<PAGE> 1
File Number 333-79049
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment Number
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Post-Effective Amendment Number 1
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment Number
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VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
MINNESOTA LIFE INSURANCE COMPANY
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(Name of Depositor)
400 ROBERT STREET NORTH, ST. PAUL, MINNESOTA 55101-2098
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(Address of Depositor's Principal Executive Offices) (Zip Code)
(651) 665-3500
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(Depositor's Telephone Number, Including Area Code)
Dennis E. Prohofsky Copy to:
Senior Vice President, J. Sumner Jones, Esq.
General Counsel and Secretary Jones & Blouch L.L.P.
Minnesota Life Insurance Company 1025 Thomas Jefferson St., N.W.
400 Robert Street North Suite 405 West
St. Paul, Minnesota 55101-2098 Washington, D.C. 20007
- -------------------------------------------
(Name and Address of Agent for Service)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE(check appropriate box)
immediately upon filing pursuant to paragraph (b)
--
on (date) pursuant to paragraph (b) of Rule 485
--
60 days after filing pursuant to paragraph (a) (i)
--
X on May 1, 2000, pursuant to paragraph (a) (i)
--
75 days after filing pursuant to paragraph (a) (ii)
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on (date) pursuant to paragraph (a) (ii) of Rule 485.
--
IF APPROPRIATE, CHECK FOLLOWING BOX:
this post-effective amendment designates a new effective date for a
-- previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED
Variable Annuity Contracts
<PAGE> 2
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 3
Variable Annuity Account
Cross Reference Sheet to Prospectus
Form N-4
Item Number Caption in Prospectus
1. Cover Page
2. Special Terms
3. Questions and Answers About the Variable Annuity Contract
4. Condensed Financial Information Performance Data
5. General Descriptions
6. Contract Charges
7. Description of the Contract; General Descriptions
8. Description of the Contract; Annuity Payments and Options
9. Description of the Contract; Death Benefits
10. Description of the Contract; Purchase Payments and Value of the
Contract and Transfers
11. Description of the Contract; Redemptions
12. Federal Tax Status
13. Not Applicable
14. Table of Contents of the Statement of Additional
Information
<PAGE> 4
MULTIOPTION ACHIEVER
VARIABLE ANNUITY CONTRACT
MINNESOTA LIFE INSURANCE COMPANY
("MINNESOTA LIFE")
400 Robert Street North
St. Paul, Minnesota 55101-2098
Ph 1-800-362-3141
http://www.minnesotamutual.com
This Prospectus describes an individual, flexible payment, variable annuity
contract ("the contract") offered by the Minnesota Life Insurance Company. The
contract may be used in connection with all types of personal retirement plans.
It may also be used apart from those plans.
You may invest your contract values in our Variable Annuity Account or our
General Account.
The Variable Annuity Account invests in the following Fund portfolios:
- - Advantus Series Fund, Inc.
- all portfolios, except the Maturing Government Bond portfolios,
which are only available to contracts issued prior to May 1, 2000.
- - Templeton Variable Products Series Fund
- Templeton Developing Markets Fund -- Class 2 Shares
- - Janus Aspen Series
- Capital Appreciation Portfolio - Service Shares
- International Growth Portfolio - Service Shares
- - Fidelity Variable Insurance Products Funds
- Mid Cap Portfolio - Service Class 2 Shares
- Contrafund Portfolio - Service Class 2 Shares
- Equity-Income Portfolio - Service Class 2 Shares
Your contract's accumulation value and the amount of each variable annuity
payment will vary in accordance with the performance of the Fund investment
portfolio(s) ("Portfolio(s)") you select. You bear the entire investment risk
for amounts you allocate to those Portfolios.
This Prospectus includes the information you should know before purchasing a
contract. You should read it and keep it for future reference. A Statement of
Additional Information, with the same date, contains further contract
information. It has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. A copy of the
Statement of Additional Information may be obtained without charge by calling
1-800-362-3141, or by writing to us at our office at 400 Robert Street North,
St. Paul, Minnesota 55101-2098. The table of contents for the Statement of
Additional Information may be found at the end of this Prospectus. A copy of the
text of this Prospectus and the Statement of Additional Information may also be
found at the SEC's web site, http://www.sec.gov, via its EDGAR database.
THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED BY A CURRENT PROSPECTUS OF THE
ADVANTUS SERIES FUND, INC., THE TEMPLETON VARIABLE PRODUCTS SERIES FUND CLASS 2,
JANUS ASPEN SERIES -- SERVICE SHARES AND FIDELITY VARIABLE
INSURANCE PRODUCTS FUNDS -- SERVICE CLASS 2 SHARES.
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.
The date of this Prospectus and of the Statement of Additional Information is:
May 1, 2000.
<PAGE> 5
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION IN WHICH THE OFFERING
WOULD BE UNLAWFUL. WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN, OR OTHER PERSON
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,
YOU SHOULD NOT RELY ON THEM.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SPECIAL TERMS 1
QUESTIONS AND ANSWERS ABOUT THE VARIABLE ANNUITY CONTRACT 2
EXPENSE TABLE 5
GENERAL DESCRIPTIONS 10
Minnesota Life Insurance Company 10
Variable Annuity Account 10
The Funds 11
Additions, Deletions or Substitutions 13
CONTRACT CHARGES 14
Deferred Sales Charge 14
Mortality and Expense Risk Charge 17
Administrative Charge 17
Contract Fee 18
Premium Taxes 18
Transaction Charges 18
EXCHANGE OFFER 18
VOTING RIGHTS 19
DESCRIPTION OF THE CONTRACT 20
General Provisions 20
Annuity Payments and Options 22
Death Benefits 27
Purchase Payments and Value of the Contract 30
Redemptions 35
FEDERAL TAX STATUS 36
PERFORMANCE DATA 41
STATEMENT OF ADDITIONAL INFORMATION 42
APPENDIX A -- CONDENSED FINANCIAL INFORMATION A-1
APPENDIX B -- ILLUSTRATION OF VARIABLE ANNUITY VALUES B-1
APPENDIX C -- TYPES OF QUALIFIED PLANS C-1
</TABLE>
<PAGE> 6
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: the sum of your values under a contract in the Variable
Annuity Account and in the General 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 or
her 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.
Funds: the mutual funds whose separate investment portfolios we have designated
as eligible investments for the Variable Annuity Account. Currently, the
portfolios of the Advantus Series Fund, Inc. ("Advantus Fund") -- please note:
the Maturing Government Bond Portfolios are only available to contracts issued
prior to May 1, 2000; Class 2 shares of the Templeton Developing Markets Fund a
series of the Templeton Variable Products Series Fund ("Templeton Fund");
Service Shares of the Janus Aspen Series; International Growth Portfolio and
Capital Appreciation Portfolio; and Service Class 2 Shares of Fidelity Variable
Insurance Products Funds; Contrafund Portfolio, Equity-Income Portfolio and Mid
Cap Portfolio.
General Account: all of our assets other than those in the Variable Annuity
Account or in our other separate accounts.
Plan: a tax-qualified employer pension, profit-sharing, or annuity purchase
plan under which benefits are to be provided by the contract.
Purchase Payments: amounts you pay to us under your contract.
Valuation Date or Valuation Days: each date on which a Fund Portfolio is
valued.
Variable Annuity Account: a separate investment account called the Variable
Annuity Account. The investment experience of its assets is separate from that
of our other assets.
Variable Annuity: an annuity providing for payments varying in amount in
accordance with the investment experience of the Funds.
Wealthbuilder Credit: an additional amount, other than a dividend, which we may
credit to your contract.
We, Our, Us: Minnesota 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;
or for a specified period of time. An annuity with payments which are guaranteed
as to amount during the payment period is a fixed annuity. An annuity with
payments which vary with the investment experience of a separate account is a
variable annuity.
WHAT TYPE OF CONTRACT IS OFFERED BY THIS PROSPECTUS?
The contract is a variable annuity contract which provides for monthly annuity
payments. These payments may begin immediately or at a future date you specify.
We allocate your purchase payments to the Variable Annuity Account or to our
General Account. The Variable Annuity Account invests in one or more Fund
Portfolios. There are no interest or principal guarantees on your contract
values in the Variable Annuity Account. In the General Account your purchase
payments receive principal and interest guarantees.
WHAT INVESTMENT OPTIONS ARE AVAILABLE?
Any purchase payments you allocate to the Variable Annuity Account are invested
exclusively in shares of one or more Fund Portfolios. We reserve the right to
add, combine or remove other eligible Funds and Portfolios.
The available Portfolios of Advantus Fund are:
Growth Portfolio
Bond Portfolio
Money Market Portfolio
Asset Allocation Portfolio
Mortgage Securities Portfolio
Index 500 Portfolio
Capital Appreciation Portfolio
International Stock Portfolio
Small Company Growth Portfolio
Maturing Government Bond Portfolios (only available to contracts issued
prior to May 1, 2000).
Value Stock Portfolio
Small Company Value Portfolio
Global Bond Portfolio
Index 400 Mid-Cap Portfolio
Macro-Cap Value Portfolio
Micro-Cap Growth Portfolio
Real Estate Securities Portfolio
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<PAGE> 8
The Variable Annuity Account also invests in:
- - Templeton Variable Products Series Fund
- Templeton Developing Markets Fund - Class 2 Shares
- - Janus Aspen Series
- Capital Appreciation Portfolio - Service Shares
- International Growth Portfolio - Service Shares
- - Fidelity Variable Insurance Products Funds
- Mid Cap Portfolio - Service Class 2 Shares
- Contrafund Portfolio - Service Class 2 Shares
- Equity-Income Portfolio - Service Class 2 Shares
There is no assurance that any Portfolio will meet its objectives. Detailed
information about the investment objectives and policies of the Portfolios can
be found in the current prospectuses for each Fund, which are attached to this
Prospectus. You should carefully read each Fund prospectus before purchasing the
contract.
CAN YOU CHANGE THE PORTFOLIO THAT YOU SELECT?
Yes. You can change your allocation of future purchase payments by giving us
written notice or a telephone call notifying us of the change. Before annuity
payments begin, you may transfer all or a part of your accumulation value among
the Portfolios and/or the General Account. After annuity payments begin, you may
instruct us to transfer amounts held as annuity reserves among the variable
annuity sub-accounts, subject to some restrictions. During the annuity period,
annuity reserves may only be transferred from a variable annuity to a fixed
annuity.
WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACT?
We deduct a daily charge equal to an annual rate of 1.25% of the net asset value
of the Variable Annuity Account for mortality and expense risk guarantees. We
reserve the right to increase the charge to not more than 1.40%.
We also deduct a daily charge equal to an annual rate of .15% of the net asset
value for administrative expenses incurred by us. We reserve the right to
increase the charge to not more than .40% of the net asset value of the separate
account.
A deferred sales charge of up to 7% of purchase payments may apply if you make
partial withdrawals or surrender your contract within seven or fewer years after
your last purchase payment.
There is a contract fee taken annually from the accumulation value of the
Contract. The charge applied will be equal to the lesser of $30 or 2% of the
accumulation value at the end of the Contract Year taken generally from
contracts with values of less than $50,000.
Deductions for any applicable premium taxes may also be made (currently such
taxes range from 0.0% to 3.5%) depending upon applicable law.
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The Portfolios pay investment advisory and other expenses. Total expenses of the
Portfolios range from % to % of average daily net assets of the
Portfolios on an annual basis.
We reserve the right to make a charge of up to $10 for transfers occurring more
frequently than once a month. We also reserve the right to assess a $100 fee to
cover administration costs associated with an exchange, if you exchange to this
contract from another of our contracts.
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EXPENSE TABLES
The tables shown below are to assist you in understanding the costs and expenses
that you will bear directly or indirectly. The table does not reflect deductions
for any applicable premium taxes which may be made from each purchase payment
depending upon the applicable law. The tables show the expenses of each of the
Fund Portfolios available. Expenses of the Funds are not fixed or specified
under the terms of the Contract, and actual expenses may vary.
The following contract expense information is intended to illustrate the
expenses of the MultiOption Achiever 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.
Contract Owner Transaction Expenses
The amount of the deferred sales charge percentage is as shown in the table
below:
<TABLE>
<CAPTION>
CONTRACT YEARS SINCE PAYMENT CHARGE
- ---------------------------- ------
<S> <C>
0-1 7%
1-2 7%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7 and thereafter 0%
</TABLE>
<TABLE>
<S> <C>
Annual Contract Fee: lesser of $30 or
2% of accumulation value (applied
only to a Contract where the
greater of the accumulation value
or purchase payments, less
withdrawals, is less than $50,000) $30
</TABLE>
Minnesota Life reserves the right, not currently imposed, to make a transaction
charge, not to exceed $10, on transfer requests exceeding one per month.
Separate Account Annual Expenses
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Fees 1.25%
Administrative Fee .15%
-----
Total Separate Account Annual Expenses 1.40%
=====
</TABLE>
Note: We reserve the right to increase the mortality and expense risk fees to
not more than 1.40% on an annual rate and the administrative fees to not more
than .40% on an annual basis.
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<PAGE> 11
FUND ANNUAL EXPENSES
(As a percentage of average net assets for the described Funds).
<TABLE>
<CAPTION>
TOTAL FUND
INVESTMENT OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT (AFTER EXPENSE DISTRIBUTION (AFTER EXPENSE
FEES REIMBURSEMENTS) EXPENSES REIMBURSEMENTS)
---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
ADVANTUS SERIES FUND, INC.:
Growth Portfolio 0.50% 0.03% -- 0.53%
Bond Portfolio 0.50% 0.05% -- 0.55%
Money Market Portfolio 0.50% 0.08% -- 0.58%
Asset Allocation Portfolio 0.50% 0.03% -- 0.53%
Mortgage Securities Portfolio 0.50% 0.07% -- 0.57%
Index 500 Portfolio 0.40% 0.04% -- 0.44%
Capital Appreciation Portfolio 0.75% 0.03% -- 0.78%
International Stock Portfolio 0.70% 0.24% -- 0.94%
Small Company Growth Portfolio 0.75% 0.04% -- 0.79%
Value Stock Portfolio 0.75% 0.04% -- 0.79%
Small Company Value Portfolio(1) 0.75% 0.15% -- 0.90%
Maturing Government Bond 2002
Portfolio(1) 0.25% 0.15% -- 0.40%
Maturing Government Bond 2006
Portfolio(1) 0.25% 0.15% -- 0.40%
Maturing Government Bond 2010
Portfolio(1) 0.25% 0.15% -- 0.40%
Global Bond Portfolio 0.60% 0.53% -- 1.13%
Index 400 Mid-Cap Portfolio(1) 0.40% 0.15% -- 0.55%
Macro-Cap Value Portfolio(1) 0.70% 0.15% -- 0.85%
Micro-Cap Growth Portfolio(1) 1.10% 0.15% -- 1.25%
Real Estate Securities Portfolio(1) 0.75% 0.15% -- 0.90%
TEMPLETON VARIABLE PRODUCTS SERIES FUND:
Developing Markets Fund Class 2 shares(2) 1.25% 0.41% 0.25% 1.91%
JANUS ASPEN SERIES:
Capital Appreciation Portfolio -- Service
Shares(2)
International Growth Portfolio -- Service
Shares(2)
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS:
Mid Cap Portfolio -- Service Class 2
Shares(2)
Contrafund Portfolio -- Service Class 2
Shares(2)
Equity-Income Portfolio -- Service Class
2 Shares(2)
</TABLE>
(1) Minnesota Life voluntarily absorbed certain expenses of the Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government
Bond 2010, Small Company Value, Index 400 Mid-Cap, Macro-Cap Value,
Micro-Cap Growth, and Real Estate Securities Portfolios for the period ended
December 31, 1998. If these Portfolios had been charged for expenses, the
ratio of expenses to average daily net assets (i.e., the total fund expenses
absent expense reimbursements) would have been 1.07%, 1.12%, 1.33%, 1.83%,
1.36%, 2.53%, 2.10%, and 1.90%, respectively. For these Portfolios, it is
Minnesota Life's intention to waive other fund expenses during the current
fiscal year which exceed, as a percentage of average daily net assets, .15%.
Minnesota Life also reserves the option to reduce the level of other
expenses which it will voluntarily absorb.
(2) This class of shares of the Fund has a distribution plan or "Rule 12b-1
Plan" which is described in the Fund's prospectus.
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CONTRACT OWNER EXPENSE EXAMPLE
You would pay the following expenses on a $1,000 investment assuming:
(1) 5% annual return,
(2) redemption at the end of each time period and
(3) removal of any annual amount not subject to contingent deferred sales
charge.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF YOU ANNUITIZE AT THE
IF YOU SURRENDERED YOUR END OF THE APPLICABLE TIME
CONTRACT AT THE END OF THE PERIOD OR YOU DO NOT SURRENDER
PORTFOLIO NAME APPLICABLE TIME PERIOD YOUR CONTRACT
- -------------- ------------------------------------- -------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADVANTUS SERIES FUND, INC.:
Growth Portfolio $110 $182 $245 $421 $40 $122 $205 $421
Bond Portfolio $110 $182 $246 $423 $40 $122 $206 $423
Money Market Portfolio $111 $183 $247 $425 $41 $123 $207 $425
Asset Allocation Portfolio $110 $182 $245 $421 $40 $122 $205 $421
Mortgage Securities Portfolio $111 $183 $247 $424 $41 $123 $207 $424
Index 500 Portfolio $109 $179 $241 $413 $39 $119 $201 $413
Capital Appreciation Portfolio $113 $189 $257 $442 $43 $129 $217 $442
International Stock Portfolio $114 $194 $264 $455 $44 $134 $224 $455
Small Company Growth Portfolio $113 $189 $257 $443 $43 $129 $217 $443
Maturing Government Bond 2002
Portfolio $109 $178 $239 $410 $39 $118 $199 $410
Maturing Government Bond 2006
Portfolio $109 $178 $239 $410 $39 $118 $199 $410
Maturing Government Bond 2010
Portfolio $109 $178 $239 $410 $39 $118 $199 $410
Value Stock Portfolio $113 $189 $257 $443 $43 $129 $217 $443
Small Company Value Portfolio $114 $192 $262 $451 $44 $132 $222 $451
International Bond Portfolio $116 $199 $272 $470 $46 $139 $232 $470
Index 400 Mid-Cap Portfolio $110 $182 $246 $423 $40 $122 $206 $423
Macro-Cap Value Portfolio $113 $191 $260 $447 $43 $131 $220 $447
Micro-Cap Growth Portfolio $117 $202 $278 $479 $47 $142 $238 $479
Real Estate Securities Portfolio $114 $192 $262 $451 $44 $132 $222 $451
TEMPLETON VARIABLE PRODUCTS SERIES FUND:
Developing Markets Fund Class 2 $124 $221 $307 $529 $54 $161 $267 $529
JANUS ASPEN SERIES:
Capital Appreciation Portfolio --
Service Shares
International Growth Portfolio --
Service Shares
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS:
Mid Cap Portfolio -- Service Class
2 Shares
Contrafund Portfolio -- Service
Class 2 Shares
Equity-Income Portfolio -- Service
Class 2 Shares
</TABLE>
- --------------------------------------------------------------------------------
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than these shown.
Page 7
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CONDENSED FINANCIAL INFORMATION AND FINANCIAL STATEMENTS
The financial history of each sub-account may be found in Appendix A under the
heading "Condensed Financial Information." The complete financial statements of
the Minnesota Life Insurance Company and the Variable Annuity Account are
included in the Statement of Additional Information.
CAN YOU MAKE PARTIAL WITHDRAWALS FROM THE CONTRACT?
Yes. You may make withdrawals of the accumulation value of your contract before
an annuity begins. Your requests for partial withdrawals must be in writing.
Partial withdrawals are generally subject to the deferred sales charge. In
addition, a penalty tax on the amount of the taxable distribution may be
assessed upon withdrawals from the variable annuity contract in certain
circumstances, including distributions made prior to the owner's attainment of
age 59 1/2.
DO YOU HAVE A RIGHT TO CANCEL YOUR CONTRACT?
Yes. You may cancel your contract any time within ten days of receiving it by
returning it to us or your agent. In some states, the free look period may be
longer than ten days. For example, California's free look period is thirty days.
These rights are subject to change and may vary among the states.
WHAT IF THE OWNER OR ANNUITANT DIES?
If the contract owner dies before annuity payments begin, we will pay the death
benefit to the beneficiary. The death benefit payable to the beneficiary upon
the death of the contract owner or annuitant, if applicable, if the contract
owner or annuitant dies prior to his or her 80th birthday, during the
accumulation period is equal to the greater of:
- the amount of the accumulation value payable at death; or
- the total amount of your purchase payments, less all partial
withdrawals; or
- the last "stepped-up value" prior to the date of death, adjusted for any
purchase payments or withdrawals.
If the contract owner or annuitant, if applicable, dies on or after his or her
80th birthday, the death benefit is the greater of:
- the accumulation value payable at death; or
- the total amount of purchase payments, less all partial withdrawals; or
- the last "stepped-up value" prior to age 80, adjusted for any
withdrawals.
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<PAGE> 14
The "stepped-up value" will be determined on each contract anniversary that is
an exact multiple of three and is prior to the 80th birthday of the oldest owner
or annuitant, if applicable.
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
commencement of annuity payments.
WHAT ANNUITY OPTIONS ARE AVAILABLE?
The annuity options available are:
- a life annuity;
- a life annuity with a period certain of 120 months, 180 months or 240
months;
- a joint and last survivor annuity; and
- a period certain annuity.
Each annuity option may be elected as a variable annuity or fixed annuity or a
combination of the two. Other annuity options may be available from us on
request.
WHAT VOTING RIGHTS DO YOU HAVE?
Contract owners and annuitants will be able to direct us as to how to vote
shares of the Funds held for their contracts where shareholder approval is
required by law in the affairs of the Funds.
Page 9
<PAGE> 15
GENERAL DESCRIPTIONS
A. MINNESOTA LIFE INSURANCE COMPANY
We are a life insurance
company.
We are Minnesota Life Insurance Company ("Minnesota Life"), a life insurance
company organized under the laws of Minnesota. Minnesota Life was formerly known
as The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"), a mutual
life insurance company organized in 1880 under the laws of Minnesota. In 1998,
Minnesota Mutual reorganized as a stock insurance company subsidiary of
Minnesota Mutual Companies, Inc., a mutual insurance holding company, and took
the name Minnesota Life. Our home office is at 400 Robert Street North, St.
Paul, Minnesota 55101-2098, telephone: 1-800-362-3141. 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
The Variable Annuity
Account is one of our
separate accounts.
We established the Variable Annuity Account on September 10, 1984, in accordance
with Minnesota law. The separate account is registered as a "unit investment
trust" with the SEC under the Investment Company Act of 1940, but that
registration does not mean that the SEC supervises the management, or the
investment practices or policies, of the Variable Annuity Account.
The assets of the Variable Annuity Account are not chargeable with liabilities
arising out of any other business we may conduct. The investment performance of
the Variable Annuity Account is entirely independent of both the investment
performance of our General Account and of any of our other separate accounts.
All obligations under the contracts are our general corporate obligations.
Each of the sub-
accounts of the Variable
Annuity Account invests
in a different Fund
Portfolio.
The Variable Annuity Account has sub-accounts to which you may allocate purchase
payments. Each sub-account invests in shares of a corresponding Portfolio of the
Funds. Additional sub-accounts may be added at our discretion.
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<PAGE> 16
C. THE FUNDS
Below is a list of the available Portfolios and their investment adviser or sub-
adviser. Prospectuses for the Funds must accompany this Prospectus. You should
carefully read these Prospectuses before investing in the contract.
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
FUND/PORTFOLIO ADVISER SUB-ADVISER
-------------- ---------- -----------
<S> <C> <C>
ADVANTUS SERIES FUND, INC.:
Growth Portfolio Advantus Capital Management, Inc.
Bond Portfolio Advantus Capital Management, Inc.
Money Market Portfolio Advantus Capital Management, Inc.
Asset Allocation Portfolio Advantus Capital Management, Inc.
Mortgage Securities Portfolio Advantus Capital Management, Inc.
Index 500 Portfolio Advantus Capital Management, Inc.
Capital Appreciation Portfolio Advantus Capital Management, Inc. Winslow Capital
Management, Inc.
International Stock Portfolio Advantus Capital Management, Inc Templeton Investment
Counsel, Inc.
Small Company Growth Portfolio Advantus Capital Management, Inc.
Maturing Government Bond - 2002 Advantus Capital Management, Inc.
Portfolio
Maturing Government Bond - 2006 Advantus Capital Management, Inc.
Portfolio
Maturing Government Bond - 2010 Advantus Capital Management, Inc.
Portfolio
Value Stock Portfolio Advantus Capital Management, Inc.
Small Company Value Portfolio Advantus Capital Management, Inc.
Global Bond Portfolio Advantus Capital Management, Inc Julius Baer Investment
Management, Inc.
Index 400 Mid-Cap Portfolio Advantus Capital Management, Inc.
Macro-Cap Value Portfolio Advantus Capital Management, Inc. J.P. Morgan Investment
Management, Inc.
Micro-Cap Growth Portfolio Advantus Capital Management, Inc Wall Street Associates
Real Estate Securities Portfolio Advantus Capital Management, Inc.
TEMPLETON VARIABLE PRODUCTS SERIES
FUND:
Templeton Developing Markets Fund - Templeton Asset Management Ltd.
Class 2 Shares
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
FUND/PORTFOLIO ADVISER SUB-ADVISER
-------------- ---------- -----------
<S> <C> <C>
JANUS ASPEN SERIES:
Capital Appreciation Portfolio - Janus Capital
Service Shares
International Growth Portfolio - Janus Capital
Service Shares
FIDELITY VARIABLE INSURANCE PRODUCTS
FUNDS:
Mid Cap Portfolio - Service Class 2 Fidelity Management & Research
Shares
Contrafund Portfolio - Service Class Fidelity Management & Research
2 Shares
Equity-Income Portfolio - Service Fidelity Management & Research
Class 2 Shares
</TABLE>
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D. ADDITIONS, DELETIONS OR SUBSTITUTIONS
We may change the
Portfolios offered under
the contract.
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.
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. Sub-accounts may be established when, in our sole
discretion, marketing, tax, investment or other conditions warrant. We will use
similar considerations in determining whether to eliminate one or more of the
sub-accounts of the Variable Annuity Account. The addition of any investment
option may be made available to existing contract owners on whatever basis we
determine.
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 may invest
premiums 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. Neither
we nor the Funds currently foresee any such disadvantages either to variable
life insurance policy owners or to variable annuity contract owners. However,
the Funds' Boards of Directors intend to monitor events in order to identify any
material conflicts between policy owners and contract owners and to determine
what action, if any, should be taken in response thereto. Possible actions 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:
- changes in state insurance laws,
- changes in federal income tax laws,
- changes in the investment management of any of the Portfolios of the
Funds, or
- differences in voting instructions between those given by policy owners
and those given by contract owners.
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CONTRACT CHARGES
A. DEFERRED SALES CHARGE
A deferred sales charge
may apply.
No sales charge is deducted from a purchase payment made for this contract at
the time of its receipt. However, when a contract's accumulation value is
reduced by a withdrawal or a surrender, a deferred sales charge may be deducted.
This is for expenses related to the sale of the contracts. The amount of the
deferred sales charge is determined from the percentages shown in the table
below. The schedule in the table is applied separately to each purchase payment.
All purchase payments will be allocated to a withdrawal or a surrender for this
purpose on a first-in, first-out basis. It applies only to withdrawal or
surrender of purchase payments we received within seven years of the date of the
withdrawal or surrender.
The applicable deferred sales charge percentage is as shown in the table below:
<TABLE>
<CAPTION>
CONTRACT YEARS SINCE PAYMENT CHARGE
- ---------------------------- ------
<S> <C>
0-1 7%
1-2 7%
2-3 6%
3-4 5%
4-5 4%
5-6 3%
6-7 2%
7 and thereafter 0%
</TABLE>
The amount of the deferred sales charge is determined by:
- calculating the number of years each purchase payment being withdrawn
has been in the contract;
- multiplying each purchase payment withdrawn by the appropriate sales
charge percentage in the table; and
- adding the deferred sales charge from all purchase payments so
calculated. This amount is then deducted from your accumulation value.
EXAMPLE Assuming that all amounts to be withdrawn are subject to a deferred
sales load, if the contract owner requests a withdrawal of $1,000, and the
applicable sales charge is 7% (because the purchase payment was made within the
last 2 years), the contractowner will receive $1,000, the sales charge will be
$75.27 (which represents the sales charge applied to the total amount withdrawn,
including the sales charge) and the total withdrawn amount deducted from the
accumulation value will equal $1,075.27.
The deferred sales charge will not apply to:
- amounts withdrawn in any calendar year that are less than or equal to
the greater of: (1) accumulation value less purchase payments not
previously withdrawn; or (2) 10% of the sum of purchase payments not
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<PAGE> 20
previously withdrawn that have been received by us within seven years of
withdrawal;
- any amounts withdrawn to pay the contract fee;
- amounts payable as a death benefit upon the death of the owner or the
annuitant, if applicable;
- amounts applied to provide annuity payments under an annuity option;
- amounts withdrawn because of an excess contribution to a tax-qualified
contract (including for example IRAs and tax sheltered annuities);
- certain amounts of a contract's accumulation value withdrawn and applied
to the purchase of our Adjustable Income Annuity contract, an immediate
variable annuity contract (see the Adjustable Income Annuity prospectus
for details);
- a surrender or withdrawal requested any time after the first contract
anniversary when benefits are payable due to a qualifying confinement in
a hospital or medical care facility as described below; or
- a surrender or withdrawal requested any time after the first contract
anniversary in the event that benefits are payable because of the
diagnosis of a terminal illness as described below.
A surrender or withdrawal request made any time after the first contract
anniversary due to the owner's confinement in a hospital or medical care
facility for at least 90 consecutive days will not be subject to a deferred
sales charge. The request must be made while the owner is still confined or
within 60 days after the discharge from a hospital or medical care facility
after a confinement of at least 90 consecutive days. A medical care facility for
this purpose means a facility operated pursuant to law or any state licensed
facility providing medically necessary in-patient care which is:
- prescribed by a licensed Physician in writing; and
- based on physical limitations which prohibit daily living in a non-
institutional setting.
A surrender or withdrawal request made any time after the first contract
anniversary in the event the owner is diagnosed with a terminal illness will
also not be subject to a deferred sales charge. A terminal illness for this
purpose is a condition which:
- is diagnosed by a licensed Physician; and
- is expected to result in death within 12 months for 80% of diagnosed
cases (except for Pennsylvania where the 80% limitation does not apply).
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<PAGE> 21
For purposes of these provisions, we must receive due proof, satisfactory to us,
of the owner's confinement or terminal illness in writing. Physician for this
purpose means:
- a licensed medical doctor (MD) or a licensed doctor of osteopathy (DO)
practicing within the scope of his or her license; and
- not the owner, the annuitant or a member of either the owner's or the
annuitant's immediate families.
In certain states (for example New Jersey or Texas) a surrender or withdrawal
request due to the owner's confinement in a hospital or medical care facility;
or if the owner is diagnosed with a terminal illness; may be made immediately
after contract issue (rather than after the first contract anniversary). Please
see your contract for the applicable provision in your state.
If the owner of this contract is other than a natural person, such as a trust or
other similar entity, benefits payable due to nursing home confinement or
terminal illness will be based upon the annuitant.
If the owner, or annuitant in the case of a contract owned by a non-natural
person, is changed subject to the provisions of this contract, there will be a
one year waiting period before the new owner or annuitant is eligible for these
benefits.
The deferred sales charge is designed to compensate us for the distribution
expenses of the contract. To the extent that sales expenses are not recovered
from the sales load, we will recover them from our other assets or surplus
including profits from mortality and expense risk charges.
We pay broker-dealers to
sell the contracts.
Ascend Financial Services, Inc. ("Ascend Financial"), the principal underwriter
for the contracts, may pay up to 4.75% of the amount of purchase payments to
broker-dealers who sell the contracts. In addition, either Ascend Financial or
we will issue credits to broker-dealers which will allow their registered
representatives to attend meetings sponsored by us or our affiliates for
training and education purposes with respect to the insurance and/or investment
products that we or our affiliates offer. Such credits may cover the registered
representatives' transportation, hotel accommodations, meals, registration fees
and the like. We may also pay those registered representatives amounts based
upon their production and the persistency of life insurance and annuity business
they place with us.
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<PAGE> 22
B. MORTALITY AND EXPENSE RISK CHARGES
We assume mortality risk under the contract by our obligation to continue to
make monthly annuity payments, in accordance with the annuity rate tables and
other provisions in the contract, regardless of how long that annuitant lives or
all annuitants as a group live. This assures an annuitant that neither the
annuitant's own longevity nor an improvement in life expectancy generally will
have an adverse effect on the monthly annuity payments received under the
contract.
Our expense risk is the risk that the charges under the contract will be
inadequate to cover our expenses.
The mortality and
expense risk charge is
1.25%, but we may
increase it to 1.40%.
For assuming these risks, we currently make a deduction from the Variable
Annuity Account at the annual rate of 1.25% of net asset value. We reserve the
right to increase the charge to not more than 1.40% on an annual basis. Certain
states, such as Maryland, limit our ability to increase this charge. This charge
is deducted during both the accumulation phase and the annuity phase of the
contract.
If these deductions are insufficient to cover our actual costs, then we will
absorb the resulting losses. If the deductions are more than sufficient after
the establishment of any contingency reserves deemed prudent or required by law,
any excess will be profit to us. Some or all of such profit may be used to cover
any distribution costs not recovered through the deferred sales charge.
C. ADMINISTRATIVE CHARGE
We perform all contract administrative services. These include the review of
applications, the preparation and issue of contracts, the receipt of purchase
payments, forwarding amounts to the Funds for investment, the preparation and
mailing of periodic reports and other services.
For providing these services we make a deduction from the Variable Annuity
Account at the annual rate of .15% of the net asset value of the Variable
Annuity Account. We reserve the right to increase this administrative charge to
an annual rate of not more than .40%. Certain states, such as Maryland, limit
our ability to increase this charge.
Because the charge is designed to cover administrative expenses, it is taken
during both the accumulation period and the annuity period by the contract.
Since the charge is taken from a contract on each valuation date, there is no
return of any part of the charge in the event that the contract is redeemed. As
the charge is made as a percentage of assets in the Variable Annuity Account,
there is no necessary relationship between the amount of administrative charge
imposed on a given contract and the amount of expenses that may be attributable
to that contract.
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D. CONTRACT FEE
We charge a contract fee for maintaining the records and documents with each
contract. This fee is the lesser of $30 or 2% of accumulation value at the end
of the contract year. The contract fee will apply when the greater of either:
- accumulation value; or
- purchase payments, less withdrawals,
is less than $50,000 at the end of the contract year.
The fee is deducted on the contract anniversary pro-rata from the General
Account and Separate Account values.
E. PREMIUM TAXES
Deduction for any applicable state premium taxes may be made from each purchase
payment or when an annuity begins. Currently such taxes range from 0% to 3.5%,
depending on applicable law. Any amount withdrawn from the Contract may be
reduced by any premium taxes not previously deducted.
F. TRANSACTION CHARGES
There currently is no charge for any transfer. However, we reserve the right to
charge up to $10, for the second and subsequent transfers in any calendar month.
We also reserve the right to charge a $100 fee to cover administrative costs if
you exchange the contract for another of our variable annuities.
EXCHANGE OFFER
Certain owners of fixed or variable annuity contracts issued by us may exchange
an existing annuity contract for this contract. Contracts which may be exchanged
under the terms of this offer include:
- Most fixed annuity contracts issued by us or Ministers Life Insurance
Company
- Variable annuity contracts issued by our Variable Fund D
- Most of the MultiOption variable annuity contracts with a contingent
deferred sales charge
If you own a fixed annuity contract ("Fixed Contract") and wish to exchange it
for the MultiOption Achiever ("New Contract"), no deferred sales charge will be
assessed at the time of the exchange. The surrender charge in your New Contract
will be based on the amount of time remaining on your old Fixed Contract's
surrender charge schedule.
If you own a MultiOption Annuity- Flexible or Single Payment, MultiOption
Annuity Select, or a variable annuity contract issued by our Variable Fund D,
(referred to collectively as "Old Contracts"), no deferred sales charge will be
assessed when you exchange to the MultiOption Achiever contract ("New
Contract"). Rather, in computing the surrender charge for your New Contract, we
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<PAGE> 24
will treat all of your purchase payments to your Old Contract as if they had
been made to your New Contract on the date of the very first purchase payment to
the Old Contract.
Other important considerations that apply to all exchanges under this offer
include:
- - If you surrender your new MultiOption Achiever contract, the deferred sales
charge may be higher or lower than under your old contract.
- - Amounts exchanged into this contract WILL NOT BE treated as "purchase
payments" for the Wealthbuilder Credit. No amount exchanged will be entitled
to the Wealthbuilder Credit. Subsequent purchase payments, after the date of
exchange, will be entitled to any Wealthbuilder Credit applicable under the
program at the time of these payments.
- - The entire amount exchanged WILL BE treated as a "purchase payment" to
calculate the amounts not subject to a contingent deferred sales charge on
withdrawal, otherwise known as the "free-out amount." Therefore if you are
taking systematic withdrawals or amounts out of your contract to satisfy
required minimum distributions for example, you need to consider this
carefully as it may impact the charges imposed on your withdrawals.
- - To make an exchange, you need to complete an application for this Contract and
an Annuity Exchange Authorization form. You must also return your existing
contract to us. Finally, a $100 administrative fee will be charged for our
costs associated with the exchange. This amount must be submitted along with
your completed application for this Contract. It may not be deducted from your
accumulation value.
You should review both the terms of your old contract and this prospectus and
carefully consider whether an exchange of your old contract is right for you.
While this contract may provide new and beneficial product features to you, it
also may have new or higher charges or fees than your existing contract. We
reserve the right to modify or terminate this exchange offer at any time.
VOTING RIGHTS
You can instruct us how
to vote Fund shares.
We will vote the Fund shares held in the Variable Annuity Account at shareholder
meetings of the Funds. We will vote shares attributable to contracts in
accordance with instructions received from contract owners with voting interests
in each sub-account of the Variable Annuity Account. We will vote shares for
which no instructions are received and shares not attributable to contracts in
the same proportion as shares for which instructions have been received. The
number of votes for which a contract owner may provide instructions will be
calculated separately for each sub-account of the Variable Annuity Account. If
applicable laws should change so that we were allowed to vote shares in our own
right, then we may elect to do so.
During the accumulation period, you hold the voting interest in the contract.
The number of votes will be determined by dividing the accumulation value of the
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<PAGE> 25
contract attributable to each sub-account by the net asset value per share of
the Fund shares held by that sub-account.
During the annuity period the annuitant holds the voting interest in the
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 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, we count fractional shares.
We shall notify you or annuitant of a Fund shareholders' meeting if the contract
has shares to vote. 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. Flexible Payment Variable Annuity Contract
The contract is a flexible
payment variable
annuity.
The contract may be used in connection with all types of tax-qualified plans,
state deferred compensation 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. Purchase payments are flexible with
respect to timing and amount.
2. Issuance of Contract
We issue the contract to
you and you select the
annuitant.
The contract is issued to you, the contract owner named in the application. You
may be the annuitant or you may specify someone else to be the annuitant.
3. Modification of the Contract
Your 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.
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), then:
- 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.
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<PAGE> 26
If the contract is not issued in connection with a tax-qualified program, any
person's interest 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 we make before
it was recorded. Any payments to an assignee will be paid in a single sum. Any
claim made by an assignee will be subject to proof of the assignee's interest
and the extent of the assignment.
5. Limitations on Purchase Payments
You choose when to make purchase payments. Purchase payments must be at least
$2,000. This minimum may not apply under certain automatic or group payment
plans, or if other retirement plan limitations apply. There may also be limits
on the maximum contributions to retirement plans that qualify for special tax
treatment.
There is no minimum amount which must be allocated to any sub-account of the
Variable Annuity Account. In the Variable Annuity Account, your purchase
payments are invested in the Funds according to your instructions. We will
return your initial payment within five business days if:
- your application fails to specify which Portfolios you desire, or is
otherwise incomplete, and
- you do not consent to our retention of your initial payment until the
application is made complete.
You cannot pay more
than $5 million unless
we consent.
Total purchase payments under the contract may not exceed $5,000,000, except
with our consent.
The contract permits us to cancel your contract, and pay you its accumulation
value if:
We may cancel your
contract if you stop
making payments and
have a small
accumulation value.
- no purchase payments are made for a period of two or more full contract
years, and
- the total purchase payments made, less any withdrawals and associated
charges, are less than $2,000, and
- the accumulation value of the contract is less than $2,000.
We will notify you, in advance, of our intent to exercise this right in our
annual report to you about the status of your contract. We will cancel the
contract ninety days after the contract anniversary unless we receive an
additional purchase payment before the end of that ninety day period. Contracts
issued in some states (for example, New Jersey) do not contain such a
cancellation because the laws of those states do not permit it.
Additional purchase payments will not be accepted while either the owner or
joint owner qualifies under the nursing home or terminal illness provisions for
the waiver of any contingent deferred sales charges.
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6. Deferment of Payment
We normally pay lump
sum payments within
7 days, but may delay
payments in certain
circumstances.
We will pay any single sum payment within seven days after the date the payment
is called for by the terms of the contract, unless the payment is postponed for:
- 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 SEC;
- any period during which an emergency exists as determined by the SEC as
a result of which it is not reasonably practical to dispose of
securities in the Portfolio(s) or to fairly determine the value of the
assets of the Portfolio(s); or
- other periods the SEC by order permits for the protection of the
contract owners.
B. ANNUITY PAYMENTS AND OPTIONS
1. Annuity Payments
Variable annuity payments are determined on the basis of:
- the mortality table specified in the contract, which reflects the age of
the annuitant,
- the type of annuity payment option you select, and
- the investment performance of the Fund Portfolios you select.
The amount of the variable annuity payments will not be affected by adverse
mortality experience or by an increase in our expenses in excess of the expense
deductions provided for in the contract. The annuitant will receive the value of
a fixed number of annuity units each month. The value of those units, and thus
the amounts of the monthly annuity payments will, however, reflect investment
gains and losses and investment income of the Funds. Thus, the annuity payments
will vary with the investment experience of the assets of the Portfolios you
select.
2. Electing the Retirement Date and Form of Annuity
Each of the annuity
options is available on a
fixed, variable or
combination fixed and
variable basis.
The contract provides for four annuity options. Any one of them 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. We may make other
annuity options available on request.
While the contract requires that we must receive your notice of election to
begin annuity payments at least 30 days prior to the annuity commencement date,
we are currently waiving that requirement for 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.
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The contract permits an annuity payment to begin on the first day of any month.
Under the contract, if you do not make an election, annuity payments will begin
on the later of:
- the 85th birthday of the annuitant, or
- seven years after the date of issue of the contract.
You tell us when to begin
making annuity
payments to the
annuitant, unless your
retirement plan requires
them to commence by a
certain age.
Currently, it is our practice to await your instructions before beginning to pay
annuity payments. If you fail to elect an annuity option, a variable annuity
will be provided and the annuity option will 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 must be at least $20. If the first monthly annuity payment would be less
than $20, we may fulfill our obligation by paying in a single sum the surrender
value of the contract which would otherwise have been applied to provide annuity
payments.
The maximum amount which may be applied to provide a fixed annuity under the
contract is $1,000,000.
Benefits under retirement plans that qualify for special tax treatment generally
must commence no later than the April 1 following the year in which the
participant reaches age 70 1/2 and are subject to other conditions and
restrictions.
3. Annuity Options
OPTION 1 - LIFE ANNUITY This is an annuity payable monthly during the lifetime
of the annuitant and terminating with the last scheduled payment preceding the
death of the annuitant. This option offers the maximum monthly payment (of those
options involving life contingencies) 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 or she died prior to the due date of the second annuity payment,
two if he or she 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
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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 10 to 20 years, as elected. At any time prior to the
annuitant's death, the annuitant may elect to withdraw the commuted value of any
portion of the remaining annuity payments as determined by Minnesota Life.
Redemption requests for any period certain annuity may not be less than the
minimum contract withdrawal amount. Commutation prior to death is not available
on the general account.
If the annuitant dies before all payments have been made for the period certain
elected, payments will continue to the beneficiary during the remainder of the
period certain, or be commuted to a present value as determined by Minnesota
Life and paid as either a single sum or applied to effect a life annuity under
Option 1 or Option 2, at the beneficiary's election.
NOTICE -- PLEASE READ CAREFULLY
WE HAVE BEEN ADVISED THAT IT IS THE POSITION OF THE INTERNAL REVENUE SERVICE
THAT WHEN WITHDRAWALS (OTHER THAN ANNUITY PAYMENTS) ARE TAKEN FROM AN ANNUITY
CONTRACT IN "PAYOUT" STATUS, SUCH AS BY CANCELING A PERIOD CERTAIN ANNUITY
CONTRACT UNDER OPTION 4 PRIOR TO DEATH OF THE ANNUITANT AND TAKING A COMMUTED
VALUE, THEN ALL AMOUNTS RECEIVED BY THE TAXPAYER ARE TAXABLE AT ORDINARY INCOME
RATES AS AMOUNTS "NOT RECEIVED AS AN ANNUITY". IN ADDITION, SUCH AMOUNTS ARE
TAXABLE TO THE RECIPIENT WITHOUT REGARD TO THE OWNER'S INVESTMENT IN THE
CONTRACT OR ANY INVESTMENT GAIN WHICH MIGHT BE PRESENT IN THE CURRENT ANNUITY
VALUE. THIS ADVERSE TAX RESULT MEANS THAT OWNERS OF NON-QUALIFIED CONTRACTS
SHOULD CONSIDER CAREFULLY THE TAX IMPLICATIONS OF ANY WITHDRAWAL REQUESTS PRIOR
TO THE EXERCISE OF THIS RIGHT TO COMMUTE A PERIOD CERTAIN ANNUITY CONTRACT,
PRIOR TO DEATH OF THE ANNUITANT.
4. Determination of Amount of First Monthly Annuity Payment
The amount of your first
annuity payment depends
on the age of the
annuitant and the
annuity option you
select.
The first monthly annuity payment under the contract is determined by the
accumulation value of the contract when the annuity begins. In addition, many
states impose a premium tax on the amount used to purchase an annuity benefit,
depending on the type of plan involved. These taxes are deducted from the
accumulation 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 annuity payment option
elected and the "adjusted age" of the annuitant and any joint annuitant. A
formula for determining the adjusted age is contained in your contract.
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The contract contains tables indicating the dollar amount of the first fixed
monthly payment under each annuity payment option for each $1,000 of value
applied (after deduction of any premium taxes not previously deducted). If, when
annuity payments are elected, we are using tables of annuity rates for this
contract which result in larger annuity payments, we will use those tables
instead.
The dollar amount of the first monthly variable annuity payment is determined by
applying the accumulation value (minus any premium tax deduction) to a rate per
$1,000 contained in a table in the contract. The contract table on which the
rate per $1,000 is based assumes an interest rate of 4.5% per annum. The amount
of the first payment depends upon the annuity payment option selected and the
adjusted age(s) 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, except for transfers and in the case of
certain joint annuity payment options which provide for a reduction in payment
after the death of annuitant. This determination is made separately for each
sub-account of the Variable Annuity Account. The number of annuity units is
based upon the accumulation 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 payments.
The 4.5% interest rate assumed in the variable annuity determination would
produce level annuity payments if the net investment factor remained constant at
4.5% per year. Subsequent variable annuity payments will decrease, remain the
same or increase depending upon whether the actual net investment factor is less
than, equal to, or greater than 4.5%.
Annuity payments are always made as of the first day of a month. The contract
requires that we receive notice of election to begin annuity payments at least
thirty days prior to the annuity commencement date. We currently waive this
notice requirement, but reserve the right to enforce it 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. The transfer will occur on the valuation date on or next
following the date on which the request is received. The account value used to
determine the fixed annuity payment will be the value as of the last valuation
date of the month preceding the annuity 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
annuity commencement date.
If the request for a fixed or variable annuity payment is not received at least
three valuation days prior to the date used to determine the account value as
described above, the annuity commencement date will be changed to the first of
the month following the requested annuity commencement date.
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<PAGE> 31
5. Amount of Second and Subsequent Monthly Annuity Payments
The dollar amount of the second and later variable annuity payments is equal to
the number of annuity units determined for each sub-account multiplied by the
annuity unit value for that sub-account as of the due date of the payment. This
amount may increase or decrease from month to month.
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:
- .996338, and
- 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 (.996338 is a
factor to neutralize the assumed net investment factor, as discussed
above, of 4.5% per annum built into the first payment calculation which
is not applicable because the actual net investment rate is credited
instead).
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
You may change
Portfolios in the annuity
period, subject to some
restrictions.
During the annuity period, we hold amounts as "reserves" for our obligations to
make annuity payments under your contract. You specify where we hold those
reserves. If you specify a sub-account of the Variable Annuity Account, then the
amount of your annuity payments will vary with the performance of that sub-
account. Amounts held as annuity reserves may be transferred among the sub-
accounts. 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.
- 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.
- We must receive the written request for an annuity transfer more than 30
days in advance of the due date of the annuity payment subject to the
transfer.
Upon request, we will make available to you annuity reserve amount sub-account
information.
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<PAGE> 32
A transfer will be made on the basis of annuity unit values. The number of
annuity units being transferred from the sub-account 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 the 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 applied to provide a fixed annuity amount. This amount
will 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.
When we receive a request to make such a transfer to a fixed annuity, 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. We will use the same fixed annuity pricing at the time of transfer that
we use to determine an initial fixed annuity payment. 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 to which reserves
are transferred for the period between annuity valuation dates. Contracts with
this transfer feature may not be available in all states.
C. DEATH BENEFITS
If you die before annuity payments begin, we will pay the death benefit to the
beneficiary. If the owner of this contract is other than a natural person, such
as a trust or other similar entity, we will pay the death benefit to the
beneficiary on the death of the annuitant, if it occurs prior to the date that
annuity payments have started. The death benefit will be paid in a single sum to
the beneficiary designated unless an annuity payment option is elected.
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<PAGE> 33
If the owner or the annuitant, if applicable, dies prior to his or her 80th
birthday, the death benefit is the greater of:
- accumulation value payable at death; or
- the total amount of purchase payments, less all partial withdrawals; or
- the last "stepped-up value" prior to the date of death, adjusted for any
purchase payments and proportionately for withdrawals occurring
thereafter. The definition of this "stepped-up value" is described
below.
If the contract owner or the annuitant, if applicable, dies on or after his or
her 80th birthday, the death benefit is the greater of:
- the accumulation value payable at death; or
- the total amount of purchase payments, less all partial withdrawals; or
- the last stepped-up value prior to the date of death, adjusted
proportionately for any withdrawals occurring thereafter.
The stepped-up value will be determined on each contract anniversary that is an
exact multiple of three and is prior to the 80th birthday of the owner or the
annuitant, if applicable. The stepped-up value is the greater of: (a)
accumulation value on that contract anniversary; or (b) the previous stepped-up
value adjusted proportionately for any withdrawals occurring thereafter. Where
joint owners exist, there will be no further stepped-up values after the 80th
birthday of the oldest joint owner. After the death of the first joint owner,
stepped-up values may resume on the next contract anniversary that is an exact
multiple of three providing the surviving joint owner continues the contract and
has not yet reached his or her 80th birthday.
If there are joint owners of the contract, at the death of the first owner,
there will be no death benefit adjustment to the accumulation value, if the
surviving owner elects to continue the contract.
If any portion of the death benefit is payable to the designated beneficiary who
is also the surviving spouse, that spouse shall be treated as the contract owner
for purposes of: (1) when payments must begin, and (2) the time of distribution
in the event of that spouse's death. In addition, if a surviving spouse elects
to assume his or her deceased spouse's contract, there will be no adjustment to
the accumulation value in the form of a death benefit.
If the designated beneficiary is a person other than the owner's spouse, that
beneficiary may elect an annuity option measured by a period not longer than
that beneficiary's life expectancy only so long as annuity payments begin not
later than one year after the death. If there is no designated beneficiary, then
the entire value in the contract must be distributed within five years after the
death.
If the annuitant dies after annuity payments have started, we will pay whatever
amount may be required by the terms of the annuity payment option selected. The
remaining value in the contract must be distributed at least as rapidly as under
the option in effect at the annuitant's death.
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<PAGE> 34
To illustrate the death benefit, assume a contract is issued to an owner at age
63. A single purchase payment of $10,000 is made.
On the third contract anniversary (owner age 66), the stepped-up value is
determined to be $12,000, the accumulation value on that contract anniversary.
The death benefit at this point in time is $12,000 since the death benefit is
the greater of accumulation value ($12,000), purchase payments less withdrawals
($10,000), or the last stepped up value adjusted for any withdrawals ($12,000).
Stepped-up values and death benefits for the sixth, ninth, twelfth, and
fifteenth contract anniversaries are calculated in a similar fashion and are
shown in the table below. On the eighteenth contract anniversary, the death
benefit is not stepped-up since there are no further stepped-up values after the
80(th) birthday of the owner.
<TABLE>
<CAPTION>
CONTRACT PURCHASE PAYMENTS ACCUMULATION STEPPED-UP DEATH
ANNIVERSARY AGE LESS WITHDRAWALS VALUE DEATH BENEFIT BENEFIT
- ----------- --- ----------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C>
0 63 10,000 10,000 n/a 10,000
3 66 10,000 12,000 12,000 12,000
6 69 10,000 16,000 16,000 16,000
9 72 10,000 18,000 18,000 18,000
12 75 10,000 14,000 18,000 18,000
15 78 10,000 22,000 22,000 22,000
18 81 10,000 24,000 22,000 24,000
</TABLE>
MULTIOPTION ACHIEVER
DEATH BENEFIT ILLUSTRATION
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
PURCHASE PAYMENTS LESS STEPPED-UP DEATH
WITHDRAWALS ACCUMULATION VALUE BENEFIT
---------------------- ------------------ ----------------
<S> <C> <C> <C>
63 10000.00 10000.00 10000.00
10000.00 8000.00 10000.00
10000.00 11500.00 10000.00
66 10000.00 12000.00 10000.00
10000.00 14000.00 12000.00
10000.00 17000.00 12000.00
69 10000.00 16000.00 12000.00
10000.00 15000.00 16000.00
10000.00 16000.00 16000.00
72 10000.00 18000.00 16000.00
10000.00 21000.00 18000.00
10000.00 20000.00 18000.00
75 10000.00 14000.00 18000.00
10000.00 18000.00 18000.00
10000.00 19000.00 18000.00
78 10000.00 22000.00 18000.00
10000.00 24000.00 22000.00
10000.00 20000.00 22000.00
81 10000.00 24000.00 22000.00
10000.00 23000.00 22000.00
10000.00 22000.00 22000.00
</TABLE>
The value of the death benefit will be determined as of the valuation date
coincident with or next following the day we receive due proof of death and any
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<PAGE> 35
related information necessary. Any amounts due as a death benefit in excess of
the accumulation value on the date we receive due proof of death will be
directed into the money market sub-account in fulfillment of the guaranteed
death benefit provision of the Contract.
Prior to any election by the beneficiary of a death benefit payment option,
amounts held in the contract (including amounts paid or payable by us a death
benefit to the accumulation value) shall continue to be affected by the
sub-account performance as allocated by the contract owner. The beneficiary has
the right to allocate or transfer any amount to any available sub-account
option, subject to the same limitations imposed on the contract owner.
D. PURCHASE PAYMENTS AND VALUE OF THE CONTRACT
1. Crediting Accumulation Units
During the accumulation period -- the period before annuity payments begin --
each purchase payment is credited on the valuation date on or following the date
we receive the purchase payment at our home office. When the contract is
originally issued, application forms are completed by the applicant and
forwarded to our home office. We will review each application form for
compliance with our issue criteria and, if it is accepted, we will issue a
contract. Applications received without instructions as to allocations will be
treated as incomplete.
Initial purchase payments
are credited within
2 business days of our
receipt of a complete
application.
If your initial purchase payment is accompanied by an incomplete application,
your purchase payment will not be credited until we receive a completed
application. We will immediately return your initial purchase payment in full if
it appears your application cannot be completed within five business days,
unless you specifically consent to our holding your purchase payment until your
application is completed.
We will credit your purchase payments to your 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 you select.
Subsequent purchase
payments are credited on
the day we receive them,
or on the next business
day if they arrive late in
the day.
We will determine the value of accumulation units on each day on which each
Portfolio is valued. The net asset value of the Portfolios' 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 (currently, 3:00 p.m., Central time), on each
day, Monday through Friday, except:
- days on which changes in the value of that Fund's portfolio securities
will not materially affect the current net asset value of that
Portfolio's shares,
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<PAGE> 36
- days during which none of that Portfolio's shares are tendered for
redemption and no order to purchase or sell that Portfolio's shares is
received by that Portfolio and
- customary national business holidays on which the New York Stock
Exchange is closed for trading.
The value of accumulation units will be the same on all purchase payments we
receive at our home office on that day prior to the close of the Exchange.
Purchase payments received after the close of business of the Exchange will be
priced on the next valuation date.
In addition to providing for the allocation of purchase payments to the sub-
accounts of the Variable Annuity Account, the contracts allow you to allocate
purchase payments to our General Account for accumulation at a guaranteed
interest rate.
2. Transfers
Upon your written request, values may be transferred between our General Account
and the Variable Annuity Account or among the sub-accounts of the Variable
Annuity Account. We will make the transfer on the basis of accumulation unit
values next determined upon receipt of your request at our home office. No
deferred sales charge will be imposed on transfers. There is no dollar amount
limitation on transfers and we reserve the right to impose a charge of up to $10
for transfers occurring more frequently than once a month. No charge is
currently imposed.
The contracts permit us to limit the frequency and amount of transfers from our
General Account to the Variable Annuity Account. Except as provided below, we
limit such transfers to a single such transfer during any calendar year and to
any amount which is no more than 20% of the General Account accumulation value
at the time of the transfer. However, in the case of General Account
accumulation values of $1,000 or less, we will allow a one-time transfer of the
entire accumulation value amount from the General Account to the sub-accounts of
the Variable Annuity Account. Where you have a systematic transfer arrangement
with us, you may transfer General Account current interest earnings or a
specified amount from the General Account on a monthly, quarterly, semi-annual
or annual basis. If you transfer a specified amount from the General Account,
the maximum initial amount that may be transferred may not exceed 10% of your
current General Account accumulation value at the time of the first transfer.
For contracts where the General Account accumulation value is increased during
the year because of transfers into the General Account or additional purchase
payments made after the program is established, systematic transfers are allowed
to the extent of the greater of the current transfer amount or 10% of the then
current General Account accumulation value. Even with respect to systematic
transfer plans, we reserve the right to alter the terms of such programs once
established where funds are being transferred out of the General Account. Our
alteration of existing systematic transfer programs will be effective only upon
our written notice to contract owners.
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<PAGE> 37
Systematic transfers and
telephone transfers are
available.
Systematic transfer arrangements may be established among the sub-accounts of
the Variable Annuity Account. They may begin on the 10th or 20th of any month
and if a transfer cannot be completed it will be made on the next available
transfer date. In the absence of specific instructions, systematic transfers
will be made on a monthly basis and will remain active until the appropriate
sub-account accumulation value is depleted. Systematic transfer arrangements are
limited to a maximum of twenty sub-accounts. There will be no charge for
systematic transfers.
As a type of systematic transfer arrangement, for certain contracts we offer
automatic portfolio rebalancing ("APR") on a quarterly, semi-annual and annual
basis. Instructions to us must be in whole percentages totaling 100%. They will
be treated as instructions for transfers to and from the various sub-accounts.
Rebalancing instructions will not affect the current allocation of future
purchase payments; they may differ from those future allocations and are not
limited to any minimum or maximum number of sub-accounts. There will be no
charge for APR transfers. APR is not available for values in the General Account
or in the Advantus Fund Maturing Government Bond Portfolios.
You may effect transfers, cancel automatic premium plans or change the
allocation of your future purchase payments by telephone. Telephone transfers
are subject to the same conditions and procedures as written transfer requests.
During periods of marked economic or market changes, you may experience
difficulty in implementing a telephone transfer due to a heavy volume of
telephone calls. If that occurs, you should consider submitting a written
transfer request while continuing to attempt a telephone redemption. 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 us at 1-800-362-3141.
Telephone contract services are automatically available to you. 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 the owner to personally identify
themselves in telephone conversations through information we designate. We
record your telephone transfer instruction conversations and we provide you with
a written confirmation of your telephone transfer.
The underlying funds may restrict the amounts or frequency of transfers to or
from a sub-account of the separate account in order to protect fund
shareholders.
The interests of contract owners arising from the allocation of purchase
payments or the transfer of contract values to our General Account are not
registered under the Securities Act of 1933. We are not registered as an
investment company under the Investment Company Act of 1940. Accordingly, such
interests are not subject to the provisions of those acts that would apply if
registration under such acts were required. Therefore, the General Account is
not described here.
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<PAGE> 38
3. MultiOption Wealthbuilder Credit
If you make very large
purchase payments we
may credit your contract
with extra values
("Wealthbuilder Credits").
Where allowed by law, we reserve the right to credit certain additional amounts
("Wealthbuilder Credit") to your contract if you make large purchase payments.
We pay for your Wealthbuilder credit with funds from our General Account. We
reserve the right to modify, suspend or terminate this wealthbuilder credit
program at any time, or from time to time, without notice.
The current breakpoints for qualifying for a Wealthbuilder Credit are shown
below. Also shown is the value of the Wealthbuilder Credit as a percentage of
your purchase payment.
<TABLE>
<CAPTION>
WEALTHBUILDER CREDIT AS A
PURCHASE PAYMENT PERCENTAGE OF THE PURCHASE PAYMENT
---------------- ----------------------------------
<S> <C>
$ 0- 499,999 0.000%
500,000- 749,999 0.375
750,000- 999,999 0.750
1,000,000-1,499,999 1.125
1,500,000-1,999,999 1.500
2,000,000-2,499,999 1.875
2,500,000-2,999,999 2.250
3,000,000-3,999,999 2.625
4,000,000-5,000,000 3.000
</TABLE>
Wealthbuilder Credits
may have tax
consequences.
Your Wealthbuilder Credit is added the next business day after your purchase
payments are allocated to your contract, and is allocated to the investment
options in the same manner as the purchase payment. If you exercise your right
to return your contract under the free look provision, the value of any
Wealthbuilder Credit as of the date your contract is cancelled will be deducted
from your accumulated value prior to determining the amount to be returned to
you. This means that any loss attributable to the Wealthbuilder Credit amount
will be borne by Minnesota Life if cancelled during the free look period.
Similarly, the gain, if any attributable to the Wealthbuilder Credit amount,
will be recaptured by Minnesota Life in the event of cancellation during the
free look period. However, the total amount deducted will not exceed the total
sales charge of the contract.
We do not consider the Wealthbuilder Credit to be part of your "investment in
the contract" for income tax purposes (see "Federal Tax Status"). Generally,
Wealthbuilder Credit will be treated as gain upon distribution. Wealthbuilder
Credit amounts may be withdrawn without assessment of the deferred sales charge
(see "Deferred Sales Charge").
Each time a new purchase payment is made, a new Wealthbuilder Credit will be
calculated. The applicable percentage from the chart will be based on the total
cumulative purchase payments to date, including the new purchase payment, less
all prior purchase payments withdrawn. The new Wealthbuilder Credit equals this
percentage multiplied by the amount of the new purchase payment.
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<PAGE> 39
4. Value of the Contract
Your contract's
accumulation value
varies with the
performance of the
Portfolios you select and
is not guaranteed.
The accumulation value of your contract at any time prior to when annuity
payments begin can be determined by multiplying the number of accumulation units
of each sub-account to which you allocate values by the current value of these
units and then adding the values so calculated. There is no assurance that your
accumulation value will equal or exceed your purchase payments. We will advise
you periodically of the number of accumulation units in your contract, the
current value of each accumulation unit, and its total value.
5. 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 sub-account. The
value of an accumulation unit on any subsequent valuation date is determined by
multiplying:
- the value of that 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 any day other than a valuation date is its
value on the next valuation date.
6. 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
that sub-account for the valuation period, less a deduction for the mortality
and expense risk charge at the current rate of 1.25% per annum and a deduction
for the administration charge at the current rate of .15% per annum.
The gross investment rate is equal to:
- 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
- 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
- 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.
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<PAGE> 40
E. REDEMPTIONS
1. Partial Withdrawals and Surrender
Prior to the date annuity payments begin you may make partial withdrawals from
your contract in amounts of at least $250. Your request must be in writing and
signed. It may be sent to us via facsimile. Our FAX number is: (651) 665-7942.
Payment of a partial withdrawal or surrender will be made to you within 7 days
after we receive your completed request.
Your accumulation value will be reduced by the amount of your withdrawal and any
applicable deferred sales charge. Unless you tell us otherwise, withdrawals will
be made from the General Account accumulation value and from the Variable
Annuity Account accumulation value in the same proportion. We will waive the
applicable dollar amount limitation:
- on withdrawals where a systematic withdrawal program is in place and the
smaller amount satisfies the minimum distribution requirements of the
Code, or
- the withdrawal is requested because of an excess contribution to a tax-
qualified contract.
Withdrawal values will be determined as of the valuation date we received your
written withdrawal request at our home office. Unless you tell us otherwise,
withdrawals including systematic withdrawals, will be made from the sub-
accounts on a pro-rata basis. Please note that we can only make pro-rata
withdrawals from 20 sub-accounts on systematic withdrawals.
Before annuity payments begin, you may surrender the contract for its surrender
value. You will receive in a single cash sum the accumulation value computed as
of the valuation date your surrender request is received, reduced by any
applicable deferred sales charge. In lieu of a cash sum payment, you may elect
an annuity. In most cases, once annuity payments begin for an annuitant, the
annuitant cannot surrender that annuity benefit and receive a single sum
instead.
2. Right of Cancellation
You can cancel your
contract within 10 days
of receiving it and we
will refund you the
greater of your
accumulation value or
your purchase payments.
You should read your contract carefully as soon as you receive it. You may
cancel your 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. If you cancel and return your contract, we will refund to
you the greater of:
- the accumulation value of the contract, or
- 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, the free look period may be
longer. For example, California's free look period is thirty days. Those rights
are subject to change and may vary among the states.
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<PAGE> 41
The liability of the Variable Annuity Account is limited to the accumulation
value of the contract at the time it is returned for cancellation. We will pay
for any additional amounts necessary to make our refund to you equal to your
purchase payments.
FEDERAL TAX STATUS
INTRODUCTION
We are not offering tax
advice. You should
consult your own tax
adviser.
Our tax discussion in this prospectus is general in nature and is not intended
as tax advice. You should consult a competent tax adviser. We make no attempt 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. We make no representation regarding the likelihood of continuation
of current income tax laws or the current interpretations of the Internal
Revenue Service ("IRS"). The contract may be purchased on a non-tax qualified
basis or purchased and used in connection with certain retirement arrangements
entitled to special income tax treatment under section 401(a), 403(b), 408(b),
408A or 457 of the Code. The ultimate effect of federal income taxes on the
amounts held under a contract, on annuity payments, and on the economic benefit
to the contract owner, the annuitant, or the beneficiary(ies) may depend on the
tax status of the individual concerned.
We are taxed as a "life insurance company" under the Internal Revenue Code. The
operations of the Variable Annuity Account form a part of, and are taxed with,
our other business activities. Currently, we pay no federal income tax 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 we do not
anticipate any change in that tax status.
TAXATION OF ANNUITY CONTRACTS IN GENERAL
Taxes on gains under the
contract are normally
deferred until there is a
distribution of contract
values.
Section 72 of the Code governs taxation of nonqualified annuities in general and
some aspects of qualified programs. No taxes are generally 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. As a general rule, deferred
annuity contracts held by an entity (such as a corporation or trust) that is not
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.
Ordinary income tax
rates apply to amounts
distributed in excess of
purchase payments.
Gains are assumed to be
distributed before return
of purchase payments.
The taxable portion of amounts you receive in the event of a full surrender of
an annuity is generally the amount in excess of the cost basis (i.e., purchase
payments) for the contract. Amounts withdrawn upon a partial withdrawal 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
Page 36
<PAGE> 42
payments made under the contract. All taxable amounts received under an annuity
contract are subject to tax at ordinary rather than capital gain tax rates.
In the case of a withdrawal under an annuity that is part of a tax-qualified
retirement plan, 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.
The taxable portion for annuity payments, is generally determined by a formula
that establishes the ratio of the cost basis of the contract to the expected
return under the contract. The taxable part is taxed at ordinary income rates.
A penalty tax may apply
to distributions prior to
age 59 1/2.
The Code imposes a 10% penalty tax on the taxable portion of certain
distributions from annuity contracts. 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, where they are made for
the life (or life expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and beneficiary.
For some types of qualified plans, other tax penalties may apply to certain
distributions.
Transfers, assignments
and certain designations
of annuitants can have
tax consequences.
A transfer of ownership of a contract, a pledge of any interest in a contract as
security for a loan, 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. If you are contemplating such a transfer, pledge,
designation or assignment, you should consult a competent tax adviser about its
potential tax effects.
For purposes of determining a contract owner's gross income, the Code provides
that all nonqualified deferred annuity contracts issued by the same company (or
its affiliates) to the same contract owner during any calendar year shall be
treated as one annuity contract. Additional rules may be promulgated under this
provision to prevent avoidance of its effect through the ownership of serial
contracts or otherwise.
Page 37
<PAGE> 43
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code authorizes the Treasury Department 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 Portfolios, intends to comply with the diversification requirements
prescribed in Regulations Section 1.817-5, which affect how the Portfolio's
assets may be invested. Although the investment adviser of Advantus Fund is an
affiliate of ours, we do not control Advantus Fund or the investments of its
Portfolios. Nonetheless, we believe that each Portfolio of Advantus Fund in
which the Variable Annuity Account owns shares will be operated in compliance
with the requirements prescribed by the Treasury.
Prior to the enactment of Section 817(h), the IRS published several rulings
under which owners of certain variable annuity contracts were treated as owners,
for federal income tax purposes, of the assets held in a separate account used
to support their contracts. In those circumstances, income and gains from the
separate account assets would be includable in the variable annuity contract
owner's gross income. However, the continued effectiveness of the pre-Section
817(h) published rulings is somewhat uncertain. In connection with its issuance
of proposed regulations under Section 817(h) in 1986, the Treasury Department
announced that those regulations did 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."
While the Treasury's 1986 announcement stated that guidance would be issued on
the "extent to which the policyholders may direct their investment to particular
sub-accounts without being treated as owners of the underlying assets", no such
guidance has been forthcoming.
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. Minnesota Life does not
believe that the ownership rights of a contract owner under the Contract would
result in any contract owner being treated as the owner of the assets of the
Variable Annuity Account. However, Minnesota Life does not know what standards
would be applied if the Treasury Department should proceed to issue regulations
or rulings on this issue. Minnesota Life 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.
Page 38
<PAGE> 44
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
Section 72(s) of the Code requires any nonqualified contract issued after
January 18, 1985 to provide that:
- 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
- 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 will be considered satisfied if any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary"
who is a natural person, is distributed over the life of that 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", who must be a natural person, is the person designated
by the owner as a beneficiary and to whom ownership of the contract passes by
reason of death. If the owner's "designated beneficiary" is the surviving spouse
of the owner, however, the contract may be continued with the surviving spouse
as the new owner.
Nonqualified 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. We
intend 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
Death benefits paid upon the death of a contract owner, generally, 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,
or (2) if distributed under an annuity option, they are taxed in the same manner
as annuity payments, as described above.
POSSIBLE CHANGES IN TAXATION
Congress may change the
tax laws and reduce or
eliminate any tax
advantages of the
contract.
Although the likelihood of there being any change is uncertain, there is always
the possibility that the tax treatment of the contracts could change by
legislation or other means. Moreover, it is also possible that any change could
be retroactive
Page 39
<PAGE> 45
(that is, taking effect before the date of the change). You should consult a tax
adviser with respect to legislative developments and their effect on the
contract.
TAX QUALIFIED PROGRAMS
The contract is designed for use with several types of retirement plans that
qualify for special tax treatment. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from:
- contributions in excess of specified limits;
- distributions prior to age 59 1/2 (subject to certain exceptions);
- distributions that do not conform to specified minimum distribution
rules; and
- other specified circumstances.
We make no attempt to provide more than general information about the use of
annuities with the various types of retirement plans. The rights of any person
to any benefits under annuity contracts 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 our annuity administration
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the contracts comply with applicable law. If you intend to purchase a
contract for use with any retirement plan you should consult your legal counsel
and tax adviser regarding the suitability of the contract.
For qualified plans under Section 401(a), 403(b), and 457, the Code requires
that distributions generally must commence no later than the later of April 1 of
the calendar year following the calendar year in which the Owner (or plan
participant) (i) reaches age 70 1/2 or (ii) retires and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than April 1 of the calendar year
following the calendar year in which the Owner (or plan participant) reaches age
70 1/2. Roth IRAs under Section 408A do not require distributions at any time
prior to the Owner's death.
WITHHOLDING
Distributions are subject
to income tax
withholding requirements
unless you take steps to
prevent it.
In general, distributions from annuity contracts are subject to federal income
tax withholding unless the recipient elects not to have tax withheld. Different
rules
Page 40
<PAGE> 46
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:
- one of a series of substantially equal annual (or more frequent)
payments made:
-- over the life or life expectancy of the employee,
-- over the joint lives or joint expectancies of the employee and the
employee's designated beneficiary, or
-- for a specified period of ten years or more;
- a required minimum distribution; or
- the non-taxable portion of a distribution.
Any distribution eligible for rollover, which may include payment to an
employee, an employee's surviving spouse or an ex-spouse who is an alternate
payee, will be subject to federal tax withholding at a 20% rate unless the
distribution is made as a direct rollover to a tax-qualified plan or to an
individual retirement account or annuity. It may be noted that amounts received
by individuals which are eligible for rollover may still be placed in another
tax-qualified plan or individual retirement account or individual retirement
annuity if the transaction is completed within 60 days after the distribution
has been received. Such a taxpayer must replace withheld amounts with other
funds to avoid taxation on the amount previously withheld.
SEE YOUR OWN TAX ADVISER
The foregoing summary of the federal income tax consequences under these
contracts is not exhaustive. Special rules are provided with respect to
situations not discussed here. Should a plan lose its qualified status,
employees will lose some of the tax benefits described. Statutory changes in the
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 you should consult a qualified tax adviser.
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
Page 41
<PAGE> 47
yield quotations for a seven-day or other specified period. In the case of the
other sub-accounts, performance data will consist of average annual total return
quotations for one year, five year and ten year periods and for the period when
the underlying Portfolios first became available to the Variable Annuity
Account. Such performance data may be accompanied by cumulative total return
quotations for the comparable periods. For periods prior to the date of this
Prospectus the quotations will be based on the assumption that the contract
described herein was issued when the underlying Portfolios first became
available to the Variable Annuity Account under other contracts issued by us.
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
charges made pursuant to the terms of the contracts offered by this Prospectus
and charges of underlying funds. More detailed information on the computations
is set forth in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information, which contains additional information
including financial statements, is available from us at your request. The table
of contents for that Statement of Additional Information is as follows:
Directors and Principal Management Officers of Minnesota Life
Distribution of Contract
Performance Data
Auditors
Registration Statement
Financial Statements
Page 42
<PAGE> 48
APPENDIX A--CONDENSED FINANCIAL INFORMATION AND FINANCIAL STATEMENTS
Page A-1
<PAGE> 49
APPENDIX B--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%, 6.66% and 12.00%.
For illustration purposes, an average annual expense equal to 2.16% of the
average daily net assets is deducted from the gross investment return to
determine the net investment return. The net investment return is then used to
project the monthly variable annuity incomes. The expense charge of 2.16%
includes: 1.25% for Mortality and Expense Risk, .15% for Administrative Charge
and an average of .76% 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 4.50%. After the first variable annuity payment, future payments will
increase if the annualized net rate of return exceeds the initial interest rate,
and will decrease if the annualized net rate of return is less than the initial
interest rate.
The illustration provided is for a 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%).
Page B-1
<PAGE> 50
ACTUAL 1999 VARIABLE ANNUITY ACCOUNT CHARGES AND FUND EXPENSES
<TABLE>
<CAPTION>
MORTALITY & FUND OTHER
EXPENSE ADMINISTRATIVE MANAGEMENT FUND DISTRIBUTION
SEPARATE ACCOUNT SUB-ACCOUNT NAME RISK CHARGE FEE EXPENSES EXPENSES TOTAL
--------------------------------- ----------- -------------- ---------- -------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
ADVANTUS SERIES FUNDS INC:
Growth.................................. 1.25% .15% .50% .03% -- 1.93%
Bond.................................... 1.25% .15% .50% .05% -- 1.95%
Money Market............................ 1.25% .15% .50% .08% -- 1.98%
Asset Allocation........................ 1.25% .15% .50% .03% -- 1.93%
Mortgage Securities..................... 1.25% .15% .50% .07% -- 1.97%
Index 500............................... 1.25% .15% .40% .04% -- 1.84%
Capital Appreciation.................... 1.25% .15% .75% .03% -- 2.18%
International Stock..................... 1.25% .15% .70% .24% -- 2.34%
Small Company Growth.................... 1.25% .15% .75% .04% -- 2.19%
Maturing Government Bond 2002(1)........ 1.25% .15% .25% .15% -- 1.80%
Maturing Government Bond 2006(1)........ 1.25% .15% .25% .15% -- 1.80%
Maturing Government Bond 2010(1)........ 1.25% .15% .25% .15% -- 1.80%
Value Stock............................. 1.25% .15% .75% .04% -- 2.19%
Small Company Value(1).................. 1.25% .15% .75% .15% -- 2.30%
Global Bond............................. 1.25% .15% .60% .53% -- 2.53%
Index 400 Mid-Cap(1).................... 1.25% .15% .40% .15% -- 1.95%
Macro-Cap Value(1)...................... 1.25% .15% .70% .15% -- 2.25%
Micro-Cap Growth(1)..................... 1.25% .15% 1.10% .15% -- 2.65%
Real Estate Securities(1)............... 1.25% .15% .75% .15% -- 2.30%
TEMPLETON VARIABLE PRODUCTS SERIES FUND:
Templeton Developing Markets Portfolio
Class 2(2)........................... 1.25% .15% 1.25% .41% .25% 3.31%
JANUS ASPEN SERIES:
Capital Appreciation Portfolio-Service
Shares (2)...........................
International Growth Portfolio-Service
Shares (2)...........................
FIDELITY VARIABLE INSURANCE PRODUCTS
FUNDS:
Mid Cap Portfolio-Service Class 2
Shares (2)...........................
Contrafund Portfolio-Service Class 2
Shares (2)...........................
Equity-Income Portfolio-Service Class 2
Shares (2)...........................
Average................................. 1.25% .15% .61% .14% .01% 2.16%
</TABLE>
(1) Minnesota Life voluntarily absorbed certain expenses of the Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government
Bond 2010, Small Company Value, Index 400 Mid-Cap, Macro-Cap Value,
Micro-Cap Growth, and Real Estate Securities Portfolios for the period ended
December 31, 1998. If these portfolios had been charged for expenses, the
ratio of expenses to average daily net assets would have been 1.07%, 1.12%,
1.33%, 1.83%, 1.36%, 2.53%, 2.10%, and 1.90%, respectively. For these
portfolios, it is Minnesota Life's intention to waive other fund expenses
during the current fiscal year which exceed, as a percentage of average
daily net assets, .15%. Minnesota Life also reserves the option to reduce
the level of other expenses which it will voluntarily absorb.
(2) This class of shares of the Fund has a distribution plan or "Rule 12b-1
Plan" which is described in the Fund's prospectus.
Page B-2
<PAGE> 51
VARIABLE ANNUITY PAYOUT ILLUSTRATION
<TABLE>
<S> <C>
PREPARED FOR: Client ANNUITIZATION OPTION: 10 Year Certain with Life
Contingency
PRESENTED BY: Minnesota Life ANNUITY COMMENCEMENT: 06/01/1999
SEX: Male DATE OF SINGLE PAYMENT RECEIVED: $100,000.00
BIRTH: 06/01/1934
ISSUE STATE: MN FUNDS: Non-Qualified
LIFE EXPECTANCY: 20.0 (IRS) 18.1 (ML) INITIAL MONTHLY INCOME: $663.26
AMOUNT ALLOCATED TO VARIABLE: $100,000.00
</TABLE>
The monthly variable annuity income amount shown below assumes a constant annual
investment return. The initial interest rate of 4.50% is the assumed rate used
to calculate the first monthly payment. Thereafter, monthly payments will
increase or decrease based upon the relationship between the initial interest
rate and the performance of the sub-account(s) selected. The investment returns
shown are hypothetical and not a representation of future returns.
<TABLE>
<CAPTION>
MONTHLY INCOME ASSUMING
ANNUAL RATE OF RETURN
-------------------------------------------
BEGINNING 0.00% GROSS 6.66% GROSS 12.00% GROSS
DATE OF YEAR AGE (-2.16% NET) (4.50% NET) (9.84% NET)
---- --------- --- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
June 01, 1999.................................. 1 65 663 663 663
June 01, 2000.................................. 2 66 621 663 697
June 01, 2001.................................. 3 67 581 663 733
June 01, 2002.................................. 4 68 544 663 770
June 01, 2003.................................. 5 69 510 663 810
June 01, 2005.................................. 7 71 447 663 894
June 01, 2007.................................. 9 73 392 663 988
June 01, 2009.................................. 11 75 343 663 1,092
June 01, 2011.................................. 13 77 301 663 1,206
June 01, 2013.................................. 15 79 264 663 1,333
June 01, 2015.................................. 17 81 231 663 1,472
June 01, 2017.................................. 19 83 203 663 1,627
June 01, 2019.................................. 21 85 178 663 1,797
June 01, 2021.................................. 23 87 156 663 1,985
June 01, 2023.................................. 25 89 137 663 2,194
June 01, 2025.................................. 27 91 120 663 2,423
June 01, 2027.................................. 29 93 105 663 2,677
June 01, 2029.................................. 31 95 92 663 2,958
June 01, 2031.................................. 33 97 81 663 3,268
June 01, 2034.................................. 36 100 66 663 3,795
</TABLE>
IF YOU APPLIED THE AMOUNT OF YOUR PURCHASE PAYMENT ALLOCATED TO VARIABLE TO A
FIXED ANNUITY ON THE QUOTATION DATE OF THIS ILLUSTRATION, YOUR FIXED ANNUITY
INCOME WOULD BE $698.41.
Net rate of return reflects expenses totaling 2.16%, which consist of the 1.25%
Variable Annuity Account mortality and expense risk charge, .15% administrative
charge and .76% for the Series Fund management fee and other fund expenses (this
is an average with the actual varying from .40% to 1.91%).
Minnesota Life MultiOption variable annuities are available through Ascend
Financial Services, Inc., Securities Dealer, Member NASD/SIPC. This illustration
must be accompanied or preceded by a current prospectus for the Variable Annuity
Account, Advantus Series Fund, Inc. and Templeton Variable Products Series Fund.
THE INVESTMENT RETURNS SHOWN ARE HYPOTHETICAL AND ARE NOT A REPRESENTATION OF
FUTURE RESULTS.
THIS IS AN ILLUSTRATION ONLY AND NOT A CONTRACT.
Page B-3
<PAGE> 52
APPENDIX C--TYPES OF QUALIFIED PLANS
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. Income attributable to elective contributions may not be distributed
in the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
Individual Retirement Annuity, (an "IRA"). Distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. The sale of a contract for use with an IRA may be subject to special
disclosure requirements of the IRS. Purchasers of a contract for use with IRAs
will be provided with supplemental information required by the IRS or other
appropriate agency. Such purchasers will have the right to revoke their purchase
within 7 days of the earlier of the establishment of the IRA or their purchase.
A qualified contract issued in connection with an IRA will be amended as
necessary to conform to the requirements of the Code. You should seek competent
advice as to the suitability of the Contract for use with IRAs.
Earnings in an IRA are not taxed until distribution. IRA contributions are
limited each year to the lesser of $2,000 or 100% of the owner's adjusted gross
income and may be deductible in whole or in part depending on the individual's
income. The limit on the amount contributed to an IRA does not apply to
distributions from certain other types of qualified plans that are "rolled over"
on a tax-deferred basis into an IRA. Amounts in the IRA (other than
nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
SIMPLIFIED EMPLOYEE PENSION (SEP) IRAS
Employers may establish Simplified Employee Pension (SEP) IRAs under Code
section 408(k) to provide IRA contributions on behalf of their employees. In
addition to all of the general Code rules governing IRAs, such plans are subject
to certain Code requirements regarding participation and amounts of
contributions.
SIMPLE IRAS
Beginning January 1, 1997, certain small employers may establish Simple IRAs 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 Simple IRAs
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
Page C-1
<PAGE> 53
to 25% if the distribution occurs within the first two years after the
commencement of the employee's participation in the plan.
ROTH IRAS
Effective January 1, 1998, section 408A of the Code permits certain eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth IRA. Contributions to a Roth IRA, which are subject to
certain limitations, must be made in cash or as a rollover or conversion from
another Roth IRA or a traditional IRA. A rollover from, or conversion of, a
traditional IRA to a Roth IRA may be subject to tax, contingent deferred sales
charge and other special rules may apply.
Qualified distributions from a Roth IRA, as defined by the Code, generally are
excluded from gross income. Qualified distributions include those distributions
made more than five years after the taxable year of the first contribution to
the Roth IRA, but only if : (1) the annuity owner has reached age 59 1/2; (2)
the distribution is paid to a beneficiary after the owner's death; (3) the
annuity owner becomes disabled; or (4) the distribution will be used for a first
time home purchase and does not exceed $10,000. Non-qualified distributions are
includable in gross income only to the extent they exceed contributions made to
the Roth IRA. The taxable portion of a non-qualified distribution may be subject
to a 10% penalty tax.
In addition, state laws may not completely follow the federal tax treatment of
Roth IRAs. You should consult your tax adviser for further information regarding
Roth IRAs.
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 for service to 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. In
general, all amounts received under a Section 457 plan are taxable and are
subject to federal income tax withholding as wages. Under the provisions of the
Small Business Job Protection Act of 1996, all of the assets and income of a
governmental plan maintained by an eligible employer as a Section 457 plan must
be held in trust or in a qualifying custodial account or annuity contract held
for the exclusive benefit of plan participants and beneficiaries.
Page C-2
<PAGE> 54
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 55
VARIABLE ANNUITY ACCOUNT
CROSS REFERENCE SHEET TO STATEMENT OF ADDITIONAL INFORMATION
FORM N-4
<TABLE>
<CAPTION>
ITEM NUMBER CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------- ---------------------------------------------------------------------------
<S> <C>
15. Cover Page
16. Cover Page
17. Directors and Principal Management Officers of Minnesota Life
18. Not applicable
19. Not applicable
20. Distribution of Contract
21. Performance Data
22. Not applicable
23. Financial Statements
</TABLE>
<PAGE> 56
Variable Annuity Account
("Variable Annuity Account"), a Separate Account of
Minnesota Life Insurance Company
("Minnesota Life")
400 Robert Street North
St. Paul, Minnesota 55101-2098
Telephone: 1-800-362-3141
Statement of Additional Information
The date of this document and the Prospectus is: May 1, 2000
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus. Therefore, this Statement should be read
in conjunction with the Variable Annuity Account's current Prospectus, bearing
the same date, which may be obtained by calling Minnesota Life Insurance Company
at 1-800-362-3141; or writing to Minnesota Life at Minnesota Mutual Center, 400
Robert Street North, St. Paul, Minnesota 55101-2098.
Directors and Principal Management Officers of Minnesota Life
Distribution of Contract
Performance Data
Auditors
Registration Statement
Financial Statements
<PAGE> 57
DIRECTORS AND PRINCIPAL MANAGEMENT OFFICERS OF MINNESOTA LIFE
Directors Principal Occupation
Anthony L. Andersen Chair-Board of Directors, H. B. Fuller
Company, St. Paul, Minnesota, since June
1995, prior thereto for more than five
years President and Chief Executive
Officer, H. B. Fuller Company (Adhesive
Products)
Leslie S. Biller Vice Chairman and Chief Operating
Officer, Wells Fargo & Company, San
Francisco, California (Banking)
John F. Grundhofer President, Chairman and Chief Executive
Officer, U.S. Bancorp, Minneapolis,
Minnesota (Banking)
Robert E. Hunstad Executive Vice President,
Minnesota Life Insurance
Company, St. Paul, Minnesota
Dennis E. Prohofsky Senior Vice President, General
Counsel and Secretary,
Minnesota Life Insurance
Company, St. Paul, Minnesota
Robert L. Senkler Chairman of the Board, President and
Chief Executive Officer, Minnesota Life
Insurance Company, since August 1995;
prior thereto for more than five years
Vice President and Actuary, Minnesota
Life Insurance Company
Michael E. Shannon Chairman, Chief Financial and
Administrative Officer, Ecolab, Inc.,
St. Paul, Minnesota (Develops and
Markets Cleaning and Sanitizing
Products)
William N. Westhoff Senior Vice President, Minnesota Life
Insurance Company, St. Paul,
Minnesota since April 1998, prior
thereto, Senior Vice President, Global
Investments, American Express Financial
Corporation, Minneapolis, Minnesota
from August 1994 to October 1997
Frederick T. Weyerhaeuser Retired since April 1998, prior thereto
Chairman and Treasurer, Clearwater
Investment Trust since May 1996, prior
thereto for more than five years,
Chairman, Clearwater Management Company,
St. Paul, Minnesota (Financial
Management)
<PAGE> 58
Principal Officers (other than Directors)
Name Position
John F. Bruder Senior Vice President
Keith M. Campbell Senior Vice President
Robert E. Hunstad Executive Vice President
James E. Johnson Senior Vice President and Actuary
Dennis E. Prohofsky Senior Vice President, General Counsel
and Secretary
Gregory S. Strong Senior Vice President and Chief
Financial Officer
Terrence M. Sullivan Senior Vice President
Randy F. Wallake Senior Vice President
William N. Westhoff Senior Vice President and Treasurer
All Directors who are not also officers of Minnesota Life have had the principal
occupation (or employers) shown for at least five years. All officers of
Minnesota Life have been employed by Minnesota Life for at least five years with
the exception of Mr. Westhoff. Mr. Westhoff has been employed by Minnesota Life
since April 1998. Prior thereto, Mr. Westhoff was employed by American Express
Financial Corporation, Minneapolis, Minnesota, from August 1994 to October 1997
as Senior Vice President, Global Investments.
DISTRIBUTION OF CONTRACT
The contract will be sold in a continuous offering by our life insurance
agents who are also registered representatives of Ascend Financial Services,
Inc. ("Ascend Financial") or other broker-dealers who have entered into selling
agreements with Ascend Financial. Ascend Financial acts as principal underwriter
of the contracts. Ascend Financial is a wholly-owned subsidiary of Advantus
Capital Management, Inc., which in turn is a wholly-owned subsidiary of
Minnesota Life. Advantus Capital Management, Inc., is a registered investment
adviser and the investment adviser to the Advantus Series Fund, Inc. Ascend
Financial is registered as a broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.
Amounts paid by Minnesota Life to the underwriter for 1999, 1998, and 1997 were
$16,104,617, $15,989,724, and $15,067,613 respectively, for payment to
associated dealers on the sale of the contracts, which includes other contracts
issued through the Variable Annuity Account. Agents of Minnesota Life who are
also registered representatives of Ascend Financial are compensated directly by
Minnesota Life.
<PAGE> 59
PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN
Average annual total return figures for the sub-accounts represent the rates of
return for the sub-accounts for the specified periods ended December 31, 1999.
For periods prior to the date of this Prospectus the figures will be based on
the assumption that the contracts described herein were issued when the
underlying Portfolios first became available to the Variable Annuity Account.
Average annual total return is equal to the percentage change between the net
asset value of a hypothetical $1,000 investment at the beginning of the period
referenced and the net asset value of that same investment at the end of that
period.
The average annual total return figures published by the Variable Annuity
Account will reflect Minnesota Life's voluntary absorption of certain Fund
expenses. For the period subsequent to March 9, 1987, Minnesota Life is
voluntarily absorbing the fees and expenses that exceed .65% of the average
daily net assets of the Growth, Bond, Money Market, Asset Allocation and
Mortgage Securities Portfolios of the Fund, .55% of the average daily net assets
of the Index 500 Portfolio of the Fund, .90% of the average daily net assets of
the Capital Appreciation and Small Company Growth Portfolios of the Fund and
expenses that exceed 1.00% of the average daily net assets of the International
Stock Portfolio of the Fund exclusive of the advisory fee. For the period
subsequent to May 2, 1994, Minnesota Life has voluntarily absorbed fees and
expenses that exceed .90% of the average daily net assets of the Value Stock
Portfolio and fees and expenses that exceed .40% of the average daily net assets
of the Maturing Government Bond Portfolios maturing in 2006 and 2010; and fees
and expenses that exceed .20% of the average daily net assets of the Maturing
Government Bond Portfolio maturing in 2002. Subsequent to May 1, 1998, Minnesota
Life has voluntarily absorbed fees and expenses that exceed .40% of the average
daily net assets of the Maturing Government Bond Portfolio maturing in 2002.
For the period subsequent to October 1, 1997, Minnesota Life has voluntarily
agreed to absorb fees and expenses that exceed .55% of the average daily net
assets of the Index 400 Mid-Cap Portfolio, .90% of the average daily net assets
of the Small Company Value Portfolio, 1.25% of the average daily net assets of
the Micro-Cap Growth Portfolio, .85% of the average daily net assets of the
Macro-Cap Value Portfolio and expenses that exceed 1.00% of the average daily
net assets of the Global Bond Portfolio of the Fund exclusive of the advisory
fee. For the period subsequent to May 1, 1998, Minnesota Life has voluntarily
agreed to absorb fees and expenses that exceed .90% of the average daily net
assets of the Real Estate Securities Portfolio. There is no specified or minimum
period of time during which Minnesota Life has agreed to continue its voluntary
absorption of these expenses, and Minnesota Life may in its discretion cease its
absorption of expenses at any time. Should Minnesota Life cease absorbing
expenses the effect would be to increase substantially Fund expenses and thereby
reduce investment return.
<PAGE> 60
The average annual rates of return for the Sub-Accounts, in connection with the
contract described in the Prospectus, for the specified periods ended December
31, 1998 are shown in the tables below. The figures in parentheses show what the
average annual rates of return would have been had Minnesota Life not absorbed
Fund expenses as described above.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Year Ended Five Years Ten Years From Inception Date of
12/31/98 Ended 12/31/98 Ended 12/31/98 to 12/31/98 Inception
-------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Sub-Account (25.73%) 25.73% (19.24%) 19.24% (15.50%) 15.51% (n/a) n/a 12/3/85
Bond Sub-Account (-2.47%) -2.47% (4.21%) 4.21% (6.98%) 7.01% (n/a) n/a 12/3/85
Money Market Sub-Account (-3.56%) -3.56% (2.57%) 2.58% (3.54%) 3.63% (n/a) n/a 12/3/85
Asset Allocation Sub-Account (14.84%) 14.84% (13.16%) 13.16% (12.43%) 12.43% (n/a) n/a 12/3/85
Mortgage Securities
Sub-Account (-1.98%) -1.98% (4.68%) 4.68% (7.28%) 7.30% (n/a) n/a 6/1/87
Index 500 Sub-Account (19.12%) 19.12% (21.16%) 21.16% (16.79%) 16.80% (n/a) n/a 6/1/87
Capital Appreciation
Sub-Account (21.92%) 21.92% (17.73%) 17.73% (16.85%) 16.89% (n/a) n/a 6/1/87
International Stock
Sub-Account (-1.95%) -1.95% (8.04%) 8.04% (n/a) n/a (10.63%) 10.64% 5/1/92
Small Company Growth (-7.21%) -7.21% (8.05%) 8.05% (n/a) n/a (10.13%) 10.13% 5/3/93
Sub-Account
Maturing Government Bond
2002 Sub-Account (.41%) 1.01% (n/a) n/a (n/a) n/a (6.15%) 7.08% 5/2/94
Maturing Government Bond
2006 Sub-Account (5.08%) 5.69% (n/a) n/a (n/a) n/a (8.87%) 10.04% 5/2/94
Maturing Government Bond
2010 Sub-Account (4.24%) 5.61% (n/a) n/a (n/a) n/a (9.88%) 11.62% 5/2/94
Value Stock Sub-Account (-6.73%) -6.73% (n/a) n/a (n/a) n/a (16.64%) 16.71% 5/2/94
Small Company Value
Sub-Account (-15.76%) -15.11% (n/a) n/a (n/a) n/a (-11.37%) -10.83% 10/1/97
Global Bond Sub-Account (7.48%) 7.48% (n/a) n/a (n/a) n/a (5.68%) 5.68% 10/1/97
Index 400 Mid-Cap
Sub-Account (7.36%) 7.97% (n/a) n/a (n/a) n/a (5.58%) 6.06% 10/1/97
Macro-Cap Value
Sub-Account (12.29%) 13.54% (n/a) n/a (n/a) n/a (6.99%) 8.35% 10/15/97
Micro-Cap Growth
Sub-Account (4.01%) 4.79% (n/a) n/a (n/a) n/a (-9.13%) -8.35% 10/1/97
Real Estate Securities
Sub-Account (n/a) n/a (n/a) n/a (n/a) n/a (-23.25%) -22.73% 5/1/98
Templeton Developing
Markets Class 2 Sub-Account (-29.19%) -29.19% (n/a) n/a (n/a) n/a (-45.37%) -45.37% 10/1/97
</TABLE>
The average annual total return figures described above may be accompanied by
other average annual total return quotations which do not reflect the deduction
of any deferred sales charges or contract fees. Such other average annual total
return figures will be calculated as described above, except that the initial
$1,000 investment will be equated to that same investment's net asset value,
rather than its surrender value, at the end of the period. The average annual
rates of return, as thus calculated, for the Sub-Accounts of the contracts
described in the Prospectus for the specified periods ended December 31, 1998,
are shown in the table below. A deferred sales charge has been applied to the
initial payment; no additional 'free' amounts have been deducted. The figures in
parentheses show what the average annual rates of return, without the
application of applicable deferred sales charges or contract fees, would have
been had Minnesota Life not absorbed Fund expenses as described above.
<PAGE> 61
<TABLE>
<CAPTION>
Year Ended Five Years Ten Years From Inception Date of
12/31/98 Ended 12/31/98 Ended 12/31/98 to 12/31/98 Inception
-------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Sub-Account (32.84%) 32.84% (19.73%) 19.73% (15.59%) 15.60% (n/a) n/a 12/3/85
Bond Sub-Account (4.61%) 4.61% (4.97%) 4.97% (7.07%) 7.10% (n/a) n/a 12/3/85
Money Market Sub-Account (3.52%) 3.52% (3.36%) 3.38% (3.62%) 3.71% (n/a) n/a 12/3/85
Asset Allocation
Sub-Account (21.94%) 21.94% (13.73%) 13.73% (12.52%) 12.52% (n/a) n/a 12/3/85
Mortgage Securities
Sub-Account (5.10%) 5.10% (5.42%) 5.42% (7.36%) 7.38% (n/a) n/a 6/1/87
Index 500 Sub-Account (26.22%) 26.22% (21.62%) 21.62% (16.88%) 16.90% (n/a) n/a 6/1/87
Capital Appreciation
Sub-Account (29.02%) 29.02% (18.24%) 18.24% (16.94%) 16.98% (n/a) n/a 6/1/87
International Stock
Sub-Account (5.13%) 5.13% (8.71%) 8.71% (n/a) n/a (10.89%) 10.90% 5/1/92
Small Company Growth
Sub-Account (-.13%) -.13% (8.72%) 8.72% (n/a) n/a (10.55%) 10.55% 5/3/93
Maturing Government Bond
2002 Sub-Account (7.50%) 8.10% (n/a) n/a (n/a) n/a (6.91%) 7.83% 5/2/94
Maturing Government Bond
2006 Sub-Account (12.17%) 12.78% (n/a) n/a (n/a) n/a (9.58%) 10.72% 5/2/94
Maturing Government Bond
2010 Sub-Account (11.33%) 12.70% (n/a) n/a (n/a) n/a (10.56%) 12.27% 5/2/94
Value Stock Sub-Account (.35%) .35% (n/a) n/a (n/a) n/a (17.21%) 17.29% 5/2/94
Small Company Value
Sub-Account (-8.69%) -8.04% (n/a) n/a (n/a) n/a (-5.58%) -5.04% 10/1/97
Global Bond Sub-Account (14.57%) 14.57% (n/a) n/a (n/a) n/a (11.25%) 11.25% 10/1/97
Index 400 Mid-Cap
Sub-Account (14.45%) 15.06% (n/a) n/a (n/a) n/a (11.15%) 11.62% 10/1/97
Macro-Cap Value
Sub-Account (19.39%) 20.64% (n/a) n/a (n/a) n/a (12.54%) 13.90% 10/15/97
Micro-Cap Growth
Sub-Account (11.10%) 11.88% (n/a) n/a (n/a) n/a (-3.38%) -2.60% 10/1/97
Real Estate Securities
Sub-Account (n/a) n/a (n/a) n/a (n/a) n/a (-16.20%) -15.69% 5/1/98
Templeton Developing
Markets Class 2
Sub-Account (-22.13%) -22.13% (n/a) n/a (n/a) n/a (-38.90%) -38.90% 10/1/97
</TABLE>
<PAGE> 62
CURRENT YIELD FIGURES FOR MONEY MARKET SUB-ACCOUNT
Current annualized yield quotations for the Money Market Sub-Account are based
on the Sub-Account's net investment income for a seven-day or other specified
period and exclude any realized or unrealized gains or losses on sub-account
securities. Current annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical account
having a balance of one accumulation unit at the beginning of the specified
period, dividing such net change in account value by the value of the account at
the beginning of the period, and annualizing this quotient on a 365-day basis.
The Variable Annuity Account may also quote the effective yield of the Money
Market Sub-Account for a seven-day or other specified period for which the
current annualized yield is computed by expressing the unannualized return on a
compounded, annualized basis. The yield and effective yield of the Money Market
Sub-Account for the seven-day period ended December 31, 1998 were 2.95% and
2.99%, respectively. Such figures reflect the voluntary absorption of certain
expenses of Advantus Series Fund, Inc. (the "Fund") by Minnesota Life described
below under "Total Return Figures for All Sub-Accounts." Yield figures quoted by
the Money Market Sub-Account will not reflect the deduction of any applicable
deferred sales charges (the deferred sales charge, as a percentage of the
accumulation value withdrawn, begins as of the contract date at 7% for the
flexible payment contract), or the deduction of any applicable contract fees
(the contract fee is the lesser of 2% of the accumulation value or $30. It is
taken generally from contracts with values of less than $50,000).
TOTAL RETURN FIGURES FOR ALL SUB-ACCOUNTS
Cumulative total return quotations for Sub-Accounts represent the total return
for the period since the Sub-Account became available pursuant to the Variable
Annuity Account's registration statement. Therefore, for periods prior to the
date of this Prospectus the quotations will be based on the assumption that the
contracts described herein were issued when the underlying Portfolios first
commenced operations. Cumulative total return is equal to the percentage change
between the net asset value of a hypothetical $1,000 investment at the beginning
of the period referenced and the net asset value of that same investment at the
end of that period. Such quotations of cumulative total return will not reflect
the deduction of any applicable deferred sales charges, or any applicable
contract fees.
The cumulative total return figures published by the Variable Annuity Account
relating to the contract described in the Prospectus will reflect Minnesota
Life's voluntary absorption of certain Fund expenses described below. The
cumulative total returns from the sub-accounts for the specified periods ended
December 31, 1998 are shown in the table below. The figures in parentheses show
what the cumulative total returns would have been had Minnesota Life not
absorbed Fund expenses as described.
Cumulative total return quotations for Sub-Accounts will be accompanied by
average annual total return figures for a one year period, five year period, ten
year period or since the inception of the corresponding Fund Portfolios. Average
annual total return figures are the average annual compounded rates of return
required for an initial investment of $1,000 to equal the surrender value of
that same investment at the end of the period. The surrender value will reflect
the deduction of any deferred sales charge and contract fee applicable to the
contract payments and to the length of the period the payments remain in the
contract. For the purposes of these calculations, an average contract size of
$37,500 is assumed and the deductions of annual contract fees equivalent to .08%
of ending contract value are included in all surrender values. The average
annual total return figures published by the Variable Annuity Account will
reflect Minnesota Life's voluntary absorption of certain Fund expenses,
described below. The figures in parentheses show what the average annual total
returns would have been had Minnesota Life not absorbed Fund expenses as
described.
<PAGE> 63
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
From Inception Date of
TO 12/31/98 Inception
-------------- ---------
<S> <C> <C> <C>
Growth Sub-Account (397.92%) 403.65% 12/3/85
Bond Sub-Account (138.80%) 140.87% 12/3/85
Money Market Sub-Account (59.19%) 64.46% 12/3/85
Asset Allocation Sub-Account (279.05%) 280.21% 12/3/85
Mortgage Securities Sub-Account (122.03%) 122.73% 6/1/87
Index 500 Sub-Account (365.72%) 367.52% 6/1/87
Capital Appreciation Sub-Account (360.89%) 367.34% 6/1/87
International Stock Sub-Account (99.19%) 99.28% 5/1/92
Small Company Growth Sub-Account (76.54%) 76.57% 5/3/93
Maturing Government Bond
2002 Sub-Account (36.61%) 42.14% 5/2/94
Maturing Government Bond
2006 Sub-Account (53.24%) 60.86% 5/2/94
Maturing Government Bond
2010 Sub-Account (59.78%) 71.65% 5/2/94
Value Stock Sub-Account (109.83%) 110.46% 5/2/94
Small Company Value Sub-Account (-6.92%) -6.26% 10/1/97
Global Bond Sub-Account (14.26%) 14.26% 10/1/97
Index 400 Mid-Cap Sub-Account (14.13%) 14.73% 10/1/97
Macro-Cap Value Sub-Account (15.92%) 17.66% 10/15/97
Micro-Cap Growth Sub-Account (-4.02%) -3.24% 10/1/97
Real Estate Securities Sub-Account (-16.20%) -15.69% 5/1/98
Templeton Developing Markets Class 2
Sub-Account (-45.98%) -45.98% 10/1/97
</TABLE>
<PAGE> 64
PREDICTABILITY OF RETURN
ANTICIPATED VALUE AT MATURITY. The maturity values of zero-coupon bonds are
specified at the time the bonds are issued, and this feature, combined with the
ability to calculate yield to maturity, has made these instruments popular
investment vehicles for investors seeking reliable investments to meet long-term
financial goals.
Each Maturing Government Bond Portfolio of the Fund consists primarily of
zero-coupon bonds but is actively managed to accommodate contract owner activity
and to take advantage of perceived market opportunities. Because of this active
management approach, there is no guarantee that a certain price per share of a
Maturing Government Bond Portfolio, or a certain price per unit of the
corresponding Sub-Account, will be attained by the time a Portfolio is
liquidated. Instead, the Fund attempts to track the price behavior of a directly
held zero-coupon bond by:
(1) Maintaining a weighted average maturity within each Maturing
Government Bond Portfolio's target maturity year;
(2) Investing at least 90% of assets in securities that mature within one
year of that Portfolio's target maturity year;
(3) Investing a substantial portion of assets in Treasury STRIPS (the most
liquid Treasury zero);
(4) Under normal conditions, maintaining a nominal cash balance;
(5) Executing portfolio transactions necessary to accommodate net contract
owner purchases or redemptions on a daily basis; and
(6) Whenever feasible, contacting several U.S. government securities
dealers for each intended transaction in an effort to obtain the best
price on each transaction.
These measures enable Minnesota Life to calculate an anticipated value at
maturity (AVM) for each unit of a Maturing Government Bond Sub-Account,
calculated as of the date of purchase of such unit, that approximates the price
per unit that such unit will achieve by the weighted average maturity date of
the underlying Portfolio. The AVM calculation for each Maturing Government Bond
Sub-Account is as follows:
2T
AVM = P(1 + AGR/2)
where P = the Sub-Account's current price per unit; T = the Sub-Account's
weighted average term to maturity in years; and AGR = the anticipated growth
rate.
This calculation assumes an expense ratio and a portfolio composition for the
underlying Maturing Government Bond Portfolio that remain constant for the life
of such Portfolio. Because the Portfolio's expenses and composition do not
remain constant, however, Minnesota Life may calculate AVM for each Maturing
Government Bond Sub-Account on any day on
<PAGE> 65
which the underlying Maturing Government Bond Portfolio is valued. Such an AVM
is applicable only to units purchased on that date.
In addition to the measures described above, which the adviser believes are
adequate to assure close correspondence between the price behavior of each
Portfolio and the price behavior of directly held zero-coupon bonds with
comparable maturities, the Fund expects that each Portfolio will invest at least
90% of its net assets in zero-coupon bonds until it is within four years of its
target maturity year and at least 80% of its net assets in zero-coupon
securities within two to four years of its target maturity year. This
expectation may be altered if the market supply of zero-coupon securities
diminishes unexpectedly.
ANTICIPATED GROWTH RATE. Minnesota Life calculates an anticipated growth rate
(AGR) for each Maturing Government Bond Sub-Account on each day on which the
underlying Portfolio is valued. AGR is a calculation of the anticipated
annualized rate of growth for a Sub-Account unit, calculated from the date of
purchase of such unit to the Sub-Account's target maturity date. As is the case
with calculations of AVM, the AGR calculation assumes that each underlying
Maturing Government Bond Portfolio expense ratio and portfolio composition will
remain constant. Each Maturing Government Bond Sub-Account AGR changes from day
to day (i.e., a particular AGR calculation is applicable only to units purchased
on that date), due primarily to changes in interest rates and, to a lesser
extent, to changes in portfolio composition and other factors that affect the
value of the underlying Portfolio.
Minnesota Life expects that a contract owner who holds specific units until the
underlying Portfolio's weighted average maturity date will realize an investment
return and maturity value on those units that do not differ substantially from
the AGR and AVM calculated on the day such units were purchased. The AGR and AVM
calculated with respect to units purchased on any other date, however, may be
materially different. The Maturing Government Bond portfolios are available only
to contracts issued prior to May 1, 2000.
AUDITORS
The consolidated financial statements of Minnesota Life and the Variable Annuity
Account included herein have been audited by KPMG Peat Marwick LLP, 4200 Norwest
Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, independent
auditors, whose reports thereon appear elsewhere herein, and have been so
included in reliance upon the reports of KPMG Peat Marwick LLP and upon the
authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, with respect to the
contract offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and amendments thereto and the exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Annuity Account, Minnesota Life, and the
contract. Statements contained in this Prospectus as to the contents of
contracts and other legal instruments are summaries, and reference is made to
such instruments as filed.
<PAGE> 66
PART C
OTHER INFORMATION
<PAGE> 67
Variable Annuity Account
Cross Reference Sheet to Other Information
Form N-4
Item Number Caption in Other Information
24. Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners
28. Indemnification
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
<PAGE> 68
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited Financial Statements of Variable Annuity Account for the
fiscal year ended December 31, 1999, are included in Part B of this
filing and consist of the following:
1. Independent Auditors' Report, to be filed by subsequent amendment.
2. Statements of Assets and Liabilities, December 31, 1999, to be
filed by subsequent amendment.
3. Statements of Operations, year ended December 31, 1999, to be
filed by subsequent amendment.
4. Statements of Changes in Net Assets, year ended December 31,
1999, to be filed by subsequent amendment.
5. Notes to Financial Statements, to be filed by subsequent amendment.
(b) Audited Consolidated Financial Statements and Supplementary Schedules
of the Depositor, Minnesota Life Insurance Company and subsidiaries,
are included in Part B of this filing and consist of the following:
1. Independent Auditors' Report - Minnesota Life Insurance Company
and subsidiaries, for the fiscal year ended December 31, 1999 and
1998, to be filed by subsequent amendment.
2. Consolidated Balance Sheets - Minnesota Life Insurance Company
and subsidiaries, for the fiscal year ended December 31, 1999 and
1998, to be filed by subsequent amendment.
3. Consolidated Statements of Operations and Comprehensive Income -
Minnesota Life Insurance Company and subsidiaries, for the fiscal
years ended December 31, 1999, 1998 and 1997, to be filed by
subsequent amendment.
4. Consolidated Statements of Changes in Stockholder's Equity -
Minnesota Life Insurance Company and subsidiaries, for the fiscal
years ended December 31, 1999, 1998 and 1997, to be filed by
subsequent amendment.
5. Consolidated Statements of Cash Flows - Minnesota Life Insurance
Company and subsidiaries, for the fiscal years ended December 31,
1999, 1998 and 1997, to be filed by subsequent amendment.
6. Notes to Consolidated Financial Statements - Minnesota Life
Insurance Company and subsidiaries, for the fiscal years ended
December 31, 1999 and 1998, to be filed by subsequent amendment.
7. Schedule I - Summary of Investments-Other than Investments in
Related Parties - Minnesota Life Insurance Company and
subsidiaries, for the fiscal year ended December 31, 1999, to be
filed by subsequent amendment.
8. Schedule III - Supplementary Insurance Information - Minnesota
Life Insurance Company and subsidiaries, for the fiscal years
ended December 31, 1999 and 1998, to be filed by subsequent
amendment.
9. Schedule IV - Reinsurance - Minnesota Life Insurance Company and
subsidiaries, for the fiscal years ended December 31, 1999, 1998
and 1997, to be filed by subsequent amendment.
<PAGE> 69
(c) Exhibits
1. The Resolution of The Minnesota Mutual Life Insurance Company's
Executive Committee of its Board of Trustees establishing the
Variable Annuity Account previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049, is hereby
incorporated by reference.
2. Not applicable.
3. (a) The Distribution Agreement between The Minnesota Mutual
Life Insurance Company and Ascend Financial Services, Inc.
previously filed as this exhibit to Registrant's Form N-4,
File Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference
(b) The Dealer Selling Agreement previously filed as this
exhibit to Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated by
reference.
4. (a) The Flexible Payment Deferred Variable Annuity Contract,
form 99-70017 previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
(b) The Tax Sheltered Annuity Loan Agreement, form 99-70006
previously filed as this exhibit to Registrant's Form N-4,
File Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(c) The Tax Sheltered Annuity Amendment, form MHC-88-9213
previously filed as this exhibit to Registrant's Form N-4,
File Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(d) The Endorsement, form MHC-82-9032 previously filed as this
exhibit to Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated by
reference.
(e) The Annuity Payment Endorsement, form MHC-83-9060 previously
filed as this exhibit to Registrant's Form N-4, File Number
333-79049, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
(f) The Qualified Plan Agreement, form MHC-88-9176 Rev. 8-93
previously filed as this exhibit to Registrant's Form N-4,
File Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(g) The Individual Retirement Annuity (IRA) Agreement, SEP,
Traditional IRA and Roth-IRA, form MHC-97-9418 previously
filed as this exhibit to Registrant's Form N-4, File Number
333-79049, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
(h) The Individual Retirement Annuity SIMPLE - (IRA) Agreement,
form MHC-98-9431 previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049, Pre-Effective
Amendment Number 1, is hereby incorporated by reference.
5. (a) The Variable Annuity Application, form 99-70020
previously filed as this exhibit to Registrant's Form N-4,
File Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
6. Certificate of Incorporation and Bylaws.
(a) The Restated Certificate of Incorporation previously filed
as this exhibit to Registrant's Form N-4, File Number
333-79049, Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
(b) The Bylaws of the Depositor previously filed as this exhibit
to Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated by
reference.
7. Not applicable.
8. Not applicable.
9. Opinion and consent of Donald F. Gruber, Esq.
10. Consent of KPMG LLP, not applicable.
11. Not applicable.
12. Not applicable.
<PAGE> 70
13. Schedule for Computation of Performance Quotation
(a) Growth Sub-Account Performance Calculations previously
filed as this exhibit to Registrant's Form N-4, File
Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(b) Bond Sub-Account Performance Calculations previously
filed as this exhibit to Registrant's Form N-4, File
Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(c) Money Market Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(d) Asset Allocation Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(e) Mortgage Securities Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(f) Index 500 Sub-Account Performance Calculations previously
filed as this exhibit to Registrant's Form N-4, File
Number 333-79049, Pre-Effective Amendment Number 1, is
hereby incorporated by reference.
(g) Capital Appreciation Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(h) International Stock Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(i) Small Company Growth Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(j) Maturing Government Bond 2002 Sub-Account Performance
Calculations previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated
by reference.
(k) Maturing Government Bond 2006 Sub-Account Performance
Calculations previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated
by reference.
(l) Maturing Government Bond 2010 Sub-Account Performance
Calculations previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated
by reference.
(m) Value Stock Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(n) Small Company Value Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(o) Global Bond Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(p) Index 400 Mid-Cap Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(q) Macro-Cap Value Sub-Account Performance Calculations
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(r) Micro-Cap Growth Sub-Account Performance Calculations
<PAGE> 71
previously filed as this exhibit to Registrant's Form
N-4, File Number 333-79049, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(s) Real Estate Securities Sub-Account Performance
Calculations previously filed as this exhibit to
Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated
by reference.
(t) Templeton Developing Market Class 2 Sub-Account
Performance Calculations previously filed as this exhibit
to Registrant's Form N-4, File Number 333-79049,
Pre-Effective Amendment Number 1, is hereby incorporated
by reference.
15. Minnesota Life Insurance Company Power of Attorney to Sign
Registration Statements.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Positions and Offices Positions and Offices
Business Address with Insurance Company with Registrant
- ---------------- ---------------------- ---------------
Anthony L. Andersen Director None
H. B. Fuller Company
2424 Territorial Road
St. Paul, MN 55114
Leslie S. Biller Director None
Wells Fargo & Company
MAC 0101-121
420 Montgomery Street
San Francisco, CA 94104
John F. Bruder Senior Vice President None
Minnesota Life Insurance
Company
400 Robert Street North
St. Paul, MN 55101
Keith M. Campbell Senior Vice President None
Minnesota Life Insurance
Company
400 Robert Street North
St. Paul, MN 55101
John F. Grundhofer Director None
U.S. Bancorp
601 2nd Avenue South
Suite 2900
Minneapolis, MN 55402-4302
Robert E. Hunstad Director and Executive None
Minnesota Life Insurance Vice President
Company
400 Robert Street North
St. Paul, MN 55101
James E. Johnson Senior Vice President None
Minnesota Life Insurance and Actuary
Company
400 Robert Street North
St. Paul, MN 55101
<PAGE> 72
Dennis E. Prohofsky Director Senior Vice None
Minnesota Life Insurance President, General
Company Counsel and Secretary
400 Robert Street North
St. Paul, MN 55101
Robert L. Senkler Chairman, President and None
Minnesota Life Insurance Chief Executive Officer
Company
400 Robert Street North
St. Paul, MN 55101
Michael E. Shannon Director None
Ecolab, Inc.
370 Wabasha Street
Ecolab Center
St. Paul, MN 55102
Gregory S. Strong Senior Vice President None
Minnesota Life Insurance and Chief Financial
Company Officer
400 Robert Street North
St. Paul, MN 55101
Terrence M. Sullivan Senior Vice President None
Minnesota Life Insurance
Company
400 Robert Street North
St. Paul, MN 55101
Randy F. Wallake Senior Vice President None
Minnesota Life Insurance
Company
400 Robert Street North
St. Paul, MN 55101
William N. Westhoff Director, Senior Vice None
Minnesota Life Insurance President and Treasurer
Company
400 Robert Street North
St. Paul, MN 55101
Frederick T. Weyerhaeuser Director None
Clearwater Investment Trust
332 Minnesota Street
Suite W-2090
St. Paul, MN 55101-1308
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Wholly-owned subsidiary of Minnesota Mutual Companies, Inc.:
Securian Holding Company (Delaware)
Wholly-owned subsidiary of Securian Holding Company:
Securian Financial Group, Inc. (Delaware)
Capitol City Property Management, Inc.
Wholly-owned subsidiary of Securian Financial Group, Inc.
Minnesota Life Insurance Company
HomePlus Insurance Agency, Inc.
Wholly-owned subsidiaries of Minnesota Life Insurance Company:
Advantus Capital Management, Inc.
HomePlus Insurance Company
Northstar Life Insurance Company (New York)
The Ministers Life Insurance Company
MIMLIC Life Insurance Company (Arizona)
Robert Street Energy, Inc.
Personal Finance Company (Delaware)
Enterprise Holding Corporation
<PAGE> 73
Wholly-owned subsidiary of Advantus Capital Management, Inc.:
Ascend Financial Services, Inc.
Wholly-owned subsidiaries of Ascend Financial Services, Inc.:
MIMLIC Insurance Agency of Massachusetts, Inc. (Massachusetts)
MIMLIC Insurance Agency of Texas, Inc. (Texas)
Ascend Insurance Agency of Nevada, Inc. (Nevada)
Ascend Insurance Agency of Oklahoma, Inc. (Oklahoma)
Worthmark Financial Services, LLC (Delaware)
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Financial Ink Corporation
Oakleaf Service Corporation
Concepts in Marketing Research Corporation
Lafayette Litho, Inc.
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MCM Funding 1997-1, Inc.
MCM Funding 1998-1, Inc.
MIMLIC Venture Corporation
HomePlus Insurance Agency, Inc.
Ministers Life Resources, Inc.
Wedgewood Valley Golf, Inc.
Wholly-owned subsidiary of HomePlus Insurance Agency, Inc.:
HomePlus Insurance Agency of Texas, Inc. (Texas)
Open-end registered investment company offering shares solely to separate
accounts of Minnesota Life Insurance Company:
Advantus Series Fund, Inc.
Majority-owned subsidiary of Ascend Financial Services, Inc.:
MIMLIC Insurance Agency of Ohio, Inc. (Ohio)
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Majority-owned subsidiaries of Minnesota Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Advantus Venture Fund, Inc.
Advantus Real Estate Securities Fund, Inc.
Less than majority owned, but greater than 25% owned, subsidiaries of Minnesota
Life Insurance Company:
Advantus Cornerstone Fund, Inc.
Less than 25% owned subsidiaries of Minnesota Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Bond Fund, Inc.
Advantus Money Market Fund, Inc.
Advantus Index 500 Fund, Inc.
Unless indicated otherwise parenthetically, each of the above corporations is a
Minnesota corporation.
<PAGE> 74
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 11, 2000, the number of holders of securities of this class were
as follows:
Number of Record
Title of Class Holders
-------------- ----------------
Variable Annuity Contracts 480
ITEM 28. INDEMNIFICATION
The State of Minnesota has an indemnification statute (Minnesota Statutes
300.083), as amended, effective January 1, 1984, which requires indemnification
of individuals only under the circumstances described by the statute. Expenses
incurred in the defense of any action, including attorneys' fees, may be
advanced to the individual after written request by the board of directors upon
receiving an undertaking from the individual to repay any amount advanced unless
it is ultimately determined that he or she is entitled to be indemnified by the
corporation as authorized by the statute and after a determination that the
facts then known to those making the determination would not preclude
indemnification.
Indemnification is required for persons made a part to a proceeding by reason of
their official capacity so long as they acted in good faith, received no
improper personal benefit and have not been indemnified by another organization.
In the case of a criminal proceeding, they must also have had no reasonable
cause to believe the conduct was unlawful. In respect to other acts arising out
of official capacity: (1) where the person is acting directly for the
corporation there must be a reasonable belief by the person that his or her
conduct was in the best interests of the corporation or, (2) where the person is
serving another organization or plan at the request of the corporation, the
person must have reasonably believed that his or her conduct was not opposed to
the best interests of the corporation. In the case of persons not directors,
officers or policy-making employees, determination of eligibility for
indemnification may be made by a board-appointed committee of which a director
is a member. For other employees, directors and officers, the determination of
eligibility is made by the Board or a committee of the Board, special legal
counsel, the shareholder of the corporation or pursuant to a judicial
proceeding.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
Minnesota Life Insurance Company and Variable Annuity Account pursuant to the
foregoing provisions, or otherwise, Minnesota Life Insurance Company and
Variable Annuity Account have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Minnesota Life Insurance Company and Variable Annuity Account of expenses
incurred or paid by a director, officer or controlling person of Minnesota Life
Insurance Company and Variable Annuity Account in the successful defense of any
action, suit or proceeding) is asserted by such director, officer of controlling
person in connection with the securities being registered, Minnesota Life
Insurance Company and Variable Annuity Account will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The principal underwriter is Ascend Financial Services, Inc..
Ascend Financial Services, Inc. is also the principal underwriter
for twelve mutual funds (Advantus Horizon Fund, Inc.; Advantus
Spectrum Fund, Inc.; Advantus Money Market Fund, Inc.; Advantus
Mortgage Securities Fund, Inc.; Advantus Bond Fund, Inc.;
Advantus Cornerstone Fund, Inc.; Advantus Enterprise Fund, Inc.;
Advantus International Balanced Fund, Inc. and Advantus Venture
Fund, Inc.; Advantus Index 500 Fund, Inc. and Advantus Real
Estate Securities Fund, Inc.) and for four additional registered
separate accounts of Minnesota Life Insurance Company, all of
which offer annual contracts and life insurance policies on a
variable basis.
<PAGE> 75
(b) Directors and Officers of Underwriter.
DIRECTORS AND OFFICERS OF UNDERWRITER
Positions and Positions and
Name and Principal Offices Offices
Business Address with Underwriter with Registrant
- ------------------ ---------------- ---------------
Robert E. Hunstad Director None
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
George I. Connolly President, Chief None
Ascend Financial Services, Inc. Executive Officer, Chief
400 Robert Street North Compliance Officer and
St. Paul, Minnesota 55101 Director
Margaret Milosevich Vice President, Chief None
Ascend Financial Services, Inc. Operations Officer,
400 Robert Street North Treasurer and Secretary
St. Paul, Minnesota 55101
Dennis E. Prohofsky Director None
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Thomas L. Clark Assistant Treasurer None
Ascend Financial Services, Inc. and Assistant Secretary
400 Robert Street North
St. Paul, Minnesota 55101
(c) All commissions and other compensation received by each principal
underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
<TABLE>
<CAPTION>
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage Other
Underwriter Commissions Annuitization Commissions Compensation
- ----------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Ascend Financial,
Services Inc. $16,104,617 --- --- ---
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules promulgated thereunder are in the physical
possession of Minnesota Life Insurance Company, St. Paul, Minnesota 55101-2098.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
(a) Minnesota Life Insurance Company hereby represents that it will file a
post-effective amendment to this registration statement as frequently
as is necessary to ensure that the audited financial statements in the
registration statement are never more than 16 months old for so long
as payments under the variable annuity contracts may be accepted.
(b) Minnesota Life Insurance Company hereby represents that it will
include as part of any application to purchase a contract offered by
the prospectus, a space that an applicant can check to request a
Statement of Additional Information.
(c) Minnesota Life Insurance Company hereby represents that it will
deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly upon
written or oral request.
(d) Minnesota Life Insurance Company hereby represents that, as to the
variable annuity contract which is the subject of this Registration
Statement, File No. 333-79049, the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed
by the Minnesota Life Insurance Company.
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant has
duly caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
St. Paul and the State of Minnesota on the 28th day of February, 2000.
VARIABLE ANNUITY ACCOUNT
(Registrant)
By: MINNESOTA LIFE INSURANCE COMPANY
(Depositor)
By
-----------------------------------------
Robert L. Senkler
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the Depositor,
Minnesota Life Insurance Company, has duly caused this Post-Effective Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Saint Paul, and State of Minnesota, on
the 28th day of February, 2000.
MINNESOTA LIFE INSURANCE COMPANY
By
-----------------------------------------
Robert L. Senkler
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in their capacities
with the Depositor and on the date indicated.
Signature Title Date
--------- ----- -----
- ---------------------------- Chairman, President and February 28, 2000
Robert L. Senkler Chief Executive Officer
*
- ---------------------------- Director
Anthony L. Andersen
- ---------------------------- Director
Leslie S. Biller
*
- ---------------------------- Director
John F. Grundhofer
*
- ---------------------------- Director
Robert E. Hunstad
- ---------------------------- Director
Michael E. Shannon
*
- ---------------------------- Director
Frederick T. Weyerhaeuser
- ---------------------------- Senior Vice President February 28, 2000
Gregory S. Strong (chief financial officer)
- ---------------------------- Director and Senior February 28, 2000
William N. Westhoff Vice President (treasurer)
- ---------------------------- Director and Attorney-in-Fact February 28, 2000
Dennis E. Prohofsky
* Pursuant to power of attorney dated December 13, 1999, a copy of which is
filed herewith.
<PAGE> 77
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
9. Opinion and consent of Donald F. Gruber, Esq.
15. Minnesota Life Insurance Company Power of Attorney to sign
Registration Statements.
<PAGE> 1
Minnesota Life Insurance Company
400 Robert Street North
St. Paul, MN 55101-2098
651.665.3500 Tel
MINNESOTA LIFE
A MINNESOTA MUTUAL COMPANY
February 28, 2000
Minnesota Life Insurance Company
400 Robert Street North
St. Paul, MN 55101-2098
Gentlepersons:
In my capacity as counsel for the Minnesota Life Insurance Company (the
"Company"), I have reviewed certain legal matters relating to the Company's
Separate Account entitled Variable Annuity Account (the "Account") in connection
with Post-Effective Amendment Number 1 on Form N-4. This Post-Effective
Amendment is to be filed by the Company and the Account with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, with respect
to certain variable annuity contracts.
Based upon that review, I am of the following opinion:
1. The Account is a separate account of the Company duly created and
validly existing pursuant to the laws of the State of Minnesota; and
2. The issuance and sale of the variable annuity contracts funded by the
Account have been duly authorized by the Company and such contracts,
when issued in accordance with and as described in the current
Prospectus contained in the Registration Statement, and upon
compliance with applicable local and federal laws, will be legal and
binding obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Donald F. Gruber
Donald F. Gruber
Assistant General Counsel
<PAGE> 1
Minnesota Life Insurance Company
Power of Attorney
To Sign Registration Statements
WHEREAS, Minnesota Life Insurance Company ("Minnesota Life") has
established certain separate accounts to fund certain variable annuity and
variable life insurance contracts, and
WHEREAS, Variable Fund D ("Fund D") is a separate account of Minnesota
Life registered as a unit investment trust under the Investment Company Act of
1940 offering variable annuity contracts registered under the Securities Act of
1933, and
WHEREAS, Variable Annuity Account ("Variable Annuity Account") is a
separate account of Minnesota Life registered as a unit investment trust under
the Investment Company Act of 1940 offering variable annuity contracts
registered under the Securities Act of 1933, and
WHEREAS, Minnesota Life Variable Life Account ("Variable Life Account")
is a separate account of Minnesota Life registered as a unit investment trust
under the Investment Company Act of 1940 offering variable adjustable life
insurance policies registered under the Securities Act of 1933, and
WHEREAS, Group Variable Annuity Account ("Group Variable Annuity
Account") is a separate account of Minnesota Life which has been established for
the purpose of issuing group annuity contracts on a variable basis and which is
to be registered as a unit investment trust under the Investment Company Act of
1940 offering group variable annuity contracts and certificates to be registered
under the Securities Act of 1933, and
WHEREAS, Minnesota Life Variable Universal Life Account ("Variable
Universal Life Account") is a separate account of Minnesota Life which has been
established for the purpose of issuing group and individual variable universal
life insurance policies on a variable basis and which is to be registered as a
unit investment trust under the Investment Company Act of 1940 offering group
and individual variable universal life insurance policies to be registered under
the Securities Act of 1933.
NOW THEREFORE, We, the undersigned Directors and Officers of Minnesota
Life, do hereby appoint Dennis E. Prohofsky and Garold M. Felland, and each of
them individually, as attorney in fact for the purpose of signing their names
and on our behalf as Directors of Minnesota Life and filing with the Securities
and Exchange Commission Registration Statements, or any amendment thereto, for
the purpose of: a) registering contracts and policies of Fund D, the Variable
Annuity Account, the Variable Life Account, the Group Variable Annuity Account
and the Variable Universal Life Account for sale by those entities and Minnesota
Life under the Securities Act of 1933; and b) registering Fund D, the Variable
Annuity Account, the Variable Life Account, the Group Variable Annuity Account
and the Variable Universal Life Account as unit investment trusts under the
Investment Company Act of 1940.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Robert L. Senkler Chairman of the Board, December 13, 1999
- ----------------------------- President and Chief
Robert L. Senkler Executive Officer
/s/Anthony L. Andersen Director December 13, 1999
- -----------------------------
Anthony L. Andersen
- ----------------------------- Director
Leslie S. Biller
/s/John F. Grundhofer Director December 13, 1999
- -----------------------------
John F. Grundhofer
/s/Robert E. Hunstad Director December 13, 1999
- -----------------------------
Robert E. Hunstad
/s/Dennis E. Prohofsky Director December 13, 1999
- -----------------------------
Dennis E. Prohofsky
Director
- -----------------------------
Michael E. Shannon
/s/William N. Westhoff Director December 13, 1999
- -----------------------------
William N. Westhoff
/s/Frederick T. Weyerhaeuser Director December 13, 1999
- -----------------------------
Frederick T. Weyerhaeuser
</TABLE>
