As Filed with the Securities and Exchange Commission on October 25, 2000
Registration No. 333-40304
811-8260
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE -EFFECTIVE AMENDMENT NO. 1
TO
FORM N-4
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
CUNA Mutual Life Variable Account
(Exact name of trust)
CUNA Mutual Life Insurance Company
(Name of depositor)
2000 Heritage Way
Waverly, Iowa 50677
(Complete address of depositor's principal executive offices)
Kevin S. Thompson, Esq.
CUNA Mutual Life Insurance Company
5910 Mineral Point Road
Madison, WI 53705
(Name and complete address of agent for service)
Copy to:
David Goldstein, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
Title of Securities Being Offered: Interest in the Separate Account issued
through Variable Annuity Policies.
The Registrant hereby amends this Registration Statement on such dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS October 25, 2000
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MEMBERS Variable Annuity II
A Flexible Premium Deferred Variable Annuity Contract
Issued by
CUNA Mutual Life Insurance Company
================================================================================
Inside this Prospectus, you will find basic information about the Contract and
the Variable Account that you should know before investing. Please read it
carefully and keep it for future reference. The Company may sell the Contract to
individuals, or to or in connection with retirement plans, including plans that
qualify for special federal tax treatment under the Internal Revenue Code of
1986, as amended.
The investment performance of the mutual fund portfolios underlying the
Subaccounts you select will affect the Contract Value to the Payout Date, except
for amounts you invest in the Fixed Account and will affect the size of variable
Income Payments after the Payout Date. You bear the entire investment risk on
any amounts you allocate to the Variable Account.
The following mutual funds are available through the Subaccounts of the CUNA
Mutual Life Variable Annuity Account:
Ultra Series Fund
o Money Market Fund
o Bond Fund
o Balanced Fund
o Growth and Income Stock Fund
o Capital Appreciation Stock Fund
o Mid-Cap Stock Fund
o Emerging Growth Fund
o High Income Fund
o International Stock Fund
o Global Securities Fund
This Prospectus must be accompanied by a current prospectus for the Ultra Series
Fund.
Purchase payments not allocated to the Subaccounts may be allocated to the Fixed
Account Option.
The Statement of Additional Information ("SAI") contains additional information
about the Contract and the Variable Account. You will find its table of contents
on the last page of this Prospectus. The SAI has been filed with the Securities
and Exchange Commission (SEC) and is incorporated by reference. You may obtain a
copy of the SAI dated October 25, 2000 free of charge by contacting the Company.
Additionally, the SEC maintains a website at http://www.sec.gov that contains
the SAI material incorporated by reference and other information.
Investment in a variable annuity contract is subject to risks, including the
possible loss of money. Unlike credit union and bank accounts, money invested in
the Variable Account is not insured. Money in the Variable Account is not
deposited in or guaranteed by any credit union or bank and is not guaranteed by
any government agency.
--------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
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<PAGE>
Table of Contents
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DEFINITIONS..................................................................1
EXPENSE TABLES...............................................................3
FINANCIAL HIGHLIGHTS.........................................................5
SUMMARY......................................................................5
The Contract.................................................................5
Charges and Deductions.......................................................6
Payout Provisions...........................................................6
Federal Tax Status...........................................................6
CUNA MUTUAL LIFE INSURANCE COMPANY, THE CUNA MUTUAL LIFE VARIABLE ANNUITY
ACCOUNT, AND THE UNDERLYING FUNDS...........................................7
CUNA Mutual Life Insurance Company...........................................7
CUNA Mutual Life Variable Annuity
Account.....................................................................7
The Underlying Funds.........................................................8
Availability of Funds........................................................9
Voting Rights................................................................9
Material Conflicts..........................................................10
Substitution of Securities..................................................10
THE FIXED ACCOUNT OPTION....................................................10
Preservation Plus Program...................................................11
Fixed Contract Value........................................................11
Fixed Periods...............................................................11
Market Value Adjustment.....................................................12
DESCRIPTION OF THE CONTRACT.................................................14
Issuance of a Contract......................................................14
Right to Examine............................................................14
Purchase Payments...........................................................14
Allocation of Purchase Payments.............................................15
Contract Value..............................................................15
Transfer Privileges.........................................................16
Surrenders (Redemption) and Partial Withdrawals.............................17
Contract Loans..............................................................19
Death Benefit Before the Payout Date........................................19
Proportional Adjustment for Partial Withdrawal..............................20
MISCELLANEOUS MATTERS.......................................................21
Payments....................................................................21
Modification................................................................21
Reports to Owners...........................................................22
Inquiries...................................................................22
INCOME PAYMENT OPTIONS......................................................23
Payout Date and Proceeds....................................................23
Election of Income Payment Options..........................................23
Fixed Income Payments.......................................................23
Variable Income Payments....................................................24
Description of Income Payment Options.......................................24
Death Benefit After the Payout Date.........................................25
CHARGES AND DEDUCTIONS......................................................26
Mortality and Expense Risk Charges..........................................26
Fund Expenses...............................................................26
Surrender Charge (Contingent Deferred Sales Charge).........................26
Annual Contract Fee.........................................................26
Transfer Processing Fee.....................................................27
Lost Contract Request.......................................................27
Premium Taxes...............................................................27
Other Taxes.................................................................27
RIDERS AND ENDORSEMENTS.....................................................28
Maximum Anniversary Value Death Benefit.....................................28
5% Annual Guarantee Death Benefit...........................................28
Enhanced Death Benefit Rider Charges........................................28
Waiver of Surrender Charge..................................................28
Executive Benefits Plan Endorsement.........................................29
ADVERTISING AND SUBACCOUNT PERFORMANCE SUMMARY..............................30
FEDERAL TAX MATTERS.........................................................32
Introduction................................................................32
Tax Status of the Contract..................................................32
Taxation of Annuities.......................................................33
Transfers or Exchanges of a Contract........................................35
Withholding.................................................................35
Multiple Contracts..........................................................36
Taxation of Qualified Plans.................................................38
Possible Charge for the Company's Taxes.....................................38
Other Tax Consequences......................................................38
LEGAL PROCEEDINGS...........................................................39
FINANCIAL STATEMENTS........................................................39
<PAGE>
Definitions
================================================================================
Accumulation Unit
A unit of measure used to calculate Variable Contract Value.
Annuitant
The person or persons named in the application and on whose life the first
income payment is to be made. The maximum number of joint Annuitants is two and
provisions referring to the death of an Annuitant mean the death of the last
surviving Annuitant . Only spouses may be joint Annuitants.
Beneficiary
The person to whom the proceeds payable on the death of an Annuitant will be
paid.
Code
The Internal Revenue Code of 1986, as amended.
Contract Anniversary
The same date in each contract year as the Contract Issue Date.
Contract Issue Date
The date on which the Company issues the Contract and upon which the Contract
becomes effective. This date is shown on the data page of the Contract and is
also used to determine Contract Years and Contract Anniversaries.
Contract Value
The total amount invested under the Contract. It is the sum of the Variable
Contract Value, the Fixed Contract Value and the Loan Account Value.
Contract Year
A twelve-month period beginning on the Contract Issue Date or on a Contract
Anniversary.
Due Proof of Death
Proof of death satisfactory to the Company. Such proof may consist of the
following if acceptable to the Company: (a) a certified copy of the death
record; (b) a certified copy of a court decree reciting a finding of death; (c)
any other proof satisfactory to the Company.
Fixed Account Option
An allocation option under the Contract funded by our General Account. It is not
part of or dependent upon the investment performance of the Variable Account.
Fixed Amount
Any portion of Fixed Contract Value allocated to a particular Fixed Period with
a particular expiration date (including interest thereon) less any withdrawals
or transfers.
Fixed Contact Value
The value of the Contract Value in the Fixed Account Option.
Fixed Period
A choice under the Fixed Account of a specific number of years for which the
Company agrees to credit a particular effective annual interest rate.
Fund
An investment portfolio of Ultra Series Fund or any other open-end management
investment company or unit investment trust in which a Subaccount invests.
General Account
The assets of the Company other than those allocated to the Variable Account or
any other separate account of the Company.
Home Office
The Company's principal office at 2000 Heritage Way, Waverly, Iowa 50677.
Income Payment
One of several periodic payments made by the Company to the Payee under an
Income Payment Option.
Income Payment Option
The form of Income Payments selected by the Owner under the Contract.
Loan Account
For any Contract, a portion of the Company's General Account to which Variable
Contract Value or Fixed Contract Value is transferred to provide collateral for
any loan taken under the Contract.
Loan Amount
The sum of your loan principal plus any accrued loan interest.
Net Purchase Payment
A purchase payment less any deduction for premium expense charges.
Owner
The person(s) ("you") who own(s) the Contract and who is (are) entitled to
exercise all rights and privileges provided in the Contract.
Payee
The person receiving income payments during the Payout Period. The Annuitant is
the Payee unless the Owner specifies otherwise.
Payout Date
The date on which Payout Proceeds are applied to an Income Payment Option.
Payout Proceeds
The Contract Value less any Loan Amount, less any premium expense charge, less a
pro-rated portion of the annual Contract fee, plus or minus any applicable
market value adjustment, less any applicable rider charges and any applicable
surrender charges as of the Payout Date. This is the amount applied to Income
Payments under one of the Income Payment Options.
Premium Expense Charge
An amount we may deduct from your purchase payments to cover taxes we are
charged by your state of residence.
Qualified Contract
A contract that is issued in connection with retirement plans that qualify for
special federal income tax treatment under Section(s) 401, 403(b), 408, 408A or
457 of the Code.
Subaccount
A subdivision of the Variable Account, the assets of which are invested in a
corresponding Fund.
Subaccount Value
Before the Payout Date, that part of any Net Purchase Payment allocated to the
Subaccount plus any Contract Value transferred to that Subaccount, adjusted by
interest income, dividends, net capital gains or losses (realized or
unrealized), and decreased by withdrawals (including any applicable surrender
charges, administrative fee, any charge for riders or Premium Expense Charge)
and any Contract value transferred out of that Subaccount.
Surrender Value
The Contract Value less any applicable surrender charges, market value
adjustment, Premium Expense Charges, annual contract fee, any charge for riders
and Loan Amount.
Valuation Day
For each Subaccount, each day that the New York Stock Exchange is open for
business except days that the Subaccount's corresponding Fund does not value its
shares.
Valuation Period
The period beginning at the close of regular trading on the New York Stock
Exchange on any Valuation Day and ending at the close of regular trading on the
next succeeding Valuation Day.
Variable Account
CUNA Mutual Life Variable Annuity Account.
Variable Contract Value
The sum of the Subaccount Values.
Written Request
A Written Request or request in a form satisfactory to the Company which is
signed by the Owner and received at the Home Office. A Written Request includes
a telephone or fax request made pursuant to the terms of an executed telephone
or fax authorization, with original signature, on file at the Home Office.
<PAGE>
Expense Tables
================================================================================
The following expense information assumes that the entire Contract Value is
Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on
Purchase Payments.................................None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of purchase payments...............................7%
Transfer Processing Fee............................$10*
Maximum Annual Contract Fee.............................$30**
Annual Rider Charges
(as a percentage of monthly average Contract Value)
Maximum Anniversary Value Death Benefit Rider...........0.15%
5% Annual Guarantee Death Benefit Rider.................0.15%
Variable Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge..................1.15%
Total Variable Account Expenses....................1.15%
Annual Fund Expenses
(as percentage of average net assets)
<TABLE>
<CAPTION>
Other Total Annual
Portfolio Name Management Fees Expenses Fund Expenses
-------------- --------------- --------- -------------
<S> <C> <C> <C>
Money Market Fund 0.45% 0.01% 0.46%
Bond Fund 0.55% 0.01% 0.56%
Balanced Fund 0.70% 0.01% 0.71%
Growth and Income Stock Fund 0.60% 0.01% 0.61%
Capital Appreciation Stock Fund 0.80% 0.01% 0.81%
Mid-Cap Stock Fund 1.00% 0.01% 1.01%
Emerging Growth Fund 0.85% 0.01% 0.86%
High Income Fund 0.75% 0.01% 0.76%
International Stock Fund 1.20% 0.01% 1.21%
Global Securities Fund 0.95% 0.01% 0.96%
</TABLE>
*Currently, no fee is charged for transfers. However, the Company reserves the
right to charge a $10 transfer fee on each transfer after the first 12 transfers
in any Contract Year.
**The Company does not deduct the annual Contract fee if the Contract Value is
$25,000 or more.
The tables are intended to assist you in understanding the costs and expenses
that you will bear directly or indirectly. The tables reflect the expenses for
the Variable Account and for each of the underlying Funds available as
investment options for the fiscal year ended December 31, 1999. Expenses of the
Funds are not fixed or specified under the terms of the Contract, and actual
expenses may vary. Premium taxes may be applicable, depending on the laws of the
various jurisdictions.
An Owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<PAGE>
<TABLE>
<CAPTION>
If the Contract is surrendered (or annuitized under If the Contract is not
surrendered or is annuitized (for income payout option 1) at the end of the
applicable income payout options 2 and 4) at the end of the time period:
applicable time period:
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subaccount 1 3 5 10 Subaccount 1 3 5 10
Year Years Years Years Year Years Years Years
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Money Market $83 $107 $133 $230 Money Market $20 $62 $106 $230
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Bond $84 $110 $138 $240 Bond $21 $65 $111 $240
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Balanced $86 $114 $146 $255 Balanced $23 $69 $119 $255
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
High Income $86 $116 $149 $261 High Income $23 $71 $122 $261
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Growth and Income $85 $111 $141 $245 Growth and Income $22 $66 $114 $245
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Capital Appreciation $87 $117 $151 $266 Capital Appreciation $24 $72 $124 $266
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Mid-Cap Stock $89 $123 $161 $286 Mid-Cap Stock $26 $78 $134 $286
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Emerging Growth $87 $119 $154 $271 Emerging Growth $24 $74 $127 $271
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
International Stock $91 $129 $171 $305 International Stock $28 $84 $144 $305
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
Global Securities $88 $122 $159 $281 Global Securities $25 $77 $132 $281
--------------------------- -------- -------- -------- -------- ------------------------ -------- -------- -------- --------
</TABLE>
The examples provided above assume that no transfer charges, Premium Expense
Charges, or market value adjustment have been assessed. The examples also assume
that the annual Contract fee is $30, that the average Contract Value is $50,000,
(which translates the Contract fee into an assumed 0.0006% charge for the
purposes of the examples based on a $1,000 investment) and that all optional
riders and endorsements are selected.
The examples should not be considered a representation of past or future
expenses. The assumed 5% annual rate of return is hypothetical and should not be
considered a representation of past or future annual returns, which may be
greater or less than this assumed rate. Also, actual expenses may be greater or
less than those shown.
<PAGE>
Financial Highlights
================================================================================
Although the Separate Account and many of the Funds have been in existence for
some time, the Subaccounts for this contract are new and do not have any
history. Accordingly, there is no Subaccount information to report at this time.
In future years, the prospectus will contain financial information for each
class of Accumulation Units. The value of an Accumulation Unit is determined on
the basis of changes in the per share value of the underlying mutual funds and
the assessment of various charges.
Summary
================================================================================
The following section summarizes certain provisions that we describe in more
detail later in the prospectus.
The Contract
Issuance of a Contract. The Company issues Contracts to individuals or to
employers or other groups in connection with retirement plans.
Right to Examine Period. You have the right to return the Contract within 10
days after you receive it and the Company will return the Contract Value or the
amount required by law. State or federal law may require additional return
privileges. If you return the Contract, it will become void.
Purchase Payments. Generally, you must make payments totaling $5,000 within the
first 12 months of the Contract. Certain Qualified Contracts, Section 1035
contracts, and Contracts sold to employees have lower minimum purchase amounts.
Unless you pay the minimum purchase amount in full at the time of application,
an automatic purchase payment plan must be established resulting in the minimum
purchase amount being paid before the end of the first 12 months after the
Contract Issue Date.
Allocation of Purchase Payments. You may allocate purchase payments to one or
more of the Subaccounts of the Variable Account and/or to the Fixed Account
Option. Each Subaccount invests solely in a corresponding underlying Fund. The
investment performance of the Fund(s) will affect the Subaccount in which you
invest your money and your Contract Value.
Transfers. On or before the Payout Date, you may transfer all or part of the
Contract Value between Subaccount(s) or a Fixed Period, subject to certain
restrictions.
No fee is charged for transfers, but the Company reserves the right to charge
$10 for each transfer over 12 during a Contract Year.
Partial Withdrawal. You may withdraw part of your Contract's Surrender Value by
Written Request to the Company on or before the Payout Date, subject to certain
Limitations.
Surrender. You may surrender the Contract and receive its Surrender Value, by
Written Request to the Company.
Charges and Deductions
The Contract contains the following charges and deductions:
Surrender Charge (Contingent Deferred Sales Charge). There are no sales charges
deducted at the time purchase payments are made. However, a surrender charge is
deducted when you surrender or partially withdraw purchase payment(s) within
seven years of their being paid.
The surrender charge is 7% of the amount of the payment withdrawn or surrendered
within one year of having been paid. The surrender charge decreases by 1% for
each full year that has passed since the payment was made.
Annual Contract Fee. The Contract has an annual Contract fee of $30. (This fee
is waived if the Contract Value is $25,000 or more.)
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 Company may use any profits from this charge to finance other
expenses, including expenses incurred in the administration of the Contracts and
distribution expenses related to the Contracts. The charges are deducted from
the Variable Account at a rate of 0.003151% per day which is an annual rate of
1.15%.
Premium Expense Charges. The Company deducts a charge for any state or local
premium taxes applicable to a Contract. The Company reserves the right to deduct
premium taxes at the time it pays such taxes. State premium taxes currently
range from 0% to 3.5%.
Rider Charges. The Company deducts a charge on each Contract Anniversary for
each of two optional death benefit riders. This charge is at an annual rate of
0.15% of the average monthly Contract Value for the prior Contract Year.
Payout Provisions
You select the Payout Date, subject to certain limitations.
On the Payout Date, the Payout Proceeds will be applied to an Income Payment
option, unless you choose to receive the Surrender Value in a lump sum.
Federal Tax Status
Generally, any distribution from your Contract may result in taxable income. In
certain circumstances, a 10% penalty tax may apply. For a further discussion of
the federal income status of variable annuity contracts, see Federal Tax
Matters.
CUNA Mutual Life Insurance Company - The CUNA Mutual Life Variable Annuity
Account, and the Funds
================================================================================
CUNA Mutual Life Insurance Company
CUNA Mutual Life Insurance Company is a mutual life insurance company originally
organized under the laws of Iowa in 1879 and incorporated on June 21, 1882. The
Home Office of the Company is located at 2000 Heritage Way, Waverly, Iowa
50677-9202. The telephone number is 1-800-798-5500.
As of December 31, 1999, the Company had more than $4 billion in assets and more
than $12 billion of life insurance in force. Effective June 1999, and through
the date of this Prospectus, A.M. Best rated the Company A (Excellent).
Effective March 1999, and through the date of this Prospectus, Duff & Phelps
rated the Company AA. These are the most recent ratings available as of the date
of this Prospectus. Periodically, the rating agencies review the ratings of the
Company. To obtain the most current ratings, contact the Company at the address
or telephone number shown above.
CUNA Mutual Life Variable Annuity Account
The Variable Account was established by the Company as a separate account on
December 14, 1993. The Variable Account invests in the Funds described below.
The Variable Account has been registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Variable Account or of the Company by the SEC. The
Variable Account is also subject to the laws of the State of Iowa which regulate
the operations of insurance companies domiciled in Iowa.
The Variable Account is divided into Subaccounts. In the future, the number of
Subaccounts may change. Each Subaccount invests exclusively in shares of a
single corresponding Fund. The income, gains and losses, are credited to or
charged against that
Subaccount reflect only the Subaccount's investment experience and not the
investment experience of the Company's other assets.
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 that exceed the Company's
liabilities arising under the Contracts may be transferred by the Company to the
General Account and used to pay its liabilities. All obligations arising under
the Contracts are general corporate obligations of the Company.
The Contracts are distributed by the principal underwriter, CUNA Brokerage
Services, Inc., 2000 Heritage Way, Waverly, Iowa 50677. CUNA Brokerage is an
indirect wholly-owned subsidiary of CUNA Mutual, and is registered with the SEC
under the Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc.
The Underlying Funds
The Subaccounts invest in the Ultra Series Fund. The Ultra Series Fund a
management investment company of the series type with one or more Funds. Each is
an open-end, management investment company.
The investment objectives and policies of each Fund are summarized below. There
is no assurance that any Fund will achieve its stated objectives. More detailed
information, including a description of risks and expenses, may be found in the
Fund's prospectuses which must accompany or precede this Prospectus. The
prospectuses should be read carefully and retained for future reference.
The Ultra Series Fund
Currently, the Ultra Series Fund offers Funds as investment options under the
Contracts.
Money Market Fund. This Fund seeks high current income from money market
instruments consistent with preservation of capital and liquidity. An investment
in the Money Market Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able to
maintain a stable net asset value of $1.00 per share.
Bond Fund. This Fund seeks a high level of current income, consistent with the
prudent limitation of investment risk, through investment in a diversified
portfolio of fixed-income securities with maturities of up to 30 years. It
principally invests in securities of intermediate term maturities.
Balanced Fund. This Fund seeks a high total return through the combination of
income and capital growth. It pursues this objective by investing in the types
of common stocks owned by the Capital Appreciation Stock Fund and the Growth and
Income Stock Fund, the type of bonds owned by the Bond Fund, and the type of
money market instruments owned by the Money Market Fund.
Growth and Income Stock Fund. This Fund seeks long-term growth of capital with
income as a secondary consideration. It pursues this objective by investing in
common stocks of companies with financial and market strengths and long-term
records of performance.
Capital Appreciation Stock Fund. This Fund seeks a high level of long-term
growth of capital. It pursues this objective by investing in common stocks,
including those of smaller companies and of companies undergoing significant
change.
Mid-Cap Stock Fund. This Fund seeks long-term capital appreciation by investing
in mid-size and small companies. It pursues this objective by purchasing the
common stock of generally smaller, less-developed issuers with valuations,
fundamentals and/or prospects that are attractive to the investment adviser.
Emerging Growth Fund. This Fund seeks long-term growth of capital through
investments primarily in common stock of emerging growth companies.
High Income Fund. This Fund seeks high current income by investing primarily in
a diversified portfolio of lower-rated, higher-yielding income bearing
securities. The Fund also seeks capital appreciation, but only when consistent
with its primary goal.
International Stock Fund. This Fund seeks long-term growth of capital through
investments primarily in common stocks of non-U.S. companies.
Global Securities Fund. This Fund seeks capital appreciation by investing mainly
in common stocks of U.S. and foreign companies.
MEMBERS Capital Advisors, Inc. (f/k/a CIMCO Inc. ("CIMCO")) serves as investment
adviser to the Ultra Series Fund and manages its assets in accordance with
general policies and guidelines established by the trustees of the Ultra Series
Fund.
The mutual funds described above are not available for purchase directly by the
general public, and are not the same as other mutual fund portfolios with very
similar or nearly identical names that are sold directly to the public. The
investment performance and results of the portfolios available under the policy
may be lower, or higher, than the investment results of such other (publicly
available) portfolios. There can be no assurance, and no representation is made,
that the investment results of any of the portfolios available under the policy
will be comparable to the investment results of any other mutual fund portfolio,
even if the other portfolio has the same investment adviser or manager and the
same investment objectives and policies, and a very similar name.
Availability of Funds
The Variable Account purchases shares of the Ultra Series Fund in accordance
with a participation agreement. If the participation agreement terminates, the
Variable Account may not be able to purchase additional shares of the Fund(s)
covered by the agreement. Likewise, in certain circumstances, it is possible
that shares of a Fund may not be available to the Variable Account even if the
participation agreement relating to that Fund has not been terminated. In either
event, Owners will no longer be able to allocate purchase payments or transfer
Contract Value to the Subaccount investing in the Fund.
Voting Rights
Owners with Variable Contract Value are entitled to certain voting rights for
the Funds underlying the Subaccounts in which they are invested. The Company
will vote Fund shares attributable to Owners at special shareholder meetings
based on instructions from such Owners. However, if the law changes and the
Company is allowed to vote in its own right, it may elect to do so.
Owners with voting interests in a Fund will be notified of issues requiring the
shareholders' vote as soon as possible before the shareholder meeting.
Notification will contain proxy materials and a form with which to give the
Company voting instructions. The Company will vote shares for which no
instructions are received in the same proportion as those that are received.
Before the Payout Date, the number of shares which an Owner may vote is
determined by dividing the Subaccount Value by the net asset value of that Fund.
On or after the Payout Date, an Owner's voting interest, if any, is determined
by dividing the dollar value of the liability for future variable Income
Payments to be paid from the Subaccount by the net asset value of the Fund
underlying the Subaccount. The Company will designate a date for this
determination not more than 90 days before the shareholder meeting.
Material Conflicts
The Funds are offered through other separate accounts of the Company and
directly to employee benefit plans affiliated with the Company. The Company does
not anticipate any disadvantages to this. However, it is possible that a
conflict may arise between the interest of the Variable Account and one or more
of the other separate accounts in which these Funds participate.
Materials conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the Owners and those of Owners of other types of
contracts issued by the Company. Material conflicts could also arise between the
interests of Owners (or owners of other types of contracts issued by the
Company) and the interests of participants in employee benefit plans invested in
the Funds. If a material conflict occurs, the Company will take steps to protect
Owners and variable annuity Payees, including withdrawal of the Variable Account
from participation in the Fund(s) involved in the conflict.
Substitution of Securities
The Company may substitute, eliminate, or combine shares of another mutual fund
for shares already purchased or to be purchased in the future if either of the
following occurs:
1) shares of a current Fund are no longer available for investment; or
2) further investment in a Fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
<PAGE>
THE FIXED ACCOUNT OPTION
================================================================================
The Fixed Account Option is an investment option that is funded by assets of the
Company's General Account and pays interest at declared rates. The General
Account contains all of the Company's assets other than those in other separate
accounts. It is used to support the Company's annuity and insurance obligations
and may contain compensation for mortality and expense risks. The General
Account is not subject to the same laws as the Variable Account and the SEC has
not reviewed material in this prospectus relating to the Fixed Account. However,
information relating to the Fixed Account Option is subject to federal
securities laws relating to accuracy and completeness of prospectus disclosure.
Purchase payments will be allocated to the Fixed Account by election of the
Owner.
The Company intends to credit amounts in the Fixed Account Option with interest
at current rates in excess of the minimum fixed rate but is not obligated to do
so. The Company has no specific formula for determining current interest rates.
Fixed Contract Value will not share in the investment performance of the
Company's General Account. Any interest credited on Fixed Amounts in excess of
the minimum guaranteed effective rate of 3% per year will be determined in the
sole discretion of the Company. The Owner therefore assumes the risk that
interest credited may not exceed the minimum fixed rate.
Preservation Plus Program
An Owner may elect to allocate the initial Net Purchase Payment between the
Fixed Account Option and the Variable Account so that at the end of the Fixed
Period the portion of the initial Net Purchase Payment allocated to the Fixed
Account Option will equal the initial Net Purchase Payment. This would permit
the Owner to allocate the remaining portion of the initial Net Purchase Payment
to one or more Subaccounts and still be certain of having a Contract Value at
the end of the Fixed Period at least equal to the initial Net Purchase Payment.
Upon request, the Company will calculate the portion of any Net Purchase Payment
that must be allocated to a particular Fixed Period to achieve this result.
Fixed Contract Value
The Fixed Contract value reflects:
o Net Purchase Payments allocated to and Contract Value transferred to Fixed
Periods,
o interest credited to Contract Value in Fixed Periods,
o transfers of Contract Value out of Fixed Periods,
o surrenders and partial withdrawals from Fixed Periods, and
o charges assessed in connection with the Contract.
Fixed Amounts are withdrawn or surrendered on a first-in-first-out basis. The
Fixed Account value is the sum of Fixed Amounts under the Contract. The Fixed
Account value is guaranteed to accumulate at a minimum effective annual interest
rate of 3%.
The Fixed Account Option varies according to the state in which the Contract is
issued. The Company offers fixed periods varying in duration from one year to 10
years and the Company may impose a market value adjustment on amounts withdrawn
prior to the expiration of a fixed period, if allowed by state law. Not all
fixed periods are available in all states and some states may not allow a fixed
account option. Contact the Company for information on the availability of the
Fixed Account Option and fixed periods in your state.
An Owner may allocate some or all of the Net Purchase Payments and transfer some
or all of the Contract Value to the Fixed Account Option for selected periods of
time from one to ten years. The Company also intends to offer a special one year
Fixed Period that requires minimum monthly transfers to other Subaccounts
throughout the Fixed Period (the "DCA One Year Fixed Period"). Purchase Payments
may be allocated to this DCA One Year Fixed Period, but transfers in are not
allowed. Purchase Payment allocations to certain Fixed Periods may be limited to
three years in some states.
Fixed Periods
From time to time the Company will offer to credit Fixed Account value with
interest at specific guaranteed rates for specific periods of time. These
periods of time are known as Fixed Periods. The Company may offer one or more
Fixed Periods of one to ten years' duration at any time, but will always offer a
Fixed Period of one year where allowed by state law. The Company will publish an
effective annual interest rate applicable to each Fixed Period being offered at
that time. Net Purchase Payments allocated or Contract Value transferred to a
Fixed Period are guaranteed to earn that rate of interest for each year of the
period (provided that such payments and Contract Value are not withdrawn during
the Fixed Period or surrendered). The interest rates available at any time will
vary with the number of years in the Fixed Period but will always be equal to or
greater than an effective annual rate of 3%.
Fixed Periods begin as of the date Net Purchase Payments or transfers of
Contract Value are made to them and end when the number of year(s) in the Fixed
Period have elapsed. The last day of the Fixed Period is the expiration date for
the Fixed Period. Owners may not select Fixed Periods with expiration dates
later than the Contract's current Payout Date. During the 30-day period prior to
the expiration of a Fixed Period, the Owner may transfer the Fixed Amount
related to that Fixed Period to any new Fixed Period or Subaccount available at
that time. Such transfers may be made at any time from the DCA One Year Fixed
Period. In addition, monthly transfers from the DCA One Year Fixed Period to the
Subaccount(s) you designate are required. If no Subaccount is designated,
transfers will be made to the Money Market Subaccount. The minimum transfer
amount is the monthly sum required to fully amortize the Fixed Amount as of the
expiration date of the DCA Fixed Amount. If, at the expiration of a Fixed
Period, less than one year remains until the Payout Date, the Company will
credit interest to the Fixed Amount at the guaranteed rate then applicable to a
one year Fixed Period. For Fixed Periods other than the DCA One Year Fixed
Period, the Company will notify Owners of the available Fixed Periods and
Subaccounts 30 days prior to the expiration of a Fixed Period.
If an Owner does not respond to the notice with instructions as to how to
reinvest the Fixed Amount, then on the expiration date the Company will invest
the Fixed Amount in another Fixed Period of the same duration as the expiring
period. If no Fixed Period of equal duration is available at that time, the
Company will reinvest the Fixed Amount in the next shortest Fixed Period
available. If either of such default Fixed Periods would extend beyond the
Payout Date of the Contract, the Company will reinvest the Fixed Amount in the
Fixed Period of the longest duration that expires before the Payout Date.
Market Value Adjustment
The Company will impose a market value adjustment on Fixed Amounts withdrawn or
surrendered or applied to an Income Payment Option from a Fixed Period of more
than 2 years before expiration of the period except when such a withdrawal,
surrender or annuitization occurs during the last 30 days of the period. The
market value adjustment is calculated by multiplying the amount surrendered,
withdrawn or annuitized by the following factor:
0.70 x (I - J) x n/12
Where:
I = the guaranteed interest rate then being offered for a new Fixed
Period equal in duration and type to the period from which the Fixed
Amount is being withdrawn, surrendered or annuitized. If a Fixed
Period of such duration is not being offered, "I" equals the linear
interpolation of the guaranteed rates for periods then available. If
the Fixed Periods needed to perform the interpolation are not being
offered, "I" equals the interest rate being paid on the Treasury
Constant Maturity Series published by the Federal Reserve Board for
Treasury securities with remaining maturities equal to the duration of
the appropriate Fixed Period. If no published rates are available for
maturities equal to the duration of the appropriate Fixed Period,
linear interpolation of other published rates will be used.
J = the guaranteed interest rate then being credited to the Fixed Amount
being withdrawn, surrendered or annuitized.
n = the number of complete months remaining until the expiration of the
Fixed Period.
At a time when I exceeds J, the market value adjustment will reduce the portion
of any Fixed Amount available for withdrawal, surrender or application to an
Income Payment Option. At a time when J exceeds I, the market value adjustment
will increase the portion of any Fixed Amount available for withdrawal,
surrender or application to an Income Payment Option. Moreover, the market value
adjustment will only operate to increase or reduce credited interest in an
amount equal to the excess of 3% per year on a Fixed Amount at the beginning of
any Fixed Period.
The market value adjustment is calculated separately for each Fixed Amount and
is applied before any surrender charge. Owners must instruct the Company as to
which Fixed Periods should be withdrawn or surrendered. Within any Fixed Period,
Fixed Amounts are withdrawn or surrendered on a first-in-first-out basis. The
adjustment does not apply to the calculation of a death benefit or to amounts
deducted from Fixed Account value by the Company as fees or charges. In
addition, the sum of the surrender charge and market value adjustment for a
Fixed Amount withdrawn or surrendered will not exceed 10% of the Fixed Amount
withdrawn or surrendered.
Any applicable market value adjustment(s) will be deducted from or added to the
remaining Fixed Amount(s), if any, or from all remaining Fixed Amounts on a
pro-rata basis. If, at the time a partial withdrawal is requested from a Fixed
Amount, the Fixed Account value would be insufficient to permit the deduction of
the market value adjustment from any remaining Fixed Amounts, then the Company
will not permit the partial withdrawal.
The imposition of an market value adjustment may have significant federal income
tax consequences. (See FEDERAL TAX MATTERS.)
<PAGE>
DESCRIPTION OF THE CONTRACT
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Issuance of a Contract
In order to purchase a Contract, application must be made through a
representative of CUNA Brokerage Services, Inc. ("CUNA Brokerage"). Contracts
may be sold to or in connection with retirement plans that do not qualify for
special tax treatment as well as retirement plans that qualify for special tax
treatment under the Code. Neither the Owner nor the Annuitant may be older than
age 85 (78 in Pennsylvania) on the Contract Issue Date.
Right to Examine
Owners have a ten day period to examine the contract. The contract may be
returned to the Home Office for any reason within ten days of receipt and the
Company will refund the Contract Value or another amount required by law. The
refunded Contract Value will reflect the deduction of any contract charges,
unless otherwise required by law. State and/or federal law may provide
additional return privileges.
Liability of the Variable Account under this provision is limited to the
Contract Value in each Subaccount on the date of revocation. Any additional
amounts refunded to the Owner will be paid by the Company.
Purchase Payments
The minimum amount required to purchase a Contract depends upon several factors.
The minimum purchase amount the Company must receive during the first 12 months
of the Contract is:
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$5,000 Except as described below.
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$2,000 For Contracts that qualify for special
federal income tax treatment under Sections
401, 408, 408A, or 457 of the Code. This
category includes qualified pension plans,
individual retirement accounts, and certain
deferred compensation plans.
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$300 For Contracts that qualify for special
federal income tax treatment under Section
403(b) of the Code. This category includes
tax-sheltered annuities.
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The Value of The value of a Contract exchanged pursuant
a Contract to Section 1035 of the Code, if the Company
approves the transaction prior to the
exchange.
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$600 For a Contract sold to employees of the
Company and its subsidiaries, to employees
of CUNA Mutual and its subsidiaries, and to
registered representatives and other
persons associated with CUNA Brokerage.
This category includes both individual
retirement accounts and non-individual
retirement accounts.
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Unless the minimum purchase amount is paid in full at the time of application,
an automatic purchase payment plan must be established to schedule regular
payments during the first 12 months of the Contract. Under the Company's
automatic purchase payment plan, the Owner can select a monthly payment schedule
pursuant to which purchase payments will be automatically deducted from a credit
union account, bank account or other source.
The minimum size for an initial purchase payment and subsequent purchase payment
is $100, unless the payment is made through an automatic purchase payment plan
in which case the minimum size is $25. Purchase payments may be made at any time
during the Annuitant's lifetime and before the Payout Date. Additional purchase
payments after the initial purchase payment are not required.
The Company reserves the right not to accept: (1) purchase payments received
after the Contract Anniversary following the Annuitant's 85th birthday (78th
birthday in Pennsylvania), (2) purchase payments of less than $100, and (3)
purchase payments in excess of $1 million.
Allocation of Purchase Payments
The Company allocates purchase payments to Subaccounts and/or the Fixed Account
Option as instructed by the Owner. An allocation to a Subaccount must be for at
least 1% of a purchase payment and be in whole percentages. An allocation to the
Fixed Account Option must be for at least $1,000. A requested allocation of less
than $1,000 will be transferred to the money market fund.
If the application for a Contract is properly completed and is accompanied by
all the information necessary to process it, including payment of the initial
purchase payment, the initial Net Purchase Payment will be allocated to one or
more of the Subaccounts or to the Fixed Account Option within two Valuation Days
of receipt by the Company. If the application is not properly completed, the
Company reserves the right to retain the purchase payment for up to five
Valuation Days while it attempts to complete the application. If the application
is not complete at the end of the 5-day period, the Company will inform the
applicant of the reason for the delay and the initial purchase payment will be
returned immediately, unless the applicant specifically consents to the Company
retaining the purchase payment until the application is complete. Once the
application is complete, the initial Net Purchase Payment will be allocated as
designated by the Owner within two Valuation Days.
Contract Value
The Contract Value is the sum of Variable Contract Value, Fixed Contract Value
and the Loan Account.
Determining the Variable Contract Value. The Variable Contract Value is
determined at the end of each Valuation Period and reflects the investment
experience of the selected Subaccounts, after applicable charges. The value will
be the total of the values attributable to the Contract in each of the
Subaccounts (i.e. Subaccount Value). The Subaccount Values are determined by
multiplying that Subaccount's Accumulation Unit value by the number of
Accumulation Units.
Determination of Number of Accumulation Units. Any Net Purchase Payment
allocated to a Subaccount or Contract Value transferred to a Subaccount is
converted into Accumulation Units of that Subaccount. The number of Accumulation
Units is determined by dividing the dollar amount being allocated or transferred
to a Subaccount by the Accumulation Unit value for that Subaccount. The number
of Accumulation Units is increased by additional purchase payments or
allocations. The number of Accumulation Units does not change as a result of
investment experience.
Any Contract Value transferred, surrendered or deducted from a Subaccount is
processed by canceling or liquidating Accumulation Units. The number of
Accumulation Units canceled is determined by dividing the dollar amount being
removed from a Subaccount by the Accumulation Unit value.
Determination of Accumulation Unit Value. The Accumulation Unit value for a
Subaccount is calculated for each Valuation Period by subtracting (2) from (1)
and dividing the result by (3), where:
(1) Is:
(a) the net assets of the Subaccount as of the end of the Valuation
Period;
(b) plus or minus the net charge or credit with respect to any taxes
paid or any amount set aside as a provision for taxes during the
Valuation Period.
(2) The daily charge for mortality and expense risks and for
administration multiplied by the number of days in the Valuation
Period.
(3) The number of Accumulation Units outstanding as of the end of the
Valuation Period.
The value of an Accumulation Unit may increase or decrease as a result of
investment experience.
Transfer Privileges
General. Before the Payout Date, the Owner may make transfers between the
Subaccounts and Fixed Amounts as described below.
o Transfers to the Fixed Account must be at least $1,000 (lesser amounts
received are allocated to the Money Market Subaccount).
o Transfers are not allowed to the DCA One Year Fixed Period. o Except for the
DCA One Year Fixed Period, transfers out of the Fixed
Account Option are only permitted during the 30-day period before the
expiration of a Fixed Period.
o Transfers from the DCA One Year Fixed Period may be made throughout its
Fixed Period.
o A minimum monthly transfer to the designated Subaccounts is required from
each DCA Fixed Amount. If no Subaccounts are designated, the minimum
transfer amount will be transferred to the Money Market Subaccount. The
minimum transfer amount is the monthly sum that will amortize the DCA Fixed
Amount on its expiration date.
Amounts transferred to a Subaccount will receive the Accumulation Unit value
next determined after the transfer request is received.
Subject to the above, there is currently no limit on the number of transfers
that can be made among or between Subaccounts or to or from the Fixed Account
Option.
Transfers may be made by written request or by telephone.
The Company will send a written confirmation of all transfers made pursuant to
telephone instructions. The Company will use reasonable procedures to confirm
that telephone instructions are genuine and will not be liable for following
telephone instructions that are reasonably determined to be genuine.
The Company may modify or terminate the transfer privileges at any time for any
reason.
Dollar-Cost Averaging. Dollar Cost Averaging is a long-term transfer program
that allows you to make regular (monthly, quarterly, semi-annual or annual)
level investments over time. The level investments will purchase more
Accumulation Units when their value is lower and fewer units when their value is
higher. Over time, the cost per unit averages out to be less than if all
purchases had been made at the highest value and greater than if all purchases
had been made at the lowest value. If continued over an extended period of time,
the dollar-cost averaging method of investment reduces the risk of making
purchases only when the price of Accumulation Units is high. It does not
guarantee a profit or protect against a loss.
Dollar Cost Averaging (DCA) Transfers. An Owner may choose to systematically or
automatically transfer (on a monthly, quarterly, semi-annual or annual basis) a
specified dollar amount from the Money Market Subaccount to one or more
Subaccounts. A minimum monthly amount must be systematically transferred from
the DCA One Year Fixed Period to one or more Subaccounts. The minimum monthly
transfer amount is the monthly sum that will amortize the DCA Fixed Amount on
its expiration date.
Portfolio Rebalancing. An Owner may instruct the Company to automatically
transfer (on a monthly, quarterly, semi-annual or annual basis) Variable
Contract Value between and among specified Subaccounts in order to achieve a
particular percentage allocation of Variable Contract Value among the
Subaccounts. Owners may start and stop automatic Variable Contract Value
rebalancing at any time and may specify any percentage allocation of Contract
Value between or among as many Subaccounts as are available at the time the
rebalancing is elected. (If an Owner elects automatic Variable Contract Value
rebalancing without specifying such percentage allocation(s), the Company will
allocate Variable Contract Value in accordance with the Owner's currently
effective purchase payment allocation schedule. This is not applicable if the
purchase payment allocations include an allocation to a fixed period.) If the
Owner does not specify a frequency for rebalancing, we will rebalance quarterly.
Other Types of Automatic Transfers. An Owner may also choose to systematically
or automatically transfer (on a monthly, quarterly, semi-annual or annual basis)
Variable Contract Value from one Subaccount to another. Such automatic transfers
may be: (1) a specified dollar amount, (2) a specified number of Accumulation
Units, (3) a specified percent of Variable Contract Value in a particular
Subaccount, or (4) in an amount equal to the excess of a specified amount of
Variable Contract Value in a particular Subaccount.
The minimum DCA or automatic transfer amount is the equivalent of $100 per
month. If less than $100 remains in the Subaccount or DCA One Year Fixed Period
from which transfers are being made, the entire amount will be transferred. The
amount transferred to a Subaccount must be at least 1% of the amount transferred
and must be stated in whole percentages. Once elected, automatic transfers
remain in effect until the earliest of: (1) the Variable Contract Value in the
Subaccount or DCA One Year Fixed Period from which transfers are being made is
depleted to zero; (2) the Owner cancels the election; or (3) for three
successive months, the Variable Contract Value in the Subaccount from which
transfers are being made has been insufficient to implement the automatic
transfer instructions. The Company will notify the Owner when automatic transfer
instructions are no longer in effect. There is no additional charge for using
automatic transfers. The Company reserves the right to stop the automatic
transfer programs.
Surrenders (Redemption) and Partial Withdrawals
Surrender. At any time before the Payout Date, the Owner may surrender the
Contract and receive its Surrender Value. The Surrender Value will be paid in a
lump sum unless the Owner requests payment under an Income Payment Option.
Partial Withdrawals. At any time before the Payout Date, an Owner may make
withdrawals of the Surrender Value. There is no minimum amount which may be
withdrawn but the maximum amount is that which would leave the remaining
Surrender Value equal to $2,000. A partial withdrawal request that would reduce
the Surrender Value to less than $2,000 is treated as a request for a full
surrender of the Contract. The Company will withdraw the amount requested on the
Valuation Day the request is received. Any applicable market value adjustment or
surrender charge will be deducted from the remaining Contract Value.
The Owner may specify the amount of the partial withdrawal to be made from
Subaccounts or the Fixed Periods. If the Owner does not so specify, or if the
amount in the designated Subaccounts or Fixed Periods is not enough to comply
with the request, the partial withdrawal will be made proportionately from the
accounts.
A contingent deferred sales charge may apply to surrenders and partial
withdrawals.
Systematic Withdrawals. An Owner may elect to receive periodic partial
withdrawals under the Company's systematic withdrawal plan. Under the plan, the
Company will make partial withdrawals (on a monthly, quarterly, semi-annual or
annual basis) from designated Subaccounts. Such withdrawals must be at least
$100 each and may only be made from Variable Contract Value. Generally, Owners
must be at least age 59 1/2 to participate in the systematic withdrawal plan
unless they elect to receive substantially equal periodic payments.
The withdrawals may be: (1) a specified dollar amount, (2) a specified whole
number of Accumulation Units, (3) a specified whole percent of Variable Contract
Value in a particular Subaccount, (4) in an amount equal to the excess of a
specified amount of Variable Contract Value in a particular Subaccount, and (5)
in an amount equal to an Owner's required minimum distribution under the Code.
Participation in the systematic withdrawal plan will terminate on the earliest
of the following events: (1) the Variable Contract Value in a Subaccount from
which partial withdrawals are being made becomes zero, (2) a termination date
specified by the Owner is reached, (3) the Owner requests that his or her
participation in the plan cease, or (4) a surrender charge would be applicable
to amounts being withdrawn (i.e., partial withdrawals under the systematic
withdrawal plan may not include amounts subject to the surrender charge). With
regard to (4), an Owner may, by Written Request, request that systematic
withdrawals continue even though a surrender charge is deducted in connection
with such withdrawals. Also with regard to (4), if necessary to meet the
required minimum distribution under the Code or if necessary to make
substantially equal payments as required under the Code, the Company will
continue systematic withdrawals even though a surrender charge is deducted.
Restrictions on Distributions from Certain Types of Contracts. There are certain
restrictions on surrenders of and partial withdrawals from Contracts used as
funding vehicles for Code Section 403(b) retirement programs. Section 403(b)(11)
of the Code restricts the distribution under Section 403(b) annuity contracts
of: (i) elective contributions made in years beginning after December 31, 1988;
(ii) earnings on those contributions; and (iii) earnings in such years on
amounts held as of the last year beginning before January 1, 1989. Distributions
of those amounts may only occur upon the death of the employee, attainment of
age 59 1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be distributed
in the case of hardship.
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Contracts or under the terms of the plans
in respect of which Qualified Contracts are issued.
There are federal income tax consequences to surrenders and partial withdrawals.
Owners should consult with their tax adviser. The Company reserves the right to
stop offering the systematic withdrawal plan at any time.
Contract Loans
Owners of Contracts issued in connection with retirement programs meeting the
requirements of Section 403(b) of the Code (other than those programs subject to
Title 1 of the Employee Retirement Income Security Act of 1974) may borrow from
the Company using their Contracts as collateral. Loans are subject to the terms
of the Contract, the retirement program and the Code. Loans are described in
more detail in the SAI.
Death Benefit Before the Payout Date
Death of an Owner. If any Owner dies before the Payout Date, any surviving Owner
becomes the sole Owner. If there is no surviving Owner, the Annuitant becomes
the new Owner unless the deceased Owner was also the Annuitant. If the sole
deceased Owner was also the Annuitant, then the provisions relating to the death
of an Annuitant (described below) will govern unless the deceased Owner was one
of two joint Annuitants. In the latter event, the surviving Annuitant becomes
the Owner.
The following options are available to a sole surviving Owner or a new Owner:
(1) If the Owner is the spouse of the deceased Owner, he or she may
continue the Contract as the new Owner.
(2) If the Owner is not the spouse of the deceased Owner he or she may
elect, within 60 days of the date the Company receives Due Proof of
Death:
(a) to receive the Surrender Value in a single sum within 5 years of
the deceased Owner's death; or
(b) to apply the Surrender Value within 1 year of the deceased
Owner's death to one of the Income Payment Options provided that
payments under the option are payable over the new Owner's life
or over a period not greater than the new Owner's life
expectancy.
If he or she does not elect one of the above options, the Company will pay the
Surrender Value five years from the date of the deceased Owner's death.
Under any of these options, sole surviving Owners or new Owners may exercise all
Ownership rights and privileges from the date of the deceased Owner's death
until the date that the Surrender Value is paid.
Death of the Annuitant. If the Annuitant dies before the Payout Date, the
Company will pay the death benefit described below to the Beneficiary named by
the Owner in a lump sum. (Owners and Beneficiaries also may name successor
Beneficiaries.) If there is no surviving Beneficiary, the Company will pay the
death benefit to the Owner or the Owner's estate. In lieu of a lump sum payment,
the Beneficiary may elect, within 60 days of the date the Company receives due
proof of the Annuitant's death, to apply the death benefit to an Income Payment
Option.
If the Annuitant who is also an Owner dies, the provisions described immediately
above apply except that the Beneficiary may only apply the death benefit payment
to an Income Payment Option if:
(1) payments under the option begin within 1 year of the Annuitant's
death; and
(2) payments under the option are payable over the Beneficiary's life or
over a period not greater than the Beneficiary's life expectancy.
Basic Death Benefit. If the Annuitant is age 75 or younger on the Contract Date,
the basic death benefit is an amount equal to the greater of:
(1) aggregate Net Purchase Payments made under the Contract less a
proportional adjustment for partial withdrawals as of the date the
Company receives Due Proof of Death of the deceased;
(2) Contract Value as of the date the Company receives Due Proof of Death;
or
For Contracts issued after the Annuitant's 76th birthday, the death benefit is
always equal to the Contract Value as of the date the Company receives due proof
of the Annuitant's death. The death benefit will be reduced by any outstanding
Loan Amount and any applicable Premium Expense Charges not previously deducted.
The contract also offers additional guaranteed death benefit choices as riders
to the contract. These additional choices enhance the death benefit and are
available at an additional charge. Please see the Riders section for more
details.
Proportional Adjustment for Partial Withdrawals
When calculating the death benefit amount, as described above, an adjustment is
made to aggregate Net Purchase Payments for partial withdrawals taken from the
contract. The proportional adjustment for partial withdrawals is calculated by
dividing (1) by (2) and multiplying the result by (3) where: (1) Is the partial
withdrawal amount; (2) Is the Contract Value immediately prior to the partial
withdrawal; and (3) Is the sum of Net Purchase Payments immediately prior to the
partial withdrawal less any adjustment for prior partial withdrawals.
<PAGE>
MISCELLANEOUS MATTERS
================================================================================
Payments
Any surrender, partial withdrawal, Contract loan or death benefit usually will
be paid within seven days of receipt of a Written Request, any information or
documentation reasonably necessary to process the request, and (in the case of a
death benefit) receipt and filing of Due Proof of Death. However, payments may
be postponed if:
(1) the New York Stock Exchange is closed, other than customary weekend and
holiday closings, or trading on the exchange is restricted as
determined by the SEC; or
(2) the SEC permits the postponement for the protection of Owners; or
(3) the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of the value of the Variable Account's net assets not
reasonably practicable.
If a recent check or draft has been submitted, the Company has the right to
delay payment until it has assured itself that the check or draft has been
honored.
The Company has the right to defer payment of any surrender, partial withdrawal
or transfer from the Fixed Account Option for up to six months from the date of
receipt of Written Request for such a surrender or transfer. If payment is not
made within 30 days after receipt of documentation necessary to complete the
transaction, or such shorter period required by a particular jurisdiction,
interest will be added to the amount paid from the date of receipt of
documentation at 3% or such higher rate required for a particular jurisdiction.
Modification
Upon notice to the Owner, the Company may modify the Contract:
(1) to permit the Contract or the Variable Account to comply with any
applicable law or regulation issued by a government agency; or
(2) to assure continued qualification of the Contract under the Code or other
federal or state laws relating to retirement annuities or variable annuity
contracts; or
(3) to reflect a change in the operation of the Variable Account; or
(4) to provide for the addition or substitution of investment options; or
(5) to combine the Variable Account with any of our other separate accounts; or
(6) to eliminate or combine any Subaccounts and transfer the assets of any
Subaccount to any other Subaccount; or
(7) to add new Subaccounts and make such Subaccounts available to any class of
contracts as we deem appropriate; or
(8) to substitute a different Fund for any existing Fund, if shares or units of
a Fund are no longer available for investment or if we determine that
investment in a Fund is no longer appropriate; or
(9) to deregister the Variable Account under the 1940 Act if such registration
is no longer required; or
(10) to operate the Variable Account as a management investment company under
the 1940 Act (including managing the Variable Account under the direction
of a committee) or in any other form permitted by law; or
(11) to restrict or eliminate any voting rights of Owners or other persons
having such rights as to the Variable Account; or
(12) to make any other changes to the Variable Account or its operations as may
be required by the 1940 Act or other applicable law or regulation.
In the event of most such modifications, the Company will make appropriate
endorsement to the Contract.
Reports to Owners
At least annually, the Company will mail to each Owner, at such Owner's last
known address of record, a report setting forth the Contract Value (including
the Contract Value in each Subaccount and each Fixed Amount) of the Contract,
purchase payments paid and charges deducted since the last report, partial
withdrawals made since the last report and any further information required by
any applicable law or regulation.
Inquiries
Inquiries regarding a Contract may be made in writing to the Company at its Home
Office.
<PAGE>
INCOME PAYMENT OPTIONS
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Payout Date and Proceeds
The Owner selects the Payout Date. For Non-Qualified Contracts, the Payout Date
may not be after the later of the Contract Anniversary following the Annuitant's
85th birthday or 10 years after the Contract Issue Date. For Qualified
Contracts, the Payout Date must be no later than the Annuitant's age 70 1/2 or
any other date meeting the requirements of the Code.
The Owner may change the Payout Date subject to the following limitations: (1)
the Owner's Written Request must be received at the Home Office at least 30 days
before the current Payout Date, and (2) the requested Payout Date must be a date
that is at least 30 days after receipt of the Written Request.
On the Payout Date, the Payout Proceeds will be applied under the life Income
Payment Option with ten years guaranteed, unless the Owner elects to have the
proceeds paid under another payment option or to receive the Surrender Value in
a lump sum. Unless the Owner instructs the Company otherwise, amounts in the
Fixed Account Option will be used to provide a fixed income payment option and
amounts in the Variable Account will be used to provide a variable Income
Payment Option.
The Payout Proceeds equal the Contract Value:
(1) plus or minus any applicable market value adjustment;
(2) minus any applicable surrender charge if Income Payment Option 1 or
Option 2 variable Income Payments are selected;
(3) minus the pro-rated portion of the annual Contract fee or rider
charges (unless the Payout Date falls on the Contract Anniversary);
(4) minus any applicable Loan Amount; and
(5) minus any applicable Premium Expense Charges not yet deducted.
Election of Income Payment Options
On the Payout Date, the Payout Proceeds will be applied under an Income Payment
Option, unless the Owner elects to receive the Surrender Value in a single sum.
If an election of an Income Payment Option is not on file at the Home Office on
the Payout Date, the proceeds will be paid as a life income annuity with
payments for ten years guaranteed. An Income Payment Option may be elected,
revoked, or changed by the Owner at any time before the Payout Date while the
Annuitant is living. The election of an option and any revocation or change must
be made by Written Request. The Owner may elect to apply any portion of the
Payout Proceeds to provide either variable Income Payments or fixed Income
Payments or a combination of both.
The Company reserves the right to refuse the election of an Income Payment
Option other than paying the Payout Proceeds in a lump sum if the total amount
applied to an Income Payment Option would be less than $2,500, or each Income
Payment would be less than $20.00.
Fixed Income Payments
Fixed Income Payments are periodic payments from the Company to the designated
Payee, the amount of which is fixed and guaranteed by the Company. The amount of
each payment depends only on the form and duration of the Income Payment Option
chosen, the age of the Annuitant, the gender of the Annuitant (if applicable),
the amount applied to purchase the Income Payments and the applicable income
purchase rates in the Contract. The income purchase rates in the Contract are
based on a minimum guaranteed interest rate of 3.5%. The Company may, in its
sole discretion, make Income Payments in an amount based on a higher interest
rate.
Variable Income Payments
The dollar amount of the first variable Income Payment is determined in the same
manner as that of a fixed Income Payment. Variable Income Payments after the
first payment are similar to fixed Income Payments except that the amount of
each payment varies to reflect the net investment performance of the
Subaccount(s) selected by the Owner or Payee.
The net investment performance of a Subaccount is translated into a variation in
the amount of variable Income Payments through the use of Income Units. The
amount of the first variable Income Payment associated with each Subaccount is
applied to purchase Income Units at the Income Unit value for the Subaccount as
of the Payout Date. The number of Income Units of each Subaccount attributable
to a Contract then remains fixed unless an exchange of Income Units is made as
described below. Each Subaccount has a separate Income Unit value that changes
with each Valuation Period in substantially the same manner as do Accumulation
Units of the Subaccount.
The dollar value of each variable Income Payment after the first is equal to the
sum of the amounts determined by multiplying the number of Income Units by the
Income Unit value for the Subaccount for the Valuation Period which ends
immediately preceding the date of each such payment. If the net investment
return of the Subaccount for a payment period is equal to the pro-rated portion
of the 3.5% annual assumed investment rate, the variable Income Payment for that
period will equal the payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of 3.5% for a payment period, the
payment for that period will be greater than the payment for the prior period
and to the extent that such return for a period falls short of an annualized
rate of 3.5%, the payment for that period will be less than the payment for the
prior period.
After the Payout Date, a Payee may change the selected Subaccount(s) by Written
Request up to four times per Contract Year. Such a change will be made by
exchanging Income Units of one Subaccount for another on an equivalent dollar
value basis. See the Statement of Additional Information for examples of Income
Unit value calculations and variable Income Payment calculations.
Surrenders and partial withdrawals may be made after the Payout Date, when a
Variable Income Payment is chosed for a fixed period of time.
Description of Income Payment Options
Option 1 - Interest Option. (Fixed Income Payments Only) The proceeds are left
with the Company to earn interest at a compound annual rate to be determined by
the Company but not less than 3.5%. Interest will be paid every month or every
12 months as the Payee selects. Under this option, the Payee may withdraw part
or all of the proceeds at any time. This option may not be available in all
states.
Option 2 - Installment Option. The proceeds are paid out in monthly installments
for a fixed number of years between 5 and 30. In the event of the Payee's death,
a successor Payee may receive the payments or may elect to receive the present
value of the remaining payments (computed as described in the Contract) in a
lump sum. If there is no successor Payee or if the successor Payee dies, the
present value of the remaining payments will be paid to the estate of the last
surviving Payee.
If variable Income Payments are elected under Option 2, the Payee may elect to
receive the commuted value of any remaining payments in a lump sum. The commuted
value of the payments will be calculated as described in the contract.
Option 3A - Life Income Guaranteed Period Certain. The proceeds are paid in
monthly installments during the Payee's lifetime with the guarantee that
payments will be made for a period of five, ten, fifteen, or twenty years. In
the event of the Payee's death before the expiration of the specified number of
years, a successor Payee may receive the remaining payments or may elect to
receive the present value of the remaining payments (computed as described in
the Contract) in a lump sum. If there is no successor Payee or if the successor
Payee dies, the present value of the remaining payments will be paid to the
estate of the last surviving Payee.
Option 3B - Life Income. The same as Option 3A except that payments are not
guaranteed for a specific number of years but only for the lifetime of the
Payee. Under this option, a Payee could receive only one payment if the Payee
dies after the first payment, two payments if the Payee dies after the second
payment, etc.
Option 4 - Joint and Survivor Life Income - 10 Year Guaranteed Period Certain.
The proceeds are paid out in monthly installments for as long as either of two
original joint Payees remain alive. If after the second Payee dies, payments
have been made for fewer than 10 years, payments will be made to any successor
Payee who was not a joint Annuitant or such successor Payee may elect to receive
the present value of the remaining payments (computed as described in the
Contract) in a lump sum. If there is no such successor Payee or if the successor
Payee dies, the present value of the remaining payments will be paid to the
estate of the last surviving Payee. The minimum amount of each fixed payment and
the initial payment amount for variable income payout options will be determined
from the tables in the Contract that apply to the particular option using the
Payee's age (and if applicable, gender). Age will be determined from the last
birthday at the due date of the first payment.
Alternate Payment Option. In lieu of one of the above options, the Payout
Proceeds or death benefit, as applicable, may be applied to any other payment
option made available by the Company or requested and agreed to by the Company.
Death Benefit After the Payout Date
If an Owner dies after the Payout Date, any surviving Owner becomes the sole
Owner. If there is no surviving Owner, the Payee receiving Income Payments
becomes the new Owner. Such Owners will have the rights of Owners during the
annuity period, including the right to name successor Payees if the deceased
Owner had not previously done so. The death of an Annuitant after the Payout
Date will have the effect stated in the Income Payment Option pursuant to which
Income Payments are being made.
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CHARGES AND DEDUCTIONS
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Mortality and Expense Risk Charges
The Company deducts a mortality and expense risk charge from the Variable
Account. The charges are computed on a daily basis, and are equal to an annual
rate of 1.15% of the average daily net assets of the Variable Account.
The mortality risk the Company assumes is that Annuitants may live for a longer
period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Payee is assured that longevity
will not have an adverse effect on the Income Payments received. The mortality
risk that the Company assumes also includes a guarantee to pay a death benefit
if the Annuitant dies before the Payout Date. The expense risk that the Company
assumes is the risk that the administrative fees and transfer fees (if imposed)
may be insufficient to cover actual future expenses.
The Company may use any profits from this charge to finance other expenses,
including expenses incurred in the administration of the Contracts and
distribution expenses related to the Contracts.
Fund Expenses
Because the Variable Account purchases shares of the Funds, the net assets of
the Variable Account will reflect the investment management fees and other
operating expenses incurred by such Funds.
Surrender Charge (Contingent Deferred Sales Charge)
Charge for Partial Withdrawal or Surrender. No sales charge deduction is made
from purchase payments when amounts are deposited into the contracts. However,
if any amount is withdrawn or surrendered within seven years of being received
by the Company, the Company will deduct a surrender charge. The surrender charge
is calculated by multiplying the applicable charge percentage (as shown below)
by the amount of purchase payments surrendered. There is no surrender charge for
withdrawal of Contract Value in excess of aggregate purchase payments (less
withdrawals of such payments). The surrender charge is calculated using the
assumption that all Contract Value in excess of aggregate purchase payments
(less withdrawals of such payments) is surrendered before any purchase payments
and that purchase payments are surrendered on a first-in-first-out basis.
Number of Full Years
Between Date of Purchase Date of Surrender
Payment and Charge of Purchase
as Percentage Payment
-----------------------------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 + 0%
Amounts Not Subject to Surrender Charge. In each Contract Year, up to 10% of an
amount equal to the aggregate purchase payments still subject to a surrender
charge (computed at the time of the withdrawal or surrender) may be withdrawn or
surrendered during that year without a surrender charge. Any amounts surrendered
or withdrawn in excess of this 10% will be assessed a surrender charge. This
right is not cumulative from Contract Year to Contract Year.
Annual Contract Fee
On each Contract Anniversary before the Payout Date, the Company deducts an
annual Contract fee of $30 to pay for administrative expenses. The fee is
deducted from each Subaccount and from the Fixed Account Option based on a
proportional basis. The annual Contract fee also is deducted upon surrender of a
Contract on a date other than a Contract Anniversary. A pro-rated portion of the
fee is deducted upon application to an Income Payout Option. After the Payout
Date, the annual Contract fee is deducted from variable Income Payments. The
Company does not deduct the annual Contract fee on Contracts with a Contract
Value of $25,000 or more on the Contract Anniversary. The Contract fee will not
be charged after the Payout Date when a Contract with a Contract Value of
$25,000 or more has been applied to a payout option.
Transfer Processing Fee
Currently no fee is charged for transfers. However, the Company reserves the
right to charge $10 for the 13th transfer and each additional transfer during a
Contract Year. The transfer charge is not applicable to transfers from the DCA
Fixed Period. Each written request is considered to be one transfer, regardless
of the number of Subaccounts or Fixed Amounts affected by the transfer. The
transfer fee is deducted from the account from which the transfer is made. If a
transfer is made from more than one account at the same time, the transfer fee
is deducted pro-rata from the account. Automatic transfers, including Dollar
Cost Averaging, do not count against the twelve free transfers.
Lost Contract Request
You can obtain a certification of your contract at no charge. There will be a
$30 charge for a duplicate contract.
Premium Taxes
Various states and other governmental entities levy a premium tax on annuity
contracts issued by insurance companies. Premium tax rates currently range from
0% to 3.5%. This range is subject to change. If premium taxes are applicable to
a Contract, the jurisdiction may require payment (a) from purchase payments as
they are received, (b) from Contract Value upon withdrawal or surrender, (c)
from Payout Proceeds upon application to an income payment option, or (d) upon
payment of a death benefit. The Company will forward payment to the taxing
jurisdiction when required by law. Although the Company reserves the right to
deduct premium taxes at the time such taxes are paid to the taxing authority,
currently the Company does not deduct premium tax from the Owner's Contract
Value until the Contract is annuitized.
Other 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 Income
Payments, as appropriate.
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RIDERS AND ENDORSEMENTS
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Maximum Anniversary Value Death Benefit
This rider provides a minimum death benefit equal to the maximum anniversary
value less any loan amounts and Premium Expense Charge not previously deducted.
On the issue date, the maximum anniversary value is equal to the initial Net
Purchase Payment. After the issue date, the maximum anniversary value will be
calculated on three different dates:
(1) the date an additional purchase payment is received by the company,
(2) the date of payment of a partial withdrawal, and
(3) on each Contract Anniversary.
When a purchase payment is received, the maximum anniversary value is equal to
the most recently calculated maximum anniversary value plus the Net Purchase
Payment. When a partial withdrawal is paid, the maximum anniversary value is
equal to the most recently calculated maximum anniversary value less an
adjustment for the partial withdrawal. The adjustment for each partial
withdrawal is (1) divided by (2) with the result multiplied by (3) where:
(1) is the partial withdrawal amount;
(2) is the Contract Value immediately prior to the partial withdrawal; and (3)
is the most recently calculated maximum anniversary value less any
adjustments for prior partial withdrawals.
This rider is available for Annuitant's age 75 or less on the issue date. This
rider may not be available in all states.
5% Annual Guarantee Death Benefit
This rider provides a minimum death benefit equal to the 5% annual guarantee
death benefit less any loan amounts and Premium Expense Charge not previously
deducted.
On the Issue Date the 5% annual guarantee value is equal to the initial Net
Purchase Payment. Thereafter, the 5% annual guarantee value on each Contract
Anniversary is the lessor of:
(1) the sum of all Net Purchase Payments received minus an adjustment for
partial withdrawals plus interest compounded at a 5% annual effective rate;
or
(2) 200% of all Net Purchase Payments received.
The adjustment for each partial withdrawal is equal to (1) divided by (2) with
the result multiplied by (3) where: (1) is the partial withdrawal amount; (2) is
the Contract Value immediately prior to the withdrawal; and (3) is the 5% annual
guarantee death benefit immediately prior to the withdrawal, less any
adjustments for earlier withdrawals.
This rider is available for Annuitant's age 75 or less on the issue date. This
rider may not be available in all states.
Enhanced Death Benefit Rider Charges
Each death benefit rider will carry an annual charge of 0.15% of Contract Value.
This charge will be assessed on the each Contract Anniversary . The charge will
be based on the average Contract Value for the previous 12 months. The charge
will be deducted from the Subaccounts and Fixed Amounts on a pro-rata basis. A
pro-rata portion of this charge will be deducted upon contract surrender if the
contract is surrendered on a date other than the Contract Anniversary.
Waiver of Surrender Charge
In most states, the Contract provides that, upon Written Request from the Owner
before the Payout Date, the surrender charge and any applicable market value
adjustment will be waived on any partial withdrawal or surrender if the
Annuitant is:
(1) confined to a nursing home or hospital after the contract is issued (as
described in the Contract); or
(2) becomes terminally ill after the contract is issued (as described in the
Contract); or
(3) becomes unemployed at least one year after the contract is issued, has
received unemployment compensation for at least 30 days and is receiving it
at the time of the withdrawal or surrender (as described in the Contract);
or
(4) The Annuitant's primary residence is located in an are that is declared a
presidential disaster area and $50,000 of damage is sustained to the
residence as a result of the disaster and after the contract is issued (as
described in the Contract).
This waiver is not available in some states, and, therefore, is not described in
Contracts issued in those states. The terms under which the surrender charge and
any applicable market value adjustment will be waived may vary in some states
and are described in contracts issued in those states.
Executive Benefits Plan Endorsement
The Company also offers an Executive Benefits Plan Endorsement in conjunction
with certain deferred compensation plans. The executive benefits plan
endorsement waives the surrender charges on the contract subject to certain
conditions. There is no charge for this benefit. However, if you exercise this
benefit during the first two Contract Years, we reserve the right to charge a
fee to offset expenses incurred. This fee will not exceed $150. The Executive
Benefits Plan Endorsement may not be available in all states.
ADVERTISING AND SUBACCOUNT PERFORMANCE SUMMARY
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From time to time, the Company may advertise or include in sales literature
yields, effective yields and total returns for the Subaccounts. These figures
are based on historical earnings and do not indicate or project future
performance. The Company also may, from time to time, advertise or include in
sales literature Subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Fund. The performance of a Fund in
part reflects its expenses. See the prospectuses for the Funds.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the Subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a Subaccount (except the Money Market Subaccount) refers to the
annualized income generated by an investment in the Subaccount over a specified
30-day or one-month period. The yield is calculated by assuming that the income
generated by the investment during that 30-day or one-month period is generated
each month over a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time. For periods prior to the date the Variable Account commenced
operations, non-standard performance information will be calculated based on the
performance of the various Funds and the assumption that the Subaccounts were in
existence for the same periods as those indicated for the Funds, with the level
of Contract charges that were in effect at the inception of the Subaccounts for
the Contracts. When a Subaccount has been in operation for one, five, and ten
years, respectively, the total standard returns for these periods will be
provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the Subaccount from the beginning date of the
measuring period to the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all charges
and deductions applied against the Subaccount (including any surrender charge
that would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the standard version described above, total return performance
information computed on two different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, the Company may from time to
time disclose cumulative total returns for Contracts funded by Subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the Funds may be disclosed, including such
disclosures for periods prior to the date the Variable Account commenced
operations.
Non-standard performance data will only be disclosed if the standard performance
data for the required periods is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount may be
compared with the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
similar to the Subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS's rankings compare variable life and
variable universal life issuers. The performance analyses prepared by Lipper,
VARDS and Morningstar each rank such issuers on the basis of total return,
assuming reinvestment of distributions, but do not take sales charges,
redemption fees, or certain expense deductions at the separate account level
into consideration. In addition, VARDS prepares risk rankings, which consider
the effects of market risk on total return performance. This type of ranking
provides data as to which Funds provide the highest total return within various
categories of Funds defined by the degree of risk inherent in their investment
objectives.
Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for transaction costs or expenses
of operating and managing an investment portfolio. The Lehman Bond Indexes
represent unmanaged groups of securities of various issuers and terms to
maturity which are representative of bond market performance. The Consumer Price
Index is a statistical measure of changes in the prices of goods and services
over time published by the U.S. Bureau of Labor Statistics. Lipper Performance
Summary Averages represent the average annual total return of all the Funds
(within a specified investment category) that are covered by the Lipper
Analytical Services Variable Insurance Products Performance Analysis Service.
Other independent ranking services and indices may also be used for performance
comparisons.
The Company may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested on a
tax-deferred basis which can lead to substantial long-term accumulation of
assets, provided that the Subaccount investment experience is positive.
<PAGE>
FEDERAL TAX MATTERS
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The Following Discussion is General and Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about specific tax
implications should consult a competent tax adviser before making a transaction.
This discussion is based upon the Company's understanding of the present federal
income tax laws, as they are currently interpreted by the Internal Revenue
Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used in
connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), 408, 408A or 457 of the Code. The ultimate effect
of federal income taxes on the amounts held under a Contract, or Income
Payments, and on the economic benefit to the Owner, the Annuitant, or the
Beneficiary depends on the type of retirement plan, on the tax and employment
status of the individual concerned, and on the Company's tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax-qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of a Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a Contract. The following discussion assumes that Qualified
Contracts are purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that separate
account investment underlying a contract must be "adequately diversified" in
accordance with Treasury regulations in order for the contract to qualify as an
annuity contract under Section 72 of the Code. The Variable Account, through
each underlying Fund, intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various Subaccounts may be invested. Although the Company does not
have direct control over the Funds in which the Variable Account invests, we
believe that each Fund in which the Variable Account owns shares will meet the
diversification requirements, and therefore, the Contract will be treated as an
annuity contract under the Code.
Owner Control. In certain circumstances, Owners of variable annuity contracts
may be considered the Owners, for federal income tax purposes, of the assets of
the separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includable in the
variable annuity Owner's gross income. The IRS has stated in published rulings
that a variable Owner will be considered the Owner of separate account assets if
the Owner possesses incidents of ownership in those assets, such as the ability
to exercise investment control over the assets. The Treasury Department has also
announced, in connection with the issuance of regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Owner), rather than the insurance
company, to be treated as the Owner of the assets in the account." This
announcement also states that guidance would be issued by way of regulations or
rulings on the "extent to which policyholders may direct their investments to
particular Subaccounts without being treated as Owners of the underlying
assets."
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that Owners were not Owners of separate account assets. For example,
the Owner of a Contract has the choice of one or more Subaccounts in which to
allocate Net Purchase Payments and Contract Values, and may be able to transfer
among Subaccounts more frequently than in such rulings. These differences could
result in an Owner being treated as the Owner of the assets of the Variable
Account. In addition, the Company does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore reserves the right to modify
the Contract as necessary to attempt to prevent the Owner from being considered
the Owner of the assets of the Variable Account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Payout Date but prior to the time the entire interest in the contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
Owner's death; and (b) if any Owner dies prior to the Payout Date, the entire
interest in the contract will be distributed within five years after the date of
the Owner's death. These requirements will be considered satisfied as to any
portion of the Owner's interest which is payable to or for the benefit of a
"designated Beneficiary" and which is distributed over the life of such
Annuitant or over a period not extending beyond the life expectancy of that
Annuitant, provided that such distributions begin within one year of that
Owner's death. The Owner's "designated Beneficiary" is the person designated by
such Owner as an Annuitant and to whom ownership of the contract passes by
reason of death and must be a natural person. However, if the Owner's
"designated Annuitant" is the surviving spouse of the Owner, the contract may be
continued with the surviving spouse as the new Owner.
The Non-Qualified Contracts contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Contracts.
Taxation of Annuities
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
In General. Section 72 of the Code governs taxation of annuities in general. The
Company believes that an Owner who is a natural person is not taxed on increases
in the value of a Contract until distribution occurs by withdrawing all or part
of the Contract Value (e.g., partial withdrawals and surrenders) or as Income
Payments under the payment option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Contract Value (and
in the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or payment option) is taxable
as ordinary income.
Any annuity Owner who is not a natural person generally must include in income
any increase in the excess of the Contract Value over the "investment in the
contract" during the taxable year. There are some exceptions to this rule, and a
prospective Owner that is not a natural person may wish to discuss these with a
competent tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
Partial Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any purchase payments paid by or on behalf of the individual under a
Contract which were not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
In the case of a partial withdrawal (including systematic withdrawals) from a
Non-Qualified Contract, under Section 72(e), any amounts received are generally
first treated as taxable income to the extent that the Contract Value
immediately before the partial withdrawal exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable. With
respect to a Non-Qualified Contract, partial withdrawals are generally treated
as taxable income to the extent that the Contract Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The Contract
Value immediately before a partial withdrawal may have to be increased by any
positive market value adjustment which results from such a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of market value
adjustments, and the Owner should contact a competent tax adviser with respect
to the potential tax consequences of a market value adjustment. Surrenders are
treated as taxable income to the extent that the amount received exceeds the
investment in the contract.
In the case of a full surrender under a Qualified or Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."
Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. Special rules
and procedures apply to Section 1035 transactions. Prospective Owners wishing to
take advantage of Section 1035 should consult their tax adviser.
Income Payments. Tax consequences may vary depending on the payment option
elected under an annuity contract. Generally, under Code Section 72(b), (prior
to recovery of the investment in the Contract) taxable income does not include
that part of any amount received as an annuity under an annuity contract that
bears the same ratio to such amount as the investment in the contract bears to
the expected return at the annuity starting date. For variable Income Payments,
the taxable portion is generally determined by an equation that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the "investment in the contract" by the total number of
expected periodic payments. However, the entire distribution will be taxable
once the recipient has recovered the dollar amount of his or her "investment in
the contract." For fixed Income Payments, in general, there is no tax on the
portion of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the Income Payments for the
term of the payments; however, the remainder of each Income Payment is taxable
until the recovery of the investment in the contract, and thereafter the full
amount of each Income Payment is taxable. If death occurs before full recovery
of the investment in the contract, the unrecovered amount may be deducted on the
Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of the Owner or Annuitant. Generally, such amounts are
includable in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a full surrender of the contract
or (ii) if distributed under a payment option, they are taxed in the same way as
Income Payments.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
(1) made on or after the taxpayer reaches age 59 1/2;
(2) made on or after the death of the holder (or if the holder is not an
individual, the death of the primary Annuitant);
(3) attributable to the taxpayer's becoming disabled;
(4) as part of a series of substantially equal periodic payments not less
frequently than annually for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and the designated Beneficiary;
(5) made under certain annuities issued in connection with structured
settlement agreements; and
(6) made under an annuity contract that is purchased with a single
purchase payment when the Payout Date is no later than a year from
purchase of the annuity and substantially equal periodic payments are
made not less frequently than annually during the Income Payment
period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.
Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an Annuitant, Payee or
other Beneficiary who is not also the Owner, the selection of certain Payout
Dates or the exchange of a Contract may result in certain tax consequences to
the Owner that are not discussed herein. An Owner contemplating any such actions
should contact a competent tax adviser with respect to the potential tax
effects.
Withholding
Distributions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distribution and the Owner's tax status. The Owner will be provided
the opportunity to elect to not have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
Multiple Contracts
All non-qualified deferred annuity Contracts that are issued by the Company (or
its affiliates) to the same Owner during any calendar year are treated as one
annuity Contract for purposes of determining the amount includable in gross
income under Section 72(e). In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or otherwise. There may also be
other situations in which the Treasury may conclude that it would be appropriate
to aggregate two or more annuity Contracts purchased by the same Owner.
Accordingly, an Owner should consult a competent tax adviser before purchasing
more than one annuity Contract.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Therefore, no
attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified retirement plans. Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but the Company shall not be bound by the terms and conditions of
such plans to the extent such terms contradict the Contract, unless the Company
consents. Some retirement plans are subject to distribution and other
requirements that are not incorporated into the Company's Contract
administration procedures. Brief descriptions follow of the various types of
qualified retirement plans in connection with a Contract. The Company will amend
the Contract as necessary to conform it to the requirements of such plans.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent Owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later tan the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish these
plans for themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the participant or to
both may result if this Contract is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the Contract.
Employers intending to use the Contract with such plans should seek competent
advice.
The Contract includes a Death Benefit that in some cases may exceed the greater
of the purchase payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax adviser.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." IRA contributions are limited each
year to the lesser of $2,000 or 100% of the Owner's adjusted gross income and
may be deductible in whole or in part depending on the individual's income.
Distributions from certain other types of qualified plans, however, may be
"rolled over" on a tax-deferred basis into an IRA without regard to this limit.
Earnings in an IRA are not taxed while held in the IRA. All amounts in the IRA
(other than nondeductible contributions) are taxed when distributed from the
IRA. Distributions prior to age 59 1/2 (unless certain exceptions apply) are
also subject to a 10% penalty tax. Sales of the Contract for use with IRAs may
be subject to special requirements of the Internal Revenue Service. The Internal
Revenue Service has not reviewed the Contract for qualification as an IRA, and
has not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with IRA qualifications
requirements.
Roth IRAs. Effective January 1, 1998, Section 408A of the Code permits certain
eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA,
which are subject to certain limitations, are not deductible and must be made in
cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA may be subject to tax and other
special rules may apply. You should consult a tax adviser before combining any
converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.
Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of certain
Section 501(c)(3) organizations and public schools to exclude from their gross
income the purchase payments paid, within certain limits, on a Contract that
will provide an annuity for the employee's retirement. These purchase payments
may be subject to FICA (Social Security) taxes. Owners of certain Section 403(b)
annuities may receive Contract loans. Contract loans that satisfy certain
requirements with respect to Loan Amount and repayment are not treated as
taxable distributions. If these requirements are not satisfied, or if the
Contract terminates while a loan is outstanding, the loan balance will be
treated as a taxable distribution and may be subject to penalty tax, and the
treatment of the Contract under Section 403(b) may be adversely affected. Owners
should seek competent advice before requesting a Contract loan. The Contract
includes a Death Benefit that in some cases may exceed the greater of the
Purchase Payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the Death Benefit may exceed
this limitation, employers using the Contract in connection with such plans
should consult their tax adviser.
Certain Deferred Compensation Plans. Code Section 457 provides for certain
deferred compensation plans. These plans may be offered with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax-exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account. In general, all investments
are owned by the sponsoring
employer and are subject to the claims of the general creditors of the employer.
Depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations. In general, all amounts distributed under a Section 457 plan are
taxable and are subject to federal income tax withholding as wages.
Possible Charge for the Company's Taxes
At the present time, the Company makes no charge to the Subaccounts for any
Federal, state, or local taxes that the Company incurs which may be attributable
to such Subaccounts or the Contracts. The Company, however, reserves the right
in the future to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be properly
attributable to the Subaccounts or to the Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax consequences under
these Contracts are not exhaustive, and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the Federal
income tax consequences discussed herein reflect the Company's understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
<PAGE>
LEGAL PROCEEDINGS
================================================================================
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Separate Account or the Company.
FINANCIAL STATEMENTS
================================================================================
The audited financial statements of the Variable Annuity Account as of December
31, 1999, including a statement of assets and liabilities, a statement of
operations for the year then ended, a statement of changes in net assets for the
years ended December 31, 1999, 1998,and 1997, and accompanying notes, are
included in the Statement of Additional Information.
The statutory basis statements of admitted assets, liabilities, and surplus for
the Company as of December 31, 1999, and 1998,and 1997, and the related
statutory basis statements of operations, changes in unassigned surplus, and
cash flows for the years ended December 31, 1999, 1998, and 1997, as well as the
Independent Auditors' Report are contained in the Statement of Additional
Information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS.............................................1
The Contract......................................................1
Incontestability..................................................1
Misstatement of Age or Gender.....................................1
Participation.....................................................1
Contract Loans....................................................1
Loan Amounts......................................................1
Loan Processing...................................................1
Loan Interest.....................................................2
PRINCIPAL UNDERWRITER......................................................2
CALCULATION OF YIELDS AND TOTAL RETURNS....................................2
Money Market Subaccount Yields....................................2
Other Subaccount Yields...........................................4
Average Annual Total Returns......................................5
Other Total Returns...............................................6
Effect of the Annual Contract Fee on Performance Data.............8
VARIABLE ANNUITY PAYMENTS..................................................8
Assumed Investment Rate...........................................8
Amount of Variable Annuity Payments...............................8
Annuity Unit Value................................................9
LEGAL MATTERS.............................................................10
EXPERTS...................................................................10
OTHER INFORMATION.........................................................11
FINANCIAL STATEMENTS......................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT.................................12
CUNA MUTUAL LIFE INSURANCE COMPANY........................................26
You may obtain a copy of the Statement of Additional Information free of charge
by writing to or calling us at the address or telephone number shown at the
beginning of this Prospectus.
<PAGE>
MEMBERS VARIABLE ANNUITY II
STATEMENT OF ADDITIONAL INFORMATION
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
(800) 798-5500
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Individual Flexible Premium Deferred Variable Annuity Contract
This Statement of Additional Information contains additional information to that
already provided in the Prospectus for the individual flexible premium deferred
variable annuity contract (the "Contract") offered by CUNA Mutual Life Insurance
Company (the "Company").
This Statement of Additional Information is not a Prospectus, and it should be
read only in conjunction with Prospectuses for the following:
1. Contract;
2. Ultra Series Fund
The Prospectus for the Contract is dated the same as this Statement of
Additional Information. You may obtain a copy of the Prospectuses by writing or
calling us at our address or phone number shown above.
October 25, 2000
<PAGE>
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS...............................................1
The Contract........................................................1
Incontestability....................................................1
Misstatement of Age or Gender.......................................1
Participation.......................................................1
Contract Loans......................................................1
Loan Amounts........................................................1
Loan Processing.....................................................1
Loan Interest.......................................................2
PRINCIPAL UNDERWRITER........................................................2
CALCULATION OF YIELDS AND TOTAL RETURNS......................................2
Money Market Subaccount Yields......................................2
Other Subaccount Yields.............................................4
Average Annual Total Returns........................................5
Other Total Returns.................................................6
Effect of the Annual Contract Fee on Performance Data...............8
VARIABLE INCOME PAYMENTS.....................................................8
Assumed Investment Rate.............................................8
Amount of Variable Income Payments..................................8
Income Unit Value...................................................9
LEGAL MATTERS...............................................................10
EXPERTS.....................................................................10
OTHER INFORMATION...........................................................11
FINANCIAL STATEMENTS........................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT...................................12
CUNA MUTUAL LIFE INSURANCE COMPANY..........................................26
<PAGE>
ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of the
Contract. The statements made in the application are representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.
Incontestability
The Company will not contest the Contract.
Misstatement of Age or Gender
If the age or gender (if applicable) of the Annuitant has been misstated, the
amount which will be paid is that which the proceeds would have purchased at the
correct age and sex (if applicable).
Participation
The Contract may participate in the Company's divisible surpluses but no
dividends are expected to be paid. Any dividends paid after the Annuity Date
would be paid with each income payment.
Contract Loans
Loan Amounts
Generally, Owners may borrow up to 90% of the Surrender Value of their Contract
unless a lower minimum is required by law. Loans in excess of the maximum amount
permitted under the Code may be treated as a taxable distribution rather than a
loan. The Company will only make Contract loans after approving a written
request by the Owner. The written consent of all irrevocable beneficiaries must
be obtained before a loan will be given.
Loan Processing
When a loan is made, the Company transfers an amount equal to the amount
borrowed from the Variable Contract Value or Fixed Contract Value to the Loan
Account. The Loan Account is part of the Company's General Account and Contract
Value in the Loan Account does not participate in the investment experience of
any Subaccount or Fixed Account Option. The Owner must indicate in the loan
application from which Subaccount or Fixed Account Option, and in what amounts,
Contract Value is to be transferred to the Loan Account. If no instructions are
given by the Owner, the transfer(s) are made pro-rata from all Subaccounts
having Variable Contract Value and from all Fixed Amounts. Loans may be repaid
by the Owner at any time before the Payout Date. Upon the repayment of any
portion of a loan, an amount equal to the repayment will be transferred from the
Loan Account to the Subaccount(s) or Fixed Period(s) as requested by the Owner.
Any transfer to a Fixed Period must be at least $1,000. A request to transfer
less will be transferred to the Money Market Subaccount. Loan repayments are not
allowed to the DCA One Year Fixed Period. Amounts transferred from the Fixed
Amount to the Loan Account may be subject to a market value adjustment.
Loan Interest
The Company charges 6.5% interest on Contract loans. The Company pays interest
on the Contract Value in the Loan Account at rates it determines from time to
time, but never less than 3.0%. Consequently, the net cost of a loan is the
difference between 6.5% and the rate being paid on the Contract Value in the
Loan Account. Interest on Contract loans accrues on a daily basis from the date
of the loan and is due and payable at the end of each Contract Year. If the
Owner does not pay the interest due at that time, an amount equal to such
interest less interest earned on the Contract Value in the Loan Account is
transferred from his or her Variable Contract Value or Fixed Account (as
described above for the loan itself) to the Loan Account. This transfer
increases the Loan Amount.
Specific loan terms are disclosed at the time of loan application or issuance.
Any Loan Amount outstanding upon the death of the Owner or Annuitant is deducted
from any death benefit paid.
PRINCIPAL UNDERWRITER
CUNA Brokerage Services, Inc., ("CUNA Brokerage"), an affiliate of CUNA Mutual,
is the principal underwriter of the variable annuity contracts described herein.
The offering of the contract is continuous. CUNA Mutual does not anticipate
discontinuing the offering of the Contract, but does reserve the right to do so.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns, and other
performance data pertaining to the Contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses, or income other than investment income, on shares of the Ultra Series
Fund's Money Market Fund or on that Fund's portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation), and exclusive of income other than investment
income at the end of the seven-day period in the value of a hypothetical account
under a Contract having a balance of 1 unit of the Money Market Subaccount at
the beginning of the period. Then dividing such net change in account value by
the value of the hypothetical account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis.
The net change in account value reflects: 1) net income from the Fund
attributable to the hypothetical account; and 2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for: 1) the annual Contract fee; 2) the mortality and expense risk
charge; and (3) the asset-based administration charge.
For purposes of calculating current yields for a Contract, an average per unit
Contract fee is used based on the $30 annual Contract fee deducted at the end of
each Contract Year. Current Yield is calculated according to the following
formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Money Market Fund (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation), and exclusive of income other than
investment income for the seven-day period attributable to a
hypothetical account having a balance of 1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the
seven-day period.
UV = the unit value for the first day of the seven-day period.
Effective yield = (1 + ((NCS-ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the Money Market Fund (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the
seven-day period.
UV = the unit value for the first day of the seven-day period.
Because of the charges and deductions imposed under the Contract, the yield for
the Money Market Subaccount is lower than the yield for the Money Market Fund.
The current and effective yields on amounts held in the Money Market Subaccount
normally fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Money Market Fund, the types and quality of portfolio securities held by
the Money Market Fund and the Money Market Fund's operating expenses. Yields on
amounts held in the Money Market Subaccount may also be presented for periods
other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to 1% to 7% of certain purchase payments during the seven years
subsequent to each payment being made. A surrender charge will not be imposed
upon surrender or partial withdrawal in any Contract Year on an amount equal to
10% of the aggregate purchase payments subject to the surrender charge as of the
time of the first withdrawal or surrender in that Contract Year.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one-month periods. The annualized yield
of a Subaccount refers to income generated by the Subaccount during a 30-day or
one-month period and is assumed to be generated each period over a 12-month
period.
The yield is computed by:
1) dividing the net investment income of the Fund attributable to the
Subaccount units less Subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by
3) compounding that yield for a six-month period; and by
4) multiplying that result by 2.
Expenses attributable to the Subaccount include the annual contract fee, the
asset-based administration charge and the mortality and expense risk charge. The
yield calculation assumes a contract fee of $30 per year per Contract deducted
at the end of each Contract Year. For purposes of calculating the 30-day or
one-month yield, an average contract fee based on the average Contract Value in
the Variable Account is used to determine the amount of the charge attributable
to the Subaccount for the 30-day or one-month period. The 30-day or one-month
yield is calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV) + 1)6 - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month period
attributable to the Subaccount's units.
ES = expenses of the Subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the 30-day
or one-month period.
Because of the charges and deductions imposed under the Contracts, the yield for
the Subaccount is lower than the yield for the corresponding Fund.
The yield on the amounts held in the Subaccounts normally fluctuates over time.
Therefore, the disclosed yield for any given past period is not an indication or
representation of future yields or rates of return. A Subaccount's actual yield
is affected by the types and quality of portfolio securities held by the
corresponding Fund and that Fund's operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract equal to 1% to 7% of certain purchase payments during the seven years
subsequent to each payment being made. A surrender charge will not be imposed
upon surrender or partial withdrawal in any Contract Year on an amount equal to
10% of the aggregate purchase payments subject to the surrender charge as of the
time of the first withdrawal or surrender in that Contract Year.
Average Annual Total Returns
From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the Subaccounts for various periods of
time.
When a Subaccount or Fund has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount unit
values which the Company calculates on each Valuation Day based on the
performance of the Subaccount's underlying Fund, the deductions for the
mortality and expense risk charge, the deductions for the asset-based
administration charge and the annual Contract fee. The calculation assumes that
the Contract fee is $30 per year per Contract deducted at the end of each
Contract year. For purposes of calculating average annual total return, an
average per-dollar per-day Contract fee attributable to the hypothetical account
for the period is used. The calculation also assumes surrender of the Contract
at the end of the period for the return quotation. Total returns will therefore
reflect a deduction of the surrender charge for any period less than eight
years. The total return is calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
Where:
TR = the average annual total return net of Subaccount recurring charges.
ERV = the ending redeemable value (net of any applicable surrender charge)
of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date the Variable Account or any
Subaccount commenced operations. The Money Market, Bond, Balanced, and Growth &
Income Stock Funds commenced operations in January, 1985. The Capital
Appreciation Stock Fund commenced operations in January, 1994. The Mid-Cap Stock
Fund commenced operations in May, 1999. The Emerging Growth, High Income,
International Stock and Global Securities Funds commenced operations on
October 31, 2000.
Performance information for the Subaccounts for periods prior to the inception
of the Variable Account is calculated according to the formula shown on the
previous page, based on the performance of the Funds and the assumption that the
corresponding Subaccounts were in existence for the same periods as those
indicated for the Funds, with the level of Contract charges that were in effect
at the inception of the Subaccounts.
Such average annual total return information for the Subaccounts is as follows:
<TABLE>
<CAPTION>
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/99 12/31/99 12/31/99 12/31/99
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Money Market 3.07% 3.01% 3.20% 4.01%
Bond -7.07% 4.55% 5.08% 6.33%
Balanced 6.49% 13.46% 9.84% 10.51%
Growth and Income Stock 9.88% 22.01% 14.51% 14.30%
Capital Appreciation Stock 17.05% 23.82% N/A 20.47%
Mid-Cap Stock N/A N/A N/A N/A
Emerging Growth N/A N/A N/A N/A
High Income N/A N/A N/A N/A
International Stock N/A N/A N/A N/A
Global Securities N/A N/A N/A N/A
</TABLE>
Other Total Returns
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn.
<PAGE>
Such average annual total return information for the Subaccounts is as follows:
<TABLE>
<CAPTION>
Period Since Inception
Subaccount 10/31/00 to 12/31/00
<S> <C>
Money Market N/A
Bond N/A
Balanced N/A
Bond N/A
Balanced N/A
Growth and Income Stock N/A
Capital Appreciation Stock N/A
Mid-Cap Stock N/A
Emerging Growth N/A
High Income N/A
International Stock N/A
Global Securities N/A
</TABLE>
The chart below corresponds to the chart on the previous page showing returns
for periods prior to the date the Variable Account commenced operations, except
that the chart below does not reflect the surrender charge.
Such average annual total return information for the Subaccounts is as follows:
<TABLE>
<CAPTION>
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/99 12/31/99 12/31/99 12/31/99
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Money Market 3.23% 3.49% 3.20% 4.01%
Bond -0.76% 5.00% 5.08% 6.33%
Balanced 12.79% 13.79% 9.84% 10.51%
Growth and Income Stock 16.18% 22.25% 14.51% 14.30%
Capital Appreciation Stock 23.35% 24.05% N/A 20.47%
Mid-Cap Stock N/A N/A N/A N/A
Emerging Growth N/A N/A N/A N/A
High Income N/A N/A N/A N/A
International Stock N/A N/A N/A N/A
Global Securities N/A N/A N/A N/A
</TABLE>
<PAGE>
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges for
the period.
ERV = The ending redeemable value of the hypothetical investment at the
end of the period.
P = A hypothetical single payment of $1,000.
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 annual Contract fee to be deducted annually at
the end of each Contract Year, from the Subaccounts based on the proportion of
the Variable Contract Value invested in each such Subaccount. For purposes of
reflecting the Contract fee in yield and total return quotations, the annual
charge is converted into a per-dollar per-day charge based on the average
Variable Contract Value in the Variable Account of all Contracts on the last day
of the period for which quotations are provided. The per-dollar per-day average
charge will then be adjusted to reflect the basis upon which the particular
quotation is calculated.
VARIABLE INCOME PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable income payments which follows
this section is based on an assumed investment rate of 3.5% per year. The
assumed investment rate is used merely in order to determine the first monthly
payment per thousand dollars of applied value. This rate does not bear any
relationship to the actual net investment experience of the Variable Account or
of any Subaccount.
Amount of Variable Income Payments
The amount of the first variable income payment to a Payee will depend on the
amount (i.e., the adjusted Contract Value, the Surrender Value, the death
benefit) applied to effect the variable income payment as of the Annuity Date,
the income payment option selected, and the age and sex (if, applicable) of the
Annuitant. The Contracts contain tables indicating the dollar amount of the
first income payment under each income payment option for each $1,000 applied at
various ages. These tables are based upon the Annuity 2000 Table (promulgated by
the Society of Actuaries) and an assumed investment rate of 3.5% per year.
The portion of the first monthly variable income payment derived from a
Subaccount is divided by the Income Unit value for that Subaccount (calculated
as of the date of the first monthly payment). The number of such units will
remain fixed during the annuity period, assuming the Payee makes no exchanges of
Income Units for Income Units of another Subaccount.
In any subsequent month, for any Contract, the dollar amount of the variable
income payment derived from each Subaccount is determined by multiplying the
number of Income Units of that Subaccount attributable to that Contract by the
value of such Income unit at the end of the Valuation Period immediately
preceding the date of such payment.
The Income Unit value will increase or decrease from one payment to the next in
proportion to the net investment return of the Subaccount or Subaccounts
supporting the variable income payments, less an adjustment to neutralize the
3.5% assumed investment rate referred to above. Therefore, the dollar amount of
income payments after the first will vary with the amount by which the net
investment return of the appropriate Subaccounts is greater or less than 3.5%
per year. For example, for a Contract using only one Subaccount to generate
variable income payments, if that Subaccount has a cumulative net investment
return of 5% over a one year period, the first income payment in the next year
will be approximately 1 1/2% greater than the payment on the same date in the
preceding year. If such net investment return is 1% over a one year period, the
first income payment in the next year will be approximately 2 1/2 percentage
points less than the payment on the same date in the preceding year. (See also
"Variable Income Payments" in the Prospectus.)
Income Unit Value
The value of an Income Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Variable Contract Value" in the
Prospectus.) The Income Unit value for each Subaccount's first Valuation Period
was set at $100. The Income Unit value for a Subaccount is calculated for each
subsequent Valuation Period by dividing (1) by (2), then multiplying this
quotient by (3) and then multiplying the result by (4), where:
(1) is the Accumulation Unit value for the current Valuation Period;
(2) is the Accumulation Unit value for the immediately preceding Valuation
Period;
(3) is the Income unit value for the immediately preceding Valuation
Period; and
(4) is a special factor designed to compensate for the assumed investment
rate of 3.5% built into the table used to compute the first variable
income payment.
The following illustrations show, by use of hypothetical examples, the method of
determining the Income unit value and the amount of several variable income
payments based on one Subaccount.
<TABLE>
<CAPTION>
Illustration of Calculation of Income Unit Value
<S> <C>
1. Accumulation Unit value for current Valuation Period 12.56
2. Accumulation Unit value for immediately preceding Valuation Period 12.55
3. Income Unit value for immediately preceding Valuation Period 103.41
4. Factor to compensate for the assumed investment rate of 3.5% 0.99990575
5. Income Unit value of current Valuation Period ((1) / (2)) x (3) x (4) 103.48
Illustration of Variable Income Payments
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit value $18.00
3. Adjusted Contract Value (1)x(2) $18,000.00
4. First monthly income payment per $1,000 of adjusted Contract Value $5.63
5. First monthly income payment (3)x(4) , 1,000 $101.34
6. Income Unit value $98.00
7. Number of Income Units (5) , (6) 1.034
8. Assume Income Unit value for second month equal to $99.70
9. Second monthly income payment (7)x(8) $103.09
10. Assume Income Uunit value for third month equal to $95.30
11. Third monthly income payment (7)x(10) $98.54
</TABLE>
LEGAL MATTERS
All matters relating to Iowa law pertaining to the Contracts, including the
validity of the Contracts and the Company's authority to issue the Contracts,
have been passed upon by Kevin S. Thompson, Associate Counsel of the Company.
EXPERTS
The financial statements of the Variable Annuity Account as of December 31,
1999, including a statement of assets and liabilities, a statement of operations
for the year then ended, a statement of changes in net assets for the years
ended December 31, 1999 and 1998, and accompanying notes are included in this
Statement of Additional Information. The 1999 financial statements have been
audited by PricewaterhouseCoopers LLP, independent accountants, as set forth in
their report herein, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The statutory basis statements of admitted assets, liabilities and surplus of
the Company as of December 31, 1999 and 1998, and the related statements of
operations, changes in unassigned surplus, and cash flows for the years ended
December 31, 1999, 1998, and 1997, are included in this Statement of Additional
Information. The 1999 financial statements have been audited by
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report herein, and are included herein in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The report of PricewaterhouseCoopers LLP covering the December 31, 1999,
financial statements contains an explanatory paragraph that states that the
Company prepared the financial statements using accounting practices prescribed
or permitted by the Iowa Department of Commerce, Insurance Division, which
practices differ from generally accepted accounting principles.
<PAGE>
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The audited financial statements of the Variable Account as of December 31,
1999, including a statement of assets and liabilities, a statement of operations
for the year then ended, a statement of changes in net assets for the years
ended December 31, 1999 and 1998, and accompanying notes, are included in this
Statement of Additional Information.
The Company's statutory basis statements of admitted assets, liabilities and
surplus as of December 31, 1999 and 1998, and the related statutory basis
statements of operations, changes in unassigned surplus, and cash flows for the
years ended December 31, 1999, 1998, and 1997, as well as the Independent
Accountant's Reports, which are included in this Statement of Additional
Information, should be considered only as bearing on the Company's ability to
meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Report on Audits of Financial Statements - December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities
December 31, 1999
Capital
Money Growth and Appreciation Mid-Cap
Market Bond Balanced Income Stock Stock Stock
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
Assets: ---------- ---------- ---------- ---------- ---------- ----------
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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities, continued
December 31, 1999
International Global Emerging High Developing
Stock Governments Growth Income Markets
Subaccount Subaccount Subaccount Subaccount Subaccount
Assets: ---------- ---------- ---------- ---------- ----------
Investments in T. Rowe Price
<S> <C> <C> <C> <C> <C>
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 Trust(SM):
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 Trust(SM):
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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Operations
Year Ended December 31, 1999
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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1999 and 1998
MONEY MARKET SUBACCOUNT BOND SUBACCOUNT
Operations: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
BALANCED SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
Years Ended December 31, 1999 and 1998
CAPITAL APPRECIATION STOCK SUBACCOUNT MID-CAP STOCK SUBACCOUNT
Operations: 1999 1998 1999*
---- ---- -----
<S> <C> <C> <C>
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
=========== =========== ==========
INTERNATIONAL STOCK SUBACCOUNT GLOBALGOVERNMENTS SUBACCOUNT
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>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
Years Ended December 31, 1999 and 1998
EMERGING GROWTH SUBACCOUNT HIGH INCOME SUBACCOUNT
Operations: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
=========== ========== ========== ==========
DEVELOPING MARKETS SUBACCOUNT
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.
<PAGE>
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
<PAGE>
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%.
<PAGE>
(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 12,088,415 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 18,544,722 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>
<PAGE>
(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
Unit value: 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
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
Capital Appreciation Mid-Cap International Global Governments
Stock Subaccount Stock Subaccount Stock Subaccount Subaccount
---------------- ---------------- ---------------- ----------
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
Unit value: 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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
<PAGE>
Independent Auditors' Report
The Board of Directors
CUNA Mutual Life Insurance Company and Contract Owners of CUNA Mutual Life
Variable Annuity Account:
We have audited the statements of changes in net assets and the condensed
financial information of Capital Appreciation Stock Subaccount, Growth and
Income Stock Subaccount, Balanced Subaccount, Bond Subaccount, Money Market
Subaccount, International Stock Subaccount, World Governments Subaccount,
Emerging Growth Subaccount, High Income Subaccount, and Developing Markets
Subaccount of CUNA Mutual Life Variable Annuity Account for the year ended
December 31, 1998. These financial statements and condensed financial
information are the responsibility of the Accounts' management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the results of
operations and condensed financial information of Capital Appreciation Stock
Subaccount, Growth and Income Stock Subaccount, Balanced Subaccount, Bond
Subaccount, Money Market Subaccount, International Stock Subaccount, World
Governments Subaccount, Emerging Growth Subaccount, High Income Subaccount, and
Developing Markets Subaccount of CUNA Mutual Life Variable Annuity Account for
the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Des Moines, Iowa
February 5, 1999
<PAGE>
CUNA Mutual Life Insurance Company
Report on Audits of Financial Statements -
Statutory Basis
For the Years Ended December 31, 1999, 1998 and 1997
<PAGE>
Report of Independent Accountants
The Board of Directors
CUNA Mutual Life Insurance Company:
We have audited the accompanying statutory statement of admitted assets,
liabilities and surplus of CUNA Mutual Life Insurance Company (the "Company") as
of December 31, 1999, and the related statutory statements of operations,
changes in surplus and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The statutory financial statements of the Company as of December 31,
1998, and for each of the two years in the period then ended were audited by
other independent accountants whose report dated March 19, 1999, expressed an
unqualified opinion on those statements as to conformity with the basis of
accounting described in Note 2. The other independent accountants also expressed
an adverse opinion with regard to accounting principles generally accepted in
the United States, as a result of the material differences between the basis of
accounting described in Note 2 and accounting principles generally accepted in
the United States.
We conducted our audit 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. 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 audit provides a reasonable basis for our
opinion.
As described in Note 2 to the financial statements, the Company prepared these
financial statements using accounting practices prescribed or permitted by the
Iowa Department of Commerce, Insurance Division, which practices differ from
accounting principles generally accepted in the United States. The effects on
the 1998 and 1997 financial statements of the variances between the statutory
basis of accounting and generally accepted accounting principles are also
described in Note 2. The effects of such variances on the 1999 financial
statements, although not reasonably determinable as of this date, are presumed
to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of the Company as of December 31, 1999, or the results of
its operations or its cash flows for the year then ended.
In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of the
Company as of December 31, 1999, and the results of its operations and its cash
flows for the year then ended, on the basis of accounting described in Note 2.
Our audit was conducted for the purpose of forming an opinion on the basic
statutory financial statements taken as a whole. The accompanying Supplemental
Schedule of Assets and Liabilities of the Company as of December 31, 1999, and
for the year then ended, is presented for purposes of additional analysis and is
not a required part of the basic statutory financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic statutory financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic statutory financial
statements taken as a whole.
March 31, 2000
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
<PAGE>
KPMG Report
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus
December 31, 1999 and 1998
(in thousands)
Admitted Assets 1999 1998
--------------- ---- ----
<S> <C> <C>
Investments:
Bonds and notes 1,509,325 $1,517,147
Stocks
Preferred 41 71
Common 82,086 77,036
Mortgage loans on real estate 325,603 306,037
Real estate 58,746 62,345
Policy loans 101,830 101,569
Other invested assets 18,311 16,799
Receivable for securities 7,250 19,886
Cash and short-term investments 87,518 74,740
-----------------------------------------------------------------------------------------------
Total cash and investments 2,190,710 2,175,630
Premiums receivable 16,274 15,147
Accrued investment income 26,680 28,005
Electronic data processing equipment
at cost, less accumulated depreciation
(1999 - 7,070; 1998 - 6,744)
1,610 2,230
Receivable from affiliates 12,169 8,121
Other assets 1,685 2,295
Separate accounts 2,611,459 1,830,012
-----------------------------------------------------------------------------------------------
Total admitted assets $4,860,587 $4,061,440
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Surplus 1999 1998
----------------------- ---- ----
<S> <C> <C>
Liabilities:
Policy reserves:
Life insurance and annuity contracts $1,649,573 $1,672,272
Accident and health insurance 14,106 12,611
Supplementary contracts without life contingencies 80,747 76,131
Policyholders' dividend accumulation 157,858 156,216
Policy and contract claims 10,373 9,850
Other policyholders' funds
Dividends payable to policyholders 25,190 24,450
Premiums and other deposit funds 3,573 4,194
Interest maintenance reserve 3,482 5,694
Payable to affiliates 17,959 13,525
Amounts held for others 18,952 18,923
Commissions, expenses, taxes, licenses and fees accrued 17,728 14,594
Asset valuation reserve 56,762 48,395
Loss contingency reserve for investments 5,800 5,800
Federal income taxes due and accrued 15,906 5,025
Note payable 1,300 1,300
Payable for securities 2,887 2,031
Other liabilities 577 83
Separate accounts 2,555,312 1,784,589
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities and Capital and Surplus
December 31, 1999 and 1998 (continued)
(in thousands)
Liabilities and Surplus 1999 1998
----------------------- ---- ----
<S> <C> <C>
Total liabilities 4,638,085 3,855,683
-----------------------------------------------------------------------------------------------
Surplus:
Unassigned surplus 222,502 205,757
-----------------------------------------------------------------------------------------------
Total surplus 222,502 205,757
-----------------------------------------------------------------------------------------------
Total liabilities and surplus $4,860,587 $4,061,440
-----------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income:
Premiums and other considerations:
Life and annuity contracts $515,917 $466,203 $414,724
Accident and health 21,892 18,292 14,886
Supplementary contracts and dividend accumulations 38,294 43,547 44,194
Other deposit funds 254,015 159,786 114,825
Net investment income 148,915 148,998 168,192
Reinsurance commissions 8,661 7,871 9,601
Separate accounts income and fees 22,723 15,892 9,907
Other income 6,362 5,760 5,840
-------------------------------------------------------------------------------------------------------------
Total income 1,016,779 866,349 782,169
-------------------------------------------------------------------------------------------------------------
Benefits and Expenses:
Death and annuity benefits 224,978 123,982 86,525
Surrender benefits 207,924 189,343 176,291
Payments on supplementary contracts without life
contingencies and dividend accumulations 41,862 47,431 44,747
Other benefits to policyholders and beneficiaries 20,494 18,244 17,509
Decrease in policy reserves - life and annuity
contracts and accident and health insurance (21,204) (76,839) (78,148)
Increase in liabilities for supplementary contracts
without life contingencies and policyholders' dividend
accumulations 6,271 5,687 6,954
Decrease in group annuity reserves (523) (225) (2)
Increase in benefit fund 902 870 3,975
General insurance expenses, including cost of collection
in excess of loading on due and deferred premiums and
other expenses 64,451 60,126 60,722
Insurance taxes, licenses, fees and commissions 59,186 49,305 43,956
Net transfers to separate accounts 367,835 408,384 369,788
-------------------------------------------------------------------------------------------------------------
Total benefits and expenses 972,176 826,308 732,317
-------------------------------------------------------------------------------------------------------------
Income before dividends to policyholders, federal
income taxes, and net realized capital gains 44,603 40,041 49,852
Dividends to policyholders 25,107 24,441 23,670
-------------------------------------------------------------------------------------------------------------
Income before federal income taxes and
net realized capital gains 19,496 15,600 26,182
Federal income taxes 7,802 4,436 12,208
-------------------------------------------------------------------------------------------------------------
Income before net realized capital gains 11,694 11,164 13,974
Net realized capital gains (losses), less federal income
taxes and transfers to the interest maintenance reserve 7,099 (317) 3,885
-------------------------------------------------------------------------------------------------------------
Net income $18,793 $10,847 $17,859
-------------------------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Changes in Capital and Surplus
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $205,757 $190,681 $163,304
-------------------------------------------------------------------------------------------------------------
Additions (deductions):
Net income 18,793 10,847 17,859
Change in net unrealized gains 5,569 10,070 6,752
Change in asset valuation reserve (8,367) (6,639) 257
Change in nonadmitted assets 749 543 285
Change in surplus of separate accounts 76 (64) 209
Change in separate account seed money (77) 64 (189)
Change in loss contingency reserve for investments -- 250 2,200
Other miscellaneous changes 2 5 4
-------------------------------------------------------------------------------------------------------------
Net additions 16,745 15,076 27,377
-------------------------------------------------------------------------------------------------------------
Balance at end of year $222,502 $205,757 $190,681
-------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash from operations:
Premiums and other considerations:
Life and annuity contracts $513,927 $463,537 $412,840
Accident and health 22,298 17,903 14,754
Supplementary contracts and dividend accumulations 38,294 43,546 44,194
Other deposit funds 254,015 159,786 114,826
Net investment income received 154,266 160,304 177,984
Reinsurance commissions 8,661 7,871 8,425
Separate accounts income and fees 22,712 15,858 9,885
Other income 5,282 4,786 4,931
---------------------------------------------------------------------------------------------
Total provided from operations 1,019,455 873,591 787,839
---------------------------------------------------------------------------------------------
Life and accident and health claims paid 50,226 46,128 42,004
Surrender benefits 207,924 189,343 176,291
Other benefits to policyholders paid 236,415 140,575 105,505
Commissions, other expenses and taxes paid, excluding
federal income taxes 119,767 107,589 105,834
Dividends to policyholders paid 24,380 23,756 23,161
Federal income taxes 1,194 (181) 14,558
Net transfers to separate accounts 378,471 419,156 383,942
Interest paid on defined benefit plans 902 1,338 3,507
Other 77 -- 189
---------------------------------------------------------------------------------------------
Total used in operations 1,019,356 927,704 854,991
---------------------------------------------------------------------------------------------
Net cash provided from (used in) operations 99 (54,113) (67,152)
---------------------------------------------------------------------------------------------
Cash from investments:
Proceeds from investments sold, matured or repaid:
Bonds and notes 826,675 296,732 285,135
Stocks 37,955 17,412 17,223
Mortgage loans on real estate 29,034 77,980 47,892
Other invested assets 1,091 562 969
Investment real estate 6,427 3,950 17,701
---------------------------------------------------------------------------------------------
Total investment proceeds 901,182 396,636 368,920
---------------------------------------------------------------------------------------------
Cost of investments acquired:
Bonds and notes 819,514 243,804 200,692
Stocks 26,969 24,923 29,724
Mortgage loans on real estate 48,571 17,956 4,704
Investment real estate 5,471 5,222 10,929
Other invested assets -- 10,461 --
Other cash used 3,165 109 4,098
---------------------------------------------------------------------------------------------
Total investments acquired 903,690 302,475 250,147
Increase (decrease) in policy loans and premium notes 262 500 (475)
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow (continued)
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
1999 1998 1997
<S> <C> <C> <C>
Net cash (used in) provided from investments (2,770) 93,661 119,248
---------------------------------------------------------------------------------------------
Cash from financing and miscellaneous sources -
Transfer of defined benefit pension plan assets -- -- (42,247)
Other cash provided (applied), net 15,449 7,932 (15,879)
---------------------------------------------------------------------------------------------
Net change in cash and short-term investments 12,778 47,480 (6,030)
Cash and short-term investments at beginning of year 74,740 27,260 33,290
---------------------------------------------------------------------------------------------
Cash and short-term investments at end of year $87,518 $74,740 $27,260
---------------------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Nature of Business
CUNA Mutual Life Insurance Company (the Company), a mutual life insurer
domiciled in Iowa, offers a full range of ordinary life and health
insurance products through face-to-face and direct response distribution
systems. The Company's operations are conducted in 49 states and the
District of Columbia. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed and undergoes periodic
examinations by those departments. The Company owns 50% of CIMCO, Inc., a
registered investment advisor.
(2) Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statutory financial statements have been prepared in
conformity with statutory accounting practices prescribed or permitted by
the Iowa Department of Commerce, Insurance Division (Insurance Department),
which differ in some respects from generally accepted accounting principles
in the United States (GAAP). The Company currently does not apply any
significant permitted accounting practices. The following summary
identifies the significant differences from GAAP:
-Acquisition costs such as commissions, premium taxes, and other items
are expensed in the year incurred, rather than deferred and amortized
over the periods benefited;
-Bonds are generally recorded at amortized cost rather than fair
value, and are not classified as either held to maturity securities,
trading securities, or available for sale securities;
-Majority owned subsidiaries are not consolidated, and are carried at
their underlying statutory book value;
-Policy reserves are based on statutory mortality and interest
requirements, without consideration for withdrawals, which may differ
from reserves established for GAAP based on reasonably conservative
estimates of mortality, interest and withdrawals;
-Derivative investment contract hedging fixed income securities are
carried on the statutory financial statements at the amortized cost,
if any, versus at the estimated fair value of the contract;
-Tax expense is recorded for amounts currently due or recoverable, and
deferred federal income taxes are not provided for unrealized gains or
losses and the temporary differences between the statutory book basis
and tax basis of assets and liabilities;
-"Nonadmitted assets" (principally, an airplane, prepaid expenses,
furniture, equipment and certain receivables) are excluded from the
statutory statements of admitted assets, liabilities and surplus
through a direct charge to unassigned surplus;
<PAGE>
-The asset valuation reserve (AVR), a statutory reserve established
for the purpose of stabilizing the surplus of the Company against
fluctuations in the market value of assets, is recorded as a liability
by a direct charge to unassigned surplus;
-The interest maintenance reserve (IMR) defers recognition of
interest-related gains and losses from the disposal of investment
securities and amortizes them into income over the remaining lives of
those securities versus immediate recognition;
-Reserves established for potential bond and mortgage loan defaults or
real estate impairments are recorded as liabilities by direct charges
to unassigned surplus;
-Pension cost is equal to the amount to be funded in accordance with
accepted actuarial cost methods rather than recognizing pension cost
over the period participants render service to the Company and
recording a liability currently for all unfunded costs;
-Certain postretirement benefits are accrued when employees become
vested for benefits rather than over the vesting period;
-Amounts due from reinsurers for their share of ceded reserves are
netted against liabilities rather than shown as assets; and
-Deposits, surrenders, and benefits on annuity contracts are recorded
as revenue and expense in the statutory statements of operations.
Under GAAP, amounts collected are credited directly to policyholder
account balances, and benefits and claims that are charged to expense
include benefits incurred in the period that are in excess of related
policyholder account balances.
<PAGE>
A reconciliation of net income and surplus between amounts presented herein
and amounts stated in conformity with GAAP as of December 31 are as follows
(000s omitted):
<TABLE>
<CAPTION>
=================================================== ===================== ====================
1998 1997
--------------------------------------------------- --------------------- --------------------
As Restated
Net income
<S> <C> <C>
Statutory net income $ 10,847 $ 17,859
Adjustments:
Federal income taxes (7,623) 1,982
Deferred policy acquisition costs 20,322 18,593
Insurance reserves (9,478) (10,765)
Investments 2,885 (414)
Pension benefits 1,135 1,175
Other 2,998 (1,983)
--------- ----------
GAAP net income $ 21,086 $ 26,447
========= =========
Surplus
Statutory surplus $205,756 $190,681
Adjustments:
Federal income taxes (22,119) 9,411
Deferred policy acquisition costs 158,795 142,710
Insurance reserves (84,984) (75,506)
Investments 76,853 37,409
Employee benefits (19,183) (20,072)
Dividends payable to policyholders 12,225 11,890
Other 8,590 3,723
--------------------------------------------------- --------------------- --------------------
GAAP surplus $335,933 $300,246
=================================================== ===================== ====================
</TABLE>
The effects of these variances on net income and surplus at December 31,
1999, although not determined as of this date, are presumed to be material.
Investments
Investments are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Bonds and notes and short-term investments
are generally carried at amortized cost, preferred stocks are stated at
cost, common stocks of unaffiliated companies at market value, and mortgage
loans at the unpaid balance, adjusted for unamortized premium or discount.
Bonds that the NAIC has determined are impaired in value are carried at the
lower of amortized cost or estimated fair value. Real estate acquired in
satisfaction of debt is valued at the lower of the carrying value of the
outstanding mortgage loans or fair value of the acquired real estate at
time of foreclosure. The adjusted basis is subsequently depreciated.
Investments in limited partnerships are included in other invested assets,
and investments in subsidiaries are carried at the Company's share of the
underlying net equity of the investment. Home office real estate is carried
at depreciated cost. Policy loans are stated at their aggregate unpaid
balances.
Prepayment assumptions for loan-backed bonds and structured securities were
obtained from industry survey values or internal estimates. These
assumptions are consistent with the current
<PAGE>
interest rate environment. The retrospective adjustment method is used to
value all such securities.
Realized gains and losses on the sale of investments are reported in income
based upon the first-in, first-out method. The net unrealized gains and
losses attributable to the adjustment from book value to carrying value for
all investments are reflected in surplus.
Provision for Depreciation
The provision for depreciation of real estate is computed on a
straight-line basis using estimated useful lives of the assets ranging from
five to fifty years. The Company depreciates the cost of electronic data
processing equipment and operating software on a straight-line basis over
no more than three years.
Policy Reserves
During 1988, the Company began using the 1980 Commissioners' Standard
Ordinary (C.S.O.) Mortality Table. Prior to the adoption of the 1980 C.S.O.
table, reserves were recorded using the 1958 C.S.O. table. The 1958 C.S.O.
table is used with interest rate assumptions ranging from 2.5% to 5.0%. The
1980 C.S.O. table is used with interest rate assumptions ranging from 3.5%
to 5.5%. With respect to older policies, the mortality table and interest
assumptions vary from the American Experience table with 2.5% to 4%
interest to the 1941 C.S.O. table with 2.5% interest. Approximately 24% of
the life reserves are calculated on a net level reserve basis and 76% on a
modified reserve basis. The effect of the use of a modified reserve basis
is to partially offset the effect of immediately expensing acquisition
costs by providing a policy reserve increase in the first policy year which
is less than the reserve increase in renewal years. Fixed deferred annuity
reserves are calculated using the continuous Commissioners' Annuity Reserve
Valuation Method (CARVM) with interest assumptions ranging from 2.5% to
7.5%.
Provision for Participating Policy Dividends
The provision for participating policy dividends is based on the board of
directors' determination and declaration of an equitable current dividend
plus a provision for such dividend expected to be paid in the following
year, rather than being provided for ratably over the premium-paying period
in accordance with dividend scales contemplated at the time the policies
were issued. Participating business comprised 99.9% of ordinary life
insurance in force and premiums received during 1999.
Statutory Valuation Reserves
The IMR is maintained as prescribed by the NAIC for the purpose of
stabilizing the surplus of the Company against gains and losses on sales of
fixed income investments that are primarily attributable to changing
interest rates. The interest-related gains and losses are deferred and
amortized into income over the remaining lives of the securities sold. The
AVR provides a reserve for fluctuations in the values of invested assets.
Changes in the AVR are charged or credited directly to unassigned surplus.
<PAGE>
Revenue Recognition
Term life and whole life insurance premiums are recognized as premium
income when due. Modal payment dates on the underlying term and whole life
policies can be monthly, quarterly, semi-annually or annually. Annuity and
other fund deposits are credited to revenue when received. Health insurance
premiums and premiums for employee benefit coverages are recognized as
income when due.
Pension Costs
Pension costs relating to the Company's pension plans are computed on the
basis of accepted actuarial methods. The annual contributions are computed
according to the aggregate funding method, which produces an annual normal
cost at each valuation date. Such annual normal cost provides for spreading
the excess of the present value of future benefits over the value of the
assets of the plan as a level percentage of payroll over the remaining
period of service of active employees on the valuation date based upon the
actuarial assumptions adopted. Gains and losses which arise on each
valuation date as the result of differences between the actual experience
and that expected by the actuarial assumptions are spread over the
remaining period of service of active employees. The Company's policy is to
fund pension costs accrued.
Benefit Plans
The Company provides medical and life insurance benefits for its retirees.
Retirees become eligible to participate in the medical and life coverage
based upon age and years of service. Retirees pay a portion of the medical
coverage premium based upon age. Retirees can utilize sick leave balances
to reduce required premium payments. There is no retiree premium for life
coverage. The Company records an accrual for the estimated costs of retiree
medical and life benefits over the period during which employees render the
service that qualifies them for benefits. Benefits are generally funded on
a pay-as-you-go basis.
Derivative Financial Instruments
The Company enters into derivative contracts, such as interest rate swaps
and caps and stock index futures to reduce interest rate exposure for
long-term assets, to exchange fixed rates for floating interest rates and
to increase or decrease exposure to selected segments of the bond and stock
markets. Hedges of fixed maturity securities are stated at amortized cost,
if any, and hedges of equity securities are stated at market value.
Net interest receivable or payable on those contracts that hedge risks
associated with interest rate fluctuations are recognized in the period
incurred as an adjustment to investment income. Realized capital gains and
losses on equity swaps are recognized in the period incurred as an
adjustment to net realized capital gains and losses. Unrealized capital
gains and losses on equity swaps are charged or credited to surplus.
Interest rate cap agreements entitle the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps is included in other invested assets and
amortized over the term of the agreements as an adjustment to investment
income.
<PAGE>
Reinsurance
Reinsurance premiums, commission expense reimbursements, and reserves
related to reinsured business ceded are accounted for on a basis consistent
with those used in accounting for the original policies issued and the
terms of the reinsurance contracts. Premiums and benefits ceded to other
companies have been reported as reductions of premium income and benefits
in the accompanying statements of operations.
Separate Accounts
Separate account assets are funds of separate account contractholders and
the Company, segregated into accounts with specific investment objectives.
The assets are generally carried at fair value. An offsetting liability is
maintained to the extent of contractholders' interests in the assets.
Appreciation or depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
policyholders' surplus. Contractholders' interests in net investment income
and realized and unrealized capital gains and losses on separate account
assets are not reflected in operations.
Risks and Uncertainties
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statutory statements of admitted assets,
liabilities and surplus and operations for the reporting period. Actual
results could differ from those estimates. Investment valuations and
insurance reserves are most affected by the use of estimates and
assumptions.
The Company is subject to the risk that interest rates will change and
cause a decrease in the value of its investments. To the extent that
fluctuations in interest rates cause the duration of assets and liabilities
to differ, the Company may have to sell assets prior to their maturity and
realize losses. Interest rate exposure for the investment portfolio is
managed through asset/liability management techniques that attempt to match
the duration of the assets with the estimated duration of the liabilities.
The Company also uses derivative financial instruments at December 31, 1999
and 1998, to manage interest rate exposures.
The Company is subject to the risk that issuers of securities or mortgages
owned by the Company will default, or other parties, including reinsurers
or mortgagors who owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment strategy and
by maintaining sound reinsurance and credit and collection policies.
The Company is subject to the risk that the legal or regulatory environment
in which the Company operates will change and create additional costs and
expenses not anticipated by the Company in pricing its products. In other
words, regulatory initiatives designed to reduce insurer profits or new
legal theories may create costs for the insurer beyond those recorded in
the statutory financial statements. The Company mitigates this risk by
operating in a geographically diverse area, thus reducing its exposure to
any single jurisdiction, closely monitoring the regulatory environment to
anticipate changes and by using underwriting and loss adjusting practices
that identify and minimize the potential adverse impact of this risk.
<PAGE>
The Company is also contingently liable for guaranty fund assessments
related to the insolvencies of unaffiliated insurance companies. Estimated
accruals of $1,300,000 for such assessments have been included in the
accompanying statutory financial statements for both 1999 and 1998.
Statutory Accounting Practices
The NAIC has developed a codification of Statements of Statutory Accounting
Principles (SSAPs) which, in accordance with the rules adopted by the
Insurance Department, will take effect January 1, 2001. The effect of
adopting the SSAPs will be reported as an adjustment to unassigned surplus
on the effective date. Although generally consistent with current statutory
practices, there are differences which could have a material impact on the
Company. The ultimate impact on unassigned surplus has not been determined.
(3) Disclosures About Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
About Fair Value of FinancialInstruments, requires disclosure of fair value
information about certain on and off-balance sheet financial instruments.
In cases where quoted market prices are not readily available, fair values
are based on estimates using present value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rates and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could cause these
estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in the immediate settlement of the
instruments. Certain financial instruments and all non-financial
instruments are excluded from disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company. In addition, the tax ramifications related to the
realization of unrealized gains and losses can have a significant effect on
fair value estimates and have not been taken into consideration.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for significant financial
instruments:
Cash, Short-term Investments and Accrued Investment Income
The carrying amounts reported in the statutory statements of admitted
assets, liabilities and surplus for these instruments approximate their
fair values.
Bonds and Stocks
Fair values for bonds and notes are based on quoted market prices, where
available. For bonds and notes not actively traded, fair values are
estimated using values obtained from independent pricing services or, in
the case of private placements, are estimated by discounting expected
future cash flows using a current market rate applicable to the yield,
credit quality and maturity of the investments. The fair values of
preferred and unaffiliated common stocks are based on quoted market prices.
The carrying values and fair value for these instruments is disclosed in
Note 4.
<PAGE>
Derivative Financial Instruments
The carrying value and fair value of the derivative financial instruments
are disclosed in Note 4.
Mortgage Loans on Real Estate
The fair value for mortgage loans is estimated using discounted cash flow
analysis with interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar characteristics
are aggregated for purposes of the calculations. Fair values for mortgages
in default are reported at the estimated fair value of the underlying
collateral. The carrying and fair values for these instruments are
disclosed in Note 4.
Separate Account Assets and Liabilities
The fair value of assets held in separate accounts is based on quoted
market prices. The fair value of liabilities related to separate accounts
is the amount payable on demand. The carrying amounts reported in these
accounts approximate their fair values.
Investment-type Contracts
The fair values of the Company's liabilities under investment-type
insurance contracts such as annuities are estimated using the cash
surrender value of the contracts. The carrying value and estimated fair
value of these liabilities were $1,048,621,000 and $1,044,371,000 for 1999
and $1,100,994,000 and $1,096,826,000 for 1998, respectively.
<PAGE>
(4) Investments
Bonds and Notes
The statement value, which principally represents amortized cost, gross
unrealized gains and losses and the estimated fair value of investments in
bonds and notes as of December 31, 1999 and 1998 are as follows (000s
omitted):
<TABLE>
<CAPTION>
======================================= =============== =============================== ===============
Statement Gross Unrealized Estimated
December 31, 1999 Value Gains Losses Fair Value
--------------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
United States governments
and agencies $ 98,891 325 (970) 98,246
Foreign government securities 18,425 352 (35) 18,742
Corporate securities 763,184 8,962 (15,533) 756,613
Mortgage-backed and other
structured securities 581,009 1,088 (24,074) 558,023
Other debt securities 47,816 495 (772) 47,539
--------------------------------------- --------------- --------------- --------------- ---------------
Total bonds and notes $ 1,509,325 $11,222 $(41,384) $1,479,163
======================================= =============== =============================== ===============
Statement Gross Unrealized Estimated
December 31, 1998 Value Gains Losses Fair Value
--------------------------------------- --------------- --------------- --------------- ---------------
United States governments
and agencies $ 56,037 $ 2,539 $ - $ 58,576
States and political subdivisions
Securities 38 - - 38
Foreign government securities 16,433 1,487 - 17,920
Corporate securities 885,831 52,988 (1,629) 937,190
Mortgage-backed and other
structured securities 524,821 9,794 (3,703) 530,912
Other debt securities 33,987 1,963 - 35,950
--------------------------------------- --------------- --------------- --------------- ---------------
Total bonds and notes $1,517,147 $68,771 $(5,332) $1,580,586
======================================= =============== =============== =============== ===============
</TABLE>
Cumulative unrealized losses of $158,000 and $409,000 at December 31, 1999
and 1998, respectively, have been recorded for bonds and notes that have
been determined by the NAIC to have an impairment in value. In addition to
the AVR provision, a loss contingency reserve of $1,700,000 has been
established at December 31, 1999 and 1998, for projected bond losses.
The statement value and estimated fair value of bonds and notes at December
31, 1999, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Because most mortgage-backed and other structured securities provide for
periodic payments throughout their lives, they are listed below in a
separate category.
<PAGE>
<TABLE>
<CAPTION>
=================================================== ====================== ======================
Statement Estimated
(000's omitted) Value Fair Value
--------------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Due in one year or less $ 44,936 $ 44,815
Due after one year through five years 559,458 557,268
Due after five years through ten years 228,070 225,330
Due after ten years 95,852 93,727
--------------------------------------------------- ---------------------- ----------------------
Total bonds 928,316 921,140
Mortgage-backed and other structured securities 581,009 558,023
--------------------------------------------------- ---------------------- ----------------------
Total bonds and notes $1,509,325 $1,479,163
=================================================== ====================== ======================
</TABLE>
Proceeds from sales of bonds and notes were $574,495,000, $66,335,000, and
$43,061,000 during 1999, 1998 and 1997, respectively. Gross gains of
$4,163,000, $1,735,000, and $589,000 and gross losses of $6,240,000,
$1,886,000, and $137,000 were realized on those sales in 1999, 1998 and
1997, respectively.
Stocks
The cost, gross unrealized gains and losses, and estimated fair value on
unaffiliated stocks are as follows (000s omitted):
<TABLE>
<CAPTION>
====================================== =============== =============================== ===============
Gross Unrealized Estimated
December 31, 1999 Cost Gains Losses Fair Value
-------------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common stock $ 55,959 $22,887 $(2,567) $76,279
Preferred stock 41 - (7) 34
====================================== =============== =============== =============== ===============
====================================== =============== =============================== ===============
Gross Unrealized Estimated
December 31, 1998 Cost Gains Losses Fair Value
-------------------------------------- --------------- --------------- --------------- ---------------
Common stock $55,551 $20,297 $(2,090) $73,758
Preferred stock 71 - (4) 67
====================================== =============== =============== =============== ===============
</TABLE>
Mortgage Loans on Real Estate
The Company's mortgage portfolio consists mainly of commercial mortgage
loans. The Company limits its concentrations of credit risk by diversifying
its mortgage loan portfolio so that loans made in any one state are not
greater than 20% (the largest State is Illinois with 14%) of the aggregate
mortgage loan portfolio balance and loans of no more than 2% of the
aggregate mortgage loan balance are made to any one borrower. In addition
to the AVR, a loss contingency reserve of $2,000,000 has been provided for
mortgage loans on real estate as of December 31, 1999 and 1998.
<PAGE>
The carrying value and estimated fair value of the mortgage loan portfolio
at December 31, 1999 and 1998 are as follows (000s omitted):
<TABLE>
<CAPTION>
=============== ====================== ======================
Carrying Estimated
Value Fair Value
--------------- ---------------------- ----------------------
<S> <C> <C>
1999 $ 325,603 $ 320,393
1998 306,037 328,591
=============== ====================== ======================
</TABLE>
Assets Designated
The statement value of assets designated for regulatory authorities and
held on deposit accordingly as of December 31 are as follows (000s
omitted):
<TABLE>
<CAPTION>
============================================= ====================== ======================
1999 1998
--------------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Bonds and notes and short-term investments $ 1,454,904 $1,527,512
Mortgage loans on real estate 325,603 306,037
Policy loans 101,831 101,569
--------------------------------------------- ---------------------- ----------------------
Total assets designated $ 1,882,338 $1,935,118
============================================= ====================== ======================
</TABLE>
Net Investment Income
Components of net investment income for the years ended December 31 are as
follows (000s omitted):
<TABLE>
<CAPTION>
====================================== =================== =================== ===================
1999 1998 1997
-------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Bonds and notes $112,788 $114,421 $123,395
Stocks 1,431 1,198 458
Mortgage loans on real estate 27,133 29,057 34,372
Investment real estate 9,486 9,244 10,158
Policy loans 6,609 6,664 6,571
Other invested assets 2,060 (2,244) 4,711
Short-term investments 4,604 2,175 2,689
Derivative financial instruments (3,190) (1,835) (1,445)
Other 328 2,911 11
-------------------------------------- ------------------- ------------------- -------------------
Gross investment income 161,249 161,591 180,920
Less investment expenses 12,334 12,593 12,728
-------------------------------------- ------------------- ------------------- -------------------
Net investment income $148,998 $168,192 $148,915
====================================== =================== =================== ===================
</TABLE>
The Company incurs expense in managing its investment portfolio and
producing investment income. These expenses, which include salaries,
brokerage fees, securities custodial fees, and real estate expenses are
deducted from investment income to determine the net investment income
reported in the financial statements.
<PAGE>
Realized Gains and Losses
Net realized investment gains and losses for the years ended December 31
are summarized as follows (000s omitted):
<TABLE>
<CAPTION>
============================================= ================= ================= =================
1999 1998 1997
--------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Bonds and notes $(1,730) $(1,645) $1,843
Stocks 10,872 3,832 2,853
Mortgage loans on real estate 5 2,965 1,030
Investment real estate 1,172 413 3,056
Derivative financial instruments - (108) -
Short-term investments and other
invested assets - - 12
--------------------------------------------- ----------------- ----------------- -----------------
10,319 5,457 8,794
Less:
Capital gains tax 4,273 2,566 3,057
Transfer to interest maintenance reserve (1,053) 3,208 1,852
--------------------------------------------- ----------------- ----------------- -----------------
Net realized investment gains (losses) $ 7,099 $ (317) $3,885
============================================= ================= ================= =================
</TABLE>
Derivative Financial Instruments
As of December 31, 1999, the Company had an interest rate swap agreement
with a major financial institution, having a notional amount of $100
million. Under the agreement, the Company receives interest payments at a
floating rate based on an interest rate index, which was 5.95% as of
December 31, 1999, and pays interest on the same notional amount at a fixed
rate, which was 6.96%. Amounts exchanged as a part of the interest rate
differential are accounted for as adjustments to investment income. This
interest rate swap agreement is scheduled to terminate in 2000. As of
December 31, 1999 and 1998, the fair value of the interest rate swap
agreement was ($386,000) and ($3,420,000), respectively. This negative fair
value represents the estimated amount the Company would have to pay to
cancel the contract or transfer it to another party.
The Company had three interest rate cap agreements with two major financial
institutions which terminated in 1999. The Company paid $2,280,000 for
these agreements. The agreements entitled the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps was amortized over the term of the
agreements.
The Company had a one-year total return swap agreement which terminated in
1999. The purpose was to increase exposure to the high yield bond market,
consistent with the Company's strategic asset allocation. The Company paid
interest on a notional amount of $25 million based on the one-month LIBOR
interest rate and received the total return of a high yield bond index on
the same notional amount. Net settlements were made quarterly. The position
was further hedged by ownership of a $25 million one-year bond that paid a
floating rate that was also based upon LIBOR. The net effect was the
equivalent of a $25 million investment in high-yield fixed maturities
without incurring the specific credit risks and transaction costs of
purchasing individual securities. The Company recognized ($930,000) and
$511,000 of income in 1999 and 1998, respectively, relating to this
derivative investment.
<PAGE>
During 1999, the Company invested in short Municipal Bond Index futures
with a face amount of approximately $14.1 million. The purpose of the
investment is to help reduce overall general account duration, consistent
with the Company's strategic asset allocation.
The Company is exposed to credit losses in the event of nonperformance by
the counter-party to its swap agreement. The Company anticipates, however,
that the counter-party will be able to fully satisfy its obligation under
the contract. The Company monitors the credit standing of the
counter-party. The futures contracts are traded on an exchange and have no
counter-party risk.
Real Estate
A summary of real estate held as of December 31 is as follows (000s
omitted):
<TABLE>
<CAPTION>
=================================== ================== ====================
1999 1998
----------------------------------- ------------------ --------------------
Cost:
<S> <C> <C>
Investment real estate $74,713 $83,537
Home office 16,390 16,064
----------------------------------- ------------------ --------------------
91,103 99,601
Less accumulated depreciation 32,357 37,256
----------------------------------- ------------------ --------------------
Total real estate $58,746 $62,345
=================================== ================== ====================
</TABLE>
Investment real estate and the home office buildings are being depreciated
using the straight-line basis over the useful lives of these assets. In
addition to the AVR provision, a loss contingency reserve of $2,100,000 at
December 31, 1999 and 1998, has been provided for potential impairments of
investment real estate.
Self-occupancy Rent
Under statutory accounting practices, the Company is required to include in
investment income and general insurance expense an amount representing
rental income for occupancy of its own buildings. Investment income
includes self-occupancy rental income of $1,077,181, $1,113,977 and
$1,092,600 in 1999, 1998 and 1997, respectively.
(5) Note Payable
As of December 31, 1999 and 1998, the Company has an outstanding liability
for borrowed money in the original amount of $1,300,000 as a result of a
non-recourse interest-free loan and grant made by the Community
Redevelopment Agency of the City of Los Angeles, California. The loan is
secured by real estate property with an appraisal value that exceeds the
loan principal balance. The loan will be amortized on a straight-line basis
over 240 months beginning in September 2001. The loan agreement includes a
grant provision forgiving 15% of the original balance in September 2001
upon the fulfillment of conditions specified in the loan agreement. It is
the Company's opinion that these conditions have been fully satisfied.
<PAGE>
(6) Related Party Transactions
The Company has entered into an agreement of permanent affiliation with
CUNA Mutual Insurance Society (CMIS), a mutual life insurer domiciled in
Wisconsin. The agreement is not a merger or consolidation, in that both
companies remain separate corporate entities, and both continue to be
separately owned and ultimately controlled by their respective policyholder
groups, who retain their voting rights without change. The agreement terms
include a provision for reinsurance of each company's individual life and
health business, joint development of business plans and distribution
systems for the sale of individual insurance and financial service products
within the credit union market, and a provision for the sharing of certain
resources and facilities. Expenses relating to shared resources and
facilities are allocated between the companies and their subsidiaries under
a jointly developed cost-sharing agreement. Expenses are allocated based on
specific identification or, if indeterminable, generally on the basis of
usage or benefit derived. These transactions give rise to intercompany
account balances, which are settled at least annually. Subsequent to each
year-end, the expense allocation process is subject to review by each
company. Based on these reviews, allocated expenses to each company may be
adjusted, if determined necessary.
CMLIC allocated expenses of $31,048,000 in 1999, $30,586,000 in 1998 and
$25,278,000 in 1997 to CMIS and its affiliates. CMIS allocated expenses to
the Company of $41,864,000 in 1999, $37,818,000 in 1998 and $34,096,000 in
1997.
Equity security investments on December 31, 1999 and 1998, include the
Company's wholly owned subsidiary, CMIA Wisconsin, Inc. and the 50%
ownership of CIMCO Inc. (CIMCO), a registered investment advisor. A wholly
owned subsidiary, Red Fox Motor Hotel Corporation, was dissolved in 1999
and the Company realized a gain of $213,000. The carrying value of the
subsidiary investments was $5,806,000 and $3,278,000 at December 31, 1999
and 1998, respectively.
The Company allocates expenses to its subsidiaries. These expenses, such as
salaries, rents, depreciation, and other operating expenses, represent the
subsidiaries' share of expenses and are allocated based on specific
identification or, if indeterminable, generally on the basis of usage or
benefit derived. These transactions give rise to intercompany account
balances, which are settled monthly.
The Company has a note receivable from CUNA Mutual Investment Corporation
(CMIC), a wholly owned subsidiary of CMIS, with a stated maturity date of
January 15, 2011. The effective yield on the date of the agreement in 1995
was 10.62%. The yield varies over the life of the note, as both the yield
and the payment stream are determined based on the pay-down activity of an
underlying notional pool of Federal National Mortgage Association
mortgages. The structure of this arrangement provides a hedge against the
Company's fixed maturity holdings, as the return varies inversely with the
return on the fixed maturity portfolio. The statement value of the note was
$3.4 million and $5.1 million at 1999 and 1998, respectively, and is
included in other invested assets. The Company recognized interest income
of $33,000 in 1999, $676,000 in 1998 and $1,074,000 in 1997 relating to
this note.
The Company is party to an agreement with CIMCO for investment advisory
services. CIMCO provides an investment program which complies with
policies, directives and guidelines
<PAGE>
established by the Company. For these services, the Company paid fees to
CIMCO totaling $2,350,000, $2,172,000, and $2,115,000 for 1999, 1998, and
1997, respectively.
CUNA Mutual created its own proprietary mutual funds entitled MEMBERS
Mutual Funds, which became available to the public in 1998. The carrying
value of the Company's investments in the funds was $12,533,000 and
$20,332,000 at 1999 and 1998, respectively, and is included with common
stocks.
(7) Separate Accounts
The Company has three separate account components. The first component is
used for the investment of premiums on flexible premium variable universal
life insurance policies and has ten subaccounts, which invest exclusively
in shares of a single corresponding fund. Nine of the funds - Capital
Appreciation Stock, Growth and Income Stock, Balanced (combination of
common stock and bond), Bond, Money Market, Treasury 2000, International
Stock, World Governments and Emerging Growth are offered as investment
options for the first generation of the Company's variable universal life
product. The tenth fund, Mid-Cap Stock, is offered as an investment option
for a second generation of the variable universal life product, while the
Treasury 2000 is not available for this generation. The second component is
used for the investment of group annuity premium deposits and has 10
subaccounts, which invest in all but the Treasury 2000 fund and Mid-Cap
Stock, plus High Income and Developing Markets subaccounts. The third
component is used for the investment of premiums received on variable
annuity contracts and has 11 subaccounts, which invest in all but the
Treasury 2000 fund, plus High Income and Developing Markets subaccounts.
(8) Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company's annuity contracts and
deposit liabilities as of December 31 are as follows (000s omitted):
<TABLE>
<CAPTION>
========================================================= ================== ===================
1999 1998
--------------------------------------------------------- ------------------ -------------------
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 923,751 $ 724,535
At book value less surrender charge of 5% or more 244,875 298,044
At market value 1,706,174 1,181,132
At book value, with minimal or no charge adjustment 699,544 714,170
Not subject to discretionary withdrawal 46,948 41,091
--------------------------------------------------------- ------------------ -------------------
3,621,292 2,958,972
Reinsurance ceded 378,290 395,706
--------------------------------------------------------- ------------------ -------------------
Total annuity reserves $3,243,002 $2,563,266
========================================================= ================== ===================
</TABLE>
(9) Reinsurance
In the ordinary course of doing business, the Company enters into
reinsurance agreements for the purpose of limiting its exposure to loss on
any one single insured or to diversify its risk and limit its overall
financial exposure. The Company remains contingently liable in the event
that a reinsurer is unable to meet the obligations assumed under the
reinsurance agreements.
<PAGE>
The effects of reinsurance on premium income and on claims benefit expenses
incurred are as follows (000s omitted):
<TABLE>
<CAPTION>
======================================== ================= ================= =================
1999 1998 1997
---------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Premium income:
Direct $506,538 $458,408 $423,146
Assumed from affiliates 56,846 48,355 39,644
Ceded to affiliates 20,875 18,369 30,118
Ceded to non-affiliates 4,700 3,899 3,062
---------------------------------------- ----------------- ----------------- -----------------
Premium income, net of reinsurance $537,809 $484,495 $429,610
---------------------------------------- ----------------- ----------------- -----------------
Benefit expenses:
Direct $233,737 $136,727 $100,413
Assumed from affiliates 17,591 13,875 11,266
Ceded to affiliates 10,857 12,278 11,141
Ceded to non-affiliates 677 1,389 1,360
---------------------------------------- ----------------- ----------------- -----------------
Benefit expenses, net of reinsurance $239,794 $136,935 $ 99,178
======================================== ================= ================= =================
</TABLE>
Policy reserves and claim liabilities are net of reinsurance balances of
(000s omitted) $453,448 and $464,940 at December 31, 1999 and 1998,
respectively.
(10) Liability for Claim Reserves
Activity in the liability for accident and health claim reserves, which is
included in the liabilities for policy reserves and policy and contract
claims in the accompanying statutory statements of admitted assets,
liabilities and surplus, is summarized as follows (000s omitted):
<TABLE>
<CAPTION>
================================================= ================== ==================
1999 1998
------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Balance as of January 1, net of reinsurance
recoverables of $820 and $679 $6,820 $5,589
Incurred related to:
Current year 9,238 5,960
Prior year (1,809) (464)
------------------------------------------------- ------------------ ------------------
Total incurred 7,429 5,496
------------------------------------------------- ------------------ ------------------
Paid related to:
Current year 3,543 2,766
Prior years 1,971 1,499
------------------------------------------------- ------------------ ------------------
Total paid 5,514 4,265
------------------------------------------------- ------------------ ------------------
Balance as of December 31, net of reinsurance
recoverables of $1,043 and $820 $8,735 $6,820
================================================= ================== ==================
</TABLE>
The liability for accident and health claim reserves for prior years
decreased by $1,809,000 in 1999 and $464,000 in 1998 due to experience
improvements as determined by the actuarial analyses of claim reserves.
<PAGE>
(11) Federal Income Taxes
The Company files a consolidated life/nonlife federal income tax return
with its subsidiaries. The Company's policy is to collect from or refund to
its subsidiaries the amount of taxes applicable to its operations had it
filed a separate return. Net federal income taxes payable or recoverable
reflect balances payable to or due from subsidiaries and the Internal
Revenue Service (IRS) as follows (000s omitted):
<TABLE>
<CAPTION>
========================= ====================== ======================
1999 1998
------------------------- ---------------------- ----------------------
<S> <C> <C>
Due from subsidiaries $ - $ -
Due (to)/from IRS (15,906) (5,025)
-------- --------
$(15,906) $(5,025)
========================= ====================== ======================
</TABLE>
The actual federal income tax expense differs from "expected" tax expense
computed by applying the statutory federal income tax rate of 35% to the
earnings before federal income taxes and net realized capital gains
(losses) for the following reasons (000s omitted):
<TABLE>
<CAPTION>
================================ ======================== ========================= ========================
1999 1998 1997
Amount Percent Amount Percent Amount Percent
-------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense
computed at federal
corporate tax rate $6,824 35.0% $5,460 35.0% $9,164 35.0%
Nontaxable
investment income (2,959) (15.2) (2,587) (16.6) (1,419) (5.4)
Mutual life insurance
company differential
earnings tax 3,276 16.8 3,450 22.1 4,200 16.0
Deferred acquisition costs 870 4.5 681 4.4 1,465 5.6
Book and tax reserve
change (527) (2.7) (1,569) (10.1) (670) (2.6)
Prior-year over/under
accrual (979) (5.0) (72) (0.5) (200) (.8)
General and
administrative expenses 1,208 6.2 (543) (3.5)
Other, net (170) (0.9) (619) (3.9) 857 3.3
Accrued policyholder
dividends 259 1.3 235 1.5 (1,189) (4.5)
-------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
Total federal income
tax expense $7,802 40.0% $4,436 28.4% $12,208 46.6%
================================ ============ =========== ============ ============ =========== ============
</TABLE>
The Company's consolidated federal income tax return has been examined by
the IRS through the year ending December 31, 1996. No material adjustments
resulted from the examination.
<PAGE>
(12) Benefit Plans
Post Retirement Benefit
The Company has two noncontributory defined benefit pension plans that
cover substantially all employees and agents who meet eligibility
requirements. Until December 12, 1997, the pension plans were funded
through a Deposit Administration contract issued by the Company. On
December 12, 1997, the Company transferred the plan assets from the Deposit
Administration contract to State Street Bank and Trust Company as trustee.
The amount transferred was $43,871,000 for the defined benefit pension
plans. Plan assets are now invested primarily in the Ultra Series Funds, an
affiliated investment, which serves as the investment vehicle for the
Company's variable insurance, annuity and pension products. The total
pension expense for 1999, 1998 and 1997 was $1,812,000, $2,614,000, and
$2,674,000, respectively.
The Company also provides certain medical and life insurance benefits for
retirees and their beneficiaries and covered dependents. The Company's
medical benefit plan provides subsidized coverage after retirement for
eligible full-time employees and agents, their spouses, and dependents, up
to age 65. Starting at age 65, retirees pay the full cost of their
coverage. Additionally, the Company provides group term life insurance for
its retirees, the face amount of which is based on the individual's salary
at retirement. The cost of post-retirement benefits other than pensions is
recognized by the Company during the employee's active working careers. The
Company adopted this accounting policy as of January 1, 1992, and is
amortizing the related initial impact over twenty years.
Financial information related to the plans is shown below (000s omitted):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1999 1998
----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Benefit obligation at December 31 $ (53,672) $ (47,912) $(8,738) $(8,616)
Fair value of plan assets at
December 31 62,312 54,074 - -
----------------- ----------------- ---------------- ---------------
Funded status 8,640 6,162 (8,738) (8,616)
Unrecognized prior service cost - - 20 32
Unrecognized net (gain) loss (15,541) (14,444) 749 1,704
Unrecognized net transition
(asset) liability (1,232) - 1,467 1,599
----------------- ----------------- ---------------- ---------------
(Accrued) prepaid benefit cost $ (8,133) $ (8,282) $(6,502) $(5,281)
================= ================= ================ ===============
Benefit cost $ 1,187 $ 744 $ 1,506 $ 1,577
================= ================= ================ ===============
Pension Benefits Other Benefits
1999 1998 1999 1998
------------------ ---------------- ---------------- ---------------
Discount rate 7.0% 7.0% 7.5% 7.5%
Expected return on plan assets 7.0% 7.0% 8.0% 8.0%
Rate of compensation increase 5.0% 5.0% 5.0% 5.0%
</TABLE>
<PAGE>
For measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.0%.
Defined Contribution Pension Plans
The Company has two defined contribution plans (401[k] and thrift) which
cover all regular full-time employees and agents who meet certain
eligibility requirements. Under the plans, the Company contributes an
amount equal to 50% of the employees' contributions, up to a maximum of 3%
of the employees' salaries. The Company contributions were approximately
$1,379,000, $1,212,000 and $998,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
Nonqualified Pension Plans
In addition to the defined benefit and defined contribution plans mentioned
above, the Company has a variety of deferred compensation and supplemental
benefit plans available to qualifying employees. Liabilities of these plans
totaled $2,079,000 and $1,929,000 as of December 31, 1999 and 1998,
respectively.
(13) Statutory Financial Data
Iowa has adopted Risk Based Capital (RBC) requirements for U. S. life
insurers. If prescribed levels of RBC are not maintained, certain actions
may be required on the part of the Company or its regulators. At December
31, 1999, the Total Adjusted Capital and Authorized Control Level - Risk
Based Capital for the Company were $291,858,000 and $49,642,000,
respectively. At this level of total adjusted capital, no action is
required.
(14) Commitments and Contingencies
The Company participates in a securities lending program. The Company's
policy requires that a minimum of 102% of the fair value of the loaned
securities must be fully collateralized with cash, U.S. Government
securities or irrevocable bank letters of credit. The security custodian
monitors the collateral position on a daily basis. At December 31, 1999 and
1998, the amortized cost of securities loaned by the Company totaled
$54,420,000 and $9,935,000 respectively.
The Company is liable for guaranty fund assessments related to certain
unaffiliated insurance companies that have become insolvent during 1999 and
prior. The Company includes a provision for all known assessments that will
be levied as well as an estimate of amounts (net of estimated future
premium tax recoveries) that it believes will be assessed in the future for
which the life insurance industry has estimated the cost to cover losses to
policyholders. The Company is also contingently liable for any future
guaranty fund assessments related to insolvencies of unaffiliated insurance
companies for which the life insurance industry has been unable to estimate
the cost to cover losses to policyholders.
The Company is a defendant in various legal actions arising out of the
conduct of its business. In the opinion of management, the ultimate
liability, if any, resulting from all such pending actions will not
materially affect the financial position or results of operations of the
Company.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule of Selected Financial Data
Year Ended December 31, 1999
(in thousands)
The following is a summary of certain financial data included in other exhibits
and schedules subjected to audit procedures by independent auditors and utilized
by actuaries in the determination of reserves.
<TABLE>
<CAPTION>
Investment income earned
<S> <C>
Government bonds 4,578
Other bonds (unaffiliated) 108,210
Bonds of affiliates --
Preferred stocks (unaffiliated) 4
Preferred stocks of affiliates --
Common stocks (unaffiliated) 1,427
Common stocks of affiliates --
Mortgage loans on real estate 27,133
Real estate 9,486
Premium notes, policy loans and liens 6,609
Collateral loans --
Cash on hand and on deposit 96
Short-term investments 4,604
Other invested assets 2,060
Derivative financial instruments (3,190)
Aggregate write-in for investment income 232
----
Gross investment income $161,249
========
Real estate owned - book value less encumbrances $ 58,746
=========
Mortgage loans - book value:
Farm mortgages $ --
Residential mortgages --
Commercial mortgages 325,603
--------
Total mortgage loans $ 325,603
=========
Mortgage loans by standing - book value:
Good standing $ 311,656
Good standing with restructured terms 8,057
Interest overdue more than three months,
not in foreclosure 5,890
Foreclosure in process --
Other long-term assets - statement value $ 14,962
Collateral loans --
Bonds and stocks of parents, subsidiaries and
affiliates - book value
Bonds --
Preferred stocks --
Common stocks 266
<PAGE>
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value
Due within one year or less 219,908
Over 1 year through 5 years 793,294
Over 5 years through 10 years 479,631
Over 10 years through 20 years 79,800
Over 20 years 19,162
-------
Total by maturity $1,591,795
==========
Bonds by class - statement value
Class 1 1,150,780
Class 2 333,423
Class 3 72,830
Class 4 25,792
Class 5 7,924
Class 6 1,046
------
Total by class $1,591,795
==========
Total bonds publicly traded $1,217,533
Total bonds privately placed 374,262
Preferred stocks - statement value 41
Common stocks - market value 82,086
Short-term investments - book value 82,470
Financial options owned - statement value 1,184
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 5,049
Life insurance in force:
Industrial $ --
Ordinary 11,701,626
Credit life --
Group life 2,809,157
Amount of accidental death insurance in force under
ordinary policies 446,238
Life insurance policies with disability provisions in force:
Industrial --
Ordinary 5,221,971
Credit life --
Group life 40
Supplementary contracts in force:
Ordinary - not involving life contingencies
Amount on deposit 52,856
Income payable 7,877
Ordinary - involving life contingencies
Income payable 4,144
<PAGE>
Group - not involving life contingencies
Amount of deposit --
Income payable --
Group - involving life contingencies
Income payable --
Annuities:
Ordinary
Immediate - amount of income payable 2,095
Deferred - fully paid - account balance 532,497
Deferred - not fully paid - account balance 1,905,531
Group
Immediate - amount of income payable --
Fully paid account payable --
Not fully paid - account balance --
Accident and health insurance - premiums in force:
Ordinary $ 2,767
Group 22,518
Credit --
Deposit funds and dividend accumulations:
Deposit funds - account balance 1,149
Dividend accumulations - account balance 158,377
Claim payments 1999:
Group accident and health - year ended December 31
1999 3,186
1998 1,385
1997 55
1996 30
1995 11
Prior 74
Other accident and health
1999 357
1998 164
1997 54
1996 54
1995 53
Prior 92
Other coverages that use developmental methods
To calculate claims reserves
1999 --
1998 --
1997 --
1996 --
1995 --
Prior --
See accompanying independent auditors' report.
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
1. Certified resolution of the board of directors of Century Life of
America (the "Company") establishing Century Variable Annuity Account
(the "Account"). Incorporated herein by reference to post-effective
amendment number 5 to Form N-4 registration statement (File No.
33-73738) filed with the Commission on April 16, 1996.
2. Not Applicable.
3.(a)Distribution Agreement Between CUNA Mutual Life Insurance Company and
CUNA Brokerage Services, Inc. for Variable Annuity Contracts dated
January 1, 1997. Incorporated herein by reference to post-effective
amendment number 6 to Form N-4 registration statement (File No.
33-73738) filed with the Commission on April 18, 1997.
(b) Servicing Agreement related to the Distribution Agreement between CUNA
Mutual Life Insurance Company and CUNA Brokerage Services, Inc. for
Variable Annuity Contracts dated January 1, 1997. Incorporated herein
by reference to post-effective amendment number 6 to Form N-4
registration statement (File No. 33-73738) filed with the Commission
on April 18, 1997.
4.(a)Variable Annuity Contract. Incorporated herein by reference to Form
N-4 initial registration statement (File No. 333-40304) filed with the
Commission on June 28, 2000.
(b) State Variations to Contract Form No. 2000-VAII.
(c) TSA Endorsement, Form No. 1659 (VANN). Incorporated herein by
reference to post-effective amendment number 7 to Form N-4
registration statement (File No. 33-73738) filed with the Commission
on April 17, 1998.
(d) IRA Endorsement, Form No. 3762 (VANN) 2000.
(e) Roth IRA Endorsement, Form No. 99-VAROTH. Incorporated herein by
reference to post-effective amendment number 9 to Form N-4
registration statement (File NO. 33-73738) filed with the Commission
on April 22, 1999.
(f) Executive Benefit Plan Endorsement, Form No. 98-EBP. Incorporated
herein by reference to post-effective amendment number 8 to Form N-4
registration statement (File No. 33-73738) filed with the Commission
on February 24, 1999.
(g) 5% Guarantee Death Benefit Rider. Incorporated herein by reference to
Form N-4 initial registration statement (File No. 333-40304) filed
with the Commission on June 28, 2000.
(h) 7 Year Anniversary Value Death Benefit Rider. Incorporated herein by
reference to Form N-4 initial registration statement (File No.
333-40304) filed with the Commission on June 28, 2000.
(i) Maximum Anniversary Value Death Benefit Rider. Incorporated herein by
reference to Form N-4 initial registration statement (File No.
333-40304) filed with the Commission on June 28, 2000.
(j) Waiver of Surrender Charge Endorsement. Incorporated herein by
reference to Form N-4 initial registration statement (File No.
333-40304) filed with the Commission on June 28, 2000.
5.(a) Variable Annuity Application.
(b) State Variations to Application Form No. 2000-VAIIAPP.
6.(a)Certificate of Existence of the Company. Incorporated herein by
reference to post-effective amendment number 5 to Form N-4
registration statement (File No. 33-73738) filed with the Commission
on April 16, 1996.
(b) Articles of Incorporation of the Company. Incorporated herein by
reference to post-effective amendment number 6 to Form N-4
registration statement (File No. 33-73738) filed with the Commission
on April 18, 1997.
(c) Bylaws of the Company. Incorporated herein by reference to
post-effective amendment number 6 to Form N-4 registration statement
(File No. 33-73738) filed with the Commission on April 18, 1997.
7. Not Applicable.
8. Not Applicable.
9. Opinion of Counsel from Kevin S. Thompson.
10. a. PricewaterhouseCoopers LLP Consent.
b. KPMG LLP Consent
11. Not applicable.
12. Not applicable.
13. Schedules of Performance Data Computation. Incorporated herein by reference
to post-effective amendment number 8 to Form N-4 registration statement
(File No. 33-73738) filed with the Commission on February 24, 1999.
14. Not applicable.
Power of Attorney.
<PAGE>
Item 25. Directors and Officers of the Company
Name Position/Office
Directors
James C. Barbre** Director
Robert W. Bream** Director
James L. Bryan** Director & Vice Chairman
Loretta M. Burd** Director & Treasurer
Ralph B. Canterbury** Director
Rudolf J. Hanley** Director
Jerald R. Hinrichs** Director
Michael B. Kitchen** Director
Robert T. Lynch** Director
Brian L. McDonnell** Director & Secretary
C. Alan Peppers** Director
Omer K. Reed** Director
Neil A. Springer** Director & Chairman of the Board
Farouk D.G. Wang** Director
Larry T. Wilson** Director
Executive Officers
Wayne A. Benson** CUNA Mutual Life Insurance Company*
Chief Officer - Sales
Michael S. Daubs** CUNA Mutual Life Insurance Company*
Chief Officer - Investments
James M. Greaney** CUNA Mutual Life Insurance Company*
Chief Officer - Corporate Services
Steven A. Haroldson CUNA Mutual Life Insurance Company
Chief Officer - Technology
Jeffrey D. Holley CUNA Mutual Life Insurance Company
Chief Officer - Finance
Michael B. Kitchen** CUNA Mutual Life Insurance Company*
President and Chief Executive Officer
Reid A. Koenig*** CUNA Mutual Life Insurance Company*
Chief Officer - Operations
Daniel E. Meylink, Sr.** CUNA Mutual Life Insurance Company*
Chief Officer - Member Services/Lending Services
Faye Patzner** CUNA Mutual Life Insurance Company*
Senior Vice President - General Counsel
* CUNA Mutual Life Insurance Company entered into a permanent affiliation
with the CUNA Mutual Insurance Society on July 1, 1990. Those persons
marked with an "*" hold identical titles with CUNA Mutual Insurance
Society. The most recent position has been given for those persons who have
held more than one position with CUNA Mutual Life Insurance Company or CUNA
Mutual Insurance Society during the last five year period.
** Principal place of business is 5910 Mineral Point Road, Madison, Wisconsin
53705.
*** Principal place of business is 2000 Heritage Way, Waverly, Iowa 50677.
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant. The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. The Company is a mutual life
insurance company and therefore is controlled by its contractowners.
Nonetheless, various companies and other entities are controlled by the Company
and may be considered to be under common control with the registrant or the
Company. Such other companies and entities, together with the identity of their
controlling persons (where applicable), are set forth on the following
organization charts.
In addition, as described in the prospectus under the caption "CUNA Mutual Life
Insurance Company," by virtue of an Agreement of Permanent Affiliation with CUNA
Mutual Insurance Society ("CUNA Mutual"), the Company and the registrant could
be considered to be affiliated persons of CUNA Mutual. Likewise, CUNA Mutual and
its affiliates, together with the identity of their controlling persons (where
applicable), are set forth on the following organization charts.
See organization charts on following page.
<PAGE>
CUNA Mutual Insurance Society
ORGANIZATIONAL CHART AS OF September 22, 2000
CUNA Mutual Insurance Society
Business: Life, Health & Disability Insurance
May 20, 1935*
State of domicile: Wisconsin
CUNA Mutual Insurance Society, either directly or indirectly is the controlling
company of the following wholly-owned subsidiaries:
1. CUNA Mutual Investment Corporation
Business: Holding Company
September 15, 1972*
State of domicile: Wisconsin
CUNA Mutual Investment Corporation is the owner of the following
subsidiaries:
a. CUMIS Insurance Society, Inc.
Business: Corporate Property/Casualty Insurance
May 23, 1960*
State of domicile: Wisconsin
CUMIS Insurance Society, Inc. is the 100% owner of the
following subsidiary:
(1) Credit Union Mutual Insurance Society New Zealand Ltd.
Business: Fidelity Bond Coverage
November l, 1990*
State of domicile: Wisconsin
b. CUNA Brokerage Services, Inc.
Business: Brokerage
July 19, 1985*
State of domicile: Wisconsin
c. CUNA Mutual General Agency of Texas, Inc.
Business: Managing General Agent
August 14, 1991*
State of domicile: Texas
d. MEMBERS Life Insurance Company
Business: Credit Disability/Life/Health
February 27, 1976*
State of domicile: Wisconsin
Formerly CUMIS Life & CUDIS
e. International Commons, Inc.
Business: Special Events
January 13, 1981*
State of domicile: Wisconsin
f. CUNA Mutual Mortgage Corporation
Business: Mortgage Servicing
November 20, 1978* Incorporated
December 1, 1995 Wholly Owned
State of domicile: Wisconsin
g. CUNA Mutual Insurance Agency, Inc.
Business: Leasing/Brokerage
March 1, 1974*
State of domicile: Wisconsin
Formerly CMCI Corporation
h. Stewart Associates Incorporated
Business: Credit Insurance
March 6, 1998
State of domicile: Wisconsin
i. CMG Mortgage Assurance Company
Business: Private Mortgage Insurance
April 14, 1994
State of domicile: California
j. CUNA Mutual Business Services, Inc.
Business: Financial Services
Incorporated April 22, 1974
Wholly owned March 6, 2000
State of domicile: Wisconsin
k. League Insurance Agency
Business: Insurance Agency
September 1, 2000
State of domicile: Wisconsin
CUNA Mutual Insurance Agency, Inc. is the 100% owner of the following
subsidiaries:
(1) CM Field Services, Inc.
Business: Serves Agency Field Staff
January 26,1994*
State of domicile: Wisconsin
(2) CUNA Mutual Insurance Agency of Alabama, Inc.
Business: Property & Casualty Agency
May 27, 1993
State of domicile: Alabama
(3) CUNA Mutual Insurance Agency of New Mexico, Inc.
Business: Brokerage of Corporate & Personal Lines
June 10, 1993*
State of domicile: New Mexico
(4) CUNA Mutual Insurance Agency of Hawaii, Inc.
Business: Property & Casualty Agency
June 10, 1993*
State of domicile: Hawaii
(5) CUNA Mutual Casualty Insurance Agency of Mississippi, Inc.
Business: Property & Casualty Agency
June 24, 1993 *
State of domicile: Mississippi
(6) CUNA Mutual Insurance Agency of Kentucky, Inc.
Business: Brokerage of Corporate & Personal Lines
October 5, 1994*
State of domicile: Kentucky
(7) CUNA Mutual Insurance Agency of Massachusetts, Inc.
Business: Brokerage of Corporate & Personal Lines
January 27, 1995*
State of domicile: Massachusetts
2. C.U.I.B.S. Pty. Ltd.
Business: Brokerage
February 18,1981*
Country of domicile: Australia
3. CUNA Caribbean Insurance Society Limited
Business: Life and Health
July 4, 1985*
Country of domicile: Trinidad and Tobago
4. CUNA Mutual Australia Holding Co. Pty. Ltd.
Business: Holding Company
September 17, 1999*
Country of domicile: Australia
CUNA Mutual Australia Holding Co. Pty. Ltd is the owner of the
following subsidiary:
(1) CUNA Mutual Life Australia, Ltd.
Business: Life insurance
October 15, 1999
Australia
5. CUNA Mutual Group, Limited
Business: Brokerage
May 27, 1998
Country of domicile: U.K.
* Dates shown are dates of acquisition, control or organization.
CUNA Mutual Insurance Society, either directly or through a wholly-owned
subsidiary, has a partial ownership interest in the following:
1. C. U. Family Insurance Services, Inc./Colorado
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Colleague Services Corporation
September 1, 1981
2. C. U. Insurance Services, Inc./Oregon
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Oregon Credit Union League
December 27, 1989
3. The CUMIS Group Limited
63.3% ownership by CUNA Mutual Insurance Society (as of 12-31 -96)
4. MEMBERS Capital Advisors, Inc. (f/k/a CIMCO Inc. (CIMCO))
50% ownership by CUNA Mutual Investment Corporation
50% ownership by CUNA Mutual Life Insurance Company
January 1, 1992
5. CUNA Mutual Insurance Agency of Ohio, Inc.
1% of value owned by Boris Natyshak (CUNA Mutual Employee) subject to
a voting trust agreement, Michael B. Kitchen as Voting Trustee.
99% of value-owned by CUNA Mutual Insurance Agency, Inc. Due to Ohio
regulations, CUNA Mutual Insurance Agency, Inc. holds no voting stock
in this corporation.
June 14, 1993
6. SECURITY Management Company, Ltd. (Hungary)
90% ownership by CUNA Mutual Insurance Society
10% ownership by: Federation of Savings Cooperatives
Savings Cooperative of Szoreg
Savings Cooperative of Szekkutas
(collectively called Hungarian Associates)
September 5, 1992
7. CMG Mortgage Insurance Company
50% ownership by CUNA Mutual Investment Corporation 50% ownership by
PMI Mortgage Insurance Co.
April 14, 1994
8. Cooperators Life Assurance Society Limited (Jamaica)
CUNA Mutual Insurance Society owns 122,500 shares
Jamaica Co-op Credit Union League owns 127,500 shares
May 10, 1990
9. CU Interchange Group, Inc.
Owned by CUNA Strategic Services, Inc. and various state league
organizations
December 15, 1993 - CUNA Mutual Investment Corporation purchased 100
shares stock
10. CMG Mortgage Reinsurance Company
50% ownership by CUNA Mutual Investment Corporation
50% ownership by PMI Insurance Company
July 26, 1999
11. Credit Union Service Corporation
Owned by Credit Union National Association, Inc. and 18 state league
organizations
March 29, 1996 - CUNA Mutual Investment Corporation purchased
1,300,000 shares of stock
12. finsure.australia limited
50% ownership by CUNA Mutual Australia Holding Company Pty. Limited
50% ownership by CUSCAL
October 15, 1999
13. CUNA Strategic Services, Inc.
CUNA Mutual Insurance Society owns 200.71 shares
December 31, 1999
Partnerships
1. CM CUSO Limited Partnership, a Washington Partnership
CUMIS Insurance Society, Inc. - General Partner
Credit Unions in Washington - Limited Partners
June 14, 1993
Limited Liability Companies
1. "Sofia LTD." (Ukraine)
99.96% CUNA Mutual Insurance Society
.04% CUMIS Insurance Society, Inc.
March 6, 1996
2. 'FORTRESS' (Ukraine)
80% "Sofia LTD."
19% The Ukrainian National Association of Savings and Credit Unions
1% Service Center by UNASCU
September 25, 1996
3. MEMBERS Development Company LLC
49 % CUNA Mutual Investment Corporation
51% Credit Unions & CUSOs
September 24, 1999
4. The Center for Credit Union Innovation LLC
33.3% ownership by CUNA Mutual Insurance Society
33.3% ownership by CUNA & Affiliates
33.3% ownership by American Association of Credit Union Leagues
January 5, 2000
Affiliated (Nonstock)
1. MEMBERS Prime Club, Inc.
August 8, 1978
2. CUNA Mutual Group Foundation, Inc.
July 5, 1967
3. CUNA Mutual Life Insurance Company
July 1, 1990
<PAGE>
CUNA Mutual Life Insurance Company
ORGANIZATIONAL CHART AS OF September 22, 2000
CUNA Mutual Life Insurance Company
An Iowa mutual life insurance company
Fiscal Year End: December 31
CUNA Mutual Life Insurance Company is the controlling company for the following
subsidiaries:
1. MEMBERS Capital Advisors, Inc. (f/k/a CIMCO Inc. (CIMCO))
An Iowa Business Act Corporation
50% ownership by CUNA Mutual Life Insurance Company
50% ownership by CUNA Mutual Investment Corporation
July 16, 1982
MEMBERS Capital Advisors, Inc. (f/k/a CIMCO Inc. (CIMCO)) is the
investment adviser of:
Ultra Series Fund
MEMBERS Mutual Funds
2. Plan America Program, Inc.
A Maine Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
March 9, 1995
3. CMIA Wisconsin Inc.
A Wisconsin Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
May 29, 1998
<PAGE>
Item 27. Number of Contractowners
As of October 1, 2000, there were 0 (zero) non-qualified contracts
outstanding and 0 (zero) qualified contracts outstanding.
<PAGE>
Item 28. Indemnification.
Section 10 of the Bylaws of the Company and Article VIII, Section 4 of
the Company's charter together provide for indemnification of officers
and directors of the Company against claims and liabilities that such
officers and/or directors become subject to by reason of having served
as an officer or director of the Company or any subsidiary or affiliate
of the Company. Such indemnification covers liability for all actions
alleged to have been taken, omitted, or neglected by such officers or
directors in the line of duty as an officer or director, except
liability arising out of an officer's or a director's willful
misconduct.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriter
(a) CUNA Brokerage is the registrant's principal underwriter and for
certain variable life insurance contracts issued by CUNA Mutual Life
Variable Account. CUNA Brokerage is also principal underwriter for the
Ultra Series Fund, an underlying Fund for the Company's variable
products. CUNA Brokerage is the distributor of MEMBERS Mutual Funds, a
group of open-end investment companies.
(b) Officers and Directors of CUNA Brokerage.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
Business Address With the Underwriter With Registrant
Joseph L. Bauer* Assistant Treasurer Finance Reporting Operations Manager
Wayne A. Benson* Director & President Chief Officer - Sales
Donna C. Blankenheim* Assistant Secretary Vice President, Corporate Secretary
Timothy L. Carlson** Assistant Treasurer None
Jan C. Doyle* Assistant Secretary Corporate Services Manager
Mark Eisenmann* Assistant Compliance Assistant Director - Insurance & Officer
Securities Market
David S. Emery* Vice President Division Vice President Credit Union Services
9500 Cleveland Ave. #210
Rancho Cucamonga, CA 91730
John C. Fritsche Assistant Vice President None
4455 LBJ Freeway
Suite 1108
Dallas, TX 75244
James E. Gowan* Director Vice President Relationship Management Sales
Tracy K. Gunderson* Assistant Secretary Recording Secretary/Technical Writer
Lawrence R. Halverson* Director None
John W. Henry* Director & Vice President Vice President
Michael G. Joneson* Secretary & Treasurer Forecasting & Planning Vice President, Finance
Daniel J. LaRocque* Vice President Vice President & Deputy General Counsel
Marcia L. Martin** Director & Assistant Vice Assistant Vice President
President Broker/Dealer Ops
Campbell D. McHugh* Compliance Officer Assistant Vice President, Associate General Counsel
Daniel E. Meylink, Sr.* Director Chief Officer - Members Services
Andrew C. Osen* Associate Compliance Assistant Counsel
Officer
Faye A. Patzner* Vice President - General Senior Vice President and General
Counsel Counsel
Brian L. Schroeder* Associate Compliance Assistant Director, Insurance & Officer Securities Market
Barbara L. Secor** Assistant Secretary None
Helen W. Wagabaza* Assistant Secretary Recording Secretary/Technical Writer
John W. Wiley* Associate Compliance Officer Assistant Director, Insurance Market Conduct
</TABLE>
* The principal business address of these persons is: 5910 Mineral Point
Road, Madison, Wisconsin 53705.
** The principal business address of these persons is: 2000 Heritage Way,
Waverly, Iowa 50677.
(c) CUNA Brokerage Services is the only principal underwriter. The
Distribution Agreement between the Company and CUNA Brokerage Services
and the Related Servicing Agreement between the Company and CUNA
Brokerage Services specify the services provided by each party. Those
contracts have been filed as exhibits under Item 24(b)(3). The Company
pays a dealer concession of approximately six percent, as more fully
described in Schedule A of the Servicing Agreement. The total dealer's
concession for the year ended December 31, 1999, was $23,489,271.00.
The contracts provide that the Company performs certain functions on
behalf of the distributor. For example, the Company sends confirmation
statements to Owners and the Company maintains payroll records for the
registered representatives. Some of the dealer concession is used to
reimburse the Company for the services it performs on behalf of the
distributor.
<PAGE>
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at 2000 Heritage Way, Waverly, Iowa
50677 or at MEMBERS Capital Advisors, Inc. (f/k/a CIMCO Inc. (CIMCO)) or CUNA
Mutual Group, both at 5910 Mineral Point Road, Madison, Wisconsin 53705.
<PAGE>
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
registration statement.
<PAGE>
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for as long as purchase payments under the Contracts offered
herein are being accepted.
(b) The registrant undertakes that it will include either (1) as
part of any application to purchase a Contract offered by the
Prospectus, a space that an applicant can check to request a
statement of additional information, or (2) a postcard or
similar written communication affixed to or included in the
Prospectus that the applicant can remove and send to the
Company for a statement of additional information.
(c) The registrant undertakes to deliver any statement of
additional information and any financial statements required
to be made available under this Form N-4 promptly upon written
or oral request to the Company at the address or phone number
listed in the Prospectus.
(d) The Company represents that in connection with its offering of
the Contracts as funding vehicles for retirement plans meeting
the requirements of Section 403(b) of the Internal Revenue
Code of 1986, it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter will be
complied with.
(e) The Company represents that the fees and charges deducted
under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by CUNA Mutual Life Insurance
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Annuity Account, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Madison, and State of Wisconsin, on the 1st day
of October, 2000.
CUNA Mutual Life Variable Annuity Account (Registrant)
By CUNA Mutual Life Insurance Company
By:/s/Michael B. Kitchen
Michael B. Kitchen
President
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Annuity Account, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Madison, and State of Wisconsin, on the 1st day
of October, 2000.
CUNA Mutual Life Insurance Company (Depositor)
By:/s/Michael B. Kitchen
Michael B. Kitchen
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE AND TITLE DATE SIGNATURE AND TITLE DATE
/s/James C. Barbre * /s/Robert T. Lynch *
-------------------------------------- --------------------------------------
James C. Barbre, Director Robert T. Lynch, Director
/s/Robert W. Bream * /s/Brian L. McDonnell *
-------------------------------------- --------------------------------------
Robert W. Bream, Director Brian L. McDonnell, Director
/s/James L. Bryan * /s/C. Alan Peppers *
-------------------------------------- --------------------------------------
James L. Bryan, Director C. Alan Peppers, Director
/s/Loretta M. Burd * /s/Omer K. Reed *
-------------------------------------- --------------------------------------
Loretta M. Burd, Director Omer K. Reed, Director
/s/Ralph B. Canterbury * /s/Neil A. Springer *
-------------------------------------- --------------------------------------
Ralph B. Canterbury, Director Neil A. Springer, Director
/s/Rudolf J. Hanley * /s/Kevin S. Thompson 10/01/00
-------------------------------------- --------------------------------------
Rudolf J. Hanley, Director Kevin S. Thompson,
Attorney-In-Fact
/s/Jerald R. Hinrichs * /s/Farouk D. G. Wang *
-------------------------------------- --------------------------------------
Jerald R. Hinrichs, Director Farouk D. G. Wang, Director
/s/Michael B. Kitchen 10/01/00 /s/Larry T. Wilson *
-------------------------------------- --------------------------------------
Michael B. Kitchen, Director Larry T. Wilson, Director
</TABLE>
*Pursuant to Powers of Attorney filed herewith
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following person in the capacity indicated on
the date indicated.
SIGNATURE AND TITLE DATE
/s/Michael G. Joneson 10/01/00
Michael G. Joneson
Vice President - Accounting & Financial Systems
/s/Jeffrey D. Holley 10/01/00
Jeffrey D. Holley
Chief Financial Officer
/s/Michael B. Kitchen 10/01/00
Michael B. Kitchen
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
4. (b) State Variations to Contract Form No. 2000-VAII.
(d) IRA Endorsement. (Form No. 3762(VANN)2000).
5. (a) Variable Annuity Application.
(b) State Variations to Application Form NO. 2000-VAIIAPP.
9. Opinion of Counsel from Kevin S. Thompson.
10. a. PricewaterhouseCoopers LLP Consent
b. KPMB LLP Consent
Powers of Attorney
<PAGE>
EXHIBIT 4.(b)
State Variations to Contract Form No. 2000-VAII
Flexible Premium Deferred Variable and Fixed Annuity Contract
State Variations
Contract Form No. 2000-VAII attached as Exhibit is a copy of the Contract
language used in the following states:
Arkansas Mississippi
Colorado Nevada
Delaware New Mexico
Iowa South Dakota
Kentucky Tennessee
Kansas Wyoming
The following state contract forms vary from the Form No. 2000-VAII as indicated
below:
2000-VAII(B) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Form 2000-VAII(B) is used in the
following states:
Alabama
Alaska
Indiana
Maine
Ohio
Rhode Island
Virginia
2000-VAII(AZ) - Changes the Right to Examine Provision on the cover page to add
the following statement: Upon written request, we will provide you with
information regarding the benefits and provisions of the contract. Form
2000-VAII(AZ) is used in the following state:
Arizona
2000-VAII(CA) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the third paragraph of the cover
page to read: The dollar amount of any income payments, death benefit and other
values provided by this contract will increase or decrease based on the
investment experience of the subaccounts selected. The Variable provisions are
described in Section 7. The minimum death benefit is described in Section 12.
In addition to changes above, the right to examine provision differs if contract
is issued to ages 60+....an important notice prints instead indicating the
contract can be returned during 30 days of contract issue date.
Section 7.4, Can the Variable Account be modified?, is changed to add a
paragraph indicating that the investment policy of a subaccount may not be
changed unless the change is approved, if required, by the Commissioner of the
State of Iowa and a statement of such approval is filed, if required, with the
insurance department of the state in which the contract is delivered. Form
2000-VAII(CA) is used in the following state:
California
2000-VAII(CT) - Changes the right to examine provision on the cover page to add
language for return of the contract for a refund of purchase payments during the
first 10 days if cancellation is made prior to the actual delivery of the
contract. Changes Section 3.2, When does this contract become incontestable?, to
delete "in the absence of fraud". Form 2000-VAII(CT) is used in the following
state:
Connecticut
2000-VAII(DC) - Changes Section 3.5, What premium expense charges may be
deducted?, to delete the second paragraph in its entirety. Form 2000-VAII(DC) is
used in the following:
District of Columbia
2000-VAII(FL) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Adds the following statement to the
cover page: If you have a question, complaint, or need information concerning
your contract, call 1-800-798-5500. In Section 2.1, What are the most commonly
used terms and what do they mean?, define "dca fixed period" to be a dollar cost
averaging fixed period where monthly transfers are required as described in
Sections 7.2. and 8.1. In Section 3.2, When does this contract become
incontestable?, add that the contract may be incontestable from its contract
issue date or the reinstatement date. In Section 3.7, Can we modify the
contract?, delete item b.): necessary to assure continued qualification of the
contract under the code or other federal or state laws relating to retirement
annuities or variable annuity contracts. In Section 9.2, How is your fixed
contract value determined?, add a table of values per $1,000 allocated to a
fixed period. In Section 10.6, change the second sentence of the second
paragraph and add a third sentence to read: If payment is postponed for more
than 29 days, we will pay interest at the effective annual rate required by
state law for the period of postponement. In no event will the effective annual
rate be less than 3.50%. In Section 12., add a paragraph at the end of the
section to read: If lump sum payment is requested, the death benefit will
include interest from the date of settlement. We will determine the interest
rate each year, but it is guaranteed to be not less than that required by state
law. In Section 13.1, add paragraph indicating the contract may be reinstated
within one year after it terminates and list requirements of that request. Form
2000-VAII(FL) is used in the following state:
Florida
2000-VAII(HI) - Changes the right to examine provision to refund purchase
payments instead of experience. Form 2000-VAII(HI) is used in the following
state:
Hawaii
2000-VAII(ID) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine provision
to refund purchase payments, not experience, for 20 days initial and replacement
situations. Changes Section 10.6, Are there any restrictions on payment of
surrender, partial withdrawals or loans?, in the second sentence, to read: If
payment is postponed for more than 29 days, we will pay interest at the
effective annual rate specified in Idaho Code, Section 28-22-104(2) for the
period of postponement. Form 2000-VAII(ID) is used in the following state:
Idaho
2000-VAII(LA) - Changes the right to examine provision on the cover to refund
purchase payments instead of experience. Form 2000-VAII(LA) is used in the
following state:
Louisiana
2000-VAII(MI-S) - Sex-distinct version. Changes the cover page to add a
countersignature by a duly licensed resident agent signature line. Changes
Section 1, Data Page, to remove "Life Income Rates". Changes Section 3.3, What
if the annuitant's date of birth or gender has been misstated? to delete the
second sentence giving reference to Type A life income rates such that this
provision reads: If the annuitant's date of birth or gender has been misstated,
we will adjust the payments under this contract, based on the correct date of
birth or gender. Any underpayment will be added to the next payment. Any
overpayment will be subtracted from future payments. Changes Section 15.3, What
are the requirements for choosing an income payment option?, fourth paragraph to
delete the second sentence and revise the first to read: we may require due
proof of the age and gender of any payee who is to receive a life income.
Changes Section 17, Option Tables, to delete Type A and Type B language. Remove
the Type B uni-sex tables in their entirety. Form 2000-VAII(MI-S) is used in the
following state:
Michigan
2000-VAII(MI-U) - Uni-sex version. Changes the cover page to add a
countersignature by a duly licensed resident agent signature line. Changes
Section 1, Data Page, to remove "Life Income Rates". ". Changes the question of
Section 3.3, What if the annuitant's date of birth has been misstated?, to
remove the word "gender", giving reference to only birth. Revise this section to
delete the second sentence giving reference to gender and Type A life income
rates such that this provision reads: If the annuitant's date of birth has been
misstated, we will adjust the payments under this contract, based on the correct
date of birth. Any underpayment will be added to the next payment. Any
overpayment will be subtracted from future payments. Changes Section 15.3, What
are the requirements for choosing an income payment option?, fourth paragraph to
delete the second sentence. Changes Section 17, Option Tables, to delete Type A
and Type B language. Remove the Type A sex distinct tables in their entirety.
Form 2000-VAII(MI-U) is used in the following state:
Michigan
2000-VAII(MO) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine period to
refund purchase payments and not experience. Form 2000-VAII(MO) will be used in
the following state:]
Missouri
2000-VAII(NC) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine provision
to return purchase payments and to limit amount of days on replacements to 20.
Form 2000-VAII(NC) is used in the following state:
North Carolina
2000-VAII(ND) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine period
initial amount to days to 20 from 10. Form 2000-VAII(ND) is used in the
following state:
North Dakota
2000-VAII(NE) - Changes the right to examine period to return purchase payments
instead of experience. Form 2000-VAII(NE) is used in the following state:
Nebraska
2000-VAII(NH) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes Section 3.1, What is the entire
contract?, to delete the phrase "if attached to it" when referring to the
application when constituting the entire contract Form 2000-VAII(NH) is used in
the following state:
New Hampshire
2000-VAII(OK) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine provision
on the cover page to return purchase payments instead of experience and only for
20 days, not 30, in replacement situations. Changes Section 3.2, When does this
contract become incontestable? to delete "in the absence of fraud" language.
Form 2000-VAII(OK) is used in the following state:
Oklahoma
2000-VAII(SC) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. Changes the right to examine provision
to refund purchase payments, instead of experience and only for 20 days, not 30
in replacement situations. Add Flexible Premium Deferred Variable and Fixed
Annuity to the general description on the cover page. Changes Section 3.2, When
does this contract become incontestable?, to delete "in the absence of fraud".
In Section 3.4, What is the annual contract fee?, delete language that the
contract fee will be deducted pro-rata from any fixed amount contract
value....(it will only be deducted from the contract value held in the
subaccounts). Form 2000-VAII(SC) is used in the following state:
South Carolina
2000-VAII(UT) - Changes the front and back cover pages and the title of the data
page to delete "and fixed" from the title such that it reads Flexible Premium
Deferred Variable Annuity. Changes the right to examine provision to refund
purchase payments, not experience, and for only 20 days, not 30, in replacement
situations. Form 2000-VAII(UT) is used in the following state:
Utah
2000-VAII(TX) - Changes the cover page to delete the 4th paragraph regarding
market value adjustment. Also delete market value adjustment language throughout
the contact. Add another paragraph to the cover page which reads: In the event
we are unable to fulfill our contractual obligation under this contract, the
portion of your contract value in the subaccounts is not protected by an
insurance guaranty fund or other solvency protection agreement. Change Section
1, Data Page, to delete the 3,5,7, and 10 year fixed periods. Section 2.1, What
are the most commonly used terms and what do they mean?, change the definition
of fixed period to read a choice under the fixed account option with a specific
number of months (instead of years) for which we agree to credit a particular
effective annual interest rate. In Section 3.5, What premium expense charges may
be deducted?, delete the second paragraph in its entirety. Section 7.2 is
revised in the fourth sentence of the first paragraph to delete the phrase "when
the number of years in the fixed period selected has elapsed, and add that it
will end on the "expiration date". Form 2000-VAII(TX) is used in the following
state:
Texas
2000-VAII(WI) - Changes the right to examine provision for replacement
situations to refund purchase payments during 20 days: Changes Section 13.2,
Will dividends be paid?, in the second paragraph, to revise item a.) to read
that owner may request we apply any dividend to the subaccounts as they
designate, instead of in the same proportion as set for purchase payments. .
Form 2000-VAII(WI) is used in the following state
Wisconsin
2000-VAII(WV) - Changes the cover page to add a countersignature by a duly
licensed resident agent signature line. In Section 10.6, Are there any
restrictions on payment of surrender, partial withdrawals or loans? change the
language to read we may postpone the payment of surrender, partial withdrawal,
or loan for up to 30 days (not six months). Also delete the last sentence of
this paragraph.
<PAGE>
EXHIBIT 4.(d)
IRA Endorsement For:
Flexible Premium Deferred Variable and Fixed Annuity
Flexible Premium Deferred Variable Annuity
3762(VANN)2000
Contract No. __________________ Endorsement Effective Date_______________
Owner__________________________ City & State_____________________________
The contract is to be qualified as an Individual Retirement Annuity under
Section ss.408 of the Internal Revenue Code (Code). The terms and conditions
listed below will then form a part of the owner's contract effective as of the
date listed above. In any conflict between the terms of this Section and all or
any of the other Sections of the contract, this Section will govern.
--------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ANNUITY
--------------------------------------------------------------------------------
EXCLUSIVITY, NONFORFEITABLE, NONTRANSFERABLE AND NONASSIGNABLE
This contract is for the exclusive benefit of the owner or his or her
beneficiaries. The interest of the owner is nonforfeitable. The owner must be
the annuitant. A co-owner may not be designated. This contract is not
transferable except to the Company on surrender or settlement. It may not be
pledged as security for any purpose.
PURCHASE PAYMENTS
A. Maximum Payment. The maximum payment under this contract for any tax year
will be no more than the lesser of:
1. $2,000 as an aggregate amount of the purchase payments for this
contract and contributions to all other individual retirement
arrangements that the owner has or may create; or
2. 100 percent of compensation. Compensation means wages, salaries,
professional fees, or other amounts derived from or received for
personal service actually rendered (including, but not limited to,
commissions paid sales personnel, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums,
tips and bonuses) and includes earned income, as defined in Code
ss.401(c)(2) (reduced by the deduction the self-employed individual
takes for contributions made to a Keogh plan). For purposes of this
definition,ss.401(c)(2) will be applied as if the term trade or
business for purposes ofss.1402 included service described in
subsection (c)(6). Compensation does not include amounts derived from
or received as earnings or profits from property (including, but not
limited to, interest and dividends) or amounts not includible in gross
income. Compensation also does not include any amount received as a
pension or annuity or as deferred compensation. The term
"compensation" shall include any amount includible in the individual's
gross income under Codess.71 with respect to a divorce or separation
instrument described in subparagraph (A) of Codess.71(b)(2).
3. The above maximum purchase payment limitations do not apply to:
a. a transfer, direct rollover, rollover contributions as permitted
by Codess.402(c), 403(a)(4), 403(b)(8) or 408(d)(3); or b. a
transfer to the owner of a distribution from a qualified employer
plan from a former spouse under a divorce decree or written
instrument incidental to such divorce.
4. No contributions will be accepted under a SIMPLE IRA Plan established
by any employer pursuant to section 408(p). Also, no transfer or
rollover of contributions made by a particular employer under its
SIMPLE IRA Plan will be accepted prior to the end of the 2 year period
starting with the date the owner first participated in that employer's
SIMPLE IRA Plan.
B. SEP Contributions. The above maximum payment limitations do not apply to a
contribution made in accordance with the terms of a Simplified Employee
Pension Plan (SEP) as described in Codess.408(k) as amended.
C. Refund of Excess Contributions. If the purchase payment received is in
excess of the maximum payment: (1) the excess amount is subject to an
excise tax for the year of the excess and for each year thereafter until
corrected; or (2) the owner may receive a refund of the excess amount plus
any investment gain resulting from allocation to the subaccount(s). Any
investment loss resulting from the allocation of the excess amount to the
subaccount(s) will be deducted proportionately from the remaining
subaccount value(s) and fixed amount(s).
D. Refund of Purchase Payments. Any refund of purchase payments (other than
those attributable to excess contributions) will be applied, before the
close of the calendar year following the year of the refund, toward the
payment of future purchase payments or the purchase of additional benefits.
E. Payment. Payment under this contract must be in cash.
DISTRIBUTIONS
A. Premature Distributions. Any distribution will be reported to the IRS as a
premature distribution and may be subject to an excise tax in addition to
income tax unless the Company is notified of one of the following
circumstances:
1. the distribution is a part of a series of substantially equal periodic
payments made no less frequently than annually over the life
expectancy of the owner or joint life expectancies of the owner and
the named beneficiary(ies).
2. the owner is over age 591/2;
3. distribution occurs following the disability (within the meaning
ofss.72(m)(7) of the Code) of the owner;
4. the distribution to the beneficiary(ies) occurs following the death of
the owner; or
5. the distribution occurs: a. to pay health insurance premiums, if the
owner receives state or federal unemployment compensation for at least
twelve (12) consecutive weeks; or b. to pay medical bills in excess of
7 1/2% of the owner's adjusted gross income.
B. Payments to Owner. Payments of the owner's entire interest will be made to
the owner under this contract on or before April 1 of the year following
the calendar year in which the owner attains the age of 70 1/2as follows:
1. as a single lump sum;
2. in equal or substantially equal payments: over the lifetime of the
owner; over the lives of the owner and his or her beneficiary(ies);
over a specified period that may not be longer than the owner's life
expectancy; or over a specified period that may not be longer than the
joint life and last survivor expectancy of the owner and his or her
named beneficiary(ies).
Periodic payments must be made in intervals of no longer than one
year. In addition, payments must be either nonincreasing or they may
increase only as provided in Q&A F-3 of ss.1.401(a)(9)-1 of the
Proposed Income Tax Regulations.
Payment shall also be made to the owner at any time the owner requests it in
order to pay health insurance premiums (if the owner receives state or federal
unemployment compensation for at least twelve (12) consecutive weeks), or to pay
medical bills in excess of 7 1/2% of the owner's adjusted gross income. However,
any applicable charges outlined in the contract will apply to the amount
withdrawn to the extent allowed by federal regulation.
All distributions made hereunder shall be made in accordance with the
requirement of ss.401(a)(9) of the Code including incidental death
benefit requirements of ss.401(a)(9)(G) of the Code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement of
ss.1.401(a)(9)-2 of the Proposed Income Tax Regulations.
C. Payments to Beneficiary(ies). If the owner dies, payments will be
distributed as follows:
1. If death occurs on or after the date income payments have begun; the
remaining payments will be distributed at least as rapidly as under
the payment method used prior to death.
2. If the death occurs before income payments have begun; the death
benefit must be distributed as elected. However, if an election has
not been made; the beneficiary(ies) has the following options for
distribution:
a. the full amount to be paid by December 31st of the year
containing the fifth anniversary of the owner's death; or
b. in equal or substantially equal payments over the life or life
expectancy of the beneficiary(ies). Such payments must start by
December 31st of the year following the owner's death. However,
for a spouse beneficiary, payments are not required to begin
until December 31st of the year the owner would have turned 70
1/2. A spouse beneficiary may also roll all or a portion of the
death benefit to their own individual retirement annuity.
3. If the designated beneficiary is the individual's surviving spouse,
the spouse may treat the contract as his or her own IRA. This election
will be deemed to have been made if such surviving spouse makes a
regular IRA contribution to the contract, makes a rollover to or from
such contract, or fails to elect any of the above provisions.
Payment under this Section is considered to have begun if payments are
made because:
a. an individual reaches his or her required beginning date; or
b. if prior to the required beginning date; payments have begun
under an irrevocable income payment option acceptable under and
over a period permitted byss.1.401(a)(9) of the Regulations.
D. Other Distribution Provisions.
1. The return multiplies contained in Tables V and VI of 1.72-9 of the
Income Tax Regulations are used to calculate: Life expectancy; and
joint and last survivor expectancy.
The life expectancy of the owner or spouse beneficiary will be
recalculated annually for the purposes of payment, unless otherwise
elected by: the owner, prior to payments beginning; or by the spouse
beneficiary if the owner dies before payments have begun.
If election has been made not to recalculate life expectancy annually;
such election is irrevocable and will apply to all subsequent years.
The life expectancy of a non-spouse beneficiary(ies) may not be
recalculated. Instead, life expectancy will be based on the age(s) of
the beneficiary(ies) in the year the owner attains age 70 1/2.
Payments for subsequent years will be based on such life expectancy;
reduced by one year which has elapsed since the calendar year life
expectancy was first calculated.
2. The payment amounts will be no less than the amount obtained by
dividing the owner's entire interest by: the life expectancy of the
owner or beneficiary; or the joint and last survivor expectancy of the
owner and spouse beneficiary.
3. For a non-spouse beneficiary; the payment amount will be no less than
the amount obtained by dividing the owner's entire interest by the
lesser of: the owner's life expectancy; or a divisor obtained from the
tables available inss.1.401(a)(9)-2.
4. The beneficiary(ies) may increase the frequency or amount of payments;
if the payments are for a period
certain.
5. If there are two or more individual retirement accounts or annuities
(IRA's); minimum distribution requirements of the Code may be
satisfied out of one of the IRA's. This is possible by receiving the
combined required minimum distribution amounts out of one IRA. This is
the alternative method described in Notice 88-38, 1988-1 C.B. 524.
GENERAL PROVISIONS
A. Other Limitations.
1. No amount of life insurance is provided under this contract.
2. Commingling of funds of this contract with any other annuity is
prohibited.
3. The only values which may be held under this contract are those for
the separate interest of the owner.
4. Purchase Payments for this contract will not be invested in
collectibles.
B. Minimum Purchase Payment Amount. The minimum total first-year purchase
payment amount required to purchase a contract is $2,000. The minimum
purchase payment size is $100, unless the payment is made through an
Automatic Purchase Payment Plan, in which case the minimum is $25.
C. Additional Purchase Payments. Additional purchase payments after the
initial purchase payment are not required.
D. Endorsements. The contract including this Endorsement will be amended as
required by changes in: the Code; IRS Regulation, or published revenue
rulings. The Company will promptly furnish any endorsements which are
required to comply with such changes. Upon receipt of such endorsement, the
owner has thirty (30) days in which to contact the Company in order to
reject the endorsement. If the thirty (30) days elapse and the Company has
not been contacted, the endorsement is deemed accepted. Because this
contract is established with the intent to comply with federal regulation,
rejection will be deemed a request to remove this endorsement and will
result in a taxable event.
E. Reporting. The Company is required to report payments from this contract to
the IRS and, in some cases, to withhold certain amounts from taxable
distributions. The Company will furnish an annual report summarizing total
contributions and distributions under this contract.
F. Disclosure. The Company furnishes a disclosure statement describing IRAs
when the contract is delivered or endorsed.
G. Enabling Agreement. The owner, by signing the application requesting that
the contract be issued as an Individual Retirement Annuity, agrees to the
terms of this section and requests that this Endorsement be attached to the
contract. The matters which the owner agrees to and accepts responsibility
for in the contract (including the Application and this Endorsement) will
not be the responsibility of CUNA Mutual Life Insurance Company (the
Company). The Company will not be liable for any direct or indirect damage
or loss including (without limitation) taxes suffered or incurred by the
owner or the beneficiary(ies) as a result of those matters.
Unless such damage or loss is caused by willful or negligent act or
omission of the Company in violation of the contract or applicable law, the
Company will not be liable for any direct or indirect damage or loss. This
includes (without limitation) taxes suffered or incurred by the owner when
the Company:
1. acts in accordance with or reliance upon any information furnished by
the owner or the beneficiary(ies);
2. is required to act without the benefit of information which the owner
is required to provide under the provisions of the contract or by law;
or
3. administers any other matters arising under or relating to the
contract.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
/s/Michael B. Kitchen
President
Form 3762(VANN)2000
<PAGE>
EXHIBIT 5(a)
Variable Annuity Application
MEMBERS Variable Annuity II
Variable Annuity Application
(Please Print Clearly)
CUNA Mutual Life Insurance Company Credit Union No.
A Mutual Insurance Company ________________
2000 Heritage Way __ Check If Not Applicable
Waverly, Iowa 50677
1. ANNUITANT (OWNER) MUST BE AGE 85 OR YOUNGER
Name ____________________________________________________________
Address _________________________________________________________
City ___________________________________________________________
Sex: __ Male __ Female
SS No./Tax ID:______________
Date of Birth:____________________
Month Day Year
Daytime Phone ( )
2. CO-ANNUITANT/CO-OWNER: OPTIONAL; NONQUALIFIED ONLY (Check one, if
applicable.)
__ CO-ANNUITANT MUST BE SPOUSE OF ANNUITANT AND AGE 85 OR YOUNGER
__ CO-ANNUITANT & CO-OWNER MUST BE SPOUSE OF ANNUITANT AND AGE 85 OR YOUNGER
__ CO-OWNER MUST BE AGE 85 OR YOUNGER
Name ____________________________________________________________
Address _________________________________________________________
City ___________________________________________________________
Sex: __ Male __ Female
SS No./Tax ID: __________________
Date of Birth:____________________
Month Day Year
Daytime Phone ( )
3. OWNER IF ANNUITANT(S) IS NOT ALSO THE OWNER(S). MUST BE AGE 85 OR YOUNGER
Name ____________________________________________________________
Address _________________________________________________________
City ___________________________________________________________
Sex: __ Male __ Female
SS No./Tax ID: __________________
Date of Birth:____________________
Month Day Year
Daytime Phone ( )
4. BENEFICIARY (To list more beneficiaries, use Section 8, or use a separate
signed and dated paper.)
Name Address Relationship to Annuitant
Primary ______________________________________________________________
Contingent ______________________________________________________________
5. PLAN TYPE (Check the appropriate box.)
__ Nonqualified __ 457(b) __ 457(f)
Qualified (Check one of the following; complete contribution year.)
__ Traditional IRA __ Roth IRA
__ SEP/IRA __ 403(b)
__ Other ________________________________________
Contribution Year ___________ (excludes transfers/rollovers)
6. DEATH BENEFIT OPTIONS
Basic Death Benefit: A Basic Death Benefit is automatically included with
the Variable Annuity. (See your prospectus.) Optional Death Benefit(s):
(ANNUITANT(S) MUST BE AGE 75 OR YOUNGER ON THE CONTRACT ISSUE DATE.) Check
one of the following boxes to choose an Optional Death Benefit, at an
additional charge (See your prospectus):
__ Maximum Anniversary __ 5% Annual Guarantee
__ Both Maximum Anniversary and 5% Annual Guarantee
7. PURCHASE PAYMENTS (Please make checks payable to CUNA Mutual Life Insurance
Company.)
<TABLE>
<CAPTION>
<S> <C>
Single/Initial Purchase Payment $_________________ Future Purchase Payments $__________________
(Min. Total First Year: Nonqual. $5000, Qual. or 457 (Min.: $100 or $25 for Automatic & Salary Savings)
$2000, 403(b) $300)
By: __ Check __ Automatic* __ 1035 Exchange (Nonqual.) By: __ Monthly Automatic* __ Salary Savings
__ Transfer (Qual.) __ Rollover (Qual.) __ Quarterly __ Semiannual __ Annual
</TABLE>
The Initial Purchase Payment applied will be equal to the actual amount received
by CUNA Mutual Life Insurance Company. *Complete Section 16.
8. Special Instructions ______________________________
9. HOME OFFICE USE ONLY ______________________________
10. Do you have any existing life insurance or annuity in this or any other
company?...................__ Yes __ No
Will this contract replace, discontinue or change any existing life
insurance or annuity in this or any other company?__ Yes __ No
If Yes: What Company?______________________________________________________
What Contract Number? ______________________________________________________
11. SUITABILITY MUST BE COMPLETED ON THE OWNER(S)
Occupation __________________________________________________
Employer ____________________________________________________
Address _____________________________________________________
City ________________ State _______ ZIP____________________
Marital Status ______________________________________________
No. of Dependents _____________ Ages _______________________
Federal Tax Bracket ________%
Financial Information
INCOME ESTIMATED NET WORTH
(Exclusive of Residence)
__ $___________________ __ $__________________
__ $ 25,000 - $ 50,000 __ $ 50,000 - $100,000
__ $ 50,000 - $ 75,000 __ $100,000 - $250,000
__ $ 75,000 - $100,000 __ $250,000 - $500,000
__ Over $100,000 __ Over $500,000
Specify: $___________ Specify: $___________
Investment Objectives (Check all that apply.)
__ Capital Appreciation __ Growth and Income
__ Income __ Conservation of Principal
Risk Tolerance (Check one.)
__ High __ Medium __ Low
Investment Experience (Check one.)
__ Minimal __ Moderate __ Extensive
Initial Source Of Funds (Check all that apply.)
__ CDs/Saving Account __ Investments
__ Stocks/Bonds __ Sale of Personal Property
__ Current Income __ Policy Cash Value/Div/Loan
__ Policy Surrender __ Qualified Retirement Plan
__ Other ______________
Other Investment & Savings (List below.)
Suitability Questions:
1.) Do you acknowledge that the following were discussed:
a.) Product features including: variable subaccounts and fixed
account periods; death benefit(s); partial withdrawal privilege;
loan privilege (if applicable); tax treatment and IRS penalties
including the effect of withdrawals before age 59 1/2; and
income options?................................... __ Yes __ No
b.) Fees and charges including: surrender charges; market value
adjustments applicable to the fixed account option; mortality and
expense charges; and market risk?.............. __Yes __ No
c.) For tax qualified plans only (i.e. IRA, 403(b), pension):
tax-deferred accrual feature of a qualified plan; tax- deferred
accrual feature of a variable annuity is unnecessary and the
decision to purchase a variable annuity is supported by the other
benefits provided; and for applicants subject to Required Minimum
Distribution (RMD), that surrender charges and market value
adjustments may be applicable to the
distribution?..................................... __ Yes __ No
2.) Do you have a long-term investment objective?.......... __ Yes __ No
12. TELEPHONE/FAX AUTHORIZATION
I understand that I will automatically have telephone/fax authorization
unless the following box is marked:
__ I do NOT want telephone/fax authorization
I understand that the representative who signs this application will
automatically have telephone/fax authorization unless the following box is
marked:
__ I do NOT want the representative who signed this application to have
telephone/fax authorization
See the Optional Program form for detail on what transactions can be done
by telephone/fax. If your representative changes, you will need to complete
a new authorization.
13. PURCHASE PAYMENT ALLOCATION % (WHOLE %; MUST TOTAL 100%; MINIMUM 1% PER
SUBACCOUNT OR FIXED PERIOD.)
<TABLE>
<CAPTION>
ALLOCATION % TO SUBACCOUNT(S) OF THE VARIABLE ACCOUNT:
<S> <C> <C> <C>
______% Mid-Cap Stock ______% Bond ______% High Income
______% Capital Appreciation Stock ______% Money Market ______% Global Securities
______% Growth & Income Stock ______% International Stock ______% Other ______________
______% Balanced ______% Emerging Growth ______% Other ______________
</TABLE>
<TABLE>
<CAPTION>
ALLOCATION % TO FIXED PERIOD(S) OF THE FIXED ACCOUNT OPTION: (MINIMUM: $1000 EACH PAYMENT.)
<S> <C> <C> <C> <C> <C>
______% 1 Year ______% 3 Year ______% 5 Year ______% 7 Year ______% 10 Year
ALLOCATION % TO DCA 1 YR. FIXED PERIOD OF THE FIXED ACCOUNT OPTION: (MINIMUM: $1,000 EACH PAYMENT.)
______% DCA 1 Year (Complete the following DCA 1 Year Fixed Period Transfer Section.*)
</TABLE>
--------------------------------------------------------------------------------
*DCA 1 YEAR FIXED PERIOD TRANSFERS REQUIRED FOR ALLOCATIONS MADE TO THE DCA 1
YEAR FIXED PERIOD. (If the following section is not completed, a Dollar Cost
Averaging form must be completed - CLS-217.)
Monthly transfers will begin 1 month after allocation to the DCA 1 year fixed
period. (If the transfer date falls on a weekend or holiday, the transfer will
be made on the following valuation day.)
Transfers of equal monthly amounts that will deplete the DCA 1 year fixed amount
will occur automatically for the duration of the fixed period according to the
subaccounts selected below: (This is the minimum monthly transfer amount. To
transfer a larger amount you must complete the Dollar Cost Averaging form -
CLS-217. Additional transfers are allowed by request.)
<TABLE>
<CAPTION>
Transfers from the DCA 1 Yr. Fixed Period to be distributed to the following subaccounts: (WHOLE %; MUST TOTAL 100%.)
<S> <C> <C>
______% Mid-Cap Stock ______% Bond ______% High Income
______% Capital Appreciation Stock ______% Money Market ______% Global Securities
______% Growth & Income Stock ______% International Stock ______% Other _______________
______% Balanced ______% Emerging Growth ______% Other _______________
</TABLE>
(If no subaccounts are selected, transfers will be automatically distributed to
the Money Market subaccount.)
14. PORTFOLIO REBALANCE PROGRAM
Frequency (Check one.) __ Monthly __ Quarterly __ Semiannually __ Annually
If the frequency is not selected, transfers will occur quarterly.
Indicate how you would like your variable account value allocated. (Check one of
the following.)
__ Transfer the value in my subaccounts in proportion to my purchase
payment allocation schedule. (Not applicable if purchase payments are
allocated to a fixed period.)
__ Transfer the value in my subaccounts as follows: (WHOLE %; MUST TOTAL 100%.)
___% Mid-Cap Stock ___% Bond ___% High Income
___% Capital Appreciation Stock ___% Money Market ___% Global Securities
___% Growth & Income Stock ___% International Stock ___% Other __________
___% Balanced ___% Emerging Growth ___% Other __________
15. PRESERVATION PLUS PROGRAM
__ I will participate in the Preservation Plus Program. I hereby authorize
CUNA Mutual Life Insurance Company to allocate a portion of the initial
purchase payment to the following fixed period: (Check one.)
__ 1 Year __ 3 Year __ 5 Year __ 7 Year __ 10 Year
This portion will be the present value reflecting the guaranteed interest
rate as of the contract issue date for the fixed period indicated. The
difference between the initial purchase payment and the portion allocated
to the fixed period will be allocated as indicated in Section 13.
16. AUTHORIZATION PLEASE ATTACH A BLANK VOIDED CHECK (For Checking and Share
Draft Accounts Only.)
Initial Payment: __ I hereby authorize a debit entry to my financial
institution account indicated below to initiate the related credit entry to
the CUNA Mutual Life Insurance Company account in the amount of
$______________.
Future Payments: __ I authorize CUNA Mutual Life Insurance Company and the
financial institution named below to initiate variable entries to my
account. I elect to receive quarterly statements for my variable annuity.
This authorization will remain in effect until revoked by me in writing. A
monthly debit in the amount of $_____________ will occur on the first of
the month, unless another draft date is checked:
__ 1 __ 5 __ 10 __ 15 __ 20 __ 25
Financial Institution __________________ Account Number __________________
Address ____________________________ If this is a savings account, are
____________________________ electronic debits allowed? __Yes __No
17 a. AGREEMENT
o I hereby represent my answers to the above questions to be correct and
true to the best of my knowledge and belief and are made as a basis for
my application.
o I understand that no agent is authorized to make, modify or discharge
any annuity contract provision or waive any of the Company's rights or
requirements.
o Any person who knowingly and with intent to defraud any insurance
company or other person files an application for insurance or statement
of claim containing any materially false information or conceals for
the purpose of misleading, information concerning any fact material
thereto commits a fraudulent insurance act, which is a crime and
subjects such person to criminal and civil penalties.
o I ACKNOWLEDGE RECEIPT OF A CURRENT VARIABLE ANNUITY PROSPECTUS DATED
__________________________.
o I HEREBY REQUEST A STATEMENT OF ADDITIONAL INFORMATION. __ YES __ NO
o I UNDERSTAND THAT CONTRACT VALUES, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A VARIABLE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO
A FIXED DOLLAR AMOUNT.
o I UNDERSTAND THAT AMOUNTS WITHDRAWN FROM THE FIXED ACCOUNT OPTION MAY
BE ADJUSTED UPWARD OR DOWNWARD BASED ON A MARKET VALUE FORMULA.
o If this contract will replace, change or modify an existing policy or
contract, I hereby confirm my belief that replacing my existing
contract is suitable, and I have considered product features, fees and
charges.
17 b. W-9 CERTIFICATION
I, the proposed owner(s) certify under penalties or perjury, that the
taxpayer identification number(s) shown under Sections 1 and 2, or under
Section 3 (if owner is other than the annuitant), is my correct taxpayer
identification number, and I am NOT subject to backup withholding unless I
have marked the box below:
__ I have been notified that I am subject to backup withholding under
Internal Revenue Section 3406(a)(1)(c), and the payor shall
withhold in accordance with withholding requirement imposed by law.
The Internal Revenue Service does not require your consent to any
provisions of this document other than the certifications required to
avoid backup withholding.
Signed at_________________________________________________________________
City and State Date
__________________________________________________________________________
Signature of Owner(s) [if other than Proposed Annuitant(s)] Date
__________________________________________________________________________
Signature of Annuitant(s) Date
AGENT: To the best of your knowledge, will this contract replace,
discontinue or change any existing life insurance or annuity?
__ Yes __ No If yes, I hereby confirm:
(1) That consideration has been given to product features, fees and
charges.
(2) All required documents have been complete in compliance with
applicable state regulations. (If all documents have not been
completed, explain in Section 8.)
(3) That the following sales material was used:
______________________________________________ .
Reason for Replacement: __________________________________________________
__________________________________________________________________________
Date Signature of Agent Agent No.
<PAGE>
EXHIBIT 5(b)
Flexible Premium Deferred Variable and Fixed Annuity Application
State Variations
Application Form No. 2000-VAIIAPP attached as Exhibit is a copy of the
Application language used in the following states:
Alaska Kansas Ohio
Alabama Kentucky Oklahoma
Arkansas Louisiana Rhode Island
California Maine South Carolina
Colorado Michigan South Dakota
Connecticut Mississippi Tennessee
Delaware Nebraska West Virginia
District of Columbia Nevada Wisconsin
Hawaii New Hampshire Wyoming
Iowa New Mexico
Idaho North Carolina
Indiana
The following application forms vary from the Form No. 2000-VAIIAPP as indicated
below:
Application Form No. 2000-VAIIAPP-B changes the fraud statement in Section 17a.
to read: "Missouri Residents: Any person who, with intent to defraud or knowing
that he is facilitating a fraud against an insurer, submits an application or
files a claim containing a false or deceptive statement may be guilty of
insurance fraud, which is a crime." Form 2000-VAIIAPP-B language is used in the
following states:
Missouri
Virginia
Application Form No. 2000-VAIIAPP-C : changes Section 13, Purchase Payment
Allocation, and Section 15, Preservation Plus Program, to delete the 3, 5, 7,
and 10 year fixed periods. Also changes Section 17a, Agreement, to change the
fraud statement to read: New Jersey Residents: Any person who includes any false
or misleading information on an application for an insurance policy is subject
to criminal and civil penalties. In the same section, delete the language
regarding market value adjustment. Form 2000-VAIIAPP-C is used in the following
states:
Texas
Application Form No. 2000-VAIIAPP-AZ Changes Section 17a. to add, "Upon written
request, we will provide the owner with information regarding benefits and
provisions of the contract. If you decide not to keep your contract, return it
within 10 days (30 days for replacement contracts) after you receive it for a
refund of purchase payments, adjusted for any investment gain or loss if
allocated to the Subaccount(s) of the Variable Account. For IRA contracts, we
will refund purchase payments during the first 10 days. You may return it to
CUNA Mutual Life Insurance Company, 2000 Heritage Way, Waverly, Iowa 50677, or
to the agent who sold it to you." Form 2000-VAIIAPP- AZ language is used in the
following state:
Arizona
Application Form No. 2000-VAIIAPP-FL changes the fraud statement in Section 17a.
to read: "Any person who knowingly and with intent to injure, defraud or deceive
any insurer files a statement of claim or an application containing any false,
incomplete or misleading information is guilty of a felony of the third
degree."; adds "printed name of agent", "agent license no" and "date" line under
"Signature of Annuitant(s)" line. This app also includes as an attachment, Form
99-VAAPP-FLNOTICE, Notice to Florida Applicants. Form 2000-VAIIAPP-FL language
is used in the following state:
Florida
Application Form No. 2000-VAIIAPP-ND changes Section 12, Telephone/Fax
Authorization to make the applicant check if they do or do not want the program
(it is not automatic if they don't do anything). Application Form No.
2000-VAIIAPP-ND is used in the following states:
North Dakota
<PAGE>
EXHIBIT 9
Opinion of Counsel from Kevin S. Thompson
Kevin S. Thompson
Associate Counsel
Office of General Counsel
Phone: 608.231.8588
Fax: 608.236.8588
E-mail: [email protected]
October 1, 2000
CUNA MUTUAL LIFE INSURANCE COMPANY
2000 HERITAGE WAY
WAVERLY IA 50677
Ladies and Gentlemen:
With reference to the registration statement on Form N-4 to be filed by CUNA
Mutual Life Insurance Company (the "Company") and CUNA Mutual Life Variable
Annuity Account (the "Account") with the Securities and Exchange Commission for
the purpose of registering under the Securities Act of 1933, as amended,
deferred variable annuity contracts (the "Contracts"), I have examined such
documents and such law as I considered necessary and appropriate, and on the
basis of such examination, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
mutual life insurance company under the laws of the State of Iowa and is
duly authorized by the Insurance Division of the Department of Commerce of
the State of Iowa to issue the Contracts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 508A.1 of the Iowa Code (1993).
3. Unless provided to the contrary under the contracts, that portion of the
assets of the Account equal to the reserves and other contracts liabilities
with respect to the Account will not be chargeable with liabilities arising
out of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account and to the use of my
name under the caption "Legal Matters" in the statement of additional
information.
Sincerely,
/s/Kevin S. Thompson
Kevin S. Thompson
Associate Counsel
CUNA MUTUAL LIFE INSURANCE COMPANY
<PAGE>
EXHIBIT 10.a.
PricewaterhouseCoopers LLP Consent
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-4 of our
reports dated February 11, 2000, relating to the financial statements and
financial highlights of CUNA Mutual Life Variable Annuity Account and March 31,
2000, relating to the financial statements of CUNA Mutual Life Insurance
Company, which appear in such Registration Statement. We also consent to the
references to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
September 29, 2000
<PAGE>
EXHIBIT 10.b.
Independent Auditors' Consent
The Board of Directors of CUNA Mutual Life Insurance Company
And Contract Owners of CUNA Mutual Life Variable Annuity Account:
We consent to the use of our report on the financial statements of CUNA Mutual
Life Variable Annuity Account dated February 5, 1999, and our report on the
financial statements of CUNA Mutual Life Insurance Company dated March 19, 1999,
included herein.
Our report dated March 19, 1999, contains an explanatory paragraph that states
that the Company prepared the financial statements using accounting practices
prescribed or permitted by the Iowa Department of Commerce, Insurance Division,
which practices differ from generally accepted accounting principles.
KPMG LLP
Des Moines, Iowa
October 6, 2000
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, James C. Barbre, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/James C. Barbre
James C. Barbre
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Robert W. Bream, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Robert W. Bream
Robert W. Bream
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, James L. Bryan, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/James L. Bryan
James L. Bryan
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Loretta M. Burd, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Loretta M. Burd
Loretta M. Burd
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Ralph B. Canterbury, a director of CUNA
Mutual Life Insurance Company, a life insurance company incorporated under the
laws of and domiciled in the State of Iowa, hereby appoint, authorize and
empower Kevin S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as
my attorneys and agents for me and in my name as director of CUNA Mutual Life
Insurance Company on behalf of CUNA Mutual Life Insurance Company and CUNA
Mutual Life Variable Annuity Account (or otherwise) with full power to prepare,
review, execute, deliver and file Pre-Effective Amendments with the Securities
and Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Ralph B. Canterbury
Ralph B. Canterbury
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Rudolf J. Hanley, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Rudolf J. Hanley
Rudolf J. Hanley
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Jerald R. Hinrichs, a director of CUNA
Mutual Life Insurance Company, a life insurance company incorporated under the
laws of and domiciled in the State of Iowa, hereby appoint, authorize and
empower Kevin S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as
my attorneys and agents for me and in my name as director of CUNA Mutual Life
Insurance Company on behalf of CUNA Mutual Life Insurance Company and CUNA
Mutual Life Variable Annuity Account (or otherwise) with full power to prepare,
review, execute, deliver and file Pre-Effective Amendments with the Securities
and Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Jerald R. Hinrichs
Jerald R. Hinrichs
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Michael B. Kitchen, a director of CUNA
Mutual Life Insurance Company, a life insurance company incorporated under the
laws of and domiciled in the State of Iowa, hereby appoint, authorize and
empower Kevin S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as
my attorneys and agents for me and in my name as director of CUNA Mutual Life
Insurance Company on behalf of CUNA Mutual Life Insurance Company and CUNA
Mutual Life Variable Annuity Account (or otherwise) with full power to prepare,
review, execute, deliver and file Pre-Effective Amendments with the Securities
and Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Michael B. Kitchen
Michael B. Kitchen
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Robert T. Lynch, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Robert T. Lynch
Robert T. Lynch
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Brian L. McDonnell, a director of CUNA
Mutual Life Insurance Company, a life insurance company incorporated under the
laws of and domiciled in the State of Iowa, hereby appoint, authorize and
empower Kevin S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as
my attorneys and agents for me and in my name as director of CUNA Mutual Life
Insurance Company on behalf of CUNA Mutual Life Insurance Company and CUNA
Mutual Life Variable Annuity Account (or otherwise) with full power to prepare,
review, execute, deliver and file Pre-Effective Amendments with the Securities
and Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Brian L. McDonnell
Brian L. McDonnell
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, C. Alan Peppers, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/C. Alan Peppers
C. Alan Peppers
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Omer K. Reed, a director of CUNA Mutual Life
Insurance Company, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin S.
Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys and
agents for me and in my name as director of CUNA Mutual Life Insurance Company
on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life Variable
Annuity Account (or otherwise) with full power to prepare, review, execute,
deliver and file Pre-Effective Amendments with the Securities and Exchange
Commission for the CUNA Mutual Life Variable Annuity Account, Registration Nos.
333-40304 and 333-40320. This Power of Attorney shall terminate at the end of my
appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Omer K. Reed
Omer K. Reed
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Neil A. Springer, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Neil A. Springer
Neil A. Springer
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Farouk D. G. Wang, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Farouk D. G. Wang
Farouk D. G. Wang
Director, CUNA Mutual Life Insurance Company
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Larry T. Wilson, a director of CUNA Mutual
Life Insurance Company, a life insurance company incorporated under the laws of
and domiciled in the State of Iowa, hereby appoint, authorize and empower Kevin
S. Thompson, Steve R. Suleski, or Faye A. Patzner, severally, as my attorneys
and agents for me and in my name as director of CUNA Mutual Life Insurance
Company on behalf of CUNA Mutual Life Insurance Company and CUNA Mutual Life
Variable Annuity Account (or otherwise) with full power to prepare, review,
execute, deliver and file Pre-Effective Amendments with the Securities and
Exchange Commission for the CUNA Mutual Life Variable Annuity Account,
Registration Nos. 333-40304 and 333-40320. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 1st day of October, 2000.
/s/Larry T. Wilson
Larry T. Wilson
Director, CUNA Mutual Life Insurance Company
