File No. 33-73058
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File No. 811-8224
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No.__ [ ]
Post-Effective Amendment No. 2 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 3 [ X ]
NORTHSTAR/NWNL VARIABLE ACCOUNT
(Exact Name of Registrant)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
20 Washington Avenue South, Minneapolis, Minnesota 55401
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (612) 342-7143
James E. Nelson
Northwestern National Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the Registration Statement becomes effective.
It is proposed that this filing will become effective
(check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on April 30, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
Registrant has chosen to register an indefinite amount of securities in
accordance with Rule 24f-2. The Rule 24f-2 Notice for Registrant's most recent
fiscal year was filed on or about February 22, 1996.
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<PAGE>
NORTHSTAR/NWNL SELECT VARIABLE ACCOUNT
Cross Reference Sheet Pursuant to Rule 495(a)
FORM N-4
ITEM NUMBER PART A HEADING IN PROSPECTUS
- ----------- ----------------------------
1. Cover Page
2. Definitions
3. Summary
4. Condensed Financial Information
5. The Company; The Variable Account; Investment of the
Variable Account
6. Charges Made by the Company
7. The Contracts
8. Annuity Provisions
9. The Contracts
10. The Contracts
11. The Contracts
12. Federal Tax Status
13. Legal Proceedings
14. Statement of Additional Information Table of Contents
Part B Heading in Statement of Additional Information
15. Cover Page
16. Table of Contents
17. Introduction
18. Administration of the Contracts
19. Distribution of the Contracts
20. Distribution of the Contracts
21. Calculation of Yield and Return
22. Annuity Provisions (In Prospectus)
23. Financial Statements
Part C Headings
24. Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners
28. Indemnification
29. Principal Underwriters
30. Location of Accounts and Records
31. Not Applicable
32. Undertakings
<PAGE>
[LOGO] Northwestern National Life
20 Washington Avenue South
Minneapolis, Minnesota 55401
--------------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
NORTHSTAR/NWNL VARIABLE ACCOUNT
AND
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
The Individual Deferred Variable/Fixed Annuity Contracts described in this
Prospectus are flexible purchase payment contracts. The Contracts are sold to or
in connection with retirement plans which may or may not qualify for special
federal tax treatment under the Internal Revenue Code. (See "Federal Tax Status"
on page 21.) Annuity payments under the Contracts are deferred until a selected
later date.
Purchase payments may be allocated to one or more of the available
Sub-Accounts of Northstar/NWNL Variable Account (the "Variable Account"), a
separate account of Northwestern National Life Insurance Company (the
"Company"), and/or to the Fixed Account (which is the general account of the
Company). The Fixed Account is not available to Contract Owners in the State of
Maryland, Oregon, South Carolina and Washington.
Purchase payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds (the
"Investment Funds"). The Investment Funds are currently the four funds of the
Northstar/NWNL Trust which are managed by Northstar Investment Management
Corporation of Greenwich, Connecticut, and two portfolios of the Variable
Insurance Products Fund and two portfolios of the Variable Insurance Products
Fund II which are managed by Fidelity Management & Research Company of Boston,
Massachusetts. Each Investment Fund pays its investment adviser certain fees
charged against the assets of the Investment Fund. The Variable Account Contract
Value and the amount of variable annuity payments will vary, primarily based on
the investment performance of the Investment Funds whose shares are held in the
Sub-Accounts selected. (For more information about the Investment Funds, see
"Investments of the Variable Account" on page 11.)
Additional information about the Contracts, the Company and the Variable
Account, contained in a Statement of Additional Information dated April 30,
1996, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to Northstar Distributors,
Inc., Two Pickwick Plaza, Greenwich, Connecticut 06830. The Statement of
Additional Information relating to the Contracts having the same date as this
Prospectus is incorporated by reference in this Prospectus. The Table of
Contents for the Statement of Additional Information may be found on page 27 of
this Prospectus. Information about the Fixed Account may be found in Appendix A,
on page A-1.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ACCOMPANYING
FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE CONTRACTS THAT A
PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING AND SHOULD BE RETAINED FOR
FUTURE REFERENCE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE
NORTHSTAR/NWNL TRUST, THE VARIABLE INSURANCE PRODUCTS FUND AND THE VARIABLE
INSURANCE PRODUCTS FUND II AND IS VALID ONLY WHEN ACCOMPANIED BY SUCH
PROSPECTUSES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE INVESTMENT FUNDS AND INTERESTS IN THE CONTRACTS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY A BANK, AND THE SHARES
AND INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE DATE OF THIS PROSPECTUS IS APRIL 30, 1996.
N200.100b
<PAGE>
TABLE OF CONTENTS
Definitions ..................................................... 3
Summary of Contract Expenses .................................... 4
Summary ......................................................... 6
Condensed Financial Information ................................. 8
Performance Information ......................................... 9
The Company ..................................................... 10
The Variable Account ............................................ 10
Investments of the Variable Account ............................. 11
Charges Made by the Company ..................................... 13
Surrender Charge (Contingent Deferred Sales Charge) ....... 13
Annual Contract Charge .................................... 14
Mortality Risk Premium .................................... 14
Expense Risk Premium ...................................... 14
Administration Charge ..................................... 14
Sufficiency of Charges .................................... 14
Premium and Other Taxes ................................... 14
Reduction of Charges ...................................... 15
Expenses of the Investment Funds .......................... 15
Administration of the Contracts ................................. 15
The Contracts ................................................... 15
Allocation of Purchase Payments ........................... 15
Sub-Account Accumulation Unit Value ....................... 16
Net Investment Factor ..................................... 16
Death Benefit Before the Annuity Commencement Date ........ 16
Death Benefit After the Annuity Commencement Date ......... 17
Surrender (Redemption) .................................... 17
Systematic Withdrawals .................................... 17
Transfers ................................................. 18
Written Transfers ...................................... 18
Telephone Transfers .................................... 18
Dollar Cost Averaging Transfers ........................ 19
Assignments ............................................... 19
Contract Owner and Beneficiaries .......................... 19
Contract Inquiries ........................................ 19
Annuity Provisions .............................................. 19
Annuity Commencement Date ................................. 19
Annuity Form Selection .................................... 20
Annuity Forms ............................................. 20
Frequency and Amount of Annuity Payments .................. 20
Annuity Payments .......................................... 20
Sub-Account Annuity Unit Value ............................ 21
Assumed Investment Rate ................................... 21
Federal Tax Status .............................................. 21
Introduction .............................................. 21
Tax Status of the Contract ................................ 22
Taxation of Annuities ..................................... 22
Transfers, Assignments or Exchanges of a Contract ......... 24
Withholding ............................................... 24
Multiple Contracts ........................................ 24
Taxation of Qualified Plans ............................... 24
Possible Charge for the Company's Taxes ................... 25
Other Tax Consequences .................................... 25
Voting of Fund Shares ........................................... 25
Distribution of the Contracts ................................... 25
Revocation ...................................................... 26
Reports to Owners ............................................... 26
Legal Proceedings ............................................... 26
Financial Statements and Experts ................................ 26
Further Information ............................................. 26
Statement of Additional
Information Table of Contents ................................... 27
Appendix A ...................................................... A-1
Investment Fund Prospectuses
Northstar/NWNL Trust (Northstar):
Northstar Income and Growth Fund .......................... Northstar-1
Northstar Growth Fund ..................................... Northstar-1
Northstar Multi-Sector Bond Fund .......................... Northstar-1
Northstar High Yield Bond Fund ............................ Northstar-1
Fidelity's Variable Insurance Products Fund (VIPF):
Money Market Portfolio .................................... VIP-1
Overseas Portfolio ........................................ VIP-1
Fidelity's Variable Insurance Products Fund II (VIPF II):
Asset Manager Portfolio ................................... VIPII-1
Index 500 Portfolio ....................................... VIPII-1
2
<PAGE>
DEFINITIONS
ANNUITANT - The person who is named by the Owner to receive annuity payments and
whose life determines the annuity benefits payable.
ANNUITY COMMENCEMENT DATE - (COMMENCEMENT DATE) The date on which the annuity
payments begin, which must be the first day of a month. The date will be
the first day of the month following the Annuitant's 75th birthday unless
an earlier or later date has been selected by the Owner and, if the date is
later, it has been agreed to by the Company. If the Annuity Commencement
Date selected by the Owner does not occur on a Valuation Date at least 60
days after the date on which the Contract was issued, the Company reserves
the right to adjust the Commencement Date to the first Valuation Date after
the Commencement Date selected by the Owner that is at least 60 days after
the Contract issue date.
BENEFICIARY - The person who is named by the Owner to receive the Contract Value
upon the death of the Owner before the Annuity Commencement Date or to
receive the balance of the annuity payments, if any, under the Annuity Form
in effect at the Annuitant's death.
CODE - The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY - Occurs yearly on the same day and month the Contract was
issued.
CONTRACT OWNER (OWNER) - The person who controls all the rights and privileges
under the Contract. The Annuitant owns the Contract unless another Owner is
named as provided for in the Contract. The Contract may be owned by one,
but no more than two, natural persons only, except when it is held under a
retirement plan described in Section 401(a) or 403(a), or a program
described in Section 403(b) of the Code.
CONTRACT VALUE - The sum of (a) the Variable Account Contract Value, which is
the value of the Sub-Account Accumulation Units under the Contract plus (b)
the Fixed Account Contract Value, which is the sum of purchase payments
allocated to the Fixed Account under the Contract, plus credited interest,
minus surrenders, surrender charges previously applied, and any annual
administrative charges applicable to the Fixed Account, and minus any
transfers to the Variable Account.
CONTRACT YEAR - Each twelve-month period starting with the date the Contract was
issued and each Contract Anniversary after that.
DEATH BENEFIT - The amount payable upon the death of a Contract Owner before the
Annuity Commencement Date. (See "Death Benefit Before the Annuity
Commencement Date" on page 16.)
DEATH BENEFIT VALUATION DATE - The Death Benefit Valuation Date is the Valuation
Date next following the date the Company receives proof of death and a
written request from the Beneficiary for a single sum payment or an Annuity
Form permitted by Section 72(s) of the Code.
FIXED ACCOUNT - The Fixed Account is the general account of the Company, which
consists of all assets of the Company other than those assets allocated to
separate accounts of the Company.
FIXED ANNUITY - An annuity with payments which do not vary as to dollar amount.
INVESTMENT FUNDS - Any open-end management investment company (or portfolio
thereof) or unit investment trust (or series thereof) in which a
Sub-Account invests as described herein.
NORTHSTAR - Northstar/NWNL Trust
Northstar Income and Growth Fund
Northstar Growth Fund
Northstar Multi-Sector Bond Fund
Northstar High Yield Bond Fund
QUALIFIED PLAN - A retirement plan under Sections 401, 403 or 408 or similar
provisions of the Code.
SPECIFIED CONTRACT ANNIVERSARY - The seventh Contract anniversary and each
consecutive one year anniversary date measured from the date of the seventh
Contract anniversary. The Specified Contract Anniversary is used to
determine the Death Benefit payable if the Contract Owner dies before the
Annuity Commencement Date. (See "Death Benefit Before the Annuity
Commencement Date" on page 16.)
SUB-ACCOUNT - That portion of the Variable Account available under the Contract
which invests in shares of a specific Investment Fund.
3
<PAGE>
SUB-ACCOUNT ACCUMULATION UNIT - A unit of measure used to determine the Variable
Account Contract Value before annuity payments start.
SUCCESSOR BENEFICIARY - The person named to become the Beneficiary if the
Beneficiary is not alive.
VALUATION DATE - The close of the market each day the New York Stock Exchange is
open for trading and the Securities and Exchange Commission has not
suspended trading.
VALUATION PERIOD - The time interval between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT - A separate account of the Company consisting of assets set
aside by the Company, the investment performance of which is kept separate
from that of the general assets of the Company.
VARIABLE ANNUITY - A series of periodic payments to the Annuitant which will
vary in amount, primarily based on the investment results of the Variable
Account Sub-Accounts under the Contract.
VARIABLE ANNUITY UNIT - A unit of measure used in the calculation of the second
and each subsequent variable annuity payment from the Variable Account.
VIPF Variable Insurance Products Fund
Money Market Portfolio
Overseas Portfolio
VIPF II Variable Insurance Products Fund II
Asset Manager Portfolio
Index 500 Portfolio
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases......................................... None
Surrender Charge (as a percentage of amounts surrendered attributable to
purchase payments made in the last six Contract years) (a)
CONTRACT YEAR OF SURRENDER SURRENDER CHARGE
MINUS CONTRACT YEAR OF AS A PERCENTAGE OF
PURCHASE PAYMENT EACH PURCHASE PAYMENT
---------------- ---------------------
0 7%
1 7
2 5
3 5
4 4
5 3
6 2
7 and later 0
Transfer Charge.(b).................................................... None
ANNUAL CONTRACT CHARGE................................................. $35
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premiums....................................... 1.25%
Other Account Fees and Expenses (See "Administration Charge" on page 14.). .15%
----
Total Separate Account Annual Expenses.................................... 1.40%
====
4
<PAGE>
ANNUAL INVESTMENT FUND EXPENSES
(as a percentage of Investment Fund average net assets)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FEES EXPENSES EXPENSES
---- -------- --------
<S> <C> <C> <C>
Northstar Income and Growth Fund.(c)...................................... 0.75% 0.05% 0.80%
Northstar Growth Fund.(c)................................................. 0.75% 0.05% 0.80%
Northstar Multi-Sector Bond Fund.(c)...................................... 0.75% 0.05% 0.80%
Northstar High Yield Bond Fund.(c)........................................ 0.75% 0.05% 0.80%
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FEES EXPENSES EXPENSES
---- -------- --------
<S> <C> <C> <C>
VIPF Money Market Portfolio............................................... 0.24% 0.09% 0.33%
VIPF Overseas Portfolio................................................... 0.76% 0.15% 0.91%
VIPF II Asset Manager Portfolio.(d)....................................... 0.71% 0.08% 0.79%
VIPF II Index 500 Portfolio.(e)........................................... 0.28% 0.00% 0.28%
</TABLE>
EXAMPLES
If you surrender your Contract at the end of the applicable time period,
you would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund................................................... $86 $115 $148 $259
Northstar Growth Fund.............................................................. 86 115 148 259
Northstar Multi-Sector Bond Fund................................................... 86 115 148 259
Northstar High Yield Bond Fund..................................................... 86 115 148 259
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
VIPF Money Market Portfolio........................................................ $81 $101 $124 $210
VIPF Overseas Portfolio............................................................ 87 119 153 270
VIPF II Asset Manager Portfolio.................................................... 86 115 147 258
VIPF II Index 500 Portfolio........................................................ 81 100 121 204
</TABLE>
If you annuitize your contract at the end of the applicable time period,
you would pay the following expenses on a $1,000 investment assuming a 5% annual
return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund................................................ $86 $70 $121 $259
Northstar Growth Fund........................................................... 86 70 121 259
Northstar Multi-Sector Bond Fund................................................ 86 70 121 259
Northstar High Yield Bond Fund.................................................. 86 70 121 259
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
VIPF Money Market Portfolio..................................................... $81 $56 $ 97 $210
VIPF Overseas Portfolio......................................................... 87 74 126 270
VIPF II Asset Manager Portfolio................................................. 86 70 120 258
VIPF II Index 500 Portfolio..................................................... 81 55 94 204
</TABLE>
* If the Contract's Annuity Commencement Date occurs during the first two
Contract years following the date the Contract was issued a Surrender Charge is
deducted and the expenses shown in year 1 reflect this deduction.
5
<PAGE>
If you do not surrender or annuitize your Contract at the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund................................................... $23 $70 $121 $259
Northstar Growth Fund.............................................................. 23 70 121 259
Northstar Multi-Sector Bond Fund................................................... 23 70 121 259
Northstar High Yield Bond Fund..................................................... 23 70 121 259
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
VIPF Money Market Portfolio........................................................ $18 $56 $ 97 $210
VIPF Overseas Portfolio............................................................ 24 74 126 270
VIPF II Asset Manager Portfolio.................................................... 23 70 120 258
VIPF II Index 500 Portfolio........................................................ 18 55 94 204
</TABLE>
(a) Under certain situations amounts may be surrendered free of any surrender
charge. For more information on the Surrender Charge, see page 13,
"Surrender Charge (Contingent Deferred Sales Charge)". The Company reserves
the right to charge a partial surrender processing fee not to exceed the
lesser of 2% of the partial surrender amount or $25. For more information
on the processing fee, see page 17, "Surrender (Redemption)".
(b) The Company currently does not impose a charge on transfers between the
Sub-Accounts or to the Fixed Account, although the Company reserves the
right to impose a charge not to exceed $25 per transfer.
(c) The investment adviser to the Northstar/NWNL Trust has agreed to reimburse
the four Northstar Funds for any expenses in excess of 0.80% of each Fund's
average daily net assets. In the absence of the investment adviser's
expense reimbursements, the actual expenses that would have been paid by
each Fund during its fiscal year ended December 31, 1995 would have been:
Income and Growth Fund - 1.74%; Growth Fund - 2.04%; Multi-Sector Bond Fund
- 2.06%; and High Yield Bond Fund - 2.11%.
(d) During 1995, a portion of the brokerage commissions paid by the Asset
Manager Portfolio was used to reduce the portfolio's expenses. Without the
reduction, total operating expenses would have been 0.81%. For more
information on the portfolio's Management Fees and Expenses, see the
prospectus for the Fund.
(e) During 1995, the investment adviser to the Index 500 Portfolio reimbursed a
portion of the portfolio's expenses. Without the reimbursement, total
operating expenses would have been 0.47%. For more information on the
portfolio's Management Fees and Expenses, see the prospectus for the Fund.
THE EXAMPLES SHOWN IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN. THE 5% ANNUAL RETURN ASSUMED IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THE ASSUMED RATES.
The purpose of this table is to assist the Contract Owner in understanding
the various costs and expenses that a Contract Owner will bear either directly
or indirectly. The table reflects the expenses of the Variable Account as well
as those of the Investment Funds. The $35 Annual Contract Charge is reflected as
an annual percentage charge in this table based on an anticipated average net
assets in the Variable Account and Fixed Account, which translates to a charge
equal to an annual rate of 0.052% of the Variable Account and Fixed Account
values.
In addition to the costs and expenses shown in this table, state premium
taxes may also be applicable. For more information on state premium taxes, see
page 14, "Premium and Other Taxes".
SUMMARY
The Contracts are flexible premium individual deferred variable/fixed
retirement annuity contracts issued by the Variable Account and the Company.
(See "The Company" on page 10 and "The Variable Account" on page 10.) They are
sold to or in connection with retirement plans which may or may not qualify for
special federal tax treatment under the Internal Revenue Code. (See "Federal Tax
Status" on page 21.) Annuity payments under the Contracts are deferred until a
later date.
Purchase payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account and/or to the Fixed Account (the Fixed
Account is not available to Contract Owners in the State of Maryland, Oregon,
South Carolina and Washington). Purchase payments allocated to one or more
Sub-Accounts of the Variable Account will be invested in shares at net asset
value of one or more of the Investment Funds. The Variable
6
<PAGE>
Account Contract Value and the amount of variable annuity payments will vary,
primarily based on the investment performance of the Investment Funds whose
shares are held in the Sub-Accounts selected. (See "Investments of the Variable
Account" on page 11.)
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, a surrender charge (contingent deferred sales charge) may,
with certain exceptions, apply to whole or partial surrenders of purchase
payments that have been credited under the Contract for less than seven Contract
years. A surrender charge will also be deducted if the Contract's Annuity
Commencement Date occurs within the first two years after the date the Contract
was issued. The amount of the surrender charge will vary as follows:
CONTRACT YEAR OF SURRENDER SURRENDER CHARGE
MINUS CONTRACT YEAR OF AS A PERCENTAGE OF
PURCHASE PAYMENT EACH PURCHASE PAYMENT
---------------- ---------------------
0 - 1 7%
2 - 3 5
4 4
5 3
6 2
7 and later 0
(See "Surrender Charge (Contingent Deferred Sales Charge)" on page 13.)
In addition, on each Contract Anniversary (and on the surrender of the
Contract for its full value if it is not surrendered on a Contract Anniversary)
the Company will deduct from the Contract Value an Annual Contract Charge of
$35. During the annuity period the Annual Contract Charge will be separately
assessed against fixed annuity payments and variable annuity payments and will
be deducted from each fixed annuity payment and from each variable annuity
payment in equal installments if both forms of annuity payment are selected.
Otherwise such charge will be deducted from each fixed annuity or variable
annuity payment as applicable. The Annual Contract Charge is to reimburse the
Company for administrative expenses relating to the issue and maintenance of the
Contracts. (See "Annual Contract Charge" on page 14.)
The Company also deducts a Mortality Risk Premium, an Expense Risk Premium
and an Administration Charge, equal to an annual rate of 1.40% of the daily net
assets of the available Sub-Accounts of the Variable Account (See "Mortality
Risk Premium", "Expense Risk Premium" and "Administration Charge" on page 14.)
The initial purchase payment must be $5,000 or more for a Non-qualified
Contract and no subsequent individual payment may be less than $500. If the
Contract is being purchased by or in connection with a Qualified Plan, the
minimum initial purchase payment is $2,000, and no subsequent individual payment
may be less than $200. The Company may choose not to accept any subsequent
purchase payment if the additional purchase payment, when added to the Contract
Value at the next Valuation Date would exceed $1,000,000. The Company reserves
the right to accept smaller initial and subsequent purchase payments in
connection with special circumstances, including sales through group or
sponsored arrangements.
If the Contract Value at the Annuity Commencement Date is less than $5,000,
the Contract Value may be distributed in a single sum payment in lieu of annuity
payments. If any annuity payment would be less than $50, the Company has the
right to change the frequency of payments to such intervals as will result in
payments of at least $50 each. (See "Frequency and Amount of Annuity Payments"
on page 20.)
Premium taxes payable to any governmental entity will be charged against
the Contracts. (See "Premium and Other Taxes" on page 14.)
The Contract Owner may request early withdrawal of all or part of the
Contract Value before the Annuity Commencement Date. (See "Surrender
(Redemption)" on page 17.) Under the Code, penalty taxes may apply to the early
withdrawal of amounts accumulated under a Contract whether or not such Contract
is part of a Qualified Plan. (See "Taxation of Annuities" on page 22.)
The Contract Owner may return the Contract within ten days after it was
delivered to the Owner, and receive a refund of the Contract Value unless
otherwise required by law. (See "Revocation" on page 26.)
7
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following table shows, for each Sub-Account of the Variable Account,
the value of a Sub-Account Accumulation Unit as it is invested in portfolios at
the dates shown, and the total number of Sub-Account Accumulation Units
outstanding at the end of each period:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
SUB-ACCOUNT INVESTING IN
NORTHSTAR'S:
(all Sub-Accounts from May 6, 1994):
Income and Growth Fund
Beginning of period................................. $10.1101 $10.0000
End of period....................................... $12.0916 $10.1101
Units outstanding at end of period.................. 301,285 100,955
Growth Fund
Beginning of period................................. $10.2534 $10.0000
End of period....................................... $12.6072 $10.2534
Units outstanding at end of period.................. 27,043 8,739
Multi-Sector Bond Fund
Beginning of period................................. $10.0748 $10.0000
End of period....................................... $11.4356 $10.0748
Units outstanding at end of period.................. 37,704 15,492
High Yield Bond Fund
Beginning of period................................. $9.8476 $10.0000
End of period....................................... $11.5675 $9.8476
Units outstanding at end of period.................. 149,292 8,985
FIDELITY'S VIPF:
(all Sub-Accounts from May 1, 1995):
Money Market Portfolio
Beginning of period................................. $10.0000 -
End of period....................................... $10.2889 -
Units outstanding at end of period.................. - -
Overseas Portfolio
Beginning of period................................. $10.0000 -
End of period....................................... $10.6517 -
Units outstanding at end of period.................. - -
FIDELITY'S VIPF II:
(all Sub-Accounts from May 1, 1995):
Asset Manager Portfolio
Beginning of period................................. $10.0000 -
End of period....................................... $11.1433 -
Units outstanding at end of period.................. - -
Index 500 Portfolio
Beginning of period................................. $10.0000 -
End of period....................................... $12.0488 -
Units outstanding at end of period.................. 335 -
The Sub-Accounts investing in VIPF Money Market Portfolio, VIPF Overseas
Portfolio, VIPF II Asset Manager Portfolio and VIPF II Index 500 Portfolio were
not available under the Contract prior to 1995.
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PERFORMANCE INFORMATION
From time to time, the Company may advertise or include in sales literature
yields, effective yields, and total returns for the available Sub-Accounts.
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Each Sub-Account may, from time to time, advertise or
include in sales literature performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance information, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.
Yields, effective yields and total returns for the Sub-Accounts are based
on the investment performance of the corresponding portfolios of the Investment
Funds. The performance in part reflects the Investment Funds' expenses. See the
Prospectuses for the Investment Funds.
The yield of the Sub-Account investing in the VIPF Money Market Portfolio
refers to the annualized income generated by an investment in the Sub-Account
over a specified seven-day period. The yield is calculated by assuming that the
income generated for that seven-day period is generated each seven day period
over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Sub-Account is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reivestment.
The yield of a Sub-Account (except the Money Market Sub-Account investing
in the VIPF Money Market Portfolio) refers to the annualized income generated by
an investment in the Sub-Account over a specified 30-day or one-month period.
The yield is calculated by assuming that the income generated by the investment
during that 30-day or one-month period is generated each period over a 12-month
period and is shown as a percentage of the investment.
The total return of a Sub-Account refers to return quotations assuming an
investment under a Contract has been held in the Sub-Account for various periods
of time including, but not limited to, a period measured from the date the
Sub-Account commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Sub-Account from the beginning date of the measuring
period to the end of that period. This version of average annual total return
reflects all historical investment results, less all charges and deductions
applied against the Sub-Account (including any surrender charge that would apply
if an Owner terminated the Contract at the end of each period indicated, but
excluding any deductions for premium taxes).
When a Sub-Account has been in operation for one, five, and ten years, the
average annual total return for these periods will be provided. For periods
prior to the date the Sub-Account commenced operations, performance information
for Contracts funded by the Sub-Accounts will be calculated based on the
performance of the Investment Funds' Portfolios and the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Investment Funds' Portfolios, with the level of Contract Charges that were in
effect at the inception of the Sub-Accounts for the Contracts.
Average total return information may be presented, computed on the same
basis as described above, except deductions will not include the surrender
charge. In addition, the Company may from time to time disclose average annual
total return in non-standard formats and cumulative total return for Contracts
funded by the Sub-Accounts.
The Company may, from time to time, also disclose yield and total returns
for the portfolios of the Investment Funds, including such disclosure for
periods prior to the dates the Sub-Accounts commenced operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each Sub-Account
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or investment series of mutual funds with investment objectives
similar to each of the Sub-Accounts.
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Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity
Research Data Service ("VARDS") are independent services which monitor and rank
the performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. Lipper's rankings include
variable life insurance issuers as well as variable annuity issuers. VARDS
rankings compare only variable annuity issuers. The performance analyses
prepared by Lipper and VARDS each rank such issuers on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees, or certain expense deductions at the separate account level
into consideration. In addition, VARDS prepares risk adjusted rankings, which
consider the effects of market risk on total return performance. This type of
ranking provides data as to which funds provide the highest total return within
various categories of funds defined by the degree of risk inherent in their
investment objectives.
Advertising and sales literature may also compare the performance of each
Sub-Account to the Standard & Poor's Composite Index of 500 Stocks, a widely
used measure of stock performance. This unmanaged index assumes the reinvestment
of dividends but does not reflect any "deduction" for the expense of operating
or managing an investment portfolio. Other independent ranking services and
indices may also be used as a source of performance comparison.
The Company may also report other information including the effect of
tax-deferred compounding on a Sub-Account's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Sub-Account investments are reinvested and can lead
to substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
THE COMPANY
The Company, organized in 1885, is a stock life insurance company
incorporated under the laws of the State of Minnesota. The Company is a direct,
wholly-owned subsidiary of ReliaStar Financial Corp. (formerly known as The NWNL
Companies, Inc.), a publicly-traded holding company incorporated under the laws
of the State of Delaware, whose shares are listed on the New York Stock
Exchange. The Company offers individual life insurance and annuities, employee
benefits, and retirement contracts. The Company is admitted to do business in
the District of Columbia and all states except New York. Its home office is at
20 Washington Avenue South, Minneapolis, Minnesota 55401 (telephone 612/
372-5507).
The Contracts described in this Prospectus are nonparticipating. The
capital and surplus of the Company should be considered as bearing only upon the
ability of the Company to meet its obligations under the Contracts.
THE VARIABLE ACCOUNT
The Variable Account is a Separate Account of the Company established by
the Board of Directors of the Company on November 12, 1992, pursuant to the laws
of the State of Minnesota. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended ("1940 Act"). Such registration does
not involve supervision by the Commission of the management or investment
policies or practices of the Variable Account, the Company or the Investment
Funds. The Company has complete ownership and control of the assets in the
Variable Account, but these assets are held separately from the Company's other
assets and are not part of the Company's General Account.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities incurred in any other business that the Company may conduct. The
Company has the right to transfer to its General Account any assets of the
Variable Account which are in excess of such reserves and other liabilities. The
income, if any, and gains and losses, realized or unrealized, of the Variable
Account will be credited to or charged against the amount allocated to the
Variable Account, in accordance with the contracts supported by the Variable
Account, without regard to the other income, gains, or losses of the Company.
Purchase payments allocated to the Variable Account under a Contract are
invested in one or more Sub-Accounts of the Variable Account. The purchase
payments under a Contract are allocated to the Sub-Account or Sub-Accounts
selected by the Owner, and the future Variable Account Contract Value depends
primarily on the investment performance of the Investment Funds whose shares are
held in the Sub-Accounts selected.
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INVESTMENTS OF THE VARIABLE ACCOUNT
When a Contract is applied for, the Owner may elect to have purchase
payments allocated to one or more of the available Sub-Accounts each of which
invests in shares of one of the Investment Funds at its net asset value. The
Owner may change a purchase payment allocation for future purchase payments and
may at any time transfer all or part of any existing values in a Sub-Account to
another Sub-Account that invests in shares of another Investment Fund.
Northstar Investment Management Corporation, an affiliate of the Company,
is the investment adviser for the four funds of Northstar. Fidelity Management &
Research Company is the investment adviser for the two portfolios of VIPF and
the two portfolios of VIPF II offered through the Contracts. The investment
advisers are paid fees for their services by the Investment Funds. The
Investment Funds currently offered, together with their investment objectives
are briefly described below. More detailed information concerning the investment
objectives, policies and restrictions pertaining to the Investment Funds and the
expenses, investment advisory services and charges and the risks attendant to
investing in the Investment Funds and other aspects of their operations can be
found in the current prospectus for each Investment Fund which accompany this
Prospectus and the current Statement of Additional Information for each
Investment Fund. The Investment Fund prospectuses should be read carefully
before any decision is made concerning the allocation of purchase payments or
transfers among the Sub-Accounts.
NORTHSTAR/NWNL TRUST (NORTHSTAR)
Northstar is a diversified management investment company currently offering
four investment funds, each with a different investment objective. The
following four Northstar Funds are available under this Contract:
NORTHSTAR INCOME AND GROWTH FUND is a diversified portfolio with an
investment objective of seeking current income balanced with the objective
of achieving capital appreciation. This Fund will seek to achieve its
objective through investments in common and preferred stocks, convertible
securities, investment grade corporate debt securities, and government
securities, selected for their prospects of producing income and capital
appreciation.
NORTHSTAR GROWTH FUND is a diversified portfolio with an investment
objective of long-term growth of capital through investments in equity
securities of companies that are believed to provide above average
potential for capital appreciation. Navellier Fund Management, Inc. serves
as sub-adviser to the Fund and is responsible for the day-to-day investment
management of the Fund, subject to the supervision of the investment
adviser and the Trustees of the Fund. All fees and expenses of the
subadvisory arrangement are borne by the investment adviser.
NORTHSTAR MULTI-SECTOR BOND FUND is a diversified portfolio with an
investment objective of maximizing current income. This Fund will seek to
achieve its objective by investment in the following sectors of the fixed
income securities markets: (a) securities issued or guaranteed as to
principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities; (b) investment grade corporate debt securities; (c)
investment grade or comparable quality debt securities issued by foreign
corporate issuers, and securities issued by foreign governments and their
political subdivisions, limited to 35% of assets determined at the time of
investment; and (d) high yield-high risk fixed income securities of U.S.
and foreign issuers, limited to 50% of assets determined at the time of
investment.
NORTHSTAR HIGH YIELD BOND FUND is a diversified portfolio with an
investment objective of seeking high income consistent with the
preservation of capital. Under normal market conditions, this Investment
Fund invests predominantly in high yield, high risk lower-rated U.S.
dollar-denominated debt securities. Most of the securities in which the
Investment Fund invests are rated, at the time of investment, at least Caa
by Moody's Investors Service, Inc. ("Moody's") or CCC by Standard & Poor's
Corporation ("S&P") or, if not rated, are of comparable quality in the
opinion of the investment adviser. The Investment Fund may, however, invest
in securities in the lowest ratings categories of Moody's and S&P, which
are C in the case of Moody's and D in the case of S&P.
VARIABLE INSURANCE PRODUCTS FUND (VIPF)
VIPF is a mutual fund currently offering five investment portfolios, each
with a different investment objective. The following two portfolios are
available under this Contract:
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MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. The
portfolio will invest only in high-quality U.S. dollar denominated money
market instruments of domestic and foreign issuers. An investment in the
portfolio is not insured or guaranteed by the U.S. Government, and there
can be no assurance that the portfolio will maintain a stable asset value
per share of $1.00.
OVERSEAS PORTFOLIO seeks long term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside of the United States.
VARIABLE INSURANCE PRODUCTS FUND II (VIPF II)
VIPF II is a mutual fund currently offering five investment portfolios,
each with a different investment objective. The following two portfolios
are available under this Contract:
ASSET MANAGER PORTFOLIO seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds
and short-term, fixed-income instruments.
INDEX 500 PORTFOLIO seeks to provide investment results that correspond to
the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States. In seeking this
objective, the portfolio attempts to duplicate the composition and total
return of the Standard & Poor's Composite Index of 500 Stocks while keeping
transaction costs and other expenses low. The portfolio is designed as a
long-term investment option.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
INVESTMENT FUNDS WILL BE ACHIEVED.
The Company reserves the right, subject to compliance with the law, to
offer additional funds.
An investment in the Variable Account, or in any Investment Fund, is not
insured or guaranteed by the U.S. Government.
The Investment Funds are currently offered only to the Variable Account but
may, in the future, be available to other registered separate accounts of the
Company offering variable annuity contracts and variable life insurance
policies.
REINVESTMENT
The Investment Funds described above have as a policy the distribution of
income dividends and capital gains. However, under the Contracts described in
this Prospectus there is an automatic reinvestment of such distributions.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENT FUND SHARES
The Company reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
an Investment Fund are no longer available for investment or if in the Company's
judgment further investment in any Investment Fund should become inappropriate
in view of the purposes of the Variable Account, the Company may redeem the
shares, if any, of that Investment Fund and substitute shares of another
registered open-end management investment company. The Company will not
substitute any shares attributable to a Contract's interest in a Sub-Account of
the Variable Account without notice and prior approval of the SEC and state
insurance authorities, as required by law.
The Company also reserves the right to establish additional Sub-Accounts of
the Variable Account, each of which would invest in shares corresponding to a
new Investment Fund or in shares of another investment company having a
specified investment objective. Subject to applicable law and any required SEC
approval, the Company may, in its sole discretion, establish new Sub-Accounts or
eliminate one or more Sub-Accounts if marketing needs, tax considerations or
investment conditions warrant. Any new Sub-Accounts may be made available to
existing Contract Owners on a basis to be determined by the Company.
If any of these substitutions or changes are made, the Company may by
appropriate endorsement change the Contract to reflect the substitution or
change. If the Company deems it to be in the best interest of Contract Owners
and Annuitants, and subject to any approvals that may be required under
applicable law, the Variable Account may be operated as a management investment
company under the 1940 Act, it may be deregistered under the Act if registration
is no longer required, or it may be combined with other separate accounts of the
Company.
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If a purchase payment for a selected Sub-Account is unable to be invested
because shares of the applicable Investment Fund are no longer available for
investment or if in the judgment of the Company's management further investment
in such Investment Fund shares would be inappropriate in view of the purposes of
the Contract, the portion of the purchase payment designated to be invested in
such Investment Fund will be returned to the Owner. The Owner may then direct
investment of such purchase payment to a different Sub-Account.
CHARGES MADE BY THE COMPANY
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, the surrender charge described below (which may be deemed a
contingent deferred sales charge), when it is applicable, is intended to
reimburse the Company for expenses relating to the sale of the Contracts,
including commissions to sales personnel, costs of sales material and other
promotional activities and sales administration costs.
If part or all of a Contract's value is surrendered, or if the Contract's
Annuity Commencement Date occurs within the first two years after the Contract
was issued, surrender charges may be made by the Company. For purposes of the
following surrender charge description, "New Purchase Payments" are those
Contract purchase payments received by the Company during the Contract Year in
which the surrender occurs or in the six immediately preceding Contract Years;
"Old Purchase Payments" are those Contract purchase payments not defined as New
Purchase Payments; and "Contract Earnings" at any Valuation Date is the Contract
Value less the sum of New Purchase Payments and Old Purchase Payments.
For purposes of determining surrender charges, surrenders shall first be
taken from Old Purchase Payments until they are exhausted, then from New
Purchase Payments until they are exhausted, and thereafter from Contract
Earnings.
Surrenders taken from the following amounts ("Free Surrenders") are not
subject to a surrender charge during any Contract Year: (a) any Old Purchase
Payments not already surrendered; (b) 10% of all New Purchase Payments that have
been received by the Company (with the exception of Systematic Withdrawals, this
does not apply to surrenders made during the first Contract Year nor to any
surrenders after the first surrender made in each Contract Year thereafter); and
(c) any Contract Earnings being surrendered.
TOTAL SURRENDERS The surrender charge for a total surrender is determined
by multiplying the amount of each New Purchase Payment surrendered, that is not
eligible for a free surrender, by the applicable surrender charge percentage as
set forth in the following table:
SURRENDER CHARGE PERCENTAGE TABLE
CONTRACT YEAR OF SURRENDER SURRENDER CHARGE AS A
MINUS CONTRACT YEAR OF PERCENTAGE OF EACH
PURCHASE PAYMENT PURCHASE PAYMENT
---------------- ----------------
0 7%
1 7
2 5
3 5
4 4
5 3
6 2
7 and later 0
PARTIAL SURRENDERS - The amount of the partial surrender subject to a
surrender charge is determined by dividing (a) the portion of each New Purchase
Payment to be surrendered which is not eligible for a Free Surrender by (b) one
minus the applicable surrender charge percentage from the Surrender Charge
Percentage Table set forth above. The resulting amount for each New Purchase
Payment to be surrendered is then multiplied by the applicable surrender charge
percentage from the Surrender Charge Percentage Table shown above to arrive at
the amount of surrender charge to be assessed by the Company.
If the surrender charge is less than the Contract Value that remains
immediately after surrender, it will be deducted proportionately from the
Sub-Accounts that make up such Contract Value. If the surrender charge is more
than such remaining Contract Value, the portion of the surrender charge that can
be deducted from such remaining
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Contract Value will be so deducted and the balance will be deducted from the
surrender payment. In computing surrenders, any portion of a surrender charge
that is deducted from the remaining Contract Value will be deemed a part of the
surrender.
ANNUAL CONTRACT CHARGE
Each year on the Contract Anniversary, the Company deducts an Annual
Contract Charge of $35 from the Contract Value to reimburse it for
administrative expenses relating to the Contract, the Variable Account and the
Sub-Accounts. The Company will not increase the Annual Contract Charge. In any
Contract Year when a Contract is surrendered for its full value on other than
the Contract Anniversary, the Annual Contract Charge will be deducted at the
time of such surrender. During the annuity period if both a fixed annuity
payment and a variable annuity payment are selected, then an Annual Contract
Charge will be separately assessed against each payment type. The charges will
be deducted in equal installments from each such payment made during a
twelve-month period. If only a fixed annuity payment or a variable annuity
payment is selected, then only one Annual Contract Charge will be assessed and
deducted in equal installments.
MORTALITY RISK PREMIUM
The variable annuity payments made to Annuitants will vary in accordance
with the investment performance of the Sub-Accounts selected by the Owner.
However, they will not be affected by the mortality experience (death rate) of
persons receiving annuity payments from the Variable Account. The Company
assumes this "mortality risk" and has guaranteed the annuity rates incorporated
in the Contract, which cannot be changed.
To compensate the Company for assuming this mortality risk and the
mortality risk that Beneficiaries of Annuitants dying before the Annuity
Commencement Date may receive amounts in excess of the then current Contract
Value (see "Death Benefit Before the Annuity Commencement Date" on page 16), the
Company deducts a Mortality Risk Premium from the Variable Account Contract
Value. The deduction is made daily in an amount that is equal to an annual rate
of .85% of the daily Contract Values under the Variable Account. The Company may
not change the rate charged for the Mortality Risk Premium under any Contract.
EXPENSE RISK PREMIUM
The Company will not increase charges for administrative expenses
regardless of its actual expenses. To compensate the Company for assuming this
expense risk, the Company deducts an Expense Risk Premium from the Variable
Account Contract Value. The deduction is made daily in an amount that is equal
to an annual rate of .40% of the daily Variable Account Contract Values. The
Company may not change the rate of the Expense Risk Premium under any Contract.
ADMINISTRATION CHARGE
The Company deducts a daily Administration Charge from the Variable Account
Contract Value in an amount equal to an annual rate of .15% of the daily
Contract Values under the Variable Account. This charge is deducted to reimburse
the Company for the cost of providing administrative services under the
Contracts and the Variable Account. The Company may not change the rate of the
Administration Charge under any Contract.
SUFFICIENCY OF CHARGES
If the amount of the surrender charge assessed in connection with the
Contracts is not enough to cover all distribution expenses incurred in
connection therewith, the loss will be borne by the Company. Any excess
distribution expenses borne by the Company will be paid out of its general
account which may include, among other things, proceeds derived from the
Mortality Risk Premium and the Expense Risk Premium deducted from the Variable
Account.
PREMIUM AND OTHER TAXES
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.50%, on annuity contracts issued by insurance
companies. If the Owner of the Contract lives in a governmental jurisdiction
that levies such a tax, the Company will pay the taxes when due but reserves the
right to deduct the amount of the tax either from purchase payments as they are
received or from the Contract Value at a later date.
The current range of premium tax rates is a guide only and should not be
relied on to determine actual premium taxes on any purchase payment or Contract
because the taxes are subject to change from time to time by legislative and
other governmental action. The timing of tax levies also varies from one taxing
authority to another. Consequently, in many cases the purchaser of a Contract
will not be able to accurately determine the premium tax applicable to the
Contract by reference to the range of tax rates described above. The Company
reserves the right to deduct charges for any other tax or economic burden
resulting from the application of the tax laws that it determines to be
applicable to the Contract.
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REDUCTION OF CHARGES
Any of the charges under the Contract, as well as the minimum purchase
payment requirements set forth in this Prospectus, may be reduced due to special
circumstances that result in lower sales, administrative or mortality expenses.
For example, special circumstances may exist in connection with group or
sponsored arrangements, sales to the Company's policy and Contract Owners or
those of affiliated insurance companies, or sales to employees or clients of the
Company's affiliates. The amount of any reductions will reflect the reduced
sales effort and administrative costs resulting from, or the different mortality
experience expected as a result of, the special circumstances. Reductions will
not be unfairly discriminatory against any person, including the affected policy
or Contract Owners and owners of all other contracts funded by the Variable
Account.
EXPENSES OF THE INVESTMENT FUNDS
There are fees deducted from and expenses paid out of the assets of the
Investment Funds that are described in the accompanying prospectuses for the
Funds.
ADMINISTRATION OF THE CONTRACTS
The Company has entered into a contract with Continuum Administrative
Services Corporation (formerly known as Vantage Computer Systems, Inc.), Kansas
City, Missouri ("CASC") under which CASC has agreed to perform certain
administrative functions relating to the Contracts and the Variable Account.
These functions include, among other things, maintaining the books and records
of the Variable Account and the Sub-Accounts, and maintaining records of the
name, address, taxpayer identification number, Contract number, type of Contract
issued to each Owner, Contract Value and other pertinent information necessary
to the administration and operation of the Contracts.
THE CONTRACTS
The Contracts described in this Prospectus are designed for retirement
plans which may or may not be Qualified Plans. Often a single purchase payment
is made for a deferred annuity, but this Contract freely permits subsequent
purchase payments up to the maximum level of funding set forth below. The
minimum amount the Company will accept as an initial purchase payment is $5,000
for Non-Qualified Contracts and $2,000 for Qualified Contracts. The Company may
choose not to accept any subsequent purchase payment for a Non-Qualified
Contract if it is less than $500 and for a Qualified Contract if it is less than
$200. The Company may also choose not to accept any subsequent purchase payment
if the purchase payment together with the Contract Value at the next Valuation
Date exceeds $1,000,000. Any purchase payment not accepted by the Company will
be refunded. The Company reserves the right to accept smaller or larger initial
and subsequent purchase payments in connection with special circumstances, such
as sales through group or sponsored arrangements.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments may be allocated to the available Sub-Accounts of the
Variable Account selected by the Owner and/or the Fixed Account (see Appendix
A). The Fixed Account is not available to Contract Owners in the states of
Maryland, Oregon, South Carolina and Washington. Any purchase payment or portion
thereof for which no allocation election is made will be returned to the Owner.
The initial purchase payment will be allocated to the selected Sub-Accounts
and/or the Fixed Account not later than two business days after receipt, if the
application and all information necessary for processing the Contract are
complete. The Company may retain purchase payments for up to five business days
while attempting to complete an incomplete application. If the application
cannot be made complete within this period, the applicant will be informed of
the reasons for the delay and the purchase payment will be returned immediately
unless the applicant consents to retention of the payment by the Company until
the application is made complete. Once the completed application is received,
the payment must be allocated within two business days. For any subsequent
purchase payments, the payments will be credited at the Sub-Account Accumulation
Unit Value next determined after receipt of the purchase payment.
Upon allocation to Sub-Accounts of the Variable Account, a purchase payment
is converted into Accumulation Units of the Sub-Account. The amount of the
purchase payment allocated to a particular Sub-Account is divided by the value
of an Accumulation Unit for the Sub-Account to determine the number of
Accumulation Units of the Sub-Account to be held in the Variable Account with
respect to the Contract. The net investment results of each Sub-Account vary
primarily with the investment performance of the Investment Fund whose shares
are held in the Sub-Account.
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An Investment Fund may impose a minimum purchase requirement. If that
minimum purchase requirement exceeds the aggregate of all purchase payments
received by the Company, less any redemption of Investment Fund shares resulting
from transfers or surrenders, on any given day that are to be applied to a
Sub-Account for the purchase of shares of such Investment Fund, such purchase
payments will be refunded.
SUB-ACCOUNT ACCUMULATION UNIT VALUE
Each Sub-Account Accumulation Unit was initially valued at $10 when the
first Investment Fund shares were purchased. Thereafter the value of each
Sub-Account Accumulation Unit will vary up or down according to a Net Investment
Factor, which is primarily based on the investment performance of the applicable
Investment Fund. Investment Fund shares in the Sub-Accounts will be valued at
their net asset value.
Dividend and capital gain distributions from an Investment Fund will be
automatically reinvested in additional shares of such Investment Fund and
allocated to the appropriate Sub-Account. The number of Sub-Account Accumulation
Units does not increase because of the additional shares, but the Accumulation
Unit value may increase.
NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects charges under
the Contract and the investment performance during a Valuation Period of the
Investment Fund whose shares are held in the particular Sub-Account. If the Net
Investment Factor is greater than one, the value of a Sub-Account Accumulation
Unit has increased. If the Net Investment Factor is less than one, the value of
a Sub-Account Accumulation Unit has decreased. The Net Investment Factor is
determined by dividing (1) by (2) then subtracting (3) from the result, where:
(1) is the net result of:
(a) the net asset value per share of the Investment Fund shares held
in the Sub-Account, determined at the end of the current
Valuation Period, plus
(b) the per share amount of any dividend or capital gain
distributions made on the Investment Fund shares held in the
Sub-Account during the current Valuation Period, plus or minus
(c) a per share charge or credit for any taxes reserved for which the
Company determines to have resulted from the investment
operations of the Sub-Account and to be applicable to the
Contract;
(2) is the net result of:
(a) the net asset value per share of the Investment Fund shares held
in the Sub-Account, determined at the end of the last prior
Valuation Period, plus or minus
(b) a per share charge or credit for any taxes reserved for during
the last prior Valuation Period which the Company determines to
have resulted from the investment operations of the Sub-Account
and to be applicable to the Contract; and
(3) is a factor representing the Mortality Risk Premium, the Expense Risk
Premium and the Administration Charge deducted from the Sub-Account,
which factor is equal, on an annual basis, to 1.40% of the daily net
asset value of the Sub-Account.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
If the Owner, including any joint Owner, dies before the Annuity
Commencement Date, the Beneficiary will be entitled to receive the Death
Benefit. For this purpose the Death Benefit will be:
(1) if any Owner (including the Annuitant) dies on or before the first day
of the month following the Owner's 85th birthday, the greatest of (i)
the Contract Value on the Death Benefit Valuation Date; or (ii) the
sum of the purchase payments received by the Company under the
Contract to the Death Benefit Valuation Date, less any surrender
payments previously made by the Company; or (iii) the Contract Value
on the Specified Contract Anniversary (immediately preceding the
Owner's death), plus any purchase payments and less any surrender
payments since that anniversary;
(2) if any Owner (including the Annuitant) dies after the first day of the
month following the Annuitant's 85th birthday, the Contract Value on
the Death Benefit Valuation Date.
If a single sum is requested, it will be paid within seven days after the
Death Benefit Valuation Date. If an Annuity Form is requested, it may be any
Annuity Form permitted by Section 72(s) of the Code and which the
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Company is willing to issue. An Annuity Form selection must be in writing and
must be received by the Company within 60 days after the date of the Owner's
death, otherwise the Death Benefit as of the Death Benefit Valuation Date will
be paid in a single sum to the Beneficiary and the Contract will be canceled.
If the only Beneficiary is the Owner's surviving spouse, such spouse may
continue the Contract as the Owner, and then (1) select a single sum payment, or
(2) select any Annuity Form which does not exceed such spouse's life expectancy.
If the Beneficiary elects to receive annuity payments under an Annuity
Form, the amount and duration of payments may vary depending on the Annuity Form
selected and whether fixed and/or variable annuity payments are requested. See
"Annuity Provisions" beginning on page 19.
DEATH BENEFIT AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies after the Annuity Commencement Date, the Death
Benefit, if any, shall be as stated in the Annuity Form in effect.
SURRENDER (REDEMPTION)
If a written request therefor from the Owner is received by the Company
before the Annuity Commencement Date, all or part of the Contract Value will be
paid to the Owner after deducting any applicable surrender charge and taxes.
(See "Surrender Charge (Contingent Deferred Sales Charge)" on page 13.) Partial
surrenders may be made in amounts not less than $500 and no partial surrender
may cause the Contract Value to fall below $1,000. In addition, if a total
surrender occurs other than on a Contract Anniversary the Annual Contract Charge
will be deducted from the Contract Value before the surrender payment is made.
Surrenders must be consented to by each collateral assignee. The Company
reserves the right to require that surrenders in excess of $50,000 be signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia, or Pacific Stock Exchange, or by a commercial bank (not a savings
bank) which is a member of the Federal Deposit Insurance Corporation, or, in
certain cases, by a member firm of the National Association of Securities
Dealers, Inc. that has entered into an appropriate agreement with the Company.
The Company may require that the Contract be returned before a surrender
takes place. A surrender will take place on the next Valuation Date after the
requirements for surrender are completed and payment will be made within seven
days after such Valuation Date. Unless the Owner requests a partial surrender to
be made from the Fixed Account or particular Sub-Accounts, a partial surrender
will be taken proportionately from the Fixed Account and all Sub-Accounts on a
basis that reflects their proportionate percentage of the Contract Value.
The Company reserves the right to limit the number of partial surrenders,
and to assess a processing fee not to exceed the lesser of 2% of the partial
surrender amount or $25. No processing fee will be charged in connection with
total surrenders.
The Company may cancel the Contract on any Contract Anniversary, or if such
Contract Anniversary is not a Valuation Date, on the next Valuation Date
thereafter, by paying to the Owner the Contract Value as of such Valuation Date
if such Contract Value after all charges is less than $1,000.
If this Contract is purchased as a "tax-sheltered annuity" under Section
403(b) of the Internal Revenue Code (the "Code"), it is subject to certain
restrictions on redemption imposed by Section 403(b)(11) of the Code. (See
"Tax-Sheltered Annuities" on page 24.) These restrictions on redemption are
imposed by the Variable Account and the Company in full compliance with and in
reliance upon the terms and conditions of a no-action letter issued by the
Office of Insurance Products and Legal Compliance of the Securities and Exchange
Commission to the American Council of Life Insurance (publicly available
November 28, 1988).
For tax purposes, surrender payments may be taxable. Such payments shall be
deemed to be from earnings and then gains until cumulative surrender payments
equal all accumulated earnings and gains, and thereafter from purchase payments
received by the Company. Consideration should be given to the tax implications
of a surrender prior to making a surrender request, including a surrender in
connection with a Qualified Plan.
SYSTEMATIC WITHDRAWALS
A Systematic Withdrawal is a specialized form of partial surrender. (See
"Surrender (Redemption)" on page 17.) The Owner may elect to take Systematic
Withdrawals by surrendering a specified dollar amount or percentage of
cumulative purchase payments on a monthly, quarterly, semi-annual or annual
basis from Sub-Accounts. Systematic Withdrawals may be taken from Variable
Account Contract Value and/or Fixed Account Contract Value, but are limited
annually to 10% of total cumulative purchase payments made under the Contract. A
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Surrender Charge will be imposed on the amount of any Systematic Withdrawal,
partial surrender or any combination thereof which is not a Free Surrender. (See
"Surrender Charge (Contingent Deferred Sales Charge)" on page 13.) Systematic
Withdrawals may be discontinued by the Owner at any time by notifying the
Company in writing.
The Company reserves the right to modify or discontinue offering Systematic
Withdrawals, however, any such modification or discontinuation will not affect
any Systematic Withdrawal programs already commenced. While the Company does not
currently charge a processing fee for partial surrenders under this program, it
reserves the right to charge a processing fee not to exceed the lesser of 2% of
the Systematic Withdrawal payment or $25.
Systematic Withdrawals may be subject to tax, including a penalty tax, and
the Owner should consult with his or her tax adviser before requesting any
Systematic Withdrawal. (See "FEDERAL TAX STATUS Taxation of Annuities" on page
22.)
Contract Owners interested in participating in the Systematic Withdrawal
program may obtain a separate application form and full information concerning
the program and its restrictions from their registered representative.
TRANSFERS
Before the Annuity Commencement Date, the Owner may transfer amounts
between the Sub-Accounts or from the Sub-Accounts to the Fixed Account. Subject
to certain restrictions, amounts may also be transferred from the Fixed Account
to the Sub-Accounts. Currently, there are three methods by which transfers may
be made: in writing, by telephone and by Dollar Cost Averaging.
WRITTEN TRANSFERS - Before the Annuity Commencement Date the Owner may
request a transfer in writing, subject to any conditions or charges the
Investment Funds whose shares are involved may impose, of all or part of a
Sub-Account's value to other Sub-Accounts or to the Fixed Account. The transfer
will be made by the Company on the first Valuation Date after the request for
such a transfer is received by the Company. Currently, there is no charge for
such a transfer, other than those that may be made by the Investment Funds. The
Company reserves the right, however, to charge a transfer fee not to exceed $25
per transfer and to limit the number of transfers made by the Owner. To
accomplish the transfer, the Variable Account will surrender Accumulation Units
in the particular Sub-Accounts and reinvest that value in Accumulation Units of
one or more of the available Sub-Accounts as directed in the request. After the
Annuity Commencement Date, an Annuitant who has selected Variable Annuity
Payments may request transfer of Annuity Unit values in the same manner and
subject to the same requirements as for an Owner-transfer of Sub-Account
Accumulation Unit values. However, no transfers may be made to the Fixed Account
after the Annuity Commencement Date.
Before the Annuity Commencement Date, transfers may also be made from the
Fixed Account to the Variable Account, provided, however, that (a) transfers may
only be made during the period starting 30 days before and ending 30 days after
the Contract Anniversary, and only one transfer may be made during each such
period, (b) no more than 50% of the Fixed Account Contract Value may be the
subject of any such transfer (unless the balance, after such transfer, would be
less than $1,000, in which case the full Fixed Account Contract Value may be
transferred), and (c) such transfer must involve at least $500 (or the total
Fixed Account Contract Value, if less). No transfers may be made from the Fixed
Account after the Annuity Commencement Date.
The conditions applicable to written transfers also apply to telephone
transfers and Dollar Cost Averaging transfers.
TELEPHONE TRANSFERS - Telephone transfers are available when the Owner
completes a telephone transfer form. If the Owner elects to complete the
telephone transfer form, the Owner thereby agrees that the Company and its
Contract Administrator will not be liable for any loss, liability, cost or
expense when the Company, and/or the Contract Administrator act in accordance
with the telephone transfer instructions which are received and recorded on
voice recording equipment. If a telephone transfer, processed after the Owner
has completed the telephone transfer form, is later determined not to have been
made by the Owner or was made without the Owner's authorization, and a loss
results from such unauthorized transfer, the Owner bears the risk of this loss.
The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. In the event the Company does not employ
such procedures, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. Such procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of such instructions and/or tape recording
telephone instructions.
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DOLLAR COST AVERAGING TRANSFERS - The Owner may direct the Company to
automatically transfer a fixed dollar amount or a specified percentage of
Sub-Account Value to any one or more other Sub-Accounts or to the Fixed Account.
No transfers from the Fixed Account are permitted under this service. Transfers
of this type may be made on a monthly, quarterly, semi-annual or annual basis.
This service is intended to allow the Owner to utilize "Dollar Cost Averaging,"
a long-term investment method which provides for regular, level investments over
time. The Company makes no guarantees that Dollar Cost Averaging will result in
a profit or protect against loss. The Owner may discontinue Dollar Cost
Averaging at any time by notifying the Company in writing.
Contract Owners interested in Dollar Cost Averaging may obtain a separate
application form and full information concerning this service and its
restrictions from their registered representatives.
The Company reserves the right to modify or discontinue offering Dollar
Cost Averaging. Any such modification or discontinuation would not affect Dollar
Cost Averaging transfer programs already commenced. Although the Company
currently charges no fees for transfers made under the Dollar Cost Averaging
program, the Company reserves the right to charge a processing fee for Dollar
Cost Averaging transfers not to exceed $25 per such transfer.
ASSIGNMENTS
If the Contract is issued pursuant to or in connection with a Qualified
Plan, it may not be sold, transferred, pledged or assigned to any person or
entity other than the Company. In other circumstances, an assignment of the
Contract is permitted, but only before the Annuity Commencement Date, by giving
the Company the original or a certified copy of the assignment. The Company
shall not be bound by any assignment until it is actually received by the
Company and shall not be responsible for the validity of any assignment. Any
payments made or actions taken by the Company before the Company actually
receives any assignment shall not be affected by the assignment.
CONTRACT OWNER AND BENEFICIARIES
Unless someone else is named as the Owner in the application for the
Contract, the applicant is the Owner of the Contract and before the Annuity
Commencement Date may exercise all of the Owner's rights under the Contract. No
more than two (2) natural persons may be named as Owner.
The Owner may name a Beneficiary and a Successor Beneficiary. In the event
an Owner dies before the Annuity Commencement Date, the Beneficiary shall
receive a Death Benefit as provided in the Contract. In the event an Owner dies
on or after the Annuity Commencement Date, the Beneficiary, if the Annuity Form
in effect at the Owner's death so provides, may continue receiving payments, be
paid a lump sum, or be paid nothing. If the Beneficiary or Successor Beneficiary
is not living on the date payment is due or if no Beneficiary or Successor
Beneficiary has been named, the Owner's estate will receive the applicable
proceeds.
A person named as an Annuitant, a Beneficiary or a Successor Beneficiary
shall not be entitled to exercise any rights relating to the Contract or to
receive any payments or settlements under the Contract or any Annuity Form,
unless such person is living on the earlier of (a) the day due proof of death of
the Owner, the Annuitant or the Beneficiary, whichever is applicable, is
received by the Company or (b) the tenth day after the death of the Owner, the
Annuitant or the Beneficiary, whichever is applicable.
Unless different arrangements have been made with the Company by the Owner,
if more than one Beneficiary is entitled to payments from the Company the
payments shall be in equal shares.
Before the Annuity Commencement Date, the Owner may change the Annuitant,
the Beneficiary or the Successor Beneficiary by giving the Company written
notice of the change, but the change shall not be effective until actually
received by the Company. Upon receipt by the Company of a notice of change, it
will be effective as of the date it was signed but shall not affect any payments
made or actions taken by the Company before the Company received the notice, and
the Company shall not be responsible for the validity of any change.
CONTRACT INQUIRIES
Inquiries regarding a Contract may be made by writing to the Annuity
Service Center, P.O. Box 419275, Kansas City, Missouri 64141-6275.
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
The Owner selects the Annuity Commencement Date, which must be the first
day of a month, when making application for the Contract. The date will be the
first day of the month following the Annuitant's 75th birthday unless an earlier
or later date has been selected by the Owner and, if the date is later, it has
been agreed to by the Company. The Owner may change an Annuity Commencement Date
selection by written notice received by the
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Company at least 30 days before both the Annuity Commencement Date currently in
effect and the new Annuity Commencement Date. The new date selected must satisfy
the requirements for an Annuity Commencement Date. If the Annuity Commencement
Date selected by the Owner does not occur on a Valuation Date at least 60 days
after the date on which the Contract was issued, the Company reserves the right
to adjust the Annuity Commencement Date to the first Valuation Date after the
Annuity Commencement Date selected by the Owner which is at least 60 days after
the Contract issue date. If the Annuity Commencement Date occurs before the
second Contract Anniversary, the Company will deduct Surrender Charges. (See
"Surrender Charge (Contingent Deferred Sales Charge)" on page 13.)
ANNUITY FORM SELECTION
The Owner may select a Variable Annuity Form, a Fixed Annuity Form, or
both, with payments starting at the Annuity Commencement Date when making
application for the Contract. Thereafter, the Owner may change the Annuity
Form(s) by written notice received by the Company before the Annuity
Commencement Date. If no election has been made before the Annuity Commencement
Date, the Company will apply the Fixed Account Contract Value to provide a Fixed
Annuity and the Variable Account Contract Value to provide a Variable Annuity,
both in the form of a Life Annuity with Payments Guaranteed for 10 years (120
Months), which shall be automatically effective.
ANNUITY FORMS
Variable annuity payments and fixed annuity payments are available in any
of the following Annuity Forms:
LIFE ANNUITY - An annuity payable on the first day of each month during the
Annuitant's life, starting with the first payment due according to the Contract.
Payments cease with the payment made on the first day of the month in which the
Annuitant's death occurs. IT WOULD BE POSSIBLE UNDER THIS ANNUITY FORM FOR THE
ANNUITANT TO RECEIVE ONLY ONE PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT, ONLY TWO PAYMENTS IF HE OR SHE DIED BEFORE THE THIRD ANNUITY
PAYMENT, ETC.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS (120 MONTHS) OR 20 YEARS
(240 MONTHS) - An annuity payable on the first day of each month during the
Annuitant's life, starting with the first payment due according to the Contract.
If the Annuitant receives all of the guaranteed payments, payments will continue
thereafter but cease with the payment made on the first day of the month in
which the Annuitant's death occurs. If all of the guaranteed payments have not
been made before the Annuitant's death, the unpaid installments of the
guaranteed payments will be continued to the Beneficiary.
JOINT AND FULL SURVIVOR ANNUITY - An annuity payable on the first day of
each month during the Annuitant's life and the life of a named person (the
"Joint Annuitant"), starting with the first payment due according to the
Contract. Payments will continue while either the Annuitant or the Joint
Annuitant is living and cease with the payment made on the first day of the
month in which the death of the Annuitant or the Joint Annuitant, whichever
lives longer, occurs. THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER
THIS ANNUITY FORM. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVOR OF THE
ANNUITANT AND THE JOINT ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
The Company also has other annuity forms available and information about
them can be obtained by writing to the Company.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments, unless the Annuitant
and the Company agree to a different payment schedule. However, if the Contract
Value at the Annuity Commencement Date is less than $5,000, the Company may pay
the Contract Value in a single sum and the Contract will be canceled. Also if a
monthly payment would be or become less than $50, the Company may change the
frequency of payments to intervals that will result in payments of at least $50
each.
ANNUITY PAYMENTS
The amount of the first fixed annuity payment is determined by applying the
Contract Value to be used for a fixed annuity at the Annuity Commencement Date
to the annuity table in the Contract for the Fixed Annuity Form selected. The
table shows the amount of the initial annuity payment for each $1,000 applied
and all subsequent payments shall be equal to this amount. The amount of the
first variable annuity payment is determined by applying the Contract Value to
be used for a variable annuity at the Annuity Commencement Date to the annuity
table in the Contract for the Annuity Form selected.
Subsequent variable annuity payments vary in amount in accordance with
the investment performance of the applicable Sub-Account. Assuming annuity
payments are based on the unit values of a single Sub-Account, the
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dollar amount of the first annuity payment, determined as set forth above, is
divided by the Sub-Account Annuity Unit Value as of the Annuity Commencement
Date to establish the number of Variable Annuity Units representing each annuity
payment. This number of Variable Annuity Units remains fixed during the annuity
payment period. The dollar amount of the second and subsequent payments is not
predetermined and may change from month to month. The dollar amount of the
second and each subsequent payment is determined by multiplying the fixed number
of Variable Annuity Units by the Sub-Account Annuity Unit Value for the
Valuation Period with respect to which the payment is due. If the monthly
payment is based upon the Annuity Unit Values of more than one Sub-Account, the
foregoing procedure is repeated for each applicable Sub-Account and the sum of
the payments based on each Sub-Account is the amount of the monthly annuity
payment.
The Annual Contract Charge is deducted in equal installments from each
annuity payment. When a fixed annuity payment is made in conjunction with a
variable annuity payment, an Annual Contract Charge is assessed against each
type of payment and is deducted in equal installments from each annuity payment.
The annuity tables in the Contracts are based on the 1983 Individual
Annuity Mortality Table (set back three years).
The Company guarantees that the dollar amount of each variable annuity
payment after the first payment will not be affected by variations in expenses
(including those related to the Variable Account) or in mortality experience
from the mortality assumptions used to determine the first payment.
SUB-ACCOUNT ANNUITY UNIT VALUE
A Sub-Account's Variable Annuity Units will initially be valued at $10 each
at the time Accumulation Units with respect to the Sub-Account are first
converted into Variable Annuity Units. The Sub-Account Annuity Unit Value for
any subsequent Valuation Period is determined by multiplying the Sub-Account
Annuity Unit Value for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account for the Valuation Period for which the
Sub-Account Annuity Unit Value is being calculated, and multiplying the result
by an interest factor to neutralize the assumed investment rate of 4% per annum
built into the annuity tables contained in the Contracts. (See "Net Investment
Factor" on page 16.)
ASSUMED INVESTMENT RATE
A 4% assumed investment rate is built into the annuity tables contained in
the Contracts. If the actual net investment rate on the assets of the Variable
Account is the same as the assumed investment rate of 4% per year, variable
annuity payments will remain level. If the actual net investment rate exceeds
the assumed investment rate, variable annuity payments will increase and
conversely, if it is less than the assumed investment rate the payments will
decrease.
FEDERAL TAX STATUS
INTRODUCTION
THIS DISCUSSION IS GENERAL AND NOT INTENDED AS TAX ADVICE. The discussion
is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under the Contract. The Contracts are designed for use by individuals in
connection with retirement plans which may or may not be Qualified Plans under
the provisions of the Internal Revenue Code (the "Code"). The ultimate effect of
federal income taxes on the Contract Value, on annuity payments and on the
economic benefit to the Owner, the Annuitant or the Beneficiary depends upon the
type of retirement plan for which the Contract is purchased, and upon the tax
and employment status of the individual concerned. No attempt is made to
consider any applicable state or other tax laws. The discussion is based on the
Company's understanding of Federal Income Tax Laws as currently interpreted. No
representation is made regarding the likelihood of the continuation of the
present Federal Income Tax Laws or the current interpretation by the Internal
Revenue Service ("IRS").
The Contract may be purchased on a non-qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). The Qualified Contract is
designed for use by individuals whose premium payments are comprised solely of
proceeds from and/or contributions under retirement plans which are intended to
qualify as plans entitled to special income tax treatment under Sections 401(a),
403(b), or 408 of the Code. The ultimate effect of federal income taxes on the
amounts held under a Contract, or annuity payments, and on the economic benefit
to the Owner, the Annuitant, or the Beneficiary depends on the type of
retirement plan, on the tax and employment status of the individual concerned,
and on the Company's tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Contract with proceeds from a tax-qualified
plan and receiving distributions from a Qualified Contract in order to continue
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receiving favorable tax treatment. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of a
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of a Contract. The following discussion assumes that
Qualified Contracts are purchased with proceeds from and/or contributions under
retirement plans that qualify for the intended special federal income tax
treatment.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Variable
Account, through each of the Investment Funds, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Sub-Accounts may be
invested. The Company expects that each Investment Fund in which the Variable
Account owns shares will meet the diversification requirements and that the
Contract will be treated as an annuity contract under the Code.
The Treasury has also announced that the diversification regulations do not
provide guidance concerning the extent to which Owners may direct their
investments to particular Sub-Accounts of a variable account or how concentrated
the investments of the Investment Funds underlying a variable account may be. It
is possible that if additional guidance in this regard is issued, the Contract
may need to be modified to comply with such additional guidance. For these
reasons, the Company reserves the right to modify the Contract as necessary to
attempt to prevent the Owner from being considered the owner of the assets of
the Investment Funds or otherwise to qualify the Contract for favorable tax
treatment.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code also requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Annuity Commencement 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 any Owner dies prior to the
Annuity Commencement Date, the entire interest in the Contract will be
distributed within five years after the date of the Owner's death. These
requirements will be considered satisfied as to any portion of the Owner's
interest which is payable to or for the benefit of a "designated Beneficiary"
and which is distributed over the life of such Beneficiary or over a period not
extending beyond the life expectancy of that Beneficiary, provided that such
distributions begin within one year of that Owner's death. The Owner's
"designated Beneficiary" is the person designated by such Owner as a Beneficiary
and to whom ownership of the Contract passes by reason of death and must be a
natural person. However, if the Owner's "designated Beneficiary" is the
surviving spouse of the Owner, the Contract may be continued with the surviving
spouse as the new Owner. If the Owner is not an individual, any change in the
primary Annuitant is treated as a change of Owner for tax purposes.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise. Other rules may apply to Qualified Contracts.
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. The Company believes that an Owner who is a natural person generally is
not taxed on increases in the value of a Contract until distribution occurs by
withdrawing all or part of the Contract Value (e.g., partial withdrawals and
complete surrenders) or as annuity payments under the Annuity Form selected. For
this purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Contract Value (and in the case of a Qualified Contract, any
portion of an interest in the qualified plan) generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a single sum
payment or annuity) is taxable as ordinary income.
The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the net surrender value
over the "investment in the contract" during the taxable year. The Company
restricts ownership of Non-Qualified Contracts to no more than two natural
persons.
The following discussion generally applies to Contracts owned by natural
persons.
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SURRENDERS. In the case of a surrender from a Qualified Contract, under
Section 72(e) of the Code a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
participant's total accrued benefit or balance under the retirement plan. The
"investment in the contract" generally equals the portion, if any, of any
premium payments paid by or on behalf of any individual under a Contract which
was not under excluded from the individual's gross income. For Contracts issued
in connection with qualified plans, the "investment in the contract" can be
zero. Special tax rules may be available for certain distributions from
Qualified Contracts.
In the case of a surrender (including Systematic Withdrawals) from a
Non-Qualified Contract before the Annuity Commencement Date, under Code Section
72(e) amounts received are generally first treated as taxable income to the
extent that the Contract Value immediately before surrender exceeds the
"investment in the contract" at that time. Any additional amount surrendered is
not taxable.
In the case of a full surrender under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
A Federal penalty tax may apply to certain surrenders from Qualified and
Non-Qualified Contracts. (See "Penalty Tax on Certain Distributions" below.)
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
Annuity Form selected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which the Contract Value exceeds
the investment in the Contract will be taxed; after the investment in the
Contract is recovered, the full amount of any additional annuity payments is
taxable. For variable annuity payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
investment in the Contract by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her investment in the Contract. For fixed
annuity payments, in general, there is no tax on the portion of each payment
which represents the same ratio that the investment in the Contract bears to the
total expected value of the annuity payments for the term of the payments;
however, the remainder of each annuity payment is taxable until the recovery of
the investment in the Contract, and thereafter the full amount of each annuity
payment is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of the death of an Owner or an Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a full surrender
of the Contract; or (ii) if distributed under a payment option, they are taxed
in the same way as annuity payments.
PENALTY TAX ON CERTAIN DISTRIBUTIONS. In the case of a distribution
pursuant to a Non-Qualified Contract, a Federal penalty equal to 10% of the
amount treated as taxable income may be imposed. In general, however, there is
no penalty on distributions:
1. made on or after the taxpayer reaches age 59-1/2;
2. made on or after the death of the holder (a holder is considered an
Owner) (or if the holder is not an individual, the death of the
primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life ( or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
5. made under an annuity contract that is purchased with a single premium
when the annuity starting date is no later than a year from purchase
of the annuity and substantially equal periodic payments are made, not
less frequently than annually, during the annuity period; and
6. made under certain annuities issued in connection with structured
settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified
Contract, as well as to certain contributions to, loans from, and other
circumstances, applicable to the Qualified Plan of which the Qualified Contract
is part.
POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed
that would have adversely modified the Federal taxation of certain annuities.
For example, one such proposal would have changed the tax
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<PAGE>
treatment of non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity. Although as of
the date of this prospectus, Congress is not considering any legislation
regarding the taxation of annuities, there is always the possibility that tax
treatment of annuities could change by legislation or other means (such as IRS
regulations, revenue rulings, judicial decisions, etc.). Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change).
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership or assignment of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Owner, or the exchange
of a Contract may result in certain tax consequences to the Owner that are not
discussed herein. An Owner contemplating any such transfer, assignment, or
exchange of a Contract should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Withholding for Contracts
issued to retirement plans established under Section 401 of the Code is the
responsibility of the plan trustee.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code treats all non-qualified deferred annuity
contracts entered into after October 21, 1988 that are issued by the Company (or
its affiliates) to the same Owner during any calendar year as one annuity
contract for purposes of determining the amount includible in gross income under
Code Section 72(e). The effects of this rule are not yet clear; however, it
could affect the time when income is taxable and the amount that might be
subject to the 10% penalty tax described above. In addition, the Treasury
Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. There may also be other situations in which the Treasury may conclude
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same Owner. Accordingly, an Owner should consult a competent
tax adviser before purchasing more than one annuity contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. 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 commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but the Company shall not be bound by the terms and conditions of
such plans to the extent such terms contradict the Contract, unless the Company
consents. Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. The Company will amend the Contract as
necessary to conform it to the requirements of such plan.
PENSION AND PROFIT SHARING PLANS. Section 401(a) of the Code permits
employers and self-employed persons to establish various types of retirement
plans for employees. Such retirement plans may permit the purchaser of the
Contract to provide benefits under the plans. Persons intending to use the
Contract with such plans should seek competent advice.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the IRS.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the premiums paid, within certain limits, on a Contract that will
provide an annuity for the employee's retirement. Code Section 403(b)(11)
restricts the distribution under
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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.
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
At the present time, the Company makes no charge to the Sub-Accounts for
any Federal, state, or local taxes that the Company incurs which may be
attributable to such Sub-Accounts or to the Contracts. The Company, however,
reserves the right in the future to make a charge for any such tax that it
determines to be properly attributable to the Sub-Accounts to the Contracts.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
Federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual circumstances
of each Owner or recipient of the distribution. A competent tax adviser should
be consulted for further information.
VOTING OF FUND SHARES
As long as the Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 and the assets of the Variable Account
are allocated to Sub-Accounts that are invested in Investment Fund shares, the
Investment Fund shares held in the Sub-Accounts will be voted by the Company in
accordance with instructions received from the person having voting interests
under the Contracts as described below. If the Company determines pursuant to
applicable law or regulation that Investment Fund shares held in the
Sub-Accounts and attributable to the Contracts need not be voted pursuant to
instructions received from persons otherwise having the voting interests, then
the Company may vote such Investment Fund shares held in the Sub-Accounts in its
own right.
Before the Annuity Commencement Date, the Owner shall have the voting
interest with respect to the Investment Fund shares attributable to the
Contract.
On and after the Annuity Commencement Date, the person then entitled to
receive annuity payments shall have the voting interest with respect to the
Investment Fund shares. Such voting interest will generally decrease during the
annuity payout period.
Any Investment Fund shares held in the Variable Account for which we do not
receive timely voting instructions, or which are not attributable to Contract
Owners, will be voted by us in proportion to the instructions received from all
Contract Owners having a voting interest in the Investment Fund. Any Investment
Fund shares held by us or any of our affiliates in general accounts will, for
voting purposes, be allocated to all separate accounts having voting interests
in the Investment Fund in proportion to each account's voting interest in the
respective Investment Fund and will be voted in the same manner as are the
respective account's vote.
All Investment Fund proxy material will be sent to persons having voting
interests together with appropriate forms which may be used to give voting
instructions. Persons entitled to voting interests and the number of votes which
they may cast shall be determined as of a record date, to be selected by the
Company, not more than 90 days before the meeting of the applicable Fund.
Persons having voting interests under the Contracts as described above will
not, as a result thereof, have voting interests with respect to meetings of the
stockholders of the Company.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in those states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by the General Distributor, Northstar
Distributors, Inc., Two Pickwick Plaza, Greenwich, Connecticut 06830, which is
an
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affiliate of the Company. Commissions and other distribution compensation will
be paid by the Company. Generally such payments will not exceed 7.00% of the
purchase payments. In some cases a trail commission based on the Contract Value
may also be paid.
REVOCATION
The Contract Owner may revoke the Contract at any time between the date of
Application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of purchase
payments. In order to revoke the Contract, it must be mailed or delivered to the
Company's Contract Administrator at the mailing address shown on the back cover
page of this Prospectus or the agent through whom it was purchased. Mailing or
delivery must occur on or before 10 days after receipt of the Contract for
revocation to be effective. In order to revoke the Contract if it has not been
received, written notice must be mailed or delivered to the Company's Contract
Administrator at the mailing address shown on the back cover page of this
Prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
REPORTS TO OWNERS
The Company will mail to the Contract Owner, at the last known address of
record at the home office of the Company, at least annually after the first
Contract Year, a report containing such information as may be required by any
applicable law or regulation and a statement showing the Contract Value.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party.
The Company is a defendant in various lawsuits in connection with the normal
conduct of its operations. In the opinion of management, the ultimate resolution
of such litigation will not result in any significant liability to the Company.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Northstar/NWNL Variable Account as of December
31, 1995 and for the period from May 6, 1994 to December 31, 1994 and the annual
financial statements of Northwestern National Life Insurance Company, which are
included in the Statement of Additional Information, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are included herein, and have been so included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission, with respect to the Contracts
described herein. The Prospectus does not contain all of the information set
forth in the Registration Statement and exhibits thereto, to which reference is
hereby made for further information concerning the Variable Account, the Company
and the Contracts. The information so omitted may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fee
prescribed by the Commission, or examined there without charge. Statements
contained in this Prospectus as to the provisions of the Contracts and other
legal documents are summaries, and reference is made to the documents as filed
with the Commission for a complete statement of the provisions thereof.
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Introduction.............................................................. 2
Administration of the Contracts........................................... 3
Custody of Assets......................................................... 3
Independent Auditors...................................................... 3
Distribution of the Contracts............................................. 4
Calculation of Yield and Return........................................... 5
Financial Statements...................................................... 11
- --------------------------------------------------------------------------------
If you would like to receive a copy of the Northstar/NWNL Variable Account
Statement of Additional Information, please return this request to:
NORTHSTAR DISTRIBUTORS, INC.
TWO PICKWICK PLAZA
GREENWICH, CT 06830
Your name ......................................................................
Address ........................................................................
City ................................... State .............. Zip .............
Please send me a copy of the Northstar/NWNL Variable Account Statement of
Additional Information.
- --------------------------------------------------------------------------------
27
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APPENDIX A
THE FIXED ACCOUNT
CONTRIBUTIONS UNDER THE FIXED PORTION OF THE CONTRACT AND TRANSFERS TO THE
FIXED PORTION BECOME PART OF THE GENERAL ACCOUNT OF THE COMPANY (THE "FIXED
ACCOUNT"), WHICH SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF
EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED ACCOUNT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") NOR IS THE FIXED
ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940 ("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTEREST
THEREIN ARE GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS AND THE
COMPANY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO
THE FIXED PORTION OF THE CONTRACT. DISCLOSURES REGARDING THE FIXED PORTION OF
THE ANNUITY CONTRACT AND THE FIXED ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
The Fixed Account is made up of all of the general assets of the Company
other than those allocated to any separate account. Purchase payments will be
allocated to the Fixed Account as elected by the Owner at the time of purchase
or as subsequently changed. The Company will invest the assets of the Fixed
Account in those assets chosen by the Company and allowed by applicable law.
Investment income from such Fixed Account assets will be allocated between the
Company and the Contracts participating in the Fixed Account, in accordance with
the terms of such Contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. The Company assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contract which cannot be changed.
In addition, the Company guarantees that it will not increase charges for
maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The Company expects to derive a profit from this
compensation. The amount of such investment income allocated to the Contracts
will vary from year to year in the sole discretion of the Company. However, the
Company guarantees that it will credit interest at a rate of not less than 3%
per year, compounded annually, to amounts allocated to the Fixed Account under
the Contract. The Company may credit interest at a rate in excess of 3% per
year; however, the Company is not obligated to credit any interest in excess of
3% per year. There is no specific formula for the determination of excess
interest credits. Such credits, if any, will be determined by the Company based
on information as to expected investment yields. Some of the factors that the
Company may consider in determining whether to credit interest to amounts
allocated to the Fixed Account and the amount thereof, are general economic
trends, rates of return currently available and anticipated on the Company's
investments, regulatory and tax requirements and competitive factors. ANY
INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders and Contract Owners and to its stockholders.
Excess interest, if any, will be credited on the Fixed Account Contract
Value. The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of purchase payments and transfers
allocated to the Fixed Account, plus interest at the rate of 3% per year,
compounded annually, plus any additional interest which the Company may, in its
discretion, credit to the Fixed Account, less the sum of all annual
administrative or surrender charges levied, any applicable premium taxes, and
less any amounts surrendered or transferred from the Fixed Account. If the Owner
surrenders the Contract the amount available from the Fixed Account will be
reduced by any applicable surrender charge and annual administration charge.
(See "Charges Made by the Company" on page 13).
A-1
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Northwestern National NORTHSTAR/NWNL
Life Insurance Company V A R I A B L E A C C O U N T
Individual Deferred
Variable/Fixed Annuity Contract
CONTRACT ADMINISTRATOR
Annuity Service Center
P.O. Box 419275
Kansas City, Missouri 64141-6275
GENERAL DISTRIBUTOR
Northstar Distributors, Inc.
Two Pickwick Plaza
Greenwich, Connecticut 06830
NORTHSTAR/
NWNL
V A R I A B L E A C C O U N T
Individual Deferred
Variable/Fixed Annuity Contract
N200.100b P R O S P E C T U S
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
NORTHSTAR/NWNL VARIABLE ACCOUNT
AND
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus, dated April 30, 1996 (the "Prospectus")
relating to the Individual Deferred Variable/Fixed Annuity Contracts issued by
Northstar/NWNL Variable Account (the "Variable Account") and Northwestern
National Life Insurance Company (the "Company"). Much of the information
contained in this Statement of Additional Information expands upon subjects
discussed in the Prospectus. A copy of the Prospectus may be obtained from
Northstar Distributors, Inc., Two Pickwick Plaza, Greenwich, Connecticut 06830.
Capitalized terms used in this Statement of Additional Information that are
not otherwise defined herein shall have the meanings given to them in the
Prospectus.
-------------
TABLE OF CONTENTS
Page
----
Introduction............................................................. 2
Administration of the Contracts.......................................... 3
Custody of Assets........................................................ 3
Independent Auditors..................................................... 3
Distribution of the Contracts............................................ 4
Calculation of Yield and Return.......................................... 5
Financial Statements..................................................... 11
---------
The date of this Statement of Additional Information is April 30, 1996.
Page 1
<PAGE>
INTRODUCTION
The Individual Deferred Variable/Fixed Annuity Contracts described in the
Prospectus are flexible purchase payment contracts. The Contracts are sold to or
in connection with retirement plans which may or may not qualify for special
federal tax treatment under the Internal Revenue Code. (See "Federal Tax Status"
on page 21 of the Prospectus.) Annuity payments under the Contracts are deferred
until a selected later date.
Purchase payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account, a separate account of the Company, and/or
to the Fixed Account (which is the general account of the Company).
Purchase payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds (the
"Investment Funds"). The Investment Funds are currently the four portfolios of
the Northstar/NWNL Trust which are managed by Northstar Investment Management
Corporation of Greenwich, Connecticut, which is an affiliate of the Company, and
the two portfolios of The Variable Insurance Products Fund and the two
portfolios of the Variable Insurance Products Fund II which are managed by
Fidelity Management and Research Company of Boston, Massachusetts. Each
Investment Fund pays its investment adviser certain fees charged against the
assets of the Investment Fund. The Variable Account Contract Value and the
amount of variable annuity payments will vary, primarily based on the investment
performance of the Investment Funds whose shares are held in the Sub-Accounts
selected. (For more information about the Investment Funds, see "Investments of
the Variable Account" on page 11 of the Prospectus.)
Purchase payments allocated to the Fixed Account, which is the general
account of the Company, will be credited with interest at a rate not less than
3% per year. Interest credited in excess of 3%, if any, will be determined at
the sole discretion of the Company. That part of the Contract relating to the
Fixed Account is not registered under the Securities Act of 1933 and the Fixed
Account is not subject to the restrictions of the Investment Company Act of
1940. (See Appendix A of the Prospectus.)
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ADMINISTRATION OF THE CONTRACTS
The Company has entered into a contract with Continuum Administrative
Services Corporation (formerly known as Vantage Computer Systems, Inc.), Kansas
City, Missouri ("CASC") under which CASC as assignee of the Company's contract
with State Street Bank and Trust Company, Boston, Massachusetts has agreed to
perform certain administrative functions relating to the Contracts and the
Variable Account. These functions include, among other things, maintaining the
books and records of the Variable Account and the Sub-Accounts, and maintaining
records of the name, address, taxpayer identification number, Contract number,
type of Contract issued to each Owner, Contract Value and other pertinent
information necessary to the administration and operation of the Contracts. For
the years ended December 31, 1994 and 1995, the Company paid fees to CASC under
the agreement in the amount of $1,711 and $4,249, respectively in connection
with administration of the Contracts.
CUSTODY OF ASSETS
The Company, whose address appears on the cover of the Prospectus,
maintains custody of the assets of the Variable Account.
INDEPENDENT AUDITORS
The financial statements of Northstar/NWNL Variable Account and
Northwestern National Life Insurance Company, which are included in the
Statement of Additional Information, have been audited by Deloitte & Touche LLP,
400 One Financial Plaza, 120 South 6th Street, Minneapolis, Minnesota 55402,
independent auditors, as stated in their reports which are included herein, and
have been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
Page 3
<PAGE>
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in those states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
The Contracts will be distributed by the General Distributor, Northstar
Distributors, Inc., which is an affiliate of the Company. For the year ended
December 31, 1994, General Distributor was paid fees by the Company with respect
to the distribution of the Contracts, in the amount of $4,000. For the year
ended December 31, 1995, General Distributor was not paid any fees by the
Company with respect to the distribution of the Contracts.
The offering of the Contracts is continuous.
There are no special purchase plans or exchange privileges not described in
the Prospectus. (See "Transfers" at page 18 of the Prospectus.)
No deduction for a sales charge is made from the purchase payments for the
Contracts. However, if part or all of a Contract's value is surrendered,
surrender charges (which may be deemed to be contingent deferred sales charges)
may be made by the Company. The method used to determine the amount of such
charge is described in the Prospectus under the heading "Charges Made By The
Company - Surrender Charge (Contingent Deferred Sales Charge)" on page 13.
Any of the charges under the Contract, as well as the minimum purchase
payment requirements set forth in the Prospectus, may be reduced due to special
circumstances that result in lower sales, administrative or mortality expenses.
For example, special circumstances may exist in connection with group or
sponsored arrangements, sales to the Company's policy and Contract Owners or
those of affiliated insurance companies, or sales to employees or clients of the
Company's affiliates. The amount of any reductions will reflect the reduced
sales effort and administrative costs resulting from, or the different mortality
experience expected as a result of, the special circumstances. Reductions will
not be unfairly discriminatory against any person,
Page 4
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including the affected policy or Contract owners and owners of all other
contracts funded by the Variable Account.
CALCULATION OF YIELD AND RETURN
CURRENT YIELD AND EFFECTIVE YIELD. Current yield and effective yield will
be calculated only for the VIPF Money Market Portfolio Sub-Account.
The current yield is based on a seven-day period (the "base period") and is
calculated by determining the "net change in value" on a hypothetical account
having a balance of one Accumulation Unit at the beginning of the period,
dividing the net change in account value by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by 365/7 with the resulting yield figure carried to the
nearest hundredth of one percent. The effective yield is computed in a similar
manner, except that the base period return is compounded by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(Base Period Return + 1)^ 365/7 ] - 1
Net changes in value of a hypothetical account will include net investment
income of the account (accrued daily dividends as declared by the VIPF Money
Market Portfolio, less daily expense and contract charges to the account) for
the period, but will not include realized or unrealized gains or losses on its
underlying fund shares.
The VIPF Money Market Portfolio Sub-Account's yield and effective yield
will vary in response to any fluctuations in interest rates and expenses of the
Sub-Account.
The yield and effective yield of the Sub-Account for the seven day period
ended December 29, 1995 were as follows:
Yield: 4.12%
Effective Yield: 4.20%
Page 5
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STANDARDIZED YIELD. A standardized yield computation may be used for bond
Sub-Accounts. The yield quotation will be based on a recent 30 day (or one
month) period, and is computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price on the
last day of the period according to the following formula:
YIELD = 2[((((a - b)/cd) + 1)^6) - 1]
Where:
a = net investment earned during the period by the Fund or Portfolio
attributable to shares owned by the Sub-Account.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Accumulation Units outstanding during
the period.
d = the maximum offering price per Accumulation Unit on the last day of
the period.
Yield on each Sub-Account is earned from dividends declared and paid by the
underlying Fund or Portfolio, which are automatically reinvested in Fund or
Portfolio shares.
Following are the standardized yields for the bond sub-accounts for the
month ended December 31, 1995:
Northstar Northstar
Multi-Sector High Yield
Bond Fund Bond Fund
--------- ---------
5.93% 7.49%
AVERAGE ANNUAL TOTAL RETURNS. From time to time, sales literature or
advertisements may also quote average annual total returns for one or more of
the Sub-Accounts for various periods of time.
Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month-end practicable, considering the type
and media of the communication and will be stated in the communication.
Page 6
<PAGE>
Average annual total returns will be calculated using Sub-Account unit
values which the Company calculates on each Valuation Date based on the
performance of the Sub-Account's underlying Portfolio, the deductions for the
Mortality and Expense Risk Premiums, the Administration Charge, and the Annual
Contract Charge. The calculation assumes that the Annual Contract Charge is $35
per year per Contract deducted at the end of each Contract Year. For purposes of
calculating average annual total return, an average per dollar Annual Contract
Charge attributable to the hypothetical account for the period is used. The
calculation also assumes surrender of the Contract at the end of the period for
the return quotation. Total returns will therefore reflect a deduction of the
Surrender Charge for any period less than seven years. The total return will
then be calculated according to the following formula:
TR = ((ERV/P)^1/N) - 1
Where:
TR = The average annual total return net of Sub-Account recurring
charges.
ERV = the ending redeemable value (net of any applicable surrender
charge) of the hypothetical account at the end of the
period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD FOR THE 10-YEAR PERIOD OF SUB-ACCOUNT
SUB-ACCOUNT ENDED 12/31/95 ENDED 12/31/95 ENDED 12/31/95 TO 12/31/95
- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Sub-Account Inception: 05/06/94) 13.25% N/A N/A 8.53%
Northstar Growth Fund
(Sub-Account Inception: 05/06/94) 16.60% N/A N/A 11.45%
Northstar Multi-Sector Bond Fund
(Sub-Account Inception: 05/06/94) 7.15% N/A N/A 4.73%
Northstar High Yield Bond Fund
(Sub-Account Inception: 05/06/94) 11.11% N/A N/A 5.50%
VIPF Overseas Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 0.25%
VIPF II Asset Manager Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 7.70%
VIPF II Index 500 Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 21.87%
</TABLE>
Page 7
<PAGE>
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Sub-Accounts commenced
operations. Such performance information for the Sub-Accounts will be calculated
based on the performance of the Portfolios and the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Portfolios, with the level of Contract charges currently in effect.
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD FOR THE 10-YEAR PERIOD OF FUND PORTFOLIO
SUB-ACCOUNT ENDED 12/31/95 ENDED 12/31/95 ENDED 12/31/95 TO 12/31/95
- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 05/06/94) 13.25% N/A N/A 8.53%
Northstar Growth Fund
(Portfolio Inception: 05/06/94) 16.60% N/A N/A 11.45%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 05/06/94) 7.15% N/A N/A 4.73%
Northstar High Yield Bond Fund
(Portfolio Inception: 05/06/94) 11.11% N/A N/A 5.50%
VIPF Overseas Portfolio
(Portfolio Inception: 01/28/87) 2.71% 6.04% N/A 5.79%
VIPF II Asset Manager Portfolio
(Portfolio Inception: 09/06/89) 9.89% 10.70% N/A 9.69%
VIPF II Index 500 Portfolio
(Portfolio Inception: 08/27/92) 29.85% N/A N/A 12.83%
</TABLE>
The Company may also disclose average annual total returns for the
Investment Funds' Portfolios since their inception, including such disclosure
for periods prior to the date the Variable Account commenced operations.
Page 8
<PAGE>
Such average annual total return information for the Portfolios of the
Investment Funds is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD FOR THE 10-YEAR PERIOD OF FUND PORTFOLIO
SUB-ACCOUNT ENDED 12/31/95 ENDED 12/31/95 ENDED 12/31/95 TO 12/31/95
- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 05/06/94) 21.27% N/A N/A 13.78%
Northstar Growth Fund
(Portfolio Inception: 05/06/94) 24.29% N/A N/A 13.40%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 05/06/94) 15.28% N/A N/A 10.10%
Northstar High Yield Bond Fund
(Portfolio Inception: 05/06/94) 18.86% N/A N/A 10.58%
VIPF Overseas Portfolio
(Portfolio Inception: 01/28/87) 9.68% 8.14% N/A 7.31%
VIPF II Asset Manager Portfolio
(Portfolio Inception: 09/06/89) 16.96% 12.76% N/A 11.26%
VIPF II Index 500 Portfolio
(Portfolio Inception: 08/27/92) 37.19% N/A N/A 15.48%
</TABLE>
OTHER TOTAL RETURNS. From time to time, sales literature or advertisements
may quote average annual total returns for the Sub-Accounts that do not reflect
the Surrender Charge. Such performance information may quote average annual
total returns for periods during which the Sub-Accounts were operating and for
periods prior to the date the Sub-Accounts commenced operations. These returns
are calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn. Such information
is as follows:
Page 9
<PAGE>
RETURNS SINCE DATE SUB-ACCOUNTS COMMENCED OPERATIONS
----------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD FOR THE 10-YEAR PERIOD OF SUB-ACCOUNT
SUB-ACCOUNT ENDED 12/31/95 ENDED 12/31/95 ENDED 12/31/95 TO 12/31/95
- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Sub-Account Inception: 05/06/94) 12.10% N/A N/A 19.55%
Northstar Growth Fund
(Sub-Account Inception: 05/06/94) 22.90% N/A N/A 14.96%
Northstar Multi-Sector Bond Fund
(Sub-Account inception: 05/06/94) 13.45% N/A N/A 8.38%
Northstar High Yield Bond Fund
(Sub-Account Inception: 05/06/94) 17.41% N/A N/A 9.13%
VIPF Overseas Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 9.82%
VIPF II Asset Manager Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 17.50%
VIPF II Index 500 Portfolio
(Sub-Account Inception: 05/01/95) N/A N/A N/A 32.07%
</TABLE>
RETURNS INCLUDING PERIOD PRIOR TO DATE SINCE SUB-ACCOUNTS COMMENCED OPERATIONS
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD FOR THE 10-YEAR PERIOD OF FUND PORTFOLIO
SUB-ACCOUNT ENDED 12/31/95 ENDED 12/31/95 ENDED 12/31/95 TO 12/31/95
- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Northstar Income and Growth Fund
(Portfolio Inception: 05/06/94) 12.10% N/A N/A 19.55%
Northstar Growth Fund
(Portfolio Inception: 05/06/94) 22.90% N/A N/A 14.96%
Northstar Multi-Sector Bond Fund
(Portfolio Inception: 05/06/94) 13.45% N/A N/A 8.38%
Northstar High Yield Bond Fund
(Portfolio Inception: 05/06/94) 17.41% N/A N/A 9.13%
VIPF Overseas Portfolio
(Portfolio Inception: 01/28/87) 8.11% 6.60% N/A 5.79%
VIPF II Asset Manager Portfolio
(Portfolio Inception: 09/06/89) 15.29% 11.18% N/A 9.69%
VIPF II Index 500 Portfolio
(Portfolio Inception: 08/27/92) 35.25% N/A N/A 12.83%
</TABLE>
The Investment Funds have provided the total return information for the
Portfolios, including the Portfolio total return information used to calculate
the total returns of the Sub-Accounts for periods prior to
Page 10
<PAGE>
the inception of the Sub-Accounts. The Variable Insurance Products Fund and the
Variable Insurance Products Fund II are not affiliated with the Company.
The Company may disclose Cumulative Total Returns in conjunction with the
standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
CTR = ERV/P - 1
Where:
CTR = the Cumulative Total Return net of Sub-Account recurring
charges for the period.
ERV = the ending redeemable value of the hypothetical investment
at the end of the period.
P = a hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL CONTRACT CHARGE ON PERFORMANCE DATA. The Contract
provides for a $35 Annual Contract Charge to be deducted annually at the end of
each Contract Year, from the Sub-Accounts and the Fixed Account based on the
proportion that the value of each such account bears to the total Contract
Value. For purposes of reflecting the Annual Contract Charge in yield and total
return quotations, the annual charge is converted into an annual charge per
$1,000 invested based on the Annual Contract Charges collected from the average
total assets of the Variable Account and Fixed Account during the calendar year
ending December 31, 1995.
FINANCIAL STATEMENTS
The Statement of Additional Information contains Financial Statements for
the Variable Account for the period of May 6, 1994 (the date on which the
Variable Account commenced operations) to December 31, 1995. Deloitte & Touche
LLP serves as independent auditors for the Variable Account. Although the
financial statements are audited, the period they cover is not necessarily
indicative of the longer term performance of the assets in the Variable Account.
The Company's statements of financial condition as of December 31, 1995 and
1994, and the related statements of operations, shareholder's equity and cash
flows for the years ended December 31, 1995 and 1994 which are included in this
Statement of Additional Information, should be considered only as bearing on the
Company's ability to meet its obligations under the Contracts. They should not
be considered as bearing on the investment performance of the assets held in the
Variable Account.
Page 11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Northwestern National Life Insurance
Company and Contract Owners of
Northstar/NWNL Variable Account:
We have audited the accompanying statement of assets and liabilities of
Northstar/NWNL Variable Account as of December 31, 1995 and the related combined
statements of operations and changes in Contract Owners' equity for the year
ended December 31, 1995 and the period from May 6, 1994 to December 31, 1994.
These financial statements are the responsibility of the management of
Northwestern National Life Insurance Company. Our responsibility is to express
an opinion on these financial statements based on our audits.
We have 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
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures include
confirmation of the securities owned as of December 31, 1995, by correspondence
with the Account custodians. 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
audit provides 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 Northstar/NWNL Variable Account
as of December 31, 1995, and the results of its operations and changes in
Contract Owners' equity for the year ended December 31, 1995 and the period from
May 6, 1994 to December 31, 1994, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
February 2, 1996
i
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(In Thousands, Except Share and Unit Data)
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S NORTHSTAR'S
ASSETS: INCOME AND NORTHSTAR'S MULTI-SECTOR HIGH YIELD
- ------- GROWTH FUND GROWTH FUND BOND FUND BOND FUND
Investments in mutual funds at market value: ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
320,192 shares (cost $3,431) $3,647
Growth Fund
29,554 shares (cost $343) $341
Multi-Sector Bond Fund
83,892 shares (cost $420) $431
High Yield Bond Fund
342,853 shares (cost $1,692) $1,728
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
0 shares (cost $-)
Overseas Portfolio
0 shares (cost $-)
Asset Manager Portfolio
0 shares (cost $-)
Index 500 Portfolio
51 shares (cost $4)
---------- ---------- ---------- ----------
Total Assets $3,647 $341 $431 $1,728
====== ==== ==== ======
LIABILITIES AND CONTRACT
OWNER'S EQUITY:
Due to Northwestern National Life
Insurance Company for contract charges $ 4 $ - $ - $1
Contract Owners' Equity 3,643 341 431 1,727
---------- ---------- ---------- ----------
Total Liabilities and Contract Owners' Equity $3,647 $341 $431 $1,728
====== ==== ==== ======
Units Outstanding: 301,285.181 27,043.488 37,703.818 149,292.389
Net Asset Value per Unit:
Northstar/NWNL Variable Annuity
Tax Qualified $12.091637 $12.607218 $11.435577 $11.567470
Non-Tax Qualified $12.091637 $12.607218 $11.435577 $11.567470
</TABLE>
The accompanying notes are an integral part of the financial statements.
ii
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
<TABLE>
<CAPTION>
IDELITY'S VIP FIDELITY'S VIPF FIDELITY'S VIPF II FIDELITY'S VIPF II
ASSETS: MONEY MARKET OVERSEAS ASSET MANAGER INDEX 500
- ------- PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
Investments in mutual funds at market value: ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NORTHSTAR'S:
Income and Growth Fund
320,192 shares (cost $3,431) $3,647
Growth Fund
29,554 shares (cost $343) 341
Multi-Sector Bond Fund
83,892 shares (cost $420) 431
High Yield Bond Fund
342,853 shares (cost $1,692) 1,728
FIDELITY'S VIPF AND VIPF II:
Money Market Portfolio
0 shares (cost $-) $- -
Overseas Portfolio
0 shares (cost $-) $- -
Asset Manager Portfolio
0 shares (cost $-) $- -
Index 500 Portfolio
51 shares (cost $4) $4 4
---------- ---------- ---------- ---------- ----------
Total Assets $- $- $- $4 $6,151
== == == == ======
LIABILITIES AND CONTRACT
OWNER'S EQUITY:
Due to Northwestern National Life
Insurance Company for contract charges $- $- $- $- $5
Contract Owners' Equity - - - 4 6,146
---------- ---------- ---------- ---------- ----------
Total Liabilities and Contract Owners' Equity $- $- $- $4 $6,151
== == == == ======
Units Outstanding: - - - 335.333 515,660.209
Net Asset Value per Unit:
Northstar/NWNL Variable Annuity
Tax Qualified $10.288920 $10.651696 $11.143293 $12.048834
Non-Tax Qualified $10.288920 $10.651696 $11.143293 $12.048834
</TABLE>
The accompanying notes are an integral part of the financial statements.
iii
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
STATEMENT OF OPERATIONS AND
CHANGES IN CONTRACT OWNERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Year ended Period from
December 31, May 6, 1994 to
1995 Dec. 31, 1994
--------------- ---------------
<S> <C> <C>
Net investment income:
Reinvested dividend income............................... $ 226 $ 16
Reinvested capital gains................................. 102 9
Administrative expenses.................................. (60) (3)
--------- ---------
Net investment income
and capital gains ........................... 268 22
--------- ---------
Realized and unrealized gains (losses):.......................
Net realized gains (losses) on
redemptions of fund shares ........................ 44 (1)
Increase (decrease) in unrealized
appreciation of investments ....................... 286 (25)
------- ---------
Net realized and unrealized gains (losses) ........ 330 (26)
--------- ---------
Net additions (reductions) from operations... 598 (4)
--------- ---------
Contract Owners' transactions:
Net purchase payments ................................... 4,461 1,381
Surrenders .............................................. (268) (22)
Transfers between Sub-Accounts
and Fixed Account ................................. - -
Annuity payments......................................... - -
Transfers to (from) required reserves.................... - -
--------- ---------
Net additions for Contract
Owners' transactions ........................ 4,193 1,359
--------- ---------
Net additions for the year ............ 4,791 1,355
Contract Owners' Equity, beginning of the year ............... 1,355 -
--------- ---------
Contract Owners' Equity, end of the year ..................... $6,146 $1,355
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
iv
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND CONTRACTS:
Northstar/NWNL Variable Account (the Account) is a separate account of
Northwestern National Life Insurance Company (NWNL or Northwestern), a
wholly-owned subsidiary of ReliaStar Financial Corp. (formerly The NWNL
Companies, Inc.). The Account commenced operations on May 6, 1994 and is
registered as a unit investment trust under the Investment Company Act of
1940.
Purchase payments received under the contracts are allocated to Sub-Accounts
of the Account, each of which is invested in one of the Funds listed below
during the period.
NORTHSTAR FUNDS: FIDELITY'S VIPF AND VIPF II:
---------------- ----------------------------
Income and Growth Fund Money Market Portfolio
Growth Fund Overseas Portfolio
Multi-Sector Bond Fund Asset Manager Portfolio
High Yield Bond Fund Index 500 Portfolio
Northstar Investment Management Corporation, an affiliate of NWNL, is the
investment adviser for the four Funds of the Northstar/NWNL Trust and is paid
fees for its services by the Northstar Funds. Fidelity Management & Research
Company is the investment adviser for Fidelity's Variable Insurance Products
Fund (VIPF) and Variable Insurance Products Fund II (VIPF II) and is paid for
its services by the VIPF and VIPF II Portfolios. On April 30, 1995,
Sub-Accounts investing in VIPF and VIPF II Portfolios were made available
under the contracts.
SECURITIES VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME:
The market value of investments in the Sub-Accounts is based on the closing
net asset values of the Fund shares held at the end of the period. Investment
transactions are accounted for on the trade date (date the order to purchase
or redeem is executed) and dividend income and capital gain distributions are
recorded on the ex-dividend date. Net realized gains and losses on
redemptions of shares of the Funds are determined on the basis of specific
identification of Fund share costs.
VARIABLE ANNUITY RESERVES:
The amount of the reserves for contracts in the distribution period is
determined by actuarial assumptions which meet statutory requirements. Gains
or losses resulting from actual mortality experience, the full responsibility
for which is assumed by NWNL, are offset by transfers to (or from) NWNL.
2. FEDERAL INCOME TAXES:
Under current tax law, the income, gains and losses from the separate account
investments are not taxable to either the Account or NWNL.
3. CONTRACT CHARGES:
No deduction is made for a sales charge from the purchase payments made for
the contracts. However, on certain surrenders, NWNL will deduct from the
contract value a surrender charge as set forth in the contract.
Certain charges are made by NWNL to Contract Owners' Variable Accumulation
Values in the Account in accordance with the terms of the Contracts. These
charges may include: an annual administrative/contract charge of $35 from
each contract on the anniversary date or at the time of surrender, if
surrender is at a time other than the anniversary date; a daily
administrative charge; and a daily charge for mortality and expense risk
assumed by NWNL. NWNL bears the risk of adverse mortality experience and any
costs for sales and administrative services and expenses which exceed these
periodic charges.
Various states and other governmental units levy a premium tax on annuity
contracts issued by insurance companies. If the owner of a contract lives in
a state which levies such a tax, NWNL may deduct the amount of the tax from
the purchase payments received or the value of the contract at annuitization.
v
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INVESTMENTS:
The net realized gains (losses) on redemptions of fund shares for the year
ended December 31, 1995 and the period from May 6, 1994 (date operations
commenced) to December 31, 1994, were as follows, (in thousands):
<TABLE>
<CAPTION>
NORTHSTAR'S
INCOME AND NORTHSTAR'S
TOTAL GROWTH FUND GROWTH FUND
----------------------------- ------------------------------ -----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, May 6, 1994 Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions........ $1461 $65 $986 $24 $23 $14
Cost............................. 1,417 66 954 25 20 14
--------- --------- --------- --------- --------- ---------
Net realized gains (losses) on
redemptions of fund shares.. $ 44 ($1) $32 ($1) $ 3 $ -
======= === === === === ====
<CAPTION>
FIDELITY'S VIPF FIDELITY'S VIPF II FIDELITY'S VIPF II
OVERSEAS ASSET MANAGER INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------ ----------------------------- ------------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, May 6, 1994, Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------ ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions .......... $- $- $- $- $- $-
Cost................................ - - - - - -
--------- --------- --------- --------- --------- ---------
Net realized gains (losses) on
redemptions of fund shares... $- $- $- $- $- $-
== == == == == ==
</TABLE>
vi
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S FIDELITY'S VIPF
MULTI-SECTOR HIGH YIELD MONEY MARKET
BOND FUND BOND FUND PORTFOLIO
------------------------------- ------------------------------ ----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, May 6, 1994 Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------ -------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from redemptions.......... $271 $4 $181 $23 $- $-
Cost............................... 267 4 176 23 - -
--------- --------- --------- --------- --------- ---------
Net realized gains (losses) on
redemptions of fund shares.... $ 4 $- $ 5 $ - $- $-
====== == ====== ==== == ==
</TABLE>
vii
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. CONTRACT OWNERS' TRANSACTIONS:
Unit transactions in each Sub-Account during the year ended December 31,
1995 and the period from May 6, 1994 (date operations commenced) to
December 31, 1994, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S
INCOME AND NORTHSTAR'S MULTI-SECTOR
GROWTH FUND GROWTH FUND BOND FUND
----------------------------- ----------------------------- ----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, May 6, 1994 Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of the year...... 100,955.441 - 8,738.734 - 15,492.534 -
Units purchased............... 272,482.821 102,017.017 16,561.980 8,900.561 34,047.693 15,492.534
Units redeemed................ (12,532.790) (1,061.576) (1,662.223) (626.685) (10.440) -
Units transferred between
Sub-Accounts and/or
Fixed Account ............. (59,620.291) - 3,404.997 464.858 (11,825.969) -
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding,
end of the year............ 301,285.181 100,955.441 27,043.488 8,738.734 37,703.818 15,492.534
=========== =========== ========== ========= ========== ==========
<CAPTION>
FIDELITY'S VIPF FIDELITY'S VIPF II FIDELITY'S VIPF II
OVERSEAS ASSET MANAGER INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ---------------------------- ----------------------------
Year ended Period from Year ended Period from Year ended Period from
Dec. 31, May 6, 1994 Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------- ------------ ------------- ------------ ------------- ------------
<S> <C>
Units outstanding,
beginning of the year....... - - - - - -
Units purchased ............... - - - - - -
Units redeemed ................ - - - - - -
Units transferred between
Sub-Accounts and/or
Fixed Account .............. - - - - 335.333 -
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding,
end of the year ............ - - - - 335.333 -
======= ======= ======= ======= ======= =======
</TABLE>
viii
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
NORTHSTAR'S FIDELITY'S VIPF
HIGH YIELD MONEY MARKET
BOND FUND PORTFOLIO
----------------------------- -----------------------------
Year ended Period from Year ended Period from
Dec. 31, May 6, 1994 Dec. 31, May 6, 1994
1995 to Dec. 31, 1994 1995 to Dec. 31, 1994
------------- ------------ ------------- ------------
<S> <C> <C>
Units outstanding,
beginning of the year............ 8,985.149 - - -
Units purchased..................... 83,081.624 10,139.023 - -
Units redeemed...................... (10,401.395) (658.699) - -
Units transferred between
Sub-Accounts and/or
Fixed Account ................... 67,627.011 (495.175) - -
----------- ----------- ----------- -----------
Units outstanding,
end of the year.................. 149,292.389 8,985.149 - -
=========== ========= =========== ===========
</TABLE>
ix
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. COMBINING STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY.
Operations and changes in Contract Owners' equity for the year ended
December 31, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
NORTHSTAR'S NORTHSTAR'S NORTHSTAR'S
INCOME AND NORTHSTAR'S MULTI-SECTOR HIGH YIELD
TOTAL GROWTH FUND GROWTH FUND BOND FUND BOND FUND
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Reinvested dividend income $226 $91 $3 $28 $104
Reinvested capital gains ... 102 81 21 - -
Administrative expenses .... (60) (38) (3) (5) (14)
--------- --------- --------- --------- ---------
Net investment income
and capital gains .... 268 134 21 23 90
--------- --------- --------- --------- ---------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares 44 32 3 4 5
Increase in unrealized
appreciation of investments 286 233 - 15 38
--------- --------- --------- --------- ---------
Net realized and unrealized
gains ................ 330 265 3 19 43
--------- --------- --------- --------- ---------
Net additions
from operations 598 399 24 42 133
--------- --------- --------- --------- ---------
Contract Owners' transactions:
Net purchase payments ...... 4,461 2,985 202 358 916
Surrenders ................. (268) (136) (19) - (113)
Transfers between Sub-Accounts
and/or Fixed Account .... - (626) 44 (125) 703
Annuity payments............ - - - - -
Transfers to (from)
required reserves......... - - - - -
--------- --------- --------- --------- ---------
Net additions for
Contract Owners' transactions 4,193 2,223 227 233 1,506
--------- --------- --------- --------- ---------
Net additions
for the year ... 4,791 2,622 251 275 1,639
Contract Owners' Equity,
beginning of the year ...... 1,355 1,021 90 156 88
--------- --------- --------- --------- ---------
Contract Owners' Equity,
end of the year ............ $6,146 $3,643 $341 $431 $1,727
====== ====== ==== ==== ======
</TABLE>
x
<PAGE>
NORTHSTAR/NWNL VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
FIDELITY'S VIPF FIDELITY'S VIPF FIDELITY'S VIPF II FIDELITY'S VIPF II
MONEY MARKET OVERSEAS ASSET MANAGER INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net investment income:
Reinvested dividend income $- $- $- $-
Reinvested capital gains ... - - - -
Administrative expenses .... - - - -
--------- --------- --------- ---------
Net investment income
and capital gains .... - - - -
--------- --------- --------- ---------
Realized and unrealized gains:
Net realized gains on
redemptions of fund shares - - - -
Increase in unrealized
appreciation of investments - - - -
--------- --------- --------- ---------
Net realized and unrealized
gains ................ - - - -
--------- --------- --------- ---------
Net additions
from operations - - - -
--------- --------- --------- ---------
Contract Owners' transactions:
Net purchase payments ...... - - - -
Surrenders ................. - - - -
Transfers between Sub-Accounts
and/or Fixed Account .... - - - 4
Annuity payments............ - - - -
Transfers to (from)
required reserves......... - - - -
--------- --------- --------- ---------
Net additions for
Contract Owners' transactions - - - 4
--------- --------- --------- ---------
Net additions
for the year ... - - - 4
Contract Owners' Equity,
beginning of the year ...... - - - -
--------- --------- --------- ---------
Contract Owners' Equity,
end of the year ............ $- $- $- $4
== == == ==
</TABLE>
xi
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
Northwestern National Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar Financial Corp.)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of
Northwestern National Life Insurance Company and Subsidiaries as of December 31,
1995 and 1994, and the related statements of income, shareholder's equity, and
cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 Northwestern
National Life Insurance Company and Subsidiaries as of December 31, 1995 and
1994 and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 1, 1996
i
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1994
---- ----
<S> <C> <C>
Investments
Fixed Maturity Securities
Available-for-Sale (Amortized Cost: 1995, $8,485.4; 1994, $3,638.6) .............. $ 9,053.7 $ 3,470.6
Held-to-Maturity (Fair Value: $2,253.0) .......................................... -- 2,310.4
Equity Securities (Cost: 1995, $34.8; 1994, $45.9) ................................. 35.9 43.7
Mortgage Loans on Real Estate ...................................................... 1,948.4 1,570.3
Real Estate and Leases ............................................................. 97.9 111.0
Policy Loans ................................. ................ .................... 499.8 306.8
Other Invested Assets .............................................................. 47.0 42.3
Short-Term Investments ............................................................. 122.4 59.9
----- ----
Total Investments .............................................................. 11,805.1 7,915.0
Cash ................................................................................ 43.0 19.8
Accounts and Notes Receivable ....................................................... 150.9 118.2
Reinsurance Receivable .............................................................. 162.9 93.9
Deferred Policy Acquisition Costs ................................................... 860.7 885.2
Present Value of Future Profits ..................................................... 192.0 --
Property and Equipment, Net ......................................................... 122.6 121.1
Accrued Investment Income ........................................................... 164.7 112.2
Other Assets ........................................................................ 275.0 128.4
Participation Fund Account Assets ................................................... 319.6 323.4
Assets Held in Separate Accounts .................................................... 1,369.0 623.6
------- -----
Total Assets ................................................................... $ 15,465.5 $ 10,340.8
=========== ===========
<CAPTION>
LIABILITIES
<S> <C> <C>
Future Policy and Contract Benefits ................................................. $ 11,033.2 $ 7,823.6
Pending Policy Claims ............................................................... 257.7 193.5
Other Policyholder Funds ............................................................ 174.4 157.2
Notes and Mortgages Payable - Unaffiliated .......................................... 144.6 74.8
Note Payable - Parent ............................................................... 100.0 100.0
Income Taxes ........................................................................ 169.2 --
Other Liabilities ................................................................... 328.9 235.0
Participation Fund Account Liabilities .............................................. 319.6 323.4
Liabilities Related to Separate Accounts ............................................ 1,362.9 623.6
------- -----
Total Liabilities .............................................................. 13,890.5 9,531.1
-------- -------
<CAPTION>
SHAREHOLDER'S EQUITY
<S> <C> <C>
Common Stock (2.0 Million Shares Issued in 1995 and 1994) ........................... 2.5 2.5
Additional Paid-In Capital .......................................................... 538.9 216.4
Net Unrealized Investment Gains (Losses) ............................................ 246.8 (79.4)
Retained Earnings ................................................................... 786.8 670.2
----- -----
Total Shareholder's Equity ..................................................... 1,575.0 809.7
------- -----
Total Liabilities and Shareholder's Equity ................................ $ 15,465.5 $ 10,340.8
=========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
ii
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994
---- ----
REVENUES
<S> <C> <C>
Premiums ....................................................................................... $ 851.5 $ 726.9
Net Investment Income .......................................................................... 890.3 618.1
Realized Investment Gains (Losses) ............................................................. 7.4 (27.4)
Policy and Contract Charges .................................................................... 218.5 136.2
Other Income ................................................................................... 94.4 111.1
---- -----
Total ...................................................................................... 2,062.1 1,564.9
------- -------
BENEFITS AND EXPENSES
Benefits to Policyholders ...................................................................... 1,321.9 1,025.8
Sales and Operating Expenses ................................................................... 344.4 281.8
Amortization of Deferred Policy Acquisition Costs and Present Value of Future Profits .......... 90.5 56.7
Interest Expense ............................................................................... 13.5 15.2
Dividends and Experience Refunds to Policyholders .............................................. 23.4 19.0
---- ----
Total ...................................................................................... 1,793.7 1,398.5
------- -------
Income from Continuing Operations before Income Taxes ........................................... 268.4 166.4
Income Tax Expense ............................................................................ 94.4 57.9
---- ----
Income from Continuing Operations .......................................................... 174.0 108.5
----- -----
Loss from Discontinued Operations ............................................................. (5.4) (2.6)
---- ----
Net Income ................................................................................. $ 168.6 $ 105.9
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
iii
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
SHAREHOLDER'S EQUITY 1995 1994
---- ----
<S> <C> <C>
Common Stock
Beginning and End of Year ........................................................ $ 2.5 $ 2.5
---------- --------
Additional Paid-In Capital
Beginning of Year ................................................................ 216.4 216.4
Capital Contributions from Parent ................................................ 322.5 --
----- -----
End of Year .................................................................. 538.9 216.4
----- -----
Net Unrealized Investment Gains (Losses)
Beginning of Year ................................................................ (79.4) 1.8
Cumulative Effect of Accounting Change - Securities .............................. -- 85.3
Change for the Year .............................................................. 326.2 166.5)
----- -----
End of Year .................................................................. 246.8 (79.4)
----- -----
Retained Earnings
Beginning of Year ................................................................ 670.2 588.3
Net Income ....................................................................... 168.6 105.9
Dividends to Shareholder ......................................................... (52.0) (24.0)
----- -----
End of Year .................................................................. 786.8 670.2
----- -----
Total Shareholder's Equity ............................................................. $ 1,575.0 $ 809.7
========== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
iv
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ................................................................................. $ 168.6 $ 105.9
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Interest Credited to Insurance Contracts ......................................... 500.1 364.7
Future Policy Benefits ........................................................... (117.5) (60.1)
Capitalization of Policy Acquisition Costs ....................................... (176.6) (119.0)
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits ........................................... 90.5 56.7
Deferred Income Taxes ............................................................ 11.5 9.2
Net Change in Receivables and Payables ........................................... 8.5 45.2
Other Assets ..................................................................... (83.4) 4.0
Realized Investment (Gains) Losses, Net .......................................... (7.4) 27.4
Other ............................................................................ (3.5) 15.7
---- ----
Net Cash Provided by Operating Activities ................................... 390.8 449.7
----- -----
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities ........................................... 190.5 158.5
Proceeds from Maturities or Repayment of Fixed Maturity Securities
Available-for-Sale .................................................................... 329.9 177.2
Held-to-Maturity ...................................................................... 415.6 390.2
Cost of Fixed Maturity Securities Acquired
Available-for-Sale .................................................................... (971.4) (720.7)
Held-to-Maturity ...................................................................... (519.8) (617.5)
Sales (Purchases) of Equity Securities, Net ................................................ 31.0 (9.0)
Proceeds of Mortgage Loans Sold, Matured or Repaid ......................................... 314.2 358.2
Cost of Mortgage Loans Acquired ............................................................ (385.2) (149.4)
Sales of Real Estate and Leases, Net ....................................................... 28.8 14.5
Policy Loans Issued, Net ................................................................... (63.0) (49.4)
Sales of Other Invested Assets, Net ........................................................ 39.0 19.6
Sales (Purchases) of Short-Term Investments, Net ........................................... (56.4) 13.8
Cash Acquired with Acquisition of USLICO ................................................... .4 --
------ ------
Net Cash Used by Investing Activities ................................................. (646.4) (414.0)
------ ------
FINANCING ACTIVITIES
Deposits to Insurance Contracts ............................................................ 1,265.6 862.6
Maturities and Withdrawals from Insurance Contracts ........................................ (1,015.3) (849.7)
Increase in Notes and Mortgages Payable .................................................... 72.1 --
Repayment of Notes and Mortgages Payable ................................................... (2.3) (35.8)
Dividends to Shareholder ................................................................... (41.3) (24.0)
----- -----
Net Cash Provided (Used) by Financing Activities ..................................... 278.8 (46.9)
----- -----
Increase (Decrease) in Cash ................................................................ 23.2 (11.2)
Cash at Beginning of Year .................................................................. 19.8 31.0
---- ----
Cash at End of Year ........................................................................ $ 43.0 $ 19.8
========= ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
v
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
Effective January 1, 1995, Northwestern National Life Insurance Company
(Northwestern) and its subsidiaries (the Company) adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan" and SFAS No. 118 "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure." SFAS No. 114 and SFAS No. 118 require a
company to measure impairment based upon the present value of expected future
cash flows discounted at the loan's effective interest rate, the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. If foreclosure is probable, the measurement of impairment
must be based upon the fair value of the collateral. The adoption of these
standards did not have a significant effect on the financial results of the
Company.
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires a
company to classify its securities into categories based upon the company's
intent relative to the eventual disposition of the securities.
SFAS No. 115 establishes three categories of securities. The first
category, held-to-maturity securities, is composed of debt securities which a
company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. The second category,
available-for-sale securities, may be sold to address the liquidity and other
needs of a company. Debt and equity securities classified as available-for-sale
are carried at fair value on the balance sheet with unrealized gains and losses
excluded from income and reported as a separate component of shareholder's
equity. The third category, trading securities, is for debt and equity
securities acquired for the purpose of selling them in the near term. The
Company has not classified any of its securities as trading securities.
The December 31, 1995 balance of shareholder's equity was increased by
$246.8 million (comprised of an increase in the carrying value of the securities
of $569.9 million, reduced by $189.4 million of related adjustments to deferred
policy acquisition costs and $133.7 million in deferred income taxes), while the
December 31, 1994 balance of shareholder's equity was reduced by $79.4 million
(comprised of a decrease in the carrying value of the securities of $170.2
million, reduced by $48.1 million of related adjustments to deferred policy
acquisition costs and $42.7 million in deferred income taxes) to reflect the net
unrealized gain/loss on fixed maturity securities classified as available-for-
sale.
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing life
insurance and related financial service products. The Company operates primarily
in the United States and, through its subsidiaries is authorized to do business
in all 50 states.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Northwestern
and its subsidiaries. Northwestern is a wholly owned subsidiary of ReliaStar
Financial Corp. (ReliaStar). Northwestern's principal subsidiaries are Northern
Life Insurance Company (Northern), United Services Life Insurance Company (USL),
Bankers Security Life Insurance Society (BSL), ReliaStar Mortgage Corporation
and Washington Square Advisors, Inc. During 1995, The North Atlantic Life
Insurance Company of America was merged into BSL. These consolidated financial
statements exclude the effects of all material intercompany transactions.
vi
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) which may
be sold to meet liquidity and other needs of the Company are categorized as
available-for-sale and are valued at fair value. Fixed maturity securities which
the Company has the positive intent and ability to hold to maturity are
categorized as held-to-maturity and are valued at amortized cost less write-offs
for other than temporary declines in fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are
valued at fair value.
Mortgage loans on real estate are carried at amortized cost less an
impairment allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost
less accumulated depreciation and allowances for estimated losses. Investments
in real estate joint ventures are accounted for using the equity method. Real
estate acquired through foreclosure is carried at the lower of fair value minus
estimated costs to sell or cost.
Short-term investments are carried at amortized cost.
Unrealized investment gains and losses of equity securities and fixed
maturity securities classified as available-for-sale, net of related deferred
acquisition costs and tax effects, are accounted for as a direct increase or
decrease in shareholder's equity.
Realized investment gains and losses enter into the determination of net
income. Realized investment gains and losses on sales of securities are
determined on the specific identification method. Write-offs of investments that
decline in value below cost on other than a temporary basis and the change in
the allowance for mortgage loans and wholly owned real estate are included with
realized investment gains and losses in the Consolidated Statements of Income.
The Company records write-offs or allowances for its investments based upon
an evaluation of specific problem investments. The Company reviews, on a
continual basis, all invested assets (including marketable bonds, private
placements, mortgage loans and real estate investments) to identify investments
where the Company has credit concerns. Investments with credit concerns include
those the Company has identified as problem investments, which are issues
delinquent in a required payment of principal or interest, issues in bankruptcy
or foreclosure and restructured or foreclosed assets. The Company also
identifies investments as potential problem investments, which are investments
where the Company has serious doubts as to the ability of the borrowers to
comply with the present loan repayment terms.
PROPERTY AND EQUIPMENt
Property and equipment are carried at cost, net of accumulated depreciation
of $79.8 million and $67.5 million at December 31, 1995 and 1994, respectively.
The Company provides for depreciation of
vii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
property and equipment using straight-line and accelerated methods over the
estimated useful lives of the assets. Buildings are generally depreciated over
35 to 50 years. Depreciation expense for 1995 and 1994 amounted to $9.1 million
and $8.4 million, respectively.
PARTICIPATION FUND ACCOUNT
On January 3, 1989, the Commissioner of Commerce of the State of Minnesota
approved a Plan of Conversion and Reorganization (the Plan) which provided,
among other things, for the conversion of Northwestern from a combined stock and
mutual insurance company to a stock life insurance company.
The Plan provided for the establishment of a Participation Fund Account
(PFA) for the benefit of certain participating individual life insurance
policies and annuities issued by Northwestern prior to the effective date of the
Plan. Under the terms of the PFA, the insurance liabilities and assets with
respect to such policies are segregated in the accounting records of
Northwestern to assure the continuation of current policyholder dividend
practices. Assets and liabilities of the PFA are presented in accordance with
statutory accounting practices. Earnings derived from the operation of the PFA
will inure solely to the benefit of the policies covered by the PFA, and no
benefit will inure to the Company. Accordingly, results of operations for the
PFA are excluded from the Company's Consolidated Statements of Income. In the
event that the assets of the PFA are insufficient to provide the contractual
benefits guaranteed by the affected policies, Northwestern must provide such
contractual benefits from its general assets.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets (principally
investments) and liabilities (principally to contractholders) of each account
are clearly identifiable and distinguishable from other assets and liabilities
of the Company. Assets are valued at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
Recognition of traditional life, group and annuity premium revenue and
benefits to policyholders - Traditional life insurance products include those
products with fixed and guaranteed premiums and benefits, and consist
principally of whole life insurance policies and certain annuities with life
contingencies (immediate annuities). Life insurance premiums and immediate
annuity premiums are recognized as premium revenue when due. Group insurance
premiums are recognized as premium revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned premiums so as
to result in recognition of profits over the life of the contracts. This
association is accomplished by means of the provision for liabilities for future
policy benefits and the amortization of deferred policy acquisition costs.
Recognition of universal life-type contracts revenue and benefits to
policyholders - Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
payments for such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed
against policy account values for deferred policy loading and the cost of
insurance and policy administration. Policy benefits and claims that are charged
to expense include interest credited to contracts and benefit claims incurred in
the period in excess of related policy account balances.
viii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recognition of investment contract revenue and benefits to policyholders--
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Guaranteed
Investment Contracts (GICs) and certain deferred annuities are considered
investment contracts. Amounts received as payments for such contracts are not
reported as premium revenues.
Revenues for investment contracts consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily
related to the production of new business, have been deferred to the extent that
such costs are deemed recoverable. Such costs include commissions, certain costs
of policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance are amortized over the
premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment
contracts are amortized over the lives of the policies, in relation to the
present value of estimated gross profits from mortality, investment and expense
margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits (PVFP) reflects the estimated fair
value of the acquired insurance business in force and represents the portion of
the cost to acquire USLICO Corporation (USLICO) that is allocated to the value
of future cash flows from insurance contracts existing at the date of
acquisition. Such value is the present value of the actuarially determined
projected net cash flows from the acquired insurance contracts. The weighted
average discount rate used to determine such value was approximately 15%.
An analysis of the present value of the future profits asset account is
presented below:
YEAR ENDED
DECEMBER 31,
1995
-----------
(IN MILLIONS)
Balance at Acquisition............................................... $300.0
Imputed Interest..................................................... 17.6
Amortization......................................................... (32.6)
Adjustment for Unrealized Gains on Available-for-Sale Securities..... (93.0)
-----
Balance, December 31, 1995........................................... $192.0
======
Based on current conditions and assumptions as to future events on acquired
policies in force, the Company expects that the net amortization of the
beginning balance of the PVFP will be between 5% and 6% in each of the years
1996 through 2000. The interest rates used to determine the amount of imputed
interest on the unamortized PVFP balance ranged from 5% to 8%.
ix
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill is the excess of the amount paid to acquire a Company over the
fair value of the net assets acquired. Goodwill is amortized on a straight-line
basis over 40 years. The carrying value of goodwill is monitored for impairment
of value based on the Company's estimate of future earnings. The carrying value
of goodwill is reduced and a charge to income is recorded when an impairment in
value is identified. No goodwill impairment charges have been recorded.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life contracts are
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible unfavorable
deviation. These assumptions are made at the time the contract is issued or, for
purchased contracts, at the date of acquisition.
Liabilities for future policy and contract benefits on universal life-type
and investment-type contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled
life reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The provision for income taxes includes amounts currently payable and
deferred income taxes resulting from the cumulative differences in the assets
and liabilities determined on a tax return and financial statement basis.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability
management of adjustable rate and short-term invested assets. The Company does
not enter into any interest rate swap agreements for trading purposes. The
interest rate swap transactions involve the exchange of fixed and floating rate
interest payments without the exchange of underlying principal amounts and do
not contain other optional provisions. The difference between amounts paid and
amounts received on interest rate swaps is reflected in net investment income.
INTEREST RATE FUTURES CONTRACTS
Futures contracts are used as hedges for asset/liability management of
fixed maturity securities and liabilities arising from GICs. Realized and
unrealized gains and losses on futures contracts are deferred and amortized over
the life of the hedged asset or liability.
NOTE 3. ACQUISITION
On January 17, 1995, ReliaStar acquired USLICO. USLICO was a holding
company with two primary subsidiaries: USL of Arlington, Virginia and BSL of
Uniondale, New York. Concurrent with the acquisition, ReliaStar contributed all
of the capital stock of USL and BSL to the Company. The acquisition was
accounted for using the purchase method of accounting and, therefore, the
consolidated financial statements include the accounts of USL and BSL since the
date of acquisition. Goodwill totaling $44.3 million representing the excess of
the purchase price allocated to USL and BSL over the fair value of the net
assets acquired has been recorded.
x
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 3. ACQUISITION (CONTINUED)
The following pro forma consolidated financial information has been
prepared assuming the acquisition had taken place at the beginning of 1994:
YEAR ENDED
DECEMBER 31,
1994
-----------
(IN MILLIONS)
Revenues.............................................. $1,961.1
Net Income............................................ 139.0
The pro forma financial information is not necessarily indicative of the
results of operations that would have occurred had the acquisition taken place
at the beginning of 1994 or of future operations of the combined companies.
NOTE 4. INVESTMENTS
Investment income summarized by type of investment was as follows:
YEAR ENDED
DECEMBER 31,
---------------
1995 1994
---- ----
(IN MILLIONS)
Fixed Maturity Securities........................... $673.4 $449.6
Equity Securities................................... 3.1 1.6
Mortgage Loans on Real Estate....................... 184.3 160.0
Real Estate and Leases.............................. 16.8 15.7
Policy Loans........................................ 28.9 17.6
Other Invested Assets............................... 7.8 3.6
Short-Term Investments.............................. 7.6 4.2
----- -----
Gross Investment Income........................ 921.9 652.3
Investment Expenses................................. 31.6 34.2
---- ----
Net Investment Income.......................... $890.3 $618.1
====== ======
xi
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 4. INVESTMENTS (CONTINUED)
Net pretax realized investment gains (losses) were as follows:
YEAR ENDED
DECEMBER 31,
---------------
1995 1994
---- ----
(IN MILLIONS)
Net Gains (Losses) on Sales of Investments
Fixed Maturity Securities..................... $3.3 $2.1
Equity Securities............................. 15.1 .6
Mortgage Loans................................ (.1) --
Foreclosed Real Estate........................ .6 .7
Real Estate .................................. 1.7 (.2)
Other ........................................ 2.2 3.2
--- ---
22.8 6.4
---- ---
Provisions for Losses on Investments
Fixed Maturity Securities..................... (3.0) (13.9)
Equity Securities............................. (.1) (1.0)
Mortgage Loans................................ (6.3) (4.9)
Foreclosed Real Estate........................ (5.2) (11.8)
Real Estate .................................. (.8) --
Other Assets ................................. -- (2.2)
---- ----
(15.4) (33.8)
----- -----
Net Pretax Realized Investment Gains (Losses). $7.4 $(27.4)
==== ======
Gross realized investment gains of $8.3 million and $5.0 million and gross
realized investment losses of $5.0 million and $2.9 million were recognized on
sales of fixed maturity securities during the years ended December 31, 1995 and
1994, respectively. All 1995 and 1994 fixed maturity security sales were from
the available-for-sale portfolio.
xii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 4. INVESTMENTS (CONTINUED)
The amortized cost and fair value of investments in fixed maturity
securities by type of investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
GROSS UNREALIZED
AMORTIZED ----------------
COST GAINS (LOSSES) FAIR VALUE
---- ----- -------- ----------
(IN MILLIONS)
AVAILABLE-FOR-SALE
<S> <C> <C> <C> <C>
United States Government and Government Agencies and Authorities..... $172.8 $13.2 -- $186.0
States, Municipalities and Political Subdivisions.................... 64.4 4.2 $(.1) 68.5
Foreign Governments.................................................. 82.1 6.8 (.2) 88.7
Public Utilities..................................................... 775.3 74.5 (.9) 848.9
Corporate Securities................................................. 5,330.7 392.2 (21.6) 5,701.3
Mortgage-Backed/Structured Finance Securities........................ 2,058.0 102.7 (2.4) 2,158.3
Redeemable Preferred Stock............ .............................. 2.1 -- (.1) 2.0
--- --- --- ---
Total............................................................ $8,485.4 $593.6 $(25.3) $9,053.7
======== ====== ====== ========
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------------
GROSS UNREALIZED
AMORTIZED ----------------
COST GAINS (LOSSES) FAIR VALUE
---- ----- -------- ----------
(IN MILLIONS)
AVAILABLE-FOR-SALE
<S> <C> <C> <C> <C>
United States Government and Government Agencies and Authorities...... $5.8 -- $(.3) $5.5
States, Municipalities and Political Subdivisions..................... 5.7 -- -- 5.7
Foreign Governments................................................... 56.4 -- (3.4) 53.0
Public Utilities...................................................... 309.4 $1.3 (17.5) 293.2
Corporate Securities.................................................. 2,649.8 13.3 (136.4) 2,526.7
Mortgage-Backed/Structured Finance Securities......................... 608.5 2.5 (27.1) 583.9
Redeemable Preferred Stock ........................................... 3.0 -- (.4) 2.6
--- --- --- ---
Total Available-for-Sale......................................... 3,638.6 17.1 (185.1) 3,470.6
======= ==== ====== =======
HELD-TO-MATURITY
States, Municipalities and Political Subdivisions..................... .7 -- (.1) .6
Public Utilities...................................................... 42.5 .8 (1.8) 41.5
Corporate Securities.................................................. 1,202.1 15.0 (37.7) 1,179.4
Mortgage-Backed/Structured Finance Securities......................... 1,065.1 .6 (34.2) 1,031.5
------- -- ----- -------
Total Held-to-Maturity........................................... 2,310.4 16.4 (73.8) 2,253.0
------- ---- ----- -------
Total............................................................ $5,949.0 $33.5 $(258.9) $5,723.6
======== ===== ======= ========
</TABLE>
xiii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 4. INVESTMENTS (CONTINUED)
The amortized cost and fair value of fixed maturity securities 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.
DECEMBER 31, 1995
-----------------
AVAILABLE-FOR-SALE
--------------------
AMORTIZED FAIR
COST VALUE
---- -----
Due in One Year or Less.......................... $ 123.1 $ 122.8
Due After One Year Through Five Years............ 2,497.4 2,634.3
Due After Five Years Through Ten Years........... 2,750.4 2,965.4
Due After Ten Years.............................. 1,056.5 1,172.9
Mortgage-Backed/Structured Finance Securities.... 2,058.0 2,158.3
------- -------
Total........................................ $8,485.4 $9,053.7
======== ========
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY TOTAL
------------------------ ------------------------ ------------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
---- ----- ---- ----- ---- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Due in One Year or Less....................... $63.4 $63.0 $47.7 $47.8 $111.1 $110.8
Due After One Year Through Five Years......... 928.2 898.3 425.9 422.1 1,354.1 1,320.4
Due After Five Years Through Ten Years........ 1,697.3 1,600.7 445.0 437.2 2,142.3 2,037.9
Due After Ten Years........................... 341.2 324.7 326.7 314.4 667.9 639.1
Mortgage-Backed/Structured Finance Securities. 608.5 583.9 1,065.1 1,031.5 1,673.6 1,615.4
----- ----- ------- ------- ------- -------
Total...................................... $3,638.6 $3,470.6 $2,310.4 $2,253.0 $5,949.0 $5,723.6
======== ======== ======== ======== ======== ========
</TABLE>
The fair values for the marketable bonds are determined based upon the
quoted market prices for bonds actively traded. The fair values for marketable
bonds without an active market are obtained through several commercial pricing
services which provide the estimated fair values. Fair values of privately
placed bonds which are not considered problems are determined utilizing a
commercially available pricing model. The model considers the current level of
risk-free interest rates, current corporate spreads, the credit quality of the
issuer and cash flow characteristics of the security. Utilizing these data, the
model generates estimated market values which the Company considers reflective
of the fair value of each privately placed bond. Fair values for privately
placed bonds which are considered problems are determined though consideration
of factors such as the net worth of borrower, the value of collateral, the
capital structure of the borrower, the presence of guarantees and the Company's
evaluation of the borrower's ability to compete in the relevant market.
At December 31, 1995, the largest industry concentration of the private
placement portfolio was consumer products/services, where 18.9% of the portfolio
was invested, and the largest industry concentration of the marketable bond
portfolio was structured finance/mortgage-backed securities, where 31.9% of the
portfolio was invested. At December 31, 1995, the largest geographic
concentration of commercial mortgage loans was in the midwest region of the
United States, where approximately 32.5% of the commercial mortgage loan
portfolio was invested.
xiv
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 4. INVESTMENTS (CONTINUED)
At December 31, 1995 and 1994, gross unrealized appreciation of equity
securities was $3.0 million and $7.5 million, respectively, and gross unrealized
depreciation was $1.9 million and $9.7 million, respectively.
Invested assets which were nonincome producing (no income received for the
12 months preceding the balance sheet date) were as follows:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Fixed Maturity Securities............................. $ .7 $ 7.8
Mortgage Loans on Real Estate......................... 2.8 2.5
Real Estate and Leases................................ 17.6 29.9
---- ----
Total............................................. $21.1 $40.2
===== =====
Allowances for losses on investments are reflected on the Consolidated
Balance Sheets as a reduction of the related assets and were as follows:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Mortgage Loans........................................ $12.4 $4.1
Foreclosed Real Estate................................ 10.6 11.9
Investment Real Estate................................ 1.0 .2
Other Invested Assets................................. 2.3 2.5
At December 31, 1995, the total investment in impaired mortgage loans
(before allowances for credit losses) and the related allowance for credit
losses on these impaired mortgage loans was $25.4 million and $12.4 million,
respectively. Increases to the allowance for credit losses account charged to
income and the amount of decreases to the allowance account were $6.3 million
and $9.5 million, respectively, during the year ended December 31, 1995. The
average investment in impaired mortgage loans (before allowances for credit
losses) and the amount of the related interest income recognized on impaired
mortgage loans during 1995, were approximately $2.0 million and $1.7 million,
respectively. The Company does not accrue interest income on impaired mortgage
loans when the likelihood of collection is doubtful. Cash receipts for interest
payments are recognized as income in the period received.
Noncash investing activities consisted of the following:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Real Estate Assets Acquired Through Foreclosure........... $28.0 $24.9
Mortgage Loans Acquired in Sales of Real Estate Assets.... 15.3 27.9
During 1994, the Company transferred four fixed maturity securities with an
amortized cost of $31.0 million and a fair value of $27.1 million from the
held-to-maturity portfolio to the available-for-sale portfolio. Each of the
securities transferred were private placement securities which experienced a
significant deterioration in the issuers' creditworthiness during the period.
None of the securities transferred were sold during the year.
xv
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 4. INVESTMENTS (CONTINUED)
Effective December 31, 1995, the Company adopted the implementation
guidance contained in the Financial Accounting Series Special Report, "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Concurrent with the adoption of this implementation
guidance, the Company reclassified all of its held-to-maturity securities to
available-for-sale based upon a reassessment of the appropriateness of the
classifications of all securities held at that time. The amortized cost and net
unrealized appreciation of the securities reclassified were $2.42 billion and
$108.1 million, respectively, at December 31, 1995. In accordance with the
special report, financial statements prior to December 31, 1995 have not been
restated to reflect the effects of initially adopting the implementation
guidance.
NOTE 5. INCOME TAXES
The income tax liability (asset) as reflected on the Consolidated Balance
Sheets consisted of the following:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Current Income Taxes.................................... $6.4 $5.4
Deferred Income Taxes................................... 162.8 (5.6)
----- ----
Total.............................................. $169.2 $(.2)
====== ====
The provision for income taxes reflected on the Consolidated Statements of
Income consisted of the following:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Currently Payable...................................... $82.9 $47.3
Deferred............................................... 11.5 10.6
---- ----
Total............................................. $94.4 $57.9
===== =====
The Internal Revenue Service has completed its review of the Company's tax
return for all years through 1991.
xvi
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 5. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to a significant portion of the deferred tax liability (asset)
relate to the following:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Future Policy and Contract Benefits.................. $(269.7) $(221.2)
Investment Write-Offs and Allowances................. (35.0) (17.7)
Pension and Postretirement Benefit Plans............. (8.3) (6.3)
Employee Benefits.................................... (9.3) (5.2)
Deferred Futures Gains............................... (1.8) (5.1)
Net Unrealized Investment Losses..................... -- (42.7)
Other ............................................... (42.0) (35.8)
----- -----
Gross Deferred Tax Asset............................. (366.1) (334.0)
------ ------
Deferred Policy Acquisition Costs.................... 267.9 260.4
Present Value of Future Profits...................... 99.0 --
Net Unrealized Investment Gains...................... 90.2 --
Property and Equipment............................... 27.1 26.3
Real Estate Joint Ventures........................... 12.2 14.3
Accrual of Market Discount........................... 8.4 3.2
Policyholder Dividends............................... 4.4 3.0
Other................................................ 19.7 21.2
---- ----
Gross Deferred Tax Liability......................... 528.9 328.4
----- -----
Net Deferred Tax Liability (Asset).............. $162.8 $(5.6)
====== =====
Federal income tax regulations allowed certain special deductions for 1983
and prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1995, Northwestern and its life
insurance subsidiaries have accumulated approximately $51.0 million in their
separate policyholders' surplus accounts. Deferred taxes have not been provided
on this temporary difference.
There have been no deferred taxes recorded for the unremitted equity in
subsidiaries as the earnings are considered to be permanently invested or will
be remitted only when tax effective to do so.
The difference between the U.S. federal income tax rate and the
consolidated tax provision rate is summarized as follows:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Statutory Tax Rate...................................... 35.0% 35.0%
Other................................................... .2 (.2)
-- ---
Provision for Income Taxes........................... 35.2% 34.8%
==== ====
xvii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 5. INCOME TAXES (CONTINUED)
Cash paid to ReliaStar for federal income taxes was $90.3 million and $29.8
million for the years ended December 31, 1995 and 1994, respectively.
NOTE 6. NOTES AND MORTGAGES PAYABLE
A summary of notes and mortgages payable is as follows:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Unaffiliated:
Commercial Paper..................................... $135.6 $ 65.6
Other Indebtedness - Current Portion................. .1 .1
----- ----
Short-Term Debt................................. 135.7 65.7
----- ----
Other Indebtedness - Noncurrent Portion.............. 8.9 9.1
--- ---
Total Unaffiliated.............................. $144.6 $ 74.8
====== ======
Note Payable to Parent.......................... $100.0 $100.0
====== ======
At December 31, 1995 and 1994, other indebtedness is primarily mortgage
notes assumed in connection with certain real estate investments with interest
rates ranging from 6.2% to 11.5%.
The weighted average interest rate on the commercial paper outstanding at
December 31, 1995 and 1994 was 6.06% and 6.10%, respectively, with maturities
ranging from 5 to 44 days at December 31, 1995.
Principal payments required on notes and mortgages payable to unaffiliated
companies in each of the next five years and thereafter are as follows:
(IN MILLIONS)
-------------
1996 - $135.7 1999 - $ .2
1997 - $ .1 2000 - $ .2
1998 - $ .2 2001 and thereafter - $8.2
ReliaStar has loaned $100.0 million to Northwestern under a surplus note.
The original note, dated April 1, 1989, was issued in connection with
Northwestern's demutualization and was used to offset the surplus reduction
related to the cash distribution to the mutual policyholders in the
demutualization. This original note was replaced by a successor surplus note
(the 1994 Note) dated November 1, 1994. The 1994 Note provides, subject to the
regulatory constraints discussed below, that (i) it is a surplus note which will
mature on September 15, 2003 with principal due at maturity, but payable without
penalty, in whole or in part before maturity; (ii) interest is at 6 5/8% payable
semi-annually; and (iii) in the event that Northwestern is in default in the
payment of any required interest or principal, Northwestern cannot pay cash
dividends on its capital stock (all of which is owned directly by ReliaStar).
The 1994 Note further provides that there may be no payment of interest or
principal without the express approval of the Minnesota Department of Commerce.
Interest paid on debt was $14.2 million and $16.0 million for 1995 and
1994, respectively.
xviii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has noncontributory defined benefit retirement plans covering
substantially all employees. The plans, which may be terminated as to accrual of
additional benefits at any time by the Board of Directors, provide benefits to
employees upon retirement.
The benefits under the plans are based on years of service and the
employee's compensation during the last five years of employment. The Company's
policy is to fund the minimum required contribution necessary to meet the
present and future obligations of the plans. Contributions are intended to
provide not only for benefits attributed to service to date but also for those
expected to be earned in the future. Contributions are made to a tax-exempt
trust. Plan assets consist principally of investments in stock and bond mutual
funds, common stock and corporate bonds. Included in plan assets are 616,491
shares of ReliaStar common stock with a fair value of $27.4 million.
The Company and ReliaStar also have unfunded noncontributory defined
benefit plans providing for benefits to employees in excess of limits for
qualified retirement plans and for benefits to nonemployee members of the
ReliaStar Board of Directors.
Net periodic pension expense for ReliaStar and its subsidiaries included
the following components:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Service Cost - Benefits Earned During the Year............ $3.4 $3.1
Interest Cost on Projected Benefit Obligation............. 11.9 5.2
Actual Return on Plan Assets.............................. (33.7) 2.4
Net Amortization and Deferral............................. 19.1 (7.5)
---- ----
Net Periodic Pension Expense......................... $.7 $3.2
==== ====
The following table sets forth for ReliaStar and its subsidiaries the
funded status of the plans as of December 31:
<TABLE>
<CAPTION>
FUNDED PLANS UNFUNDED PLANS
1995 1994 1995 1994
---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation
Vested...................................................................... $(157.1) $(48.5) $(10.7) $(3.5)
Nonvested................................................................... (5.1) (3.2) (1.2) (.2)
Effect of Projected Future Compensation Increases................................ (10.6) (8.1) (2.1) (2.3)
----- ---- ------ ------
Projected Benefit Obligation..................................................... (172.8) (59.8) (14.0) (6.0)
Plan Assets at Fair Value........................................................ 169.9 53.3 -- --
----- ---- ------ ------
Plan Assets Less Than Projected Benefit Obligation............................... (2.9) (6.5) (14.0) (6.0)
Unrecognized Net Loss............................................................ 24.2 8.4 6.2 1.8
Unrecognized Transition Obligation (Asset)....................................... (.8) (1.1) .1 .1
Additional Minimum Liability..................................................... -- -- (4.2) (.1)
----- ---- ------ ------
Net Pension Asset (Liability)............................................... $20.5 $.8 $(11.9) $(4.2)
===== ==== ====== =====
</TABLE>
xix
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable. The net periodic pension expense relating to and
billed to ReliaStar was insignificant.
The projected benefit obligation was determined using an assumed discount
rate of 7.25% and 8.5%, and a weighted-average assumed long-term rate of
compensation increase of 4.5% and 5.0% at January 1, 1996 and 1995,
respectively. The assumed long-term rate of return on plan assets was 9.5%.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to
retired employees (and their eligible dependents). Substantially all of the
Company's employees will become eligible for those benefits if they meet
specified age and service requirements and reach retirement age while working
for the Company, unless the plans are terminated or amended. The postretirement
health care plan is contributory, with retiree contributions adjusted annually;
the life insurance plan is noncontributory and benefits are primarily based on
the employee's final compensation levels.
The Company's postretirement health care plans currently are not funded.
The accumulated postretirement benefit obligation (APBO) and the accrued
postretirement benefit liability were as follows:
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Retirees............................................... $10.3 $8.4
Fully Eligible Active Plan Participants................ 4.5 2.4
Other Active Plan Participants......................... 4.9 2.6
--- ---
Unfunded APBO....................................... 19.7 13.4
Unrecognized Prior Service Cost........................ .1 .3
Unrecognized Gain (Loss)............................... (.3) 1.6
--- ---
Accrued Postretirement Benefit Liability.......... $19.5 $15.3
===== =====
Net periodic postretirement benefit costs consisted of the following
components:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Service Cost - Benefits Earned........................ $1.2 $1.1
Interest Cost on APBO................................. 1.3 1.0
Amortization of Prior Service Cost.................... (.1) (.1)
--- ---
Net Periodic Postretirement Benefit Costs........ $2.4 $2.0
==== ====
The assumed health care cost trend rate used in measuring the APBO as of
January 1, 1996 was 10.0%, decreasing gradually to 5.0% in the year 2010 and
thereafter. The assumed health care cost trend rate used in measuring the APBO
as of January 1, 1995 was 10.0%, decreasing gradually to 6.0% in the year 2009
and thereafter. The assumed discount rate used in determining the APBO was 7.25%
and 8.5% at January 1, 1996 and 1995, respectively. The assumed health care cost
trend rate has a significant effect on the amounts reported. For example, a
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the APBO as of December 31, 1995 approximately $2.4
million and 1995 net postretirement health care cost by approximately $.4
million.
xx
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain Company
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. The Success Sharing Plan has both
qualified and nonqualified components. The nonqualified component is equal to
25% of the annual award and is paid in cash to employees. The qualified
component is equal to 75% of the annual award, with 25% contributed to a
deferred investment account and the remaining 50% contributed to the ESOP
portion of the Success Sharing Plan. Costs charged to expense for the Success
Sharing Plan were $8.6 million and $8.4 million in 1995 and 1994, respectively.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company and ReliaStar have entered into agreements whereby ReliaStar
and the Company provide certain management, administrative, legal, and other
services to each other. The net amounts billed resulted in the Company making
payments of $25.1 million and $13.6 million to ReliaStar in 1995 and 1994,
respectively. During 1995 the Company paid dividends of $52.0 million to
ReliaStar consisting of $41.3 million paid in cash and $10.7 million in noncash
dividends.
NOTE 9. SHAREHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The ability of Northwestern to pay cash dividends to ReliaStar is
restricted by law or subject to approval of the insurance regulatory authorities
of Minnesota. These authorities recognize only statutory accounting practices
for the ability of an insurer to pay dividends to its shareholders.
Under Minnesota insurance law regulating the payment of dividends by
Northwestern, any such payment must be an amount deemed prudent by
Northwestern's Board of Directors and, unless otherwise approved by the
Commissioner of the Minnesota Department of Commerce (the Commissioner), must be
paid solely from the adjusted earned surplus of Northwestern. Adjusted earned
surplus means the earned surplus as determined in accordance with statutory
accounting practices (unassigned funds), less 25% of the amount of such earned
surplus which is attributable to net unrealized capital gains. Further, without
approval of the Commissioner, Northwestern may not pay in any calendar year any
dividend which, when combined with other dividends paid within the preceding 12
months, exceeds the greater of (i) 10% of Northwestern's statutory surplus at
the prior year-end or (ii) 100% of Northwestern's statutory net gain from
operations (not including realized capital gains) for the prior calendar year.
For 1996, the amount of dividends which can be paid by Northwestern without
commissioner approval is $117.7 million.
STATUTORY SURPLUS AND NET INCOME
Net income of Northwestern and its subsidiaries, as determined in
accordance with statutory accounting practices was $97.8 million and $57.6
million for 1995 and 1994, respectively. Northwestern's statutory surplus was
$728.3 million and $565.2 million at December 31, 1995 and 1994, respectively.
NOTE 10. REINSURANCE
The Company is a member of reinsurance associations established for the
purpose of ceding the excess of life insurance over retention limits. In
addition, Northwestern's Life and Health Reinsurance Division assumes and cedes
reinsurance on certain life and health risks as its primary business.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The amount of the allowance for uncollectible
xxi
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 10. REINSURANCE (CONTINUED)
reinsurance receivables was immaterial at December 31, 1995. 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. The Company's retention limit is $400,000 per life for individual
coverage and, to the extent that Northwestern reinsures life policies written by
Northern and North Atlantic, the limit is increased up to $600,000 per life. For
group coverage and reinsurance assumed, the retention is $500,000 per life with
per occurrence limitations, subject to certain maximums. As of December 31,
1995, $12.0 billion of life insurance in force was ceded to other companies. The
Company has assumed $36.7 billion of life insurance in force as of December 31,
1995 (including $32.0 billion of reinsurance assumed pertaining to Federal
Employees' Group Life Insurance and Servicemans' Group Life Insurance). Also
included in these amounts are $513.1 million of reinsurance ceded and $4.7
billion of reinsurance assumed by Northwestern's Life and Health Reinsurance
Division.
The effect of reinsurance on premiums and recoveries is as follows:
YEAR ENDED
DECEMBER 31
---------------
1995 1994
---- ----
(IN MILLIONS)
Direct Premiums........................................ $643.8 $533.2
Reinsurance Assumed.................................... 297.6 261.8
Reinsurance Ceded...................................... (89.9) (68.1)
----- -----
Net Premiums .......................................... $851.5 $726.9
====== ======
Reinsurance Recoveries................................. $80.4 $59.0
===== =====
NOTE 11. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
1995 1994
---- ----
(IN MILLIONS)
Balance at January 1.................................... $322.9 $244.6
Less Reinsurance Recoverables........................... 59.5 32.8
---- ----
Net Balance at January 1....................... 263.4 211.8
Incurred Related to:
Current Year....................................... 273.1 266.2
Prior Year......................................... (2.7) (16.6)
---- -----
Total Incurred................................ 270.4 249.6
Paid Related to:
Current Year....................................... 157.0 140.3
Prior Year......................................... 89.0 66.7
---- ----
Total Paid.................................... 246.0 207.0
Net Balance at December 31.............................. 287.8 254.4
Plus Reinsurance Recoverables........................... 81.6 50.5
---- ----
Balance at December 31............................. $369.4 $304.9
====== ======
xxii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 11. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE (CONTINUED)
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Consolidated
Balance Sheets.
NOTE 12. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the
normal course of the business of the Company. In the opinion of Management, the
ultimate resolution of such litigation will not result in any material adverse
impact to operations or financial condition of the Company.
JOINT GROUP LIFE AND ANNUITY CONTRACTS
Northwestern has issued certain participating group annuity and group life
insurance contracts jointly with another insurance company. Northwestern has
entered into an arrangement with this insurer whereby Northwestern will
gradually transfer these liabilities (approximately $328.4 million at December
31, 1995) to the other insurer over a ten year period which commenced in 1993.
The terms of the arrangement specify the interest rate on the liabilities and
provide for a transfer of assets and liabilities scheduled in a manner
consistent with the expected cash flows of the assets allocated to support the
liabilities. A contingent liability exists with respect to the joint obligor's
portion of the contractual liabilities attributable to contributions received
prior to July 1, 1993 in the event the joint obligor is unable to meet its
obligations.
RESERVE INDEMNIFICATION
In March 1992, the Company sold Chartwell Re Corporation (Chartwell), its
property and casualty reinsurance subsidiary. The Company and the acquiring
company entered into a separate agreement which provides for reciprocal
indemnity (but with different ultimate exposure amounts) between the parties to
the agreement with respect to the adequacy of the loss and loss adjustment
expense reserves of Chartwell for all accident years which ended on or before
December 31, 1991. The indemnity is measured for the period ending on December
31, 1996. Under the terms of the agreement, the maximum amount payable by the
Company would be $23.0 million and the maximum amount payable by the acquirer to
the Company would be $5.0 million.
Based upon analyses completed during the fourth quarter of 1995, the
Company has accrued a cumulative total of $8.0 million of the maximum potential
payment under the indemnification agreement. The ultimate amount to be paid will
be affected by subsequent favorable or adverse claims development.
The amounts accrued under the indemnification agreement are presented as
discontinued operations in the Consolidated Statements of Income.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to reduce its exposure to fluctuations in
interest rates. These financial instruments include commitments to extend
credit, financial guarantees, futures contracts and interest rate swaps. Those
instruments involve, to varying degrees, elements of credit, interest rate or
liquidity risk in excess of the amount recognized in the Consolidated Balance
Sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
financial guarantees written is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. For
xxiii
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
futures contracts and interest rate swap transactions, the contract or notional
amounts do not represent exposure to credit loss. For swaps, the Company's
exposure to credit loss is limited to those swaps where the Company has an
unrealized gain. For futures contracts, the Company has no exposure to credit
risk, as the contracts are marked to market daily.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
DECEMBER 31
---------------------------
1995 1994
---- ----
(In Millions)
Financial Instruments Whose Contract Amounts Represent Credit Risk
<S> <C> <C>
Commitments to Extend Credit........................................................ $82.6 $36.4
Financial Guarantees................................................................ 41.8 47.5
Financial Instruments Whose Notional or Contract
Amounts Exceed the Amount of Credit Risk
Futures Contracts................................................................... 80.4 84.4
Interest Rate Swap Agreements....................................................... 1,222.5 1,320.0
</TABLE>
COMMITMENTS TO EXTEND CREDIT - Commitments to extend credit are legally
binding agreements to lend to a customer. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
They generally may be terminated by the Company in the event of deterioration in
the financial condition of the borrower. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
FINANCIAL GUARANTEES - Financial guarantees are conditional commitments
issued by the Company guaranteeing the performance of the borrower to a third
party. Those guarantees are primarily issued to support public and private
commercial mortgage borrowing arrangements. The credit risk involved is
essentially the same as that involved in issuing commercial mortgage loans.
Northwestern is a partner in eight real estate joint ventures where it has
guaranteed the repayment of loans of the partnership. As of December 31, 1995,
Northwestern had guaranteed repayment of $41.8 million ($47.5 million at
December 31, 1994) of such loans including the portion allocable to the PFA. If
any payments were made under these guarantees, Northwestern would be allowed to
make a claim for repayment from the joint venture, foreclose on the assets of
the joint venture including its real estate investment and, in certain
instances, make a claim against the joint venture's general partner.
For certain of these partnerships, Northwestern has made capital
contributions from time to time to provide the partnerships with sufficient cash
to meet its obligations, including operating expenses, tenant improvements and
debt service. Capital contributions during 1995 and 1994 were insignificant.
Further capital contributions are likely to be required in future periods for
certain of the joint ventures with the guarantees. The Company cannot predict
the amount of such future contributions.
FUTURES CONTRACTS - Futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified
xxiv
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
instrument, at a specified price or yield. These contracts are entered into to
manage interest rate risk as part of the Company's asset and liability
management. Risks arise from the movements in securities values and interest
rates.
INTEREST RATE SWAP AGREEMENTS - The Company also enters into interest rate
swap agreements to manage interest rate exposure. The primary reason for the
interest rate swap agreements is to extend the duration of adjustable rate
investments. Interest rate swap transactions generally involve the exchange of
fixed and floating rate interest payment obligations without the exchange of the
underlying principal amounts. Changes in market interest rates impact income
from adjustable rate investments and have an opposite (and approximately
offsetting) effect on the reported income from the swap portfolio. The risks
under interest rate swap agreements are generally similar to those of futures
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $13.6 million
and $11.0 million for 1995 and 1994, respectively.
Future minimum aggregate rental commitments at December 31, 1995 for
operating leases were as follows:
(IN MILLIONS)
-------------
1996 - $7.6 1999 - $4.6
1997 - $6.8 2000 - $5.4
1998 - $5.7 2001 and thereafter - $4.4
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No.
107 requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent
information available to Management as of December 31, 1995 and 1994. Although
Management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date; therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
FIXED MATURITY SECURITIES - The estimated fair value disclosures for debt
securities satisfy the fair value disclosure requirements of SFAS No. 107 (See
Note 4).
xxv
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
EQUITY SECURITIES - Fair value equals carrying value as these securities
are carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE - The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses, using interest rates
currently being offered in the marketplace for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS - The carrying amounts for
these assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS - The carrying amounts for
these financial instruments (primarily premiums and other accounts receivable
and accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES - The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair value for GICs was estimated using discounted cash flow analyses.
The discount rate used was based upon current industry offering rates on GICs of
similar durations.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts which includes
participating pension contracts and retirement plan deposits, approximate those
liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS - The carrying amounts for claim and other
deposit funds approximate the liabilities' fair value.
NOTES AND MORTGAGES PAYABLE - The fair value for the note payable to
ReliaStar was based upon the quoted market price of the related ReliaStar
publicly traded debt. For other debt obligations, discounted cash flow analyses
were used. The discount rate was based upon the Company's estimated current
incremental borrowing rates.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES - The carrying amounts
for other financial instruments (primarily normal payables of a short-term
nature) approximate those liabilities' fair values.
FINANCIAL GUARANTEES - The fair values for financial guarantees were
estimated using discounted cash flow analyses based upon the expected future net
amounts to be expended. The estimated net amounts to be expended were determined
based on projected cash flows and a valuation of the underlying collateral.
INTEREST RATE SWAPS - The fair value for interest rate swaps was estimated
using discounted cash flow analyses. The discount rate was based upon rates
currently being offered for similar interest rate swaps available from similar
counterparties.
xxvi
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR FINANCIAL CORP.)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1995 1994
------------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(In Millions)
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets
Fixed Maturity Securities
Available-for-Sale..................................... $9,053.7 $9,053.7 $3,470.6 $3,470.6
Held-to-Maturity............................. ......... -- -- 2,310.4 2,253.0
Equity Securities.......................... ............... 35.9 35.9 43.7 43.7
Mortgage Loans on Real Estate
Commercial ............................................ 1,465.0 1,525.8 1,120.1 1,068.8
Residential and Other ................................. 483.4 496.1 450.2 443.1
Policy Loans .............................................. 499.8 499.8 306.8 306.8
Cash and Short-Term Investments ........................... 165.4 165.4 79.7 79.7
Other Financial Instruments Recorded as Assets ............ 503.3 503.3 349.7 349.7
Financial Instruments Recorded as Liabilities
Investment Contracts
Deferred Annuities................................... . (6,704.9) (6,285.6) (4,690.0) (4,369.3)
GICs....................................... ........... (115.0) (148.6) (239.9) (261.5)
Supplementary Contracts and Immediate Annuities ....... (99.8) (99.7) (99.1) (93.9)
Other Investment Contracts ............................ (529.2) (529.2) (539.4) (539.4)
Claim and Other Deposit Funds ............................. (114.9) (114.9) (101.2) (101.2)
Notes and Mortgages Payable ............................... (243.6) (244.4) (173.7) (159.4)
Other Financial Instruments Recorded as Liabilities ....... (224.8) (224.8) (167.8) (167.8)
Off-Balance Sheet Financial Instruments
Financial Guarantees....................................... -- (4.6) -- (5.2)
Interest Rate Swaps........................................ -- 42.7 -- (46.5)
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
xxvii
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part A: None
Part B: NORTHSTAR/NWNL VARIABLE ACCOUNT
-------------------------------
Independent Auditors' Report
Statement of Assets and Liabilities, December 31, 1995
Combined Statements of Operations and Changes in
Contract Owners' Equity, Year Ended December 31, 1995
and for the Period from May 6, 1994 to December 31, 1994
Notes to Financial Statements
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
--------------------------------------------
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Operations, Years Ended
December 31, 1995 and 1994
Consolidated Statements of Shareholders' Equity,
Years Ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements
(b) Exhibits:
1. Resolutions of the Board of Directors of Northwestern National Life
Insurance Company ("Depositor") establishing the NSR/NWNL Variable
Account ("Registrant") and changing its name to Northstar/NWNL
Variable Account.
2. Not Applicable.
3. (a) General Distributor Agreement between Depositor and Northstar
Distributors, Inc.
(b) Form of agreement between Depositor and broker-dealers with
respect to the sale of Contracts.
4. Form of Contract.
5. Contract Application Form.
6. (a) Articles of Incorporation of Depositor.
(b) Bylaws of Depositor.
Page 1
<PAGE>
7. Not Applicable.
8. (a) Agreement with Continuum Administrative Services Corporation
(formerly known as Vantage Computer Systems, Inc.).
(b) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and
Amendment numbers 1 through 7.
(c) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Amendment numbers 1 through 6.
9. Opinion and consent of James E. Nelson as to the legality of the
securities being registered.
10. Independent Auditors' Consent.
11. Not Applicable.
12. Not Applicable.
13. Schedules for Computation of Performance Quotations.
14. Financial Data Schedule.
15. Powers of Attorney.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
DIRECTORS
NAME AND PRINCIPAL
BUSINESS ADDRESS PRINCIPAL OCCUPATION
R. Michael Conley Senior Vice President of ReliaStar
20 Washington Avenue South Financial Corp. since 1991; Senior
Minneapolis, Minnesota 55401 Vice President, ReliaStar Employee
Benefits of Northwestern National
Life Insurance Company since 1986;
President of NWNL Benefits
Corporation since 1988; Director
of subsidiaries of ReliaStar
Financial Corp.
<PAGE>
Page 2
Richard R. Crowl Senior Vice President, General
20 Washington Avenue South Counsel and Secretary of ReliaStar
Minneapolis, Minnesota 55401 Financial Corp. since 1996; Senior
Vice President and General Counsel
of Northwestern National Life
Insurance Company since 1996;
Executive Vice President and
General Counsel of Washington
Square Advisers, Inc. since 1986;
Vice President and Associate
General Counsel of ReliaStar
Financial Corp. from 1989 to 1996;
Vice President and Associate
General Counsel of Northwestern
National Life Insurance Company
from 1985 to 1996; Director and
Vice President of subsidiaries of
ReliaStar Financial Corp.
John H. Flittie President and Chief Operating
20 Washington Avenue South Officer of ReliaStar Financial
Minneapolis, Minnesota 55401 Corp. and Northwestern National
Life Insurance Company since 1993;
Vice Chairman of United Services
Life Insurance Company and Bankers
Security Life Insurance Society
since 1995; Senior Executive Vice
President and Chief Operating
Officer of ReliaStar Financial
Corp. and Northwestern National
Life Insurance Company from 1992 to
1993; Senior Executive Vice
President from 1991 to 1992;
Executive Vice President and Chief
Financial Officer from 1989 to
1991; Director of Community First
BankShares, Inc. and subsidiaries
of ReliaStar Financial Corp.
Wayne R. Huneke Senior Vice President, Chief
20 Washington Avenue South Financial Officer and Treasurer of
Minneapolis, Minnesota 55401 ReliaStar Financial Corp. and
Northwestern National Life
Insurance Company since 1994; Vice
President, Treasurer and Chief
Accounting Officer from 1990 to
1994; Director of subsidiaries
of ReliaStar Financial Corp.
Page 3
<PAGE>
Kenneth U. Kuk Vice President, Strategic
20 Washington Avenue South Marketing of ReliaStar Financial
Minneapolis, Minnesota 55401 Corp. and Northwestern National
Life Insurance Company since 1996;
Vice President, Investments of
ReliaStar Financial Corp. from 1991
to 1996; President and Chief
Executive Officer of Washington
Square Advisers, Inc. since 1996;
Executive Vice President of
Washington Square Advisers, Inc.
from 1985 to 1995; President of
Washington Square Financial from
1985 to 1994; Director of National
Commercial Finance Association and
subsidiaries of ReliaStar Financial
Corp.
William R. Merriam Senior Vice President, Life &
20 Washington Avenue South Health Reinsurance of Northwestern
Minneapolis, Minnesota 55401 National Life Insurance Company
since 1991; Vice President from
1984 to 1991.
Craig R. Rodby Senior Vice President, Financial
20 Washington Avenue South Management of ReliaStar Financial
Minneapolis, Minnesota 55401 Corp. since 1994; President and
Chief Executive Officer of Northern
Life Insurance Company from 1991 to
1994; President and Chief Operating
Officer of Northern Life Insurance
Company from 1990 to 1991; Director
of subsidiaries of ReliaStar
Financial Corp.
David H. Roe Senior Vice President of ReliaStar
4601 Fairfax Drive Financial Corp. since 1995; Vice
Arlington, Virginia 22203 Chairman & Chief Executive Officer
of Bankers Security Life Insurance
Society since 1995; President and
Chief Executive Officer of United
Services Life Insurance Company
since 1995; Chairman & Chief
Executive Officer of United
Services Life Insurance Company and
Bankers Security Life Insurance
Society from 1992 to 1995;
President and Chief Operating
Officer of USLICO Corp. from 1992
to 1995; President of United
Services Life Insurance Company
from 1991 to 1992; Executive Vice
President and Chief Financial
Officer of USAA from 1990 to 1991;
Director and President of
subsidiaries of ReliaStar Financial
Corp.
Page 4
<PAGE>
Robert C. Salipante Senior Vice President, Technology
20 Washington Avenue South of ReliaStar FinancialCorp. and
Minneapolis, Minnesota 55401 Northwestern National Life
Insurance Company since 1996;
Senior Vice President, Individual
Division of Northwestern National
Life Insurance Company since 1996;
Senior Vice President, Strategic
Marketing and Technology of
ReliaStar Financial Corp. and
Northwestern National Life
Insurance Company from 1994 to
1996; Senior Vice President and
Chief Financial Officer from 1992
to 1994; Executive Vice President
of Ameritrust Corporation from 1988
to 1992; Director of subsidiaries
of ReliaStar Financial Corp.
Donald L. Swanson Senior Vice President, ReliaStar
20 Washington Avenue South Retirement Plans of Northwestern
Minneapolis, Minnesota 55401 National Life Insurance Company
since 1993; Vice President from
1990 to 1993.
John G. Turner Chairman and Chief Executive
20 Washington Avenue South Officer of ReliaStar Financial
Minneapolis, Minnesota 55401 Corp. and Northwestern National
Life Insurance Company since 1993;
Chairman of United Services Life
Insurance Company and Bankers
Security Life Insurance Society
since 1995; Chairman of Northern
Life Insurance Company since 1992;
Chairman, President and Chief
Executive Officer of ReliaStar
Financial Corp. and Northwestern
National Life Insurance Company in
1993; President and Chief Executive
Office from 1991 to 1993; President
and Chief Operating Officer from
1989 to 1991; President and Chief
Operating Officer of Northwestern
National Life Insurance Company
from 1986 to 1991; Director of
subsidiaries of ReliaStar Financial
Corp.
Steven W. Wishart Senior Vice President and Chief
20 Washington Avenue South Investment Officer of ReliaStar
Minneapolis, Minnesota 55401 Financial Corp. since 1989; Senior
Vice President of Northwestern
National Life Insurance Company
since 1981; President and Chief
Executive Officer of ReliaStar
Investment Research, Inc. since
1996; President of Washington
Square Capital Inc. from 1981 to
1996; President of WSCR, Inc. from
1986 to 1996; Director of National
Benefit Resources Group Services
Inc. and subsidiaries of ReliaStar
Financial Corp.
Page 5
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH DEPOSITOR
---- ------------------------------------
<S> <C> <C>
John G. Turner Chairman and Chief Executive Officer
John H. Flittie President and Chief Operating Officer
R. Michael Conley Senior Vice President - Employee Benefits
Richard R. Crowl Senior Vice President and General Counsel
Wayne R. Huneke Senior Vice President, Chief Financial Officer and Treasurer
William R. Merriam Senior Vice President - Life & Health Reinsurance
Craig R. Rodby Senior Vice President - Financial Management
Robert C. Salipante Senior Vice President - Technology and Individual Insurance
Donald L. Swanson Senior Vice President - Retirement Plans
Steven W. Wishart Senior Vice President and Chief Investment Officer
Kenneth U. Kuk Vice President - Strategic Marketing
</TABLE>
The principal business address of each of the foregoing executive officers
is 20 Washington Avenue South, Minneapolis, Minnesota 55401.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Registrant is a separate account of Depositor, established by the Board of
Directors of Depositor in 1992 pursuant to the laws of the State of Minnesota.
Depositor is a direct, wholly-owned subsidiary of ReliaStar Financial Corp., a
Delaware Corporation.
The following chart identifies the subsidiaries of ReliaStar Financial
Corp. and their relationship to one another, all of which, except where
indicated, are either directly or indirectly wholly-owned by ReliaStar Financial
Corp. , except for directors qualifying shares.
Page 6
<PAGE>
RELIASTAR FINANCIAL CORP.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
| | | | | | | |
100% 100% 100% 100% 100% 100% 100% 80%
| | | | | | | |
NORTHWESTERN RELIASTAR WASHINGTON | WASHINGTON BANKERS IB HOLDINGS, INC. NWNL NORTHSTAR, INC.
NATIONAL LIFE INVESTMENT SQUARE USLICO SQUARE CENTENNIAL | |
INSURANCE RESEARCH, ADVISERS SECURITIES SECURITIES, MANAGEMENT | |
COMPANY INC. INC. CORPORATION INC. CORP. | 100%
| | |
100% ------------------------- --------------
| | | | | | | |
|-----------------------------------------------------------| | | | | | | NORTHSTAR
| | | UNITED SERVICES LIFE | | | | | | ADMINISTRATORS
NORTHERN LIFE RELIASTAR | INSURANCE COMPANY | | | | | | CORPORATION
INSURANCE COMPANY MORTGAGE | | | | | | | |
| CORPORATION | ----------------------- | | | | | |
100% | | | | | INTERNATIONAL | | | | NORTHSTAR
| JAMES | | DELAWARE | RISKS, INC. | | | | DISTRIBUTORS, INC.
|-------------- MORTGAGE | | ADMINISTRATORS, INC.| | | | |
NORLIC, INC. | CORPORATION | | | NORTHEASTERN | | NORTHSTAR INVESTMENT
| | | | CORPORATION | | MANAGEMENT CORPORATION
NOVA, INC. | USL SERVICES, INC. | | | |
| | | | |
| BANKERS SECURITY LIFE | | |
| INSURANCE SOCIETY THE NEW PROVIDENCE | HSC ADVISORS, INC.
| | INSURANCE COMPANY, |
NWNL BENEFITS NORTH ATLANTIC LIFE LIMITED |
CORPORATION AGENCY, INC. IB RESOLUTION, INC.
| |
100% 50%
| |
NWNL HEALTH SELECT CARE
MANAGEMENT HEALTH
CORP. NETWORK
[LOGO]
</TABLE>
Page 7
<PAGE>
The financial statements of each subsidiary of Depositor, other than those
of the mutual funds, are consolidated with those of Depositor. The financial
statements of the mutual funds are separately filed with the Securities and
Exchange Commission.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 29, 1995, there were 104 owners of the Contracts, 51 of
which were owners of qualified contracts.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 5.01 of Depositor's Bylaws, filed as an
Exhibit to this Registration Statement. The Bylaws of Depositor mandate
indemnification by Depositor of its directors, officers and certain others,
including directors, officers, employees and agents under certain conditions.
Section 4.01 of the Bylaws of Management mandates indemnification by Management
of its directors and officers under certain conditions. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of Depositor or
Management, pursuant to the foregoing provisions or otherwise, Depositor and
Management have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Depositor of expenses
incurred or paid by a director or officer or controlling person of Depositor or
Management in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person of Depositor or
Management in connection with the securities being registered, Depositor or
Management, as the case may be, will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
An insurance company blanket bond is maintained providing $25,000,000
coverage for Depositor and Management, subject to a $500,000 deductible.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Northstar Distributors, Inc. ("Distributors"), the principal
underwriter of the Contracts, also acts as the principal underwriter of the NWNL
Northstar Series Trust, an open-end, diversified management investment company
registered under the Investment Company Act of 1940.
(b) The directors and officers of Distributors are as follows:
DIRECTORS
NAME PRINCIPAL OCCUPATION
---- --------------------
John H. Flittie Director, President and Chief Operating Officer
of ReliaStar Financial Corp. and Depositor
Mark. L. Lipson Director, Chairman and Chief Executive Officer of
NWNL Northstar, Inc. and Executive Officer of
its subsidiaries.
John G. Turner Director, Chairman and Chief Executive Officer of
ReliaStar Financial Corp. and Depositor
Page 8
<PAGE>
EXECUTIVE OFFICERS
NAME POSITIONS AND OFFICES WITH DISTRIBUTORS
---- ---------------------------------------
Mark L. Lipson Chairman and Chief Executive Officer
Robert J. Adler President
Stephen Vondrak Vice President
Mark Sfarra Vice President
Gertrude Purus Vice President
Richard Francis Regional Vice President
Hyman Glasman Regional Vice President
Charles Dolce Regional Vice President
Mark Blinder Regional Vice President
Dan Leonard Regional Vice President
Steven K. O'Brien Regional Vice President
David Linton Regional Vice President
Scott Castleberry Regional Vice President
Agnes Mullady Vice President and Treasurer
Lisa Hurley Vice President and Secretary
Wayne R. Huneke Assistant Treasurer
Stephanie L. Beckner Assistant Secretary
The principal business address of each of the foregoing directors and
executive officers, except Messrs. Flittie, Turner and Huneke, is Two Pickwick
Plaza, Greenwich, Connecticut, 06830. The principal business address for Messrs.
Flittie, Turner and Huneke, is 20 Washington Avenue South, Minneapolis,
Minnesota 55401.
(c) For the year ended December 31, 1994 Northstar Distributors, Inc.
received $4,000 in fees in connection with distribution of the
contracts. For the year ended December 31, 1995 Northstar
Distributors, Inc. was not paid any fees in connection with
distribution of the contracts.
ITEMS 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of Registrant are located at the offices of
Depositor at 20 Washington Avenue South, Minneapolis, Minnesota 55401 and at the
offices of Continuum Administrative Services Corporation (formerly known as
Vantage Computer Systems, Inc.), 301 West 11th Street, Kansas City, Missouri
64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
Page 9
<PAGE>
ITEM 32. UNDERTAKINGS
Registrant will file a post-effective amendment to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in this Registration Statement are never more than 16 months old for
so long as payments under the Contracts may be accepted.
Registrant will include either (1) as part of any application to purchase a
Contract offered by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information.
Registrant will deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly upon
written or oral request.
The Company and the Variable Account rely on a no-action letter issued by
the Division of Investment Management to the American Council of Life Insurance
on November 28, 1988 and represent that the conditions enumerated therein have
been or will be compiled with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant certifies that it meets all of the requirements of
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Minneapolis
and State of Minnesota, on this 19th day of April, 1996.
NORTHSTAR/NWNL VARIABLE ACCOUNT
(Registrant)
By NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By /s/ John G. Turner
-------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Depositor has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of Minneapolis and State of Minnesota, on this
19th day of April, 1996.
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By /s/ John G. Turner
-------------------------------
John G. Turner, Chairman
and Chief Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed on this 19th day of April, 1996 by the following
directors and officers of Depositor in the capacities indicated:
/s/ John G. Turner Chairman, and Chief Executive Officer
- ------------------
John G. Turner
/s/ Wayne R. Huneke Senior Vice President, Chief Financial Officer and Treasurer
- ------------------- (Principal Accounting Officer)
Wayne R. Huneke
R. Michael Conley Kenneth U. Kuk Robert C. Salipante
Richard R. Crowl William R. Merriam Donald L. Swanson
John H. Flittie Craig R. Rodby John G. Turner
Wayne R. Huneke David H. Roe Steven W. Wishart
A majority of the Board of Directors
James E. Nelson, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of Northwestern National Life
Insurance Company pursuant to powers of attorney duly executed by such persons.
/s/ James E. Nelson
---------------------------------
James E. Nelson, Attorney-in-Fact
EXHIBIT INDEX
(b) Exhibits:
1. Resolutions of the Board of Directors of Northwestern National
Life Insurance Company ("Depositor") establishing the NSR/NWNL
Variable Account ("Registrant") and changing its name to
Northstar/NWNL Variable.
3. (a) General Distributor Agreement between Depositor and Northstar
Distributors, Inc.
(b) Form of agreement between Depositor and broker-dealers with
respect to the sale of Contracts.
4. Form of Contract.
5. Contract Application Form.
6. (a) Articles of Incorporation of Depositor.
(b) Bylaws of Depositor.
8. (a) Agreement with Continuum Administrative Services Corporation
(formerly known as Vantage Computer Systems, Inc.).
(b) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and
Amendment numbers 1 through 7.
(c) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Amendment numbers 1 through 6.
9. Opinion and consent of James E. Nelson as to the legality of the
securities being registered.
10. Independent Auditors' Consent.
13. Schedules for Computation of Performance Quotations.
14. Financial Data Schedule.
15. Powers of Attorney.
EXHIBIT 1
Item 24(b)1
EXHIBIT A
November 12, 1992
The President reported that the Individual Insurance Division had developed a
new variable annuity product which would require the approval of the
Northwestern Board. Following discussion, with the Board sitting as the
Northwestern Board, upon motion and second, it was unanimously
RESOLVED, That, pursuant to Minnesota Statutes, Sections
61A.13 to 61A.21, as amended, the Company establish and operate, and
the Company hereby establishes, a separate account, under the name
"NSR/NWNL Variable Annuity Account" (the "Account"), for assets to be
held and applied exclusively for the benefit of the holders of variable
annuity contracts issued by the Company and designated by the Company
as contracts under which the dollar amount of benefits or other
contractual payments or values shall vary so as to reflect the
investment results of the Account, and the assets held in the Account
shall not be chargeable with liabilities arising out of any other
business the Company may conduct but shall be held and applied
exclusively for the benefit of the holders of such contracts.
RESOLVED, That the Account be registered as an investment
company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and that application be made for exemptions from such
provisions of the 1940 Act as the Chief Executive Officer, President or
any Vice President of the Company may deem necessary or advisable.
RESOLVED, That the Chief Executive Officer, President or any
Vice President of the Company is hereby authorized, for and on behalf
of the Company, to execute and file with the Securities and Exchange
Commission a registration statement on Form N-4, or other applicable
forms, for the registration of the Account under the 1940 Act and to
execute and file notification of claim of exemptions, or application
for exemptions, from provisions of the 1940 Act, all in such form as
such officer may approve, with such amendments, exhibits and other
supporting documents thereto, and to execute and deliver all such other
and further instruments and to take such other and further action in
connection therewith, as such officer may deem necessary or advisable.
RESOLVED, That the Chief Executive Officer, President or any
Vice President of the company is hereby authorized, for and on behalf
of the Company, to execute and file with the Securities and Exchange
Commission a registration statement on Form N-4, or other applicable
form, for the registration under the Securities Act of 1933, as amended
(the "1933 Act"), of variable annuity contracts to be issued by the
Company in connection with the Account and accumulation units and other
interests in the Account, in such form as such officer may approve,
with such amendments, exhibits and other supporting documents thereto,
and to execute and deliver all such other and further instruments and
to take such other and further action in connection therewith, as such
officer may deem necessary or advisable.
RESOLVED, That Royce N. Sanner is hereby designated as the
person authorized to receive notices and communications from the
Securities and Exchange Commission with respect to such registration
statement to be filed under the 1933 Act, with the powers conferred
upon him as such person by the 1933 Act and the rules and regulations
of such commission issued thereunder.
RESOLVED, That John G. Turner, Royce N. Sanner, Michael S.
Fischer, Susan S. Kelly and James E. Nelson, and each or any one of
them, are hereby made, constituted and appointed attorneys-in-fact,
with full power of substitution, for and on behalf of the Company, to
execute and file with the Securities and Exchange Commission such
notifications and registration statements to be filed under the 1940
Act and the 1933 Act, and such amendments, exhibits and other
supporting documents thereto, and such other documents in connection
therewith, as such attorneys-in-fact, or any one of them, may deem
necessary or advisable, and the President or any Vice President of the
Company is hereby authorized, for and on behalf of the Company, to
execute a power of attorney in favor of said attorneys-in-fact.
RESOLVED, That the Chief Executive Officer, President and any
Vice President of the Company, and such other officers and employees of
the Company as the Chief Executive Officer of the Company may
designate, and each of them, are hereby authorized, for and on behalf
of the Company, to execute such other and further instruments and to
take such other and further action as they, or any of them, may deem
necessary or advisable to carry out the purposes of the foregoing
resolutions.
RESOLVED, That the change in name of the NSR/NWNL Variable
Annuity Account to the Northstar/NWNL Variable Annuity Account is
hereby approved.
EXHIBIT 3
DISTRIBUTION AGREEMENT
AGREEMENT made this 18th day of March, 1993, by and between Northwestern
National Life Insurance Company, a Minnesota corporation, ("Northwestern") on
its own behalf and on behalf of the Northstar/NWNL Variable Annuity Account
("Variable Account") and NWNL Northstar Distributors, Inc., a Minnesota
corporation ("Northstar") which is a member of the National Association of
Securities Dealers, Inc. ("NASD") and is registered as a broker-dealer with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 (the "1934 Act").
WHEREAS, Northwestern has established and maintains the Variable Account, a
separate investment account, for the purpose of selling variable annuity
contracts ("Contracts") to commence after the effectiveness of the Registration
Statement relating to the Contract and Variable Account filed with the
Securities and Exchange Commission on Form N-4 pursuant to the Securities Act of
1993, as amended (the "1933 Act") and the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, Northstar is an affiliate of Northwestern and Northwestern desires to
retain Northstar as the Distributor and Principal Underwriter to provide for the
sale and distribution to the public of the Contracts issued by Northwestern and
funded by interests in the General Account of Northwestern and in the Variable
Account and Northstar is willing to render such services:
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth the parties agree as follows:
1. PRINCIPAL UNDERWRITER. Northwestern hereby appoints Northstar,
during the term of this Agreement, subject to the registration requirements of
the 1933 Act and the 1990 Act and the provisions of the 1934 Act, to be the
Distributor and Principal Underwriter for the sale of Contracts to the public in
each state and other jurisdictions in which the Contracts may be lawfully sold.
Northstar shall offer the Contracts for sale and distribution at prices set by
Northwestern.
2. SELLING AGREEMENTS. Northstar is hereby authorized to enter
into separate written agreements ("Selling Agreements"), on such terms and
conditions as Northstar and Northwestern determine are not inconsistent with
this Agreement, with such organizations that agree to participate as a broker-
dealer in the distribution of the Contracts and to use their best efforts to
solicit applications for Contracts. Any such broker-dealer (hereinafter
"Broker"), shall be both registered as a broker-dealer under the 1934 Act and
a member of the NASD. The Selling Agreement shall require Broker and its
agents or representatives soliciting applications for Contracts to be
duly and appropriately licensed, registered and otherwise qualified for the
sale of the Contracts (and the riders offered in connection therewith) under the
insurance laws and any applicable blue sky laws of each state or other juris-
diction in which such Contracts may be lawfully sold and in which Northwestern
is licensed to sell such Contracts. Northwestern shall undertake to appoint
Broker's qualified agents or representatives as life insurance agents of
Northwestern, provided that Northwestern reserves the right to refuse to appoint
any proposed representative or agent, or once appointed, to terminate such
appointment. All Selling Agreements shall require Brokers to supervise their
agents or representatives.
3. SUITABILITY. Northwestern desires to ensure that Contracts will
be sold to purchasers for whom the Contract will be suitable. Northstar shall
take reasonable steps to ensure that representatives of Northstar shall not make
recommendations to an applicant to purchase a Contract in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for such
applicant, and shall impose similar obligations upon Brokers.
4. CONFORMITY WITH REGISTRATION STATEMENT AND APPROVED SALES
MATERIALS. In performing its duties as Distributor, Northstar will act in
conformity with the Prospectus and with the instructions and directions of
Northwestern, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and
all other applicable federal and state laws and regulations. Northstar shall not
give any information nor make any representations concerning any aspect of the
Contract or of Northwestern's operations to any persons or entity unless such
information or representations are contained in the Registration Statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by Northwestern.
Northstar will not use and will take reasonable steps to ensure that its
representatives will not use any sales promotion material and registered
advertising which has not been previously approved by Northwestern. Northstar
shall impose similar obligations upon Brokers contracted under a Selling
Agreement.
5. REVIEW OF ADVERTISING AND SALES MATERIALS. Northstar will
provide Northwestern with at least one copy of all sales presentations,
mailings, sales promotion materials, advertising and any other marketing
materials in connection with the distribution or sale of the Contracts at least
five business days prior to their first use. Northwestern reserves the right to
review and approve all such materials prior to their use.
6. EXPENSES. Northstar shall, during the term of this Agreement,
bear all of the expenses in complying with this Agreement, including the
following expenses:
(a) costs of printing and mailing prospectuses, sales
presentations, mailings, sales promotion materials,
advertising and any other marketing efforts by Northstar in
connection with the distribution or sale of the Contracts; and
(b) any compensation paid to employees of Northstar and to Brokers
and their agents and representatives in connection with the
distribution or sale of the Contracts. Northstar will also pay
to Northwestern $50 per each representative or agent licensed
by Northwestern pursuant to a Selling Agreement whose earned
commissions from the sale of the Contracts is less than the 12
month minimum of $2,500.
7. APPLICATIONS. Completed applications for contracts solicited by
such Broker through its agents or representatives shall be transmitted directly
to Northwestern c/o Annuity Service Center, P. O. Box 13208, Kansas City,
Missouri, 64199-3208. All payments under the Contracts shall be made by check
payable to Northwestern or by other method acceptable to Northwestern and if
received by Northstar, shall be held at all times in a fiduciary capacity and
remitted promptly to Northwestern. All such payments will be the property of
Northwestern. Northwestern has the sole authority to approve or reject such
applications or payments.
8. STANDARD OF CARE. Northstar shall be responsible for exercising
reasonable care in carrying out the provisions of this Agreement.
9. RECORDS AND REPORTS. Northwestern shall maintain and preserve
such records as are required of it, Northstar and the Variable Account, by
applicable laws and regulations with regard to the offer and sale of the
Contracts. The books, accounts and records of Northwestern, the Variable Account
and Northstar shall be maintained by Northwestern so as to clearly and
accurately disclose the nature and details of the transactions. Northwestern
agrees that it will maintain and preserve all such records in conformity with
the requirements of the 1934 Act, to the extent such requirements are applicable
to the contracts and such records shall at all times remain available to
Northstar.
2
The parties agree that it is permissible for Northwestern or Northstar
to enter into a Contract under which a separate vendor would perform certain
administrative functions relating to the Contracts and the Variable Account.
These functions may include, among other things, maintaining the books and
records of the Variable Account and the Sub-accounts and maintaining records of
the name, address, taxpayer identification number, Contract number, type of
Contract issued to each owner, Contract value and other pertinent information
necessary to the administration and operation of the Contracts.
10. COMPENSATION. For the services rendered under this Agreement,
Northwestern shall pay Northstar the amounts set forth in Schedule A, which
schedule is incorporated herein. Northwestern shall arrange for the payment of
commissions to those Brokers that sell Contracts under agreements entered into
pursuant to Section 2, hereof, in amounts as may be agreed to by Northwestern
and Northstar specified in such written agreements.
11. INVESTIGATION AND PROCEEDINGS. Northstar and Northwestern agree
to cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the contracts distributed under
this Agreement. Northstar further agrees to furnish regulatory authorities with
any information or reports in connection with such services which may be
requested in order to ascertain whether the operations of Northwestern and the
Variable Account are being conducted in a manner consistent with applicable laws
and regulations. Northstar and Northwestern further agree to cooperate fully in
any securities regulatory investigation or proceeding with respect to
Northwestern, Northstar, their affiliates and their agents or representatives to
the extent that such investigation or proceeding is in connection with Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) Northstar will be notified promptly of any customer complaint
or notice of any regulatory investigation or proceeding or
judicial proceeding received by Northwestern with respect to
Northstar or any agent or representative of a Broker which may
affect Northwestern's issuance of any Contract sold under this
Agreement; and
(b) Northstar will promptly notify Northwestern of any customer
complaint or notice of any regulatory investigation or
proceeding received by Northstar or its affiliates with
respect to Northstar or any agent or representative of a
Broker in connection with any Contract distributed under this
Agreement or any activity in connection with any such
Contract.
12. EMPLOYEES. Northstar will not employ, except with the prior
written approval of the Commissioner of Insurance of the State of California, in
any material connection with the handling of the Variable Account's assets any
person who, to the knowledge of Northstar:
(a) in the last 10 years has been convicted of any felony or
misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or
securities, or involving violations of Section 1341, 1342, or
1343 of Title 18, United States Code; or
(b) within the last 10 years has been found by any state
regulatory authority to have violated or has acknowledged
violation of any provision of any state insurance law
involving fraud, deceit or knowing misrepresentation; or
(c) within the last 10 years has been found by any federal or
state regulatory authorities to have violated or have
acknowledged violation of any provision of federal or state
securities laws involving fraud, deceit, or knowing
misrepresentation.
3
13. TERMINATION. This Agreement may be terminated at any time,
for any reason, by either party on 60 days' written notice to the other party,
without the payment of any penalty. Upon termination of this Agreement, all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder, including commissions on purchase payments
subsequently received for contracts in effect at time of termination, and the
agreements contained in Sections 11 and 12 hereof.
14. REGULATION. This Agreement shall be subject to the provisions
of the 1940 Act and the 1934 Act and the rules, regulations and rulings there-
under, and of the applicable rules and regulations of the NASD and applicable
state insurance law and other applicable law, from time to time in effect, and
the terms hereof shall be interpreted and construed in accordance therewith.
15. NOTICES. Notices of any kind to be given to Northstar by
Northwestern or the Variable Account shall be in writing and shall be duly given
if mailed, first class postage prepaid, or delivery to the President of
Northstar at Two Pickwick Plaza, Greenwich Connecticut, 06830, or at such other
address or to such individual as shall be specified by Northstar. Notices of any
kind to be given to Northwestern or the Variable Account shall be in writing and
shall be duly given if mailed, first class postage prepaid, or delivered to them
at 20 Washington Avenue South, Minneapolis, Minnesota, 55401, Attention: Senior
Vice President, Individual Insurance Division, or at such other address or to
such individual as shall be specified by Northwestern.
16. SEVERABILITY. If any provisions of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
17. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Minnesota.
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written,
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Richard R. Crowl
Title: V.P.
By: /s/ Michael S. Fischer
Title: 2nd V.P., Asst. Gen. Counsel
NWNL NORTHSTAR DISTRIBUTORS, INC.
By: /s/ Robert J. Adler
Title: President
5
<PAGE>
SCHEDULE A
** 1. Standard Commissions/Overrides (as % of total premiums paid
unless otherwise stated)
Percent Ages 0-75 Ages 76-85
Total
Premium
Dealer Concession 5.5% 3.3%
Marketing Allowance .8% .5%
** 2. Alternative Commission Schedule (firm level)
Percent Ages 0-75 Ages 76-85
Total
Premium
Dealer Concession 3.2% 1.0%
Marketing Allowance .8% .5%
with an annual trail commission of .50% with .125% payable
quarterly beginning at the end of the 12th month.
** 3. If the contract is surrendered in the first policy year, we
will charge back 50% of the commission to Northstar.
6
NORTHSTAR DISTRIBUTORS, INC.
Two Pickwick Plaza
Greenwich, CT 06830
DEALER AGREEMENT FOR THE NORTHSTAR AFFILIATED MUTUAL FUNDS
Gentlemen:
We invite you to become a member of the selling group to distribute shares of
the open-end investment companies (hereinafter collectively referred to as the
"Funds" or, individually as the "Fund") for which we are or may become a
principal underwriter, (as defined in the Investment Company Act of 1940), on
the following terms:
1. You represent and warranty that you are a member of the National
Association of Securities Dealers, Inc., ("NASD") and that you will
continue to maintain membership in the NASD, or that you are a foreign
dealer, not eligible for membership in the NASD. You and we agree to
abide by the rules and regulations of the Securities and Exchange
Commission and the NASD, including, without limitation, Section 26 of
Articles III of the NASD Rules of Fair Practice, all of which are
incorporated herein as if set forth in full.
2. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as described in the then
current Fund prospectus. Procedures relating to the handling of orders
will be subject to the terms of the then current prospectus of the
Fund and to written instructions which we shall forward from time to
time to you, which shall become a part of this Agreement. All orders
are subject to acceptance or rejection by us in our sole discretion.
No conditional order will be accepted on any basis other than a
definite price. You understand and agree that you are acting as
principal under this agreement and not as our agent or agent of the
Funds, and that you are in no way responsible for the manner of our
performance or for any of our acts or omissions in connection
therewith.
3. You understand and agree that the applicable sales charge and dealer
concession pertaining to any sales of Fund shares will be in an amount
as set forth in the then current prospectus of such Fund, subject to
reductions under a variety of circumstances described in each Fund's
current prospectus. To obtain these reductions, we must receive notice
when the sale takes place which would qualify for the reduction.
4. The provisions of this Paragraph 4 are applicable to each of the Funds
which have adopted or which may, in the future, adopt a Plan or Plans
(the "Plans") pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act"). The Plans and the provisions of this Paragraph 4
have been approved by a majority of the Trustees/Directors of the
applicable Fund, including a majority of the Trustees/Directors who
are not interested persons of the Funds and who have no direct or
indirect financial interest in the operation of the Plans or any
related agreements (the "non-interested Trustees"), cast in person at
a meeting called for the purpose of voting thereon. Such approval
included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that each of the Plans will benefit the Fund and its
shareholders. The Plans have also been approved by a vote of at least
a majority of the Fund's outstanding voting securities, as defined in
the Act. We represent and warrant that the Funds will conform in all
respects to the requirements of Section 26 of the NASD's Rules of Fair
Practice and that the prospectuses for the Funds will contain
disclosure with respect to fees paid and charges imposed in a manner
to evidence compliance with the NASD's rules regarding such fees and
charges.
(a) To the extent you provide services in connection with the sale of
the Fund's shares pursuant to the Plans and the Fund's
prospectus, we shall pay you quarterly a fee thereof based on the
net asset value of Fund shares which are owned of record by your
firm as nominee for your customers or which are owned by those
customers of your firm whose records, as maintained by the Fund
or its agent, designate your firm as the customer's dealer of
record. No such quarterly fee will be paid if the average net
asset value of all of you customer accounts upon which the fee is
based is less than $1,000,000. Payment of such quarterly fee
shall be made within 45 days after the close of each quarter for
which such fee is payable, provided however, that you shall waive
payment until we are in receipt of such payment from the Fund
under whose Plan the amount is payable. No such quarterly fee
will be paid to you with respect to shares purchased by you and
redeemed or repurchased by the Fund or by us as agent within
seven (7) business days after the date of our confirmation of
such purchase.
(b) You shall furnish us and the Fund with such information as shall
reasonably be requested by the Trustees/Directors of the Fund
with respect to the fees paid to you pursuant to this Paragraph
4.
(c) We shall furnish to the Trustees/Directors of the Fund, for their
review, on a quarterly basis a written report of the amounts
expended under the Plan by us and the purposes for which such
expenditures were made.
(d) The provisions of this Paragraph 4 may be terminated by the vote
of a majority of the non-interested Trustees/Directors or by a
vote of a majority of the Fund's outstanding shares, on sixty
(60) days' written notice without payment of any penalty. Such
provisions will be terminated by any act which terminates either
the Fund's Underwriting Agreement with us or this Dealer
Agreement and shall terminate immediately in the event of the
assignment, as that term is defined in the Act, of this Dealer
Agreement.
(e) The provisions of the Underwriting Agreement between the Fund and
Northstar Distributors, Inc., insofar as they relate to the Plan,
are incorporated herein by reference. The provisions of this
Paragraph 4 shall continue in full force and effect only so long
as the continuance of the Plan and these provisions are approved
at least annually by a vote of the Trustees, including a majority
of the non-interested Trustees, case in person at a meeting
called for the purpose of voting thereon.
5. Payment for Fund shares sold to you shall be made on or before the
settlement date specified in our confirmation, at our office and by
check or wire. We reserve the right to delay issuance or transfer of
shares until such check has cleared. If such payment is not received
by us, we reserve the right, without notice, forthwith either to
cancel the sale, or, at our option, to sell the shares ordered back to
such Fund, and in either case, we may hold you responsible for any
loss, including loss of profit, suffered by us or by such Fund
resulting from your failure to make payment as aforesaid. You shall
assume responsibility for any loss to a Fund caused by a correction
made by you subsequent to trade date, and you shall immediately pay
such loss to the Fund upon notification.
6. You agree to purchase shares only from us or from our customers. If
you purchase shares from us, you agree that all such purchases shall
be made only to cover orders received by you from your customers, or
for your own bona fide investment. If you purchase shares from your
customers, you agree to pay such customers not less than the
applicable liquidating price determined as set forth in the then
current Fund prospectus.
7. You agree to sell shares only (a) to your customers at the applicable
public offering price or (b) to the Fund or to us as selling agent for
the Fund at the liquidating price, in each case determined as set
forth in the Fund's current prospectus. With respect to Funds offering
both shares subject to a front-end sales charge, shares subject to a
contingent deferred sales charge, or shares subject to a level load,
you agree to conform to our written compliance standards as we may
from time to time provide them to you.
8. You shall not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding;
e.g., by a change in the net asset value from that used in determining
the public offering price to your customers. You will place orders for
purchases and redemptions for your customers promptly upon receipt
from your customers.
9. If any shares sold by us under the terms of this Agreement are
repurchased or liquidated by the funds, or by us as agent for the
Funds, or is tendered for liquidation to the Funds, within seven (7)
business days after such confirmation of your original order, then you
shall forthwith repay to the Funds the full concession or commission
allowed to you on such sale and we shall forthwith repay to the Funds
our share of the selling commission thereon. We shall notify you of
such repurchase or liquidation within ten (10) days from the day on
which written redemption requests and if applicable, share
certificates are delivered to us or to the Funds.
10. You will not offer the Funds for sale in any state where they are not
qualified for sale under the securities laws of such state or where
you are not qualified to act as a dealer, except for states in which
they or you are exempt from qualification. On request we will provide
you with a list of states where the Funds are qualified for sale. You
will not offer or sell shares of the Funds except under circumstances
that will result in compliance with applicable federal and state
securities laws.
11. No person is authorized to make any representation relating to the
shares of the Funds, except those contained in the then current Funds
prospectuses, statements of additional information and any authorized
supplemental material supplied by us. In ordering shares you rely
solely and conclusively on the representations contained in the then
current prospectuses and statements of additional information, and
supplemental material, if any, above described. Reasonable numbers of
additional copies of the then current prospectuses and statements of
additional information are and will be available on written request.
In no transaction shall you have any authority to take any action or
make any representation binding upon the Funds, any other member of
the Selling Group, or ourselves. You shall provide a currently
effective prospectus to every purchaser or shares, except to the
extent that we expressly undertake to do so on your behalf. In the
event shares will be held by you in nominee name, it is agreed to that
you will pass the prospectus on to the ultimate purchaser to the
extent known to you. All advertising and promotion of the Funds by
foreign dealers shall conform to the standards applicable to members
in the United States.
12. We and you agree that all disputes between us of whatever subject
matter, whether existing on the date thereof or arising hereafter,
shall be submitted to arbitration in accordance with the Code of
Arbitration Procedure of the NASD, or similar rules or code, in effect
at the time of the submission of any such dispute.
13. Each Fund reserves the right in its discretion and we reserve the
right, in our discretion and without notice to you or to any members
of the Selling Group, to suspend sales, to withdraw the offering, to
change the offering price, or to amend, modify or cancel this
Agreement and concessions, discounts or commissions at any time
payable or allowable hereunder (including, without limitation,
concessions, or commissions on future periodic investments or
reinvestment). This Agreement may be amended by us at any time by
written notice to you, and upon your receipt thereof, such amendment
shall become effective. Each party to this Agreement may cancel its
participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be
effective on the date on which it was either delivered personally to
the other parties or any officer or member thereof, or was mailed
postpaid or delivered to a telegraph office for transmission to the
other parties at their address as shown herein. This agreement shall
terminate immediately upon the appointment of a Trustee under the
Securities Investor Protection Act or any other act of insolvency by
you. The termination of this Agreement by any of the foregoing means
shall have no effect upon transactions entered into prior to the
effective date of termination. A trade placed by you subsequent to
your voluntary termination of the Agreement will not serve to
reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer will only be effective upon written
notification by us.
14. This Agreement also permits you to offer variable contracts
("Contracts") issued by Northwestern National Life Insurance Company
("NWNL") for which we serve as distributor. You may offer and sell
Contracts to customers only through your registered representatives
who are variable contract licensed pursuant to applicable state law
and who have been specifically appointed by NWNL to solicit Contracts
in the applicable jurisdiction. You may offer and sell the Contracts
only in accordance with the terms and conditions of the currently
effective Prospectus or offering brochures applicable to the Contracts
and to any Fund which may serve as a funding vehicle for the
Contracts. You may not make any representation, including any
representation regarding the tax status of the Contract, not included
in such Prospectuses or offering brochures or in any written,
authorized advertising or sales material supplied by NWNL, and you
shall further be liable for any claim against NWNL or us arising from
your failure to comply with this provision. Any proposed advertising,
printed material or presentation script relating to the Contracts must
be approved in writing by NWNL prior to its use. In no event shall you
forward to NWNL less than any payment collected by your registered
representative, without deduction for compensation or commission. You
agree to observe NWNL's written procedures, rules and guidelines
relating to the Contracts. You agree that references in this Agreement
to "FUND" OR "FUNDS" with respect to the Contracts shall mean or
include all or any of the NWNL/Northstar Variable Account, NWNL, or
us, and that such provisions shall be and hereby are deemed amended as
necessary to comply with Section 29 of Article III of the NASD Rules
of Fair Practice, federal and state laws, and the rules and
regulations of the SEC applicable to variable contracts.
15. All communications shall be sent to us at our offices at Two Pickwick
Plaza, Greenwich, CT 06830. Any notice to you shall be duly given if
mailed or telegraphed to you at the address shown on this Agreement.
16. This Agreement shall become effective as of the date when it is
executed and dated by you below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and
construed under the laws of the State of New York.
NORTHSTAR DISTRIBUTORS, INC.
Date ............... By ........................................
Accepted:
Date .............. Investment Dealer .........................
Authorized Signature ......................
Print Name ................................
Title .....................................
Address ...................................
City ........... State ... Zip Code.......
Phone .....................................
NASD Broker/Dealer No. ...................
Clear Trades Through Broker/Dealer ........
<PAGE>
ADDENDUM TO NWNL NORTHSTAR DISTRIBUTORS, INC. DEALER AGREEMENT
FOR THE NORTHSTAR ADVANTAGE FUNDS
DATED JUNE 5, 1995
Shares of an unaffiliated money market portfolio (the "Money Market Fund") are
available for direct purchase or exchange by or on behalf of holders or
prospective purchasers of Class A, Class B, and Class C shares of the Northstar
Advantage Funds through NWNL Northstar Distributors, Inc. NWNL Northstar
Distributors, Inc. shall pay to qualifying dealers a service fee in connection
with their purchases of shares of the Money Market Fund, equal to any service
fee that we may qualify for and receive in connection with our services as
dealer for the Money Market Fund.
This program supersedes all similar programs previously offered by NWNL
Northstar Distributors, Inc., and may be terminated by us at any time without
prior notice to you.
<PAGE>
NWNL NORTHSTAR DISTRIBUTORS, INC.
TWO PICKWICK PLAZA
GREENWICH, CT 06830
COMPLIANCE STANDARDS FOR SALES OF THE NWNL NORTHSTAR FUNDS
UNDER THEIR ALTERNATIVE PURCHASE ARRANGEMENTS
As distributor of the NWNL Northstar Affiliated Investment Companies (the
"Northstar Funds"), which may offer their shares on a front-end, deferred sales
charge or combined front-end and deferred sales charge basis, NWNL Northstar
Distributors, Inc. has established the following compliance standards which set
forth the basis upon which shares of the Northstar Funds may be sold. These
standards are designed for those broker/dealers ("dealers") that distribute
shares of the Northstar Funds and for each dealer's financial
advisers/registered representatives.
As shares of the Northstar Funds may be offered with two or more different sales
arrangements for sales and distribution fees, it is important for an investor
not only to choose a mutual fund that best suits his investment objectives, but
also to choose the sales financing method which best suits his particular
situation. To assist investors in these decisions and to ensure proper
supervision of mutual fund purchase recommendations, we are instituting the
following compliance standards to which dealers must adhere when selling shares
of the Northstar Funds:
(1) Any purchase of a Northstar Fund for less than $100,000 may be of
shares subject to any of the then available sales arrangements.
(2) Any purchase of Northstar Funds sold subject to a CDSC for $100,000 or
more but less than $1 million, is subject to review by the branch
manager and must be confirmed in writing. The branch manager (or other
appropriate reviewing officer) must review the purchase order ticket
for a CDSC class of shares, given the relevant facts and
circumstances, including but not limited to:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold his shares; and
(c) any other relevant circumstances, such as the availability of
another class of shares, purchases under a letter of intention or
pursuant to rights of accumulation.
(3) Any purchase of a Northstar Fund for $1 million or more normally
should be for a class of shares sold subject to a front-end sales
charge, if available. Such an order placed for a class of shares
subject to a deferred sales charge ("CDSC") (if shares of the Fund may
also be purchased subject to a front-end sales charge) must be
approved by the dealer's regional director (or person of comparable
status) and confirmed in writing.
(4) Redemption requests placed by shareholders who own more than one class
of shares of a particular Northstar Fund will be satisfied first
generally by redeeming the shareholder's shares that are (a) not, at
that time, subject to a CDSC and (b) if applicable, subject to the
highest Rule 12b-1 fee, unless the shareholder has made a specific
election to redeem certain shares. However, there may be circumstances
where the redemption of shares with a low CDSC would be more
appropriate than redeeming shares purchased subject to a higher
front-end sales charge and lower ongoing Rule 12b-1 fee. Accordingly,
financial advisers/registered representatives are charged with
reviewing their client's particular circumstances prior to processing
redemption requests.
GENERAL GUIDELINES
There are instances where one financing method may be more advantageous to an
investor than the other. For example, investors that would qualify for a
significant discount on a front-end sales load may determine that such a
purchase is preferable to payment of the ongoing distribution fee imposed upon
shares subject to a CDSC for a period of years.
On the other hand, an investor whose order would not qualify for a discount may
wish to defer the sales load and have all his funds invested in shares of a Fund
initially. However, if such an investor anticipates that he will redeem his
shares within a short period of time, such as within one year, the investor may,
depending on the amount of his purchase, bear higher distribution expenses than
if he had made a front-end load purchase.
In addition, investors who intend to hold their shares for a significant period
may not wish to continue to bear the Rule 12b- 1 distribution expenses
associated with a class of shares despite the fact that deferred sales charges
would not apply to a redemption of shares hold in excess of set number of years
and is reduced for each year the shares are held. Certain of the Northstar Funds
provide that after a holding period of 2-8 years, the classes of shares with a
relatively high distribution fee will convert to a class of shares with a
relatively lower distribution fee.
A National Association of Securities Dealers rule specifically prohibits
"breakpoint sales" of front-end load shares. A "Breakpoint sale" is a sale to
the client of an amount of front-end load shares just below the amount which
would be subject to the next breakpoint on the Fund's sales charge schedule.
Because the deferred sale charge on deferred sales load shares is reduced by 1%
for each year the shares are held, a redemption of such shares just before and
"anniversary date" is in some ways analogous to a breakpoint sale. A client
might wish to redeem just before an anniversary date for tax or other reasons,
and a client who chooses to wait would continue to be at market risk.
Nevertheless, investment executives should inform clients intending to redeem
deferred load shares near an anniversary date that, if the redemption were
delayed, the deferred sales charge would be reduced.
RESPONSIBILITY OF BRANCH OFFICE MANAGER
(OR OTHER APPROPRIATE REVIEWING OFFICER)
A dealer's branch manager or other appropriate reviewing officer (the "Reviewing
Officer") must ensure that the financial adviser/registered representative has
advised the client of the available financing methods offered by the Northstar
Funds, and the impact of choosing one method over another. In certain instances,
it may be appropriate for the branch manager to discuss the purchase directly
with the client. The foregoing guidelines, as well examples cited above, should
assist the Reviewing Officer in reviewing purchase orders in the range of
$100,000 to less than $1 million, and in supervising purchase recommendations
where purchase orders are less than $100,000.
EFFECTIVENESS
These compliance guidelines are effective immediately with respect to any order
for shares of those Northstar Funds which offer their shares pursuant to
alternative purchase arrangements, and shall supersede all previously issued
compliance standards for Funds with such arrangements.
Questions relating to these compliance guidelines should be directed by the
dealer to its national mutual fund sales and market group or its legal
department or compliance director. Northstar Distributors, will advise dealers
in writing of any future changes in these guidelines.
11/93
EXHIBIT 4
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED
RETIREMENT ANNUITY
Variable and/or Fixed Accumulation
Variable and/or Fixed Dollar Annuity Payments
Non-Participating
- --------------------------------------------------------------------------------
NOTICE
ANNUITY PAYMENTS AND ACCUMULATION VALUES PROVIDED BY THIS CONTRACT, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
- --------------------------------------------------------------------------------
RIGHT TO RETURN CONTRACT
Please read this contract carefully. If you do not want it, you may return it to
us or your agent within 10 days after you receive it and ask us to cancel it. As
soon as you return it, we will consider it void from the start and refund the
Contract Value as of the next Valuation Date after receiving your request.
However, if applicable law so requires, the full amount of any Purchase Payments
we receive will be refunded.
- --------------------------------------------------------------------------------
Index Page
Age and Sex 11
Annuitant A
Annuity Benefits 13
Annuity Forms 15
Claims 17
Contract Data Page A
Contract Owner and Beneficiary 11
Death Benefit 10
Definitions 2-3
Fixed Account 4
Fixed Annuity Payments 13
General Provisions 1
Purchase Payments 4
Surrenders 8
Termination 12
Transfers 8
Variable Account 4
Variable Annuity Payments 14
Additional benefits, if any, are listed on the Contract Data Page and follow
page 2. Additional restrictions, if any, follow page 2.
- --------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Box 20
Minneapolis
Minnesota 55440
Northwestern National Life Insurance Company (we, us, our) will make payments to
the Annuitant starting on the Annuity Commencement Date as stated in this
Contract. We will pay the Death Benefit if an Owner dies before the Annuity
Commencement Date.
We issue this Contract in consideration of the Application and the Purchase
Payments we receive.
Executed at our Home Office
John H. Flittie President
/s/ John H. Flittie
Royce N. Sanner Secretary
/s/ Royce N. Sanner
Page 1 84-420
- --------------------------------------------------------------------------------
THE CONTRACT
Read this contract carefully. This contract states, in detail, all of the rights
and obligations of both you and us. The entire contract is:
- -------------
This contract
- -------------
Plus all applications, riders, endorsements, and amendments at the time of
issue.
Plus all applications, riders, endorsements, amendments, and Contract Data Pages
agreed upon later.
- -------
Changes
- -------
Contract changes must be in writing and signed by our President or Secretary, or
one of our Vice Presidents or Assistant Secretaries. No other agent or person
may alter or change the terms or conditions of this Contract.
- --------------------------------------------------------------------------------
DEFINITIONS
- -------------------------------------
Annuitant
The person you name to receive annuity payments and whose life determines the
annuity benefits payable. The Annuitant is shown on the Contract Data Page.
- -------------------------------------
Annuity Commencement Date
The date on which the annuity payments begin. The Annuity Commencement Date is
as shown on the Contract Data Page unless changed as provided by this Contract.
- -------------------------------------
Beneficiary
The person(s) you name to receive:
1.
The Death Benefit if you die before the Annuity Commencement Date and a Death
Benefit is payable under the terms of this contract.
2.
The balance of the annuity payments, if any, under the Annuity Form in effect at
the Annuitant's death.
- -------------------------------------
Code
The Internal Revenue Code of 1986, as amended.
- -------------------------------------
Contract Anniversary
The same day and month as the Issue Date each year that this Contract remains in
force.
- -------------------------------------
Contract Value
The sum of the Variable Account Contract Value plus the Fixed Account Contract
Value on a Valuation Date.
- -------------------------------------
Contract Year
Each 12 month period starting with the Issue Date and each Contract Anniversary
after that.
- -------------------------------------
Death Benefit Valuation Date
The Death Benefit Valuation Date is the Valuation Date next following the date
we receive:
1.
Proof of death; and,
2.
A written request from the Beneficiary for a single sum payment or an Annuity
Form permitted by Section 72(s) of the Code which we approve.
- ------------
Page 2 4642
- ------------
<PAGE>
CONTRACT DATE PAGE Date Printed
Contract Number 99999 December 1, 1993
- --------------------------------------------------------------------------------
CONTRACT INFORMATION Owner John Jones
Annuitant John Jones
Age of Annuitant 35
Sex of Annuitant Male
Issue Date December 1, 1993
Initial Purchase December 1, 1993
Payment $10,000
Issue Date December 1, 1993
Annuity
Commencement Date December 1, 1993
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
Minimum Initial Purchase Payment Non-qualified $5,000
Qualified $2,000
Minimum Subsequent Payment Non-qualified $500
Qualified $200
Purchase payments are allocated to the Fixed Account and the Variable Account as
shown below unless changed as provided in this contract.
Purchase Payments allocated to the Variable Account are used by the Sub-Accounts
to purchase at net asset value, shares of any of the following Mutual Funds:
Mutual Funds Abbreviation Initial
Allocation
Northstar/NWNL Trust (Northstar)
Northstar Income and Growth Fund NIGF %
Northstar Growth Fund NGF %
Northstar Multi-Sector Bond Fund NMSF %
Northstar High Yield Fund NHYF %
- --------------------------------------------------------------------------------
Fixed Account SFA %
Total Allocation 100%
Fixed Account, Initial interest rate %
This rate is guaranteed until the end of the current calendar year for all
purchase payments and transfers credited to the Fixed Account while this rate
and guarantee are in effect.
- --------------------------------------------------------------------------------
Form Numbers: 84-420, 82-000, 84-693, 84-694, 84-895
84-696, 84-421, 84-422, 84-604
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SURRENDERS
TABLE OF SURRENDER CHARGES
Contract Year of total/partial Surrender Charge
surrender minus Contract as percentage of
Year of Purchase Payment each Purchase Payment
- ------------------------ ---------------------
0-1 7%
2-3 5%
4 4%
5 3%
6 2%
7 & later 0%
Free Surrender Percentage: $10%
Minimum Amount of a Partial Surrender: $500.00
Maximum Amount of a Partial Surrender: The Contract Value cannot
fall below $1,000
- --------------------------------------------------------------------------------
OTHER CHARGES (Annual basis)
Mortality Risk Premium: .85% of the daily net asset value
Expense Risk Premium: .40% of the daily net asset value
Administration Charge: .15% of the daily net asset value
Annual Contract Charge: $35
- --------------------------------------------------------------------------------
MINIMUM GUARANTEED DEATH BENEFIT
Specified Anniversary: Seventh contract anniversary and every
contract anniversary after that.
- --------------------------------------------------------------------------------
<PAGE>
DEFINITIONS (continued)]
Fixed Account
An account under this Contract that guarantees both principle and interest.
Fixed Account Contract Values are held in our General Account which is composed
of all our assets other than those in our Separate Accounts. We have complete
ownership and control of the assets in the General Account.
- -------------------------------------
Owner (You, Your)
The person(s) named on the Contract Data Page to hold this Contract and to
exercise all rights and privileges under it. This Contract may be owned by one,
but no more than two, natural person(s) only, except when it is held under a
retirement plan described in Section 401 (a) or 403(a), or a program described
in Section 403(b) of the Code. The Annuitant owns this Contract unless another
owner is named as provided for in this Contract. You may change the Owner of
this Contract by sending us written notice.
- -------------------------------------
Sub-Account
A subdivision of the Variable Account. Each Sub-Account's assets are invested
exclusively in one of the investment funds we make available for investment
under this Contract. The Sub-Accounts available on the Issue Date, and the
percentage of Purchase Payments you have allocated to each Sub-Account is shown
on the Contract Data Page.
- -------------------------------------
Sub-Account Accumulation Unit
A unit of measure used to determine the Variable Account Contract Value before
annuity payments start.
- -------------------------------------
Successor Beneficiary
The person you name to become the Beneficiary if the Beneficiary dies.
- -------------------------------------
Valuation Date
The close of the market each day that the New York Stock Exchange is open for
trading and trading has not been suspended by the Securities and Exchange
Commission.
- -------------------------------------
Valuation Period
The period of time between a Valuation Date and the next Valuation Date.
- -------------------------------------
Variable Account
A separate investment account of ours which has been established under the State
of Minnesota insurance laws and is divided into Sub-Accounts.
- -------------------------------------
Variable Annuity
A series of periodic payments to the Annuitant which will vary in amount based
on the investment performance of the Variable Account Sub-Accounts under this
Contract.
- -------------------------------------
Variable Annuity Unit
A unit of measure used to determine the amount of an annuity payment after the
first annuity payment under a Variable Annuity.
- -------------------------------------
- ------ ---
84-693 3
- ------ ---
DEFINITIONS (continued)
We, Us, Our
Northwestern National Life Insurance Company.
- -------------------------------------
Written, In Writing
A written request or notice, signed and dated, and received at an address
designated by us. The form and content of the request must be acceptable to us.
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
Purchase Payments
You may make Purchase Payments any time before the Annuity Commencement Date
while the Contract is inforce. Purchase Payments must equal at least the
applicable minimum Purchase Payment as shown on the Contract Data Page. We may
choose not to accept an additional Purchase Payment if it is less than the
minimum, or if the additional Purchase Payment plus the Contract Value at the
next Valuation Date exceeds $ 1,000,000.
- -------------------------------------
Allocation of Purchase Payments
You specified the initial allocation of Purchase Payments on your application
for this Contract. Your allocation is shown on the Contract Data Page. The
percentage allocation between the accounts may be changed at any time by written
notice. Changes in allocations of Sub-Account funds are subject to any
limitations imposed by such funds. The only fee for such changes will be the
charges, if any, imposed by the investments funds. Changes in the allocation
will not be effective until the date we receive your notice and will only affect
Purchase Payments we receive after that date. The allocation may be 100% to any
account or may be divided between the accounts in whole percentage points
totaling 100%.
- --------------------------------------------------------------------------------
FIXED ACCOUNT
Purchase Payments will be allocated to the Fixed Account in the whole
percentages you have specified. We credit interest to the Fixed Account Contract
Value at rates we determine from time to time. We will never credit less than 3%
per year. The Fixed Account Interest Rate applicable to the initial purchase
payment is shown on the Contract Data Page and is guaranteed until December 31
next following receipt of the initial Purchase Payment.
- -------------------------------------
Fixed Account Contract Value
The Fixed Account Contract Value on any Valuation Date is:
1.
The sum of your Purchase Payments allocated to the Fixed Account.
2.
Plus any transfers from the Variable Account.
3.
Plus interest credited as specified above.
4.
Minus any partial surrenders, Surrender Charges, and Annual Contract Charges
applicable to the Fixed Account.
5.
Minus any transfers to the Variable Account.
- --------------------------------------------------------------------------------
VARIABLE ACCOUNT
The Variable Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940. We have
complete ownership and control of the assets in the Variable Account, but these
assets are held separately from our other assets and are not part of our General
Account.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities incurred in any other business that we may conduct. We have the
right to transfer to our General Account any assets of the Variable Account
which are in excess of such reserves and other liabilities. The income, if any,
and gains and losses, realized or unrealized, of the Variable Account will be
credited to or charged against the amount allocated to the Variable Account, in
accordance with the contracts supported by the Variable Account, without regard
to the other income, gains, or losses of the Company.
- --------------------------------
- ---- ---
4835 4
- ---- ---
- --------------------------------------------------------------------------------
VARIABLE ACCOUNTS (continued)
Sub-Accounts
The Variable Account is divided into Sub-Accounts, some of which are available
under this Contract. Each Sub-Account that is made available under this Contract
invests in shares of a corresponding series of a designated investment fund, as
set forth on the Contract Data Page. Shares of a series will be purchased and
redeemed for a Sub-Account at their net asset value. Any amount of income,
dividends, and gains distributed from shares of a series will be reinvested in
additional shares of that series at its net asset value. The investment fund
prospectuses define the net asset value and describe the investment funds.
The dollar amounts of values and benefits of this Contract provided by the
Variable Account depend on the investment performance of the investment funds
in which your selected Sub-Accounts are invested. We do not guarantee the
investment performance of the investment funds. You bear the full investment
risk for amounts applied to the selected Sub-Accounts.
An investment fund may impose a minimum purchase requirement. If your Purchase
Payment plus all other Purchase Payments we receive to be allocated to the
Sub-Account for purchase of shares in that investment fund on a given day less
any redemption of such shares resulting from transfers or surrenders on that day
do not meet the minimum, we will refund your Purchase Payment.
Purchase Payments allocated to a Sub-Account may be unable to be invested in
shares of a selected investment fund because:
1.
Shares are not being offered for sale by the investment fund, or
2.
In the judgement of our management, further investment in such investment fund
shares would be inappropriate in view of the purposes of this Contract.
If we are unable to invest your Purchase Payment as you have specified, we will
return it to you. You may then direct allocation of the Purchase Payments to a
different Sub-Account. The new allocation will be effective on the next
Valuation Date after we receive your request.
- --------------------------------
Sub-Account Accumulation Units
Purchase Payments received under this Contract and allocated to, and any amounts
transferred to, the Variable Account will be credited in the form of Sub-Account
Accumulation Units. The number of Sub-Account Accumulation Units credited is
found by dividing the amount of the Purchase Payment allocated to, or any amount
transferred to, the Sub-Account by the Sub-Account Accumulation Unit Value on
the next Valuation Date. The number of Sub-Account Accumulation Units canceled
upon surrender or transfer from a Sub-Account is determined by dividing the
amount surrendered or transferred by the Sub-Account Accumulation Unit Value on
the next Valuation Date.
Each Sub-Account Accumulation Unit Value was initially set at $10 when the
Sub-Account first purchased investment fund shares. Subsequent values on any
Valuation Date are equal to the previous Sub-Account Accumulation Unit Value
times the Net Investment Factor for that Sub-Account for the Valuation Date.
- --------------------------------
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84-694 5
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VARIABLE ACCOUNTS (continued)
Variable Account Contract Value
The Variable Account Contract Value is the total of the values of your interest
in each Sub-Account, which for each Sub-Account is equal to:
1.
The number of Sub-Account Accumulation Units.
2.
Times the Sub-Account Accumulation Unit Value.
The Variable Account Contract Value will vary from Valuation Date to Valuation
Date reflecting the total value of your interest in the Sub-Accounts.
- --------------------------------
Net Investment Factor
The Net investment Factor is an index number which reflects charges to this
Contract and the investment performance during a Valuation Period of the
investment fund in which a Sub-Account is invested. If the Net Investment Factor
is greater than one, the Sub-Account Accumulation Unit Value has increased. If
the Net Investment Factor is less than one, the Sub-Account Accumulation Unit
Value has decreased. The Net Investment Factor for a Sub-Account is determined
by dividing (1) by (2) and then subtracting (3) from the result, where:
1.
Is the net result of:
a.
The net asset value per share of the investment fund shares held in the
Sub-Account, determined at the end of the current Valuation Period.
b.
Plus the per share amount of any dividend or capital gain distributions made on
the investment fund shares held in the Sub-Account during the current Valuation
Period.
c.
Plus or minus a per share charge or credit for any taxes reserved for which we
determine to have resulted from the investment operations of the Sub-Account and
to be applicable to this Contract.
2.
Is the net result of:
a.
The net asset value per share of the investment fund shares held in the
Sub-Account, determined at the end of the last prior Valuation Period.
b.
Plus or minus a per share charge or credit for any taxes reserved for the last
prior Valuation Period which we determine to have resulted from the investment
operations of the Sub-Account and to be applicable to this Contract.
3.
Is a factor representing the Mortality Risk Premium, the Expense Risk Charge,
and the Administrative Charge which are shown on an annual basis on the Contract
Data Page.
- --------------------------------
Mortality Risk Premium
The Mortality Risk Premium pays us for assuming the mortality risk under this
Contract. This charge is included in the Net Investment Factor and is shown on
the Contract Data Page.
- --------------------------------
Expense Risk Charge
The Expense Risk Charge pays us for guaranteeing that we will not increase the
Annual Contract Charge or the Administrative Charge even though our cost of
administering this Contract and the accounts may increase. This Expense Risk
Charge is included in the Net Investment Factor and is shown on the Contract
Data Page.
- --------------------------------
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4836 6
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VARIABLE ACCOUNT (continued)
Administrative Charge and Annual Contract Charge
The Administrative Charge and the Annual Contract Charge shown on the Contract
Data Page pay us for the administrative expenses of the Contract.
The Administrative Charge is included in the Net Investment Factor.
The Annual Contract Charge will be deducted from the Contract Value on each
Contract Anniversary before the Annuity Commencement Date. We may not increase
the Annual Contract Charge. We make the deduction from the Fixed Account and the
Variable Account on a basis that reflects each account's proportionate
percentage of the Contract Value. If you request a total surrender of this
Contract on other than the Contract Anniversary, the Annual Contract Charge will
be deducted at the time of the surrender.
On or after the Annuity Commencement Date, if we provide a Fixed Annuity we will
deduct 1/12th of the Annual Contract Charge from each monthly Fixed Annuity
Payment; if we provide a Variable Annuity, we will deduct 1/12th of the Annual
Contract Charge from each monthly Variable Annuity Payment. If either form of
annuity payment is paid other than monthly, the deduction for the Annual
Contract Charge will be adjusted pro rata. The amount will be deducted from each
Fixed Annuity Payment and also will be deducted from each Variable Annuity
Payment.
- --------------------------------
Premium and Other Taxes
We may also deduct any applicable premium taxes levied by any unit of
government. We may, at our discretion, deduct premium taxes from purchase
payments upon receipt or deduct premium taxes from the Contract Value at a later
date. We reserve the right to deduct charges for any other tax or economic
burden resulting from the application of any tax laws that we determine to be
applicable to the Contract.
- --------------------------------
Reserved Rights
We reserve the right, if permitted by law, to:
1.
Create new variable accounts;
2.
Combine variable accounts, including the Variable Account;
3.
Remove, add or combine Sub-Accounts and make the new Sub-Accounts available to
Contract Owners at our discretion;
4.
Substitute shares of other investment funds or series thereof for those of the
investment funds and series made available under the Contract;
5.
Transfer assets of the Variable Account, which we determine to be associated
with the class of contracts to which this Contract belongs, to another variable
account (if this type of transfer is made, the term 'Variable Account' as used
in this Contract will then mean the variable account to which the assets were
transferred);
6.
Deregister the Variable Account under the Investment Company Act, of 1940, if
registration is no longer required;
7.
Make any changes required by the Investment Company Act of 1940;
8.
Operate the Variable Account as a managed investment company under the
Investment Company Act of 1940, or any other form permitted by law; and
9.
Restrict or eliminate any voting privileges of Contract Owners or other persons
who have voting privileges as to the Variable Account.
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84-695 7
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TRANSFERS
You may transfer Contract Value among Sub-Accounts, from one or more
Sub-Accounts to the Fixed Account, and from the Fixed Account to one or more
Sub-Accounts, subject to certain limitations. We make a transfer on the next
Valuation Date after we receive your written instructions requesting the
transfer. Transfers are subject to any charge imposed by the investment funds
invested in by the Sub-Accounts involved in the transfer. We reserve the right
to impose a charge of up to $25 for each transfer and to limit the number of
transfers you can make. All transfers are subject to any conditions the
investment fund whose shares are involved may impose.
- --------------------------------
Transfers from the Fixed Account
Before the Annuity Commencement Date, you may request in writing the transfer of
part of the Fixed Account Contract Value to the Variable Account under the
following conditions:
1.
You may only make the transfer in the transfer period starting 30 days before
and ending 30 days after each Contract Anniversary. Only one transfer is allowed
during the transfer period.
2.
The request to transfer must be received by us no more than 30 days before the
start of the transfer period and not later than the end of the transfer period.
3.
No more than 50% of the Fixed Account Contract Value may be transferred unless
the Fixed Account Contract Value would be less than $1000 after the transfer,
in which case the full Fixed Account Contract Value may be transferred.
4.
You must transfer at least $500 or the total Fixed Account Contract Value, if
less.
No transfers from the Fixed Account may be made after the Annuity Commencement
Date.
- --------------------------------
All Other Transfers
Before the Annuity Commencement Date, you may request in writing the transfer of
all or part of a Sub-Account's value to other Sub-Accounts or to the Fixed
Account. To accomplish the transfer, appropriate Sub-Account Accumulation Units
will be redeemed and their value will be reinvested in other Sub-Accounts, or
reallocated to the Fixed Account as directed in your request.
After the Annuity Commencement Date, the Annuitant may request in writing the
transfer of the value of the Sub-Account Variable Annuity Units in the same
manner and subject to the same requirements as for a transfer of the value of
the Sub-Account Accumulation Units.
No transfers to the Fixed Account may be made after the Annuity Commencement
Date.
- --------------------------------------------------------------------------------
SURRENDERS
At any time prior to the Annuity Commencement Date and during the lifetime of
the Annuitant, you may surrender all or part of this Contract by sending us a
written request.
Surrenders will be taken first from Purchase Payments on a first-in, first-out
basis, then from Contract Earnings.
- --------------------------------
Total Surrender
Any time prior to the Annuity Commencement Date and during the lifetime of the
Annuitant, you may surrender this Contract by sending us a written request.
The amount payable on surrender is:
1.
The Contract Value and the Valuation Date next following our receipt of your
request.
2.
Minus the Annual Administrative Charge if the surrender does not occur on a
Contract Anniversary.
3.
Minus any Surrender Charges.
4.
Minus any premium and other taxes.
Upon payment of the above surrender amount, this Contract is terminated and we
have no further obligation under this Contract.
- --------------------------------
Partial Surrender
At any time prior to the Annuity Commencement Date and during the lifetime of
the Annuitant, you may surrender a portion of the Fixed Account Contract Value
and/or the Variable Account Contract Value by sending us a written request. We
reserve the right to impose a charge of up to $25 for each partial surrender and
to limit the number of partial surrenders you can make.
You must request to surrender an amount equal to at least the minimum amount
shown on the Contract Data Page.
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4837 8
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SURRENDERS (continued)
The requested amount of the partial surrender may not exceed the amount payable
under a total surrender.
The partial surrender may not cause the remaining contract value to fall below
the amount shown on the Contract Data Page.
We will surrender Sub-Account Accumulation Units from the Variable Account,
and/or dollar amount from the Fixed Account, so that the total amount
surrendered equals the sum of the following:
1.
The dollar amount of your partial surrender request.
2.
Plus any Surrender Charges.
3.
Plus any premium and other taxes.
If you do not specify the accounts from which surrender is to be made, surrender
will be made from the Fixed Account and the Sub-Accounts of the Variable Account
in the same proportion your interest in each account bears to the Contract
Value. Partial surrenders will be made as of the Valuation Date next following
our receipt of your request.
- --------------------------------------------------------------------------------
SURRENDER CHARGES
Order of Surrender
For purposes of determining Surrender Charges, the Contract Value is divided
into the following categories:
1.
New Purchase Payments - Purchase Payments we have received and that still may
have a Surrender Charge applied as shown on the Contract Data Page.
2.
Old Purchase Payments - Purchase Payments not defined as New Purchase Payments.
3.
Contract Earnings - The Contract Value at any Valuation Date minus the sum of
the New Purchase Payments and Old Purchase Payments.
Surrenders will be taken from the funds available in the following order:
1.
Old Purchase Payments, until exhausted.
2.
New Purchase Payments, until exhausted.
3.
Contract Earnings.
- --------------------------------
Free Surrender
During any Contract Year, surrenders taken from the following amounts are not
subject to a Surrender Charge:
1.
Old Purchase Payments not already surrendered.
2.
The Percentage of Free Surrender shown on the Contract Data Page multiplied by
all New Purchase Payments. However, this applies only to the first surrender
made in each contract year after the first Contract Year.
3.
Contract Earnings.
- --------------------------------------------------------------------------------
AMOUNT OF SURRENDER CHARGE
Total Surrender
The Surrender Charge for a total surrender is found by multiplying the amount of
each New Purchase Payment, surrendered and not eligible for a Free Surrender, by
the applicable Surrender Charge percentage shown on the Contract Data Page.
Partial Surrender
The Surrender Charge for a partial surrender is found by dividing (1) by (2) and
multiplying the result by (3), for each New Purchase Payment to be surrendered,
where:
1.
Is the amount of the New Purchase Payment to be surrendered and not eligible for
a Free Surrender.
2.
Is one minus the applicable Surrender Charge percentage shown on the Contract
Data Page.
3.
Is the applicable Surrender Charge percentage shown on the Contract Data Page.
The Surrender Charge will be deducted proportionately from the Fixed Account
and/or the Sub-Accounts from which the surrender is taken.
In computing surrenders, any portion of a Surrender Charge that is deducted from
the remaining Contract Value will be deemed a part of the surrender.
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84-696 9
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GENERAL SURRENDER PROVISIONS
The amount surrendered, minus any charges, will normally be paid to you within 7
days of:
1.
Receipt of your written request, and
2.
Receipt of your contract, if required.
We have the right to defer payment of surrenders from the Fixed Account for up
to 6 months from the date we receive your request.
No surrenders are allowed on or after the Annuity Commencement Date.
- --------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
Death of Owner
When an Owner, including any Joint Owner, dies before the Annuity Commencement
Date we pay the Death Benefit to the Beneficiary (otherwise to the Successor
Beneficiary, otherwise to the estate of the deceased Owner) in a lump sum within
5 years of the Owner's death, unless the person designated to receive the Death
Benefit requests an Annuity Form permitted by Section 72(s) of the Code, within
60 days of the date of death and we approve it.
If the Owner has designated the Owner's spouse as sole Beneficiary, the Contract
continues in the name of the surviving spouse who becomes the Owner and may
exercise all rights and privileges hereunder.
- --------------------------------
Death of Annuitant When Annuitant is Not Owner
When someone other than the Annuitant owns this Contract, and the Annuitant dies
before the Annuity Commencement Date while this Contract is inforce, the Owner
must designate a successor Annuitant within 60 days of the date of the
Annuitant's death, otherwise the Owner becomes the Annuitant.
- --------------------------------
Amount of Death Benefit
The amount of the Death Benefit is defined as follows:
1.
If an Owner (including the Annuitant) dies on or before the first day of the
month following such Owner's 85th birthday, the greatest of:
a.
The Contract Value on the Death Benefit Valuation Date; or
b.
The sum of the Purchase Payments we received under this Contract, minus the
amount of all partial surrenders; or
c.
The Contract Value on the Specified Contract Anniversary (immediately
preceding the Owner's death) shown on the Contract Data Page, plus any Purchase
Payments and less any partial surrenders since that anniversary.
2.
If an Owner (including the Annuitant) dies after the first day of the month
following such Owner's 85th birthday, the Contract Value on the Death Benefit
Valuation Date.
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4838 10
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DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE (continued)
Payment of Death Benefit
If the Beneficiary elects a single sum payment of the Death Benefit, we will
make payment within 7 days after the Death Benefit Valuation Date. If an Annuity
Form is requested, it may be any Annuity Form that could have been selected
under the Annuity Benefits Section of this Contract and which is permitted by
Section 72(s) of the Code.
If an Annuity Form is not requested within 60 days after the date of death, the
Death Benefit will be paid in a single sum to the Beneficiary and this Contract
will end.
- --------------------------------------------------------------------------------
DEATH BENEFIT ON OR AFTER ANNUITY COMMENCEMENT DATE
When the Annuitant dies, on or after the Annuity Commencement Date, we will pay
the Beneficiary, in a lump sum, the value of the remaining proceeds, if any,
under the Annuity Form in effect.
- --------------------------------------------------------------------------------
PAYMENT TO BENEFICIARY
The Death Benefit is paid to the Beneficiary, if any. If there is more than one
Beneficiary, each receives an equal share, unless you have requested another
method in writing.
- --------------------------------------------------------------------------------
CONTRACT OWNER
As Owner, you may exercise all of the rights and duties under this Contract
before the Annuity Commencement Date.
Before the Annuity Commencement Date and while the Annuitant is living, you may
name or change a Beneficiary, a Successor Beneficiary, or Annuitant by giving us
written notice of the change. We are not responsible for the validity of any
change. A change will take effect as of the date it is signed but will not
affect any payments we make or action we take before receiving your notice. We
need the consent of any irrevocably named person before making a requested
change.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
Age and Sex
If age or sex affects payments or benefits under this Contract, we may require
satisfactory proof of correct age or sex at any time. If we have made
overpayments because of incorrect age or sex information, or any error or
miscalculation, we will deduct the overpayment from the next payment or payments
due. We add underpayments to the next payment.
- --------------------------------
Amendment
We reserve the right to amend this Contract in order to include any future
changes relating to this Contract's remaining qualified for treatment as an
annuity contract under the following:
1.
The Code.
2.
Internal Revenue Service rulings and regulations.
3.
Any requirements imposed by the Internal Revenue Service.
We will promptly send you a copy of any amendments.
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84-421 11
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GENERAL PROVISIONS (continued)
Assignment
This Contract may be assigned before the Annuity Commencement Date. You may
assign all rights under this Contract by giving us the original or a certified
copy of the assignment. We are not responsible for the validity of any
assignment. We are not bound by any assignment until we receive it.
All collateral assignees must consent to any surrender. We may require that this
Contract be returned to our Home Office prior to making payment.
- --------------------------------
Disclaimer
We are not liable for the tax or tax penalties you own resulting from failure to
comply with the requirements of the Code, Regulations and Rulings imposed on
this Contract.
- --------------------------------
Payments and Settlements
All payments and settlements we make are payable at our Home Office. We may
require that this Contract be returned before payments and settlements are made.
- --------------------------------
Proof of Death
We accept any of the following as proof of death:
1.
A copy of a certified death certificate.
2.
A copy of a certified decree of a court of competent jurisdiction as to the
finding of death.
3.
Any other proof satisfactory to us.
- --------------------------------
Protection of Proceeds
Payments we make under this Contract may not be assigned before they are due
and, except as permitted by law, are not subject to claims of creditors or legal
process.
- --------------------------------
Reports
We will send you a report showing the Contract Value at least once each year.
- --------------------------------
Termination
This Contract ends when:
1.
It is surrendered for its full value, or
2.
The Death Benefit is paid, whichever occurs first.
If the Contract Value is less than $1,000, we may cancel this Contract on any
Contract Anniversary which is a Valuation Date or on the next Valuation Date if
the Contract Anniversary is not a Valuation Date. This cancellation is
considered a total surrender of this Contract, subject to the Surrender Charges
and Annual Administrative Charges.
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4643 12
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ANNUITY BENEFITS
Application of Contract Value
On the Annuity Commencement Date, we apply the Fixed Account Contract Value to
provide a Fixed Annuity, and the Variable Account Contract Value to provide a
Variable Annuity, unless you tell us to do otherwise in writing. If the Contract
Value on the Annuity Commencement Date is less than $5,000, we may pay the
Contract Value in a single sum and cancel this Contract. If the Annuity
Commencement Date is more than two years from the Policy Date, we will not
subtract any Surrender Charges. We reserve the right to deduct applicable
premium and other taxes levied by any unit of government from the Contract Value
on the Annuity Commencement Date.
- ---------------------------------
Annuity Commencement Date
You specified the Annuity Commencement Date for this Contract in the
application. It is the date on which annuity payments are to start. The date
will be the first day of the month following the Annuitant's 75th birthday
unless you select another date. If a later date is selected, we must agree to
it. You may change the Annuity Commencement Date at any time if we receive
written notice at least 30 days before both the current Annuity Commencement
Date and the new Annuity Commencement Date.
If the Annuity Commencement Date does not occur on a Valuation Date that is at
least 60 days after the Issue Date, we reserve the right to change the Annuity
Commencement Date to the first Valuation Date that is at least 60 days after the
Issue Date. If the Annuity Commencement Date is less than two years from the
Issue Date, we may apply Surrender Charges.
- --------------------------------
Frequency and Amount of Payments
Annuity payments will be made monthly unless we agree to a different payment
schedule. We reserve the right to change the frequency of either a Fixed Annuity
Payment or a Variable Annuity Payment so that each payment will be at least $50.
- --------------------------------------------------------------------------------
FIXED ANNUITY PAYMENTS
Fixed Annuity Payments start on the Annuity Commencement Date. The amount of the
first monthly payment for the Annuity Form selected, before the deduction of any
portion of the Annual Contract Charge, is shown on the Annuity Tables of this
Contract for each $1,000 of Contract Value applied. The monthly portion of the
Annual Contract Charge is deducted from the amount of each Fixed Annuity
Payment.
The dollar amount of any payments after the first payment are fixed during the
entire period of annuity payments, according to the provisions of the Annuity
Form selected.
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS
Sub-Account Variable Annuity Units
Unless you request otherwise in writing, we convert the Sub-Account Accumulation
Units applicable to this Contract into Sub-Account Variable Annuity Units at the
Variable Annuity Unit Value on the Annuity Commencement Date. The number of
Sub-Account Variable Annuity Units remains constant, as long as an annuity
remains in force and allocation among the Sub-Accounts has not changed.
Each Sub-Account Variable Annuity Unit Value was set at $10 when the Sub-Account
first converted Sub-Account Accumulation Units into Variable Annuity Units.
Subsequent values on any Valuation Date are equal to the previous Sub-Account
Variable Annuity Unit Value times the Net Investment Factor for that Sub-Account
for the Valuation Period ending on that Valuation Date, with an offset for the
4% assumed interest rate used in the Annuity Tables of this Contract.
- --------------------------------
Variable Annuity Payments
Variable Annuity Payments start on the Annuity Commencement Date. The amount of
the first monthly payment for the Annuity Form selected, before the deduction of
any monthly portion of the Annual Contract Charge, is shown on the Annuity
Tables of this Contract for each $1,000 of Contract Value applied.
Payments after the first payment will vary in amount and are determined on the
first Valuation Date of each subsequent month. If the monthly payment under the
Annuity Form selected is based on the Variable Annuity Unit Value of a single
Sub-Account, the monthly payment is found by:
1.
Multiplying the Sub-Account Variable Annuity Unit Value on the Valuation Date
next prior to the payment date by the Net Investment Factor for the Sub-Account
for the Valuation Period that ends on the payment date;
2.
Multiplying the result in 1. by a factor that offsets the 4% assumed interest
rate, producing the current value of the Sub-Account Variable Annuity Unit; and
3.
Multiplying the result of 2. by the number of Variable Annuity Units under this
Contract in the Sub-Account.
If the monthly payment under the Annuity Form selected is based upon Variable
Annuity Unit Values of more than one Sub-Account, the above procedure is
repeated for each applicable Sub-Account. The sum of these payments is the total
Variable Annuity Payment.
The monthly portion of the Annual Contract Charge will then be deducted from the
total Variable Annuity Payment.
We guarantee that the amount or each payment after the first payment will not be
affected by variations in expense or mortality experience.
- --------------------------------------------------------------------------------
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4644 14
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OPTIONAL ANNUITY FORMS
You may select an Annuity Form or change a previous selection. The selection or
change must be in writing and received by us at least 15 days before the Annuity
Commencement Date. If no Annuity Form selection is in effect on the Annuity
Commencement Date, we automatically apply Option 2, with payments guaranteed for
10 years.
The following options are available for the Fixed Annuity Payment and the
Variable Annuity Payment:
1.
Life Annuity - Payments are made as of the first Valuation Date of each month
during the Annuitant's life, starting with the Annuity Commencement Date. No
payments will be made after the Annuitant dies.
2.
Life Annuity with Payments Guaranteed for 10 Years or 20 Years - Payments are
made as of the first Valuation Date of each month starting on the Annuity
Commencement Date. Payments will continue as long as the Annuitant lives. If the
Annuitant dies before all of the guaranteed payments have been made, we will pay
the value of the unpaid installments of the guaranteed payments to the
Beneficiary in a single sum.
3.
Joint and Full Survivor Annuity - Payments are made as of the first Valuation
Date of each month starting with the Annuity Commencement Date. Payments will
continue as long as either the Annuitant or the Joint Annuitant is alive. No
payments will be made after both the Annuitant and the Joint Annuitant have
died.
4.
Other Annuity Forms - We have other Annuity Forms available and information
about them can be obtained by writing us.
The Annuity Tables show the amount of the first annuity payment, before the
deduction of any portion of the Annual Contract Charge, due on the Annuity
Commencement Date for each $1,000 of Contract Value applied under options 1, 2,
and 3.
- --------------------------------------------------------------------------------
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84-604 15
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Annuity Tables
Life Annuity - Initial Monthly Annuity Payment Per $ 1,000 Applied
<TABLE>
<CAPTION>
Annuitant's Male Female
Attained Age Guaranteed Period Guaranteed Period
Nearest 120 240 120 240
Birthday None Months Months None Months Months
<S> <C> <C> <C> <C> <C> <C> <C>
40 $4.16 $4.15 $4.11 $3.96 $3.95 $3.93
41 4.20 4.18 4.14 3.99 3.98 3.96
42 4.24 4.23 4.18 4.02 4.01 3.99
43 4.29 4.27 4.21 4.06 4.05 4.02
44 4.33 4.31 4.25 4.09 4.08 4.06
45 4.38 4.36 4.29 4.13 4.12 4.09
46 4.44 4.41 4.33 4.17 4.16 4.13
47 4.49 4.46 4.38 4.21 4.20 4.16
48 4.55 4.52 4.42 4.26 4.24 4.20
49 4.61 4.57 4.47 4.30 4.29 4.24
50 4.67 4.63 4.52 4.35 4.34 4.28
51 4.74 4.70 4.57 4.40 4.39 4.33
52 4.81 4.76 4.62 4.46 4.44 4.37
53 4.88 4.83 4.67 4.52 4.49 4.42
54 4.96 4.90 4.73 4.58 4.55 4.47
55 5.04 4.97 4.78 4.64 4.61 4.52
56 5.13 5.05 4.84 4.71 4.68 4.58
57 5.22 5.13 4.90 4.78 4.75 4.63
58 5.31 5.22 4.96 4.86 4.82 4.69
59 5.42 5.31 5.02 4.94 4.89 4.75
60 5.52 5.41 5.08 5.03 4.97 4.81
61 5.64 5.51 5.14 5.12 5.06 4.87
62 5.76 5.62 5.20 5.22 5.15 4.94
63 5.90 5.73 5.27 5.32 5.24 5.00
64 6.04 5.85 5.33 5.43 5.34 5.07
65 6.19 5.98 5.39 5.55 5.45 5.14
66 6.36 6.11 5.45 5.68 5.56 5.21
67 6.53 6.25 5.51 5.81 5.68 5.27
68 6.72 6.39 5.56 5.96 5.80 5.34
69 6.92 6.54 5.62 6.11 5.94 5.41
70 7.14 6.69 5.66 6.28 6.08 5.48
71 7.37 6.85 5.71 6.46 6.22 5.54
72 7.61 7.01 5.75 6.65 6.38 5.60
73 7.88 7.18 5.79 6.86 6.54 5.66
74 8.16 7.35 5.83 7.09 6.71 5.71
75 8.46 7.52 5.86 7.33 6.88 5.76
</TABLE>
Joint and Survivor - Initial Monthly Annuity Payment Per $1,000 Applied
Annuitants' Attained Ages Nearest Birthday
Female Age
Male Age 50 55 60 65 70
50 $ 4.08 $ 4.15 $ 4.21 $ 4.25 $ 4.29
55 4.20 4.30 4.39 4.47 4.53
60 4.30 4.45 4.59 4.71 4.81
65 4.40 4.60 4.80 4.99 5.16
70 4.48 4.72 4.99 6.27 5.54
The above tables are based on the 1983 Individual Annuity Mortality Table, set
back 3 years, with interest at 4%. Annuity payments for ages(s) not above are
available upon request.
- --------------------------------------------------------------------------------
- ---- ---
4846 16
- ---- ---
<PAGE>
CODE SECTION 403(B) ENDORSEMENT
This Endorsement amends the Flexible Premium Individual Deferred Retirement
Annuity Contract (Contract) to which it is attached. This Contract is issued in
connection with a tax sheltered annuity plan described in Section 403(b) of the
Code.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
The following provisions apply to and replace any contrary Contract provisions.
You are responsible for determining that Purchase Payments and distributions
under this Contract comply with the following provisions.
- --------------------------------
Nontransferable
This Contract may not be transferred, sold assigned, discounted or pledged
either as collateral for a loan or security for the performance of an obligation
or for any other purpose, to any person other than us.
- --------------------------------
Owner
The Annuitant will be the sole Owner.
- --------------------------------
Annuity Commencement Date
The Annuity Commencement Date is the date the entire interest (value of the
annuity) of the Owner will be distributed or commence to be distributed. The
Annuity Commencement Date shall not be later than the Required Beginning Date.
The Required Beginning Date is April 1 of the calendar year following the
calendar year in which the Owner attains age 70 1/2 provided, however, that if
this Contract is issued in connection with a government or church sponsored
tax-sheltered annuity plan, the Required Beginning Date shall be April 1 of the
calendar year following the later of the calendar year in which the Owner
retires or attains age 70 1/2.
- --------------------------------
Purchase Payments
Purchase Payments made pursuant to a salary reduction agreement in connection
with the plan under which this Contract is purchased may not in any taxable year
exceed the amount specified in Code Section 402(g)(4).
- --------------------------------
Effect of Law and Plan Documents
This Contract shall be subject to and interpreted in conformity with the
provisions, terms and conditions of the tax-sheltered annuity plan document of
which this Contract is a part, if any, and with the terms and conditions of
section 403(b) of the Code, the regulations thereunder, and other applicable law
(including without limitation the Employee Retirement Income Security Act of
1974, as amended, if applicable), as determined by the plan administrator or
other designated plan fiduciary or, if none, the Owner.
- --------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Box 20
Minneapolis
Minnesota 55440
Executed at our Home Office
John H. Flittie President
/s/ John H. Flittie
Royce N. Sanner Secretary
/s/ Royce N. Sanner
- ------ ---
84-830 1
- ------ ---
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (continued)
Disclaimer
We shall be under no obligation either:
1.
To determine whether any Purchase Payment, distribution or transfer under the
Contract complies with the provisions, terms, and conditions of such plan of
with applicable law; or
2.
To administer such plan, including, without limitation, any provisions required
by the Retirement Equity Act of 1984.
- --------------------------------
Reserved Rights
1.
Notwithstanding any provision to the contrary in this Contract or the
tax-sheltered annuity plan of which this Contract is a part, if any, we reserve
the right to amend or modify this Contract or Endorsement to the extent
necessary to comply with any law, regulations, ruling or other requirement
necessary to establish or maintain the tax advantages, protections or benefits
available to such tax-sheltered annuity under Code Section 403(b) and other
applicable law.
2.
Except as otherwise set forth above, this Endorsement is subject to the
exclusions, definitions and provisions of the Contract.
- --------------------------------------------------------------------------------
REQUIRED DISTRIBUTIONS
1.
With respect to any amount which becomes payable under the Contract during the
lifetime of the Owner, such payment shall commence on or before the Required
Beginning Date and shall be payable in substantially equal amounts, no less
frequently than annually. The entire interest in the Contract shall be
distributed in the following manner:
a.
In one lump sum;
b.
Over the life of the Owner;
c.
Over the lives of the Owner and his or her designated Beneficiary;
d.
Over a period certain not exceeding the life expectancy of the Owner; or
e.
Over the joint and last survivor expectancy of Owner and his or her designated
Beneficiary.
If the Owner's entire interest is to be distributed in other than one lump sum,
then the amount to be distributed each year (commencing with the Required
Beginning Date and each year thereafter) shall be determined in accordance with
Code Section 403(b)(10) and the regulations thereunder.
2.
If the Owner dies after distribution of his or her interest has commenced, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used immediately preceding the
Owner's death.
3.
If the Owner dies before distribution has commenced, the entire interest shall
be distributed no later than December 31 of the calendar year in which the fifth
anniversary of the Owner's death occurs. However, proceeds which are payable to
a Beneficiary who is a natural person may be distributed in substantially equal
installments over the lifetime of the Beneficiary or a period certain not
exceeding the life expectancy of the Beneficiary provided such distribution
commences not later than December 31 of the calendar year following the calendar
year in which the Owner's death occurred. If the Beneficiary is the surviving
spouse of the Owner, the Beneficiary may elect not later than December 31 of the
calendar year in which the fifth anniversary of the Owner's death occurs to
receive equal or substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the date on which the
Owner would have attained age 70 1/2. Payments shall be calculated in accordance
with Code Section 403(b)(10) and the regulations thereunder.
For the purposes of requirements 3, 4, and 5, any amount paid to a child of an
Owner shall be treated as if it had been paid to the surviving spouse if the
remainder of the interest becomes payable to the surviving spouse when the child
reaches the age of majority.
- --------------------------------------------------------------------------------
- ---- ---
4940 2
- ---- ---
- --------------------------------------------------------------------------------
REQUIRED DISTRIBUTIONS (continued)
4.
If the Owner's spouse is not the named Beneficiary, the method of distribution
selected will assure that at least 50% of the present value of the amount
available for distribution is paid within the life expectancy of the Owner and
that such method of distribution complies with the requirements of Code Section
403(b)(10) and the regulations thereunder.
5.
For purpose of the foregoing provisions, life expectancy and joint and last
survivor expectancy will be determined by use of the expected return multiples
in Tables V and VI of Treasury Regulation Section 1.72-9 in accordance with Code
Section 403(b)(10) and the regulations thereunder. In the case of distributions
under paragraph 4 of this Endorsement, the Owner's life expectancy or, if
applicable, the joint and last survivor expectancy of the Owner and his or her
Beneficiary, will be initially determined on the basis of attained ages in the
year the Owner reaches age 70 1/2. In the case of distribution under paragraph 2
of this Endorsement, life expectancy shall be initially determined on the basis
of the Beneficiary's attained age in the year distributions are required to
commence. Unless the Owner (or Owner's spouse) elects otherwise prior to the
date distributions are required to commence, the Owner's life expectancy and, if
applicable, the Owner's spouse's life expectancy shall be recalculated annually
based on attained ages in the year for which the required distribution is being
determined. The life expectancy of a nonspouse Beneficiary shall not be
recalculated.
In the case of a distribution other than in the form of life income or joint
life income, the annual distribution required to be made by the Required
Beginning Date is for the calendar year in which the Owner reached age 70 1/2.
Annual payments for subsequent years, including the year in which the Required
Beginning Date occurs, must be made by December 31 of the year. The amount
distributed for each year shall equal or exceed the annuity value as of the
close of business on December 31 of the preceding year, divided by the
applicable life expectancy or joint and last survivor expectancy.
6.
Distributions shall not be made prior to the date the Owner attains age 59 1/2,
separates from service, dies, becomes disabled or incurs a hardship within the
meaning of Code Section 403(b)(11), to the extent such distribution is
attributable to:
a.
Purchase Payments made pursuant to a salary reduction agreement (except to the
extent attributable to assets held as of the close of the last year beginning
before January 1, 1989); or
b.
Amounts transferred to this Contract from a contract or account that was subject
to such conditions.
In the event of hardship, income attributable to such Purchase Payments or
amounts shall not be distributed.
7.
The Owner or the Owner's surviving spouse as Beneficiary or the Owner's former
spouse as alternate payee under a qualified domestic order within the meaning of
Code Section 414(q), as applicable (the 'Distributee'), may elect, at the time
and in the manner we prescribe, to have any portion of an eligible rollover
distribution with respect to the Distributee's interest in the Contract paid
directly by the Company as a direct rollover to an individual retirement account
described in Code Section 408(a), an individual retirement annuity described in
Section 408(b) or (except in the case of a surviving spouse as Beneficiary)
another annuity described in Code Section 403(b) specified by the Distributee
that accepts direct rollovers. An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, other than:
a.
Any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life or life
expectancy of the Distributee or for the joint lives or life expectancies of the
Distributee and his or her Beneficiary or for a specified period of ten years or
more;
b.
Any distribution to the extent it is a required minimum distribution under Code
Section 403(b)(10); and
c.
The portion of any distribution that is not includible in gross income.
This provision shall be interpreted in accordance with Code Section 403(b)(10)
and the regulations thereunder.
- --------------------------------------------------------------------------------
- ------ ---
84-831 3
- ------ ---
<PAGE>
QUALIFIED PLAN ENDORSEMENT
This Endorsement amends the Flexible Premium Individual Deferred Retirement
Annuity Contract (Contract) to which it is attached. This Contract is issued to
or purchased by the trustee of a pension or profit-sharing plan intended to
qualify under Section 401(a) of the Code.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
The following provisions apply to and replace any contrary Contract provisions.
- --------------------------------
Nontransferable
Except as allowed by the qualified pension or profit-sharing plan of which this
Contract is a part, the Contract may not be transferred, sold, assigned,
discounted or pledged, either as collateral for a loan or as security for the
performance of an obligation or for any other purpose, to any person other than
us.
- --------------------------------
Effect of Plan Documents
This Contract shall be subject to the provisions, terms and conditions of the
qualified pension or profit-sharing plan of which the Contract is a part. Any
payment, distribution or transfer under this Contract shall comply with the
provisions, terms and conditions of such plan as determined by the plan
administrator, trustee or other designated plan fiduciary.
- --------------------------------
Disclaimer
We shall be under no obligation either:
1.
To determine whether any such payment, distribution or transfer complies with
the provisions, terms and conditions of such plan or with applicable law; or
2.
To administer such plan, including, without limitation, any provisions required
by the Retirement Equity Act of 1984.
- --------------------------------
Reserved Rights
Notwithstanding any provision to the contrary in this Contract or the qualified
pension or profit-sharing plan of which this Contract is a part, we reserve the
right to amend or modify this Contract or Rider to the extent necessary to
comply with any law, regulation, ruling or other requirement deemed by the
Company to be necessary to establish or maintain the qualified status of such
pension or profit-sharing plan.
Except as otherwise set forth above, this Endorsement is subject to the
exclusions, definitions, and provisions of the Contract.
- --------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Box 20
Minneapolis
Minnesota 55440
Executed at our Home Office
John H. Flittie President
/s/ John H. Flittie
Royce N. Sanner Secretary
/s/ Royce N. Sanner
- ------ ---
84-832 1
- ------ ---
<PAGE>
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Endorsement amends the Flexible Premium Individual Deferred Retirement
Annuity (Contract) to which it is attached in order to qualify it as an
individual retirement annuity under Section 408(b) of the Code. The Contract,
including this Endorsement, also may be used in conjunction with a Simplified
Employee Pension (SEP) under Code Section 408(k). The following provisions apply
and replace any contrary provisions of the Contract
- --------------------------------------------------------------------------------
NONTRANSFERABLE
You will be the Owner. The Contract is not transferable or assignable (other
than pursuant to a divorce decree in accordance with applicable law) and is
established for the exclusive benefit of you and your beneficiaries. It may not
be transferred, sold, assigned, alienated, or pledged as collateral for a loan
or as security.
- --------------------------------------------------------------------------------
NONFORFEITABLE
Your entire interest in the Contract will be nonforfeitable.
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
Purchase Payments will be in cash or a cash equivalent. The following Purchase
Payments will be accepted under this Contract:
1.
Rollover contributions described in Sections 402(c), 403(a)(4), 403(b)(8) and
408(d)(3) of the Code;
2.
Amounts transferred from another individual retirement account or annuity;
3.
Contributions pursuant to a SEP as provided in Section 408(k) of the Code;
4.
Other premium payments in an amount not in excess of $2,000 for any year.
You have the sole responsibility for determining whether any Purchase Payment
meets applicable income tax requirements, if you make a Purchase Payment greater
than that permitted by the Code, you may make a written request to withdraw the
excess pursuant to the Code, subject to applicable Contract Surrender Charges
and tax penalties.
This Contract does not require fixed premium payments. Any refund of premiums
(other than those attributable to excess contributions) will be applied before
the close of the calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional benefits.
- --------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Box 20
Minneapolis
Minnesota 55440
Executed at our Home Office
John H. Flittie President
/s/ John H. Flittie
Royce N. Sanner Secretary
/s/ Royce N. Sanner
- ------ ---
84-833 1
- ------ ---
- --------------------------------------------------------------------------------
REQUIRED DISTRIBUTIONS
Your entire Contract value will be distributed or commence to be distributed to
you no later than April 1 of the calendar year following the calendar year in
which you attain age 70 1/2 (Required Beginning Date). You have the sole
responsibility for requesting a distribution that complies with this Endorsement
and applicable law.
With respect to any amount which becomes payable under the Contract during your
lifetime, such payment will be payable in equal amounts, no less frequently than
annually. Payments will be made:
1.
In a lump sum; or
2.
Over your life; or
3.
Over the lives of you and your designated Beneficiary; or
4.
Over a period certain not exceeding your life expectancy; or
5.
Over a period certain not exceeding the joint and last survivor expectancy of
you and your designated Beneficiary.
Payments must be nonincreasing or may increase only as provided in Q&A F-3 of
Proposed Treasury Regulations Section 1.401(a)(9)-1. If your entire interest is
to be distributed in other than a lump sum, the minimum amount to be distributed
each year (commencing with the calendar year following the calendar year in
which you attain age 70 1/2 and each year thereafter) will be determined in
accordance with Code Section 408(b)(3) and the regulations thereunder. We permit
partial surrenders if necessary to fund these required distributions prior to
the Annuity Commencement Date. Partial surrenders are subject to Contract
Surrender Charges.
- --------------------------------------------------------------------------------
DEATH BENEFIT
If you die after distribution of your interest has commenced, the remaining
portion of such interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to your death (pursuant to the
Annuity Form in effect, if you die after the Annuity Commencement Date).
If you die before distribution has begun, the entire interest must be
distributed no later than December 31 of the calendar year in which the fifth
anniversary of your death occurs. However, proceeds which are payable to a named
Beneficiary who is a natural person may be distributed in equal installments
over the lifetime of the Beneficiary or a period certain not exceeding the life
expectancy of the Beneficiary, provided such distribution begins not later than
December 31 of the calendar year in which your death occurred. If the
Beneficiary is your surviving spouse, the Beneficiary may elect not later than
December 31 of the calendar year in which the fifth anniversary of your death to
receive equal or substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the date on which you
would have attained age 70 1/2. Minimum payments will be calculated in
accordance with Code section 408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any of your children
will be treated as if it had been paid to your surviving spouse if the remainder
of the interest becomes payable to the surviving spouse when the child reaches
the age of majority.
If you die before the Annuity Commencement Date, no additional Purchase Payments
will be accepted under this Contract after your death unless the sole
Beneficiary is your surviving spouse.
- --------------------------------------------------------------------------------
DISTRIBUTIONS PROVISIONS
For purposes of the foregoing provisions life expectancy and joint and last
survivor expectancy will be determined by use of the expected return multiples
in Tables V and VI of Treasury Regulation Section 1.72-9 in accordance with Code
Section 408(b)(3) and the regulations thereunder. In the case of Required
Distributions, life expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you mach 70 1/2. In
the case of Death Benefits, life expectancy will be initially determined on the
basis of your Beneficiary's attained age in the year distributions are required
to commence. Unless you (or your spouse) elect otherwise prior to the time
distributions are required to commence, your life expectancy and, if applicable,
your spouse's life expectancy will be recalculated annually based on your
attained ages in the year for which the required distribution is being
determined. The life expectancy of a nonspouse Beneficiary will not be
recalculated.
- --------------------------------------------------------------------------------
- ---- ---
4942 2
- ---- ---
- --------------------------------------------------------------------------------
DISTRIBUTION PROVISIONS (continued)
The annual distribution required to be made by your Required Beginning Date is
for the calendar year in which you reach age 70 1/2. Annual payments for
subsequent years, including the year in which your Required Beginning Date
occurs, must be made by December 31 of the preceding year, divided by the
applicable life expectancy or joint and last survivor expectancy.
- --------------------------------------------------------------------------------
AMENDMENT TO CONFORM TO LAW
We reserve the right to amend this Contract, or any Endorsement to this
Contract, at any time without your consent if the amendment is necessary for the
Contract to comply with changes in the Code or with any other applicable federal
or state law, rule, or regulation.
- --------------------------------------------------------------------------------
REPORTS
We make information reports to the Internal Revenue Service and to you as
prescribed by the Internal Revenue Service. You agree to provide us at your
expense with any information we need to prepare these reports. We send an annual
report to your latest address shown in our files. The report will show the
Contract Values required to be reported by the Code.
- --------------------------------------------------------------------------------
DISCONTINUANCE
We may stop accepting Purchase Payments as of the date on which the Contract no
longer meets Code requirements. We may return Purchase Payments in excess of
those allowed to you without regard to Contract provisions affecting surrenders.
- --------------------------------------------------------------------------------
DISCLAIMER
We are not liable for any tax or tax penalties you or your Beneficiary may owe
resulting from failure to comply with requirements imposed by the Code or by any
other applicable federal or state law, rule or regulation.
- --------------------------------------------------------------------------------
EFFECTIVE DATE
This Endorsement is effective as of the Contract Date.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
This Endorsement is subject to all the exclusions, definitions and provisions of
the Contract which are not inconsistent herewith.
- --------------------------------------------------------------------------------
- ------ ---
84-834 3
- ------ ---
<PAGE>
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED RETIREMENT ANNUITY
Variable and/or Fixed Accumulation
Variable and/or Fixed Dollar Annuity Payments
Non-Participating
- --------------------------------------------------------------------------------
NOTICE
To make Purchase Payments, make a claim, or exercise your rights under this
Contract, please write to us at the address below and include your Contract
Number:
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
C/O ANNUITY SERVICE CENTER
P. O. BOX 13208
KANSAS CITY, MISSOURI 64199-3208
- --------------------------------------------------------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Box 20
Minneapolis
Minnesota 55440
- --------------------------------------------------------------------------------
- -----------------
Page 17 84-420
- -----------------
EXHIBIT 5
VARIABLE ANNUITY APPLICATION Northwestern National Life
FOR NWNL VARIABLE ANNUITY Insurance Company
P. O. Box 20
Minneapolis, Minnesota 55440
<TABLE>
<CAPTION>
1. ANNUITANT Social Security number Birth date (mo., day, yr.) Sex Occupation
<S> <C> <C> <C> <C> <C>
Address City State Zip
- ----------------------------------------------------------------------------------------------------------------------
2. OWNER Birth date (mo., day, yr.) Tax I.D. or Social Security number
Address City State Zip
- ----------------------------------------------------------------------------------------------------------------------
3. BENEFICIARY Birth date (mo., day, yr.) Relationship
- ----------------------------------------------------------------------------------------------------------------------
4. SUCCESSOR BENEFICIARY Birth date (mo., day, yr.) Relationship
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
5. PURCHASE PAYMENT
An initial purchase payment of $....... is attached (must be $5, 000 or
more for nonqualified and must be $2, 000 or more for qualified). Please
check this box [ ] if you would like information for making future
purchase payments by bank draft.
- --------------------------------------------------------------------------------
6. PURCHASE PAYMENT ALLOCATION (whole %)
___% Fixed Account
Northstar/NWNL Trust
___% Income and Growth Fund
___% Multi-Sector Bond Fund
___% High Yield Fund
___% Growth Fund
___% Other
Fidelity's Variable Insurance Products Funds (VIPF and VIPF II)
___% Money Market Portfolio
___% Overseas Portfolio
___% Asset Manager Portfolio
___% Index 500 Portfolio
___% Other
100% TOTAL
- --------------------------------------------------------------------------------
7. PLAN TYPE This contract will fund the following type of plan:
[ ] IRA [ ] 403(b) [ ] Other
[ ] 401(a) [ ] SEP-IRA [ ] Nonqualified
Attach appropriate adoption agreements
- --------------------------------------------------------------------------------
8. ANNUITY COMMENCEMENT DATE
The first day of .................(mo.), ......(yr.).
- --------------------------------------------------------------------------------
9. REPLACEMENT
Will the annuity applied for replace or change existing annuity or life
insurance? [ ] Yes [ ] No
- --------------------------------------------------------------------------------
10. ANNUITY FORM SELECTION
[ ] Life annuity
[ ] Life annuity with payments guaranteed for
[ ] 10 years or [ ] 20 years
[ ] Joint and full survivor annuity
Joint annuitant .............................
Birth date .................. Relationship ....................
If annuity form has not been selected by the annuity commencement date,
the life annuity with payments guaranteed for 10 years will be
automatically effective.
- --------------------------------------------------------------------------------
11. PROSPECTUS
Did the Owner receive the Northstar Variable Annuity Prospectus describing
the contract? [ ] Yes [ ] No
If yes, date of prospectus ................ (mo.), ......(yr.).
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that the taxpayer identification number
above is correct. I also certify that (check one):
[ ] The IRS has not notified me that I am currently subject to backup
withholding; or
[ ] I am exempt from backup withholding; or
[ ] I am currently subject to backup withholding.
I hereby represent my answers to the above questions to be correct and true to
the best of my knowledge and belief and agree that this application will be a
part of the annuity contract issued by Northwestern National Life Insurance
Company. I UNDERSTAND THAT ANNUITY PAYMENTS AND ACCUMULATION VALUES, WHEN BASED
UPON THE INVESTMENT EXPERIENCE OF A VARIABLE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT. RECEIPT OF NORTHSTAR VARIABLE ANNUITY PROSPECTUS
IS HEREBY ACKNOWLEDGED.
Signature of applicant Date Location
Signature of owner if other than applicant
43968a-1 (Revised 7-95)
FOR AGENT ONLY
AGENT'S REPLACEMENT QUESTION
To the best of your knowledge and belief, will the proposed annuity replace or
change any existing annuity or life insurance?
[ ] Yes [ ] No If "yes," explain:
CONTRACT TYPE [ ] A [ ] B If no box is checked, A will be in effect.
Witnessed by (signature of selling agent) Selling agent name and number
(Please print.)
PREMIUM BILLING INFORMATION
Mode of Payments (Check one box)
[ ] Single Premium [ ] Semi-Annual Monthly (List bill contracts only)
[ ] Annual [ ] Quarterly Monthly -- Pre-Authorized Check
Payment Amount Attached Modal Payment Amount Annual Payment Amount
$ $ $
[ ] Add to Existing List Bill Number...............
[ ] Begin New List Bill for the Plan
Send bill to:
Plan Name
Plan Address City State Zip
Agent: Please make check payable to Northwestern National Life Insurance Company
and forward application to your broker/dealer.
FOR BROKER/DEALER ONLY
Dealer's name Authorized signature
BROKER/DEALER ONLY: MAIL VARIABLE ANNUITY APPLICATION AND CHECK TO:
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, C/O ANNUITY SERVICE CENTER,
P.O. BOX 419275, KANSAS CITY, MO 64141-6275.
43968a-2 (Revised 7-95)
Exhibit 6(a)
ARTICLES OF INCORPORATION
(as amended and restated effective January 3, 1989)
AND
BY-LAWS
(as amended and restated January 12, 1989)
OF
NORTHWESTERN NATIONAL
LIFE INSURANCE COMPANY
HOME OFFICE - MINNEAPOLIS, MINNESOTA
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
ARTICLES OF INCORPORATION
(as amended and restated effective January 3, 1989)
ARTICLE I
The name of this corporation shall be Northwestern National Life Insurance
Company.
ARTICLE II
The principal place of business and Home Office of the Company shall be in the
City of Minneapolis, State of Minnesota.
ARTICLE III
Sec. 1. The purposes and general nature of the business of the Company are to
engage in those business activities in which a life insurance company
incorporated under the laws of the State of Minnesota may from time to time
engage.
Sec. 2. The Company shall be a stock life insurance company.
Sec. 3. The duration of the Company shall be perpetual.
ARTICLE IV
The Company shall have and possess all powers to do everything necessary,
suitable, convenient or incidental to the transaction of its business and the
accomplishment of any of the purposes stated herein and shall have and possess
all powers, rights, privileges, immunities and franchises conferred by the laws
of the State of Minnesota under which it was organized and operates and such
others as are conferred upon stock life insurance companies by the laws of the
State of Minnesota; and the same shall be exercised by the Board of Directors,
the Executive Committee, and such officers and agents as may be elected or
appointed by the Board of Directors or by the Executive Committee.
ARTICLE V
Sec. 1. The business of the Company shall be managed by a Board of Directors
consisting of not less than twelve nor more than twenty-one persons.
Sec. 2. The directors shall be divided into three classes; the terms of one
class shall expire at the April 1968 annual meeting of the Company; the term of
a second class shall expire at the April 1969 annual meeting of the Company; and
the term of a third class shall expire at the April 1970 annual meeting of the
Company; and at each annual meeting of the Company successors to the class of
directors whose terms shall then expire shall be elected to hold office for a
term of three years. Each class shall consist of not less than four nor more
then seven directors. The number of directors in each class is to be determined
by the Board of Directors prior to the annual meeting of the Company at which
the directors of such class are to be elected, or, in the absence of such
determination by the stockholders at such annual meeting of the Company. In the
event of a vacancy occurring in any class, the Board of Directors may reduce the
number of directors in such class to eliminate the vacancy, but in no case may
the number of directors in such class be less than four. Prior to an annual
meeting of the Company, the Board of Directors may increase the number of
directors in a class whose term does not expire at such meeting, but in no case
may the number of directors in such class be more than seven.
Sec. 3. In the event of a vacancy occurring in any class, the Board of Directors
may fill such vacancy for the remainder of the unexpired term by vote of the
majority of the remaining directors, though less than a quorum, provided that no
vacancy created by an increase in the number of directors in a class may be
filled by the directors. In the event a vacancy remains unfilled at the time of
an annual meeting of the Company, the stockholders may fill such vacancy or the
remainder of the unexpired term by vote at such meeting. The directors of each
class shall hold office for the term for which elected and until the successors
to such class are elected, and nothing herein shall prevent any retiring
directors from being eligible for re-election.
Sec. 4. A director of the Company shall not be personally liable to the Company
or its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for a breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under subdivisions 2 and 3 of Section 300.64 of the Minnesota
Statutes, (iv) for any transaction from which the director derived an improper
personal benefit, or (v) for any act or omission occurring prior to the
effective date of this section. No amendment to or repeal of this section shall
apply to or have any effect on the liability or alleged liability of any
directors of the Company for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ARTICLE VI
The President and not less than four nor more than six other members of the
Board of Directors, to be chosen by the Board of Directors, shall constitute an
Executive Committee, which, when the Board of Directors is not in session, shall
have and may exercise all the powers of the Board of Directors.
ARTICLE VII
The officers of the Company shall consist of a President, one or more Vice
Presidents, a Secretary, a Treasurer and an Actuary, all of whom shall be
elected by the Board of Directors, and such other officers as may be determined
and elected by the Board of Directors or by the Executive Committee.
ARTICLE VIII
Sec. 1. The authorized capital stock of the Company shall be Thirty Seven
Million Five Hundred Thousand Dollars ($37,500,000) divided into Five Million
(5,000,000) shares of Preferred Stock of the par value of One Dollar Twenty-Five
Cents ($1.25) each and Twenty-Five Million (25,000,000) shares of Common Stock
of the par value of One Dollar Twenty-Five Cents ($1.25) each. Each holder of
Common Stock and each holder of Preferred Stock, which by its terms has general
voting rights, shall have one vote for each share held.
Sec. 2. No holders of shares of the Company of any class or of any security or
obligation convertible into, or of any warrant, option or right to subscribe
for, purchase or otherwise acquire, shares of the Company of any class, whether
now or hereafter authorized, shall as such holder, have any preemptive right
whatsoever to subscribe for, purchase or otherwise acquire shares of the Company
of any class or any security or obligation convertible into, or any warrant,
option or right to subscribe for, purchase or otherwise acquire, shares of the
Company of any class, whether now or hereafter authorized.
Sec. 3. Preferred Stock.
(a) The authorized shares of Preferred Stock may be issued from time to
time in one or more series, each of such series to have such relative
rights, voting power, preferences and restrictions as are stated herein
and in the resolution or resolutions providing for the issuance of such
series adopted by the Board of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of Directors,
subject to the provisions of this Article VIII, to authorize from time
to time the issuance of one or more series of Preferred Stock and with
respect to each series to fix or alter from time to time, as to shares
then unallotted, by resolution or resolutions providing for the
issuance of such series.
(i) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below
the number of shares thereof outstanding) from time to time by
action of the Board of Directors;
(ii) the dividend rate or rates to which shares of such series
shall be entitled, the restrictions, conditions and
limitations upon the payment of such dividends, whether such
dividends shall be cumulative and, if cumulative, the date or
dates from which such dividends shall be cumulative, and the
dates on which such dividends, if declared, shall be payable;
(iii) whether shares of such series shall be redeemable and, if so,
the manner of selecting shares for redemption, the redemption
price or prices, and the manner of redemption and the effect
thereof;
(iv) the amount payable on shares of such series in the event of
any liquidation, dissolution or winding up of the Company,
which amount may vary at different dates and may vary
depending upon whether such liquidation, dissolution or
winding up is voluntary or involuntary;
(v) the obligation, if any, of the Company to maintain a purchase,
retirement or sinking fund for shares of such series, or to
redeem shares of such series, and the provisions with respect
thereto;
(vi) the rights, if any, of the holders of shares of such series to
convert such shares into shares of stock of the Company of any
class or of any series of any class and the price or prices or
the rate or rates of such conversion and the other terms,
provisions and conditions of such conversion;
(vii) the general voting rights, if any, of the holders of shares of
such series, and the special voting rights, if any, of the
holders of shares of such series and the terms and provisions
thereof, in addition to voting rights provided by law; and
(viii) any other relative rights, preferences and restrictions not
inconsistent with applicable laws of the State of Minnesota or
these Articles of Incorporation.
(c) All shares of any one series of Preferred Stock shall be identical with
each other in all respects, except that shares of any one series issued
at different times may differ as to the dates from which dividends
thereon shall be cumulative. All series of Preferred Stock shall be of
equal rank and be identical in all respects, except as permitted by the
foregoing provisions of paragraph (b) of this Section 3.
(d) The holders of the Preferred Stock of each series shall be entitled to
receive such dividends, when and as declared by the Board of Directors,
out of funds legally available therefor, as they may be entitled to in
accordance with the resolution or resolutions adopted by the Board of
Directors authorizing such series, payable on such dates as may be
fixed in such resolution or resolutions. So long as there shall be out-
standing any shares of Preferred Stock of any series entitled to cumu-
lative dividends pursuant to the resolution or resolutions authorizing
such series, no dividend, whether in cash or property, shall be paid or
declared, nor shall any distribution be made, on the Common Stock, nor
shall any shares of Common Stock be purchased, redeemed or otherwise
acquired for value by the Company, if at the time of making such
payment, declaration, distribution, purchase, redemption or acquisition
the Company shall be in default with respect to any dividend payable
on, or obligation to maintain a purchase, retirement or sinking fund
with respect to or to redeem, shares of Preferred Stock of any series.
The foregoing provisions of this paragraph (d) shall not, however,
apply to a dividend payable in Common Stock or to the acquisition of
shares of Common Stock in exchange for, or through application of the
proceeds of the sale of, shares of Common Stock. Accrued dividends
shall not bear interest.
(e) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, before any payment or dis-
tribution of the assets of the Company is made to the holders of any
Common Stock, the holders of the Preferred Stock of each series shall
be entitled to receive the amount per share provided in the resolution
or resolutions adopted by the Board of Directors authorizing such
series. When such payments shall have been made in full to the holders
of the Preferred Stock, they shall have no further rights in respect of
their shares to the assets of the Company. If upon any liquidation,
dissolution or winding up of the Company the assets available for
distribution shall be insufficient to pay the holders of all out-
standing shares of Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of shares of Preferred
Stock of all series shall share ratably in any distribution of assets
according to the respective amounts which would be payable in respect
of the shares of Preferred Stock held by them upon such distribution if
all amounts payable in respect of the Preferred Stock of all series
were paid in full. Neither a statutory merger or consolidation of the
Company into or with any other corporation, nor a statutory merger or
consolidation of any other corporation into or with the Company, nor a
sale, transfer, exchange or lease of all or any part of the assets of
the Company, shall be deemed to be a liquidation, dissolution or
winding up of the Company within the meaning of this Article VIII.
(f) The Company, at the option of the Board of Directors, may redeem the
whole or any part of the Preferred Stock of any series at the price or
prices and on the terms and conditions provided in the resolution or
resolutions adopted by the Board of Directors authorizing such series.
ARTICLE IX
Sec. 1. The annual meeting of the Company shall be held at the Home Office of
the City of Minneapolis, State of Minnesota, or at such other place in said City
as may be designated from time to time by the Board of Directors, on the fourth
Thursday of April of each year, commencing in the year 1968, at ten o'clock in
the forenoon, for the election of directors and the transaction of such other
business as may properly come before the meeting.
Sec. 2. Special meetings of the Company may be called by the President and the
Secretary, or by the Board of Directors or Executive Committee in accordance
with the By-Laws.
Sec. 3. At any meeting of the Company, each stockholder shall be entitled to the
vote provided in Article VIII hereof for each share of stock held by him.
Sec. 4. Stockholders may vote by proxy.
Sec. 5. At any meeting of the Company a quorum shall consist of the holders of
one-third (1/3) of the stock outstanding present in person or by proxy.
ARTICLE X
The Board of Directors shall have authority to make and alter the By-Laws of the
Company, subject to the power of the stockholders to change or repeal such
By-Laws.
EXHIBIT 6(b)
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
BY-LAWS
(as amended and restated January 12, 1989)
MEETINGS OF THE COMPANY
Section 1.01. Annual Meetings. The annual meeting of the Company shall be held
annually on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, for the
election of directors and the transaction of such other business as may properly
come before the meeting.
Section 1.02. Special Meetings. Special meetings of the Company may be called
by the Chairman or the President and the Secretary, or by the Board of Directors
or the Executive Committee.
Section 1.03. Place of Meetings. All meetings of the Company shall be held at
the Home Office of the Company in the City of Minneapolis, State of Minnesota,
or at such other place in said City as may be designated from time to time by
the Board of Directors.
Section 1.04. Notice of Meetings. A written or printed notice, stating the
place, day and hour of any meeting of the Company, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered or mailed, at least ten days before the date of the meeting, to each
stockholder of record at such address as appears upon the records of the
Company.
Section 1.05. Quorum. At any meeting of the Company a quorum shall consist of
the holders of one third (1/3) of the stock outstanding present in person or by
proxy. The stockholders present, though less than a quorum, may adjourn the
meeting to a later day or hour or to another place in the City of Minneapolis,
State of Minnesota, without further notice other than by announcement at the
meeting. At such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at the meeting as
originally noticed.
Section 1.06. Proxies. Each stockholder may vote by proxy executed in writing
by the stockholder or a duly authorized attorney in fact.
Section 1.07. Voting. The stockholders holding all of the shares of Preferred
Stock of series having general voting rights and of all shares of Common Stock
of the Company shall, at all meetings, be entitled to one vote for each share
held.
Section 1.08. Conduct of Meetings. The chief executive officer shall act as
chairman, and the secretary shall act as secretary, of each meeting of the
Company. In the absence of the chief executive officer, the chief operating
officer may act as chairman of the meeting. In the absence of the secretary, the
chairman of the meeting may appoint any person to act as secretary of the
meeting. All matters brought before the meeting shall, unless otherwise provided
by law, be decided by a majority of the votes represented at the meeting. In the
event of a tie vote, the deciding vote may be cast by the chairman of the
meeting in his capacity as chairman, but this section shall not be construed to
prevent the chairman from casting the number of votes to which he is otherwise
entitled. At each meeting of the Company elections shall be conducted, proxies
and ballots shall be received and taken in charge, and all questions touching
the qualifications of voters, the validity of proxies, and the acceptance and
rejection of votes shall be decided by a Credentials Committee consisting of
three or more persons, who shall be appointed by the chairman of the meeting.
Section 1.09. Record Date. The Board of Directors may fix a time, not less than
twenty nor more than sixty days preceding the date of any meeting of the
Company, as a record date for the determination of the stockholders entitled to
notice of and to vote at such meeting, and in such case stockholders of record
on the date so fixed, or their legal representatives, shall be the only
stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, notwithstanding any transfer of any shares on the books of
the Company after any record date so fixed. The Board of Directors may close the
books of the Company against transfers of shares during the whole or any part of
such period.
BOARD OF DIRECTORS
Section 2.01. General Powers. The property and business of the Company shall be
managed by the Board of Directors.
Section 2.02. Number. The Board of Directors shall consist of not less than
twelve nor more than twenty-one persons. The directors shall be divided into
three classes: the term of one class shall expire at the April 1968 annual
meeting of the Company; the term of a second class shall expire at the April
1969 annual meeting of the Company; and the term of a third class shall expire
at the April 1970 annual meeting of the Company; and at each annual meeting of
the Company successors to the class of directors whose terms shall then expire
shall be elected to hold office for a term of three years. Each class shall
consist of not less than four nor more than seven directors. The number of
directors in each class is to be determined by the Board of Directors prior to
the annual meeting of the Company at which the directors of such class are to be
elected, or, in the absence of such determination, by the stockholders at such
annual meeting of the Company. In the event of a vacancy occurring in any class,
the Board of Directors may reduce the number of directors in such class to
eliminate the vacancy, but in no case may the number of directors in such class
be less than four. Prior to any annual meeting of the Company, the Board of
Directors may increase the number of directors in a class whose term does not
expire at such meeting, but in no case may the number of directors in such class
be more than seven. Directors shall be elected by ballot.
Section 2.03. Tenure. In the event of a vacancy occurring in any class, the
Board of Directors may fill such vacancy for the remainder of the unexpired term
by vote of the majority of the remaining directors, though less than a quorum,
provided that not more than one-third (1/3) of the members of the Board of
Directors may be so filled in any one year, and provided further that no vacancy
created by an increase in the number of directors in a class may be filled by
the directors. In the event a vacancy remains unfilled at the time of an annual
meeting of the Company, the stockholders may fill such vacancy for the remainder
of the unexpired term by vote at such meeting. The directors in each class shall
hold office for the term for which elected and until the successors to such
class are elected, and nothing herein shall prevent any retiring director from
being eligible for re-election.
Section 2.04. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board.
Section 2.05. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman or the President and, upon request by any two members
of the Board of Directors, shall be called by the Chairman or the President.
Section 2.06. Notice of Special Meetings. Notice of each special meeting of the
Board of Directors shall be given by written notice mailed to or served upon
each director at least twenty-four hours prior to such meetings, and such
special meeting shall be held at such time and place as shall be specified in
such written notice. Notice of a special meeting may be waived by any director.
A special meeting of the Board of Directors may also be held without written
notice or call at such time and place as shall be fixed by the consent in
writing of all of the directors given before, at or after such meeting.
Section 2.07. Quorum. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of the
Board of Directors, but if less than such majority is present at the meeting, a
majority of the directors present may adjourn the meeting from time to time,
without further notice other than by announcement at the meeting, until a quorum
shall be present.
Section 2.08. Manner of Acting. The act of a majority of the directors present
at any meeting of the Board of Directors at which a quorum is present shall be
the act of the Board of Directors, unless a greater number is required by law or
by the Articles of Incorporation or by these By-Laws. Any action which might be
taken at a meeting of the Board of Directors may be taken without a meeting if
done in writing signed by all of the Directors.
EXECUTIVE COMMITTEE
Section 3.01. General Powers. When the Board of Directors is not in session,
the Executive Committee shall have and may exercise all the powers of the Board
of Directors.
Section 3.02. Number and Chairman. The Board of Directors shall appoint
annually, at its first meeting after the annual meeting of the Company in each
year, an Executive Committee consisting of not less than five nor more than
seven members of the Board of Directors, one of whom shall be the Chairman, if
at the time there shall be a Chairman, and one of whom shall be the President.
There shall be at least three members of the Executive Committee who are not
officers of the Company. The Board of Directors may appoint one or more
alternate members to the Executive Committee who shall have no right to vote
unless the alternate is substituting for the regular member of the Executive
Committee. The Board of Directors shall designate one of the members of the
Executive Committee as Chairman of the Executive Committee, who shall preside at
all meetings of the Executive Committee and shall perform such other duties and
have such other authority as the Board of Directors or the Executive Committee
may from time to time prescribe. In the absence of the Chairman of the Executive
Committee, the Chairman shall preside at any meeting of the Executive Committee.
Section 3.03. Tenure. Any vacancy occurring in the regular or alternate
membership of the Executive Committee may be filled for the remainder of the
term by the Board of Directors.
Section 3.04. Regular Meetings. Regular meetings of the Executive Committee may
be held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors.
Section 3.05. Special Meetings. Special meetings of the Executive Committee may
be called by the Chairman or the President and, upon request by any two members
of the Executive Committee, shall be called by the Chairman or the President.
Section 3.06. Notice of Special Meetings. Notice of each special meeting of the
Executive Committee shall be given by personal notice of the time and place of
such meeting received by each member of the Executive Committee at least six
hours prior to such meeting or by written notice mailed to or served upon each
member at least twenty-four hours prior to such meeting, and such special
meeting shall be held at such time and place as shall be specified in such
notice. Notice of a special meeting may be waived by any member of the Executive
Committee. A special meeting of the Executive Committee may also be held without
written notice or call at such time and place as shall be fixed by the consent
in writing of all of the members of the Executive Committee given before, at or
after such meeting.
Section 3.07. Quorum. A majority of the whole Executive Committee shall
constitute a quorum for the transaction of any business at any meeting of the
Executive Committee.
Section 3.08. Manner of Acting. The act of a majority of the members present at
any meeting of the Executive Committee at which a quorum is present shall be the
act of the Executive Committee. Any action which might be taken at a meeting of
the Executive Committee may be taken without a meeting if done in writing signed
by all of the members of the Executive Committee.
Section 3.09. Records. The Executive Committee shall keep a record of its pro-
ceedings and shall make such report to the Board of Directors of its actions as
may be required by the Board of Directors.
OFFICERS
Section 4.01. Election. The Board of Directors may elect from among its members
a Chairman, who shall be designated by the Board of Directors as the Chairman or
Chairman of the Board. The Chairman shall be an officer. The other officers of
the Company shall consist of a President, who shall be elected from among the
members of the Board of Directors, one or more Vice Presidents, a Secretary, and
a Treasurer. Any one or more Vice Presidents may be designated Executive Vice
President, Senior Vice President, Second Vice President, or Assistant Vice
President as the Board of Directors may determine. All of the foregoing officers
shall be elected annually by the Board of Directors at its first meeting after
the annual meeting of the Company in each year, except that the office of
Chairman or any vacancy in any office may be filled prior to the next annual
election by the Board of Directors at any regular or special meeting of the
Board of Directors. Officers other than the foregoing may from time to time be
elected by the Board of Directors or by the Executive Committee at any regular
or special meeting of the Board of Directors or the Executive Committee. Any two
or more offices, except those of President and Secretary, may be held by the
same person.
Section 4.02. Appointment. The chief executive officer, subject to approval by
the Board of Directors or the Executive Committee, may from time to time appoint
one or more regional or other Vice Presidents and may prescribe their duties and
powers and the period of appointment to be held by each. Such Vice Presidents
shall not, by virtue of their appointment, be officers of the Company, nor shall
they be included in the term "Vice President" as that term is used in any By-Law
or in any resolution of the Board of Directors or of the Executive Committee.
Section 4.03. Tenure. Each officer of the Company shall hold office until his
successor is elected and qualifies, provided that each officer shall serve at
the pleasure of, and may be removed with or without cause at any time by, the
Board of Directors.
Section 4.04. Compensation. All salaries and other compensation of officers,
except Assistant Secretaries and Assistant Treasurers, shall be fixed by the
Board of Directors, the Executive Committee or by such other committee or such
officer or officers as shall be designated from time to time by the Board of
Directors.
Section 4.05. Chief Executive Officer. The Board of Directors shall designate
the Chairman or the President as the chief executive officer of the Company. If
there be no Chairman, the President shall be the chief executive officer. The
chief executive officer shall have the general powers and duties of the
management and supervision usually vested in and imposed upon the chief
executive officer of a corporation. The chief executive officer shall preside at
all meetings of the Company
Section 4.06. Chairman. The Chairman shall preside at all meetings of the Board
of Directors and shall perform such other duties and have such other authority
as the Board of Directors may from time to time prescribe.
Section 4.07. President. The President shall perform such duties and have such
authority as the Board of Directors, the Executive Committee, or the Chairman
may from time to time prescribe. If the Chairman shall be the chief executive
officer, then the President shall be the chief operating officer of the Company.
If there be a Chairman and he shall be absent or if there shall be no Chairman,
the President shall perform the duties and have the authority of the Chairman.
Section 4.08. Vice Presidents. The Vice Presidents shall perform such duties and
have such powers as the Board of Directors, the Executive Committee, or the
chief executive officer of the Company may from time to time prescribe. In the
absence of the Chairman and the President, Vice Presidents shall perform the
duties and have the authority of the President in the order prescribed by the
Board of Directors or the Executive Committee.
Section 4.09. Secretary. The Secretary shall keep the minutes of the meetings of
the Company and of the Board of Directors, and shall cause all notices of
meetings of the Company and the Board of Directors to be duly given in
accordance with the provisions of these By-Laws or as required by law. The
Secretary shall in general perform all duties usually incident to the office of
secretary.
Section 4.10. Treasurer. The Treasurer shall have the custody of the funds and
securities of the Company under the direction of the Board of Directors and the
Executive Committee, shall deposit all moneys of the Company that may come into
his hands to the credit of the Company in such depositories as are authorized or
approved by the Board of Directors or the Executive Committee, and shall see
that all expenditures are duly authorized and evidenced by proper receipts and
vouchers. The Treasurer shall in general perform all duties usually incident to
the office of treasurer.
Section 4.11. Assistant Secretaries. The Board of Directors or the Executive
Committee may elect one or more Assistant Secretaries, who shall perform such
duties as the Board of Directors, the Executive Committee, or the chief
executive officer of the Company may from time to time prescribe. In the absence
of the Secretary, his duties shall devolve upon such officer or officers as
designated by the chief executive officer of the Company.
Section 4.12. Assistant Treasurers. The Board of Directors or the Executive
Committee may elect one or more Assistant Treasurers, who shall perform such
duties as the Board of Directors, Executive Committee, or the chief executive
officer of the Company may from time to time prescribe. In the absence of the
Treasurer, his duties shall devolve upon such officer or officers as designated
by the chief executive officer of the Company.
Section 4.13. Duties and Authority. All officers of the Company shall be subject
to the supervision and direction of the Board of Directors and the Executive
Committee and, in addition to the foregoing duties and authority, shall perform
such duties and have such authority as the Board of Directors, the Executive
Committee, the Chairman or the President may from time to time prescribe.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01. Indemnification. To the full extent permitted by Minnesota
Statutes, Section 300.083, as amended from time to time, or by other provisions
of law, each person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, wherever
brought, whether civil, criminal, administrative or investigative, by reason of
the fact that he is or was a director, officer or employee of the Company, or he
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Company against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding.
The indemnification provided by this Section shall continue as to a person who
has ceased to be director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person and shall
apply whether or not the claim against such person arise out of matters
occurring before the adoption of this By-Law.
INSTRUMENTS
Section 6.01. Policies. All insurance and annuity policies, and amendments and
agreements relating thereto, shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary, or, in their absence,
by two directors. The signatures may be facsimile signatures.
Section 6.02. Contracts and Commission Agreements with Field Force. Contracts
and agreements with any member of the field force or any employee thereof shall
be signed or approved by the Chairman, the President, a Vice President, or by
any other officer or employee of the Company designated by the Board of
Directors or the Executive Committee to sign or approve such documents.
Section 6.03. Checks and Drafts. All checks and drafts drawn upon depositories
of the Company shall be signed as prescribed from time to time by the Board of
Directors or the Executive Committee.
Section 6.04. Investment and Mortgages. All note, bond, stock or other
securities purchase agreements and security, mortgage, or real estate commitment
letters, and amendments thereto, deeds and leases, and assignments, releases, or
partial releases, or payment or performance moratoriums of any mortgages, debt
obligations or other security interests held by the Company shall be signed by
the Chairman, the President, a Vice President, the Secretary, or the Treasurer,
or shall be signed by such other person or persons as may be designated from
time to time by the Board of Directors or the Executive Committee.
Section 6.05. Stock Certificates. All certificates of stock shall be signed by
the Chairman or the President or a Vice President and by the Secretary or an
Assistant Secretary of the Company, but when a certificate is signed by a
transfer agent or registrar appointed by the Board of Directors, the signature
of any such corporate officer and the corporate seal upon such certificate may
be facsimiles, engraved or printed.
Section 6.06. Other Instruments. All other contracts and written instruments of
any kind not previously described shall be signed (1) by at least two of the
following officers: The Chairman, the President, a Vice President, the
Secretary, and the Treasurer, or by one of them and any other officer or
employee of the Company as shall be so empowered by the Board of Directors or
the Executive Committee, or (2) by such other person or persons as may be
designated from time to time by the Board of Directors or the Executive
Committee.
Section 6.07. Seal. The seal of the Company may be affixed to any instrument
requiring a seal and may be duly attested by any officer of the Company,
provided that one of the signatures to the instrument shall be that of the
Chairman, the President, a Vice President, the Secretary, or the Treasurer.
Section 6.08. Signatures of Vice Presidents. Any officer with the designation of
Vice President, such as an Executive Vice President, Senior Vice President,
Second Vice President or an Assistant Vice President, shall have all the rights
and powers of a Vice President in the execution of instruments as provided in
these By-Laws.
AMENDMENTS
Section 7.01. Amendments of By-Laws. The Board of Directors shall have
authority to make and alter the By-Laws of the Company, subject to the power of
the stockholders to change or repeal such By-Laws.
EXHIBIT 8(a)
ADMINISTRATIVE SERVICES AGREEMENT
between
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
and
STATE STREET AND TRUST COMPANY
for
FIXED AND/OR VARIABLE ANNUITY CONTRACTS
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 Administrative Services Provided
by the Bank 1
Article 2 Fees and Expenses 1
Article 3 Representations and Warranties of
the Bank 2
Article 4 Representations and Warranties of
the Insurance Company 2
Article 5 Indemnification 3
Article 6 Complaints and Litigation 4
Article 7 Certain Covenants 5
Article 8 Access to and Retention of Records
Created 5
Article 9 Termination 5
Article 10 Third Party Administrator 6
Article 11 Relationship of Parties 6
Article 12 Use of the Insurance Company's Name 6
Article 13 Amendment of Agreement 6
Article 14 Assignment 6
Article 15 Miscellaneous 7
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 1st day of August 1983, by and between
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, a corporation having its principal
office and place of business at 20 Washington Avenue South, Minneapolis,
Minnesota (the Insurance Company") and STATE STREET AND TRUST COMPANY, a
Massachusetts Corporation having its principal office and place of business at
225 Franklin Street, Boston, MA 02110 ("Bank").
BACKGROUND
The Insurance Company is in the business of issuing annuity contracts
in the form(s) identified by "Contract Form Number" in Exhibit A attached. The
Contracts will be funded through investments held in the accounts identified in
Exhibit A (collectively, the "Accounts" and any such account other than the
Insurance Company's general account, a "Separate Account"). If the investments
in any Separate Account are shares of an investment company or companies
(collectively, "Investment Companies" and each an "Investment Company"), such
Investment Company is (or Companies) are identified in Exhibit A under the name
of such Separate Account.
The Insurance Company desires to retain the Bank to perform the
administrative services in respect of its Contracts set forth in this Agreement
and the Bank desires to provide such services to the Insurance Company.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties agree as follows:
Article 1 ADMINISTRATIVE SERVICES PROVIDED BY THE BANK
1.01 Subject to the terms and conditions set forth in this Agreement,
the Insurance Company hereby appoints and retains the Bank, and the Bank agrees
to provide to the Insurance Company the administrative services set forth in
Exhibit B attached hereto with respect to the Contracts, for one year beginning
from the date of this Agreement (the "Initial Term") and thereafter until
terminated as hereafter provided.
Article 2 FEES AND EXPENSES
2.01 The Insurance Company shall pay the Bank an annual fee for each
Contract serviced by the Bank during the term hereof and, if this Agreement is
terminated by the Insurance Company pursuant to Section 9.01 hereof, other than
on account of a material default by the Bank hereunder, in the amount set forth
in Exhibit C hereto and thereafter in the same amount or such other amount as
agreed upon in writing by the parties hereto. The annual fee with respect to
each Contract shall be payable by the Insurance Company one twelfth (1/12th)
thereof in arrears on the first day of each month following the month in which
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such Contract is issued and thereafter for each year such Contract is to remain
in effect. Such fees are effective for the Initial Term and shall be agreed upon
in writing each year thereafter.
2.02 In addition to the fees payable pursuant to Section 2.01 hereof,
the Insurance Company shall reimburse the Bank for all reasonable out-of-pocket
expenses incurred by the bank in connection with the services set forth in
Exhibit B hereto or requested by the Insurance Company. Reimbursement for any
such expense shall be made promptly after notice from the Bank that such expense
was incurred and in any event within thirty days thereafter. Notwithstanding the
foregoing, the Insurance Company shall advance the cost of postage for general
mailings (e.g., proxies, annual reports, tax information) to contract owners or
annuitants at last seven (7) days prior to the mailing date specified by the
Insurance Company or required by law.
2.03 The Bank will promptly provide upon request of the Insurance
Company, a written estimate of the costs of providing any additional services,
reports or information requested by the Insurance Company.
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Insurance Company that:
3.01 It is a Massachusetts Trust Company duly organized and existing in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It has the power and authority under the laws of the Commonwealth
of Massachusetts and under its charter and bylaws to enter into and perform the
administrative services contemplated in this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform the administrative services contemplated in this
Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE INSURANCE COMPANY
The Insurance Company represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing in good standing
under the laws of the state of incorporation.
4.02 It is qualified and licensed to carry on its business in those
jurisdictions in which it transacts business and is required to be qualified or
licensed.
-2-
4.03 It has the power and authority under law and under its charter and
bylaws to enter into and perform its obligations under this Agreement.
4.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this Agreement.
4.05 Each registration statement required under the Securities Act of
1933, as amended, or under the securities or "blue sky" laws of any
jurisdiction, as to each Policy or shares of each Investment Company in, and
will, so long during the term hereof as such Policy is, and shares of such
Investment Company are, offered, continue to be, in effect.
4.06 Each Separate Account and each Investment Company is, and will, so
long during the term hereof as such Separate Account is, and shares of such
Investment Company are, outstanding, continue to be, registered under the
Investment Company Act of 1940, as amended.
4.07 It has complied and will continue to be in compliance with all
insurance or securities laws applicable to it and the offering, sale and
maintenance of Contracts under each Policy to be serviced by the Bank hereunder.
Article 5 INDEMNIFICATION
5.01 The Bank shall not be responsible for, and the Insurance Company
shall indemnify and hold the Bank and its officer, directors, shareholders,
employees and agents harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liabilities arising out of
or attributable to:
(a) The breach of any representation or warranty of the Insurance
Company hereunder;
(b) The default by the Insurance Company in the performance of any
covenant or agreement of the Insurance Company hereunder;
(c) Any action taken in connection with the performance of the
obligations of the Bank under this Agreement or requested by the Insurance
Company; provided, however, that such action is taken in good faith and without
negligence or willful misconduct;
(d) Reliance upon any information, document, record or data furnished
to the Bank in connection with this Agreement reasonably believed to be genuine
(whether furnished in writing or by electronic means or in English or machine
readable form or otherwise); or
(e) To the extent permitted by law, any insurance or securities law, or
any rule, regulation, order or decree issues thereunder or in connection
therewith.
-3-
5.02 The Insurance Company shall not be responsible for, and the Bank
shall indemnify and hold the Insurance Company and its officers, directors,
shareholders, employees and agents harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) The breach of any representation or warranty of the Bank
hereunder;
(b) The default by the Bank in the performance of any covenant or
agreement of the bank hereunder; or
(c) The theft or embezzlement by any employee or agent of the Bank
of any funds provided to the Bank hereunder.
5.03 Any provision of this Agreement to the contrary notwithstanding
the Bank shall have no liability arising out of any action or failure to act:
(a) Based on any written instruction furnished to it by the Insurance
Company or any order or decree of any court, regulatory body or administrative
agency;
(b) Caused by any act of God, strike, equipment or transmission
failure, or event beyond its control; or
(c) In connection with any legal obligation as a result of services
provided hereunder to register, qualify or obtain a license to act as an
insurance company, broker/dealer or agency thereof.
5.04 Neither party shall be liable to the other for special or
consequential damages.
5.05 Upon receiving notice of a claim for which one party (the
"Indemnifying Party") may be required to indemnify the other (the "Indemnified
Party"), the Indemnified Party shall promptly give written notice thereof to the
Office of the General Counsel of the Indemnifying Party; provided, however, that
the obligation of the Indemnifying Party shall not be reduced on account of the
failure or delay of the Indemnified Party to give such notice except to the
extent that the Indemnifying Party is damaged by such failure or delay. The
Indemnifying Party may participate in the defense of such claim and if it elects
to so participate, the Indemnified Party will not compromise or settle such
claim without the prior written consent of the Indemnifying Party.
Article 6 COMPLAINTS AND LITIGATION
6.01 Each party will promptly give written notice to the other of any
complaint to or from any federal or state regulatory authority of which it
becomes aware in connection with any transaction covered by Article 5 of this
Agreement. Any complaint from any federal or state regulatory authority received
by each party with a detailed report on the matter shall be
-4-
forwarded immediately to the Legal Department. Each party will promptly furnish
information it has, upon request.
6.02 Each party will promptly notify the other of any litigation of
which it becomes aware in connection with any Transaction covered by article 5
of this agreement. Each party shall immediately provide the other with a
detailed report concerning such litigation. Each party will promptly furnish any
information it has upon request.
Article 7 CERTAIN COVENANTS
7.01 All information, books, records and data supplied by one party to
the other in connection with the negotiation or carrying out of this Agreement
are and shall remain the property of the party supplying such information,
books, records or data and shall be kept confidential by the other party except
as may be required by law; provided, however, that the Bank may provide
information concerning the account of any Contract owner or otherwise when it is
advised by its counsel that it may be held liable for its failure to provide
such information.
7.02 The Insurance Company will provide instructions with respect to
any matter concerning this Agreement requested by the Bank. The Bank may rely
upon any instruction or information furnished by the persons designated in
Exhibit D to this Agreement, and shall not be held to have notice of any change
of authority of any such persons until receipt of written notice thereof from
the Insurance Company.
Article 8 ACCESS TO AND RETENTION OF RECORDS CREATED
8.01 The Bank shall maintain, as required, pursuant to applicable laws,
books and records of all Transactions between the Bank, The Insurance Company
and all Contract Owners; each such record shall be maintained by the Bank for a
period specified beginning the date the record was written or otherwise
formulated as instructed in writing by the Insurance Company. These records
shall be maintained in accordance with prudent standards or insurance record
keeping and in accordance with any and all applicable rules and regulations of
regulatory authorities. The Insurance Company retains the right to continuing
access to the books and records of the Bank needed by the Insurance Company to
fulfill all of its obligations under the contracts issued to Contract Owners.
All such records maintained by the Bank hereunder shall be made available to the
insurance company during normal business hours for review, inspection,
examination, and, at the Insurance Company's expense, reproduction. The
Insurance Company may demand the production of all such records upon the
retention periods, as required by applicable laws.
Article 9 TERMINATION
9.01 This Agreement may be terminated by either party effective at any
time after the Initial Term hereof, upon
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ninety (90) days written notice to the other party; provided, however, that
either party may immediately terminate this Agreement if its continued
performance hereunder would violate any law, rule, regulation, order or decree;
provided, however, if the Insurance Company has not arranged for services by a
new administrative agent after having made a good faith effort, the Agreement
shall be continued for another ninety (90) days.
9.02 Upon termination of this Agreement, either partially or in its
entirety, both parties, will continue to take all steps necessary to preserve
and honor the confidentiality of information of both parties as provided in
Article 7, Section 7.01 of this Agreement.
9.03 The Insurance Company shall reimburse the Bank for all
out-of-pocket expenses incurred by the bank in connection with such termination,
including, without limitation, the retrieval and movement of documents, records
and data, unless this Agreement is terminated by the Insurance Company on
account of a material default by the Bank hereunder.
Article 10 THIRD PARTY ADMINISTRATOR
10.01 The Bank is exempted from registration or licensing in every
jurisdiction where a registration or license is required to permit it to perform
the administrative services contemplated in this Agreement.
Article 11 RELATIONSHIP OF PARTIES
11.01 The only relationship between the Bank and the Insurance Company
with respect to the business serviced hereunder is the contractual relationship
established by this Agreement. Nothing contained in the Agreement shall be
construed to create the relationship of employer and employee, or the
relationship of principal and insurance agent, between the Bank and the
Insurance Company. The authority of the Bank shall be limited to that which is
expressly stated in this Agreement. The Insurance Company shall exercise no
control over the hours, office location, rentals or employees of the Bank.
Article 12 USE OF THE INSURANCE COMPANY'S NAME
11.01 The Bank shall make no advertising use of the Insurance Company's
name except as authorized in writing by the Insurance Company.
Article 13 AMENDMENT OF AGREEMENT
13.01 This Agreement shall not be modified or amended except in writing
signed by the Bank and two Officers of the Insurance Company.
Article 14 ASSIGNMENT
14.01 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors
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and assigns; provided, however, that, subject to the right of the Bank to
subcontract portions of its obligations hereunder, Article 14.02, neither party
may assign its rights or obligations under this Agreement without the written
consent of the other party.
14.02 The Bank may, without further consent on the part of the
Insurance Company, subcontract for the performance hereof with (i) Boston
Financial Data Services, Inc., a Massachusetts Corporation ("established") which
is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the
Securities Exchange Act of 1934 ("Section 17A(c)(1)", (ii) a BFDS subsidiary
duly registered as transfer agent pursuant to Section 17A(c)(1) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be fully responsible
to the Insurance Company for the acts and omissions of any subcontractor as it
is for its own acts and omissions.
Article 15 MISCELLANEOUS
15.01 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one Agreement.
15.02 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof, whether written or oral.
15.03 This Agreement shall be governed by and construed and interpreted
under the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INSURANCE COMPANY
Attest:
By: /s/ Judy Lissick
/s/ Michael S. Fischer
Title: Assistant Vice President
By: /s/ John A. Johnson
Title: Vice President and Actuary
STATE STREET BANK AND TRUST COMPANY
Attest:
By: /s/ E. D. Hawkes, Jr.
/s/ Eric Greene
Title: Vice President
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<PAGE>
EXHIBIT A
(FORMS OF ANNUITY POLICIES)
<PAGE>
SELECT*ANNUITY I
<TABLE>
<CAPTION>
Non-Qualified
408(b) (IRA's) Qualified
408(k) (SEP's) 403 (b) (TSA) Policy
Rider 81-821 Rider 83-155 Form
State Approvals Approvals Number
<S> <C>
Alabama x x 32538a
Alaska x x 32538a
Arizona x x 32538a
Arkansas x x 32538a
California x x 32538a
Colorado x x 32538a
Connecticut x x 32538a
Delaware x x 32538a
D.C. x x 32538a
Florida x x 32538a
Georgia x 32538a
Hawaii 32538a
Idaho x x 32538a
Illinois x x 32538a
Indiana x x 32538a
Iowa x x 32538a
Kansas x x 32538a
Kentucky x x 32538a
Louisiana x x 32538a
Maine x 32538a
Massachusetts x x 32538a
Michigan x x 32538a
Minnesota x x 32538a
Mississippi x x 32538a
Missouri x x 32538a
Montana x x 32538a
Nebraska x x 32538a
Nevada x x 32538a
New Hampshire x 32538a
New Jersey (DID NOT FILE -- POLICY NOT AVAILABLE)
New Mexico x x 32538a
North Carolina x x 32538a
North Dakota x 32538a
Ohio x x 32538a
Oklahoma x x 32538a
Oregon x x 32538a
Pennsylvania x Form 81-822 x Form 83-652 32538
Rhode Island x x 32538a
South Carolina x x 32538a
South Dakota x x 32538a
Tennessee x x 32538a
Texas x x (POLICY NOT AVAILABLE)
Utah x x 32538a
Vermont x x 32538a
Virginia x x 32538a
Washington x x 32538a
West Virginia x x 32538a
Wisconsin x x 32538a
Wyoming x x 32538a
</TABLE>
<PAGE>
Exhibit A
select Annuity I
Page 2
SEPARATE ACCOUNT: MFS/NWNL Variable Account
INVESTMENT COMPANIES
AVAILABLE UNDER
SEPARATE ACCOUNT:
Massachusetts Cash Management Trust - Prime Series
Massachusetts Financial High Income Trust - Series I
Massachusetts Financial Bond Fund
Massachusetts Financial Total Return Trust
Massachusetts Investors Trust
Massachusetts Financial Development Fund
Massachusetts Investors Growth stock Fund
Massachusetts Capital Development Fund
Massachusetts Financial International Trust - Bond Portfolio
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
SELECT*ANNUITY II
Non-Qualified
408(b) (IRA's) Qualified
408(k) (SEP's) 403 (b) (TSA) Policy
Rider 81-821 Rider 83-155 Form
State Approvals Approvals Number
<S> <C>
Alabama x x 81-870
Alaska x x 81-870
Arizona x x 81-870
Arkansas x x 81-870
California x x 81-870
Colorado x x 81-870
Connecticut x x 81-870
Delaware x x 81-870
D.C. x x 81-870
Florida x x 81-870
Georgia x 81-870
Hawaii 81-870
Idaho x x 81-870
Illinois x x 81-870
Indiana x x 81-870
Iowa x x 81-870
Kansas x x 81-870
Kentucky x x 81-870
Louisiana x x 81-870
Maine x 81-870
Massachusetts x x 81-870
Michigan x x 81-870
Minnesota x x 81-870
Mississippi x x 81-870
Missouri x x 81-870
Montana x x 81-870
Nebraska x x 81-870
Nevada x x 81-870
New Hampshire x 81-870
New Jersey (DID NOT FILE -- POLICY NOT AVAILABLE)
New Mexico x x 81-870
North Carolina x x 81-870
North Dakota x 81-870
Ohio x x 81-870
Oklahoma x x 81-870
Oregon x x 81-870
Pennsylvania x Form 81-822 x Form 83-652 81-870
Rhode Island x x 81-870
South Carolina x x 81-870
South Dakota x x 81-870
Tennessee x x 81-870
Texas x x 81-870
Utah x x 81-870
Vermont x x 81-870
Virginia x x 81-870
Washington x x 81-870
West Virginia x x 81-870
Wisconsin x x 81-870
Wyoming x x 81-870
</TABLE>
<PAGE>
EXHIBIT A
Select *Annuity II
Page 2
Separate Account: NWNL Select Variable Account
Account: Fixed Account (Insurance Company's General Account)
Investment Companies
Available Under
Separate Account:
Select Capital Growth Fund, Inc.
Select Cash Management Fund, Inc.
Select High Yield Fund, Inc.
Select Managed Fund, Inc.
Variable Insurance Products Fund:
Money Market Portfolio
High Income Portfolio
Equity Income Portfolio
Growth Portfolio
Overseas Portfolio
<PAGE>
EXHIBIT B
ADMINISTRATIVE SERVICES
A. ISSUANCE OF CONTRACT
1. Reviews form of application, applies issuance criteria to
application for annuity Contract.
2. Notifies dealer/agent of any error or missing data needed to
establish participant, annuitant or Contract owner records.
3. If issuance criteria are met, prepares Contract data page,
prepares issued Contract, and mails to Contract owners or
registered representatives/agents.
4. Establishes and maintains participant, annuitant, and Contract
owner records, as applicable, on authorized storage/retrieval
systems.
5. Causes to have printed and maintains supply of confirmation
statements. Prepares and mails confirmation statements of
purchases to Contract owners with copies to registered
representatives/agents, if required.
6. Deposits monies received with application into the designated
Account (see "Banking" below).
7. Causes to have printed and maintains inventory of issue
related forms, Contracts and endorsements.
B. BILLING AND COLLECTION
1. Receives purchases payments and reconciles amount paid with
returned billing statements or other remittance media.
2. Prepares and mails confirmation statement of purchase payments
to Contract owners with copies to registered representatives/
agents, if requested.
3. Updates the Contract owner master records and other records to
reflect payments received, and performs accounting
distribution of each payment received.
4. Deposits cash received under the Contracts into a designated
bank account (see "Banking" below).
5. Transmits daily accounting and bank transfer authorization
summaries prepared for each valuation period.
6. Prepares individual bills or group billing lists for all
periodic payment Contracts (confirmation can double as billing
statement, if desired).
C. BANKING
1. Microfilms all checks, balances, edits, endorses and prepares
daily deposit.
2. Deposits are placed into depository account.
3. Transfers funds from the depository account to the applicable
Account.
4. On dishonored items, reverses transactions, prepares reports,
and communicates with Contract owner.
5. Receives Funds from Accounts for transfer into disbursement
account and tax withholding account.
6. Prepares disbursement checks (see "Disbursement" below).
7. Prepares daily cash journal summary reports and transmits by
facsimile transmission. Mails detail of activity.
D. ACCOUNTING/AUDITING
1. Provides information necessary to post accounting entries to
the general account ledger, including amounts withheld from
annuity payments for taxes.
2. Generates accounting information necessary to post entries to
Separate Account ledgers.
3. Prepares daily accounting reports for Contracts maintained on
the system.
4. Determines the "Net Amount Available for Investment."
5. Retains systems generated reports in accordance with a
retention schedule mutually established. Provides access to
such reports for internal and external auditing.
6. Cooperates on annual audit of Separate Accounts financial
conducted for purposes of financial statement certification
and publication. Accommodates other client or regulatory
audits, as required.
E. PRICING/VALUATION
1. Receives information needed in determining Separate Account
unit values from the Investment Company transfer agent. This
information includes the daily net asset value of the
underlying Investment Company and any capital gains or
dividend distribution made by the Investment Company.
2. Performs unit valuation procedure for accumulation and annuity
(payout) unit values for the Separate Account based upon
valuation information from the Investment Company.
3. Performs valuation of annuity reserves, minimum death
benefits, contingency reserves, etc., associated with the
variable annuity contracts.
F. CONTRACT OWNER SERVICE/RECORD MAINTENANCE
1. Processes Contract owner service requests, including
information requests, beneficiary changes, transfer of assets
between eligible investment vehicles, and changes of any other
information maintained on the system.
2. Researches inquiries using both data stored in the system and
microfilm records. Responds directly to questions or
inquiries relating to transaction records or current account
value.
3. Prepares a set of daily journals confirming changes made to
participant, annuitant, or Contract owner accounts. Microfilms
copies of communications from participants, annuitants, and
Contract owners.
G. DISBURSEMENT (SURRENDERS, BORROWINGS, CLAIMS)
1. Notifies Contract owners of qualified minimum distribution
regulations at appropriate time.
2. Receives requests for partial or full surrenders, minimum
distributions, partial withdrawals and death claims from
Contract owners and beneficiaries. Calculates minimum
distributions using software supplied by NORTHWESTERN NATIONAL
LIFE. Accounts for any Contract administrative charge.
3. Processes minimum distribution, surrender and partial
withdrawal requests and death claims against the participant
master files.
4. Prepares checks for surrenders, partial withdrawals, and death
claims and forwards to Contract owner, annuitant, or
designated payee.
5. Prepares and mails confirmation statements of disbursement
transactions to Contract owners with copies to registered
representatives/agents, if requested.
6. Prepares report on surrenders, partial withdrawals, and death
claims.
7. Reviews, causes to have printed, and maintains adequate supply
of checks.
H. COMMISSIONS
1. Creates and maintains detailed commission transaction records
for each financial transaction processed.
2. Creates commission adjustment transactions, as necessary, due
to cancellations, lapses, and the like.
3. Prepares commission statements and checks, if required.
4. Prepares commission interface to Insurance Company in machine
readable form, as required.
5. Creates agent tax reporting forms, as required at date of this
agreement.
I. ANNUITY BENEFIT PROCESSING
1. Receives information with respect to annuitants going into the
annuity (payout) phase.
2. Calculates the amount of the initial annuity payment for
variable payout based on tables supplied by the Insurance
Company.
3. Deducts applicable premium taxes.
4. Processes annuity reserve adjustments instructed by the
Insurance Company.
5. Calculates annuity reserves.
J. PROXY PROCESSING
1. Receives record date information and proxy solicitation from
Investment Companies.
2. Prepares proxy cards.
3. Mails one annual solicitation (and Resolicitations, if
necessary).
4. Maintains proxy registers and other required proxy material.
K. PERIODIC REPORTS TO CONTRACT OWNERS
1. Collates information necessary to prepare semi-annual reports
for Separate Accounts.
2. Inserts and mails statement of Account to each participant,
annuitant, or Contract owner.
3. Prepares and mails statement of Account to each participant,
annuitant, or Contract owner.
L. REGULATORY STATEMENT REPORTS
1. Collates relevant financial information for preparation of
convention blanks for Accounts.
2. Prepares IRS Reports 1099-R, W-2P, and 5498 as required for
Contract owners who made contributions or received annuity
payments or distributions. Mails to Contract owners and IRS.
3. Maintains Taxpayer Identification Numbers for Contract owners
and performs withholding and backup withholding as required by
the Internal Revenue Code and regulations thereunder.
4. Responds to requests from plan administrators or trustees for
information affecting the plan or participants for qualified
plans.
5. Provides relevant financial data for preparation of the Annual
SEC Report for Separate Accounts under the Investment Company
Act of 1940.
M. PREMIUM TAXES
1. Collects and accounts for premium taxes as appropriate.
2. Prepares and maintains premium tax records by Contract owner
and by state.
N. FINANCIAL AND MANAGEMENT REPORTS
Sends the reports listed below to the Insurance Company within three
business days after the anticipated production dates:
Item Production Dates
General Distributor
Compensation Statement..........1st and 15th each month
Commissions Statement................1st and 15th each month
Commissions Check Register...........1st and 15th each month
Commissions Proofs...................1st and 15th each month
Cash Recap Report....................Daily
Agents' Negative Balance
Listing.........................1st and 15th each month
Commissions Suspended
File Listing....................1st and 15th each month
Agent Balance Forward Net
Change Report...................1st and 15th each month
Item Production Dates
Annuity Commissions
Transactions not Processed......1st and 15th each month
Agent Summary Listing................1st and 15th each month
NWNL Detail Production Report
by Region/Division..............End of the month
Report Listing contracts
where Owner and Annuitant
differ..........................End of the month
Daily Price Report...................Daily
Daily Production Report..............Daily
As of Transactions Report............Daily
Annuity Masterfile Update............Daily
Annuity New Policy Register..........Daily
Gain and Loss Report.................Daily
Cash Recap Supersheet................Daily
Unit Value Supersheet................Daily
Address Change Report................Daily
Nightly Pricing Sheet................Daily
Cash Transfers on Fixed
Account.........................Daily
Checks for Asset Charges,
Sales Charges, Liquidations
and State Taxes.................End of the month
Monthly Processing Report
for NWNL........................4th of each month
C. AGENT LICENSE RECORDKEEPING
1. Receives agent license status information from Insurance
Company, if required:
(a) New Agents
(b) Changes in Status
(c) Agents Terminated
2. Establishes, maintains, or deletes agent records on computer
system, if required.
3. Edits against agent records when processing transactions
against a Contract.
P. OPTIONAL SERVICES AS AGREED UPON FROM TIME FOR ADDITIONAL FEES
1. Billing and Collection
(a) Prepares pre-authorized checks("PAC"). Causes to have
printed and maintains supply of PAC authorization
forms.
(b) Generates and deposits PAC's on appropriate schedule.
2. Asset Balancing for Separate Accounts
(a) Collect the number of Investment Company shares from
the Investment Company transfer agent.
(b) Compares assets (Investment Company market value,
accrued dividend/capital gains) to liability
(participant value which is total amount multiplied
by Separate Account unit value).
(c) Calculates daily asset charge for Insurance Company.
(d) Redeems asset charges periodically and remits to
Insurance Company.
<PAGE>
EXHIBIT C
FEE SCHEDULE
<PAGE>
EXHIBIT C
FEE SCHEDULE
o Policy Administration Fee - An annual fee charged for the ongoing
maintenance of each policy.
Policies Cost Per Policy
First 25,000 $30.00
Next 25,000 $28.00
o Out-of-pocket Expenses - Expenses billed at cost but not limited to the
following:
- postage
- printing
- overnight pouch/freight
- telephone
- electronic funds transfer
o Minimum Monthly Fees - No minimum
The minimum monthly fee is required to cover staffing and start-up
expenses. This fee will be invoked if the policy administration fee
does not exceed the minimum monthly fee.
o Ongoing Support - Cost of programming for additional products,
services, and modifications billed according to time and materials. On
this basis, an estimate of the job to be completed would be made prior
to commencement. Time and materials costs are billed as the job is
completed, with the maximum being the original estimate.
<PAGE>
EXHIBIT D
AUTHORIZED INSURANCE COMPANY PERSONNEL
NWNL Law Division Legal Staff
Vice President, Individual Insurance Operations Select Annuity
Compliance Coordinator Director, Policy Services
Manager of Qualified Plans, Annuities and Variable Products
<PAGE>
ASSIGNMENT AGREEMENT
THIS AGREEMENT is made this 6th day of May, 1991, by and between STATE
STREET BANK AND TRUST COMPANY ("State Street") and VANTAGE COMPUTER SYSTEMS,
INC. ("Vantage").
WHEREAS, State Street is a party to that certain Agreement dated August
1, 1983 (the "Agreement") with NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY (the
"Client") wherein State Street agreed to perform certain annuity accounting,
record keeping and service functions (the "Services") for the Client;
WHEREAS, Vantage is also in the business of providing annuity
accounting, recordkeeping and service functions and desires to acquire the
rights and assume the obligations of State Street under the Agreement;
WHEREAS, the Agreement is assignable by its terms upon the written
consent of the Client, and such consent has been obtained.
NOW, THEREFORE, the parties agree as follows:
1. State Street hereby assigns the Agreement and all of State Street's
rights and obligations under the Agreement to Vantage, effective May 6th, 1991.
2. Vantage accepts the assignment of the Agreement and agrees to
perform all of State Street's obligations under the Agreement required to be
performed on or after the effective date hereof.
3. Vantage and State Street shall reimburse and hold Client harmless
for and from all costs resulting from transfer of the Services which the Client
would not have otherwise incurred.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf by their duly authorized representatives as of the day
and year first above written.
VANTAGE COMPUTER SYSTEMS, INC.
By: /s/ Paul D. Carter, Jr.
Name: Paul D. Carter, Jr.
Title: Senior Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ A. E. Allinson
Name: A. E. Allinson
Title: Executive Vice President
<PAGE>
ADDENDUM
Effective May 6, 1991, Northwestern National Life Insurance Company ("NNL") and
Vantage Computer System, Inc. ("Vantage") of Kansas City, Missouri, assignee of
State Street Bank and Trust Company, hereby amend the Administrative Services
Agreement dated August 1, 1983 (the "Agreement"), as follows:
1. EXHIBIT C to the Agreement is amended so as to read in its entirety
in accordance with the attached Exhibit C.
2. The term of the Agreement in hereby extended to May 5, 1992, and
thereafter shall continue in effect until terminated as hereafter provided.
3. Article 3 REPRESENTATIONS AND WARRANTIES OF VANTAGE
Vantage represents and warrants to NNL as follows:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
3.02 It is empowered under applicable laws and by its charter and
bylaws to enter into and perform the services contemplated in the Agreement.
3.03 All requisite Corporate proceedings have been taken to authorize
it to enter into and perform the services contemplated in this Agreement.
3.04 It has and will continue to have and maintain the necessary
facilities, equipment, and personnel to perform its duties and obligations under
this Agreement.
4. New Section 8.02 is added to the Agreement and shall read in its
entirety as follows:
8.02 Upon request by the California Commissioner of Insurance, Vantage
will furnish the California Commissioner of Insurance with any information or
reports in connection with services furnished by Vantage hereunder, to the
extent that such services pertain to NNL's variable life insurance operations
in the State of California. Vantage will provide access to the Commissioner of
Insurance of any state having jurisdiction to the books and records maintained
hereunder for the purpose of examination, audit and inspection. NNL shall
reimburse Vantage for all of its costs and expenses incurred in connection with
Vantage's duties under this Section 8.02.
5. Section 9.01 of the Agreement is hereby amended to read in its
entirety as follows:
-1-
9.01 This Agreement may be terminated by either party effective at any
time after May 5, 1992, upon at least ninety (90) days written notice to the
other party; provided, however, that either party may immediately terminate this
Agreement if its continued performance hereunder would violate any law, rule,
regulation, order or decree; provided, however, if NNL has not arranged for
services by a new administrative agent after having made a good faith effort,
the Agreement shall be continued for another ninety (90) days.
6. New section 9.04 in added to the Agreement and shall read in its
entirety as follows:
9.04 If Vantage desires to increases its fees or charges to NNL,
change the manner of payment or change any other provision of this Agreement
effective after May 5, 1992, Vantage shall give NNL at least sixty (60) days
advance written notice of such increase or change. If Vantage and NNL do not
agree to fees and charges or the manner of payment or other change within sixty
(60) days after such notice is given by Vantage, this Agreement shall terminate
at the and of the sixty (60) day period. If NNL shall so request in writing,
Vantage shall continue to provide the services described herein to NNL for a
period of three (3) months following such termination, such service to be
provided in accordance with the terms of this Agreement and Vantage shall have
the right to increase the fees in effect immediately preceding such sixty (60)
day period by a percentage not to. exceed the percentage increase in the
consumer Price Index for all Urban Consumers (1982-4=100)" for Kansas City, Mo.
- - Kan. "All Items" since the later of (a) May 6, 1991 or (b) the date of the
last increase in fees pursuant to this Section 9.04.
7. Section 15.03 is hereby amended to read in its entirety as follows:
15.03 This Agreement shall be governed by and construed and interpreted
under the laws of the State of Missouri.
8. A new Article 16 is added to the Agreement to read as follows:
Article 16 - Additional Covenants
16.01 This Agreement shall be retained as part of the official records
of both parties for its duration and six (6) years thereafter, or for such
longer period as may be required by law.
16.02 In states where required, when a policy, contract, or annuity
(the "policy") is issued to a trustee or trustees after May 5, 1991, Vantage
will request a copy of the trust agreement and any amendments thereto to be
furnished to it in conjunction with the application for such policy. Vantage
-2-
will from time to time advise NNL of the states to which this requirement
applies. NNL agrees to notify its agents in such states of these requirements.
Upon receipt of such trust agreements and any amendments thereto, Vantage will
retain such documents as part of the official records of Vantage and NNL for
the duration of such policies and six years thereafter, or for such longer
period as may be required by law.
16.03 Vantage shall maintain at its principal administrative office,
for the duration of this Agreement and six (6) years thereafter or for such
longer period as may be required by law, the records retained pursuant to
Article 8.01. Such records may be maintained an microfiche, microfilm, in
computer code, or in such other format or media as NNL shall from time to time
instruct Vantage in writing.
16.04 Any policies, certificates, booklets, termination notices or
other written communications delivered by NNL to Vantage for delivery to the
insureds shall be delivered by Vantage promptly after receipt of instructions
from NNL to do so.
16.05 The payment to Vantage of any premiums or charges for insurance
by or on behalf of an insured shall be deemed to have been received by NNL, and
the payment of return premiums or claims by NNL to Vantage shall not be deemed
payment to the insured or claimant until such payments are received by such
insured or claimant.
16.06 Vantage will hold in a fiduciary capacity all insurance charges
or premiums collected by it on behalf of or for NNL with respect to insureds,
and return premiums received from NNL. Vantage will immediately remit such
funds to the person or persons entitled thereto, or shall promptly deposit them
in a fiduciary account in a federally insured financial institution approved
by NNL, which shall be established and maintained by Vantage in the name of
NNL. Vantage shall periodically render an accounting to NNL detailing all
transactions performed by Vantage with respect to such account. Vantage shall
require the bank in which such fiduciary account is maintained to keep records
clearly recording the deposits and withdrawals from such account on behalf of
or for each insurer. Vantage shall promptly obtain and keep copies of such
records and upon request of NNL, furnish NNL with copies of such records
pertaining to deposits and withdrawals on behalf of or for NNL. Vantage may
make withdrawals from such account for:
a. remittance to NNL in accordance with NNL's written instruction(s);
b. transfer to and deposit in a claims paying account, with claims to
be paid as provided in paragraph 16.07 below;
-3-
c. remittance of return premium to the person or persons entitled
thereto.
16.07 All surrenders or claims paid by Vantage from funds collected on
behalf of NNL shall be paid only on checks or drafts of and as authorized by
NNL.
16.08 Vantage shall provide a written notice to the insured advising
them of the identity of and relationship among Vantage, the insured and NNL.
Under this Agreement, Vantage will not collect amounts other than premiums
directly from NNL's insureds. When Vantage collects premiums from an insured,
Vantage will provide the insured with written notice of the premium charged by
NNL for such insurance coverage.
16.09 The parties acknowledge that the insurance policies subject to
the services performed under this Agreement are underwritten by NNL.
16.10 Whenever required by a state, Vantage shall maintain a deposit or
a bond in favor of such state to be held in trust for the benefit and protection
of insureds and insurers whose money Vantage handles.
16.11 With respect to Wyoming residents, Vantage will not:
a. solicit applications for insurance or annuities for NNL, negotiate
insurance or annuities on behalf of NNL, or carry out and countersign insurance
policies unless licensed in Wyoming as an agent;
b. an behalf of NNL, for compensation or fee, solicit, negotiate or
procure insurance or the renewal or continuance hereof for Wyoming insureds or
prospective insureds unless licensed in Wyoming as a broker;
c. adjust claims in Wyoming for NNL by investigating and negotiating
settlements unless licensed in Wyoming as an adjuster, or an agent or broker who
adjusts or assists in the adjustment of losses arising under policies issued by
the insurers represented by that agent or through that broker. Nothing herein
shall be interpreted as to prohibit Vantage from engaging in ministerial or
clerical activities relating to the payment of claims.
9. Article 10 is deleted in its entirety.
10. Subject to this Addendum, the Agreement shall continue in full
force and effect.
-4-
Dated this 9th day of May, 1991.
VANTAGE COMPUTER SYSTEMS, INC.
By: /s/ Paul D. Carter, Jr.
Name: Paul D. Carter, Jr.
Title: Senior Vice President
NORTHWESTERN NATIONAL LIFE INSURANCE
COMPANY
By: /s/ Judy Lissick
Name: Judy Lissick
Title: Assistant Vice President
By: /s/ Paul R. Chapman
Name: Paul R. Chapman
Title: Assistant Vice President
-5-
<PAGE>
EXHIBIT C
VANTAGE COMPUTER SYSTEMS, INC.
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
FULL SERVICE FEE SCHEDULE
EFFECTIVE MAY 6, 1991 THRU MAY 5, 1992
A) PROCESSING CHARGES:
1) ACTIVE CONTRACT SERVICE FEES:
ANNUAL SERVICE FEE
ACTIVE CONTRACT VOLUME PER ACTIVE CONTRACT
First 10,000 Contracts $30.00 per Contract
Next 15,000 Contracts 27.00 per Contract
Next 25,000 Contracts 26.00 per Contract
Next 50,000 Contracts 25.00 per Contract
Over 100,000 Contracts 24.00 per Contract
ACTIVE CONTRACTS are defined as those which contained assets
during the billing month or on the last working day of the
billing month are in one of the following statuses:
- Active (0)
- Pending (4)
If a contract is in a status of Pending (4) and the reason for
being pended is 1035 Exchange, then the contract WILL NOT be
considered active.
MINIMUM MONTHLY ACTIVE CONTRACT SERVICE FEE: The minimum
monthly active contract service fee schedule is as follows:
For the first year of service $10,000.00
For the second year of service $15,000.00
For the third year of service $20,000.00
Monthly, Vantage will bill 1/12th of the annual active
contract service fee or the above minimum monthly service fee,
whichever is greater.
INACTIVE CONTRACTS will be charged an annual fee of $1.92.
Inactive contracts are defined as those in the following
status at the beginning and end of the billing month:
- Closed (3)
Monthly, Vantage will bill one-twelfth (1/12) of the annual
inactive contract service fee for contracts that were inactive
at the beginning and end of the billing month.
B) OTHER CHARGES
1) Charges incurred upon NNL's written request for the following
will be at standard Vantage Time and Materials rates:
o Systems Interfaces o Training Classes
o Customizations o Model Office
o Addition of New Plans o ADHoc Reports *
o Conversion Activities
* At Vantage's discretion, when Easytrieve is used as
the programming language of choice, the charge will
be $250.00 per new program written.
2) Proxy Processing Fee - $200.00 per month for tabulation
services.
3) Application Processing Fees - The one-time charge per
application processed is as follows:
APPLICATION VOLUME CHARGE PER APPLICATION
All $0
OUT-OF-POCKET EXPENSES:
In addition to the fees set forth above, Vantage will bill out-of-pocket
expenses as they are incurred. Out-of-pocket expenses are expenditures for the
items such as those listed below and any other items agreed to by the parties:
1. Cost of printing blank stock and the cost of set-up and printing
(including per impression costs) confirmation statements, contract file
folders, checks, contract pages, specification pages, envelopes, proxy
or voting instruction cards, quarterly statements, separate account
semi-annual statements, individual and list bills, and any other
required forms or reports.
2. Cost of postage for mailing these forms, reports, contracts and
prospectuses to owners or agents, and cost for postage and overnight
express delivery requested by NNL for any other communication to
policyowners or the parties to the Service Agreement.
3. The cost of long distance telephone calls and facsimile (Fax)
transmissions to or from policyowners. All long distance calls
and facsimile transmissions to NNL shall be made on toll-free numbers
provided by NNL. Costs of any lines installed at NNL's request for
communication between the parties to this Agreement, including CRT's
and related mini-computer equipment. Costs of telecommunication lines
and equipment installed to provide primary and backup support for on-
line access to the administrative system, including transmission capa-
bilities between mainframes. Vantage will not recover costs related to
its unilateral installation of equipment without NNL's consent.
4. Cost of microfilm and microfiche equipment and supplies and the cost of
transferring all necessary information to microfilm and/or microfiche.
5. Normal and reasonable travel, meal and lodging expenses incurred at
NNL's request during Vantage's performance of the Service Agreement.
6. Cost of equipment (including maintenance) which is provided to or
obtained by Vantage and installed at NNL's offices in Minneapolis for
purposes of the Service Agreement. Client will be responsible for such
costs including costs under Vantage leases and maintenance agreements
with third parties for such equipment, including leases and maintenance
agreements which may extend beyond the termination or expiration of the
Service Agreement.
7. Costs involved with off-site storage requested by NNL for client
records, documents, correspondence and other items.
<PAGE>
AMENDMENT AGREEMENT
This Amendment is made this 6th day of February 1992, by and between Vantage
Computer Systems, Inc., a Delaware corporation, ("Vantage") and Northwestern
National Life Insurance Company ("NNL").
WHEREAS, Vantage is performing certain recordkeeping and other services for NNL
pursuant to an agreement dated August 1, 1983 between State Street Bank and
Trust Company ("State Street") and NNL as amended on May 7, 1991 (the
"Agreement") which was assigned by State Street to Vantage on or about May 9,
1991;
WHEREAS pursuant to the Agreement, Vantage in servicing certain policyholders of
NNL in the state of Arizona and as a result, is required to be registered in
that state as a third party administrator ("TPA");
WHEREAS the Arizona Department of Insurance is requiring Vantage to amend the
Agreement as set out below to comply with such state's statutory requirements;
and
WHEREAS NNL desires that the Agreement be amended so as to comply with the
Arizona statutory requirements.
Therefore, the parties agree as follows:
1. NNL shall provide written notice of change, cancellation, or
termination of the Agreement to the Director of Insurance for
the State of Arizona in compliance with Section 20-485.01(B)
of the Arizona Statutes.
2. All other provisions of the Agreement, except as modified by
this Amendment, shall remain in full force and effect, in
accordance with their terms.
In witness hereof, the parties have caused this Amendment to be executed on
their behalf by duly authorized representatives as of the date first written
above.
Vantage Computer Systems, Inc. Northwestern National Life
Insurance Company
By: /s/ Paul D. Carter, Jr. By: /s/ Judy Lissick
Name: Paul D. Carter, Jr. Name: Judy Lissick
Title: Senior Vice President Title: 2nd Vice President
By: /s/ Paul R. Chapman
Name: Paul R. Chapman
Title: 2nd Vice President
<PAGE>
Section 20.485.01. Written agreement; provisions; maintenance of records
A. No person may act as an administrator and no administrator may collect a
premium without a written agreement between the person as administrator and the
insurer for whom the services are rendered. Such written agreement shall be
retained as part of the official records of both the insurer and the
administrator for the duration of the agreement and for five years thereafter.
B. The written agreement shall contain provisions which include the
requirements of Sections 20.485.03 through 20.485.10 except as those
requirements do not apply to the functions performed by the administrator. The
agreement shall include a provision that the insurer shall provide thirty days'
written notice to the administrator of termination or cancellation of the
agreement. The agreement shall also include a provision that the insurer shall
provide fifteen day's written notice to the director of termination or
cancellation or any other change in the agreement.
C. If a policy is issued to a trustee or trustees, a copy of the trust agreement
and any amendments to such agreements shall be furnished to the insurer by the
administrator and shall be retained as part of the official records of both the
insurer and the administrator for the duration of the policy and for five years
thereafter.
<PAGE>
SECOND ADDENDUM
Effective June 5, 1992, Northwestern National Life Insurance ("NNL") and Vantage
Computer System, Inc., assignee of State Street Bank and Trust Company
("Vantage") of Kansas City, Missouri hereby amend the Service Agreement dated
August 2, 1983 as amended by addendum dated May 6, 1991 and as further amended
by the Amendment Agreement dated February 6, 1992 (the "Agreement") as follows:
1) The term of the Agreement is hereby extended to June 4, 1995, subject
to renewal thereafter as provided in section 1.01 of the Agreement.
2) Section 9.01 is amended to read in its entirety as follows:
This Agreement may be terminated by either party effective at any time
after June 4, 1995, upon ninety (90) days written notice to the other
party; provided, however, that either party may immediately terminate
this Agreement if its continued performance hereunder would violate any
law, rule, regulation, order or decree; provided, however, if NNL has
not arranged for services by a new administrative agent after having
made a good faith effort, the Agreement shall be continued for another
ninety (90) days.
3) Effective June 5, 1992, Agreement Exhibit B in hereby Amended so as to
read in its entirety in accordance with the attached Exhibit B.
4) Effective June 5, 1992, Agreement Exhibit C is hereby Amended so as to
read in its entirety in accordance with the attached Exhibit C.
5) Subject to this Addendum, the Agreement shall continue in full force
and effect.
Dated this 4th day of June, 1992.
VANTAGE COMPUTER SYSTEMS, INC.
By: /s/ Paul D. Carter, Jr.
Name: Paul D. Carter, Jr.
Title: Senior Vice President
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Judy Lissick
Name: Judy Lissick
Title: 2nd Vice President
By: /s/ Paul R. Chapman
Name: Paul R. Chapman
Title: 2nd Vice President
1
<PAGE>
EXHIBIT B
ADMINISTRATIVE SERVICES
CURRENT
DESIRED SERVICE
SERVICE STANDARD
STANDARD A. ISSUANCE OF CONTRACT (IF KNOWN)
5 bus. days 1. Reviews form of application, 5 bus. days
total applies issuance criteria to total
application for annuity
Contract.
5 bus. days 2. Notifies dealer/agent of 5 bus. days
total error or missing data total
needed to establish
participant, annuitant or
Contract owner records.
5 bus. days 3. If issuance criteria are 5 bus. days
total met, prepares Contract data total
page, prepares issued Contract,
and mails to Contract owners
or registered representatives/
agents.
5 bus. days 4. Established and maintains 5 bus. days
total participant, annuitant, and total -
Contract owner records, as microfiche
applicable, on authorized is a 3-day
storage/retrieval systems. out-of-file
process
Print as 5. Cause to have printed and
needed (w/o maintains supply of confirma-
depleting supply) tion statements. Prepares
Mails w/in and mails confirmation
2 bus. days statements of purchases to
Contract owners with copies
to registered representa-
tives/agents, if required.
Daily 6. Deposits monies received Daily
with application into the
designated Account (see
"Banking" below).
Provides 6 7. Causes to have printed and Same
weeks supply/ maintains inventory of issue
order lag related forms, Contracts and
endorsements.
B. BILLING AND COLLECTION
1 bus. day 1. Receives purchases payments Same
and reconciles amount paid
with returned billing
statements or other
remittance media.
2 bus. day 2. Prepares and mails Same
after confirmation statement of
transaction purchase payments to Contract
owner with copies to
registered representatives/
agents, if required.
1 bus. day 3. Updates the Contract owner Same
master records and other
records to reflect payments
received, and performs
accounting distribution or
each payment received.
daily 4. Deposits cash received Daily
under the Contracts into a
designated bank account
(see "Banking" below).
2
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
daily 5. Transmits daily accounting Daily
and banking transfer
authorization summaries
prepared for each valuation
period.
Produced 6. Prepares individual bills or Produced
weekly group billing lists for all weekly
Mailed 1 bus. periodic payment Contracts
day after (confirmation can double
as billing statement, if
desired).
C. BANKING
1. Microfilms all checks.
Balances, edits, endorses,
and prepares daily deposit.
2. Deposits are placed into
depository account.
3. Transfers funds from the
depository account to the
applicable Account.
4. On dishonored items,
reverses transactions,
prepares reports, and
communicates with Contract
owner.
5. Receives Funds from
Accounts for transfer into
disbursement account and
tax withholding account.
6. Prepares disbursement checks
(see "Disbursement") below.
7. Prepares daily cash journal
summary reports and transmits
by facsimile transmission.
Mails detail of activity.
D. ACCOUNTING/AUDITING
1. Provides information necessary to
post accounting entries to the
general account ledger, including
amounts withheld from annuity
payments for taxes.
2. Generates accounting information
necessary to post entries
to Separate Account ledgers.
3. Prepares daily accounting
reports for Contracts
maintained on the system.
4. Determines the "Net Amount
Available for Investment".
5. Retains systems generated
reports in accordance with
a retention schedule mutually
established. Provides access
to such reports for internal
and external auditing.
3
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
6. Cooperates on annual audit
of Separate Accounts financial
conducted for purposes of
financial statement certi-
fication and publication.
Accommodates other clients
or regulatory audits, as
required.
E. PRICING/VALUATION
1. Receives information needed
in determining Separate
Account unit values from
the Investment Company
transfer agent. This
information includes the
daily net asset value
of the underlying Invest-
ment Company and any capital
gains or dividend distribu-
tion made by the Investment
Company.
2. Performs unit valuation procedure
for accumulation and annuity
(payout) unit values for the
Separate Account based upon
valuation information from the
Investment Company.
3. Performs valuation of
annuity reserves, minimum
death benefits, contingency
reserves, etc. associated
with the variable annuity
contracts.
F. CONTRACT OWNER SERVICE/RECORD MAINTENANCE
Financial 1. Processes Contract owner Same
1 bus. day service requests, including
non-financial information requests, bene-
5 bus. days ficiary changes, transfer of
assets between eligible
investment vehicles, and
changes of any other
information maintained on
the system.
7 bus. days 2. Researches inquiries using Same
both data stored in the system
and microfilm records.
Responds directly to questions
or inquiries relating to
transaction records or current
account value.
3. Prepares a set of daily Daily
journals confirming changes
made to participant, annuitant,
or Contract owner accounts.
Microfilms copies of commu-
nications from participants,
annuitants, and Contract
owners.
G. DISBURSEMENT (SURRENDERS, BORROWINGS,
CLAIMS)
Vantage 1. Notifies Contract owners of Same
initiates minimum distribution regula-
annually in tions at appropriate time.
November
4
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
2 bus. days 2. Receives request for partial Please
or full surrenders, minimum provide
distributions, partial disc. 2
withdrawals and death claims bus. days
from Contract owners and
beneficiaries. Calculates
minimum distributions using
software supplied by NORTH-
WESTERN NATIONAL LIFE.
Accounts for any Contract
administrative charge.
2 bus. days 3. Processes minimum distribu- Same
tion, surrender and partial
withdrawal requests and
death claims against the
the participant master files.
2 bus. days 4. Prepares checks for surrenders Same
after transaction partial withdrawals, and death
claims and forwards to Contract
owner, annuitant, or designated
payee.
5. Prepares and mails confir- 2 bus. days
mation statements of dis- after
bursement transactions to transaction
Contract owner with copies
to registered representatives/
agents, if requested.
monthly 6. Prepares report on surrenders, Same
partial withdrawals, and death
claims.
as needed w/o 7. Reviews, causes to have Same
depleting printed, and maintains
adequate supply of checks.
H. COMMISSIONS
daily 1. Creates and maintains Same
detailed commission
transaction records for
each financial transaction
processed.
daily 2. Creates commission Same
adjustment transactions, as
necessary, due to cancel-
lations, lapses, and the
like.
cut-off 15th 3. Prepares commission state- Same
and last day ments and checks, if required.
of the month
4. Prepares commission inter- Twice
face to Insurance Company monthly
in machine readable form,
as required.
5. Creates agent tax reporting
forms, as required at date
of this agreement.
I. ANNUITY BENEFIT PROCESSING
1. Receives information with 5 bus. days
respect to annuitants going for entire
into the annuity (payout) process
phase.
5
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
2. Calculates the amount of
the initial annuity payment
for variable payout based on
tables supplied by the
Insurance Company.
3. Deducts applicable premium
taxes.
4. Processes annuity reserves
adjustments instructed by the
Insurance Company.
5. Calculates annuity reserves.
J. PROXY PROCESSING
1. Receives record date infor- 12 bus. days
mation and proxy solicitation
from Investment Companies.
2. Prepares proxy cards. w/in 12 days
3. Mails one annual solicita- 5 bus. days
tion (and Resolications, if
necessary).
4. Maintains proxy registers until cut-
and other required proxy off date
material.
K. PERIODIC REPORTS TO CONTRACT OWNERS
1. Collates information
necessary to prepare semi-
annual reports for Separate
Accounts.
Produced & 2. Inserts and mails statement Same
mailed so of Account to each participant,
Contract owner annuitant, or Contract owner.
receives by
Jan. 31 and
July 31 each
year.
3. Prepares and mails statement
of Account to each parti-
cipant, annuitant or Contract
owner.
L. REGULATORY STATEMENT REPORTS
1. Collates relevant financial
information for preparation
of convention blanks.
1099 by 1/31 2. Prepares IRS Reports 1099-R Same
5498 by 5/31 and W-2P and 5498 for
contract owners who received
annuity payments or distribu-
tions. Mails to Contract
owners and IRS.
as required 3. Maintains Taxpayer Identi- Same
fication Numbers for Contract
owners and performs withholding
and backup withholding as
required by the Internal Revenue
Code and regulations thereunder.
6
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
7 bus. days 4. Responds to requests from Same
plan administrators or
trustees for information
affecting the plan or
participants for qualified
plans.
as required 5. Provides relevant financial Same
data for preparation of the
Annual SEC Report for under
the Investment Company Act
of the 1940.
M. PREMIUM TAXES
1. Collects and accounts for
premium taxes as
appropriate.
2. Prepares and maintains all
premium tax records by
Contract owner and by
state.
N. FINANCIAL AND MANAGEMENT REPORTS
3 bus. days Sends the reports listed below Same
to the Insurance Company within three
business days after the anticipated
PRODUCTION DATES:
ITEM PRODUCTION DATES
General Distributor Compensation
Statement 1st and 15th each month
Commissions Statement 1st and 15th each month
Commissions Check Register 1st and 15th each month
Commissions Proofs 1st and 15th each month
Cash Recap Report Daily
Agent's Negative Balance Listing 1st and 15th each month
Commissions Suspended File
Listing 1st and 15th each month
Agent Balance Forward Net Change
Report 1st and 15th each month
Annuity Commissions Transactions
not Processed 1st and 15th each month
Agent Summary Listing 1st and 15th each month
NWNL Detail Production Report
by Region/Division End of each month
Report Listing contracts where
Owner and Annuitant differ End of each month
Daily Price Report Daily
Daily Production Report Daily
As of Transactions Report Daily
Annuity Masterfile Update Daily
Annuity New Policy Register Daily
Gain and Loss Report Daily
Cash Recap Supersheet Daily
Unit Value Supersheet Daily
Address Change Report Daily
Nightly Pricing sheet Daily
Cash Transfers on Fixed Account Daily
Checks for Asset Charges, Sales
Charges Liquidations and
and State Taxes End of each month
Monthly Processing Report for
NWNL End of each month
7
DESIRED SERVICE
SERVICE STANDARD
STANDARD (IF KNOWN)
O. AGENT LICENSE RECORDKEEPING
5 bus. days 1. Receives agent license Handled by
status information from NWNL
Insurance Company, if
required:
a) New Agents
b) Changes in Status
c) Agents Terminated
2. Establishes, maintains or 3 bus. days
deletes agent records on
computer system, if required
3. Edits against agent records on-going
when processing transactions
against a Contract.
P. OPTIONAL SERVICES AS AGREED UPON FROM TIME
TO TIME FOR ADDITIONAL FEES
5 bus. days 1. Billing and Collection
a) Prepares pre-authorized 5 bus. days
checks ("PAC"). Causes
to have printed and
maintains supply of PAC
authorization forms.
b) Generates and deposits daily
PAC's on appropriate
schedule.
2. Asset Balancing for Separate
Accounts
a) Collect the number of
Investment Company shares
from the Investment
Company transfer agent.
b) Compares assets (Investment
Company market value,
accrued dividend/capital
gains) to liability
(participant value which
is total amount multiplied
by Separate Account unit
value).
c) Calculates daily asset
charge for Insurance
Company.
d) Redeems asset charges
periodically and remits to
Insurance Company, as
required.
8
<PAGE>
EXHIBIT C
VANTAGE COMPUTER SYSTEMS, INC.
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
FULL SERVICE FEE SCHEDULE
A) PROCESSING CHARGES:
1) ACTIVE CONTRACT SERVICE FEES:
ANNUAL SERVICE FEE
ACTIVE CONTRACT VOLUME PER ACTIVE CONTRACT
First 50,000 Contracts $25.00 per Contract
Over 50,000 Contracts $24.00 per Contract
ACTIVE CONTRACTS are defined as those which contained assets
during the billing month or on the last working day of the
billing month are in one of the following statuses:
o Active (0)
o Pending (4)
If a contract is in a status of Pending (4) and the reason for
being pended is 1035 Exchange, then the contract WILL NOT be
considered active.
MINIMUM MONTHLY ACTIVE CONTRACT SERVICE FEE: The minimum
monthly active contract service fee schedule is as follows:
For the first year of service $10,000.00
For the second year of service $15,000.00
For the third year of service $20,000.00
Monthly, Vantage will bill 1/12th of the annual active
contract service fee or the above minimum monthly service fee,
whichever is greater.
B) OTHER CHARGES
1) Charges incurred upon NNL's written request for the following
will be at standard Vantage Time and Materials rates:
o Systems Interfaces o Training Classes
o Customizations o Model Office
o Addition of New Plans o ADHoc Reports *
o Conversion Activities
* At Vantage's discretion, when Easytrieve is used as
the programming language of choice, the charge will
be $250.00 per new program written.
2) Application Processing Fees -- The one-time charge per
application processed is $10.00.
9
OUT OF POCKET EXPENSES:
In addition to the fees set forth above, Vantage will bill out-of-pocket
expenses as they are incurred. Out-of-pocket expenses are expenditures for the
items such as those listed below and any other items agreed to by the parties:
1. Cost of printing blank stock and the cost of set-up and printing (including
per impression costs) confirmation statements, contract file folders,
checks, contract pages, specification pages, envelopes, proxy or voting
instruction cards, quarterly statements, separate account semi-annual
statements, individual and list bills, and any other required forms or
reports.
2. Cost of postage for mailing these forms, reports, contracts and prospectuses
to owners or agents, and cost for postage and overnight express delivery
requested by NNL for other communication to policyowners or the parties to
the Service Agreement.
3. The cost of long distance telephone calls and facsimile (Fax) transmissions
to or from policyowners. All long distance calls and facsimile transmissions
to NNL shall be made on toll-free numbers provided by NNL. Costs of any lines
installed at NNL's request for communication between the parties to this
Agreement, including CRT's and related mini-computer equipment. Costs of
telecommunication lines and equipment installed to provide primary and
backup support for on-line access to the administrative system, including
transmission capabilities between mainframes. Vantage will not cover costs
related to its unilateral installation of equipment without NNL's consent.
4. Cost of microfilm and microfiche equipment and supplies and the cost of
transferring all necessary information to microfilm and/or microfiche.
5. Normal and reasonable travel, meal and lodging expenses incurred at NNL's
request during Vantage's performance of the Service Agreement.
6. Cost of equipment (including maintenance) which is provided to or obtained by
Vantage and installed at NNL's offices in Minneapolis for purposes of the
Service Agreement. Client will be responsible for such costs including
costs under Vantage leases and maintenance agreements with third parties for
such equipment, including leases and maintenance agreements which may
extend beyond the termination or expiration of the Service Agreement.
7. Costs involved with off-site storage requested by NNL for client records,
documents, correspondence and other items.
10
<PAGE>
THIRD AMENDMENT TO ADMINISTRATIVE SERVICES AGREEMENT
THIS THIRD AMENDMENT TO ADMINISTRATIVE SERVICES AGREEMENT (the
"Amendment") dated as of November 1, 1994, is between Vantage Computer, Inc.
("VANTAGE"), and Northwestern National Life Company (the "CLIENT").
WHEREAS, VANTAGE and the CLIENT have entered into that certain
Administrative Services Agreement between CLIENT and State Street Bank and Trust
Company dated August 1, 1983, assigned to VANTAGE on May 9, 1991, amended by
Addendum dated May 6, 1991 and Second Addendum dated June 5, 1992 (the "Prior
Agreement"); and
WHEREAS, VANTAGE and CLIENT now desire to amend the Prior Agreement as
herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1 - AMENDMENT
1.1 AMENDMENT OF PRIOR AGREEMENT. The Prior Agreement is hereby amended to
include each of the following provisions set forth in this Section 1. The Prior
Agreement, as amended by this Amendment, is hereinafter referred to as the
"Agreement." In the event of a conflict between the terms of the Prior Agreement
and the terms of this Amendment, the terms of this Amendment shall control.
1.2 TERMINATION. Either party may terminate the contract for Cause (as defined
herein) upon written notice sent by certified mail to VANTAGE. CLIENT and
VANTAGE must each fulfill all lawful obligations with respect to policies
affected by the Agreement, regardless of any dispute between CLIENT and VANTAGE.
"Cause" shall mean the material breach of this Agreement by either party or the
material default by either party in any of its duties and obligations hereunder,
which breach or default remains uncured for thirty (30) days after the receipt
of written notice thereof by the breaching or defaulting party.
CLIENT shall provide thirty (30) days written notice to VANTAGE of
termination or cancellation of the agreement as required by applicable law. In
the event the Agreement is terminated for Cause, the thirty day period shall
commence on the date the notice of breach or default is delivered. In addition,
CLIENT shall provide fifteen (15) days written notice to the director of the
Department of Insurance for the State of Arizona of termination or cancellation
or any other change in the Agreement as required by Arizona law.
1.3 NOTICES TO POLICYHOLDERS. To the extent required by applicable law, VANTAGE
shall provide a written notice to the insured advising them of the identity of
and relationship among VANTAGE, the insured and CLIENT. If VANTAGE collects
premiums from the insured, VANTAGE will provide the insured with written notice
of the premium charged by CLIENT for such insurance coverage. Any policies,
certificates, booklets, termination notices or other written communications
delivered by CLIENT to VANTAGE for delivery to its policyholders shall be
delivered by VANTAGE promptly after receipt of instructions from CLIENT to do
so. VANTAGE shall not collect amounts other than premiums directly from
CLIENT's insureds.
1
1.4 BOOKS AND RECORDS. VANTAGE shall establish and maintain facilities and
procedures for the safekeeping of policy forms, check forms and facsimile
signature imprinting devices, if any, and all other documents, reports, records,
books, files, and other materials relative to this Agreement and all
transactions between VANTAGE, CLIENT, and which shall include the identity and
addresses of policyholders and certificate holders (collectively, "Books and
Records"). VANTAGE shall maintain the Books and Records at its principal
administrative office, for the duration of this Agreement and seven years or
such longer period as may be required by law thereafter, and in accordance with
prudent standards of recordkeeping and as required by applicable law.
1.5 ACCESS TO BOOKS AND RECORDS. CLIENT and any applicable insurance regulator
shall have full and free access, during ordinary business hours, to the Books
and Records, which shall be in a form usable by them. CLIENT and applicable
insurance regulator shall keep confidential any of VANTAGE'S confidential
information or trade secrets contained in the Books and Records, provided that
the applicable insurance regulator may use such information in a proceeding
instituted against CLIENT or VANTAGE.
CLIENT or its duly authorized independent auditors have the right under
this Agreement to perform on-site audits of the Books and Records directly
pertaining to the Contracts serviced by VANTAGE'S Facilities hereunder at
VANTAGE'S Facilities in accordance with reasonable procedures and at reasonable
frequencies. CLIENT shall reimburse VANTAGE for all of its costs and expenses
(including personnel time and materials) incurred in connection with such
audits.
In addition, Section 8.02 of the Addendum dated May 6, 1991, shall
remain in effect.
1.6 DESCRIPTION OF BOOKS AND RECORDS.
a. VANTAGE shall maintain detailed books and records that reflect all
administered transactions specifically in regard to premiums,
premium taxes, agent's commissions, administrator's fees,
contributions received and deposited and claims and authorized
expenses paid. To the extent described in Exhibit B, the books and
records should be kept as detailed therein. Otherwise, the
provisions below shall apply.
b. The detailed preparation, journalizing, and posting of such books
and records shall be made in accordance with the terms and
conditions of the service agreement between VANTAGE and CLIENT, and,
if applicable, in accordance with ERISA, as amended and to enable
the insurer to complete the National Association of Insurance
Commissioners' annual financial statement.
c. VANTAGE shall maintain a cash receipts register of all premiums or
contributions received. The minimum detail required in the register
shall be: date received and deposited, the mode of payment, the
policy number, name of group policyholder and names of certificate
holders and individual premium amounts and agent.
d. The description of a disbursement shall be in sufficient detail to
identify the source document substantiating the purpose of the
disbursement, and shall include all of the following: (i) the check
number; (ii) the date of disbursement; (iii) the person to whom
the disbursement was made; (iv) the amount disbursed, and (v) ledger
account number. If the amount disbursed does not agree with the
amount billed or authorized, VANTAGE shall prepare a written
record as to the application for the disbursement. If the
disbursement is for the earned administrative fee or commission, the
disbursement shall be supported by evidential matter. The evidential
matters must be referenced in the journal entry so that it may be
traced for verification.
2
e. VANTAGE shall prepare and maintain monthly financial institution
account reconciliations if such service is requested by CLIENT.
f. VANTAGE shall render accounts to the CLIENT detailing all
transactions and remit all money due to the CLIENT under the
contract to the CLIENT at least monthly. VANTAGE will periodically
render an accounting to the CLIENT detailing all transactions
performed by the VANTAGE pertaining to the business underwritten by
the insurer.
1.7 CONTINGENT FEES. VANTAGE shall not receive commissions, fees, or charges
contingent upon savings obtained in the adjustment, settlement and payment of
losses covered by the CLIENT's obligations, but VANTAGE may receive compensation
based on premiums or charges collected or the number of claims paid or
processed.
VANTAGE shall not receive from CLIENT or any covered individual
compensation or other payments except as expressly set forth in this Agreement.
1.8 ADVERTISING. VANTAGE may use only such advertising pertaining to the
business underwritten by CLIENT as has been approved by CLIENT in advance of its
use. CLIENT shall have the prior approval of the Director of the Department of
Insurance, State of Idaho, before approving advertising for use by VANTAGE.
VANTAGE shall maintain at its principal administrative office a
complete file of all advertisements, regardless of by whom written, created or
designed, which are used by VANTAGE and authorized by CLIENT with respect to
policyholders or potential policyholders of CLIENT located in Georgia, with a
notation indicating the manner and extent of distribution and the form number of
any policy advertised. Such file shall be subject to inspection by the Office of
Commissioner of Insurance of the State of Georgia. All such advertisements shall
be maintained in said file for a period of not less than five years. VANTAGE
shall file with the Commissioner of Insurance of the State of Georgia on or
before March 1 in each year, a certification executed by an authorized officer
of the administrator wherein it is stated that to the best of his knowledge,
information and belief, the advertisements disseminated by VANTAGE during the
preceding calendar year complied, or were made to comply in all respects, with
the advertising regulations of Georgia.
1.9 UNDERWRITING. The insurance policies subject to the services performed under
this Agreement are underwritten by CLIENT, and VANTAGE shall not provide any
underwriting services. CLIENT shall be responsible for determining the benefits,
premium rates, adjudication of claims, underwriting criteria and claims payment
procedures applicable to such coverage and for securing reinsurance, if any; the
rules pertaining to these matters must be provided, in writing, by CLIENT to
VANTAGE.
1.10 COPY OF WRITTEN AGREEMENT. This Agreement shall be retained as part of
the official records of both CLIENT and VANTAGE for the duration of this Agree-
ment plus seven years.
1.11 CONFIDENTIALITY OF PERSONAL INFORMATION. Information that identifies an
individual covered by a plan is confidential and all information furnished by
CLIENT to VANTAGE hereunder is confidential. During the time such information is
in VANTAGE's custody or control, VANTAGE shall take all reasonable precautions
to prevent disclosure or use of the information for a purpose unrelated to
administration of the plan. VANTAGE shall disclose such information only: in
response to a court order; for an examination conducted by the applicable
insurance regulator for an audit or investigation conducted under ERISA; to or
at the request of CLIENT; or with the written consent of the identified
individual or his or her legal representative.
3
This section shall not affect the obligations contained in Section 7.01
of the Agreement.
SECTION 2 - MISCELLANEOUS
2.1 RATIFICATIONS. The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the
Prior Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Prior Agreement are ratified and
confirmed and shall continue in full force and effect.
2.2 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to
the benefit of CLIENT and VANTAGE and their respective and permitted assigns.
2.3 CORPORATE AUTHORITY. Each party hereto represents and warrants to each other
party that it is empowered under the applicable laws and regulations and by its
charter and bylaws to enter into this Amendment and to perform the Agreement and
that all requisite corporate precedings have been taken to authorize it to enter
into this Amendment and perform the Agreement.
EXECUTED as of the date first written above.
VANTAGE:
VANTAGE COMPUTER SYSTEMS, INC.
By: /s/ Ron Nowak
Name: Ron Nowak
Title: Sr. Vice President
CLIENT:
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Michael M. Masterson
Name: Michael M. Masterson
Title: President - NWNL Sales Company
By: /s/ Peg Sierk
Name: M.C. Peg Sierk
Title: Assistant Vice President
Policy Service
<PAGE>
FOURTH AMENDMENT
Effective June 4, 1995, Northwestern National Life Insurance Company ("NWNL")
and Vantage Computer Systems, Inc. ("Vantage") hereby amend the Service
Agreement dated August 1, 1983, as amended May 9, 1991, February 6, 1992, June
5, 1992, and November 1, 1994 (the "Agreement") as follows:
The term of the Agreement is hereby extended to August 4, 1995. Both parties
shall use their best efforts to execute a final agreement before August 4, 1995,
regarding the terms of the service agreement between NWNL and Vantage.
In all other respects, the Agreement shall continue in full force and effect
until August 4, 1995.
Dated this 2nd day of June, 1995.
VANTAGE COMPUTER SYSTEMS, INC. NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ John E. Connell By: /s/ Robert C. Salipante
(authorized signature) (authorized signature)
Name: John E. Connell Name: Robert C. Salipante
Title: Senior Vice President Title: Senior Vice President
Date: June 7, 1995 Date: June 2, 1995
By: /s/ John A. Johnson
(authorized signature)
Name: John A. Johnson, FSA
Title: Vice President
Date: June 2, 1995
<PAGE>
CONTINUUM
FIFTH AMENDMENT
Effective August 4, 1995, Northwestern National Life Insurance Company ("NWNL")
and Vantage Computer Systems, Inc. ("Vantage") hereby amend the Service
Agreement dated August 1, 1983, as amended May 9, 1991, February 6, 1992, June
5, 1992, November 1, 1994 and June 2, 1995, (the "Agreement") as follows:
The term of the Agreement is hereby extended to October 31, 1995. Both parties
shall use their best efforts to execute a final agreement before October 31,
1995, regarding the terms of the service arrangement between NWNL and Vantage.
In all other respects, the Agreement shall continue in full force and effect
until October 31, 1995.
Dated this 10th day of July, 1995.
VANTAGE COMPUTER SYSTEMS, INC. NORTHWESTERN NATIONAL
LIFE INSURANCE COMPANY
By: /s/ Robert S. Maltempo By: /s/ Robert C. Salipante
Name: Robert S. Maltempo Name: Robert C. Salipante
Title: Attorney-In-Fact Title: Senior Vice President
Date: 7/31/95 Date: 7/12/95
By: /s/ John A. Johnson
Name: John A. Johnson
Title: Vice President
Date: July 14, 1995
<PAGE>
SIXTH AMENDMENT
This Amendment shall amend the Service Agreement dated August 1, 1993,
between Northwestern National Life Insurance Company ("NWNL") and Continuum
Administrative Services Corporation (formerly known as Vantage Computer Systems,
Inc.) ("CASC"), as amended (the "Agreement").
The parties hereby agree to amend the term of the Agreement to the
earliest of the following dates: (a) thirty days after NWNL gives written notice
to CASC that the migration of processing from CASC to NWNL has been completed;
(b) December 31, 1996; and (c) a date mutually agreed in writing by the
parties.
Notwithstanding anything to the contrary within the Service Agreement,
in the event of any claim against CASC relating to the Agreement or any
transaction affected by the Agreement, except where NWNL establishes that
liability is directly resulting from CASC's gross negligence or willful
misconduct, including without limitation any right of indemnification from CASC
as provided in Section 5.02 of the Agreement, CASC's liability shall be limited
as follows:
(a) With respect to claims against NWNL made by NWNL policyholders:
(i) CASC shall have no liability for the first $5,000 in loss
incurred by NWNL as a result of any single occurrence for
which CASC may otherwise be responsible under the Agreement.
(ii) CASC shall, however, be responsible for reimbursing NWNL
for any loss incurred by which exceeds the first $5,000 but
only up to an aggregate loss incurred by NWNL of $100,000 with
respect to any single occurrence for which CASC is liable as
provided in the Agreement; provided, however, that CASC's
aggregate liability for reimbursement as described under this
part (ii) for all occurrences after the effective date of this
Amendment shall not exceed an amount equal to $274 multiplied
by the number of days between the date of this Sixth Amendment
and the last day of the term of the Agreement.
(iii) NWNL shall have the right to recover any loss incurred
by it as a result of any single occurrence for which CASC is
liable as provided in the Agreement which exceeds $500,000 in
loss to NWNL, but only to the extent that it is collectible
under a valid insurance policy covering the subject matter of
this Agreement. CASC agrees to use its best efforts to
maintain the errors & omissions insurance policy (or
equivalent) it holds as of the date of this Sixth Amendment.
(b) With respect to all other liability:
(i) CASC shall have no liability for the first $5,000 in loss
incurred by NWNL as a result of any single occurrence for
which CASC may otherwise be responsible under the Agreement.
(ii) CASC shall, however, be responsible for reimbursing for
any loss incurred by NWNL which exceeds the first $5,000 but
only up to an aggregate loss incurred by NWNL of $100,000 with
respect to any single occurrence for which CASC is liable as
provided in the Agreement; provided, however, that CASC's
aggregate liability for reimbursement as described under this
part (ii) for all occurrences after the effective date of this
Amendment shall not exceed an amount equal to $274 multiplied
by the number of days between the date of this Sixth Amendment
and the last day of the term of the Agreement.
(iii) NWNL shall have the right to recover any loss incurred
by it as a result of any single occurrence for which CASC is
liable as provided in the Agreement which exceeds $500,000 in
loss to NWNL, but only to the extent that it is collectible
under a valid CASC insurance policy covering the subject
matter of this Agreement.
This Sixth Amendment is entered into as of December 6, 1995.
CONTINUUM ADMINISTRATIVE NORTHWESTERN NATIONAL
SERVICES CORPORATION LIFE INSURANCE COMPANY
By: /s/ John C. Bower By: /s/ Robert C. Salipante
Name: John C. Bower Name: Robert C. Salipante
Title: President Title: Senior Vice President
Strategic Mktg. & Technology
Date: December 26, 1995 Date: December 6, 1995
By: /s/ David F. Hill
Name: David F. Hill
Title: Senior Vice President
Individual Insurance
Date: December 6, 1995
EXHIBIT 8(b)
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 16th day of March, 1988 by
and among NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY (hereinafter the
"Company") on its own behalf and on behalf of NWNL SELECT VARIABLE ACCOUNT
Separate Account (hereinafter the "Account"), segregated asset account of the
Company, and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
-1-
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Act of 1940, as amended, (hereinafter
the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the
extent necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
annuity contracts under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on November 12, 1981, to set aside and invest assets attributable to
the aforesaid variable annuity contracts; and
-2-
WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange commission under the Securities Exchange Act of 1934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Account to fund certain of the aforesaid variable annuity contracts and
the Underwriter is authorized to sell such shares to unit investment trusts such
as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from the Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:30a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
-3-
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Sections 2.5 and 2.12 of
Article II of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
-4-
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement; or (d)
the Fund or Underwriter consents to the use of such other investment company.
The fund and the Underwriter hereby consent to the utilization of the following
registered investment companies as additional funding vehicles for the
contracts: Select High Yield Fund, Inc., Select Capital Growth Fund, Inc.,
Select Cash Management Fund, Inc., and Select Managed Fund, Inc..
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Sections 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
-5-
1.8. Issuance and transfer of the Funds' shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account prior to any issuance or sale thereof as a segregated
asset account under Section 61A.13 of the Minnesota Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
-6-
the Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endorsement or annuity insurance contracts, under applicable provisions of the
Code, and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
-7-
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Minnesota and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Minnesota to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Minnesota and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
-8-
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Minnesota and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Section 17g-(1) of the Investment
Company Act of 1940 or related provisions as may be promulgated from time to
time. The aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by Section 17g-(1) of the Investment Act of 1940 or related provisions as may be
promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.12. The Company represents and warrants it will not purchase Fund
shares with Account assets derived from the sale of Contracts to deferred
compensation plans with respect to service for state and local governments which
qualify under Section 457 of the federal Internal Revenue Code, as may be
amended, except that the company may continue purchasing shares for and
enrolling additional state and local employees under the companies existing
arrangements with state and local governments. The Company may purchase Fund
-9-
shares with Account assets derived from any sale of a Contract to any other type
of tax-advantaged employee benefit plan; PROVIDED however that such plan has no
more than 300 employees who are eligible to participate at the time of the first
such purchase hereunder by the Company of Fund shares derived from the sale
of such Contract.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
-10-
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such portfolio for which instructions have been
received:
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the Investment Company Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to vote
Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
-11-
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material (a) in which the Fund or its investment adviser or the Underwriter is
named, and (b) to be used in connection with investment companies other than the
Fund which are used as a funding vehicle for the Contracts, at least fifteen
Business Days prior to its use. No such material specified in clause 4.1(a)
shall be used if the Fund or its designee object to such use within fifteen
Business Days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
-12-
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or the Account, contemporaneously with the filing of such document
with the Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
-13-
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
-14-
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI . DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Temporary Regulation 1.817-5T, dated, September 12, 1986
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications to such
Section or Regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
-15-
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote,
-16-
the Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of the other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
-17-
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each of its Trustees and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1)
-18-
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the Registration Statement or prospectus
for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Fund for use in
the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations
-19-
contained in the Registration Statement,
prospectus or sales literature of the Fund not
supplied by the Company, or persons under its
control) or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading if such a statement or
omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company;
or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1 (c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
-20-
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
-21-
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for use
-22-
in the Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares: or
(ii) arise out of or as a result of statements or representa-
tions (other than statements or representations contained
in the Registration Statement, prospectus or sales literature
for the Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement
or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or
in good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) ; or
-23-
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
-24-
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Trustees any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement);or
-25-
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the
-26-
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party dependently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; provided, however such notice shall not be given
earlier than one year following the date of this Agreement; or
-27-
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of the
Contracts as determined by the Company, provided however, that such termination
shall apply only to the Portfolio(s) not reasonably available. Prompt notice of
the election to terminate for such cause shall be furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrative proceedings are instituted against the Company by the National
Association of Securities Dealers, Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or any other regulatory body regarding
the Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, or the purchase of the Fund shares,
provided, however, that the Fund determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its obligations under
this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or Underwriter by the
NASD, the Securities and Exchange Commission, or any state securities or
insurance department or any other regulatory body, provided, however, that the
Company determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Fund or Underwriter to perform its obligations under this Agreement; or
(e) upon requisite vote of the Contract owners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment
-28-
media. The Company will give 30 days' prior written notice to the Fund of the
date of any proposed vote to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the
Fund's shares are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(g) at the option of the Company, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of either the Fund or the Underwriter, if
(1) the Fund or the Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company has suffered a
material adverse change in its business or financial condition or is the subject
of material adverse publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon the business and
operations of either the Fund or the Underwriter, (2) the Fund or the
Underwriter shall notify the Company in writing of such determination and its
intent to terminate this Agreement, and (3) after considering the actions taken
by the Company and any other changes in circumstances since the giving of such
notice, such determination of the Fund or the Underwriter shall continue to
apply on the sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination; or
-29-
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good faith, that either
the Fund or the Underwriter has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the Company, (2) the
Company shall notify the Fund and the Underwriter in writing of such
determination and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Fund and/or the Underwriter and any other
changes in circumstances since the giving of such notice, such determination
shall continue to apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective date of termination; or
(k) at the option of either the Fund or the Underwriter, if
the Company gives the Fund and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was given there was no notice
of termination outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(k) shall be effective
forty five (45) days after the notice specified in Section 1.6(b) was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination. Furthermore,
-30-
(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section 10.1(a) , 10.1(i) ,
10.1(j) or 10.1(k) of this Agreement, such prior written notice shall be given
in advance of the effective date of termination as required by such provisions;
and
(b) In the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior written
notice shall be given at least ninety (90) days before the effective date of
termination.
10.4. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII
and the effect of such Article VII terminations shall be governed by Article VII
of this Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a Legally Required Redemption").
-31-
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
20 Washington Avenue South
Minneapolis, MN 55440
Attention: Karl Wolf, Esquire
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
-32-
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses and other
confidential information without the express written consent of the affected
party until such time as it may come into the public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiring relating to this Agreement or the
transactions contemplated hereby.
-33-
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable insurance
product operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of Colorado, Maryland,
Massachusetts, Michigan or Pennsylvania, the Underwriter shall indemnify and
reimburse the Company for any out of pocket expenses and actual damages the
Company has incurred as a result of any such proceeding; provided however that
the provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
-34-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
By its authorized officer,
NORTHWESTERN NATIONAL LIFE INSURANCE
COMPANY
SEAL By: /s/ Michael J. Dubes
Title: Senior Vice President, Ind. Ins.
Date:
Company:
By its authorized officer,
SEAL By: /s/ Michael S. Fischer
Title: 2nd V.P. & Assistant General
Counsel--Individual
Date:
-35-
Fund:
By its authorized officer,
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
SEAL By: /s/ John L. O'Brien
Title: Senior Vice President
Date: 4-11-88
<PAGE>
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
SEAL By: /s/ John L. O'Brien
Title: President
Date: 4-11-88
-36-
<PAGE>
SCHEDULE A
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
-37-
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting (the "Record Date") to facilitate the
establishment of tabulation procedures. At this time the Underwriter
will inform the Company of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units/shares which are attributed to each contractowner/
policyholder (the "Customer") as of the Record Date. Allowance should
should be made for account adjustments made after this date that could
affect the status of the Customers' accounts as of the Record Date.
Note: The number of voting instruction cards is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to Fidelity, as
soon as possible, but no later than two weeks after the Record
Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
-1-
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards
with the name, address, and number of units/shares for each customer.
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
5. Company will, at its expense, print account information on the Cards.
6. Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of shares/units (depends upon tabula-
tion process used by the computer system, i.e., whether or not
system knows number of shares held just by "reading" the
account number)
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
Note: When the Cards are printed by the Fund, each Card is
numbered individually to guard against potential
Card/vote duplication.
7. During this time, the Legal Department of the Underwriter or its
affiliate ("Fidelity Legal") will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided
and paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card
b. proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
-2-
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
8. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
9. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended,
but not necessary, to receive a proper response percentage.)
Solicitation time is calculated as days from (but NOT
including) the meeting, counting backwards.
** If the Customers were actually the shareholders, at least 50%
of the outstanding shares must be represented and 66 2/3% of
that 50% must have voted affirmatively on the proposals to
have an effective vote. HOWEVER, since the Company is the
shareholder, the Customers' votes will (except in certain
limited circumstances) be used to dictate how the Company will
vote.
10. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival into vote
categories of all yes, no, or mixed replies, and to begin data entry.
* Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
-3-
11. Signatures on Card checked against legal name on account registration
which was printed on the Card.
* This verifies whether an individual has signed correctly for
self with the same name as is on the account registration.
For Example:
If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
12. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g., mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
13. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may be calculated. If
the initial estimates and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a recount.
14. The actual tabulation of votes is done in units and in shares. (It is
very important that the Fund receives the tabulations stated in terms
of a percentage and the number of SHARES.)
-4-
15. Final tabulation in shares is verbally given by the Company to the
Legal Department on the morning of the meeting by 10:00 a.m. Boston
time.
16. Vote is verified by the Company and is sent to Fidelity Legal.
17. Company then votes its proxy in accordance with the votes received from
the Customers the morning of the meeting (except in limited
circumstances as may be otherwise required by law). A letter
documenting the Company's vote is supplied by Fidelity Legal and is
sent to officer of company for his signature. This letter is normally
sent after the meeting has taken place.
18. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity will
be permitted reasonable access to such Cards.
19. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
20. During tabulation procedures, the Fund and Company determine if a
resolicitation is required and what form that resolicitation should
take, whether it should be by a mailing, or by recorded telephone line.
A resolicitation is considered when the vote response is slow and it
appears that not enough votes would be received by the meeting date.
The meeting could be adjourned to leave enough time for the
resolicitation.
A determination is made by the Company and the Fund to find the most
cost effective candidates for resolicitation. These are Customers who
have not yet voted, but whose balances are large enough to bring in the
required vote with minimal costs.
-5-
a. By mail: Fidelity Legal amends the voting instruction cards,
if necessary, and writes a resolicitation letter. The Fund
supplies these to the Company. The Company generates a mailing
list etc., as per step 2 onward.
b. By phone: Rarely used. This must be done on a recorded line.
Fidelity Legal and the Fund will supply the necessary
procedures and script if a phone resolicitation were to be
required.
-6-
<PAGE>
AMENDMENT NO. 1
This Amendment dated as of the 1st day of June 1989, to the
Participation Agreement dated as of August 18, 1987 (the "Agreement") among
Northwestern National Life Insurance Company (the "Company"), Fidelity
Distributors Corporation (the "Underwriter") and Variable Insurance Products
Fund (the "Fund").
In consideration of the mutual promises herein, the Company, the
Underwriter and the Fund hereby agree to amend the Agreement as follows:
1. By deleting Section 2.12 in its entirety and by substituting
the following therefor:
"2.12. The Company represents and warrants that it will not
purchase Fund shares with Account assets derived from the
sale of Contracts to deferred compensation plans with respect
to service for state and local governments which qualify
under Section 457 of the federal Internal Revenue Code, as
may be amended. The Company may purchase Fund shares with
Account assets derived from any sale of a Contract to any
other type of tax-advantaged employee benefit plan; provided
however that such plan has no more than 500 employees who are
eligible to participate at the time of the first such
purchase hereunder by the Company of Fund shares derived from
the sale of such Contract."
2. By attaching to and making a part of the Agreement a copy of
this Amendment No. 1.
3. The Agreement, as amended hereby, is and shall remain in full
force and effect.
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of the date first written above.
Northwestern National Life Insurance Company
By: /s/ John A. Johnson
Title: Vice President and Actuary
Fidelity Distributors Corporation
By: /s/ Roger Shawn
Title: President
Variable Insurance Products Fund
By: /s/ J. Gary Burkhead
Title: Senior Vice President
<PAGE>
AMENDMENT NO. 2
Amendment to the Participation Agreement among Northwestern National
Life Insurance Company (the "Company"), Variable Insurance Products Fund (the
"Fund") and Fidelity Distributors Corporation (the "Underwriter") dated March
16, 1988 (the "Agreement").
WHEREAS, each of the parties is desirous of expanding the ability of
Company to participate in the qualified markets, the Company, the Underwriter
and the Fund hereby agree to amend the Agreement by deleting from Section 1.4
the reference to Section 2.12 and by deleting Section 2.12 in its entirety.
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of November 1, 1991.
NORTHWESTERN NATIONAL FIDELITY DISTRIBUTORS
LIFE INSURANCE COMPANY CORPORATION
By: /s/ John A. Johnson By: /s/ Roger T. Servison
Name: John A. Johnson Name: Roger T. Servison
Title: Vice President and Actuary Title: President
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
<PAGE>
AMENDMENT NO. 3
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund (the "Fund")
and Fidelity Distributors Corporation (the "Underwriter") dated March 16, 1988
(the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule A of the Agreement by inserting the following in its entirety:
2. Flexible Premium Variable Life Policy Contract Form No. 84-705,
and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of
January ___, 1993.
Northwestern National
Life Insurance Company
By: /s/ Michael S. Fischer
Name:
Title:
Variable Insurance Products Fund
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Roger T. Servison
Name: Roger T. Servison
Title: President
<PAGE>
SCHEDULE A
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form No. 84-705, and the
state exceptions.
<PAGE>
AMENDMENT NO. 4
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund (the "Fund")
and Fidelity Distributors Corporation (the "Underwriter") dated March 16, 1988
(the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule A of the Agreement by inserting the following in its entirety:
3. Flexible Premium Variable Life Policy Contract Form No. 84-795,
and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of
June ___, 1993.
Northwestern National Life
Insurance Company
By: /s/ Michael S. Fischer By: /s/ John Johnson
Name: Michael S. Fischer Name: John Johnson
Title: Second Vice President Title: Vice President and Actuary
and Asst. General Counsel
Variable Insurance Products Fund
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Kurt Lange
Name: Kurt Lange
Title: President
<PAGE>
SCHEDULE A
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form No. 84-705, and the
state exceptions.
3. Flexible Premium Variable Life Policy Contract Form No. 84-795, and the
state exceptions.
<PAGE>
AMENDMENT NO. 5
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund (the "Fund")
and Fidelity Distributors Corporation (the "Underwriter") dated March 16, 1988
(the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule A of the Agreement by inserting the following in its entirety:
5. Flexible Premium Individual Deferred Retirement Annuity
Contract Form No. 84-420 and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of August
30, 1993.
Northwestern National Life
Insurance Company
By: /s/ Michael S. Fischer
Name: Michael S. Fischer
Title: Second Vice President and
Asst. General Counsel
By: /s/ John A. Johnson
Name: John A. Johnson
Title: Vice President and Actuary/
Individual Insurance
Variable Insurance Products Fund
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Kurt A. Lange
Name: Kurt A. Lange
Title: President
<PAGE>
SCHEDULE A
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium, etc. (see Schedule B).
3. Flexible Premium Variable Life Insurance Policy Contract Form No.
84-705, and the state exceptions.
4. Flexible Premium Variable Life Insurance Policy Contract Form No.
84-795, and the state exceptions.
5. Flexible Premium Individual Deferred Retirement Annuity Contract Form
No. 84-420, and the state exceptions.
<PAGE>
SCHEDULE B
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form Number:
83-300, 83-301, 83-302, 83-303, 83-304, 83-305, 83-306, 83-307, 83-187
or 83-309.
-39-
<PAGE>
AMENDMENT NO. 6 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
WHEREAS, NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY (the "Company"), VARIABLE
INSURANCE PRODUCTS FUND (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION have
previously entered into a Participation Agreement (the "Agreement") containing
certain arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost,
such number of prospectuses and Statements of Additional Information as are
actually distributed to the Company's then-existing variable life and/or
variable annuity contract owners.
2. If the Company takes camera-ready film or computer diskettes
containing the Fund's prospectus and/or Statement of Additional Information
in lieu of receiving hard copies of these documents, the Fund will reimburse
the Company in an amount computed as follows. The number of prospectuses and
Statements of Additional Information actually distributed to existing contract
owners by the Company will be multiplied by the Fund's actual per-unit cost of
printing the documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify
that the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December
1994.
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By: /s/ John Johnson By: /s/ David F. Hill
Name: John Johnson Name: David F. Hill
Title: Vice President and Title: Senior Vice President,
Actuary Individual Insurance
Division
VARIABLE INSURANCE PRODUCTS FIDELITY DISTRIBUTORS
FUND CORPORATION
By: /s/ J. Gary Burkhead By: /s/ Kurt A. Lange
Name: J. Gary Burkhead Name: Kurt A. Lange
Title: Senior Vice President Title: President
<PAGE>
AMENDMENT NO. 7 TO PARTICIPATION AGREEMENT
Amendment No. 7 to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), NWNL Select Variable Account, Variable
Insurance Products Fund (the "Fund") and Fidelity Distributors Corporation (the
"Underwriter") dated March 16, 1988 (the "Agreement").
WHEREAS, each of the parties to the Agreement desires to expand the
ability of the Company to develop and market Variable Life Insurance Policies
and Variable Annuity Contracts which have separate accounts using the Fund as an
investment vehicle.
NOW, THEREFORE, the parties hereto agree to amend the Agreement as
follows:
1. The first paragraph on page 1 of the Agreement is amended by
inserting in the fourth line of said paragraph after the words
"VARIABLE ACCOUNT" the following words:
"and the NORTHSTAR/NWNL VARIABLE ACCOUNT."
2. Schedule A of the Agreement is amended by inserting in its
entirety the following:
"6. Flexible Premium Individual Deferred Retirement
Annuity Contracts Form Number 84-420 and state
exceptions."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative(s).
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Michael S. Fischer
Its: Second Vice President and
Assistant General Counsel
Date: April 4, 1995
By: /s/ John A. Johnson
Its: Vice President and Actuary
Date: April 4, 1995
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ J. Gary Burkhead
Its: Senior Vice President
Date: 4/24/95
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kurt A. Lange
Its: President
Date: 4/10/95
EXHIBIT 8(c)
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 1st day of January,
1991 by and among NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, (hereinafter the
"Company"), a Minnesota corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
-1-
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Act of 1940, as amended, (hereinafter
the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
-2-
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of
-3-
this Section 1.1, the Company shall be the designee of the Fund for receipt of
such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
9:30 a.m. Boston time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing
-4-
provisions substantially the same as Articles I, III, V, VII and Sections 2.5
and 2.12 of Article II of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the
-5-
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such fund shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
-6-
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 61A.13 of the Minnesota Insurance Code and has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Minnesota and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order
-7-
to effect the continuous offering of its shares. The Fund shall register and
qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such quali-
fication (under Subchapter M or any successor or similar provision) and that it
will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
-8-
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Minnesota and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Minnesota to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the state of Minnesota and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Minnesota and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
-9-
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Fund, in an amount not less than the minimal coverage as required
currently by entities subject to the requirements of Rule 17g-1 of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.12. The Company represents and warrants that it will not purchase
Fund shares with Account assets derived from the sale of Contracts to deferred
compensation plans with respect to service for state and local governments which
qualify under Section 457 of the federal Internal Revenue Code, as may be
amended. The Company may purchase Fund shares with Account assets derived from
any sale of a Contract to any other type of tax-advantaged employee benefit
plan; PROVIDED however that such plan has no more than 500 employees who are
eligible to participate at the time of the first such purchase hereunder by the
Company of Fund shares derived from the sale of such Contract.
-10-
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company
may reasonably request. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
as set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Contracts and the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such
-11-
portfolio for which instructions have been received:
so long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940
Act to require pass-through voting privileges for
variable contract owners. The Company reserves the
right to vote Fund shares held in any segregated
asset account in its own right, to the extent
permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their
separate accounts participating in the Fund
calculates voting privileges in a manner consistent
with the standards set forth on Schedule B attached
hereto and incorporated herein by this reference,
which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
-12-
4. 2. The Company shall not give any information or make any repre-
sentations or statements on behalf of the Fund or representations or statements
on behalf of the Fund or concerning the Fund in connection with the sale of
the Contracts other than the information or representations contained in the
registration statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to time, or
in reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the designee of
either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such
use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
-13-
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statement of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statement of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the
Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or
-14-
all agents or employees, and registration statements, prospectuses, Statements
of Additional Information, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter
in writing and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter or other resources available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
-15-
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817 (h) of the
Code and Treasury Regulation Section 1.817-5, relating to the diversification
requirements for variable annuity, endorsement, or life insurance contracts and
any amendments or other modifications to such Section or Regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a
-16-
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
-17-
affected contract owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company
in writing that it has determined that such decision has created an irreconcil-
able material conflict; provided, however, that such withdrawal and termina-
tion shall be limited to the extent required by the foregoing material irrecon-
cilable conflict as determined by a majority of the disinterested members of the
Board. Until the end of the foregoing six month period, the Underwriter and Fund
shall continue to accept and
-18-
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determine that any
proposed action does not adequately remedy any irreconcilable material conflict,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b)
-19-
Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue
in effect only to the extent that terms and conditions substantially identical
to such Sections are contained in such Rule(s) so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each of trustees of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
-20-
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
or persons under its control, with respect to the sale or distribution
of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company: or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
-21-
(v) arise out of or result from any material breach of any representa-
tion and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing within
a reasonable time after the summons or other first legal process giving informa-
tion of the nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification
-22-
provision. In case any such action is brought against the Indemnified Parties,
the Company shall be entitled to participate, at its own expense, in the defense
of such action. The Company also shall be entitled to the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or
-23-
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter or
Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Fund shares; or
-24-
(iii) arise out of any untrue statement or all alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any representa-
tion and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Underwriter; as limited by and in accordance with the provisions
of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
-25-
8.2 (c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
-26-
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representa-
tion and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the
Fund; as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or
-27-
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or each
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this
-28-
Agreement, the issuance or sale of the Contracts, with respect to the operation
of either Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance
written notice to the other parties; provided,
however such notice shall not be given earlier than
one year following the date of this Agreement; or
(b) at the option of the Company to the extent that
shares of Portfolios are not reasonably available to
meet the requirements of the Contracts as determined
by the Company, provided however, that such
termination shall apply only to the Portfolio(s) not
reasonably available. Prompt notice of
-29-
the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrative proceedings are instituted against the
Company by the National Association of Securities
Dealers, Inc.("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the
Contracts, with respect to the operation of any
Account, or the purchase of the Fund shares,
provided, however, that the Fund determines in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter by the NASD, the Securities and
Exchange Commission, or any state securities or
insurance department or any other regulatory body,
provided, however, that the Company determines in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this
Agreement; or
(e) with respect to any Account, upon requisite vote of
the Contract having an interest in such Account (or
any subaccount) to substitute the shares of another
investment
-30-
company for the corresponding Portfolio shares of
the Fund in accordance with the terms of the
Contracts for which those Portfolio shares had
been selected to serve as the underlying investment
media. The Company will give 30 days' prior written
notice to the Fund of the date of any proposed vote
to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the
Fund's shares are not registered, issued or sold in
accordance with applicable state and/or federal law
or such law precludes the use of such shares as the
underlying investment media of the Contracts issued
or to be issued by the Company; or
(g) at the option of the Company, if the Fund ceases to
qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or
similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to
meet the diversification requirements specified in
Article VI hereof; or
(i) at the option of either the Fund or the Underwriter,
if (1) the Fund or the Underwriter, respectively,
shall determine, in their sole judgment reasonably
exercised in good faith, that the Company has
suffered a material adverse change in its business or
financial condition or is the subject of material
adverse publicity and such material adverse change or
material adverse publicity will have a material
adverse impact upon the business and operations of
either the Fund or the
-31-
Underwriter, (2) the Fund or the Underwriter shall
notify the Company in writing of such determination
and its intent to terminate this Agreement, and (3)
after considering the actions taken by the Company
and any other changes in circumstances since the
giving of such notice, such determination of the Fund
or the Underwriter shall continue to apply on the
sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective
date of termination; or
(j) at the option of the Company, if (1) the Company
shall determine, in its sole judgment reasonably
exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in
its business or financial condition or is the subject
of material adverse publicity and such material
adverse change or material adverse publicity will
have a material adverse impact upon the business and
operations of the Company, (2) the Company shall
notify the Fund and the Underwriter in writing of
such determination and its intent to terminate the
Agreement, and (3) after considering the actions
taken by the Fund and/or the Underwriter and any
other changes in circumstances since the giving of
such notice, such determination shall continue to
apply on the sixtieth (60th) day following the giving
of such notice, which sixtieth day shall be the
effective date of termination; or
(k) at the option of either the Fund or the Underwriter,
if the Company gives the Fund and the Underwriter the
written
-32-
notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of
termination outstanding under any other provision of
this Agreement; provided, however any termination
under this Section 10.1(k) shall be effective forty
five (45) days after the notice specified in Section
1.6(b) was given.
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination. Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VII, or the provision of
Section 10.1(a), 10.1(i), 10.1(j) or 10.1(k) of this
Agreement, such prior written notice shall be given
in advance of the effective date of termination as
required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this
Agreement, such prior written notice shall be given
at least ninety (90) days before the effective date
of termination.
10.4. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant
-33-
to the terms and conditions of this Agreement, for all Contracts in effect on
the effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Underwriter)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
-34-
certified mail to the other Party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
20 Washington Avenue South
Minneapolis, Minnesota 55440
Attention: Michael S. Fischer, Esq.
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or
-35-
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company are
being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland or Michigan, the Underwriter shall indemnify and reimburse the Company
for any out of pocket expenses and actual damages the Company has incurred as a
result of any such proceeding; provided however that the provisions of Section
8.2(b) of this and 8.2(c) shall apply to such indemnification and
-36-
reimbursement obligation. Such indemnification and reimbursement obligation
shall be in addition to any other indemnification and reimbursement obligations
of the Fund and/or the Underwriter under this Agreement.
12.8. The rights, remedies, and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
<PAGE>
Company:
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By its authorized officer,
SEAL By: /s/ Michael Keller By: /s/ Michael Masterson
Title: 2nd VP-Ind. Marketing Title: Vice President-Individual
Date: January 7, 1991 Insurance
Date: January 7, 1991
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ J. Gary Burkhead
SEAL Title: Senior Vice President
Date: 4/30/91
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
SEAL By: /s/ R. A. Lawson
Title: President
Date: 4/30/91
-37-
<PAGE>
SCHEDULE A
ACCOUNTS
Name of Account Date of Resolution of Company's Board
which Established the Account
NWNL Select Variable Account 11/12/81
Select*Life Variable Account 10/11/84
-38-
<PAGE>
SCHEDULE B
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form Number: 83-300,
83-301, 83-302, 83-303, 83-304, 83-305, 83-306, 83-307, 83-187 or
83-309.
-39-
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of the
Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to
call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
B-1
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. one proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
B-2
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g., mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity
Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provided a standard from for each
Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
B-3
<PAGE>
AMENDMENT NO. 1
Amendment to the Participation Agreement among Northwestern National
Life Insurance Company (the "Company"), Variable Insurance Products Fund II
(the "Fund") and Fidelity Distributors Corporation (the "Underwriter") dated
January 1, 1991 (the "Agreement").
WHEREAS, each of the parties is desirous of expanding the ability of
Company to participate in the qualified markets, the Company, the Underwriter
and the Fund hereby agree to amend the Agreement by deleting from Section 1.4
the reference to Section 2.12 and by deleting Section 2.12 in its entirety.
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of November 1, 1991.
NORTHWESTERN NATIONAL FIDELITY DISTRIBUTORS
LIFE INSURANCE COMPANY CORPORATION
By: /s/ John A. Johnson By: /s/ Roger T. Servison
Name: John A. Johnson Name: Roger T. Servison
Title: Vice President and Actuary Title: President
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
<PAGE>
AMENDMENT NO. 2
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund II (the
"Fund") and Fidelity Distributors Corporation (the "Underwriter") dated
January 1, 1991 (the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule B of the Agreement by inserting the following in its entirety:
2. Flexible Premium Variable Life Policy Contract Form No. 84-705,
and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of
January ____, 1993.
Northwestern National
Life Insurance Company
By: /s/ Michael S. Fischer
Name: Michael S. Fischer
Title: Second Vice President and
Assistant General Counsel
Variable Insurance Products Fund II
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Roger T. Servison
Name: Roger T. Servison
Title: President
<PAGE>
SCHEDULE B
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form Number: 83-300,
83-301, 83-302, 83-303, 83-304, 83-305, 83-306, 83-307, 83-187, or
83-309.
3. Flexible Premium Variable Life Policy Contract Form Number: 84-705, and
the state exceptions.
<PAGE>
AMENDMENT NO. 3
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund II (the
"Fund") and Fidelity Distributors Corporation (the "Underwriter") dated
January 1, 1991 (the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule B of the Agreement by inserting the following in its entirety:
3. Flexible Premium Variable Life Policy Contract Form No. 84-795,
and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of June
___, 1993.
Northwestern National Life
Insurance Company
By: /s/ Michael S. Fischer By: /s/ John Johnson
Name: Michael S. Fischer Name: John Johnson
Title: Second Vice President Title: Vice President and Actuary
and Asst. General Counsel
Variable Insurance Products Fund II
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Kurt Lange
Name: Kurt Lange
Title: President
<PAGE>
SCHEDULE B
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Policy Contract Form No. 83-300,
83-301, 83-302, 83-303, 83-304, 83-305, 83-306, 83-307, 83-187, OR
83-309
3. Flexible Premium Variable Life Policy Contract Form No. 84-705, and the
state exceptions.
4. Flexible Premium Variable Life Policy Contract Form No. 84-795, and the
state exceptions.
<PAGE>
AMENDMENT NO. 4
Amendment to the Participation Agreement among Northwestern National Life
Insurance Company (the "Company"), Variable Insurance Products Fund II (the
"Fund") and Fidelity Distributors Corporation (the "Underwriter") dated
January 1, 1991 (the "Agreement").
WHEREAS each of the parties desire to expand the ability of the Company to
develop and market Variable Life Insurance Policies and Variable Annuity
Contracts which have separate accounts using the Fund as the investment vehicle
for said separate accounts. The Company, Underwriter and Fund hereby agree to
amend Schedule B of the Agreement by inserting the following in its entirety:
5. Flexible Premium Individual Deferred Retirement Annuity
Contract Form No. 84-420, and the state exceptions.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative as of August
30, 1993.
Northwestern National Life
Insurance Company
By: /s/ Michael S. Fischer
Name: Michael S. Fischer
Title: Second Vice President and
Asst. General Counsel
By: /s/ John A. Johnson
Name: John A. Johnson
Title: Vice President and Actuary/
Individual Insurance
Variable Insurance Products Fund
By: /s/ J. Gary Burkhead
Name: J. Gary Burkhead
Title: Senior Vice President
Fidelity Distributors Corporation
By: /s/ Kurt A. Lange
Name: Kurt A. Lange
Title: President
<PAGE>
SCHEDULE B
CONTRACTS
1. Flexible Premium Individual Deferred Retirement Annuity Contract Form
Number: 81-870 and 81-873.
2. Flexible Premium Variable Life Insurance Policy Contract Form No.
83-300, 83-301, 83-302, 83-303, 83-304, 83-305, 83-306, 83-307, 83-187,
OR 83-309.
3. Flexible Premium Variable Life Insurance Policy Contract Form No.
84-705, and the state exceptions.
4. Flexible Premium Variable Life Insurance Policy Contract Form No.
84-795, and the state exceptions.
5. Flexible Premium Individual Deferred Retirement Annuity Contract Form
No. 84-420, and the state exceptions.
<PAGE>
AMENDMENT NO. 5 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY DISTRIBUTORS CORPORATION
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
WHEREAS, NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY (the "Company"),
VARIABLE INSURANCE PRODUCTS FUND II(the "Fund") and FIDELITY DISTRIBUTORS CORPO-
RATION have previously entered into a Participation Agreement (the "Agreement")
containing certain arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost, such
number of prospectuses and Statements of Additional Information as are actually
distributed to the Company's then-existing variable life and/or variable annuity
contract owners.
2. If the Company takes camera-ready film or computer diskettes containing the
Fund's prospectus and/or Statements of Additional Information in lieu of
receiving hard copies of these documents, the Fund will reimburse the Company in
an amount computed as follows. The number of prospectuses and Statements of
Additional Information actually distributed to existing contract owners by the
Company will be multiplied by the Fund's actual per-unit cost of printing the
documents.
3. The Company agrees to provide the Fund or its designee with such information
as may be reasonably requested by the Fund in order to verify that the
prospectuses and Statements of Additional Information provided to the Company,
or the reimbursement made to the Company, are or have been used only for the
purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December,
1994.
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By: /s/ John Johnson By: /s/ David F. Hill
Name: John Johnson Name: David F. Hill
Title: Vice President and Title: Senior Vice President,
Actuary Individual Insurance
Division
VARIABLE INSURANCE PRODUCTS FIDELITY DISTRIBUTORS
FUND II CORPORATION
By: /s/ J. Gary Burkhead By: /s/ Kurt A. Lange
Name: J. Gary Burkhead Name: Kurt A. Lange
Title: Senior Vice President Title: President
<PAGE>
AMENDMENT NO. 6 TO PARTICIPATION AGREEMENT
Amendment No. 6 dated April 14, 1995 to the Participation Agreement among
Northwestern National Life Insurance Company (the "Company"), Variable
Insurance Products Fund II (the "Fund") and Fidelity Distributors Corporation
(the "Underwriter") dated January 1, 1995 (the "Agreement").
WHEREAS, each of the parties to the Agreement desires to expand the
ability of the Company to develop and market Variable Life Insurance Policies
and Variable Annuity Contracts which have separate accounts using the Fund as an
investment vehicle.
NOW, THEREFORE, the parties hereto agree to amend the Agreement as
follows:
1. Schedule A of the Agreement is amended by inserting the
following in its entirety:
"Northstar/NWNL Variable Account 11/12/92"
2. Schedule B to the Agreement is amended by adding in its
entirety the following:
" Flexible Premium Individual Deferred Retirement
Annuity Contracts Form Number 84-420 and state
exceptions."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative(s).
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Michael S. Fischer
Its: Second Vice President and
Assistant General Counsel
Date: April 4, 1995
By: /s/ John A. Johnson
Its: Vice President and Actuary
Date: April 4, 1995
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ J. Gary Burkhead
Its: Sr. Vice President
Date: 4/24/95
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kurt A. Lange
Its: President
Date: 4/10/95
-2-
[LOGO] Northwestern National Life
A Reliastar Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
April 19, 1996
Northwestern National Life
Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of individual variable annuity contracts (the "Contracts") and
interests in Northstar/NWNL Variable Account (the "Separate Account"), I have
examined documents relating to the establishment of the Separate Account by the
Board of Directors of ReliaStar Financial Corp. (the "Company") as a separate
account for assets applicable to variable annuity contracts, pursuant to
Minnesota Statutes Sections 61A.13 to 61A.21, as amended by Post-Effective
Amendment No. 2 thereto, File No. 33-73058 and the Registration Statement, on
Form N-4 (the "Registration Statement"), and I have examined such other
documents and have reviewed such matters of law as I deemed necessary for this
opinion, and I advise you that in my opinion:
1. The Separate Account is a separate account of the Company duly created
and validly existing pursuant to the laws of the State of Minnesota.
2. The contracts, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon compliance with
applicable local law, will be legal and binding obligations of the Company in
accordance with their respective terms.
3. The portion of the assets held in the Separate Account equal to
reserves and other contract liabilities with respect to the Separate Account are
not chargeable with liabilities arising out of any other business the Company
may conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Opinions" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Very truly yours,
/s/ James E. Nelson
James E. Nelson
Counsel
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
Northstar/NWNL Variable Account
We consent to the use in this Post-Effective Amendment No. 2 and No. 3 to
Registration Statement on Form N-4 (File No. 33-73058) of Northstar/NWNL
Variable Account filed under the Securities Act of 1933 and the Investment
Company Act of 1940, respectively, of our report dated February 2, 1996 on the
audit of the financial statements of Northstar/NWNL Variable Account as of
December 31, 1995 and for the period May 6, 1994 to December 31, 1994, and our
report dated February 1, 1996, on the audit of the consolidated financial
statements of Northwestern National Life Insurance Company and subsidiaries as
of and for the years ended December 31, 1995 and 1994, appearing in the
Statement of Additional information of such Registration Statement, and to the
references to us under the heading "Financial Statements and Experts" appearing
in the Prospectus and under the headings "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information, all of which are part of
such Registration Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 19, 1996
EXHIBIT 13
DESCRIPTION OF RETURNS BASED ON UNDERLYING FUND PERFORMANCE
The company may at times quote average annual returns for periods prior to the
Sub-Accounts commenced operations. Such performance information for the
Sub-Accounts will be calculated based on the performance of the Portfolios and
the assumption that the Sub-Accounts were in existence for the same periods as
those indicated for the portfolios, with the level of Contract charges currently
in effect. The following provides the details in providing such returns.
AVERAGE ANNUAL TOTAL RETURNS
The company may at times quote average annual returns that reflect net recurring
charges and any applicable surrender charges. The following is the formula used
to provide such returns.
TR = ((1 + TRsa - SC)^(1/N)) - 1
Where:
TR = The average annual total return of the Sub-Account net of recurring
charges and any applicable surrender charge for the period.
TRf = Total return of the fund for the period, provided by the investment
company.
TRsa = Total return of the fund for the period, provided by the investment
company, adjusted for the annual contract charge (AP) and separate
account annual expenses (AE) or the following formula:
((1 + TRf) * (((1 - AE) * (1 - AP)) ^ N)) - 1.
SC = Applicable surrender charge at the end of period.
AP = Annual Contract Charge as an equivalent annual percent charge (AP)
based on the average net assets in the Variable Account and Fixed
Account during the preceeding year. (ie Northstar NWNL Variable
Annuity would be .052%)
AE = Total Separate Account Annual Expenses consisting of the mortality and
expense risk premium and the administration charge. (ie Northstar NWNL
Variable Annuity would be 1.40%)
N = The number of years (N) in the period.
OTHER AVERAGE ANNUAL RETURNS
In addition, the company may at times quote average annual returns that do not
reflect the Surrender Charge. These are calculated in exactly the same way as
the average annual total returns described above, except that the surrender
charge is ignored as the following formula demonstrates.
TR = ((1 + TRsa)^(1/N)) - 1
Where:
TR = The average annual total return of the Sub-Account net of recurring
charges for the period.
<PAGE>
NORTHSTAR ANNUITY CALCULATION OF FUND YIELDS
CURRENT & EFFECTIVE YIELD (NET OF ALL CONTRACT FEES) DECEMBER, 1995
UNIT VALUE UNIT VALUE NET 7 DAY CURRENT EFFECTIVE
FUND 12/22/95 12/29/95 CHANGE RETURN YIELD YIELD
FMM $10.280701 $10.288920 $0.008116 0.0789% 4.12% 4.20%
Note: Net Change = 12/31 Unit Value - 12/24 Unit Value - Hypothetical Weekly Fee
Current Yield = 7 Day Return x 365/7
Effective Yield = [(7 Day Return +1)^(365/7)] - 1
CALCULATION OF AVERAGE WEEKLY CONTRACT FEE PER MONEY MARKET UNIT DECEMBER, 1995
ANNUAL FEE STATED AS UNIT VALUE
AS PERCENT OF A WEEKLY 12/22/95 HYPOTHETICAL
AVG INVESTED $ FEE (INVESTED $) WEEKLY FEE
0.052% 0.0010% $10.280701 $0.000103
<PAGE>
NORTHSTAR ANNUITY CALCULATION OF FUND YIELDS
STANDARDIZED YIELD FOR BOND FUNDS (NET OF ALL FEES) DECEMBER, 1995
STANDARDIZED
FUND "a" "b" "c" "d" YIELD
NMB $2,601.15 $491.04 37,770.925 $11.435577 5.93%
NHY $12,583.74 $1,902.70 150,160.350 $11.567470 7.49%
Note: Yield = 2 x [ (Y+1)^ 6 - 1 ] where Y = (a - b)/(c x d)
"a" is the net investment income per share (provided by Northstar) multiplied by
the number of NWNL shares invested in the Fund as of 12/31/95
"b" is the accrued expenses, i.e. December's mortality and expense charges plus
a hypothetical fee representing the effect of the Annual Contract Fee (see
below)
"c" is the average number of accumulation units (see below)
"d" is the 12/31/95 Unit Value
TAKING INTO ACCOUNT THE EFFECT OF THE $35 ANNUAL CONTRACT FEE BY CALCULATING A
HYPOTHETICAL DECEMBER FEE (INCLUDED IN "B" ABOVE)
ANNUAL FEE STATED AS AVG DOLLARS HYPOTHETICAL
AS PERCENT OF A MONTHLY INVESTED IN DECEMBER
AVG INVESTED $ FEE DECEMBER FEE
NMB 0.052% 0.0043% $428,664 $18.58
NHY 0.052% 0.0043% $1,717,252 $74.41
CALCULATION OF AVERAGE # UNITS OUTSTANDING FOR DECEMBER, 1995 ("C" ABOVE)
11/30/95 12/29/95 AVERAGE
FUND # UNITS # UNITS # UNIT O/S
NMB 37,837.931 37,703.918 37,770.925
NHY 151,028.310 149,292.389 150,160.350
Note: Average # Units Outstanding = (Ending # Units O/S + Beginning # Units
O/S)/2
UNIT VALUE UNIT VALUE
FUND 11/30/95 12/29/95
NMB 11.262817 11.435577
NHY 11.306286 11.567470
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: NORTHSTAR INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/06/94 $1,000.00 $10.000000 100.000
12/30/94 $10.110064 100.000 $1,011.01 $1,010.49 99.949
12/29/95 $12.091637 99.949 $1,208.54 $1,208.02 99.906
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,208.02 $1,145.02
Total Return Incep to Date 20.80% 14.50%
Average Annual Return 12.10% 8.53%
------------------------------------------------------------------
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
12/30/94 $1,000.00 $10.110064 98.911
12/29/95 $12.091637 98.911 $1,196.00 $1,195.48 98.868
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,195.48 $1,132.48
Total Return One Year 19.55% 13.25%
Average Annual Return 19.55% 13.25%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: NORTHSTAR GROWTH FUND
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/06/94 $1,000.00 $10.000000 100.000
12/30/94 $10.253437 100.000 $1,025.34 $1,024.82 99.949
12/29/95 $12.607218 99.949 $1,260.08 $1,259.56 99.908
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,259.56 $1,196.56
Total Return Incep to Date 25.96% 19.66%
Average Annual Return 14.96% 11.45%
------------------------------------------------------------------
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
12/30/94 $1,000.00 $10.253437 97.528
12/29/95 $12.607218 97.528 $1,229.56 $1,229.04 97.487
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,229.04 $1,166.04
Total Return One Year 22.90% 16.60%
Average Annual Return 22.90% 16.60%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: NORTHSTAR MULTI-SECTOR BOND FUND
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/06/94 $1,000.00 $10.000000 100.000
12/30/94 $10.074816 100.000 $1,007.48 $1,006.96 99.948
12/29/95 $11.435577 99.948 $1,142.97 $1,142.45 99.903
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,142.45 $1,079.45
Total Return Incep to Date 14.24% 7.94%
Average Annual Return 8.38% 4.73%
------------------------------------------------------------------
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
12/30/94 $1,000.00 $10.074816 99.257
12/29/95 $11.435577 99.257 $1,135.07 $1,134.55 99.212
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,134.55 $1,071.55
Total Return One Year 13.45% 7.15%
Average Annual Return 13.45% 7.15%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: NORTHSTAR HIGH YIELD FUND
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/06/94 $1,000.00 $10.000000 100.000
12/30/94 $9.847552 100.000 $984.76 $984.24 99.947
12/29/95 $11.567470 99.947 $1,156.14 $1,155.62 99.902
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,155.62 $1,092.62
Total Return Incep to Date 15.56% 9.26%
Average Annual Return 9.13% 5.50%
------------------------------------------------------------------
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
12/30/94 $1,000.00 $9.847552 101.548
12/29/95 $11.567470 101.548 $1,174.65 $1,174.13 101.503
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,174.13 $1,111.13
Total Return One Year 17.41% 11.11%
Average Annual Return 17.41% 11.11%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: FIDELITY MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/l/95 $1,000.00 $10.000000 100.000
12/29/95 $10.288920 100.000 $1,028.89 $1,028.37 99.949
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,028.37 $965.37
Total Return Incep to Date 2.84% -3.46%
Average Annual Return 4.27% -5.14%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: FIDELITY OVERSEAS PORTFOLIO
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/l/95 $1,000.00 $10.000000 100.000
12/29/95 $10.651696 100.000 $1,065.17 $1,064.65 99.951
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,064.65 $1,001.65
Total Return Incep to Date 6.46% 0.16%
Average Annual Return 9.82% 0.25%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: FIDELITY ASSET MANAGER PORTFOLIO
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/1/95 $1,000.00 $10.000000 100.000
12/29/95 $11.143293 100.000 $1,114.33 $1,113.81 99.953
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,113.81 $1,050.81
Total Return Incep to Date 11.38% 5.08%
Average Annual Return 17.50% 7.70%
------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ANNUITY RETURNS AS OF DECEMBER 31, 1995
FUND: FIDELITY INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
Yearend Less "Avg" Yearend
Date Deposit NQ UV # Units Value Cont Fee Units
<S> <C> <C> <C> <C> <C> <C> <C>
5/1/95 $1,000.00 $10.000000 100.000
12/29/95 $12.048834 100.000 $1,204.88 $1,204.36 99.957
<CAPTION>
------------------------------------------------------------------
CONTRACT VALUE SURRENDER VALUE
<S> <C> <C>
Ending Value $1,204.36 $1,141.36
Total Return Incep to Date 20.44% 14.14%
Average Annual Return 32.07% 21.87%
------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Northstar/NWNL Variable Account Annual Report for the Year Ended 12-31-95,
Annual Report (Form N-SAR) Filing Pursuant to Section 15(d) of the 1934 Act and
Section 30(b) of the 1940 Act, Form 24F-2 Annual Notice of Securities Sold
Pursuant to Rule 24f-2.
</LEGEND>
<CIK> 0000916201
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> $1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,890
<INVESTMENTS-AT-VALUE> 6,151
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,151
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,890
<SHARES-COMMON-STOCK> 515,660
<SHARES-COMMON-PRIOR> 134,171
<ACCUMULATED-NII-CURRENT> 268
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 261
<NET-ASSETS> 6,151
<DIVIDEND-INCOME> 226
<INTEREST-INCOME> 0
<OTHER-INCOME> 102
<EXPENSES-NET> 60
<NET-INVESTMENT-INCOME> 268
<REALIZED-GAINS-CURRENT> 44
<APPREC-INCREASE-CURRENT> 286
<NET-CHANGE-FROM-OPS> 598
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 406,174
<NUMBER-OF-SHARES-REDEEMED> 24,685
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,795
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ R. Michael Conley
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 11th day of March, 1996.
/s/ Richard R. Crowl
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995
/s/ John H. Flittie
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ Wayne R. Huneke
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 2nd day of January, 1996.
/s/ William R. Merriam
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ Craig R. Rodby
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ David H. Roe
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ Robert C. Salipante
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereto set the undersigned's hand
this 19th day of October, 1995.
/s/ Donald L. Swanson
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ John G. Turner
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
<PAGE>
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
POWER OF ATTORNEY
OF DIRECTOR AND OFFICER
The undersigned director and/or officer of NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY, a Minnesota corporation, does hereby make, constitute and
appoint ROYCE N. SANNER, RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON,
ROBERT B. SAGINAW, and JEFFREY A. PROULX, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with full power of
substitution, for the undersigned and in the undersigned's name, place and
stead, to sign and affix the undersigned's name as such director and/or officer
of said Company to a Registration Statement or Registration Statements, under
the Securities Act of 1933 (1933 Act) and the Investment Company Act of 1940
(1940 Act) and any other forms applicable to such registrations, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, DC, in
connection with the registration under the 1933 and 1940 Acts, as amended, of
variable annuity contracts and accumulation units in the MFS/NWNL Variable
Account, the NWNL Select Variable Account, the Northstar/NWNL Variable Account,
and of variable life insurance policies and accumulation units in the
Select*Life Variable Account, and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 19th day of October, 1995.
/s/ Steven W. Wishart
MFS/NWNL
NWNL Select
Northstar/NWNL
Select*Life
Rev. 12/95
