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File Number 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MINNESOTA MUTUAL VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
The Minnesota Mutual Life Insurance Company
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(Name of Depositor)
400 Robert Street North, St. Paul, Minnesota 55101-2098
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(Address of Depositor's Principal Executive Offices) (Zip Code)
(612) 298-3500
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(Depositor's Telephone Number, Including Area Code)
Dennis E. Prohofsky, Esq. Copy to:
Senior Vice President, General Counsel J. Sumner Jones, Esq.
and Secretary Jones & Blouch L.L.P.
The Minnesota Mutual Life Insurance Company 1025 Thomas Jefferson Street, N.W.
400 Robert Street North Suite 405 West
St. Paul, Minnesota 55101-2098 Washington, D.C. 20007
(Name and Address of Agent for Service)
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the 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.
Pursuant to Regulation 270.24f-2 under the Investment Company Act of 1940,
Registrant elects to register an indefinite number of its commons shares under
the Securities Act of 1933.
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
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Minnesota Mutual Variable Annuity Account
Cross Reference Sheet to Prospectus
Form N-4
Item Number Caption in Prospectus
1. Cover Page
2. Special Terms
3. Questions and Answers About the Variable Annuity Contract
4. Condensed Financial Information; Performance Data
5. General Descriptions
6. Contract Charges
7. Description of the Contract
8. Description of the Contract; Annuity Payments and Options
9. Description of the Contract; Death Benefits
10. Description of the Contract; Purchase Payments and Value of
the Contract
11. Description of the Contract; Redemptions
12. Federal Tax Status
13. Not Applicable
14. Table of Contents of the Statement of Additional Information
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VOYAGEUR HARBOUR ANNUITY PROSPECTUS
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
MINNESOTA MUTUAL VARIABLE ANNUITY ACCOUNT
("VARIABLE ACCOUNT"), A SEPARATE ACCOUNT OF
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
The individual variable annuity contract offered by this Prospectus is designed
for use in connection with personal retirement plans, some of which may qualify
for federal income tax advantages available under sections 401, 403, 408 or 457
of the Internal Revenue Code. It may also be used apart from a qualified plan.
The contract is a Flexible Payment Variable Annuity Contract (the "Contract").
The initial purchase payment made to the Contract must be in an amount of at
least $2,000 and any subsequent purchase payment must be in an amount of at
least $500. Other minimums exist for certain automatic payment plans.
The owner of a Contract may elect to have contract values accumulated on a
completely variable basis, on a completely fixed basis (as part of Minnesota
Mutual's Fixed Account) or on a combination fixed and variable basis. To the
extent that contract values are accumulated on a variable basis, they will be a
part of the Variable Account. The Variable Account invests its assets in shares
of MIMLIC Series Fund, Inc. (the "MIMLIC Fund") or the Federated Insurance
Series ("Federated Funds"). The variable accumulation value of the Contract and
the amount of each variable annuity payment will vary in accordance with the
performance of the Portfolio of the MIMLIC Fund or the Federated Fund selected
by the contract owner. The contract owner bears the entire investment risk for
any amounts allocated to the Portfolios of the Fund. Except as specifically
noted herein and as set forth under the caption "Fixed Account Guarantee Period
Options", in this Prospectus, this Prospectus describes only the variable
portion of the Contract.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in the Variable Account, and it should be
read and kept for future reference. A Statement of Additional Information,
bearing the same date, which contains further Contract information, has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. A copy of the Statement of Additional
Information may be obtained without charge by calling (612) 298-3500, or by
writing Minnesota Mutual at its principal office at Minnesota Mutual Life
Center, 400 Robert Street North, St. Paul, Minnesota 55101-2098. A Table of
Contents for the Statement of Additional Information appears in this Prospectus
on page 30.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
MINNESOTA MUTUAL
The Minnesota Mutual Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101-2098
Telephone: (612) 298-3500
The date of this document and the Statement of Additional Information is: XXXX
xx, 1996
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Special Terms............................................................. 3
Questions and Answers About the Contract.................................. 5
Expense Table............................................................. 8
Condensed Financial Information........................................... 10
Performance Data.......................................................... 10
General Descriptions...................................................... 11
The Minnesota Mutual Life Insurance Company........................... 11
Variable Account...................................................... 11
MIMLIC Series Fund, Inc............................................... 11
Federated Funds....................................................... 13
Additions, Deletions or Substitutions................................. 13
Contract Charges.......................................................... 14
Sales Charges......................................................... 14
Mortality and Expense Risk Charges.................................... 15
Administrative Charge................................................. 16
Contract Fee.......................................................... 16
Premium Taxes......................................................... 16
Voting Rights............................................................. 17
Description of the Contract............................................... 17
General Provisions.................................................... 17
Annuity Payments and Annuity Payment Options.......................... 20
Death Benefits........................................................ 23
Purchase Payments, Transfers and Value of the Contract................ 23
Redemptions........................................................... 26
Fixed Account Guarantee Period Options.................................... 27
Federal Tax Status........................................................ 29
Statement of Additional Information....................................... 33
Appendix A--Illustration of Variable Annuity Payment Values............... 34
Appendix B--Illustration of Market Value Adjustments...................... 36
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THE PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
2
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT: a measure of the Contract's value in each sub-account of the
Variable Account.
ACCUMULATION VALUE: the sum of values under a Contract in the Fixed Account
and/or in the Variable Account. In the Fixed Account, the value is the sum of
the values in each Guarantee Period. In the Variable Account, it is the total
value of the accumulation units in each sub-account. The value in each
sub-account shall be determined separately.
AGE: the age of a person at nearest birthday.
ANNUITANT: the person who may receive lifetime benefits under the Contract.
ANNUITY: a series of payments for life; for life with a minimum number of
payments guaranteed; for the joint lifetime of the annuitant and another person
and thereafter during the lifetime of the survivor; or for a period certain.
Annuity payments will be due and payable only on the first day of a calendar
month.
ANNUITY UNIT: a unit of measurement used to calculate variable annuity payments.
BENEFICIARY: the person or persons or entity designated to receive death
benefits payable under the Contract. Prior to the commencement of annuity
payments, the beneficiary is the first person on the following list who is alive
on the date of the contract owner's death: the joint owner, the primary (Class
1) beneficiary, the secondary (Class 2) beneficiary, or, if none of the above is
alive, to the executor or administrator of the owner's estate.
CODE: the Internal Revenue Code of 1986, as amended.
CONTRACT OWNER: the owner of the Contract, which could be the annuitant, a
corporation or trust, or any other person acting on behalf of the annuitant.
CONTRACT YEAR: a period of one year beginning with the Contract date or a
Contract anniversary.
FIXED ACCOUNT: a non-unitized separate account of the Company providing
Guarantee Periods of different durations. Amounts allocated to the Guarantee
Periods of the Fixed Account are credited with interest rates guaranteed by us
for the duration of the Guarantee Period.
FIXED ANNUITY PAYMENTS: annuity payments payable from the General Account, with
guaranteed payments of pre-established dollar amounts during the payment period.
FUND: the mutual fund or separate investment portfolio within a series mutual
fund which we have designated as an eligible investment for the Variable
Account.
GENERAL ACCOUNT: all of our assets other than those in the Variable Account, the
Fixed Account or in other separate accounts established by us.
GUARANTEE PERIOD: a period, of one or more years, for which the current interest
rate is guaranteed.
JOINT OWNER: persons who have equal ownership right in the Contract, both of
which must authorize any exercising of those ownership rights unless otherwise
allowed by us. Any joint owner must be the spouse of the other joint owner.
MARKET VALUE ADJUSTMENT: a positive or negative adjustment in the Fixed Account
value that we may make if such value is paid out more than 30 days before or
after the Renewal Date of the Guarantee Period in which it was being held.
PLAN: a tax-qualified employer pension, profit-sharing, or annuity purchase plan
under which benefits are to be provided by the variable annuity Contract
described herein.
PURCHASE PAYMENTS: amounts paid to us as consideration for the benefits provided
by the Contract.
RENEWAL DATE: the first day following the last day of any Guarantee Period in
the Fixed Account.
SURRENDER VALUE: the amount payable to the Owner on surrender of this Contract.
It is equal to the accumulation value after the application of all applicable
adjustments and deduction of all applicable charges.
VALUATION DATE: each date on which a Fund is valued.
VALUATION PERIOD: the period between successive valuation dates measured from
the time of one determination to the next.
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VARIABLE ANNUITY PAYMENTS: annuity payments payable from the Variable Account
with payments which may increase or decrease in dollar amount to reflect the
investment experience of the sub-accounts of the Variable Account. The dollar
amount of each Annuity Payment is not guaranteed.
VARIABLE ACCOUNT: a separate investment account called the Minnesota Mutual
Variable Annuity Account. This separate account was established by us for this
class of Contract under Minnesota law. The separate account is composed of
several sub-accounts. The assets of this account are not subject to claims
arising out of any other business of ours.
WE, OUR, US: The Minnesota Mutual Life Insurance Company.
YOU, YOUR: the Contract Owner.
4
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QUESTIONS AND ANSWERS ABOUT THE CONTRACT
WHAT IS AN ANNUITY?
An annuity is a series of payments for life; for life with a minimum number of
payments guaranteed; for the joint lifetime of the annuitant and another person
and thereafter during the lifetime of the survivor; or for a period certain. An
annuity with payments which are guaranteed as to amount during the payment
period is a fixed annuity. An annuity with payments which vary during the
payment period in accordance with the investment experience of a separate
account is called a variable annuity.
WHAT IS THE CONTRACT OFFERED BY THIS PROSPECTUS?
The Contract is an individual, combination fixed and variable, deferred annuity
contract issued by us which provides for monthly annuity payments. These
payments may begin at a future date elected by the owner of the Contract.
Purchase payments received by us under a Contract are allocated either to our
Variable Account or to the Fixed Account, as specified by the owner of the
Contract. In the Fixed Account, purchase payments receive interest, which may be
increased or decreased by a market value adjustment in the event of early
termination; in the Variable Account, purchase payments are invested in shares
of one or more Portfolios of MIMLIC Series Fund, Inc. or the Federated Funds. In
the Variable Account amounts receive no interest or principal guarantees and the
owner of the Contract bears the entire investment risk.
This Prospectus describes only the variable aspects of the Contract, except
where fixed aspects are specifically mentioned. Please look to the language of
the Contract for a description of the fixed portion of the Contract and to the
heading "Fixed Account Guarantee Period Options" in this Prospectus. For more
information on the Contract, see the heading "Description of the Contract" in
this Prospectus.
WHAT TYPE OF ANNUITY IS THE CONTRACT?
We offer a single type of contract which is a flexible payment, deferred
variable annuity contract.
WHAT INVESTMENT OPTIONS ARE AVAILABLE FOR THE VARIABLE ACCOUNT?
Purchase payments allocated to the Variable Account are directed to one or more
of the sub-accounts of the Variable Account.
The sub-accounts currently invest in shares of the following:
The Growth Portfolio of the MIMLIC Series Fund, Inc.
The Bond Portfolio of the MIMLIC Series Fund, Inc.
The Money Market Portfolio of the MIMLIC Series Fund, Inc.
The Asset Allocation Portfolio of the MIMLIC Series Fund, Inc.
The Mortgage Securities Portfolio of the MIMLIC Series Fund, Inc.
The Index 500 Portfolio of the MIMLIC Series Fund, Inc.
The Capital Appreciation Portfolio of the MIMLIC Series Fund, Inc.
The International Stock Portfolio of the MIMLIC Series Fund, Inc.
The Small Company Portfolio of the MIMLIC Series Fund, Inc.
The Value Stock Portfolio of the MIMLIC Series Fund, Inc.
The Global Bond Portfolio of the MIMLIC Series Fund, Inc.
The Small Company Value Portfolio of the MIMLIC Series Fund, Inc.
And, with respect to the Federated Funds:
The Federated American Leaders Fund II of the Federated Insurance Series.
The Federated High Income Bond Fund II of the Federated Insurance Series.
A brief explanation of the objectives of each investment option may be found
in this Prospectus under the heading "MIMLIC Series Fund, Inc." and "Federated
Funds." Additional information concerning the investment objectives and policies
of the MIMLIC Fund and the Federated Funds can be found in the current
prospectuses for MIMLIC Series Fund, Inc. and Federated Insurance Series,
respectively, which prospectuses accompany this Prospectus. The prospectuses for
the MIMLIC Fund and the Federated Funds, (collectively referred to herein as
"Funds"), may include descriptions of portfolios that are not available under
the Contract.
CAN YOU CHANGE THE PORTFOLIO SELECTED?
Yes. The owner may change the allocation of future purchase payments by giving
us written notice or a telephone call notifying us of the change. And before
annuity payments begin, the owner may transfer all or a part of the accumulation
value from one sub-account to another or among the sub-accounts. After annuity
payments begin, subject to some
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restrictions, amounts held as annuity reserves may be transferred among the
variable annuity sub-accounts. Annuity reserves may also be transferred from a
variable annuity to a fixed annuity during the annuity period. Annuity reserves
can not be transferred from a fixed annuity to a variable annuity.
WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACT?
There may be a deferred sales charge, an annual contract fee and a transaction
charge. There are also certain charges which are made directly to the Variable
Account.
WHAT IS THE DEFERRED SALES CHARGE?
A deferred sales charge may be assessed upon the withdrawal or surrender of
purchase payments, including withdrawals or surrenders made in connection with
the payment of certain death benefits and the application of amounts to provide
annuity payments for a fixed period of less than ten years. The deferred sales
charge is applied only to withdrawals or surrenders of purchase payments
received by us within seven years of the date of the withdrawal or surrender.
The deferred sales charge decreases during the seven year period from the time
that each purchase payment was made beginning at 6% and decreasing to 0% after
the end of seven years. For the purpose of determining the amount of the
deferred sales charge, purchase payments are deemed withdrawn on a first-in,
first-out basis.
ARE THERE CIRCUMSTANCES WHERE THE DEFERRED SALES CHARGE WILL NOT APPLY?
Yes. The deferred sales charge will not apply to: (a) Amounts withdrawn in any
calendar year that are less than or equal to the greater of: (1) earnings
accumulated in the Contract; or (2) 10% of the sum of purchase payments not
previously withdrawn that have been received by us within seven years of the
date of withdrawal; (b) amounts withdrawn to pay the contract fee; (c) amounts
payable as a death benefit upon the death of the owner or the annuitant, if
applicable, prior to the 75th birthday of the owner or annuitant; (d) amounts
applied to provide annuity payments under an annuity payment option based on a
lifetime, joint lifetimes, or a fixed period of at least ten years; (e) a
surrender or withdrawal requested any time after the first contract anniversary
when benefits are payable due to a confinement in a hospital or medical care
facility; or (f) a surrender or withdrawal requested any time after the first
contract anniversary in the event that benefits are payable because of the
diagnosis of a terminal illness. For more information, including a definition of
terms, see the heading "Sales Charges," in this Prospectus.
WHAT IS THE ANNUAL CONTRACT FEE?
The contract fee is an annual charge deducted from the Accumulation Value of the
Contract. It is taken only in contract years where the Accumulation Value of the
Contract on the contract anniversary is less than $50,000. The charge applied
will be deducted on the contract anniversary from the first available
sub-account or fixed account guarantee period accumulation value in the
following order: (1) money market sub-account; (2) pro-rata among the remaining
variable sub-accounts; (3) the largest accumulation value of the fixed account
guarantee periods.
ARE THERE ANY OTHER CHARGES IN THE CONTRACT?
Yes. We reserve the right to make a transaction charge, not to exceed $25, for
each transfer when the frequency of transfer requests exceeds one in any
calendar month. Currently, we do not apply this charge.
In addition, deductions for any applicable premium taxes may also be made
(currently such taxes range from 0.0% to 3.5%) depending upon applicable law.
WHAT ARE THE VARIABLE ACCOUNT CHARGES?
The charges taken from the Variable Account are the mortality risk charge, the
expense risk charge and the administrative charge.
We deduct from the net asset value of the Variable Account an amount, computed
daily, equal to an annual rate of 1.25% for mortality and expense risk
guarantees. This total represents a charge of .80% for our assumption of
mortality risks and .45% for our assumption of expense risks. We reserve the
right to increase the charge for the assumption of expense risks to not more
than .60%. If this charge is increased to this maximum amount, then the total of
the mortality risk and expense risk charge would be 1.40% at an annual rate. Any
such increase would be subject to the approval of the Securities and Exchange
Commission.
The administrative charge is to compensate us for the administrative expenses
incurred by us for contracts of this class. This amount, computed daily, is
equal to an annual rate of .15% of the net asset value of the Variable Account
for contract administration. We reserve
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the right to increase the charge to not more than an annual rate of .40%.
For more information on charges, see the heading "Contract Charges," in this
Prospectus.
CAN YOU MAKE WITHDRAWALS FROM THE CONTRACT?
Yes. The owner may make withdrawals of the accumulation value of the Contract
before annuity payments begin. Withdrawals must be pursuant to the written
request of the owner or telephone instructions. A withdrawal must be in an
amount of at least $250.
Withdrawals are generally subject to the deferred sales charge. However, there
are some exceptions, defined in this summary and under the heading "Sales
Charges," in this Prospectus. In addition, an income and penalty tax may be
incurred upon withdrawals from the Contract in certain circumstances. For more
information, see the heading "Federal Tax Status" in this Prospectus. Systematic
withdrawal plans of a fixed amount or over a fixed period may also be available.
DO YOU HAVE A RIGHT TO CANCEL THE CONTRACT?
Yes. The owner may cancel the Contract any time within ten days of receipt of
the Contract by returning it to us or your representative. In some states, such
as California, the free look period is extended to 30 days' time for Contracts
issued or delivered to owners that are 60 years of age or older at the time of
delivery. These rights are subject to change and may vary among the states.
IS THERE A GUARANTEED DEATH BENEFIT?
If the owner dies before annuity payments have started, we will pay the death
benefit of the Contract to the beneficiary. If the owner of this Contract is
other than a natural person, such as a trust or other similar entity, we will
pay the death benefit to the beneficiary on the death of the annuitant, if death
occurs prior to the date that annuity payments have started.
If the owner or the annuitant, if applicable, dies prior to his or her 75th
birthday, the death benefit is the greater of: (a) Accumulation Value; (b) the
sum of purchase payments adjusted for any amounts previously withdrawn; or (c)
the last stepped-up value prior to the date of death, adjusted for any purchase
payments and withdrawals occurring thereafter.
If the owner or the annuitant, if applicable, dies on or after his or her 75th
birthday, the death benefit is the greater of: (a) Surrender Value; or (b) the
last stepped-up value prior to the date of death, adjusted for any withdrawals
occurring thereafter.
The stepped-up value will be determined on each contract anniversary that is
an exact multiple of five and is prior to the 75th birthday of the owner or the
annuitant, if applicable. The stepped-up value is the greater of: (a)
Accumulation Value on that contract anniversary; or (b) the previous stepped-up
value. Where joint owners exist, there will be no further stepped-up values
after the 75th birthday of the oldest joint owner. After the death of the first
joint owner, stepped-up values may resume on the next contract anniversary that
is an exact multiple of five providing the surviving joint owner continues the
Contract and has not yet reached his or her 75th birthday. For examples of the
calculation of the guaranteed death benefit, see the heading "Death Benefits,"
in this Prospectus.
The value of the death benefit will be determined as of the valuation date
coincident with or next following the day we receive due proof of death and all
related information necessary to make payment at our home office.
If the annuitant dies after annuity payments have started, we will pay
whatever amount may be required by the terms of the annuity payment option
selected. The remaining value in the Contract must be distributed at least as
rapidly as under the option in effect at the annuitant's death.
WHAT ANNUITY OPTIONS ARE AVAILABLE?
The Contract specifies several annuity options. Each annuity option may be
elected as either a variable annuity or fixed annuity or a combination of the
two. The specified annuity options are: a life annuity; a life annuity with a
period certain of either 120 months, 180 months or 240 months; and, a joint and
last survivor annuity. Other annuity options may be available as may be agreed
between the owner and us.
WHAT VOTING RIGHTS DO YOU HAVE?
Contract owners and variable annuitants will be able to direct us as to how to
vote shares of the underlying Portfolios of the Fund held for their Contracts.
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EXPENSE TABLE
The tables shown below are to assist a contract owner in understanding the costs
and expenses that a Contract will bear directly or indirectly. For more
information on Contract costs and expenses, see the Prospectus heading "Contract
Charges" and the information immediately following. The table does not reflect
deductions for any applicable premium taxes which may be made from each purchase
payment depending upon the applicable law. Surrender amounts in years shown
reflect the contract owner's ability to withdraw, without the imposition of the
deferred sales charge, an amount in any calendar year which is less than or
equal to the greater of: (a) earnings accumulated in the Contract; or (b) 10% of
the sum of purchase payments not previously withdrawn that have been received by
us within seven years of the date of withdrawal. The tables show the expenses of
the Funds after expense reimbursement.
The following Contract expense information is intended to illustrate the
expenses of the variable annuity contracts. All expenses shown are rounded to
the nearest dollar. The information contained in the tables must be considered
with the narrative information which immediately follows them in this heading.
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
CONTRACT OWNER TRANSACTION EXPENSE
<TABLE>
<S> <C>
Deferred Sales Charge (as a percentage of amount 6%
surrendered)............................................... decreasing by
increments applied
to each purchase
payment over a
period of seven
years from the date
of each purchase
payment
Contract Fee lesser of $35 of 2% of accumulation value....... $35
(applied only to a
Contract with an
accumulation value
of less than
$50,000)
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Administrative Charge........................................ .15%
Mortality and Expense Risk Fees.............................. 1.25%
-----
Total Separate Account Annual Expenses................... 1.40%
-----
-----
</TABLE>
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MIMLIC FUND AND FEDERATED FUNDS ANNUAL EXPENSES
(As a percentage of average net assets for the described fund.)
<TABLE>
<CAPTION>
INVESTMENT MANAGEMENT OTHER FUND OPERATING TOTAL FUND ANNUAL
FEES EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
REIMBURSEMENTS) REIMBURSEMENTS) REIMBURSEMENTS)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
MIMLIC Series Fund, Inc.:
Growth Portfolio.......................... 0.50% 0.05% 0.55%
Bond Portfolio............................ 0.50% 0.08% 0.58%
Money Market Portfolio.................... 0.50% 0.14% 0.64%
Asset Allocation Portfolio................ 0.50% 0.05% 0.55%
Mortgage Securities Portfolio............. 0.50% 0.08% 0.58%
Index 500 Portfolio....................... 0.40% 0.07% 0.47%
Capital Appreciation Portfolio............ 0.75% 0.05% 0.80%
International Stock Portfolio............. 0.78% 0.26% 1.04%
Small Company Portfolio................... 0.75% 0.09% 0.84%
Value Stock Portfolio (1)................. 0.75% 0.14% 0.89%
Small Company Value Portfolio (2)......... 0.75% 0.15% 0.90%
Global Bond Portfolio (2)................. 0.75% 0.50% 1.25%
Federated High Income Bond Fund II (3)........ 0.00% 0.80% 0.80%
Federated American Leaders
Fund II (3).................................. 0.00% 0.85% 0.85%
</TABLE>
(1) Minnesota Mutual voluntarily absorbed certain other fund operating expenses
of the Value Stock Portfolio for the year ended December 31, 1995. If this
portfolio had been charged for these expenses, the ratio of total annual
fund expenses to average daily net assets would have been .95%. It is
Minnesota Mutual's present intention to waive other fund operating expenses
during the current fiscal year which exceed, as a percentage of average
daily net assets, .15%. Minnesota Mutual also reserves the option to reduce
the level of other fund operating expenses which it will voluntarily
absorb.
(2) Because the portfolio has only recently commenced operations, the figure
for other fund operating expenses has been based on estimates for the
current fiscal year. Minnesota Mutual has voluntarily agreed to absorb
certain other fund operating expense for the Small Company Value and Global
Bond Portfolios for the year ending December 31, 1997. If the Small Company
Value and Global Bond Portfolios were to be charged for these expenses, it
is estimated that the ratio of total fund annual expenses to average daily
net assets would be .98% and 2.09%, respectively.
(3) Federated Advisers voluntarily absorbed all of its investment management
fee, which before reimbursement were .60% and .75%, respectively, and
certain other fund operating expenses of the Federated High Income Bond
Fund II and the Federated American Leaders II for the year ended December
31, 1995. If these portfolio had been charged for these expenses, the ratio
of total fund annual expenses to average daily net assets would have been
4.20% and 2.21%, respectively. It is Federated Advisers' present intention
to waive all its investment management fee and other fund operating in
excess of, as a percentage of average daily net assets, .80% and .85%,
respectively. Federated Advisers also reserves the option to reduce the
level of other expenses which it will voluntarily absorb.
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CONTRACT OWNER EXPENSE EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
IF YOU IF YOU
SURRENDERED ANNUITIZE FOR A
YOUR CONTRACT LIFETIME INCOME
AT THE END OF AT THE END OF
THE APPLICABLE THE APPLICABLE
TIME PERIOD TIME PERIOD*
---------------- ------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
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<S> <C> <C> <C> <C>
MIMLIC Series Fund, Inc.:
Growth Portfolio......................... $95 $174 $ 40 $125
Bond Portfolio........................... $95 $174 $ 41 $126
Money Market Portfolio................... $96 $176 $ 41 $128
Asset Allocation Portfolio............... $95 $174 $ 40 $125
Mortgage Securities Portfolio............ $95 $174 $ 41 $126
Index 500 Portfolio...................... $94 $171 $ 40 $123
Capital Appreciation Portfolio........... $97 $180 $ 43 $132
International Stock Portfolio............ $100 $187 $ 45 $139
Small Company Portfolio.................. $98 $182 $ 43 $133
Value Stock Portfolio.................... $98 $183 $ 44 $135
Small Company Value Portfolio............ $98 $183 $ 44 $135
Global Bond Portfolio.................... $101 $193 $ 47 $145
Federated High Income Bond Fund II........... $97 $180 $ 43 $132
Federated American Leaders Fund II........... $98 $182 $ 43 $134
</TABLE>
*If you annuitize for a fixed period of less than ten years, the expenses you
would pay would be the same as if you surrendered your contract.
The examples contained in the table should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown.
- ------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
No condensed financial information is included in this Prospectus for the
Variable Account because no variable annuity contracts of this
class utilizing that account have been sold prior to the date of this
Prospectus.
- ------------------------------------------------------------------------
PERFORMANCE DATA
From time to time the Variable Account may publish advertisements containing
performance data relating to its sub-accounts. In the case of the Money Market
sub-account, the Variable Account will publish yield or effective yield
quotations for a seven-day or other specified period. In the case of the other
sub-accounts, performance data will consist of average annual total return
quotations for one, five and ten year periods or, if less, for the period since
the sub-account first became available pursuant to this or other variable
annuity contracts offered by the Company. The Money Market sub-account may also
quote such average annual total return figures. Performance figures used by the
Variable Account are based on historical information of the sub-accounts for
specified periods, and the figures are not intended to suggest that such
performance will continue in the future. Performance figures of the Variable
Account will reflect only charges pursuant to the terms of the Contract offered
by this Prospectus. The various performance figures used in Variable Account
advertisements relating to the Contract described in this Prospectus are
summarized below. More detailed information on the computations is set forth in
the Statement of Additional Information.
MONEY MARKET SUB-ACCOUNT YIELD. Yield quotations for the Money Market
sub-account are based on the income generated by an investment in the
sub-account over a specified period, usually seven days. The figures are
"annualized," that is, the amount of income generated by the investment during
the period is assumed to be generated over a 52-week period and is shown as a
percentage of the investment. Effective yield quotations are
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<PAGE>
calculated similarly, but when annualized the income earned by an investment in
the sub-account is assumed to be reinvested. Effective yield quotations will be
slightly higher than yield quotations because of the compounding effect of this
assumed reinvestment. Yield and effective yield figures quoted by the sub-
account will not reflect the deduction of any applicable deferred sales charges.
TOTAL RETURN FIGURES. Average annual total return figures will show for the
specified period the average annual rate of return required for an initial
investment of $1,000 to equal the surrender value of that investment at the end
of the period. The surrender value will reflect the deduction of the deferred
sales charge applicable to the Contract and to the length of the period
advertised. Such average annual total return figures may also be accompanied by
average annual total return figures, for the same or other periods, which do not
reflect the deduction of any applicable deferred sales charges.
- ------------------------------------------------------------------------
GENERAL DESCRIPTIONS
A. THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
We are a mutual life insurance company organized in 1880 under the laws of
Minnesota. Our home office is at 400 Robert Street North, St. Paul, Minnesota
55101-2098, telephone: (612) 298-3500. We are licensed to do a life insurance
business in all states of the United States (except New York where we are an
authorized reinsurer), the District of Columbia, Canada and Puerto Rico.
B. VARIABLE ACCOUNT
A separate account called the Minnesota Mutual Variable Annuity Account was
established on September 10, 1984, by our Board of Trustees in accordance with
certain provisions of the Minnesota insurance law. The separate account is
registered as a "unit investment trust" with the Securities and Exchange
Commission under the Investment Company Act of 1940, but such registration does
not signify that the Securities and Exchange Commission supervises the
management, or the investment practices or policies, of the Variable Account.
The separate account meets the definition of a "separate account" under the
federal securities laws.
The Minnesota law under which the Variable Account was established provides
that the assets of the Variable Account shall not be chargeable with liabilities
arising out of any other business which we may conduct, but shall be held and
applied exclusively to the benefit of the holders of those variable annuity
contracts for which the separate account was established. The investment
performance of the Variable Account is entirely independent of both the
investment performance of our General Account and of any other separate account
which we may have established or may later establish. All obligations under the
Contract are general corporate obligations of Minnesota Mutual.
The Variable Account currently has a number of sub-accounts to which contract
owners may allocate purchase payments. Each sub-account invests in shares of the
Funds. Additional sub-accounts may be added at our discretion. Not all of the
sub-accounts of the Variable Account are available to the Contract.
C. MIMLIC SERIES FUND, INC.
The Variable Account currently invests in MIMLIC Series Fund, Inc. (the "MIMLIC
Fund"), a mutual fund of the series type which is advised by MIMLIC Asset
Management Company. The MIMLIC Fund is registered with the Securities and
Exchange Commission as a diversified, open-end management investment company,
but such registration does not signify that the Commission supervises the
management, or the investment practices or policies, of the MIMLIC Fund. The
MIMLIC Fund issues its shares, continually and without sales charge, only to us
and our separate accounts, which currently include the Variable Account,
Variable Fund D, the Variable Life Account, the Group Variable Annuity Account
and the Variable Universal Life Accounts. Shares are sold and redeemed at net
asset value. Not all of the Portfolios of the MIMLIC Fund are available for use
in the Contract.
MIMLIC Asset Management Company ("MIMLIC Management"), a subsidiary of
Minnesota Mutual, acts as investment adviser for the MIMLIC Fund and its
Portfolios. Winslow Capital Management, Inc., a Minnesota corporation with
principal offices in Minneapolis, Minnesota, has been retained under an
investment sub-advisory agreement with MIMLIC Asset Management Company to
provide investment advice and, in general, conduct the management and investment
program of the Capital Appreciation Portfolio.
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<PAGE>
Templeton Investment Counsel, Inc., a Florida corporation with principal offices
in Fort Lauderdale, has been retained under an investment sub-advisory agreement
to provide investment advice to the International Stock Portfolio of the MIMLIC
Fund. Voyageur Fund Managers, Inc.("Voyageur Managers"), a Minnesota corporation
with principal offices in Minneapolis, Minnesota has been retained under an
investment sub-advisory agreement to provide investment advice to the Growth
Portfolio of the MIMLIC Fund. Voyageur Managers and Lazard London International
Investment Management Limited, an entity organized under the laws of the United
Kingdom, with principal offices in London, England, have been retained under an
investment sub-advisory agreements to provide investment advice to the Global
Bond Portfolio.
The investment objectives and certain policies of the Portfolios of the MIMLIC
Fund which are available in the Contract are as follows:
The Growth Portfolio seeks the long-term accumulation of capital. Current
income, while a factor in portfolio selection, is a secondary objective. The
Growth Portfolio will invest primarily in common stocks and other equity
securities. Common stocks are more volatile than debt securities and involve
greater investment risk.
The Bond Portfolio seeks as high a level of long-term total rate of return
as is consistent with prudent investment risk. A secondary objective is to
seek preservation of capital. The Bond Portfolio will invest primarily in
long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.
The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the stability of capital. The Money Market
Portfolio will invest in money market instruments and other debt securities
with maturities not exceeding one year. The return produced by these
securities will reflect fluctuation in short-term interest rates.
The Asset Allocation Portfolio seeks as high a level of long-term total
rate of return as is consistent with prudent investment risk. The Asset
Allocation Portfolio will invest in common stocks and other equity
securities, bonds and money market instruments. The Asset Allocation
Portfolio involves the risks inherent in stocks and debt securities of
varying maturities and the risk that the Portfolio may invest too much or
too little of its assets in each type of security at any particular time.
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will follow a policy of investment primarily
in mortgage-related securities. Prices of mortgage-related securities will
tend to rise and fall inversely with the rise and fall of the general level
of interest rates.
The Index 500 Portfolio seeks investment results that correspond generally
to the price and yield performance of the common stocks included in the
Standard & Poor's Corporation 500 Composite Stock Price Index (the "Index").
It is designed to provide an economical and convenient means of maintaining
a broad position in the equity market as part of an overall investment
strategy. All common stocks, including those in the Index, involve greater
investment risk than debt securities. The fact that a stock has been
included in the Index affords no assurance against declines in the price or
yield performance of that stock.
The Capital Appreciation Portfolio seeks growth of capital. Investments
will be made based upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital growth.
Because of the market risks inherent in any equity investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value.
The International Stock Portfolio seeks long-term capital growth. In
pursuit of this objective the International Stock Portfolio will follow a
policy of investing in stocks issued by companies, large and small, and debt
obligations of companies and governments outside the United States. Current
income will be incidental to the objective of capital growth. The Portfolio
is designed for persons seeking international diversification. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are
in addition to the usual risks inherent in domestic investments.
The Small Company Portfolio seeks long-term accumulation of capital. In
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<PAGE>
pursuit of this objective, the Small Company Portfolio will follow a policy
of investing primarily in common or preferred stocks issued by small
companies, defined in terms of either market capitalization or gross
revenues. Investments in small companies usually involve greater investment
risks than fixed income securities or corporate equity securities generally.
Small companies will typically have a market capitalization of less than
$1.5 billion or annual gross revenues of less than $1.5 billion.
The Value Stock Portfolio seeks the long-term accumulation of capital. In
pursuit of this objective, the Value Stock Portfolio will follow a policy of
investing primarily in the equity securities of companies which, in the
opinion of the adviser, have market values which appear low relative to
their underlying value or future earnings and growth potential. As it is
anticipated that the Portfolio will consist in large part of dividend-paying
common stocks, the production of income will be a secondary objective of the
Portfolio.
The Global Bond Portfolio seeks to maximize total return, consistent with
preservation of capital and prudent investment management. In pursuit of
this objective, the Portfolio will attempt to achieve its investment
objective by investing primarily in debt securities issued by issuers
located anywhere in the world.
The Small Company Value Portfolio seeks the long-term accumulation of
capital. In pursuit of this objective, the Portfolio will follow a policy of
investing primarily in the equity securities of small companies, defined in
terms of their market capitalization or gross revenues, which appear to have
market values which are low relative to their underlying value or future
earning and growth potential.
A prospectus for the MIMLIC Fund is attached to this Prospectus. A person
should carefully read the MIMLIC Fund's prospectus before investing in the
Contract.
D. FEDERATED FUNDS
In addition to the investments in the MIMLIC Fund, the Variable Account invests
in the Federated American Leaders Fund II (an equity growth and income fund) and
the Federated High Income Bond Fund II (a bond fund investing in lower-rated
corporate bonds), both of which are diversified Portfolios of the Federated
Insurance Series, a mutual fund of the series type (the "Federated Funds").
The investment objectives and certain policies of the Federated Funds
available under the Contract are as follows:
The Federated American Leaders Fund II seeks to achieve long-term growth
of capital, with a secondary objective to provide income. It is a
diversified investment portfolio of the Federated Insurance Series, pursues
its investment objectives by investing, under normal circumstances, at least
65% of its total assets in common stock of "blue-chip" companies, selected
by the adviser as top-quality, established growth companies.
The Federated High Income Bond Fund II seeks high current income. It is a
diversified investment portfolio of the Federated Insurance Series, pursues
this objective by investing at least 65% of its assets in lower-rated fixed
income bonds. These securities, which are usually not in the three highest
rating categories of the nationally recognized statistical rating
organizations, have speculative characteristics. While they usually offer
high yields than higher-rated securities there is more risk associated with
these investments because of reduced creditworthiness and increased risk of
default.
Prospectuses for the Federated Funds are attached to this Prospectus. A person
should carefully read the Federated Funds' prospectuses before investing in the
Contract.
E. ADDITIONS, DELETIONS OR SUBSTITUTIONS
We retain the right, subject to any applicable law, to make substitutions with
respect to the investments of the sub-accounts of the Variable Account. If
investment in a fund should no longer be possible or if we determine it becomes
inappropriate for contracts of this class, we may substitute another fund for a
sub-account. Substitution may be with respect to existing accumulation values,
future purchase payments and future annuity payments.
While we have the right to make certain changes to the Variable Account,
assets in any separate account, may not be transferred by sale, exchange,
substitution or otherwise from one account to another except, where required,
with the approval of the Commissioner of Insurance of the state where the
Contract is delivered.
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<PAGE>
We may also establish additional sub-accounts in the Variable Account and we
reserve the right to add, combine or remove any sub-accounts of the Variable
Account. Each additional sub-account will purchase shares in a new portfolio or
mutual fund. Such sub-accounts may be established when, in our sole discretion,
marketing, tax, investment or other conditions warrant such action. Similar
considerations will be used by us should there be a determination to eliminate
one or more of the sub-accounts of the Variable Account. The addition of any
investment option will be made available to existing contract owners on such
basis as may be determined by us.
We also reserve the right, when permitted by law, to de-register the Variable
Account under the Investment Company Act of 1940, to restrict or eliminate any
voting rights of the contract owners, and to combine the Variable Account with
one or more of our other separate accounts.
Shares of the Portfolios of the MIMLIC Fund are also sold to other of our
separate accounts, which are used to receive and invest premiums paid under our
variable life policies, a practice known as mixed funding. It is conceivable
that in the future it may be disadvantageous for variable life insurance
separate accounts and variable annuity separate accounts to invest in the MIMLIC
Fund simultaneously. Although neither Minnesota Mutual nor the MIMLIC Fund
currently foresees any such disadvantages either to variable life insurance
policy owners or to variable annuity contract owners, the MIMLIC Fund's Board of
Directors intends to monitor events in order to identify any material conflicts
between such policy owners and contract owners and to determine what action, if
any, should be taken in response thereto. Such action could include the sale of
MIMLIC Fund shares by one or more of the separate accounts, which could have
adverse consequences. Material conflicts could result from, for example, (1)
changes in state insurance laws, (2) changes in Federal income tax laws, (3)
changes in the investment management of any of the Portfolios of the MIMLIC
Fund, or (4) differences in voting instructions between those given by policy
owners and those given by contract owners.
The Board of Trustees of the Federated Funds will also monitor events to
identify any material conflicts which may arise between owners of variable
annuity contracts and variable life insurance policies. In addition to the
considerations arising from mixed funding described above, the Federated Funds
must consider any special risks attributable to the Federated Funds' offering of
shares to separate accounts of a number of unaffiliated life insurance
companies. In that situation, material conflict could also arise from a decision
by a life insurance company holding shares of the Federated Funds making a
determination to disregard voting instructions from its variable policy and
contract owners, particularly if that decision represented a minority position
or precluded a majority vote.
- ------------------------------------------------------------------------
CONTRACT CHARGES
A. SALES CHARGES
No sales charge is deducted from the purchase payments for the Contract.
However, a deferred sales charge may be assessed upon the withdrawal or
surrender of purchase payments, including withdrawals or surrenders made in
connection with the payment of certain death benefits and the application of
amounts to provide an annuity for a fixed period of less than ten years. The
deferred sales charge is applied only to withdrawals or surrenders of purchase
payments received by us within seven years of the date of the withdrawal or
surrender. The deferred sales charge decreases during the seven year period from
the time that each purchase payment was made beginning at 6% and decreasing to
0% after the end of seven years. For the purpose of determining the amount of
the deferred sales charge, purchase payments are deemed withdrawn on a first-in,
first-out basis.
The deferred sales charge will not apply to: (a) Amounts withdrawn in any
calendar year that are less than or equal to the greater of: (1) earnings
accumulated in the Contract; or (2) 10% of the sum of purchase payments not
previously withdrawn that have been received by us within seven years of the
date of withdrawal; (b) Amounts withdrawn to pay the contract fee; (c) Amounts
payable as a death benefit upon the death of the owner or the annuitant, if
applicable, prior to the 75th birthday of the owner or annuitant; (d) Amounts
applied to provide annuity payments under an annuity payment option based on a
lifetime, joint lifetimes, or a fixed period of at least ten years; (e) A
surrender or withdrawal requested any time after the first contract anniversary
when benefits are payable due to a confinement
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<PAGE>
in a hospital or medical care facility; or (f) A surrender or withdrawal
requested any time after the first contract anniversary in the event that
benefits are payable because of the diagnosis of a terminal illness. In
addition, we will waive the deferred sales charge if a contract is annuitized,
on any annuity payment form, within the first contract year after issue.
The deferred sales charge is deducted from the remaining accumulation value in
the Contract except in the case of a surrender, where it reduces the amount
distributed.
The amount of the deferred sales charge, expressed as a percentage of the
amount taken out of the Contract and subject to the deferred sales charge, is
shown in the following table. Percentages are shown for the number of years
since the purchase payment was received by us from 0 to the end of seven years.
In no event will the sum of the deferred sales charges exceed 6% of the purchase
payments made under a Contract.
<TABLE>
<CAPTION>
CONTRACT YEARS
SINCE PAYMENT CHARGE
--------------------- ---------
<S> <C>
0-1 6%
1-2 6%
2-3 5%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7 and thereafter 0%
</TABLE>
The amount of the deferred sales charge is determined by: (a) calculating the
number of years each purchase payment being withdrawn has been in the Contract;
(b) multiplying each purchase payment withdrawn, after the deduction of any free
withdrawal amount, by the appropriate sales charge percentage in the table; and
(c) adding the deferred sales charge from all purchase payments as calculated in
(b).
A surrender or withdrawal requested any time after the first contract
anniversary due to the owner's confinement in a hospital or medical care
facility for at least 90 consecutive days will not be subject to a deferred
sales charge. The request must be made while the owner is still confined or
within 60 days after the discharge from a hospital or medical care facility
after a confinement of at least 90 consecutive days. A medical care facility for
this purpose means a facility operated pursuant to law or any state licensed
facility providing medically necessary in-patient care which is (a) prescribed
by a licensed Physician in writing; and (b) based on physical limitations which
prohibit daily living in a non-institutional setting.
A surrender or withdrawal requested any time after the first contract
anniversary in the event the owner is diagnosed with a terminal illness will
also not be subject to a deferred sales charge. A terminal illness for this
purpose is a condition (a) diagnosed by a licensed Physician; and (b) is
expected to result in death within 12 months for 80% of diagnosed cases.
For purposes of these provisions, we must receive due proof, satisfactory to
us, of the owner's confinement or terminal illness in writing. Physician means:
(a) a licensed medical doctor (MD) or a licensed doctor of osteopathy (DO)
practicing within the scope of his or her license; and (b) not the owner, the
annuitant or a member of either the owner's nor the annuitant's immediate
families. If the owner of this Contract is other than a natural person, such as
a trust or other similar entity, benefits payable due to nursing home
confinement or terminal illness will be based upon the annuitant. If the owner,
or annuitant in the case of a Contract owned by a non-natural person, is changed
subject to the provisions of this Contract, a one year waiting period will apply
before the new owner or annuitant is eligible for these benefits.
The deferred sales charge is designed to compensate us for distribution
expenses incurred with respect to the Contract. To the extent that sales
expenses are not recovered from the sales load, we will recover them from our
other assets or surplus including profits from mortality and expense risk
charges. As a percentage of purchase payments paid to the Contract, Voyageur
Fund Distributors, Inc. ("Voyageur Distributors"), the principal underwriter,
may pay up to 7.0% of the amount of those purchase payments to broker-dealers
responsible for the sales of the Contract.
B. MORTALITY AND EXPENSE RISK CHARGES
We assume the mortality risk under the Contract by our obligation to continue to
make monthly annuity payments, determined in accordance with the annuity rate
tables and other provisions contained in the Contract, to each annuitant
regardless of how long that annuitant lives or all annuitants as a group live.
This assures an annuitant that neither the annuitant's own longevity nor an
improvement in life expectancy generally will have an adverse effect on the
monthly annuity payments received under the Contract.
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<PAGE>
We assume an expense risk by assuming the risk that deductions provided for in
the Contract for the sales and administrative expenses will be adequate to cover
the expenses incurred.
For assuming these risks, we currently make a deduction from the Variable
Account at the annual rate of .80% for the mortality risk and .45% for the
expense risk. We reserve the right to increase the charge for the assumption of
expense risks to not more than .60%. If this charge is increased to this maximum
amount, then the total of the mortality risk and expense risk charge would be
1.40% on an annual basis. Any such increase would be subject to the approval of
the Securities and Exchange Commission.
For a discussion of how these charges are applied in the calculation of the
accumulation unit value, please see the discussion entitled "Purchase Payments,
Value of the Contract and Transfers" in this Prospectus.
If these deductions prove to be insufficient to cover the actual cost of the
expense and mortality risks assumed by us, then we will absorb the resulting
losses and make sufficient transfers to the Variable Account from our general
account, where appropriate. Conversely, if these deductions prove to be more
than sufficient after the establishment of any contingency reserves deemed
prudent or required by law, any excess will be profit (or "surplus") to us. Some
or all of such profit may be used to cover any distribution costs not recovered
through the deferred sales charge.
C. ADMINISTRATIVE CHARGE
We perform all administrative services relative to the Contract. These services
include the review of applications for compliance with our issue criteria, the
preparation and issue of Contracts, the receipt of purchase payments, forwarding
amounts to the Funds for investment, the preparation and mailing of periodic
reports and the performance of other services.
As consideration for providing these services we currently make a deduction
from the Variable Account at the annual rate of .15% of the net asset value of
the Variable Account. We reserve the right to increase this administrative
charge to an annual rate of not more than .40%.
The administrative charge is designed to cover the administrative expenses
incurred by us under the Contract. We do not expect to recover from the charge
any amount in excess of our accumulated expenses associated with the
administration of the Contract.
D. CONTRACT FEE
For maintaining the records and documents associated with each particular
Contract, we charge a contract fee. This fee is in an amount which is the lesser
of $35 or 2% of accumulation value at the end of the contract year. The contract
fee is applied only when the accumulation value in any particular Contract is
less than $50,000. We do not expect to recover from the charge any amount in
excess of our accumulated expenses associated with the administration of the
contract. The fee is deducted on the contract anniversary from the first
available sub-account or fixed account guarantee period accumulation value in
the following order: (1) money market sub-account; (2) pro-rata among the
remaining variable sub-accounts; (3) the largest accumulation value of the fixed
account guarantee periods.
E. PREMIUM TAXES
Deduction for any applicable state premium taxes may be made from each purchase
payment or at the commencement of annuity payments. (Currently, such taxes range
from 0.0% to 3.5%, depending on the applicable law.) Any amount withdrawn from
the Contract may be reduced by any premium taxes not previously deducted from
purchase payments.
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<PAGE>
- ------------------------------------------------------------------------
VOTING RIGHTS
The MIMLIC Fund shares held in the Variable Account will be voted by us at the
regular and special meetings of the MIMLIC Fund. Shares attributable to
Contracts will be voted by us in accordance with instructions received from
contract owners with voting interests in each sub-account of the Variable
Account. In the event no instructions are received from a contract owner with
respect to shares of a Portfolio of the MIMLIC Fund held by a sub-account, we
will vote such shares of the Portfolio and shares not attributable to Contracts
in the same proportion as shares of the Portfolio held by such sub-account for
which instructions have been received. The number of votes which are available
to a contract owner will be calculated separately for each sub-account of the
Variable Account. If, however, the Investment Company Act of 1940 or any
regulation under that Act should change so that we may be allowed to vote shares
in our own right, then we may elect to do so.
During the accumulation period of each Contract, the contract owner holds the
voting interest in each Contract. The number of votes will be determined by
dividing the accumulation value of the Contract attributable to each sub-account
by the net asset value per share of the underlying MIMLIC Fund shares held by
that sub-account.
During the annuity period of each Contract, the annuitant holds the voting
interest in each Contract. The number of votes will be determined by dividing
the reserve for each Contract allocated to each sub-account by the net asset
value per share of the underlying MIMLIC Fund shares held by that sub-account.
After an annuity begins, the votes attributable to any particular Contract will
decrease as the reserves decrease. In determining any voting interest,
fractional shares will be recognized.
We shall notify each contract owner or variable annuitant of a MIMLIC Fund
shareholders' meeting if the shares held for the contract owner's Contract may
be voted at such meeting. We will also send proxy materials and a form of
instruction so that the owner can instruct us with respect to voting.
The Federated Funds also serve as mixed and shared funding vehicles for
variable annuity and variable life insurance contracts offered by various
insurance companies. The procedures described above will be available to shares
attributable to the Contract and voted by Minnesota Mutual in accordance with
instructions received from contract interests in each sub-account of the
Variable Account holding interests in the Federated Funds.
- ------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACT
A. GENERAL PROVISIONS
1. FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
This type of individual Contract may be used in connection with all types of
qualified plans, tax-sheltered annuities or individual retirement annuities
adopted by or on behalf of individuals. It may also be purchased by individuals
not as a part of any plan. The Contract provides for a variable or fixed annuity
payments to begin at some future date with the purchase payments for the
Contract to be paid prior to the annuity commencement date in a series of
payments flexible in respect to the date and amount of payment.
2. ISSUANCE OF CONTRACT
The Contract is issued to the contract owner named in the application. The owner
of the Contract may be the annuitant or someone else.
3. MODIFICATION OF THE CONTRACT
A Contract may be modified at any time by written agreement between the owner
and us. However, no such modification will adversely affect the rights of an
owner under the Contract unless the modification is made to comply with a law or
government regulation. The owner will have the right to accept or reject the
modification. This right of acceptance or rejection may be limited for Contracts
used as individual retirement annuities.
4. ASSIGNMENT
If the Contract is sold in connection with a tax-qualified program, (including
employer sponsored employee pension benefit plans, tax-sheltered annuities and
individual retirement annuities,) neither the owner's nor the annuitant's
interest may be assigned, sold, transferred, discounted or pledged as collateral
for a loan or as security for the performance of an obligation or for any other
purpose, except
17
<PAGE>
under such conditions as may be allowed under applicable law.
If the Contract is not issued in connection with a tax-qualified program, the
interest of any person in the Contract may be assigned during the lifetime of
the annuitant. We will not be bound by any assignment until we have recorded
written notice of it at our home office. We are not responsible for the validity
of any assignment. An assignment will not apply to any payment or action made by
us before it was recorded. Any proceeds which become payable to an assignee will
be payable in a single sum. Any claim made by an assignee will be subject to
proof of the assignee's interest and the extent of the assignment. To the extent
permitted by law, no benefit provided by this Contract will be subject to any
creditor's claim or process of law.
5. LIMITATIONS ON PURCHASE PAYMENTS
You may choose when to make purchase payments under the Contract. There is no
minimum amount which must be allocated to any sub-account of the Variable
Account or to the Fixed Account.
Total purchase payments under the Contract may not exceed $1,000,000, except
with our consent. The amount of any initial purchase payment must be at least
$2,000 and any subsequent purchase payments must be in the amount of at least
$500. These minimums may be waived by us under certain automatic or group
payment plans which may be established and agreed to by us in advance. Purchase
payment amounts in such plans will generally be required to be in an amount of
at least $50. There may be limits on the maximum contributions to retirement
plans that qualify for special tax treatment.
You may stop making purchase payments at any time. If the owner stops making
purchase payments, the Contract remains in force as a paid-up annuity according
to its terms. Its value may be applied to provide annuity payments at a later
date.
We may, at our discretion, cancel a Contract if no purchase payments are made
for a period of two or more full contract years and both (a) the total purchase
payments made, less any withdrawals and associated charges, and (b) the
Accumulation Value of the Contract, are less than $2,000. If such a cancellation
takes place, we will pay the Accumulation Value to the owner.
We will notify the owner of our intention to exercise these rights in the
annual report. We will act 90 days after the contract anniversary unless an
additional purchase payment is received before the end of that 90 day period.
6. DEFERMENT OF PAYMENT
Usually, we will make payment within seven days after payment is called for by
the terms of the Contract. However, in the case of payment from the Fixed
Account or the General Account, we reserve the right to defer payment of
withdrawal or surrender benefits for up to six months. In the case of payments
from the Variable Account, we reserve the right to defer payment for any period
during which the New York Stock Exchange is closed for trading (except for
normal holiday closing) or when the Securities and Exchange Commission has
determined that a state of emergency exists which may make such determination
and payment impractical.
7. PARTICIPATION IN DIVISIBLE SURPLUS
The Contract participates in our divisible surplus, according to the annual
determination of our Board of Trustees as to the portion, if any, of our
divisible surplus which has accrued on the Contract.
No assurance can be given as to the amount of divisible surplus, if any, that
will be distributable under the Contract in the future. Such amount may arise if
mortality and expense experience is more favorable than assumed. When any
distribution of divisible surplus is made, it may take the form of additional
payments to annuitants or the crediting of additional accumulation units or, if
the owner so elects, a cash payment.
8. CONTRACT LOANS
A Contract which satisfies the requirements of Code Section 403 as a
tax-sheltered annuity (a "TSA Contract") and under a plan which provides for
loans and which is not subject to Title I of ERISA may take a loan from us, to
the extent that such loans are permitted by applicable state law, the contract
forms have been approved by the appropriate state insurance authorities and as
administratively feasible. The Contract will be the only security for the loan.
The maximum loan available is the lesser of (a) or (b), where (a) is $50,000
and (b) is the greater of: (i) one-half of the Surrender Value; or (ii) the
Surrender Value up to the amount of $10,000, less the amount of interest that
would be charged during the first quarter that the loan would be outstanding and
less any applicable deferred sales charge. Such a loan taken from,
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or secured by, a TSA Contract may have income tax consequences. See the heading
"Federal Tax Status," in this Prospectus. The maximum loan amount is determined
as of the date we receive a request for a loan. The minimum loan amount is
$1,000.
Upon receiving a written request for a loan, we will send a loan application
and agreement. We will charge interest in arrears. Restrictions other than the
maximum loan amount which apply to loans are: (a) Only one loan may be
outstanding at any time; (b) A period of at least three months is required
between the repayment of a loan and the application for a new loan; (c) If there
is an outstanding loan on the Contract, then any withdrawals will be limited to
Surrender Value, less the outstanding loan principal, less any interest due; (d)
A loan is not available if annuity payments have begun; and (e) The TSA loan
account portion of a Contract may not be transferred to the Variable Account
when a loan is outstanding, provided, however, that a single transfer from the
TSA loan account will be allowed each calendar year in an amount no more than
the TSA loan account value less the outstanding loan principal, less the
outstanding interest, and less any applicable deferred sales charge.
The loan amount requested, plus the first quarter's interest, plus any
applicable deferred sales charge, will be transferred from the portion of the
Accumulation Value allocated to the Variable Account or the Fixed Account
Guarantee Period of more than one year to the Fixed Account Guarantee Period of
a one-year duration. Amounts available for a TSA Loan may only come from the
Fixed Account Guarantee Period option for a one-year duration. Unless we are
directed otherwise, amounts will be transferred from sub-accounts of the
Variable Account and the Fixed Account Guarantee Option for other than a
one-year period in the same proportion that the allocations to each sub-account
bears to his or her total allocations to the Variable Account and the Guarantee
Options prior to the loan.
LOAN INTEREST AND TSA LOAN ACCOUNT INTEREST
The interest rate charged on a loan is variable and will be set on the first day
of each calendar quarter. It will apply to the outstanding loan principal in
that calendar quarter. The loan interest rate will not exceed the greater of the
"published monthly average" for the calendar month ending two months before the
beginning of the calendar quarter or the "interest rate in effect on the
Contract" plus 1%. The "published monthly average" means the Moody's Composite
Average of Yields on Bonds as published by the Moody's Investors Service. The
"interest rate in effect on the Contract" is the interest rate credited on the
Fixed Account Guarantee Period of a one-year duration, including amounts held in
the TSA loan account.
The interest rate credited to allocations of Accumulation Value to the one
year Fixed Account Guarantee Period Account will also be credited to the TSA
loan account, which will have the effect of reducing the effective interest rate
to be paid on the loan to the difference between the interest rate paid on the
loan and that credited on the TSA loan account. A loan will have a permanent
effect on the Contract's Accumulation Value. The effect could be either positive
or negative, depending upon whether the investment results of the sub-accounts
and Fixed Account Guarantee Period options of other durations are greater or
lesser than the interest rate credited on the TSA loan account.
LOAN REPAYMENT
Repayment must be made in substantially equal quarterly payments over a period
of five years or less. Early repayment may be made without penalty at any time.
When the loan is repaid, then the TSA loan account terminates, and the amounts
remain in the Fixed Account Guarantee Period of a one year duration. A
reallocation of these amounts among the Fixed Account and the sub-accounts of
the Variable Account may be made by exercising the Contract's transfer rights.
If there is a surrender while a loan is outstanding, then the loan is due at
that time. If the loan is not repaid at that time, the payment on surrender will
be the surrender value, less the outstanding loan principal, less any interest
due. In addition, depending upon the circumstances, such a surrender may result
in income taxation, tax penalties and disqualification of the Participant's
interest in the Contract as a tax-sheltered annuity.
Failure to meet the requirements of the loan agreement will result in its
termination. Loan amounts will then be treated as distributions under the
Contract. Treatment of a loan as a distribution will result in taxable income
under applicable tax rules. In addition, depending upon the circumstances, it
may result in income taxation, tax penalties, and disqualification of the
Contract as a tax-sheltered annuity. If there is a distribution, the
Accumulation Value will be
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reduced by the amount of the outstanding loan principal, reduced by any interest
due, and reduced by any applicable deferred sales charge on that amount.
B. ANNUITY PAYMENTS AND ANNUITY PAYMENT OPTIONS
1. ANNUITY PAYMENTS
Both fixed and variable annuity payments are available under the Contract. If
the owner fails to elect an annuity payment option or an annuity form, then a
variable annuity will be provided using the Money Market sub-account and the
annuity option shall be Option 2A, a life annuity with a period certain of 120
months. We restrict the maximum amount which may be applied to provide a fixed
annuity payment under the Contract. Without our prior consent, the maximum
amount which may be applied under the Contract for a fixed annuity payment is
$1,000,000. The minimum first monthly annuity payment on either a variable or
fixed dollar basis is $20. If such first monthly payment would be less than $20,
or if a smaller minimum amount would be required by law, we may fulfill our
obligation by paying in a single sum the surrender value of the Contract. This
payment would be in lieu of all other rights under the Contract.
Variable annuity payments are determined on the basis of (a) the mortality
table specified in the Contract, which is based upon the age of the annuitant
and any joint annuitant, if applicable, (b) the type of annuity payment option
selected, and (c) the investment performance of the Funds selected by the
contract owner. The amount of the variable annuity payments will not be affected
by adverse mortality experience or by an increase in our expenses in excess of
the expense deductions provided for in the Contract. The annuitant will receive
the value of a fixed number of annuity units each month, or such other period as
may be agreed upon between the owner and us. The value of such units, and thus
the amounts of the annuity payments will, however, reflect investment gains and
losses and investment income of the Funds, and thus the annuity payments will
vary with the investment experience of the assets of the Funds selected by the
contract owner.
2. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
The Contract provides for three annuity payment options, any one of which may be
elected if permitted by law. Other annuity payment options may be available from
us on request. Each annuity payment option may be elected in the form of either
a variable annuity or a fixed annuity payment basis, or a combination of the
two.
Annuity payments begin on the annuity commencement date. Annuity payments are
always made as of the first day of a month. If the annuity commencement date is
not specified in the application, it will be the later of the first of the month
preceding the annuitant's 85th birthday or ten years after issue. If the owner
wishes to change the annuity commencement date, he or she must notify us in
writing: (a) that annuity payments are to be made to the annuitant or other
designated payee; (b) when these payments are to begin; (c) the form of the
annuity; and (d) what annuity payment option has been selected. We must receive
this notice at least 30 days before annuity payments are to begin. This Contract
permits annuity payments to begin no later than age 85 or ten years after the
date of issue of this Contract, whichever is later.
While the Contract requires that notice of election to begin annuity payments
must be received by us at least 30 days prior to the annuity commencement date,
we are currently waiving that requirement for such variable annuity elections
received at least seven valuation days prior to the annuity commencement date.
We reserve the right to enforce the 30 day notice requirement at our option at
any time in the future.
Money will be transferred to the General Account for the purpose of electing
fixed annuity payments, or to the appropriate variable sub-accounts for variable
annuity payments, on the valuation date which is the fifth valuation date
preceding the annuity commencement date.
Once annuity payments have commenced, the owner cannot surrender an annuity
benefit and receive a single sum settlement in lieu thereof.
Benefits under retirement plans that qualify for special tax treatment
generally must commence no later than the April 1 following the year in which
the participant reaches age 70 1/2 and are subject to other conditions and
restrictions.
3. ANNUITY PAYMENT OPTIONS
OPTION 1--LIFE ANNUITY
This is an annuity payable during the lifetime of the annuitant and terminating
with the last
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payment preceding the death of the annuitant. This option usually provides the
maximum monthly payment since there is no guarantee of a minimum number of
payments or provision for a death benefit for beneficiaries. It would be
possible under this option for the annuitant to receive only one annuity payment
if he died prior to the due date of the second annuity payment, two if he died
before the due date of the third annuity payment, etc.
OPTION 2--LIFE ANNUITY WITH A PERIOD CERTAIN OF 120 MONTHS (OPTION 2A), 180
MONTHS (OPTION 2B), OR 240 MONTHS (OPTION 2C)
This is an annuity payable during the lifetime of the annuitant, with the
guarantee that if the annuitant dies before payments have been made for the
period certain elected, payments will continue to the beneficiary during the
remainder of the period certain. If the beneficiary elects at the annuitant's
death, the present value of the remaining guaranteed number of payments, based
on the then current dollar amount of one such payment and using the same
interest rate which served as a basis for the annuity shall be paid in a single
sum to the beneficiary.
OPTION 3--JOINT AND LAST SURVIVOR ANNUITY
This is an annuity payable monthly during the joint lifetime of the annuitant
and a designated joint annuitant and continuing thereafter during the remaining
lifetime of the survivor. Under this option there is no guarantee of a minimum
number of payments or provision for a death benefit for beneficiaries. If this
option is elected, the Contract and payments shall then be the joint property of
the annuitant and the designated joint annuitant. It would be possible under
this option for both annuitants to receive only one annuity payment if they both
died prior to the due date of the second annuity payment, two if they died
before the due date of the third annuity payment, etc.
4. DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT
Under the Contracts described in this Prospectus, the first monthly annuity
payment is determined by the available value of the Contract when an annuity
begins. The available value is the Contract's accumulation value as of the fifth
valuation date preceding the date annuity payments begin when the annuity option
is based on a lifetime, joint lifetimes or a fixed period of at least 10 years.
If the annuity option selected is an annuity payment period of less than 10
years, the available value is the surrender value as of the valuation date.
In addition, we may deduct premium tax, where applicable, from the amount
applied to purchase annuity payments. Where applicable, these taxes currently
range from 0% to 3.5%, depending on state and the type of plan involved.
The amount of the first monthly payment depends on the annuity payment option
elected, whether the annuity payments are to be made on a fixed or variable
basis, and sex and adjusted age of the annuitant and the joint annuitant, if
any.
For both fixed and variable annuity payments, an age adjustment is made
depending on when annuity payments begin. If the year in which such payments
begin is within years 2000 to 2009, the annuitant's (and joint annuitant's, if
any) age is reduced by one year. If the annuity commencement date is between
years 2010 to 2019, 2020 to 2029, or 2030 and later, the age reduction is two,
three, or four years, respectively. Persons selecting an annuity commencement
date at a time an age adjustment takes place should consider annuitizing prior
to the occurrence of the age adjustment in order to avoid a reduction in the
amount of all annuity payments that would otherwise occur.
The contract contains tables indicating the dollar amount of the monthly fixed
annuity payments under each annuity payment option for each $1,000 of value
applied. The tables are determined using Individual Annuity 1983 Table A
mortality with an age setback of one year and interest rate of 3%, compounded
annually.
The dollar amount of the first monthly variable annuity payment is determined
by applying the available value (after deduction of any premium taxes not
previously deducted) to a rate per $1,000 which is based on the Individual
Annuity 1983 Table A female mortality rates with an age setback of one year and
an interest rate of 4.5%, compounded annually. A number of annuity units is
determined by dividing the dollar amount of the first variable annuity payment
by the then current annuity unit value. The dollar amount determined for each
sub-account will be aggregated for purposes of making payment. Except under
certain joint annuity payment options which provide for decreased payments after
the first death, or where a transfer occurs, the number of annuity units remains
unchanged during the period of annuity payments.
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If, when annuity payments begin, we are using mortality or interest
assumptions which are more favorable than those listed above, resulting in
larger annuity payments, we will use those assumptions instead.
5. AMOUNT OF SECOND AND SUBSEQUENT MONTHLY ANNUITY PAYMENTS
The dollar amount of the second and later variable annuity payments is equal to
the number of annuity units determined for each sub-account multiplied by the
annuity unit value for that sub-account as of the due date of the payment. This
amount may increase or decrease from month to month. The dollar amount
determined for each sub-account will be aggregated for the purpose of making an
annuity payment.
The dollar amount of the second and later fixed annuity payments, except under
certain joint annuity payment options which provide for decreased payments after
the first death, will be equal to the initial payment.
6. VALUE OF THE ANNUITY UNIT
The value of an annuity unit for a sub-account is determined monthly as of the
first day of the month. For purposes of determining the annuity unit value, the
accumulation unit value will be as of the fifth valuation date preceding the
first day of the calendar month. The annuity unit value is equal to the annuity
unit value for that sub-account as of the first day of the preceding month
multiplied by the product of: (a) .996338 (.996338 is a factor to neutralize the
assumed net investment rate, discussed in Section 3 above, of 4.5% per annum
built into the first payment calculation which is not applicable because the
actual net investment rate is credited instead); and (b) a sub-account
investment factor. The investment factor is the accumulation unit value for that
sub-account for the preceding month divided by the accumulation unit value for
the second preceding month. The value of an annuity unit for a sub-account as of
any date other than the first day of a month is equal to its value as of the
first day of the next succeeding month.
7. TRANSFER OF ANNUITY RESERVES
Amounts held as annuity reserves may be transferred among the variable annuity
sub-accounts during the annuity period. Annuity reserves may also be transferred
from a variable annuity to a fixed annuity during this time. Amounts paid as a
fixed annuity may not be transferred to a variable annuity. The change must be
made by a written request. The annuitant and joint annuitant, if any, must make
such an election.
There may be restrictions to such a transfer. We reserve the right to require
that a transfer of an annuity reserve amount from any sub-account be at least
equal to $5,000 or the entire amount of the reserve remaining in that sub-
account. In addition, annuity payments must have been in effect for a period of
12 months before a change may be made. Such transfers can be made only once
every 12 months. The written request for an annuity transfer must be received by
us more than 30 days in advance of the due date of the annuity payment subject
to the transfer. Upon request, we will make available to you annuity reserve
amount sub-account information.
A transfer to another sub-account will be made on the basis of annuity unit
values. The number of annuity units from the sub-account being transferred will
be converted to a number of annuity units in the new sub-account. The annuity
payment option will remain the same and cannot be changed. After this
conversion, a number of annuity units in the new sub-account will be payable
under the elected option. The first payment after conversion will be of the same
amount as it would have been without the transfer. The number of annuity units
will be set at that number of units which are needed to pay that same amount as
of the transfer date.
When we receive a request for the transfer of variable annuity reserves, it
will be effective for future annuity payments. The transfer will be effective
and amounts actually transferred as of the fifth valuation date prior to the
next annuity payment affected by your request. We will use the same valuation
procedures to determine your variable annuity payment that we used initially.
If you request a transfer to a fixed annuity, the amount transferred will then
be applied to provide a fixed annuity payment amount. We will use the then
current fixed annuity rate at the time of transfer for the remaining period of
the annuity payment option (which shall remain unchanged) and the attained age
of the annuitant and joint annuitant, if any. The request for such a transfer to
a fixed annuity will be effective only for future annuity payments. The transfer
will be effective and amounts will actually be transferred as of the fifth
valuation date prior to the next annuity payment affected by your request.
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C. DEATH BENEFITS
If the owner dies before annuity payments have started, we will pay the death
benefit of the Contract to the beneficiary. If the owner of this Contract is
other than a natural person, such as a trust or other similar entity, we will
pay the death benefit to the beneficiary on the death of the annuitant, if it
occurs prior to the date that annuity payments have started. The death benefit
will be paid in a single sum to the beneficiary designated unless an annuity
payment option is elected.
If the owner or the annuitant, if applicable, dies prior to his or her 75th
birthday, the death benefit is the greater of: (a) Accumulation Value; (b) the
sum of purchase payments adjusted for any amounts previously withdrawn; or (c)
the last stepped-up value prior to the date of death, adjusted for any purchase
payments and withdrawals occurring thereafter.
If the owner or the annuitant, if applicable, dies on or after his or her 75th
birthday, the death benefit is the greater of: (a) Surrender Value; or (b) the
last stepped-up value prior to the date of death, adjusted for any withdrawals
occurring thereafter.
The stepped-up value will be determined on each contract anniversary that is
an exact multiple of five and is prior to the 75th birthday of the owner or the
annuitant, if applicable. The stepped-up value is the greater of: (a)
Accumulation Value on that contract anniversary; or (b) the previous stepped-up
value. Where joint owners exist, there will be no further stepped-up values
after the 75th birthday of the oldest joint owner. After the death of the first
joint owner, stepped-up values may resume on the next contract anniversary that
is an exact multiple of five providing the surviving joint owner continues the
Contract and has not yet reached his or her 75th birthday.
The value of the death benefit will be determined as of the valuation date
coincident with or next following the day we receive due proof of death and all
related information necessary to make payment at our home office.
If the designated beneficiary is a person other than the owner's spouse, that
beneficiary may elect an annuity option measured by a period not longer than
that beneficiary's life expectancy only so long as annuity payments begin not
later than one year after the death. If there is no designated beneficiary, then
the entire value in the Contract must be distributed within five years after the
death.
If any portion of the death benefit is payable to the designated beneficiary
who is also the surviving spouse, that spouse shall be treated as the contract
owner for purposes of: (1) when payments must begin, and (2) the time of
distribution in the event of that spouse's death. Payments must be made in
substantially equal installments.
If the annuitant dies after annuity payments have started, we will pay
whatever amount may be required by the terms of the annuity payment option
selected. The remaining value in the Contract must be distributed at least as
rapidly as under the option in effect at the annuitant's death.
To illustrate the death benefit, assume a Contract is issued to joint owners,
age 69 and 62. A single purchase payment of $50,000 is made and no withdrawals
are assumed to occur. On the fifth contract anniversary (owners age 74 and 67),
the accumulation value has increased to $62,500. Both owners are under age 75 so
the death benefit is "stepped-up" to $62,500. In the 8th contract year, the
oldest owner (now age 77) dies. The current accumulation and surrender value has
decreased to $61,000. The death benefit available to the joint owner is the
greater of the accumulation value less withdrawals or the previous stepped-up
value of $62,500. Assume further that the joint owner, being the spouse, chooses
to continue the Contract. On the tenth contract anniversary the accumulation
value has increased to $75,000 and the surviving owner is now age 72. The death
benefit is again stepped-up to the current value of $75,000. On the fifteenth
contract anniversary, the owner is now age 77 and is no longer eligible for
further step-ups. At age 80, the remaining owner dies with an accumulation value
and surrender value of $78,000. The amount payable to the beneficiary is then
the amount of $78,000.
D. PURCHASE PAYMENTS, TRANSFERS AND VALUE OF THE CONTRACT
1. CREDITING ACCUMULATION UNITS
During the accumulation period--the period before annuity payments begin--each
purchase payment is credited on the valuation date coincident with or next
following the date such purchase payment is received by us at our home office.
When the Contract is originally issued, an application form is completed by the
applicant and forwarded to our home office. We will review each application form
submitted to us for compliance with our issue criteria and, if it is accepted, a
Contract will be issued.
If the initial purchase payment is accompanied by an incomplete application,
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that purchase payment will not be credited until the valuation date coincident
with or next following the date a completed application is received. We will
offer to return the initial purchase payment accompanying an incomplete
application if it appears that the application cannot be completed within five
business days.
Purchase payments may be allocated to one or more of the sub-accounts of the
Variable Account or to one or more of the Guarantee Periods of the Fixed Account
for accumulation at a fixed rate of interest. See the Heading, "Fixed Account
Guarantee Period Options," in this Prospectus. Initially, the allocation will be
as the owner directs in the application, and such instructions will apply to
further purchase payments until changed by the owner. An application received
without allocation instructions will be treated as incomplete.
During the 30-day period following receipt of the first purchase payment into
the Contract, we will allocate purchase payments directed to the variable
sub-accounts first to the Money Market sub-account of the Variable Account. At
the end of this 30 day period, these purchase payments will be transferred as
the owner directs.
Purchase payments allocated to the Variable Account will be credited to the
Contract in the form of accumulation units. The number of accumulation units
credited with respect to each purchase payment is determined by dividing the
portion of the purchase payment allocated to each sub-account by the then
current accumulation unit value for that sub-account. The sub-accounts invest in
shares of the Funds.
The number of accumulation units so determined shall not be changed by any
subsequent change in the value of an accumulation unit, but the value of an
accumulation unit will vary from valuation date to valuation date to reflect the
investment experience of the Funds.
We will determine the value of accumulation units on each day on which the
Funds are valued. The net asset value of the Funds' shares shall be computed
once daily, and, in the case of Money Market Portfolio, after the declaration of
the daily dividend, as of the primary closing time for business on the New York
Stock Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's portfolio
securities will not materially affect the current net asset value of such Fund's
shares, (ii) days during which no such Fund's shares are tendered for redemption
and no order to purchase or sell such Fund's shares is received by such Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). The value of accumulation units determined on a valuation date
will be applicable to all purchase payments received by us at our home office on
that day prior to the close of business of the Exchange. The value of
accumulation units applicable to purchase payments received after the close of
business of the Exchange will be the value determined on the next valuation
date.
2. TRANSFERS
Upon the owner's written request, values under the Contract may be transferred
among our Fixed Account Guaranteed Options and the sub-accounts of the Variable
Account prior to the commencement of annuity payments. For the sub-accounts of
the Variable Account, we will make the transfer on the basis of accumulation
unit values on the valuation date coincident with or next following the day we
receive the request at our home office. No deferred sales charge will be imposed
on such transfers, though we reserve the right to impose a transaction fee on
such transfers in the future. There is no dollar amount limitation, such as a
minimum amount, which is applied to transfers. A market value adjustment may be
imposed on transfers from the Guarantee Periods of the Fixed Account to the
Variable Account or among those Guarantee Period options. See the heading "Fixed
Account Guarantee Period Options" in this Prospectus.
You may establish a systematic transfer arrangement with us. Transfers
pursuant to such an arrangement will be made on the on the day the owner
selects. If a transfer cannot be effected on the day selected, it will be made
on the next available transfer date. In the event the next available transfer
date would occur in the next calendar month, the systematic transfer will take
place as of the last available day in the current calendar month. In the absence
of specific instructions, transfers will be made on a monthly basis and will
remain active until the appropriate Fixed Account or variable sub-account value
is depleted.
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As a type of systematic transfer arrangement, for Contracts with accumulation
values of $10,000 or more, we will offer rebalancing of amounts in the Variable
Account on a quarterly, semi-annual or annual basis. Instructions to us for
rebalancing must be in equal percentages totaling 100% and will be treated as
instructions for transfer to and from the various sub-accounts of the Variable
Account. Rebalancing instructions will be without regard to the current
allocation of future contributions, they may differ from those future
allocations and are not limited to any minimum or maximum number of sub-accounts
affected by the rebalancing instructions.
Also, the owner or persons authorized by the owner may effect transfers, or a
change in the allocation of future purchase payments, by means of a telephone
call. Transfers or allocation changes made pursuant to such a call are subject
to the same conditions and procedures as are outlined above for written transfer
requests. During periods of marked economic or market changes, contract owners
may experience difficulty in implementing a telephone transfer due to a heavy
volume of telephone calls. In such a circumstance, contract owners should
consider submitting a written transfer request while continuing to attempt a
telephone transfer. We reserve the right to restrict the frequency of telephone
transfers or otherwise modify, condition, terminate or impose charges upon
telephone transfer privileges. For more information on telephone transfers,
contact Minnesota Mutual.
We make telephone transactions automatically available to all contract owners.
We will employ reasonable procedures to satisfy ourselves that instructions
received from contract owners are genuine and, to the extent that we do not, we
may be liable for any losses due to unauthorized or fraudulent instructions. We
require contract owners or persons authorized by them to personally identify
themselves in those telephone conversations through contract numbers, social
security numbers and such other information as we may deem to be reasonable. We
record telephone transfer instruction conversations and we provide the contract
owners with a written confirmation of the telephone transfer.
3. VALUE OF THE CONTRACT
The Accumulation Value of the Contract is the sum of the values under the
Contract. It is determined separately for each sub-account of the Variable
Account and each entry in the Guarantee Periods of the Fixed Account. For each
sub-account of the Variable Account, it is the number of accumulation units
credited for that sub-account multiplied by the applicable current accumulation
unit value.
4. ACCUMULATION UNIT VALUE
The value of an accumulation unit for each sub-account of the Variable Account
was set at $1.000000 on the first valuation date of the Variable Account. The
value of an accumulation unit on any subsequent valuation date is determined by
multiplying the value of an accumulation unit on the immediately preceding
valuation date by the net investment factor for the applicable sub-account
(described below) for the valuation period just ended. The value of an
accumulation unit as of any date other than a valuation date is equal to its
value on the next succeeding valuation date.
5. NET INVESTMENT FACTOR FOR EACH VALUATION PERIOD
The net investment factor is an index used to measure the investment performance
of a sub-account from one valuation period to the next. For any sub-account, the
net investment factor for a valuation period is the gross investment rate for
such sub-account for the valuation period, less a deduction for the mortality
and expense risk charge at the current rate of 1.25% per annum and a deduction
for the administration charge at the current rate of .15% per annum.
The gross investment rate is equal to: (1) the net asset value per share of a
Portfolio share held in a sub-account of the Variable Account determined at the
end of the current valuation period, plus (2) the per share amount of any
dividend or capital gain distribution by the Portfolio if the "ex-dividend" date
occurs during the current valuation period, divided by (3) the net asset value
per share of that Portfolio share determined at the end of the preceding
valuation period. The gross investment rate may be positive or negative.
6. PRINCIPAL UNDERWRITER
The principal underwriter for the Contract is Voyageur Fund Distributors, Inc.
("Voyageur Distributors"). Voyageur Distributors is a Minnesota corporation with
offices at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
Voyageur Distributors is an indirect, wholly-owned subsidiary of Dougherty
Financial Group, Inc. ("DFG"), at the same address as Voyageur Distributors. DFG
is owned 49% by Michael E. Dougherty, 49% by
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Pohlad Companies, Inc. and less than 1% by certain employee retirement plans for
the benefit of DFG employees. The address of the Pohlad Companies is 3880 Dain
Bosworth Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402. Voyageur
Managers, the investment sub-advisor to the Growth and Global Bond Portfolios of
the MIMLIC Fund, is also an indirect, wholly-owned subsidiary of DFG.
E. REDEMPTIONS
1. WITHDRAWALS AND SURRENDER
The Contract provides that prior to the date annuity payments begin withdrawals
may be made by the owner from the Contract for cash amounts of at least $250.
You must make a written request for any withdrawal. In this event, the
accumulation value will be adjusted for the amount of the withdrawal and any
applicable market value adjustment and the deferred sales charge.
Unless instructed otherwise by the owner, withdrawals will be made from the
value in each Guarantee Period of the Fixed Account and each sub-account of the
Variable Account in the same proportion that the value in each Guarantee Period
of the Fixed Account and each variable sub-account bears to the total
Accumulation Value. Withdrawal values will be determined as of the valuation
date coincident with or next following the date a Written Request is received at
our home office. Withdrawals from the Fixed Account may be subject to a Market
Value Adjustment. See the heading "Fixed Account Guarantee Period Options" in
this Prospectus.
Systematic withdrawal plans of a fixed amount or over a fixed period may also
be available.
We will waive the applicable dollar amount limitation on withdrawals where a
systematic withdrawal program is in place and such a smaller amount satisfies
the minimum distribution requirements of the Code.
The Contract provides that prior to the commencement of annuity payments, the
owner may elect to surrender the Contract for its surrender value. The surrender
value is equal to the Accumulation Value after the application of all applicable
adjustments and deduction of all applicable charges. Amounts surrendered may be
subject to a deferred sales charge and, in addition, amounts surrendered from
the Fixed Account may be subject to a Market Value Adjustment. See the heading
"Fixed Account Guarantee Period Options" in this Prospectus.
For more information on the application of the deferred sales charge, see
"Sales Charges," in this Prospectus.
Once annuity payments have commenced for an annuitant, the annuitant cannot
surrender the annuity benefit and receive a single sum settlement in lieu
thereof. For a discussion of commutation rights of beneficiaries subsequent to
the annuity commencement date, see "Annuity Payment Options," in this
Prospectus.
Contract owners may also submit their signed written withdrawal or surrender
requests to Minnesota Mutual by facsimile (FAX) transmission. Our FAX number is
(612) 298-7942. Transfer instructions or changes as to future allocations of
purchase payments may be communicated to us by the same means.
2. RIGHT OF CANCELLATION
You should read the Contract carefully as soon as it is received. You may cancel
the purchase of a Contract within ten days after its delivery, for any reason,
by giving us written notice at 400 Robert Street North, St. Paul, Minnesota
55101-2098, of an intention to cancel. If the Contract is canceled and returned,
we will refund to the owner the greater of (a) the accumulation value of the
Contract, or (b) the amount of purchase payments paid under the Contract.
Payment of the requested refund will be made to the owner within seven days
after we receive notice of cancellation.
In some states, such as California, the free look period may be extended. In
California, the free look period is extended to thirty days' time for Contracts
issued or delivered to owners that are 60 years of age or older at the time of
delivery. Those rights are subject to change and may vary among the states.
The liability of the Variable Account under the foregoing is limited to the
accumulation value of the Contract at the time it is returned for cancellation.
Any additional amounts necessary to make our refund to the owner equal to the
purchase payments will be made by Minnesota Mutual.
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FIXED ACCOUNT GUARANTEE PERIOD OPTIONS
Due to certain exemptive and exclusionary provisions, interests in the fixed
account investment options under the Contract are not registered under the
Securities Act of 1933 (the "'33 Act") and neither the Company's general account
nor its Fixed Account, which is a separate account of Minnesota Mutual, is
registered as an investment company under the Investment Company Act of 1940
(the "'40 Act"). Accordingly, neither interests in the fixed account investment
options nor the general account are subject to the provisions or restrictions of
the '33 Act or the '40 Act and the staff of the Commission has not reviewed the
disclosures in the Prospectus relating thereto. Disclosures relating to
interests in the Fixed Account options and the general account, however, may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy of statements made in a registration statement.
FIXED ACCOUNT GUARANTEE PERIODS. Currently, there are five Fixed Account
Guarantee Periods under the Contract; these provide for the accumulation of
interest at a guaranteed interest rate when held for one, three, five, seven and
ten year periods. Minnesota Mutual may offer additional Fixed Account Guarantee
Period options for any yearly period from two to ten years. It also may at any
time stop accepting new purchase payments, transfers or renewals for a
particular Guarantee Period. The guaranteed interest rate on new amounts
allocated or transferred to a Fixed Account Guarantee Period option are
determined from time-to-time by Minnesota Mutual in accordance with existing
market conditions. In no event will the guaranteed rate of interest be less than
3%. Once an interest rate is established for a Fixed Account Guarantee Period
option, it is guaranteed for the duration of the stated period and may not be
changed by Minnesota Mutual.
Contract owners may allocate purchase payments, or make transfers from the
Variable Account options, to the Fixed Account Guarantee Period options at any
time prior to the annuity commencement date. Minnesota Mutual establishes a
separate entry in the Fixed Account for accounting and interest rate purposes
each time the contract owner allocates or transfers amounts to a Fixed Account
Guarantee Period option, except that amounts allocated or transferred to the
same Fixed Account Guarantee Period option on the same day will establish a
single fixed account entry.
RENEWALS. At the end of a Guarantee Period, the contract owner may establish
a new Fixed Account Guarantee Period with the same guarantee period at the then
current interest rate, select a different Fixed Account Guarantee Period option
or transfer the amounts to a Variable Account option or those amounts may be
withdrawn from the Contract (though such amounts withdrawn may be subject to a
deferred sales charge). A period of 30 days prior to or immediately following
the Renewal Date of each Guarantee Period is allowed for this purpose.
If the contract owner does not specify the Fixed Account Guarantee Period
option desired at the time of renewal, Minnesota Mutual will automatically renew
the funds held in that Guarantee Period option for the same duration at the
newly established interest rate. The interest rate applicable to the new
Guarantee Period may be higher or lower than the interest rate which was
credited to the expired Guarantee Period. If, at the time of renewal, a
Guarantee Period of the same duration is no longer available, Minnesota Mutual
will select the next shortest available Guarantee Period.
MARKET VALUE ADJUSTMENT. Amounts surrendered, withdrawn or transferred
(including amounts applied to provide annuity payments under the Contract for a
fixed period of less than ten years) from the Guarantee Period of the Fixed
Account prior to the Renewal Date may be subject to a Market Value Adjustment.
The Market Value Adjustment may increase or decrease the amount of the Fixed
Account value which is being transferred, withdrawn or surrendered. This
adjustment does not apply to amounts held in the one year Guarantee Period Fixed
Account.
The Market Value Adjustment will be calculated by multiplying the amount
transferred, withdrawn, or surrendered by the
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Market Value Adjustment factor. The Market Value Adjustment factor is equal to:
(n/12)
(1 + i) - 1
--------------
(1 + j + .0025)
where i = Treasury rate applicable on the date of allocation into
the Fixed Account for the original Guarantee Period.
j = Treasury rate applicable on the date of withdrawal,
surrender or Transfer for the original Guarantee Period.
n = the number of months remaining in the Guarantee Period,
rounded to the nearest whole number of months.
The Treasury rate applicable for a particular day will be the rate as of the
close of the prior business day. If treasury rates are no longer available we
will use an appropriate rate approved by the Insurance Department of the state
which has jurisdiction over the Contract. Treasury rates for each business day
are published by a variety of sources, including BLOOMBERG FINANCIAL MARKETS
SERVICE and the WALL STREET JOURNAL.
We guarantee that the application of the Market Value Adjustment will not
reduce the Accumulation Value of each Fixed Account Guarantee Period to an
amount less than allocations to that Fixed Account Guarantee Period, less
withdrawals or transfers, accumulated at a rate of 3%, compounded annually.
There will be no market value adjustment in the following situations: (a)
Transfers, withdrawals and surrenders from the one year Guarantee Period of the
Fixed Account; (b) Transfers, withdrawals and surrenders occurring within 30
days prior to or immediately following the Renewal Date of each Guarantee
Period; and, (c) Amounts withdrawn from the Fixed Account to pay the contract
fee. However, amounts withdrawn or surrendered may be subject to the deferred
sales charge.
It should be noted that the market value adjustment can, depending upon
interest rates, be either positive or negative. However, there will be no
negative market value adjustment applied to withdrawals or surrenders from the
Fixed Account Guarantee Period options when: (a) Amounts are payable as a death
benefit; (b) Amounts are applied to provide annuity payments under an annuity
payment option based on lifetime, joint lifetimes, or a fixed period of at least
ten years; (c) A surrender or withdrawal is requested any time after the first
contract anniversary due to confinement in a hospital or medical care facility,
as defined in the "Sales Charges" section of this Prospectus; and, (d) A
surrender or withdrawal is requested any time after the first contract
anniversary in the event of the diagnosis of a terminal illness, as defined in
the "Sales Charges" section of this Prospectus.
TRANSFERS. Prior to the annuity commencement date, the contract owner may
transfer amounts among the Fixed Account Guarantee Period options and from the
Fixed Account Guarantee Period options to the Variable Account options. The
market value adjustment, if applicable, will be applied or deducted from the
amount remaining in the accumulation value. For further information, see the
heading "Purchase Payments and Transfers" in this Prospectus.
The contract owner must specify the Fixed Account Guarantee Period options
from or to which a transfer is to be made.
WITHDRAWALS. The contract owner may make withdrawals of or may surrender
amounts held in the Fixed Account Guarantee Period options at any time prior to
death and prior to the start of annuity payments. Withdrawals from Fixed Account
Guarantee Period options will be made in the same manner and be subject to the
same limitations as set forth under the heading "Withdrawals" in this
Prospectus. In addition, the following provisions apply to withdrawals from the
Fixed Account Guarantee Period options: (1) Minnesota Mutual reserves the right
to defer payment of amounts withdrawn from fixed account investment options for
up to six months from the date it receives the written withdrawal request (if a
withdrawal is deferred for more than 30 days pursuant to this right, Minnesota
Mutual will pay interest on the amount deferred at a rate not less than 3% per
year); (2) if there are multiple investment entries under a Fixed Account
Guarantee Period option, amounts will be withdrawn from such accounts on a
first-in-first-out basis and (3) the market value adjustment described above may
apply to withdrawals from any investment option except the Fixed Account
Guarantee Period option with a duration of one year. In the case of a Contract
surrender, the market value adjustment to each Guarantee Period option, if
applicable, will be calculated using the full
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amount in that Guarantee Period option, and the amount of the adjustment will be
added to or subtracted from such amount and paid to the owner. In the case of a
withdrawal, the market value adjustment to each Guarantee Period option affected
by the withdrawal will be calculated using the full amount to be taken from that
Guarantee Period in order to provide the amount requested, after application of
the adjustment and deduction of applicable charges, and the amount of the
adjustment will be added to or subtracted from the accumulation value remaining
after payment of the requested amount.
Withdrawals from the Contract may be subject to income tax and a 10% penalty
tax. Withdrawals are permitted from a Contract issued in connection with Section
403(b) qualified plans only under limited circumstances. Withdrawals may also be
limited in other types of employee benefit plans. See the heading "Federal Tax
Status," in this Prospectus.
LOANS. We offer a loan privilege only to owners of Contracts issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. Owners of such Contract may obtain loans using the Contract as the
only security for a loan. Owners of such a Contract may borrow amounts allocated
to Fixed Account Guarantee Period options of a one-year duration in the same
manner and subject to the same limitations as set forth under "Contract Loans,"
in this Prospectus. Loans may be taken only from the one year Guarantee Period
of the Fixed Account.
FIXED ANNUITY OPTIONS. Subject to the death benefit provisions, at death,
withdrawal or at the annuity commencement date of the Contract, the proceeds may
be applied to provide a fixed annuity. The amount of each fixed annuity payment
is determined by applying the portion of the proceeds, plus any market value
adjustment (on amounts applied to provide annuity payments under an annuity
payment option based on lifetime, joint lifetimes or a fixed period of at least
ten years), less any applicable premium taxes and market value adjustment (on
amounts applied to provide a fixed period annuity of less than ten years), or
deferred sales charges, applied to purchase the fixed annuity to the appropriate
table in the Contract. If the table in use by Minnesota Mutual is more favorable
to the contract owner, Minnesota Mutual will use that table. Minnesota Mutual
guarantees the dollar amount of fixed annuity payments.
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FEDERAL TAX STATUS
INTRODUCTION
The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. In addition, this
discussion is based on our understanding of federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of current income tax laws or the current interpretations of the
Internal Revenue Service.
We are taxed as a "life insurance company" under the Internal Revenue Code.
The operations of the Variable Account form a part of, and are taxed with, our
other business activities. Currently, no federal income tax is payable by us on
income dividends received by the Variable Account or on capital gains arising
from the Variable Account's activities. The Variable Account is not taxed as a
"regulated investment company" under the Code and it does not anticipate any
change in that tax status.
TAXATION OF ANNUITY CONTRACTS IN GENERAL
Section 72 of the Code governs taxation of nonqualified annuities in general and
some aspects of qualified programs. No taxes are imposed on increases in the
value of a Contract until distribution occurs, either in the form of a payment
in a single sum or as annuity payments under the annuity option elected. As a
general rule, deferred annuity contracts held by a corporation, trust or other
similar entity, as opposed to a natural person, are not treated as annuity
contracts for federal tax purposes. The investment income on such contracts is
taxed as ordinary income that is received or accrued by the owner of the
contract during the taxable year.
For payments made in the event of a full surrender of an annuity, the taxable
portion is generally the amount in excess of the cost basis (i.e., purchase
payments) of the Contract. Amounts withdrawn from the variable annuity contracts
not part of a qualified program are treated first as taxable income to the
extent of the excess of the contract value over the
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purchase payments made under the Contract. Such taxable portion is taxed at
ordinary income tax rates.
In the case of a withdrawal under an annuity that is part of a qualified
program, a portion of the amount received is taxable based on the ratio of the
"investment in the contract" to the individual's balance in the retirement plan,
generally the value of the annuity. The "investment in the contract" generally
equals the portion of any premium payments made by or on behalf of an individual
under an annuity which was not excluded from the gross income of the individual.
For annuities issued in connection with qualified plans, the "investment in the
contract" can be zero. The contract value may have to be increased by any
positive Market Value Adjustment which could result from 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.
For annuity payments, the taxable portion is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. Such taxable part is taxed at ordinary
income rates.
If a taxable distribution is made under the variable annuity contracts, a
penalty tax of 10% of the amount of the taxable distribution may apply. This
additional tax does not apply where the taxpayer is 59 1/2 or older, where
payment is made on account of the taxpayer's disability, or where payment is
made by reason of death.
The Code also provides an exception to the penalty tax for distributions in
periodic payments of substantially equal installments made for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies) of
the taxpayer and beneficiary.
For some types of qualified plans, other tax penalties may apply to certain
distributions.
A transfer of ownership of a contract, the designation of an annuitant or
other payee who is not also the contract owner, or the assignment of the
contract may result in certain income or gift tax consequences to the contract
owner that are beyond the scope of this discussion. A contract owner who is
contemplating any such transfer, designation or assignment should consult a
competent tax adviser with respect to the potential tax effects of that
transaction.
For purposes of determining a contract owner's gross income, the Code provides
that all nonqualified deferred annuity contracts issued by the same company (or
its affiliates) to the same contract owner during any calendar year shall be
treated as one annuity contract. Additional rules may be promulgated under this
provision to prevent avoidance of its effect through serial contracts or
otherwise. For further information on these rules, see your tax adviser.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Variable Account to be
"adequately diversified" in order for the contract to be treated as an annuity
contract for Federal tax purposes. The Variable Account, through the Funds,
intends to comply with the diversification requirements prescribed in
Regulations Section 1.817-5, which affect how the Funds' assets may be invested.
Minnesota Mutual does not have control over the Funds or their investments.
Nonetheless, Minnesota Mutual believes that each Portfolio of the Funds in which
the Variable Account owns shares will be operated in compliance with the
requirements prescribed by the Treasury.
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 contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract 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
contract 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 sub-accounts without
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<PAGE>
being treated as owners of the underlying assets."
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of a Contract has the choice of several sub-accounts in which
to allocate net purchase payments and Contract values, and may be able to
transfer among sub-accounts more frequently than in such rulings. These
differences could result in a contract owner being treated as the owner of the
assets of the Variable Account. In addition, Minnesota Mutual 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. Minnesota Mutual therefore
reserves the right to modify the Contract as necessary to attempt to prevent a
contract owner from being considered the owner of a pro rata share 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 nonqualified contract issued after
January 18, 1985 to provide that (a) if an owner dies on or after the annuity
starting 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 an owner dies prior to the annuity starting date, the
entire interest in the contract must be distributed within five years after the
date of the owner's death. These requirements shall be considered satisfied if
any portion of the owner's interest which is payable to or for the benefit of a
"designated beneficiary" is distributed over the life of such beneficiary or
over a period not extending beyond the life expectancy of that beneficiary and
such distributions begin within one year of that owner's death. The owner's
"designated beneficiary" is the person designated by such owner as a beneficiary
and to whom ownership of the contract passes by reason of death. It must be a
natural person. However, if the owner's "designated beneficiary" is the
surviving spouse of the owner, the contract may be continued with the surviving
spouse as the new owner.
Nonqualified 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. Minnesota Mutual 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 DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of death. Generally, such
amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full surrender
of the contract, as described above, or (2) if distributed under an annuity
option, they are taxed in the same manner as annuity payments, as described
above.
POSSIBLE CHANGES IN TAXATION
In the past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of nonqualified annuities that did
not have "substantial life contingencies" by taxing income as it is credited to
the annuity. Although as of the date of this Prospectus Congress is not actively
considering any legislation regarding the taxation of annuities, there is always
the possibility that the tax treatment of annuities could change by legislation
or other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
TAX QUALIFIED PROGRAMS
The contract is designed for use with several types of retirement plans that
qualify for special tax treatment. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. 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 actual age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.
We make no attempt to provide more than general information about use of
annuities with
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the various types of retirement plans. Owners and participants under retirement
plans as well as annuitants and beneficiaries are cautioned that the rights of
any person to any benefits under annuities purchased in connection with these
plans may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the annuity issued in connection with
such a plan. Some retirement plans are subject to transfer restrictions,
distribution and other requirements that are not incorporated into the annuity
or our annuity administration procedures. Owners, participants and beneficiaries
are responsible for determining that contributions, distributions and other
transactions with respect to the annuities comply with applicable law.
Purchasers of annuities for use with any retirement plan should consult their
legal counsel and tax adviser regarding the suitability of the Contract.
PUBLIC SCHOOL SYSTEMS AND CERTAIN TAX EXEMPT ORGANIZATIONS
Under Code Section 403(b), payments made by public school systems and certain
tax exempt organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of actual 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.
INDIVIDUAL RETIREMENT ANNUITIES
Code Sections 219 and 408 permit individuals or their employers to contribute to
an individual retirement program known as an "Individual Retirement Annuity" or
"IRA". Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of retirement
plans may be placed into an Individual Retirement Annuity on a tax deferred
basis. Employers may establish Simplified Employee Pension (SEP) Plans for
making IRA contributions on behalf of their employees.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Code Section 401(a) permits employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish
retirement 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 annuity 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
annuity.
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. The plans may permit participants
to specify the form of investment for their deferred compensation account. 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
received under a Section 457 plan are taxable and are subject to federal income
tax withholding as wages.
WITHHOLDING
In general, distributions from annuities are subject to federal income tax
withholding unless the recipient elects not to have tax withheld. Different
rules may apply to payments delivered outside the United States. Some states
have enacted similar rules.
Recent changes to the Code allow the rollover of most distributions from
tax-qualified plans and Section 403(b) annuities directly to other tax-qualified
plans that will accept such distributions and to individual retirement accounts
and individual retirement annuities. Distributions which may not be rolled over
are those which are: (1) one of a series of substantially equal annual (or more
frequent)
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payments made (a) over the life or life expectancy of the employee, (b) the
joint lives or joint expectancies of the employee and the employee's designated
beneficiary, or (c) for a specified period of ten years or more; (2) a required
minimum distribution; or (3) the non-taxable portion of a distribution.
Any distribution eligible for rollover, which may include payment to an
employee, an employee's surviving spouse or an ex-spouse who is an alternate
payee, will be subject to federal tax withholding at a 20% rate unless the
distribution is made as a direct rollover to a tax-qualified plan or to an
individual retirement account or annuity. It may be noted that amounts received
by individuals which are eligible for rollover may still be placed in another
tax-qualified plan or individual retirement account or individual retirement
annuity if the transaction is completed within 60 days after the distribution
has been received. Such a taxpayer must replace withheld amounts with other
funds to avoid taxation on the amount previously withheld.
SEE YOUR OWN TAX ADVISER
It should be understood that the foregoing description of the federal income tax
consequences under the Contracts is not exhaustive and that special rules are
provided with respect to situations not discussed herein. It should also be
understood that should a plan lose its qualified status, employees will lose
some of the tax benefits described. Statutory changes in the Internal Revenue
Code with varying effective dates, and regulations adopted thereunder may also
alter the tax consequences of specific factual situations. Due to the complexity
of the applicable laws, tax advice may be needed by a person contemplating the
purchase of a variable annuity contract or exercising elections under such a
contract. For further information a qualified tax adviser should be consulted.
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STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information, which contains additional information
including financial statements, is available from the offices of Minnesota
Mutual at your request. The Table of Contents for that Statement of Additional
Information is as follows:
Trustees and Principal Management Officers of Minnesota Mutual
Distribution of the Contract
Performance Data
Auditors
Registration Statement
Financial Statements
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<PAGE>
APPENDIX A--
ILLUSTRATION OF VARIABLE ANNUITY PAYMENT VALUES
The illustration included in this appendix shows the effect of investment
performance on the monthly variable annuity income. The illustration assumes a
gross investment return, after tax, of: 0%, 6.67% and 12.00%.
For illustration purposes, an average annual expense equal to 2.17% of the
average daily net assets is deducted from the gross investment return to
determine the net investment return. The net investment return is then used to
project the monthly variable annuity incomes. The expense charge of 2.17%
includes: 1.25% for mortality and expense risk, .15% for administrative charge,
and an average of .77% for investment management and other fund expenses. These
expenses are listed for each portfolio in the table following.
The gross and net investment rates are for illustrative purposes only and are
not a reflection of past or future performance. Actual variable annuity income
will be more or less than shown if the actual returns are different than those
illustrated.
The illustration assumes 100% of the assets are invested in sub-account(s) of
the Variable Account. For comparison purposes, a current fixed annuity income,
available through the general account is also provided. The illustration assumes
an initial interest rate, used to determine the first variable payment of 4.50%.
After the first variable annuity payment, future payments will increase if the
annualized net rate of return exceeds the initial interest rate, and will
decrease if the annualized net rate of return is less than the initial interest
rate.
The illustration provided is for a female, age 65, selecting a life and 10
year certain annuity option with $100,000 of non-qualified funds, residing in
the State of Minnesota. Upon request, we will provide a comparable illustration
based upon the proposed annuitant's date of birth, sex, annuity option, state of
residence, type of funds, value of funds, and selected gross annual rate of
return (not to exceed 12%).
<TABLE>
<CAPTION>
FUND OTHER
MORTALITY & ADMINISTRATIVE MANAGEMENT FUND
EXPENSE RISK CHARGE FEE EXPENSE TOTAL
----------------- ------------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
MIMLIC Series Fund, Inc.
Growth........................... 1.25% 0.15% 0.50% 0.05% 1.95%
Bond............................. 1.25% 0.15% 0.50% 0.08% 1.98%
Money Market..................... 1.25% 0.15% 0.50% 0.14% 2.04%
Asset Allocation................. 1.25% 0.15% 0.50% 0.05% 1.95%
Mortgage Securities.............. 1.25% 0.15% 0.50% 0.08% 1.98%
Index 500........................ 1.25% 0.15% 0.40% 0.07% 1.87%
Capital Appreciation............. 1.25% 0.15% 0.75% 0.05% 2.20%
International Stock.............. 1.25% 0.15% 0.78% 0.26% 2.44%
Small Company.................... 1.25% 0.15% 0.75% 0.09% 2.24%
Value Stock...................... 1.25% 0.15% 0.75% 0.14% 2.29%
Small Company Value*............. 1.25% 0.15% 0.75% 0.15% 2.30%
Global Bond*..................... 1.25% 0.15% 0.75% 0.50% 2.65%
Federated Insurance Series
High Income Bond Fund II......... 1.25% 0.15% 0.00% 0.80% 2.20%
American Leaders Fund II......... 1.25% 0.15% 0.00% 0.85% 2.25%
--- --- --- --- ---
Average........................ 1.25% 0.15% 0.53% 0.24% 2.17%
</TABLE>
*Estimated expenses after commencement of operation
34
<PAGE>
<TABLE>
<S> <C>
VARIABLE ANNUITY PAYOUT ILLUSTRATION
PREPARED FOR: Prospect PREPARED BY: Minnesota Mutual
ANNUITY PAYMENT OPTION: 10 Year w/Life PORTFOLIO: Growth
Contingency FUNDS: Non-Qualified
DATE OF BIRTH: 02/01/1932 SEX: Female COMMENCEMENT DATE: 02/01/1997
STATE: MN SINGLE PAYMENT RECEIVED: $100,000.00
LIFE EXPECTANCY: 20.0 (IRS)
INITIAL MONTHLY INCOME: $593
</TABLE>
The monthly variable annuity income amount shown below assumes a constant
annual investment return. The initial interest rate of 4.50% is the assumed rate
used to calculate the first monthly payment. Thereafter, monthly payments will
increase or decrease based upon the relationship between the initial interest
rate and the performance of the sub-account(s) selected. The investment returns
shown are hypothetical and not a representation of future returns.
<TABLE>
<CAPTION>
ANNUAL RATE OF RETURN
------------------------------------------------
0% GROSS 6.67% GROSS 12.00% GROSS
DATE AGE (-2.17% NET) (4.50% NET) (9.83% NET)
- ------------------------------------------------------ --------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
February 1, 1997...................................... 65 $ 593 $ 593 $ 593
February 1, 1998...................................... 66 555 593 624
February 1, 1999...................................... 67 520 593 655
February 1, 2000...................................... 68 487 593 689
February 1, 2001...................................... 69 456 593 724
February 1, 2006...................................... 74 328 593 928
February 1, 2011...................................... 79 236 593 1,191
February 1, 2016...................................... 84 169 593 1,527
February 1, 2021...................................... 89 122 593 1,958
February 1, 2026...................................... 94 88 593 2,511
February 1, 2031...................................... 99 63 593 3,220
February 1, 2032...................................... 100 59 593 3,384
</TABLE>
IF 100% OF YOUR PURCHASE WAS APPLIED TO PROVIDE A FIXED ANNUITY ON THE
QUOTATION DATE OF THIS ILLUSTRATION, THE FIXED ANNUITY INCOME AMOUNT WOULD BE
$699.
Net rate of return reflects expenses totaling 2.17%, which consist of the
1.25% Variable Account mortality and expense risk charge, 0.15% administrative
charge, and 0.77% for the fund management and other fund expenses (this is an
average with the actual varying from 0.47% to 1.25%).
Minnesota Mutual Voyageur Harbour Annuities are offered through Voyageur Fund
Distributors, Inc., its selling group and their registered representatives and
is issued by The Minnesota Mutual Life Insurance Company. This illustration must
be accompanied or preceded by the current prospectuses for the Minnesota Mutual
Variable Annuity Account, MIMLIC Series Fund, Inc. and Federated Insurance
Series.
This is an illustration only and not a Contract.
35
<PAGE>
APPENDIX B--
ILLUSTRATION OF MARKET VALUE ADJUSTMENTS
The following are examples of Market Value Adjustment (MVA) calculations using
hypothetical guarantee period interest rates. These examples do not include the
effect of any deferred sales charge that may be assessed under the contract upon
withdrawal.
EXAMPLE I
Assumptions:
i, the Treasury rate on the date of allocation is 8%
j, the Treasury rate on the date of withdrawal, surrender or transfer is 10%
n, the number of months remaining (rounded to the nearest whole month) is 20
n/12
MVA factor = (1 + i) - 1
--------------
(1 + j + .0025)
20/12
= (1.08) - 1 = -.0338
--------------
(1.1025)
In this example, the current Treasury rate is higher than the original rate,
therefore there is a negative Market Value Adjustment, that is, the Market Value
is less than the Accumulation Value. This factor is applied to the amount
withdrawn from the Accumulation Value and the resultant payment is reduced by
that amount.
In the above example, if the withdrawal from the Accumulation Value was
$5,000, the dollar amount of the Market Value Adjustment would be -.0338 x
$5,000 = $169 and the amount of the payment would be $5,000 - $169 = $4,831.
The Market Value Adjustment is guaranteed to never be less than an amount
which would cause the Market Value to be reduced below the allocation to the
Fixed Account Guarantee Period accumulated at 3%. For example, in the above
example, if the original allocation was $4,700 into a three year Fixed Account
Guarantee Period, the accumulation of the allocation at 3% from the time of the
allocation to the time of withdrawal, 16 months later, would be (1.03)16/12 x
$4,700 = $4,888.93, which is greater than the above calculated Market Value. The
amount of the payment would be the greater amount of $4,888.93.
If, in the above example, the original allocation was $4,600 into a three year
Fixed Account Guarantee Period, the accumulation of the allocation at 3% from
the time of the allocation to the time of withdrawal, 16 months later, would be
(1.03)16/12 x $4,600 = $4,784.91, which is less than the above calculated Market
Value. The amount of the payment would be the greater amount of $4,831.
In addition to the market value adjustment, withdrawals may be subject to a
deferred sales charge as described in the contract. The market value adjustment
is done before application of any deferred sales charge.
36
<PAGE>
EXAMPLE II
Assumptions:
i, the Treasury rate on the date of allocation is 8%
j, the Treasury rate on the date of withdrawal, surrender or transfer is 6%
n, the number of months remaining (rounded to the nearest whole month) is 20
n/12
MVA factor = (1 + i) - 1
--------------
(1 + j + .0025)
20/12
= (1.08) - 1 = .0276
--------------
(1.0625)
In this example, the current Treasury rate is lower than the original rate,
therefore there is a positive Market Value Adjustment, that is, the Market Value
is greater than the Accumulation Value. This factor is applied to the amount
withdrawn from the Accumulation Value and the resultant payment is increased by
that amount.
In the above example, if the withdrawal from the Accumulation Value was
$5,000, the dollar amount of the Market Value Adjustment would be .0276 x $5,000
= $138 and the amount of the payment would be $5,000 + $138 = $5,138.
In addition to the market value adjustment, withdrawals may be subject to a
deferred sales charge as described in the contract. The market value adjustment
is done before application of any deferred sales charge.
37
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
Minnesota Mutual Variable Annuity Account
Cross Reference Sheet to Statement of Additional Information
Form N-4
Item Number Caption in Statement of Additional Information
15. Cover Page
16. Cover Page
17. Trustees and Principal Management Officers of Minnesota Mutual
18. Not Applicable
19. Not Applicable
20. Distribution of Contracts
21. Performance Data
22. Not Applicable
23. Financial Statements
<PAGE>
Minnesota Mutual Variable Annuity Account
("Variable Annuity Account"), a Separate Account of
The Minnesota Mutual Life Insurance Company
("Minnesota Mutual")
400 Robert Street North
St. Paul, Minnesota 55101-2098
Telephone: (612) 298-3500
Statement of Additional Information
The date of this document and the Prospectus is: , 1996
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus. Therefore, this Statement should be read
in conjunction with the Variable Account's Prospectus, bearing the same date,
which may be obtained by calling The Minnesota Mutual Life Insurance Company at
(612) 298-3500, or writing to Minnesota Mutual at Minnesota Mutual Life Center,
400 Robert Street North, St. Paul, Minnesota 55101-2098.
Trustees and Principal Management Officers of Minnesota Mutual
Distribution of Contracts
Performance Data
Auditors
Registration Statement
Financial Statements
1
<PAGE>
TRUSTEES AND PRINCIPAL MANAGEMENT OFFICERS OF MINNESOTA MUTUAL
Trustees Principal Occupation
Giulio Agostini Senior Vice President, Finance and Office
Administration, Minnesota Mining and Manufacturing
Company, Maplewood, Minnesota since July 1991,
prior thereto for more than five years Director,
Finance and Administration, Minnesota Mining and
Manufacturing - Italy
Anthony L. Andersen Chair-Board of Directors, H. B. Fuller Company,
St. Paul, Minnesota (Adhesive Products) since June
1995, prior thereto for more than five years
President and Chief Executive Officer, H. B.
Fuller Company
John F. Grundhofer President, Chairman and Chief Executive Officer,
First Bank System, Inc., Minneapolis, Minnesota
(Banking)
Harold V. Haverty Retired since May 1995, prior thereto for more
than five years Chairman of the Board, President
and Chief Executive Officer, Deluxe Corporation,
Shoreview, Minnesota (Check Printing)
Lloyd P. Johnson Retired since May 1995, prior thereto for more
than five years Chairman of the Board, Norwest
Corporation, Minneapolis, Minnesota (Banking)
David S. Kidwell, Ph.D. Dean and Professor of Finance, The Curtis L.
Carlson School of Management, University of
Minnesota, since August 1991; prior thereto, Dean
of the School and Professor, University of
Connecticut, School of Business Administration
from 1988 to July 1991
Reatha C. King, Ph.D. President and Executive Director, General Mills
Foundation, Minneapolis, Minnesota
Thomas E. Rohricht Member, Doherty, Rumble & Butler Professional
Association, St. Paul, Minnesota (Attorneys)
Terry N. Saario, Ph.D. Former President and prior thereto, to March 1996,
for more than five years, President, Northwest
Area Foundation, St. Paul, Minnesota (Private
Regional Foundation)
Robert L. Senkler Chairman of the Board, President and Chief
Executive Officer, The Minnesota Mutual Life
Insurance Company since August 1995; prior thereto
for more than five years Vice President and
Actuary, The Minnesota Mutual Life Insurance
Company
2
<PAGE>
Michael E. Shannon Chairman and Chief Financial and Administrative
Officer, Ecolab Inc., St. Paul, Minnesota, since
August 1992, prior thereto President, Residential
Services Group, Ecolab Inc., St. Paul, Minnesota
from October 1990 to July 1992 (Develops and
Markets Cleaning and Sanitizing Products)
Frederick T. Weyerhaeuser Chairman, Clearwater Investment Trust since May
1996, prior thereto for more than five years
Chairman, Clearwater Management Company, St. Paul,
Minnesota (Financial Management)
Principal Officers (other than Trustees)
Name Position
John F. Bruder Senior Vice President
Keith M. Campbell Vice President
Paul H. Gooding Vice President and Treasurer
Robert E. Hunstad Executive Vice President
James E. Johnson Senior Vice President and Actuary
Richard D. Lee Vice President
Joel W. Mahle Vice President
Dennis E. Prohofsky Senior Vice President, General Counsel and
Secretary
Gregory S. Strong Vice President and Actuary
Terrence M. Sullivan Senior Vice President
Randy F. Wallake Senior Vice President
All Trustees who are not also officers of Minnesota Mutual have had the
principal occupation (or employers) shown for the last five years. All officers
of Minnesota Mutual have been employed by Minnesota Mutual for at least five
years.
3
<PAGE>
DISTRIBUTION OF CONTRACTS
The Contract will be sold in a continuous offering by persons who are life
insurance agents of Minnesota Mutual and who are also registered representatives
of Voyageur Fund Distributors, Inc. ("Voyageur Distributors") or other broker-
dealers who have entered into selling agreements with Voyageur Distributors.
Voyageur Distributors acts as principal underwriter of the Contract.
PERFORMANCE DATA
CURRENT YIELD FIGURES FOR MONEY MARKET SUB-ACCOUNT
Current annualized yield quotations for the Money Market Sub-Account are based
on the Sub-Account's net investment income for a seven-day or other specified
period and exclude any realized or unrealized gains or losses on sub-account
securities. Current annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical account
having a balance of one accumulation unit at the beginning of the specified
period, dividing such net change in account value by the value of the account at
the beginning of the period, and annualizing this quotient on a 365-day basis.
The Variable Annuity Account may also quote the effective yield of the Money
Market Sub-Account for a seven-day or other specified period for which the
current annualized yield is computed by expressing the unannualized return on a
compounded, annualized basis. The yield and effective yield of the Money Market
Sub-Account for the seven-day period ended December 31, 1995 were 3.85% and
3.92%, respectively. Yield figures quoted by the Money Market Sub-Account will
not reflect the deduction of any applicable deferred sales charges (the deferred
sales charges, as a percentage of the purchase payments applied to amounts
transferred, surrendered or withdrawn, begin from the date such payments are at
6% and decrease to 0% after the completion of seven contract years).
TOTAL RETURN FIGURES FOR ALL SUB-ACCOUNTS
The average annual rates of return for the Sub-Accounts, in connection with the
flexible premium Contract described in the Prospectus, for the specified periods
ended December 31, 1995 are shown in the tables below. The figures in
parentheses show what the average annual rates of return would have been had
Minnesota Mutual not absorbed Fund expenses as described above.
FLEXIBLE PREMIUM CONTRACT
(FINANCIAL DATA TO BE SUPPLIED BY AMENDMENT)
The average annual total return figures described above may be accompanied by
other average annual total return quotations which do not reflect the deduction
of any deferred sales charges. Such other average annual total return figures
will be calculated as described above, except that the initial $1,000 investment
will be equated to that same investment's net asset value, rather than its
surrender value, at the end of the period. The average annual rates of return,
as thus calculated, for the Sub-Accounts of the Contract described in the
Prospectus for the specified periods ended December 31, 1995 are shown in the
table below. The figures in parentheses show
4
<PAGE>
what the average annual rates of return, without the application of applicable
deferred sales charges, would have been had Minnesota Mutual not absorbed Fund
expenses as described above.
(Financial Data to be Supplied by Amendment)
AUDITORS
The financial statements of Minnesota Mutual included herein have been audited
by KPMG Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, independent auditors, whose reports thereon
appear elsewhere herein, and have been so included in reliance upon the
reports of KPMG Peat Marwick LLP and upon the authority of said firm as
experts in accounting and auditing.
REGISTRATION STATEMENT
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, with respect to the
Contract offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and amendments thereto and the exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Annuity Account, Minnesota Mutual, and the
Contract. Statements contained in this Prospectus as to the contents of
Contract and other legal instruments are summaries, and reference is made to
such instruments as filed.
5
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report............................................... 1
Balance Sheets............................................................. 2
Statements of Operations and Policyowners' Surplus......................... 3
Statements of Cash Flows................................................... 4
Notes to Financial Statements.............................................. 5
Financial Statement Schedules:
I. Summary of Investments--Other than Investments in Related Parties..... 15
V. Supplementary Insurance Information................................... 16
VI. Reinsurance.......................................................... 17
</TABLE>
I
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
The Minnesota Mutual Life Insurance Company:
We have audited the accompanying balance sheets of The Minnesota Mutual Life
Insurance Company as of December 31, 1995 and 1994 and the related statements
of operations and policyowners' surplus and cash flows for each of the years in
the three-year period ended December 31, 1995. In connection with our audits of
the financial statements, we also have audited the financial statement
schedules as listed in the accompanying index. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules 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 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 referred to above present fairly, in
all material respects, the financial position of The Minnesota Mutual Life
Insurance Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles (notes 2 and 11). Also in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1996
1
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Bonds $ 5,488,876 $5,134,554
Common stocks 279,353 209,958
Mortgage loans 754,501 598,186
Real estate, including Home Office property 76,639 76,346
Other invested assets 90,264 60,604
Policy loans 197,555 185,599
Investments in subsidiary companies 197,413 155,404
Cash and short-term securities 99,031 112,869
Premiums deferred and uncollected 116,878 125,422
Other assets 147,155 134,594
----------- ----------
Total assets, excluding separate accounts 7,447,665 6,793,536
Separate account assets 2,609,396 1,750,680
----------- ----------
Total assets $10,057,061 $8,544,216
=========== ==========
LIABILITIES AND POLICYOWNERS' SURPLUS
Liabilities:
Policy reserves:
Life insurance $ 2,129,336 $1,981,469
Annuities and other fund deposits 3,322,866 3,179,279
Accident and health 369,273 343,241
Policy claims in process of settlement 50,512 53,670
Dividends payable to policyowners 107,366 100,287
Other policy liabilities 403,683 388,538
Asset valuation reserve 201,721 165,341
Interest maintenance reserve 32,899 19,922
Federal income taxes 40,195 35,050
Other liabilities 237,434 186,575
----------- ----------
Total liabilities, excluding separate accounts 6,895,285 6,453,372
Separate account liabilities 2,560,211 1,708,529
----------- ----------
Total liabilities 9,455,496 8,161,901
Policyowners' surplus
Surplus notes 124,967 --
Unassigned funds 476,598 382,315
----------- ----------
Total policyowners' surplus 601,565 382,315
Total liabilities and policyowners' surplus $10,057,061 $8,544,216
=========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND POLICYOWNERS' SURPLUS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Premiums, annuity considerations and fund
deposits $1,473,666 $1,424,352 $1,289,954
Net investment income 524,671 488,813 493,011
---------- ---------- ----------
Total revenues 1,998,337 1,913,165 1,782,965
---------- ---------- ----------
Benefits and expenses:
Policyowner benefits 1,138,723 1,259,685 1,131,638
Increase in policy reserves 260,482 94,116 122,280
General insurance expenses and taxes 299,348 279,022 268,041
Commissions 78,642 75,443 70,899
Federal income taxes 46,135 49,626 36,656
---------- ---------- ----------
Total benefits and expenses 1,823,330 1,757,892 1,629,514
---------- ---------- ----------
Gain from operations before net realized
capital gains and dividends 175,007 155,273 153,451
Realized capital gains, net of tax 29,358 18,559 2,907
---------- ---------- ----------
Gain from operations before dividends 204,365 173,832 156,358
Dividends to policyowners 115,659 108,709 97,937
---------- ---------- ----------
Net income $ 88,706 $ 65,123 $ 58,421
========== ========== ==========
STATEMENTS OF POLICYOWNERS' SURPLUS
Policyowners' surplus, beginning of year $ 382,315 $ 347,900 $ 264,542
Surplus notes 124,967 -- --
Net income 88,706 65,123 58,421
Net change in unrealized capital gains
and losses 49,761 (317) 3,286
Change in asset valuation reserve (36,380) (29,405) (17,002)
Change in policy reserve bases (10,828) 1,463 --
Change in separate account surplus 7,579 (3,764) 5,623
Guaranty fund certificate redemption -- -- 19,171
Business combination -- -- 16,684
Other, net (4,555) 1,315 (2,825)
---------- ---------- ----------
Policyowners' surplus, end of year $ 601,565 $ 382,315 $ 347,900
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
CASH PROVIDED: 1995 1994 1993
- -------------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
From operations:
Revenues:
Premiums, annuity considerations and fund
deposits $1,480,303 $1,474,471 $1,252,183
Net investment income 496,421 468,927 473,487
---------- ---------- ----------
Total receipts 1,976,724 1,943,398 1,725,670
---------- ---------- ----------
Benefits and expenses paid:
Policyowner benefits 1,139,133 1,301,060 1,069,090
Dividends to policyowners 109,249 103,634 97,697
Commissions and expenses 392,337 360,150 348,397
Federal income taxes 61,245 40,482 50,994
---------- ---------- ----------
Total payments 1,701,964 1,805,326 1,566,178
---------- ---------- ----------
Cash provided from operations 274,760 138,072 159,492
Proceeds from investments sold, matured or
repaid:
Bonds 1,713,579 1,031,279 1,631,215
Common stocks 205,757 113,228 113,945
Mortgage loans 112,954 152,418 265,356
Real estate 15,948 17,571 10,100
Other invested assets 10,618 16,831 17,266
Surplus notes 124,967 -- --
Separate account redemption 2,041 14,519 --
Business combination -- -- 24,628
Other sources, net 77,772 58,072 53,531
---------- ---------- ----------
Total cash provided 2,538,396 1,541,990 2,275,533
---------- ---------- ----------
<CAPTION>
CASH APPLIED:
- -------------
<S> <C> <C> <C>
Cost of investments acquired:
Bonds 2,026,116 1,146,117 1,966,653
Common stocks 222,491 132,301 123,185
Mortgage loans 266,401 203,803 109,559
Real estate 16,596 11,904 16,572
Other invested assets 20,515 12,732 9,800
Separate account investment 115 12,530 3,365
---------- ---------- ----------
Total cash applied 2,552,234 1,519,387 2,229,134
---------- ---------- ----------
Net change in cash and short-term securi-
ties (13,838) 22,603 46,399
Cash and short-term securities, beginning of
year 112,869 90,266 43,867
---------- ---------- ----------
Cash and short-term securities, end of year $ 99,031 $ 112,869 $ 90,266
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(1)NATURE OF OPERATIONS
The Minnesota Mutual Life Insurance Company (the Company), both directly and
through its subsidiaries, provides a diversified array of insurance and
financial products and services designed principally to protect and enhance the
long-term financial well-being of individuals and families.
The Company's strategy is to be successful in carefully selected niche
markets, primarily in the United States, while focusing on the retention of
existing business and the maintenance of profitability. To achieve this
objective, the Company has divided its businesses into four strategic business
units, which focus on various markets: Individual, Financial Services, Group,
and Pension. Revenues in 1995 for these business units were $1,051,749,000,
$268,004,000, $205,926,000, and $472,658,000, respectively.
At December 31, 1994 the Company was one of the 15 largest mutual life
insurance companies in the United States, as measured by total assets. The
Company employs over 2,100 persons throughout the United States; in addition,
the Company maintains an independent sales force of approximately 100 general
agents and 1,850 agents. The Company insures or provides other financial
services to nearly seven million people.
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Company have been prepared in
accordance with accounting practices prescribed or permitted by the Commerce
Department of the State of Minnesota (Department of Commerce), which are
currently considered generally accepted accounting principles for mutual life
insurance companies (note 11). The significant accounting policies follow:
Revenues and Expenses
Premiums are credited to revenue over the premium paying period of the
policies. Annuity considerations and fund deposits are recognized as revenue
when received. Expenses, including acquisition costs related to acquiring new
business, are charged to operations as incurred. Investment income is
recognized as earned, net of related investment expenses.
Valuation of Investments
Bonds and stocks are valued as prescribed by the National Association of
Insurance Commissioners (NAIC).
Bonds are generally carried at cost, adjusted for the amortization of
premiums and discounts, and common stocks at market value. Premiums and
discounts are amortized over the estimated lives of the bonds based on the
interest yield method.
Mortgage loans are generally stated at the outstanding principal balances,
net of unamortized premiums and discounts. Premiums and discounts are amortized
over the terms of the related mortgage loans based on the interest yield
method.
Real estate, exclusive of properties acquired through foreclosure, is
generally carried at cost less accumulated depreciation of $35,323,535 and
$35,954,239 at December 31, 1995 and 1994, respectively. Depreciation is
computed principally on a straight-line basis. Properties acquired through
foreclosure are carried at the lower of cost or market.
Policy loans are carried at the unpaid principal balance.
Investments in subsidiary companies are accounted for using the equity
method. The Company records its equity in the earnings of its subsidiaries as
investment income and its equity in other changes in its subsidiaries' surplus
as credits (charges) to policyowners' surplus. These investments include
$95,373,000 and $74,154,000 at December 31, 1995 and 1994, respectively, of
initial contributions to affiliated registered investment funds managed by a
subsidiary of the Company which are carried at the market value of the
underlying net assets. All significant subsidiaries are wholly-owned.
Short-term securities at December 31, 1995 and 1994 amounted to $61,561,000
and $103,203,000, respectively, and are included in the caption cash and short-
term securities.
5
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Asset Valuation Reserve (AVR) is a formula reserve for possible losses
on bonds, stocks, mortgage loans, real estate, and other invested assets.
Changes in the reserve are reflected as direct charges or credits to
policyowners' surplus and are included in the change in asset valuation
reserve line.
Interest Maintenance Reserve
The Company separates realized capital gains and losses, net of tax, on fixed
income investments between those due to changes in interest rates and those
due to changes in credit quality. Realized capital gains and losses due to
interest rate changes are transferred to the Interest Maintenance Reserve
(IMR) and amortized into investment income over the original remaining life of
the related bond or mortgage sold.
Capital Gains and Losses
Realized capital gains and losses, net of related taxes and amounts
transferred to the IMR, if any, are reflected as a component of net income.
The Company reduces the carrying value of its assets for credit risk and
records a realized capital loss only if the underlying asset has been
converted to another asset of lesser value. Unrealized capital gains and
losses are accounted for as a direct increase or decrease to policyowners'
surplus. Both realized and unrealized capital gains and losses are determined
using the specific identification method.
Separate Account Business
Separate account business represents funds administered and invested by the
Company for the exclusive benefit of certain pension and variable life policy
and annuity contract holders. The Company receives administrative and
investment advisory fees for services rendered on behalf of these funds.
Separate account assets are carried at market value.
The Company periodically invests money in its separate accounts. The
appreciation or depreciation on the investment is reflected as a direct charge
or credit to policyowners' surplus. A realized capital gain of $603,995 and
$3,018,248 was recognized in 1995 and 1994, respectively, on the separate
accounts. No gain was realized in 1993.
Policy Reserves
Policy reserves for life insurance and annuities are based on mortality and
interest assumptions without consideration for lapses and withdrawals.
Mortality assumptions for life insurance and annuities are based on various
mortality tables including American Experience, 1941 Commissioners Standard
Ordinary (CSO), 1958 CSO, 1980 CSO, Progressive Annuity and 1960 Commissioners
Standard Group. Interest assumptions range from 2.0% to 6.0% for individual
life insurance policy reserves and from 2.25% to 12.0% for group policy and
annuity reserves.
Approximately 15% of the individual life and group life reserves are
calculated on a net level reserve basis and 85% on a modified reserve basis.
The use of a modified reserve basis partially offsets 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.
Policy reserves for individual deferred annuities are generally equal to the
total contract holders' account balance, less applicable surrender charges,
calculated according to the Commissioners Annuity Reserve Valuation Method.
Policy reserves for immediate annuities and supplementary contracts are equal
to the present value of future benefit payments based on the purchase interest
rate and the Progressive Annuity tables. Group annuity reserves are equal to
the account value plus expected interest strengthening.
Policy reserves for individual accident and health contracts include
reserves for active lives based on the 1964 Commissioners Disability Table
(CDT) and the 1985 Commissioners Disability Table B (CIDB), modified for
company experience and discounted at various interest rates. Disabled life
reserves on individual policies are equal to the present value of future
benefits using the 1964 CDT and the 1985 CIDB, discounted at various interest
rates. Disabled life reserves for group mortgage disability policies are equal
to the present value of future benefits using the 1964 CDT, modified for
Company experience and discounted at various interest rates.
6
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Group employer-employee long term disability reserves are equal to the present
value of future benefits at 3%
interest and the 1964 CDT modified for Company experience. Disabled life
reserves for credit disability are computed using a lag factor method based on
Company experience, discounted at 4% interest.
The Company issues certain life and annuity products which are considered
financial instruments. The estimated fair value of these liabilities as of the
respective years ended December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred annuities $2,147,662 $2,156,885 $2,042,383 $2,042,060
Annuity certain contracts 49,113 50,732 41,934 41,828
Other fund deposits 836,149 847,975 798,509 791,732
Guaranteed investment contracts 47,426 47,987 68,568 69,353
Supplementary contracts without
life contingencies 41,431 39,962 43,205 42,433
---------- ---------- ---------- ----------
Total financial liabilities $3,121,781 $3,143,541 $2,994,599 $2,987,406
========== ========== ========== ==========
</TABLE>
The fair value of deferred annuities, annuity certain contracts, and other
fund deposits, which have guaranteed interest rates and surrender charges, were
calculated using Commissioners Annuity Reserve Valuation Method calculation
procedures and current market interest rates. Contracts without guaranteed
interest rates and surrender charges have fair values equal to their
accumulation values plus applicable market value adjustments. The fair value of
guaranteed investment contracts and supplementary contracts without life
contingencies were calculated using discounted cash flows, based on interest
rates currently offered for similar products with maturities consistent with
those remaining for the contracts being valued. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1995 and 1994. Although management
is not aware of any factors that would significantly affect the estimated fair
values, such amounts have not been comprehensively revalued since those dates
and therefore, estimates of fair value subsequent to the valuation dates may
differ significantly from the amounts presented herein.
Non-admitted Assets
Certain assets, designated as "non-admitted assets" (principally furniture,
equipment and certain receivables), amounting to $27,022,000 and $26,123,000 at
December 31, 1995 and 1994, respectively, have been charged to policyowners'
surplus.
Participating Business
Substantially all of the Company's premium revenues are derived from
participating policies. Dividends and other discretionary payments are declared
by the Board of Trustees based upon actuarial determinations which take into
consideration current mortality, interest earnings, expense factors, and
federal income taxes. Dividends are generally recognized as expenses consistent
with the recognition of premiums and contract considerations.
Federal Income Taxes
Federal income taxes are based on income that is currently taxable. Deferred
federal income taxes are not provided for differences between financial
statement and taxable income.
7
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Reclassifications
Certain prior year financial statement balances have been reclassified to
conform with the 1995 presentation.
(3)INVESTMENTS
Net investment income for the respective years ended December 31, is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Bonds $422,242 $412,873 $404,353
Common stocks--unaffiliated 3,465 3,188 3,390
Common stocks--affiliated 16,555 8,526 9,562
Mortgage loans 58,946 49,882 63,881
Real estate, including Home Office property 11,440 11,337 11,554
Policy loans 12,821 11,800 10,866
Short-term securities 6,183 4,026 2,067
Other, net 4,994 1,717 2,868
-------- -------- --------
536,646 503,349 508,541
Amortization of interest maintenance reserve 4,527 3,741 3,458
Investment expenses (16,502) (18,277) (18,988)
-------- -------- --------
Total $524,671 $488,813 $493,011
======== ======== ========
Changes in unrealized capital gains (losses) for the respective years ended
December 31, are as follows:
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Bonds $ 2,332 $ 4,039 $(3,753)
Common stocks--unaffiliated 39,013 (5,465) 2,854
Common stocks--affiliated 9,863 (997) (1,305)
Mortgage loans 447 (71) 1,361
Real estate (1,481) 2,270 4,211
Other, net (413) (93) (82)
-------- -------- --------
Total $ 49,761 $ (317) $ 3,286
======== ======== ========
The cost and gross unrealized gains (losses) on unaffiliated common stocks at
December 31, are as follows:
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost $189,893 $159,511 $155,881
Gross unrealized gains 91,050 56,813 58,440
Gross unrealized losses (1,590) (6,366) (2,529)
-------- -------- --------
Admitted asset value $279,353 $209,958 $211,792
======== ======== ========
</TABLE>
8
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3)INVESTMENTS (CONTINUED)
Net realized capital gains (losses) for the respective years ended December
31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Bonds $22,411 $(3,511) $31,234
Common stocks--unaffiliated 33,432 11,268 9,651
Mortgage loans (945) (46) (741)
Real estate 3,787 2,041 (8,496)
Other 7,288 15,872 7,837
------- ------- -------
65,973 25,624 39,485
Less: Amount transferred to the interest mainte-
nance reserve, net of taxes 17,503 (685) 20,336
Income tax expense 19,112 7,750 16,242
------- ------- -------
Total $29,358 $18,559 $ 2,907
======= ======= =======
</TABLE>
Gross realized gains (losses) on sales of bonds for the respective years
ended December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross realized gains $ 34,898 $ 13,249 $38,443
Gross realized losses (12,487) (16,760) (7,209)
</TABLE>
Proceeds from the sale of bonds amounted to $1,338,481,000, $638,420,000, and
$1,058,684,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.
Bonds and mortgage loans held at December 31, 1995 and 1994 for which no
income was recorded for the previous twelve months totaled $20,852 and $88,000,
respectively.
At December 31, 1995 and 1994, bonds with a carrying value of $2,740,000 and
$2,748,000, respectively, were on deposit with various regulatory authorities
as required by law.
The estimated fair value of the Company's financial instruments has been
determined using available market information as of December 31, 1995 and 1994
and appropriate valuation methodologies. Considerable judgment, however, is
required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. The admitted asset value
for bonds, commercial mortgages, and residential mortgages are $5,488,876,
$501,439, and $253,062 in 1995 and $5,134,554, $342,205, and $255,981 in 1994,
respectively. The estimated fair value for these financial instruments are
$5,821,024, $523,129, and $258,966 in 1995 and $4,919,495, $341,195, and
$255,449 in 1994, respectively.
Fair values for bonds and commercial and residential mortgages are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are estimated using values obtained from independent
pricing services which specialize in matrix pricing and modeling techniques for
estimating fair values. The admitted asset value approximates fair value for
common stock, policy loans, cash and short-term securities, and other assets.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1995 and 1994. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of the financial statements since the original valuation dates and therefore,
subsequent estimates of fair value may differ significantly from the amounts
presented herein.
9
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3)INVESTMENTS (CONTINUED)
The admitted asset value, gross unrealized appreciation and depreciation, and
estimated fair value of investments in bonds are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
ADMITTED ------------------------- FAIR
DECEMBER 31, 1995 ASSET VALUE APPRECIATION DEPRECIATION VALUE
- ----------------- ----------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal government $ 241,228 $ 10,914 $ 440 $ 251,702
State and local government 26,337 3,268 0 29,605
Foreign government 861 79 0 940
Corporate bonds 3,494,386 262,214 6,542 3,750,058
Mortgage-backed securities 1,726,064 66,260 3,605 1,788,719
---------- -------- -------- ----------
Total $5,488,876 $342,735 $ 10,587 $5,821,024
========== ======== ======== ==========
<CAPTION>
GROSS UNREALIZED
ADMITTED ------------------------- FAIR
DECEMBER 31, 1994 ASSET VALUE APPRECIATION DEPRECIATION VALUE
- ----------------- ----------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal government $ 210,335 $ 19 $ 9,983 $ 200,371
State and local government 26,493 10 1,171 25,332
Foreign government 17,691 413 20 18,084
Corporate bonds 3,325,331 41,167 167,404 3,199,094
Mortgage-backed securities 1,554,704 11,110 89,200 1,476,614
---------- -------- -------- ----------
Total $5,134,554 $ 52,719 $267,778 $4,919,495
========== ======== ======== ==========
</TABLE>
The amortized cost and estimated fair value of bonds at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
ADMITTED FAIR
ASSET VALUE VALUE
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 39,108 $ 39,811
Due after one year through five years 764,085 803,817
Due after five years through ten years 1,677,321 1,778,549
Due after ten years 1,282,298 1,410,128
---------- ----------
3,762,812 4,032,305
Mortgage-backed securities 1,726,064 1,788,719
---------- ----------
Total $5,488,876 $5,821,024
========== ==========
</TABLE>
10
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4)FEDERAL INCOME TAXES
The federal income tax expense varies from amounts computed by applying the
federal income tax rate of 35% to the gain from operations after dividends to
policyowners and before federal income taxes and realized capital gains. The
reasons for this difference, and the tax effects thereof, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed tax expense $36,918 $33,666 $32,260
Difference between statutory and tax basis:
Investment income (9,284) (5,853) (7,204)
Policy reserves (81) (767) (2,079)
Dividends to policyowners 1,043 593 (1,907)
Acquisition expense 7,508 9,013 8,393
Other expenses 453 2,137 3,739
Special tax on mutual life insurance companies 8,201 15,466 3,396
Other, net 1,377 (4,629) 58
------- ------- -------
Tax expense $46,135 $49,626 $36,656
======= ======= =======
</TABLE>
The Company's tax returns for 1993 through 1994 are under examination by the
Internal Revenue Service. The Company believes additional taxes, if any,
assessed as a result of these examinations will not have a material effect on
its financial position.
(5)LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid accident and health claims and claim
adjustment expenses, exclusive of $96,728,000, $89,540,000, and $81,990,000,
respectively, for active life reserves, is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1 $301,352 $274,253 $246,777
Less: reinsurance recoverable 47,651 38,418 29,622
-------- -------- --------
Net balance at January 1 253,701 235,835 217,155
-------- -------- --------
Incurred related to:
Current year 95,392 91,573 85,112
Prior years 1,367 (308) 7,121
-------- -------- --------
Total incurred 96,759 91,265 92,233
-------- -------- --------
Paid related to:
Current year 26,291 23,019 22,002
Prior years 51,624 50,380 51,551
-------- -------- --------
Total paid 77,915 73,399 73,553
-------- -------- --------
Net Balance at December 31 272,545 253,701 235,835
Plus: reinsurance recoverable 72,617 47,651 38,418
-------- -------- --------
Balance at December 31 $345,162 $301,352 $274,253
======== ======== ========
</TABLE>
Incurred claims related to prior years are due to the difference between
actual and estimated claims incurred as of the prior year end.
11
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6)BUSINESS COMBINATION
On July 1, 1993, the Company entered into an "Agreement and Plan of
Reorganization" that combined all of the assets, liabilities, and surplus of
Ministers Life--A Mutual Life Insurance Company (Ministers Life) into the
Company. Ministers Life sold life and health insurance products to religious
professionals in the continental United States. The business combination
increased the Company's assets by $272,649,000, liabilities by $255,965,000 and
policyowners' surplus by $16,684,000.
(7)RELATED PARTY TRANSACTIONS
In 1993, the Company received 2,375,000 shares of common stock of the Minnesota
Fire and Casualty Company (the Casualty Company) in return for the surrender of
outstanding guaranty fund certificates totalling $21,800,000 which had
previously been charged to surplus. The surrender of the certificates and
concurrent issuance of stock were part of the Casualty Company's
"Demutualization and Stock Conversion Plan" (the Plan) approved by the
Department of Commerce. Pursuant to the Plan, the Casualty Company became a
subsidiary of the Company on December 31, 1993. The effect of the transaction
was an increase to investments in subsidiary companies and an increase to
policyowners' surplus as of December 31, 1993 of $19,171,000.
(8)PENSION PLANS AND OTHER RETIREMENT PLANS
Pension Plans
The Company has self-insured, noncontributory, defined benefit retirement plans
covering substantially all employees. The Company's funding policy is to
contribute annually the maximum amount that may be deducted for federal income
tax purposes. The Company expenses amounts as contributed. The Company made
contributions of $3,003,400 and $1,714,200 in 1995 and 1994, respectively. No
contributions were made in 1993. Information for these plans as of the
beginning of the plan year is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefits:
Vested $47,271 $42,849 $36,281
Nonvested 14,588 12,033 12,996
------- ------- -------
Total $61,859 $54,882 $49,277
======= ======= =======
Net assets available for benefits $85,348 $85,651 $78,952
======= ======= =======
</TABLE>
In determining the actuarial present value of accumulated benefits, the
Company used a weighted average assumed rate of return of 8.3% in 1995 and 8.4%
in 1994 and 1993.
Profit Sharing Plans
The Company also has profit sharing plans covering substantially all employees
and agents. The Company's contribution rate to the employee plan is determined
annually by the Trustees of the Company and is applied to each participant's
prior year earnings. The Company's contribution to the agent plan is made as a
certain percentage, based upon years of service, applied to each agent's total
annual compensation. The Company recognized contributions to the plans during
1995, 1994, and 1993 of $6,595,000, $6,866,000 and $6,753,000, respectively.
Participants may elect to receive a portion of their contributions in cash.
Postretirement Benefits Other than Pensions
The Company also has postretirement plans that provide certain health care and
life insurance benefits ("postretirement benefits") to substantially all
retired employees and agents. These plans are unfunded.
In 1993, the Company changed its method of accounting for the costs of its
postretirement benefit plans to the accrual method, and elected to amortize its
transition obligation for retirees and fully eligible employees and
12
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8)PENSION PLANS AND OTHER RETIREMENT PLANS (CONTINUED)
agents over 20 years. The unamortized transition obligation was $11,203,000 and
$13,000,000 at December 31, 1995 and 1994, respectively.
The net postretirement benefit cost for the years ended December 31, 1995,
1994, and 1993, was $3,163,000, $3,202,000 and $3,832,000, respectively. This
amount includes the expected cost of such benefits for newly eligible
employees, interest cost, and amortization of the transition obligation. The
Company made payments under the plans of $575,000, $526,000, and $555,000 in
1995, 1994, and 1993, respectively, as claims were incurred.
At December 31, 1995 and 1994, the postretirement benefit obligation for
retirees and other fully eligible participants was $17,410,000 and $19,635,000,
respectively. The estimated cost of the benefit obligation for active employees
and agents who are not yet fully eligible was $9,808,000 and $13,065,000 for
1995 and 1994, respectively. The discount rate used in determining the
accumulated postretirement benefit obligation for 1995 and 1994 was 7.5%. The
1995 net health care cost trend rate was 11.0% graded to 5.5% over 11 years,
and the 1994 net health care cost rate was 11.5%, graded to 5.5% over 12 years.
The assumptions presented herein are based on pertinent information available
to management as of December 31, 1995 and 1994. Actual results could differ
from those estimates and assumptions. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would
increase the postretirement benefit obligation as of December 31, 1995 by
$1,874,000 and the estimated eligibility cost and interest cost components of
net periodic postretirement benefit costs for 1995 by $290,889.
(9)COMMITMENTS AND CONTINGENCIES
The Company reinsures certain individual and group business. At December 31,
1995 and 1994, policy reserves in the accompanying balance sheet are reflected
net of reinsurance ceded of $97,854,000 and $68,289,000, respectively. To the
extent that an assuming reinsurer is unable to meet its obligation under its
agreement, the Company remains liable.
The Company has issued certain participating group annuity and life insurance
contracts jointly with another life insurance company. The joint contract
issuer has liabilities related to these contracts of $378,475,000 as of
December 31, 1995. To the extent the joint contract issuer is unable to meet
its obligation under the agreement, the Company remains liable.
The Company has long-term commitments to fund venture capital and real estate
investments totalling $76,461,000 as of December 31, 1995. The Company
estimates that $11,650,000 of these commitments will be invested in 1996 with
the remaining $64,811,000 invested over the next five years.
At December 31, 1995, the Company had guaranteed the payment of $64,100,000
in policyowner dividends payable in 1996. The Company has pledged bonds, valued
at $66,906,000, to secure this guarantee.
The Company is contingently liable under state regulatory requirements for
possible assessment pertaining to future insolvencies and impairments of
unaffiliated companies.
(10) SURPLUS NOTES
In September 1995, the Company issued surplus notes with a face value of
$125,000,000, at 8.25%, due in 2025. The surplus notes are reported in the
Company's surplus at a statement value of $124,966,578, which represents the
face value of the notes less unamortized discount. The surplus notes are
subordinate to all current and future policyowners' interests, including
claims, and indebtedness of the Company. All payments of
interest and principal on the notes are subject to the approval of the
Department of Commerce. The unapproved accrued interest at December 31, 1995,
is $3,007,800. The issuance costs of $1,403,400 are deferred and treated as a
non-admitted asset. The deferred expense is amortized over 30 years on a
straight-line basis. Interest, discount amortization, and deferred expense
amortization are included in general insurance expenses in the statement of
operations. The Company's method of accounting for its surplus notes has been
approved by the Department of Commerce.
13
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(11) MUTUAL LIFE INSURANCE COMPANY ACCOUNTING POLICIES
In April 1993 the Financial Accounting Standards Board (FASB) issued
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises." In January 1995 the
FASB issued the statement, "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts" and, jointly with the American Institute of Certified
Public Accountants, issued a Statement of Position (SOP), "Accounting for
Certain Insurance Activities of Mutual Insurance Enterprises." Under
Interpretation No. 40, the statement and SOP (collectively "the statements"),
mutual life insurance companies that report their financial statements in
conformity with generally accepted accounting principles will be required to
apply the statements and all related authoritative GAAP pronouncements.
The statements apply to years beginning after December 15, 1995 and will
require restatement of prior year balances. The Company plans to prepare such
financial statements as of and for the year-ended December 31, 1996 with
restatement of the then prior year financial statements. Applying the
provisions of the statements will likely result in policyholders' surplus and
net income amounts differing from the amounts included in the accompanying
financial statements. Management is in the process of determining the impact of
the adoption of GAAP.
The Company will also continue to prepare its financial statements in
accordance with statutory accounting practices prescribed or permitted by the
Department of Commerce, which will no longer be considered generally accepted
accounting principles.
14
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
SCHEDULE I
SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN
MARKET IN THE BALANCE
TYPE OF INVESTMENT COST(4) VALUE SHEET(1)(3)
- ------------------ ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Bonds:
United States government and government
agencies and authorities $ 241,228 $ 251,702 $ 241,228
States, municipalities and political
subdivisions 26,337 29,605 26,337
Foreign governments 861 940 861
Public utilities 547,229 590,445 547,229
Mortgage-backed securities 1,726,064 1,788,719 1,726,064
All other corporate bonds 2,909,767 3,116,990 2,907,107
---------- ---------- ----------
Total bonds 5,451,486 5,778,401 5,448,826
---------- ---------- ----------
Equity securities:
Common stocks:
Public utilities 17,500 23,333 23,333
Banks, trusts and insurance companies 11,950 22,358 22,358
Industrial, miscellaneous and all
other 160,443 233,662 233,662
---------- ---------- ----------
Total equity securities 189,893 279,353 279,353
---------- ---------- ----------
Mortgage loans on real estate 755,997 xxxxxx 754,501
Real estate (2) 86,646 xxxxxx 76,639
Policy loans 197,555 xxxxxx 197,555
Other long-term investments 96,080 xxxxxx 90,264
Short-term investments 51,904 xxxxxx 51,816
---------- ----------
Total $1,188,182 xxxxxx $1,170,775
---------- ----------
Total investments $6,829,561 xxxxxx $6,898,954
========== ==========
</TABLE>
- -------
(1) Debt securities are carried at amortized cost or investment values pre-
scribed by the National Association of Insurance Commissioners.
(2) The carrying value of real estate acquired in satisfaction of indebtedness
is $1,999. Real estate includes property occupied by the Company.
(3) Differences between cost and amounts shown in the balance sheet for invest-
ments, other than equity securities and bonds, represent non-admitted in-
vestments.
(4) Original cost for equity securities and original cost reduced by repayments
and adjusted for amortization of premiums or accrual of discounts for bonds
and other investments.
15
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
SCHEDULE V
SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
FUTURE POLICY
DEFERRED BENEFITS OTHER POLICY
POLICY LOSSES, CLAIMS CLAIMS AND
ACQUISITION AND SETTLEMENT UNEARNED BENEFITS
SEGMENT COSTS(1) EXPENSES(3) PREMIUMS(3) PAYABLE
- ------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
1995:
Life insurance $2,129,336 $37,784
Accident and
health insurance 369,273 12,724
Annuity consid-
erations 3,322,866 4
------- ---------- ------- -------
Total -- 5,821,475 -- 50,512
======= ========== ======= =======
1994:
Life insurance $1,981,469 $37,909
Accident and
health insurance 343,241 15,754
Annuity consid-
erations 3,179,279 7
------- ---------- ------- -------
Total -- 5,503,989 -- 53,670
======= ========== ======= =======
1993:
Life insurance $1,875,570 $83,365
Accident and
health insurance 317,825 14,979
Annuity consid-
erations 3,166,944 7
------- ---------- ------- -------
Total -- $5,360,339 -- $98,351
======= ========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
AMORTIZATION
PREMIUMS, BENEFITS, OF DEFERRED
ANNUITY, AND NET CLAIMS, LOSSES POLICY OTHER
OTHER FUND INVESTMENT AND SETTLEMENT ACQUISITION OPERATING PREMIUMS
SEGMENT DEPOSITS INCOME EXPENSES COSTS(1) EXPENSES WRITTEN(2)
- ------- ------------ ---------- -------------- ------------ --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1995:
Life insurance $ 789,350 $212,641 $591,775 $243,379
Accident and
health insurance 154,358 35,894 94,164 79,491
Annuity consid-
erations 529,958 276,136 713,266 55,120
---------- -------- ---------- ------- -------- -------
Total 1,473,666 524,671 1,399,205 -- 377,990 --
========== ======== ========== ======= ======== =======
1994:
Life insurance $ 802,265 $196,877 $ 608,091 $230,327 --
Accident and
health insurance 142,032 32,724 93,634 71,958
Annuity consid-
erations 480,055 259,212 652,076 52,180
---------- -------- ---------- ------- -------- -------
Total 1,424,352 488,813 1,353,801 -- 354,465 --
========== ======== ========== ======= ======== =======
1993:
Life insurance $ 718,232 $193,724 $ 538,880 $220,861
Accident and
health insurance 138,690 31,452 88,857 72,616
Annuity consid-
erations 433,032 267,835 626,181 45,463
---------- -------- ---------- ------- -------- -------
Total $1,289,954 $493,011 $1,253,918 -- $338,940 --
========== ======== ========== ======= ======== =======
</TABLE>
- -----
(1) Does not apply to financial statements of mutual life insurance companies
which are prepared on a statutory basis.
(2) Does not apply to life insurance.
(3) Unearned premiums and other deposit funds are included in future policy
benefits, losses, claims and settlement expenses.
16
<PAGE>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
SCHEDULE VI
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
OTHER FROM OTHER NET ASSUMED TO
GROSS AMOUNT COMPANIES COMPANIES AMOUNT NET
------------ ----------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995:
Life insurance in
force $104,059,399 $15,291,357 $21,129,067 $109,897,109 19.2%
============ =========== =========== ============ ====
Premiums, annuity con-
siderations and fund
deposits:
Life insurance $ 782,558 $ 55,362 $ 62,154 $ 789,350 7.9%
Accident and health
insurance 164,683 12,724 2,399 154,358 1.6%
Annuity 529,958 -- -- 529,958 --
------------ ----------- ----------- ------------ ----
Total premiums*,
annuity considera-
tions and fund
deposits $ 1,477,199 $ 68,086 $ 64,553 $ 1,473,666 4.4%
============ =========== =========== ============ ====
1994:
Life insurance in
force $ 97,181,118 $13,314,267 $20,555,910 $104,422,761 19.7%
============ =========== =========== ============ ====
Premiums, annuity con-
siderations and fund
deposits:
Life insurance $ 792,087 $ 48,773 $ 58,951 $ 802,265 7.3%
Accident and health
insurance 150,876 10,145 1,301 142,032 0.9%
Annuity 480,055 -- -- 480,055 --
------------ ----------- ----------- ------------ ----
Total premiums*,
annuity considera-
tions and fund
deposits $ 1,423,018 $ 58,918 $ 60,252 $ 1,424,352 4.2%
============ =========== =========== ============ ====
1993:
Life insurance in
force $ 93,206,579 $11,674,202 $19,758,935 $101,291,312 19.5%
============ =========== =========== ============ ====
Premiums, annuity con-
siderations and fund
deposits:
Life insurance $ 704,172 $ 43,313 $ 57,373 $ 718,232 8.0%
Accident and health
insurance 147,229 9,699 1,160 138,690 0.8%
Annuity 433,032 -- -- 433,032 --
------------ ----------- ----------- ------------ ----
Total premiums*,
annuity considera-
tions and fund de-
posits $ 1,284,433 $ 53,012 $ 58,533 $ 1,289,954 4.5%
============ =========== =========== ============ ====
</TABLE>
- -------
* There are no premiums related to either property and liability or title
insurance.
17
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
Minnesota Mutual Variable Annuity Account
Cross Reference Sheet to Other Information
Form N-4
Item Number Caption in Other Information
24. Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners
28. Indemnification
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Audited Financial Statements of the Depositor, The Minnesota Mutual
Life Insurance Company, for the fiscal year ended December 31, 1995
and 1994, are included in Part B of this filing and consist of the
following:
1. Independent Auditors' Report - The Minnesota Mutual Life
Insurance Company.
2. Balance Sheets - The Minnesota Mutual Life Insurance Company.
3. Statements of Operations and Policyowners' Surplus - The
Minnesota Mutual Life Insurance Company.
4. Statements of Cash Flows - The Minnesota Mutual Life Insurance
Company.
5. Notes to Financial Statements - The Minnesota Mutual Life
Insurance Company.
6. Summary of Investments-Other than Investments in Related
Parties - The Minnesota Mutual Life Insurance Company.
7. Supplementary Insurance Information - The Minnesota Mutual Life
Insurance Company.
8. Reinsurance - The Minnesota Mutual Life Insurance Company.
9. Short-term Borrowings - The Minnesota Mutual Life Insurance
Company.
(c) Exhibits
1. The Resolution of The Minnesota Mutual Life Insurance Company's
Executive Committee of its Board of Trustees establishing the
Variable Annuity Account.
2. Not applicable.
3. (a) The Distribution Agreement between The Minnesota Mutual Life
Insurance Company and Voyageur Fund Distributors, Inc.
(b) Dealer Agreement Specimen.
<PAGE>
4. (a) Flexible Payment Deferred Variable Annuity Contract, form
96-9347.
(b) The Qualified Plan Agreement, form 88-9176 Rev. 9-96.
(c) The Individual Retirement Annuity Agreement, form 83-9058
Rev. 10-93.
(d) Tax Sheltered Annuity Amendment, form 88-9213.
(e) Tax Sheltered Annuity Loan Agreement, form 96-9351.
(f) Annuity Payment Endorsement, form 96-9352.
(g) Annuity Payment Endorsement, form 83-9060.
5. (a) Application, form 96-9350.
6. Certificate of Incorporation and Bylaws.
(a) The Articles of Re-Incorporation of the Depositor.
(b) The Bylaws of the Depositor.
7. Not applicable.
8. Fund Participation Agreement.
9. Opinion and consent of Donald F. Gruber, Esq.
10. Consent of KPMG Peat Marwick LLP.
11. Not applicable.
12. Not applicable.
<PAGE>
15. The Minnesota Mutual Life Insurance Company Power of Attorney
to Sign Registration Statements.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Positions and Offices Positions and Offices
Business Address with Insurance Company with Registrant
- ------------------ ---------------------- ---------------------
Giulio Agostini Trustee None
3M
3M Center -
Executive 220-14W-08
P. O. Box 33220
St. Paul, MN 55133-3220
Anthony L. Andersen Trustee None
H. B. Fuller Company
2424 Territorial Road
St. Paul, MN 55114
John F. Bruder Senior Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Keith M. Campbell Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Paul H. Gooding Vice President and None
The Minnesota Mutual Life Treasurer
Insurance Company
400 Robert Street North
St. Paul, MN 55101
John F. Grundhofer Trustee None
First Bank System, Inc.
601 2nd Avenue South
Suite 2900
Minneapolis, MN 55402
Harold V. Haverty Trustee None
Deluxe Corporation
c/o 1 Woodduck Lane
North Oaks, MN 55127
Robert E. Hunstad Executive Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
James E. Johnson Senior Vice President None
The Minnesota Mutual Life and Actuary
Insurance Company
400 Robert Street North
St. Paul, MN 55101
<PAGE>
Lloyd P. Johnson Trustee None
Norwest Corporation
4900 IDS Center
80 S 8th Street
Minneapolis, MN 55479-1060
David S. Kidwell, Ph.D. Trustee None
The Curtis L. Carlson
School of Management
University of Minnesota
271 19th Avenue South
Minneapolis, MN 55455
Richard D. Lee Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Reatha C. King, Ph.D. Trustee None
General Mills Foundation
P. O. Box 1113
Minneapolis, MN 55440
Joel W. Mahle Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Dennis E. Prohofsky Senior Vice President, None
The Minnesota Mutual Life General Counsel and
Insurance Company Secretary
400 Robert Street North
St. Paul, MN 55101
Thomas E. Rohricht Trustee None
Doherty, Rumble & Butler
Professional Association
2800 Minnesota World
Trade Center
30 East Seventh Street
St. Paul, MN 55101-4999
Terry N. Saario, Ph.D. Trustee None
3141 Dean Court, #1202
Minneapolis, MN 55416
Robert L. Senkler Chairman, President and None
The Minnesota Mutual Life Chief Executive Officer
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Michael E. Shannon Trustee None
Ecolab, Inc.
Ecolab Center
St. Paul, MN 55102
<PAGE>
Gregory S. Strong Vice President and None
The Minnesota Mutual Life Actuary
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Terrence M. Sullivan Senior Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Randy F. Wallake Senior Vice President None
The Minnesota Mutual Life
Insurance Company
400 Robert Street North
St. Paul, MN 55101
Frederick T. Weyerhaeuser Trustee None
Clearwater Investment
Trust
332 Minnesota Street
Suite W-2090
St. Paul, MN 55101-1308
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Wholly-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Asset Management Company
The Ministers Life Insurance Company
MIMLIC Corporation
Minnesota Fire and Casualty Company
Northstar Life Insurance Company (New York)
Robert Street Energy, Inc.
Open-end registered investment company offering shares solely to separate
accounts of The Minnesota Mutual Life Insurance Company:
MIMLIC Series Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Asset Management Company:
MIMLIC Sales Corporation
Advantus Capital Management, Inc.
Advantus Venture Fund, Inc.
Advantus Index 500 Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Corporation:
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MIMLIC Venture Corporation
Personal Finance Company (Delaware)
Wedgewood Valley Golf, Inc.
Ministers Life Resources, Inc.
Enterprise Holding Corporation
HomePlus Agency, Inc.
<PAGE>
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Oakleaf Service Corporation
Lafayette Litho, Inc.
Financial Ink Corporation
Concepts in Marketing Research Corporation
Concepts in Marketing Services Corporation
National Association of Religious Professionals, Inc.
Wholly-owned subsidiary of Minnesota Fire and Casualty Company:
HomePlus Insurance Company
Majority-owned subsidiaries of MIMLIC Imperial Corporation:
J. H. Shoemaker Advisory Corporation
Consolidated Capital Advisors, Inc.
Majority-owned subsidiary of MIMLIC Sales Corporation:
MIMLIC Insurance Agency of Ohio, Inc.
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Wholly-owned subsidiary of Oakleaf Service Corporation:
New West Agency, Inc. (Oregon)
Majority-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
MIMLIC Cash Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Less than majority-owned, but greater than 25% owned, subsidiaries of The
Minnesota Mutual Life Insurance Company:
Advantus Money Market Fund, Inc.
Less than 25% owned subsidiaries of The Minnesota Mutual Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Bond Fund, Inc.
Unless indicated otherwise, parenthetically, each of the above
corporations is a Minnesota corporation.
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of September 16, 1996, the number of holders of securities of this class were
as follows:
Number of Record
Title of Class Holders
-------------- ----------------
Voyageur Harbour -0-
Variable Annuity Contract
ITEM 28. INDEMNIFICATION
The State of Minnesota has an indemnification statute (Minnesota Statutes
300.083), as amended, effective January 1, 1984, which requires indemnification
of individuals only under the circumstances described by the statute. Expenses
incurred in the defense of any action, including attorneys' fees, may be
advanced to the individual after written request by the board of directors upon
receiving an undertaking from the individual to repay any amount advanced unless
it is ultimately determined that he or she is entitled to be indemnified by the
corporation as authorized by the statute and after a determination that the
facts then known to those making the determination would not preclude
indemnification.
Indemnification is required for persons made a part to a proceeding by reason of
their official capacity so long as they acted in good faith, received no
improper personal benefit and have not been indemnified by another organization.
In the case of a criminal proceeding, they must also have had no reasonable
cause to believe the conduct was unlawful. In respect to other acts arising out
of official capacity: (1) where the person is acting directly for the
corporation there must be a reasonable belief by the person that his or her
conduct was in the best interests of the corporation or, (2) where the person is
serving another organization or plan at the request of the corporation, the
person must have reasonably believed that his or her conduct was not opposed to
the best interests of the corporation. In the case of persons not directors,
officers or policy-making employees, determination of eligibility for
indemnification may be made by a board-appointed committee of which a director
is a member. For other employees, directors and officers, the determination of
eligibility is made by the Board or a committee of the Board, special legal
counsel, the shareholder of the corporation or pursuant to a judicial
proceeding.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of The
Minnesota Mutual Life Insurance Company and Minnesota Mutual Variable Annuity
Account pursuant to the foregoing provisions, or otherwise, The Minnesota Mutual
Life Insurance Company and Minnesota Mutual Variable Annuity Account have 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 Minnesota Mutual Life Insurance
Company and Minnesota Mutual Variable Annuity Account of expenses incurred or
paid by a director, officer or controlling person of The Minnesota Mutual Life
Insurance Company and Minnesota Mutual Variable Annuity Account in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, The Minnesota Mutual Life Insurance Company and Minnesota Mutual
Variable Annuity Account 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
<PAGE>
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Voyageur Fund Distributors, Inc., the underwriter of the
Registrant's shares, is principal underwriter for the shares of
Voyageur Tax Free Funds, Inc., Voyageur Insured Funds, Inc.,
Voyageur Intermediate Tax Free Funds, Inc., Voyageur Investment
Trust, Voyageur Investment Trust II, Voyageur Mutual Funds, Inc.,
Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc.
and VAM Institutional Funds, Inc., affiliated open-end management
investment companies.
(b) Executive Officers of the Underwriter (who are not also directors
of the Underwriter) and the positions of these individuals with
respect to the Registrant are:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Michael E. Dougherty Chairman None
Steven B. Johansen Secretary & Chief None
Financial Officer
Kenneth R. Larsen Treasurer None
Thomas J. Abood General Counsel None
The address of each of the executive officers is 90 South Seventh
Street, Suite 4400, Minneapolis, Minnesota 55402.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules promulgated thereunder are in the physical
possession of The Minnesota Mutual Life Insurance Company, St. Paul, Minnesota
55101-2098.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
(a) The Registrant hereby undertakes to 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 so long as payments under the
variable annuity contracts may be acceptable.
(b) The Registrant hereby undertakes to include as part of any
application to purchase a contract offered by the prospectus a space
that the applicant can check to request a Statement of Additional
Information.
<PAGE>
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statement required to be made
available under this form promptly upon written or oral request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant, Minnesota Mutual Variable Annuity Account,
has duly caused this Registration Statement to be signed on its behalf by the
Undersigned, thereunto duly authorized, in the City of Saint Paul, and State of
Minnesota, on the 25th day of September, 1996.
MINNESOTA MUTUAL VARIABLE ANNUITY ACCOUNT
(Registrant)
By: THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By /s/Robert L. Senkler
------------------------------------------------
Robert L. Senkler
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the Depositor, The
Minnesota Mutual Life Insurance Company, has duly caused this Registration
Statement to be signed on its behalf by the Undersigned, thereunto duly
authorized, in the City of Saint Paul, and State of Minnesota, on the 25th day
of September, 1996.
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By /s/Robert L. Senkler
------------------------------------------------
Robert L. Senkler
Chairman, President and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
their capacities with the Depositor and on the date indicated.
Signature Title Date
--------- ----- ----
Robert L. Senkler* Chairman,)
- -------------------------- President and)
Robert L. Senkler Chief Executive)
Officer)
)
Giulio Agostini* Trustee)
- -------------------------- )
Giulio Agostini )
)
Anthony L. Andersen* Trustee)
- -------------------------- )
Anthony L. Andersen )
)
John F. Grundhofer* Trustee)
- -------------------------- )
John F. Grundhofer )
)
Harold V. Haverty* Trustee)
- -------------------------- )
Harold V. Haverty )
)
Lloyd P. Johnson* Trustee) By /s/Dennis E. Prohofsky
- -------------------------- ) ----------------------------
Lloyd P. Johnson ) Dennis E. Prohofsky
) Attorney-in-Fact
David S. Kidwell, Ph.D.* Trustee)
- -------------------------- )
David S. Kidwell, Ph.D. ) Dated: September 25, 1996
)
Reatha C. King, Ph.D.* Trustee)
- -------------------------- )
Reatha C. King, Ph.D. )
)
Thomas E. Rohricht* Trustee)
- -------------------------- )
Thomas E. Rohricht )
)
Terry N. Saario, Ph.D.* Trustee)
- -------------------------- )
Terry N. Saario, Ph.D. )
)
Michael E. Shannon* Trustee)
- -------------------------- )
Michael E. Shannon )
)
Frederick T. Weyerhaeuser* Trustee)
- -------------------------- )
Frederick T. Weyerhaeuser )
- ---------------
*Registrant's Officer and Trustee executing power of attorney dated February 12,
1996, a copy of which is filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
1 The Resolution of The Minnesota Mutual Life Insurance
Company's Executive Committee of its Board of Trustees
establishing the Variable Annuity Account.
3(a) The Distribution Agreement between The Minnesota Mutual Life
Insurance Company and Voyageur Fund Distributors, Inc.
3(b) Distribution Agreement.
4(a) Flexible Payment Deferred Variable Annuity Contract, form
96-9347.
4(b) The Qualified Plan Agreement, form 88-9176 Rev. 9-96.
4(c) The Individual Retirement Annuity Agreement, form 83-9058
Rev. 10-93.
4(d) Tax Sheltered Annuity Amendment, form 88-9213.
4(e) Tax Sheltered Annuity Loan Agreement, form 96-9351.
4(f) Annuity Payment Endorsement, form 96-9352.
4(g) Annuity Payment Endorsement, form 83-9060.
5(a) Application, form 96-9350.
6(a) The Articles of Re-Incorporation of the Depositor.
6(b) The Bylaws of the Depositor.
8 Fund Participation Agreement.
9 Opinion and consent of Donald F. Gruber, Esq.
10 Consent of KPMG Peat Marwick LLP.
15 The Minnesota Mutual Life Insurance Company Power of
Attorney to Sign Registration Statements.
<PAGE>
CERTIFICATE OF SECRETARY
I, Dennis E. Prohofsky, hereby certify that I am the Secretary of The
Minnesota Mutual Life Insurance Company, Saint Paul, Minnesota; that I have
charge, custody and control of the record books and corporate seal of said
Company; that the following is a true and correct copy of a resolution adopted
by the Executive Committee of said Company at a meeting held September 10, 1984,
at which meeting a quorum was present and acting throughout; and that the
meeting was duly called for the purpose of acting upon the attached "Resolution
- - Separate Account H".
I hereby certify that the attached resolution has not been modified,
amended or rescinded and continues in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of The Minnesota Mutual Life Insurance Company this 16th day of September,
1996.
/s/ Dennis E. Prohofsky
---------------------------------------
Dennis E. Prohofsky
Senior Vice President,
General Counsel and Secretary
(Seal)
<PAGE>
RESOLUTION-SEPARATE ACCOUNT H
"RESOLVED, That the Company hereby establishes a separate account in accordance
with Subdivision 1 of Section 61A.14 of Minnesota Statutes 1967, as amended, for
the purpose of issuing contracts on a variable basis, which account shall be
known as Minnesota Mutual Variable fund H, or by such other name as the Chief
Executive Officer may determine;
FURTHER RESOLVED, That such separate account be registered as unit investment
trust pursuant to the provisions of the Investment company Act of 1940, as
amended, and that application be made for such exemptions from that Act as may
be necessary or desirable;
FURTHER RESOLVED, That there be prepared and filed with the Securities and
Exchange Commission in accordance with the provisions, of the Securities Act of
1933, as amended, a registration statement, and any amendments thereto, relating
to such contracts on a variable basis as may be offered to the public;
FURTHER RESOLVED, That the chief executive officer of the Company or such
officer or officers as he may designate be, and they hereby are, authorized to
seek such exemptive or other relief as may be necessary or appropriate in
connection with the separate account or the offered contracts; and
FURTHER RESOLVED, That the chief executive officer of the Company or such
officer or officers as he may designate be, and they hereby are, authorized and
directed to take such further actions as may in their judgment be necessary and
desirable to implement the foregoing resolutions."
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this _____ day of _____________, 1996, between and among
Minnesota Mutual Variable Annuity Account, (the "Separate Account"), a
registered separate account of The Minnesota Mutual Life Insurance Company, a
Minnesota corporation ("Minnesota Mutual"), and Voyageur Fund Distributors,
Inc., a Minnesota corporation ("Distributor").
WITNESSETH:
WHEREAS, Minnesota Mutual has established and is the Depositor of the
Separate Account; and
WHEREAS, Minnesota Mutual proposes to offer for sale certain individual
Flexible Payment Variable Annuity Contracts, also known as the Voyageur Harbour
Annuities, (the "Contracts") which are deemed to be securities under the
Securities Act of 1933 ("1933 Act") and the laws of some states; and
WHEREAS, the Distributor, is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934 ("1934 Act") and is a member of the National Association of Securities
Dealers, Inc. ("NASD"); and
WHEREAS, the parties desire to have the Distributor act as principal
underwriter of the Contracts and assume full responsibility for the securities
activities of each "person associated" (as that term is defined in Section
3(a)(18) of the 1934 Act) with the Distributor and engaged directly or
indirectly in the sale of the Contracts (the "associated persons");
NOW, THEREFORE, in consideration of the covenants and mutual promises of
the parties made to each other, it is hereby covenanted and agreed as follows:
1. The Distributor will act as the exclusive principal underwriter of the
Contracts and as such will assume full responsibility for the securities
activities of all the associated persons. The Distributor will train the
associated persons, use its best efforts to prepare them to complete
satisfactorily the applicable NASD and state examinations so that they may be
qualified, register the associated persons as its registered representatives
before they engage in securities activities, and supervise and control them in
the performance of such activities. Unless otherwise permitted by applicable
state law, all persons engaged in the sale of the Contracts must also be
appointed as life insurance agents of Minnesota Mutual.
2. The Distributor will assume full responsibility for the continued
compliance by itself and the associated persons with the NASD Rules of Fair
Practice and Federal and state laws, to the extent applicable, in connection
with the sale of the Contracts. The Distributor will make timely filings with
the SEC, NASD, and any other regulatory authorities of all reports and any sales
literature relating to the Contracts required by law to be filed by the
Distributor. Minnesota
<PAGE>
Mutual will make available to the Distributor copies of any agreements or
plans intended for use in connection with the sale of Contracts in sufficient
number and in adequate time for clearance by the appropriate regulatory
authorities before they are used, and it is agreed that the parties will use
their best efforts to obtain such clearance as expeditiously as is reasonably
possible.
3. The Distributor may enter into agreements with other broker-dealers
duly licensed under applicable Federal and state laws for the sale and
distribution of the Contracts and may perform such duties as may be provided for
in such agreements.
4. Minnesota Mutual, with respect to the Contracts, will prepare and file
all registration statements and prospectuses (including amendments) and all
reports required by law to be filed with Federal and state regulatory
authorities. Minnesota Mutual will bear the cost of printing and mailing all
notices, proxies, proxy statements, and periodic reports that are to be
transmitted to persons having voting rights under the Contracts. Minnesota
Mutual will make prompt and reasonable efforts to effect and keep in effect, at
its expense, the registration or qualification of its Contracts in such
jurisdictions as may be required by federal and state regulatory authorities.
5. All purchase payments and any other monies payable upon the sale,
distribution, renewal or other transaction involving the Contracts shall be paid
or remitted directly to, and all checks shall be drawn to the order of,
Minnesota Mutual, and the Distributor shall not have or be deemed to have any
interest in such payments or monies. All such payments and monies received by
the Distributor shall be remitted daily by the Distributor, or other broker-
dealers acting through Distributor, to Minnesota Mutual for allocation to the
Account in accordance with the Contracts and any prospectus with respect to the
Contracts.
6. Minnesota Mutual will, in connection with the sale of the Contracts,
pay to the Distributor all amounts (including sales commissions) due to the
Distributor or to broker-dealers who have entered into sales agreements with the
Distributor. The records in respect of such payments shall be properly
reflected on the books and records maintained by the Minnesota Mutual.
7. As compensation for the Distributor's assuming the expenses and
performing the services to be assumed and performed by it pursuant to this
Agreement, the Distributor shall receive from Minnesota Mutual such amounts as
may from time to time be agreed upon by the Distributor and Minnesota Mutual, as
described on Schedule A, which is attached hereto and incorporated by reference.
8. As compensation for its services performed and expenses incurred under
this Agreement and its Contracts, Minnesota Mutual will receive all amounts
deducted as administrative, sales, mortality and expense risk charges under the
Contracts, as specified in the Contracts and in the prospectus or prospectuses
forming a part of any registration statement with respect to the Contracts filed
with the SEC under the 1933 Act. It is understood that Minnesota Mutual assumes
the risk that the above compensation for its services under the Contracts may
not prove sufficient to cover its actual expenses in connection therewith and
that its compensation for assuming such risk shall be included in and limited to
the foregoing charges described in said prospectus(es).
-2-
<PAGE>
9. Minnesota Mutual will, except as otherwise provided in this Agreement,
bear the cost of all services and expenses, including legal services and
expenses and registration, filing and other fees, in connection with (a)
registering and qualifying the Contracts with Federal and state regulatory
authorities and the NASD and (b) printing and distributing all Contracts and all
registration statements and prospectuses (including amendments), notices and
periodic reports. All sales literature and advertising prepared by the
Distributor with respect to the Contracts shall be provided to Minnesota Mutual
prior to use.
10. Each party hereto shall advise the others promptly of (a) any action
of the SEC or any authorities of any state or territory, of which it has
knowledge, affecting registration or qualification of the Contracts, or the
right to offer the Contracts for sale, and (b) the happening of any event which
makes untrue any statement, or which requires the making of any change, in the
registration statement or prospectus in order to make the statements therein not
misleading.
11. The services of the Distributor and Minnesota Mutual under this
Agreement are not deemed to be exclusive and the Distributor and Minnesota
Mutual shall be free to render similar services to others, including, without
implied limitation, such other separate accounts as are now or hereafter
established by Minnesota Mutual, so long as the services of the Distributor and
Minnesota Mutual hereunder are not impaired or interfered with thereby.
12. (a) Minnesota Mutual Agrees to indemnify the Distributor (for the
purposes of this Section 12, the "Distributor" shall mean Voyageur Fund
Distributors, Inc. ("VFD"), the officers, directors and employees of VFD, and
any person who is or may be deemed to be a controlling person of VFD) and hold
the Distributor harmless against any and all losses, claims, damages,
liabilities or expenses (including the reasonable costs of investigation and
attorney's fees and expenses as such expenses are incurred by the Distributor in
any action or proceeding between the parties hereto or between the Distributor
and any third party) to which the Distributor may become subject under the 1933
Act, the Investment Company Act of 1940, or otherwise, insofar as any such loss,
claim, damage, liability or expenses (or actions with respect thereto) arises
out of or is based on any untrue statement of a material fact or alleged untrue
statement of a material fact contained in any Registration Statement of a
Separate Account or Contract or investment company underlying such Account or
Contract (including any prospectus or statement of additional information which
is part of any such Registration Statement) or any amendment or supplement
thereto or in any sales material relating to such Account or Contract provided
to the Distributor by Minnesota Mutual (whether or not the Distributor has
approved the use of such sales materials), or arises out of or is based on the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading. This
indemnify agreement will be in addition to any liability which Minnesota Mutual
may otherwise have. No indemnity by Minnesota Mutual hereunder shall apply in
respect of any prospectus, statement of additional information or sales
materials used at a time not authorized under the 1933 Act, or the regulations
adopted thereunder, provided that Minnesota Mutual has informed Distributor in
writing that there is no such authorization.
(b) Distributor agrees to indemnify and hold harmless Minnesota Mutual, the
Separate Account and their officers, directors and employees against any and all
losses, claims, damages or
-3-
<PAGE>
liabilities to which they may become subject under the 1933 Act, the 1934 Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any oral or written
misrepresentation by Distributor or its officers, directors, employees or
agents unless such misrepresentation is contained in any registration
statement for the Contract, any prospectus or statement of additional
information included as a part thereof, as from time to time amended and
supplemented, or any advertisement or sales literature provided by Minnesota
Mutual, or approved in writing by Minnesota Mutual, or (ii) the failure of
Distributor or its officers, directors, employees or agents to comply with
any applicable provisions of this Agreement.
(c) Distributor also agrees to indemnify and hold harmless Minnesota
Mutual, the Separate Account and their officers, directors and employees against
any and all losses, claims, damages or liabilities to which they may become
subject under the 1933 Act, the 1934 Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any oral or written misrepresentation by any Broker-Dealer or its officers,
directors, employees, registered representatives or agents, unless such
misrepresentation is contained in any registration statement for the Contract,
any prospectus or statement of additional information included as a part
thereof, as from time to time amended and supplemented, or any advertisement or
sales literature provided by Minnesota Mutual, or approved in writing by
Minnesota Mutual.
(d) Promptly after receipt by an indemnified party under this Section
12, of notice of the commencement of any action by a third party, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this section 12, notify the indemnifying party
of the commencement thereof; but the omission to so notify the indemnifying
party will not relieve the indemnifying party from liability which the
indemnifying party may have to any indemnified party otherwise than under
this Section 12. In case any such action is brought against any indemnified
party, and it notifies the indemnifying part of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation and such other costs as are approved by the
indemnifying party; provided that if counsel for an indemnified party
determines in good faith that there is a conflict which requires separate
representation for the indemnified party, the indemnified party shall be
entitled to indemnification for the reasonable expenses of one additional
primary and local counsel. Such counsel shall, to the fullest extent
consistent with its professional responsibilities, cooperate with the
indemnifying party and any counsel designated by the indemnifying party.
If the indemnifying party does not elect to assume the defense of such
action and in cases where separate counsel is retained because of the
availability of different defenses, the indemnifying party will reimburse the
indemnified party for the reasonable fees and expenses of any counsel retained
by the indemnified party. Payment (other than the reimbursement of legal and
other related fees and expenses, which will be payable to the indemnified party
upon the
-4-
<PAGE>
indemnifying party's receipt of the indemnified party's bill related thereto)
shall be made upon any final determination of liability resulting from such
claim or misstatement or omission by a court, panel of arbitrators,
administrative agency or self-regulatory organization, or upon any settlement
of any dispute the subject of which involves such a claim.
The indemnifying party shall not be liable under this Agreement for any
settlement made by an indemnified party without the indemnifying party's prior
written consent, and the indemnifying party agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability by reason
of the settlement of any claim or action without the consent of the indemnifying
party. The indemnifying party shall not settle any such claim or action without
prior written consent of the indemnified party. If the foregoing
indemnification should, for reasons of public policy, not be available to any
indemnified party, then the indemnifying party will contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and such indemnified
party on the other arising out of the matter contemplated by this Agreement.
(e) This Section 12 shall survive the termination of this Agreement.
13. This Agreement shall upon execution become effective as of the date
first above written, and shall continue in effect indefinitely unless terminated
by either party on 60 days' written notice to the other.
14. This Agreement may be amended at any time by mutual consent of the
parties.
15. This Agreement shall be governed by and construed in accordance with
the laws of Minnesota without reference to the conflict or choice of laws
principles of such state.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
THE MINNESOTA MUTUAL LIFE INSURANCE
Witness: By:
--------------------------- ------------------------------------
Secretary Chairman of the Board
MINNESOTA MUTUAL VARIABLE ANNUITY ACCOUNT
By: THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
------------------------------------
Depositor
Witness: By:
--------------------------- ------------------------------------
Secretary Chairman of the Board
VOYAGEUR FUND DISTRIBUTORS, INC.
Witness: By:
--------------------------- ------------------------------------
-6-
<PAGE>
SCHEDULE A
An addendum to the Distribution Agreement between the Separate Account,
Minnesota Mutual and the Distributor.
1. PURCHASE PAYMENT COMPENSATION.
A. There shall be payable to the Distributor, on all Purchase Payments received
under the Contracts except those Contracts issued as immediate annuities, such
compensation as is selected by the selling broker-dealer, or the selling
registered representative if approved by the selling broker-dealer, in
accordance with the following options:
(1) A payment of a commission of 5 1/2% on all new Purchase Payments
received under the Contracts, without breakpoints. Beginning in Contract Year 2
of any Contract, there shall be paid to the Distributor an annual trail service
fee in the amount of .25% of the Accumulation Value; or
(2) A payment of a commission of 7% on all new Purchase Payments received
under the Contracts, without breakpoints and without trail service fees; or
(3) A payment of a commission of 4% on all new Purchase Payments received
under the Contracts, without breakpoints. Beginning in Contract Year 2 of any
Contract, there shall be paid to the Distributor an annual trail service fee of
0.50% of the Accumulation Value.
Notwithstanding any right to elect payments under these three options, Option 3
shall be applied for any Contract issued with an Owner or Joint Owner over Age
75, or if the Owner is a non-natural person (a corporation, trust etc.) Option 3
shall be applied for any Contract issued with an Annuitant or Joint Annuitant
over Age 75.
Notwithstanding any right to elect payments under these three options, for
Contracts issued as immediate annuities where the Annuity Payment Option
selected includes a life contingency with an Annuitant or the younger Joint
Annuitant under Age 80, or is for a fixed period of at least ten years, a
commission of 4.25% on all new Purchase Payments received under such Contracts,
without breakpoints, is payable to the Distributor. For all other Contracts
issued as immediate annuities a commission of 2.125% on all new Purchase
Payments received under such Contracts, without breakpoints, is payable to the
Distributor.
B. In addition to the amounts described above, there shall be payable to the
distributor a marketing allowance of 1.00% of all Purchase Payments received
under the Contracts, except those Contracts issued as immediate annuities.
For Contracts issued as immediate annuities where the Annuity Payment Option
selected includes a life contingency with an Annuitant or the younger Joint
Annuitant under Age 80, or is for a fixed period of at least ten years, a
marketing allowance of 1.00% on all new Purchase Payments received under such
Contracts, without breakpoints, is payable to the Distributor. For all other
Contracts issued as immediate annuities a marketing allowance of 0.50% on all
new Purchase Payments received under such Contracts, without breakpoints, is
payable to the Distributor.
C. No commissions are payable, and commissions paid shall be reversed and
returned to Minnesota Mutual, on Contracts returned under the Free Look
provision of the Contract. One half of the commissions paid on new Purchase
Payments received under a Contracts shall be reversed if the Contract is
surrendered in the first Contract Year. In addition, the new Purchase Payment
marketing allowance will be reversed on Contracts returned under the Free Look
provision and one half of the marketing allowance paid on such Contracts will be
reversed if the Contract is surrendered in the first Contract Year.
2. ANNUITY COMPENSATION
A. There shall be payable to the Distributor, on all amounts applied to
provide an annuity under the Contracts, an additional amount in accordance with
the following:
<PAGE>
(1) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or the younger Joint Annuitant under Age 80, or is for a fixed
period of at least ten years, the amount of commission shall be determined by
the period of time that Purchase Payments have remained in the Contract. For
Purchase Payments which have been in the Contract for less than five years, the
rate applied to such Purchase Payments is 0%; for Purchase Payments which have
been in the Contract more than five years and less than ten years, the rate
applied to such Purchase Payments is 2.125%; and, for Purchase Payments which
have been in the Contract for ten years or longer and for all earnings, if any,
accumulated in the Contract, the rate applied to such amounts is 4.25%.
(2) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or younger Joint Annuitant over Age 79, or is for a fixed
period of less than ten years, the amount of commission shall be determined to
be one half of the commission which would have been payable as described in 2-A-
(1) above.
B. There shall also be payable to the Distributor, on all amounts applied to
provide an annuity under the Contracts, a marketing allowance in accordance with
the following:
(1) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or the younger Joint Annuitant under Age 80, or is for a fixed
period of at least ten years, the amount of commission shall be determined by
the period of time that Purchase Payments have remained in the Contract. For
Purchase Payments which have been in the Contract for less than five years, the
rate applied to such Purchase Payments is 0%; for Purchase Payments which have
been in the Contract for more than five years and less than ten years, the rate
applied to such Purchase Payments is 0.50%; and, for Purchase Payments which
have been in the Contract for ten years or longer and for all earnings, if any,
accumulated in the Contract, the rate applied to such amounts is 1%.
(2) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or younger Joint Annuitant over Age 79, or is for a fixed
period of less than ten years, the marketing allowance shall be determined to be
one half of the marketing which would have been payable as described in 2-B-(1)
above.
C. Deferred annuities may be annuitized any time after issue, with
compensation adjusted if the Accumulation Value under a Contract is applied to
provide an annuity within the first Contract Year of a Contract. The
compensation in such a case will be equal to the compensation that would have
been paid if the Contract had been issued as an immediate annuity as described
in 1-A above.
3. RETAINED ASSET COMPENSATION
Under the Contract, a spouse who is a beneficiary, may, upon election, continue
the current Contract at the death of the Owner. For amounts which remain in a
Contract after such an election, the Distributor shall receive a service fee
equal to 1.5% of the amount which remains. No additional marketing allowance is
payable to the Distributor on such retained assets.
4. DEALER BONUS
For any broker-dealer holding a current selling agreement with the Distributor,
where that broker-dealer's total values (currently Accumulation Value) under the
Contracts exceed those levels show below, a bonus will be paid to the
Distributor. The Dealer Bonus will be based only upon Accumulation Values in
Contracts which are have been in force for more than seven Contract Years,
subject to persistency requirements.
Broker-Dealer Total Service Fee
Total Values Applied to Accumulation Value
------------- -----------------------------
under $50,000,000 none
$50,000,000 to $74,999,999 .10%
$75,000,000 to $99,999,999 .25%
$100,000,000 and over .50%
-2-
<PAGE>
VOYAGEUR FUND DISTRIBUTORS, INC.
90 South Seventh Street
Minneapolis, MN 55402
DEALER SALES AGREEMENT
as of September 12, 1996
Dear Sir or Madam:
This Dealer Sales Agreement (the "Agreement") made as of the date set forth
below, by and between Voyageur Fund Distributors, Inc., (the "Underwriter"), and
you (the "Dealer"), sets forth the terms of selling arrangements between the
Underwriter and you as Dealer.
WHEREAS, the Underwriter has entered into Distribution Agreements with
certain investment companies, including open-end investment companies and unit
investment trusts (the "Funds"), under which the Underwriter was engaged and
agreed to act as principal underwriter of the securities of such Funds to the
public, either through dealers or otherwise; and
WHEREAS, the Underwriter has entered into Distribution Agreements relating
to variable annuity contracts described as "Voyageur Harbour Annuities" issued
by the Minnesota Mutual Variable Annuity Account, a separate account of The
Minnesota Mutual Life Insurance Company ("MML"), under which the Underwriter was
engaged and agreed to act as principal underwriter in the sale and distribution
of Voyageur Harbour Annuities (the "Contracts") to the public, either through
dealers or otherwise; and
WHEREAS, the parties hereto desire that the Dealer be a member of a selling
group to sell and distribute shares or units of the Funds' securities and
Contracts to the public;
NOW, THEREFORE, the Dealer hereby offers to become a member in a selling
group to sell and distribute the Funds' securities and Contracts to the public
and to render certain shareholder services, subject to the following terms and
conditions.
1. ACCEPTANCE OF SUBSCRIPTIONS. Subscriptions solicited by you will be
accepted only at the price, in the amounts, and on the terms which are set forth
in the then current Prospectuses (the term "Prospectus" shall also include any
Statement of Additional Information incorporated therein by reference) of the
Funds or Contracts, as the case may be.
2. DEALER DISCOUNT AND OTHER COMPENSATION. The Dealer shall receive, for
sales of the Funds' shares or units, the applicable Dealer Discount or other
compensation as set forth in the then current prospectus of the relevant Fund or
Contracts. Additionally, with respect to certain of the Funds, the Dealer may
be entitled to receive additional compensation upon such terms and conditions
and in such amounts as set forth in such Prospectus (and on Schedule A attached
hereto with respect to sales of money market Funds) for providing to Fund
shareholders certain personal and account maintenance services (including, but
not limited to, responding to shareholder inquiries and providing information on
their investments) not otherwise required to be provided by the applicable
Funds' investment adviser or transfer agent ("Service Fees") or (in addition to
the aforementioned Dealer Discount) for sales of the applicable Fund's
securities ("Distribution Fees"). With respect to the Contracts, the Dealer
must specify a compensation option and may be entitled to additional
compensation based on terms and conditions made part of this Agreement in
Schedule B attached hereto. These additional amounts may be amended in the
Prospectus or Schedule A or Schedule B in whole or in part without notice from
time to time by the Underwriter.
3. ORDERS. Orders to purchase shares or units of any Fund or Contracts
shall be placed as described in the then current Prospectus of the applicable
Fund or Contracts and as instructed from time to time by the Underwriter.
Orders shall be placed promptly upon receipt, and there shall be no postponement
of orders received so as to profit the Dealer by reason of such postponement.
Each order shall be confirmed by the Dealer in writing on the day such order was
placed. Payment for shares or units ordered from us shall be in New York or
Boston clearinghouse funds received by us, or is the case of the Contracts
received by MML, by the later of: (i) the end of the fifth business day
following your receipt of the customer's order to purchase such shares or units
or (ii) the end of one business day following your receipt of the customer's
payment for such shares or units, but in no event later than the end of the
eighth business day following your receipt of the customer's order; provided,
however, that commencing as of June 1, 1995 and in accordance with Rule 15c6-1
under the Securities Exchange Act of 1934, as amended, payment for such shares
or units must be received by us, or is the case of the Contracts received by
MML, not later than the end of the third business day following your receipt of
the customer's order. If such payment is not received, we reserve the right,
without notice, forthwith to cancel the sale, or, in the case of shares, at our
option, to sell the shares ordered back to the issuer, in which case we may hold
you responsible for any loss, including loss of profit, suffered by us resulting
from your failure to make payment as aforesaid.
4. GENERAL. In soliciting purchases of shares or units of any Fund or
Contracts, the Dealer shall act as an independent contractor and not as an agent
of the Underwriter or the Fund. If required by the insurance laws of any
jurisdiction, MML hereby appoints the Dealer as its agent for purposes of
offering the Contracts in such jurisdiction. The Dealer shall act as an
independent contractor and not on behalf or subject to the control of the
Underwriter or MML. The Dealer agrees that neither the Underwriter nor any
other dealer nor any of the Funds shall be deemed an agent of the Dealer.
Nothing herein shall constitute the Dealer as a partner of the Underwriter, any
other dealer or any of the Funds, or render any such entity liable for
obligations of the Dealer. The Dealer understands and agrees that each
shareholder account which includes shares or units of any Fund or Contract
subject to the Fund's or Contract's contingent deferred sales charge (as
described in the applicable Fund's current Prospectus) shall not be included the
Dealer's omnibus or house account, if any, but shall be established as a
separate shareholder account in which purchase and redemption transactions are
reported separately to the Underwriter.
5. DEALER'S UNDERTAKINGS. No person is authorized to make any
representation concerning shares or units of any Fund or Contract except those
contained in the then current Prospectus of the applicable Fund or Contract.
The Dealer shall not sell shares or units of any Fund or Contract pursuant to
this Agreement unless the then current Prospectus of the applicable Fund or
Contract is furnished to the purchaser prior to the offer and sale. The Dealer
shall not use any supplemental sales literature of any kind without prior
written approval of the Underwriter unless it is furnished by the Underwriter
for such purpose. In offering and selling shares or units of any Fund or
Contract, the Dealer will rely solely on the representations contained in the
then current Prospectus of the applicable Fund or Contract. With respect to any
Fund offering multiple classes of shares, the Dealer shall disclose to
prospective investors the existence of all available classes of such Fund and
shall determine the suitability of each available class as an investment for
each such prospective investor. Notwithstanding Paragraph 8 of this Agreement,
the Dealer agrees to indemnify and to hold harmless MML, the Funds and/or the
Underwriter from and against any and all claims, liability, expense or loss in
any way arising out of or in any way connected with (i) any violation of this
Paragraph 5, (ii) any account established by the Dealer, or for which the Dealer
is broker-dealer of record, with a "transfer on death", "payable on death" or
other similar restriction or (iii) arising out of or in any way connected with
the Dealer's willful, reckless or negligent violation of any law, regulation,
contract or other arrangement; provided that the notice provisions set forth in
Paragraph 9 with respect to the Underwriter shall apply equally under this
Agreement with respect to the Dealer.
<PAGE>
6. REPRESENTATIONS AND AGREEMENTS OF THE DEALER. By accepting this
Agreement, the Dealer represents that it: (i) is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended; (ii) is qualified to act
as a dealer in each jurisdiction in which it will offer shares of any Fund or
Contracts; (iii) is a member in good standing of the National Association of
Securities Dealers, Inc.; and (iv) will maintain such registrations,
qualifications and memberships throughout the term of this Agreement. The
Dealer shall comply with all applicable federal laws, the laws of each
jurisdiction in which it will offer shares of any Fund or Contracts, and the
rules and regulations of the National Association of Securities Dealers, Inc.
The Dealer shall not be entitled to any compensation during any period in which
it has been suspended or expelled from membership in the National Association of
Securities Dealers, Inc.
7. DEALER'S EMPLOYEES. By accepting this Agreement, the Dealer assumes
full responsibility for thorough and prior training of its representatives
concerning the selling methods to be used in connection with the offer and sale
of shares of the Fund or Contracts, giving special emphasis to the principles of
full and fair disclosure to prospective investors. The Dealer may solicit sales
of the contracts only through registered representatives of the Dealer, who
shall also have such variable annuity or other insurances licenses as are
necessary for the sale of the Contracts and who shall have been appointed agents
of MML. MML may refuse to appoint as its agent any registered representative of
the Dealer if such registered representative is deemed by MML to be unsuitable
for any reason. The Dealer shall from time to time provide the Underwriter with
a list of the Dealer's registered representatives who have been appointed agents
of MML, and shall give the Underwriter prompt notice in the event of (a) the
suspension, revocation, cancellation or other impairment of any such registered
representative's registration with the NASD or any such registered
representative's registration, license or qualification to sell the Contracts
under any applicable state or federal law or regulation, or (b) the termination
of any such registered representative's association with the Dealer.
8. INDEMNIFICATION. Except as otherwise provided in this Agreement, the
Underwriter hereby agrees to indemnify and to hold harmless the Dealer and each
person, if any, who controls the Dealer within the meaning of Section 15 of the
Securities Act of 1933 (the "Act") and their respective successors and assigns
(hereinafter in this paragraph separately and collectively referred to as the
"Defendants") from and against any and all losses, claims, demands or
liabilities, joint or several, to which the Defendants may become subject under
the Act, at common law or otherwise (including any legal or other expense
reasonably incurred in connection therewith), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of a material fact contained in the then current
Prospectuses (and/or Statements of Additional Information) of the Funds or
Contracts or arise out of or are based upon the omission or alleged omission to
state therein a material fact that is required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided that this indemnity agreement is subject to
the condition that notice be given as provided in paragraph 9.
9. NOTICE. Upon the presentation in writing of any claim or the
commencement of any suit against any Defendant in respect of which
indemnification may be sought from the Underwriter on account of its agreement
contained in the preceding sentence, such Defendant shall with reasonable
promptness give notice in writing of such suit to the Underwriter, but failure
so to give such notice shall not relieve the Underwriter from any liability that
it may have to the Defendants otherwise than on account of said indemnity
agreement. The Underwriter shall be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any such claim or
suit, but if the Underwriter elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the Defendants who are
parties to such suit or against whom such claim is presented. If the
Underwriter elects to assume the defense and retain such counsel as herein
provided, such Defendant shall bear the fees and expenses subsequently incurred
of any additional counsel retained by them. The Underwriter agrees to notify
the Dealer promptly, as soon as it has knowledge thereof, of the commencement of
any litigation or proceedings against the Underwriter or any of the Funds or any
of their directors or officers, in connection with the offer or sale of Fund
shares or Contracts to the public. The Underwriter's obligation under this
paragraph shall survive the termination of this Agreement.
10. ASSIGNMENT. The Underwriter may assign this Agreement to an affiliate
upon notice to the Dealer. This Agreement may not be assigned by the Dealer.
11. TERMINATION. Either party may terminate this Agreement at any time
upon giving written notice to the other party hereto. This Agreement shall
terminate automatically upon an "assignment" as defined in the Investment
Company Act of 1940.
12. WAIVER. No failure, neglect or forbearance on the part of the
Underwriter to require strict performance of this Agreement shall be construed
as a waiver of the rights or remedies of the Underwriter hereunder.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota without reference to the choice of laws or
conflicts principles of such state.
14. SUSPENDING SALES, AMENDING OR CANCELING THIS AGREEMENT. The
Underwriter may, at any time, without notice, suspend sales or withdraw any
offering of shares or Contracts entirely. The Underwriter reserves the right to
amend or cancel this Agreement upon notice to you. The Dealer agrees that any
order to purchase shares of Funds or Contracts placed after notice of any
amendment to this Agreement has been sent to the Dealer shall constitute the
Dealer's agreement to any such amendment.
DEALER:
- -------------------------------
(Name) (NSCC Clearing Number)
- -------------------------------
(Tax Identification Number) (NSCC Executing Broker Symbol)
- -------------------------------
(Street Address) (Telephone Number)
- -------------------------------
(City) (State) (Zip)
Date of offer: , 19 VOYAGEUR FUND DISTRIBUTORS, INC.
----------------- --
By By:
-----------------------------------------
(Signature)
Please Print Name Name: Frank C. Tonnemaker
-------------------------- Title : President
Its
----------------------------------
(Title)
2
<PAGE>
SCHEDULE A
MONEY MARKET SHARES
A. For money market shares sold by a dealer participating in the Voyageur
Cash Advantage Program*:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
FUND AGGREGATE BALANCE ANNUAL FEE
------------------------------------------------------------------------------------
<S> <C> <C>
Voyageur Cash Trust Series $0 - $5 million .40%
Voyageur Minnesota Municipal Cash Trust over $5 million - $10 million .45%
over $10 million .50%
Voyageur California Municipal Cash Trust not applicable .25%
Voyageur Florida Municipal Cash Trust not applicable .25%
</TABLE>
B. For money market shares sold by a dealer not participating in the
Voyageur Cash Advantage Program*:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
FUND AGGREGATE BALANCE ANNUAL FEE
------------------------------------------------------------------------------------
<S> <C> <C>
Voyageur Cash Trust Series not applicable .30%
Voyageur Minnesota Cash Trust Series not applicable .25%
Voyageur California Cash Trust Series not applicable .25%
Voyageur Florida Cash Trust Series not applicable .25%
</TABLE>
* The Voyageur Cash Advantage Program permits broker/dealers to use the
Voyageur Cash Trust Series of Money Market Funds and additional selected money
market funds as a "proprietary" money market fund family. In order to
participate in the Program, broker/dealers must communicate purchase and sell
orders to Voyageur through electronic or telephonic media, must maintain a
single omnibus account for each applicable Cash Trust Series and must perform
all necessary subaccounting and record keeping for individual client accounts.
SCHEDULE B
1. PURCHASE PAYMENT COMPENSATION.
A. There shall be payable to the Distributor, on all Purchase Payments received
under the Contracts, except Contracts issued as immediate annuities, such
compensation as is selected by the selling broker-dealer, or the selling
registered representative if approved by the selling broker-dealer, in
accordance with the following options:
(1) A payment of a commission of 5 1/2% on all new Purchase Payments
received under the Contracts, without breakpoints. Beginning in Contract Year 2
of any Contract, there shall be paid to the Dealer an annual trail service fee
in the amount of .25% of the Accumulation Value; or
(2) A payment of a commission of 7% on all new Purchase Payments received
under the Contracts, without breakpoints and without trail service fees; or
(3) A payment of a commission of 4% on all new Purchase Payments received
under the Contracts, without breakpoints. Beginning in Contract Year 2 of any
Contract, there shall be paid to the Dealer an annual trail service fee of
0.50% of the Accumulation Value.
Notwithstanding any right to elect payments under these three options, Option 3
shall be applied for any Contract issued with an Owner or Joint Owner over Age
75, or if the Owner is a non-natural person (a corporation, trust etc.) Option 3
shall be applied for any Contract issued with an Annuitant or Joint Annuitant
over Age 75.
Notwithstanding any right to elect payments under these three options, for
Contracts issued as immediate annuities where the Annuity Payment Option
selected includes a life contingency with an Annuitant or the younger Joint
Annuitant under Age 80, or is for a fixed period of at least ten years, a
commission of 4.25% on all new Purchase Payments received under such Contracts,
without breakpoints, is payable to the Dealer. For all other Contracts issued as
immediate annuities a commission of 2.125% on all new Purchase Payments received
under such Contracts, without breakpoints, is payable to the Dealer.
B. No commissions are payable, and commissions paid shall be reversed and
returned to Minnesota Mutual, on Contracts returned under the Free Look
provision of the Contract. One half of the commissions paid on new Purchase
Payments received under a Contracts shall be reversed if the Contract is
surrendered in the first Contract Year.
3
<PAGE>
2. ANNUITY COMPENSATION
A. There shall be payable to the Dealer, on all amounts applied to provide an
annuity under the Contracts, an additional amount in accordance with the
following:
(1) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or the younger Joint Annuitant under Age 80, or is for a fixed
period of at least ten years, the amount of commission shall be determined by
the period of time that Purchase Payments have remained in the Contract. For
Purchase Payments which have been in the Contract for less than five years, the
rate applied to such Purchase Payments is 0%; for Purchase Payments which have
been in the Contract more than five years and less than ten years, the rate
applied to such Purchase Payments is 2.125%; and, for Purchase Payments which
have been in the Contract for ten years or longer and for all earnings, if any,
accumulated in the Contract, the rate applied to such amounts is 4.25%.
(2) Where the Annuity Payment Option selected includes a life contingency
with an Annuitant or younger Joint Annuitant over Age 79, or is for a fixed
period of less than ten years, the amount of commission shall be determined to
be one half of the commission which would have been payable as described in 2-A-
(1) above.
B. Deferred annuities may be annuitized any time after issue, with
compensation adjusted if the Accumulation Value under a Contract is applied to
provide an annuity within the first Contract Year of a Contract. The
compensation in such a case will be equal to the compensation that would have
been paid if the Contract had been issued as an immediate annuity as described
in 1-A above.
3. RETAINED ASSET COMPENSATION
Under the Contract, a spouse who is a beneficiary, may, upon election, continue
the current Contract at the death of the Owner. For amounts which remain in a
Contract after such an election, the Dealer shall receive a service fee equal to
1.5% of the amount which remains.
4. DEALER BONUS
For any broker-dealer holding a current selling agreement with the Dealer, where
that broker-dealer's total values (currently Accumulation Value) under the
Contracts exceed those levels show below, a bonus will be paid to the Dealer.
The Dealer Bonus will be based only upon Accumulation Values in Contracts which
are have been in force for more than seven Contract Years, subject to
persistency requirements.
Broker-Dealer Total Service Fee
Total Values Applied to Accumulation Value
------------- -----------------------------
under $50,000,000 none
$50,000,000 to $74,999,999 .10%
$75,000,000 to $99,999,999 .25%
$100,000,000 and over .50%
4
<PAGE>
READ YOUR CONTRACT CAREFULLY
THIS IS A LEGAL CONTRACT
We promise to pay, subject to the provisions of this contract, the benefits
described by this contract.
We make this promise and issue this contract in consideration of the application
for this contract and the payment of the purchase payments.
The owner and the beneficiary are as named in the application unless they are
changed as provided for in this contract.
You are a member of The Minnesota Mutual Life Insurance Company. Our annual
meetings are held at our home office on the first Tuesday in March of each year
at three o'clock in the afternoon.
Signed for The Minnesota Mutual Life Insurance Company at St. Paul, Minnesota,
on the contract date.
President
Secretary
Registrar
NOTICE OF YOUR RIGHT TO EXAMINE THIS CONTRACT FOR 10 DAYS.
IT IS IMPORTANT TO US THAT YOU ARE SATISFIED WITH THIS CONTRACT. IF YOU ARE NOT
SATISFIED, YOU MAY RETURN THE CONTRACT TO US OR TO YOUR AGENT WITHIN 10 DAYS OF
ITS RECEIPT. IF YOU EXERCISE THIS RIGHT, YOU WILL RECEIVE THE GREATER OF: (A)
THE ACCUMULATION VALUE OF THIS CONTRACT; OR (B) THE AMOUNT OF PURCHASE PAYMENTS
PAID UNDER THIS CONTRACT. WE WILL PAY THIS REFUND WITHIN 7 DAYS AFTER WE
RECEIVE YOUR NOTICE OF CANCELLATION.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
ALL PAYMENTS AND VALUES PROVIDED UNDER THE FIXED ACCOUNT PRIOR TO RENEWAL DATES
MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT. THE MARKET VALUE ADJUSTMENT MAY
INCREASE OR DECREASE THE PAYMENT OR VALUES.
FLEXIBLE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
FIXED OR VARIABLE
ANNUITY BENEFITS
A PARTICIPATING CONTRACT
Minnesota Mutual
The Minnesota Mutual Life Insurance Company
400 Robert Street North
St. Paul, MN 55101-2098
96-9347
<PAGE>
CONTRACT INDEX
ALPHABETICAL INDEX TO THE PROVISIONS OF YOUR CONTRACT
PAGE
----
ADDITIONAL INFORMATION
AMOUNT PAYABLE AT DEATH
ANNUITY PAYMENT OPTIONS
ANNUITY PAYMENT PROVISIONS
ASSIGNMENT
BENEFICIARY
CONTRACT CHARGES
DEFINITIONS
DIVIDENDS
GENERAL INFORMATION
MISSTATEMENT
PURCHASE PAYMENTS
TRANSFER PROVISIONS
VALUATION
WITHDRAWAL AND SURRENDER
<PAGE>
[VOYAGEUR ANNUITY]
YOUR CONTRACT INFORMATION - EFFECTIVE [FEBRUARY 1, 1997]
CONTRACT NUMBER: [1-234-567] CONTRACT DATE: [February 1, 1997]
OWNER: [John Doe] DATE OF BIRTH: [September 1, 1961]
JOINT OWNER: DATE OF BIRTH:
ANNUITANT: [John Doe] SEX: Male DATE OF BIRTH: [September 1, 1961]
JOINT ANNUITANT: SEX: DATE OF BIRTH:
ANNUITY COMMENCEMENT DATE: [September 1, 2026]
PLAN: [Non-Qualified] JURISDICTION: [Minnesota]
DEFERRED SALES CHARGE:
Years Since Purchase Payment
-----------------------------------------------------------
7 and
0-1 1-2 2-3 3-4 4-5 5-6 6-7 thereafter
--- --- --- --- --- --- --- ----------
Charge: 6% 6% 5% 5% 4% 3% 2% 0%
The deferred sales charge is applied to Purchase Payments withdrawn or
surrendered from this contract.
ANNUAL CONTRACT FEE: Lesser of $35 or 2% of Accumulation Value applied only when
the Accumulation Value on the Contract Anniversary is less
than $50,000.
CURRENT FIXED ACCOUNT GUARANTEE PERIODS: [1,3,5,7, and 10 Years]
VARIABLE ACCOUNT: [Minnesota Mutual Variable Annuity Account]
CURRENT VARIABLE ACCOUNT CHARGES: Mortality Risk Charge: [0.80%]
Expense Risk Charge: [0.45%]
Administrative Charge: [0.15%]
<TABLE>
<CAPTION>
CURRENT SUB-ACCOUNTS: Portfolios of MIMLIC Series Fund, Inc. Portfolios of Federated Insurance Service
-------------------------------------- -----------------------------------------
<S> <C> <C>
[Asset Allocation] [Federated American Leaders Fund II]
[Bond] [Federated High Income Bond Fund II]
[Capital Appreciation]
[Global Bond]
[Growth]
[Index 500]
[International Stock]
[Money Market]
[Mortgage Securities]
[Small Company Value]
[Small Company]
[Value Stock]
</TABLE>
HOME OFFICE: THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
400 ROBERT STREET NORTH
ST. PAUL, MINNESOTA 55101-2098
(612) 298-3500
Minnesota Mutual 1
<PAGE>
DEFINITIONS
When we use the following words, this is what we mean:
1940 ACT
The Investment Company Act of 1940, as amended, or any similar successor federal
legislation.
ACCUMULATION UNIT
An Accumulation Unit is a measure of your value in each sub-account of the
Variable Account.
ACCUMULATION VALUE
The sum of your values under this contract in the Fixed Account and/or the
Variable Account. In the Fixed Account, your value is the sum of your values in
each Guarantee Period. In the Variable Account, it is the total value of your
Accumulation Units in each sub-account. The value of each sub-account shall be
determined separately.
AGE
The Age of a person at nearest birthday.
ANNUITANT
The person named as Annuitant on Page 1 and upon whose lifetime Annuity Payment
benefits will be paid under this contract. The Annuitant may be changed prior
to the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE
The date specified in the application and shown on Page 1 when lifetime Annuity
Payments will begin. If a date is not specified in the application, it will be
the later of the first of the month preceding the Annuitant's 85th birthday or
ten years after issue.
ANNUITY PAYMENTS
A series of payments for life, for life with a minimum number of payments, with
a determinable sum guaranteed, for a joint lifetime and thereafter during the
lifetime of the survivor, or for a designated period. Payments are made at
regular intervals to the Annuitant or any other payee. Annuity Payments will be
due and payable only on the first day of a calendar month.
ANNUITY UNIT
A unit of measurement used to calculate Variable Annuity Payments.
AUTOMATIC PAYMENT PLAN
An agreement which authorizes your Purchase Payment to be automatically deducted
from your bank or other financial institution account and paid directly to us.
BENEFICIARY
The person, persons or entity designated to receive Death Benefits payable under
the contract. Prior to the commencement of Annuity Payments, the Beneficiary is
the first person on the following list who is alive on the date of your death:
the Joint Owner, the primary (class 1) Beneficiary, the secondary (class 2)
Beneficiary, or if none of the above is alive, to the executor or administrator
of your estate.
Minnesota Mutual 2
<PAGE>
CONTRACT ANNIVERSARY
The same day and month as the Contract Date for each succeeding year of this
contract.
CONTRACT DATE
The effective date of this contract found on Page 1. It is also the date from
which we determine Contract Anniversaries and Contract Years.
CONTRACT YEAR
A period of one year beginning with the Contract Date or a Contract Anniversary.
DEATH BENEFIT
The amount payable to the Beneficiary upon your death.
FIXED ACCOUNT
The Fixed Account is a non-unitized separate account providing Guarantee Periods
of different durations. Amounts allocated to the Guarantee Periods of the Fixed
Account are credited with interest rates guaranteed by us for the duration of
the Guarantee Period.
FIXED ANNUITY PAYMENTS
Annuity Payments payable from the General Account, with guaranteed payments of
pre-established dollar amounts during the payment period.
FUND
The mutual fund or separate investment portfolio within a series mutual fund
which is designated as an eligible investment for the Variable Account.
GENERAL ACCOUNT
All assets of Minnesota Mutual other than those in the Minnesota Mutual Variable
Annuity Account, Fixed Account or in other separate accounts established by us.
GUARANTEE PERIOD
A period, of one or more years, for which the current interest rate is
guaranteed.
JOINT ANNUITANT
The person named as Joint Annuitant on Page 1 and upon whose lifetime, together
with that of the Annuitant, Annuity Payment benefits may be paid under this
contract.
JOINT OWNER
If more than one owner has been designated, each owner shall be a Joint Owner of
the contract. Joint Owners have equal ownership rights and must both authorize
any exercising of those ownership rights unless otherwise allowed by us. Any
Joint Owner must be the spouse of the other Joint Owner.
Minnesota Mutual 3
<PAGE>
MARKET VALUE ADJUSTMENT
A positive or negative adjustment in the Fixed Account value that we may make if
such value is paid out more than 30 days before or after the Renewal Date of the
Guarantee Period in which it was being held.
PURCHASE PAYMENTS
Amounts paid to us as consideration for the benefits provided by this contract.
Total Purchase Payments may not exceed $1,000,000 without our prior consent.
The amount of any initial Purchase Payment must be at least $2,000 and any
subsequent Purchase Payments must be at least $500. These minimums may not
apply under certain automatic or group payment plans which may be established
and agreed to by us.
RENEWAL DATE
The first day following the last day of any Guarantee Period in the Fixed
Account.
SURRENDER VALUE
The amount payable to you on surrender of this contract is equal to the
Accumulation Value after the application of all applicable adjustments and
deduction of all applicable charges. Amounts surrendered may be subject to a
deferred sales charge and, in addition, amounts surrendered from the Fixed
Account may be subject to a Market Value Adjustment.
TRANSFER
A Transfer is a reallocation of amounts under this contract. It may be among
the available Guarantee Periods of the Fixed Account, the Fixed Account and the
sub-accounts of the Variable Account, and the sub-accounts of the Variable
Account.
VALUATION DATE
Any date on which a Fund is valued.
VALUATION PERIOD
The period between successive Valuation Dates measured from the time of one
determination to the next.
VARIABLE ACCOUNT
A separate investment account titled Minnesota Mutual Variable Annuity Account.
This separate account was established by us for this class of contracts under
Minnesota law. The separate account is composed of several sub-accounts. The
assets of this account are not subject to claims arising out of any other
business of ours.
VARIABLE ANNUITY PAYMENTS
Annuity Payments payable from the Variable Account with payments which may
increase or decrease in dollar amount to reflect the investment experience of
the sub-accounts of the Variable Account. The dollar amount of each Annuity
Payment is not guaranteed.
WE, OUR, US
The Minnesota Mutual Life Insurance Company.
Minnesota Mutual 4
<PAGE>
WRITTEN REQUEST
A request in writing signed by you. In some cases, we may provide a form for
your use. We also may require that this contract be sent in with your Written
Request.
YOU, YOUR
The person named as the owner or Joint Owner on Page 1. The owner may be the
Annuitant or someone else. The owner shall be that person named as owner in the
application. The owner may be changed; however, this may create adverse income
tax consequences. If Joint Owners are named, all contract references to owner
shall mean the Joint Owners.
GENERAL INFORMATION
WHAT IS YOUR AGREEMENT WITH US?
This contract and the copy of the application attached to it contain the entire
contract between you and us. Any statements made in the application either by
you or the Annuitant will, in the absence of fraud, be considered
representations and not warranties. Also, any statement made either by you or
the Annuitant will not be used to void this contract or defend against a claim
under this contract unless the statement is contained in the application.
No change or waiver of any of the provisions of this contract will be valid
unless made in writing by us. It must also be signed by our president, a vice
president, our secretary or an assistant secretary. No agent or other person
has the authority to change or waive any provision of this contract.
Any additional agreement attached to this contract will become a part of this
contract. It will be subject to all the terms and conditions of this contract
unless we state otherwise in the agreement.
HOW DO YOU EXERCISE YOUR RIGHTS UNDER THIS CONTRACT?
You can exercise all the rights under this contract. You can do this by making
a Written Request to us. You have these rights during your lifetime and before
Annuity Payments begin. Unless provided otherwise in the contract, you have
full ownership and control of this contract.
HOW WILL YOU KNOW THE VALUE OF YOUR CONTRACT?
Each quarter we will send you a report. It will show the current Accumulation
Value and Surrender Value of this contract. It will also show the current
Accumulation Unit values for each sub-account in which you have value. In
addition, we will provide you with an annual report which summarizes the year's
transactions. The report will be as of a date within two months of its mailing.
PURCHASE PAYMENTS
WHERE DO YOU MAKE PURCHASE PAYMENTS?
All Purchase Payments must be made to our home office at the address shown on
Page 1. When we receive a Purchase Payment from you at our home office, we will
send you a confirmation.
WHEN ARE PURCHASE PAYMENTS MADE?
You may choose when to make Purchase Payments.
Minnesota Mutual 5
<PAGE>
ARE THERE SPECIAL METHODS OF MAKING PURCHASE PAYMENTS?
Yes. It may be possible for you to arrange with your employer to make your
Purchase Payments by payroll deduction. Or, under some plans, your employer may
make Purchase Payments on your behalf. Also, your bank or other financial
institution may consent to have your Purchase Payments automatically withdrawn
from your account and paid directly to us under an Automatic Payment Plan.
WHAT DEDUCTIONS ARE MADE FROM PURCHASE PAYMENTS?
There are usually no deductions made from the Purchase Payments. However, we
reserve the right to make a deduction from Purchase Payments for state premium
taxes, where applicable.
HOW ARE PURCHASE PAYMENTS ALLOCATED?
Purchase Payments may be allocated to one or more of the Guarantee Periods of
the Fixed Account or to the sub-accounts of the Variable Account. Initially,
the allocation will be as you direct in the application. You may change your
allocation for future Purchase Payments by giving us a Written Request or by
telephone, where permitted.
During the 30-day period following receipt of the first Purchase Payment into
this contract, we will allocate Purchase Payments directed to the variable sub-
accounts first to the Money Market sub-account of the Variable Account. At the
end of this 30 day period, these Purchase Payments will be Transferred as
directed by you.
Purchase Payments received without allocation instructions will be treated as
incomplete.
WHAT ARE THE FIXED ACCOUNT OPTIONS?
The Fixed Account provides Guarantee Periods of different durations. The
Guarantee Periods available on the Contract Date are shown on Page 1. All
amounts allocated to the same Guarantee Period on the same day will be
considered one Guarantee Period. Transfers, surrenders and withdrawals from
Guarantee Periods prior to the Renewal Date may be subject to a Market Value
Adjustment in certain situations (see sections titled "Transfer Provisions" and
"Withdrawal and Surrender").
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those shown on Page 1. We
also reserve the right at any time to stop accepting new Purchase Payments,
Transfers or renewals for a particular Guarantee Period.
At the end of the Guarantee Period, you may elect the same Guarantee Period, if
available, at the then current interest rate, select a different Fixed Account
Guarantee Period, or Transfer to sub-accounts of the Variable Account.
If we do not receive instructions from you prior to the Renewal Date of each
Guarantee Period, we will select a Guarantee Period which will be of the same
duration as the one which has just expired. The interest rate applicable to the
new Guarantee Period may be higher or lower than the interest rate which was
credited to the expired Guarantee Period. If, at the time of renewal, a
Guarantee Period of the same duration is no longer available, we will select the
next shortest available Guarantee Period.
WHAT ARE THE VARIABLE ACCOUNT OPTIONS?
The sub-accounts of the Variable Account available on the Contract Date are as
shown on Page 1.
Purchase Payments may be allocated to one or more of the sub-accounts. They may
also be made to any other sub-account which may be established by us under the
Variable Account for contracts of this class. We reserve the right to add,
combine or remove any sub-accounts of the Variable Account.
Minnesota Mutual 6
<PAGE>
WHAT ARE THE INVESTMENTS OF THE VARIABLE ACCOUNT?
The Variable Account is divided into sub-accounts. For each sub-account, there
is a Fund for the investment of that sub-account's assets. Purchase Payments
are invested in the Funds at their net asset value.
If investment in a Fund should no longer be possible or if we determine it
becomes inappropriate for contracts of this class, we may substitute another
Fund. Substitution may be with respect to existing Accumulation Values, future
Purchase Payments and future Annuity Payments.
No transfer of assets from one separate account to another affecting owners of
contracts delivered in a given state can be made except, where required, with
the approval of the Commissioner of Insurance of that state.
MAY WE MAKE CHANGES TO THE VARIABLE ACCOUNT?
Yes. We reserve the right to transfer assets of the Variable Account to another
Variable Account. The transfer will be of assets associated with this class of
contracts. We will make that determination. If this type of transfer is made,
the term "Variable Account", as used in this contract, shall then mean the
Variable Account to which the assets were transferred.
We reserve the right, when permitted by law, to:
(a) de-register the Variable Account under the 1940 Act;
(b) restrict or eliminate any voting rights of contract owners or other
persons who have voting rights as to the Variable Account; and
(c) combine the Variable Account with one or more other Variable Accounts.
WHEN ARE PURCHASE PAYMENTS CREDITED TO THE CONTRACT?
Purchase Payments are credited to the contract on the Valuation Date coincident
with or next following the day they are received in our home office. If they
are received on a day which is not a Valuation Date, those amounts will be
credited on the next Valuation Date.
MAY YOU STOP MAKING PURCHASE PAYMENTS?
Yes. You may stop making Purchase Payments at any time. If you stop making
Purchase Payments, the contract remains in force as a paid-up annuity according
to its terms. Its value may be applied to provide Annuity Payments at a later
date.
MAY WE CANCEL THE CONTRACT?
Yes. We may, at our discretion, cancel a contract if no Purchase Payments are
made for a period of two or more full Contract Years and both: (a) the total
Purchase Payments made, less any withdrawals and associated charges; and (b) the
Accumulation Value of the contract, are less than $2,000. If such a
cancellation takes place, we will pay the Accumulation Value to you.
We will notify you of our intention to exercise these rights in your annual
report. We will act 90 days after the Contract Anniversary unless an additional
Purchase Payment is received before the end of that 90 day period.
Minnesota Mutual 7
<PAGE>
CONTRACT CHARGES
ARE THERE CHARGES UNDER THIS CONTRACT?
Yes. There may be a deferred sales charge, an annual contract fee and a
transaction charge. There are also certain charges which are made directly to
the Variable Account.
WHAT IS THE DEFERRED SALES CHARGE?
The deferred sales charge may be assessed upon the withdrawal or surrender of
Purchase Payments, including withdrawals or surrenders made in connection with
certain Death Benefits and the application of amounts to provide Annuity
Payments for a fixed period of less than ten years. The deferred sales charge
percentages are shown on Page 1 and are applied only to withdrawals or
surrenders of Purchase Payments received by us within seven years of the date of
withdrawal or surrender. For purposes of determining the amount of deferred
sales charge, Purchase Payments are deemed withdrawn on a first-in, first-out
basis.
The amount of the deferred sales charge is determined from the percentages shown
on Page 1 by: (a) calculating the number of years each Purchase Payment being
withdrawn has been in the contract; (b) multiplying each Purchase Payment being
withdrawn, after deduction of any free withdrawal amount, by the appropriate
deferred sales charge percentage from Page 1; and (c) adding the deferred sales
charge from all Purchase Payments as calculated in (b).
In no event will the total amount of deferred sales charge exceed 6% of the
Purchase Payments made under this contract.
ARE THERE CIRCUMSTANCES WHERE THE DEFERRED SALES CHARGE WILL NOT APPLY?
Yes. The deferred sales charge will not apply when:
- - Amounts are withdrawn in any calendar year that are less than or equal
to the greater of: (a) earnings accumulated in the contract; or (b) 10%
of the sum of Purchase Payments not previously withdrawn that have been
received by us within seven years of the date of withdrawal.
- - Amounts are withdrawn to pay the contract fee.
- - Amounts are payable as a Death Benefit upon your death if prior to your
75th birthday.
- - Amounts are applied to provide Annuity Payments under an Annuity Payment
option based on lifetime, joint lifetimes, or a fixed period of at least
ten years.
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary due to your confinement in a hospital or medical care
facility as defined in the "Withdrawal and Surrender" section of this
contract.
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary in the event you are diagnosed with a terminal illness as
defined in the "Withdrawal and Surrender" section of this contract.
WHAT IS THE CONTRACT FEE UNDER THIS CONTRACT?
The contract fee is an annual charge deducted from the Accumulation Value. In
Contract Years where the Accumulation Value on the Contract Anniversary is less
than $50,000, the charge will be applied. The charge applied will be equal to
the lesser of $35 or 2% of the Accumulation Value at the end of the Contract
Year. The contract fee will be deducted on the Contract Anniversary from the
first available sub-account or Fixed Account Guarantee Period Accumulation Value
in the following order: (1) Money
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Market sub-account; (2) pro rata among the remaining variable sub-accounts;
(3) the largest Accumulation Value of the Fixed Account Guarantee Periods.
WHAT IS THE TRANSACTION CHARGE UNDER THIS CONTRACT?
We reserve the right to deduct a transaction charge, not to exceed $25, for each
Transfer when the frequency of such Transfer request exceeds one every calendar
month. If applied, this charge will reduce the amount of your Transfer.
ARE THERE ADJUSTMENTS ASSOCIATED WITH THE FIXED ACCOUNT?
Yes. Amounts surrendered, withdrawn (including amounts applied to provide
Annuity Payments for a fixed period of less than ten years), or Transferred from
the Guarantee Periods of the Fixed Account prior to their Renewal Date may be
subject to a Market Value Adjustment. The Market Value Adjustment may increase
or decrease the amount of the Fixed Account value being Transferred, withdrawn
or surrendered. This adjustment will not apply to the one year Guarantee
Period.
The Market Value Adjustment will be calculated by multiplying the amount
Transferred, withdrawn, or surrendered by the Market Value Adjustment factor.
The Market Value Adjustment factor is equal to:
(1+i) (n/12)
----------- - 1
(1+j+.0025)
where i = Treasury rate applicable on the date of allocation into the Fixed
Account for the original Guarantee Period.
j = Treasury rate applicable on the date of withdrawal, surrender or
Transfer for the original Guarantee Period.
n = The number of months remaining in the Guarantee Period, rounded
to the nearest whole number of months.
The Treasury rate applicable for a particular day will be the rate as of the
close of the prior business day. If Treasury rates are no longer available,
we will use an appropriate rate approved by the Insurance Department of the
state which has jurisdiction over this contract.
We guarantee that the application of the Market Value Adjustment will not
reduce the Accumulation Value of each Fixed Account Guarantee Period to an
amount less than allocations to that Fixed Account Guarantee Period, less
withdrawals or Transfers, accumulated at a rate of 3%, compounded annually.
ARE THERE CIRCUMSTANCES WHERE THERE WILL BE NO MARKET VALUE ADJUSTMENT?
Yes. There will be no Market Value Adjustment in the following situations:
- - Transfers, withdrawals and surrenders from the one year Guarantee Period
of the Fixed Account.
- - Transfers, withdrawals and surrenders occurring within 30 days prior to
or immediately following the Renewal Date of each Guarantee Period.
- - Amounts withdrawn from the Fixed Account to pay the contract fee.
However, amounts withdrawn or surrendered may be subject to the deferred sales
charge.
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In addition, there will be no negative Market Value Adjustment applied to
withdrawals or surrenders from the Guarantee Periods when:
- - Amounts are payable as a Death Benefit upon your death.
- - Amounts are applied to provide Annuity Payments under an Annuity Payment
option based on lifetime, joint lifetimes, or a fixed period of at least
ten years.
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary due to your confinement in a hospital or medical care
facility as defined in the "Withdrawal and Surrender" section of this
contract.
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary in the event you are diagnosed with a terminal illness as
defined in the "Withdrawal and Surrender" section of this contract.
ARE THERE CHARGES ASSOCIATED WITH THE VARIABLE ACCOUNT?
Yes. There are charges associated with the Variable Account. They are the
mortality risk charge, the expense risk charge and the administrative charge.
These charges are deducted on each Valuation Date from the assets of the
Variable Account. As of your Contract Date, the current mortality risk, expense
risk, and administrative charge are shown on Page 1.
WHAT IS THE MORTALITY RISK CHARGE?
This is a charge to compensate us for the mortality guarantees we make under the
contract. Actual mortality results incurred by us shall not adversely affect
any payments or values under this contract. On an annual basis, it shall not
exceed .80% of the net asset value of the Variable Account.
WHAT IS THE EXPENSE RISK CHARGE?
This charge compensates us for the guarantee that the deductions provided in
this contract will be sufficient to cover our actual expenses. Actual expense
results incurred by us shall not adversely affect any payments or values under
this contract. On an annual basis, it shall not exceed .60% of the net asset
value of the Variable Account.
WHAT IS THE ADMINISTRATIVE CHARGE?
The administrative charge is to compensate us for the administrative expenses
incurred by us. On an annual basis, it shall not exceed .40% of the net asset
value of the Variable Account.
VALUATION
HOW IS YOUR ACCUMULATION VALUE DETERMINED?
Your Accumulation Value is determined separately for each Guarantee Period in
the Fixed Account and for each sub-account of the Variable Account.
In the Fixed Account, it is the sum of all Purchase Payments or Transfers
allocated to each Guarantee Period plus interest and dividends, less any
previous contract fees, Transfers or withdrawals out of that Guarantee Period,
and any previously applied deferred sales charge or Market Value Adjustments.
For each sub-account of the Variable Account, it is your Accumulation Units
multiplied by the Accumulation Unit value.
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HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
The number of Accumulation Units credited with respect to each Purchase Payment
is determined by dividing the portion of the Purchase Payment allocated to each
sub-account by the then current Accumulation Unit value for that sub-account.
This determination is made as of the Valuation Date coincident with or next
following the date on which we receive your Purchase Payment at our home office.
Once determined, the number of Accumulation Units will not be affected by
changes in the Accumulation Unit value. However, the total number of
Accumulation Units under this contract will be affected by future contract
transactions. In addition, the Accumulation Units of each sub-account will be
increased by subsequent Purchase Payments and Transfers to that sub-account.
The Accumulation Units of each sub-account will be decreased by deductions for
contract fees, Transfers or withdrawals and any associated deferred sales
charge.
The Accumulation Unit value will be recalculated on each Valuation Date. The
new Accumulation Unit value may increase or decrease and will depend on the net
investment experience of each sub-account of the Variable Account. The value of
an Accumulation Unit for each sub-account was originally set at $1.00 on the
first Valuation Date. For any subsequent Valuation Date, its value is equal to
its value on the preceding Valuation Date multiplied by the net investment
factor for that sub-account for the Valuation Period ending on the subsequent
Valuation Date.
WHAT IS THE NET INVESTMENT FACTOR FOR EACH SUB-ACCOUNT?
The net investment factor for a Valuation Period is the gross investment rate
for such Valuation Period, less a deduction for the charges associated with the
Variable Account at the current rate.
The gross investment rate is equal to:
(a) the net asset value per share of a Fund share held in the
sub-account of the Variable Account determined at the end of
the current Valuation Period; plus
(b) the per-share amount of any dividend or capital gain
distributions by the Fund if the "ex-dividend" date occurs
during the current Valuation Period; divided by
(c) the net asset value per share of that Fund share held in the
sub-account determined at the end of the preceding Valuation
Period.
DOES THE CONTRACT CREDIT INTEREST IN THE FIXED ACCOUNT?
Yes. This contract credits interest in each Guarantee Period of the Fixed
Account. Guarantee Periods will not have an interest rate of less than 3%,
compounded annually. You will designate a Guarantee Period for each Purchase
Payment or Transfer which is allocated to the Fixed Account. On the Contract
Date, the available Guarantee Periods are shown on Page 1. The interest rate in
effect on the date each Purchase Payment or Transfer is allocated is guaranteed
for the duration of the Guarantee Period. We will periodically determine
interest rates which are applicable to each Guarantee Period.
DIVIDENDS
WILL THIS CONTRACT RECEIVE DIVIDENDS?
Each year we determine if this contract will share in our divisible surplus. We
call your share a dividend.
HOW WILL DIVIDENDS BE APPLIED?
Dividends, if received, will be added to the Accumulation Value on a pro rata
basis or applied to increase Annuity Payments. If you so elect, they may be
paid in cash.
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TRANSFER PROVISIONS
MAY TRANSFERS BE MADE UNDER THIS CONTRACT?
Yes. Before Annuity Payments begin, these Transfers may be made by your Written
Request or, where permitted, by telephone. We will make the Transfer on the
basis of Accumulation Unit values on the Valuation Date coincident with or next
following the day we receive the request at our home office.
You may make Transfers among sub-accounts of the Variable Account or from the
Variable Account to any Guarantee Periods of the Fixed Account then being
offered. You may also Transfer from one Guarantee Period to another Guarantee
Period or to sub-accounts of the Variable Account. Transfers to a Guarantee
Period will be credited with interest at the rate then in effect for the
Guarantee Period(s) chosen by you. Except for Transfers from the one year
Guarantee Period, Transfers from Guarantee Periods at times other than the
Renewal Date may be subject to a Market Value Adjustment as described in the
section of this contract titled "Contract Charges".
Systematic Transfer arrangements may also be available for a fixed amount, over
a fixed period, or based on a fixed percentage.
ARE THERE RESTRICTIONS ON TRANSFERS?
Transfers are not limited as to amount. We reserve the right to make a
transaction charge, not to exceed $25, for each Transfer when the frequency of
such Transfer request exceeds one every calendar month. If applied, this charge
will reduce the amount of your Transfer.
MAY TRANSFERS TAKE PLACE ONCE ANNUITY PAYMENTS BEGIN?
Yes. However, Transfers may be limited. They may be made only with respect to
any Variable Annuity Payments. See the "Annuity Payment Provisions" section of
this contract.
WITHDRAWAL AND SURRENDER
MAY YOU MAKE WITHDRAWALS FROM THIS CONTRACT?
Yes. At any time before Annuity Payments begin, you may request a withdrawal
from the Accumulation Value. You must make a Written Request for any
withdrawal. The amount of any withdrawal must be for at least $250. In the
event of a withdrawal, the Accumulation Value will be reduced by the amount
requested and any applicable deferred sales charge.
In addition, withdrawals from the Fixed Account may be subject to a Market Value
Adjustment.
Unless instructed otherwise by you, withdrawals will be made from your value in
each Guarantee Period of the Fixed Account and each sub-account of the Variable
Account in the same proportion that your value in each Guarantee Period of the
Fixed Account and each variable sub-account bears to your total Accumulation
Value. Withdrawal values will be determined as of the Valuation Date coincident
with or next following the date your Written Request is received at our home
office.
Systematic withdrawal plans of a fixed amount or over a fixed period may also be
available.
MAY YOU SURRENDER THE CONTRACT?
Yes. At any time before Annuity Payments begin, you may surrender this contract
for its Surrender Value. The Surrender Value will be determined as of the
Valuation Date coincident with or next following the date your Written Request
is received at our home office.
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ARE THERE SPECIAL WITHDRAWAL OR SURRENDER PROVISIONS?
Yes. Deferred sales charges and negative Market Value Adjustments will not
apply when:
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary due to your confinement in a hospital or medical care
facility for at least 90 consecutive days. The request must be made
while you are still confined or within 60 days after the discharge from
a hospital or medical care facility after a confinement of at least 90
consecutive days. Medical care facility means a facility operated
pursuant to law or any state licensed facility providing medically
necessary in-patient care which is: (a) prescribed by a licensed
Physician in writing; and (b) based on physical limitations which
prohibit daily living in a noninstitutional setting.
- - A surrender or withdrawal is requested any time after the first Contract
Anniversary in the event you are diagnosed with a terminal illness.
Terminal illness is a condition: (a) diagnosed by a licensed Physician;
and (b) is expected to result in death within 12 months for 80% of
diagnosed cases.
For purposes of these provisions, we must receive due proof, satisfactory to us,
of your confinement or terminal illness in writing. Physician means: (a) a
licensed medical doctor (MD) or a licensed doctor of osteopathy (DO) practicing
within the scope of his or her license; and (b) not you, the Annuitant or a
member of either your or the Annuitant's immediate families. If the owner of
this contract is other than a natural person, such as a trust or other similar
entity, benefits payable due to nursing home confinement or terminal illness
will be based upon the Annuitant. If the owner, or Annuitant in the case of a
contract owned by a non-natural person, is changed subject to the provisions of
this contract, a one year waiting period will apply before the new owner or
Annuitant is eligible for these benefits.
HOW WILL WITHDRAWAL OR SURRENDER BENEFITS BE PAID?
We will pay these benefits in a single sum unless another method has been
requested and approved by us. If this contract is surrendered you may elect one
of the Annuity Payment options. This election is subject to the provisions of
this contract.
AMOUNT PAYABLE AT DEATH
WHAT AMOUNT IS PAYABLE AT DEATH?
If you die before Annuity Payments have started, we will pay the Death Benefit
of the contract to the Beneficiary. If the owner of this contract is other than
a natural person, such as a trust or other similar entity, we will pay the Death
Benefit to the Beneficiary on the death of the Annuitant, if death occurs prior
to the date that Annuity Payments have started.
If you die prior to your 75th birthday, the Death Benefit is the greater of:
(a) the Accumulation Value; (b) the sum of Purchase Payments adjusted for any
amounts previously withdrawn; or (c) the last stepped-up value prior to the date
of death, adjusted for any Purchase Payments and withdrawals occurring
thereafter.
If you die on or after your 75th birthday, the Death Benefit is the greater of:
(a) the Surrender Value; or (b) the last stepped-up value prior to the date of
death, adjusted for any withdrawals occurring thereafter.
The stepped-up value will be determined on each Contract Anniversary that is an
exact multiple of five and is prior to your 75th birthday. The stepped-up value
is the greater of: (a) the Accumulation Value on that Contract Anniversary; or
(b) the previous stepped-up value. Where Joint Owners exist, there will be no
further stepped-up values after the 75th birthday of the oldest Joint Owner.
After the death of the first Joint Owner, stepped-up values may resume on the
next Contract Anniversary that is an exact multiple of five providing the
surviving Joint Owner continues the contract and has not yet reached his or her
75th birthday.
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The value of the Death Benefit will be determined as of the Valuation Date
coincident with or next following the day we receive due proof of death and all
related information necessary to make payment at our home office.
If the Annuitant dies after Annuity Payments have started, we will pay whatever
amount may be required by the terms of the Annuity Payment option selected. The
remaining value in the contract must be distributed at least as rapidly as under
the option in effect at the Annuitant's death.
TO WHOM WILL WE PAY THOSE BENEFITS?
When we receive due proof of death, satisfactory to us, we will pay the Death
Benefit under this contract to the Beneficiary or Beneficiaries.
HOW WILL THE AMOUNT PAYABLE AT DEATH BE PAID?
We will pay that amount in a single sum unless another form of settlement has
been requested and agreed to by us. All payments by us are payable at our home
office. Proof of any claim under this contract must be submitted in writing to
us at our home office.
WHEN MUST DEATH BENEFITS BE PAID?
If you die before the date on which Annuity Payments begin and if the designated
Beneficiary is a person other than your spouse, that Beneficiary may elect an
annuity option measured by a period not longer than that Beneficiary's life
expectancy. Annuity Payments must begin not later than one year after your
death. If there is no designated Beneficiary, or if an annuity option is not
elected within one year of your death, then the entire value in this contract
must be distributed within five years after your death. If the Annuitant dies
on or after Annuity Payments have begun, any payments received by a non-spouse
Beneficiary must be distributed at least as rapidly as under the method elected
by the Annuitant as of the date of death.
If any portion of the Death Benefit is payable to your designated Beneficiary
who is your surviving spouse, that spouse shall be treated as the contract owner
for purposes of: (1) when payments must begin; and (2) the time of distribution
in the event of your spouse's death.
If the contract has Joint Owners we will consider the death of the first Joint
Owner as your death and the surviving Joint Owner will become the sole Owner of
the contract.
WHAT HAPPENS IF ONE OR ALL OF THE BENEFICIARIES DIE?
If a Beneficiary dies, that Beneficiary's interest in this contract ends with
that Beneficiary's death. Only those Beneficiaries who survive you will be
eligible to share in a Death Benefit.
After Annuity Payments have begun, if there is no Beneficiary surviving at the
death of the Annuitant, any remaining value under the Annuity Payment option
will be paid to the Annuitant's estate.
CAN YOU CHANGE THE BENEFICIARY?
Yes. You can file a Written Request with us to change the Beneficiary.
Your Written Request will not be effective until it is recorded in our home
office records. After it has been recorded, it will take effect as of the date
you signed the request. However, if you die before the request has been
recorded, the request will not be effective as to those death proceeds we have
paid before the request was recorded in our home office records.
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ANNUITY PAYMENT PROVISIONS
WHEN DO ANNUITY PAYMENTS BEGIN?
Annuity Payments begin on the Annuity Commencement Date specified in the
application and shown on Page 1 of this contract. If a date is not specified in
the application, it will be the later of the first of the month preceding the
Annuitant's 85th birthday or ten years after issue.
If you wish to change the Annuity Commencement Date, you must notify us in
writing: (a) that Annuity Payments are to be made to the Annuitant or other
designated payee; (b) when these payments are to begin; (c) the form of the
annuity; and (d) what Annuity Payment option has been selected. We must receive
this notice at least 30 days before Annuity Payments are to begin. This
contract permits Annuity Payments to begin no later than Age 85 or ten years
after the date of issue of this contract, whichever is later.
WHAT VALUE IS AVAILABLE TO BE APPLIED TO PROVIDE ANNUITY PAYMENTS?
As of the fifth Valuation Date prior to the Annuity Commencement Date, we will
apply the Accumulation Value when the annuity option selected is based on
lifetime, joint lifetimes or a fixed period of at least ten years. If the
annuity option selected is expected to result in an Annuity Payment period of
less than ten years, Surrender Value will be used.
WHAT TYPES OF ANNUITY PAYMENTS ARE AVAILABLE?
Both Fixed and Variable Annuity Payments are available under this contract.
ARE THERE RESTRICTIONS ON ANNUITY PAYMENTS?
Yes. We require that the first monthly Fixed or Variable Annuity Payment must
be at least $20. It may be less if a payment of a smaller minimum amount is
required by law. If the first monthly Fixed or Variable Annuity Payment would
be less than that amount, we reserve the right to pay you the Surrender Value in
a lump sum. This payment would be in lieu of all other rights under this
contract.
In addition, we restrict the maximum amount which may be applied to provide a
Fixed Annuity Payment under this contract. Without our prior consent, the
maximum amount which may be applied under this contract for a Fixed Annuity
Payment is $1,000,000.
MAY WE REQUIRE INFORMATION BEFORE MAKING ANNUITY PAYMENTS?
Yes. We reserve the right to require proof satisfactory to us of the Age of the
Annuitant and of any Joint Annuitant before payments begin.
We may also require proof that a person is alive before making any Annuity
Payment which is based on the survival of that person.
IF YOU FAIL TO ELECT AN ANNUITY PAYMENT OPTION, IS THERE AN OPTION UNDER WHICH
ANNUITY PAYMENTS WILL BE MADE?
Yes. If you do not elect an Annuity Payment option, we will make monthly
payments on the basis of Option 2A, a life annuity with a period certain of 120
months.
IF YOU FAIL TO ELECT AN ANNUITY FORM, IS THERE A FORM UNDER WHICH ANNUITY
PAYMENTS WILL BE MADE?
Yes. If you do not elect an Annuity Payment form, we will make Annuity Payments
in the form of a variable annuity using the Money Market sub-account.
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MUST AN ANNUITY PAYMENT OPTION BE ELECTED?
No. You may elect a lump sum payment equal to the Surrender Value instead. If
you do so, you and the Annuitant shall have no further rights under this
contract.
ANNUITY PAYMENT OPTIONS
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
The following Annuity Payment options are available:
Option 1 -- Life Annuity -- Annuity Payments payable for the lifetime of the
Annuitant, ending with the last payment due prior to the Annuitant's death.
Option 2 -- Life Annuity with a Period Certain -- Annuity Payments payable for
the lifetime of the Annuitant; provided, if the Annuitant dies before payments
have been made for the entire period certain, those remaining certain payments
will be made to the Beneficiary.
The period certain may be for 120 months (Option 2A); for 180 months (Option
2B); or for 240 months (Option 2C).
Option 3 -- Joint and Last Survivor Annuity -- Annuity Payments payable for the
joint lifetimes of the Annuitant and a designated Joint Annuitant. The payments
end with the last payment due before the survivor's death. If this option is
elected, the contract and payments shall be the joint property of the Annuitant
and the designated Joint Annuitant.
ARE OTHER ANNUITY PAYMENT OPTIONS AVAILABLE?
Yes. Other options may be available. They will be as agreed upon between you
and us.
HOW WILL ANNUITY PAYMENTS BE MADE?
Annuity Payments under a Fixed or Variable Annuity Payment option will be made
on a monthly basis to the Annuitant or other designated payee, unless we agree
to a different payment schedule.
AFTER DEATH OF THE ANNUITANT, MAY THE BENEFICIARY RECEIVE A LUMP SUM PAYMENT
INSTEAD OF THE REMAINING ANNUITY PAYMENTS?
Yes. At the time of death the Beneficiary may elect, under Option 2, to have
the present value of the remaining payments paid in a lump sum.
The lump sum payment will be the commuted value of the remaining payments. It
will be based on the then current dollar amount of one payment. We will use the
same interest rate which served as a basis for the annuity.
HOW IS THE AMOUNT OF A VARIABLE ANNUITY PAYMENT DETERMINED?
The dollar amount of the first Variable Annuity Payment is determined by
applying the available value (after deduction of any premium taxes not
previously deducted) to a rate per $1,000 which is based on the Individual
Annuity 1983 Table A female mortality rates with an age setback of one year and
an interest rate of 4.50%, compounded annually. The amount of the first
Variable Annuity Payment depends upon the Annuity Payment option selected, the
adjusted Age of any Annuitant and Joint Annuitant and the amount applied.
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Annuitant and Joint Annuitant Age are determined as of the Annuity Commencement
Date and adjusted based on the year of commencement as follows:
Annuity Commencement Year Age Adjustment
------------------------- --------------
2000 - 2009 -1
2010 - 2019 -2
2020 - 2029 -3
2030 and later -4
A number of Annuity Units is determined by dividing this dollar amount by the
then current Annuity Unit value. This determination is made separately for each
sub-account of the Variable Account. The number of Annuity Units remains
unchanged during the period of Annuity Payments, except for Transfers and in the
case of certain joint Annuity Payment options which provide for a reduction in
payment after the death of an Annuitant.
The dollar amount of the second and later Variable Annuity Payments is equal to
the number of Annuity Units determined for each sub-account multiplied by the
Annuity Unit value for that sub-account as of the due date of the payment. This
amount may increase or decrease.
The value of an Annuity Unit for a sub-account is determined each month as of
the first day of the month. For purposes of determining the Annuity Unit value,
the Accumulation Unit values will be as of the fifth Valuation Date preceding
the first day of the calendar month. The value is equal to the Annuity Unit
value for that sub-account as of the first day of the preceding month multiplied
by the product of: (a) .996338; and (b) a sub-account investment factor. This
investment factor is the Accumulation Unit value for that sub-account for the
preceding month divided by the Accumulation Unit value for the second preceding
month.
The dollar amount determined for each sub-account will be aggregated for
purposes of making payment.
HOW IS THE AMOUNT OF A FIXED ANNUITY PAYMENT DETERMINED?
The tables shown in Appendix A are used to determine the amount of guaranteed
monthly Fixed Annuity Payments. They show the dollar amount of each payment
that can be provided with each $1,000 of available value, after the deduction of
any applicable premium taxes not previously deducted.
WILL THESE TABLES ALWAYS BE USED FOR ANNUITY PURCHASES?
Not necessarily. If, when Annuity Payments are elected, we are using tables of
annuity purchase rates for this class of contract which would result in larger
Annuity Payments, we will use those tables instead.
ONCE ANNUITY PAYMENTS BEGIN, MAY THE ANNUITY OPTION BE CHANGED?
No.
MAY AMOUNTS BE TRANSFERRED DURING THE ANNUITY PAYMENT PERIOD?
Yes. Amounts held as annuity reserves may be Transferred among the variable
sub-accounts during the Annuity Payment period. Annuity reserves may also be
Transferred from the variable sub-accounts to the General Account providing a
Fixed Annuity Payment during this time. Amounts payable as Fixed Annuity
Payments may not be Transferred to the variable sub-accounts.
HOW DOES AN ANNUITANT CHANGE SUB-ACCOUNT ELECTIONS OR TRANSFER AMOUNTS TO A
FIXED ANNUITY?
The change must be made by Written Request. The Annuitant and Joint Annuitant,
if any, must make such an election.
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HOW WILL WE TRANSFER VARIABLE ANNUITY SUB-ACCOUNT VALUES?
A Transfer will be made on the basis of Annuity Unit values. The number of
Annuity Units from the sub-account being Transferred will be converted to a
number of Annuity Units in a new sub-account. The Annuity Payment option will
stay the same.
When you tell us to make such a Transfer it will be effective for future Annuity
Payments. Your Transfer will be effective and amounts will be actually
Transferred as of the Annuity Payment Valuation Date prior to the next Annuity
Payment affected by your request. We will use the same valuation procedures
that we describe to determine an initial Variable Annuity Payment.
After this conversion, a number of Annuity Units in the new sub-account will be
payable under the elected option. The first payment after conversion will be of
the same amount as it would have been without the Transfer. The number of
Annuity Units will be set at that number of units which are needed to pay that
same amount as of the Transfer date.
HOW WILL WE TRANSFER AMOUNTS HELD AS RESERVES TO PAY VARIABLE ANNUITY PAYMENTS
TO PURCHASE FIXED ANNUITY PAYMENTS?
When you instruct us to make such a Transfer it will be effective for future
Annuity Payments. Your Transfer will be effective and amounts will be actually
Transferred as of the Annuity Payment Valuation Date prior to the next Annuity
Payment. We will use the same method to determine the Fixed Annuity Payment at
the time of Transfer that we describe to determine an initial Fixed Annuity
Payment.
The amount Transferred will then be applied to provide a Fixed Annuity Payment.
This amount will be based upon the Age of the Annuitant and any Joint Annuitant
at the time of the Transfer. The payment option will remain the same.
ARE THERE ANY RESTRICTIONS ON ANNUITY SUB-ACCOUNT TRANSFERS?
Yes. We reserve the right to require Transfers during the Annuity Payment
period to meet the following conditions:
- - The Transfer of an annuity reserve amount from any sub-account must be
at least equal to $5,000, or the entire amount of the reserve remaining
in that sub-account, if less.
- - Variable Annuity Payments must be in effect for a period of 12 months
before a change may be made.
- - Transfers are limited to one in any 12 month period.
Your Written Request for an annuity sub-account Transfer must be received by us
at least 30 days in advance of the due date of the Annuity Payment subject to
the Transfer.
ADDITIONAL INFORMATION
CAN YOU ASSIGN THIS CONTRACT?
Unless this contract provides otherwise, you may assign all rights to this
contract during the lifetime of the Annuitant. We will not be bound by any
assignment until we have recorded written notice of it at our home office. We
are not responsible for the validity of any assignment. An assignment will not
apply to any payment or action made by us before it was recorded. Any proceeds
payable to an assignee will be paid in a single sum. Any claim made by an
assignee will be subject to proof of the assignee's interest and the extent of
the assignment.
Minnesota Mutual 18
<PAGE>
If this contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Section 401, 403, 404, 408 or
457 of the Internal Revenue Code, then it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
ARE THE CONTRACT BENEFITS PROTECTED?
Yes. To the extent permitted by law, no benefit provided by this contract will
be subject to any creditor's claim or process of law.
HOW WILL BENEFITS BE DETERMINED?
Any paid-up benefit, withdrawal benefit, surrender benefit, or any other benefit
described by this contract shall be calculated as of the date the provisions of
the contract are exercised. Interest credited on Purchase Payments made to the
Fixed Account shall be calculated on contract amounts from the date they are
credited to the contract to the date the withdrawal value or Surrender Value is
determined.
WILL THERE BE AN ADJUSTMENT IF A PERSON'S AGE IS MISSTATED?
Yes. If a person's Age has been misstated, the amount payable under an Annuity
Payment option will be that amount which would have been paid based upon that
person's correct Age. In the case of an overpayment, we may either deduct the
required amount from that person's payments under this contract; we may require
you to pay us in cash, or we may do both until we are fully repaid. In the case
of an underpayment, we will pay the required additional amount with the next
payment.
MUST YOU PROVIDE ADDITIONAL INFORMATION?
Yes. You must provide any other information we need to administer this
contract. If you cannot do so, we may ask the person concerned for that
information. We shall not be liable for any payment based upon information
given to us in error or not given to us.
DO CONTRACT VALUES COMPLY WITH STATE REQUIREMENTS?
Yes. Amounts payable at death, withdrawal and surrender benefits, Accumulation
Values and the paid-up annuity benefit described by this contract are not less
than the minimum benefits required by any statute of the state in which this
contract is delivered.
WHAT ANNUITY RESERVES WILL WE HOLD UNDER THIS CONTRACT?
Reserves held by us for Annuity Payments under this contract shall not be less
than those reserves required by the law in the state in which this contract is
delivered.
MAY THIS CONTRACT BE MODIFIED?
Yes. This contract may be modified at any time by written agreement between you
and us. However, no such modification will adversely affect your rights under
this contract unless the modification is made to comply with a law or government
regulation. Such modification will be in writing. You will have the right to
accept or reject such a modification.
WHO OWNS THE FIXED ACCOUNT, GENERAL ACCOUNT AND VARIABLE ACCOUNTS?
We have exclusive and absolute ownership of the assets of the Fixed Account,
General Account and the Variable Account utilized by this contract.
Minnesota Mutual 19
<PAGE>
WHEN WILL LUMP SUM PAYMENTS BE MADE?
Usually, we will make payment within seven days after payment is called for by
the terms of the contract. However, in the case of payments from the Fixed
Account or General Account, we reserve the right to defer payment of withdrawal
or surrender benefits for up to six months. In the case of payments from the
Variable Account, we reserve the right to defer payment for any period during
which the New York Stock Exchange is closed for trading (except for normal
holiday closing) or when the Securities and Exchange Commission has determined
that a state of emergency exists which may make such determination and payment
impractical.
DO YOU HAVE ADDITIONAL VOTING RIGHTS?
Yes. If you have Variable Account Accumulation or Annuity Units under this
contract, you may direct us with respect to the voting rights of Fund shares
held by us and attributable to this contract.
Minnesota Mutual 20
<PAGE>
APPENDIX A
The following tables show the minimum dollar amount of monthly Fixed Annuity
Payment that can be provided with each $1,000 of available value, after the
deduction of any applicable premium tax not previously deducted.
The rates shown are based upon an interest rate of 3% per year, compounded
annually, and Individual Annuity 1983 Table A mortality rates with an age
setback of one year, blended to provide genderless rates. Dollar amounts for
ages or payment frequencies other than those shown here will be calculated on
the same basis and may be obtained from Us upon request.
Annuitant and Joint Annuitant Age is determined as of the Annuity Commencement
Date and adjusted based on the year of commencement as follows:
Annuity Commencement Year Age Adjustment
------------------------- --------------
2000 - 2009 -1
2010 - 2019 -2
2020 - 2029 -3
2030 and later -4
Life with Life with Life with
Annuitant Life 120 Months 180 Months 240 Months
Adjusted Age (Option 1) (Option 2A) (Option 2B) (Option 2C)
- ------------ ---------- ----------- ----------- -----------
50 3.92 3.90 3.87 3.83
55 4.26 4.23 4.18 4.10
60 4.72 4.66 4.56 4.43
65 5.35 5.21 5.03 4.78
70 6.23 5.94 5.57 5.10
75 7.49 6.82 6.10 5.34
80 9.36 7.80 6.52 5.46
85 12.12 8.65 6.75 5.50
Joint & Last Survivor (Option 3)
Joint Annuitant Adjusted Age
----------------------------
<TABLE>
<CAPTION>
Annuitant
Adjusted Age 40 45 50 55 60 65 70 75 80 85
- ------------ -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.29 3.40 3.52 3.62 3.70 3.77 3.82 3.86 3.88 3.90
55 3.33 3.47 3.62 3.76 3.89 4.01 4.09 4.16 4.20 4.23
60 3.36 3.52 3.70 3.89 4.09 4.26 4.41 4.52 4.61 4.66
65 3.39 3.56 3.77 4.01 4.26 4.52 4.76 4.96 5.12 5.22
70 3.40 3.59 3.82 4.09 4.41 4.76 5.13 5.46 5.74 5.94
75 3.42 3.61 3.86 4.16 4.52 4.96 5.46 5.99 6.47 6.86
80 3.42 3.63 3.88 4.20 4.61 5.12 5.74 6.47 7.24 7.94
85 3.43 3.64 3.90 4.23 4.66 5.22 5.94 6.86 7.94 9.07
</TABLE>
96-9348 Minnesota Mutual 21
<PAGE>
APPENDIX A
The following tables show the minimum dollar amount of monthly Fixed Annuity
Payment that can be provided with each $1,000 of available value, after the
deduction of any applicable premium tax not previously deducted.
The rates shown are based upon an interest rate of 3% per year, compounded
annually, and Individual Annuity 1983 Table A mortality rates with an age
setback of one year. Dollar amounts for Ages or payment frequencies other than
those shown here will be calculated on the same basis and may be obtained from
us upon request.
Annuitant and Joint Annuitant Age is determined as of the Annuity Commencement
Date and adjusted based on the year of commencement as follows:
Annuity Commencement Year Age Adjustment
------------------------- --------------
2000 - 2009 -1
2010 - 2019 -2
2020 - 2029 -3
2030 and later -4
Life with Life with Life with
Male Annuitant Life 120 Months 180 Months 240 Months
Adjusted Age (Option 1) (Option 2A) (Option 2B) (Option 2C)
------------ ---------- ----------- ----------- -----------
50 4.19 4.15 4.10 4.03
55 4.60 4.54 4.45 4.32
60 5.15 5.03 4.87 4.64
65 5.91 5.66 5.36 4.96
70 6.97 6.44 5.86 5.23
75 8.45 7.32 6.31 5.40
80 10.55 8.17 6.62 5.48
85 13.46 8.86 6.79 5.51
Female Annuitant
Adjusted Age
-------------
50 3.84 3.83 3.81 3.77
55 4.18 4.15 4.11 4.04
60 4.61 4.56 4.48 4.37
65 5.21 5.10 4.95 4.72
70 6.04 5.80 5.49 5.06
75 7.26 6.69 6.04 5.32
80 9.07 7.69 6.48 5.45
85 11.79 8.59 6.74 5.50
Joint & Last Survivor (Option 3)
Female Annuitant Adjusted Age
-----------------------------
<TABLE>
<CAPTION>
Male Annuitant
Adjusted Age 40 45 50 55 60 65 70 75 80 85
------------ -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.29 3.42 3.56 3.69 3.82 3.93 4.01 4.08 4.12 4.15
55 3.32 3.47 3.64 3.82 3.99 4.16 4.29 4.40 4.48 4.53
60 3.34 3.51 3.70 3.92 4.15 4.39 4.61 4.79 4.93 5.02
65 3.36 3.54 3.75 4.00 4.29 4.61 4.94 5.24 5.48 5.66
70 3.37 3.56 3.78 4.06 4.40 4.80 5.25 5.70 6.12 6.45
75 3.38 3.57 3.81 4.11 4.48 4.95 5.51 6.15 6.80 7.37
80 3.38 3.58 3.82 4.14 4.54 5.05 5.71 6.52 7.45 8.37
85 3.38 3.58 3.83 4.15 4.57 5.12 5.84 6.80 7.99 9.33
</TABLE>
96-9349 Minnesota Mutual 21
<PAGE>
FLEXIBLE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT
FIXED OR VARIABLE
ANNUITY BENEFITS
A PARTICIPATING CONTRACT
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA MUTUAL QUALIFIED PLAN AGREEMENT
- --------------------------------------------------------------------------------
WHAT DOES THIS AGREEMENT PROVIDE?
The Agreement modifies the contract. The Agreement is used when an annuity
contract is distributed by a pension or profit sharing plan. The plan must be
qualified under Section 401(a) of the Internal Revenue Code ("Code"), as
amended.
IS THIS CONTRACT TRANSFERABLE?
No. This contract is non-transferable. It may not be sold or assigned. There
is an exception if the contract is the subject of a domestic relations order.
IS THERE AN AUTOMATIC FORM OF RETIREMENT BENEFIT?
Yes. The automatic form is payable if the annuitant is married when a contract
benefit is paid. The automatic form is a joint and 100% to survivor annuity.
It is payable to the annuitant and the annuitant's spouse. The automatic option
is a life annuity if the annuitant is single when a contract benefit is paid.
It is payable to the annuitant.
MAY ANOTHER PAYMENT OPTION OF THE RETIREMENT BENEFIT BE ELECTED?
Yes. However, there are two conditions. First, the annuitant must elect a
different contract option. This election must be made within the 90 day period
before the benefit is paid. Second, the spouse of a married annuitant must
consent to any election of an optional form. This consent must be made on a
Minnesota Mutual form. It must contain a notarized statement. Any consent by a
spouse herein shall be effective only with respect to such spouse. Any annuity
payment option may not provide for payments over a period longer than the life
or the life expectancy of the annuitant or the joint annuitant.
ARE THERE RULES AS TO WHEN ANNUITY PAYMENT MUST BEGIN?
Yes. Payments under the contract must begin no later than April 1st following
the later of (a) the calendar year in which the annuitant attains age 70 1/2, or
(b) retires.
IS THERE A PRE-RETIREMENT DEATH BENEFIT?
Yes. If the annuitant was married for a period of at least one year at the time
of death, the beneficiary of the pre-retirement death benefit is the annuitant's
spouse. The spouse's payment option is a life annuity.
If the annuitant was not married or was married less than one year at death, the
general rule does not apply. The beneficiary of this benefit is then the
designated beneficiary. The automatic annuity payment option in this case is a
lump sum payment.
MAY THE ANNUITANT WHO HAS BEEN MARRIED FOR AT LEAST ONE YEAR ELECT ANOTHER
BENEFICIARY FOR THE PRE-RETIREMENT DEATH BENEFIT?
Yes. Such an annuitant may choose a beneficiary. It may be a person other than
the spouse. The spouse must consent to such an election. The consent must be
on a Minnesota Mutual form. It must include a
88-9176 Rev. 9-96 The Minnesota Mutual Life Insurance Company
<PAGE>
notarized statement. Consent must also be obtained if there is a subsequent
change of beneficiary.
MAY ANOTHER PAYMENT OPTION BE ELECTED FOR THE PRE-RETIREMENT DEATH BENEFIT?
Yes. On the annuitant's death, the beneficiary may elect any contract option.
The option elected must be permitted by the Code.
MAY THE PAYMENT OF THE PRE-RETIREMENT DEATH BENEFIT BE DEFERRED?
Yes. The pre-retirement death benefit may begin at any time after the
annuitant's death. If the beneficiary is the annuitant's spouse, the spouse may
elect to defer the benefit. The benefit must begin by the time the annuitant
would have been age 70 1/2.
Payment rules differ if the beneficiary is not the annuitant's spouse. In that
case payment must begin no later than one year from the annuitant's death.
Payment must be: (a) in a lump sum; (b) in substantially equal installments
over the life of that beneficiary; or (c) over a period not longer than the
beneficiary's life expectancy.
ARE THERE ANY EXCEPTIONS TO THESE DISTRIBUTION REQUIREMENTS?
Yes.
Secretary
President
<PAGE>
MINNESOTA MUTUAL INDIVIDUAL RETIREMENT ANNUITY
(IRA) AGREEMENT
WHAT DOES THIS AGREEMENT PROVIDE?
This agreement modifies the contract. Provisions are changed before issue. In
the event of a conflict between the provisions of this agreement and the
contract to which it is attached, the provisions of this agreement will control.
These changes will allow its use: (a) with a Simplified Employee Pension
(herein "SEP"); and/or (b) as an Individual Retirement Annuity under the
Employee Retirement Income Security Act of 1974, as amended (herein "IRA").
PURCHASE PAYMENTS
ARE IRA PURCHASE PAYMENTS LIMITED?
Yes. Where the annuitant has an IRA, purchase payments may be limited. An
annual cash purchase payment may not exceed the lesser of: (a) the amount of
compensation includible in gross income in any taxable year; or (b) $2,000, or
such other maximum amount as may be allowed by law.
Where an annuitant establishes an IRA along with a nonemployed spouse, purchase
payments may be limited. They are also limited if the annuitant is the
nonemployed spouse. The cash purchase payments for both annuities and accounts
must then be considered together. They may not exceed the lesser of: (a) the
amount of compensation includible in the working spouse's compensation
includible in gross income in any taxable year; or (b) $2,250, or such other
maximum amount as may be allowed by law. In no event may an annuitant's annual
purchase payment exceed the cash amount of: (a) $2,000; or (b) the maximum
annual contribution allowed for an IRA.
ARE SEP PURCHASE PAYMENTS LIMITED?
Yes. Where the annuitant's employer establishes a SEP, purchase payments may be
limited. The annual cash purchase payment must be the lesser of: (a) an amount
equal to 15% of the compensation included in gross income in any taxable year;
or (b) $30,000, or such other maximum amount as may be allowed by law.
Additional purchase payments may be made, as described above.
DO PURCHASE PAYMENT LIMITATIONS APPLY TO A ROLLOVER?
No. Limits on purchase payments to the contract do not apply with a rollover
contribution. A rollover contribution is one within the meaning of sections
408(d)(3), 402(c), 403(a)(4) or 403(b)(8) of the Internal Revenue Code (herein
"Code") or a purchase payment made in accordance with the terms of a Simplified
Employee Pension (SEP) as described in Section 401(k) of the Code. In that
case, a cash purchase payment may be the amount received by or on behalf of an
annuitant as all or any portion of a distribution which is a rollover
contribution. The
83-9058 Rev. 10-93 The Minnesota Mutual Life Insurance Company
<PAGE>
distribution may be one from an individual retirement account, annuity or
bond plan; or an eligible rollover distribution from a tax-exempt employee's
trust, a qualified employee annuity plan or such other plan as may be allowed
by law. A rollover contribution must be received by us not later than 60
days after the annuitant receives it. A direct rollover payment may be made
to us from the plan making the distribution. A purchase payment may not
include contributions to a tax-qualified plan made by the annuitant as an
employee.
MAY THE ANNUITANT ALWAYS MAKE PURCHASE PAYMENTS?
No. We will not accept purchase payments under this contract as of a date the
annuitant is not eligible for an IRA or SEP.
In addition, no additional cash contributions or rollover contributions may be
accepted under the contract if: (a) the owner dies before the distribution of
the entire interest in the contract; and (b) the beneficiary is not the
surviving spouse.
Purchase payments which exceed those allowed for an IRA may be returned. We
will send them to the annuitant. Return is without regard to the provisions of
this contract dealing with withdrawals. Excess purchase payments to a SEP may
similarly be returned. We will send them to the payer.
DISTRIBUTION PROVISIONS
ARE THERE RULES FOR THE TIMING OF DISTRIBUTIONS?
Yes. The distribution of an annuitant's value shall be made in accordance with
the minimum distribution requirements of section 408(b)(3) of the Code and the
regulations thereunder, including the incidental death benefit provisions of
section 1.401(a)(9)-2 of the proposed regulations. All of these rules are
incorporated herein by reference.
The annuitant's accumulation value, or withdrawal value if applicable, must be
distributed or begin to be distributed, by the annuitant's required beginning
date. This is the April 1 following the calendar year in which the annuitant
reaches age 70 1/2. For each succeeding year, a distribution must be made on or
before December 31.
WHAT FORMS OF DISTRIBUTION ARE AVAILABLE?
By the required beginning date the annuitant may elect to have the accumulation
value, or withdrawal value if applicable, distributed. It must be in one of the
following forms:
(a) a single sum payment;
(b) equal or substantially equal payments over the life of the annuitant;
(c) equal or substantially equal payments over the joint lives of the
annuitant and spouse;
(d) equal or substantially equal payments over a specified period that may
not be longer than the annuitant's life expectancy;
Minnesota Mutual 2
<PAGE>
(e) equal or substantially equal payments over a specified period that may
not be longer than the joint life and last survivor expectancy of the
annuitant and spouse.
Options (b), (c), (d), and (e) can be satisfied by an annuity form elected by
the annuitant or by systematic withdrawal.
Payments must be made in periodic payments at 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 section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations or such final regulations as adopted.
ARE THERE SPECIAL RULES IF THE ANNUITANT DIES BEFORE THE ENTIRE VALUE IN THE
CONTRACT IS DISTRIBUTED?
Yes. If the annuitant dies on or after the date distributions have begun, the
entire remaining value must be distributed at least as rapidly as under the
method of distribution being used as of the date of the annuitant's death. If
the annuitant dies before distributions have begun, the entire remaining value
must be distributed as elected by the annuitant or, if the annuitant has not so
elected, as elected by the beneficiary or beneficiaries, as follows:
(a) by December 31st of the year containing the fifth anniversary of the
annuitant's death; or
(b) in equal or substantially equal payments over the life or life
expectancy of the designated beneficiary or beneficiaries starting by
December 31st of the year following the year of the annuitant's death.
If, however, the beneficiary is the annuitant's surviving spouse, then
this distribution is not required to begin until later. It must begin
by December 31st of the year in which the annuitant would have turned
70 1/2.
ARE OTHER OPTIONS AVAILABLE TO A SPOUSE BENEFICIARY?
Yes. In addition to the options discussed above, the spouse beneficiary has
other options. He or she may elect to treat the annuitant's IRA as his or her
own. This is done by either: (a) not taking a distribution within the five
year period; or (b) making eligible IRA contributions to it.
If the beneficiary chooses one of these options then he or she is the contract
owner. He or she will assume all rights and privileges under the contract.
This right is available only to the spouse of the annuitant.
HOW ARE LIFE EXPECTANCIES FOR CALCULATING REQUIRED DISTRIBUTIONS DETERMINED?
Life expectancy is computed by use of the expected return multiples in Table V
and VI of section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the annuitant prior to the commencement of
distributions or, if applicable, by the surviving spouse where the annuitant
dies before distributions have commenced,
Minnesota Mutual 3
<PAGE>
life expectancies of an annuitant or spouse beneficiary shall be recalculated
annually for purposes of required distributions. An election not to
recalculate shall be irrevocable and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary shall not be recalculated.
Instead, life expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which the annuitant attains age 70
1/2, and payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated. Instead, life expectancy
will be calculated using the attained age of such beneficiary during the
calendar year in which the annuitant attains age 70 1/2, and payments for
subsequent years shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
MAY THE ANNUITANT SATISFY MINIMUM DISTRIBUTION REQUIREMENTS BY RECEIVING A
DISTRIBUTION FROM ANOTHER IRA?
Yes. An annuitant may satisfy the minimum distribution requirements under
sections 408(a)(6) and 408(b)(3) of the Code by receiving a distribution from
one IRA that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the owner of two or more
IRAs may use the "alternative method" described in Notice 88-38, to satisfy the
minimum distribution requirements described above.
WITHDRAWAL BENEFITS
ARE THERE LIMITS ON WITHDRAWALS?
Yes. These limits apply to a partial withdrawal or a surrender of the contract
before the annuitant's age 59 1/2. In that case, we must receive notice of the
intended disposition of the proceeds. This will not apply if the annuitant dies
or is disabled.
MAY TAX PENALTIES APPLY?
Yes. If a withdrawal or surrender occurs before the annuitant is age 59 1/2,
the annuitant may be subject to tax penalties. These penalties are imposed
under the Code. The annuitant may not be subject to tax penalties on amounts
received before age 59 1/2 if: (1) the annuitant becomes disabled as defined by
the Code; (2) the amount received is in excess of the allowed deduction and
returned to the annuitant before the required tax return filing date for that
year, together with any earned interest; or (3) if the entire amount in the
contract is received and reinvested in a similar plan entitled to similar tax
treatment. Additional exceptions to tax penalties may be available to the
annuitant.
We will not be liable for any tax penalties under this contract. We are not
liable for penalties on amounts received or paid by us under this contract. Any
transaction treated by law as a contract distribution may be treated by us as a
complete contract surrender.
Minnesota Mutual 4
<PAGE>
GENERAL INFORMATION
IS THE INTEREST OF THE ANNUITANT IN THIS CONTRACT NONFORFEITABLE?
Yes. The entire interest of the annuitant in this contract is nonforfeitable.
The annuitant shall possess the entire benefit provided by this contract. This
contract is established for the exclusive benefit of the annuitant and his or
her beneficiaries.
HOW WILL DIVIDENDS BE APPLIED?
Dividends, if received, must be added to the accumulation value or applied to
increase annuity payments.
HOW WILL A REFUND OF PREMIUMS BE APPLIED?
Any refund of premiums (other than those attributable to excess purchase
payments) will be applied, before the close of the calendar year following the
year of the refund, toward the payment of future premiums or the purchase of
additional benefits.
MAY THIS AGREEMENT BE AMENDED?
Yes. This contract may be amended as required to reflect any change in the
Code, regulations or published revenue rulings. The annuitant will be deemed to
have consented to any such amendment. We will promptly furnish any such
amendment to the annuitant.
This agreement is effective as of the original contract date unless a different
effective date is shown here.
/s/ Dennis E. Prohofsky /s/ Robert L. Senkler
Secretary President
Minnesota Mutual 5
<PAGE>
MINNESOTA MUTUAL TAX SHELTERED ANNUITY AMENDMENT
We have made the following changes to your contract. They modify the contract.
They are considered to be a part of it. This agreement is effective as of the
original contract date unless a different effective date is shown here.
WHAT DOES THIS AGREEMENT PROVIDE?
This Agreement modifies your contract. The Agreement is used when the contract
is issued to fund a tax sheltered annuity program. This is as described in
Section 403(b) of the Internal Revenue Code (hereinafter "Code"), as amended.
PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
ARE PURCHASE PAYMENTS LIMITED?
Yes. Where the annuitant has a tax sheltered annuity, purchase payments may be
limited. Elective deferrals which are purchase payments made by salary
reduction are limited to: (a) $9,500; or (b) an indexed amount, if greater.
A special increased limit in the case of an annuitant who has completed 15 years
of service with an educational organization, a hospital, a home health service
agency, a church, a convention or association of churches, or a health and
welfare service agency may be available. The limit for any one year is
increased by the lesser of:
(a) $3,000;
(b) $15,000 reduced by amounts already excluded for prior taxable years by
reason of this special exception; or
(c) the excess of $5,000 multiplied by the number of years of service the
annuitant has with the employer less all prior elective deferrals.
The amount of salary reduction excludable from an annuitant's gross income may
actually be less than the amount permitted under this limit on elective
deferrals. This may be true if the annuitant's exclusion allowance, described
in Section 403(b)(2), of the Code or the overall limit as described in Section
415(c) of the Code is less.
WITHDRAWAL AND SURRENDERS
- --------------------------------------------------------------------------------
ARE THERE RESTRICTIONS ON WHEN WITHDRAWALS FROM THIS CONTRACT MAY BE MADE?
Yes. Contracts issued to fund 403(b) tax sheltered annuity programs must
restrict certain withdrawals. Any purchase payment made after January 1, 1989
pursuant to a salary reduction agreement between you and your employer may be
paid only when:
88-9213 The Minnesota Mutual Life Insurance Company
<PAGE>
(a) you attain age 59 1/2;
(b) when you separate from service with your employer;
(c) when you die;
(d) when you become disabled; or
(e) if you qualify for a hardship withdrawal.
WHAT IS MEANT BY A HARDSHIP WITHDRAWAL?
A hardship withdrawal is one that is made on account of an immediate and heavy
financial need and a withdrawal is necessary to satisfy that financial need.
You may be required to provide us with information so that we may be satisfied
that your hardship is one described in the Code and its regulations.
WHAT AMOUNT MAY BE WITHDRAWN UNDER THE HARDSHIP PROVISION?
You may withdraw only the amount represented by your salary reduction
contributions. Any earnings attributable to such contributions may not be
withdrawn.
MAY TAX PENALTIES APPLY?
Yes. If a withdrawal or surrender occurs before the annuitant is age 59 1/2,
the annuitant may be subject to tax penalties. These penalties are imposed
under the Code. The annuitant may not be subject to tax penalties on amounts
received before age 59 1/2 if:
(a) the annuitant becomes disabled as defined by the Code;
(b) The amount received is in excess of the allowed elective deferral and
returned to the annuitant before the required tax return filing date
for that year, together with any earned interest; or
(c) if the entire amount in the contract is received and reinvested in a
similar plan entitled to similar tax treatment.
We will not be liable for any tax penalties on amounts received or paid by us
under this contract. We also retain the right to treat any transaction treated
by law as a contract distribution as a complete contract surrender.
The Minnesota Mutual Life Insurance Company
<PAGE>
GENERAL INFORMATION
IS THERE A TIME WHEN DISTRIBUTIONS FROM THIS CONTRACT MUST BE MADE?
Yes. Distributions must begin within 90 days after the end of the year in which
the annuitant reaches age 70 1/2. Distributions may be made as withdrawals or
under one of the available annuity forms. In order to avoid tax penalties, you
will have to meet certain minimum distribution requirements.
IS THIS CONTRACT TRANSFERABLE?
No. This contract is non-transferable. It may not be sold or assigned.
/s/ Dennis E. Prohofsky
Secretary
/s/ Robert L. Senkler
President
The Minnesota Mutual Life Insurance Company
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA MUTUAL TAX SHELTERED ANNUITY LOAN AGREEMENT
- --------------------------------------------------------------------------------
WHAT DOES THIS AGREEMENT PROVIDE?
This agreement modifies the contract. These changes will allow contract loans
when the contract is used as a tax sheltered annuity. A tax sheltered annuity
is one described under Section 403(b) of the Internal Revenue Code, as amended.
CONTRACT LOANS
- -------------------------------------------------------------------------------
CAN YOU BORROW MONEY ON YOUR CONTRACT?
Yes. At any time after the second contract anniversary, you may borrow up to
the maximum loan amount. It will be determined as of the date we receive your
request for a loan. We will require your written request for a contract loan.
We will charge interest on the loan in arrears.
At your request, we will send you a loan agreement for your signature. The
contract will be the only security required for your loan.
ARE THERE LIMITATIONS ON THE AMOUNT WHICH MAY BE BORROWED?
Yes. There is both a minimum loan amount and a maximum loan amount. In each
case, the loan amount may not exceed the surrender value of the general account
portion of your contract at the time of the loan.
WHAT IS THE MINIMUM LOAN AMOUNT?
The minimum loan amount is $1,000.00.
WHAT IS THE MAXIMUM LOAN AMOUNT?
The maximum loan available is the lesser of (a) or (b) where (a) is $50,000
and (b) is the greater of (i) one-half of the Surrender Value less any
applicable deferred sales charge or (ii) the Surrender Value up to the amount
of $10,000, less the amount of interest that would be charged during the
first quarter that the loan would be outstanding and less any applicable
deferred sales charge. Loans may be taken only from the Fixed Account
Guarantee Period option of a one-year duration.
WHAT IS THE SOURCE OF THE LOAN AMOUNT?
The loan amount requested, plus the first quarter's interest, plus any
applicable deferred sales charge, will be transferred from the portion of the
Accumulation Value allocated to the Variable Account or from the Fixed Account
Guarantee Period options of more than a one year duration to the Fixed Account
Guarantee Period of a one-year duration. Amounts available for a TSA Loan may
only come from the Fixed Account Guarantee Period option for a one-year
duration. Unless we are directed otherwise, amounts will be transferred from
sub-accounts of the Variable Account and the Fixed Account Guarantee Option for
other than a one-year period in the same proportion that the allocations to each
sub-account bears to his or her total allocations to the Variable Account and
the Guarantee Options prior to the loan.
WHAT ARE THE CONDITIONS OF THE LOAN REPAYMENT?
You must execute a loan agreement. The loan agreement will call for the
repayment of the loan over a period of five years or less.
96-9351 The Minnesota Mutual Life Insurance Company
<PAGE>
Repayment must be made in substantially equal payments. The loan repayment
schedule will require the level amortization of the loan over the repayment
period. Early repayment may be made without penalty. You may repay the
balance of the loan at any time.
Failure to meet the requirements of the loan agreement will result in its
termination. Loan amounts will then be treated as distributions under the
contract. Treatments of a loan as a distribution will result in taxable income.
In addition, depending upon your circumstances, it may result in tax penalties.
If there is a distribution, your surrender value will be reduced. The surrender
value will be reduced by the amount of the distribution.
We will not be liable for any taxes or tax penalties on amounts received or paid
by us under the contract.
WHAT INTEREST RATE DO YOU HAVE TO PAY?
The loan interest rate on a loan is variable and will be set quarterly on the
first day of each calendar quarter. It will apply to the loan balance in that
calendar quarter. This rate will not exceed the greater of the "published
monthly average" for the calendar month ending two months before the beginning
of the calendar quarter, or the interest rate in effect on the contract plus 1%.
The "published monthly average" means the Moody's Composite Average of Yields on
Bonds as published by the Moody's Investors Service. The "interest rate in
effect on the contract" is the interest rate credited on the Fixed Account
Guaranteed Period Option of a one-year duration, including amounts held in the
TSA loan account.
WHAT HAPPENS IF YOU DO NOT REPAY YOUR LOAN?
Your contract will remain in force so long as there is a surrender value. If
there is a loan equal to the surrender value and if it is not repaid, a
distribution of the surrender value will cause the contract to terminate.
Repayment must be made in substantially equal quarterly payments over a period
of five years or less. Early repayment may be made without penalty at any time.
When the loan is repaid, then the TSA loan account terminates, and the amounts
remain in the Fixed Account Guarantee Period of a one-year duration. A
reallocation of these amounts among the Fixed Account and the sub-accounts of
the Variable Account may be made by exercising the Contract's transfer rights.
If there is a surrender while a loan is outstanding, then the loan is due at
that time. If the loan is not repaid at that time, the payment on surrender
will be the surrender value, less the outstanding loan principal, less any
interest due, and less any applicable deferred sales charges. In addition,
depending upon the circumstances, such a surrender may result in income
taxation, tax penalties and disqualification of the Participant's interest in
the Contract as a tax sheltered annuity.
Failure to meet the requirements of the loan agreement will result in its
termination. Loan amounts will then be treated as distributions under the
Contract. Treatment of a loan as a distribution will result in taxable income
under applicable tax rules. In addition, depending upon the circumstances, it
may result in income taxation, tax penalties, and disqualification of the
Contract as a tax sheltered annuity. If there is a
The Minnesota Mutual Life Insurance Company
<PAGE>
distribution, the Accumulation Value will be reduced by the amount of the
outstanding loan principal, reduced by any interest due, and reduced by any
applicable deferred sales charge on that amount.
ARE THERE OTHER LIMITATIONS ON CONTRACT LOANS?
Yes. Those additional limitations are:
(1) Only one loan may be outstanding at any time.
(2) A period of at least three months is required between the repayment of
a loan and the application for a new loan.
(3) If there is an outstanding loan on the contract, then any withdrawals
will be limited to the Accumulation Value, less the outstanding loan
principal, less any interest due and less any applicable deferred
sales charge.
(4) A loan is not available if annuity payments have begun.
(5) The loan account portion of a contract may not be transferred to the
Variable Account when a loan is outstanding, provided, however, that a
single transfer from the TSA loan account will be allowed each
calendar year in an amount no more than the TSA loan account value
less the outstanding loan principal, the outstanding interest and any
applicable deferred sales charge.
MAY THE CONTRACT BE SURRENDERED WHILE THERE IS A LOAN?
Yes. If there is a loan and the contract is surrendered, the loan is due. If
it is not repaid prior to the surrender, the payment on surrender will be the
surrender value less the current loan balance.
ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
ARE ANNUITY PROVISIONS ALWAYS AVAILABLE?
No. Annuity payments may not begin during a period when a contract loan is in
effect.
MAY THIS AGREEMENT BE AMENDED?
Yes. This agreement may be amended. It may be amended only to reflect any
change in the Internal Revenue Code, regulations or published revenue rulings.
You will be deemed to have consented to such an amendment. We will promptly
furnish you with any such amendment.
This agreement is effective as of the original contract date unless a different
effective date is shown here.
Secretary
President
The Minnesota Mutual Life Insurance Company
<PAGE>
===============================================================================
MINNESOTA MUTUAL ANNUITY PAYMENT ENDORSEMENT
- -------------------------------------------------------------------------------
This endorsement, when attached to the contract, modifies certain contract
provisions so as to change the contract to a Single Payment Immediate Annuity.
Notwithstanding any provisions of this contract to the contrary, the annuitant
may request that the contribution be applied to provide for immediate annuity
payments to begin within the first contract year. In that event no reduction in
the accumulation value will be made. Amounts allocated to the Guarantee Period
Fixed Account Option will be transferred to the General Account when annuity
payments begin. The greater of the then current immediate annuity purchase
rates offered by Minnesota Mutual or the guaranteed purchase rates as shown in
the contract will be used to determine the monthly annuity payments.
Secretary President
96-9352 The Minnesota Mutual Life Insurance Company
<PAGE>
MINNESOTA MUTUAL ANNUITY PAYMENT ENDORSEMENT
The Minnesota Mutual Life Insurance Company certifies that the Annuitant named
in the Schedule below is entitled to the Annuity Payments described in this
schedule. Payments are to commence on the Annuity Commencement Date.
ANNUITY PAYMENTS SCHEDULE
ANNUITANT
---------------------------------------------------------------------
ANNUITANT'S DATE OF BIRTH
-----------------------------------------------------
ANNUITY COMMENCEMENT DATE
-----------------------------------------------------
FORM OF ANNUITY PAYMENT
-------------------------------------------------------
FIXED ANNUITY PAYMENT $
-------------------------------------------------------
NUMBER OF VARIABLE ANNUITY UNITS
----------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INITIAL VARIABLE ANNUITY PAYMENT $
--------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
JOINT ANNUITANT
---------------------------------------------------------------
JOINT ANNUITANT'S DATE OF BIRTH
-----------------------------------------------
ANNUITANT'S BENEFICIARY
-------------------------------------------------------
/s/ Dennis E. Prohofsky /s/ Robert L. Senkler
Secretary Registrar President
83-9060
<PAGE>
<TABLE>
<S><C>
VOYAGEUR HARBOUR ANNUITIES VARIABLE ANNUITY APPLICATION
- ------------------------------------------------------------------------------------------------------------------------------------
Distributed by Voyageur Fund Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Issued by The Minnesota Mutual Life Insurance Company-Annuity Services G2-8888-400 Robert Street North-St Paul Minnesota 55101-2098
- ------------------------------------------------------------------------------------------------------------------------------------
Fax (612) 225-6689 Toll Free 1-800-277-6595 In Metro Area (612) 225-6688
- ------------------------------------------------------------------------------------------------------------------------------------
OWNER (please print) ANNUITANT (if other than owner)
- ------------------------------------------------------------------------------------------------------------------------------------
OWNER NAME ANNUITANT NAME
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE CITY STATE ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------------
DATE OF BIRTH SEX TAXPAYER ID(SSN OR TIN) DAYTIME PHONE # DATE OF BIRTH SEX TAXPAYER ID(SSN OR TIN) DAYTIME PHONE #
/ /M / /F / /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT OWNER (optional-spouse only) JOINT ANNUITANT (optional)
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT OWNER NAME JOINT ANNUITANT NAME
- ------------------------------------------------------------------------------------------------------------------------------------
DATE OF BIRTH SEX TAXPAYER ID(SSN OR TIN) DAYTIME PHONE # DATE OF BIRTH SEX TAXPAYER ID(SSN OR TIN) DAYTIME PHONE #
/ /M / /F / /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY (indicate class 1 for primary and class 2 for contingent)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS NAME RELATIONSHIP DATE OF BIRTH SEX SSN or TIN
- ------------------------------------------------------------------------------------------------------------------------------------
/ /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
/ /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
/ /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
/ /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
/ /M / /F
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE OF CONTRACT PURCHASE PAYMENT ALLOCATION
- ------------------------------------------------------------------------------------------------------------------------------------
/ / Deferred annuity with an Annuity Commencement Date of Purchase Payments may be allocated to one or more of the Fixed
___/01/_____. If none selected, the Annuity Accounts or sub-accounts of the Variable Account. During the 30 day
Commencement Date will be the later of the first of the period following receipt of the first Purchase Payment into this
month preceding the annuitant's 85th birthday or ten contract, Purchase Payments directed to the variable sub-accounts
years after issue. will first be allocated to the Money Market sub-account of the
Variable Account. At the end of this 30 day period, these Purchase
/ / Immediate annuity commencing the first of _________ Payments will be transferred as you have directed.
(month). Fixed immediate will be allocated to the 1
year fixed account. (Please attach proof of age.)
- -------------------------------------------------------------- % 1 Year Fixed Account % Asset Allocation
TYPE OF PLAN ------ ------
- -------------------------------------------------------------- % 3 Year Fixed Account % Index 500
/ / Non-Qualified ------ ------
/ / 1035 Exchange % 5 year Fixed Account % Federated American
/ / Under the ____(state) Uniform Transfers ------ ------ Leaders Fund II
to Minor Act % 7 Year Fixed Account % Value Stock
------ ------
/ / Individual Retirement Annuity (IRA) % 10 Year Fixed Account % Small Company Value
/ / Purchase Payment ------ ------
/ / Rollover % Money Market % Growth
/ / Transfer ------ ------
% Mortgage Securities % Small Company
/ / Simplified Employee Pension (SEP) ------ ------
% Bond % Capital Appreciation
/ / Savings Incentive Match Plans for Employees (SIMPLE) ------ ------
% Federated High Income % International Stock
/ / Tax Sheltered Annuity (IRC Section 403(b)) ------ Bond Fund II ------
% Global Bond
/ / Qualified Retirement Plan (IRC Section 401) ------ 100 % TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
Voyageur Fund Distributors, Inc. PAGE 1 OF 2 The Minnesota Mutual Life Insurance Company
(NOT VALID WITHOUT BOTH PAGES)
05-0000-90-500 9/96 96-9350
</TABLE>
<PAGE>
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE PAYMENT METHOD (check all that apply)
- ------------------------------------------------------------------------------------------------------------------------------------
/ / $_________ remitted with application / / Direct Transfer/1035 Exchange/Rollover
/ / Automatic Payment Plan (attach authorization and voided check)
/ / $________ as Cash Rollover Commencing on Month ___________ Day ______
/ / Other _________________________
/ / $________ for tax year _________
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE PAYMENT REMINDER NOTICE (check one if applicable)
- ------------------------------------------------------------------------------------------------------------------------------------
/ / Send Individual Purchase Payment Reminder Notice (IRA, / / Send Purchase Payment Reminder Notice to EMPLOYER*
non-qualified only) on the 1st day of ________ (month) beginning ___________ (month) for $ ________________
for $ ____________ and continuing and continuing
/ / Quarterly / / Semi-Annually / / Annually / / Annually (1) / /Semi-Annually (2) / / Quarterly (4)
/ / Monthly (12) / / Semi-Monthly (24) / / Bi-Weekly (26)
- ------------------------------------------------------------------------------------------------------------------------------------
*EMPLOYER NAME (if other than owner) ADDRESS CITY, STATE, ZIP
- ------------------------------------------------------------------------------------------------------------------------------------
REPLACEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Will this contract replace or change an existing insurance or annuity contract? / /Yes / /No Submit replacement forms if
applicable.
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE COMPANY CONTRACT NUMBER
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SPECIAL INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OWNER/ANNUITANT SIGNATURES
- ------------------------------------------------------------------------------------------------------------------------------------
I represent that the statements and answers in this application are full, complete and true to the best of my knowledge. I agree
that they are to be considered the basis of any contract issued to me. I ACKNOWLEDGE RECEIPT OF THE CURRENT VARIABLE ACCOUNT AND
THE FUND PROSPECTUSES FOR THE VARIABLE ANNUITY. I UNDERSTAND THAT ALL PAYMENTS AND VALUES OF ANY CONTRACT ISSUED, WHEN BASED UPON
THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT. Amounts payable
under this contract, when part of the Fixed Account with a Guarantee Period of more than one year, may be subject to a market value
adjustment when withdrawals or other payments are made prior to a date specified in the contract.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNED AT (City, State) SIGNATURE OF OWNER SIGNATURE OF ANNUITANT (if other than owner)
X X
- ------------------------------------------------------------------------------------------------------------------------------------
DATE SIGNATURE OF JOINT OWNER SIGNATURE OF JOINT ANNUITANT (if other than joint owner)
X X
- ------------------------------------------------------------------------------------------------------------------------------------
The Prospectuses for the Variable Account and the Funds refer to a Statement of Additional Information. Would you like us to send
you copies? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------------------------
BROKER INFORMATION (licensing appointment with Minnesota Mutual is required)
- ------------------------------------------------------------------------------------------------------------------------------------
To the best of my knowledge this contract / / will / / will not replace or change an existing insurance or annuity contract. I
certify that a current prospectus was delivered. No written sales materials were used other than those approved by Voyageur Fund
Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
BROKER CODE BROKER NAME BROKER SIGNATURE
X
- ------------------------------------------------------------------------------------------------------------------------------------
BRANCH CODE BRANCH NAME CLIENT BROKERAGE ACCOUNT NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
FIRM CODE FIRM NAME AUTHORIZED SIGNATURE OF FIRM
X
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL NOTIFICATION INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
/ / Assign contract number and case number (if applicable) immediately and notify broker at fax number ____________,
telephone number _____________, or electronic mail address ____________________________________________________.
- ------------------------------------------------------------------------------------------------------------------------------------
This application becomes effective only upon its acceptance by The Minnesota Mutual Life Insurance Company.
- ------------------------------------------------------------------------------------------------------------------------------------
ACCEPTED BY DATE CONTRACT NUMBER CASE NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
Voyageur Fund Distributors, Inc. PAGE 2 OF 2 The Minnesota Mutual Life Insurance Company
(NOT VALID WITHOUT BOTH PAGES)
05-0000-90-500 9/96 96-9350
</TABLE>
<PAGE>
RE-INCORPORATION
OF
"THE BANKERS LIFE ASSOCIATION OF MINNESOTA"
and
Change of Name to
"THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY"
(as adopted on August 5, 1901)
"Resolved, that THE BANKERS LIFE ASSOCIATION OF MINNESOTA, hereby
authorizes and declares its Re-incorporation, and does hereby Re-incorporate
under and by virtue of Chapter One Hundred and Seventy-five (175), as amended,
of the General Laws of the State of Minnesota for the year Eighteen Hundred and
Ninety-five entitled 'An Act to Revise and Codify the Insurance Laws of the
State'; and to that end does hereby adopt the following Articles of
Incorporation, in lieu of, and as a substitute for, any and all Articles of
Incorporation, heretofore existing, viz:
ARTICLE I.
The future corporate name of this corporation is THE MINNESOTA MUTUAL
LIFE INSURANCE COMPANY.
ARTICLE II.
The location and Home Office of the Company is and shall be in the
City of Saint Paul, State of Minnesota.
ARTICLE III.
This Company is re-incorporated for the purpose of transacting and it
proposes, upon the Mutual Plan, to transact, the business of, and to make,
insurance upon the lives of individuals, and every insurance appertaining
thereto or connected therewith; to grant, purchase or dispose of annuities and
endowments of any kind whatsoever; and to take risks, and insure, against
accident to or sickness of persons.
It is proposed and intended that the duration and continuance of this
corporation and its corporate powers shall be perpetual, and that it shall have
perpetual succession.
<PAGE>
-2-
ARTICLE IV.
By-laws not in conflict herewith or with the law, may be adopted, and
from time to time amended, repealed or abrogated in whole or in part, by the
Board of Trustees.
ARTICLE V.
Except as herein otherwise expressly provided, all of the corporate
powers of the company shall be exercised and the amount of compensation of
Officers and Trustees shall be regulated by a Board of Trustees, and authority
is vested in the Board of Trustees to appoint, and delegate power and authority
to, such Officers, Servants and Agents as said Board shall by resolution or by-
law determine.
ARTICLE VI.
The Board of Trustees shall consist of at least five persons, and may
consist of a greater number, if the by-laws shall at any time so provide.
All of the members of the Board of Trustees shall be residents and
citizens of the State of Minnesota, until such time as the By-laws otherwise
provide.
The names of the members of the present Board of Trustees are CHARLES
H. BIGELOW, MAURICE AUERBACH, JOHN B. SANBORN, CRAWFORD LIVINGSTON AND J.F.R.
FOSS.
ARTICLE VII.
The first meeting of members hereafter shall be held at three o'clock
in the afternoon on the first Tuesday in March, A.D. Nineteen Hundred and Two at
the Home Office of the Company; provided, that a special meeting, or special
meetings of members may be held prior to said date upon due notice.
ARTICLE VIII.
The regular annual meeting of members shall be held at three o'clock
in the afternoon of the first Tuesday in March of each year, at the Home Office,
for the election of Trustees, whenever any are to be elected, and for the
transaction of such other business as may properly come before it.
<PAGE>
-3-
ARTICLE IX.
Article ten of these Articles relates solely to a Guaranty Trust Fund
heretofore created by the deposits of members who became such under the
assessment plan.
ARTICLE X.
All amounts pledged to this Company to secure payment of assessments
occasioned by death of its members shall be used only for that purpose, and
meanwhile the same shall be and remain invested in United States Registered
Bonds, and shall constitute and be know as "The Guaranty Trust Fund". Such
bonds shall be made payable to this company, and shall be transferable or
convertible only upon resolution of its Board of Trustees, and such board shall
have the exclusive charge and control thereof.
All interest realized from such bonds shall meanwhile be used to
defray the Company's operating expenses.
This article shall never be amended or in any way at all changed
without the consent of every member of this Company, to be given in writing,
signed by him and filed with the Company's Secretary, and reciting in full the
proposed amendment or change.
ARTICLE XI.
These Articles may be amended at any time to any extent, not in
violation of law, by resolution adopted by a two-thirds vote of all the votes
cast by the members at any special meeting lawfully called for that purpose, or
by such two-thirds vote at any regular meeting of the members."
<PAGE>
BY-LAWS
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
ST. PAUL, MINNESOTA
As Amended by Resolution of
the Board of Trustees
July 22, 1994
<PAGE>
BY-LAWS
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
TABLE OF CONTENTS
PAGE
ARTICLE I. MEMBERS
Section 1. Regular Annual Meetings............................ 1
Section 2. Special Meetings................................... 1
Section 3. Number of Votes.................................... 2
Section 4. Proxies............................................ 2
Section 5. Quorum............................................. 2
Section 6. Presiding Officer and Recording of Minutes......... 3
ARTICLE II. BOARD OF TRUSTEES
Section 1. Composition of the Board of Trustees............... 3
(a) Number of Trustees................................... 3
(b) Qualifications....................................... 4
(c) Election............................................. 4
(d) Term of Office of Elected Trustee.................... 4
(e) Appointment by the Board............................. 5
Section 2. Meetings of the Board.............................. 5
(a) Place of Meetings.................................... 5
(b) Regular Meetings..................................... 5
(c) Special Meetings..................................... 6
(d) Notice............................................... 6
(e) Quorum............................................... 7
(f) Action without Meeting............................... 7
Section 3. Removal............................................ 7
Section 4. Chair of the Board................................. 8
Section 5. Compensation....................................... 8
ARTICLE III. COMMITTEES OF THE BOARD
Section 1. Standing and Other Committees of the Board......... 9
(a) Creation of Committees............................... 9
(b) Appointments......................................... 9
(c) Qualifications....................................... 9
(d) Committee Chairs..................................... 10
(e) Meetings............................................. 10
(f) Quorum............................................... 10
(g) Vacancies............................................ 11
(h) Minutes and Reports.................................. 11
Section 2. Audit Committee.................................... 11
Section 3. Corporate Governance and Public Affairs Committee.. 12
Section 4. Executive Committee................................ 14
Section 5. Investment Committee............................... 14
Section 6. Personnel and Compensation Committee............... 15
<PAGE>
ARTICLE IV. OFFICERS PAGE
Section 1. Number............................................. 17
Section 2. Election........................................... 17
Section 3. Term of Office..................................... 17
Section 4. Removal............................................ 18
Section 5. Vacancies.......................................... 18
Section 6. Duties of Officers................................. 18
(a) Chief Executive Officer.............................. 18
(b) President............................................ 18
(c) Vice Presidents...................................... 19
(d) Secretary............................................ 19
(e) Treasurer............................................ 20
(f) Controller........................................... 20
(g) Actuary.............................................. 20
(h) Other Officers....................................... 20
Section 7. Absence or Disability.............................. 21
ARTICLE V. DISPOSITION OF FUNDS AND INVESTMENTS
Section 1. Fund and Investments............................... 21
Section 2. Deposits........................................... 21
ARTICLE VI. INDEMNIFICATION
Section 1. Trustees and Officers.............................. 22
Section 2. Employees and Agents............................... 23
Section 3. Insurance.......................................... 24
Section 4. Other Indemnification Permitted.................... 24
ARTICLE VII. CORPORATE SEAL........................................ 24
ARTICLE VIII. AMENDMENTS........................................... 25
<PAGE>
BY-LAWS
OF
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
ST. PAUL, MINNESOTA
AS AMENDED BY RESOLUTION
OF THE BOARD OF TRUSTEES
JULY 22, 1994
ARTICLE I
MEMBERS
Section 1. REGULAR ANNUAL MEETINGS. The regular annual meeting of members
shall be held at three o'clock in the afternoon of the first Tuesday in March of
each year, at the Home Office of the Company, as required by Article VIII of the
Articles of Re-incorporation. Notice of the meeting shall be as prescribed in
Section 61A.32 of Minnesota Statutes, as amended from time to time.
Section 2. SPECIAL MEETINGS. A special meeting of the members may be
called at any time by the Board of Trustees or by the joint action of either the
Chair of the Board or the Chief Executive Officer and not less than three other
Trustees. The Secretary shall give notice of the special meeting by causing to
be mailed to each member, at the member's address then appearing on the books of
the Company, a notice of the time, place and purpose of the meeting at least
thirty days before the date set for the meeting.
-1-
<PAGE>
Section 3. NUMBER OF VOTES. At each meeting of the members, every person
insured by this Company will be a member entitled to one vote, and one
additional vote for each one thousand dollars of insurance in excess of the
first one thousand dollars, subject to a maximum of one hundred votes; provided,
however, that, in the case of group insurance, voting rights shall be determined
by Section 61A.32 of Minnesota Statutes, as amended from time to time. The
Company has no cumulative voting.
Section 4. PROXIES. Any member may vote by proxy at any meeting of
members. To be valid, the proxy appointment must be in writing and must be
filed with, and received by, the Secretary at the Home Office of the Company at
least five days before the meeting at which it is to be used, exclusive of the
day of the meeting, but inclusive of the day of receipt and filing of the proxy.
A proxy appointment may be for a specified period of time or may provide that it
will be in effect until revoked. A proxy may be revoked by a member at any time
by written notice to the Secretary, or by executing a new proxy appointment and
filing it as required herein, or by personally appearing and exercising his or
her rights as a member at any meeting of the members.
Section 5. QUORUM. Insurance of an amount not less than One Hundred
Million Dollars, represented in person or by proxy, or partly in person and
partly by proxy, shall constitute a quorum at any regular or special meeting of
members. In the
-2-
<PAGE>
absence of a quorum, those members present may adjourn the meeting from time
to time until a quorum shall be present. If a quorum is present when a duly
called or held meeting is convened, the members present may continue to
transact business until adjournment, even though member(s) may have left the
meeting so that less than a quorum is present at the meeting.
Section 6. PRESIDING OFFICER AND RECORDING OF MINUTES. Meetings of the
members shall be presided over by the Chair of the Board, if present, otherwise
by the Chief Executive Officer, if present, otherwise by the President, if
present, otherwise by a Vice President; provided that if none of those
designated are present, then by a chair to be chosen by a majority of the
members who are present in person or by proxy. The Secretary, if present,
otherwise an Assistant Secretary, shall record the minutes of every meeting;
provided that if none of those designated are present, then a person to record
the minutes of that meeting shall be chosen by a majority of the members who are
present in person or by proxy.
ARTICLE II
BOARD OF TRUSTEES
Section 1. COMPOSITION OF THE BOARD OF TRUSTEES. The composition of the
Board of Trustees shall be as follows:
(a) NUMBER OF TRUSTEES. The property, affairs and business of the Company
shall be managed by a Board of Trustees which shall consist of not fewer than
five (as required by
-3-
<PAGE>
Article VI of the Articles of Re-incorporation) or more than sixteen persons,
the number of which for each year shall be determined by the members at their
regular annual meeting. The person or persons who hold the offices of Chief
Executive Officer and President shall, without the necessity of election, be
Trustees by virtue of the office.
(b) QUALIFICATIONS. Trustees need not be members of the Company, nor
residents or citizens of Minnesota. Additional qualifications for initial or
continued Board membership may be prescribed from time to time by the Board.
(c) ELECTION. Except as otherwise provided in these By-Laws, Trustees
shall be elected at regular annual meetings of the members. Nominations for the
office of Trustee shall be made before voting for that office commences. Votes
for persons not so nominated shall be disregarded. The election of each Trustee
shall be by a plurality of the votes cast for the office. In the event the
members fail to elect nominees to fill all of the offices to be elected, then
the Board of Trustees shall have the authority to choose qualified persons to
fill such office or offices by appointment as provided in Section 1(e) of this
Article II.
(d) TERM OF OFFICE OF ELECTED TRUSTEE. The term of office of each elected
Trustee shall be to such of the next three regular annual meetings of the
members as is stated in his or her nomination, or, if none is stated, to the
third such meeting following the date of his or her election, or until his
-4-
<PAGE>
or her earlier death, resignation or removal. No Trustee shall be elected to
the Board for a term of office which extends beyond the annual meeting of
members which coincides with or next follows his or her seventieth birthday.
(e) APPOINTMENT BY THE BOARD. If the office of any Trustee is not filled
by the members at a regular annual meeting of members, a majority of the
Trustees may choose a person to fill that office. If the office of any Trustee
becomes vacant for any reason, a majority of the remaining Trustees may choose a
successor. Each Trustee so chosen shall hold office until the next regular
annual meeting of the members. Not more than one-third of the maximum number of
Trustees may be so chosen by the Board between regular annual meetings of the
members.
Section 2. MEETINGS OF THE BOARD. Meetings of the Board of Trustees shall
be as follows:
(a) PLACE OF MEETINGS. Meetings of the Board may be held either within or
without the State of Minnesota.
(b) REGULAR MEETINGS. Regular meetings of the Board shall be held at such
times and places as are fixed from time to time by resolution of the Board.
Notice need not be given of those regular meetings of the Board held at the
times and places fixed by resolution, nor need notice be given of adjourned
meetings. If either or both the time or place of a regular meeting are other
than that fixed by resolution, a telephonic or written notice shall be given to
each Trustee not
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less than twenty-four hours prior to the time of that regular meeting.
(c) SPECIAL MEETINGS. Special meetings of the Board may be held at any
time upon call either of the Chair of the Board, or of the Chief Executive
Officer, or upon written request of any three or more Trustees. Except as
otherwise provided, notice of a special meeting shall be given to each Trustee
either in writing or by telephone. Notice of at least seventy-two hours prior
to the meeting time is required if written notice is deposited in the United
States mail in the City of Saint Paul. Notice of at least twenty-four hours
prior to the meeting time is required if written notice is left at either the
place of business or residence of each Trustee. Notice of at least six hours
prior to the meeting time is required if all Trustees are personally either
served with a written notice or contacted by telephone. Notice need not be
given to the Trustees of adjourned special meetings. Also, special meetings may
be held at any time without notice if all of the Trustees are present, or if,
before the meeting, those not present waive such notice in writing. Notice of a
special meeting shall state the purpose of the meeting.
(d) NOTICE. All notices of meetings of the Board required to be given
under these By-Laws shall be given either by the person or persons who called
the meeting, or by the Secretary, or, in his or her absence, by an Assistant
Secretary.
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(e) QUORUM. A majority of the Trustees shall constitute a quorum for the
transaction of business at any meeting of the Board. In the absence of a
quorum, those Trustees present may adjourn the meeting from time to time until a
quorum shall be present. Except as otherwise provided in these By-Laws, the
acts of a majority of the Trustees present at any meeting at which a quorum is
present shall be the acts of the Board. The Trustees present at a duly called
or held meeting at which a quorum is present, may continue to transact business
until adjournment, even though Trustee(s) may have left the meeting so that less
than a quorum is present at the meeting.
(f) ACTION WITHOUT MEETING. Any action which may be taken at a meeting of
the Board may be taken without a meeting if a consent in writing, setting forth
the actions to be taken, shall be signed by all of the Trustees. The action so
taken shall be effective on the date on which the last signature is placed on
the writing or writings, or on such earlier effective date as is stated in the
writing.
Section 3. REMOVAL. A member of the Board of Trustees who fails to meet
the standards set by the Board for Board members, or who is deemed by the
remaining members of the Board to be untrustworthy, or incapable by reason of
total and permanent disability of fulfilling the duties of his or her office,
may be removed from office by the unanimous vote of the remaining Trustees then
in office.
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Section 4. CHAIR OF THE BOARD. The Board of Trustees shall elect annually
from among its members a Chair of the Board. The Chair of the Board shall
continue to serve at the will and pleasure of the Board, for the term of his or
her election or until his or her prior death, resignation, or removal from the
Board. The Chair of the Board shall preside at meetings of the members, of the
Board and of the Executive Committee. In addition, the Chair shall have such
other powers, duties and responsibilities as may be determined and assigned by
the Board or these By-Laws.
Section 5. COMPENSATION. Except as provided in this Section, Trustees
shall be entitled to reasonable compensation for their services, and to
reimbursement for reasonable expenses incurred, as Trustees and as members of
committees of the Board. The amount of compensation shall be set from time to
time by resolution of the Board of Trustees. Except as otherwise expressly
provided by the Board, no such compensation or reimbursement shall be paid to an
officer of the Company who also serves as a Trustee. Any Trustee receiving
compensation under this Section shall not be barred from serving the Company in
a non-officer capacity and receiving reasonable compensation for such other
services.
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ARTICLE III
COMMITTEES OF THE BOARD
Section 1. STANDING AND OTHER COMMITTEES OF THE BOARD. The Board of
Trustees shall have the following committees:
(a) CREATION OF COMMITTEES. The following designated standing committees
of the Board are hereby authorized and created: Audit, Corporate Governance and
Public Affairs, Executive, Investment, and Personnel and Compensation. In
addition, the Board is authorized to create any other committee or committees of
the Board as the Board from time to time deems necessary. The name, duration
and duties of each other committee and the number of members thereof shall be as
prescribed in the action creating the committee.
(b) APPOINTMENTS. Except as provided in Section 4 of this Article III,
the members of each standing Board committee shall consist of those Trustees
appointed by the Board of Trustees. Each Trustee appointed to a Board committee
shall continue to serve on that committee at the will and pleasure of the Board
for the period specified in his or her appointment or until his or her earlier
death, resignation or removal.
(c) QUALIFICATIONS. Each Trustee is qualified to be appointed and
successively reappointed to one or more committees, except that a Trustee who
also acts as an officer or employee of the Company shall not serve as a member
of the Audit Committee.
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(d) COMMITTEE CHAIRS. The Board shall appoint one of the members of each
of the Board committees, except the Executive Committee, to chair that committee
and, in its discretion, may also appoint one of the members of each of the
committees to serve as a vice chair of that committee. If neither the committee
chair nor the committee vice chair is present at a meeting of a committee, the
committee members present at that committee meeting shall elect another
committee member to chair that meeting.
(e) MEETINGS. Each committee shall meet at such times as the chair of
that committee may designate or as a majority of that committee may determine,
subject to a minimum of not less than two meetings per calendar year, except
that the Executive Committee is not subject to a minimum number of meetings
requirement.
(f) QUORUM. A majority of each Board committee shall constitute a quorum
at each meeting of that committee. At any meeting of a committee at which a
quorum is present, the committee may continue to transact business until
adjournment, even though committee member(s) may have left the meeting so that
less than a quorum is present at the meeting. If a quorum is not present for a
committee meeting, the chair of that committee may request the Board to appoint
a sufficient number of other Trustees to serve as members of the committee only
for that meeting, so as to obtain a quorum. If the Board makes the
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requested appointments, any action so taken at the committee meeting shall be
valid and binding.
(g) VACANCIES. In the case of the death, resignation or removal of a
member of a committee, the Board may appoint another Trustee to fill the vacancy
so created on that committee for the balance of the unexpired appointment. The
appointment shall be subject to the qualifications set forth for that committee.
(h) MINUTES AND REPORTS. Each committee shall keep a written record of
its acts and proceedings and shall submit that record to the Board of Trustees
at a regular meeting of the Board and at such other times as requested by the
Board or when a majority of the committee deems it desirable to do so. Failure
to submit a record will not, however, invalidate any action taken by the
committee prior to the time the record of the action was, or should have been
submitted to the Board. The minutes of the Corporate Governance and Public
Affairs, Executive, and Personnel and Compensation Committees shall be recorded
by the Secretary. The minutes of each of the other committees shall be recorded
by the person designated by the chair of that committee.
Section 2. AUDIT COMMITTEE. The Audit Committee shall consist of not
fewer than four non-management Trustees and shall have the following powers and
duties:
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(a) Annually recommend to the Board a firm of independent certified public
accountants to audit the Company's books, records and accounts.
(b) Approve the scope of audits to be conducted by the independent
certified public accountants, taking into account the principal risks inherent
in the Company's business and the recommendations from the independent
accountants as to scope of audit.
(c) Review all recommendations made by the independent certified public
accountants in their audit reports to the Board.
(d) Approve the scope of audits to be conducted by the Company's internal
auditors and review the reports of those audits.
(e) Review the reports which result from the examinations of the Company
conducted by state insurance authorities.
(f) Review corporate litigation involving extra-contractual damages.
(g) Periodically review the Company's plans for data security and disaster
recovery.
(h) Advise the Board of the results of Committee reviews and
recommendations resulting therefrom.
Section 3. CORPORATE GOVERNANCE AND PUBLIC AFFAIRS COMMITTEE. The
Corporate Governance and Public Affairs Committee shall consist of not fewer
than four Trustees and shall have the following powers and duties:
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(a) Annually review the size and composition of the Board.
(b) Periodically develop and recommend to the Board the standards to be
met by persons selected for nomination to the Board.
(c) Prior to the annual meeting of members each year, recommend to the
Board a slate of persons to be nominated to serve on the Board for whom the
Company should solicit proxies.
(d) On the recommendation of the Chair of the Board or the Chief Executive
Officer, review the ongoing affiliation with the Board of any member who fails
to meet the standards set by the Board for Board members, or who is deemed by
the remaining members of the Board to be untrustworthy, or incapable by reason
of total and permanent disability of fulfilling the duties of his or her office.
(e) Periodically, review the powers and duties of Board committees.
(f) Annually review and approve the methods and levels of compensation for
members of the Board, including but not limited to benefit plans and
compensation deferral plans; and review and make changes in the method and
timing of benefits for individuals covered under any such plans in accordance
with the terms of such plans.
(g) Annually review and approve the contributions policy.
(h) Annually review Company contributions to be made to the foundation.
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(i) Review Company's code of ethics and conflict of interest disclosures.
(j) Review Company policy on major issues in areas of social
responsibility and public affairs, including such matters as voting and
solicitation of proxies, "social purpose" investments, and other like matters as
may properly come before it.
(k) Periodically review Company by-laws.
(l) Advise the Board of the results of Committee reviews and
recommendations resulting therefrom.
Section 4. EXECUTIVE COMMITTEE. The Executive Committee shall consist of
the Chairs of the other standing Board committees and the Chair of the Board
and, in the interim between meetings of the Board, shall have and exercise all
of the powers and authority of the Board (including the determination of whether
a person is entitled to indemnification under Article VI of these By-Laws as
required by Section 300.083, Subdivision 6(b) of Minnesota Statutes, as amended
from time to time), except the Committee shall not:
(a) alter or amend the By-Laws;
(b) make appointments to the Board of Trustees;
(c) elect, appoint or terminate the Chairman of the Board, Chief Executive
Officer, President, any Vice President, Secretary, or Treasurer.
Section 5. INVESTMENT COMMITTEE. The Investment Committee shall consist
of not fewer than four Trustees and
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shall have the following powers and duties which shall be exercised not less
than once every twelve months:
(a) Review the written investment policy for Company investments, the
procedures for the valuation of real estate owned by the Company and commercial
loans held by the Company, recommend changes thereto, and submit to the Board
for its approval and adoption the policy and procedures for the ensuing twelve
months.
(b) Review all investments, except policy loans, of Company funds,
including their acquisition and sale and report findings to the Board.
(c) Furnish the Board with summaries of investment transactions.
(d) Review compliance with the written investment policy and valuation
procedures and submit findings to the Board.
Section 6. PERSONNEL AND COMPENSATION COMMITTEE. The Personnel and
Compensation Committee shall consist of not fewer than four Trustees and shall
have the following powers and duties:
(a) For senior management, annually review performance and total
compensation, including salary, bonus plans, employee benefits and perquisites.
Senior management is defined as Chief Executive Officer, Chief Operating
Officer, President and all vice presidents. Approve and report to the Board for
ratification total compensation for the Chief Executive
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Officer, President and Chief Operating Officer. Approve total compensation
for the vice presidents.
(b) Review qualifications of candidates for election as officers of the
Company. Recommend to the Board for approval officer candidates for the
positions of Chief Executive Officer, Chief Operating Officer, President, all
vice presidents, controller, secretary, treasurer, assistant secretary and
assistant treasurer.
(c) Periodically review succession plans for Chief Executive Officer,
Chief Operating Officer and senior vice presidents.
(d) Review and report to the Board organization changes that have
significant Company and business impact.
(e) Review and approve special employment or compensation contracts for
active, retired or terminated employees.
(f) Annually review and approve salary policies for Company employees.
(g) Annually review and recommend to the Board a PSP distribution to
covered employees.
(h) Periodically review and approve changes to compensation deferral plans
for officers and employees, including the designation of plan trustees and plan
administrators. Review and make changes in the method of timing of benefits for
individuals covered under any of said plans in accordance with the terms of said
plans. Annually determine and approve the interest crediting rates for amounts
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held under deferred compensation plans for officers, employees and Trustees
and make any other determination necessary or advisable in the administration
of those plans.
(i) Periodically review and approve major changes to benefit plans.
(j) Annually review programs and progress made for developing diversity at
all levels of the Company and submit findings to the Board.
ARTICLE IV
OFFICERS
Section 1. NUMBER. The officers of the Company shall be a Chief Executive
Officer, a President, one or more Vice Presidents, a Treasurer, an Actuary, a
Controller, a Secretary, and one or more Assistant Secretaries. In addition,
there may be such other officers as the Board of Trustees from time to time may
deem necessary. One individual may hold two or more offices, except that of
President and Secretary.
Section 2. ELECTION. Officers shall be elected or appointed by the Board
of Trustees.
Section 3. TERM OF OFFICE. Each officer shall serve for the term stated
in his or her election or appointment or until his or her earlier death,
resignation or removal.
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Section 4. REMOVAL. Any officer may be removed from office, with or
without cause, at any time by the affirmative vote of the majority of the Board
of Trustees then in office.
Section 5. VACANCIES. Any vacancy in any office from any cause may be
filled by the Board of Trustees at its next meeting.
Section 6. DUTIES OF OFFICERS. The duties of the officers shall be as
follows:
(a) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general active management of the business of the Company and, in the absence of
the Chair of the Board, shall preside at all meetings of the members and the
Board of Trustees, and shall see that all orders and resolutions of the Board
are carried into effect. Except where, by law, the signature of the President
is required, the Chief Executive Officer shall possess the same power as the
President to sign and execute all authorized certificates, contracts, bonds, and
other obligations of the Company.
(b) PRESIDENT. The President, in the absence of the Chair of the Board
and the Chief Executive Officer, shall preside at all meetings of the members
and the Board of Trustees. The President shall be the chief administrative
officer of the Company and shall have the power to sign and execute all
authorized certificates, contracts, bonds, and other obligations of the Company.
The President also shall perform such other duties as are incident to the office
or are
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properly required of him or her by the Board or the Chief Executive Officer.
(c) VICE PRESIDENTS. Each Vice President will perform those duties as
from time to time may be assigned by the Chief Executive Officer. In the
absence of the President, a Vice President designated by the Board of Trustees
shall perform the duties of the President. A Vice President shall have the
power to sign and execute all authorized certificates, contracts, bonds and
other obligations of the Company. One or more of the Vice Presidents may be
entitled Executive Vice President, Senior Vice President, Vice President, Second
Vice President, Group Vice President, Assistant Vice President, or such other
variation thereof as may be designated by the Board.
(d) SECRETARY. The Secretary shall give notice and keep the minutes of
all meetings of the members, the Board of Trustees, the Corporate Governance and
Public Affairs Committee, the Executive Committee and the Personnel and
Compensation Committees and shall give and serve all notices of the Company.
The Secretary or an Assistant Secretary shall have the power to sign with the
Chief Executive Officer, President, or any Vice President in the name of the
Company all authorized certificates, contracts, bonds, or other obligations of
the company and may affix the Company Seal thereto. The Secretary shall have
charge and custody of the books and papers of the Company and in general shall
perform all duties incident to the office of Secretary, except as otherwise
specifically
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provided in these By-Laws, and such other duties as from time to time may be
assigned by the Chief Executive Officer. If Assistant Secretaries are
elected or appointed, they shall have those powers and perform those duties
as from time to time may be assigned to them by the Chief Executive Officer
and, in the absence of the Secretary, one of them shall perform the duties of
the Secretary.
(e) TREASURER. The Treasurer shall have those powers and shall perform
those duties as from time to time may be assigned by the Chief Executive
Officer. If Assistant Treasurers are elected or appointed, they shall have
those powers and perform those duties as from time to time may be assigned to
them by the Chief Executive Officer and, in the absence of the Treasurer, one of
them shall perform the duties of the Treasurer.
(f) CONTROLLER. The Controller shall have those powers and shall perform
those duties as from time to time may be assigned by the Chief Executive
Officer.
(g) ACTUARY. The Actuary shall have those powers and shall perform those
duties as from time to time may be assigned by the Chief Executive Officer.
(h) OTHER OFFICERS. Other officers elected or appointed by the Board of
Trustees shall have those powers and perform those duties as from time to time
may be assigned by the Chief Executive Officer.
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Section 7. ABSENCE OR DISABILITY. In the case of the absence or
disability of any officer of the Company or of any person authorized to act in
his or her place during such period of absence or disability, the Board of
Trustees from time to time may delegate the powers and duties of such officer to
any other officer, or any Trustee, or any other person whom they may select.
ARTICLE V
DISPOSITION OF FUNDS AND INVESTMENTS
Section 1. FUNDS AND INVESTMENTS. All funds and investments of the
Company shall be held in the name of "The Minnesota Mutual Life Insurance
Company" or its nominee or as otherwise provided in accordance with applicable
Minnesota Statutes, as amended from time to time. In no event shall any funds
or investments be held in the name of any individual who is an officer or
employee of the Company.
Section 2. DEPOSITS. The Board of Trustees shall designate those banks
and financial institutions in which Company funds shall be deposited. The Board
by separate resolution also shall designate the persons authorized to withdraw
or transfer funds held in those accounts. No funds shall be withdrawn or
transferred from those accounts except upon the authorization of the person or
persons so authorized.
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ARTICLE VI
INDEMNIFICATION
Section 1. TRUSTEES AND OFFICERS. To the fullest extent permitted by
applicable Minnesota Statutes, as amended from time to time, the Company shall
indemnify each person (and the legal representatives of the person) who has
been, or is, a Trustee or officer of the Company. This indemnification shall
extend to all judgments, penalties, and fines, including, without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan, settlements, and reasonable expenses, including attorney's fees and
disbursements incurred by the person in connection with the defense of a
threatened, pending, or completed claim, action, suit or other proceeding,
whether it be civil, criminal, administrative, arbitration, or investigative
proceeding. This shall include any proceeding by or in the right of the
Company, in which the person becomes involved as a party or otherwise by reason
of his or her being or having been a Trustee or officer of the Company or who,
while a Trustee or officer of the Company, is or was serving at the request of
the Company or whose duties in that position involve or involved service as a
director, officer, partner, trustee, employee, or agent of another organization
or of an employee benefit plan. However, indemnification for appeals from any
determination in a proceeding shall be subject to prior approval of the Board by
Trustees.
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Section 2. EMPLOYEES AND AGENTS. Subject to the provisions of applicable
Minnesota Statutes, as amended from time to time, the Board of Trustees may, but
need not, decide to indemnify a person (and the legal representatives of the
person), other than a Trustee or officer, who has been or is an employee or
agent of the Company. The indemnification, if any, shall extend to all
judgments, penalties, and fines, including, without limitation, excise taxes
assessed against the person with respect to an employee benefit plan,
settlements, and reasonable expenses, including attorney's fees and
disbursements incurred by the person in connection with the defense of a
threatened, pending, or completed claim, action, suit or other proceeding,
whether it be civil, criminal, administrative, arbitration, or investigative
proceeding. This shall include any proceeding by or in the right of the
Company, in which the person becomes involved as a party or otherwise by reason
of his or her being or having been an employee or agent of the Company or who,
while an employee or agent of the Company, is or was serving at the request of
the Company or whose duties in that position involve or involved service as a
director, officer, partner, trustee, employee or agent of another organization
or of an employee benefit plan. Also, indemnification for appeals from any
determination in a proceeding, where indemnification was previously granted by
the Board, shall be subject to prior approval by the Board.
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Section 3. INSURANCE. The Board of Trustees may authorize the purchase
and maintenance of such form or forms of insurance as the Board may deem
necessary or prudent to indemnify the Company and/or those persons who have
been, are or may be Trustees, officers, employees, or agents of the Company, or
who, while a Trustee, officer, employee or agent of the Company, is or was
serving at the request of the Company as a director, officer, partner, trustee,
employee, or agent of another organization or of an employee benefit plan
against any liability asserted against and incurred by the person in or arising
from that capacity, whether or not the Company would have been required to
indemnify the person against the liability under the provisions of this Article
VI or under applicable Minnesota Statutes, as amended from time to time.
Section 4. OTHER INDEMNIFICATION PERMITTED. Nothing contained in this
Article shall affect the rights to indemnification to which Company personnel
other than Trustees and officers may be entitled by contract or otherwise under
law.
ARTICLE VII
CORPORATE SEAL
The corporate seal of this Company shall be the words "Corporate Seal"
encircled with the words "The Minnesota Mutual Life Insurance Company".
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ARTICLE VIII
AMENDMENTS
By the affirmative vote of a majority of the Board of Trustees, these By-
Laws, or any part thereof, may be amended, repealed, or abrogated.
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FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 10th day of September, 1996, by and between
The Minnesota Mutual Life Insurance Company (the "Insurer"), a life insurance
company domiciled in Minnesota, on its behalf and on behalf of the segregated
asset accounts of the Insurer listed on Exhibit A to this Agreement (the
"Separate Accounts"); Insurance Management Series (the "Fund"), a Massachusetts
business trust; and Federated Securities Corp. (the "Distributor"), a
Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement
("Participating Insurance Companies"), and the Fund will be made available in
the future to offer shares of one or more of its portfolios to separate
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accounts of insurance companies that fund variable life insurance policies
(at which time such policies would also be "Variable Contracts" hereunder),
and
WHEREAS, the Fund is currently comprised of seven separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
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NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being
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adequately diversified pursuant to Section 817(h) of the Internal Revenue
Code of 1986, as amended ("Code"), and the regulations thereunder. No shares
of any Portfolio will be sold directly to the general public to the extent
not permitted by applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent
of the Fund for the limited purpose of receiving and accepting purchase and
redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00
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p.m. Eastern time on such day, although the Insurer will use its best efforts
to provide such notice by 12:00 noon Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby
elects to reinvest in the Portfolio all such dividends and distributions as are
payable on a Portfolio's shares and to receive such dividends and distributions
in additional shares of that Portfolio. The Insurer reserves the right to
revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of
shares so issued as payment of such dividends and distributions.
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1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio as soon
as reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available by
7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under applicable federal and state law.
2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
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2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
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ARTICLE III. GENERAL DUTIES
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
8
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3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
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3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
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ARTICLE IV. POTENTIAL CONFLICTS
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive
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Order, or, if the Fund is engaged in Mixed Funding or Shared Funding in
reliance on Rule 6e-2, 6e-3(T), or any other regulation under the 1940 Act,
the Insurer will be responsible for assisting the Board of Trustees of the
Fund in carrying out its responsibilities under such regulation, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Insurer to inform the Board whenever Variable Contract Owner voting
instructions are disregarded. The Insurer shall carry out its responsibility
under this Section 4.3 with a view only to the interests of the Variable
Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (I.E., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
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<PAGE>
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
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<PAGE>
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the
Insurer and the current prospectus for the Fund, or a document
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combining the Fund prospectus with prospectuses of other funds in which the
Variable Contracts may be invested. The Fund shall bear the expense of
printing copies of its current prospectus that will be distributed to
existing Variable Contract Owners, and the Insurer shall bear the expense of
printing copies of the Fund's prospectus that are used in connection with
offering the Variable Contracts issued by the Insurer.
5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
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5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Insurer (or its designated agent) from owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Insurer (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Portfolio from
whom instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material
16
<PAGE>
irreconcilable conflicts possibly may arise, and (3) the Board of Trustees of
the Fund will monitor events in order to identify the existence of any
material irreconcilable conflicts and to determine what action, if any,
should be taken in response to any such conflict. The Fund hereby notifies
the Insurer that prospectus disclosure may be appropriate regarding potential
risks of offering shares of the Fund to separate accounts funding both
variable annuity contracts and variable life insurance policies and to
separate accounts funding Variable Contracts of unaffiliated life insurance
companies.
ARTICLE VI. SALES MATERIAL AND INFORMATION
6.1 The Insurer shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund (or any Portfolio thereof) or its investment adviser or the
Distributor is named at least 15 days prior to the anticipated use of such
material, and no such sales literature or other promotional material shall be
used unless the Fund and the Distributor or the designee of either approve the
material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the
17
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Fund or its designee and by the Distributor or its designee, except with the
permission of the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all
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amendments and supplements to any of the above, that relate to the Fund or
its shares, promptly after the filing of such document with the SEC or other
regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
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ARTICLE VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY THE INSURER
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers, any affiliated person of the Fund within the
meaning of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively,
the "Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement or prospectus (which shall include
an offering memorandum) for the Variable Contracts issued by
the Insurer or sales literature for such Variable Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished
to the Insurer by or on behalf of the Fund for use in the
registration statement or prospectus for the Variable
Contracts issued by the Insurer or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Insurer or persons
20
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under its control) or wrongful conduct of the Insurer or any
of its affiliates, employees or agents with respect to the
sale or distribution of the Variable Contracts issued by the
Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Insurer; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the Insurer in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations or duties under this Agreement or
to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such
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Indemnified Party (or after such Party shall have received notice of such
service on any designated agent), but failure to notify the Insurer of any
such claim shall not relieve the Insurer from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Insurer shall be entitled to
participate, at its own expense, in the defense of such action. The Insurer
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Insurer
to such party of the Insurer's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Contracts issued by
the Insurer or the operation of the Fund.
7.2 INDEMNIFICATION BY THE DISTRIBUTOR
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
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losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Distributor or the Fund or the designee of
either by or on behalf of the Insurer for use in the
registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for
use in the registration statement or prospectus for the Fund
or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund or Distributor, or the affiliates,
employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts
issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Variable Contracts issued by the Insurer, or any amendment
thereof or supplement
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thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Insurer by or on behalf of the
Fund; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the Distributor in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by reason
of the Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Insurer or the Separate Accounts.
7.2(c) The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Party shall have notified the Distributor in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Party shall have received notice
of such service on any designated agent), but failure to notify the
Distributor of any such claim shall not relieve the Distributor from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Distributor will be
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entitled to participate, at is own expense, in the defense thereof. The
Distributor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Distributor to such party of the Distributor's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such party under this Agreement for any legal or other expense subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Variable
Contracts issued by the Insurer or the operation of the Separate Accounts.
7.3 INDEMNIFICATION BY THE FUND
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer,
its affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer within
the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or litigation expenses are related to
the sale or
25
<PAGE>
acquisition of the Fund's shares or the Variable Contracts issued by the
Insurer and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Distributor or the Fund or the designee of
either by or on behalf of the Insurer for use in the
registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Contracts
issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund, or the affiliates, employees, or agents
of the Fund, with respect to the sale or distribution of the
Variable Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus or sales literature covering the
Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
26
<PAGE>
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations or duties under this Agreement or
to the Insurer or the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Party shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve
the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred
27
<PAGE>
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Variable
Contracts issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII. APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice
to the other parties; or
28
<PAGE>
(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Insurer, as determined by the Insurer, and upon prompt notice by the
Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Insurer or its agent by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body regarding
the Insurer's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Insurer, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to substitute the
shares of another investment company for the corresponding shares of the Fund or
a Portfolio in accordance with the terms of the Variable Contracts for which
those shares had been selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or such
law precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Insurer; or
29
<PAGE>
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees, that
an irreconcilable conflict, as described in Article IV hereof, exists; or
(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment Company specified in Section 3.2 hereof or the diversi-
fication requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other parties
to the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 60 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
30
<PAGE>
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
31
<PAGE>
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
ARTICLE XI: MISCELLANEOUS
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
32
<PAGE>
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In
consideration of the administrative savings resulting from having a sole
shareholder rather than multiple shareholders, Distributor agrees to pay to
Insurer an amount computed at an annual rate of .25 of 1% of the average daily
net asset value of shares held in subaccounts for which Insurer provides
administrative services. Distributor's payments to Insurer are for
administrative services only and do not constitute payment in any manner for
investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
33
<PAGE>
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE MANAGEMENT SERIES
ATTEST: BY:
--------------------------- -----------------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
---------------------------- --------------------------
FEDERATED SECURITIES CORP.
ATTEST: BY:
--------------------------- -----------------------------
Name: Name:
----------------------------- ---------------------------
Title: Title:
---------------------------- --------------------------
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
ATTEST: /s/ Donald F. Gruber BY: /s/ Jaymes Hubbell
--------------------------- -----------------------------
Name: Donald F. Gruber Name: Jaymes Hubbell
----------------------------- ---------------------------
Title: Senior Counsel Title: Second Vice President
---------------------------- --------------------------
35
<PAGE>
EXHIBIT A
TO THE FUND PARTICIPATION AGREEMENT BETWEEN
THE SEPARATE ACCOUNT, THE FUND AND THE DISTRIBUTION
<PAGE>
The Minnesota Mutual Variable Annuity Account
<PAGE>
EXHIBIT B
TO THE FUND PARTICIPATION AGREEMENT BETWEEN
THE SEPARATE ACCOUNT, THE FUND AND THE DISTRIBUTOR
<PAGE>
The Federated Insurance Series: Federated High Income Bond Fund II
and Federated American Leaders Fund II
<PAGE>
[LETTERHEAD]
September 16, 1996
The Minnesota Mutual Life Insurance Company
Minnesota Mutual Life Center
400 Robert Street North
St. Paul, Minnesota 55101
Gentlepersons:
In my capacity as counsel for The Minnesota Mutual Life Insurance Company (the
"Company"), I have reviewed certain legal matters relating to the Company's
Separate Account entitled Minnesota Mutual Variable Annuity Account (the
"Account") in connection with a Registration Statement on Form N-4. This
Registration Statement is to be filed by the Company and the Account with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
with respect to certain variable annuity contracts.
Based upon that review, I am of the following opinion:
1. The Account is a separate account of the Company duly created and validly
existing pursuant of the laws of the State of Minnesota; and
2. The issuance and sale of the variable annuity contracts funded by the
Account have been duly authorized by the Company and such contracts, when
issued in accordance with and as described in the current Prospectus
contained in the Registration Statement, and upon compliance with
applicable local and federal laws, will be legal and binding obligations
of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Donald F. Gruber
Donald F. Gruber
Senior Counsel
<PAGE>
[KPMG Peat Marwick LLP Letterhead]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
The Minnesota Mutual Life Insurance Company and
Contract Owners of Minnesota Mutual Variable Annuity Account:
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "AUDITORS" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 18, 1996
<PAGE>
The Minnesota Mutual Life Insurance Company
Power of Attorney
To Sign Registration Statements
WHEREAS, The Minnesota Mutual Life Insurance Company ("Minnesota Mutual")
has established certain separate accounts to fund certain variable annuity and
variable life insurance contracts, and
WHEREAS, Minnesota Mutual Variable Fund D ("Fund D") is a separate account
of Minnesota Mutual registered as a unit investment trust under the Investment
Company Act of 1940 offering variable annuity contracts registered under the
Securities Act of 1933, and
WHEREAS, Minnesota Mutual Variable Annuity Account ("Variable Annuity
Account") is a separate account of Minnesota Mutual registered as a unit
investment trust under the Investment Company Act of 1940 offering variable
annuity contracts registered under the Securities Act of 1933, and
WHEREAS, Minnesota Mutual Variable Life Account ("Variable Life Account")
is a separate account of Minnesota Mutual registered as a unit investment trust
under the Investment Company Act of 1940 offering variable adjustable life
insurance policies registered under the Securities Act of 1933,
WHEREAS, Minnesota Mutual Group Variable Annuity Account ("Group Variable
Annuity Account") is a separate account of Minnesota Mutual which has been
established for the purpose of issuing group annuity contracts on a variable
basis and which is to be registered as a unit investment trust under the
Investment Company Act of 1940 offering group variable annuity contracts and
certificates to be registered under the Securities Act of 1933;
WHEREAS, Minnesota Mutual Variable Universal Life Account ("Variable
Universal Life Account") is a separate account of Minnesota Mutual which has
been established for the purpose of issuing group and individual variable
universal life insurance policies on a variable basis and which is to be
registered as a unit investment trust under the Investment Company Act of 1940
offering group and individual variable universal life insurance policies to be
registered under the Securities Act of 1933;
NOW THEREFORE, We, the undersigned Trustees of Minnesota Mutual, do hereby
appoint Dennis E. Prohofsky and Garold M. Felland, and each of them
individually, as attorney in fact for the purpose of signing in their names and
on their behalf as Trustees of Minnesota Mutual and filing with the Securities
and Exchange Commission Registration Statements, or any amendment thereto, for
the purpose of: a) registering contracts and policies of Fund D, the Variable
Annuity Account, the Variable Life Account, the Group Variable Annuity Account
and the Variable Universal Life Account for sale by those entities and Minnesota
Mutual under the Securities Act of 1933; and b) registering Fund D, the Variable
Annuity Account, the Variable Life Account, the Group Variable Annuity Account
and the Variable Universal Life Account as unit investment trusts under the
Investment Company Act of 1940.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert L. Senkler Chairman of the Board, February 12, 1996
----------------------------- President and Chief
Robert L. Senkler Executive Officer
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Giulio Agostini Trustee February 12, 1996
-----------------------------
Giulio Agostini
/s/ Anthony L. Andersen Trustee February 12, 1996
-----------------------------
Anthony L. Andersen
/s/ John F. Grundhofer Trustee February 12, 1996
-----------------------------
John F. Grundhofer
/s/ Harold V. Haverty Trustee February 12, 1996
-----------------------------
Harold V. Haverty
/s/ Lloyd P. Johnson Trustee February 12, 1996
-----------------------------
Lloyd P. Johnson
/s/ David S. Kidwell, Ph.D. Trustee February 12, 1996
-----------------------------
David S. Kidwell, Ph.D.
/s/ Reatha C. King, Ph.D. Trustee February 12, 1996
-----------------------------
Reatha C. King, Ph.D.
/s/ Thomas E. Rohricht Trustee February 12, 1996
-----------------------------
Thomas E. Rohricht
/s/ Terry N. Saario, Ph.D. Trustee February 12, 1996
-----------------------------
Terry N. Saario, Ph.D.
/s/ Michael E. Shannon Trustee February 12, 1996
-----------------------------
Michael E. Shannon
/s/ Frederick T. Weyerhaeuser Trustee February 12, 1996
------------------------------
Frederick T. Weyerhaeuser
