<PAGE>
PROSPECTUS
IMMEDIATE VARIABLE ANNUITY CONTRACT
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
This Prospectus describes an individual, immediate variable annuity contract
(the "contract") offered by Minnesota Life Insurance Company. It may be used in
connection with all types of personal retirement plans.
Your contract values are invested in our Variable Annuity Account. The Variable
Annuity Account invests in shares of the Index 500 Portfolio of the Advantus
Series Fund, Inc. The value of the contract and the amount of each variable
annuity payment will vary in accordance with the performance of the Index 500
Portfolio, except as payments are guaranteed in amount by Minnesota Life. The
contract lets you make additional purchase payments and withdrawals during part
of the time you are receiving annuity payments.
This Prospectus includes information you should know before purchasing a
contract. You should read and keep it for future reference. A Statement of
Additional Information, bearing the same date, which contains further
information, 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 400 Robert Street North, St. Paul,
Minnesota 55101-2098. Its table of contents may be found at the end of this
Prospectus.
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO A CURRENT
PROSPECTUS OF ADVANTUS SERIES FUND, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THE 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 document and the Statement of Additional Information is May 1,
2000.
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL TERMS 1
QUESTIONS AND ANSWERS ABOUT THE VARIABLE ANNUITY CONTRACT 3
EXPENSE TABLE 6
CONDENSED FINANCIAL INFORMATION 9
GENERAL DESCRIPTIONS 9
Minnesota Life Insurance Company 9
Separate Account 9
Advantus Series Fund, Inc. 9
Additions, Deletions or Substitutions 10
CONTRACT CHARGES 11
Sales Charges 11
Risk Charge 12
Mortality and Expense Risk Charges 12
Administration Charge 13
DESCRIPTION OF THE CONTRACTS 13
General Provisions 13
Annuity Payments and Options 16
Death Benefits 18
Purchase Payments and Value of the Contract 20
Redemptions 22
VOTING RIGHTS 25
FEDERAL TAX STATUS 26
PERFORMANCE DATA 32
STATEMENT OF ADDITIONAL INFORMATION 33
APPENDIX A -- TAXATION OF QUALIFIED PLANS A-1
APPENDIX B -- COMPUTATION AND EXAMPLES OF WITHDRAWALS B-1
APPENDIX C -- IMMEDIATE VARIABLE ANNUITY ILLUSTRATION C-1
</TABLE>
<PAGE>
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
AGE: the age of a person at nearest birthday.
ANNUITANT: the person named on page one of the contract who may receive
lifetime benefits under the contract. Except in the event of the death of either
annuitant prior to the annuity payment commencement date, joint annuitants will
be considered a single entity.
ANNUITY PAYMENT COMMENCEMENT DATE: the first annuity payment date as specified
on page one of the contract.
ANNUITY PAYMENT DATE: each day indicated by the annuity payment commencement
date and the annuity payment frequency for an annuity payment to be determined.
This is shown on page one of the contract.
ANNUITY PAYMENTS: payments made at regular intervals to the annuitant or any
other payee. The annuity payments will increase or decrease in amount. The
changes will reflect the investment experience of the sub-account of the
separate account.
ANNUITY UNIT: the standard of value for the variable annuity payment amount.
BENEFICIARY: the person, persons or entity designated to receive death benefits
payable in the event of the annuitant's death.
CASH VALUE: the dollar amount available for withdrawal under the contract at
any time. A cash value exists only as long as both the number of cash value
units and the applicable factor from the cash value factor table shown in the
contract are greater than zero.
CASH VALUE PERIOD: the time during which there is a cash value under the
contract. The cash value period begins on the annuity commencement date and ends
on the cash value end date shown on page one of the contract.
CASH VALUE UNIT: the measure of your interest in the Separate Account that is
available for withdrawal during the cash value period.
CODE: the Internal Revenue Code of 1986, as amended.
CONTRACT DATE: the effective date of a contract.
FUND: Advantus Series Fund, Inc. or any mutual fund or separate investment
portfolio within a series mutual fund which is designated as an eligible
investment for the Separate Account.
GENERAL ACCOUNT: all of our assets other than those in the Separate Account or
in other separate accounts established by us.
GUARANTEED MINIMUM ANNUITY PAYMENT AMOUNT: the amount which is guaranteed as
the minimum annuity payment amount. This amount is payable regardless of the
performance of the Sub-Account. Purchase payments and cash value withdrawals
will change the guaranteed minimum annuity payment amount.
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JOINT OWNER: the person designated to share equally in the rights and
privileges provided to the owner of this contract. Only you and your spouse may
be named as a joint owner in those states where we offer joint contracts.
PLAN: a tax-qualified employer pension, profit-sharing, or annuity purchase
plan which provide benefits using these contracts.
PURCHASE PAYMENT DATE: the date we receive a purchase payment in our
home office.
PURCHASE PAYMENTS: amounts paid to us as consideration for the contract.
SEPARATE ACCOUNT: a separate investment account entitled Variable Annuity
Account. The assets of the Separate Account are ours. Those assets are not
subject to claims arising out of any other business which we may conduct.
SURRENDER VALUE: the surrender value of the contract shall be the total annuity
value as of the date of surrender plus the amounts deducted from purchase
payments. These include deductions for sales charges, risk charges and state
premium taxes where applicable.
TOTAL ANNUITY VALUE: the total annuity value represents your total interest in
the Separate Account.
VALUATION DATE: any date on which a Fund is valued.
VALUATION PERIOD: the period between successive valuation dates measured from
the time of one determination to the next.
VARIABLE ANNUITY: an annuity providing for payments varying in amount in
accordance with the investment experience of the Fund.
WE, OUR, US: Minnesota Life Insurance Company.
WRITTEN REQUEST: a request in writing signed by you. In the case of joint
owners, the signatures of both owners will be required to complete a written
request. In some cases, we may provide a form for your use. We may also require
that the contract be sent to us along with your written request.
YOU, YOUR: the owner of this contract. The owner may be the annuitant or
someone else. The owner is named in the application.
1940 ACT: the Investment Company Act of 1940, as amended, or any similar
successor federal legislation.
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QUESTIONS AND ANSWERS ABOUT
THE VARIABLE ANNUITY CONTRACT
WHAT IS AN ANNUITY?
An annuity is a series of payments for the life of a person or for the joint
lifetimes of the annuitant and another person and thereafter during the lifetime
of the survivor. An annuity with payments which are guaranteed as to amount
during the payment period is a fixed annuity. An annuity with payments which
vary during the payment period in accordance with the investment experience of a
separate account of an insurance company is called a variable annuity.
WHAT IS AN IMMEDIATE ANNUITY?
An immediate annuity provides for annuity payments beginning within a relatively
short period after contract issue. This type of annuity is distinguished from a
deferred annuity where contract values may be left with an insurance company or
separate account for some years before annuity payments begin. In some states
this period is shortened so that the contract may be considered to be an
immediate annuity within that state.
WHAT IS THE CONTRACT OFFERED BY THIS PROSPECTUS?
The contract is an immediate, variable annuity contract with scheduled annuity
payments. Annuity payments may be received on a monthly, quarterly, semi-annual
or annual basis. These payments may begin immediately and must begin on a date
within 12 months after the issue date of the contract. Purchase payments are
allocated to the Separate Account. In the Separate Account, your purchase
payments are put into a Sub-Account which invests only in the Index 500
Portfolio of the Fund.
IS THERE A GUARANTEED MINIMUM ANNUITY PAYMENT AMOUNT?
Yes. You will receive at least the guaranteed minimum annuity payment amount
shown in your contract. Each variable annuity payment will vary upwards or
downwards in accordance with the performance of the Sub-Account. However, if
Sub-Account performance produces a payment that would be less than the
guaranteed minimum annuity payment amount, you will get the guaranteed amount
instead. At each annuity payment date, we will pay the annuitant or annuitants
the greater of:
- the annuity payment amount determined by multiplying the number of
annuity units times the annuity unit value, or
- the guaranteed minimum annuity payment amount currently in force for the
contract.
We guarantee that variable annuity payments will always be at least 85% of the
initial variable annuity payment amount. We determine this amount when we issue
your contract. It is shown on page one of the contract. If an additional
PAGE 3
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purchase payment is made, we guarantee that variable annuity payments will
always be at least 85% of the annuity amount attributable to that additional
purchase payment, plus the amount already guaranteed. If you withdraw cash value
amounts, the guaranteed annuity payment amount will be reduced by the same
proportion that the withdrawal reduces the number of annuity units.
IS THE AMOUNT OF THE CASH VALUE OF THE CONTRACT GUARANTEED?
No. The cash value of the contract decreases as annuity payments are made. It
will also increase or decrease based upon the performance of the Sub-Account of
the Separate Account. This is reflected in the annuity unit value. We do not
guarantee the performance of any Sub-Account, nor do we guarantee the annuity
unit value, which may fall to zero. The performance of the Sub-Account will not
affect the duration of the cash value period.
ARE THERE LIMITATIONS ON PURCHASE PAYMENTS?
Yes. A purchase payment in an amount of at least $10,000 is required in order
for us to issue the contract. Contracts will not be issued for less than that
amount.
After we issue the contract, you may make additional purchase payments. This
right extends only until the end of the cash value period of the contract. This
period is shown on page one of the contract. You may make more purchase payments
only while the annuitant or joint annuitant is alive. Additional purchase
payments must be in an amount of at least $5,000. We will waive this contract
limitation for amounts which are received after the contract effective date as
part of an integrated rollover or Section 1035 transaction.
Whenever an additional purchase payment is made under a contract during the cash
value period, the amount of that additional payment will be added to the
remaining investment in the contract and a new exclusion amount will be
calculated for the contract based on the then current IRS defined life
expectancy of the annuitant or annuitants.
WE RESERVE THE RIGHT TO SUSPEND THE SALE OF THESE CONTRACTS AND TO TERMINATE
YOUR ABILITY TO MAKE ADDITIONAL PURCHASE PAYMENTS INTO THE CONTRACT.
Total purchase payments may not exceed $1,000,000 except with our prior consent.
Currently, we are accepting purchase payments of up to $5,000,000 without
requiring special advance consent.
WHAT INVESTMENT OPTIONS ARE AVAILABLE FOR THE SEPARATE ACCOUNT?
Purchase payments are allocated to the Sub-Account and in shares of the
Index 500 Portfolio of the Fund.
There is no assurance that the Portfolio will meet its objectives. Additional
information concerning the investment objectives and policies of the Portfolio
can be found in the current prospectus for the Fund, which is attached to this
Prospectus. You should carefully read the Fund prospectus before purchasing
the contract.
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WHAT CHARGES ARE ASSOCIATED WITH THE CONTRACTS?
There are charges which reduce purchase payments and charges made directly to
the assets held in the Separate Account.
A deduction for a sales charge and a risk charge is made from purchase payments.
The sales charge is up to 4.5% of purchase payments.
The risk charge, for guaranteeing the minimum annuity payment amount, may be as
much as 2% of each purchase payment. Currently, this charge is made at the per
annum rate of 1.25% of purchase payments.
We deduct a daily charge of .80% of the net asset value of the Separate Account
on an annual basis for our mortality and expense risk guarantees. We reserve the
right to increase this charge to 1.40% on an annual rate.
The Portfolio pays advisory and other expenses. Total advisory and other
expenses of the Portfolio are .42% of average daily net assets of the Portfolio
on an annual basis.
We deduct an administrative charge from the net asset value of the Separate
Account in the amount of .15% computed daily, on an annual basis. We reserve the
right to increase this charge to .40%.
Deductions for any applicable premium taxes may also be made from purchase
payments (currently such taxes range from 0.0% to 3.5%) depending upon
applicable law.
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The following expense table will illustrate these expenses to assist you in
understanding the contract's changes.
EXPENSE TABLE
The following contract expense information is intended to illustrate the
expenses of the individual, immediate 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.
INDIVIDUAL, IMMEDIATE VARIABLE ANNUITY CONTRACT
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SALES CHARGE AS A PERCENTAGE
PURCHASE PAYMENTS OF PURCHASE PAYMENTS
- ----------------------------------- ----------------------------
<S> <C>
$ 0 to 499,999.99 4.500%
500,000 to 749,999.99 4.125
750,000 to 1,000,000.00 3.750
1,000,000.01 to 1,499,999.99 3.375
1,500,000 to 1,999,999.99 3.000
2,000,000 to 2,499,999.99 2.625
2,500,000 to 2,999,999.99 2.250
3,000,000 to 3,999,999.99 1.875
4,000,000 to 5,000,000.00 1.500
Risk Charge 1.25%
-----
Total Contract Expenses 5.75%
(assuming maximum sales charge)
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<CAPTION>
MAXIMUM
CURRENT POSSIBLE
CHARGE CHARGE
-------- --------
<S> <C> <C>
Mortality and Expense Risk Fees* 0.80% 1.40%
Administrative Charge* 0.15% 0.40%
----- -----
Total Separate Account Annual Expenses 0.95% 1.80%
</TABLE>
ADVANTUS SERIES FUND, INC. INDEX 500 PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C>
Index 500 Portfolio**
Management Fees 0.12%
Other Expenses 0.05%
Distribution Fees 0.25%
-----
Total Index 500 Portfolio Annual Expenses 0.42%
=====
</TABLE>
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EXAMPLES:
Whether or not you surrender your contract at the end of the applicable time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $706 $984 $1,282 $2,127
$10,000 investment as of the end of the
period indicated, assuming a 5% annual
return on assets and application of
current charges:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $787 $1,229 $1,696 $2,982
$10,000 investment as of the end of the
period indicated, assuming a 5% annual
return on assets and application of the
maximum possible charges*:
</TABLE>
*Under the terms of the contract, total mortality and expense risk fees may be
increased to as much as 1.40% (provided any necessary regulatory approvals are
obtained) and the administrative charge may be increased to as much as .40%.
**The shareholders of Advantus Series Fund, Inc. approved new management fees
and a distribution (12b-1) fee, effective May 1, 2000 for the Index 500
Portfolio. The table shows restated table expenses for the Portfolio based on
the new fees as of December 31, 1999.
These figures are based on the assumption that the contract will accumulate in
value prior to the annuity payment commencement date at a 5% annual return on
assets for one, three, five and ten years, respectively. The maximum period
allowable between the issuance of a contract and the commencement of annuity
payments is one year.
The tables shown above are to assist a contract owner in understanding the costs
and expenses that a contract will bear directly or indirectly. For more
information on contract costs and expenses, see the Prospectus heading "Contract
Charges" and the information immediately following. The table does not reflect
deductions for any applicable premium taxes which may be made from each purchase
payment depending upon applicable law.
The examples contained in this table should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown.
CAN YOU SURRENDER THE CONTRACT?
Yes. Before annuity payments begin, you can surrender the contract for its
surrender value. The surrender value is its total annuity value plus the amounts
deducted from your purchase payments for sales charges, risk charges and state
premium taxes where applicable.
CAN YOU MAKE WITHDRAWALS FROM THE CONTRACT?
Yes. During the cash value period, you can make withdrawals of the cash value
from the contract, pursuant to your written request. Each withdrawal must be in
an amount of at least $500 or, if the cash value of the contract is less than
that amount, all of the total remaining cash value in the contract must be
withdrawn. Withdrawals are not allowed during the period before annuity payments
begin.
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A withdrawal of all or a portion of the cash value of the contract, subject to
the dollar limitations described above, may be made during the "cash value
period" of the contract. The amount of the cash value depends upon the number of
cash value units in the contract. The number of cash value units and the cash
value period are shown on page one of each contract. If you make later purchase
payments or withdrawals we will give you a new page one.
When a withdrawal is made during the cash value period, the amount of the
annuity payment to be received by the annuitant after the withdrawal will be
recalculated. The guaranteed minimum annuity payment amount will be redetermined
as well. Each will be adjusted downward to reflect the withdrawal of cash value.
When a withdrawal is taken, an amount equal to the lesser of (i) the amount
withdrawn or (ii) the net gain received from the contract will be taxable as
ordinary income for that year. Net gain, for this purpose, is the total annuity
value prior to the withdrawal less the investment in the contract. The balance
of the amount withdrawn will be considered a return of the investment in the
contract, and not as taxable income. Any portion of the withdrawal that is not
taxable as ordinary income will be deducted from the investment in the contract
and a new exclusion amount will be calculated for the contract.
DO YOU HAVE A RIGHT TO CANCEL THE CONTRACT?
Yes. You may cancel the contract any time within ten days of your receipt of the
contract by returning it to us or your agent.
WHAT ANNUITY OPTIONS ARE AVAILABLE?
You may select one of two variable annuity options. One provides for lifetime
variable annuity payments based on the life of a single annuitant, the other
provides for the lifetime variable annuity payments based upon the combined
lives of joint annuitants.
WHAT HAPPENS IF THE ANNUITANT DIES?
If the annuitant, or one of the named joint annuitants dies before annuity
payments begin, we will pay a death benefit to you or the named beneficiary.
This death benefit will be the sum of the contract's total annuity value plus
the amounts deducted from the contract's purchase payments for sales charges,
risk charges and state premium taxes, where applicable.
If the annuitant dies after annuity payments have begun, or after the second
death in the case of joint annuitants, we will pay a death benefit. It will be
equal to the cash value, if any, of the contract as of the date of the
annuitant's death.
WHAT VOTING RIGHTS DO YOU HAVE?
Contract owners and annuitants will be able to direct us as to how to vote
shares of the Portfolio held for their contracts in the Sub-Account of the
Separate Account.
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(SIDEBAR)
We are a life insurance company.
The Variable Annuity Account is one of our separate accounts.
Contract values are invested in a single Portfolio.
(END SIDEBAR)
CONDENSED FINANCIAL INFORMATION
The financial statements of Variable Annuity Account and the consolidated
financial statements of Minnesota Life Insurance Company may be found in the
Statement of Additional Information. No condensed financial information is
presented as the variable annuity contract described in this Prospectus has no
accumulation units or associated information.
GENERAL DESCRIPTIONS
A. MINNESOTA 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. On
October 1, 1998, a plan of reorganization created a mutual insurance holding
company named Minnesota Mutual Companies, Inc. Minnesota Mutual reorganized as a
stock insurance company subsidiary of the new holding company and took the name
Minnesota Life. Our home office is at 400 Robert Street North, St. Paul,
Minnesota 55101-2098, telephone: (651) 665-3500. We are licensed to do a life
insurance business in all states of the United States (except New York where we
are an authorized reinsurer), the District of Columbia, Canada, Puerto Rico and
Guam.
B. SEPARATE ACCOUNT
We established the Variable Annuity Account on September 10, 1984. The Separate
Account is registered as a "unit investment trust" with the SEC under the 1940
Act, but such registration does not signify that the SEC supervises the
management, or the investment practices or policies, of the Separate Account.
The assets of the Separate Account are not chargeable with liabilities arising
out of any other business we may conduct. The investment performance of the
Separate 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 general corporate obligations of Minnesota Life.
The Separate Account has one Sub-Account available for your purchase payments to
the contract. That Sub-Account invests in the Index 500 Portfolio.
C. ADVANTUS SERIES FUND, INC.
Advantus Series Fund, Inc. (the "Fund"), is a mutual fund advised by Advantus
Capital Management, Inc. ("Advantus Capital"). Prior to May 1, 1997, the name of
the Fund was "MIMLIC Series Fund, Inc." The Fund issues its shares only to us
and our separate accounts. It may be offered to separate accounts of insurance
companies affiliated with us in the future.
Advantus Capital is a wholly-owned subsidiary of Minnesota Life.
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(SIDEBAR)
We may change the Portfolios offered under the contract.
(END SIDEBAR)
The only Portfolio of the Fund which is available for investment by the contract
is the Index 500 Portfolio.
A prospectus for the Fund is attached to this Prospectus. You should carefully
read the Fund's prospectus before investing in the contract.
D. ADDITIONS, DELETIONS OR SUBSTITUTIONS
We retain the right, subject to any applicable law, to make substitutions with
respect to the investments of the Sub-Accounts of the Separate 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 total annuity values
and cash values, future purchase payments and future annuity payments.
We reserve the right to transfer assets of the separate account to another
separate account.
We may also establish additional Sub-Accounts in the Separate Account and we
reserve the right to add, combine or remove any Sub-Accounts of the Separate
Account. Each additional Sub-Account will purchase shares in a new portfolio or
mutual fund. Such Sub-Accounts may be established when, in our sole discretion,
marketing, tax, investment or other conditions warrant. We will use similar
considerations in determining to eliminate one or more of the Sub-Accounts of
the Separate Account. The addition of any investment option will 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 Separate
Account under the 1940 Act, to restrict or eliminate any voting rights of the
contract owners, and to combine the Separate Account with one or more of our
other separate accounts.
Shares of the Fund are also sold to some of our other separate accounts, which
are used to receive and invest premiums paid under our 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
the Fund simultaneously. Although neither we nor the Fund currently foresees any
such disadvantages either to variable life insurance policy owners or to
variable annuity contract owners, the Fund's Board of Directors intends to
monitor events in order to identify any material conflicts between such policy
owners and contract owners and to determine what action, if any, should be taken
in response. Action could include the sale of Fund shares by one or more of the
separate accounts, which could have adverse consequences. Material conflicts
could result from, for example,
- changes in state insurance laws,
- changes in federal income tax laws,
- changes in the investment management of any of the Portfolios of the
Fund, or
- differences in voting instructions between those given by policy owners
and those given by contract owners.
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(SIDEBAR)
A sales charge of up to 4.5% may apply.
(END SIDEBAR)
CONTRACT CHARGES
Under this contract, there are deductions for charges from purchase payments and
other charges which are made directly to the Separate Account. Deductions from
purchase payments are made for sales charges, risk charges and state premium
taxes, where applicable. Deductions for the mortality risk charge, expense risk
charge and the administrative charge are all deducted on each valuation date
from the Separate Account.
In addition to the charges which are applied under the contract, there are also
charges associated with the Index 500 Portfolio of the Fund. These charges,
which are not guaranteed, cover the advisory and other expenses of the
Index 500 Portfolio. Current total advisory and other expenses of the Portfolio
are .42% of average daily net assets of the Portfolio on an annual basis. More
information can be obtained in the prospectus for the Fund, which is attached to
this Prospectus.
A. SALES CHARGES
A sales charge is deducted from the purchase payments. The percentage amount of
the deduction is as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SALES CHARGE AS A PERCENTAGE
PURCHASE PAYMENTS OF PURCHASE PAYMENTS
- ---------------------------- ----------------------------
<S> <C>
$ 0 to 499,999.99 4.500%
500,000 to 749,999.99 4.125
750,000 to 1,000,000.00 3.750
1,000,000.01 to 1,499,999.99 3.375
1,500,000 to 1,999,999.99 3.000
2,000,000 to 2,499,999.99 2.625
2,500,000 to 2,999,999.99 2.250
3,000,000 to 3,999,999.99 1.875
4,000,000 to 5,000,000.00 1.500
</TABLE>
The applicable percentage will be based on the total cumulative purchase
payments to the date of payment, including the new purchase payment. In
addition, if you purchase multiple contracts at different times, purchase
payments made under all contracts will be aggregated solely for the purpose of
determining the sales charge applicable to those purchase payments made to later
contracts.
These sales charges may be waived in whole or in part where sales expenses are
not paid at the time of sale to registered representatives and broker-dealers
responsible for the sale of the contracts or where the contract is sold in
anticipation of reduced expenses in group or group-type situations. We will not
eliminate or reduce a sales charge if that would be unfairly discriminatory to
any person or class of persons.
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(SIDEBAR)
The risk charge is 1.25%.
(END SIDEBAR)
The full amount of the sales charge for the Adjustable Income Annuity described
in this Prospectus will be applied to purchase payments. However, certain sales
charges on your old contract may be waived.
For certain variable annuity contracts issued by us prior to May 1, 2000, we
will waive the sales charge on any portion of that contract's value applied to
the purchase of an Adjustable Income Annuity.
For certain variable annuity contracts issued by us on or after May 1, 2000, we
will waive the sales charge remaining on any portion of that contract's value
applied to the purchase of an Adjustable Income Annuity according to the
following schedule:
<TABLE>
<CAPTION>
CUMULATIVE ACCUMULATION VALUE APPLIED TO
PURCHASE AN ADJUSTABLE INCOME ANNUITY SALES CHARGE WAIVED
- ---------------------------------------- ------------------------------------
<S> <C>
$ 0 to 499,999 anytime after issue
500,000 to 1,999,999 2 years after issue or later
2,000,000 to 5,000,000 5 years after issue or later
</TABLE>
For persons who are current owners of our MOA Select and MOA Achiever variable
annuity contracts, the value applied in the exchange will be the total purchase
payments made to those contracts. For all other variable annuity contracts
issued by us, the value applied in this exchange will be the accumulation value
in those contracts.
B. RISK CHARGE
A risk charge is deducted from each purchase payment for our guarantee of the
minimum annuity payment amount. The risk charge may be as much as 2% of each
purchase payment. Currently, this charge is made at the rate of 1.25% of
purchase payments made to the contract. This rate is not guaranteed for future
purchase payments made under the contract and may change based upon our
experience.
If this deduction proves to be insufficient to cover our actual costs of the
risk assumed by us in providing a guaranteed minimum payment, then we will
absorb the resulting losses. If these deductions prove to be more than
sufficient after the establishment of any contingency reserves deemed prudent or
required by law, any excess will be profit to us.
C. MORTALITY AND EXPENSE RISK CHARGES
We assume the mortality risk by our obligation to continue to make scheduled
annuity payments, in accordance with the annuity rate tables and other
provisions contained in the contract, to each annuitant regardless of how long
that annuitant lives or all annuitants as a group live. This assures an
annuitant that neither the annuitant's own longevity nor an improvement in life
expectancy generally will have an adverse effect on the scheduled annuity
payments received under the contract. Our actual mortality results will not
adversely affect any payments or values.
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(SIDEBAR)
The mortality and expense risk charge is .80%.
The administrative charge is .15%.
The contract is an immediate payment variable annuity. It may be used with a
variety of retirement plans.
(END SIDEBAR)
We assume an expense risk by assuming that deductions in the contracts will be
adequate to cover our actual expenses. Our actual expense results will not
adversely affect any payments or values.
For assuming these risks, we currently make a deduction from the net asset value
of the Separate Account at an annual rate of .80%. This is 0.55% for the
mortality expense risk charge and 0.25% for the expense risk charge. We have the
right to increase these charges. If these charges are increased to the maximum
amount, then the total for the mortality risk and expense risk charges would be
1.40% on an annual basis.
If these deductions prove to be insufficient to cover our actual costs, then we
will absorb the resulting losses. If these deductions prove to be more than
sufficient after the establishment of any contingency reserves deemed prudent or
required by law, any excess will be profit to us. Some or all of such profit may
be used to cover any distribution costs not recovered through the sales charge.
D. ADMINISTRATION CHARGE
We perform all administrative services relative to the contract. These services
include the review of applications for compliance with our issue rules, the
preparation and issue of the contract, the receipt of purchase payments,
forwarding amounts to the Fund for investment, the calculation of the guaranteed
minimum annuity payment amount, the preparation and mailing of periodic reports
and the performance of other services.
As consideration for providing these services, we currently make a deduction
from the Separate Account at the annual rate of 0.15%. We reserve the right to
increase this charge. If we do, the amount of this charge will not exceed 0.40%.
DESCRIPTION OF THE CONTRACTS
A. GENERAL PROVISIONS
1. Types of Contracts Offered
(a) Variable Annuity Contract
The contract is an individual, immediate, variable annuity contract
issued by us. It provides for scheduled annuity payments on a monthly,
quarterly, semi-annual or annual basis. These payments may begin
immediately. They must begin on a date within 12 months after the issue
date of the contract. Purchase payments received by us under a contract
are allocated to the Separate Account. In the Separate Account, your
purchase payments are put into a Sub-Account which are then invested in
the Portfolio.
PAGE 13
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(SIDEBAR)
We issue the contract to you and you select the annuitant.
You cannot pay more than $1 million unless we consent to a larger purchase
payment.
(END SIDEBAR)
This type of contract may be used in connection with a pension or profit
sharing plan under which plan contributions have been accumulating. It
may be used in connection with a plan which has previously been funded
with insurance or annuity contracts. It may also be purchased by
individuals not as a part of any qualified plan. The contract provides
for a variable annuity which is paid on the basis of a single or joint
life annuity. The annuity option elected may not be changed.
2. Issuance of Contracts
The contracts are issued to you. The owner of the contract may be the annuitant
or someone else. The contract may be owned by two persons jointly. In some
states, we may not offer joint contracts.
3. Modification of the Contracts
A written agreement between you and us may modify a contract. However, no
modification will adversely affect the rights of an annuitant under the contract
unless it is made to comply with a law or government regulation. You will have
the right to accept or reject a modification. You cannot reject a modification
where the contract is used in a tax-qualified arrangement, and the change is
required to conform the contract with tax laws or regulations.
4. Assignment
The annuitant, or the joint annuitants, can direct or assign the contract
annuity payments so that they are paid to someone else. We will not be bound by
any assignment until we have recorded a written request 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 before it was recorded. Any claim made
by an assignee will be subject to proof of the assignee's interest and the
extent of the assignment.
If the contract is part of a tax-qualified program (including employer-sponsored
employee pension benefit plans, tax-sheltered annuities and individual
retirement annuities), your or the annuitant's interest may not be assigned,
sold, transferred, discounted or pledged as collateral for a loan or as security
for the performance of an obligation or for any other purpose. To the maximum
extent permitted by law, benefits payable under the contract shall be exempt
from the claims of creditors.
5. Limitations on Purchase Payments
Purchase payments must be made at our home office. Our home office is at
400 Robert Street North, St. Paul, Minnesota 55101-2098. When we receive a
purchase payment, we will send you a confirmation statement and an updated
page one for the contract.
A purchase payment in an amount of at least $10,000 will be required in order
for us to issue the contract. We will not issue a contract for less than
that amount.
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<PAGE>
(SIDEBAR)
We normally pay lump sum payments within 7 days, but may delay payments in
certain circumstances.
The contract is non-participating.
(END SIDEBAR)
After the contract has been issued, you may make additional purchase payments.
You can do this only during the cash value period of the contract as shown on
page one. Additional purchase payments may be made only while the annuitant or
joint annuitant, if any, is alive. Additional purchase payments must be in an
amount of at least $5,000. We will waive this contract provision for amounts
which are received after contract issue if it is part of an integrated rollover
or Section 1035 transaction. When you make additional purchase payments, those
purchase payments will not result in a recalculation of your investment in the
contract and a determination of a new exclusion amount. You may also wish to
consult with your tax adviser.
WE RESERVE THE RIGHT TO SUSPEND THE SALE OF THESE CONTRACTS AND TO TERMINATE
YOUR ABILITY TO MAKE ADDITIONAL PURCHASE PAYMENTS INTO THE CONTRACT.
You may not make total purchase payments which exceed the amount of $1,000,000
unless you have our prior consent. Currently, we are accepting purchase payments
of up to $5,000,000 without requiring specific advance consent.
Some states will limit these contracts to a single purchase payment.
There may be limits on the maximum contributions to retirement plans that
qualify for special tax treatment.
6. Deferment of Payment
Whenever we make any payment in a single sum, we will make it within seven days
after the date such payment is called for by the terms of the contract, except
as payment may be subject to postponement 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 Commission,
- any period during which an emergency exists as determined by the
Commission as a result of which it is not reasonably practical to dispose
of securities in the Fund or to fairly determine the value of the assets
of the Fund,
- or such other periods as the Commission may by order permit for the
protection of the contract owners.
7. Participation
The contract is nonparticipating. Contracts issued before October 1, 1998 were
participating.
No assurance can be given as to the amounts, if any, that will be distributable
under participating contracts in the future. If any distribution of divisible
surplus is made, it will take the form of the purchase of additional annuity
units.
PAGE 15
<PAGE>
(SIDEBAR)
Two annuity options are available. Each is payable only as a variable annuity.
(END SIDEBAR)
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 or the joint annuitants, and
- the investment performance of the Sub-Account.
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 amount of each scheduled annuity payment) will reflect investment gains
and losses and investment income of the Portfolio. The amount of the annuity
payment will increase or decrease from one annuity payment date to the next
unless affected by the guaranteed minimum annuity payment amount.
2. Electing the Annuity Commencement Date
The contracts are issued as immediate annuities on the contract date. When you
purchase a contract, you must indicate the annuity commencement date. It must be
within 12 months from the contract date. Some jurisdictions may restrict this
time limit to a shorter period.
An annuity payment may begin on any day of the month. Annuity payments may be
received on a monthly, quarterly, semi-annual or annual basis.
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
The contracts provide for two lifetime annuity options, a life annuity or a
joint and last survivor annuity. Each annuity payment option is available only
as a variable annuity. No additional annuity options are provided or allowed
under the contracts.
The amount of the first scheduled payment depends on the annuity option elected,
the age of the annuitant and the joint annuitant, if any, and the frequency of
payments.
LIFE ANNUITY
This is a scheduled annuity payable during the lifetime of the annuitant.
Annuity payments terminate with the last scheduled payment preceding the death
of the annuitant if the annuitant's death occurs after the cash value period has
expired. If the annuitant dies during the cash value period, the beneficiary
will be paid a death benefit that permits the beneficiary to elect to continue
receiving payments
PAGE 16
<PAGE>
(SIDEBAR)
The amount of your first annuity payment depends on the age of the annuitant,
the annuity option and the frequency of payments.
(END SIDEBAR)
until the end of the cash value period or to withdraw some or all of the cash
value amount. Annuity payment amounts payable as a death benefit will be reduced
for any cash value withdrawals received by the beneficiary.
JOINT AND LAST SURVIVOR ANNUITY
This is a scheduled annuity payable during the joint lifetime of the annuitant
and a designated joint annuitant. Payments continue during the remaining
lifetime of the survivor. If the last surviving annuitant dies during the cash
value period, the beneficiary will be paid a death benefit. The beneficiary may
elect to continue receiving payments until the end of the cash value period or
to withdraw some or all of the cash value. Annuity payment amounts payable as a
death benefit will be reduced for any cash value withdrawals received by the
beneficiary. If this option is elected, the contract and payments shall then be
the joint property of the annuitant and the designated joint annuitant.
4. Determination of Amount of Variable Annuity Payments
Unless annuity payments are based on the guaranteed minimum annuity payment
amount, the dollar amount of each variable annuity payment is equal to:
- the number of annuity units in the contract, multiplied by
- the annuity unit value as of the due date of the payment.
A number of annuity units is credited at issuance of the contract based upon the
initial annuity payment amount attributable to the initial purchase payment
received for the contract. The number of annuity units to be credited is
determined by dividing the initial annuity payment amount by the annuity unit
value as of the contract date. The number of annuity units remains unchanged
except as adjusted for your additional purchase payments, cash value withdrawals
or an annuitant's death.
The initial annuity payment amount is determined by applying the purchase
payment, after deductions, to the appropriate annuity purchase rate per $1,000.
Deductions from purchase payments may include premium taxes. Where applicable,
these taxes currently range from 0% to 3.5%.
The initial annuity payment amount depends on the annuity form you elected and
upon the adjusted age of the annuitant and the joint annuitant, if any. The
initial annuity payment amount is also based upon annuity payment purchase rate
tables which assume an interest rate of 4.5% per annum. The 4.5% interest rate
will produce level annuity payments if the net investment performance remains
constant at 4.5% per year. Subsequent payments will decrease, remain the same or
increase depending upon whether the actual net investment performance is less
than, equal to, or greater than 4.5%.
The amount of the first annuity payment after the initial purchase payment, or
after an addition or withdrawal, may be different than the initial annuity
payment amount used to determine the number of annuity units credited at the
time of that transaction. The actual annuity payment amount on any due date is
the
PAGE 17
<PAGE>
(SIDEBAR)
Payments are guaranteed at 85% of your initial variable annuity payment amount.
This immediate variable annuity has a death benefit during the cash value
period.
(END SIDEBAR)
number of annuity units multiplied by the annuity unit value on the due date of
the payment. We will pay the guaranteed minimum annuity payment amount if that
amount is greater. The annuity unit value recognizes the net sub-account
performance between the date of a transaction and the date the annuity payment
is calculated for payment.
5. Amount of Second and Subsequent Scheduled Annuity Payments
Unless annuity payments are the guaranteed minimum annuity payment amount, the
dollar amount of the second and later variable annuity payments is equal to:
- the number of annuity units determined for the Sub-Account,
multiplied by
- the annuity unit value as of the due date of the payment. This amount
will increase or decrease from payment to payment.
6. The Guaranteed Minimum Annuity Payment Amount
You will receive at least the guaranteed minimum annuity payment amount
specified in your contract. Each variable annuity payment will vary upwards or
downwards in accordance with investment performance unless it would be less than
the guaranteed minimum annuity payment amount. At each annuity payment date, we
will pay the annuitant or annuitants the greater of:
- the annuity payment amount determined by multiplying the number of
annuity units multiplied by the annuity unit value, or
- the guaranteed minimum annuity payment amount currently in force for the
contract.
We guarantee that variable annuity payments will always be at least 85% of the
initial variable annuity payment amount.
The guaranteed amount is determined on the contract issue date and shown on page
one of the contract. If an additional purchase payment is made, we will
guarantee that variable annuity payments will always be at least 85% of the
annuity amount attributable to that additional purchase payment, plus the amount
already guaranteed when you make that purchase payment. If you withdraw cash
value amounts under the contract, it will reduce the guaranteed annuity payment
amount by the same proportion that the withdrawal reduces the number of annuity
units.
C. DEATH BENEFITS
The contracts provide that in the event of the death of the annuitant or a joint
annuitant before the annuity payments begin, a death benefit will be paid to you
or, if applicable, to your beneficiary. The death benefit will be paid when we
PAGE 18
<PAGE>
receive due proof, satisfactory to us, of the death at our home office. The
death benefit will be the sum of:
- the total annuity value of the contract, plus
- the amounts deducted from your purchase payments for sales charges, risk
charges and state premium taxes where applicable.
Death proceeds will be paid in a single sum to the beneficiary designated to
receive a lump sum benefit. Payment will be made within seven days after we
receive due proof of death.
We will pay the cash value of the contract, if any, as a lump sum death benefit
in the event of the death of the annuitant or the second joint annuitant after
annuity payments have begun. We will pay the death benefit to the beneficiary.
The beneficiary may elect to receive annuity payments during the remainder of
the cash value period rather than a lump sum benefit. However, the number of
annuity units will be set as a number equal to the number of cash value units as
of the date of the annuitant's death. The annuity payments to the beneficiary
will terminate at the end of the cash value period. Then, the guaranteed minimum
annuity payment amount will be adjusted in proportion to any change in the
number of annuity units. The new guaranteed minimum annuity payment amount will
be equal to:
- the guaranteed minimum annuity payment amount just prior to the
annuitant's death, multiplied by
- the number of annuity units after the annuitant's death,
- divided by the number of annuity units prior to the annuitant's death.
If the beneficiary elects to continue the annuity payments, the cash value will
also continue on the beneficiary's behalf as part of the death benefit. This
allows the beneficiary to withdraw any or all of the cash value available at any
time during the remaining cash value period. As with cash value withdrawals
while the annuitant is alive, cash value withdrawals by the beneficiary after
the annuitant's death will reduce future annuity payments and the guaranteed
minimum annuity payment amount. Except as noted below, the entire interest in
the contract must be distributed within five years of an owner's death.
Death benefits payable after the annuitant's death must be distributed at least
as rapidly as under the method elected by the annuitant or annuitants.
If you are not an annuitant and you die, or if any joint owner who is not an
annuitant dies, a death benefit will be paid. This death benefit will be the
same amount as the amount that would be paid on the death of the annuitant or
joint annuitant. It will be paid out in the same manner, except that if death
occurs before the annuity payments begin, the death benefit will be paid out
within five years of the date of death. When we pay a death benefit on the death
of the owner, no other contract benefits are then payable.
PAGE 19
<PAGE>
(SIDEBAR)
Initial purchase payments are credited within 2 business days of our receipt of
a complete application.
This immediate annuity allows you to make additional purchase payments.
(END SIDEBAR)
You can file a written request with us to change the beneficiary. It will not be
effective until it is recorded in our home office records. After it has been
recorded, it will take effect as of the date you signed the request. However, if
a death occurs before the request has been recorded, the request will not be
effective as to any death proceeds we have paid before the request was recorded
in our home office. If a beneficiary dies, that beneficiary's interest in a
contract ends with his or her death. Only those beneficiaries who survive will
be eligible to share in the amount payable to the beneficiary at the annuitant's
death. If there is no surviving beneficiary upon the death of the annuitant, any
remaining value of death benefit payable to the beneficiary will be paid to the
annuitant's estate.
D. PURCHASE PAYMENTS AND VALUE OF THE CONTRACT
1. Crediting Annuity and Cash Value Units
You must complete an application and send it to our home office. We will review
each application form submitted to us for compliance with our issue criteria
and, if it is accepted, we will issue a contract. The initial purchase payment
for the contract must be an amount of at least $10,000.
If we receive money and an incomplete application, that purchase payment will
not be credited until the valuation date coincident with or next following the
date a completed application is received and accepted. We will offer to return
the initial purchase payment with an incomplete application if it appears that
the application cannot be completed within five business days.
Purchase payments are credited to the contract in the form of annuity units and
cash value units. Each purchase payment is credited on the valuation date
coincident with or next following the date such purchase payment is received by
us at our home office, except for the initial purchase payment. The number of
annuity and cash value units credited with respect to each purchase payment is
determined by:
- dividing the initial annuity payment amount attributable to the purchase
payment by
- the then current annuity unit value for the Sub-Account on the date the
purchase payment is credited.
The net amount of each purchase payment, after deductions, will be applied to
purchase an additional initial annuity payment amount at least as great as that
determined by using the guaranteed annuity payment purchase rate table for new
purchase payments included in the contract. When a purchase payment is made, if
we are using a more favorable table of annuity payment purchase rates for new
purchase payments, we will use that table instead.
The number of annuity and cash value units determined shall not be changed by
any subsequent change in the value of a unit, but the value of a unit will vary
from valuation date to valuation date to reflect the investment experience of
the Sub-Account.
PAGE 20
<PAGE>
We will determine the value of annuity units on each day on which the Portfolio
of the Fund is valued.
Cash value units will be credited for each purchase payment in a number equal to
the number of annuity units credited for each respective purchase payment.
2. Total Annuity Value of the Contract
The total annuity value of the contract at any time is the present value of the
future annuity payments expected to be made under the contract. The total
annuity value represents your total interest in the Separate Account.
When the annuitant is alive, the total annuity value is equal to:
- the sum of the number of cash value units, multiplied by the annuity unit
value,
- multiplied by the appropriate factor from the total annuity value factor
table(s) included in the contract,
- plus the number of annuity units in excess of the number of cash
value units,
- multiplied by the annuity unit value,
- multiplied by the appropriate factor from the total annuity value factor
table(s) included in the contract.
After the annuitant's death, if the beneficiary elects to continue annuity
payments for the remainder of the cash value period, the total annuity value
will be equal to the cash value at all times during the cash value period.
3. Value of the Annuity Unit
The value of an annuity unit for the Sub-Account is determined on each valuation
date by using the product of:
- the value of an annuity unit on the preceding valuation date,
- the net investment factor for the Sub-Account for the valuation period
ending on the current valuation date, and
- a daily factor (.999879) which adjusts the value for the effect in the
valuation period of the 4.5% annual assumed interest rate that has
already been built into each contract's total annuity value, cash value
and annuity payment calculations.
4. Net Investment Factor for Each Valuation Period
The net investment factor is an index used to measure the investment performance
of a Sub-Account from one valuation period to the next. For the Sub-Account, the
net investment factor for a valuation period is the gross investment rate for
the valuation period, less a deduction for the mortality and expense risk
charges and the administrative charge at the current rate of 0.95% per annum.
PAGE 21
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(SIDEBAR)
The contract may be surrendered before annuity payments begin.
This immediate annuity allows cash withdrawals during the cash value period.
(END SIDEBAR)
The gross investment rate is equal to:
- the net asset value of a Portfolio share 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 of a Portfolio share determined at the end of the
preceding valuation period. The gross investment rate may be positive or
negative.
E. REDEMPTIONS
1. Withdrawals and Surrender
Withdrawals are not allowed prior to the "cash value period" which begins when
annuity payments begin. At any time during the cash value period of the
contract, you may request a withdrawal from the cash value of the contract. Each
withdrawal must be in an amount of at least $500. However, if the cash value of
the contract is less than that amount, the total of any remaining cash value in
the contract must be withdrawn. Other restrictions on withdrawals may be present
when the contract is used in conjunction with tax qualified programs. You must
make a written request for any withdrawal or surrender. Appendix B contains
examples of contract changes when there is a withdrawal.
You may surrender the contract at any time before the annuity payment
commencement date. The annuity payment commencement date is the day the first
annuity payment is made under the contract and it is the beginning of the cash
value period. If you make a surrender request, you will receive the contract's
surrender value. The surrender value will be determined on the valuation date
coincident with or next following the day your written request is received at
our home office.
Withdrawal or surrender proceeds will be paid in a single sum within seven days
of our receipt of your written request.
(a) Determination of Surrender Value
The surrender value of a contract is the total annuity value of the contract as
of the date of surrender plus the amounts deducted from your purchase payments
for sales charges, risk charges and state premium taxes where applicable. As
this surrender value is available only until the time the first annuity payment
is made under the contract, this provision has the effect of providing a return
of your contract's charges, the net purchase payments, plus or minus investment
gains or losses and less Separate Account charges, up until the time of that
payment. The maximum period of deferral is 12 months after the Contract Date.
This provision offers a benefit which is limited.
PAGE 22
<PAGE>
(SIDEBAR)
This is how we calculate your new annuity payment after a withdrawal.
(END SIDEBAR)
(b) Determination of Cash Value
The cash value of the contract is not guaranteed. The cash value decreases as
annuity payments are made, but also increases or decreases based on the
performance of the Sub-Account of the Separate Account given by the relative
change in the annuity unit value.
A withdrawal of all or a portion of the cash value of the contract, subject to
the dollar limitations described above, may be made during the "cash value
period" of the contract. The amount of the cash value available for withdrawal
is equal to: (a) multiplied by (b) multiplied by (c), where (a) is the number of
cash value units credited to the contract, (b) is the current annuity unit value
and (c) is the appropriate cash value factor set forth in a table in the
contract. The cash value period begins at the annuity payment commencement date
of the contract and runs for a period approximately equal to the annuitant's
life expectancy at the time the contract is issued. The number of cash value
units and the cash value period are shown on page one of your contract. We will
send you a new page one if you make subsequent purchase payments or withdrawals.
This will inform you of the number of cash value units remaining in your
contract.
The number of cash value units credited under a contract depends on your
purchase payments and cash value withdrawals. On the issue date of the contract
the number of cash value units will be equal to the number of annuity units
credited to the contract. Normally, withdrawals will reduce both the number of
cash value units and the number of annuity units but at different rates, so that
after a withdrawal the number of cash value units will no longer equal the
number of annuity units.
(c) Effect of Withdrawals on Cash Value
A withdrawal during the cash value period reduces the number of cash value units
of the contract. The new number of cash value units after a withdrawal is equal
to:
- the number of cash value units just prior to the withdrawal,
- multiplied by the cash value prior to withdrawal,
- less the cash value withdrawn, divided by the cash value prior to
withdrawal.
Cash value units are reduced on a last in, first out basis. Therefore, if you
make additional purchase payments to the contract after its issue, the value of
the cash value units attributable to those payments will be valued and cashed
out as withdrawals first, running backwards in time until we reach the values
attributable to the initial purchase payment.
(d) Annuity Payment Determinations after Withdrawals
A cash value withdrawal will affect future annuity payments by reducing the
number of annuity units, the basis for determining the amount of those payments.
The new number of annuity units following a cash value withdrawal will depend on
whether or not the annuitant is alive at the time the cash value withdrawal is
PAGE 23
<PAGE>
(SIDEBAR)
This immediate annuity will always pay an annuity benefit, even if you withdraw
all available cash value.
(END SIDEBAR)
made. If the annuitant is not alive, in other words if the withdrawal is made by
the beneficiary as part of the death benefit, the new number of annuity units
will equal the number of cash value units following the withdrawal. At the death
of the annuitant, the number of annuity units is adjusted, if necessary, to
equal the then number of cash value units, and this equivalency is continued
through any subsequent cash value withdrawals.
If the annuitant is alive at the time of the withdrawal, the adjustment of
subsequent annuity payments that occurs after a withdrawal is designed to
produce a new level of annuity payments -- assuming a rate of return exactly
equal to 4.5% -- over the remaining lifetime of the contract, including the
period after the end of the cash value period. After such a withdrawal, there
will be less cash value to support benefit payments during the cash value
period, so that the level of annuity payments before the withdrawal cannot be
maintained during the cash value period. In order to levelize payments -- again,
based on the assumption of a 4.5% return -- both before and after the end of the
cash value period, it is necessary to "redistribute" annuity payments, reducing
payments after the end of the cash value period and using the portion of the
excess reserves attributable to the reduction to increase payments during the
cash value period above the level that could be supported by the remaining cash
value alone to the level payable after the cash value period. (As a result, even
if all of a contract's cash value is withdrawn, annuity payments will continue
to be made, although at a considerably reduced level.)
If the annuitant is alive at the time of the withdrawal, annuity payments after
a withdrawal are determined as follows. When a withdrawal occurs, the total
annuity value of the contract is recomputed by adding the sum of the new cash
value immediately after the withdrawal and the contract's excess reserves. The
new total annuity value is then converted into a new "initial annuity payment
amount," based on tables set forth in the contract, and the new initial annuity
payment amount is in turn converted into annuity units by dividing it by the
annuity unit value on the date of the withdrawal. The tables are actuarially
computed to produce a level annuity payment for the remaining lifetime of the
contract based on an interest rate of 4.5% and the mortality rates originally
applied to purchase payments received under the contract using its specified
table. When a cash value withdrawal is made, we will inform you of the new
number of annuity units by sending you a new page one for your contract.
Redistribution of annuity payments after withdrawals do not adjust
redistributions made in connection with prior withdrawals. Despite
redistributions, the original mortality guarantees associated with each purchase
payment are preserved.
While annuity payments will be reduced as a result of cash value withdrawals, so
long as the annuitant is alive, annuity payments will never be eliminated by
cash value withdrawals even if all available cash value is completely withdrawn.
Some level of annuity benefit, under the option elected, will always be payable.
Also, a
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<PAGE>
(SIDEBAR)
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 can instruct us how to vote Fund shares.
(END SIDEBAR)
new guaranteed annuity amount will always be in effect after cash withdrawals.
While a new initial annuity payment amount is determined after a cash
withdrawal, additional cash values are not created.
2. Right of Cancellation
You should read the contract carefully when you receive it. You may cancel the
purchase of a contract within ten days after its delivery, for any reason, by
giving us written notice at 400 Robert Street North, St. Paul, Minnesota
55101-2098, of your intention to cancel. If the contract is canceled and
returned, we will refund to you the greater of:
- the total annuity value of the contract attributable to your purchase
payments, plus the amounts deducted from your purchase payments, or
- the amount of purchase payments paid under this contract.
Payment of the requested refund will be made to you within seven days after we
receive notice of cancellation.
For more information on your contract, you may contact us at 1-800-362-3141. In
addition, you may be able to contact us via Internet e-mail through our web
site. Please remember that an e-mail is not a valid substitute for a written
request that requires your signature.
VOTING RIGHTS
We will vote fund shares held in the Separate Account at the regular and special
meetings of the Fund. We will vote shares attributable to contracts in
accordance with instructions received from the annuitant or annuitants or,
during the surrender period of the contract, from the owner, if different from
the annuitants. In the event no instructions are received from the person or
persons entitled to direct such a vote, we will vote shares attributable to that
contract in the same proportion as shares of the Portfolio held by the
Sub-Account for which instructions have been received. If, however, the 1940
Act, any interpretations of that Act or the regulations under it should change
so that we may be allowed to vote shares in our own right, then we may elect to
do so.
The number of votes will be determined by dividing the total annuity value for
each contract allocated to the Sub-Account by the net asset value per share of
the underlying Fund shares held by that Sub-Account. The votes attributable to
any particular contract will decrease as the reserves decrease. In determining
any voting interest, fractional shares will be recognized.
We will notify each person entitled to vote of a Fund shareholders' meeting if
the shares held for his or her contract may be voted at that meeting. We will
also provide proxy materials and a form of instruction to facilitate provision
of voting instructions.
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<PAGE>
(SIDEBAR)
We are not offering tax advice. You should consult your own tax adviser.
Taxes on gains under the contract are normally deferred until there is a
distribution of contract values.
(END SIDEBAR)
FEDERAL TAX STATUS
INTRODUCTION
The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. In addition, this
discussion is based on our understanding of federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of current income tax laws or the current interpretations of the
Internal Revenue Service. The contract may be purchased on a non-tax qualified
basis ("Nonqualified Contract") or purchased and used in connection with certain
retirement arrangements entitled to special income tax treatment under
Section 401(a), 403(b), 408, 408A or 457 of the Code ("Qualified Contracts").
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 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 Separate Account form a part of, and are taxed with, our other
business activities. Currently, no federal income tax is payable by us on income
dividends received by the Separate Account or on capital gains arising from the
Separate Account's activities. The Separate Account is not taxed as a "regulated
investment company" under the Code and it does not anticipate any change in that
tax status.
TAXATION OF ANNUITY CONTRACTS IN GENERAL
Section 72 of the Code governs taxation of nonqualified annuities in general and
some aspects of qualified programs. No taxes are 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 under the annuity option elected.
As a general rule, annuity contracts held by a corporation, trust or other
similar entity, as opposed to a natural person, are not treated as annuity
contracts for federal tax purposes. The investment income on such contracts is
taxed as ordinary income that is received or accrued by the owner of the
contract during the taxable year. There is an exception to this general rule for
immediate annuity contracts. An immediate annuity contract for these purposes is
an annuity (i) purchased with a single premium or annuity consideration,
(ii) the annuity starting date of which commences within one year from the date
of the purchase of the annuity, and (iii) which provides for a series of
substantially equal periodic payments (to be made not less frequently than
annually) during the annuity period. Corporations, trusts and other similar
entities, other than natural persons, seeking to take advantage of this
exception for immediate annuity contracts should consult with a tax adviser.
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(SIDEBAR)
Ordinary income tax rates apply to amounts distributed in excess of purchase
payments. Gains are assumed to be distributed before return of purchase
payments.
A penalty tax may apply to distributions prior to age 59 1/2.
(END SIDEBAR)
Under current guidance, the tax consequences of additional premium payments and
partial withdrawals under nonqualified and qualified annuities are unclear,
including the effect on taxation of distributions, required distribution
provisions and penalty taxes. Consult a qualified tax adviser before submitting
additional premium payments or requesting a partial withdrawal.
For payments made in the event of a full surrender of an annuity not part of a
qualified program, the taxable portion is generally the amount in excess of the
cost basis of the contract. Amounts withdrawn upon a partial surrender from the
variable annuity contracts are generally treated first as taxable income to the
extent of the excess of the contract value over the purchase payments made under
the contract. All taxable amounts received under an annuity contract are subject
to tax at ordinary rather than capital gain 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.
For annuity payments, the taxable portion is generally determined by a formula
that establishes a specific dollar amount of each payment that is not taxed. In
this respect, Congress has indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract and
a separate deferred annuity contract as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws. A prospective purchaser of more than one annuity contract in a
calendar year should consult a tax adviser. The taxable part of each annuity
payment is taxed at ordinary income rates.
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 payment is made under an immediate annuity contract, as defined above, or
where the taxpayer is:
- 59 1/2 or older,
- where payment is made on account of the taxpayer's disability,
- where payment is made by reason of the death of an owner, and
- in certain other circumstances.
The Code also provides an exception to the 10% additional tax for distributions,
in periodic payments, of substantially equal installments, being made for the
life (or life expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and beneficiary.
PAGE 27
<PAGE>
(SIDEBAR)
Transfers, assignments and certain designations of annuitants can have tax
consequences.
(END SIDEBAR)
For some types of qualified plans, other tax penalties may apply to certain
distributions.
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. A contract owner who is contemplating any such transfer,
pledge, designation or assignment should consult a competent tax adviser with
respect to the potential tax effects of that transaction.
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 THE CASH
VALUE OF AN IMMEDIATE VARIABLE ANNUITY CONTRACT, SUCH AS THAT OFFERED BY THIS
PROSPECTUS, 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. FOR EXAMPLE, UNDER THIS VIEW, A CONTRACT OWNER WITH A CASH VALUE OF
$100,000, SEEKING TO OBTAIN $20,000 OF THE CASH VALUE IMMEDIATELY AFTER ISSUE,
WOULD PAY INCOME TAXES ON THE ENTIRE $20,000 AMOUNT IN THAT TAX YEAR. FOR SOME
TAXPAYERS, SUCH AS THOSE UNDER AGE 59 1/2, ADDITIONAL TAX PENALTIES MAY ALSO
APPLY. THIS ADVERSE TAX RESULT MEANS THAT OWNERS OF NONQUALIFIED CONTRACTS
SHOULD CONSIDER CAREFULLY THE TAX IMPLICATIONS OF ANY WITHDRAWAL REQUESTS AND
THEIR NEED FOR CONTRACT FUNDS PRIOR TO THE EXERCISE OF THIS RIGHT. CONTRACT
OWNERS SHOULD ALSO CONTACT THEIR TAX ADVISER PRIOR TO MAKING WITHDRAWALS.
IN ADDITION, WE HAVE BEEN ADVISED THAT IT IS THE POSITION OF THE INTERNAL
REVENUE SERVICE THAT WHEN ADDITIONAL PURCHASE PAYMENTS ARE MADE UNDER AN
EXISTING IMMEDIATE VARIABLE ANNUITY CONTRACT, SUCH AS THAT OFFERED BY THIS
PROSPECTUS, THOSE PURCHASE PAYMENTS WILL NOT RESULT IN A RECALCULATION OF THE
OWNER'S INVESTMENT IN THE CONTRACT AND A DETERMINATION OF A NEW EXCLUSION
AMOUNT. FOR EXAMPLE, A CONTRACT OWNER AGED 60 MIGHT PURCHASE A CONTRACT FOR THE
SUM OF $100,000, WHICH WOULD RESULT IN AN INITIAL LIFETIME ANNUITY PAYMENT OF
$460.00 PER MONTH. EACH YEAR, $4,132.23 WOULD BE RECEIVED AS A RETURN OF
INVESTMENT IN THE CONTRACT AND THE EXCESS WOULD BE TAXED AS ORDINARY INCOME. IF
WE ASSUME THAT THE CONTRACT OWNER MAKES AN ADDITIONAL PURCHASE PAYMENT OF
$20,000, THE EXCLUSION AMOUNT OF $4,123.23 WOULD NOT CHANGE, EVEN THOUGH
ADDITIONAL CASH VALUE WILL RESULT IN A NEW VARIABLE ANNUITY PAYMENT. THIS
POSITION OF THE SERVICE WILL RESULT IN THE OWNER'S INABILITY TO RECOVER HIS OR
HER INVESTMENT OVER THE PERIOD OF THE PAYMENTS. ACCORDINGLY, CONTRACT OWNERS,
ESPECIALLY THOSE INTENDING TO
PAGE 28
<PAGE>
MAKE SUBSTANTIAL AND MATERIAL ADDITIONAL PAYMENTS, SHOULD CONSIDER PURCHASING AN
ADDITIONAL CONTRACT INSTEAD OF MAKING AN ADDITIONAL PAYMENT. FOR FURTHER
INFORMATION YOU SHOULD CONSULT YOUR OWN QUALIFIED TAX ADVISER.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Separate Account to be
"adequately diversified" in order for the contract to be treated as a variable
contract for federal tax purposes. The Separate Account, through the Fund,
intends to comply with the diversification requirements prescribed in
Regulations Section 1.817-5, which affect how the Fund's assets may be invested.
Although the investment adviser is an affiliate of ours, we do not have control
over the Fund or its investments. Nonetheless, we believe that the Portfolio of
the Fund in which the Separate 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 the
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 investments
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. We do 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, we do not know what standards would be
applied if the Treasury Department should proceed to issue regulations or
rulings on this issue. We reserve 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 29
<PAGE>
(SIDEBAR)
Congress may change the tax laws and reduce or eliminate any tax advantages of
the contract.
(END SIDEBAR)
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
Section 72(s) of the Code requires any nonqualified contract issued after
January 18, 1985 to provide that (a) if an owner dies on or after the annuity
starting date but prior to the time the entire interest in the contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
owner's death; and (b) if an owner dies prior to the annuity starting date, the
entire interest in the contract must be distributed within five years after the
date of the owner's death.
These requirements shall be considered satisfied if any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary" is
distributed over the life of such beneficiary or over a period not extending
beyond the life expectancy of that beneficiary and such distributions begin
within one year of that owner's death. The owner's "designated beneficiary", who
must be a natural person, is the person designated by such owner as a
beneficiary and to whom ownership of the contract passes by reason of death.
However, if the owner's "designated beneficiary" is the surviving spouse of the
owner, the contract may be continued with the surviving spouse as the new owner.
Nonqualified contracts 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
Amounts may be distributed from a contract because of the death of an owner.
Generally, such amounts are includable in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender of the contract, as described above, or (2) if distributed
under an annuity option, they are taxed in the same manner as annuity payments,
as described above. For these purposes, the investment in the contract is not
affected by the owner's death. That is, the investment in the contract remains
the amount of any purchase payments paid which were not excluded from gross
income.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of there being any change in taxation 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 (that is, effective prior to the date of the
change). You should consult a tax adviser with respect to legislative
developments and their effect on the contract.
PAGE 30
<PAGE>
(SIDEBAR)
Distributions are subject to income tax withholding requirements unless you take
steps to prevent it.
(END SIDEBAR)
TAX QUALIFIED PROGRAMS
The annuity is designed for use with several types of retirement plans that
qualify for special tax treatment. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from:
- contributions in excess of specified limits,
- distributions prior to age 59 1/2 (subject to certain exceptions),
- distributions that do not conform to specified minimum distribution
rules, and
- other specified circumstances.
We make no attempt to provide more than general information about use of
annuities with the various types of retirement plans. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
annuity. The rights of any person to 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
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 annuities comply with applicable law. If you
intend to purchase a contract for use with any retirement plan you should
consult legal counsel and a 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 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
In general, distributions from annuities are subject to federal income tax
withholding unless the recipient elects not to have tax withheld. Different
rules may apply to payments delivered outside the United States. Some states
have enacted similar rules.
PAGE 31
<PAGE>
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 (a) over the life or life expectancy of the employee, (b) the joint
lives or joint expectancies of the employee and the employee's designated
beneficiary, or (c) for a specified period of ten years or more,
- 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
It should be understood that the foregoing description of the federal income tax
consequences under these contracts is not exhaustive and that special rules are
provided with respect to situations not discussed herein. It should also be
understood that should a plan lose its qualified status, employees will lose
some of the tax benefits described. Statutory changes in the Internal Revenue
Code with varying effective dates, and regulations adopted thereunder may also
alter the tax consequences of specific factual situations. Due to the complexity
of the applicable laws, tax advice may be needed by a person contemplating the
purchase of a variable annuity contract or exercising elections under such a
contract. For further information a tax adviser should be consulted.
PERFORMANCE DATA
From time to time the Variable Annuity Account may publish advertisements
containing performance data relating to the Sub-Account. Performance data will
consist of average annual total return quotations for recent one-year, five-year
and ten-year periods. Performance data may also include cumulative total return
quotations for the period since June 1, 1987 or average annual total return
quotations for periods other than as described above. Performance figures are
based on historical performance information on the assumption that the contracts
offered by this Prospectus were available for sale on June 1, 1987, when the
Sub-
PAGE 32
<PAGE>
Account began operations, and could accumulate value prior to the commencement
of annuity payments for periods in excess of one year. The figures are not
intended to suggest that such performance will continue in the future.
Average annual total return figures are the average annual compounded rates of
return required for an initial investment to equal its total annuity value at
the end of the period. The total annuity value will reflect the sales and risk
charges deducted from purchase payments as well as all other contract charges.
Cumulative total return figures are the percentage changes between the value of
an initial investment and its total annuity value at the end of the period.
Cumulative total return figures will not reflect the deduction of any amounts
from purchase payments. Cumulative total return figures will always be
accompanied by average annual total return figures. 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 the offices of Minnesota Life
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 Contracts
Performance Data
Auditors
Registration Statement
Financial Statements
PAGE 33
<PAGE>
APPENDIX A
TAXATION 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. In addition, 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, hereinafter referred to as an "IRA". Also,
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 Internal Revenue
Service. Purchasers of a contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service 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. Purchasers 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.
PAGE A-1
<PAGE>
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 a Simple
IRA are subject to the same restrictions that apply to IRA distributions and are
taxed as ordinary income. Subject to certain exceptions, premature distributions
prior to age 59 1/2 are subject to a 10% penalty tax, which is increased to 25%
if the distribution occurs within the first two years after the commencement of
the employee's participation in the plan.
ROTH IRAS
Effective January 1, 1998, Section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are
subject to certain limitations, are not deductible and must be made in cash or
as a rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax. 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:
- the annuity owner has reached age 59 1/2,
- the distribution is paid to a beneficiary after the owner's death,
- the annuity owner becomes disabled, or
- the distribution will be used for a first time home purchase and does not
exceed $10,000.
Nonqualified distributions are includable in gross income only to the extent
they exceed contributions made to the Roth IRA. The taxable portion of a
nonqualified 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
PAGE A-2
<PAGE>
may result if this annuity is assigned or transferred to any individual as a
means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the annuity.
DEFERRED COMPENSATION PLANS
Code Section 457 provides for certain deferred compensation plans. These plans
may be offered with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. The plans may permit participants
to specify the form of investment for their deferred compensation account. With
respect to non-governmental Section 457 plans, all investments are owned by the
sponsoring employer and are subject to the claims of the general creditors of
the employer and depending on the terms of the particular plan, the employer may
be entitled to draw on deferred amounts for purposes unrelated to its Section
457 plan obligations. In general, all amounts received under a Section 457 plan
are taxable and are subject to federal income tax withholding as wages.
PAGE A-3
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APPENDIX B
COMPUTATION AND EXAMPLES OF WITHDRAWALS
A cash value withdrawal will affect future annuity payments by reducing the
number of annuity units, the basis for determining the amount of such payments.
If the annuitant is alive at the time of the withdrawal, the new number of
annuity units is determined by first computing a new initial annuity payment
amount and then dividing that amount by the annuity unit value at the time of
the withdrawal.
IF NO PRIOR WITHDRAWALS
If no prior cash withdrawals have been made, the new initial annuity payment
amount is the sum of:
(i) the product of the number of cash value units after the withdrawal
multiplied by the current annuity unit value, and
(ii) the product of ([(a) X (b)]/1000) multiplied by (c), where
(a) is the excess of the total annuity value over the cash value
immediately prior to the withdrawal,
(b) is the ratio of the cash value withdrawn over the cash value
prior to the withdrawal, and
(c) is the applicable annuity purchase rate set forth in the contract
in the table captioned "Total Annuity Value Factors and Annuity
Payment Purchase Rates Applicable at a Cash Value Withdrawal
while the Annuitant is Alive" ("Table I").
In the above computation "(i)" reflects the portion of the new initial annuity
payment amount supported by the reserves attributable to the cash value of the
contract, and "(ii)" reflects the portion of the new initial annuity payment
amount supported by the annuity reserves in excess of the cash value. The excess
reserves, "(ii) (a)," are multiplied by the proportionate reduction in the cash
value, "(ii) (b)," to determine the portion of the excess reserves that are to
be redistributed, and the redistribution is effected by dividing the portion so
determined by 1000 and multiplying the result by the appropriate annuity
purchase rate.
An example of the withdrawal calculation may serve as a useful illustration.
Assume a contract issued to a woman in 1995, age 60, for an initial purchase
payment of $100,000. Assume further that the net Sub-Account performance matches
the assumed interest rate of 4.5% so that we need not consider the variation in
annuity payments as a result of fluctuations in investment performance. Assume
also that the annuity unit value is and remains $1.00. At the time of issue of
the contract, the initial annuity payment amount, if paid as a life annuity,
will be $460.99, and the number of annuity units and cash value units will be
460.9900. The guaranteed minimum annuity payment amount is $391.84 (85% X
$460.99).
PAGE B-1
<PAGE>
Assume that at year five, the contract owner makes a withdrawal of 60% of the
cash value. Immediately prior to the withdrawal, the contract has a total
annuity value of $85,594, which is determined by multiplying the current annuity
payment amount, $460.99, by the appropriate factor set forth in the contract
applicable to cash value units in Table I, 185.6737. The total annuity reserves
amount is $85,594. The cash value of the contract immediately prior to the
withdrawal is $70,890, which is determined by multiplying the current annuity
payment amount, $460.99, by the appropriate factor set forth in the contract in
the table captioned "Cash Value Factors." ("Table II"), 153.7783. $70,890 is the
amount of the annuity reserves attributable to the cash value of the contract.
The cash value after the withdrawal is $28,356 ($70,890 - $42,534 (60% X
$70,890)), and the new number of cash value units is 184.3960 (460.9900 X
($28,356/$70,890)).
The new initial annuity payment amount is $235.19, the sum of:
(i) $184.40, the product of the number of cash value units after the
withdrawal (184.3960) multiplied by the annuity unit value ($1.00),
and
(ii) $50.79, the product of ([(a) X (b)]/1000) multiplied by (c), where
(a) is $14,704, the excess of the total annuity value ($85,594) over
the cash value ($70,890) immediately prior to the withdrawal,
(b) is .6, the ratio of the cash value withdrawn ($42,534) over the
cash value prior to the withdrawal ($70,890), and
(c) is 5.7568, the applicable annuity purchase rate set forth in the
contract in Table I.
The new guaranteed minimum annuity payment amount after the withdrawal is
$199.91 ($391.84 X (235.1900/460.9900)).
IF PRIOR WITHDRAWALS
Where prior withdrawals have been made, the above formula is adjusted in the
manner shown in the following example. Assume that after the withdrawal of 60%
of the cash value in the contract described above the owner withdraws 75% of the
remaining cash value at year 15.
Immediately prior to the transaction the contract has a total annuity value of
$32,003. This is determined by multiplying the two components of the current
annuity payment amount $184.40 -- the portion attributable to the cash value
reserves, and $50.79 -- the portion attributable to the annuity reserves in
excess of the cash value, by the appropriate factors set forth in the contract
applicable to cash value units and annuity units in excess of cash value units,
respectively, in Table I, namely, 137.7353 and 130.0297 ($32,003 = ($184.40 X
137.7353) + ($50.79 X 130.0297)). The cash value of the contract immediately
prior to the withdrawal is $16,289, which is determined by multiplying the
portion of the current annuity payment amount attributable to the cash value,
$184.40, by the
PAGE B-2
<PAGE>
appropriate factor set forth in the contract in Table II, 88.3373 ($16,289 =
$184.40 X 88.3373). The cash value after the withdrawal is $4,072 ($16,289 -
$12,217 (75% X $16,289)), and the new number of cash value units is 46.0962
(184.3960 X ($4,072/$16,289)).
The new initial annuity payment amount is $149.44, the sum of:
(i) $46.10, the product of the number of cash value units after the
withdrawal (46.0962) multiplied by the current annuity unit
value ($1.00),
(ii) $50.79, the product of the number of annuity units (235.19) minus the
number of cash value units (184.40), each prior to the withdrawal,
multiplied by the current annuity unit value ($1.00), and
(iii) $52.55, the product of ([(a) X (b)]/1000) multiplied by (c), where
(a) is $9110, which is
(A) $15,714, the excess of the total annuity value ($32,003)
over the cash value ($16,289) immediately prior to the
withdrawal, minus
(B) $6,604, the value is (ii) above ($50.79) multiplied by the
appropriate factor as of the withdrawal date applicable to
annuity units in excess of cash value units set forth in the
contract in Table I (130.0297),
(b) is .75, the ratio of the cash value withdrawn ($12,217) over the
cash value prior to the withdrawal ($16,289), and
(c) is 7.6905, the applicable annuity purchase rate set forth in the
contract in Table I.
The new initial annuity payment amount has a new guaranteed minimum annuity
payment amount associated with it of $127.02 ($199.91 X 149.4400/235.1900).
PAGE B-3
<PAGE>
APPENDIX C
ADJUSTABLE INCOME ANNUITY DISCLOSURE "A VARIABLE IMMEDIATE ANNUITY"
<TABLE>
<S> <C>
PREPARED FOR: Jane M. Doe COMMENCEMENT DATE: 5/01/2000
DATE OF BIRTH: 5/01/1940 SEX: Female INCOME FREQUENCY: Monthly
STATE: MN INITIAL PERIODIC INCOME: $482.08
PURCHASE PAYMENT: $100,000.00 GUARANTEED MINIMUM INCOME AT ISSUE:
FUNDS: Non-Qualified $409.77
LIFE EXPECTANCY: 24.2 (IRS) ESTIMATED ANNUAL EXCLUSION AMOUNT AT
PREPARED BY: Minnesota Life ISSUE: $3,471.00
QUOTATION DATE: 3/27/2000
ANNUITIZATION OPTION: Single Life
</TABLE>
AGE Your age at nearest birthday.
GUARANTEED INCOME The guaranteed income column represents the minimum annuity
payment you will receive. This amount will be adjusted for additional purchase
payments made to the contract or cash value withdrawals taken from the contract.
PROJECTED INCOME The variable annuity income amount shown assumes a constant
annual investment return. 4.5% is the assumed interest rate used to calculate
the first payment. Thereafter, payments will increase or decrease based upon the
relationship between the 4.5% interest rate and the net investment performance
of the Index 500* Portfolio of the Advantus Series Fund, Inc. Actual value of
the contract will fluctuate depending on the performance of the underlying
sub-account.
CUMULATIVE INCOME The cumulative income amount shown represents the sum of the
projected income payments on an annual basis.
TOTAL ANNUITY VALUE The total annuity value at issue is the net amount credited
to your account after deduction of all front end charges. Thereafter, the total
annuity value changes based on fund performance, annuity payments made, and
subsequent purchase payments or withdrawals. The total annuity value includes
the cash value plus an amount intended to fund annuity payments for the
remainder of your life after the cash value period has ended.
CASH VALUE The cash value is the dollar amount available for withdrawal under
this contract at a given point in time. Access to the cash value is available
during the cash value period--a time period from the first annuity payment date
to your life expectancy as determined at issue. It is important to note that
withdrawals of cash value will reduce the amount of the minimum guaranteed
payment.
Page 1 of 5
Not valid without all pages.
The investment returns shown are hypothetical and are not
a representation of future results.
This is an illustration only and not a contract.
Prepared by Minnesota Life Insurance Company
PAGE C-1
<PAGE>
ESTIMATED ANNUAL EXCLUSION AMOUNT AT ISSUE The annual variable exclusion amount
is based on a cost basis of $100,000 and represents the amount of variable
payments that are excluded from taxation in each calendar year. This annual
amount is prorated in the first calendar year and may be recalculated in any
year where the total value of the annuity payments is less than the exclusion
amount. Exclusion calculations apply only until the cost basis is returned,
thereafter, all payments are fully taxable. This calculation does not include
future contributions or withdrawals.
NON-QUALIFIED PLANS When a withdrawal is taken, an amount equal to the lesser
of (i) the amount withdrawn or (ii) the net gain received from the contract will
be taxable as ordinary income for that year. Net gain, for this purpose, is the
total annuity value prior to the withdrawal less the investment in the contract.
The balance of the amount withdrawn will be considered a return of the
investment in the contract, and not as taxable income. Any portion of the
withdrawal that is not taxable as ordinary income will be deducted from the
investment in the contract and a new exclusion amount will be calculated for the
contract.
Any additional purchase payments made under an Adjustable Income Annuity
contract will be added to the owner's investment in the contract and will result
in an increase in the exclusion amount allowable over the remaining IRS
determined life expectancy of the annuitant or annuitants.
OTHER Deductions from your purchase payments are made for sales charges, risk
charges and state premium taxes where applicable. Sales charges are based on
your total cumulative purchase payments (see prospectus for schedule). A risk
charge is deducted for Minnesota Life's guarantee of a minimum annuity payment
amount. This charge is 1.25% of each purchase payment.
Net rates of return reflect expenses totaling 1.37%, which consist of the .95%
Variable Annuity Account mortality and expense risk charge and administrative
charge, and .42% for the Series Fund management fee and other expenses.
Minnesota Life variable immediate annuities are available through registered
representatives of 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 and for the Advantus Series
Fund, Inc.
* "Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-", "S&P
500-Registered Trademark-", "Standard & Poor's 500", and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Advantus
Series Fund, Inc. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund."
Page 2 of 5
Not valid without all pages.
The investment returns shown are hypothetical and are not
a representation of future results.
This is an illustration only and not a contract.
Prepared by Minnesota Life Insurance Company
PAGE C-2
<PAGE>
ADJUSTABLE INCOME ANNUITY ILLUSTRATION "A VARIABLE IMMEDIATE ANNUITY"
<TABLE>
<S> <C>
PREPARED FOR: Jane M. Doe ANNUITIZATION OPTION: Single Life
DATE OF BIRTH: 5/01/1940 SEX: Female COMMENCEMENT DATE: 5/01/2000
STATE: MN INCOME FREQUENCY: Monthly
PURCHASE PAYMENT: $100,000.00 INITIAL PERIODIC INCOME: $482.08
FUNDS: Non-Qualified GUARANTEED MINIMUM INCOME AT ISSUE:
LIFE EXPECTANCY: 24.2 (IRS) $409.77
PREPARED BY: Minnesota Life *ESTIMATED ANNUAL EXCLUSION AMOUNT AT
QUOTATION DATE: 3/27/2000 ISSUE: $3,471.00
</TABLE>
<TABLE>
<CAPTION>
0.00% GROSS RATE OF RETURN (-1.37% NET)
----------------------------------------------------------------
BEGINNING GUARANTEED PROJECTED CUMULATIVE TOTAL ANNUITY
DATE OF YEAR AGE INCOME INCOME INCOME VALUE CASH VALUE
- ---- --------- -------- ---------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 01, 2000......... 1 60 410 482 482 93,769 85,404
May 01, 2001......... 2 61 410 455 6,089 86,949 78,662
May 01, 2002......... 3 62 410 429 11,382 80,539 72,325
May 01, 2003......... 4 63 410 410 16,384 74,517 66,372
May 01, 2004......... 5 64 410 410 21,302 68,860 60,777
May 01, 2006......... 7 66 410 410 31,136 58,563 50,590
May 01, 2008......... 9 68 410 410 40,971 49,501 41,611
May 01, 2010......... 11 70 410 410 50,805 41,542 33,707
May 01, 2012......... 13 72 410 410 60,640 34,569 26,757
May 01, 2014......... 15 74 410 410 70,474 28,491 20,656
May 01, 2016......... 17 76 410 410 80,309 23,227 15,306
May 01, 2017......... 18 77 410 410 85,226 20,880 12,887
May 01, 2018......... 19 78 410 410 90,143 18,714 10,625
May 01, 2019......... 20 79 410 410 95,060 16,725 8,511
May 01, 2020......... 21 80 410 410 99,978 14,909 6,537
May 01, 2021......... 22 81 410 410 104,895 13,264 4,694
May 01, 2022......... 23 82 410 410 109,812 11,788 2,975
May 01, 2023......... 24 83 410 410 114,729 10,485 1,373
May 01, 2024......... 25 84 410 410 119,647 9,360 0
May 01, 2025......... 26 85 410 410 124,564 8,372 0
May 01, 2026......... 27 86 410 410 129,481 7,480 0
May 01, 2027......... 28 87 410 410 134,398 6,677 0
May 01, 2028......... 29 88 410 410 139,315 5,956 0
May 01, 2029......... 30 89 410 410 144,233 5,313 0
May 01, 2030......... 31 90 410 410 149,150 4,741 0
May 01, 2031......... 32 91 410 410 154,067 4,232 0
May 01, 2032......... 33 92 410 410 158,984 3,781 0
May 01, 2033......... 34 93 410 410 163,902 3,381 0
May 01, 2034......... 35 94 410 410 168,819 3,025 0
May 01, 2035......... 36 95 410 410 173,736 2,709 0
May 01, 2036......... 37 96 410 410 178,653 2,425 0
May 01, 2037......... 38 97 410 410 183,571 2,171 0
May 01, 2038......... 39 98 410 410 188,488 1,939 0
May 01, 2039......... 40 99 410 410 193,405 1,727 0
May 01, 2040......... 41 100 410 410 198,322 1,532 0
</TABLE>
* The exclusion amount does not assume future contributions or withdrawals.
Page 3 of 5
Not valid without all pages.
The investment returns shown are hypothetical and are not
a representation of future results.
This is an illustration only and not a contract.
Prepared by Minnesota Life Insurance Company
PAGE C-3
<PAGE>
ADJUSTABLE INCOME ANNUITY ILLUSTRATION "A VARIABLE IMMEDIATE ANNUITY"
<TABLE>
<S> <C>
PREPARED FOR: Jane M. Doe ANNUITIZATION OPTION: Single Life
DATE OF BIRTH: 5/01/1940 SEX: Female COMMENCEMENT DATE: 5/01/2000
STATE: MN INCOME FREQUENCY: Monthly
PURCHASE PAYMENT: $100,000.00 INITIAL PERIODIC INCOME: $428.08
FUNDS: Non-Qualified GUARANTEED MINIMUM INCOME AT ISSUE:
LIFE EXPECTANCY: 24.2 (IRS) $409.77
PREPARED BY: Minnesota Life *ESTIMATED ANNUAL EXCLUSION AMOUNT AT
QUOTATION DATE: 3/27/2000 ISSUE: $3,471.00
</TABLE>
<TABLE>
<CAPTION>
5.90% GROSS RATE OF RETURN (4.50% NET)
----------------------------------------------------------------
BEGINNING GUARANTEED PROJECTED CUMULATIVE TOTAL ANNUITY
DATE OF YEAR AGE INCOME INCOME INCOME VALUE CASH VALUE
- ---- --------- -------- ---------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 01, 2000......... 1 60 410 482 482 93,769 85,404
May 01, 2001......... 2 61 410 482 6,267 92,124 83,344
May 01, 2002......... 3 62 410 482 12,052 90,412 81,191
May 01, 2003......... 4 63 410 482 17,837 88,629 78,941
May 01, 2004......... 5 64 410 482 23,622 86,775 76,590
May 01, 2006......... 7 66 410 482 35,192 82,846 71,566
May 01, 2008......... 9 68 410 482 46,762 78,609 66,080
May 01, 2010......... 11 70 410 482 58,332 74,054 60,088
May 01, 2012......... 13 72 410 482 69,902 69,178 53,546
May 01, 2014......... 15 74 410 482 81,472 64,002 46,401
May 01, 2016......... 17 76 410 482 93,041 58,572 38,599
May 01, 2017......... 18 77 410 482 98,826 55,788 34,432
May 01, 2018......... 19 78 410 482 104,611 52,979 30,078
May 01, 2019......... 20 79 410 482 110,396 50,167 25,529
May 01, 2020......... 21 80 410 482 116,181 47,382 20,774
May 01, 2021......... 22 81 410 482 121,966 44,661 15,806
May 01, 2022......... 23 82 410 482 127,751 42,055 10,614
May 01, 2023......... 24 83 410 482 133,536 39,633 5,188
May 01, 2024......... 25 84 410 482 139,321 37,483 0
May 01, 2025......... 26 85 410 482 145,106 35,521 0
May 01, 2026......... 27 86 410 482 150,891 33,623 0
May 01, 2027......... 28 87 410 482 156,676 31,799 0
May 01, 2028......... 29 88 410 482 162,461 30,058 0
May 01, 2029......... 30 89 410 482 168,246 28,409 0
May 01, 2030......... 31 90 410 482 174,031 26,857 0
May 01, 2031......... 32 91 410 482 179,816 25,403 0
May 01, 2032......... 33 92 410 482 185,601 24,046 0
May 01, 2033......... 34 93 410 482 191,386 22,779 0
May 01, 2034......... 35 94 410 482 197,171 21,596 0
May 01, 2035......... 36 95 410 482 202,956 20,486 0
May 01, 2036......... 37 96 410 482 208,741 19,436 0
May 01, 2037......... 38 97 410 482 214,526 18,428 0
May 01, 2038......... 39 98 410 482 220,311 17,440 0
May 01, 2039......... 40 99 410 482 226,096 16,456 0
May 01, 2040......... 41 100 410 482 231,880 15,468 0
</TABLE>
* The exclusion amount does not assume future contributions or withdrawals.
Page 4 of 5
Not valid without all pages.
The investment returns shown are hypothetical and are not
a representation of future results.
This is an illustration only and not a contract.
Prepared by Minnesota Life Insurance Company
PAGE C-4
<PAGE>
ADJUSTABLE INCOME ANNUITY ILLUSTRATION "A VARIABLE IMMEDIATE ANNUITY"
<TABLE>
<S> <C>
PREPARED FOR: Jane M. Doe ANNUITIZATION OPTION: Single Life
DATE OF BIRTH: 5/01/1940 SEX: Female COMMENCEMENT DATE: 5/01/2000
STATE: MN INCOME FREQUENCY: Monthly
PURCHASE PAYMENT: $100,000.00 INITIAL PERIODIC INCOME: $482.08
FUNDS: Non-Qualified GUARANTEED MINIMUM INCOME AT ISSUE:
LIFE EXPECTANCY: 24.2 (IRS) $409.77
PREPARED BY: Minnesota Life *ESTIMATED ANNUAL EXCLUSION AMOUNT AT
QUOTATION DATE: 3/27/2000 ISSUE: $3,471.00
</TABLE>
<TABLE>
<CAPTION>
12.00% GROSS RATE OF RETURN (10.60% NET)
----------------------------------------------------------------
BEGINNING GUARANTEED PROJECTED CUMULATIVE TOTAL ANNUITY
DATE OF YEAR AGE INCOME INCOME INCOME VALUE CASH VALUE
- ---- --------- -------- ---------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 01, 2000......... 1 60 410 482 482 93,769 85,404
May 01, 2001......... 2 61 410 510 6,449 97,528 88,233
May 01, 2002......... 3 62 410 540 12,766 101,331 90,996
May 01, 2003......... 4 63 410 572 19,454 105,159 93,664
May 01, 2004......... 5 64 410 606 26,534 108,998 96,205
May 01, 2006......... 7 66 410 679 41,965 116,628 100,749
May 01, 2008......... 9 68 410 761 59,259 124,028 104,260
May 01, 2010......... 11 70 410 852 78,641 130,952 106,257
May 01, 2012......... 13 72 410 955 100,364 137,104 106,122
May 01, 2014......... 15 74 410 1,071 124,711 142,162 103,067
May 01, 2016......... 17 76 410 1,200 151,997 145,812 96,090
May 01, 2017......... 18 77 410 1,271 166,852 147,028 90,746
May 01, 2018......... 19 78 410 1,345 182,579 147,817 83,922
May 01, 2019......... 20 79 410 1,424 199,228 148,182 75,406
May 01, 2020......... 21 80 410 1,507 216,853 148,164 64,961
May 01, 2021......... 22 81 410 1,596 235,513 147,848 52,324
May 01, 2022......... 23 82 410 1,690 255,267 147,390 37,197
May 01, 2023......... 24 83 410 1,789 276,180 147,050 19,248
May 01, 2024......... 25 84 410 1,894 298,320 147,231 0
May 01, 2025......... 26 85 410 2,005 321,758 147,707 0
May 01, 2026......... 27 86 410 2,122 346,572 148,017 0
May 01, 2027......... 28 87 410 2,247 372,840 148,200 0
May 01, 2028......... 29 88 410 2,379 400,650 148,303 0
May 01, 2029......... 30 89 410 2,518 430,091 148,388 0
May 01, 2030......... 31 90 410 2,666 461,260 148,510 0
May 01, 2031......... 32 91 410 2,822 494,256 148,711 0
May 01, 2032......... 33 92 410 2,988 529,188 149,021 0
May 01, 2033......... 34 93 410 3,163 566,169 149,454 0
May 01, 2034......... 35 94 410 3,348 605,320 150,004 0
May 01, 2035......... 36 95 410 3,545 646,767 150,641 0
May 01, 2036......... 37 96 410 3,753 690,646 151,303 0
May 01, 2037......... 38 97 410 3,973 737,098 151,874 0
May 01, 2038......... 39 98 410 4,206 786,275 152,163 0
May 01, 2039......... 40 99 410 4,453 838,337 152,000 0
May 01, 2040......... 41 100 410 4,714 893,454 151,247 0
</TABLE>
* The exclusion amount does not assume future contributions or withdrawals.
Page 5 of 5
Not valid without all pages.
The investment returns shown are hypothetical and are not
a representation of future results.
This is an illustration only and not a contract.
Prepared by Minnesota Life Insurance Company
PAGE C-5
<PAGE>
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: (651) 665-3500
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 Separate Account's current Prospectus, bearing
the same date, which may be obtained by calling Minnesota Life Insurance
Company at (651) 665-3500, or writing to us at: 400 Robert Street North, St.
Paul, Minnesota 55101-2098.
Directors and Principal Management Officers of Minnesota Life
Distribution of Contracts
Performance Data
Auditors
Registration Statement
Financial Statements
-1-
<PAGE>
DIRECTORS AND PRINCIPAL MANAGEMENT OFFICERS OF MINNESOTA LIFE
Directors Principal Occupation
--------- --------------------
Anthony L. Andersen Retired since November 1999, prior thereto
Chair-Board of Directors, H. B. Fuller Company,
St. Paul, Minnesota (Adhesive Products) since
June 1995, prior thereto for more than five
years President and Chief Executive Officer,
H. B. Fuller Company
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
Dennis E. Prohofsky Senior Vice President, General Counsel and
Secretary, Minnesota Life Insurance Company
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 Retired since December 1999, prior thereto for
more than five years Chairman, Chief Financial
and Administrative Officer, Ecolab, Inc., St.
Paul, Minnesota (Develops and Markets Cleaning
and Sanitizing Products)
William N. Westhoff Senior Vice President and Treasurer, Minnesota
Life Insurance Company, since April 1998, prior
thereto from August 1994 to October 1997, Senior
Vice President, Global Investments, American
Express Financial Corporation, Minneapolis,
Minnesota
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)
-2-
<PAGE>
Principal Officers (other than Directors)
Name Position
John F. Bruder Senior Vice President
Keith M. Campbell Senior Vice President
James E. Johnson Senior Vice President
Gregory S. Strong Senior Vice President and Chief Financial
Officer
Terrence M. Sullivan Senior Vice President
Randy F. Wallake Senior Vice President
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.
DISTRIBUTION OF CONTRACTS
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. 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. The amounts paid by
Minnesota Life to the underwriter for 1999, 1998 and 1997 were $16,104,617,
$15,989,724 and $15,067,613 for payments to associated dealers on the sale of
variable annuity 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.
PERFORMANCE DATA
TOTAL RETURN FIGURES FOR THE SUB-ACCOUNT
Average annual total return figures for one-year, five-year and ten-year
periods are presented. Average annual total return figures are the average
annual compounded rates of return required for an initial investment of
$10,000 to equal the total annuity value of that same investment at the end
of the period. The total annuity value will reflect the deduction of the
sales and risk charges applicable to the contract. 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 December 31, 1987 and to May 1, 2000, Minnesota Life
voluntarily absorbed the fees and expenses that exceed .55% of the daily net
assets of the Index 500 Portfolio. After May 1, 2000, Advantus Capital has
agreed to voluntarily absorb fees and expenses of the Index 500 Portfolio on
the same basis. There is no specified or minimum period of time during which
Advantus Capital has agreed to continue its voluntary absorption of these
expenses, and Advantus Capital 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.
-3-
<PAGE>
The average annual rates of return for the Sub-Account, in connection with the
contract described in the Prospectus, for the specified periods ended
December 31, 1999 are shown in the table 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. These figures also assume that the
contracts described herein were issued when the underlying Portfolio first
became available to the Variable Annuity Account.
<TABLE>
<CAPTION>
Year Ended Five Years Ten Years
12/31/99 Ended 12/31/99 Ended 12/31/99
---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Index 500 Sub-Account (12.30%) 12.30% (24.87%) 24.87% (15.67%) 15.70%
------ ----- ------ ------ ------ ------
</TABLE>
AUDITORS
The financial statements of the Variable Annuity Account and the consolidated
financial statements of Minnesota Life included herein have been audited by
KPMG 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 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
contracts 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
contracts. Statements contained in this Statement of Additional Information as
to the contents of contracts and other legal instruments are summaries, and
reference is made to such instruments as filed.
-4-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees of Minnesota Life Insurance Company
and Contract Owners of Variable Annuity Account:
We have audited the accompanying statements of assets and liabilities of the
Growth, Bond, Money Market, Asset Allocation, Mortgage Securities, Index 500,
Capital Appreciation, International Stock, Small Company Growth, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010, Value Stock, Small Company Value, Global Bond, Index 400 Mid-Cap,
Macro-Cap Value, Micro-Cap Growth, Real Estate Securities, and Templeton
Developing Markets Segregated Sub-Accounts of Variable Annuity Account (the
Account), as of December 31, 1999 and the related statements of operations, the
statements of changes in net assets and the financial highlights for the periods
presented. These financial statements and the financial highlights are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investments owned at December 31, 1999 were confirmed to us by the
respective sub-account mutual fund, or for Advantus Series Fund, Inc., verified
by examination of the underlying portfolios. An audit also includes assessing
the accounting principles used and significant estimates made by management as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company Growth, Maturing Government Bond 2002,
Maturing Government Bond 2006, Maturing Government Bond 2010, Value Stock,
Small Company Value, Global Bond, Index 400 Mid-Cap, Macro-Cap Value, Micro-Cap
Growth, Real Estate Securities, and Templeton Developing Markets Segregated
Sub-Accounts of Variable Annuity Account at December 31, 1999 and the results
of their operations, changes in their net assets and the financial highlights
for the periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Minneapolis, Minnesota
February 4, 2000
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------
MONEY ASSET
ASSETS GROWTH BOND MARKET ALLOCATION
------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 102,150,015 shares at net asset
value of $3.33 per share (cost $229,222,924).............. $340,441,608 - - -
Bond Portfolio, 104,450,367 shares at net asset
value of $1.18 per share (cost $130,246,982).............. - 123,212,040 - -
Money Market Portfolio, 77,746,588 shares at
net asset value of $1.00 per share (cost $77,746,588)..... - - 77,746,588 -
Asset Allocation Portfolio, 238,232,702 shares at
net asset value of $2.39 per share (cost $435,126,522).... - - - 568,532,959
Mortgage Securities Portfolio, 84,279,775 shares at
net asset value of $1.17 per share (cost $98,514,345).... - - - -
Index 500 Portfolio, 93,620,590 shares at net asset
value of $4.56 per share (cost $272,052,018).............. - - - -
Capital Appreciation Portfolio, 80,817,036 shares at
net asset value of $3.70 per share (cost $192,682,114).... - - - -
------------ ----------- ----------- -----------
340,441,608 123,212,040 77,746,588 568,532,959
Receivable for investments sold................................... 399,903 78,433 141,970 786,111
Receivable from Minnesota Life for contract purchase payments..... 143,866 39,055 1,191,214 237,463
------------ ----------- ----------- -----------
Total assets............................................ 340,985,377 123,329,528 79,079,772 569,556,533
------------ ----------- ----------- -----------
LIABILITIES
-----------
Payable for investments purchased................................. 143,866 39,055 1,191,214 237,463
Payable to Minnesota Life for contract terminations
and mortality and expense charges.............................. 399,903 78,433 141,970 786,111
------------ ----------- ----------- -----------
Total liabilities......................................... 543,769 117,488 1,333,184 1,023,574
------------ ----------- ----------- -----------
Net assets applicable to annuity contract owners.......... $ 340,441,608 123,212,040 77,746,588 568,532,959
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
CONTRACT OWNERS' EQUITY
-----------------------
Contracts in accumulation period
(MultiOption Flex/Single/Select)............................... $ 325,822,734 115,403,799 72,023,538 547,968,676
Contracts in accumulation period
(MultiOption Classic/Achiever)................................. 1,877,652 763,788 3,410,308 3,652,657
Contracts in accumulation period (MegAnnuity)..................... 9,386,598 5,481,670 2,191,566 8,864,610
Contracts in annuity payment period
(MultiOption Flex/Single/Select) (note 2)...................... 3,209,966 1,533,406 121,176 7,480,265
Contracts in annuity payment period (Megannuity) (note 2)......... 144,658 29,377 - 566,751
Contracts in annuity payment period
(Adjustable Income Annuity) (note 2)........................... - - - -
------------ ----------- ----------- -----------
Total contract owners' equity............................. $ 340,441,608 123,212,040 77,746,588 568,532,959
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION FLEX/SINGLE/SELECT)... 49,216,657 48,459,470 41,200,616 121,522,399
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION CLASSIC/ACHIEVER)..... 1,608,959 765,852 3,372,875 3,296,125
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MEGANNUITY)....................... 1,773,719 2,238,400 1,175,791 2,078,286
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT
(MULTIOPTION FLEX/SINGLE/SELECT)............................... $ 6.62 2.38 1.75 4.51
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT
(MULTIOPTION CLASSIC/ACHIEVER)................................. $ 1.17 1.00 1.01 1.10
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT (MEGANNUITY)................ $ 5.29 2.45 1.86 4.27
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------
MORTGAGE INDEX CAPITAL
ASSETS SECURITIES 500 APPRECIATION
------ ------------ ----------- ----------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Growth Portfolio, 102,150,015 shares at net asset
value of $3.33 per share (cost $229,222,924).............. $ - - -
Bond Portfolio, 104,450,367 shares at net asset
value of $1.18 per share (cost $130,246,982).............. - - -
Money Market Portfolio, 77,746,588 shares at
net asset value of $1.00 per share (cost $77,746,588)..... - - -
Asset Allocation Portfolio, 238,232,702 shares at
net asset value of $2.39 per share (cost $435,126,522).... - - -
Mortgage Securities Portfolio, 84,279,775 shares at
net asset value of $1.17 per share (cost $98,514,345).... 98,489,717 - -
Index 500 Portfolio, 93,620,590 shares at net asset
value of $4.56 per share (cost $272,052,018).............. - 427,268,242 -
Capital Appreciation Portfolio, 80,817,036 shares at
net asset value of $3.70 per share (cost $192,682,114).... - - 299,365,075
------------ ----------- -----------
98,489,717 427,268,242 299,365,075
Receivable for investments sold................................... 109,009 876,116 376,169
Receivable from Minnesota Life for contract purchase payments..... 40,560 266,956 49,060
------------ ----------- -----------
Total assets............................................ 98,639,286 428,411,314 299,790,304
------------ ----------- -----------
LIABILITIES
-----------
Payable for investments purchased................................. 40,560 266,956 49,060
Payable to Minnesota Life for contract terminations
and mortality and expense charges.............................. 109,009 876,116 376,169
------------ ----------- -----------
Total liabilities......................................... 149,569 1,143,072 425,229
------------ ----------- -----------
Net assets applicable to annuity contract owners.......... $ 98,489,717 427,268,242 299,365,075
------------ ----------- -----------
------------ ----------- -----------
CONTRACT OWNERS' EQUITY
-----------------------
Contracts in accumulation period
(MultiOption Flex/Single/Select)............................... 94,095,555 370,000,382 286,307,412
Contracts in accumulation period
(MultiOption Classic/Achiever)................................. 993,688 2,216,824 766,231
Contracts in accumulation period (MegAnnuity)..................... 2,282,486 16,762,759 9,218,987
Contracts in annuity payment period
(MultiOption Flex/Single/Select) (note 2)...................... 1,117,988 4,077,098 2,995,002
Contracts in annuity payment period (Megannuity) (note 2)......... - 98,282 77,443
Contracts in annuity payment period
(Adjustable Income Annuity) (note 2)........................... - 34,112,897 -
------------ ----------- -----------
Total contract owners' equity............................. $ 98,489,717 427,268,242 299,365,075
------------ ----------- -----------
------------ ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION FLEX/SINGLE/SELECT)... 40,937,593 64,735,863 49,725,886
------------ ----------- -----------
------------ ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION CLASSIC/ACHIEVER)..... 989,073 2,038,959 602,909
------------ ----------- -----------
------------ ----------- -----------
ACCUMULATION UNITS OUTSTANDING (MEGANNUITY)....................... 878,899 2,938,591 1,598,318
------------ ----------- -----------
------------ ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT
(MULTIOPTION FLEX/SINGLE/SELECT)............................... $ 2.30 5.72 5.76
------------ ----------- -----------
------------ ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT
(MULTIOPTION CLASSIC/ACHIEVER)................................. $ 1.00 1.09 1.27
------------ ----------- -----------
------------ ----------- -----------
NET ASSET VALUE PER ACCUMULATION UNIT (MEGANNUITY)................ $ 2.60 5.70 5.77
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
----------------------------------------------
MATURING
SMALL GOVERNMENT
INTERNATIONAL COMPANY BOND
ASSETS STOCK GROWTH 2002
------ ------------- ------------- -------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
International Stock Portfolio, 116,701,083 shares
at net asset value of $1.94 per share (cost $178,245,174) .................... $ 226,335,709 - -
Small Company Growth Portfolio, 67,810,567 shares
at net asset value of $2.44 per share (cost $103,494,241) .................... - 165,416,235 -
Maturing Government Bond 2002 Portfolio, 9,631,089 shares
at net asset value of $1.05 per share (cost $10,461,247) ..................... - - 10,159,332
Maturing Government Bond 2006 Portfolio, 5,760,595 shares
at net asset value of $1.09 per share (cost $6,684,659) ...................... - - -
Maturing Government Bond 2010 Portfolio, 4,147,470 shares
at net asset value of $1.19 per share (cost $5,199,093) ...................... - - -
Value Stock Portfolio, 78,347,675 shares
at net asset value of $1.71 per share (cost $128,368,598) .................... - - -
------------- ------------- -------------
226,335,709 165,416,235 10,159,332
Receivable for investments sold ................................................. 348,091 178,483 9,616
Receivable from Minnesota Life for contract purchase payments ................... 73,117 63,634 337
------------- ------------- -------------
Total assets ............................................................ 226,756,917 165,658,352 10,169,285
------------- ------------- -------------
LIABILITIES
-----------
Payable for investments purchased ............................................... 73,117 63,634 337
Payable to Minnesota Life for contract terminations and mortality and
expense charges ............................................................... 348,091 178,483 9,616
------------- ------------- -------------
Total liabilities ....................................................... 421,208 242,117 9,953
------------- ------------- -------------
Net assets applicable to annuity contract owners ........................ $ 226,335,709 165,416,235 10,159,332
------------- ------------- -------------
------------- ------------- -------------
CONTRACT OWNERS' EQUITY
-----------------------
Contracts in accumulation period (MultiOption Flex/Single/Select)................ $ 217,231,990 158,030,561 6,995,326
Contracts in accumulation period (MultiOption Classic/Achiever).................. 951,414 706,670 21,599
Contracts in accumulation period (MegAnnuity).................................... 5,319,278 4,255,549 3,121,612
Contracts in annuity payment period (MultiOption Flex/Single/Select) (note 2).... 2,613,036 2,401,934 20,795
Contracts in annuity payment period (Megannuity) (note 2) ....................... 219,991 21,521 -
Contracts in annuity payment period (Adjustable Income Annuity) (note 2)......... - - -
------------- ------------- -------------
Total contract owners' equity ........................................... $ 226,335,709 165,416,235 10,159,332
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION FLEX/SINGLE/ SELECT) ................ 89,983,922 61,721,924 5,090,494
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION CLASSIC/ACHIEVER).................... 888,642 503,561 21,585
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MEGANNUITY) ..................................... 2,062,152 1,577,615 2,134,169
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MULTIOPTION FLEX/SINGLE/SELECT) ......... $ 2.41 2.56 1.37
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MULTIOPTION CLASSIC/ACHIEVER) ............ $ 1.07 1.40 1.00
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MEGANNUITY) .............................. $ 2.58 2.70 1.46
------------- ------------- -------------
------------- ------------- -------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------
MATURING MATURING
GOVERNMENT GOVERNMENT
BOND BOND VALUE
ASSETS 2006 2010 STOCK
------ ------------- ------------- -------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
International Stock Portfolio, 116,701,083 shares
at net asset value of $1.94 per share (cost $178,245,174) .................... $ - - -
Small Company Growth Portfolio, 67,810,567 shares
at net asset value of $2.44 per share (cost $103,494,241) .................... - - -
Maturing Government Bond 2002 Portfolio, 9,631,089 shares
at net asset value of $1.05 per share (cost $10,461,247) ..................... - - -
Maturing Government Bond 2006 Portfolio, 5,760,595 shares
at net asset value of $1.09 per share (cost $6,684,659) ...................... 6,259,261 - -
Maturing Government Bond 2010 Portfolio, 4,147,470 shares
at net asset value of $1.19 per share (cost $5,199,093) ...................... - 4,937,876 -
Value Stock Portfolio, 78,347,675 shares
at net asset value of $1.71 per share (cost $128,368,598) .................... - - 134,172,501
------------- ------------- -------------
6,259,261 4,937,876 134,172,501
Receivable for investments sold ................................................. 865 11,578 89,622
Receivable from Minnesota Life for contract purchase payments ................... 576 778 17,914
------------- ------------- -------------
Total assets ............................................................ 6,260,702 4,950,232 134,280,037
------------- ------------- -------------
LIABILITIES
-----------
Payable for investments purchased ............................................... 576 778 17,914
Payable to Minnesota Life for contract terminations and mortality and
expense charges ............................................................... 865 11,578 89,622
------------- ------------- -------------
Total liabilities ....................................................... 1,441 12,356 107,536
------------- ------------- -------------
Net assets applicable to annuity contract owners ........................ $ 6,259,261 4,937,876 134,172,501
------------- ------------- -------------
------------- ------------- -------------
CONTRACT OWNERS' EQUITY
-----------------------
Contracts in accumulation period (MultiOption Flex/Single/Select)................ $ 5,398,626 4,470,674 129,587,702
Contracts in accumulation period (MultiOption Classic/Achiever).................. 102,031 4,174 395,554
Contracts in accumulation period (MegAnnuity).................................... 409,215 165,944 2,338,693
Contracts in annuity payment period (MultiOption Flex/Single/Select) (note 2).... 317,498 297,084 1,831,894
Contracts in annuity payment period (Megannuity) (note 2) ....................... 31,891 - 18,658
Contracts in annuity payment period (Adjustable Income Annuity) (note 2)......... - - -
------------- ------------- -------------
Total contract owners' equity ........................................... $ 6,259,261 4,937,876 134,172,501
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION FLEX/SINGLE/ SELECT) ................ 3,776,193 3,079,844 61,230,340
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MULTIOPTION CLASSIC/ACHIEVER).................... 102,972 4,254 392,479
------------- ------------- -------------
------------- ------------- -------------
ACCUMULATION UNITS OUTSTANDING (MEGANNUITY) ..................................... 268,923 107,403 1,038,209
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MULTIOPTION FLEX/SINGLE/SELECT) ......... $ 1.43 1.45 2.12
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MULTIOPTION CLASSIC/ACHIEVER) ............ $ 0.99 0.98 1.01
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE PER ACCUMULATION UNIT (MEGANNUITY) .............................. $ 1.52 1.55 2.25
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-----------------------------------------------------
SMALL
COMPANY GLOBAL INDEX 400 MACRO-CAP
ASSETS VALUE BOND MID-CAP VALUE
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Small Company Value Portfolio, 11,145,500 shares at net asset value
of $0.91 per share (cost $10,726,773) ................................... $10,118,516 - - -
Global Bond Portfolio, 32,945,742 shares at net
asset value of $0.94 per share (cost $33,094,826) ....................... - 30,804,192 - -
Index 400 Mid-Cap Portfolio, 13,987,034 shares at net asset value
of $1.18 per share (cost $14,919,527) ................................... - - 16,554,178 -
Macro-Cap Value Portfolio, 15,999,202 shares at net asset value
of $1.16 per share (cost $17,641,949) ................................... - - - 18,612,415
Micro-Cap Growth Portfolio, 12,600,217 shares at net asset value
of $2.51 per share (cost $15,567,827) ................................... - - - -
Real Estate Securities Portfolio, 6,833,331 shares at net asset value
of $0.76 per share (cost $6,404,040) .................................... - - - -
Investment in shares of Templeton Variable Products Series Fund:
Templeton Developing Markets Fund - Class 2, 1,176,200 shares at net
asset value of $7.74 per share (cost $7,445,789) ........................ - - - -
------------ ---------- ----------- ----------
10,118,516 30,804,192 16,554,178 18,612,415
Receivable for investments sold ............................................. 10,038 3,572 16,860 17,967
Receivable from Minnesota Life for contract purchase payments ............... 7,777 1,344 40,728 9,599
------------ ---------- ----------- ----------
Total assets ............................................................ 10,136,331 30,809,108 16,611,766 18,639,981
------------ ---------- ----------- ----------
LIABILITIES
Payable for investments purchased ........................................... 7,777 1,344 40,728 9,599
Payable to Minnesota Life for contract terminations and mortality and
expense charges ......................................................... 10,038 3,572 16,860 17,967
------------ ---------- ----------- ----------
Total liabilities ....................................................... 17,815 4,916 57,588 27,566
------------ ---------- ----------- ----------
Net assets applicable to annuity contract owners ........................ $10,118,516 30,804,192 16,554,178 18,612,415
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
CONTRACT OWNERS' EQUITY
Contracts in accumulation period (MultiOption Flex/Single/Select) ........... $ 9,447,260 30,179,184 15,547,411 17,756,379
Contracts in accumulation period (MultiOption Classic/Achiever) ............. 178,103 339,555 434,727 245,153
Contracts in accumulation period (MegAnnuity) ............................... 194,564 133,395 367,506 436,026
Contracts in annuity payment period (MultiOption Flex/Single/Select) (note 2) 297,105 150,552 202,864 171,751
Contracts in annuity payment period (Megannuity) (note 2) ................... 1,484 1,506 1,670 3,106
Contracts in annuity payment period (Adjustable Income Annuity) (note 2) .... - - - -
------------ ---------- ----------- ----------
Total contract owners' equity ........................................... $10,118,516 30,804,192 16,554,178 18,612,415
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
ACCUMULATION UNITS OUTSTANDING (MultiOption Flex/Single/Select)............. 10,422,707 28,982,189 11,781,426 14,276,707
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
ACCUMULATION UNITS OUTSTANDING (MultiOption Classic/Achiever)................ 179,266 342,453 398,475 236,331
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
ACCUMULATION UNITS OUTSTANDING (MegAnnuity) ................................. 213,346 125,858 275,066 339,537
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
NET ASSET VALUE PER ACCUMULATION UNIT (MultiOption Flex/Single/Select) ...... $ 0.91 1.04 1.32 1.24
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
NET ASSET VALUE PER ACCUMULATION UNIT (MultiOption Classic/Achiever) ........ $ 0.99 0.99 1.09 1.04
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
NET ASSET VALUE PER ACCUMULATION UNIT (MegAnnuity) .......................... $ 0.91 1.06 1.34 1.28
------------ ---------- ----------- ----------
------------ ---------- ----------- ----------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------
REAL TEMPLETON
MICRO-CAP ESTATE DEVELOPING
ASSETS GROWTH SECURITIES MARKETS
----------- ---------- ------------
<S> <C> <C> <C>
Investments in shares of Advantus Series Fund, Inc.:
Small Company Value Portfolio, 11,145,500 shares at net asset value
of $0.91 per share (cost $10,726,773) ................................... - - -
Global Bond Portfolio, 32,945,742 shares at net
asset value of $0.94 per share (cost $33,094,826) ....................... - - -
Index 400 Mid-Cap Portfolio, 13,987,034 shares at net asset value
of $1.18 per share (cost $14,919,527) ................................... - - -
Macro-Cap Value Portfolio, 15,999,202 shares at net asset value
of $1.16 per share (cost $17,641,949) ................................... - - -
Micro-Cap Growth Portfolio, 12,600,217 shares at net asset value
of $2.51 per share (cost $15,567,827) ................................... 31,610,551 - -
Real Estate Securities Portfolio, 6,833,331 shares at net asset value
of $0.76 per share (cost $6,404,040) .................................... - 5,167,629 -
Investment in shares of Templeton Variable Products Series Fund:
Templeton Developing Markets Fund - Class 2, 1,176,200 shares at net
asset value of $7.74 per share (cost $7,445,789) ........................ - - 9,103,791
----------- ---------- ------------
31,610,551 5,167,629 9,103,791
Receivable for investments sold ............................................. 44,713 6,540 -
Receivable from Minnesota Life for contract purchase payments ............... 104,409 292 -
----------- ---------- ------------
Total assets ............................................................ 31,759,673 5,174,461 9,103,791
----------- ---------- ------------
LIABILITIES
Payable for investments purchased ........................................... 104,409 292 -
Payable to Minnesota Life for contract terminations and mortality and
expense charges ......................................................... 44,713 6,540 -
----------- ---------- ------------
Total liabilities ....................................................... 149,122 6,832 -
----------- ---------- ------------
Net assets applicable to annuity contract owners ........................ 31,610,551 5,167,629 9,103,791
----------- ---------- ------------
----------- ---------- ------------
CONTRACT OWNERS' EQUITY
Contracts in accumulation period (MultiOption Flex/Single/Select) ........... 30,144,820 5,087,178 8,042,400
Contracts in accumulation period (MultiOption Classic/Achiever) ............. 758,885 17,160 321,969
Contracts in accumulation period (MegAnnuity) ............................... 536,497 53,124 324,262
Contracts in annuity payment period (MultiOption Flex/Single/Select) (note 2) 167,322 10,167 414,256
Contracts in annuity payment period (Megannuity) (note 2) ................... 3,027 - 904
Contracts in annuity payment period (Adjustable Income Annuity) (note 2) .... - - -
----------- ---------- ------------
Total contract owners' equity ........................................... 31,610,551 5,167,629 9,103,791
----------- ---------- ------------
----------- ---------- ------------
ACCUMULATION UNITS OUTSTANDING (MultiOption Flex/Single/Select) ............. 11,992,142 6,242,074 9,817,346
----------- ---------- ------------
----------- ---------- ------------
ACCUMULATION UNITS OUTSTANDING (MultiOption Classic/Achiever)................ 420,716 17,691 268,232
----------- ---------- ------------
----------- ---------- ------------
ACCUMULATION UNITS OUTSTANDING (MegAnnuity) ................................. 227,183 64,837 384,533
----------- ---------- ------------
----------- ---------- ------------
NET ASSET VALUE PER ACCUMULATION UNIT (MultiOption Flex/Single/Select) ...... 2.51 0.81 0.82
----------- ---------- ------------
----------- ---------- ------------
NET ASSET VALUE PER ACCUMULATION UNIT (MultiOption Classic/Achiever) ........ 1.80 0.97 1.20
----------- ---------- ------------
----------- ---------- ------------
NET ASSET VALUE PER ACCUMULATION UNIT (MegAnnuity) .......................... 2.36 0.82 0.84
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. $ 1,216,273 6,950,288 2,832,683 21,955,364
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (3,458,004) (1,552,717) (726,283) (6,247,042)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (1,432) (750) (2,332) (3,681)
Administrative Charges (MegAnnuity) (note 3) .......................... (11,518) (8,161) (4,544) (12,415)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - - - -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - - - -
------------- ------------ ------------- ------------
Investment income (loss) - net ...................................... (2,254,681) 5,388,660 2,099,524 15,692,226
------------- ------------ ------------- ------------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... 7,321,816 2,796,242 - 25,221,531
------------- ------------ ------------- ------------
Realized gains on sales of investments:
Proceeds from sales ................................................. 48,016,016 31,329,399 116,588,946 82,786,777
Cost of investments sold ............................................ (37,318,496) (32,499,749) (116,588,946) (67,047,883)
------------- ------------ ------------- ------------
10,697,520 (1,170,350) - 15,738,894
------------- ------------ ------------- ------------
Net realized gains on investments ................................... 18,019,336 1,625,892 - 40,960,425
------------- ------------ ------------- ------------
Net change in unrealized appreciation or depreciation
of investments .................................................... 50,293,092 (12,138,764) - 12,248,124
------------- ------------ ------------- ------------
Net gains (losses) on investments ................................... 68,312,428 (10,512,872) - 53,208,549
------------- ------------ ------------- ------------
Net increase (decrease) in net assets resulting from operations ......... $ 66,057,747 (5,124,212) 2,099,524 68,900,775
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------
MORTGAGE INDEX CAPITAL
SECURITIES 500 APPRECIATION
------------ ----------- -------------
<S> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. 5,888,726 6,261,969 -
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (1,219,304) (4,150,957) (3,091,406)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (1,155) (2,136) (763)
Administrative Charges (MegAnnuity) (note 3) .......................... (2,851) (23,085) (12,095)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - (184,538) -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - (34,602) -
------------ ----------- -------------
Investment income (loss) - net ...................................... 4,665,416 1,866,651 (3,104,264)
------------ ----------- -------------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... - 4,842,801 35,390,810
------------ ----------- -------------
Realized gains on sales of investments:
Proceeds from sales ................................................. 26,190,893 76,250,729 54,508,699
Cost of investments sold ............................................ (26,137,445) (48,867,723) (41,509,406)
------------ ----------- -------------
53,448 27,383,006 12,999,293
------------ ----------- -------------
Net realized gains on investments ................................... 53,448 32,225,807 48,390,103
------------ ----------- -------------
Net change in unrealized appreciation or depreciation
of investments .................................................... (3,945,102) 31,274,622 4,294,708
------------ ----------- -------------
Net gains (losses) on investments ................................... (3,891,654) 63,500,429 52,684,811
------------ ----------- -------------
Net increase (decrease) in net assets resulting from operations ......... 773,762 65,367,080 49,580,547
------------ ----------- -------------
------------ ----------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------
MATURING
SMALL GOVERNMENT
INTERNATIONAL COMPANY BOND
STOCK GROWTH 2002
-------------- ------------ ------------
<S> <S> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. $ 5,304,166 - 421,025
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (2,551,540) (1,492,414) (87,077)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (855) (533) (15)
Administrative Charges (MegAnnuity) (note 3) .......................... (7,970) (4,553) (1,380)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - - -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - - -
-------------- ------------ ------------
Investment income (loss) - net ...................................... 2,743,801 (1,497,500) 332,553
-------------- ------------ ------------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... 10,304,189 - -
-------------- ------------ ------------
Realized gains on sales of investments:
Proceeds from sales ................................................. 48,332,606 33,118,273 1,740,616
Cost of investments sold ............................................ (41,708,533) (29,374,223) (1,722,269)
-------------- ------------ ------------
6,624,073 3,744,050 18,347
-------------- ------------ ------------
Net realized gains on investments ................................... 16,928,262 3,744,050 18,347
-------------- ------------ ------------
Net change in unrealized appreciation or depreciation
of investments .................................................... 18,877,885 47,912,509 (462,548)
-------------- ------------ ------------
Net gains (losses) on investments ................................... 35,806,147 51,656,559 (444,201)
-------------- ------------ ------------
Net increase (decrease) in net assets resulting from operations ......... $ 38,549,948 50,159,059 (111,648)
-------------- ------------ ------------
-------------- ------------ ------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------
MATURING MATURING
GOVERNMENT GOVERNMENT
BOND BOND VALUE
2006 2010 STOCK
-------------- ----------- ------------
<S> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. 374,252 230,926 4,050,401
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (76,319) (64,889) (1,759,082)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (101) (4) (423)
Administrative Charges (MegAnnuity) (note 3) .......................... (630) (266) (3,756)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - - -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - - -
-------------- ----------- ------------
Investment income (loss) - net ...................................... 297,202 165,767 2,287,140
-------------- ----------- ------------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... - 10,510 -
-------------- ----------- ------------
Realized gains on sales of investments:
Proceeds from sales ................................................. 1,789,392 2,075,487 40,309,094
Cost of investments sold ............................................ (1,741,443) (2,069,631) (37,674,442)
-------------- ----------- ------------
47,949 5,856 2,634,652
-------------- ----------- ------------
Net realized gains on investments ................................... 47,949 16,366 2,634,652
-------------- ----------- ------------
Net change in unrealized appreciation or depreciation
of investments .................................................... (960,318) (913,774) (6,443,650)
-------------- ----------- ------------
Net gains (losses) on investments ................................... (912,369) (897,408) (3,808,998)
-------------- ----------- ------------
Net increase (decrease) in net assets resulting from operations ......... (615,167) (731,641) (1,521,858)
-------------- ----------- ------------
-------------- ----------- ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------------
SMALL
COMPANY GLOBAL INDEX 400 MACRO-CAP
VALUE BOND MID-CAP VALUE
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. $ 121,512 878,074 66,856 81,181
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (106,880) (382,244) (146,109) (171,858)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (191) (313) (606) (169)
Administrative Charges (MegAnnuity) (note 3) .......................... (444) (129) (480) (374)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - - - -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - - - -
------------ ------------ ------------ -----------
Investment income (loss) - net ...................................... 13,997 495,388 (80,339) (91,220)
------------ ------------ ------------ -----------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... - 138,813 1,270,620 696,871
------------ ------------ ------------ -----------
Realized gains (losses) on sales of investments:
Proceeds from sales ................................................. 1,803,354 3,371,458 2,139,232 2,273,590
Cost of investments sold ............................................ (1,964,941) (3,507,115) (2,011,906) (2,115,511)
------------ ------------ ------------ -----------
(161,587) (135,657) 127,326 158,079
------------ ------------ ------------ -----------
Net realized gains (losses) on investments .......................... (161,587) 3,156 1,397,946 854,950
------------ ------------ ------------ -----------
Net change in unrealized appreciation or depreciation of investments (145,818) (3,362,094) 631,352 78,827
------------ ------------ ------------ -----------
Net gains (losses) on investments ................................... (307,405) (3,358,938) 2,029,298 933,777
------------ ------------ ------------ -----------
Net increase (decrease) in net assets resulting from operations .......... $ (293,408) (2,863,550) 1,948,959 842,557
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------
REAL TEMPLETON
MICRO-CAP ESTATE DEVELOPING
GROWTH SECURITIES MARKETS
------------- ---------- -------------
<S> <C> <C> <C>
Investment income (loss):
Investment income distributions from underlying mutual fund (note 4) .. - 278,798 41,274
Mortality and expense charges (MultiOption Flex/Single/Select) (note 3) (158,745) (63,555) (61,821)
Mortality and expense charges (MultiOption Classic/Achiever) (note 3) . (692) (15) (335)
Administrative Charges (MegAnnuity) (note 3) .......................... (250) (46) (1,191)
Mortality and expense charges (Adjustable Income Annuity) (note 3) .... - - -
Administrative Charges (Adjustable Income Annuity) (note 3) ........... - - -
------------- ---------- -------------
Investment income (loss) - net ...................................... (159,687) 215,182 (22,073)
------------- ---------- -------------
Realized and unrealized gains (losses) on investments - net:
Realized gain distributions from underlying mutual fund (note 4) ...... - - -
------------- ---------- -------------
Realized gains (losses) on sales of investments:
Proceeds from sales ................................................. 1,869,456 650,164 27,924,792
Cost of investments sold ............................................ (1,413,012) (767,886) (27,952,683)
------------- ---------- -------------
456,444 (117,722) (27,891)
------------- ---------- -------------
Net realized gains (losses) on investments .......................... 456,444 (117,722) (27,891)
------------- ---------- -------------
Net change in unrealized appreciation or depreciation of investments 15,639,140 (383,438) 2,207,898
------------- ---------- -------------
Net gains (losses) on investments ................................... 16,095,584 (501,160) 2,180,007
------------- ---------- -------------
Net increase (decrease) in net assets resulting from operations .......... 15,935,897 (285,978) 2,157,934
------------- ---------- -------------
------------- ---------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-----------------------------------------------------------------
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net .............................. $ (2,254,681) 5,388,660 2,099,524 15,692,226
Net realized gains on investments ........................... 18,019,336 1,625,892 - 40,960,425
Net change in unrealized appreciation or depreciation
of investments .......................................... 50,293,092 (12,138,764) - 12,248,124
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from operations 66,057,747 (5,124,212) 2,099,524 68,900,775
------------- ------------- ------------- -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select .......................... 50,375,114 21,764,953 97,482,632 79,896,349
MultiOption Classic/Achiever ............................ 1,770,529 770,380 4,028,348 4,517,172
MegAnnuity .............................................. 2,451,486 1,595,769 40,082,783 1,775,775
Adjustable Income Annuity ............................... - - - -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select .......................... (42,408,777) (28,146,686) (74,569,730) (73,367,680)
MultiOption Classic/Achiever ............................ (746) (680) (625,007) (1,042,065)
MegAnnuity .............................................. (1,778,180) (1,417,081) (40,635,718) (1,428,107)
Adjustable Income Annuity ............................... - - - -
Actuarial adjustments for mortality experience on annuities
in payment period:
MultiOption Flex/Single/Select .......................... (7,146) 3,752 (3,307) 15,031
MultiOption Classic/Achiever ............................ - - - -
MegAnnuity .............................................. 48 56 - 134
Adjustable Income Annuity ............................... - - - -
Annuity benefit payments:
MultiOption Flex/Single/Select .......................... (342,750) (205,229) (22,024) (671,498)
MultiOption Classic/Achiever ............................ - - - -
MegAnnuity .............................................. (7,511) (1,898) - (29,455)
Adjustable Income Annuity ............................... - - - -
------------- ------------- ------------- -------------
Increase (decrease) in net assets from contract transactions .. 10,052,067 (5,636,664) 25,737,977 9,665,656
------------- ------------- ------------- -------------
Increase (decrease) in net assets ............................. 76,109,814 (10,760,876) 27,837,501 78,566,431
Net assets at the beginning of year ........................... 264,331,794 133,972,916 49,909,087 489,966,528
------------- ------------- ------------- -------------
Net assets at the end of year ................................. $ 340,441,608 123,212,040 77,746,588 568,532,959
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-----------------------------------------------
MORTGAGE INDEX CAPITAL
SECURITIES 500 APPRECIATION
------------- ------------- -------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net .............................. 4,665,416 1,866,651 (3,104,264)
Net realized gains on investments ........................... 53,448 32,225,807 48,390,103
Net change in unrealized appreciation or depreciation
of investments .......................................... (3,945,102) 31,274,622 4,294,708
------------- ------------- -------------
Net increase (decrease) in net assets resulting from operations 773,762 65,367,080 49,580,547
------------- ------------- -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select .......................... 23,575,223 88,025,964 29,786,676
MultiOption Classic/Achiever ............................ 996,373 2,125,515 693,669
MegAnnuity .............................................. 703,369 5,724,390 1,390,385
Adjustable Income Annuity ............................... - 16,412,426 -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select .......................... (24,617,363) (63,918,267) (48,734,480)
MultiOption Classic/Achiever ............................ (210) (859) (92)
MegAnnuity .............................................. (204,506) (4,957,879) (2,322,797)
Adjustable Income Annuity ............................... - (1,040,198) -
Actuarial adjustments for mortality experience on annuities
in payment period:
MultiOption Flex/Single/Select .......................... 3,502 (2,381) (13,552)
MultiOption Classic/Achiever ............................ - - -
MegAnnuity .............................................. - 279 22
Adjustable Income Annuity ............................... - 30,526 -
Annuity benefit payments:
MultiOption Flex/Single/Select .......................... (149,006) (428,960) (330,639)
MultiOption Classic/Achiever ............................ - - -
MegAnnuity .............................................. - (5,714) (2,897)
Adjustable Income Annuity ............................... - (1,531,959) -
------------- ------------- -------------
Increase (decrease) in net assets from contract transactions .. 307,382 40,432,883 (19,533,705)
------------- ------------- -------------
Increase (decrease) in net assets ............................. 1,081,144 105,799,963 30,046,842
Net assets at the beginning of year ........................... 97,408,573 321,468,279 269,318,233
------------- ------------- -------------
Net assets at the end of year ................................. 98,489,717 427,268,242 299,365,075
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------------
MATURING
SMALL GOVERNMENT
INTERNATIONAL COMPANY BOND
STOCK GROWTH 2002
--------------- --------------- -------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net ............................................ $ 2,743,801 (1,497,500) 332,553
Net realized gains on investments ......................................... 16,928,262 3,744,050 18,347
Net change in unrealized appreciation or depreciation
of investments ....................................................... 18,877,885 47,912,509 (462,548)
--------------- --------------- -------------
Net increase (decrease) in net assets resulting from operations ................ 38,549,948 50,159,059 (111,648)
--------------- --------------- -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select ....................................... 22,772,482 16,000,752 2,421,924
MultiOption Classic/Achiever ......................................... 900,786 627,050 21,644
MegAnnuity ........................................................... 992,032 994,221 2,626,630
Adjustable Income Annuity ............................................ - - -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select ....................................... (43,506,808) (30,229,689) (1,644,661)
MultiOption Classic/Achiever ......................................... (103) (64) (2)
MegAnnuity ........................................................... (1,948,801) (1,165,442) (4,962)
Adjustable Income Annuity ............................................ - - -
Actuarial adjustments for mortality experience on annuities in payment
period:
MultiOption Flex/Single/Select ....................................... (16,316) (9,224) 33
MultiOption Classic/Achiever ......................................... - - -
MegAnnuity ........................................................... 68 (3) -
Adjustable Income Annuity ............................................ - - -
Annuity benefit payments:
MultiOption Flex/Single/Select ....................................... (288,178) (214,932) (2,553)
MultiOption Classic/Achiever ......................................... - - -
MegAnnuity ........................................................... (12,104) (1,418) -
Adjustable Income Annuity ............................................ - - -
--------------- --------------- -------------
Increase (decrease) in net assets from contract transactions ................... (21,106,942) (13,998,749) 3,418,053
--------------- --------------- -------------
Increase (decrease) in net assets .............................................. 17,443,006 36,160,310 3,306,405
Net assets at the beginning of year ............................................ 208,892,703 129,255,925 6,852,927
--------------- --------------- -------------
Net assets at the end of year .................................................. $ 226,335,709 165,416,235 10,159,332
--------------- --------------- -------------
--------------- --------------- -------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------
MATURING MATURING
GOVERNMENT GOVERNMENT
BOND BOND VALUE
2006 2010 STOCK
-------------- -------------- --------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net ............................................ 297,202 165,767 2,287,140
Net realized gains on investments ......................................... 47,949 16,366 2,634,652
Net change in unrealized appreciation or depreciation
of investments ....................................................... (960,318) (913,774) (6,443,650)
-------------- -------------- --------------
Net increase (decrease) in net assets resulting from operations ................ (615,167) (731,641) (1,521,858)
-------------- -------------- --------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select ....................................... 1,526,636 2,030,474 18,700,154
MultiOption Classic/Achiever ......................................... 103,443 4,215 393,048
MegAnnuity ........................................................... 88,210 230 649,546
Adjustable Income Annuity ............................................ - - -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select ....................................... (1,675,064) (1,957,748) (37,110,285)
MultiOption Classic/Achiever ......................................... (12) - (51)
MegAnnuity ........................................................... (4,530) (23,905) (1,172,623)
Adjustable Income Annuity ............................................ - - -
Actuarial adjustments for mortality experience on annuities in payment
period:
MultiOption Flex/Single/Select ....................................... 1,110 1,057 (570)
MultiOption Classic/Achiever ......................................... - - -
MegAnnuity ........................................................... 168 57 (133)
Adjustable Income Annuity ............................................ - - -
Annuity benefit payments:
MultiOption Flex/Single/Select ....................................... (30,605) (29,386) (260,590)
MultiOption Classic/Achiever ......................................... - - -
MegAnnuity ........................................................... (3,409) (403) (1,581)
Adjustable Income Annuity ............................................ - - -
-------------- -------------- --------------
Increase (decrease) in net assets from contract transactions ................... 5,947 24,591 (18,803,085)
-------------- -------------- --------------
Increase (decrease) in net assets .............................................. (609,220) (707,050) (20,324,943)
Net assets at the beginning of year ............................................ 6,868,481 5,644,926 154,497,444
-------------- -------------- --------------
Net assets at the end of year .................................................. 6,259,261 4,937,876 134,172,501
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------
SMALL
COMPANY GLOBAL INDEX 400 MACRO-CAP
VALUE BOND MID-CAP VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net ............................ $ 13,997 495,388 (80,339) (91,220)
Net realized gains (losses) on investments ................ (161,587) 3,156 1,397,946 854,950
Net change in unrealized appreciation or depreciation
of investments ........................................ (145,818) (3,362,094) 631,352 78,827
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from operations . (293,408) (2,863,550) 1,948,959 842,557
------------- ------------- ------------- -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select ........................ 3,951,669 5,402,475 6,644,292 9,106,528
MultiOption Classic/Achiever .......................... 172,769 339,782 398,478 237,806
MegAnnuity ............................................ 132,181 91,001 195,712 316,809
Adjustable Income Annuity ............................. - - - -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select ........................ (1,399,857) (2,969,821) (1,850,467) (2,069,201)
MultiOption Classic/Achiever .......................... (331) (37) (73) (20)
MegAnnuity ............................................ (264,558) (1,089) (126,401) (13,417)
Adjustable Income Annuity ............................. - - - -
Actuarial adjustments for mortality experience on annuities
in payment period:
MultiOption Flex/Single/Select ........................ 1,175 138 188 372
MultiOption Classic/Achiever .......................... - - - -
MegAnnuity ............................................ - 1 (2) 1
Adjustable Income Annuity ............................. - - - -
Annuity benefit payments:
MultiOption Flex/Single/Select ........................ (32,243) (17,940) (15,257) (18,875)
MultiOption Classic/Achiever .......................... - - - -
MegAnnuity ............................................ (24) (25) (25) (48)
Adjustable Income Annuity ............................. - - - -
------------- ------------- ------------- -------------
Increase in net assets from contract transactions ............... 2,560,781 2,844,485 5,246,445 7,559,955
------------- ------------- ------------- -------------
Increase (decrease) in net assets ............................... 2,267,373 (19,065) 7,195,404 8,402,512
Net assets at the beginning of year ............................. 7,851,143 30,823,257 9,358,774 10,209,903
------------- ------------- ------------- -------------
Net assets at the end of year ................................... $ 10,118,516 30,804,192 16,554,178 18,612,415
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------
REAL TEMPLETON
MICRO-CAP ESTATE DEVELOPING
GROWTH SECURITIES MARKETS
------------- ------------ -------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net ............................ (159,687) 215,182 (22,073)
Net realized gains (losses) on investments ................ 456,444 (117,722) (27,891)
Net change in unrealized appreciation or depreciation
of investments ........................................ 15,639,140 (383,438) 2,207,898
------------- ------------ -------------
Net increase (decrease) in net assets resulting from operations . 15,935,897 (285,978) 2,157,934
------------- ------------ -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
MultiOption Flex/Single/Select ........................ 9,266,982 898,091 4,760,534
MultiOption Classic/Achiever .......................... 626,486 16,835 290,558
MegAnnuity ............................................ 249,289 49,362 27,247,119
Adjustable Income Annuity ............................. - - -
Contract terminations, withdrawal payments and charges:
MultiOption Flex/Single/Select ........................ (1,687,229) (582,994) (1,303,383)
MultiOption Classic/Achiever .......................... (83) (2) (206)
MegAnnuity ............................................ (3,824) (2,110) (26,984,731)
Adjustable Income Annuity ............................. - - -
Actuarial adjustments for mortality experience on
annuities in payment period:
MultiOption Flex/Single/Select ........................ 145 - 1,015
MultiOption Classic/Achiever .......................... - - -
MegAnnuity ............................................ (1) - (760)
Adjustable Income Annuity ............................. - - -
Annuity benefit payments:
MultiOption Flex/Single/Select ........................ (18,746) (1,442) (81,211)
MultiOption Classic/Achiever .......................... - - -
MegAnnuity ............................................ (32) - (13)
Adjustable Income Annuity ............................. - - -
------------- ------------ -------------
Increase in net assets from contract transactions ............... 8,432,987 377,740 3,928,922
------------- ------------ -------------
Increase (decrease) in net assets ............................... 24,368,884 91,762 6,086,856
Net assets at the beginning of year ............................. 7,241,667 5,075,867 3,016,935
------------- ------------ -------------
Net assets at the end of year ................................... 31,610,551 5,167,629 9,103,791
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------------------------
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
--------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net ...................... $ (757,899) 5,096,987 1,421,466 5,708,809
Net realized gains on investments ................... 35,969,150 2,143,010 - 41,108,373
Net change in unrealized appreciation or depreciation
of investments ................................... 28,752,083 (1,508,399) - 41,516,841
--------------- ------------- ------------- ----------------
Net increase in net assets resulting from operations ..... 63,963,334 5,731,598 1,421,466 88,334,023
--------------- ------------- ------------- ----------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ........................ 51,637,934 41,441,722 72,457,091 70,303,040
MegAnnuity ....................................... 2,288,260 2,374,930 3,391,144 1,777,956
Adjustable Income Annuity ........................ - - - -
Contract terminations and withdrawal payments:
Personal Retirement Plans ........................ (36,450,685) (21,212,178) (58,811,259) (65,726,252)
MegAnnuity ....................................... (1,455,740) (866,165) (1,931,680) (1,155,438)
Adjustable Income Annuity ........................ - - - -
Actuarial adjustments for mortality experience on
annuities in payment period:
Personal Retirement Plans ........................ 1,950 (43,058) 27 (4,603)
MegAnnuity ....................................... 18 51 - 62
Adjustable Income Annuity ........................ - - - -
Annuity benefit payments:
Personal Retirement Plans ........................ (201,089) (140,143) (6,516) (441,066)
MegAnnuity ....................................... (4,132) (1,922) - (26,300)
Adjustable Income Annuity ........................ - - - -
--------------- ------------- ------------- ----------------
Increase in net assets from contract transactions ........ 15,816,516 21,553,237 15,098,807 4,727,399
--------------- ------------- ------------- ----------------
Increase in net assets ................................... 79,779,850 27,284,835 16,520,273 93,061,422
Net assets at the beginning of year ...................... 184,551,944 106,688,081 33,388,814 396,905,106
--------------- ------------- ------------- ----------------
Net assets at the end of year ............................ $ 264,331,794 133,972,916 49,909,087 489,966,528
--------------- ------------- ------------- ----------------
--------------- ------------- ------------- ----------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------
MORTGAGE INDEX CAPITAL
SECURITIES 500 APPRECIATION
----------------- ------------- ---------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net ...................... 3,497,879 (971,183) (2,785,999)
Net realized gains on investments ................... 653,974 19,013,210 23,604,148
Net change in unrealized appreciation or depreciation
of investments ................................... 233,763 45,447,205 39,001,666
----------------- ------------- ---------------
Net increase in net assets resulting from operations ..... 4,385,616 63,489,232 59,819,815
----------------- ------------- ---------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ........................ 33,557,094 67,949,692 37,672,274
MegAnnuity ....................................... 969,771 3,417,868 1,306,737
Adjustable Income Annuity ........................ - 6,647,680 -
Contract terminations and withdrawal payments:
Personal Retirement Plans ........................ (17,949,781) (42,752,201) (34,786,814)
MegAnnuity ....................................... (479,285) (3,364,285) (1,158,543)
Adjustable Income Annuity ........................ - (655,211) -
Actuarial adjustments for mortality experience on
annuities in payment period:
Personal Retirement Plans ........................ (12,738) (13,196) (1,165)
MegAnnuity ....................................... - 161 16
Adjustable Income Annuity ........................ - 81,585 -
Annuity benefit payments:
Personal Retirement Plans ........................ (85,620) (231,073) (212,803)
MegAnnuity ....................................... - (2,538) (2,573)
Adjustable Income Annuity ........................ - (794,250) -
----------------- ------------- ---------------
Increase in net assets from contract transactions ........ 15,999,441 30,284,232 2,817,129
----------------- ------------- ---------------
Increase in net assets ................................... 20,385,057 93,773,464 62,636,944
Net assets at the beginning of year ...................... 77,023,516 227,694,815 206,681,289
----------------- ------------- ---------------
Net assets at the end of year ............................ 97,408,573 321,468,279 269,318,233
----------------- ------------- ---------------
----------------- ------------- ---------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-----------------------------------------------------------
MATURING MATURING
SMALL GOVERNMENT GOVERNMENT
INTERNATIONAL COMPANY BOND BOND
STOCK GROWTH 2002 2006
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net ........................... $ 3,125,103 (1,526,143) 266,243 258,869
Net realized gains on investments ........................ 12,699,612 1,655,860 104,469 156,665
Net change in unrealized appreciation or depreciation
of investments ........................................ (5,845,206) (882,409) 31,481 218,033
-------------- ------------- ------------ -------------
Net increase (decrease) in net assets resulting from operations 9,979,509 (752,692) 402,193 633,567
-------------- ------------- ------------ -------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ............................. 36,659,650 28,012,351 2,697,576 3,409,399
MegAnnuity ............................................ 1,096,968 1,086,917 104,356 206,525
Adjustable Income Annuity ............................. - - - -
Contract terminations and withdrawal payments:
Personal Retirement Plans ............................. (42,040,850) (24,558,706) (536,207) (1,258,332)
MegAnnuity ............................................ (2,122,613) (689,332) (8,740) (11,210)
Adjustable Income Annuity ............................. - - - -
Actuarial adjustments for mortality experience on
annuities in payment period:
Personal Retirement Plans ............................. (2,076) (34,522) 11,619 14,151
MegAnnuity ............................................ 362 124 - 1,019
Adjustable Income Annuity ............................. - - - -
Annuity benefit payments:
Personal Retirement Plans ............................. (220,772) (170,663) (3,389) (23,275)
MegAnnuity ............................................ (13,429) (1,198) - (2,341)
Adjustable Income Annuity ............................. - - - -
-------------- ------------- ------------ -------------
Increase (decrease) in net assets from contract transactions . (6,642,760) 3,644,971 2,265,215 2,335,936
-------------- ------------- ------------ -------------
Increase (decrease) in net assets ............................. 3,336,749 2,892,279 2,667,408 2,969,503
Net assets at the beginning of year ........................... 205,555,954 126,363,646 4,185,519 3,898,978
-------------- ------------- ------------ -------------
Net assets at the end of year ................................. $ 208,892,703 129,255,925 6,852,927 6,868,481
-------------- ------------- ------------ -------------
-------------- ------------- ------------ -------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------
MATURING
GOVERNMENT
BOND VALUE
2010 STOCK
-------------- --------------
<S> <C> <C>
Operations:
Investment income (loss) - net ........................... 116,829 (1,889,523)
Net realized gains on investments ........................ 183,887 2,176,444
Net change in unrealized appreciation or depreciation
of investments ........................................ 233,938 (307,967)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 534,654 (21,046)
-------------- --------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ............................. 3,456,312 43,797,257
MegAnnuity ............................................ 25,510 1,341,893
Adjustable Income Annuity ............................. - -
Contract terminations and withdrawal payments:
Personal Retirement Plans ............................. (1,503,240) (38,307,284)
MegAnnuity ............................................ (64,298) (1,811,450)
Adjustable Income Annuity ............................. - -
Actuarial adjustments for mortality experience on
annuities in payment period:
Personal Retirement Plans ............................. 3,086 3,280
MegAnnuity ............................................ 389 539
Adjustable Income Annuity ............................. - -
Annuity benefit payments:
Personal Retirement Plans ............................. 20,121 (198,093)
MegAnnuity ............................................ (2,697) (3,411)
Adjustable Income Annuity ............................. - -
-------------- --------------
Increase (decrease) in net assets from contract transactions . 1,935,183 4,822,731
-------------- --------------
Increase (decrease) in net assets ............................. 2,469,837 4,801,685
Net assets at the beginning of year ........................... 3,175,089 149,695,759
-------------- --------------
Net assets at the end of year ................................. 5,644,926 154,497,444
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-----------------------------------------------------------
SMALL
COMPANY GLOBAL INDEX 400 MACRO-CAP
VALUE BOND MID-CAP VALUE
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss) - net ................................... $ 29,395 1,405,064 (19,463) (59,096)
Net realized gains (losses) on investments ....................... 76,974 865,463 287,711 483,800
Net change in unrealized appreciation or depreciation
of investments ................................................ (617,083) 1,473,702 955,141 1,007,945
--------------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations ....... (510,714) 3,744,229 1,223,389 1,432,649
--------------- ------------ ------------ ------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ...................................... 6,475,581 4,876,523 5,538,756 6,338,736
MegAnnuity ..................................................... 136,060 44,459 210,696 63,746
Adjustable Income Annuity ...................................... - - - -
Contract terminations and withdrawal payments:
Personal Retirement Plans ...................................... (3,395,717) (2,838,384) (2,645,937) (2,540,858)
MegAnnuity ..................................................... (5,912) (16,675) (17,473) (3,721)
Adjustable Income Annuity ...................................... - - - -
Actuarial adjustments for mortality experience on annuities
in payment period:
Personal Retirement Plans ...................................... (2,310) (880) (576) (869)
MegAnnuity ..................................................... - - - -
Adjustable Income Annuity ...................................... - - - -
Annuity benefit payments:
Personal Retirement Plans ...................................... (23,150) (4,734) (1,971) (3,204)
MegAnnuity ..................................................... - - - -
Adjustable Income Annuity ...................................... - - - -
--------------- ------------ ------------ ------------
Increase in net assets from contract transactions ..................... 3,184,552 2,060,309 3,083,495 3,853,830
--------------- ------------ ------------ ------------
Increase in net assets ................................................ 2,673,838 5,804,538 4,306,884 5,286,479
Net assets at the beginning of year ................................... 5,177,305 25,018,719 5,051,890 4,923,424
--------------- ------------ ------------ ------------
Net assets at the end of year ........................................ $ 7,851,143 30,823,257 9,358,774 10,209,903
--------------- ------------ ------------ ------------
--------------- ------------ ------------ ------------
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------
REAL TEMPLETON
MICRO-CAP ESTATE DEVELOPING
GROWTH SECURITIES (a) MARKETS
------------- -------------- ------------
<S> <C> <C> <C>
Operations:
Investment income (loss) - net ................................... (65,522) 155,184 (6,121)
Net realized gains (losses) on investments ....................... (94,680) (21,658) (41,787)
Net change in unrealized appreciation or depreciation
of investments ................................................ 953,763 (852,973) (444,051)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations ...... 793,561 (719,447) (491,959)
------------- -------------- ------------
Contract transactions (notes 2, 3, 4 and 5):
Contract purchase payments:
Personal Retirement Plans ...................................... 3,203,379 5,877,266 3,575,326
MegAnnuity ..................................................... 105,113 10,489 70,613
Adjustable Income Annuity ...................................... - - -
Contract terminations and withdrawal payments:
Personal Retirement Plans ...................................... (1,387,271) (91,132) (650,918)
MegAnnuity ..................................................... (57,134) (1,184) (3,025)
Adjustable Income Annuity ...................................... - - -
Actuarial adjustments for mortality experience on annuities
in payment period:
Personal Retirement Plans ...................................... (805) - (5,630)
MegAnnuity ..................................................... - - -
Adjustable Income Annuity ...................................... - - -
Annuity benefit payments:
Personal Retirement Plans ...................................... (6,101) (125) (15,524)
MegAnnuity ..................................................... - - -
Adjustable Income Annuity ...................................... - - -
------------- -------------- ------------
Increase in net assets from contract transactions ..................... 1,857,181 5,795,314 2,970,842
------------- -------------- ------------
Increase in net assets ................................................ 2,650,742 5,075,867 2,478,883
Net assets at the beginning of year ................................... 4,590,925 - 538,052
------------- -------------- ------------
Net assets at the end of year ........................................ 7,241,667 5,075,867 3,016,935
------------- -------------- ------------
------------- -------------- ------------
</TABLE>
(a) Period from April 24, 1998, commencement of operations, to
December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
The Variable Annuity Account (the Account), was established on
September 10, 1984 as a segregated asset account of Minnesota Life
Insurance Company (Minnesota Life), under Minnesota law and is
registered as a unit investment trust under the Investment Company Act
of 1940 (as amended). The Account currently offers six types of
contracts each consisting of twenty segregated sub-accounts to which
contract owners may allocate their purchase payments. The Account
charges a mortality and expense risk charge, which varies based on the
group-sponsored insurance program under which the contract is issued.
The differentiating features of the contracts are described in
notes 2 and 3 below.
The assets of each segregated sub-account are held for the exclusive
benefit of the variable annuity contract owners and are not chargeable
with liabilities arising out of the business conducted by any other
account or by Minnesota Life. Contract owners allocate their variable
annuity purchase payments to one or more of the twenty segregated
sub-accounts. Such payments are then invested in shares of Advantus
Series Fund, Inc. and Templeton Variable Products Series Fund (Underlying
Funds). The Advantus Series Fund, Inc. was organized by Minnesota Life as
the investment vehicle for its variable annuity contracts and variable
life policies. Each of the Underlying Funds is registered under the
Investment Company Act of 1940 (as amended) as a diversified (except
Global Bond Portfolio which is non-diversified), open-end management
investment company.
Payments allocated to the Growth, Bond, Money Market, Asset Allocation,
Mortgage Securities, Index 500, Capital Appreciation, International
Stock, Small Company Growth, Maturing Government Bond 2002, Maturing
Government Bond 2006, Maturing Government Bond 2010, Value Stock, Small
Company Value, Global Bond, Index 400 Mid-Cap, Macro-Cap Value, Micro-Cap
Growth, Real Estate Securities, and Templeton Developing Markets
segregated sub-accounts are invested in shares of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital
Appreciation, International Stock, Small Company Growth, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government
Bond 2010, Value Stock, Small Company Value, Global Bond, Index 400
Mid-Cap, Macro-Cap Value, Micro-Cap Growth and Real Estate Securities
Portfolios of the Advantus Series Fund, Inc. and Templeton Developing
Markets Fund - Class 2 of the Templeton Variable Products Series Fund,
respectively.
Ascend Financial Services, Inc. acts as the underwriter for the Account.
Advantus Capital Management, Inc. acts as the investment adviser for the
Advantus Series Fund, Inc. Ascend Financial Services, Inc. is a
wholly-owned subsidiary of Advantus Capital Management, Inc. and Advantus
Capital Management, Inc. is a wholly-owned subsidiary of Minnesota Life.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
INVESTMENTS IN UNDERLYING FUNDS
Investments in shares of the Underlying Funds are stated at market value,
which is the net asset value per share as determined daily by each of the
Underlying Funds. Investment transactions are accounted for on the date
the shares are purchased or sold. The cost of investments sold is
determined on the average cost method. All dividend distributions
received from the Underlying Funds are reinvested in additional shares of
the Underlying Funds and are recorded by the segregated sub-accounts on
the ex-dividend date.
<PAGE>
2
VARIABLE ANNUITY ACCOUNT
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FEDERAL INCOME TAXES
The Account is treated as part of Minnesota Life for federal income tax
purposes. Under current interpretations of existing federal income tax
law, no income taxes are payable on investment income or capital gain
distributions received by the Account from the Underlying Funds.
CONTRACTS IN ANNUITY PAYMENT PERIOD
MULTIOPTION FLEX/SINGLE/SELECT AND MULTIOPTION CLASSIC/ACHIEVER:
Annuity reserves are computed for currently payable contracts according
to the mortality and assumed interest rate assumptions used to purchase
the annuity income. Charges to annuity reserves for mortality and risk
expense are reimbursed to Minnesota Life if the reserves required are
less than originally estimated. If additional reserves are required,
Minnesota Life reimburses the Account.
MEGANNUITY:
Annuity reserves are computed for currently payable contracts according
to the Progressive Annuity Mortality Table, using an assumed interest
rate of 3.5 percent. Charges to annuity reserves for mortality and risk
expense are reimbursed to Minnesota Life if the reserves required are
less than originally estimated. If additional reserves are required,
Minnesota Life reimburses the Account.
ADJUSTABLE INCOME ANNUITY:
Annuity reserves are computed for currently payable contracts according
to the Individual Annuity 1983 Table A, using an assumed interest rate of
4.5 percent. Charges to annuity reserves for mortality and risk expense
are reimbursed to Minnesota Life if the reserves required are less than
originally estimated. If additional reserves are required, Minnesota Life
reimburses the Account.
(3) CONTRACT CHARGES
MULTIOPTION FLEX/SINGLE/SELECT:
The mortality and expense charge paid to Minnesota Life is computed daily
and is equal, on an annual basis, to 1.25 percent of the average daily
net assets of the Account. Under certain conditions, the charge may be
increased to 1.40 percent of the average daily net assets of the Account.
A contingent deferred sales charge may be imposed on a Multi-Option
Annuity or Multi-Option Select contract owner during the first ten years
or first seven years, respectively, if a contract's accumulation value is
reduced by a withdrawal or surrender. Total sales charges deducted from
redemption proceeds for the years ended December 31, 1999 and 1998
amounted to $4,481,055 and $3,304,803, respectively.
MULTIOPTION CLASSIC/ACHIEVER:
The mortality and expense charge paid to Minnesota Life is computed daily
and is equal, on an annual basis, to 1.25 percent of the average daily
net assets of the Account. Under certain conditions, the charge may be
increased to 1.40 percent of the average daily net assets of the Account.
A contingent deferred sales charge may be imposed on a Multi-Option
Classic or Multi-Option Achiever contract owner during the first seven
years or first ten years, respectively, if a contract's accumulation
value is reduced by a withdrawal or surrender. There were no sales
charges deducted from redemption proceeds for the year ended December 31,
1999.
<PAGE>
3
VARIABLE ANNUITY ACCOUNT
(3) CONTRACT CHARGES - CONTINUED
MEGANNUITY:
The administrative charge paid to Minnesota Life is equal, on an annual
basis, to .15 percent of the average daily net assets of the Account.
Under certain conditions, the charge may be increased to not more than
.35 percent of the average daily net assets of the Account.
Premium taxes may be deducted from purchase payments or at the
commencement of annuity payments. Currently such taxes range from 0 to
3.5 percent depending on the applicable state law. No premium taxes were
deducted from purchase payments for the years ended December 31, 1999 and
1998.
ADJUSTABLE INCOME ANNUITY:
The mortality and expense risk charge paid to Minnesota Life is computed
daily and is equal, on an annual basis, to .80 percent of the average
daily net assets of the Account. Under certain conditions, the charge may
be increased to not more than 1.40 percent of the average daily net
assets of the Account.
The administrative charge paid to Minnesota Life is computed daily and is
equal, on an annual basis, to .15 percent of the average daily net assets
of the Account. Under certain conditions, the administrative charge may
be increased to not more than .40 percent of the average daily net assets
of the Account.
Contract purchase payments for Adjustable Income Annuity are reflected
net of the following charges paid to Minnesota Life:
A sales charge ranging from 3.75 to 4.50 percent, depending upon
the total amount of purchase payments, is deducted from each
contract purchase payment. Total sales charges deducted from
contract purchase payments for the years ended December 31, 1999
and 1998 amounted to $9,925 and $111,222, respectively.
A risk charge in the amount of 1.25 percent is deducted from each
contract purchase payment. Under certain conditions, the risk
charge may be as high as 2.00 percent. Total risk charges deducted
from contract purchase payments for the years ended December 31,
1999 and 1998 amounted to $119,048 and $30,895, respectively.
A premium tax charge of up to 3.50 percent is deducted from each
contract purchase payment. Total premium tax charges deducted from
contract purchase payments for the years ended December 31, 1999
and 1998 amounted to $3,773 and $121, respectively.
<PAGE>
4
VARIABLE ANNUITY ACCOUNT
(4) INVESTMENT TRANSACTIONS
The Account's purchases of Underlying Funds shares, including
reinvestment of dividend distributions, were as follows during the year
ended December 31, 1999:
<TABLE>
<CAPTION>
1999
---------------
<S> <C>
Growth Portfolio .................................$ 63,135,218
Bond Portfolio ................................... 33,877,637
Money Market Portfolio ........................... 144,426,447
Asset Allocation Portfolio ....................... 133,366,190
Mortgage Securities Portfolio .................... 31,163,691
Index 500 Portfolio .............................. 123,393,064
Capital Appreciation Portfolio ................... 67,261,540
International Stock Portfolio .................... 40,273,654
Small Company Growth Portfolio ................... 17,622,024
Maturing Government Bond 1998 Portfolio .......... -
Maturing Government Bond 2002 Portfolio .......... 5,491,222
Maturing Government Bond 2006 Portfolio .......... 2,092,541
Maturing Government Bond 2010 Portfolio .......... 2,276,355
Value Stock Portfolio ............................ 23,793,149
Small Company Value Portfolio..................... 4,378,296
Global Bond Portfolio............................. 6,850,146
Index 400 Mid-Cap Portfolio ...................... 8,575,958
Macro-Cap Value Portfolio ........................ 10,439,196
Micro-Cap Growth Portfolio ....................... 10,142,756
Real Estate Securities Portfolio ................. 1,243,086
Templeton Developing Markets Fund ................ 31,831,641
</TABLE>
<PAGE>
5
VARIABLE ANNUITY ACCOUNT
(5) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS - MULTIOPTION FLEX/SINGLE/SELECT
Transactions in units for each segregated sub-account for the years
ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------------
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997 ......................... 44,705,247 43,266,404 19,804,841 119,491,402 34,751,197
Contract purchase
payments ............................ 11,145,679 16,757,246 43,552,011 19,570,064 14,779,503
Deductions for contract
terminations, withdrawal
payments and charges ................ (8,045,075) (8,682,491) (35,397,177) (18,688,238) (8,023,362)
------------ ------------ ------------ ------------ ------------
Units outstanding at
December 31, 1998 ......................... 47,805,851 51,341,159 27,959,675 120,373,228 41,507,338
Contract purchase
payments ............................ 9,013,901 8,746,000 56,607,809 19,260,225 10,151,505
Deductions for contract
terminations, withdrawal
payments and charges ................. (7,603,095) (11,627,689) (43,366,868) (18,111,054) (10,721,250)
------------ ------------ ------------ ------------ ------------
Units outstanding at
December 31, 1999 ......................... 49,216,657 48,459,470 41,200,616 121,522,399 40,937,593
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------------------
SMALL
INDEX CAPITAL INTERNATIONAL COMPANY
500 APPRECIATION STOCK GROWTH
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Units outstanding at
December 31, 1997 ......................... 54,579,265 53,582,481 103,600,602 68,590,765
Contract purchase
payments ............................ 15,789,448 8,967,037 17,507,237 15,655,645
Deductions for contract
terminations, withdrawal
payments and charges ................ (10,100,150) (8,655,037) (21,151,100) (14,456,560)
------------ ------------ ------------- ------------
Units outstanding at
December 31, 1998 ......................... 60,268,563 53,894,481 99,956,739 69,789,850
Contract purchase
payments ............................ 16,766,526 6,273,116 10,351,698 8,682,270
Deductions for contract
terminations, withdrawal
payments and charges ................ (12,299,226) (10,441,711) (20,324,515) (16,750,196)
------------ ------------ ------------- ------------
Units outstanding at
December 31, 1999 ......................... 64,735,863 49,725,886 89,983,922 61,721,924
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</TABLE>
<PAGE>
6
VARIABLE ANNUITY ACCOUNT
(5) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS - MULTIOPTION FLEX/SINGLE/SELECT
- CONTINUED
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------------------------------
MATURING MATURING MATURING SMALL
GOVERNMENT GOVERNMENT GOVERNMENT VALUE COMPANY
BOND 2002 BOND 2006 BOND 2010 STOCK VALUE
------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997 ............... 2,938,848 2,665,421 2,017,743 68,251,135 4,822,504
Contract purchase
payments ................... 1,966,007 2,048,990 1,948,023 20,251,001 5,908,905
Deductions for contract
terminations, withdrawal
payments and charges ........ (377,892) (833,184) (919,654) (18,520,135) (3,175,808)
----------- ------------ ---------- ------------- ------------
Units outstanding
December 31, 1998 ............... 4,526,963 3,881,227 3,046,112 69,982,001 7,555,601
Contract purchase
payments ................... 1,794,875 1,057,788 1,311,371 8,642,347 4,423,543
Deductions for contract
terminations, withdrawal
payments and charges ....... (1,231,344) (1,162,822) (1,277,639) (17,394,008) (1,556,437)
----------- ------------ ---------- ------------- ------------
Units outstanding at
December 31, 1999 ............... 5,090,494 3,776,193 3,079,844 61,230,340 10,422,707
========== ============ ========== ============= ============
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------------------------------------
REAL TEMPLETON
GLOBAL INDEX 400 MACRO-CAP MICRO-CAP ESTATE DEVELOPING
BOND MID-CAP VALUE GROWTH SECURITIES MARKETS
-------------- ------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997 ............... 25,083,345 5,020,041 5,003,390 5,019,479 - 724,374
Contract purchase
payments ................... 4,365,049 5,194,349 5,753,309 3,282,037 5,998,094 5,312,035
Deductions for contract
terminations, withdrawal
payments and charges ....... (2,607,087) (2,435,110) (2,270,829) (1,378,864) (110,703) (1,127,977)
-------------- ------------- ------------- ------------- -------------- --------------
Units outstanding at
December 31, 1998 ............... 26,841,307 7,779,280 8,485,870 6,922,652 5,887,391 4,908,432
Contract purchase
payments ................... 4,935,728 5,548,904 7,490,929 6,292,561 1,053,185 6,838,408
Deductions for contract
terminations, withdrawal
payments and charges ....... (2,794,846) (1,546,758) (1,700,092) (1,223,071) (698,502) (1,929,494)
-------------- ------------- ------------- ------------- -------------- --------------
Units outstanding at
December 31, 1999 ................ 28,982,189 11,781,426 14,276,707 11,992,142 6,242,074 9,817,346
============== ============= ============= ============= ============== ==============
</TABLE>
<PAGE>
7
VARIABLE ANNUITY ACCOUNT
(5) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS - MULTIOPTION
CLASSIC/ACHIEVER
Transactions in units for each segregated sub-account for the year ended
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
----------------------------------------------------------------
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
----------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1998................... - - - - -
Contract purchase
payments........................ 1,609,477 766,440 3,993,816 4,265,438 989,144
Deductions for contract
terminations, withdrawal
payments and charges............ (518) (588) (620,941) (969,313) (71)
---------- ---------- ------------ ------------ --------------
Units outstanding at
December 31, 1999................... 1,608,959 765,852 3,372,875 3,296,125 989,073
========== ========== =========== =========== =============
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------------------------
SMALL MATURING
INDEX CAPITAL INTERNATIONAL COMPANY GOVERNMENT
500 APPRECIATION STOCK GROWTH BOND 2002
--------- --------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1998................... - - - -
Contract purchase
payments........................ 2,039,531 602,909 888,642 503,561 21,585
Deductions for contract
terminations, withdrawal
payments and charges............ (572) - - - -
-------- -------------- ------------ ----------- ------------
Units outstanding at
December 31, 1999.................. 2,038,959 602,909 888,642 503,561 21,585
========= ============== ============ =========== ============
<CAPTION>
SEGREGATED SUB-ACCOUNTS
-------------------------------------------------------------
MATURING MATURING SMALL
GOVERNMENT GOVERNMENT VALUE COMPANY GLOBAL
BOND 2006 BOND 2010 STOCK VALUE BOND
-------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1998................... - - - - -
Contract purchase
payments........................ 102,972 4,254 392,479 179,591 342,453
Deductions for contract
terminations, withdrawal
payments and charges............ - - - (325) -
------------ ---------- --------- ----------- --------
Units outstanding at
December 31, 1999................... 102,972 4,254 392,479 179,266 342,453
============ ========== ========= ========== ========
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------
REAL TEMPLETON
INDEX 400 MACRO-CAP MICRO-CAP ESTATE DEVELOPING
MID-CAP VALUE GROWTH SECURITIES MARKETS
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1998.................... - - - - -
Contract purchase
payments........................ 398,475 236,331 420,716 17,691 268,416
Deductions for contract
terminations, withdrawal
payments and charges........... - - - - (184)
----------- ------------ ---------- ------------ ----------
Units outstanding at
December 31, 1999................... 398,475 236,331 420,716 17,691 268,232
=========== ============ ========== ============ ===========
</TABLE>
<PAGE>
8
VARIABLE ANNUITY ACCOUNT
(5) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS -
MEGANNUITY
Transactions in units for each segregated sub-account for the years
ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------------------------------------------
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
---------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997............... 1,394,064 1,545,276 625,617 1,806,441 484,707
Contract purchase
payments................... 657,711 972,566 1,947,732 546,207 395,612
Deductions for contract
terminations, withdrawal
payments and charges...... (423,308) (354,976) (1,109,635) (365,486) (194,240)
---------- ----------- ------------- ------------- ----------
Units outstanding at
December 31, 1998............. 1,628,467 2,162,866 1,463,714 1,987,162 686,079
Contract purchase
payments.................. 545,679 646,495 22,001,268 465,525 272,542
Deductions for contract
terminations, withdrawal
payments and charges....... (400,427) (570,961) (22,289,191) (374,401) (79,722)
---------- ----------- ------------- ------------- ----------
Units outstanding at
December 31, 1999.............. 1,773,719 2,238,400 1,175,791 2,078,286 878,899
=========== ============ ============= ============= ==========
<CAPTION>
SEGREGATED SUB-ACCOUNTS
--------------------------------------------------------------
SMALL
INDEX CAPITAL INTERNATIONAL COMPANY
500 APPRECIATION STOCK GROWTH
--------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Units outstanding at
December 31, 1997............. 2,786,221 1,768,498 2,966,962 1,504,543
Contract purchase
payments.................. 822,830 321,369 497,133 588,895
Deductions for contract
terminations, withdrawal
payments and charges....... (828,745) (289,215) (999,182) (411,648)
--------- ------------ ------------ ---------
Units outstanding at
December 31, 1998............. 2,780,306 1,800,652 2,464,913 1,681,790
Contract purchase
payments................... 1,111,383 301,006 431,585 483,647
Deductions for contract
terminations, withdrawal
payments and charges....... (953,098) (503,340) (834,346) (587,822)
--------- ------------ ------------ ---------
Units outstanding at
December 31, 1999............... 2,938,591 1,598,318 2,062,152 1,577,615
=========== ============ ============= =============
</TABLE>
<PAGE>
9
VARIABLE ANNUITY ACCOUNT
(5) UNIT ACTIVITY FROM CONTRACT TRANSACTIONS - MEGANNUITY - CONTINUED
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNTS
---------------------------------------------------------------------
MATURING MATURING MATURING SMALL
GOVERNMENT GOVERNMENT GOVERNMENT VALUE COMPANY
BOND 2002 BOND 2006 BOND 2010 STOCK VALUE
----------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997................. 272,962 117,035 109,462 1,500,040 215,169
Contract purchase
payments...................... 72,286 112,281 14,766 590,073 152,448
Deductions for contract
terminations, withdrawal
payments and charges.......... (6,111) (6,280) (16,825) (829,771) (6,269)
----------- ---------- ----------- --------- ---------
Units outstanding at
December 31, 1998.................. 339,137 223,036 107,403 1,260,342 361,348
Contract purchase
payments....................... 1,798,442 48,690 - 281,549 143,713
Deductions for contract
terminations, withdrawal
payments and charges........... (3,410) (2,803) - (503,682) (291,715)
----------- ---------- ----------- --------- ---------
Units outstanding at
December 31, 1999.................. 2,134,169 268,923 107,403 1,038,209 213,346
=========== ========== =========== ========= =========
<CAPTION>
SEGREGATED SUB-ACCOUNTS
------------------------------------------------------------------------------
REAL TEMPLETON
GLOBAL INDEX 400 MACRO-CAP MICRO-CAP ESTATE DEVELOPING
BOND MID-CAP VALUE GROWTH SECURITIES MARKETS
--------- ---------- ----------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1997.................. 15,173 9,788 39,998 18,000 - 33,388
Contract purchase
payments....................... 42,386 225,451 60,652 119,408 13,452 104,594
Deductions for contract
terminations, withdrawal
payments and charges........... (14,916) (17,626) (3,069) (65,814) (1,428) (5,765)
--------- ---------- ----------- --------- ---------- ------------
Units outstanding at
December 31, 1998.................. 42,643 217,613 97,581 71,594 12,024 132,217
Contract purchase
payments....................... 84,240 164,052 252,625 157,939 55,427 33,973,859
Deductions for contract
terminations, withdrawal
payments and charges............ (1,025) (106,599) (10,669) (2,350) (2,614) (33,721,543)
--------- ---------- ----------- --------- ---------- ------------
Units outstanding at
December 31, 1999................... 125,858 275,066 339,537 227,183 64,837 384,533
========= ========== ============ ========= ========== ============
</TABLE>
<PAGE>
10
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT
-----------------------------------------------------
The following tables for each segregated sub-account show certain data
for an accumulation unit outstanding
during the periods indicated:
GROWTH
------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ................................ $ 5.34 4.01 3.04 2.63 2.14
-------- -------- -------- ------- -------
Income (loss) from investment operations:
Net investment income (loss) ............................... (.05) (.02) (.02) (.01) (.01)
Net gains or losses on securities
(both realized and unrealized)............................ 1.33 1.35 .99 .42 .50
-------- -------- -------- ------- -------
Total from investment operations......................... 1.28 1.33 .97 .41 .49
-------- -------- -------- ------- -------
Unit value, end of year........................................ $ 6.62 5.34 4.01 3.04 2.63
-------- ------- -------- ------- -------
-------- ------- -------- ------- -------
</TABLE>
<PAGE>
11
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
BOND
----
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year................................ $ 2.48 2.37 2.19 2.15 1.82
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ................................... .10 .10 .09 .08 .04
Net gains or losses on securities
(both realized and unrealized) ........................ (.20) .01 .09 (.04) .29
-------- ------- ------- ------- -------
Total from investment operations....................... (.10) .11 .18 .04 .33
-------- ------- ------- ------- -------
Unit value, end of year...................................... $ 2.38 2.48 2.37 2.19 2.15
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
12
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MONEY MARKET
------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ................................. $ 1.69 1.63 1.57 1.52 1.46
-------- ------- ------- ------- -------
Income from investment operations:
Net investment income ...................................... .06 .06 .06 .05 .06
-------- ------- ------- ------- -------
Total from investment operations........................ .06 .06 .06 .05 .06
-------- ------- ------- ------- -------
Unit value, end of year ....................................... $ 1.75 1.69 1.63 1.57 1.52
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
13
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
ASSET ALLOCATION
----------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.................................. $ 3.96 3.25 2.76 2.49 2.01
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income...................................... .13 .05 .04 .04 .04
Net gains or losses on securities
(both realized and unrealized).......................... .42 .66 .45 .23 .44
-------- ------- ------- ------- -------
Total from investment operations........................ .55 .71 .49 .27 .48
-------- ------- ------- ------- -------
Unit value, end of year........................................ $ 4.51 3.96 3.25 2.76 2.49
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
14
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MORTGAGE SECURITIES
-------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year................................... $ 2.28 2.17 2.01 1.93 1.66
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income....................................... .11 .09 .10 .10 .10
Net gains or losses on securities
(both realized and unrealized)........................... (.09) .02 .06 (.02) .17
-------- ------- ------- ------- -------
Total from investment operations......................... .02 .11 .16 .08 .27
-------- ------- ------- ------- -------
Unit value, end of year ........................................ $ 2.30 2.28 2.17 2.01 1.93
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
15
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
INDEX 500
---------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year.................................. $ 4.81 3.81 2.91 2.43 1.79
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)............................... .02 (.02) (.01) -- .01
Net gains or losses on securities
(both realized and unrealized).......................... .89 1.02 .91 .48 .63
-------- ------- ------- ------- -------
Total from investment operations........................ .91 1.00 .90 .48 .64
-------- ------- ------- ------- -------
Unit value, end of year........................................ $ 5.72 4.81 3.81 2.91 2.43
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
16
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
CAPITAL APPRECIATION
--------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year................................... $ 4.79 3.71 2.93 2.52 2.08
-------- ------- ------- ------- -------
Income from investment operations:
Net investment loss......................................... (.06) (.05) (.04) (.03) (.03)
Net gains or losses on securities (both
realized and unrealized)................................. 1.03 1.13 .82 .44 .47
-------- ------- ------- ------- -------
Total from investment operations......................... .97 1.08 .78 .41 .44
-------- ------- ------- ------- -------
Unit value, end of year......................................... $ 5.76 4.79 3.71 2.93 2.52
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
17
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
INTERNATIONAL STOCK
-------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year................................... $ 2.01 1.91 1.73 1.46 1.30
-------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)................................ .03 .03 .03 .02 (.02)
Net gains or losses on securities
(both realized and unrealized)........................... .37 .07 .15 .25 .18
-------- ------- ------- ------- -------
Total from investment operations........................ .40 .10 .18 .27 .16
-------- ------- ------- ------- -------
Unit value, end of year........................................ $ 2.41 2.01 1.91 1.73 1.46
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
18
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
SMALL COMPANY GROWTH
--------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period................................ $ 1.78 1.78 1.67 1.59 1.22
-------- ------- ------- ------- -------
Income from investment operations:
Net investment loss......................................... (.02) (.02) (.02) (.02) (.02)
Net gains or losses on securities
(both realized and unrealized).......................... .80 .02 .13 .10 .39
-------- ------- ------- ------- -------
Total from investment operations........................ .78 - .11 .08 .37
-------- ------- ------- ------- -------
Unit value, end of period ..................................... $ 2.56 1.78 1.78 1.67 1.59
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
</TABLE>
<PAGE>
19
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MATURING GOVERNMENT BOND 2002
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ................ $ 1.40 1.29 1.21 1.20 .97
---------- --------- -------- ---------- ----------
Income (loss) from investment operations:
Net investment income ...................... .04 .07 .05 .06 .06
Net gains or losses on securities
(both realized and unrealized) ............ (.07) .04 .03 (.05) .17
---------- --------- -------- ---------- ----------
Total from investment operations ........ (.03) .11 .08 .01 .23
---------- --------- -------- ---------- ----------
Unit value, end of period ...................... $ 1.37 1.40 1.29 1.21 1.20
---------- --------- -------- ---------- ----------
---------- --------- -------- ---------- ----------
</TABLE>
<PAGE>
20
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MATURING GOVERNMENT BOND 2006
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ................ $ 1.57 1.39 1.25 1.28 .96
---------- --------- -------- ---------- ----------
Income (loss) from investment operations:
Net investment income ....................... .07 .08 .05 .06 .06
Net gains or losses on securities
(both realized and unrealized) ............. (.21) .10 .09 (.09) .26
---------- --------- -------- ---------- ----------
Total from investment operations ......... (.14) .18 .14 (.03) .32
---------- --------- -------- ---------- ----------
Unit value, end of period ...................... $ 1.43 1.57 1.39 1.25 1.28
---------- --------- -------- ---------- ----------
---------- --------- -------- ---------- ----------
</TABLE>
<PAGE>
21
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MATURING GOVERNMENT BOND 2010
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ................ $ 1.66 1.47 1.27 1.33 .95
---------- --------- -------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) .............. .05 .05 .04 (.02) .06
Net gains or losses on securities
(both realized and unrealized) ............ (.26) .14 .16 (.04) .32
---------- --------- -------- ---------- ----------
Total from investment operations ........ (.21) .19 .20 (.06) .38
---------- --------- -------- ---------- ----------
Unit value, end of period ...................... $ 1.45 1.66 1.47 1.27 1.33
---------- --------- -------- ---------- ----------
---------- --------- -------- ---------- ----------
</TABLE>
<PAGE>
22
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
VALUE STOCK
-----------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ................ $ 2.14 2.13 1.78 1.38 1.05
---------- --------- -------- ---------- ----------
Income from investment operations:
Net investment income (loss) ............... .03 (.03) - - -
Net gains or losses on securities
(both realized and unrealized) ............ (.05) .04 .35 .40 .33
---------- --------- -------- ---------- ----------
Total from investment operations ........ (.02) .01 .35 .40 .33
---------- --------- -------- ---------- ----------
Unit value, end of period ...................... $ 2.12 2.14 2.13 1.78 1.38
---------- --------- -------- ---------- ----------
---------- --------- -------- ---------- ----------
</TABLE>
<PAGE>
23
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
SMALL COMPANY VALUE
-------------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period .......................................... $ .95 1.03 1.00
----------- ------------ ---------------
Income from investment operations:
Net investment income (loss) ....................................... - - -
Net gains or losses on securities (both realized and unrealized) .... (.04) (.08) .03
----------- ------------ ---------------
Total from investment operations ................................. (.04) (.08) .03
----------- ------------ ---------------
Unit value, end of period ............................................... $ .91 .95 1.03
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
24
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
GLOBAL BOND
-----------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ......................................... $ 1.14 1.00 1.00
----------- ------------ ---------------
Income from investment operations:
Net investment income (loss) ....................................... .02 .06 .01
Net gains or losses on securities (both realized and unrealized) .... (.12) .08 (.01)
----------- ------------ ---------------
Total from investment operations ................................. (.10) .14 -
----------- ------------ ---------------
Unit value, end of period ............................................... $ 1.04 1.14 1.00
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
25
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
INDEX 400 MID-CAP
-----------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ......................................... $ 1.16 1.00 1.00
----------- ------------ ---------------
Income from investment operations:
Net investment income (loss) ....................................... (.01) - -
Net gains or losses on securities (both realized and unrealized) .... .17 .16 -
----------- ------------ ---------------
Total from investment operations ................................. .16 .16 -
----------- ------------ ---------------
Unit value, end of period ............................................... $ 1.32 1.16 1.00
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
26
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MACRO-CAP VALUE
---------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 15, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ......................................... $ 1.18 .98 1.00
----------- ------------ ---------------
Income (loss) from investment operations:
Net investment income ............................................... (.01) (.01) -
Net gains or losses on securities (both realized and unrealized) .... .07 .21 (.02)
----------- ------------ ---------------
Total from investment operations ................................ .06 .20 (.02)
----------- ------------ ---------------
Unit value, end of period ............................................... $ 1.24 1.18 .98
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 15, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
27
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
MICRO-CAP GROWTH
----------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ......................................... $ 1.02 .91 1.00
----------- ------------ ---------------
Income (loss) from investment operations:
Net investment loss ................................................. (.02) (.01) (.01)
Net gains or losses on securities (both realized and unrealized) .... 1.51 .12 (.08)
----------- ------------ ---------------
Total from investment operations ................................. 1.49 .11 (.09)
----------- ------------ ---------------
Unit value, end of period ............................................... $ 2.51 1.02 .91
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
28
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
REAL ESTATE SECURITIES
----------------------
<TABLE>
<CAPTION>
YEAR PERIOD FROM
ENDED APRIL 24, 1998 *
DECEMBER 31, TO DECEMBER
1999 31, 1998
-------------- -----------------
<S> <C> <C>
Unit value, beginning of period ......................................... $ .86 1.00
-------------- -----------------
Income (loss) from investment operations:
Net investment income ............................................... .03 .03
Net gains or losses on securities (both realized and unrealized) .... (.08) (.17)
-------------- -----------------
Total from investment operations ................................. (.05) (.14)
-------------- -----------------
Unit value, end of period .............................................. $ .81 .86
-------------- -----------------
-------------- -----------------
</TABLE>
* Inception of the segregated sub-account was April 24, 1998, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
29
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION FLEX/SINGLE/SELECT - CONTINUED
-----------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS
----------------------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 2, 1997*
--------------------------- TO DECEMBER
1999 1998 31, 1997
----------- ------------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ......................................... $ .54 .69 1.00
----------- ------------ ---------------
Income (loss) from investment operations:
Net investment income ............................................... - - -
Net gains or losses on securities (both realized and unrealized) .... .28 (.15) (.31)
----------- ------------ ---------------
Total from investment operations ................................ .28 (.15) (.31)
----------- ------------ ---------------
Unit value, end of period ............................................... $ .82 .54 .69
----------- ------------ ---------------
----------- ------------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 2, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
30
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MULTIOPTION CLASSIC/ACHIEVER
---------------------------------------------------
The following tables for each segregated sub-account show certain data for an
accumulation unit outstanding during the periods from September 9, 1999,
commencement of the operations, to December 31, 1999:
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNT
--------------------------------------------------------------------------------
MONEY ASSET MORTGAGE INDEX CAPITAL
GROWTH BOND MARKET ALLOCATION SECURITIES 500 APPRECIATION
-------- ------ ------- ------------ ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ............ $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-------- ------ ------- ------------ ------------ ------- -------------
Income (loss) from investment operations:
Net investment income (loss) ............ - - .01 .07 - .02 (.01)
Net gains or losses on securities
(both realized and unrealized) ......... .17 - - .03 - .07 .28
-------- ------ ------- ------------ ------------ ------- -------------
Total from investment operations .... .17 - .01 .10 - .09 .27
-------- ------ ------- ------------ ------------ ------- -------------
Unit value, end of year .................... $ 1.17 1.00 1.01 1.10 1.00 1.09 1.27
-------- ------ ------- ------------ ------------ ------- -------------
-------- ------ ------- ------------ ------------ ------- -------------
</TABLE>
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNT
---------------------------------------------------------------------------------
SMALL MATURING MATURING MATURING SMALL
INTERNATIONAL COMPANY GOVERNMENT GOVERNMENT GOVERNMENT VALUE COMPANY
STOCK GROWTH BOND 2002 BOND 2006 BOND 2010 STOCK VALUE
------------- ------- ---------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ............ $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------------- ------- ---------- ---------- ---------- ----- -------
Income (loss) from investment operations:
Net investment income (loss) ........... - (.01) .23 .22 - .04 .03
Net gains or losses on securities
(both realized and unrealized) ........ .07 .41 (.23) (.23) (.02) (.03) (.04)
------------- ------- ---------- ---------- ---------- ----- -------
Total from investment operations ... .07 .40 - (.01) (.02) .01 (.01)
------------- ------- ---------- ---------- ---------- ----- -------
Unit value, end of year .................... $ 1.07 1.40 1.00 .99 .98 1.01 .99
------------- ------- ---------- ---------- ---------- ----- -------
------------- ------- ---------- ---------- ---------- ----- -------
</TABLE>
<TABLE>
<CAPTION>
SEGREGATED SUB-ACCOUNT
------------------------------------------------------------------------
REAL TEMPLETON
GLOBAL INDEX 400 MACRO-CAP MICRO-CAP ESTATE DEVELOPING
BOND MID-CAP VALUE GROWTH SECURITIES MARKETS
------ ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period ............ $ 1.00 1.00 1.00 1.00 1.00 1.00
------ ----------- ----------- ----------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ............ .07 .01 .02 (.01) .18 (.01)
Net gains or losses on securities
(both realized and unrealized) ......... (.08) .08 .02 .81 (.21) .21
------ ----------- ----------- ----------- ---------- ----------
Total from investment operations .... (.01) .09 .04 .80 (.03) .20
------ ----------- ----------- ----------- ---------- ----------
Unit value, end of year .................... $ .99 1.09 1.04 1.80 .97 1.20
------ ----------- ----------- ----------- ---------- ----------
------ ----------- ----------- ----------- ---------- ----------
</TABLE>
<PAGE>
31
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY
---------------------------------
The following tables for each segregated sub-account show certain data
for an accumulation unit outstanding during the periods indicated:
GROWTH
------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............. $ 4.22 3.14 2.35 2.01 1.62
-------- --------- ----------- ---------- ---------
Income from investment operations:
Net investment income ................. .01 .03 .02 .02 .01
Net gains on securities
(both realized and unrealized) ....... 1.06 1.05 .77 .32 .38
-------- --------- ----------- ---------- ---------
Total from investment operations ... 1.07 1.08 .79 .34 .39
-------- --------- ----------- ---------- ---------
Unit value, end of year ................... $ 5.29 4.22 3.14 2.35 2.01
-------- --------- ----------- ---------- ---------
-------- --------- ----------- ---------- ---------
</TABLE>
<PAGE>
32
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
BOND
----
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............ $ 2.52 2.38 2.18 2.12 1.77
-------- --------- ----------- ---------- ---------
Income (loss) from investment operations:
Net investment income ................ .13 .13 .11 .11 .07
Net gains or losses on securities
(both realized and unrealized) ...... (.20) .01 .09 (.05) .28
-------- --------- ----------- ---------- ---------
Total from investment operations .. (.07) .14 .20 .06 .35
-------- --------- ----------- ---------- ---------
Unit value, end of year .................. $ 2.45 2.52 2.38 2.18 2.12
-------- --------- ----------- ---------- ---------
-------- --------- ----------- ---------- ---------
</TABLE>
<PAGE>
33
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
MONEY MARKET
------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ........... $ 1.78 1.70 1.62 1.55 1.47
-------- --------- ----------- ---------- ---------
Income from investment operations:
Net investment income ............... .08 .08 .08 .07 .08
-------- --------- ----------- ---------- ---------
Total from investment operations . .08 .08 .08 .07 .08
-------- --------- ----------- ---------- ---------
Unit value, end of year ................. $ 1.86 1.78 1.70 1.62 1.55
-------- --------- ----------- ---------- ---------
-------- --------- ----------- ---------- ---------
</TABLE>
<PAGE>
34
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
ASSET ALLOCATION
----------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............ $ 3.71 3.00 2.53 2.25 1.80
-------- --------- ----------- ---------- ---------
Income (loss) from investment operations:
Net investment income ................. .17 .08 .08 .08 .06
Net gains or losses on securities
(both realized and unrealized) ...... .39 .63 .39 .20 .39
-------- --------- ----------- ---------- ---------
Total from investment operations .. .56 .71 .47 .28 .45
-------- --------- ----------- ---------- ---------
Unit value, end of year .................. $ 4.27 3.71 3.00 2.53 2.25
-------- --------- ----------- ---------- ---------
-------- --------- ----------- ---------- ---------
</TABLE>
<PAGE>
35
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
MORTGAGE SECURITIES
-------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............... $ 2.55 2.40 2.20 2.09 1.78
------- ------ ------ ------ -------
Income from investment operations:
Net investment income ................... .14 .13 .14 .13 .12
Net gains or losses on securities
(both realized and unrealized) ....... (.09) .02 .06 (.02) .19
------- ------ ------ ------ -------
Total from investment operations ..... .05 .15 .20 .11 .31
------- ------ ------ ------ -------
Unit value, end of year ..................... $ 2.60 2.55 2.40 2.20 2.09
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
36
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
INDEX 500
---------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............... $ 4.75 3.72 2.81 2.32 1.70
------- ------ ------ ------ -------
Income from investment operations:
Net investment income ................... .08 .03 .03 .03 .03
Net gains or losses on securities
(both realized and unrealized) ....... .87 1.00 .88 .46 .59
------- ------ ------ ------ -------
Total from investment operations ..... .95 1.03 .91 .49 .62
------- ------ ------ ------ -------
Unit value, end of year ..................... $ 5.70 4.75 3.72 2.81 2.32
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
37
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
CAPITAL APPRECIATION
--------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............... $ 4.75 3.64 2.84 2.42 1.97
------- ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) ............ (.01) (.01) (.01) - -
Net gains on securities
(both realized and unrealized) ....... 1.03 1.12 .81 .42 .45
------- ------ ------ ------ -------
Total from investment operations ..... 1.02 1.11 .80 .42 .45
------- ------ ------ ------ -------
Unit value, end of year ..................... $ 5.77 4.75 3.64 2.84 2.42
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
38
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
INTERNATIONAL STOCK
-------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ............... $ 2.13 2.00 1.79 1.50 1.31
------- ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) ............ .06 .06 .05 .04 -
Net gains on securities
(both realized and unrealized) ....... .39 .07 .16 .25 .19
------- ------ ------ ------ -------
Total from investment operations ..... .45 .13 .21 .29 .19
------- ------ ------ ------ -------
Unit value, end of year ..................... $ 2.58 2.13 2.00 1.79 1.50
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
39
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
SMALL COMPANY GROWTH
--------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ............. $ 1.86 1.84 1.71 1.60 1.22
------- ------ ------ ------ -------
Income from investment operations:
Net investment income ................... - - - - -
Net gains on securities
(both realized and unrealized) ....... .84 .02 .13 .11 .38
------- ------ ------ ------ -------
Total from investment operations ..... .84 .02 .13 .11 .38
------- ------ ------ ------ -------
Unit value, end of period.................... $ 2.70 1.86 1.84 1.71 1.60
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
40
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
MATURING GOVERNMENT BOND 2002
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ............. $ 1.47 1.35 1.24 1.22 .98
------- ------ ------ ------ -------
Income (loss) from investment operations:
Net investment income ................... .20 .08 .06 .15 .07
Net gains or losses on securities
(both realized and unrealized) ....... (.21) .04 .05 (.13) .17
------- ------ ------ ------ -------
Total from investment operations ..... (.01) .12 .11 .02 .24
------- ------ ------ ------ -------
Unit value, end of period.................... $ 1.46 1.47 1.35 1.24 1.22
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
41
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
MATURING GOVERNMENT BOND 2006
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period .............. $ 1.65 1.45 1.29 1.31 .97
------- ------ ------ ------ -------
Income (loss) from investment operations:
Net investment income .................... .10 .11 .06 .07 .07
Net gains or losses on securities
(both realized and unrealized) ........ (.23) .09 .10 (.09) .27
------- ------ ------ ------ -------
Total from investment operations ... (.13) .20 .16 (.02) .34
------- ------ ------ ------ -------
Unit value, end of period..................... $ 1.52 1.65 1.45 1.29 1.31
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
42
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
MATURING GOVERNMENT BOND 2010
-----------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ............. $ 1.75 1.53 1.30 1.35 .96
------- ------ ------ ------ -------
Income (loss) from investment operations:
Net investment income ................... .07 .08 .08 - .05
Net gains or losses on securities
(both realized and unrealized) ......... (.27) .14 .15 (.05) .34
------- ------ ------ ------ -------
Total from investment operations .... (.20) .22 .23 (.05) .39
------- ------ ------ ------ -------
Unit value, end of period.................... $ 1.55 1.75 1.53 1.30 1.35
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
43
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
---------------------------------------------
VALUE STOCK
-----------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period ............. $ 2.25 2.22 1.83 1.40 1.06
------- ------ ------ ------ -------
Income from investment operations:
Net investment income ................... .06 - .03 .02 .01
Net gains on securities (both
realized and unrealized) ............... (.06) .03 .36 .41 .33
------- ------ ------ ------ -------
Total from investment operations ..... - .03 .39 .43 .34
------- ------ ------ ------ -------
Unit value, end of period.................... $ 2.25 2.25 2.22 1.83 1.40
------- ------ ------ ------ -------
------- ------ ------ ------ -------
</TABLE>
<PAGE>
44
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
SMALL COMPANY VALUE
-------------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ................... $ .94 1.01 1.00
------- ------ ---------------
Income from investment operations:
Net investment income ........................ .01 .02 -
Net gains or losses on securities
(both realized and unrealized) ............... (.04) (.09) .01
------- ------ ---------------
Total from investment operations ......... (.03) (.07) .01
------- ------ ---------------
Unit value, end of period.......................... $ .91 .94 1.01
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
45
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
GLOBAL BOND
-----------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ................... $ 1.15 .99 1.00
------- ------ ---------------
Income (loss) from investment operations:
Net investment income ........................ .04 .07 .01
Net gains or losses on securities
(both realized and unrealized) ............... (.13) .09 (.02)
------- ------ ---------------
Total from investment operations ........... (.09) .16 (.01)
------- ------ ---------------
Unit value, end of period.......................... $ 1.06 1.15 .99
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
46
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
INDEX 400 MID-CAP
-----------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period .................... $ 1.15 .99 1.00
------- ------ ---------------
Income (loss) from investment operations:
Net investment income ......................... - .01 -
Net gains or losses on securities
(both realized and unrealized) ................ .19 .15 (.01)
------- ------ ---------------
Total from investment operations ........... .19 .16 (.01)
------- ------ ---------------
Unit value, end of period........................... $ 1.34 1.15 .99
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
47
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
MACRO-CAP VALUE
---------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ................... $ 1.20 .99 1.00
------- ------ ---------------
Income (loss) from investment operations:
Net investment income ......................... .01 .01 .01
Net gains or losses on securities
(both realized and unrealized) ............... .07 .20 (.02)
------- ------ ---------------
Total from investment operations .......... .08 .21 (.01)
------- ------ ---------------
Unit value, end of period.......................... $ 1.28 1.20 .99
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 15, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
48
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
MACRO-CAP GROWTH
----------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ................... $ .95 .84 1.00
------- ------ ---------------
Income (loss) from investment operations:
Net investment income ......................... - - -
Net gains or losses on securities
(both realized and unrealized) ............... 1.41 .11 (.16)
------- ------ ---------------
Total from investment operations .......... 1.41 .11 (.16)
------- ------ ---------------
Unit value, end of period.......................... $2.36 .95 .84
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 1, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
49
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
REAL ESTATES SECURITIES
-----------------------
<TABLE>
<CAPTION>
YEAR PERIOD FROM
ENDED APRIL 1, 1998*
DECEMBER 31, TO DECEMBER
1999 31, 1998
----------- -------------
<S> <C> <C>
Unit value, beginning of period ................... $ .85 1.00
----------- -------------
Income (loss) from investment operations:
Net investment income ......................... .08 .08
Net gains or losses on securities
(both realized and unrealized) ............... (.11) (.23)
----------- -------------
Total from investment operations ........... (.03) (.15)
----------- -------------
Unit value, end of period.......................... $ .82 .85
----------- -------------
----------- -------------
</TABLE>
* Inception of the segregated sub-account was April 1, 1998, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
50
VARIABLE ANNUITY ACCOUNT
(6) FINANCIAL HIGHLIGHTS - MEGANNUITY - CONTINUED
----------------------------------------------
TEMPLETON DEVELOPING MARKETS
----------------------------
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, OCTOBER 1, 1997*
---------------------- TO DECEMBER
1999 1998 31, 1997
------- ------ ---------------
<S> <C> <C> <C>
Unit value, beginning of period ..................... $ .55 .70 1.00
------- ------ ---------------
Income (loss) from investment operations:
Net investment income .......................... - .01 -
Net gains or losses on securities
(both realized and unrealized) ................. .29 (.16) (.30)
------- ------ ---------------
Total from investment operations ............ .29 (.15) (.30)
------- ------ ---------------
Unit value, end of period............................ $ .84 .55 .70
------- ------ ---------------
------- ------ ---------------
</TABLE>
* Inception of the segregated sub-account was October 2, 1997, when the units
became effectively registered under the Securities Exchange Act of 1933.
<PAGE>
Independent Auditors' Report
The Board of Directors
Minnesota Life Insurance Company:
We have audited the accompanying consolidated balance sheets of the
Minnesota Life Insurance Company and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations and comprehensive
income, changes in stockholder's equity and cash flows for each of the years in
the three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Minnesota Life Insurance Company and subsidiaries as of December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplementary
information included in the accompanying schedules is presented for purpose of
additional analysis and is not a required part of the basic consolidated
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic consolidated financial statements taken as a whole.
Minneapolis, Minnesota
February 11, 2000
ML-1
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(In thousands)
<S> <C> <C>
Fixed maturity securities:
Available-for-sale, at fair value (amortized cost
$4,868,584 and $4,667,688) $ 4,803,568 $ 4,914,012
Held-to-maturity, at amortized cost (fair value
$968,852 and $1,161,784) 974,814 1,086,548
Equity securities, at fair value (cost $587,014 and
$579,546) 770,269 749,800
Mortgage loans, net 696,672 681,219
Real estate, net 36,793 38,530
Finance receivables, net 134,812 163,411
Policy loans 237,335 226,409
Short-term investments 93,993 136,435
Private equities 284,797 160,958
Other invested assets 53,919 100,667
----------- -----------
Total investments 8,086,972 8,257,989
Cash 116,803 175,660
Deferred policy acquisition costs 713,217 564,382
Accrued investment income 93,385 86,974
Premiums receivable, net 94,171 62,609
Property and equipment, net 59,223 67,448
Reinsurance recoverables 194,940 176,683
Other assets 64,256 61,183
Separate account assets 8,931,456 6,994,752
----------- -----------
Total assets $18,354,423 $16,447,680
=========== ===========
Liabilities and Stockholder's Equity
Liabilities:
Policy and contract account balances $ 4,234,183 $ 4,242,802
Future policy and contract benefits 1,826,953 1,758,375
Pending policy and contract claims 90,762 70,564
Other policyholders funds 451,056 438,595
Policyholders dividends payable 51,749 53,957
Stockholder dividend payable -- 24,700
Unearned premiums and fees 208,013 180,191
Federal income tax liability:
Current 68,320 53,039
Deferred 125,094 173,907
Other liabilities 442,369 514,468
Notes payable 218,000 267,000
Separate account liabilities 8,882,060 6,947,806
----------- -----------
Total liabilities 16,598,559 14,725,404
----------- -----------
Stockholder's equity:
Common stock, $1 par value, 5,000,000 shares autho-
rized, issued and outstanding 5,000 5,000
Additional paid in capital 3,000 --
Retained earnings 1,629,787 1,513,661
Accumulated other comprehensive income 118,077 203,615
----------- -----------
Total stockholder's equity 1,755,864 1,722,276
----------- -----------
Total liabilities and stockholder's equity $18,354,423 $16,447,680
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
ML-2
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 697,799 $ 577,693 $ 615,253
Policy and contract fees 331,110 300,361 272,037
Net investment income 540,056 531,081 553,773
Net realized investment gains 79,615 114,652 114,367
Finance charge income 31,969 35,880 43,650
Other income 81,135 73,498 71,707
---------- ---------- ----------
Total revenues 1,761,684 1,633,165 1,670,787
---------- ---------- ----------
Benefits and expenses:
Policyholders benefits 667,207 519,926 515,873
Interest credited to policies and con-
tracts 282,627 290,870 298,033
General operating expenses 358,387 360,916 369,961
Commissions 110,645 110,211 114,404
Administrative and sponsorship fees 79,787 80,183 81,750
Dividends to policyholders 18,928 25,159 26,776
Interest on notes payable 24,282 22,360 24,192
Amortization of deferred policy acqui-
sition costs 123,455 148,098 128,176
Capitalization of policy acquisition
costs (152,602) (166,140) (155,054)
---------- ---------- ----------
Total benefits and expenses 1,512,716 1,391,583 1,404,111
---------- ---------- ----------
Income from operations before taxes 248,968 241,582 266,676
Federal income tax expense (benefit):
Current 75,172 93,584 84,612
Deferred (1,439) (15,351) (7,832)
---------- ---------- ----------
Total federal income tax expense 73,733 78,233 76,780
---------- ---------- ----------
Net income $ 175,235 $ 163,349 $ 189,896
========== ========== ==========
Other comprehensive income (loss), after
tax:
Foreign currency translation adjust-
ments $ -- $ (947) $ 947
Unrealized gains (losses) on securities (85,538) 47,889 47,414
---------- ---------- ----------
Other comprehensive income (loss), net
of tax (85,538) 46,942 48,361
---------- ---------- ----------
Comprehensive income $ 89,697 $ 210,291 $ 238,257
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
ML-3
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Common stock:
Beginning balance $ 5,000 $ -- $ --
Issued during the year -- 5,000 --
---------- ---------- ----------
Total common stock $ 5,000 $ 5,000 $ --
========== ========== ==========
Additional paid in capital:
Beginning balance $ -- $ -- $ --
Contribution 3,000 -- --
---------- ---------- ----------
Total additional paid in capital $ 3,000 $ -- $ --
========== ========== ==========
Retained earnings:
Beginning balance $1,513,661 $1,380,012 $1,190,116
Net income 175,235 163,349 189,896
Retained earnings transfer for common
stock issued -- (5,000) --
Dividends to stockholder (59,109) (24,700) --
---------- ---------- ----------
Total retained earnings $1,629,787 $1,513,661 $1,380,012
========== ========== ==========
Accumulated other comprehensive income:
Beginning balance $ 203,615 $ 156,673 $ 108,312
Change in unrealized appreciation of
investments (85,538) 47,889 47,414
Change in unrealized gain on foreign
currency translation -- (947) 947
---------- ---------- ----------
Total accumulated other comprehensive
income $ 118,077 $ 203,615 $ 156,673
========== ========== ==========
Total stockholder's equity $1,755,864 $1,722,276 $1,536,685
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
ML-4
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 175,235 $ 163,349 $ 189,896
Adjustments to reconcile net income to
net cash
provided by operating activities:
Interest credited to annuity and in-
surance contracts 282,627 290,870 298,033
Fees deducted from policy and con-
tract balances (217,941) (212,901) (214,803)
Change in future policy benefits 68,578 56,716 76,358
Change in other policyholders lia-
bilities 29,426 11,965 7,597
Amortization of deferred policy ac-
quisition costs 123,455 148,098 128,176
Capitalization of policy acquisition
costs (152,602) (166,140) (155,054)
Change in premiums receivable (31,562) 5,421 (9,280)
Change in federal income tax liabil-
ities 14,598 (7,455) 36,049
Net realized investment gains (79,615) (114,652) (114,367)
Other, net (27,314) 30,524 (44,527)
----------- ----------- -----------
Net cash provided by operating ac-
tivities 184,885 205,795 198,078
----------- ----------- -----------
Cash Flows from Investing Activities
Proceeds from sales of:
Fixed maturity securities, avail-
able-for-sale 1,856,757 1,835,955 1,099,114
Equity securities 705,050 621,125 601,936
Real estate 7,341 7,800 9,279
Private equities 28,128 20,025 19,817
Other invested assets 5,731 822 7,060
Proceeds from maturities and repay-
ments of:
Fixed maturity securities, avail-
able-for-sale 345,677 414,726 403,829
Fixed maturity securities, held-to-
maturity 122,704 148,848 139,394
Mortgage loans 116,785 126,066 109,246
Purchases of:
Fixed maturity securities, avail-
able-for-sale (2,432,049) (2,384,720) (1,498,048)
Fixed maturity securities, held-to-
maturity (8,446) (99,989) (82,835)
Equity securities (613,596) (610,553) (585,349)
Mortgage loans (130,013) (141,008) (157,247)
Real estate (1,016) (5,612) (3,908)
Private equities (79,584) (64,811) (48,778)
Other invested assets (11,435) (10,871) (7,210)
Finance receivable originations or
purchases (74,989) (77,141) (115,248)
Finance receivable principal payments 88,697 109,277 133,762
Other, net (91,346) 104,519 (88,626)
----------- ----------- -----------
Net cash used for investing activi-
ties (165,604) (5,542) (63,812)
----------- ----------- -----------
Cash Flows from Financing Activities
Deposits credited to annuity and in-
surance contracts 448,012 952,622 928,696
Withdrawals from annuity and insurance
contracts (478,775) (1,053,844) (1,013,588)
Proceeds from issuance of debt 50,000 40,000 --
Payments on debt (49,000) (31,000) (21,000)
Dividends paid to stockholder (83,809) -- --
Other, net (7,008) (4,467) (3,355)
----------- ----------- -----------
Net cash used for financing activi-
ties (120,580) (96,689) (109,247)
----------- ----------- -----------
Net increase (decrease) in cash and
short-term investments (101,299) 103,564 25,019
Cash and short-term investments, be-
ginning of year 312,095 208,531 183,512
----------- ----------- -----------
Cash and short-term investments, end
of year $ 210,796 $ 312,095 $ 208,531
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
ML-5
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
(1) Nature of Operations
Description of Business
Minnesota Life Insurance Company, both directly and through its subsidiaries
(collectively, the Company), provides a diversified array of insurance and
financial products and services designed principally to protect and enhance the
long-term financial well-being of individuals and families.
The Company's strategy is to be successful in carefully selected niche
markets, primarily in the United States, while focusing on the retention of
existing business and the maintenance of profitability. To achieve this
objective, the Company has divided its businesses into five strategic business
units, which focus on various markets: Individual Insurance, Financial
Services, Group Insurance, Pension and Asset Management. Revenues in 1999 for
these business units were $703,473,000, $263,418,000, $388,792,000,
$164,774,000, and $66,594,000, respectively. Additional revenues of
$174,633,000 were reported by the Company's subsidiaries and corporate product
line.
The Company serves over six million people through more than 4,000
associates located at its St. Paul, Minnesota headquarters and in sales offices
nationwide.
Conversion to a Mutual Holding Company Structure
Consent was given from the Minnesota Department of Commerce (Department of
Commerce) allowing The Minnesota Mutual Life Insurance Company to implement a
conversion to a mutual holding company. The Minnesota Mutual Life Insurance
Company enacted this privilege effective October 1, 1998. The conversion
created Minnesota Mutual Companies, Inc., a mutual holding company, Securian
Holding Company, and Securian Financial Group, Inc., which are intermediate
stock holding companies. The Minnesota Mutual Life Insurance Company was
converted into a stock life insurance company and renamed Minnesota Life
Insurance Company. Minnesota Mutual Companies, Inc. will at all times, in
accordance with the conversion plan and as required by the Mutual Insurance
Holding Company Act, directly or indirectly control Minnesota Life Insurance
Company through the ownership of at least a majority of the voting power of the
voting shares of the capital stock of Minnesota Life Insurance Company. Annuity
contract and life insurance policyholders of Minnesota Life Insurance Company
have certain membership interests consisting primarily of the right to vote on
certain matters involving Minnesota Mutual Companies, Inc. and the right to
receive distributions of surplus in the event of demutualization, dissolution
or liquidation of Minnesota Mutual Companies, Inc.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP). The
consolidated financial statements include the accounts of the Minnesota Life
Insurance Company and its subsidiaries. All material intercompany transactions
and balances have been eliminated.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported
assets and liabilities, including reporting or disclosure of contingent assets
and liabilities as of the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Future events, including
changes in mortality, morbidity, interest rates and asset valuations, could
cause actual results to differ from the estimates used in the consolidated
financial statements.
Insurance Revenues and Expenses
Premiums on traditional life products, which include individual whole life and
term insurance and immediate annuities, are credited to revenue when due. For
accident and health and group life products, premiums are credited to revenue
over the contract period as earned. Benefits and expenses are recognized in
relation to premiums over the contract period via a provision for future policy
benefits and the amortization of deferred policy acquisition costs.
ML-6
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
Nontraditional life products include individual adjustable and variable life
insurance and group universal and variable life insurance. Revenue from
nontraditional life products and deferred annuities is comprised of policy and
contract fees charged for the cost of insurance, policy administration and
surrenders. Expenses include both the portion of claims not covered by and
interest credited to the related policy and contract account balances. Policy
acquisition costs are amortized relative to estimated gross profits or margins.
Deferred Policy Acquisition Costs
The costs of acquiring new and renewal business, which vary with and are
primarily related to the production of new and renewal business, are generally
deferred to the extent recoverable from future premiums or expected gross
profits. Deferrable costs include commissions, underwriting expenses and
certain other selling and issue costs.
For traditional life, accident and health and group life products, deferred
policy acquisition costs are amortized over the premium paying period in
proportion to the ratio of annual premium revenues to ultimate anticipated
premium revenues. The ultimate premium revenues are estimated based upon the
same assumptions used to calculate the future policy benefits.
For nontraditional life products and deferred annuities, deferred policy
acquisition costs are amortized over the estimated lives of the contracts in
relation to the present value of estimated gross profits from surrender charges
and investment, mortality and expense margins.
Deferred policy acquisition costs amortized were $123,455,000, $148,098,000
and $128,176,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Software Capitalization
The Accounting Standards Executive Committee issued Statement of Position 98-1,
Accounting for Costs of Computer Software for Internal Use, effective for
fiscal years beginning after December 15, 1998. The Company has adopted the
capitalization of software cost beginning in 1999. At December 1999, the
Company had unamortized cost of $7,459,000 and amortized software expense of
$1,643,000. Costs are amortized over a three-year period.
Finance Charge Income and Receivables
Finance charge income represents fees and interest charged on consumer loans.
The Company uses the interest (actuarial) method of accounting for finance
charges and interest on finance receivables. Accrual of finance charges and
interest on the smaller balance homogeneous finance receivables is suspended
when a loan is contractually delinquent for more than 60 days and is
subsequently recognized when received. Accrual is resumed when the loan is
contractually less than 60 days past due. Finance charges and interest is
suspended when a loan is considered by management to be impaired. Loan
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or as a practical expedient,
at the observable market price of the loan or the fair value of the collateral
if the loan is collateral dependent. When a loan is identified as impaired,
interest previously accrued in the current year is reversed. Interest payments
received on impaired loans are generally applied to principal unless the
remaining principal balance has been determined to be fully collectible. An
allowance for uncollectible amounts is maintained by direct charges to
operations at an amount which management believes, based upon historical losses
and economic conditions, is adequate to absorb probable losses on existing
receivables that may become uncollectible. The reported receivables are net of
this allowance.
Valuation of Investments
Fixed maturity securities (bonds) which the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity and are carried
at amortized cost, net of write-downs for other than temporary declines in
value. Premiums and discounts are amortized or accreted over the estimated
lives of the securities based on the interest yield method. Fixed maturity
securities, which may be sold prior to maturity, are classified as available-
for-sale and are carried at fair value.
ML-7
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
Equity securities (common stocks and preferred stocks) are carried at fair
value. Equity securities also include initial contributions to affiliated
registered investment funds that are managed by a subsidiary of the Company.
These contributions are carried at the market value of the underlying net
assets of the funds.
Mortgage loans are carried at amortized cost less an allowance for
uncollectible amounts. Premiums and discounts are amortized or accreted over
the terms of the mortgage loans based on the interest yield method. A mortgage
loan is considered impaired if it is probable that contractual amounts due will
not be collected. Impaired mortgage loans are valued at the fair value of the
underlying collateral. Interest income on impaired mortgage loans is recorded
on an accrual basis. However, when the likelihood of collection is doubtful,
interest income is recognized when received.
On January 1, 1999, the Company converted to the equity method of accounting
for its private equity investments. Prior to 1999 the Company accounted for
these investments using the cost method. The change to this method of
accounting was not material to prior year amounts. Private equity investments
are now carried at our equity in the estimated fair value of the underlying
investments of these limited partnerships. In-kind distributions are recorded
as a return of capital for the cost basis of the stock received. Changes in
fair value are recorded directly in stockholder's equity.
Fair values of fixed maturity securities, equity securities and private
equities are based on quoted market prices, where available. If quoted market
prices are not available, fair values are estimated using values obtained from
independent pricing services which specialize in matrix pricing and modeling
techniques for estimating fair values. Fair values of mortgage loans are based
upon discounted cash flows, quoted market prices and matrix pricing.
Real estate is carried at cost less accumulated depreciation and an
allowance for estimated losses. Accumulated depreciation on real estate at
December 31, 1999 and 1998, was $7,101,000 and $6,713,000, respectively.
Policy loans are carried at the unpaid principal balance.
Derivative Financial Instruments
The Company entered into equity swaps in 1996 as part of an overall risk
management strategy. The swaps were used to hedge exposure to market risk on
$400,000,000 of the Company's common stock portfolio. The swaps were based upon
certain stock indices. If, at the time of settlement for a particular swap, the
designated stock index had fallen below a specified level, the counterparty
would pay the Company an amount based upon the decline in the index and the
stock portfolio value protected by the swap. If, at the time of settlement, the
designated stock index had risen, the Company would pay the counterparty an
amount based upon the increase in the index and 25% of the stock portfolio
value protected by the swap. The equity swaps were settled with the
counterparties in August 1997. The swaps were carried at fair value, which were
based upon dealer quotes. Changes in fair value were recorded directly in
stockholder's equity. Upon settlement of the swaps, gains or losses were
recognized in income, and the Company realized a loss of approximately
$31,000,000 in 1997, upon settlement of these equity swaps.
The Company began investing in international bonds denominated in foreign
currencies in 1997. Unrealized gains or losses are recorded on foreign
denominated securities due to the fluctuation in foreign currency exchange
rates and/or related payables and receivables and interest on foreign
securities. The Company uses forward foreign exchange currency contracts as
part of its risk management strategy for international investments. The forward
foreign exchange currency contracts are used to reduce market risks from
changes in foreign exchange rates. These forward foreign exchange currency
contracts are agreements to purchase a specified amount of one currency in
exchange for a specified amount of another currency at a future point in time
at a foreign exchange currency rate agreed upon on the contract open date. No
cash is exchanged at the outset of the contract and no payments are made by
either party until the contract close date. On the contract
ML-8
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
close date the contracted amount of the purchased currency is received from the
counterparty and the contracted amount of the sold currency is sent to the
counterparty. Realized and unrealized gains and losses on these forward foreign
exchange contracts are recorded in income as incurred. Notional amounts for the
years ended December 31, 1999 and 1998, were $98,606,000 and $115,194,000,
respectively.
Capital Gains and Losses
Realized and unrealized capital gains and losses are determined on the specific
identification method. Write-downs of held-to-maturity securities and the
provision for credit losses on mortgage loans and real estate are recorded as
realized losses.
Changes in the fair value of fixed maturity securities available-for-sale,
equity securities and private equity investments in limited partnerships are
recorded as a separate component of stockholder's equity, net of taxes and
related adjustments to deferred policy acquisition costs and unearned policy
and contract fees.
Property and Equipment
Property and equipment are carried at cost, net of accumulated depreciation of
$113,441,000 and $101,692,000 at December 31, 1999 and 1998, respectively.
Buildings are depreciated over 40 years and equipment is generally depreciated
over 5 to 10 years. Depreciation expenses for the years ended December 31,
1999, 1998 and 1997, were $11,749,000, $10,765,000 and $8,965,000,
respectively.
Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the exclusive benefit of pension, variable
annuity and variable life insurance policyholders and contractholders. Assets
consist principally of marketable securities and both assets and liabilities
are reported at fair value, based upon the market value of the investments held
in the segregated funds. The Company receives administrative and investment
advisory fees for services rendered on behalf of these accounts.
The Company periodically invests money in its separate accounts. The market
value of such investments, included with separate account assets, amounted to
$49,396,000 and $46,946,000 at December 31, 1999 and 1998, respectively.
Policyholders Liabilities
Policy and contract account balances represent the net accumulation of funds
associated with nontraditional life products and deferred annuities. Additions
to the account balances include premiums, deposits and interest credited by the
Company. Decreases in the account balances include surrenders, withdrawals,
benefit payments, and charges assessed for the cost of insurance, policy
administration and surrenders.
Future policy and contract benefits are comprised of reserves for
traditional life, group life, and accident and health products. The reserves
were calculated using the net level premium method based upon assumptions
regarding investment yield, mortality, morbidity, and withdrawal rates
determined at the date of issue, commensurate with the Company's experience.
Provision has been made in certain cases for adverse deviations from these
assumptions.
Other policyholders funds are comprised of dividend accumulations, premium
deposit funds and supplementary contracts without life contingencies.
Participating Business
Dividends on participating policies and other discretionary payments are
declared by the Board of Directors based upon actuarial determinations, which
take into consideration current mortality, interest earnings, expense factors
and federal income taxes. Dividends are recognized as expenses consistent with
the recognition of premiums. At December 31, 1999 and 1998, the total
participating business in force was $50,305,164,000 and $55,683,649,000,
respectively.
ML-9
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
Income Taxes
Current income taxes are charged to operations based upon amounts estimated to
be payable as a result of taxable operations for the current year. Deferred
income tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Reinsurance Recoverables
Insurance liabilities are reported before the effects of ceded reinsurance.
Reinsurance recoverables represent amounts due from reinsurers for paid and
unpaid benefits, expense reimbursements, prepaid premiums and future policy
benefits.
Reclassifications
Certain 1998 and 1997 consolidated financial statement balances have been
reclassified to conform to the 1999 presentation.
(3) Investments
Net investment income for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities $428,286 $445,220 $457,391
Equity securities 29,282 12,183 16,182
Mortgage loans 54,596 54,785 55,929
Real estate 11 (236) (407)
Policy loans 16,016 15,502 15,231
Short-term investments 5,829 6,147 6,995
Private equities 4,114 1,908 2,081
Other invested assets 6,278 1,918 1,790
-------- -------- --------
Gross investment income 544,412 537,427 555,192
Investment expenses (4,356) (6,346) (1,419)
-------- -------- --------
Total $540,056 $531,081 $553,773
======== ======== ========
Net realized investment gains (losses) for the years ended December 31 were
as follows:
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities $(31,404) $ 43,244 $ 3,711
Equity securities 91,591 47,526 92,765
Mortgage loans 1,344 3,399 2,011
Real estate 4,806 7,809 1,598
Private equities 13,983 6,336 8,431
Other invested assets (705) 6,338 5,851
-------- -------- --------
Total $ 79,615 $114,652 $114,367
======== ======== ========
</TABLE>
ML-10
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(3) Investments (continued)
Gross realized gains (losses) on the sales of fixed maturity securities and
equity securities for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Fixed maturity securities, available-for-sale:
Gross realized gains $ 28,619 $ 56,428 $ 18,804
Gross realized losses (60,023) (13,184) (15,093)
Equity securities:
Gross realized gains 143,180 107,342 120,437
Gross realized losses (51,589) (59,816) (27,672)
Private equities:
Gross realized gains 14,558 13,563 10,515
Gross realized losses (575) (7,227) (2,084)
</TABLE>
Net unrealized gains (losses) included in stockholder's equity at December
31 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Gross unrealized gains $ 361,895 $ 487,479
Gross unrealized losses (184,268) (73,440)
Adjustment to deferred acquisition costs (414) (119,542)
Adjustment to unearned policy and contract fees (473) 15,912
Deferred federal income taxes (58,663) (106,794)
--------- ---------
Net unrealized gains $ 118,077 $ 203,615
========= =========
</TABLE>
ML-11
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(3) Investments (continued)
The amortized cost and fair value of investments in marketable securities by
type of investment were as follows:
<TABLE>
<CAPTION>
Gross Unrealized
-----------------
Amortized Fair
Cost Gains Losses Value
---------- -------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1999
Available-for-sale:
United States government and gov-
ernment
agencies and authorities $ 151,864 $ 32 $ 8,299 $ 143,597
Foreign governments 122,505 678 7,913 115,270
Corporate securities 3,088,999 108,203 117,543 3,079,659
International bond securities 28,979 -- 2,633 26,346
Mortgage-backed securities 1,476,237 4,867 42,408 1,438,696
---------- -------- -------- ----------
Total fixed maturities 4,868,584 113,780 178,796 4,803,568
Equity securities-unaffiliated 463,089 142,583 2,745 602,927
Equity securities-affiliated mu-
tual funds 123,925 44,014 597 167,342
---------- -------- -------- ----------
Total equity securities 587,014 186,597 3,342 770,269
---------- -------- -------- ----------
Total available-for-sale 5,455,598 300,377 182,138 5,573,837
Held-to maturity:
Corporate securities 848,689 15,965 21,492 843,162
Mortgage-backed securities 126,125 2,584 3,019 125,690
---------- -------- -------- ----------
Total held-to-maturity 974,814 18,549 24,511 968,852
---------- -------- -------- ----------
Total $6,430,412 $318,926 $206,649 $6,542,689
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Unrealized
----------------
Amortized Fair
Cost Gains Losses Value
---------- -------- ------- ----------
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1998
Available-for-sale:
United States government and gov-
ernment
agencies and authorities $ 195,650 $ 17,389 $ 201 $ 212,838
Foreign governments 784 -- 311 473
Corporate securities 2,357,861 204,277 30,648 2,531,490
International bond securities 188,448 22,636 1,298 209,786
Mortgage-backed securities 1,924,945 52,580 18,100 1,959,425
---------- -------- ------- ----------
Total fixed maturities 4,667,688 296,882 50,558 4,914,012
Equity securities-unaffiliated 463,777 157,585 15,057 606,305
Equity securities-affiliated mu-
tual funds 115,769 27,726 -- 143,495
---------- -------- ------- ----------
Total equity securities 579,546 185,311 15,057 749,800
---------- -------- ------- ----------
Total available-for-sale 5,247,234 482,193 65,615 5,663,812
Held-to maturity:
Corporate securities 894,064 67,496 235 961,325
Mortgage-backed securities 192,484 9,030 1,055 200,459
---------- -------- ------- ----------
Total held-to-maturity 1,086,548 76,526 1,290 1,161,784
---------- -------- ------- ----------
Total $6,333,782 $558,719 $66,905 $6,825,596
========== ======== ======= ==========
</TABLE>
ML-12
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(3) Investments (continued)
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1999, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
--------------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- --------- --------
(In thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 39,213 $ 39,542 $ 5,628 $ 5,589
Due after one year through five years 1,065,644 1,125,653 175,672 176,672
Due after five years through ten
years 1,305,697 1,271,316 376,752 375,480
Due after ten years 981,793 928,361 290,637 285,421
---------- ---------- -------- --------
3,392,347 3,364,872 848,689 843,162
Mortgage-backed securities 1,476,237 1,438,696 126,125 125,690
---------- ---------- -------- --------
Total $4,868,584 $4,803,568 $974,814 $968,852
========== ========== ======== ========
</TABLE>
At December 31, 1999 and 1998, fixed maturity securities and short-term
investments with a carrying value of $13,945,000 and $6,361,000, respectively,
were on deposit with various regulatory authorities as required by law.
Allowances for credit losses on investments are reflected on the
consolidated balance sheets as a reduction of the related assets and were as
follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(In thousands)
<S> <C> <C>
Mortgage loans $ 1,500 $ 1,500
Investment real estate -- 841
------- -------
Total $ 1,500 $ 2,341
======= =======
</TABLE>
At December 31, 1999, no mortgage loans were considered impaired. At
December 31, 1998, the recorded investment in mortgage loans that were
considered to be impaired was $8,798, before the allowance for credit losses.
These impaired loans, due to adequate fair market value of underlying
collateral, do not have an allowance for credit losses.
A general allowance for credit losses was established for potential
impairments in the remainder of the mortgage loan portfolio. The general
allowance was $1,500,000 at December 31, 1999 and 1998.
Changes in the allowance for credit losses on mortgage loans were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $1,500 $1,500 $1,895
Provision for credit losses -- -- --
Charge-offs -- -- (395)
------ ------ ------
Balance at end of year $1,500 $1,500 $1,500
====== ====== ======
Below is a summary of interest income on impaired mortgage loans.
<CAPTION>
1999 1998 1997
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Average impaired mortgage loans $ 4 $ 14 $3,268
Interest income on impaired mortgage loans--contractual 4 18 556
Interest income on impaired mortgage loans--collected 4 17 554
</TABLE>
ML-13
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(4) Notes Receivable
In connection with the Company's construction of an additional home office
facility in St. Paul, Minnesota, the Company entered into a loan contingency
agreement with the Housing and Redevelopment Authority of the City of St. Paul,
Minnesota (HRA) in November 1997. A maximum of $15 million in funds is
available under this loan for condemnation and demolition of the Company's
proposed building site. The note bears interest at a rate of 8.625%, with
principal payments commencing February 2004 and a maturity date of August 2025.
Interest payments are accrued and are payable February and August of each year
commencing February 2001. All principal and interest payments are due only to
the extent of available tax increments. As of December 31, 1999 and 1998, HRA
has drawn $13,574,000 and $9,669,000 on this loan contingency agreement and
accrued interest of $1,795,000 and $673,000, respectively.
(5) Net Finance Receivables
Finance receivables as of December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Direct installment loans $127,379 $147,425
Retail installment notes 9,199 12,209
Retail revolving credit 3,457 17,170
Accrued interest 2,505 2,683
-------- --------
Gross receivables 142,540 179,487
Allowance for uncollectible amounts (7,728) (16,076)
-------- --------
Finance receivables, net $134,812 $163,411
======== ========
</TABLE>
The direct installment loans, at December 31, 1999 and 1998, consisted of
$83,376,000 and $81,066,000, respectively, of discount basis loans (net of
unearned finance charges) and $44,003,000 and $66,359,000, respectively, of
interest-bearing loans and generally have a maximum term of 84 months; the
retail installment notes are principally discount basis, arise from the sale of
household appliances, furniture, and sundry services, and generally have a
maximum term of 48 months. Direct installment loans included approximately $29
million and $44 million of real estate secured loans at December 31, 1999 and
1998, respectively. Revolving credit loans included approximately $3 million
and $16 million of real estate secured loans at December 31, 1999 and 1998,
respectively. Contractual maturities of the finance receivables by year, as
required by the industry audit guide for finance companies, were not readily
available at December 31, 1999 and 1998, but experience has shown that such
information is not significant in that a substantial portion of receivables
will be renewed, converted, or paid in full prior to maturity.
During the years ended December 31, 1999 and 1998, principal cash
collections of direct installment loans were $57,665,000 and $75,011,000,
respectively, and the percentages of these cash collections to average net
balances were 43% and 47%, respectively. Retail installment notes' principal
cash collections to average net balances were $12,180,000 and $15,990,000,
respectively, and the percentages of these cash collections to average net
balances were 121% and 101%, respectively.
ML-14
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(5) Net Finance Receivables (continued)
The ratio for the allowance for losses to net outstanding receivables
balances at December 31, 1999 and 1998 was 5.4% and 9.0%, respectively. Changes
in the allowance for losses for the periods ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 16,076 $ 20,545 $ 7,497
Provision for credit losses 5,434 10,712 28,206
Allowance applicable to bulk purchase 125 -- --
Charge-offs (16,712) (18,440) (17,869)
Recoveries 2,805 3,259 2,711
-------- -------- --------
Balance at end of year $ 7,728 $ 16,076 $ 20,545
======== ======== ========
</TABLE>
At December 31, 1999, the recorded investment in certain direct installment
loans and direct revolving credit loans were considered to be impaired. The
balances of such loans at December 31, 1999 and the related allowance for
credit losses were as follows:
<TABLE>
<CAPTION>
Installment Revolving
Loans Credit Total
----------- --------- ------
(In thousands)
<S> <C> <C> <C>
Balances at December 31, 1999 $5,539 692 $6,231
Related allowance for credit losses $1,478 330 $1,808
</TABLE>
All loans deemed to be impaired are placed on a non-accrual status. No
accrued or unpaid interest was recognized on impaired loans during 1999. The
average quarterly balance of impaired loans during the year ended December 31,
1999 and 1998, was $5,758,000 and $6,354,000 for installment basis loans and
$6,214,000 and $12,471,000 for revolving credit loans, respectively.
There were no material commitments to lend additional funds to customers
whose loans were classified as impaired at December 31, 1999.
(6) Income Taxes
Income tax expense varies from the amount computed by applying the federal
income tax rate of 35% to income from operations before taxes. The significant
components of this difference were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Computed tax expense $87,139 $84,553 $93,337
Difference between computed and actual tax ex-
pense:
Dividends received deduction (3,127) (1,730) (5,573)
Special tax on mutual life insurance companies (9,568) (3,455) 3,341
Sale of subsidiary -- -- (4,408)
Foundation gain (538) -- (4,042)
Tax credits (4,500) (4,416) (3,600)
Expense adjustments and other 4,327 3,281 (2,275)
------- ------- -------
Total tax expense $73,733 $78,233 $76,780
======= ======= =======
</TABLE>
ML-15
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(6) Income Taxes (continued)
The tax effects of temporary differences that give rise to the Company's net
deferred federal tax liability were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Policyholders liabilities $ 17,461 $ 16,999
Pension and post retirement benefits 30,151 27,003
Tax deferred policy acquisition costs 91,976 82,940
Net realized capital losses 6,709 8,221
Other 16,612 18,487
-------- --------
Gross deferred tax assets 162,909 153,650
-------- --------
Deferred tax liabilities:
Deferred policy acquisition costs $198,501 $155,655
Real estate and property and equipment depreciation 14,642 10,275
Basis difference on investments 8,092 10,798
Net unrealized capital gains 59,411 143,354
Other 7,357 7,475
-------- --------
Gross deferred tax liabilities 288,003 327,557
-------- --------
Net deferred tax liability $125,094 $173,907
======== ========
</TABLE>
A valuation allowance for deferred tax assets was not considered necessary
as of December 31, 1999 and 1998 because the Company believes that it is more
likely than not that the deferred tax assets will be realized through future
reversals of existing taxable temporary differences and future taxable income.
Income taxes paid for the years ended December 31, 1999, 1998 and 1997, were
$59,905,000, $91,259,000 and $71,108,000, respectively.
The Company's tax returns for 1995, 1996, and 1997 are under examination by
the Internal Revenue Service. The Company believes additional taxes, if any,
assessed as a result of these examinations, will not have a material effect on
its financial position.
ML-16
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(7) Liability for Unpaid Accident and Health Claims, Reserve for Losses, and
Claim and Loss Adjustment Expenses
Activity in the liability for unpaid accident and health claims, reserve for
losses and claim and loss adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at January 1 $435,079 $409,249 $416,910
Less: reinsurance recoverable 108,918 104,741 102,161
-------- -------- --------
Net balance at January 1 326,161 304,508 314,749
-------- -------- --------
Incurred related to:
Current year 92,421 92,793 121,153
Prior years 19,435 14,644 7,809
-------- -------- --------
Total incurred 111,856 107,437 128,962
-------- -------- --------
Paid related to:
Current year 25,084 27,660 51,275
Prior years 63,827 58,124 57,475
-------- -------- --------
Total paid 88,911 85,784 108,750
-------- -------- --------
Decrease in liabilities due to sale of subsidiary -- -- 30,453
-------- -------- --------
Net balance at December 31 349,106 326,161 304,508
Plus: reinsurance recoverable 121,395 108,918 104,741
-------- -------- --------
Balance at December 31 $470,501 $435,079 $409,249
======== ======== ========
</TABLE>
The liability for unpaid accident and health claims, reserve for losses and
claim and loss adjustment expenses is included in future policy and contract
benefits and pending policy and contract claims on the consolidated balance
sheets.
As a result of changes in estimates of claims incurred in prior years, the
accident and health claims, reserve for losses and claim and loss adjustment
expenses incurred increased by $19,435,000, $14,644,000 and $7,809,000 in 1999,
1998 and 1997, respectively which includes the amortization of discount on
individual accident and health claim reserves of $13,918,000, $14,256,000,
$11,522,000 in 1999, 1998 and 1997, respectively. The remaining changes in
amounts are the result of normal reserve development inherent in the
uncertainty of establishing the liability for unpaid accident and health
claims, reserve for losses and claim and loss adjustment expenses.
(8) Employee Benefit Plans
Pension Plans and Post Retirement Plans Other than Pensions
The Company has noncontributory defined benefit retirement plans covering
substantially all employees and certain agents. Benefits are based upon years
of participation and the employee's average monthly compensation or the agent's
adjusted annual compensation. Plan assets are comprised of mostly stocks and
bonds, which are held in the general and separate accounts of the Company and
administered under group annuity contracts issued by the Company. The Company's
funding policy is to contribute annually the minimum amount required by
applicable regulations. The Company also has an unfunded noncontributory
defined benefit retirement plan, which provides certain employees with benefits
in excess of limits for qualified retirement plans.
The Company also has unfunded postretirement plans that provide certain
health care and life insurance benefits to substantially all retired employees
and agents. Eligibility is determined by age at retirement and years of service
after age 30. Health care premiums are shared with retirees, and other cost-
sharing features include deductibles and co-payments.
ML-17
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(8) Employee Benefit Plans (continued)
The change in the benefit obligation and plan assets for the Company's plans
as of December 31 was calculated as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year $181,439 $151,509 $ 31,236 $ 24,467
Service cost 8,272 8,402 1,419 1,375
Interest cost 13,132 10,436 2,340 1,713
Amendments 4,385 6 -- --
Actuarial gain (4,143) 16,298 (33) 4,542
Benefits paid (6,060) (5,212) (1,242) (861)
-------- -------- -------- --------
Benefit obligation at end of year $197,025 $181,439 $ 33,720 $ 31,236
======== ======== ======== ========
Change in plan assets:
Fair value of plan assets at the
beginning of the year $146,710 $133,505 $ -- $ --
Actual return on plan assets 12,948 13,068 -- --
Employer contribution 6,096 5,349 1,242 861
Benefits paid (6,060) (5,212) (1,242) (861)
-------- -------- -------- --------
Fair value of plan assets at the
end of year $159,694 $146,710 $ -- $ --
======== ======== ======== ========
Funded status $(37,330) $(34,729) $(33,720) $(31,236)
Unrecognized net actuarial loss
(gain) 6,812 12,283 (6,089) (6,251)
Unrecognized prior service cost
(benefit) 8,723 5,293 (2,472) (2,986)
-------- -------- -------- --------
Net amount recognized $(21,795) $(17,153) $(42,281) $(40,473)
======== ======== ======== ========
Amounts recognized in the balance
sheet statement consist of:
Accrued benefit cost $(27,980) $(23,242) $(42,395) $(40,473)
Intangible asset 6,185 6,089 114 --
-------- -------- -------- --------
Net amount recognized $(21,795) $(17,153) $(42,281) $(40,473)
======== ======== ======== ========
Weighted average assumptions as of
December 31
Discount rate 7.50% 7.00% 7.50% 7.00%
Expected return on plan assets 8.27% 8.27% -- --
Rate of compensation increase 5.32% 5.32% -- --
</TABLE>
ML-18
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(8) Employee Benefit Plans (continued)
For measurement purposes, an 8.5 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate was
assumed to decrease gradually to 5.5 percent for 2005 and remain at that level
thereafter.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------------- ----------------------
1999 1998 1997 1999 1998 1997
-------- -------- ------- ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $ 8,272 $ 8,402 $ 6,847 $1,419 $1,375 $1,047
Interest cost 13,132 10,436 9,956 2,340 1,713 1,872
Expected return on plan
assets (12,080) (10,978) (9,859) -- -- --
Amortization of prior
service cost (benefits) 954 578 578 (513) (513) (510)
Recognized net actuarial
loss (gain) 459 190 77 (195) (559) (480)
-------- -------- ------- ------ ------ ------
Net periodic benefit
cost $ 10,737 $ 8,628 $ 7,599 $3,051 $2,016 $1,929
======== ======== ======= ====== ====== ======
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $45,610,000, $36,376,000 and $18,500,000,
respectively, as of December 31, 1999, and $39,470,000, $31,546,000 and
$17,334,000, respectively, as of December 31, 1998.
The assumptions presented herein are based on pertinent information
available to management as of December 31, 1999 and 1998. Actual results could
differ from those estimates and assumptions. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the postretirement benefit obligation as of December 31, 1999 by
$6,164,000 and the estimated eligibility cost and interest cost components of
net periodic benefit costs for 1999 by $831,000. Decreasing the assumed health
care cost trend rates by one percentage point in each year would decrease the
postretirement benefit obligation as of December 31, 1999 by $4,879,000 and the
estimated eligibility cost and interest cost components of net periodic
postretirement benefit costs for 1999 by $637,000.
Profit Sharing Plans
The Company also has profit sharing plans covering substantially all employees
and agents. The Company's contribution rate to the employee plan is determined
annually by the directors of the Company and is applied to each participant's
prior year earnings. The Company's contribution to the agent plan is made as a
certain percentage, based upon years of service, applied to each agent's total
annual compensation. The Company recognized contributions to the plans during
1999, 1998 and 1997 of $6,003,000, $7,145,000 and $7,173,000, respectively.
Participants may elect to receive a portion of their contributions in cash.
(9) Sale of Subsidiary
On October 1, 1997, the Company sold Minnesota Fire and Casualty Company (MFC),
a wholly owned subsidiary, to Harleysville Group, Inc. The Company received net
cash proceeds of approximately $33.5 million from the sale, and realized a gain
of approximately $14.5 million. HomePlus Insurance Company (HomePlus), a
previously wholly owned subsidiary of MFC, was excluded from the sale of
assets. In accordance with the agreement, prior to September 30, 1997, MFC made
a distribution of private placement bonds to the Company with an amortized cost
of approximately $4.3 million and transferred all issued and outstanding shares
of HomePlus to the Company. The carrying value of the transferred shares was
approximately $5.8 million. Under an administrative services agreement with
MFC, the Company has retained MFC to provide financial and other services for
HomePlus.
ML-19
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(10) Reinsurance
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance companies. To the extent that a reinsurer is
unable to meet its obligation under the reinsurance agreement, the Company
remains liable. The Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk to minimize its exposure to
significant losses from reinsurer insolvencies. Allowances are established for
amounts deemed to be uncollectible.
Reinsurance is accounted for over the lives of the underlying reinsured
policies using assumptions consistent with those used to account for the
underlying policies.
The effect of reinsurance on premiums for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Direct premiums $662,775 $553,408 $595,686
Reinsurance assumed 102,154 91,548 78,097
Reinsurance ceded (67,130) (67,263) (58,530)
-------- -------- --------
Net premiums $697,799 $577,693 $615,253
======== ======== ========
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts were $71,922,000,
$64,174,000 and $58,072,000 during 1999, 1998 and 1997, respectively.
On January 1, 1999, the Company entered into an agreement to sell its
assumed individual life reinsurance business representing $1,982,509,000 of in
force to RGA Reinsurance Company. The Company received cash of $1,284,000 from
the sale and recognized miscellaneous income of approximately $4,139,000,
representing the gain on the sale.
On October 1, 1999, the Company entered into an assumption reinsurance
agreement with Fort Dearborn Life Insurance Company. The agreement transfers
401(k) accounts with associated fixed and variable assets of approximately
$260,000,000.
(11) Fair Value of Financial Instruments
The estimated fair value of the Company's financial instruments has been
determined using available market information as of December 31, 1999 and 1998.
Although management is not aware of any factors that would significantly affect
the estimated fair value, such amounts have not been comprehensively revalued
since those dates. Therefore, estimates of fair value subsequent to the
valuation dates may differ significantly from the amounts presented herein.
Considerable judgement is required to interpret market data to develop the
estimates of fair value. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
Please refer to Note 2 for additional fair value disclosures concerning
fixed maturity securities, equity securities, mortgages, private equities and
derivatives. The carrying amounts for policy loans, cash, short-term
investments and finance receivables approximate the assets' fair values.
The interest rates on the finance receivables outstanding as of December 31,
1999 and 1998, are consistent with the rates at which loans would currently be
made to borrowers of similar credit quality and for the same maturity; as such,
the carrying value of the finance receivables outstanding as of December 31,
1999 and 1998, approximate the fair value for those respective dates.
The fair values of deferred annuities, annuity certain contracts and other
fund deposits, which have guaranteed interest rates and surrender charges are
estimated to be the amount payable on demand as of December 31, 1999 and 1998
as those investment contracts have no defined maturity and are similar to a
deposit liability. The amount payable on demand equates to the account balance
less applicable surrender charges. Contracts without guaranteed interest rates
and surrender charges have fair values equal to their accumulation values plus
applicable market value adjustments.
ML-20
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(11) Fair Value of Financial Instruments (continued)
The fair values of guaranteed investment contracts and supplementary
contracts without life contingencies are calculated using discounted cash
flows, based on interest rates currently offered for similar products with
maturities consistent with those remaining for the contracts being valued.
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate the fair value of notes payable.
The carrying amounts and fair values of the Company's financial instruments,
which were classified as assets as of December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities:
Available-for-sale $4,803,568 $4,803,568 $4,914,012 $4,914,012
Held-to-maturity 974,814 968,852 1,086,548 1,161,784
Equity securities 770,269 770,269 749,800 749,800
Mortgage loans:
Commercial 625,196 605,112 579,890 603,173
Residential 71,476 73,293 101,329 104,315
Policy loans 237,335 237,335 226,409 226,409
Short-term investments 93,993 93,993 136,435 136,435
Cash 116,803 116,803 175,660 175,660
Finance receivables, net 134,812 134,812 163,411 163,411
Private equities 284,797 284,797 160,958 164,332
Foreign currency exchange con-
tract 655 655 1,594 1,594
---------- ---------- ---------- ----------
Total financial assets $8,113,718 $8,089,489 $8,296,046 $8,400,925
========== ========== ========== ==========
</TABLE>
The carrying amounts and fair values of the Company's financial instruments,
which were classified as liabilities as of December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Deferred annuities $1,822,302 $1,810,820 $2,085,408 $2,075,738
Annuity certain contracts 39,513 39,421 57,528 60,766
Other fund deposits 945,575 936,590 722,321 731,122
Guaranteed investment contracts 116 116 862 862
Supplementary contracts without
life contingencies 43,050 43,126 44,696 44,251
Notes payable 218,000 221,233 267,000 272,834
---------- ---------- ---------- ----------
Total financial liabilities $3,068,556 $3,051,306 $3,177,815 $3,185,573
========== ========== ========== ==========
</TABLE>
(12) Notes Payable
In September 1995, the Company issued surplus notes with a face value of
$125,000,000, at 8.25%, due in 2025. The surplus notes are subordinate to all
current and future policyholders interests, including claims, and indebtedness
of the Company. All payments of interest and principal on the notes are subject
to the approval of the Department of Commerce. The approved accrued interest
was $3,008,000 as of December 31, 1999 and 1998. The issuance costs of
$1,421,000 are deferred and amortized over 30 years on straight-line basis.
ML-21
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(12) Notes Payable (continued)
Notes payable as of December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Corporate-surplus notes, 8.25%, 2025 $125,000 $125,000
Consumer finance subsidiary-senior, 6.53%-8.77%, through
2003 93,000 142,000
-------- --------
Total notes payable $218,000 $267,000
======== ========
</TABLE>
At December 31, 1999, the aggregate minimum annual notes payable maturities
for the next four years were as follows: 2000, $33,000,000; 2001, $26,000,000;
2002, $22,000,000; 2003, $12,000,000; thereafter $125,000,000.
Long-term borrowing agreements involving the consumer finance subsidiary
include provisions with respect to borrowing limitations, payment of cash
dividends on or purchases of common stock, and maintenance of liquid net worth
of $41,354,000. The consumer finance subsidiary was in compliance with all such
provisions at December 31, 1999.
The Company maintains a line of credit, which is drawn down periodically
throughout the year. As of December 1999 and 1998, the outstanding balance of
this line of credit was $90,000,000 and $40,000,000, respectively.
Interest paid on debt for the years ended December 31, 1999, 1998 and 1997,
was $24,120,000, $25,008,000 and $18,197,000, respectively.
(13) Other Comprehensive Income
Comprehensive income is defined as any change in stockholder's equity
originating from non-owner transactions. The Company had identified those
changes as being comprised of net income, unrealized appreciation
(depreciation) on securities, and unrealized foreign currency translation
adjustments.
The components of comprehensive income (loss), other than net income are
illustrated below:
<TABLE>
<CAPTION>
1999 1998 1997
---------- -------- --------
(In thousands)
<S> <C> <C> <C>
Other comprehensive income (loss), before tax:
Foreign currency translation adjustment $ -- $ -- $ 1,457
Less: reclassification adjustment for gains
included in net income -- (1,457) --
---------- -------- --------
-- (1,457) 1,457
Unrealized gains (loss) on securities (59,499) 162,214 171,654
Less: reclassification adjustment for gains
included in net income (74,170) (90,770) (96,476)
---------- -------- --------
(133,669) 71,444 75,178
Income tax expense related to items of other
comprehensive income 48,131 (23,045) (28,274)
---------- -------- --------
Other comprehensive income (loss), net of tax $ (85,538) $ 46,942 $ 48,361
========== ======== ========
</TABLE>
(14) Stock Dividends
During 1999, the Company declared and paid dividends to Securian Financial
Group, Inc. totaling $59,109,000. These dividends were in the form of cash,
common stock and the affiliated stock of Capitol City Property Management and
HomePlus Insurance Agency, Inc. On December 14, 1998, the Company declared and
accrued a dividend to Securian Financial Group, Inc. in the amount of
$24,700,000, which was paid in 1999.
ML-22
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(14) Stock Dividends (continued)
Dividend payments by Minnesota Life Insurance Company to its parent cannot
exceed the greater of 10% of statutory capital and surplus as of the preceding
year-end or the statutory net gain from operations for the current calendar
year, without prior approval from the Department of Commerce. Based on this
limitation and 1998 statutory results, Minnesota Life Insurance Company could
have paid $168,076,000 in dividends in 1999 without prior approval.
(15) Commitments and Contingencies
The Company is involved in various pending or threatened legal proceedings
arising out of the normal course of business. In the opinion of management, the
ultimate resolution of such litigation will not have a material adverse effect
on operations or the financial position of the Company.
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance companies. To the extent that a reinsurer is
unable to meet its obligations under the reinsurance agreement, the Company
remains liable. The Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk to minimize its exposure to
significant losses from reinsurer insolvencies. Allowances are established for
amounts deemed uncollectible.
The Company has issued certain participating group annuity and group life
insurance contracts jointly with another life insurance company. The joint
contract issuer has liabilities related to these contracts of $183,200,000 as
of December 31, 1999. To the extent the joint contract issuer is unable to meet
its obligation under the agreement, the Company remains liable.
The Company has long-term commitments to fund private equities and real
estate investments totaling $147,652,000 as of December 31, 1999. The Company
estimates that $60,000,000 of these commitments will be invested in 2000, with
the remaining $87,652,000 invested over the next four years.
As of December 31, 1999, the Company had committed to purchase bonds and
mortgage loans totaling $54,130,000 but had not completed the purchase
transactions.
The Company has a long-term lease agreement for rental space in downtown St.
Paul and other locations. Minimum rental commitments under such leases are as
follows: 2000, $2,400,000; 2001, $2,227,000; 2002, $2,092,000; 2003,
$2,108,000; 2004, $1,261,000; 2005, $22,000.
At December 31, 1999, the Company had guaranteed the payment of $76,600,000
in policyholders dividends and discretionary amounts payable in 2000. The
Company has pledged bonds, valued at $79,333,000 to secure this guarantee.
The Company is contingently liable under state regulatory requirements for
possible assessments pertaining to future insolvencies and impairments of
unaffiliated insurance companies. The Company records a liability for future
guaranty fund assessments based upon known insolvencies, according to data
received from the National Organization of Life and Health Insurance Guaranty
Association. At December 31, 1999 and 1998 the liability was ($352,000) and
$1,105,000, respectively. An asset is recorded for the amount of guaranty fund
assessments paid, which can be recovered through future premium tax credits.
This asset was $5,485,000 and $7,282,000 for the periods ending December 31,
1999 and 1998, respectively. These assets are being amortized over a five-year
period.
At December 1999, the Company has guaranteed the payment of approximately
$125,000,000 of senior notes issued by Capitol City Properties Management,
Inc., an affiliated company through the expiration date of the notes June 1,
2021 or by mutual agreement of the parties. These notes were issued in
conjunction with the financing of the Company's additional home office space.
ML-23
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(16) Statutory Financial Data
The Company also prepares financial statements according to statutory
accounting practices prescribed or permitted by the Department of Commerce for
purposes of filing with the Department of Commerce, the National Association of
Insurance Commissioners and states in which the Company is licensed to do
business. Statutory accounting practices focus primarily on solvency and
surplus adequacy. The significant differences that exist between statutory and
GAAP accounting, and their effects are illustrated below:
<TABLE>
<CAPTION>
Year ended December
----------------------
1999 1998
---------- ----------
(In thousands)
<S> <C> <C>
Statutory capital and surplus $1,089,474 $ 947,885
Adjustments:
Deferred policy acquisition costs 712,532 564,382
Net unrealized investment gains (losses) (49,572) 279,885
Statutory asset valuation reserve 310,626 239,455
Statutory interest maintenance reserve 30,984 49,915
Premiums and fees deferred or receivable (69,618) (73,312)
Change in reserve basis 115,718 113,648
Separate accounts (64,860) (56,816)
Unearned policy and contract fees (144,157) (118,459)
Surplus notes (125,000) (125,000)
Net deferred income taxes (125,094) (173,907)
Non-admitted assets 36,205 39,525
Policyholders dividends 62,268 60,648
Other (23,642) (25,573)
---------- ----------
Stockholder's equity as reported in the accompanying
consolidated financial statements $1,755,864 $1,722,276
========== ==========
</TABLE>
<TABLE>
<CAPTION>
As of December 31
--------------------------------
1999 1998 1997
-------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Statutory net income $167,957 $ 104,609 $ 167,078
Adjustments:
Deferred policy acquisition costs 29,164 18,042 26,878
Statutory interest maintenance reserve (18,931) 25,746 (538)
Premiums and fees deferred or receivable 3,686 708 2,175
Change in reserve basis 2,555 3,011 9,699
Separate accounts (8,044) (5,644) (6,272)
Unearned policy and contract fees (8,696) (7,896) (12,825)
Net deferred income taxes 1,439 15,351 7,832
Policyholders dividends 1,620 1,194 2,708
Other 4,485 8,228 (6,839)
-------- ---------- ----------
Net income as reported in the accompanying
consolidated financial statements $175,235 $ 163,349 $ 189,896
======== ========== ==========
</TABLE>
ML-24
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Schedule I
Summary of Investments--Other than Investments in Related Parties
December 31, 1999
<TABLE>
<CAPTION>
As Shown
on the
Market consolidated
Type of investment Cost(3) Value balance sheet(1)
- ------------------ ---------- ---------- ----------------
(In thousands)
<S> <C> <C> <C>
Bonds:
United States government and
government agencies and authorities $ 151,864 $ 143,597 $ 143,597
Foreign governments 122,505 115,270 115,270
Public utilities 287,970 276,558 276,558
Mortgage-backed securities 1,602,362 1,564,386 1,564,386
All other corporate bonds 3,678,697 3,672,609 3,678,571
---------- ---------- ----------
Total bonds 5,843,398 5,772,420 5,778,382
---------- ---------- ----------
Equity securities:
Common stocks:
Public utilities 7,475 9,072 9,072
Banks, trusts and insurance compa-
nies 25,959 25,399 25,399
Industrial, miscellaneous and all
other 525,152 708,848 708,848
Nonredeemable preferred stocks 28,428 26,950 26,950
---------- ---------- ----------
Total equity securities 587,014 770,269 770,269
---------- ---------- ----------
Mortgage loans on real estate 696,672 XXXXXX 696,672
Real estate (2) 36,793 XXXXXX 36,793
Policy loans 237,335 XXXXXX 237,335
Other long-term investments 473,528 XXXXXX 473,528
Short-term investments 93,993 XXXXXX 93,993
---------- ---------- ----------
Total 1,538,321 -- 1,538,321
---------- ---------- ----------
Total investments $7,968,733 $6,542,689 $8,086,972
========== ========== ==========
</TABLE>
- -------
(1) Amortized cost for bonds classified as held-to-maturity and fair value for
common stocks and bonds classified as available-for-sale
(2) The carrying value of real estate acquired in satisfaction of indebtedness
is $ -0-
(3) Original cost for equity securities and original cost reduced by
repayments and adjusted for amortization of premiums or accrual of
discounts for bonds and other investments
See independent auditors' report.
ML-25
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Schedule III
Supplementary Insurance Information
(In thousands)
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------------
Future policy
Deferred benefits Other policy
policy losses, claims claims and
acquisition and settlement Unearned benefits
Segment costs expenses(1) premiums(2) payable
- ------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
1999:
Life insurance $535,709 $2,388,867 $172,430 $73,670
Accident and
health insur-
ance 80,371 552,833 35,558 16,858
Annuity 97,137 3,118,995 25 234
Property and li-
ability insur-
ance -- 441
-------- ---------- -------- -------
$713,217 $6,061,136 $208,013 $90,762
======== ========== ======== =======
1998:
Life insurance $421,057 $2,303,580 $146,042 $51,798
Accident and
health insur-
ance 74,606 510,969 33,568 18,342
Annuity 68,719 3,186,148 25 424
Property and li-
ability insur-
ance -- 480 556 --
-------- ---------- -------- -------
$564,382 $6,001,177 $180,191 $70,564
======== ========== ======== =======
1997:
Life insurance $434,012 $2,229,396 $166,704 $42,627
Accident and
health insur-
ance 70,593 466,109 34,250 17,153
Annuity 71,425 3,266,965 -- 4,576
Property and li-
ability insur-
ance -- 280 1,116 --
-------- ---------- -------- -------
$576,030 $5,962,750 $202,070 $64,356
======== ========== ======== =======
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------------------
Amortization
Benefits, of deferred
Net claims, losses policy Other
Premium investment and settlement acquisition operating Premiums
Segment revenue(3) income expenses costs expenses written(4)
- ------- ----------- ---------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1999:
Life insurance $ 762,745 $258,483 $645,695 $ 88,731 $391,454
Accident and
health insur-
ance 170,988 37,922 108,283 11,779 101,021
Annuity 95,190 243,160 214,461 22,945 79,883
Property and li-
ability insur-
ance (14) 491 323 743 (570)
----------- ---------- -------------- ------------ --------- ----------
$1,028,909 $540,056 $968,762 $123,455 $573,101 $ (570)
=========== ========== ============== ============ ========= ==========
1998:
Life insurance $ 615,856 $246,303 $502,767 $114,589 $342,080
Accident and
health insur-
ance 167,544 35,822 105,336 12,261 93,876
Annuity 93,992 247,970 225,004 21,248 136,527
Property and li-
ability insur-
ance 662 986 2,848 -- 1,187 103
----------- ---------- -------------- ------------ --------- ----------
$ 878,054 $531,081 $835,955 $148,098 $573,670 $ 103
=========== ========== ============== ============ ========= ==========
1997:
Life insurance $ 576,468 $247,267 $476,747 $102,473 $345,938
Accident and
health insur-
ance 205,869 40,343 87,424 9,451 101,960
Annuity 64,637 261,768 242,738 16,252 129,263
Property and li-
ability insur-
ance 40,316 4,395 33,773 -- 13,146 43,376
----------- ---------- -------------- ------------ --------- ----------
$ 887,290 $553,773 $840,682 $128,176 $590,307 $43,376
=========== ========== ============== ============ ========= ==========
</TABLE>
- ------
(1) Includes policy and contract account balances
(2) Includes unearned policy and contract fees
(3) Includes policy and contract fees
(4) Applies only to property and liability insurance
See independent auditors' report.
ML-26
<PAGE>
Minnesota Life Insurance Company and Subsidiaries
Schedule IV
Reinsurance
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
------------ ----------- ----------- ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
1999:
Life insurance in force $175,297,217 $21,279,606 $37,337,340 $191,354,951 19.5%
============ =========== =========== ============
Premiums:
Life insurance $ 455,857 $ 30,557 $ 83,681 $ 508,981 16.4%
Accident and health
insurance 183,765 18,776 1,281 166,270 0.8%
Annuity 22,562 -- -- 22,562 --
Property and liability
insurance 591 17,797 17,192 (14) n/a
------------ ----------- ----------- ------------
Total premiums $ 662,775 $ 67,130 $ 102,154 $ 697,799 14.6%
============ =========== =========== ============
1998:
Life insurance in force $158,229,143 $18,656,917 $28,559,482 $168,131,708 17.0%
============ =========== =========== ============
Premiums:
Life insurance $ 338,909 $ 30,532 $ 71,198 $ 379,575 18.8%
Accident and health
insurance 180,081 17,894 1,432 163,619 0.9%
Annuity 33,837 -- -- 33,837 --
Property and liability
insurance 581 18,837 18,918 662 2857.7%
------------ ----------- ----------- ------------
Total premiums $ 553,408 $ 67,263 $ 91,548 $ 577,693 15.8%
============ =========== =========== ============
1997:
Life insurance in force $122,120,394 $14,813,351 $25,566,734 $132,873,777 19.2%
============ =========== =========== ============
Premiums:
Life insurance $ 340,984 $ 30,547 $ 63,815 $ 374,252 17.1%
Accident and health
insurance 175,647 16,332 1,310 160,625 0.8%
Annuity 40,060 -- -- 40,060 --
Property and liability
insurance 38,995 11,651 12,972 40,316 32.2%
------------ ----------- ----------- ------------
Total premiums $ 595,686 $ 58,530 $ 78,097 $ 615,253 12.7%
============ =========== =========== ============
</TABLE>
See independent auditors' report.
ML-27
