<PAGE> 1
FINANCIAL STATEMENTS
AMERICAN REPUBLIC VARIABLE ANNUITY ACCOUNT
YEAR ENDED DECEMBER 31, 1999
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 2
American Republic Variable Annuity Account
Financial Statements
Year ended December 31, 1999
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statements of Net Assets......................................................2
Statements of Operations......................................................5
Statements of Changes in Net Assets...........................................7
Notes to Financial Statements.................................................9
<PAGE> 3
[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
The Board of Directors
American Republic Insurance Company
We have audited the accompanying individual and combined statements of net
assets of each of the divisions of American Republic Variable Annuity Account
(comprised of the Money Market, Growth, Growth and Income, Global Equity,
Global Income, Strategic Fixed Income and Balanced Divisions) as of December
31, 1999, and the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund shares owned as of December 31,
1999, by correspondence with the transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of each
of the divisions of American Republic Variable Annuity Account at December 31,
1999, and the individual and combined results of their operations for the year
then ended and the changes in their net assets for each of the two years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
January 19, 2000
1
<PAGE> 4
American Republic Variable Annuity Account
Statements of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
COMBINED
--------------------
<S> <C>
ASSETS
Investments at net asset value:
Mitchell Hutchins Series Trust Money Market Portfolio, 1,698,874 shares at $1.00
per share (cost - $1,698,874) $ 1,698,874
Mitchell Hutchins Series Trust Growth Portfolio, 684,912 shares at $24.09 per share
(cost - $11,242,864) 16,499,530
Mitchell Hutchins Series Trust Growth and Income Portfolio, 341,157 shares at
$16.34 per share (cost - $4,198,635) 5,574,507
Mitchell Hutchins Series Trust Global Equity Portfolio, 251,941 shares at $16.21
per share (cost - $3,227,569) 4,083,962
Mitchell Hutchins Series Trust Global Income Portfolio, 414,125 shares at $10.54
per share (cost - $4,689,321) 4,364,879
Mitchell Hutchins Series Trust Strategic Fixed Income Portfolio, 239,642 shares at
$10.42 per share (cost - $2,627,930) 2,497,070
Mitchell Hutchins Series Trust Balanced Portfolio, 593,774 shares at $11.75 per
share (cost - $6,544,803) 6,976,848
--------------------
Total investments (cost - $34,229,996) 41,695,670
Payable to American Republic Insurance Company (39,767)
--------------------
Total net assets $41,655,903
====================
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
MONEY GLOBAL
MARKET GROWTH GROWTH AND GLOBAL EQUITY INCOME STRATEGIC FIXED BALANCED
DIVISION DIVISION INCOME DIVISION DIVISION DIVISION INCOME DIVISION DIVISION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,698,874 - $ - $ - $ - $ - $ -
- 16,499,530 -
- - 5,574,507 - - - -
- - - 4,083,962 - - -
- - - - 4,364,879 - -
- - - - - 2,497,070 -
- - - - - - 6,976,848
- ----------------------------------------------------------------------------------------------------------------------
1,698,874 16,499,530 5,574,507 4,083,962 4,364,879 2,497,070 6,976,848
(2,275) (10,903) (4,359) (4,388) (5,611) (1,509) (10,722)
- ----------------------------------------------------------------------------------------------------------------------
$1,696,599 $16,488,627 $ 5,570,148 $ 4,079,574 $ 4,359,268 $ 2,495,561 $ 6,966,126
======================================================================================================================
</TABLE>
3
<PAGE> 6
American Republic Variable Annuity Account
Statements of Net Assets (continued)
<TABLE>
<S> <C>
Net assets represented by:
Currently payable annuity contracts:
Money Market Division $ 32,996
Growth Division 102,431
Growth and Income Division 47,394
Global Equity Division 32,345
Global Income Division 121,260
Strategic Fixed Income Division 23,224
Balanced Division 243,964
-----------------
603,614
<CAPTION>
UNITS VALUE
---------------------------
<S> <C> <C> <C>
Contracts in accumulation period:
Money Market Division 110,284 $15.08 1,663,603
Growth Division 273,218 59.97 16,386,196
Growth and Income Division 240,346 22.98 5,522,754
Global Equity Division 184,090 21.99 4,047,229
Global Income Division 235,822 17.97 4,238,008
Strategic Fixed Income Division 139,201 17.76 2,472,337
Balanced Division 234,798 28.63 6,722,162
----------------
41,052,289
----------------
$ 41,655,903
================
</TABLE>
See accompanying notes.
4
<PAGE> 7
American Republic Variable Annuity Account
Statements of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
COMBINED DIVISION DIVISION
-----------------------------------------------------
<S> <C> <C> <C>
NET INVESTMENT INCOME (LOSS)
Income:
Dividends $ 82,512 $ 66,984 $ -
Capital gains distributions 3,289 - 301
-----------------------------------------------------
Total investment income 85,801 66,984 301
Expenses (Note 2):
Mortality, distribution and expense risk (612,178) (26,791) (217,227)
Administrative charges (31,968) (1,990) (10,679)
-----------------------------------------------------
Total expenses (644,146) (28,781) (227,906)
-----------------------------------------------------
Net investment income (loss) (558,345) 38,203 (227,605)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Note 4)
Net realized gain (loss) on investments 1,341,051 - 905,995
Change in net unrealized appreciation/
depreciation of investments 4,099,056 - 3,622,206
-----------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ 4,881,762 $ 38,203 $ 4,300,596
=====================================================
</TABLE>
See accompanying notes.
5
<PAGE> 8
<TABLE>
<CAPTION>
GLOBAL GLOBAL
GROWTH EQUITY INCOME STRATEGIC BALANCED
AND INCOME DIVISION DIVISION DIVISION FIXED INCOME DIVISION DIVISION
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 77 $ 15,451 $ - $ - $ -
- 2,337 - 523 128
- -------------------------------------------------------------------------------------------------------------------
77 17,788 - 523 128
(83,282) (61,714) (75,884) (40,392) (106,888)
(3,956) (4,138) (4,376) (1,666) (5,163)
- -------------------------------------------------------------------------------------------------------------------
(87,238) (65,852) (80,260) (42,058) (112,051)
- -------------------------------------------------------------------------------------------------------------------
(87,161) (48,064) (80,260) (41,535) (111,923)
374,325 161,443 (115,756) (32,295) 47,339
158,138 511,379 (171,231) (71,375) 49,939
- -------------------------------------------------------------------------------------------------------------------
$445,302 $624,758 $(367,247) $(145,205) $ (14,645)
===================================================================================================================
</TABLE>
6
<PAGE> 9
American Republic Variable Annuity Account
Statements of Changes in Net Assets
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
MONEY
MARKET
COMBINED DIVISION
------------------------------------
<S> <C> <C>
Net assets at January 1, 1998 $53,225,719 $2,509,866
Operations:
Net investment income 4,356,527 77,552
Net realized gain (loss) on investments 1,230,910 -
Change in net unrealized appreciation/depreciation of investments 1,994,505 -
------------------------------------
Net increase in net assets resulting from operations 7,581,942 77,552
Changes from principal transactions:
Purchase payments 21,495 -
Contract distributions and terminations (11,713,072) (733,709)
Transfer payments (to) from other divisions or other contracts 64,282 500,753
Annuity payments and related actuarial adjustment in reserves (161,692) (13,491)
------------------------------------
Decrease in net assets derived from principal transactions (11,788,987) (246,447)
------------------------------------
Total increase (decrease) (4,207,045) (168,895)
------------------------------------
Net assets at December 31, 1998 49,018,674 2,340,971
Operations:
Net investment income (loss) (558,345) 38,203
Net realized gain (loss) on investments 1,341,051 -
Change in net unrealized appreciation/depreciation of investments 4,099,056 -
------------------------------------
Net increase (decrease) in net assets resulting from operations 4,881,762 38,203
Changes from principal transactions:
Purchase payments 84,325 -
Contract distributions and terminations (12,338,245) (1,500,693)
Transfer payments (to) from other divisions or other contracts 147,077 830,368
Annuity payments and related actuarial adjustment in reserves (137,690) (12,250)
------------------------------------
Decrease in net assets derived from principal transactions (12,244,533) (682,575)
------------------------------------
Total decrease (7,362,771) (644,372)
------------------------------------
Net assets at December 31, 1999 $41,655,903 $1,696,599
====================================
</TABLE>
See accompanying notes.
7
<PAGE> 10
<TABLE>
<CAPTION>
GLOBAL GLOBAL STRATEGIC FIXED
GROWTH GROWTH AND INCOME EQUITY INCOME INCOME BALANCED
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15,409,813 $7,104,201 $5,734,131 $8,476,046 $3,926,923 $10,064,739
1,680,734 371,980 768,258 318,632 169,671 969,700
156,653 416,468 309,251 (44,058) 15,393 377,203
1,942,564 171,147 (467,933) 275,130 66,932 6,665
- ----------------------------------------------------------------------------------------------------------
3,779,951 959,595 609,576 549,704 251,996 1,353,568
7,421 4,150 2,437 - - 7,487
(2,604,973) (1,364,249) (1,198,799) (2,281,763) (919,535) (2,610,044)
(29,926) 128,086 (250,822) (301,128) 98,469 (81,150)
(14,481) (18,718) (2,001) (65,712) (17,315) (29,974)
- ----------------------------------------------------------------------------------------------------------
(2,641,959) (1,250,731) (1,449,185) (2,648,603) (838,381) (2,713,681)
- ----------------------------------------------------------------------------------------------------------
1,137,992 (291,136) (839,609) (2,098,899) (586,385) (1,360,113)
- ----------------------------------------------------------------------------------------------------------
16,547,805 6,813,065 4,894,522 6,377,147 3,340,538 8,704,626
(227,605) (87,161) (48,064) (80,260) (41,535) (111,923)
905,995 374,325 161,443 (115,756) (32,295) 47,339
3,622,206 158,138 511,379 (171,231) (71,375) 49,939
- ----------------------------------------------------------------------------------------------------------
4,300,596 445,302 624,758 (367,247) (145,205) (14,645)
17,607 33,189 4,324 275 1,000 27,930
(4,230,169) (1,803,251) (1,288,330) (1,433,680) (475,074) (1,607,048)
(126,702) 99,656 (152,661) (197,589) (214,918) (91,077)
(20,510) (17,813) (3,039) (19,638) (10,780) (53,660)
- ----------------------------------------------------------------------------------------------------------
(4,359,774) (1,688,219) (1,439,706) (1,650,632) (699,772) (1,723,855)
- ----------------------------------------------------------------------------------------------------------
(59,178) (1,242,917) (814,948) (2,017,879) (844,977) (1,738,500)
- ----------------------------------------------------------------------------------------------------------
$16,488,627 $5,570,148 $4,079,574 $4,359,268 $2,495,561 $ 6,966,126
==========================================================================================================
</TABLE>
8
<PAGE> 11
American Republic Variable Annuity Account
Notes to Financial Statements
December 31, 1999
1. INVESTMENT AND ACCOUNTING POLICIES
ORGANIZATION
American Republic Variable Annuity Account (the "Account") was organized by
American Republic Insurance Company (the "Company") in accordance with the
provisions of Iowa Insurance laws and is a part of the total operations of the
Company. The assets and liabilities of the Account are clearly identified and
distinguished from the other assets and liabilities of the Company. The Account
invests solely in specified portfolios of Mitchell Hutchins Series Trust (the
"Series Trust"), an open-end management investment company under the Investment
Company Act of 1940, as directed by eligible contract owners. All series of
shares are diversified except the Global Income Portfolio and Strategic Fixed
Income Portfolio. On July 28, 1999, the Global Growth Division changed its name
to Global Equity Division.
The Company has elected to terminate sales efforts of the Account. As a result,
the Account is no longer available to new contract owners. Existing contract
owners may continue to allocate purchase payments to, or transfers into, the
Account.
INVESTMENT OPERATIONS
Investments are stated at the closing net asset values per share on December
31, 1999.
The average cost method is used to determine realized gains and losses.
Dividends are taken into income on an accrual basis as of the ex-dividend date.
ANNUITY RESERVES
Currently payable annuity contract reserves are computed according to the
Individual Annuity Valuation 1983 Table using an assumed interest rate of 4.0%.
If the amount paid to the contractholder is less than originally estimated,
charges paid for mortality and expense risks are reimbursed to the Company. If
additional amounts are required, the Company reimburses the Account.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts reported and
disclosed herein.
9
<PAGE> 12
American Republic Variable Annuity Account
Notes to Financial Statements (continued)
2. EXPENSES
The Company is compensated for certain expenses. Mortality, distribution, and
expense risks assumed by the Company are compensated for by a charge equivalent
to an annual rate of 1.40% of the total net assets of each division. These
charges amounted to $612,178 in 1999.
An annual contract administration charge of $30 is deducted on the last
valuation date of each calendar year, upon full withdrawal of a contract's
value or upon commencement of annuity payments if such withdrawal is made or
annuity payments commence prior to the last valuation date of the year. A
transfer charge of $10 will be imposed on each transfer between divisions of
the account in excess of six in any one calendar year. However, the Company has
waived this charge until further notice. An early withdrawal charge may be
imposed in the event of withdrawal of any portion of the contract value or upon
annuitization. The early withdrawal charge is 5% of the amount withdrawn for
purchase payments made within five years prior to the date of withdrawal. A
withdrawal transaction charge of $10 will be imposed on each withdrawal in
excess of three per calendar year. Total administrative charges amounted to
$31,968 in 1999.
3. FEDERAL INCOME TAXES
Operations of the Account are part of the operations of the Company. Under
current practice, no federal income taxes are allocated by the Company to the
operations of the Account.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------------- --------------------------------
PURCHASES SALES PURCHASES SALES
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Portfolio:
Money Market $1,889,247 $ 2,531,344 $ 2,078,979 $ 2,247,874
Growth 2,678,141 5,429,735 4,759,381 4,058,020
Growth and Income 819,169 2,116,362 1,796,159 2,028,804
Global Equity 891,205 1,524,473 65,333 1,555,626
Global Income 512,095 1,818,823 587,381 2,810,819
Strategic Fixed Income 252,837 768,131 469,779 1,121,443
Balanced 1,339,692 2,056,164 2,187,680 3,320,284
-------------------------------- --------------------------------
$8,382,386 $16,245,032 $11,944,692 $17,142,870
================================ ================================
</TABLE>
10
<PAGE> 13
American Republic Variable Annuity Account
Notes to Financial Statements (continued)
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------------- --------------------------------
PURCHASED REDEEMED PURCHASED REDEEMED
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Division:
Money Market 122,171 167,348 135,347 151,047
Growth 17,814 106,857 31,020 102,821
Growth and Income 16,658 96,159 34,715 96,836
Global Equity 1,651 75,533 1,283 82,572
Global Income 1,382 94,759 3,071 148,221
Strategic Fixed Income 1,524 38,588 12,826 58,232
Balanced 3,621 67,131 14,876 118,321
-------------------------------- --------------------------------
164,821 646,375 233,138 758,050
================================ ================================
</TABLE>
6. NET ASSETS
Net assets at December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
MONEY GROWTH
MARKET GROWTH AND INCOME
COMBINED DIVISION DIVISION DIVISION
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit transactions $ 1,735,916 $ 753,798 $ - $ -
Accumulated net investment
income 32,454,313 942,801 11,231,961 4,194,276
Net unrealized
appreciation/depreciation of
investments 7,465,674 - 5,256,666 1,375,872
-------------------------------------------------------------------------
$ 41,655,903 $ 1,696,599 $ 16,488,627 $ 5,570,148
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL GLOBAL
EQUITY INCOME STRATEGIC FIXED BALANCED
DIVISION DIVISION INCOME DIVISION DIVISION
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit transactions $ - $ 27,925 $ 954,193 $ -
Accumulated net investment
income 3,223,181 4,655,785 1,672,228 6,534,081
Net unrealized
appreciation/depreciation of
investments 856,393 (324,442) (130,860) 432,045
------------------------------------------------------------------------
$ 4,079,574 $ 4,359,268 $ 2,495,561 $ 6,966,126
========================================================================
</TABLE>
11
