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MULTI OPTION(TM) ANNUITY
MEGANNUITY
PROSPECTUS
MAY 1997
This document consists of Prospectuses for
the Minnesota Mutual Variable Annuity
Account, a separate account of The Minnesota
Mutual Life Insurance Company, for
Advantus Series Fund, Inc. and the Templeton
Developing Markets Fund, a Series of Templeton
Variable Products Series Fund. This product is
distributed through MIMLIC Sales Corporation,
member NASD/SIPC.
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VARIABLE ANNUITY CONTRACT PROSPECTUS
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
OF MINNESOTA MUTUAL'S VARIABLE ANNUITY ACCOUNT
The individual variable annuity contract offered by this Prospectus is
designed for use by members of the faculty and employees of the University of
Minnesota. It may also be used by officers, directors, full-time and part-time
employees, sales representatives and their employees, and retirees of Minnesota
Mutual or any of Minnesota Mutual's other affiliated companies, any trust,
pension or benefit plan for such persons, the spouses, siblings, direct
ancestors and the direct descendents of such persons. The variable annuity
contract may also be used by other groups. These groups shall consist of
individuals employed by an employer or associated with a program established or
maintained by an entity which: (1) provides an exclusive or partially exclusive
sales arrangement with Minnesota Mutual or its affiliates; (2) allows for the
purchase of annuities under section 403(b) or 403(b)(9) of the Code; and (3) has
more than 1,000 individuals who are eligible for participation by annuity
purchase. This variable annuity contract may also be used by individuals
purchasing one or more of these contracts wherein the aggregate purchase
payments total $5,000,000 or more, other than as part of a qualified pension or
profit sharing plan, and by certain individuals solicited by registered
investment advisers who charge clients a fee for their services and where the
initial contract purchase payment is at least $25,000. The use of this contract
may be in connection with retirement plans which qualify for federal income tax
advantages under sections 401, 403 or 408 of the Internal Revenue Code.
Contract values will accumulate on a variable basis. Contract values will be a
part of the Variable Annuity Account. The Variable Annuity Account invests its
assets in shares of Advantus Series Fund, Inc. and in Class 2 of the Templeton
Developing Markets Fund (the "Funds"). The accumulation value of the contract
and the amount of each variable annuity payment will vary in accordance with the
performance of the Portfolio or Portfolios of the Funds selected by the contract
owner. The contract owner bears the entire investment risk for any amounts
allocated to the Portfolios of the Fund.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in the Variable Annuity 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) 665-3500, 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 28.
This Prospectus is not valid unless attached to a current prospectus of Advantus
Series Fund, Inc. and the Templeton Developing Markets Fund.
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.
[LOGO]
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
PH 612/665-3500
http://www.minnesotamutual.com
The date of this document and the Statement of Additional Information is: May 1,
1997
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TABLE OF CONTENTS
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Page
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Special Terms............................................... 3
Questions and Answers About the Variable Annuity Contract... 4
Expense Table............................................... 8
Condensed Financial Information............................. 10
Performance Data............................................ 12
General Descriptions
The Minnesota Mutual Life Insurance Company............. 13
Variable Annuity Account................................ 13
Advantus Series Fund, Inc............................... 13
Templeton Variable Products Series Fund................. 14
Additions, Deletions or Substitutions................... 15
Contract Charges
Administrative Charge................................... 15
Premium Taxes........................................... 16
Voting Rights............................................... 16
Description of the Contract
General Provisions...................................... 16
Annuity Payments and Options............................ 17
Death Benefits.......................................... 21
Purchase Payments, Value of the Contract and
Transfers.............................................. 21
Redemptions............................................. 23
Federal Tax Status.......................................... 23
Statement of Additional Information......................... 28
Appendix A--Illustration of Variable Annuity Values......... 29
</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.
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT: an accounting device used to determine the value of a
contract before annuity payments begin.
ACCUMULATION VALUE: your interest in this contract composed of your interest in
one or more sub-accounts of the Variable Annuity Account.
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 UNIT: an accounting device used to determine the amount of annuity
payments.
CODE: the Internal Revenue Code of 1986, as amended.
CONTRACT OWNER: the owner of the contract, which could be the annuitant, his
employer, or a trustee acting on behalf of the employer.
CONTRACT YEAR: a period of one year beginning with the contract date or a
contract anniversary.
FIXED ANNUITY: an annuity providing for payments of guaranteed amounts
throughout 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 Annuity
Account, namely, Advantus Series Fund, Inc. and its Portfolios and Class 2 of
the Templeton Developing Markets Fund.
PLAN: a tax-qualified employer pension, profit-sharing, or annuity purchase plan
under which benefits are to be provided by the variable annuity contracts
described herein.
PURCHASE PAYMENTS: amounts paid to us under a contract.
VALUATION DATE: each date on which a Fund Portfolio is valued.
VARIABLE ANNUITY ACCOUNT: a separate investment account called the Minnesota
Mutual Variable Annuity Account, where the investment experience of its assets
is kept separate from our other assets.
VARIABLE ANNUITY: an annuity providing for payments varying in amount in
accordance with the investment experience of the Fund.
WE, OUR, US: The Minnesota Mutual Life Insurance Company.
YOU, YOUR: the Contract Owner.
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QUESTIONS AND ANSWERS ABOUT THE VARIABLE ANNUITY 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 CONTRACT IS OFFERED BY THIS PROSPECTUS?
The contract is a variable annuity contract issued by us which provides for
monthly annuity payments. These payments may begin immediately or at a future
date elected by you. Purchase payments received by us under a contract are
allocated to our Variable Annuity Account, where they are invested in one or
more Portfolios of the Fund and receive no interest or principal guarantees.
For more information on the contract, see the heading "Description of the
Contract" in this Prospectus.
WHAT INVESTMENT OPTIONS ARE AVAILABLE FOR THE VARIABLE ANNUITY ACCOUNT?
Purchase payments allocated to the Variable Annuity Account are invested in
shares of Advantus Series Fund, Inc. and the Templeton Developing Markets Funds.
Each Fund is a mutual fund of the series type, which means that it has several
different portfolios which it offers for investment. Shares of this Fund will be
made available at net asset value to the Variable Annuity Account to fund the
variable annuity contracts. The Fund is also required to redeem its shares at
net asset value at our request. We reserve the right to add, combine or remove
other eligible funds.
The investment objectives and certain policies of the Portfolios of the
Advantus Series Fund 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.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
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.
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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
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 Maturing Government Bond Portfolios seek to provide as high an
investment return as is consistent with prudent investment risk for a
specified period of time ending on a specified liquidation date. In pursuit
of this objective, each of the four Maturing Government Bond Portfolios seek
to return a reasonably assured targeted dollar amount, predictable at the
time of investment, on a specific target date in the future through
investment in a portfolio composed primarily of zero coupon securities.
These are securities that pay no cash income and are sold at a discount from
their par value at maturity. The current target dates for the maturities of
these Portfolios are 1998, 2002, 2006 and 2010, respectively. On maturity,
the Portfolio will be converted to cash and reinvested at the direction of
the contract owner. In the absence of instructions, liquidation proceeds
will be allocated to the Money Market Portfolio.
The Small Company Value Portfolio seeks the long-term accumulation of
capital. The Portfolio will follow a policy of investing primarily in the
equity securities of small companies, defined in terms of market
capitalization and which appear to have market values which are low relative
to their underlying value or future earnings and growth potential. Dividend
income will be incidental to the investment objective for this Portfolio.
The International Bond Portfolio seeks to maximize current income
consistent with protection of principal. The Portfolio pursues its objective
by investing primarily in a managed portfolio of non-U.S. dollar debt
securities issued by foreign governments, companies and supranational
entities.
The Index 400 Mid-Cap Portfolio seeks to provide investment results
generally corresponding to the aggregate price and dividend performance of
publicly traded common stocks that comprise the Standard & Poor's 400 Mid
Cap Index. The Portfolio pursues its investment objective by investing
primarily in the 400 common stocks that comprise the Index, issued by
medium-sized domestic companies with market capitalizations that generally
range from $200 million to $5 billion. It is designed to provide an
economical and convenient means of maintaining a diversified portfolio in
this equity security area as part of an over-all investment strategy. The
inclusion of a stock in the Index in no way implies an opinion by Standard &
Poor's as to its attractiveness
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as an investment, nor is it a sponsor or in any way affiliated with the
Portfolio.
The Micro-Cap Value Portfolio seeks capital appreciation. The Portfolio
will pursue its objective by investing in a diversified portfolio of
securities that the sub-adviser believes to be undervalued. It will invest
primarily in common stocks and stock equivalents of micro-cap companies,
that is, companies with a market capitalization of less than $300 million.
The Macro-Cap Value Portfolio seeks to provide high total return. It
pursues this objective by investing in equity securities that the
sub-adviser believes, through the use of dividend discount models, to be
undervalued relative to their long-term earnings power, creating a
diversified portfolio of equity securities which typically will have a
price/earnings ratio and a price to book ratio that reflects a value
orientation. The Portfolio seeks to enhance its total return relative to
that of a universe of large-sized U.S. companies.
The Micro-Cap Growth Portfolio seeks long-term capital appreciation. It
pursues its objective by investing primarily in equity securities of smaller
companies which the sub-adviser believes are in an early stage or
transitional point in their development and have demonstrated or have the
potential for above average revenue growth. It will invest primarily in
common stocks and stock equivalents of micro-cap companies, that is,
companies with a market capitalization of less than $300 million.
ALTHOUGH THE SMALL COMPANY VALUE, THE INTERNATIONAL BOND, THE INDEX 400
MID-CAP, THE MICRO-CAP VALUE, THE MACRO-CAP VALUE AND THE MICRO-CAP GROWTH
PORTFOLIOS OF THE FUND ARE INCLUDED IN THIS PROSPECTUS, THEY WILL NOT BE
AVAILABLE IN THE CONTRACT UNTIL OCTOBER 1, 1997.
In addition to the investments in the Advantus Series Fund, the Variable
Annuity Account invests in the Templeton Developing Markets Fund, a diversified
portfolio with two classes of shares of the Templeton Variable Products Series
Fund Class 2, a mutual fund of the series type.
ALTHOUGH THE TEMPLETON DEVELOPING MARKETS FUND IS INCLUDED IN THIS PROSPECTUS
IT WILL NOT BE AVAILABLE IN THE CONTRACT UNTIL OCTOBER 1, 1997.
The investment objectives and certain policies of the Templeton Developing
Markets Fund available under the contract are as follows:
The Templeton Developing Markets Fund seeks long-term capital
appreciation. It pursues this objective by investing primarily in equity
securities of issuers in countries having developing markets. Countries
generally considered to have developing markets are all countries that are
considered to be developing or emerging countries by the International Bank
for Reconstruction and Development (more commonly referred to as the World
Bank) or the International Finance Corporation, as well as countries that
are classified by the United Nations or otherwise regarded by their
authorities as developing.
There is no assurance that any Fund will meet its objectives. Additional
information concerning the investment objectives and policies of the Portfolios
can be found in the current prospectus for each Fund, which is attached to this
Prospectus. A person should carefully read the Fund's prospectus before
investing in the contract.
CAN YOU CHANGE THE PORTFOLIO SELECTED?
Yes. You may change your allocation of future purchase payments by giving us
written notice or a telephone call notifying us of the change. And before
annuity payments begin, you may transfer all or a part of your accumulation
value from one Fund to another or among the Portfolios. Under some contracts,
transfers may be restricted dependent upon the source of purchase payments.
Additional information can be found in this Prospectus. After annuity payments
begin, transfers may be made with respect to variable annuity payments and,
subject to some restrictions, amounts held as annuity reserves may be
transferred among the variable annuity sub-accounts and the Portfolios. Annuity
reserves may be transferred only from a variable annuity to a fixed annuity
during the annuity period.
WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACTS?
We deduct from the net asset value of the Variable Annuity Account an amount,
computed daily, equal to an annual rate of .15% for contract administration. We
reserve the right to increase the charge to not more than .35% of the net asset
value of the Variable Annuity Account.
In addition, Advantus Capital Management, Inc., ("Advantus Capital") one of
our
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subsidiaries, acts as the investment adviser to the Advantus Series Fund, Inc.
and deducts from the net asset value of each Portfolio of the Fund a fee for its
services which are provided under an investment advisory agreement. The
investment advisory agreements with Advantus Capital provide that the fee shall
be computed at the annual rate which may not exceed .4% of the Index 500 and
Index 400 Micro-Cap Portfolios, .75% of the Capital Appreciation, Value Stock,
Small Company Value and the Small Company Portfolios, 1.0% of the International
Stock Portfolio .6% of the International Bond Portfolio, .7% of the Macro-Cap
Value Portfolio, 1.1% of the Micro-Cap Growth Portfolio and 1.25% of the
Micro-Cap Value Portfolio and .5% of each of the remaining Portfolio's average
daily net assets other than the Maturing Government Bond Portfolios. The
Maturing Government Bond Portfolios pay an advisory fee equal to an annual rate
of .25% of average daily net assets, however, the Portfolio which matures in
1998 will pay a rate of .05% from its inception to April 30, 1998, and .25%
thereafter and the Portfolio which matures in 2002 will pay a rate of .05% from
its inception to April 30, 1998, and .25% thereafter of average daily net
assets.
The Funds are subject to certain expenses that may be incurred with respect to
their operations. For more information, see the prospectus of each Fund which is
attached to this prospectus. The Templeton Developing Markets Fund pays its
investment adviser management fees at an annual rate of 1.25% of the Fund's
average daily net assets and pays other operating expenses which will vary every
year but, for the most recent fiscal year, were .53% of its average daily net
assets. In addition, Class 2 of the Templeton Developing Markets Fund has a Rule
12b-1 plan and may pay up to .25% annually of the average daily net assets for
distribution. For more information, see the fund's prospectus.
Deductions for any applicable premium taxes may also be made (currently such
taxes range from 0.0% to 3.5%) depending upon applicable law.
For more information on charges, see the heading "Contract Charges" in this
Prospectus.
CAN YOU MAKE PARTIAL WITHDRAWALS FROM THE CONTRACT?
Yes. You may make partial withdrawals of the accumulation value of your contract
before an annuity begins. A penalty tax may be assessed upon withdrawals from
annuity contracts in certain circumstances. For more information, see the
heading "Federal Tax Status" in this Prospectus.
DO YOU HAVE A RIGHT TO CANCEL THE CONTRACT?
Yes. You may cancel the contract any time within ten days of your receipt of the
contract by returning it to us or your agent. 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. These rights
are subject to change and may vary among the states.
IS THERE A GUARANTEED DEATH BENEFIT?
Yes. The contract has a guaranteed death benefit if you die before annuity
payments have started. The death benefit shall be equal to the greater of: (1)
the amount of the accumulation value payable at death; or (2) the amount of the
total purchase payments paid to us as consideration for this contract, less all
contract withdrawals.
WHAT ANNUITY OPTIONS ARE AVAILABLE?
The contracts specify several annuity options. Each annuity option may be
elected on either a variable annuity or fixed annuity or a combination of the
two. Other annuity options may be available from us on request. The specified
annuity options are a life annuity; a life annuity with a period certain of
either 120 months, 180 months or 240 months; a joint and last survivor annuity
and a period certain annuity.
WHAT IF THE OWNER DIES?
If you die before payments begin, we will pay the accumulation value of the
contract as a death benefit to the named beneficiary. If the annuitant dies
after annuity payments have begun, we will pay whatever death benefit may be
called for by the terms of the annuity option selected. If the owner of this
contract is other than a natural person, such as a trust or other similar
entity, we will pay a death benefit of the accumulation value to the named
beneficiary on the death of the annuitant, if death occurs prior to the date for
annuity payments to begin.
WHAT VOTING RIGHTS DO YOU HAVE?
Contract owners and annuitants will be able to direct us as to how to vote
shares of the underlying Funds held for their contracts where shareholder
approval is required by law in the affairs of the Funds.
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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 following contract expense information is intended to illustrate the
expense of a MultiOption variable annuity contract. 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
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Administrative Charge........................................ .15%
-----
Total Separate Account Annual Expense.................... .15%
-----
-----
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UNDERLYING FUNDS ANNUAL EXPENSES
(As a percentage of average net assets for the described underlying Fund.)
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<CAPTION>
TOTAL FUND
OTHER EXPENSE ANNUAL EXPENSE
INVESTMENT (AFTER EXPENSE (AFTER EXPENSE
MANAGEMENT REIMBURSEMENTS DISTRIBUTION REIMBURSEMENTS
FEES IF ANY) EXPENSES IF ANY)
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Advantus Series Fund, Inc.:
Growth Portfolio.............................. 0.50% 0.09% -- 0.59%
Bond Portfolio................................ 0.50% 0.06% -- 0.56%
Money Market Portfolio........................ 0.50% 0.00% -- 0.60%
Asset Allocation Portfolio.................... 0.50% 0.04% -- 0.54%
Mortgage Securities Portfolio................. 0.50% 0.08% -- 0.58%
Index 500 Portfolio........................... 0.40% 0.05% -- 0.45%
Capital Appreciation Portfolio................ 0.75% 0.10% -- 0.85%
International Stock Portfolio................. 0.74% 0.22% -- 1.06%
Small Company Portfolio....................... 0.75% 0.06% -- 0.81%
Maturing Government Bond 1998 Portfolio
(1)(2)...................................... 0.05% 0.15% -- 0.20%
Maturing Government Bond 2002 Portfolio
(1)(2)...................................... 0.05% 0.15% -- 0.20%
Maturing Government Bond 2006 Portfolio (2)... 0.25% 0.15% -- 0.40%
Maturing Government Bond 2010 Portfolio (2)... 0.25% 0.15% -- 0.40%
Value Stock Portfolio (2)..................... 0.75% 0.08% -- 0.83%
Small Company Value Portfolio (3)............. 0.75% 0.15% -- 0.90%
International Bond Portfolio (3).............. 0.60% 1.00% -- 1.60%
Index 400 Mid-Cap Portfolio (3)............... 0.40% 0.15% -- 0.55%
Micro-Cap Value Portfolio (3)................. 1.25% 0.15% -- 1.40%
Macro-Cap Value Portfolio (3)................. 0.70% 0.15% -- 0.85%
Micro-Cap Growth Portfolio (3)................ 1.10% 0.15% -- 1.25%
Templeton Variable Products Series:
Developing Markets Fund Class 2 (3)(4)........ 1.25% 0.53% 0.25% 2.03%
</TABLE>
(1) Investment management fees for the Maturing Government Bond 1998 and 2002
Portfolios are equal on an annual basis to .05% of average daily net assets
until April 30, 1998 at which time the fees will be .25% of average daily
net assets.
(2) Minnesota Mutual voluntarily absorbed certain expenses of the Maturing
Government Bond 1998, Maturing Government Bond 2002, Maturing Government
Bond 2006 and Maturing Government Bond 2010 Portfolios for the year ended
December 31, 1996. If these portfolios had been charged for expenses the
ratio of expenses to average daily net assets would have been .72%, 1.14%,
1.58% and 2.18%, respectively. It is Minnesota Mutual's present intention to
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waive other fund 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 expenses which it will voluntarily
absorb.
(3) Although the Small Company Value, International Bond, Index 400 Mid-Cap,
Micro-Cap Value, and Micro-Cap Growth Portfolios will not be available until
October 1, 1997, Minnesota Mutual has voluntarily agreed to absorb or waive
other fund expenses which exceed, as a percentage of average daily net
assets, 1.00% for International Bond and .15% for Small Company Value, Index
400 Mid-Cap, Micro-Cap Value, Macro-Cap Value and Micro-Cap Growth
Portfolios for the period ended December 31, 1997. If the Portfolios were to
be charged for these expenses, it is estimated that the ratio of total
expenses to average daily net assets would be 3.04% for Small Company Value,
3.19% for International Bond, 2.20% for Index 400 Mid-Cap, 4.07% for
Micro-Cap Value, 2.97% for Macro-Cap Value, 3.77% for Micro-Cap Growth and
3.75% for Templeton Developing Markets. Minnesota Mutual also reserves the
option to reduce the level of other expenses which it will voluntarily
absorb.
(4) Templeton Developing Markets -- Class 2. Figures are estimates for 1997
based on annualized Class 1 1996 figures. The Fund began operations in March
1996. Class 2 shares of the Fund were first offered May 1, 1997, and have a
distribution plan or "Rule 12b-1 Plan" which is described in the Fund's
prospectus. In addition, figures do not reflect the Investment Manager's
agreement in advance to waive a portion of its fees during 1996. After the
waiver, actual management fees and total operating expenses of the portfolio
were 1.17% and 1.95% of net assets, respectively. This waiver agreement has
been terminated.
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.
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Advantus Series Fund, Inc.:
Growth Portfolio........................... $ 8 $ 24 $ 41 $ 92
Bond Portfolio............................. $ 7 $ 23 $ 40 $ 88
Money Market Portfolio..................... $ 8 $ 24 $ 42 $ 93
Asset Allocation Portfolio................. $ 7 $ 22 $ 38 $ 86
Mortgage Securities Portfolio.............. $ 7 $ 23 $ 41 $ 91
Index 500 Portfolio........................ $ 6 $ 19 $ 33 $ 75
Capital Appreciation Portfolio............. $10 $ 32 $ 55 $122
International Stock Portfolio.............. $12 $ 38 $ 66 $147
Small Company Portfolio.................... $10 $ 31 $ 53 $118
Maturing Government Bond 1998 Portfolio.... $ 4 $ 11 $ 20 $ 44
Maturing Government Bond 2002 Portfolio.... $ 4 $ 11 $ 20 $ 44
Maturing Government Bond 2006 Portfolio.... $ 6 $ 18 $ 31 $ 69
Maturing Government Bond 2010 Portfolio.... $ 6 $ 18 $ 31 $ 69
Value Stock Portfolio...................... $10 $ 31 $ 54 $120
Small Company Value Portfolio.............. $11 $ 33 N/A N/A
International Bond Portfolio............... $18 $ 55 N/A N/A
Index 400 Mid-Cap Portfolio................ $ 7 $ 22 N/A N/A
Micro-Cap Value Portfolio.................. $16 $ 49 N/A N/A
Macro-Cap Value Portfolio.................. $10 $ 32 N/A N/A
Micro-Cap Growth Portfolio................. $14 $ 44 N/A N/A
Templeton Variable Products Series:
Developing Markets Fund Class 2............ $22 $ 68 N/A N/A
</TABLE>
The table does not reflect deductions for any applicable premium taxes which
may be made from each purchase payment depending upon the applicable law.
Prior to May 3, 1993, several of the Portfolios were known by different names.
The Growth Portfolio was the Stock Portfolio, the Asset Allocation Portfolio was
the Managed Portfolio, the Index 500 Portfolio was the Index Portfolio and the
Capital Appreciation Portfolio was the Aggressive Growth Portfolio.
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
The financial statements of Minnesota Mutual Variable Annuity Account and of The
Minnesota Mutual Life Insurance Company may be found in the Statement of
Additional Information.
The table below gives per unit information about the financial history of each
sub-account from the inception of each to December 31, 1996. This information
should be read in conjunction with the financial statements and related notes of
Minnesota Mutual Variable Annuity Account included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Growth Sub-Account:
Unit value at beginning of period..... $2.012 $1.622 $1.611 $1.542 $1.473 $1.100
Unit value at end of period........... $2.354 $2.012 $1.622 $1.611 $1.542 $1.473
Number of units outstanding at end of
period.............................. 1,448,982 1,534,005 1,477,118 1,145,632 879,694 532,298
Bond Sub-Account:
Unit value at beginning of period..... $2.118 $1.772 $1.859 $1.688 $1.585 $1.350
Unit value at end of period........... $2.178 $2.118 $1.772 $1.859 $1.688 $1.585
Number of units outstanding at end of
period.............................. 1,506,859 1,525,791 1,480,397 1,452,616 1,414,784 1,028,316
Money Market Sub-Account:
Unit value at beginning of period..... $1.546 $1.469 $1.418 $1.383 $1.342 $1.275
Unit value at end of period........... $1.620 $1.546 $1.469 $1.418 $1.383 $1.342
Number of units outstanding at end of
period.............................. 750,434 726,235 669,925 758,519 854,376 1,089,711
Asset Allocation Sub-Account:
Unit value at beginning of period..... $2.251 $1.803 $1.831 $1.723 $1.609 $1.250
Unit value at end of period........... $2.529 $2.251 $1.803 $1.831 $1.723 $1.609
Number of units outstanding at end of
period.............................. 2,029,532 1,871,136 2,307,972 2,610,010 1,843,236 659,538
Mortgage Securities Sub-Account:
Unit value at beginning of period..... $2.091 $1.775 $1.839 $1.686 $1.588 $1.368
Unit value at end of period........... $2.198 $2.091 $1.775 $1.839 $1.686 $1.588
Number of units outstanding at end of
period.............................. 450,065 485,533 477,367 632,499 753,204 363,294
Index 500 Sub-Account:
Unit value at beginning of period..... $2.316 $1.695 $1.678 $1.531 $1.428 $1.102
Unit value at end of period........... $2.813 $2.316 $1.695 $1.678 $1.531 $1.428
Number of units outstanding at end of
period.............................. 2,364,949 2,056,365 1,345,845 1,208,415 1,046,000 832,514
Capital Appreciation Sub-Account:
Unit value at beginning of period..... $2.420 $1.974 $1.933 $1.754 $1.672 $1.182
Unit value at end of period........... $2.842 $2.420 $1.974 $1.933 $1.754 $1.672
Number of units outstanding at end of
period.............................. 1,668,256 1,869,447 1,659,517 1,193,412 913,174 582,915
<CAPTION>
PERIOD FROM
JUNE 1, 1987
TO DECEMBER
1990 1989 1988 1987
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Growth Sub-Account:
Unit value at beginning of period..... $1.099 $0.873 $0.757 $1.000
Unit value at end of period........... $1.100 $1.099 $0.873 $0.757
Number of units outstanding at end of
period.............................. 239,250 156,253 115,601 18,851
Bond Sub-Account:
Unit value at beginning of period..... $1.261 $1.121 $1.050 $1.000
Unit value at end of period........... $1.350 $1.261 $1.121 $1.050
Number of units outstanding at end of
period.............................. 800,284 707,399 116,128 7,642
Money Market Sub-Account:
Unit value at beginning of period..... $1.185 $1.093 $1.026 $1.000
Unit value at end of period........... $1.275 $1.185 $1.093 $1.026
Number of units outstanding at end of
period.............................. 748,839 541,490 276,977 48,357
Asset Allocation Sub-Account:
Unit value at beginning of period..... $1.208 $1.006 $0.909 $1.000
Unit value at end of period........... $1.250 $1.208 $1.006 $0.909
Number of units outstanding at end of
period.............................. 316,973 216,005 144,160 571
Mortgage Securities Sub-Account:
Unit value at beginning of period..... $1.251 $1.105 $1.019 $1.000
Unit value at end of period........... $1.368 $1.251 $1.105 $1.019
Number of units outstanding at end of
period.............................. 187,645 172,295 157,244 117,269
Index 500 Sub-Account:
Unit value at beginning of period..... $1.149 $0.882 $0.761 $1.000
Unit value at end of period........... $1.102 $1.149 $0.882 $0.761
Number of units outstanding at end of
period.............................. 547,781 436,533 261,284 126,183
Capital Appreciation Sub-Account:
Unit value at beginning of period..... $1.206 $0.874 $0.813 $1.000
Unit value at end of period........... $1.182 $1.206 $0.874 $0.813
Number of units outstanding at end of
period.............................. 339,404 180,206 135,463 8,751
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
International Stock Sub-Account:
Unit value at beginning of period..... $1.495 $1.311 $1.317 $0.915 $1.000(a)
Unit value at end of period........... $1.788 $1.495 $1.311 $1.317 $0.915
Number of units outstanding at end of
period.............................. 2,418,015 2,254,079 2,153,847 1,330,940 441,041
Small Company Sub-Account
Unit value at beginning of period..... $1.604 $1.217 $1.148 $1.000(b)
Unit value at end of period........... $1.705 $1.604 $1.217 $1.148
Number of units outstanding at end of
period.............................. 1,237,091 1,581,035 1,091,852 387,337
Maturing Government Bond 1998
Sub-Account
Unit value at beginning of period..... $1.145 $0.988 $1.000(c)
Unit value at end of period........... $1.190 $1.145 $0.988
Number of units outstanding at end of
period.............................. 1,324,838 1,146,897 881,942
Maturing Government Bond 2002
Sub-Account
Unit value at beginning of period..... $1.222 $0.979 $1.000(c)
Unit value at end of period........... $1.241 $1.222 $0.979
Number of units outstanding at end of
period.............................. 269,553 121,397 120,595
Maturing Government Bond 2006
Sub-Account
Unit value at beginning of period..... $1.305 $0.970 $1.000(c)
Unit value at end of period........... $1.287 $1.305 $0.970
Number of units outstanding at end of
period.............................. 117,035 124,592 121,565
Maturing Government Bond 2010
Sub-Account
Unit value at beginning of period..... $1.351 $0.958 $1.000(c)
Unit value at end of period........... $1.303 $1.351 $0.958
Number of units outstanding at end of
period.............................. 141,772 116,635 211,596
Value Stock Sub-Account
Unit value at beginning of period..... $1.400 $1.055 $1.000(c)
Unit value at end of period........... $1.831 $1.400 $1.055
Number of units outstanding at end of
period 798,596 426,836 183,180
</TABLE>
(a) The information for the sub-account is shown for the period May 1, 1992 to
December 31, 1992. May 1, 1992 was the effective date of the 1933 Act
Registration Statement for the sub-account.
(b) The information for the sub-account is shown for the period May 3, 1993 to
December 31, 1993. May 3, 1993 was the effective date of the 1933 Act
Registration Statement for the sub-account.
(c) The information for the sub-account is shown for the period May 2, 1994 to
December 31, 1994. May 2, 1994 was the effective date of the 1933 Act
Registration Statement for the sub-account.
11
<PAGE>
PERFORMANCE DATA
From time to time the Variable Annuity Account may publish advertisements
containing performance data relating to its Sub-Accounts. In the case of the
Money Market Sub-Account, the Variable Annuity 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 a one-year period and for the period since the Sub-
Account became available pursuant to the Variable Annuity Account's registration
statement, and may also include cumulative total return quotations for the
period since the Sub-Account became available pursuant to such registration
statement. The Money Market Sub-Account may also quote such average annual and
cumulative total return figures. Performance figures used by the Variable
Annuity 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
Annuity Account will reflect only charges made against the net asset value of
the Variable Annuity Account pursuant to the terms of the variable annuity
contracts offered by this Prospectus. The various performance figures used in
Variable Annuity Account advertisements relating to the contracts 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 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.
TOTAL RETURN FIGURES. Cumulative total return figures may also be quoted for
all Sub-Accounts. Cumulative total return is based on a hypothetical $1,000
investment in the Sub-Account at the beginning of the advertised period, and is
equal to the percentage change between the $1,000 net asset value of that
investment at the beginning of the period and the net asset value of that
investment at the end of the period.
Prior to May 3, 1993, several of the Sub-Accounts were known by different
names. The Growth Sub-Account was the Stock Sub-Account, the Asset Allocation
Sub-Account was the Managed Sub-Account, the Index 500 Sub-Account was the Index
Sub-Account and the Capital Appreciation Sub-Account was the Aggressive Growth
Sub-Account.
All cumulative total return figures published for Sub-Accounts will be
accompanied by average annual total return figures for a one-year period,
five-year period and for the period since the Sub-Account became available
pursuant to the Variable Annuity Account's registration statement. 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
accumulation value of that investment at the end of the period.
PREDICTABILITY OF RETURN. For each of the Maturing Government Bond
Sub-Accounts, Minnesota Mutual will calculate an anticipated growth rate (AGR)
on each day that the underlying Portfolio of the Fund is valued. Minnesota
Mutual may also calculate an anticipated value at maturity (AVM) on any such
day. Daily calculations for each are necessary because (i) the AGR and AVM
calculations assume, among other things, an expense ratio and portfolio
composition that remains unchanged for the life of each such Sub-Account to the
target date at maturity, (ii) such calculations are therefore meaningful as a
measure of predictable return with respect to particular units only if such
units are held to the applicable target maturity date and only with respect to
units purchased on the date of such calculations (the AGR and AVM applicable to
units purchased on any other date may be materially different). Those
assumptions can only be hypothetical given that owners of contracts have the
option to purchase or redeem units on any business day through contract
activity, and will receive dividend and capital gain distributions through the
receipt of additional shares to their unit values. A number of factors in
addition to contract owner activity can cause a Maturing Government Bond Sub-
Account's AGR and AVM to change from day to day. These include the adviser's
efforts to improve total return through market
12
<PAGE>
opportunities, transaction costs, interest rate changes and other events that
affect the market value of the investments held in each Maturing Government Bond
Portfolio in the Fund. Despite these factors, it is anticipated that if specific
units of a Maturing Government Bond Sub-Account are held to the applicable
target maturity date, then the AGR and AVM applicable to such units (i.e.,
calculated as of the date of purchase of such units) will vary from the actual
return experienced by such units within a narrow range.
- ------------------------------------------------------------------------
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) 665-3500. 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, Puerto Rico, and Guam.
B. VARIABLE ANNUITY 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 Annuity
Account. The separate account meets the definition of a "separate account" under
the federal securities laws.
The Minnesota law under which the Variable Annuity Account was established
provides that the assets of the Variable Annuity 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 Annuity 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 contracts are general corporate obligations of Minnesota
Mutual.
The Variable Annuity Account currently has twenty-one sub-accounts to which
contract owners may allocate purchase payments. Each sub-account invests in
shares of a corresponding Portfolio of the Fund. Additional sub-accounts may be
added at our discretion.
The University of Minnesota provides tax-deferred annuities and custodial
funds in accordance with section 403(b) as amended by section 415, of the Code.
The University of Minnesota has separated its plan into two sections: The Basic
Plan, which is that portion of the plan that relates to the Faculty Retirement
Plan; and the Optional Plan, which is that portion of the plan which relates to
the purchase of optional annuities and mutual funds.
When this contract is used in association with the University of Minnesota
Basic Plan, purchase payments may be allocated only to the following
sub-accounts: Money Market Account and Bond Account. When this contract is used
in association with the Optional Plan, purchase payments may be allocated to any
sub-account offered under the contract. In addition, contracts issued in
association with the Basic Plan and Optional Plan do not allow amounts to be
transferred between the two Plans.
C. ADVANTUS SERIES FUND, INC.
The Variable Annuity Account currently invests in Advantus Series Fund, Inc.
(the "Series Fund"), a mutual fund of the series type which is advised by
Advantus Capital Management, Inc. Prior to May 1, 1997, the name of the Series
Fund was "MIMLIC Series Fund, Inc." On January 14, 1997, the Fund's Board of
Directors approved an amendment of the Series Fund's Articles of Incorporation
for the purpose of changing the name of the Series Fund to "Advantus Series
Fund, Inc." effective May 1, 1997. The purpose of the name change is to provide
the Series Fund with a more distinctive name which may provide greater
visibility and name recognition, which reflects the name of its adviser, and
which may provide additional marketing opportunities for variable contracts
investing in shares of the Series Fund. The change in the Series Fund's name
will not result in any change in investment objectives, policies or practices
for the Series Fund or any of its portfolios. The Series Fund is registered with
the Securities and Exchange Commission as a
13
<PAGE>
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 Series Fund. The Series Fund issues its shares,
continually and without sales charge, only to us and our separate accounts,
which currently include the Variable Annuity Account, Variable Fund D, the
Variable Life Account, the Group Variable Annuity Account and the Variable
Universal Life Account. The Series Fund may also be used as the underlying
investment medium for separate accounts of the Northstar Life Insurance Company,
a wholly-owned life insurance subsidiary of Minnesota Mutual which is domiciled
in the State of New York. Shares are sold and redeemed at net asset value. In
the case of a newly issued contract, purchases of shares of the Portfolios of
the Series Fund in connection with the first purchase payment will be based on
the values next determined after issuance of the contract by us. Redemptions of
shares of the Portfolios of the Series Fund are made at the net asset value next
determined after receive a request for transfer, partial withdrawal or surrender
at our home office. In the case of outstanding contracts, purchases of shares of
the Portfolio of the Series Fund for the Variable Annuity Account are made at
the net asset value of such shares next determined after receipt by us of
contract purchase payments.
The Series Fund's investment adviser is Advantus Capital Management, Inc.
("Advantus Capital"). Advantus Capital is a wholly-owned subsidiary of MIMLIC
Asset Management Company ("MIMLIC Management") which prior to May 1, 1997,
served as investment adviser to the Series Fund. MIMLIC Management is a
wholly-owned subsidiary of Minnesota Mutual. The same portfolio managers and
other personnel who previously provided investment advisory services to the
Series Fund through MIMLIC Management continue to provide the same services
through Advantus Capital. It acts as an investment adviser to the Series Fund
pursuant to an advisory agreement.
Advantus Capital acts as investment adviser for the Fund and its Portfolios.
Winslow Capital Management, Inc., a Minnesota corporation with principal offices
at 4720 IDS Tower, 80 South Eighth Street, Minneapolis, Minnesota 55402, has
been retained under an investment sub-advisory agreement with Advantus Capital
Management, Inc. to provide investment advice and, in general, conduct the
management and investment program of the Capital Appreciation Portfolio.
Similarly, Templeton Investment Counsel, Inc., a Florida corporation with
principal offices in Fort Lauderdale, Florida has been retained under an
investment sub-advisory agreement to provide investment advice to the
International Stock Portfolio of the Fund. J.P. Morgan Investment Management
Inc., a Delaware corporation with principal offices in New York, New York, has
been retained under an investment sub-advisory agreement to provide investment
advice for the Macro-Cap Value Portfolio of the Fund. Keystone Investment
Management Company, a Delaware corporation with principal offices in Boston,
Massachusetts, has been retained under an investment sub-advisory agreement to
provide investment advice for the Micro-Cap Value Portfolio of the Fund. Wall
Street Associates, a California corporation with principal offices in La Jolla,
California, as been retained under an investment sub-advisory agreement to
provide investment advice for the Micro-Cap Growth Portfolio of the Fund. Julius
Baer Investment Management, Inc., a Delaware corporation with principal offices
in New York, New York, has been retained under an investment sub-advisory
agreement to provide investment advice for the International Bond Portfolio of
the Fund.
A prospectus for the Fund is attached to this Prospectus. A person should
carefully read the Fund's prospectus before investing in the contracts.
D. TEMPLETON VARIABLE PRODUCTS SERIES FUND
In addition to the investments in the Fund, the Variable Annuity Account invests
in the Templeton Developing Markets Fund, a diversified portfolio of the
Templeton Variable Products Series Fund, a mutual fund of the series type.
The investment objectives and certain policies of the Templeton Developing
Markets Fund available under the contract are as follows:
The Templeton Developing Markets fund seeks long-term capital appreciation.
It pursues this objective by investing primarily in equity securities of
issuers in countries having developing markets. Countries considered to have
developing markets are all countries that are considered to be developing or
emerging countries by the International Bank for Reconstruction and
Development (more commonly referred to as the World Bank)
14
<PAGE>
or the International Finance Corporation, as well as countries that are
classified by the United Nations or otherwise regarded by their authorities
as developing.
Class 2 of the Templeton Developing Markets Fund pays .25% of the average
daily net assets annually under a distribution plan adopted under Rule 12b-1 of
the Investment Company Act of 1940. Amounts paid under the 12b-1 plan to
Minnesota Mutual may be used for certain contract owner services or distribution
activities.
The investment adviser of Templeton Developing Markets Fund is Templeton Asset
Management Ltd., a Singapore corporation. It is an indirect wholly owned
subsidiary of Franklin Resources, Inc. ("Franklin"). Through its subsidiaries,
Franklin is engaged in the financial services industry. The Templeton
organization has been investing globally since 1940 and, with its affiliates,
provides investment management and advisory services to a worldwide client base.
The investment adviser and its affiliates have offices worldwide.
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 Annuity 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.
We may also establish additional sub-accounts in the Variable Annuity Account
and we reserve the right to add, combine or remove any sub-accounts of the
Variable Annuity 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
Annuity 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
Annuity Account under the Investment Company Act of 1940, to restrict or
eliminate any voting rights of the contract owners, and to combine the Variable
Annuity Account with one or more of our other separate accounts.
Shares of the Funds are also sold to other separate accounts, which are used
to receive and invest premiums paid under variable life policies. 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
a Fund simultaneously. Although neither Minnesota Mutual nor the Fund currently
foresees any such disadvantages either to variable life insurance policy owners
or to variable annuity contract owners, the Funds' 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 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 Fund, or (4) differences in voting instructions
between those given by policy owners and those given by contract owners.
- ------------------------------------------------------------------------
CONTRACT CHARGES
A. 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 Fund 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 Annuity Account at the annual rate of .15%. We reserve the
right to increase this administrative charge to not more than .35%.
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.
15
<PAGE>
B. 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.
- ------------------------------------------------------------------------
VOTING RIGHTS
The Fund shares held in the Variable Annuity Account will be voted by us at the
regular and special meetings of the Fund. Shares will be voted by us in
accordance with instructions received from contract owners with voting interests
in each sub-account of the Variable Annuity Account. In the event no
instructions are received from a contract owner, we will vote such shares of the
Fund in the same proportion as shares of the Fund for which instructions have
been received from contract owners with voting interests in each sub-account of
the Variable Annuity Account. In the event no instructions are received from a
contract owner, with respect to shares of a Portfolio held by a sub-account,
Minnesota Mutual 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 Annuity 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 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 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 annuitant of a 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 you can instruct us with respect to voting.
- ------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACT
A. GENERAL PROVISIONS
1. TYPE OF CONTRACT OFFERED
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
This type of contract may be used in connection with all types of plans, 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 annuity or a fixed annuity 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 CONTRACTS
The contract is issued to you, the contract owner named in the application. The
owner of the contract may be the annuitant or someone else.
3. MODIFICATION OF THE CONTRACTS
A contract may be modified at any time by written agreement between you and us.
However, no such modification will adversely affect the rights of an annuitant
under the contract unless the modification is made to comply with a law or
government regulation. You will have the right to accept or reject the
modification. This right of acceptance or rejection is limited for contracts
used as individual retirement annuities.
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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), your or the annuitant's interest may not 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, and
to the maximum extent permitted by law, benefits payable under the contract
shall be exempt from the claims of creditors.
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.
5. LIMITATIONS ON PURCHASE PAYMENTS
You choose when to make purchase payments. There is no minimum amount which is
to be allocated to any sub-account of the Variable Annuity Account.
We may cancel a flexible payment contract, in our discretion, 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 (b) the accumulation
value of the entire contract, are less than $2,000. If such a cancellation takes
place, we will pay you the accumulation value of your contract and we will
notify you, in advance, of our intent to exercise this right in our annual
report which advises contract owners of the status of their contracts. We will
act to cancel the contract ninety days after the contract anniversary unless an
additional purchase payment is received before the end of that ninety day
period. Contracts issued in some states, for example, New Jersey, do not permit
such a cancellation and contracts issued there do not contain this provision.
There may be limits on the maximum contributions to retirement plans that
qualify for special tax treatment.
6. DEFERMENT OF PAYMENT
Whenever any payment under a contract is to be made in a single sum, payment
will be made within seven days after the date such payment is called for by the
terms of the contract, except as payment may be subject for postponement for:
(a) any period during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, or during which trading on the
New York Stock Exchange is restricted, as determined by the Securities
and Exchange Commission;
(b) any period during which an emergency exists as determined by the
Commission as a result of which it is not reasonably practical to
dispose of securities in the Fund or to fairly determine the value of
the assets of the Fund; or
(c) such other periods as the Commission may by order permit for the
protection of the contract owners.
7. PARTICIPATION IN DIVISIBLE SURPLUS
The contracts participate 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 contracts.
No assurance can be given as to the amount of divisible surplus, if any, that
will be distributable under these contracts in the future. Such amount may arise
if mortality 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.
B. ANNUITY PAYMENTS AND OPTIONS
1. ANNUITY PAYMENTS
Variable annuity payments are determined on the basis of (a) a mortality table
at least as favorable as the mortality table specified in the contract, which
reflects the age of the annuitant, (b) the type of annuity payment option
selected, and (c) the investment performance of the Fund Portfolios 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 maximum expense deductions provided for in the contract. The
annuitant will receive the
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value of a fixed number of annuity units each month. The value of such units,
and thus the amounts of the monthly 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
Portfolio of the Fund selected by the contract owner.
2. ELECTING THE RETIREMENT DATE AND FORM OF ANNUITY
The contracts provide for four optional annuity forms, any one of which may be
elected if permitted by law. Each annuity option may be elected on either a
variable annuity or a fixed annuity basis, or a combination of the two. Other
annuity options may be available from us on request.
While the contracts require 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 three valuation days prior to the 15th of the month. We
reserve the right to enforce the 30 day notice requirement at our option at any
time in the future.
The contract permits an annuity payment to begin on the first day of any month
after the 50th birthday of the annuitant. Contract payments must begin before
the 75th birthday of the annuitant. If an election has not been made otherwise,
and the plan does not specify to the contrary, annuity payments will begin on
the later of: the first day of the month immediately following the 65th birthday
of the annuitant, or the first day of the month immediately following the fifth
contract anniversary. A variable annuity will be provided and the annuity option
shall be Option 2A, a life annuity with a period of 120 months. 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, we may fulfill our
obligation by paying in a single sum the accumulation value of the contract
which would otherwise have been applied to provide annuity payments.
Once annuity payments have commenced, you 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. OPTIONAL ANNUITY FORMS
OPTION 1--LIFE ANNUITY
This is an annuity payable monthly during the lifetime of the annuitant and
terminating with the last monthly payment preceding the death of the annuitant.
This option offers 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 monthly 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 so elects at any time during
the remainder of the period certain, 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.
OPTION 4--PERIOD CERTAIN ANNUITY
This is an annuity payable monthly for a period certain of from 1 to 20 years,
as elected. If the annuitant dies before payments have been
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made for the period certain elected, payments will continue to the beneficiary
during the remainder of the fixed period. In the event of the death of the
annuitant, the beneficiary may, at any time during the payment period, elect
that (1) 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, or (2) such commuted amount shall be applied to effect a life annuity under
Option 1 or Option 2.
4. DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT
Under the contract described in this Prospectus, the first monthly annuity
payment is determined by the available value of the contract when an annuity
begins. In addition, a number of states do impose a premium tax on the amount
used to purchase an annuity benefit, depending on the type of plan involved.
Where applicable, these taxes currently range from 0.0% to 3.5% and are deducted
from the contract value applied to provide annuity payments. We reserve the
right to make such deductions from purchase payments as they are received.
The amount of the first monthly payment depends on the optional annuity form
elected and the adjusted age of the annuitant. A formula for determining the
adjusted age is contained in the contract. The contracts contain tables
indicating the dollar amount of the first monthly payment under each optional
annuity form for each $1,000 of value applied. The tables are determined from
the Progressive Annuity Table with interest at the rate of 3.5% per annum,
assuming births in the year 1900 and an age setback of eight years. Also, for
contracts issued after 1993 or such later date as we may be able to issue this
contract in a jurisdiction, the contracts contain a provision that applies a
contract fee of $200 when a fixed annuity is elected. If, when annuity payments
are elected, we are using tables of annuity rates for these contracts which
result in larger annuity payments, we will use those tables instead.
The 3.5% interest rate assumed in the annuity tables would produce level
annuity payments if the net investment rate remained constant at 3.5% per year.
Subsequent payments will be less than, equal to, or greater than the first
payment depending upon whether the actual net investment rate is less than,
equal to, or greater than 3.5%. A higher interest rate would mean a higher
initial payment, but a more slowly rising (or more rapidly falling) series of
subsequent payments. A lower assumption would have the opposite effect.
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 the table using the adjusted age of the annuitant and
any joint annuitant. A number of annuity units is then determined by dividing
this dollar amount by the then current annuity unit value. Thereafter, the
number of annuity units remains unchanged during the period of annuity payments.
This determination is made separately for each sub-account of the separate
account. The number of annuity units is determined for each sub-account and is
based upon the available value in each sub-account as of the date annuity
payments are to begin.
The dollar amount determined for each sub-account will then be aggregated for
purposes of making payment.
Annuity payments are always made as of the first day of a month. The contracts
require that notice of election to begin annuity payments must be received by us
at least thirty days prior to the annuity commencement date. However, Minnesota
Mutual currently waives this requirement, and at the same time reserves the
right to enforce the thirty day notice at its option 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 coincident with the first valuation date
following the fourteenth day of the month preceding the date on which the
annuity is to begin.
If a request for a fixed annuity is received between the first valuation date
following the fourteenth day of the month and the second to last valuation date
of the month prior to commencement, the transfer will occur on the valuation
date coincident with or next following the date on which the request is
received. If a fixed annuity request is received after the third to the last
valuation day of the month prior to commencement, it will be treated as a
request received the following month, and the commencement date will be changed
to the first of the month following the requested commencement date. The account
value used to determine fixed annuity payments will be the value as of the last
valuation date of the month preceding the date the fixed annuity is to begin.
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If a variable annuity request is received after the third valuation date
preceding the first valuation date following the fourteenth day of the month
prior to the commencement date, it will be treated as a request received the
following month, and the commencement date will be changed to the first of the
month following the requested commencement date. The account value used to
determine the initial variable annuity payment will be the value as of the first
valuation date following the fourteenth day of the month prior to the variable
annuity begin date.
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 times 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.
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 each month by multiplying the value on the first day of the
preceding month by the product of (a) .997137, and (b) the ratio of the value of
the accumulation unit for that sub-account for the valuation date next following
the fourteenth day of the preceding month to the value of the accumulation unit
for the valuation date next following the fourteenth day of the second preceding
month (.997137 is a factor to neutralize the assumed net investment rate,
discussed in Section 4 above, of 3.5% per annum built into the annuity rate
tables contained in the contract and which is not applicable because the actual
net investment rate is credited instead). 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. The change must be
made by a written request. The annuitant and joint annuitant, if any, must make
such an election.
There are restrictions to such a transfer. 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. 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 thirty 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 sub-account amount
information.
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 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 on 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 funds actually transferred in the middle of the month 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.
However, if your annuity is based upon annuity units in a sub-account which
matures on a date other than the stated annuity valuation date, then your
annuity units will be adjusted to reflect sub-account performance in the
maturing sub-account and the sub-account to which reserves are transferred for
the period between annuity valuation dates.
Amounts held as reserves to pay a variable annuity may also be transferred to
a fixed annuity during the annuity period. However, the restrictions which apply
to annuity sub-account transfers will apply in this case as well. The amount
transferred will then be based upon the adjusted age of the annuitant and any
joint annuitant at the time of the transfer. The annuity payment option will
remain the same. Amounts paid as a fixed annuity may not be transferred to a
variable annuity.
Contracts with this transfer feature may not be available in all states.
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C. DEATH BENEFITS
The contracts provide that in the event of the death of the owner before annuity
payments begin, the amount payable at death will be the accumulation value
determined as of the valuation date coincident with or next following the date
due proof of death is received by us at our home office. Death proceeds will be
paid in a single sum to the beneficiary designated unless an annuity option is
elected. Payment will be made within seven days after we receive due proof of
death. Except as noted below, the entire interest in the contract must be
distributed within five years of the owner's death.
The contract has a guaranteed death benefit if you die before annuity payments
have started. The death benefit shall be equal to the greater of: (1) the amount
of the accumulation value payable at death; or (2) the amount of the total
purchase payments paid to us as consideration for this contract, less all
contract withdrawals.
If the owner dies on or before the date on which annuity payments begin and 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 owner's death. If there is no designated
beneficiary, then the entire interest in a contract must be distributed within
five years after the owner's death. If the annuitant dies 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 contract interest is payable to the owner's designated
beneficiary who is also the surviving spouse of the owner, 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 owner of this contract is other than a natural person, such as a trust
or other similar entity, we will pay a death benefit of the accumulation value
to the named beneficiary on the death of the annuitant, if death occurs prior to
the date for annuity payments to begin.
D. PURCHASE PAYMENTS, VALUE OF THE CONTRACT AND TRANSFERS
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 contracts are originally issued, application forms are 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,
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 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 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 Portfolios of the Fund.
We will determine the value of accumulation units on each day on which each
Fund is valued. The net asset value of the Fund's 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
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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). Accordingly, the value of accumulation
units so determined 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.
Upon your written request, values under the contract may be transferred among
the sub-accounts of the Variable Annuity 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. There is no
dollar amount limitation which is applied to transfers.
Systematic transfer arrangements are limited to the use of a maximum of twenty
sub-accounts.
Also, you may effect transfers, or a change in the allocation of future
premiums, by means of a telephone call. Transfers or requests made pursuant to
such a call are subject to the same conditions and procedures as are outlined
above for written transfer requests. We reserve the right to restrict the
frequency of--or otherwise modify, condition, terminate or impose charges
upon--telephone transfer privileges. For more information on telephone
transfers, contact Minnesota Mutual.
While for some contract owners we have used a form to pre-authorize telephone
transactions, we now make this service 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 a person authorized by you 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.
For contracts where this is available, contract owners in any sub-account of
the Variable Annuity Account may elect to have accumulation unit values of that
sub-account systematically transferred to any of the other sub-accounts of the
Variable Annuity Account on a monthly, quarterly, semi-annual or annual basis.
Should the amount remaining in such a sub-account be less than the amount you
previously indicated as a transfer amount, we will then transfer the balance
remaining as well as allocating that amount pro rata in accordance with your
prior instructions. The terms and conditions otherwise applicable to transfers
generally, as described above, also apply to such systematic transfer plans.
2. VALUE OF THE CONTRACT
The accumulation value of the contract at any time prior to the commencement of
annuity payments can be determined by multiplying the total number of
accumulation units credited to the contract by the current value of an
accumulation unit. There is no assurance that such value will equal or exceed
the purchase payments made. The contract owner will be advised periodically of
the number of accumulation units credited to the contract, the current value of
an accumulation unit, and the total value of the contract.
3. ACCUMULATION UNIT VALUE
The value of an accumulation unit for each sub-account of the Variable Annuity
Account was set at $1.000000 on the first valuation date of the Variable Annuity
Account for this class of contract. 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.
4. 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
administrative charge at the current rate of .15% per annum.
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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 Annuity 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.
E. REDEMPTIONS
1. PARTIAL WITHDRAWALS AND SURRENDER
The contract provides that prior to the date annuity payments begin partial
withdrawals may be made by you 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 reduced by the amount of the withdrawal. In the
absence of instructions, withdrawals will be made from the sub-accounts on a pro
rata basis. 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. In the absence of
instructions to the contrary, systematic withdrawals will be made from the
sub-accounts on a pro rata basis if accumulation values are in no more than
twenty sub-accounts. If more than twenty sub-accounts have accumulation values,
we will need instructions as to those sub-accounts from which systematic
withdrawals are to be made. For systematic withdrawals, the maximum number of
sub-accounts which may be used is twenty.
The contract provides that prior to the commencement of annuity payments, you
may elect to surrender the contract for its accumulation value. You will receive
in a single cash sum the accumulation value computed as of the valuation date
coincident with or next following the date of surrender, or you may elect an
annuity.
Once annuity payments have commenced for an annuitant, the annuitant cannot
surrender his/her annuity benefit and receive a single sum settlement in lieu
thereof. For a discussion of commutation rights of annuitants and beneficiaries
subsequent to the annuity commencement date, see "Optional Annuity Forms" on
page 18.
Contract owners may also submit their signed written withdrawal or surrender
requests to Minnesota Mutual by facsimile (FAX) transmission. Our FAX number is
(612) 665-7942. Transfer instructions or changes as to future allocations of
premium payments may be communicated to us by the same means. Payment of a
partial withdrawal or surrender will be made to you within 7 days after we
receive your completed request.
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 cancelled and
returned, we will refund to you 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 you 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. These rights are subject to change and may vary among the states.
The liability of the Variable Annuity 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 you equal
to the purchase payments will be made by us.
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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
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operations of the Variable Annuity 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 Annuity Account or on capital gains
arising from the Variable Annuity Account's activities. The Variable Annuity
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 non-qualified annuities in general
and some aspects of tax 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 of (i.e., purchase
payments) 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 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 deposits 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.
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 the death of the owner, and in certain other circumstances.
The Code also provides an exception to the penalty tax for distributions, in
periodic payments, of substantially equal installments, 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 non-qualified 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 Annuity Account to
be "adequately diversified" in order for the contract to be treated as an
annuity contract for Federal tax purposes. The Variable Annuity Account, through
the Fund, intends to comply with the diversification requirements prescribed in
Regulations Section 1.817-5, which affect how the Fund's assets may be invested.
Although the investment adviser is an affiliate of Minnesota Mutual, Minnesota
Mutual does not have control over the Fund or its investments.
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Nonetheless, Minnesota Mutual believes that each Portfolio of the Fund in which
the Variable Annuity 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 includible 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 subaccounts without being treated as
owners of the underlying assets." As of the date of this Prospectus, no such
guidance has been issued.
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 Annuity 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 Annuity Account.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for Federal income tax purposes,
Section 72(s) of the Code requires any non-qualified contract 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.
Non-qualified contracts issued after January 18, 1985, 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 the death of the owner.
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.
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<PAGE>
POSSIBLE CHANGES IN TAXATION
In 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 non-qualified 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 annuity 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 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 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 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.
SIMPLE RETIREMENT ACCOUNTS
Beginning January 1, 1997, certain small employers may establish Simple
Retirement Accounts as provided by Section 408(p) of the Code, under which
employees may elect to defer up to $6,000 (as increased for cost of living
adjustments) as a percentage of compensation. The sponsoring employer is
required to make a matching contribution on behalf of contributing employees.
Distributions from a Simple Retirement Account are subject to the same
restrictions that apply to IRA distributions and are taxed as ordinary income.
Subject to certain exceptions, premature distributions prior to age 59 1/2 are
subject to a 10% penalty tax, which is increased to 25% if the distribution
occurs within the first two years after the commencement of the employee's
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participation in the plan. The failure of the Simple Retirement Account to meet
Code requirements may result in adverse tax consequences.
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 with
respect to non-governmental Section 457 Plans. All investments are owned by the
sponsoring employer and are subject to the claims of the general creditors of
the employer and 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) 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 sixty 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 these 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 Contract
Performance Data
Auditors
Registration Statement
Financial Statements
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APPENDIX A--ILLUSTRATION OF VARIABLE ANNUITY 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%, 4.44% and 12.00%.
For illustration purposes, an average annual expense equal to .94% 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 .94%
includes: .15% for contract administration and an average of .79% 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 Annuity 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 3.50%. 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 male, 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%).
ACTUAL 1996 VARIABLE ANNUITY SEPARATE ACCOUNT CHARGES
AND FUND EXPENSES
<TABLE>
<CAPTION>
FUND
SEPARATE ACCOUNT ADMINISTRATIVE MANAGEMENT OTHER FUND
SUB-ACCOUNT NAME CHARGE FEE EXPENSES TOTAL
- ---------------------------------------- -------------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Growth.................................. .15% .50% .09% .74%
Bond.................................... .15% .50% .06% .71%
Money Market............................ .15% .50% .10% .75%
Asset Allocation........................ .15% .50% .04% .69%
Mortgage Securities..................... .15% .50% .08% .73%
Index 500............................... .15% .40% .05% .60%
Capital Appreciation.................... .15% .75% .10% 1.00%
International Stock..................... .15% .74% .32% 1.19%
Small Company........................... .15% .75% .09% .99%
Value Stock............................. .15% .75% .14% 1.04%
Maturing Government Bond 1998........... .15% .05% .15% .35%
Maturing Government Bond 2002........... .15% .05% .15% .35%
Maturing Government Bond 2006........... .15% .25% .15% .55%
Maturing Government Bond 2010........... .15% .25% .15% .55%
Small Company Value..................... .15% .75% .15% 1.05%
International Bond...................... .15% .60% 1.00% 1.75%
Index 400 Mid-Cap....................... .15% .40% .15% .70%
Micro-Cap Value......................... .15% 1.25% .15% 1.55%
Macro-Cap Value......................... .15% .70% .15% 1.00%
Micro-Cap Growth........................ .15% 1.10% .15% 1.40%
Templeton Developing Markets Class 2.... .15% 1.25% .78%* 2.18%
--
--- --- -----
Average......................... .15% .60% .20% .94%
</TABLE>
* For the purpose of this illustration, the term "Other Fund Expenses"
includes a distribution fee in this Fund of .25%.
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VARIABLE ANNUITY PAYOUT ILLUSTRATION
PREPARED FOR: Prospect
PREPARED BY: Minnesota Mutual
SEX: Male DATE OF BIRTH: 05/01/32
STATE: MN
LIFE EXPECTANCY: 20.2 (IRS) 17.3 (MML)
ANNUITIZATION OPTION:10 Year Certain with Life Contingency
QUOTATION DATE: 05/01/97
COMMENCEMENT DATE: 06/01/97
SINGLE PAYMENT RECEIVED: $100,000.00
FUNDS: Non-Qualified
INITIAL MONTHLY INCOME: $624
The monthly variable annuity income amount shown below assumes a constant
annual investment return. The initial interest rate of 3.50% 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 results.
<TABLE>
<CAPTION>
ANNUAL RATE OF RETURN
-----------------------------------------------------------
0% GROSS 4.44% GROSS 12.00% GROSS
DATE AGE (-.94% NET) (3.50% NET) (11.06% NET)
- ------------------------------------------------------- --------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
June 1, 1997........................................... 65 $ 678 $ 678 $ 678
June 1, 1998........................................... 66 649 678 728
June 1, 1999........................................... 67 621 678 781
June 1, 2000........................................... 68 595 678 838
June 1, 2001........................................... 69 569 678 899
June 1, 2006........................................... 74 457 678 1,279
June 1, 2011........................................... 79 367 678 1,820
June 1, 2016........................................... 84 295 678 2,589
June 1, 2021........................................... 89 237 678 3,683
June 1, 2026........................................... 94 190 678 5,240
June 1, 2031........................................... 99 153 678 7,454
June 1, 2032........................................... 100 146 678 7,999
</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
$777.
Net rates of return reflect expenses totaling .94%, which consist of the .15%
Variable Account administrative charge and .79% for the Fund management fee and
other Fund expenses (this is an average with the actual varying from .20% to
2.03%).
Minnesota Mutual MultiOption variable annuities are available through
registered representatives of MIMLIC Sales Corporation.
This is an illustration only and not a contract.
30
