Dear Variable Annuity Owner:
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 Annuity reflect these market forces:
Percent increase
in Unit Value from
Subaccount 12/31/97 through 6/30/98
- ------------------------------------------------------------------------------
Capital Appreciation Stock 12.97%
Growth and Income Stock 11.50%
Balanced 6.86%
Bond 2.62%
Money Market 1.86%
International Stock 12.93%
- ------------------------------------------------------------------------------
World Governments 1.51%
- ------------------------------------------------------------------------------
Emerging Growth 20.71%
High Income 4.00%
Developing Markets 0.00%
- ------------------------------------------------------------------------------
This booklet is divided into several sections. Each section contains the
semiannual report for a component of the MEMBERS(R) Variable Annuity. The first
section contains the following reports for the CUNA Mutual Life Variable Annuity
Account:
Statement of Assets and Liabilities ............................ page 2
Statement of Operations ........................................ page 4
Statement of Changes in Net Assets.............................. page 5
Notes to the Financial Statements .............................. page 8
The CUNA Mutual Life Variable Annuity 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 and include
discussions of the funds' results and the managers' outlooks for (1) the Ultra
Series Fund which includes the Capital Appreciation Stock Fund, Growth and
Income Stock Fund, Balanced Fund, Bond Fund, and Money Market Fund; (2) the
International Stock Portfolio of the T. Rowe Price International Series, Inc.;
(3) the MFS(R) World Government SeriesSM and the MFS(R) Emerging Growth SeriesSM
of the MFS(R) Variable Insurance TrustSM, (4) the Oppenheimer High Income Fund
of the Oppenheimer Variable Account Funds; and (5) the Templeton Developing
Markets Fund of the Templeton Variable Products Series Fund.
We appreciate the opportunity you have given us to serve your long term asset
accumulation needs through MEMBERS(R) Variable Annuity. We would like to take
this opportunity to remind you that we have seen an 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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investments in Ultra Series Fund:
(note 2)
Capital Appreciation Stock Fund,
8,356,798 shares at net asset
value of $21.42 per share
(cost $126,985,020) $179,006,310 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
12,322,675 shares at net asset
value of $30.45 per share
(cost $278,970,478) -- 375,203,240 -- -- --
Balanced Fund,13,618,124 shares
at net asset value of $18.17
per share (cost $216,644,292) -- -- 247,474,553 -- --
Bond Fund, 4,016,286 shares
at net asset value of $10.74
per share (cost $342,042,601) -- -- -- 43,116,610 --
Money Market Fund, 18,190,237 shares
at net asset value of $1.00
per share (cost $18,190,237) -- -- -- -- 18,190,237
------------ ------------ ------------ ------------ ------------
Total assets 179,006,310 375,203,240 247,474,553 43,116,610 18,190,237
------------ ------------ ------------ ------------ ------------
Liabilities:
Accrued adverse mortality and
expense charges 529,916 1,124,940 722,179 125,808 56,660
Other accrued expenses 63,590 134,993 86,662 15,097 6,799
------------ ------------ ------------ ------------ ------------
Total liabilities 593,506 1,259,933 808,841 140,905 63,459
------------ ------------ ------------ ------------ ------------
Net assets $178,412,804 $373,943,307 $246,665,712 $42,975,705 $18,126,778
============ ============ ============ ============ ============
Contract owners' equity:
Contracts in accumulation period
(note 6) 178,389,000 373,699,959 246,570,132 42,975,705 18,117,219
Contracts in annuity payment period
(note 2) 23,804 243,348 95,580 -- 9,559
------------ ------------ ------------ ------------ ------------
Total contract owners' equity 178,412,804 373,943,307 246,665,712 42,975,705 18,126,778
============ ============ ============ ============ ============
Total units outstanding
(note 5 and note 6) 7,875,334 16,845,784 15,368,539 3,429,653 1,573,924
============ ============ ============ ============ ============
Net asset value per unit $22.65 $22.20 $16.05 $12.53 $11.52
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
International World Emerging High Developing
Stock Governments Growth Income Markets
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
4,667,650 shares at net asset
value of $14.49 per share
(cost $57,257,284) $67,634,248 $ -- $ -- $ -- $ --
Investments in MFS(R) Variable
Insurance TrustSM:
World Governments Series,
1,297,001 shares at net asset
value of $10.30 per share
(cost $13,333,186) -- 13,359,113 -- -- --
Investments in MFS(R) Variable
Insurance TrustSM:
Emerging Growth Series,
3,430,743 shares at net asset
value of $19.45 per share
(cost $50,766,050) -- -- 66,727,958 -- --
Investments in Oppenheimer
Variable Account Funds:
High Income Series,
2,433,010 shares at net asset
value of $11.51 per share
(cost $27,973,237) -- -- -- 28,003,941 --
Investments in Templeton
Variable Products Series Fund:
Developing Markets Series,
732,713 shares at net asset
value of $4.96 per share
(cost $5,834,580143) -- -- -- -- 3,634,256
----------- ------------ ----------- ----------- -----------
Total assets 67,634,248 13,359,113 66,727,958 28,003,941 3,634,256
----------- ----------- ----------- ----------- -----------
Liabilities
Accrued adverse mortality and
expense charges 204,632 41,877 188,757 75,515 12,123
Other accrued expenses 24,556 5,025 22,651 9,062 1,455
----------- ----------- ----------- ----------- -----------
Total liabilities 229,188 46,902 211,408 84,577 13,578
----------- ----------- ----------- ----------- -----------
Net assets $67,405,060 $13,312,211 $66,516,550 $27,919,364 $3,620,678
=========== =========== =========== =========== ===========
Contract owners' equity:
Contracts in accumulation period
(note 6) 67,390,201 13,312,211 66,493,797 27,904,393 3,620,678
Contracts in annuity payment period
(note 2) 14,859 -- 22,753 14,971 --
----------- ----------- ----------- ----------- -----------
Total contract owners' equity 67,405,060 13,312,211 66,516,550 27,919,364 3,620,678
=========== =========== =========== =========== ===========
Total units outstanding
(note 5 and note 6) 4,732,031 1,161,991 4,546,701 2,441,621 717,708
=========== =========== =========== =========== ===========
Net asset value per unit $14.24 $11.46 $14.63 $11.43 $5.04
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Operations
June 30, 1998
(Unaudited)
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dividend income $ 178,889 $985,918 $1,846,338 $620,629 $445,979
Adverse mortality and expense
charges (note 3) (979,317) (2,068,822) (1,330,397) (234,329) (110,157)
Administrative charges (117,518) (248,258) (159,648) (28,119) (13,219)
----------- ---------- ---------- --------- ---------
Net investment income (loss) (917,946) (1,331,162) 356,293 358,181 322,603
----------- ---------- ---------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- 1,516 11,953 -- --
Proceeds from sale of securities 565,735 784,918 417,699 156,456 16,422,670
Cost of securities sold (391,976) (562,389) (358,796) (152,174) (16,422,670)
----------- ---------- ---------- --------- ----------
Net realized gain (loss) on
security transactions 173,759 224,045 70,856 4,282 --
Net change in unrealized
appreciation or depreciation
on investments 19,123,627 34,767,906 13,058,404 634,239 --
----------- ---------- ---------- --------- ----------
Net gain (loss) on investments 19,297,386 34,991,951 13,129,260 638,521 --
----------- ---------- ---------- --------- ----------
Net increase (decrease) in net
assets resulting from operations $18,379,440 $33,660,789 $13,485,553 $996,702 $322,603
=========== ========== ========== ========= =========
International World Emerging High Developing
Stock Governments Growth Income Markets
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
Dividend income $ -- $ 166,263 $ 494,173 $895,494 $ 80,388
Adverse mortality and expense
charges (note 3) (386,776) (84,249) (345,299) (126,627) (22,841)
Administrative charges (46,413) (10,110) (41,436) (15,195) (2,741)
----------- -------- ---------- --------- ----------
Net investment income (loss) (433,189) 71,904 107,438 753,672 54,806
----------- -------- ---------- --------- ----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- --
Proceeds from sale of securities 622,242 1,345,994 251,525 3,473 125,845
Cost of securities sold (554,291) (1,343,482) (201,154) (3,448) (171,366)
----------- --------- ---------- -------- ----------
Net realized gain (loss) on
security transactions 67,951 2,512 50,371 25 (45,521)
Net change in unrealized
appreciation or depreciation
on investments 7,582,434 121,610 9,891,040 (73,067) (1,052,442)
----------- -------- ---------- -------- ---------
Net gain (loss) on investments 7,650,385 124,122 9,941,411 (73,042) (1,097,963)
----------- -------- ---------- -------- ---------
Net increase (decrease) in net
assets resulting from operations $7,217,196 $196,026 $10,048,849 $680,630 $(1,043,157)
=========== ======== =========== ======== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
(Unaudited)
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income (loss) $(917,946) $(811,200) $(1,331,162) $15,195
Net realized gain (loss) on
security transactions 173,759 1,882,280 224,045 4,861,709
Net change in unrealized
appreciation or depreciation
on investments 19,123,627 24,598,979 34,767,906 46,546,353
----------- ---------- ----------- -----------
Change in net assets from operations 18,379,440 25,670,059 33,660,789 51,423,257
----------- ---------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sales of units 75,620,268 107,669,256 134,967,127 197,965,607
Cost of units repurchased (50,566,957) (67,800,969) (77,168,627) (98,094,296)
Actuarial adjustments for mortality
experience on annuities in payment period 625 -- 21,080 --
Annuity benefit payments (465) (168) (11,481) (7,512)
----------- ---------- ----------- -----------
Change in net assets from capital
unit transactions 25,053,471 39,868,119 57,808,099 99,863,799
----------- ---------- ----------- -----------
Increase (decrease) in net assets 43,432,911 65,538,178 91,468,888 151,287,056
Net assets:
Beginning of period 134,979,893 69,441,715 282,474,419 131,187,363
----------- ---------- ----------- -----------
End of period $178,412,804 $134,979,893 $373,943,307 $282,474,419
=========== =========== =========== ===========
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1998 1997 1998 1997
---- ---- ---- ----
Net investment income (loss) $356,293 $3,624,989 $358,181 $1,087,785
Net realized gain (loss) on
security transactions 70,856 2,410,519 4,282 19,072
Net change in unrealized appreciation
or depreciation on investments 13,058,404 14,073,060 634,239 524,467
------------ ----------- ---------- ----------
Change in net assets from operations 13,485,553 20,108,568 996,702 1,631,324
------------ ----------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 102,685,574 134,826,300 22,075,255 31,709,344
Cost of units repurchased (54,403,888) (71,445,220) (13,370,380) (19,493,816)
Actuarial adjustments for mortality
experience on annuities in payment period 4,746 -- -- --
Annuity benefit payments (3,838) (1,535) -- --
------------ ----------- ---------- ----------
Change in net assets from capital
unit transactions 48,282,593 63,379,545 8,704,875 12,215,528
------------ ----------- ---------- ----------
Increase (decrease) in net assets 61,768,146 83,488,113 9,701,577 13,846,852
Net assets:
Beginning of period 184,897,565 101,409,452 33,274,128 19,427,276
------------ ----------- ---------- ----------
End of period $246,665,712 $184,897,565 $42,975,705 $33,274,128
=========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
(Unaudited)
MONEY MARKET SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
Operations: 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income (loss) $322,603 $749,001 $(433,189) $575,230
Net realized gain (loss) on
security transactions -- -- 67,951 38,683
Net change in unrealized appreciation
or depreciation on investments -- -- 7,582,434 (469,465)
---------- ---------- ---------- ----------
Change in net assets from operations 322,603 749,001 7,217,196 144,448
---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sales of units 44,639,799 92,196,341 35,496,206 64,648,440
Cost of units repurchased (44,388,195) (91,675,721) (30,449,731) (42,924,106)
Actuarial adjustments for mortality
experience on annuities in payment period 991 -- 362 --
Annuity benefit payments (188) -- (247) --
---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 252,407 520,620 5,046,590 21,724,334
---------- ---------- ---------- ----------
Increase (decrease) in net assets 575,010 1,269,621 12,263,786 21,868,782
Net assets:
Beginning of period 17,551,768 16,282,147 55,141,274 33,272,492
---------- ---------- ---------- ----------
End of period $18,126,778 $17,551,768 $67,405,060 $55,141,274
========== ========== ========== ==========
WORLD GOVERNMENTS SUBACCOUNT EMERGING GROWTH SUBACCOUNT
Operations: 1998 1997 1998 1997
---- ---- ---- ----
Net investment income (loss) $71,904 $124,518 $107,438 $(441,903)
Net realized gain (loss) on
security transactions 2,512 (14,843) 50,371 22,348
Net change in unrealized appreciation
or depreciation on investments 121,610 (395,717) 9,891,040 5,960,197
---------- ---------- ---------- ----------
Change in net assets from operations 196,026 (286,042) 10,048,849 5,540,642
---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 6,927,453 15,607,791 33,643,858 50,764,584
Cost of units repurchased (7,725,808) (13,378,076) (22,654,933) (27,459,730)
Actuarial adjustments for mortality
experience on annuities in payment period -- -- 1,366 --
Annuity benefit payments -- -- (636) (187)
---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions (798,355) 2,229,715 10,989,655 23,304,667
---------- ---------- ---------- ----------
Increase (decrease) in net assets (602,329) 1,943,673 21,038,504 28,845,309
Net assets:
Beginning of period 13,914,540 11,970,867 45,478,046 16,632,737
---------- ---------- ---------- ----------
End of period $13,312,211 $13,914,540 $66,516,550 $45,478,046
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statement of Changes in Net Assets
Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
(Unaudited)
HIGH INCOME SUBACCOUNT DEVELOPING MARKETS SUBACCOUNT
Operations: 1998 1997* 1998 1997*
---- ----- ---- -----
<S> <C> <C> <C> <C>
Net investment income (loss) $753,672 $342,331 $54,806 $(18,284)
Net realized gain (loss) on
security transactions 25 52 (45,521) (20,944)
Net change in unrealized appreciation
or depreciation on investments (73,067) 103,771 (1,052,442) (1,147,882)
---------- --------- --------- ---------
Change in net assets from operations 680,630 446,154 (1,043,157) (1,187,110)
---------- --------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sales of units 18,170,311 14,947,080 2,844,738 4,966,376
Cost of units repurchased (4,502,782) (1,822,151) (1,228,584) (731,585)
Actuarial adjustments for mortality
experience on annuities in payment period 369 -- -- --
Annuity benefit payments (247) -- -- --
---------- --------- --------- ---------
Change in net assets from capital
unit transactions 13,667,651 13,124,929 1,616,154 4,234,791
---------- --------- --------- ---------
Increase (decrease) in net assets 14,348,281 13,571,083 572,997 3,047,681
Net assets:
Beginning of period 13,571,083 -- 3,047,681 --
---------- --------- --------- ---------
End of period $27,919,364 $13,571,083 $3,620,678 $3,047,681
========== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1997 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Notes to Financial Statements
(1) Organization
The CUNA Mutual Life Variable Annuity Account (the Variable Account) is a
unit investment trust registered under the Investment Company Act of 1940
with the Securities and Exchange Commission. The Variable Account was
established as a separate investment account within CUNA Mutual Life
Insurance Company (the Company) to receive and invest net premiums paid
under variable annuity contracts (Contracts).
Although the assets in the Variable Account are the property of the
Company, the assets in the Variable Account attributable to the Contracts
are not chargeable with liabilities arising out of any other business which
the Company may conduct. The assets of the Variable Account are available
to cover the general liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising under the
Contracts. The Company has the right to transfer to the general account any
assets of the Variable Account which are in excess of reserves and other
contract liabilities. All obligations arising under the Contracts are
general corporate obligations of the Company.
(2) Significant Accounting Policies
Investments
The Variable Account currently is divided into ten 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 fund, i.e., Ultra Series
Fund (Class Z shares), T. Rowe Price International Fund, Inc., MFS(R)
Variable Insurance TrustSM,* Oppenheimer Variable Account Funds, Templeton
Variable Products Series Fund, 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 Variable Account invests in shares of Ultra Series Fund, T. Rowe Price
International Fund, Inc., MFS(R) Variable Insurance TrustSM,* Oppenheimer
Variable Account Funds, and Templeton Variable Products Series Fund. 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.
The Ultra Series Fund currently has five funds available as investment
options under the Contracts, The T. Rowe Price International Series, Inc.
has one fund available as an investment option under the Contracts, the MFS
Variable Insurance Trust has two funds available as investment options
under the Contracts, the Oppenheimer Variable Account Funds has one fund
available as an investment option under the Contracts and the Templeton
Variable Products Series Fund has one fund available as an investment
option under the Contracts. The Ultra Series Fund, MFS Variable Insurance
Trust, Oppenheimer Variable Account Funds and Templeton Variable Products
Series Fund also have other funds that are not available under the
Contracts. All five investment companies may, in the future, create
additional funds or classes that may or may not be available as investment
options under the Contracts. Each fund has its own investment objective and
the income, gains and losses for each fund are determined separately for
that fund or class.
CIMCO Inc. (CIMCO) serves as the Investment Adviser 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.
The 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
Adviser 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
Adviser 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.
OppenheimerFunds, Inc. serves as the investment adviser to the Oppenheimer
High Income Fund and manages its assets in accordance with general policies
and guideline established by the board of trustees of the Oppenheimer
Variable Account Funds. The Manager is owned by Oppenheimer Acquisition
Corp., a holding company that is owned in part by senior officers of the
Manager and controlled by Massachusetts Mutual Life Insurance Company.
<PAGE>
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Fund: Class 2 and manages its assets and makes
its investments decisions. Templeton Asset Management Ltd. is a Singapore
corporation wholly owned by Franklin Resources, Inc., a publicly owned
company. Resources' principal shareholders are Charles B. Johnson and
Rupert H. Johnson, Jr.
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
Currently, no charge is made against the Variable Account for any federal,
state or local taxes (other than premium taxes) that the Company incurs or
that may be attributable to the Variable Account or the Contracts. The
Company may, however, make such a charge in the future from surrender
value, death benefits or annuity payments, as appropriate. Such taxes may
include taxes (levied by any government entity) which the Company
determines to have resulted from: (1) the establishment or maintenance of
the Variable Account, (2) receipt by the Company of purchase payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.
Annuity Reserves
Annuity reserves are computed for contracts in the payout stage according
to the 1983a Individual Annuitant Mortality Table. The assumed investment
return is 3.5% unless the annuitant elects otherwise, in which case the
rate may vary from 3.5% to 7%, as regulated by the laws of the respective
states. The mortality risk is fully borne by CUNA Mutual Life Insurance
Company and may result in additional amounts being transferred into the
variable annuity account by CUNA Mutual Life Insurance Company to cover
greater longevity of annuitants than expected. Conversely, if reserves
exceed amounts required, transfers may be made to the insurance company.
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 Variable Account.
Contract Charges
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments
are paid. However, a surrender charge is deducted upon surrender or partial
withdrawal of purchase payments within 7 years of their being paid and, in
certain circumstances, upon payment of a death benefit or the election of
certain annuity payment options.
For purchase payments withdrawn or surrendered within one year of having
been paid, the charge is 7% of the amount of the payment withdrawn or
surrendered. For each purchase payment, the surrender charge decreases by
1% for each full year that has elapsed since the payment was made. No
surrender charge is assessed upon the withdrawal or surrender of the
contract value in excess of aggregate purchase payments or on purchase
payments made more than 7 years prior to the withdrawal or surrender.
Subject to certain restrictions for the first partial withdrawal (or
surrender) in each contract year, an amount equal to 10% of aggregate
purchase payments subject to a surrender charge (as of the time of
withdrawal or surrender) may be surrendered without a surrender charge. The
surrender charge also may be waived in certain circumstances as provided in
the Contracts.
Annual Contract Fee. On each contract anniversary (or upon surrender of the
Contract) prior to the annuity date, the Company deducts an annual contract
fee of $30 from the variable contract value. After the annuity date, the
Company deducts this fee from variable annuity payments. A pro-rated
portion of the fee is deducted upon annuitization of a Contract except on a
contract anniversary.
Transfer Fee. No charge is made for transfers, however, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract year.
<PAGE>
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted either: (a) from purchase payments as they
are received, (b) from contract value upon surrender or partial withdrawal,
(c) upon application of adjusted contract value to an annuity payment
option, or (d) upon payment of a death benefit. The Company, however,
reserves the right to deduct premium taxes at the time it pays such taxes.
Variable Account Charges
Mortality and Expense Risk Charge. The Company deducts a daily mortality
and expense risk charge to compensate it for assuming certain mortality and
expense risks. The charge is deducted from the assets of the Variable
Account at an annual rate of 1.25% (approximately 0.85% for mortality risk
and 0.40% for expense risks).
Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administration of the Contract. The charge is deducted from the assets of
the Variable Account at an annual rate of 0.15%.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the six months ended June 30, 1998, was as follows:
Capital Appreciation Stock Fund................................$25,269,368
Growth and Income Stock Fund................................... 58,470,024
Balanced Fund.................................................. 49,842,246
Bond Fund...................................................... 9,354,052
Money Market Fund.............................................. 17,057,895
International Stock Portfolio.................................. 5,454,291
World Governments Series....................................... 663,769
Emerging Growth................................................ 11,551,502
High Income Fund............................................... 14,506,799
Developing Markets Fund........................................ 1,809,804
-----------
$193,979,750
===========
(5) Accumulation Unit Activity from Contract Transactions
Transactions in accumulation units of each subaccount of the Variable
Account for the year ended December 31, 1997 and for the six-month period
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Units for contracts in accumulation period:
Units outstanding at December 31, 1996 4,495,720 8,541,383 7,783,833 1,686,539 1,492,704
Units sold 6,013,456 11,114,621 9,579,893 2,687,144 8,313,505
Units repurchased (3,776,703) (5,479,461) (5,056,104) (1,647,913) (8,254,380)
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1997 6,732,473 14,176,543 12,307,622 2,725,770 1,551,829
Units sold 3,464,401 6,234,570 6,523,411 1,785,714 3,909,063
Units repurchased (2,322,590) (3,576,291) (3,468,448) (1,081,831) (3,887,798)
--------- --------- --------- --------- ---------
Units outstanding at June 30, 1998 7,874,284 16,834,822 15,362,585 3,429,653 1,573,094
========= ========= ========= ========= =========
Units for annuitizeed contracts:
Units outstanding at December 31, 1996 -- -- -- -- --
Units sold 257 9,730 3,497 -- --
Units repurchased (9) (391) (103) -- --
Units outstanding at December 31, 1997 248 9,339 3,394 -- --
--------- --------- --------- --------- ---------
Units sold 823 2,156 2,805 -- 846
Units repurchased (21) (533) (245) -- (16)
--------- --------- --------- --------- ---------
Units outstanding at June 30, 1998 1,050 10,962 5,954 -- 830
--------- --------- --------- --------- ---------
Total units outstanding June 30, 1998 7,875,334 16,845,784 15,368,539 3,429,653 1,573,924
========= ========= ========= ========= =========
<PAGE>
International World Emerging High Developing
Stock Governments Growth Income Markets
Subaccount Subaccount Subaccount Subaccount* Subaccount*
Accumulation units outstanding at December 31, 1996 2,683,277 1,033,483 1,650,627 -- --
Accumulation units sold 5,006,978 1,384,847 4,521,335 1,403,639 547,590
Accumulation units repurchased (3,316,780) (1,186,204) (2,419,917) (168,771) (88,863)
--------- --------- --------- -------- -------
Accumulation units outstanding at December 31, 1997 4,373,475 1,232,126 3,752,045 1,234,868 458,727
Accumulation units sold 2,561,783 607,914 2,450,161 1,604,547 452,423
Accumulation units repurchased (2,204,271) (678,049) (1,657,060) (399,104) (193,442)
--------- --------- --------- -------- -------
Accumulation units outstanding at June 30, 1998 4,730,987 1,161,991 4,545,146 2,440,311 717,708
========= ========= ========= ======== =======
Units for annuitizeed contracts:
Units outstanding at December 31, 1996 -- -- -- -- --
Units sold -- -- 1,507 -- --
Units repurchased -- -- (16) -- --
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1997 -- -- 1,491 -- --
--------- --------- --------- --------- ---------
Units sold 1,061 -- 110 1,332 --
Units repurchased (17) -- (46) (22) --
--------- --------- --------- --------- ---------
Units outstanding at June 30, 1998 1,044 -- 1,555 1,310 --
--------- --------- --------- --------- ---------
Total units outstanding June 30, 1998 4,732,031 1,161,991 4,546,701 2,441,621 717,708
========= ========= ========= ========= =========
<FN>
*The data is for period beginning May 1, 1997 (date of initial activity).
</FN>
</TABLE>
<TABLE>
<CAPTION>
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
Capital Appreciation Growth and Income Balanced Bond
Stock Subaccount Stock Subaccount Subaccount Subaccount
Accumulation unit value: 1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $20.05 $15.45 $19.91 $15.36 $15.02 $13.03 $12.21 $11.52
End of period 22.65 20.05 22.20 19.91 16.05 15.02 12.53 12.21
Percentage increase in
unit value during period 12.97% 29.77% 11.50% 29.62% 6.86% 15.27% 2.62% 5.99%
Number of units outstanding
at end of period 7,875,334 6,732,473 16,845,784 14,176,543 15,368,539 12,307,622 3,429,653 2,725,770
Money Market International World Governments Emerging Growth
Subaccount Stock Subaccount Subaccount Subaccount
Accumulation unit value: 1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
Beginning of period $11.31 $10.91 $12.61 $12.40 $11.29 $11.58 $12.12 $10.08
End of period 11.52 11.31 14.24 12.61 11.46 11.29 14.63 12.12
Percentage increase in
unit value during period 1.86% 3.67% 12.93% 1.69% 1.51% (2.50%) 20.71% 20.24%
Number of units outstanding
at end of period 1,573,924 1,551,829 4,732,031 4,373,475 1,161,991 1,232,126 4,546,701 3,752,045
<PAGE>
High Income Developing Markets
Subaccount Stock Subaccount
Accumulation unit value: 1998 1997* 1998 1997*
---- ----- ---- -----
Beginning of period $10.99 $10.00 $6.64 $10.00
End of period 11.43 10.99 6.64 6.64
Percentage increase in
unit value during period 4.00% 9.9% 0.00% (33.6%)
Number of units outstanding
at end of period 2,441,621 1,234,868 717,708 458,727
For the Money Market Subaccount, the "seven-day average yield" for the
seven days ended June 30, 1998, was 3.7% and the "effective yield" for that
period was 3.8%.
*1997 data is for the eight-month period ended December 31, 1997.
</TABLE>
