Dear Policyowner:
The U.S. stock market provided yet another year of strong returns in 1998. Many
of the established international stock markets also provided very attractive
returns. International developing markets struggled, however, led by problems in
Asia that spread to other developing countries worldwide. The U.S. bond market
was relatively stable, and provided returns that reflected continued relatively
low interest rates. These results are reflected in the very attractive 1998
returns of the subaccounts of MEMBERS(R) Variable Universal Life shown in the
table below:
Percent increase
in Unit Value from
Subaccount 12/31/97 through 12/31/98
- -------------------------------------------------------------------------------
Capital Appreciation Stock 19.9%
Growth and Income Stock 16.9%
Balanced 12.4%
Bond 5.3%
Money Market 4.2%
Treasury 2000 6.6%
International Stock 14.8%
World Governments 6.9%
Emerging Growth 33.0%
- -------------------------------------------------------------------------------
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.
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:
Statements of Assets and Liabilities ............... page 2
Statements of Operations ........................... page 4
Statements of Changes in Net Assets ................ page 7
Notes to the Financial Statements .................. page 10
Independent Auditors' Report ....................... page 14
The remaining sections of this booklet cover the mutual funds and 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 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 both life insurance
protection and investment alternatives you need to meet your long term asset
accumulation goals. We look forward to serving you in the years to come. Thank
you for giving us the opportunity to do so.
Sincerely,
/s/ Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
CUNA Mutual Life Insurance Company
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
<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,
1,490,692 shares at net asset value of
$22.19 per share (cost $21,505,998) $33,073,653 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
2,772,087 shares at net asset value
of $30.56 per share (cost $53,268,677) -- 84,712,385 -- -- --
Balanced Fund,
3,671,024 shares at net asset value
of $18.74 per share (cost $52,121,655) -- -- 68,777,039 -- --
Bond Fund,
342,306 shares at net asset value
of $10.57 per share (cost $3,571,882) -- -- -- 3,617,904 --
Money Market Fund,
3,616,101 shares at net asset value
of $1.00 per share (cost $3,616,101) -- -- -- -- 3,616,101
----------- ----------- ----------- ----------- -----------
Total assets 33,073,653 84,712,385 68,777,039 3,617,904 3,616,101
----------- ----------- ----------- ----------- -----------
Liabilities:
Accrued adverse mortality and
expense charges 7,915 20,706 16,790 889 834
----------- ----------- ----------- ----------- -----------
Total liabilities 7,915 20,706 16,790 889 834
----------- ----------- ----------- ----------- -----------
Net assets $33,065,738 $84,691,679 $68,760,249 $ 3,617,015 $ 3,615,267
=========== =========== =========== =========== ===========
Units outstanding (note 5) 1,296,981 1,207,005 1,581,036 130,013 187,877
=========== =========== =========== =========== ===========
Net asset value per unit $ 25.49 $ 70.17 $ 43.49 $ 27.82 $ 19.24
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
<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, 184,870
shares at net asset value of $9.93
per share (cost $1,615,171) $1,835,904 $ -- $ -- $ --
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
401,135 shares at net asset value of
$14.52 per share (cost $5,082,095) -- 5,824,487 -- --
Investments in MFS(R) Variable
Insurance TrustSM:
World Governments Series,
67,797 shares at net asset value of
$10.88 per share (cost $693,951) -- -- 737,634 --
Investments in MFS(R) Variable
Insurance TrustSM:
Emerging Growth Series,
327,804 shares at net asset value of
$21.47 per share (cost $5,126,136) -- -- -- 7,037,957
---------- ---------- ---------- ----------
Total assets 1,835,904 5,824,487 737,634 7,037,957
---------- ---------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 1,386 1,426 181 1,708
---------- ---------- ---------- ----------
Total liabilities 1,386 1,426 181 1,708
---------- ---------- ---------- ----------
Net assets $1,834,518 $5,823,061 $ 737,453 $7,036,249
========== ========== ========== ==========
Units outstanding (note 5) 201,769 411,250 59,926 433,141
========== ========== ========== ==========
Net asset value per unit $ 9.09 $ 14.16 $ 12.31 $ 16.24
========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<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 $ 88,433 $ 119,794 $ 595,603 $ 869,525 $ 778,858 $ 1,830,435
Adverse mortality and expense charges
(note 3) (259,874) (182,627) (111,426) (691,564) (527,025) (363,607)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) (171,441) (62,833) 484,177 177,961 251,833 1,466,828
------------ ------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 769,968 317,275 -- 3,106,051 1,145,587 --
Proceeds from sale of securities 1,770,807 1,795,596 855,100 3,497,748 3,033,581 2,017,365
Cost of securities sold (1,192,638) (1,354,057) (708,846) (2,160,207) (2,103,099) (1,615,917)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on security
transactions 1,348,137 758,814 146,254 4,443,592 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 4,151,868 4,563,309 1,662,956 7,377,335 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 5,500,005 5,322,123 1,809,210 11,820,927 14,928,524 6,427,541
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 5,328,564 $ 5,259,290 $ 2,293,387 $ 11,998,888 $ 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 $ 1,934,712 $ 2,062,026 $ 2,949,493 $ 196,337 $ 136,739 $ 137,535
Adverse mortality and expense charges
(note 3) (577,128) (509,762) (445,353) (30,006) (23,285) (23,607)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) 1,357,584 1,552,264 2,504,140 166,331 113,454 113,928
------------ ------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 3,744 758,320 -- 2,477 379 --
Proceeds from sale of securities 4,012,722 4,525,247 3,759,491 441,318 402,615 1,799,790
Cost of securities sold (3,159,159) (3,785,014) (3,351,391) (426,398) (394,979) (1,748,647)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss) on security
transactions 857,307 1,498,553 408,100 17,397 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 5,340,950 5,202,066 1,724,491 (14,556) 41,691 (127,295)
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 6,198,257 6,700,619 2,132,591 2,841 49,706 (76,152)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 7,555,841 $ 8,252,883 $ 4,636,731 $ 169,172 $ 163,160 $ 37,776
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT TREASURY 2000 SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 123,985 $ 85,594 $ 86,370 $ 106,291 $ 106,851 $ 107,339
Adverse mortality and expense charges
(note 3) (22,312) (15,448) (16,510) (15,826) (14,583) (13,847)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 101,673 70,146 69,860 90,465 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 2,979,908 4,634,860 4,407,707 -- -- --
Cost of securities sold (2,979,908) (4,634,860) (4,407,707) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 101,673 $ 70,146 $ 69,860 $ 112,147 $ 94,114 $ 18,546
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Investment income (loss): 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
Dividend income $ 90,596 $ 99,113 $ 39,586 $ 8,821 $ 7,143 $ --
Adverse mortality and expense
charges (note 3) (47,908) (32,130) (14,665) (6,487) (3,401) (2,326)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 42,688 66,983 24,921 2,334 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 491,409 235,721 121,135 92,387 65,919 52,028
Cost of securities sold (442,671) (211,895) (113,341) (90,661) (66,515) (53,136)
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss) on security
transactions 48,738 23,826 7,794 1,726 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 608,851 (62,452) 173,915 44,633 (5,796) 12,525
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments 657,589 (38,626) 181,709 46,359 (6,392) 11,417
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 700,277 $ 28,357 $ 206,630 $ 48,693 ($ 2,650) $ 9,091
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT
Investment income (loss): 1998 1997 1996*
---- ---- -----
<S> <C> <C> <C>
Dividend income $45,309 $ -- $9,859
Adverse mortality and expense charges
(note 3) (48,583) (21,660) (4,378)
--------- -------- -------
Net investment income (loss) (3,274) (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 448,520 234,899 213,154
Cost of securities sold (373,845) (222,640) (201,866)
--------- -------- -------
Net realized gain (loss) on security
transactions 74,675 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 1,524,641 384,388 2,792
--------- -------- -------
Net gain (loss) on investments 1,599,316 396,647 14,080
--------- -------- -------
Net increase (decrease) in net assets
resulting from operations $1,596,042 $374,987 $19,561
========= ======== =======
See accompanying notes to financial statements.
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ($ 171,441) ($ 62,833) $ 484,177 $ 177,961 $ 251,833 $ 1,466,828
Net realized gain (loss) on
security transactions 1,348,137 758,814 146,254 4,443,592 2,076,069 401,448
Net change in unrealized appreciation
or depreciation on investments 4,151,868 4,563,309 1,662,956 7,377,335 12,852,455 6,026,093
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 5,328,564 5,259,290 2,293,387 11,998,888 15,180,357 7,894,369
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 7,807,048 9,240,958 7,622,148 15,135,142 16,677,681 13,835,588
Cost of units repurchased (5,420,620) (4,699,419) (3,351,383) (11,770,989) (10,282,732) (8,554,478)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 2,386,428 4,541,539 4,270,765 3,364,153 6,394,949 5,281,110
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 7,714,992 9,800,829 6,564,152 15,363,041 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 $ 33,065,738 $ 25,350,746 $ 15,549,917 $ 84,691,679 $ 69,328,638 $ 47,753,332
============ ============ ============ ============ ============ ============
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) $ 1,357,584 $ 1,552,264 $ 2,504,140 $ 166,331 $ 113,454 $ 113,928
Net realized gain (loss) on
security transactions 857,307 1,498,553 408,100 17,397 8,015 51,143
Net change in unrealized appreciation
or depreciation on investments 5,340,950 5,202,066 1,724,491 (14,556) 41,691 (127,295)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from
operations 7,555,841 8,252,883 4,636,731 169,172 163,160 37,776
------------ ------------ ------------ ------------ ------------ ------------
Capital unit transactions (note 5):
Proceeds from sale of units 10,811,007 10,763,242 11,796,373 1,182,649 1,162,322 700,575
Cost of units repurchased (10,309,524) (10,663,916) (10,399,963) (772,448) (705,363) (2,103,924)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets from capital
unit transactions 501,483 99,326 1,396,410 410,201 456,959 (1,403,349)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets 8,057,324 8,352,209 6,033,141 579,373 620,119 (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 $ 68,760,249 $ 60,702,925 $ 52,350,716 $ 3,617,015 $ 3,037,642 $ 2,417,523
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<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) $ 101,673 $ 70,146 $ 69,860 $ 90,465 $ 92,268 $ 93,492
Net realized gain (loss) on
security transactions -- -- -- -- -- --
Net change in unrealized appreciation
or depreciation on investments -- -- -- 21,682 1,846 (74,946)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 101,673 70,146 69,860 112,147 94,114 18,546
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 4,485,112 6,190,640 4,325,194 447,349 621,004 794,517
Cost of units repurchased (3,592,636) (5,367,244) (4,801,186) (424,204) (599,303) (773,892)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 892,476 823,396 (475,992) 23,145 21,701 20,625
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 994,149 893,542 (406,132) 135,292 115,815 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 $ 3,615,267 $ 2,621,118 $ 1,727,576 $ 1,834,518 $ 1,699,266 $ 1,583,411
=========== =========== =========== =========== =========== ===========
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
Operations: 1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) $ 42,688 $ 66,983 $ 24,921 $ 2,334 $ 3,742 ($ 2,326)
Net realized gain (loss) on
security transactions 48,738 23,826 7,794 1,726 (596) (1,108)
Net change in unrealized appreciation
or depreciation on investments 608,851 (62,452) 173,915 44,633 (5,796) 12,525
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from
operations 700,277 28,357 206,630 48,693 (2,650) 9,091
----------- ----------- ----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 1,897,345 2,721,533 2,207,995 85,855 530,877 144,986
Cost of units repurchased (1,227,692) (904,022) (559,568) (118,224) (95,423) (84,667)
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 669,653 1,817,511 1,648,427 (32,369) 435,454 60,319
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 1,369,930 1,845,868 1,855,057 16,234 432,804 69,410
Net assets:
Beginning of period 4,453,131 2,607,263 752,206 721,129 288,325 218,915
----------- ----------- ----------- ----------- ----------- -----------
End of period $ 5,823,061 $ 4,453,131 $ 2,607,263 $ 737,453 $ 721,129 $ 288,325
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT
Operations: 1998 1997 1996*
---- ---- -----
<S> <C> <C> <C>
Net investment income (loss) ($3,274) ($21,660) $5,481
Net realized gain (loss) on
security transactions 74,675 12,259 11,288
Net change in unrealized appreciation
or depreciation on investments 1,524,641 384,388 2,792
--------- --------- ---------
Change in net assets from
operations 1,596,042 374,987 19,561
--------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sale of units 2,707,434 3,238,087 1,517,927
Cost of units repurchased (1,321,467) (749,413) (346,909)
--------- --------- ---------
Change in net assets from capital
unit transactions 1,385,967 2,488,674 1,171,018
--------- --------- ---------
Increase (decrease) in net assets 2,982,009 2,863,661 1,190,579
Net assets:
Beginning of period 4,054,240 1,190,579 --
--------- -------- ---------
End of period $7,036,249 $4,054,240 $1,190,579
========= ========= =========
See accompanying notes to financial statements.
<FN>
*The data is for the period beginning May 1, 1996 (date of initial activity).
</FN>
</TABLE>
<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 TrustSM, 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 TrustSM. 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 TrustSM has two funds available as an
investment option. MFS(R) Variable Insurance TrustSM 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 TrustSM.
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, 1998, was as follows:
Capital Appreciation Stock Fund........ $4,760,618
Growth and Income Stock Fund........... 10,158,204
Balanced Fund.......................... 5,884,896
Bond Fund.............................. 1,020,825
Money Market Fund...................... 3,974,568
Treasury 2000 Fund..................... 7,253
International Stock Portfolio.......... 1,204,629
World Governments Series............... 62,445
Emerging Growth........................ 1,823,433
----------
$28,905,871
==========
(5) Unit Activity from Contract Transactions
Transactions in units of each subaccount of the Account for the years
ended December 31, 1998, 1997, and 1996 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 340,862 233,645 266,148 43,507 236,364
Units repurchased (235,746) (181,819) (254,086) (28,421) (190,395)
---------- ---------- ---------- ---------- ----------
Units outstanding at
December 31, 1998 1,296,981 1,207,005 1,581,036 130,013 187,877
========== ========== ========== ========== ==========
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 52,984 141,913 7,299 197,716
Units repurchased (50,435) (91,869) (10,044) (96,508)
---------- ---------- ---------- ----------
Units outstanding at
December 31, 1998 201,769 411,250 59,926 433,141
========== ========== ========== ==========
<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 25.49 21.27 16.31 13.55 10.45 70.17 60.02 46.07 38.09 29.16
Percentage increase
in unit value
during period* 19.9% 30.4% 20.4% 29.7% 4.5% 16.9% 30.3% 21.0% 30.6% 0.5%
Number of units
outstanding at
end of period 1,296,981 1,191,865 953,534 663,269 588,501 1,207,005 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 43.49 38.69 33.40 30.41 25.09 27.82 26.43 24.82 24.35 21.11
Percentage increase
in unit value
during period* 12.4% 15.8% 9.8% 21.2% -1.4% 5.3% 6.5% 1.9% 15.4% -3.9%
Number of units
outstanding at
end of period 1,581,036 1,568,974 1,567,551 1,522,893 1,433,037 130,013 114,927 97,411 55,381 160,875
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 19.24 18.47 17.73 17.05 16.33 9.09 8.53 8.05 7.95 6.63
Percentage increase
in unit value
during period* 4.2% 4.1% 4.0% 4.4% 2.6% 6.6% 6.0% 1.3% 19.9% -7.9%
Number of units
outstanding at
end of period 187,877 141,908 97,454 125,112 179,387 201,769 199,220 196,670 194,133 191,747
INTERNATIONAL STOCK SUBACCOUNT WORLD GOVERNMENTS SUBACCOUNT
1998 1997 1996 1995 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
Net asset value:
Beginning of period $12.33 $12.07 $10.61 $10.00 $11.51 $11.74 $11.39 $10.00
End of period 14.16 12.33 12.07 10.61 12.31 11.51 11.74 11.39
Percentage increase
in unit value
during period* 14.8% 2.2% 13.7% 6.1% 6.9% (2.0%) 3.1% 13.9%
Number of units
outstanding at
end of period 411,250 361,206 216,089 70,876 59,926 62,671 24,554 19,219
EMERGING GROWTH SUBACCOUNT**
1998 1997 1996
---- ---- ----
Net asset value:
Beginning of period $12.21 $10.11 $10.00
End of period 16.24 12.21 10.11
Percentage increase
in unit value
during period* 33.0% 20.8% 1.1%
Number of units
outstanding at
end of period 433,141 331,933 117,771
For the Money Market Subaccount, the "seven-day average yield" for the seven
days ended December 31, 1998, was 3.75% and the "effective yield" for that
period was 3.86%.
<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>
<PAGE>
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,
1998; the related statements of operations and changes in net assets for each of
the years in the three-year (two years 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 (four years for International Stock Subaccount and
World Governments Subaccount, and two years and eight months 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, 1998, 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, 1998; the results of their operations and changes in
their net assets for each of the years in the three-year (two years 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 (four years for
International Stock Subaccount and World Governments Subaccount, and two years
and eight months for the Emerging Growth Subaccount) period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
February 5, 1999
