Dear Variable Annuity Owner:
Despite extreme volatility, returns in the U.S. domestic stock market were
relatively flat in the first half of 2000. There were some signs of strength,
particularly with mid-cap stocks. International markets were generally flat to
down, particularly in some of the world's developing markets. The table below
shows the percent change in unit price for each of the subaccounts of the CUNA
Mutual Life Variable Annuity Account.
Percent change
in Unit Value from
Subaccount 12/31/99 through 6/30/00
--------------------------------------------------------------------------------
Money Market 2.06%
Bond 1.89%
Balanced 2.27%
Growth and Income Stock 1.60%
Capital Appreciation Stock 2.54%
Mid-Cap Stock 5.86%
International Stock (5.38)%
Global Governments 0.78%
Emerging Growth (2.97)%
High Income (1.34)%
Developing Markets (17.65)%
--------------------------------------------------------------------------------
The CUNA Mutual Life Variable Annuity Account invests in the mutual funds listed
above. The returns shown reflect the deduction of the separate account level
charges. The returns at the separate account level are slightly lower than at
the mutual fund level as a result of these charges.
This booklet is divided into several sections. Each section contains the
semiannual report for a component of the MEMBERS(R) Variable Annuity. The first
section contains the following reports for the CUNA Mutual Life Variable Annuity
Account:
Statement of Assets and Liabilities................................... page 2
Statement of Operations............................................... page 4
Statement of Changes in Net Assets.................................... page 5
Notes to the Financial Statements..................................... page 8
The remaining sections of this booklet cover the mutual funds and include
discussions of the funds' results and the managers' outlooks for (1) the Ultra
Series Fund which includes the Money Market Fund, Bond Fund, Balanced Fund,
Growth and Income Stock Fund, Capital Appreciation Stock Fund, and Mid-Cap Stock
Fund; (2) the International Stock Portfolio of the T. Rowe Price International
Series, Inc.; (3) the MFS(R) Global Government Series(SM) and the MFS(R)
Emerging Growth Series(SM) of the MFS(R) Variable Insurance Trust(SM), (4) the
Oppenheimer High Income Fund/VA of the Oppenheimer Variable Account Funds; and
(5) the Templeton Developing Markets Fund of the Templeton Variable Products
Series Fund.
MEMBERS(R) Variable Annuity is a tool to help you meet you long term asset
accumulation and retirement income needs. We appreciate the trust you place in
our company and we look forward to helping you achieve your financial goals.
Thank you for giving us the opportunity to serve you.
Sincerely,
/s/Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
CUNA Mutual Life Insurance Company
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities
June 30, 2000
(Unaudited)
Capital
Money Growth and Appreciation Mid-Cap
Market Bond Balanced Income Stock Stock Stock
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ---------- ----------
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund,
42,398,794 shares at net asset value of
$1.00 per share (cost $42,398,794) $42,398,794 $ -- $ -- $ -- $ -- $ --
Bond Fund,
7,793,966 shares at net asset value of
$10.14 per share (cost $81,686,777) -- 79,004,626 -- -- -- --
Balanced Fund,
21,839,651 shares at net asset value of
$20.77 per share (cost $379,338,006) -- -- 453,645,009 -- -- --
Growth and Income Stock Fund,
18,644,319 shares at net asset value of
$34.14 per share (cost $489,349,805) -- -- -- 636,560,331 -- --
Capital Appreciation Stock Fund,
12,616,292 shares at net asset value of
$26.15 per share (cost $231,865,407) -- -- -- -- 329,926,430 --
Mid-Cap Stock Fund,
1,914,410 shares at net asset value of
$11.86 per share (cost $21,135,193) -- -- -- -- -- 22,712,978
---------- ---------- ----------- ----------- ----------- ----------
Total assets 42,398,794 79,004,626 453,645,009 636,560,331 329,926,430 22,712,978
---------- ---------- ----------- ----------- ----------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 90,244 166,847 962,178 1,384,108 697,904 43,701
Other accrued expenses 10,829 20,022 115,461 166,093 83,749 5,244
---------- ---------- ----------- ----------- ----------- ----------
Total liabilities 101,073 186,869 1,077,639 1,550,201 781,653 48,945
---------- ---------- ----------- ----------- ----------- ----------
Net assets $42,297,721 $78,817,757 $452,567,370 $635,010,130 $329,144,777 $22,664,033
========== ========== =========== =========== =========== ==========
Contract owners' equity:
Contracts in accumulation period
(note 5) $42,287,428 $78,812,871 $452,357,138 $634,504,953 $329,069,980 $22,660,985
Contracts in annuity payment period
(note 2 and note 5) 10,293 4,886 210,232 505,177 74,797 3,048
---------- ---------- ----------- ----------- ----------- ----------
Total contract owners' equity $42,297,721 $78,817,757 $452,567,370 $635,010,130 $329,144,777 $22,664,033
========== ========== =========== =========== =========== ==========
Total units outstanding
(note 5 and note 6) 3,418,963 6,092,388 23,323,007 23,192,777 21,869,361 1,901,549
========== ========== =========== =========== =========== ==========
Net asset value per unit $12.37 $12.94 $19.40 $27.38 $30.28 $11.92
========== ========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities, continued
June 30, 2000
(Unaudited)
International Global Emerging High Developing
Stock Governments Growth Income Markets
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
5,602,542 shares at net asset value of
$18.14 per share (cost $73,909,535) $101,630,118 $ -- $ -- $ -- $ --
Investments in MFS(R) Variable
Insurance Trust(SM):
Global Governments Series,
1,134,854 shares at net asset value of
$9.68 per share (cost $11,618,051) -- 10,985,382 -- -- --
Investments in MFS(R) Variable
Insurance Trust(SM):
Emerging Growth Series,
5,136,252 shares at net asset value of
$35.05 per share (cost $102,851,760) -- -- 180,025,627 -- --
Investments in Oppenheimer
Variable Account Funds:
High Income Series,
5,013,092 shares at net asset value of
$9.57 per share (cost $54,999,083) -- -- -- 47,975,294 --
Investments in Templeton
Variable Products Series Fund:
Developing Markets Series,
1,224,718 shares at net asset value of
$6.37 per share (cost $8,547,724) -- -- -- -- 7,801,456
----------- ---------- ----------- ---------- ---------
Total assets 101,630,118 10,985,382 180,025,627 47,975,294 7,801,456
----------- ---------- ----------- ---------- ---------
Liabilities
Accrued adverse mortality and
expense charges 210,830 23,478 368,619 102,070 16,049
Other accrued expenses 25,300 2,817 44,234 12,248 1,926
----------- ---------- ----------- ---------- ---------
Total liabilities 236,130 26,295 412,853 114,318 17,975
----------- ---------- ----------- ---------- ---------
Net assets $101,393,988 $10,959,087 $179,612,774 $47,860,976 $7,783,481
=========== ========== =========== ========== =========
Contract owners' equity:
Contracts in accumulation period
(note 5) $101,350,999 $10,957,220 $179,536,214 $47,831,309 $7,783,481
Contracts in annuity payment period
(note 2 and note 5) 42,989 1,867 76,560 29,667 --
----------- ---------- ----------- ---------- ----------
Total contract owners' equity $101,393,988 $10,959,087 $179,612,774 $47,860,976 $7,783,481
=========== ========== =========== ========== ==========
Total units outstanding
(note 5 and note 6) 5,655,305 941,526 6,622,531 4,338,623 1,208,180
=========== ========== =========== ========== =========
Net asset value per unit $17.93 $11.64 $27.12 $11.03 $6.44
=========== ========== =========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Operations
June 30, 2000
(Unaudited)
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 $1,110,194 $1,285,929 $3,630,790 $1,676,061 $56,375 $9,313
Adverse mortality and expense charges
(note 3) (249,054) (481,054) (2,706,150) (3,845,989) (1,928,855) (98,627)
Administrative charges (29,886) (57,726) (324,738) (461,519) (231,463) (11,835)
---------- ---------- ---------- ---------- ---------- --------
Net investment income (loss) 831,254 747,149 599,902 (2,631,447) (2,103,943) (101,149)
---------- ---------- ---------- ---------- ---------- --------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- 2,406,097 2,258,376 3,434,686 13,634
Proceeds from sale of securities 22,547,955 4,501,507 4,758,371 3,432,427 1,088,628 64,154
Cost of securities sold (22,547,955) (4,693,277) (3,968,546) (2,613,361) (751,723) (60,154)
---------- ---------- ---------- ---------- ---------- --------
Net realized gain (loss) on security
transactions -- (191,770) 3,195,922 3,077,442 3,771,591 17,634
Net change in unrealized appreciation
or depreciation on investments -- 889,680 6,131,505 9,055,255 6,369,507 920,820
---------- ---------- ---------- ---------- ---------- --------
Net gain (loss) on investments -- 697,910 9,327,427 12,132,697 10,141,098 938,454
---------- ---------- --------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations $831,254 $1,445,059 $9,927,329 $9,501,250 $8,037,155 $837,305
========== ========== ========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
International Global Emerging High Developing
Stock Governments Growth Income Markets
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dividend income $ -- $535,326 $ -- $4,911,477 $59,548
Adverse mortality and expense charges
(note 3) (608,285) (70,357) (1,083,642) (299,943) (49,543)
Administrative charges (72,994) (8,443) (130,037) (35,993) (5,945)
---------- -------- ---------- --------- ----------
Net investment income (loss) (681,279) 456,526 (1,213,679) 4,575,541 4,060
---------- -------- ---------- --------- ----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- 9,433,835 -- --
Proceeds from sale of securities 424,526 1,283,352 3,829,481 3,610,904 746,657
Cost of securities sold (293,531) (1,340,796) (1,808,896) (3,896,950) (724,649)
---------- -------- ---------- --------- ----------
Net realized gain (loss) on security
transactions 130,995 (57,444) 11,454,420 (286,046) 22,008
Net change in unrealized appreciation
or depreciation on investments (4,795,226) (326,499) (16,066,344) (4,921,832) (1,568,942)
---------- -------- ---------- --------- ----------
Net gain (loss) on investments (4,664,231) (383,943) (4,611,924) (5,207,878) (1,546,934)
---------- -------- ---------- --------- ----------
Net increase (decrease) in net assets
resulting from operations ($5,345,510) $72,583 ($5,825,603) ($632,337) ($1,542,874)
========== ======== ========== ========= ==========
</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
For six months ended June 30, 2000 and year ended December 31, 1999
(Unaudited)
MONEY MARKET SUBACCOUNT BOND SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 2000 1999 2000 1999
---- ---- ---- ----
Net investment income (loss) $831,254 $1,070,953 $747,149 $3,305,669
Net realized gain (loss) on
security transactions -- -- (191,770) (39,265)
Net change in unrealized appreciation
or depreciation on investments -- -- 889,680 (3,692,698)
----------- ----------- ----------- -----------
Change in net assets from operations 831,254 1,070,953 1,445,059 (426,294)
----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sales of units 67,817,212 108,025,036 33,316,760 71,191,403
Cost of units repurchased (68,589,087) (93,597,976) (33,042,988) (51,892,110)
Actuarial adjustments for mortality
experience on annuities in payment period (226) 214 (1,013) 536
Annuity benefit payments (110) (815) (209) (283)
----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions (772,211) 14,426,459 272,550 19,299,546
----------- ----------- ----------- -----------
Increase (decrease) in net assets 59,043 15,497,412 1,717,609 18,873,252
Net assets:
Beginning of period 42,238,678 26,741,266 77,100,148 58,226,896
----------- ----------- ----------- -----------
End of period $42,297,721 $42,238,678 $78,817,757 $77,100,148
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
BALANCED SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 2000 1999 2000 1999
---- ---- ---- ----
Net investment income (loss) $599,902 $5,123,255 ($2,631,447) ($2,192,294)
Net realized gain (loss) on
security transactions 3,195,922 9,927,671 3,077,442 36,423,144
Net change in unrealized appreciation
or depreciation on investments 6,131,505 28,064,336 9,055,255 39,831,071
----------- ----------- ----------- -----------
Change in net assets from operations 9,927,329 43,115,262 9,501,250 74,061,921
----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sale of units 137,323,399 253,387,516 183,847,440 324,474,244
Cost of units repurchased (113,657,250) (174,777,068) (149,408,037) (237,335,322)
Actuarial adjustments for mortality
experience on annuities in payment period 1,374 3,206 14,162 8,597
Annuity benefit payments (8,503) (25,514) (20,854) (38,478)
----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 23,659,020 78,588,140 34,432,711 87,109,041
----------- ----------- ----------- -----------
Increase (decrease) in net assets 33,586,349 121,703,402 43,933,961 161,170,962
Net assets:
Beginning of period 418,981,021 297,277,619 591,076,169 429,905,207
----------- ----------- ----------- -----------
End of period $452,567,370 $418,981,021 $635,010,130 $591,076,169
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
For six months ended June 30, 2000 and year ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION STOCK SUBACCOUNT MID-CAP STOCK SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 2000 1999 2000 1999*
---- ---- ---- -----
Net investment income (loss) ($2,103,943) ($3,152,538) ($101,149) ($29,120)
Net realized gain (loss) on
security transactions 3,771,591 23,728,098 17,634 165,812
Net change in unrealized appreciation
or depreciation on investments 6,369,507 32,577,970 920,820 656,965
----------- ----------- ---------- ---------
Change in net assets from operations 8,037,155 53,153,530 837,305 793,657
----------- ----------- ---------- ---------
Capital unit transactions (note 5):
Proceeds from sales of units 117,731,776 176,946,680 14,854,746 9,591,635
Cost of units repurchased (89,793,955) (142,267,223) (2,441,021) (972,463)
Actuarial adjustments for mortality
experience on annuities in payment period 1,239 (40) 207 --
Annuity benefit payments (2,436) (3,690) (33) --
----------- ----------- ---------- ---------
Change in net assets from capital
unit transactions 27,936,624 34,675,727 12,413,899 8,619,172
----------- ----------- ---------- ---------
Increase (decrease) in net assets 35,973,779 87,829,257 13,251,204 9,412,829
Net assets:
Beginning of period 293,170,998 205,341,741 9,412,829 --
----------- ----------- ---------- ---------
End of period $329,144,777 $293,170,998 $22,664,033 $9,412,829
=========== =========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL STOCK SUBACCOUNT GLOBAL GOVERNMENTS SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 2000 1999 2000 1999
---- ---- ---- ----
Net investment income (loss) ($681,279) ($720,547) $456,626 $529,696
Net realized gain (loss) on
security transactions 130,995 1,713,086 (57,444) 68
Net change in unrealized appreciation
or depreciation on investments (4,795,226) 22,008,904 (326,499) (1,022,529)
----------- ---------- ---------- ----------
Change in net assets from operations (5,345,510) 23,001,443 72,583 (492,765)
----------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 52,843,722 75,751,302 5,614,160 12,623,162
Cost of units repurchased (42,749,015) (73,522,825) (6,610,380) (13,481,702)
Actuarial adjustments for mortality
experience on annuities in payment period 664 150 7 13
Annuity benefit payments (1,630) (2,564) (88) (186)
----------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 10,093,741 2,226,063 (996,301) (858,713)
----------- ---------- ---------- ----------
Increase (decrease) in net assets 4,748,231 25,227,506 (923,718) (1,351,478)
Net assets:
Beginning of period 96,645,757 71,418,251 11,882,805 13,234,283
----------- ---------- ---------- ----------
End of period $101,393,988 $96,645,757 $10,959,087 $11,882,805
=========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1999 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets, continued
For six months ended June 30, 2000 and year ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
EMERGING GROWTH SUBACCOUNT HIGH INCOME SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 2000 1999 2000 1999
---- ---- ---- ----
Net investment income (loss) ($1,213,679) ($1,428,582) $4,575,541 $2,266,230
Net realized gain (loss) on
security transactions 11,454,420 1,137,510 (286,046) (126,687)
Net change in unrealized appreciation
or depreciation on investments (16,066,344) 69,201,365 (4,921,832) (1,022,154)
----------- ---------- ---------- ----------
Change in net assets from operations (5,825,603) 68,910,293 (632,337) 1,117,389
----------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sales of units 80,165,038 88,662,009 19,223,710 42,750,865
Cost of units repurchased (59,246,089) (74,742,597) (20,718,458) (32,579,557)
Actuarial adjustments for mortality
experience on annuities in payment period 773 254 (233) (243)
Annuity benefit payments (2,738) (3,421) (971) (6,484)
----------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 20,916,984 13,916,245 (1,495,952) 10,164,581
----------- ---------- ---------- ----------
Increase (decrease) in net assets 15,091,381 82,826,538 (2,128,289) 11,281,970
Net assets:
Beginning of period 164,521,393 81,694,855 49,989,265 38,707,295
----------- ---------- ---------- ----------
End of period $179,612,774 $164,521,393 $47,860,976 $49,989,265
=========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING MARKETS SUBACCOUNT
<S> <C> <C>
Operations: 2000 1999
---- ----
Net investment income (loss) $4,060 ($23,768)
Net realized gain (loss) on
security transactions 22,008 (63,889)
Net change in unrealized appreciation
or depreciation on investments (1,568,942) 2,636,489
--------- ---------
Change in net assets from operations (1,542,874) 2,548,832
--------- ---------
Capital unit transactions (note 5):
Proceeds from sales of units 4,372,551 5,286,209
Cost of units repurchased (3,284,618) (4,090,271)
Actuarial adjustments for mortality
experience on annuities in payment period -- --
Annuity benefit payments -- --
--------- ---------
Change in net assets from capital
unit transactions 1,087,933 1,195,938
--------- ---------
Increase (decrease) in net assets (454,941) 3,744,770
Net assets:
Beginning of period 8,238,422 4,493,652
--------- ---------
End of period $7,783,481 $8,238,422
========= =========
</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 Trust(SM), 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 Trust(SM), Oppenheimer
Variable Account Funds, and Templeton Variable Products Series Fund. Each
is a management investment company of the series type with one or more
funds. Each is registered with the SEC as an open-end, management
investment company. Such registration does not involve supervision of the
management or investment practices or policies of the companies or their
funds by the SEC.
The Ultra Series Fund currently has six funds available as investment
options under the Contracts. The T. Rowe Price International Series, Inc.
has one fund available as an investment option under the Contracts, the MFS
Variable Insurance Trust has two funds available as investment options
under the Contracts, the Oppenheimer Variable Account Funds has one fund
available as an investment option under the Contracts and the Templeton
Variable Products Series Fund has one fund available as an investment
option under the Contracts. The Ultra Series Fund, MFS Variable Insurance
Trust, Oppenheimer Variable Account Funds and Templeton Variable Products
Series Fund also have other funds that are not available under the
Contracts. All five investment companies may, in the future, create
additional funds or classes that may or may not be available as investment
options under the Contracts. Each fund has its own investment objective and
the income, gains and losses for each fund are determined separately for
that fund or class.
CIMCO Inc. (CIMCO) serves as the investment adviser to the Ultra Series
Fund and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Ultra Series Fund.
The Company owns one half of CIMCO's outstanding stock and one half is
owned indirectly by CUNA Mutual Insurance Society.
Rowe Price-Fleming International, Inc. (RPFI) serves as the investment
adviser to the International Stock Portfolio and manages its assets in
accordance with general policies and guidelines established by the board of
directors of T. Rowe Price International Fund, Inc.
Massachusetts Financial Services Company (MFS) serves as the investment
adviser to the MFS Global Governments Series (formerly known as the MFS
World Governments Series) and Emerging Growth Series and manages their
assets in accordance with general policies and guidelines established by
the board of trustees of MFS(R) Variable Insurance Trust(SM).
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.
<PAGE>
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Fund: Class 2 and manages its assets and makes
its investments decisions.
The assets of each fund are held separate from the assets of the other
funds, and each fund is offered at a price equal to its respective net
asset value per share, without sales charge. Dividends and capital gain
distributions from each fund are reinvested in that fund. Investments in
shares of the funds are stated at market value which is the net asset value
per share as determined by the funds. Realized gains and losses from
security transactions are reported on an average cost basis. Dividend
income is recorded on the ex-dividend date.
Federal Income Taxes
Currently, no charge is made against the Variable Account for any federal,
state or local taxes (other than premium taxes) that the Company incurs or
that may be attributable to the Variable Account or the Contracts. The
Company may, however, make such a charge in the future from surrender
value, death benefits or annuity payments, as appropriate. Such taxes may
include taxes (levied by any government entity) which the Company
determines to have resulted from: (1) the establishment or maintenance of
the Variable Account, (2) receipt by the Company of purchase payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.
Annuity Reserves
Annuity reserves are computed for contracts in the payout stage according
to the 1983a Individual Annuitant Mortality Table. The assumed investment
return is 3.5%. The mortality risk is fully borne by the Company and may
result in additional amounts being transferred into the variable annuity
account by the Company to cover greater longevity of annuitants than
expected. Conversely, if reserves exceed amounts required, transfers may be
made to the insurance company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Fees and Charges
Contract Charges
Surrender Charge (Contingent Deferred Sales Charge). At the time purchase
payments are paid, no charge is deducted for sales expenses. However, a
surrender charge is deducted upon surrender or partial withdrawal of
purchase payments within 7 years of their being paid and, in certain
circumstances, upon payment of a death benefit or the election of certain
annuity payment options.
For purchase payments withdrawn or surrendered within one year of having
been paid, the charge is 7% of the amount of the payment withdrawn or
surrendered. The surrender charge decreases by 1% for each full year that
has elapsed since the purchase payment was made. No surrender charge is
assessed upon the withdrawal or surrender of the contract value in excess
of aggregate purchase payments or on purchase payments made more than 7
years prior to the withdrawal or surrender.
Subject to certain restrictions for the first partial withdrawal (or
surrender) in each contract year, an amount equal to 10% of aggregate
purchase payments subject to a surrender charge (as of the time of
withdrawal or surrender) may be surrendered without a surrender charge. The
surrender charge also may be waived in certain circumstances as provided in
the Contracts.
Annual Contract Fee. On each contract anniversary (or upon surrender of the
Contract) prior to the annuity date, the Company deducts an annual contract
fee of $30 from the variable contract value. After the annuity date, the
Company deducts this fee from variable annuity payments. A pro-rated
portion of the fee is deducted upon annuitization of a Contract except on a
contract anniversary.
Transfer Fee. No charge is made for transfers. However, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract year.
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted either: (a) from purchase payments as they
are received, (b) from contract value upon surrender or partial withdrawal,
(c) upon application of adjusted contract value to an annuity payment
option, or (d) upon payment of a death benefit. The Company, however,
reserves the right to deduct premium taxes at the time it pays such taxes.
Variable Account Charges
Mortality and Expense Risk Charge. The Company deducts a daily mortality
and expense risk charge to compensate it for assuming certain mortality and
expense risks. The charge is deducted from the assets of the Variable
Account at an annual rate of 1.25% (approximately 0.85% for mortality risk
and 0.40% for expense risks).
Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administration of the Contract. The charge is deducted from the assets of
the Variable Account at an annual rate of 0.15%.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the six months ended June 30, 2000, was as follows:
Money Market Fund.......................................... $22,657,817
Bond Fund.................................................. 5,616,102
Balanced Fund.............................................. 32,010,618
Growth and Income Stock Fund............................... 38,356,408
Capital Appreciation Stock Fund............................ 30,801,117
Mid-Cap Stock Fund......................................... 12,429,499
International Stock Portfolio.............................. 9,965,163
Global Governments Series.................................. 755,739
Emerging Growth Series..................................... 33,208,094
High Income Fund........................................... 6,745,478
Developing Markets Fund.................................... 1,847,493
(5) Accumulation Unit Activity from Contract Transactions
Transactions in accumulation units of each subaccount of the Variable
Account for the year ended December 31, 1999, and for the six-month period
ended June 30, 2000, 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
---------- ---------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units for contracts in accumulation period:
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
Sold 5,541,704 2,620,166 7,176,896 6,745,077 3,964,136 1,273,902
Repurchased (5,608,552) (2,598,746) (5,941,745) (5,487,008) (3,023,596) (208,406)
--------- --------- ---------- ---------- ---------- ---------
Outstanding at June 30, 2000 3,418,131 6,092,010 23,312,170 23,174,327 10,866,890 1,901,293
--------- --------- ---------- ---------- ---------- ---------
Units for annuitized contracts:
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 --
Sold 1 10 2,185 7,600 1,068 259
Repurchased (29) (106) (907) (1,710) (224) (3)
--------- --------- ---------- ---------- ---------- ---------
Outstanding at June 30, 2000 832 378 10,837 18,450 2,471 256
--------- --------- ---------- ---------- ---------- ---------
Total units outstanding at June 30, 2000 3,418,963 6,092,388 23,323,007 23,192,777 10,869,361 1,901,549
========= ========= ========== ========== ========== =========
</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, 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
Sold 2,910,608 489,346 2,856,921 1,739,770 618,414
Repurchased (2,355,733) (576,203) (2,120,230) (1,873,545) (463,132)
--------- --------- --------- --------- ---------
Outstanding at June 30, 2000 5,652,908 941,366 6,619,708 4,335,934 1,208,180
--------- --------- --------- --------- ---------
Units for annuitized contracts:
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 --
Sold 755 5 959 620 --
Repurchased (181) (12) (420) (156) --
--------- --------- --------- --------- ---------
Outstanding at June 30, 2000 2,397 160 2,823 2,689 --
--------- --------- --------- --------- ---------
Total units outstanding December 31, 1999 5,655,305 941,526 6,622,531 4,338,623 1,208,180
========= ========= ========= ========= =========
</TABLE>
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
Money Market Bond Balanced Growth & Income
Subaccount Subaccount Subaccount Stock Subaccount
-------------------- -------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value: 2000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
Beginning of period $12.12 $11.72 $12.70 $12.79 $18.97 $16.80 $26.95 $23.17
End of period 12.37 12.12 12.94 12.70 19.40 18.97 27.38 26.95
Percentage increase (decrease)
in unit value during period 2.06% 3.41% 1.89% (0.70%) 2.27% 12.92% 1.60% 16.31%
Number of units outstanding
at end of period 3,418,963 3,485,839 6,092,388 6,071,064 23,323,007 22,086,578 23,192,777 21,928,818
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Mid-Cap International Global Governments
Stock Subaccount Stock Subaccount Stock Subaccount Subaccount
-------------------- -------------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value: 2000 1999 2000 1999* 2000 1999 2000 1999
---- ---- ---- ----- ---- ---- ---- ----
Beginning of period $29.53 $23.91 $11.26 $10.00 $18.95 $14.41 $11.55 $12.02
End of period 30.28 29.53 11.92 11.26 17.93 18.95 11.64 11.55
Percentage increase (decrease)
in unit value during period 2.54% 23.50% 5.86% 12.60%** (5.38%) 31.51% 0.78% (3.91%)
Number of units outstanding
at end of period 10,869,361 9,927,977 1,901,293 835,797 5,655,305 5,099,856 941,526 1,028,390
</TABLE>
*1999 data is for the eight-month period ended December 31, 1999.
**Not annualized.
<PAGE>
<TABLE>
<CAPTION>
Emerging Growth High Income Developing Markets
Subaccount Subaccount Subaccount
--------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Unit value: 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Beginning of period $27.95 $16.04 $11.18 $10.87 $7.82 $5.17
End of period 27.12 27.95 11.03 11.18 6.44 7.82
Percentage increase (decrease)
in unit value during period (2.97%) 74.25% (1.34%) 2.85% (17.65%) 51.26%
Number of units outstanding
at end of period 6,622,531 5,885,301 4,338,623 4,471,934 1,208,180 1,052,898
</TABLE>
