Dear Variable Annuity Owner:
The U. S. stock market showed strong gains overall once again in 1999. While
gains were concentrated in the "dot coms" and other technology stocks, the
broad-based market outperformed historical averages, even though approximately
half of all stocks suffered declines for the year. Interest rate increases in
the latter half of the year didn't seem to dampen the enthusiasm, but did
depress returns in the bond market. After a down year in 1998, many of the
developing international markets rebounded in 1999. These results are reflected
in the very attractive 1999 returns of the subaccounts of MEMBERS(R) Variable
Annuity.
Percent increase
in Unit Value from
Subaccount 12/31/98 through 12/31/99
Money Market 3.41%
Bond -0.70%
Balanced 12.92%
Growth and Income Stock 16.31%
Capital Appreciation Stock 23.50%
Mid-Cap Stock* 12.60%
International Stock 31.51%
Global Governments -3.91%
Emerging Growth 74.25%
High Income 2.85%
Developing Markets 51.26%
*The Mid-Cap Stock fund was added to MEMBERS(R) Variable Annuity on May 1, 1999.
As you may know, the CUNA Mutual Life Variable Annuity Account is divided into
subaccounts that each invest in an underlying mutual fund. The results shown
above reflect the deduction of the separate account level charges. As a result,
returns at the subaccount level shown above are slightly lower than at the
mutual fund level.
This booklet contains the annual reports for the various components of
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
Report of Independent Accountants................................ page 13
The remaining sections of this booklet contain the annual reports for the mutual
funds:
(1) the Ultra Series Fund which includes the Mid-Cap Stock Fund, 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)Global Governments 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 at CUNA Mutual Life Insurance Company want to take this opportunity to thank
you for the confidence you place in us. We look forward to serving your long
term asset accumulation needs in the coming years. 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 ANNUITY ACCOUNT
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
Capital
Money Growth and Appreciation Mid-Cap
Market Bond Balanced Income Stock Stock Stock
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund,
42,288,931 shares at net asset value of
$1.00 per share (cost $42,288,931) $42,288,931 $ -- $ -- $ -- $ -- $ --
Bond Fund,
7,683,188 shares at net asset value of
$10.05 per share (cost $80,763,952) -- 77,192,120 -- -- -- --
Balanced Fund,
20,526,307 shares at net asset value of
$20.44 per share (cost $351,295,934) -- -- 419,471,431 -- -- --
Growth and Income Stock Fund,
17,623,680 shares at net asset value of
$33.58 per share (cost $453,606,758) -- -- -- 591,762,029 -- --
Capital Appreciation Stock Fund,
11,469,593 shares at net asset value of
$25.59 per share (cost $201,816,014) -- -- -- -- 293,507,530 --
Mid-Cap Stock Fund,
845,419 shares at net asset value of
$11.15 per share (cost $8,765,849) -- -- -- -- -- 9,422,814
---------- ---------- ----------- ----------- ----------- ---------
Total assets 42,288,931 77,192,120 419,471,431 591,762,029 293,507,530 9,422,814
---------- ---------- ----------- ----------- ----------- ---------
Liabilities:
Accrued adverse mortality and
expense charges 44,869 82,118 437,866 612,375 300,475 8,915
Other accrued expenses 5,384 9,854 52,544 73,485 36,057 1,070
---------- ---------- ----------- ----------- ----------- ---------
Total liabilities 50,253 91,972 490,410 685,860 336,532 9,985
---------- ---------- ----------- ----------- ----------- ---------
Net assets $42,238,678 $77,100,148 $418,981,021 $591,076,169 $293,170,998 $9,412,829
========== ========== =========== =========== =========== =========
Contract owners' equity:
Contracts in accumulation period
(note 5) $42,228,258 $77,094,129 $418,799,682 $590,737,672 $293,122,958 $9,412,829
Contracts in annuity payment period
(note 2 and note 5) 10,420 6,019 181,339 338,497 48,040 --
---------- ---------- ----------- ----------- ----------- ---------
Total contract owners' equity $42,238,678 $77,100,148 $418,981,021 $591,076,169 $293,170,998 $9,412,829
========== ========== =========== =========== =========== =========
Total units outstanding
(note 5 and note 6) 3,485,839 6,071,064 22,086,578 21,928,818 9,927,977 835,797
========== ========== =========== =========== =========== =========
Net asset value per unit $12.12 $12.70 $18.97 $26.95 $29.53 $11.26
========== ========== =========== =========== =========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities, continued
December 31, 1999
<TABLE>
<CAPTION>
International Global 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,
5,081,603 shares at net asset value of
$19.04 per share (cost $64,237,903) $96,753,712 $ -- $ -- $ -- $ --
Investments in MFS(R) Variable Insurance
TrustSM: Global Governments Series,
1,186,136 shares at net asset value of
$10.03 per share (cost $12,203,108) -- 11,896,939 -- -- --
Investments in MFS(R) Variable Insurance
TrustSM: Emerging Growth Series,
4,340,874 shares at net asset value of
$37.94 per share (cost $71,452,562) -- -- 164,692,774 -- --
Investments in Oppenheimer
Variable Account Funds:
High Income Series,
4,668,713 shares at net asset value of
$10.72 per share (cost $52,150,556) -- -- -- 50,048,599 --
Investments in Templeton
Variable Products Series Fund:
Developing Markets Series,
1,065,575 shares at net asset value of
$7.74 per share (cost $7,424,880) -- -- -- -- 8,247,553
---------- ---------- ---------- ---------- ---------
Total assets 96,753,712 11,896,939 164,692,774 50,048,599 8,247,553
---------- ---------- ---------- ---------- ---------
Liabilities
Accrued adverse mortality and
expense charges 96,388 12,620 153,019 52,977 8,153
Other accrued expenses 11,567 1,514 18,362 6,357 978
---------- ---------- ---------- ---------- ---------
Total liabilities 107,955 14,134 171,381 59,334 9,131
---------- ---------- ---------- ---------- ---------
Net assets $96,645,757 $11,882,805 $164,521,393 $49,989,265 $8,238,422
========== ========== ========== ========== =========
Contract owners' equity:
Contracts in accumulation period
(note 5) $96,611,206 $11,880,871 $164,457,558 $49,964,387 $8,238,422
Contracts in annuity payment period
(note 2 and note 5) 34,551 1,934 63,835 24,878 --
---------- ---------- ----------- ---------- ----------
Total contract owners' equity $96,645,757 $11,882,805 $164,521,393 $49,989,265 $8,238,422
========== ========== =========== ========== ==========
Total units outstanding
(note 5 and note 6) 5,099,856 1,028,390 5,885,301 4,471,934 1,052,898
========== ========== =========== ========== =========
Net asset value per unit $18.95 $11.55 $27.95 $11.18 $7.82
========== ========== =========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Capital
Money Growth and Appreciation Mid-Cap
Market Bond Balanced Income Stock Stock Stock
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount*
<S> <C> <C> <C> <C> <C> <C>
Dividend income $1,522,055 $4,277,081 $10,169,612 $5,124,994 $226,205 $10,882
Adverse mortality and expense charges
(note 3) (402,770) (867,332) (4,505,676) (6,533,293) (3,016,735) (35,716)
Administrative charges (48,332) (104,080) (540,681) (783,995) (362,008) (4,286)
---------- --------- ---------- ---------- ---------- --------
Net investment income (loss) 1,070,953 3,305,669 5,123,255 (2,192,294) (3,152,538) (29,120)
---------- --------- ---------- ---------- ---------- --------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- 932 9,279,868 34,833,810 22,666,544 161,382
Proceeds from sale of securities 31,971,511 2,664,667 3,751,858 5,608,783 3,268,059 170,297
Cost of securities sold (31,971,511) (2,704,864) (3,104,055) (4,019,449) (2,206,505) (165,867)
---------- --------- ---------- ---------- ---------- --------
Net realized gain (loss) on security
transactions -- (39,265) 9,927,671 36,423,144 23,728,098 165,812
Net change in unrealized appreciation
or depreciation on investments -- (3,692,698) 28,064,336 39,831,071 32,577,970 656,965
---------- --------- ---------- ---------- ---------- --------
Net gain (loss) on investments -- (3,731,963) 37,992,007 76,254,215 56,306,068 822,777
---------- --------- --------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations $1,070,953 ($426,294) $43,115,262 $74,061,921 $53,153,530 $793,657
========== ========= ========== ========== ========== ========
International Global Emerging High Developing
Stock Governments Growth Income Markets
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
Dividend income $349,630 $704,569 $ -- $2,912,591 $59,822
Adverse mortality and expense charges
(note 3) (955,515) (156,137) (1,275,520) (577,108) (74,634)
Administrative charges (114,662) (18,736) (153,062) (69,253) (8,956)
---------- -------- ---------- --------- ---------
Net investment income (loss) (720,547) 529,696 (1,428,582) 2,266,230 (23,768)
---------- -------- ---------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 1,098,836 -- -- -- --
Proceeds from sale of securities 3,441,993 1,928,284 2,948,887 2,496,815 675,899
Cost of securities sold (2,827,743) (1,928,216) (1,811,377) (2,623,502) (739,788)
---------- -------- ---------- --------- ---------
Net realized gain (loss) on security
transactions 1,713,086 68 1,137,510 (126,687) (63,889)
Net change in unrealized appreciation
or depreciation on investments 22,008,904 (1,022,529) 69,201,365 (1,022,154) 2,636,489
---------- -------- ---------- --------- ---------
Net gain (loss) on investments 23,721,990 (1,022,461) 70,338,875 (1,148,841) 2,572,600
---------- -------- ---------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $23,001,443 ($492,765) $68,910,293 $1,117,389 $2,548,832
========== ======== ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1999 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT BOND SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998 1999 1998
Net investment income (loss) $1,070,953 $703,868 $3,305,669 $2,254,028
Net realized gain (loss) on
security transactions -- -- (39,265) 57,978
Net change in unrealized appreciation
or depreciation on investments -- -- (3,692,698) (318,903)
----------- ----------- ----------- -----------
Change in net assets from operations 1,070,953 703,868 (426,294) 1,993,103
----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sales of units 108,025,036 94,300,896 71,191,403 54,431,468
Cost of units repurchased (93,597,976) (85,815,744) (51,892,110) (31,471,803)
Actuarial adjustments for mortality
experience on annuities in payment period 214 1,043 536 --
Annuity benefit payments (815) (565) (283) --
----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 14,426,459 8,485,630 19,299,546 22,959,665
----------- ----------- ----------- -----------
Increase (decrease) in net assets 15,497,412 9,189,498 18,873,252 24,952,768
Net assets:
Beginning of period 26,741,266 17,551,768 58,226,896 33,274,128
----------- ----------- ----------- -----------
End of period $42,238,678 $26,741,266 $77,100,148 $58,226,896
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
BALANCED SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998 1999 1998
Net investment income (loss) $5,123,255 $4,495,569 ($2,192,294) ($729,501)
Net realized gain (loss) on
security transactions 9,927,671 301,386 36,423,144 16,746,571
Net change in unrealized appreciation
or depreciation on investments 28,064,336 22,339,305 39,831,071 36,859,343
----------- ----------- ----------- ----------
Change in net assets from operations 43,115,262 27,136,260 74,061,921 52,876,413
----------- ----------- ----------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 253,387,516 201,699,655 324,474,244 259,426,762
Cost of units repurchased (174,777,068) (116,452,760) (237,335,322) (164,872,612)
Actuarial adjustments for mortality
experience on annuities in payment period 3,206 5,666 8,597 24,088
Annuity benefit payments (25,514) (8,767) (38,478) (23,863)
----------- ----------- ----------- ----------
Change in net assets from capital
unit transactions 78,588,140 85,243,794 87,109,041 94,554,375
----------- ----------- ----------- ----------
Increase (decrease) in net assets 121,703,402 112,380,054 161,170,962 147,430,788
Net assets:
Beginning of period 297,277,619 184,897,565 429,905,207 282,474,419
----------- ----------- ----------- ----------
End of period $418,981,021 $297,277,619 $591,076,169 $429,905,207
=========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT MID-CAP STOCK SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998 1999*
Net investment income (loss) ($3,152,538) ($1,822,377) ($29,120)
Net realized gain (loss) on
security transactions 23,728,098 5,406,078 165,812
Net change in unrealized appreciation
or depreciation on investments 32,577,970 26,215,883 656,965
----------- ----------- ----------
Change in net assets from operations 53,153,530 29,799,584 793,657
----------- ----------- ----------
Capital unit transactions (note 5):
Proceeds from sales of units 176,946,680 144,717,642 9,591,635
Cost of units repurchased (142,267,223) (104,154,942) (972,463)
Actuarial adjustments for mortality
experience on annuities in payment period (40) 1,604 --
Annuity benefit payments (3,690) (2,040) --
----------- ----------- ----------
Change in net assets from capital
unit transactions 34,675,727 40,562,264 8,619,172
----------- ----------- ----------
Increase (decrease) in net assets 87,829,257 70,361,848 9,412,829
Net assets:
Beginning of period 205,341,741 134,979,893 --
----------- ----------- ----------
End of period $293,170,998 $205,341,741 $9,412,829
=========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL STOCK SUBACCOUNT GLOBALGOVERNMENTS SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998 1999 1998
Net investment income (loss) ($720,547) $217,383 $529,696 ($20,398)
Net realized gain (loss) on
security transactions 1,713,086 179,367 68 26,108
Net change in unrealized appreciation
or depreciation on investments 22,008,904 7,712,376 (1,022,529) 812,043
---------- ---------- ---------- ----------
Change in net assets from operations 23,001,443 8,109,126 (492,765) 817,753
---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 75,751,302 69,543,570 12,623,162 12,632,833
Cost of units repurchased (73,522,825) (61,375,314) (13,481,702) (14,130,911)
Actuarial adjustments for mortality
experience on annuities in payment period 150 1,013 13 163
Annuity benefit payments (2,564) (1,418) (186) (95)
---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 2,226,063 8,167,851 (858,713) (1,498,010)
---------- ---------- ---------- ----------
Increase (decrease) in net assets 25,227,506 16,276,977 (1,351,478) (680,257)
Net assets:
Beginning of period 71,418,251 55,141,274 13,234,283 13,914,540
---------- ---------- ---------- ----------
End of period $96,645,757 $71,418,251 $11,882,805 $13,234,283
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1999 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT HIGH INCOME SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998 1999 1998
Net investment income (loss) ($1,428,582) ($360,514) $2,266,230 $522,625
Net realized gain (loss) on
security transactions 1,137,510 201,695 (126,687) (32,367)
Net change in unrealized appreciation
or depreciation on investments 69,201,365 17,967,979 (1,022,154) (1,183,574)
----------- ---------- ---------- ----------
Change in net assets from operations 68,910,293 17,809,160 1,117,389 (693,316)
----------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sales of units 88,662,009 66,101,724 42,750,865 40,076,447
Cost of units repurchased (74,742,597) (47,694,150) (32,579,557) (14,246,691)
Actuarial adjustments for mortality
experience on annuities in payment period 254 2,039 (243) 616
Annuity benefit payments (3,421) (1,964) (6,484) (844)
----------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 13,916,245 18,407,649 10,164,581 25,829,528
----------- ---------- ---------- ----------
Increase (decrease) in net assets 82,826,538 36,216,809 11,281,970 25,136,212
Net assets:
Beginning of period 81,694,855 45,478,046 38,707,295 13,571,083
----------- ---------- ---------- ----------
End of period $164,521,393 $81,694,855 $49,989,265 $38,707,295
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING MARKETS SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1999 1998
Net investment income (loss) ($23,768) $28,189
Net realized gain (loss) on
security transactions (63,889) (254,209)
Net change in unrealized appreciation
or depreciation on investments 2,636,489 (665,933)
--------- ---------
Change in net assets from operations 2,548,832 (891,953)
--------- ---------
Capital unit transactions (note 5):
Proceeds from sales of units 5,286,209 4,921,625
Cost of units repurchased (4,090,271) (2,583,701)
Actuarial adjustments for mortality
experience on annuities in payment period -- --
Annuity benefit payments -- --
--------- ---------
Change in net assets from capital
unit transactions 1,195,938 2,337,924
--------- ---------
Increase (decrease) in net assets 3,744,770 1,445,971
Net assets:
Beginning of period 4,493,652 3,047,681
--------- ---------
End of period $8,238,422 $4,493,652
========= =========
</TABLE>
See accompanying notes to financial statements.
<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 (SEC). 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 eleven 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 six 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.
Massachusetts Financial Services Company (MFS) serves as the investment
adviser to the MFS Global Governments Series (formerly known as the MFS
World Governments Series) and Emerging Growth Series and manages their
assets in accordance with general policies and guidelines established by
the board of trustees of MFS(R) Variable Insurance TrustSM.
OppenheimerFunds, Inc. (the Manager) serves as the investment adviser to
the Oppenheimer High Income Fund and manages its assets in accordance with
general policies and guidelines established by the board of trustees of
the Oppenheimer Variable Account Funds.
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.
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%. The mortality risk is fully borne by the Company and may
result in additional amounts being transferred into the variable annuity
account by the 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
Contract Charges
Surrender Charge (Contingent Deferred Sales Charge). At the time purchase
payments are paid, no charge is deducted for sales expenses. 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. The surrender charge decreases by 1% for each full year that
has elapsed since the purchase 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.
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 year ended December 31, 1999, was as follows:
Money Market Fund........................................ $47,509,252
Bond Fund................................................ 25,340,633
Balanced Fund............................................ 97,121,035
Growth and Income Stock Fund............................. 125,881,974
Capital Appreciation Stock Fund.......................... 57,717,680
Mid-Cap Stock Fund....................................... 8,931,715
International Stock Portfolio............................ 6,127,083
Global Governments Series................................ 1,608,359
Emerging Growth Series................................... 15,577,084
High Income Fund......................................... 14,972,248
Developing Markets Fund.................................. 1,855,486
(5) Accumulation Unit Activity from Contract Transactions
Transactions in accumulation units of each subaccount of the Variable
Account for the years ended December 31, 1999 and 1998, were as follows:
<TABLE>
<CAPTION>
Capital
Money Growth and Appreciation Mid-Cap
Market Bond Balanced Income Stock Stock Stock
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
Units for contracts in accumulation period:
<S> <C> <C> <C> <C> <C> <C>
Outstanding at December 31, 1997 1,551,829 2,725,770 12,307,622 14,176,543 6,732,473 --
Sold 8,181,344 4,340,906 12,797,304 13,088,415 6,677,442 --
Repurchased (7,453,236) (2,512,411) (7,416,551) (7,720,236) (4,825,236) --
--------- --------- --------- --------- -------- --------
Outstanding at December 31, 1998 2,279,937 4,554,265 17,688,375 19,544,722 8,584,679 --
Sold 9,061,675 5,596,028 14,144,468 12,580,706 6,829,980 928,691
Repurchased (7,856,633) (4,079,703) (9,755,824) (9,209,170) (5,488,309) (92,894)
--------- --------- --------- --------- --------- --------
Outstanding at December 31, 1999 3,484,979 6,070,590 22,077,019 21,916,258 9,926,350 835,797
--------- --------- --------- --------- --------- --------
Units for annuitized contracts:
Outstanding at December 31, 1997 -- -- 3,394 9,339 248 --
Sold 851 -- 3,734 3,012 1,610 --
Repurchased (49) -- (560) (1,116) (95) --
--------- --------- --------- --------- --------- --------
Outstanding at December 31, 1998 802 -- 6,568 11,235 1,763 --
Sold 129 496 4,636 2,914 10 --
Repurchased (71) (22) (1,645) (1,589) (146) --
--------- --------- --------- --------- --------- --------
Outstanding at December 31, 1999 860 474 9,559 12,560 1,627 --
--------- --------- --------- --------- --------- --------
Total units outstanding December 31, 1999 3,485,839 6,071,064 22,086,578 21,928,818 9,927,977 835,797
========= ========= ========= ========= ========= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Global Emerging High Developing
Stock Governments Growth Income Markets
Units for contracts in accumulation period: Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1997 4,373,475 1,232,126 3,752,045 1,234,868 458,727
Sold 5,084,334 1,096,046 4,842,925 3,628,181 896,126
Repurchased (4,503,797) (1,227,192) (3,503,194) (1,303,283) (486,052)
--------- --------- --------- --------- ---------
Outstanding at December 31, 1998 4,954,012 1,100,980 5,091,776 3,559,766 868,801
Sold 4,987,211 1,075,683 4,879,364 3,836,333 826,182
Repurchased (4,843,190) (1,148,440) (4,088,123) (2,926,390) (642,085)
--------- --------- --------- --------- ---------
Outstanding at December 31, 1999 5,098,033 1,028,223 5,883,017 4,469,709 1,052,898
--------- --------- --------- --------- ---------
Units for annuitized contracts:
Outstanding at December 31, 1997 -- -- 1,491 -- --
Sold 2,090 190 1,112 1,617 --
Repurchased (106) (8) (143) (78) --
--------- --------- --------- --------- ---------
Outstanding at December 31, 1998 1,984 182 2,460 1,539 --
Sold 13 1 15 1,433 --
Repurchased (174) (16) (191) (747) --
--------- --------- --------- --------- ---------
Outstanding at December 31, 1999 1,823 167 2,284 2,225 --
--------- --------- --------- --------- ---------
Total units outstanding December 31, 1999 5,099,856 1,028,390 5,885,301 4,471,934 1,052,898
========= ========= ========= ========= =========
</TABLE>
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
Money Market Bond Balanced Growth & Income
Subaccount Subaccount Subaccount Stock Subaccount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value: 1999 1998 1999 1998 1999 1998 1999 1998
Beginning of period $11.72 $11.31 $12.79 $12.21 $16.80 $15.02 $23.17 $19.91
End of period 12.12 11.72 12.70 12.79 18.97 16.80 26.95 23.17
Percentage increase (decrease)
in unit value during period 3.41% 3.63% (0.70%) 4.75% 12.92% 11.85% 16.31% 16.37%
Number of units outstanding
at end of period 3,485,839 2,280,739 6,071,064 4,554,265 22,086,578 17,694,943 21,928,818 18,555,957
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Mid-Cap International Global Governments
Stock Subaccount Stock Subaccount Stock Subaccount Subaccount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value: 1999 1998 1999* 1999 1998 1999 1998
Beginning of period $23.91 $20.05 $10.00 $14.41 $12.61 $12.02 $11.29
End of period 29.53 23.91 11.26 18.95 14.41 11.55 12.02
Percentage increase (decrease)
in unit value during period 23.50% 19.25% 12.60%** 31.51% 14.27% (3.91%) 6.47%
Number of units outstanding
at end of period 9,927,977 8,586,442 835,797 5,099,856 4,955,996 1,028,390 1,101,162
</TABLE>
*1999 data is for the eight-month period ended December 31, 1999.
**Not annualized.
<PAGE>
<TABLE>
<CAPTION>
Emerging Growth High Income Developing Markets
Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value: 1999 1998 1999 1998 1999 1998
Beginning of period $16.04 $12.12 $10.87 $10.99 $5.17 $6.64
End of period 27.95 16.04 11.18 10.87 7.82 5.17
Percentage increase (decrease)
in unit value during period 74.25% 32.34% 2.85% (1.09%) 51.26% (22.14%)
Number of units outstanding
at end of period 5,885,301 5,094,236 4,471,934 3,561,305 1,052,898 868,801
</TABLE>
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Report of Independent Accountants
To the Board of Directors of CUNA Mutual Life Insurance Company and
Contract Owners of CUNA Mutual Life Variable Annuity Account
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the CUNA Mutual Life Variable
Annuity Account (comprising, respectively, the Money Market, Bond, Balanced,
Growth and Income Stock, Capital Appreciation Stock, Mid-Cap Stock,
International Stock, Global Governments, Emerging Growth, High Income and the
Developing Markets Subaccounts) as of December 31, 1999, the results of each of
their operations and the changes in each of their net assets for the year or the
period then ended in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of CUNA
Mutual Life Insurance Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included direct confirmation of the number of
shares owned at December 31, 1999 with Ultra Series Fund, T. Rowe Price
International Series, Inc., MFS Variable Insurance Trust, Oppenheimer High
Income Fund and Templeton Developing Markets Fund, provide a reasonable basis
for the opinion expressed above. The financial statements of the CUNA Mutual
Life Variable Annuity Account as of December 31, 1998 and for the period then
ended were audited by other independent accountants whose report dated February
5, 1999 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 11, 2000
