seven-day average yield" for the seven
days ended June 30, 1998, was 4.2% and the "effective yield" for that period was
4/3%.
<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>
