UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED].
For the Fiscal Year Ended December 31, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _____ to _____.
MIDLAND-GUARDIAN CO. SALARIED
EMPLOYEES 401(K) SAVINGS PLAN
(Full title of the Plan)
THE MIDLAND COPMANY
7000 Midland Boulevard
Amelia, Ohio 45102-2607
(Name of issuer of the securities held pursuant to the Plan and the address of
its principal executive office)
Registrant's telephone number including area code (513) 943-7100
Required information:
(a) Financial statements filed as a part of this report:
Independent Auditors' Report
Statement of Net Assets Available for Plan Benefits December 31,
1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 1998 and 1997
Notes to Financial Statements - December 31, 1998
Supplemental Schedules:
Form 5500, Item 27(a) Schedule of Assets Held for
Investment - December 31, 1998
Form 5500, Item 27(d) Schedule of Reportable
Transactions for the Year Ended
December 31, 1998
Signatures
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Investment Committee of the Plan has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
MIDLAND-GUARDIAN CO. SALARIED
EMPLOYEES 401(K) SAVINGS PLAN
(Name of Plan)
s/John I. Von Lehman
Executive Vice President,
Chief Financial Officer and
Secretary of The Midland Company
For the Midland-Guardian Co. Salaried
Employees 401(k) Savings Plan
Dated: June 29, 1999
<PAGE>
INDEPDENDENT AUDITORS' REPORT
Midland-Guardian Co.
Salaried Employees' 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of Midland-Guardian Co. Salaried Employees' 401(k) Savings Plan as of
December 31, 1998 and 1997 and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements
are the responsibility of the Plan'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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1998 and 1997, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment and reportable transactions are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental information by fund
in the statements of changes in net assets available for benefits is presented
for the purpose of additional analysis rather than to present the changes in
net assets available for benefits of the individual funds. The supplemental
schedules and supplemental information by fund are the responsibility of the
Plan's management. Such supplemental schedules and supplemental information by
fund have been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, are fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
June 25, 1999
s/Deloitte & Touche, LLP
Cincinnati, Ohio
<PAGE>
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
---------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
INVESTMENTS - At market value: --------------- ---------------
Prism Money Market Fund $ 4,152,262 $ 4,673,113
(Cost - 1998, $3,629,911;
1997, $4,223,824)
Victory Intermediate Income Fund 1,784,359 1,638,573
(Cost - 1998, $1,733,526;
1997, $1,610,780)
Victory Balanced Fund 3,327,038 2,410,650
(Cost - 1998, $2,877,495;
1997, $2,123,414)
Victory Value Fund 9,571,252 7,465,061
(Cost - 1998, $7,432,993;
1997, $5,579,848)
Victory Special Growth Fund 1,210,630 1,378,692
(Cost - 1998, $1,260,197;
1997, $1,320,761)
The Midland Company Common Stock 1,138,869 410,823
(Cost - 1998, $1,008,768;
1997, $ 289,256)
LOANS TO PARTICIPANTS 324,644 343,964
--------------- ---------------
Total investments and
loans to participants 21,509,054 18,320,876
CASH (Midland Stock Fund) 69 11,529
CONTRIBUTIONS RECEIVABLE
(Special Growth Fund) 2,508 -
INVESTMENT INCOME RECEIVABLE
(Midland Stock Fund) - 1,111
--------------- ---------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 21,511,631 $ 18,333,516
=============== ===============
See notes to financial statements.
<PAGE>
<TABLE>
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
SUPPLEMENTAL INFORMATION BY FUND TOTAL
-----------------------------------------------------------------------------------
MONEY INTERMEDIATE SPECIAL LOAN MIDLAND
MARKET INCOME BALANCED VALUE GROWTH FUND STOCK
-----------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Contributions from
Midland-Guardian Co. $ (34,715) $ 29,027 $ 100,747 $ 164,811 $ 72,342 $ 26,768 $ 358,980
Contributions from
Employees 251,774 78,098 316,219 580,736 212,887 73,531 1,513,245
Dividend and Interest
Income 438 95,203 260,056 1,486,921 280 $ 25,624 4,122 1,872,644
Net Appreciation
(Depreciation) in
Market Value of
Investments 211,578 32,052 212,329 496,933 (124,854) 8,639 836,677
Rollovers 1,143 73,034 52,070 54,482 54,827 30,083 265,639
Other 13,272 13,272
-----------------------------------------------------------------------------------------------
Total 430,218 307,414 941,421 2,783,883 215,482 25,624 156,415 4,860,457
BENEFIT PAYMENTS (634,356) (102,438) (228,901) (504,762) (147,925) - (23,324) (1,641,706)
OTHER DEDUCTIONS - - - - - (40,636) - (40,636)
TRANSFER BETWEEN
FUNDS - NET (316,713) (59,190) 203,868 (172,930) (233,111) (4,308) 582,384 -
-----------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS (520,851) 145,786 916,388 2,106,191 (165,554) (19,320) 715,475 3,178,115
NET ASSETS
AVAILABLE
FOR BENEFITS:
Beginning of Year 4,673,113 1,638,573 2,410,650 7,465,061 1,378,692 343,964 423,463 18,333,516
-----------------------------------------------------------------------------------------------
End of year $4,152,262 $1,784,359 $3,327,038 $9,571,252 $1,213,138 $ 324,644 $1,138,938 $21,511,631
===============================================================================================
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
SUPPLEMENTAL INFORMATION BY FUND TOTAL
-----------------------------------------------------------------------------------
MONEY INTERMEDIATE SPECIAL LOAN MIDLAND
MARKET INCOME BALANCED VALUE GROWTH FUND STOCK
-----------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Contributions from
Midland-Guardian Co. $ 114,817 $ 35,236 $ 89,921 $ 165,822 $ 73,195 $ 12,551 $ 491,542
Contributions from
Employees 299,323 92,913 263,928 490,486 207,970 35,340 1,389,960
Divedend and Interest
Income 86,442 179,081 637,534 157,806 $ 26,342 3,503 1,090,708
Net Appreciation
(Depreciation) in
Market Value of
Investments 251,213 15,114 158,794 887,030 (68,796) 126,828 1,370,183
Rollovers 24,095 919 23,892 48,581 25,098 20,200 142,785
Other 83 83
-----------------------------------------------------------------------------------------------
Total 689,448 230,624 715,616 2,229,453 395,273 26,342 198,505 4,485,261
BENEFIT PAYMENTS (310,918) (30,204) (58,295) (288,229) (87,645) - (6,394) (781,685)
OTHER DEDUCTIONS - - - - - (8,546) - (8,546)
TRANSFER BETWEEN
FUNDS - NET (479,946) 79,362 237,258 169,729 (99,732) 13,542 79,787 -
-----------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS (101,416) 279,782 894,579 2,110,953 207,896 31,338 271,898 3,695,030
NET ASSETS
AVAILABLE
FOR BENEFITS:
Beginning of Year 4,774,529 1,358,791 1,516,071 5,354,108 1,170,796 312,626 151,565 14,638,486
-----------------------------------------------------------------------------------------------
End of year $4,673,113 $1,638,573 $2,410,650 $7,465,061 $1,378,692 $ 343,964 $ 423,463 $18,333,516
===============================================================================================
See notes to financial statements.
</TABLE>
<PAGE>
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
---------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements conform to generally accepted
accounting principles and with the applicable accounting requirements of
the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974
("ERISA").
Expenses of the Plan
Certain expenses of the Plan are paid by the Plan sponsor,
Midland-Guardian Co. (the "Company").
Investments
The Plan's investments in mutual funds are stated at fair value, based on
market quoations provided by the trustee, and The Midland Company stock is
valued at its quoted market price. Participant notes receivable are
valued at cost which approximates fair value.
Method of Funding
The Company's annual contribution to the Plan consists of matching 50
percent of the basic contributions made by Plan Participants.
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
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions to and
deductions from net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
Reclassifications
Certain 1997 amounts have been reclassified to conform with 1998
presentation.
2. Description of the Plan
Full-time salaried employees of Midland-Guardian Co. with greater than one
year of service are eligible to participate in the Plan. An employee may
authorize (matched) contributions between two percent and six percent of
base salary through payroll deductions. Supplemental (unmatched)
contributions ranging from one to ten percent of the base salary are also
permitted above the basic contribution. The Company matches 50 percent of
an employee's basic contribution. Employees vest in the Company
contributions 30 percent after three years of service, 40 percent after
four years, increasing 20 percent each year thereafter through 7 years of
service. Forfeitures are used to reduce future Company contributions.
Upon enrollment in the Plan, a participant may direct employee
contributions in 5 percent increments in any of six investment options.
The investment options (funds and fund investment information from fund
publications) are as follows:
a) Prism Money Market Fund - Funds are invested primarily in a diversified
portfolio of high-grade money market instruments.
b) Victory Intermediate Income Fund - Funds are invested in investment-
grade debt securities issued by corporations, obligations of the U.S.
Government and its agencies or instrumentalities, and preferred stocks.
c) Victory Balanced Fund - Funds are invested in common stock, securities
convertible into common stock, preferred stock, corporate debt
securities and U.S. Government securities.
d) Victory Value Fund - Funds are invested primarily in a diversified
group of common stocks with an emphasis on companies with above average
total return potential.
e) Victory Special Growth Fund - Funds are invested primarily in equity
securities of small to medium sized companies with market values of up
to $5 billion that are believed to have superior prospects for long-
term earnings growth and price appreciation.
f) Midland Stock Fund - Funds are invested in common stock of The Midland
Company.
Participants may change their investment options monthly.
The contributions are invested in pooled accounts maintained by the Plan's
trustee. Individual accounts are maintained for each participant. Income
from investments and the change in the market value of the investments are
allocated to the participants' accounts based on the percentage that each
account balance bears to the total pool balance.
The Plan allows participants to borrow funds from their vested account
balance subject to certain restrictions. Loans are repayable in one to
five years unless the loan is related to the purchase of the participant's
primary residence, in which case the term may be up to thirty years. The
interest rate applicable to Plan loans is established at 1% over Firstar
Corporation's prime rate (8.75% at December 31, 1998).
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
The Company expects to continue the Plan indefinitely, but reserves the
right to terminate it by duly adopted written resolution of the Board of
Directors of the Company. In the event of termination, the value of each
participant's interest will become fully vested and Plan assets will be
allocated to provide benefits to participants as set forth in the Plan, or
as otherwise required by law.
3. Investments
Investments representing more than five percent of net assets available
for benefits are as follows:
Market
Cost Value
1998 ---- -----
----
Key Trust Investment Management:
Prism Money Market Fund $3,629,911 $4,152,262
Victory Intermediate Income Fund 1,733,526 1,784,359
Victory Balanced Fund 2,877,495 3,327,038
Victory Value Fund 7,432,993 9,571,252
Victory Special Growth Fund 1,260,197 1,210,630
The Midland Company Common Stock 1,008,768 1,138,869
1997
----
Key Trust Investment Management:
Prism Money Market Fund $4,223,824 $4,673,113
Victory Intermediate Income Fund 1,610,780 1,638,573
Victory Balanced Fund 2,123,414 2,410,650
Victory Value Fund 5,579,848 7,465,061
Victory Special Growth Fund 1,320,761 1,378,692
4. Tax Status
The Plan has received a letter of determination from the Internal Revenue
Service which indicates that the Plan as designed at the date of the
letter is in compliance with the applicable requirements of the Internal
Revenue Code. The Plan Administrator believes that the Plan has been
operated in compliance with the applicable requirements of the Internal
Revenue Code and that it is qualified and the related trust is tax exempt.
<PAGE>
SUPPLEMENTAL SCHEDULE
FORM 5500, ITEM 27(a) - ASSETS HELD FOR INVESTMENT
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
DECEMBER 31, 1998
-------------------------------------
MARKET
UNITS COST VALUE
-------------------------------------
Key Trust Investment Management:
Prism Money Market Fund 346,686 $ 3,629,911 $ 4,152,262
Victory Intermediate Income Fund 182,450 1,733,526 1,784,359
Victory Balanced Fund 226,634 2,877,495 3,327,038
Victory Value Fund 549,457 7,432,993 9,571,252
Victory Special Growth Fund 99,151 1,260,197 1,210,630
The Midland Company Common Stock 47,207 1,008,768 1,138,869
---------------------------
Total before Participant Loans $ 17,942,890 21,184,410
==============
Participant Loans (interest
rates: 6% to 10%) N/A 324,644
-------------
TOTAL INVESTMENTS $ 21,509,054
=============
<PAGE>
<TABLE>
SUPPLEMENTAL SCHEDULE
FORM 5500, ITEM 27(d) - REPORTABLE TRANSACTIONS
MIDLAND-GUARDIAN CO.
SALARIED EMPLOYEES' 401(K) SAVINGS PLAN
FOR THE YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
IDENTITY NET
OF PARTY DESCRIPTION PURCHASE SELLING COST OF GAIN OR
INVOLVED OF ASSET PRICE PRICE ASSET (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
SERIES OF TRANSACTIONS
- ----------------------
Key Trust Company of Ohio, N.A. Prism Money Market Fund
An Affiliate of KeyCorp (59 Purchases) $ 551,323
(82 Sales) $1,283,755 $1,145,237 $138,518
Key Trust Company of Ohio, N.A. Victory Value Fund
An Affiliate of KeyCorp (90 Purchases) 2,523,172
(82 Sales) 913,621 669,734 243,887
Key Trust Company of Ohio, N.A. Victory Balanced Fund
An Affiliate of KeyCorp (90 Purchases) 1,060,786
(68 Sales) 354,512 304,489 50,023
INDIVIDUAL TRANSACTION
- ----------------------
Key Trust Company of Ohio, N.A. Victory Value Fund
An Affiliate of KeyCorp Purchased 89,674 shares/units 1,435,675
Note - Reportable transactions are as defined in Section 2520.103-6 of the
Department of Labor's Rules and Regulations.
</TABLE>
