Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account A
File Number 333-14061
Commissioners:
Enclosed for filing is a complete copy, including exhibits, of
Post-Effective Amendment Number 1 to the above referenced Form
S-6 Registration Statement.
This amendment is being filed pursuant to paragraph (b) of Rule 485,
and pursuant to subparagraph (b)(4) of that Rule, we certify the
amendment does not contain disclosure which would render it ineligible
to become effective pursuant to said paragraph (b).
If you have any comments or questions about this filing, please contact
Fred Bellamy of Sutherland, Asbill and Brennan at 202-383-0126.
Sincerely,
Paul M. Phalen, CLU, FLMI
Assistant Vice-President
Product Implementation
VUL3CVR.TXT
<PAGE>
Registration No. 333-14061
POST-EFFECTIVE AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
--------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
________________________________________
(Exact Name of Trust)
MIDLAND NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
One Midland Plaza
Sioux Falls, SD 57193
(Address of Principal Executive Office)
_________________________
Jack L. Briggs, Vice President, Secretary and General Counsel
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
(Name and Address of Agent for Service of Process)
Copy to:
Frederick R. Bellamy
Sutherland, Asbill & Brennan, L L P
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate line):
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 01, 1998 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a) (i)
___ on _________________ pursuant to paragraph (a) (i) of Rule 485
If appropriate, check the following line:
___ the Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
----------------------------------------------------------------------
S6CVRVL3.TXT
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption in Prospective
1. Cover Page
2. Cover Page
3. Not Applicable
4. Midland's Sales And Other Agreements
5. Midland National Life Insurance Company; Our Separate
Account And Its Investment Divisions
6. Our Separate Account And Its Investment Divisions
7. Not Applicable
8. Not Applicable
9. Legal Proceedings
10. Summary; Our Separate Account And Its Investment
Divisions; Your Right To Examine The Policy;
Withdrawing Money From Your Contract Fund;
Surrendering Your Policy for Its Net Cash Surrender
Value; Death Benefits; The Fund; Transfers Of
Contract Fund Value Among Investment Divisions; Your
Policy May Lapse; You May Reinstate Your Policy;
Right To Change How We Operate Our Separate
Account; Flexible Premium Payments; Maturity
Benefits; Your Contract Fund Value; Borrowing From
Your Payment Options; Additional Benefits May Be
Available
11. Summary; The Funds; Investment Policies Of The Funds'
Portfolios
12. Summary; The Funds
13. Summary; Deductions And Charges
14. Summary; Policy Periods, Anniversaries
15. Summary; Flexible Premium Payments
16. Our Separate Account Investment Choices
17. Summary; Withdrawing Money From Your Contract Fund;
Surrendering Your Policy For Its Net Cash
Surrender Value; Your Right To Examine The Policy
18. The Funds; Flexible Premium Payments
19. Our Reports To Contractowners; Separate Account Voting
Rights
20. Not Applicable
21. Borrowing From Your Contract Fund; How To Request A
Loan; Policy Loan Interest; When Interest Is Due;
Repaying The Loan; The Effects Of A Policy Loan On
Your Contract Fund
22. Not Applicable
23. Additional Information
24. Limits On Our Right To Challenge The Policy
25. Midland National Life Insurance Company
26. Not Applicable
27. Midland National Life Insurance Company
28. Management Of Midland
29. Our Parent
<PAGE>
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Midland's Sales And Other Agreements
36. Not Applicable
37. Not Applicable
38. Midland's Sales And Other Agreements
39. Midland's Sales And Other Agreements
40. Not Applicable
41. Midland's Sales And Other Agreements
42. Not Applicable
43. Not Applicable
44. Flexible Premium Payments
45. Not Applicable
46. Withdrawing Money From Your Contract Fund;
Surrendering Your Policy For Its Net Cash Surrender
Value
47. The Funds
48. Not Applicable
49. Not Applicable
50. We Own The Assets Of Our Separate Account
51. Cover Page; Summary; Death Benefits; Deductions And
Charges; Your Beneficiary
52. The Funds
53. Not Applicable
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements
XREFER.TXT
<PAGE>
Flexible Premium Variable Life Insurance Contract
(Variable Universal Life 3)
Issued By:
Midland National Life Insurance Company
One Midland Plaza, Sioux Falls, SD 57193,
(605) 335-5700
This prospectus describes Variable Universal Life 3, an individual
flexible premium variable life insurance contract issued by Midland
National Life Insurance Company (Midland). We have designed
Variable Universal Life 3 to provide insurance coverage with
flexibility in death benefits and premiums. Variable Universal Life 3
can also provide substantial cash build-up.
This prospectus generally describes only the variable portion of the
Contract, except where the General Account is specifically mentioned.
Variable Universal Life 3 pays a death benefit if the Insured Person
dies while the contract is still in effect. You may choose Option 1, a
fixed death benefit that equals the Specified Amount, or Option 2, a
variable death benefit that equals the Specified Amount plus the value
of your Contract Fund. A death benefit equal to a percentage of the
Contract Fund on the day the Insured Person dies will be paid if that
benefit would be greater.
You may borrow against Your contract, withdraw part of the Net Cash
Surrender Value, or completely surrender Your contract for its Net
Cash Surrender Value.
After the sales charge, a premium tax charge and any per premium
expense charge is deducted, Your net premiums are put in Your
Contract Fund. You may allocate Your Contract Fund to Our General
Account or up to ten of the investment divisions of Our Separate
Account A.
We invest each of the investment divisions of Our Separate Account in
shares of a corresponding portfolio of Fidelity's Variable Insurance
Products Fund (VIP), Fidelity's Variable Insurance Products Fund II
(VIP II), Fidelity's Variable Insurance Products Fund III (VIP III), or
the American Century Variable Portfolios, Inc. (American Century
VP) (collectively called the "Funds"), mutual funds with a choice of
portfolios.
The prospectuses for the Funds, which accompany this prospectus,
describes the investment objectives, policies, and risks of the Funds'
portfolios associated with the seventeen divisions of Our Separate
Account A.
VIP Money Market Portfolio
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Asset Manager: Growth Portfolio
VIP II Index 500 Portfolio
VIP III Growth & Income Portfolio
VIP III Balanced Portfolio
VIP III Growth Opportunities Portfolio
American Century VP Capital Appreciation Portfolio
American Century VP Value Portfolio
American Century VP Balanced Portfolio
American Century VP International Portfolio
VIP Money Market Portfolio, VIP High Income Portfolio, VIP Equity-
Income Portfolio, VIP Growth Portfolio, VIP Overseas Portfolio, VIP
II Asset Manager Portfolio, VIP II Investment Grade Bond Portfolio,
VIP II Contrafund Portfolio, VIP II Asset Manager: Growth Portfolio,
VIP II Index 500 Portfolio, VIP III Growth & Income Portfolio, VIP
III Balanced Portfolio, VIP III Growth Opportunities Portfolio,
American Century VP Capital Appreciation Portfolio, American
Century VP Value Portfolio, American Century VP Balanced
Portfolio, and American Century VP International Portfolio.
An investment in the portfolios, including the VIP Money Market
Portfolio, is neither insured nor guaranteed by the U.S. Government,
and there is no assurance that the VIP Money Market Portfolio will be
able to maintain a stable net asset value.
You bear the investment risk of this contract for all amounts allocated
to Our Separate Account A. To the extent that Your Contract Fund is
in Separate Account A, the value of Your Contract Fund will vary with
the investment performance of the corresponding portfolios of the
Funds; there is no minimum guaranteed cash value for amounts
allocated to the investment divisions of Our Separate Account. Your
Contract Fund will also reflect deductions for the cost of insurance and
expenses and increases for additional premium payments. You may
incur a Surrender Charge if You surrender Your contract or allow it to
lapse.
After the first premium, You may decide how much Your premium
payments will be and how often You wish to make them, within limits.
You may also increase or decrease the amount of insurance protection,
within limits.
Depending on the amount of premiums paid, this may or may not be a
modified endowment contract. If it is a modified endowment contract,
loans and withdrawals may result in more adverse tax consequences
than would apply if the contract was not a modified endowment
contract.
You have a limited right to examine this contract and return it to Us
for a refund.
Replacing your existing insurance or, if You already own a flexible
premium variable insurance contract, acquiring additional insurance
through the contract described in this prospectus, may not be to your
advantage.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PLEASE READ THIS PROSPECTUS FOR DETAILS ON THE
CONTRACT BEING OFFERED TO YOU, AND KEEP IT FOR
FUTURE REFERENCE. THIS PROSPECTUS IS VALID ONLY
WHEN ACCOMPANIED BY CURRENT PROSPECTUSES FOR
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND III,
AND AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
The date of this prospectus is May 1, 19981997.
Table of Contents
Definitions
PART 1: SUMMARY
FEATURES OF VARIABLE UNIVERSAL LIFE 3
INVESTMENT CHOICES OF VARIABLE UNIVERSAL LIFE 3
DEDUCTIONS AND CHARGES
USING YOUR CONTRACT FUND
ADDITIONAL INFORMATION ABOUT VARIABLE UNIVERSAL
LIFE 3
PART 2: DETAILED INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
THE COMPANY THAT ISSUES VARIABLE UNIVERSAL LIFE 3
Midland National Life Insurance Company
Our Parent
THE FEATURES OF VARIABLE UNIVERSAL LIFE 3
How Variable Universal Life 3 Differs From Whole Life Insurance
Death Benefits
Maturity Benefit
Changes In Variable Universal Life 3
Changing The Specified Amount of Insurance
Automatic Benefit Increase Provision
Changing Your Death Benefit Option
When Contract Changes Go Into Effect
Flexible Premium Payments
Premium Provisions During The Minimum Premium Period
Premium Provisions Beyond The Minimum Premium Period
Allocation of Premiums
Additional Benefits May Be Available
SEPARATE ACCOUNT INVESTMENT CHOICES
Our Separate Account And Its Investment Divisions
The Funds
Investment Policies Of The Funds' Portfolios
We Own The Assets Of Our Separate Account
Our Right To Change How We Operate Our Separate Account
DEDUCTIONS AND CHARGES
Charges Against The Separate Account
Charges In The Funds
Deductions From Your Premiums
Deductions From Your Contract Fund
Transaction Charges
How Contract Fund Charges Are Allocated
Surrender Charge
YOUR CONTRACT FUND VALUE
Amounts In Our Separate Account
How We Determine The Accumulation Unit Value
CONTRACT FUND TRANSACTIONS
Changing Your Premium And Deduction Allocation Percentages
Transfers Of Contract Fund Value
Dollar Cost Averaging.
Borrowing From Your Contract Fund
How To Request A Loan
Contract Loan Interest
When Interest Is Due
Repaying The Loan
The Effects Of A Contract Loan On Your Contract Fund
Your Contract May Lapse
Withdrawing Money From Your Contract Fund
Withdrawal Charges
The Effects Of A Partial Withdrawal
Surrendering Your Contract For Its Net Cash Surrender Value
THE GENERAL ACCOUNT
Amounts In The General Account
Adding Interest To Your Amounts In The General Account
Transfers
ADDITIONAL INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
Your Right To Examine The Contract
Your Contract Can Lapse
You May Reinstate Your Contract
Contract Periods, Anniversaries
Application for Insurance
Maturity Date
TAX EFFECTS
Contract Proceeds
Possible Charge for Midland's Taxes
Other Tax Considerations
PART 3: ADDITIONAL INFORMATION
YOUR VOTING RIGHTS AS AN OWNER
Fund Voting Rights
How We Determine Your Voting Shares
Voting Privileges Of Participants In Other Companies
OUR REPORTS TO CONTRACTOWNERS
LIMITS ON OUR RIGHT TO CHALLENGE THE CONTRACT
YOUR PAYMENT OPTIONS
YOUR BENEFICIARY
ASSIGNING YOUR CONTRACT
WHEN WE PAY PROCEEDS FROM THIS CONTRACT
DIVIDENDS
MIDLAND'S SALES AND OTHER AGREEMENTS
Sales Agreements
REGULATION
Year 2000 Compliance Issues
DISCOUNT FOR MIDLAND EMPLOYEES
LEGAL MATTERS
LEGAL PROCEEDINGS
FINANCIAL AND ACTUARIAL
ADDITIONAL INFORMATION
Management of Midland
Appendix
Financial Statements
This prospectus generally describes only the variable portion of the
Contract, except where the General Account is specifically mentioned.
Replacing your existing insurance or, if You already own a flexible
premium variable insurance contract, acquiring additional insurance
through the contract described in this prospectus, may not be to your
advantage.
PLEASE READ THIS PROSPECTUS FOR DETAILS ON THE
CONTRACT BEING OFFERED TO YOU, AND KEEP IT FOR
FUTURE REFERENCE. THIS PROSPECTUS IS VALID ONLY
WHEN ACCOMPANIED BY CURRENT PROSPECTUSES FOR
THE FUNDS.
Definitions
Accumulation Unit means the units credited to each investment
division in the Separate Account.
Age means the age of the Insured Person on his/her birthday which
immediately precedes the Contract Date.
Attained Age means the age of the Insured Person on his/her birthday
preceding a Contract Anniversary date.
Beneficiary means the person or persons to whom the contract's death
benefit is paid when the Insured Person dies.
Business Day means any day We are open AND the New York Stock Exchange is
open for trading. The holidays which we are closed but the New York Stock
Excchange is open are the day after Thanksgiving, and Christmas Eve Day.
These days along with the days the New York Stock Exchange is not open for
trading will not be counted as Business Days.
Contract Fund means the total amount of monies in Our Separate
Account A attributable to Your in force contract. It also includes
monies in our General Account for Your contract.
Cash Surrender Value means the Contract Fund on the date of
surrender, less any Surrender Charges.
Contract Anniversary: The same month and day of the Contract Date
in each year following the Contract Date.
Contract Date means the date from which Contract Anniversaries and
Contract Years are determined.
Contract Month means a month that starts on a Monthly Anniversary
and ends on the following Monthly Anniversary.
Contract Year means a year that starts on the Contract Date or on each
anniversary thereafter.
Death Benefit means the amount payable under Your contract when
the Insured Person dies.
Minimum Premium Period is to Attained Age 70 or 5 years from the
Contract Date if later.
Funds mean the investment companies, more commonly called mutual
funds, available for investment by Separate Account A on the Contract
Date or as later changed by us. The Funds available as of the date of
the prospectus are Fidelity's Variable Insurance Products Fund (VIP),
Fidelity's Variable Insurance Products Fund II (VIP II), Fidelity's
Variable Insurance Products Fund III (VIP III), and the American
Century Variable Portfolios, Inc. (American Century VP).
Home Office means where You write to Us to pay premiums or take
other action, such as transfers between investment divisions, changes
in Specified Amount, or other such action regarding Your contract.
The address is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
In Force means the Insured Person's life remains insured under the
terms of the contract.
Insured Person means the person whose life is insured by the contract.
Investment Division means a division of Separate Account A which
invests exclusively in the shares of a specified Portfolio of the Fund.
Maturity Date initially set at the date on which the Insured Person
reaches Attained Age 100. However, this date may be extended if
doing so will not result in adverse tax consequences.
Minimum Premium Period: For all contracts except those issued in
Massachusetts or Pennsylvania, this is the period of time beginning on
the Contract date and ending on the later of attained age 70 or five
years from the Contract Date. For contracts issued in Pennsylvania
where the issue age is 50 or younger, this period of time is for 20 years
from the Contract Date. For contracts issued in Massachusetts, this
period of time is for 5 years from the Contract Date.
Monthly Anniversary means the day of each month that has the same
numerical date as the Contract Date.
Net Cash Surrender Value means the Cash Surrender Value less any
outstanding contract loan.
Net Premium means the premium paid less any deduction for premium
taxes, less any deduction for the sales charge and less any per premium
expenses.
Record Date means the date the contract is recorded on Our books as
an In Force contract.
Separate Account means Our Separate Account A which receives and
invests Your net premiums under the contract.
Specified Amount means the face amount of the contract which is the
minimum death benefit payable under the contract.
Surrender Charges means a charge made only upon surrender of the
contract. It includes a charge for sales related expenses and issue
related expenses.
PART 1: SUMMARY
In this prospectus "We", "Our", and "Us" mean Midland National Life
Insurance Company.
"You" and "Your" mean the owner of the contract. We refer to the
person who is covered by the contract as the "Insured Person", because
the Insured Person and the Owner may not be the same.
The following summary is qualified in its entirety by the detailed
information appearing later in this prospectus. This summary must be
read in conjunction with that detailed information. Unless otherwise
indicated, the description of the contract in this prospectus assumes
that the contract is in force and that there is no outstanding contract
loan.
FEATURES OF VARIABLE UNIVERSAL LIFE 3
Insurance Benefit Options
Variable Universal Life 3 offers insurance on the life of the Insured
Person. We will pay a death benefit when the Insured dies while the
contract is in force. We pay a maturity benefit in lieu of a death benefit
when the Insured Person reaches the Maturity Date. Two death benefit
options are available:
The Option 1 death benefit equals the Specified Amount of the
insurance contract.
The Option 2 death benefit equals the Specified Amount of the
contract, plus the value of the Contract Fund.
Provisions in the Federal tax law may require the benefit to be even
greater. A death benefit equal to a percentage multiple of the Contract
Fund on the day the Insured Person dies will be paid if that benefit
would be greater. See "Death Benefits" on page 9.
We will deduct any outstanding loans or unpaid charges before paying
any benefits. Proceeds may be paid in a lump sum or under a variety of
payment plans. The length of time Your contract will remain in force
depends on the amount of Your Net Cash Surrender Value and, during
the Minimum Premium Period, the amount of premiums You have
paid.
The minimum Specified Amount is generally $50,000. For Insured
Persons age 0 to 14 at issue, the minimum Specified Amount is
$25,000. For Insured Persons age 20 to 44 at issue and in the preferred
non-smoker rate class the minimum Specified Amount is $100,000.
Your Contract Fund
Your Contract Fund is established after We receive Your first premium
payment. After We deduct the sales charge, a premium tax charge and
any per premium expenses from Your premiums, We put the balance
into Your Contract Fund.
Your Contract Fund reflects the amount and frequency of premium
payments, deductions for the cost of insurance and expense charges,
the investment experience of amounts allocated to Our Separate
Account, interest earned on amounts allocated to the General Account,
loans, and partial withdrawals. You bear the investment risk under
Variable Universal Life 3 as the value of Your Contract Fund will vary
according to the investment experience of the divisions of Our
Separate Account You have selected. There is no minimum guaranteed
Contract Fund value with respect to any amounts allocated to the
Separate Account. See "YOUR CONTRACT FUND VALUE" on
page 19.
Contract Changes
You may change the death benefit option You have chosen. You may
also increase or decrease the Specified Amount of Your contract,
within limits.
Flexible Premium Payments
You may pay premiums whenever You want, in whatever amount You
want, within certain limits. We require an initial minimum premium
based on the age and sex of the Insured Person and the Specified
Amount of the contract.
You will also choose a planned periodic premium. You need not pay
premiums of any set amount or according to the planned schedule or
any other set schedule, but You may have to make additional premium
payments to keep Your contract in force because payment of the
planned premiums does not ensure that Your contract will remain in
force. However, You have the option of ensuring that Your contract
stays in force during the Minimum Premium Period by paying
premiums equal to the accumulated minimum premium amounts.
Beyond the Minimum Premium Period, additional premiums may be
required to keep the contract in force. See "Flexible Premium
Payments" on page 11.
Additional Benefits May Be Available
You may choose to include additional benefits in the contract by rider.
These benefits may include an accidental death benefit, life insurance
for additional insured persons, life insurance for children, family life
insurance coverage, a monthly disability benefit, a disability waiver
benefit to waive the cost of monthly deductions, and an accelerated
death benefit in the event of a terminal illness. Any cost of additional
benefits will be deducted monthly from Your Contract Fund. See
"Additional Benefits May Be Available" on page 13.
INVESTMENT CHOICES OF VARIABLE UNIVERSAL LIFE 3
You may allocate amounts in Your Contract Fund to either our
General Account, which pays interest at a declared rate, or up to ten of
the investment divisions of Our Separate Account. Each of these
investment divisions invests in shares of a corresponding portfolio of
Fidelity's Variable Insurance Products Fund, Fidelity's Variable
Insurance Products Fund II, Fidelity's Variable Insurance Products
Fund III, or the American Century Variable Portfolios, Inc., "series"
type mutual funds. The portfolios have different investment objectives.
Fidelity Management & Research Company managesreceives fees
from the VIP, VIP II and VIP III portfolios for providing investment
management services , and American Century Investment
Management, Inc. managesreceives fees from the American Century
VP PortfoliosVariable Portfolios for providing investment
management services. These fees are taken monthly in proportion to
the average daily net assets of each portfolio throughout the month.
They receive fees from the portfolios for these services.
For a full description of the Funds, see the Funds' prospectus, which
accompany this prospectus. See "The Funds" on page 14. The current
investment divisions which invest in pP ortfolios of Fidelity's
Variable Insurance Products Fund are:
VIP Money Market Portfolio
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
The current investment divisions which invest in pP ortfolios of
Fidelity's Variable Insurance Products Fund II are:
VIPII Asset Manager Portfolio
VIPII Investment Grade Bond Portfolio
VIPII Contrafund Portfolio
VIPII Asset Manager: Growth Portfolio
VIPII Index 500 Portfolio
The current investment divisions which invest in Portfolios of
Fidelity's Variable Insurance Products Fund III are:
VIPIII Growth & Income Portfolio
VIPIII Balanced Portfolio
VIPIII Growth Opportunities Portfolio
The current investment divisions which invest in Portfolios of the
American Century Variable Portfolios, Inc. are:
Capital Appreciation Portfolio
Value Portfolio
Balanced Portfolio
International Portfolio
Each portfolio charges a different investment advisory fee.The VIP,
VIP II, and VIP III Funds also charge an amount for other operating
expenses. The total expenses (as a percentage of assets) for the year
ending December 31, 19971996 are shown in the table below.
Portfolio Total Expenses
VIP Money Market .31%.30%
VIP High Income .71%
VIP Equity-Income(1) .58%
VIP Growth(1) .69%
VIP Overseas(1) .92%.93%
VIP II Investment Grade Bond .58%
VIP II Asset Manager(1) .65%.74%
VIP II Index 500 Portfolio(2) .28%
VIP II Contrafund(1) .71%.74%
VIP II Asset Manager: Growth(1) .77%.87%
VIP III Balanced(1) .61%.72%
VIP III Growth Opportunities(1) .74%.77%
VIP III Growth & Income .70%1.00%
American Century VP Capital Appreciation 1.00%
American Century VP Balanced 1.00%
American Century VP Value 1.00%
American Century VP International 1.50%
(1) A portion of the brokerage commissions the portfolio paid was
used to reduce its expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian and transfer agent expenses. Including these reductions, total
operating expenses would have been as follows:
VIP Equity-Income 0.57%
VIP Growth 0.67%
VIP Overseas 0.90%
VIP II Asset Manager 0.64%
VIP II Contrafund 0.68%
VIP II Asset Manager: Growth 0.76%
VIP III Balanced 0.60%
VIP III Growth Opportunities 0.73%
(2) The portfolio's expenses were voluntarily reduced by the Fund's
investment advisor. Absent reimbursement, the total expenses for the
VIP II Index 500 would have been 0.40%.
See "Investment Policies Of The Funds' Portfolios" on page 14,
"Charges In The Funds" on page 16, and "THE GENERAL
ACCOUNT" on page 23.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a sales charge of 4% from each premium payment. This
charge is to partially reimburse Us for the cost incurred in selling and
distributing this contract. A charge for any applicable premium taxes is
deducted from each premium payment. The current premium tax
charge We take is 2.5%. If the premium tax We incur on any premium
is less than 2.5%, We may reduce the charge for premium taxes on that
premium. We may increase this charge at any time if Our premium tax
expenses increase. We reserve the right to vary this charge by state.
A charge of $.46 is also deducted from each premium payment if you
have elected to pay premiums by Civil Service Allotment. See
Deductions From Your Premiums on page 17.
Deductions From Your Contract Fund
Certain amounts are deducted from Your Contract Fund each month.
These are:
an expense charge of $7.00 each month (currently We plan to make
this deduction for the first 15 contract years only).
a cost of insurance charge, which is based on the Insured Person's
attained age and sex, risk class, and the amount of insurance You are
buying, and
a charge for additional benefits, if any.
We guarantee that the insurance deductions from Your Contract Fund
will never be more than the maximum amounts shown in Your
contract.
In addition, We make charges when You:
make a partial withdrawal of Net Cash Surrender Value more than
once in a contract year.
make more than twelve transfers a year between investment divisions.
On a current basis an unlimited number of transfers are allowed
without a charge. We currently waive this charge.
See "Deductions From Your Contract Fund" on page 17.
Deductions From The Separate Account
We make a charge at an effective annual rate of 0.90% of the value of
the assets of Our Separate Account for certain mortality and expense
risks We assume. On a current basis, We currently intend to reduce
this charge to 0.50% after the tenth Contract Year, but there is no
guarantee We will do so. See "Charges Against The Separate Account"
on page 16.
Charges In The Funds
The Funds make a charge for managing investments and providing
services. See Charges In The Funds on page 16.
Surrender Charges
The Surrender Charge is made up of two pieces: The Deferred Sales
Charge and the Deferred Issue Charge. The Deferred Sales Charge is
to partially reimburse Us for the cost We incur in selling and
distributing this contract. The Deferred Issue Charge is to reimburse
Us for underwriting and other costs We have when We issue the
contract. We do not expect to profit from these charges.
During the first 15 years, We will subtract a Surrender Charge from
Your Contract Fund if You give up Your contract for its Net Cash
Surrender Value, or let Your contract lapse at the end of a grace
period.
The Deferred Sales Charge is based on the premiums You have paid:
26% of any premium payment in the first two contract years up to one
guideline annual premium.
5% of all other premium payments.
This sum cannot exceed 5% times the guideline annual premium times
the lesser of 20 or the number of years in the Insured Person's life
expectancy. The sum is multiplied by a percentage - 100% for the first
ten years, decreasing to 0% after the fifteenth year. The amount of the
Deferred Sales Charge You pay depends on the amount of premiums
You pay, when You pay Your premiums and when You surrender or
lapse Your contract. You will not incur any Deferred Sales Charge,
regardless of the amount and timing of premiums if You keep this
contract in force for fifteen years.
The Deferred Issue Charge is a fixed schedule per thousand dollars of
Specified Amount starting at $3.00 per thousand for the first ten years,
decreasing to zero after the fifteenth year. This discussion of the
Deferred Sales Charge and the Deferred Issue Charge assumes no
changes in Specified Amount. See "Surrender Charge" on page 18.
USING YOUR CONTRACT FUND
Transfers
You may transfer amounts in Your Contract Fund between the General
Account and the investment divisions of the Separate Account, and
among the investment divisions of the Separate Account. Transfers
take effect on the date We receive Your request. We require minimum
amounts for each transfer, usually $200. Currently, We allow
unlimited transfers without a charge. However, We reserve the right to
assess a $25 charge after the twelfth transfer in a Contract Year. There
are other limitations on transfers to and from the General Account. See
"Transfers Of Contract Fund Value" on page 20.
Surrendering Your Contract
Variable Universal Life 3 has a Cash Surrender Value, which is the
difference between the value of Your Contract Fund and any Surrender
Charge which applies during the first 15 Contract Years. If You
surrender the contract for cash, We will pay You the Net Cash
Surrender Value, which is the Cash Surrender Value less any
outstanding loan and loan interest due. See "Surrendering Your
Contract For Its Net Cash Surrender Value" on page 23.
Borrowing Against Your Contract
You may borrow a total amount up to 92% of the Cash Surrender
Value, using Your contract as security for the loan. A minimum loan
amount, usually $200, will be stated in Your contract. Contract loan
interest accrues daily at a rate adjusted annually. See "Borrowing From
Your Contract Fund" on page 21. Contract loan interest is not
deductible on Contracts owned by an individual.
It should be noted, however, that loans taken from, or secured by, a
contract may have Federal tax consequences. See "TAX EFFECTS" on
Page 25.
Withdrawing Cash From Your Contract Fund
You may make a partial withdrawal from Your Contract Fund. The
current minimum for Your withdrawal is $200. The maximum
withdrawal You can make is 50% of the Net Cash Surrender Value.
Your withdrawal is subject to certain other requirements. A charge
(currently $25 or 2 percent of the amount withdrawn, whichever is
less) will be deducted from Your Contract Fund if You make more
than one withdrawal in a Contract Year. See "Withdrawing Money
From Your Contract Fund" on page 22. Withdrawals and Surrenders
may have adverse tax consequences. See "TAX EFFECTS" on page
25.
ADDITIONAL INFORMATION ABOUT VARIABLE UNIVERSAL
LIFE 3
Your Right To Examine This Contract
You have a right to examine the contract and, if You wish, return it to
Us. Your request must be postmarked by the latest of:
10 days after You receive Your contract.
10 days after We mail You a notice of this right, or
45 days after You signed the application for the contract.
When You return your contract, We will return the sum of all charges
deducted from premiums paid, from the Separate Account, and from
the Contract Fund, plus the Contract Fund. Charges deducted in the
Funds are not returned.
See "Your Right To Examine The Contract" on page 23.
Tax Effects of Variable Universal Life 3
With respect to a contract that is issued on the basis of a standard rate
class, Midland believes such a contract should meet the definition of a
life insurance contract for Federal income tax purposes. As for a
contract that is issued on a substandard basis, it is not clear whether or
not such a contract would qualify as a life insurance contract for
Federal tax purposes, particularly if the owner of such a contract pays
the full amount of premiums permitted under the contract. If it is
subsequently determined that a contract does not satisfy section 7702
of the Internal Revenue code (which defines life insurance for tax
purposes), Midland will take appropriate and reasonable steps to
attempt to cause such a contract to comply with section 7702.
Assuming that a contract qualifies as a life insurance contract for
Federal income tax purposes, the death benefit paid to the beneficiary
of this contract is not subject to federal income tax. In addition, under
current federal tax law, You do not have to pay income tax on any
earnings in Your Contract Fund as long as they remain in Your
Contract Fund. A contract may be treated as a "modified endowment
contract" depending upon the amount of premiums paid in relation to
the death benefit. If the contract is a modified endowment contract,
then all pre-death distributions, including contract loans, will be
treated first as a distribution of taxable income and then as a return of
investment in the contract. In addition, prior to age 59 1/2 any such
distributions generally will be subject to a 10% penalty tax.
If the contract is not a modified endowment contract, distributions
generally will be treated first as a return of investment in the contract
and then as disbursing taxable income. Moreover, loans will not be
treated as distributions. Finally, neither distributions nor loans from a
contract that is not a modified endowment contract are subject to the
10% penalty tax. See "TAX EFFECTS" on page 25.
Your Contract Can Lapse
During the Minimum Premium Period, this contract will remain in
force if either (a)unless the Net Cash Surrender Value is insufficient
to pay monthly charges or (b)and You fail to meet certain minimum
premium requirements which apply. Beyond the Minimum Premium
Period, this contract will remain in force as long as the Net Cash
Surrender Value is sufficient to pay monthly charges. Therefore, the
contract could lapse after the Minimum Premium Period even if You
continue paying Minimum Premiums. See "Your Contract May Lapse"
on page 22.
Illustrations
Sample projections of hypothetical Death Benefits and Cash Surrender
Values are included starting at page 33 of this prospectus. These are
only hypothetical figures and are not indications of either past or
anticipated future investment performance. However, these projections
of hypothetical values may be helpful in understanding the long-term
effects of different levels of investment performance and the charges
and deductions, and also in comparing this contract to other life
insurance contracts. These projections also show the value of
premiums accumulated with interest and indicate that if the contract is
surrendered in the early contract years, the Net Cash Surrender Value
may be low compared to premiums accumulated at interest. This
reflects the cost of insurance protection and other charges, and
demonstrates that this contract should not be purchased as a short-term
investment.
Performance
Performance information for the investment divisions may appear in
reports and advertising to current and prospective Owners. The
performance information is based on historical investment experience
of the investment division and the Funds and does not indicate or
represent future performance.
Total return quotations reflect changes in Fund share price, the
automatic reinvestment by the Separate Account of all distributions
and the deduction of the Mortality and Expense Risk charge. The
quotations will not reflect deductions from premiums (the sales charge,
premium tax charge, and any per premium expense charge), the
monthly deduction from the Contract Fund (the expense charge, the
cost of insurance charge, and any charges for additional benefits), the
Surrender Charge, or other transaction charges. Therefore, these
returns do not show how actual investment performance will affect
Contract benefits.
A cumulative total return reflects performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative
total return if the performance had been constant over the entire period.
Because average annual total returns tend to smooth out variations in
an investment division's returns, You should recognize that they are
not the same as actual year-by-year results.
Midland may also advertise performance figures for the investment
divisions based on the performance of a Portfolio prior to the time the
Separate Account commenced operations.
Midland may also provide individual hypothetical illustrations of
Contract Fund Value, Cash Surrender Value, and Death Benefit based
on historical investment returns of the Funds. The illustrations will
reflect the deductions of expenses in the Funds and the deduction of
Contract charges, including the Mortality and Expense Risk Charge,
the deductions from premiums, the monthly deduction from the
Contract Fund and the Surrender Charge. The illustrations do not
indicate what contract benefits will be in the future.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE UNIVERSAL LIFE 3
THE COMPANY THAT ISSUES VARIABLE UNIVERSAL LIFE 3
Midland National Life Insurance Company
We are Midland National Life Insurance Company, a stock life
insurance company. Midland was organized in 1906 in South Dakota
as a mutual life insurance company at that time named "The Dakota
Mutual Life Insurance Company". We were reincorporated as a stock
life insurance company in 1909. Our name "Midland" was adopted in
1925. We are licensed to do business in 49 states, the District of
Columbia, and Puerto Rico.
Our Parent
Midland is a subsidiary of Sammons Enterprises, Inc., Dallas, Texas.
Sammons has controlling or substantial stock interests in a large
number of other companies engaged in the areas of insurance,
corporate services, and industrial distribution.
THE FEATURES OF VARIABLE UNIVERSAL LIFE 3
This prospectus describes Our regular Variable Universal Life 3
contract. There may be differences because of requirements of the state
where Your contract is issued, which will be included in Your
contract.
How Variable Universal Life 3 Differs From Whole Life Insurance
Variable Universal Life 3 is designed to provide insurance coverage
with flexibility in death benefits and premium payments. It is different
from traditional whole life insurance in that You are not required to
pay scheduled premiums and may, within limits, choose the amount
and frequency of premium payments. However, paying scheduled
premiums may not prevent the Variable Universal Life 3 contract from
lapsing. Variable Universal Life 3 also provides for two different types
of insurance benefit options. You may switch back and forth between
these options. Another feature of Variable Universal Life 3 which is
not available under traditional whole life insurance is Your ability to
increase or decrease the Specified Amount without purchasing a new
contract. However, evidence of insurability may be required. The built-
in flexibilities of Variable Universal Life 3 enable You to respond to
changes in lifestyle and take advantage of favorable financial
conditions.
Death Benefits
We pay a benefit (net of indebtedness) to the beneficiary of this
contract when the Insured Person dies. As the Owner, You may choose
from two death benefit options: Option 1 and Option 2.
Option 1 provides a benefit that equals the Specified Amount of the
contract. Except as described below, the Option 1 benefit is fixed.
Owners who prefer to have insurance coverage that does not vary in
amount and lower cost of insurance charges should choose Option 1.
Option 2 provides a benefit that equals the Specified Amount of the
contract plus the amount in Your Contract Fund on the day the Insured
Person dies. Under Option 2, the value of the benefit is variable and
fluctuates with the amount in Your Contract Fund. Owners who prefer
to have investment experience reflected in the amount of their
insurance coverage should choose Option 2.
Under both options, a provision of the federal tax law may require a
greater benefit than the option selected. This benefit is a corridor
percentage multiple of the amount in Your Contract Fund. The
corridor percentage declines as the Insured Person gets older. The
benefit will be the amount in Your Contract Fund on the day the
Insured Person dies times the percentage for the attained age (last
birthday) at the beginning of the Contract Year of the Insured Person's
death. The percentages are in the following table:
Table of Death Benefits
Based on Contract Fund Value
The Death The Death
Benefit Will Benefit Will
Be At Least Be At Least
If The Equal To If The Equal To
Insured This Percent Insured This Percent
Person's of The Person's of The
Age Is Contract Fund Age Is Contract Fund
0-40 250% 60 130%
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
95-99 100
These percentages are based on provisions of federal tax law which
require a minimum death benefit in relation to cash value for Your
contract to qualify as life insurance.
For example, assume the insured person is 55 years old and the
Specified Amount is $100,000. Under Option 1, the death benefit will
generally be $100,000. However, when the Contract Fund is greater
than $66,666.67, the corridor percentage applies. In this case, age 55,
the factor We multiply with the Contract Fund is 150 percent. If the
Contract Fund was $70,000 the death benefit at that time would be
$105,000.
Under Option 2, the death benefit is the Specified Amount, $100,000
in the example, plus the Contract Fund. If the contract on this 55-year-
old insured person had a Contract Fund greater than $200,000, the
corridor percentage applies.
Under either option, the length of time Your contract remains in force
depends on the Net Cash Surrender Value of Your contract and, during
the Minimum Premium Period, Whether YouYour ability to meet the
minimum premium requirements. Because the charges that maintain
Your contract are deducted from Your Contract Fund, Your coverage
will last as long as Your Net Cash Surrender Value (the amount in
Your Contract Fund minus the Surrender Charge and any outstanding
loan and loan interest) can cover these deductions. However, during
the Minimum Premium Period, Your contract will remain in-force
provided the sum of the premiums You have paid less any loans or
withdrawals taken exceeds the total sum of all monthly minimum
premiums for all contract months the contract has been in-force.as long
as You pay premiums more than the sum of monthly minimum
premiums to that Contract Date, the contract will remain in force.
The investment experience of any amounts in the investment divisions
of Our Separate Account and the interest earned on any amounts in the
General Account will affect the amount in Your Contract Fund. As a
result, the returns from these investment options will affect the length
of time Your contract remains in force.
The minimum Specified Amount at issue is $50,000. For issue ages 0
to 14, the minimum is $25,000. For Insured Persons age 20 to 44 at
issue and in the preferred non-smoker rate class the minimum
Specified Amount is $100,000. The maximum issue age is 80.
Maturity Benefit
If the Insured Person is still living on the Maturity Date, We will pay
You the amount in the Contract Fund net of loans. This contract will
then end.
Changes In Variable Universal Life 3
Variable Universal Life 3 provides You the flexibility to choose from a
variety of strategies, described in the sections that follow, which
enable You to increase or decrease Your insurance protection.
A reduction in Specified Amount lessens emphasis on the contract's
insurance coverage by reducing both the death benefit and the amount
at risk (the difference between Contract Fund and death benefit). The
reduced amount at risk results in lower cost of insurance deductions
from the Contract Fund. A partial withdrawal reduces the Contract
Fund and death benefit, while providing You with a cash payment, but
does not reduce the amount at risk. Choosing not to make premium
payments may have the effect of reducing the Contract Fund.
Reducing the Contract Fund will, under Option 1, increase the amount
at risk (and therefore increase the cost of insurance deductions) while
leaving the death benefit unchanged; under Option 2, it will decrease
the death benefit while leaving the amount at risk unchanged.
Increases in the Specified Amount emphasize insurance coverage by
increasing both the death benefit and the amount at risk. Additional
premium payments may increase the Contract Fund, which has the
effect, under Option 1, of reducing the amount at risk while leaving the
death benefit unchanged, or under Option 2, of increasing the death
benefit while leaving the amount at risk unchanged.
Changing The Specified Amount of Insurance
Any time after Your contract is issued, You may change its Specified
Amount. You may do this by sending a written request to Our Home
Office. You are limited to two changes in Specified Amount each
Contract Year. Any change will be subject to Our approval and the
following conditions:
If You increase the Specified Amount, You must provide satisfactory
evidence that the Insured Person is still insurable. Our current
procedure, if the Insured Person has become a more expensive risk, is
to charge higher cost of insurance charges for the additional amounts
of insurance.
Any increase must be at least $25,000. Monthly deductions from Your
Contract Fund for the cost of insurance will increase, beginning on the
date the increase in the Specified Amount takes effect. An increase in
Specified Amount will also result in an increase in Surrender Charges.
The rights to examine and exchange this contract which apply at issue
do not apply to increases in Specified Amount.
If You reduce the Specified Amount You may not reduce it below the
minimum We require to issue this contract at the time of the reduction.
Monthly deductions from Your Contract Fund for the cost of insurance
will decrease.
If You request a decrease in Specified Amount, it may be limited by
federal tax law. In such a case, Your new death benefit will be Your
Contract Fund multiplied by the corridor percentage the federal tax law
specifies for the Insured's age at the time of the change.
Our current procedure, if You request a Specified Amount decrease
when an increased Specified Amount is at substandard (i.e., higher)
risk charges and the original Specified Amount was at standard risk
charges, is to first decrease the Specified Amount that is at substandard
risk charges.
Automatic Benefit Increase Provision
The Automatic Benefit Increase (ABI) Provision provides for increases
to Your face amount of insurance to keep pace with inflation. The ABI
provision is included on all standard issues of regularly underwritten
policies where the issue age of the primary insured is 55 or younger
and where the billing mode is not military government allotment nor
civil service allotment nor list bill.
The Increase Dates begin on the second Contract Anniversary and
occur every two years after they begin until this rider terminates. At
least 30 days before the Increase Date, We will send a notice to You
regarding the amounts of increase. The Cost of Living Rider policy
form specifies the conditions under which this provision can be
terminated. You have the right to reject any increase in specified
amount by sending Us a notice before it becomes effective. If You
reject any such increase, the ABI provision will terminate. (See Your
Cost of Living Rider policy form for exact details.)
The exact amount of increase to the specified amount of insurance will
be calculated as follows:
a. The Eligible Specified Amount (unless the ABI provision has
terminated, this is the sum of the portions of the specified amount of
insurance that are in the Non-smoker, Ordinary or Preferred Premium
Class) times
b. The Consumer Price Index five months before such Increase
Date divided by
c. The Consumer Price Index 29 months before such Increase Date
minus the Eligible Specified Amount from part a.
The maximum amount of any increase is $50,000 or 20% of the eligible
specified amount, whichever is less. Once the total of all increases
provided by this provision exceeds two times the initial specified amount
of insurance, the ABI provision will automatically terminate.
The Consumer Price Index is the U.S. Consumer Price Index for All
Urban Consumers as published by the U.S. Department of Labor. (See
Your policy form for more details on this index.)
The Automatic Benefit Increase (ABI) Provision does not require
separate monthly charges, but it does affect the amount of Your
monthly cost of insurance charge by increasing Your specified
insurance amount. (See Deductions From Your Contract Fund on page
17 for more details.)
The ABI increases will increase the planned and minimum premiums.
(See Your Cost of Living Rider Policy Form and your base contract
policy form for exact details.)
Changing Your Death Benefit Option
You may change Your death benefit option by sending a written
request to our Home Office. We will require satisfactory evidence of
the Insured Person's insurability to make this change.
If You change from Option 1 to Option 2, the Specified Amount will
be decreased by the amount in Your Contract Fund on the date of the
change. We may not allow such a change if it would reduce the
Specified Amount below the minimum We require to issue this
contract at the time of the reduction.
If You change from Option 2 to Option 1, the Specified Amount of
insurance will be increased by the amount in the Contract Fund on the
date of the change. These increases and decreases in Specified Amount
are made so that the amount of the death benefit remains the same on
the date of the change. When the death benefit remains the same, there
is no change in the net amount at risk, which is the amount on which
Your cost of insurance charges are based.
When Contract Changes Go Into Effect
Any changes in the Specified Amount or death benefit option of Your
contract will go into effect on the Monthly Anniversary following the
date We approve Your request for the change. After Your request is
approved, You will receive a written notice of the approval showing
each change. You should attach this notice to Your contract. We may
also ask You to return Your contract to us at our Home Office so that
We can make a change.
In some cases, We may not approve a change You request because it
might disqualify Your contract as life insurance under applicable
federal tax law. We will send You a written notice of Our decision
about making the change.
Contract changes may have adverse tax consequences. See "TAX
EFFECTS" on page 25.
Flexible Premium Payments
You may choose the amount and frequency of premium payments, as
long as they are within the limits described below. You may specify
the frequency to be on a quarterly, semi-annual or annual basis.
Planned periodic premiums may also be monthly if paid by pre-
authorized check or premiums may be paid bi-weekly if paid by Civil
Service Allotment.
Even though Your premiums are flexible, the contract information
page of Your contract will show a "planned" periodic premium. The
planned premium is determined by You within limits set by Us when
You apply for the contract and is not necessarily designed to equal the
amount of premiums that will keep Your contract in effect. Planned
premiums are generally the amount You decide You want to pay and
You can change them at any time. Payment of the planned premiums
does not guarantee that Your contract will stay in force, so additional
premium payments may be necessary. The planned premium will
increase for any increases in specified amounts of insurance, including
increases resulting from the Automatic Benefit Increase Provision.
(See ABI Provision on page 11 for details on how and when the
increases are applied.)
You must pay a minimum initial premium on or before the date on
which the contract is delivered to You. The insurance will not go into
effect until We receive this minimum initial premium. We determine
the applicable minimum initial premium based on the age, sex, and
premium class of the Insured Person, the initial Specified Amount of
the contract and any additional benefits selected. Your first premium
payment may be by Your check or money order payable to Midland.
Any additional premiums should be payable to Midland and should be
sent directly to Our Home Office.
We will send You premium reminder notices based on Your planned
premium. You may make the planned payment, skip the planned
payment, or change the frequency or the amount of the payment.
Generally, You may pay other premiums at any time. Amounts must
be at least $50 or may be $30 through a monthly automatic payment
plan.
You may send Us a premium payment that would cause Your contract
to cease to qualify as life insurance under federal tax law. If so, We
will notify You and return to You the portion of the premium that
would cause the disqualification.
Premium Provisions During The Minimum Premium Period
During the Minimum Premium Period, Your contract may be kept in
force by meeting a minimum premium requirement. Except for
contracts issued in Massachusetts or Pennsylvania, the Minimum
Premium Period lasts until the later of the fifth Contract Anniversary
or the insured person attaining age 70. A monthly minimum premium
is shown on the Contract Information page of Your contract. The
minimum premium will increase for any increases in specified
amounts of insurance including increases resulting from the Automatic
Benefit Increase provision. (See the ABI Provision on page 11 for
details on how and when the increases are applied.) The minimum
premium requirement will be satisfied if the sum of premiums You
have paid less any loans or withdrawals you have taken exceeds a total
equal to the sum of these monthly minimums had they been paid each
month the contract was In Force.
If You stop paying premiums during the Minimum Premium Period,
Your contract will continue in effect until both of two conditions are
true: The Net Cash Surrender Value can no longer cover the monthly
deductions from Your Contract Fund for the benefits selected; and, the
total premiums You have paid are less than the total monthly
minimum premiums required to that date.
Premium Provisions Beyond The Minimum Premium Period
Beyond the Minimum Premium Period, Your contract will lapse if the
Net Cash Surrender Value can no longer cover the monthly deductions
from Your Contract Fund for the benefits selected. You should note
that Your planned premiums may not be sufficient to maintain Your
contract because of investment experience, contract changes, or other
factors. Therefore, premiums in addition to the planned premiums may
be necessary to keep Your contract in force.
Allocation of Premiums
Each net premium, except any premium received before the Record
Date, will be allocated to Our Separate Account or General Account on
the day We receive Your premium.
After the sales charge, the premium tax charge and any expense
charges are deducted from each of Your premiums, the balance, called
Your net premium, is put into Your Contract Fund. Net premiums may
be allocated to Our General Account or to one or more of the
investment divisions of Our Separate Account according to the
directions You provided on Your contract application. These
instructions will apply to any subsequent premiums You pay until You
write to Our Home Office with new instructions. Allocation
percentages may be any whole number from 10 to 100, but the sum
must equal 100. You may choose not to allocate any premium to any
particular investment division. You may not have Your Contract Fund
allocated to more than ten investment divisions of Our Separate
Account at any one point in time. See "THE GENERAL ACCOUNT"
on page 23.
Any premium received before the Record Date will be held in the
General Account from the day We receive it until the day after the
Record Date and will earn interest during this period. When this period
has expired, the premium received prior to the Record Date and any
interest earned during the period will be allocated to the investment
divisions of Our Separate Account and the General Account according
to the instructions You have given Us.
Additional Benefits May Be Available
Your contract may include additional benefits. A charge will be
deducted from Your Contract Fund monthly for certain additional
benefits You choose. You may cancel these benefits at any time. More
details will be included in Your contract if You choose any of these
benefits. The following additional benefits are currently available:
Disability Waiver Benefit. With this benefit, We waive monthly
charges from the Contract Fund if the Insured Person becomes totally
disabled on or after the Insured Person's fifteenth birthday and the
disability continues for six months. If the disability starts before the
Contract Anniversary following the Insured Person's 65th birthday, We
will waive monthly deductions for life as long as the disability
continues.
Monthly Disability Benefit. With this benefit, We will pay into your
Contract Fund an amount on Your Contract Information page. The
benefit is payable when the Insured Person becomes totally disabled
on or after the Insured Person's fifteenth birthday and the disability
continues for six months. Disability must start before the Contract
Anniversary following the Insured Person's 65th birthday. The benefit
will continue until the Insured Person is age 65. If the amount of
benefit paid into the Contract Fund exceeds the amount allowed by
Federal Guidelines, the monthly benefit will be paid to the Insured
Person.
Accidental Death Benefit. We will pay an additional benefit if the
Insured Person dies from bodily injury that results from an accident,
provided the Insured Person dies before the Contract Anniversary
nearest his or her 70th birthday.
Children's Insurance Rider. This benefit provides term life insurance
on the lives of the Insured Person's children, including natural
children, stepchildren, and legally adopted children, between the ages
of 15 days and 21 years. They are covered only until the Insured
Person reaches age 65 or the child reaches age 25.
Family Insurance Rider. This benefit provides term life insurance on
the Insured Person's children as does the Children's Term Insurance. It
also provides decreasing term life insurance on the Insured's spouse.
Additional Insured Rider. You may provide term insurance for another
person, such as the Insured Person's spouse, under Your contract. A
separate charge will be deducted for each additional insured.
Guaranteed Insurability Rider. This benefit provides for the issuance of
additional amounts of insurance without further evidence of
insurability.
Cost of Living Rider. This benefit provides for limited annual
increases in the amount of insurance.
Living Needs Rider. This benefit provides an accelerated death benefit
as payment of an "Advanced Sum," in the event the Insured Person is
expected to die within 12 months.
You choose the amount of the Death Benefit to accelerate at the time
of the claim. The Maximum Advanced Sum is 50% of the Eligible
Death Benefit (which is the death benefit of the contract plus the sum
of any additional death benefits on the life of the Insured Person
provided by any Eligible Riders) currently subject to a maximum of
$250,000 and a minimum of $5,000.
There is no charge for this benefit prior to the time of a payment. The
amount of the Advanced Sum paid is reduced by expected future
interest and may be reduced by a charge for administrative expenses.
On the day We pay the accelerated benefit, We will reduce the
following in proportion to the reduction in the Eligible Death Benefit:
a. the death benefit of the Contract and of each Eligible Rider
b. the Specified Amount
c. any contract values
d. any outstanding loan
When We reduce the Contract Fund, We will allocate the reduction
based on the proportion that Your unloaned amounts in the General
Account and Your amounts in the Investment Divisions of Our
Separate Account bear to the total unloaned value of Your Contract
Fund.
Pursuant to the recently enacted Health Insurance Portability and
Accountability Act of 1996, We believe that for federal income tax
purposes an Advanced Sum payment made under the Living Needs
Rider should be fully excludable from the gross income of the
beneficiary, as long as the beneficiary is the Insured Person under the
contract. However, You should consult a qualified tax adviser about
the consequences of adding this Rider to a contract or requesting an
Advanced Sum payment under this Rider.
SEPARATE ACCOUNT INVESTMENT CHOICES
Our Separate Account And Its Investment Divisions
The Separate Account is Our Separate Account A, established under
the Insurance Laws of the State of South Dakota, and is a unit
investment trust registered with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940. Our
Separate Account A meets the definition of a 'separate account' under
the Federal securities laws but this registration does not involve any
supervision by the SEC of the management or investment contracts of
the Separate Account. A unit investment trust is a type of investment
company. The Separate Account has a number of investment divisions,
each of which invests in shares of a corresponding portfolio of the
Funds. You may allocate part or all of Your net premiums to no more
than ten of the seventeen investment divisions of Our Separate
Account. Our Separate Account divisions invest in the VIP Money
Market Portfolio, the VIP High Income Portfolio, the VIP Equity-
Income Portfolio, the VIP Growth Portfolio, the VIP II Asset Manager
Portfolio, the VIP Overseas Portfolio, the VIP II Investment Grade
Bond Portfolio, the VIP II Contrafund Portfolio, the VIP II Asset
Manager: Growth Portfolio the VIP Index 500 Portfolio, VIP III
Growth & Income Portfolio, VIP III Balanced Portfolio, VIP III
Growth Opportunities Portfolio, ACVP Capital Appreciation Portfolio,
ACVP Value Portfolio, ACVP Balanced Portfolio, and ACVP
International Portfolio.
The Funds
Fidelity's Variable Insurance Products Fund, Fidelity's Variable
Insurance Products Fund II, Fidelity's Variable Insurance Products
Fund III, and the American Century Variable Portfolios, Inc. are open-
end diversified management investment companies, more commonly
called mutual funds. As "series" types of mutual funds, they issue
several different "series" of portfolios. The Funds' shares are bought
and sold by Our Separate Account at net asset value. More detailed
information about the Funds and their investment objectives, policies,
risks, expenses and all other aspects of their operations, appears in
their prospectus, which accompanies this prospectuses, and in the
Funds' Statement of Additional Information.
The Funds sell their shares to separate accounts of various insurance
companies to support both variable life insurance contracts and
variable annuity contracts. We currently do not foresee any
disadvantages to Our owners arising out of this. If We believe that the
Funds do not sufficiently respond to protect Our owner's interests, We
will see to it that appropriate action is taken to protect Our owners.
The Funds will also monitor this possibility. Also, if We ever believe
that any of the Funds' portfolios are so large as to materially impair its
investment performance of a portfolio or the Fund, We will examine
other investment options.
Midland may from time to time receive revenue from Fidelity
Management & Research Company and/or American Century
Investment Management, Inc. The amounts of the revenue, if any, may
be based on the amount of investments by Midland contained in the
Funds.
Investment Policies Of The Funds' Portfolios
Each portfolio has a different investment objective which it tries to
achieve by following separate investment policies. The objectives and
policies of each portfolio will affect its return and its risks. Remember
that the investment experience of the investment divisions of Our
Separate Account depends on the performance of the corresponding
Funds' portfolios. American Century Investment Management, Inc.
serves as the Investment Advisor for American Century Variable
Portfolios and Fidelity Management & Research Company serves as
the Investment Advisor for Fidelity's VIP, VIP II, and VIP III Funds.
The objectives of the Funds' portfolios are as follows:
Portfolio
Objective
VIP Money Market
Seeks to earn aobtain as high a level of current income as is
consistent with preserving capital and providing liquidity by investing
in high quality money market instruments. (An investment in the Money
Market or any other Portfolio is neither insured nor guaranteed by the
U.S. Government, and there is no assurance that the Money Market
Portfolio will be able to maintain a constant net asset value.)
VIP High
Income
Seeks to obtain a high level of current income by investing primarily
in high-yielding, lower-rated, fixed-income securities, while also
considering growth of capital. For a description of the special risks
involved in investing in these securities, see the prospectus for the
Funds.
VIP Equity-Income
Seeks to obtain reasonable income by investing primarily in income-
producing equity securities. In choosing these securities, the Manager
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500
Stocks.
VIP Growth
Seeks to achieve capital appreciation by investing in common stocks,
normally through the purchase of common stocks, although the
Portfolio's investments are not restricted to any one type of security.
Capital appreciation also may be found in other types of securities,
including bonds and preferred stocks.
VIP Overseas
Seeks long-term growth of capital, primarily through investments in
foreign securities.
VIP II Asset Manager
Seeks high total return with reduced risk over the long-term by
allocating its assets among domestic and foreign stocks, bonds and
short-term money marketfixed-income instruments.
VIP II
Investment
Grade Bond
Seeks as high a level of current income as is consistent with the
preservation of capital by investing in a broad range of investment
grade fixed income securities.
VIP II
Contrafund
Seeks to achieve capital appreciation over the long term by investing
in securities of companies whose value the manager believes is not
recognized fully by the publicthat are undervalued or out-of-favor.
VIP II
Asset Manager:
Growth
Seeks to maximize total return over the long term through investments
in stocks, bonds, and short-term instruments. This portfolio has a
heavier emphasis on stocks than the Asset Manager Portfolio.
VIP II
Index 500
Seeks to provide investment results that correspond to the total return
of common stocks publicly traded in the United States by duplicating
the composition and total return of the Standard & Poor's Composite
Index of 500 Stocks. This is designed as a long-term investment
option.
VIP III Growth & Income
Seeks high total return, combining current income and capital
appreciation. Invests mainly in stocks that pay current dividends and
show earnings potential.
VIP III Balanced
Seeks to balance the growth potential of stocks with the possible
income cushion of bonds. Invests in broad selection of stocks, bonds
and convertible securities.
VIP III Growth Opportunities
Seeks long-term growth of capital. Invests primarily in common stocks
and securities convertible into common stocks, but it has the ability to
purchase other securities such as preferred stocks and bonds that may
produce capital growth.adjusts its mix between growth, value, cyclical
and other securities to take advantage of attractive valuations.
American Century VP Capital Appreciation
Seeks capital growth by investing primarily in common stocks that
management considers to have better-than-average prospects for
appreciation.
American Century VP Value
Seeks long-term capital growth with income as a secondary objective.
Invests primarily in equity securities of well-established companies
that management believes to be under-valued.
American Century VP Balanced
Seeks capital growth and current income. Invests approximately 60
percent of its assets in commongrowth stocks that management
considers to have better than average potential for appreciation and the
rest in fixed income securities.
American Century VP International
Seeks capital growth by investing primarily in securities of foreign
companies that management believes to have potential for
appreciation.
We Own The Assets Of Our Separate Account
Under South Dakota law, We own the assets of Our Separate Account
and use them to support Your contract and other variable life contracts.
Under certain unlikely circumstances, one investment division of the
Separate Account may be liable for claims relating to the operations of
another division. We may also permit charges owed to Us to stay in
the Separate Account. Thus, We may also participate proportionately
in the Separate Account. These accumulated amounts belong to Us and
We may transfer them from the Separate Account to Our General
Account. Under certain unlikely circumstances, one investment
division of the Separate Account may be liable for claims relating to
the operations of another division.
Our Right To Change How We Operate Our Separate Account
In addition to changing or adding funds or portfoliosinvestment
companies, We have the right to modify how We or Our Separate
Account operate. We intend to comply with applicable law in making
any changes and, if necessary, We will seek contractowner approval.
We have the right to:
add investment divisions to, or remove investment divisions from, Our
Separate Account, combine two or more divisions within Our Separate
Account, or withdraw assets relating to Variable Universal Life 3 from
one investment division and put them into another;
eliminate the shares of the portfolio and substitute shares of another
portfolio of the Funds or another open-end, registered investment
company, if the shares of the portfolio are no longer available for
investment or, if in Our judgment, further investment in the portfolio
should become inappropriate in view of the purposes of Separate
Account A;
register or end the registration of Our Separate Account under the
Investment Company Act of 1940;
operate Our Separate Account under the direction of a committee or
discharge such a committee at any time (the committee may be
composed entirely of persons who are "interested persons" of Midland
under the Investment Company Act of 1940);
disregard instructions from contractowners that would otherwise
require that a Fund's shares be voted so as to cause a change in the
investment objectives of the Portfolio of a Fund or approval or
disapproval of an investment advisory policy for the Portfolio of a
Fund. We would do so only if required by state insurance regulatory
authorities pursuant to insurance law or regulation; or
operate Our Separate Account or one or more of the investment
divisions in any other form the law allows, including a form that
allows Us to make direct investments. We may make any legal
investments We wish. In choosing these investments, We will rely on
Our own or outside counsel for advice. In addition, We may
disapprove any change in investment advisers or in investment
contract unless a law or regulation provides differently.
If any changes are made that result in a material change in the
underlying investments of any investment division, You will be
notified. We may, for example, cause the investment division to invest
in a mutual fund other than or in addition to the current Funds.
If You then wish to transfer the amount You have in that investment
division to another division of Our Separate Account, or to Our
General Account, You may do so, without charge, by writing to Our
Home Office. At the same time, You may also change how Your net
premiums and deductions are allocated.
DEDUCTIONS AND CHARGES
Charges Against The Separate Account
The amount in Your Contract Fund, which can be allocated to as many
as ten investment divisions of Our Separate Account, will be reduced
by any fees and charges allocated to the investment divisions of Our
Separate Account.
Mortality and Expense Risks. We make a charge for assuming
mortality and expense risks. We guarantee that monthly administrative
and insurance deductions from Your Contract Fund will never be
greater than the maximum amounts shown in Your contract. The
mortality risk We assume is that Insured Persons will live for shorter
periods than We estimated. When this happens, We have to pay a
greater amount of death benefits than We expected to in relation to the
cost of insurance charges We received. The expense risk We assume is
that the cost of issuing and administering contracts will be greater than
We expected. We make a charge for mortality and expense risks at an
effective annual rate of 0.90% of the value of the assets in the Separate
Account attributable to Variable Universal Life 3. Currently We intend
to reduce this charge to 0.50% after the tenth Contract Year (but We
are not obligated to and might not do so). This charge is reflected in
the Accumulation Unit values for the investment divisions of the
Separate Account. See "Your Contract Fund Value -How We
Determine The Accumulation Unit Value" on page 20. If the money
We collect from this charge is not needed, it will be to Our gain, and
We expect a profit from this charge. To the extent sales expenses are
not covered by the sales charge and the Deferred Sales Charge, Our
General Account funds, which may include amounts derived from this
mortality and expense risk charge, will be used to cover sales
expenses.
Tax Reserve. We reserve the right to make a charge in the future for
taxes or reserves set aside for taxes, which if made will reduce the
investment experience of the investment divisions of Our Separate
Account. Currently no such charge is made.
Charges In The Funds
The Funds make a charge for managing investments and providing
services. These charges vary by portfolio.
The VIP, the VIP II, and the VIP III Portfolios have an annual
management fee that is the sum of an individual fund fee rate, and a
group fee rate which is based on the monthly average net assets of the
mutual funds advised by Fidelity Management & Research Company.
In addition, each of these portfolios' total operating expenses will
include fees for management, shareholder services and other expenses,
such as custodial, legal, accounting and other miscellaneous fees. See
the VIP, VIP II and VIP III prospectus for additional information on
how these charges are determined and on the minimum and maximum
charges allowed. All expenses for the year ending December 31,
19971996 are shown in the table below.
The American Century Variable Portfolios have annual management
fees that are based on the monthly average of the net assets in each of
the portfolios. See the American Century Variable Portfolios
prospectus for details. The expenses for the year ending December 31,
19971996 are shown in the table below.
Management Other Total
Portfolio Fee Expenses Expenses
VIP Money Market .21% .10.09% .31.30%
VIP High Income .59% .12% .71%
VIP Equity-Income(1) .50.51% .08.07% .58%
VIP Growth(1) .60.61% .09.08% .69%
VIP Overseas(1) .75.76% .17% .92.93%
VIP II Investment
Grade Bond .44.45% .14.13% .58%
VIP II Asset Manager(1) .55.64% .10% .65.74%
VIP II Index 500(2) .24.13% .04.15% .28%
VIP II Contrafund(1) .60.61% .11.13% .71.74%
VIP II Asset
Manager: Growth(1) .60.65% .17.22% .77.87%
VIP III Balanced(1) .45.48% .16.24% .61.72%
VIP III Growth
Opportunities(1) .60.61% .14.16% .74.77%
VIP III Growth
& Income .49.50% .21.50% .701.00%
American Century VP
Capital Appreciation 1.00% .00% 1.00%
American Century VP
Balanced 1.00% .00% 1.00%
American Century VP
Value 1.00% .00% 1.00%
American Century VP
International 1.50% .00% 1.50%
(1) A portion of the brokerage commissions the portfolio paid was
used to reduce its expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian and transfer agent expenses. Including these reductions, total
operating expenses would have been as follows:
VIP Equity-Income 0.57%
VIP Growth 0.67%
VIP Overseas 0.90%
VIP II Asset Manager 0.64%
VIP II Contrafund 0.78%
VIP II Asset Manager: Growth 0.76%
VIP III Balanced 0.60%
VIP III Growth Opportunities 0.73%
(2) The portfolio's expenses were voluntarily reduced by the Fund's
investment advisor. Absent reimbursement, the management fee, other
expenses, and total expenses for the VIP II Index 500 would have been
0.27%, 0.13% and 0.40% respectively.
Deductions From Your Premiums
We deduct a sales charge of 4% from each premium payment. This
charge is to partially reimburse Us for the costs incurred in selling and
distributing this contract, including commissions, the cost of preparing
sales literature and printing of prospectuses. A Deferred Sales Charge
will also be deductedincurred if You give up Your contract for its Net
Cash Surrender Value or let Your contract lapse. See Surrender Charge
on page 18.
A 2.5% charge for premium taxes is also deducted from all of Your
premiums and $.46 is deducted from each premium payment if You
have chosen the Civil Service Allotment Mode. The rest of each
premium (the net premium) is placed in Your Contract Fund. If the
premium tax We incur on any premium is less than 2.5%, We may
reduce the charge for premium taxes on that premium.
The $.46 deducted from each premium payment under the Civil
Service Allotment Mode is intended to cover the extra expenses We
incur in processing bi-weekly premium payments.
Applicable Taxes. All states and certain jurisdictions (cities, counties,
municipalities) tax premium payments and some levy other charges.
Currently, as indicated above, We deduct a charge of 2.5% of each
premium for these. These tax rates currently range from 0.75% to 4%.
Because of certain retaliatory provisions in the premium tax
regulations, We expect to pay at least 2.5% of mosteach premiums in
premium tax. If We pay less, We may reduct the charge for that
premium.
This is a tax to Midland so You cannot deduct it on Your income tax
return. Since the charge is a percentage of Your premium, the amount
of the charge will also vary with the amount of the premium.
We may increase this charge at any time if Our premium tax expenses
increase and We reserve the right to vary this charge by state. If We
make such a change, We will notify You.
Deductions From Your Contract Fund
At the beginning of each Contract Month (including the Contract
Date), the following three Contract Fund charges are deducted from
Your Contract Fund.
1. Expense Charge. This charge is $7.00 per month (currently We plan
to make this deduction for the first 15 years only, but we reserve the
right to deduct it throughout the life of the contract). This charge is
designed to cover the continuing costs of maintaining Your contract,
such as premium billing and collections, claim processing, contract
transactions, recordkeeping, communications with owners and other
expense and overhead items.
2. Charges for Additional Benefits. The cost for any additional benefits
You choose will be deducted monthly. We may change these charges,
but Your contract contains tables showing the guaranteed maximum
rates for all of these insurance costs.
3. Cost of Insurance Charge. The cost of insurance is Our current
monthly cost of insurance rate times the amount at risk at the
beginning of the Contract Month. Amount at risk is the difference
between the current death benefit and the amount in Your Contract
Fund. If the current death benefit for the month is increased due to the
requirements of federal tax law, Your amount at risk for the month will
also increase. For this purpose the amount in Your Contract Fund is
determined before deduction of the cost of insurance charge but after
all of the other deductions due on that date. The amount of the cost of
insurance charge will vary from month to month with changes in the
amount at risk and with increasing attained age of the Insured Person.
The cost of insurance rate is based on the sex, attained age, and rating
class of the Insured Person at the time of the charge. We currently
place the Insured Person that is a standard risk in the following rate
classes: preferred non-smoker, non-smoker, and smoker. The Insured
Person may also be placed in a rate class involving a higher mortality
risk, known as a substandard class. We may change the cost of
insurance rates from time to time, but they will never be more than the
guaranteed maximum rates set forth in Your contract. The maximum
charges are based on the charges specified in the Commissioner's 1980
Standard Ordinary Mortality Table. The table below shows the current
and guaranteed maximum monthly cost of insurance rates per $1,000
of amount at risk for a male preferred nonsmoker standard risk at
various ages. In Montana, there will be no distinctions based on sex.
Employers and employee organizations should consider, in
consultation with counsel, the impact of Title VII of the Civil Rights
Act of 1964 on the purchase of Variable Universal Life 3 in connection
with an employment-related insurance or benefit plan. The United
States Supreme Court held, in a 1983 decision, that under Title VII,
optional annuity benefits under a deferred compensation plan could not
vary on the basis of sex.
Illustrative Table of Monthly Cost of Insurance Rates (Rounded) per
$1,000 of Amount at Risk
Male Guaranteed Current
Attained Maximum (Preferred Non-Smoker)
Age Rate Rate
5 $.07 $.05
15 .11 .11
25 .13 .09
35 .14 .10
45 .29 .23
55 .69 .39
65 1.87 1.01
For a male preferred non-smoker, age 35, with a $100,000 Specified
Amount Option 1 contract and an initial premium of $1,000, the cost
of insurance for the first month will be $9.91. This example assumes
the expense charge ($7.00 per month) and current cost of insurance
rate ($.10 per $1,000).
We offer lower current cost of insurance rates at most ages for insured
people who qualify as non-smokers. To qualify, an insured must be a
standard risk and must meet additional requirements that relate to
smoking habitsThe reduced cost of insurance rates depend on such
variables as the attained age and sex of the insured.
The preferred non-smoker cost of insurance rates are lower than the
non-smoker cost of insurance rates. To qualify for the preferred non-
smoker class, the Insured Person must be age 20 or over and meet
certain underwriting requirements.
Changes in Monthly Charges. Any changes in the cost of insurance,
charges for additional benefits or expense charges will be by class of
insured and will be based on changes in future expectations about such
things as investment earnings, mortality, the length of time contracts
will remain in effect, expenses and taxes.
Automatic Benefit Increase Charges. There is no separate charge for
the Automatic Benefit Incrase (ABI) provision. However, as the
automatic increases are applied (see page 11 for exact details) the
specified amount of insurance will increase. The increase in specified
amount will cause the amount at risk to increase which will increase
the monthly cost of insurance charge over what would have been
charged without the increase.
Other Transaction Charges
In addition to the deductions described above, We charge fees for
certain contract transactions:
Partial Withdrawal of Net Cash Surrender Value. You may make one
partial withdrawal during each Contract Year without a charge. There
is an administrative charge of $25 or 2 percent of the amount
withdrawn, whichever is less, each time You make a partial
withdrawal if more than one withdrawal is made during a year.
Transfers. Currently, We do not charge when You make transfers of
Contract Fund value among investment divisions. We reserve the right
to assess a $25 charge after the twelfth transfer in a Contract Year.
How Contract Fund Charges Are Allocated
Generally, deductions from Your Contract Fund for monthly charges
or partial withdrawal charges are made from the investment divisions
of Our Separate Account and the unloaned portion of the General
Account in accordance with the deduction allocation percentages
specified by You in Your application unless You instruct Us to do
otherwise. Your allocation percentages for deductions may be any
whole numbers (from 10 to 100) which add up to one hundred. You
may change Your deduction allocation percentages by writing to Our
Home Office. Changes will be effective as of the date We receive
them.
If We cannot make a deduction in accordance with these percentages,
We will make it based on the proportion that Your unloaned amounts
in the General Account and Your amounts in the investment divisions
of Our Separate Account bear to the total unloaned value of Your
Contract Fund.
Deductions for transfer charges are allocated to the investment
divisions from which the transfer is being made in equal proportion to
such investment divisions. For example, if the transfer is made from
two investment divisions, the transfer charge allocated to each of the
investment divisions will be $12.50.
Surrender Charge
We incur various sales and promotional expenses in connection with
selling Variable Universal Life 3, such as commissions, the cost of
preparing sales literature, other promotional activities and other direct
and indirect distribution expenses. We also incur expenses for
underwriting, printing of contract forms and prospectuses, and putting
information in Our records.
There is a difference between the amount in Your Contract Fund and
the Cash Surrender Value of Your contract for the first 15 Contract
Years. This difference is the Surrender Charge, which is a contingent
deferred issue charge and sales load designed to partially recover Our
expenses in distributing and issuing contracts which are terminated by
surrender in their early years (the sales charge is also designed to
partially reimburse Us for these expenses). It is a contingent load
because You pay it only if You surrender Your contract (or let it lapse)
during the first 15 Contract Years. It is a deferred load because We do
not deduct it from Your premiums. The amount of the load in a
Contract Year is not necessarily related to Our actual sales expense in
that year. We anticipate that the sales charge and Surrender Charge
will not fully cover Our sales expenses. To the extent sales expenses
are not covered by the sales charge and Surrender Charge, We will
cover them from other funds including any funds in Our General
Account, which may include amounts derived from the mortality and
expense risk charge.
The Net Cash Surrender Value, which is the amount We pay You if
You surrender Your contract for cash, equals the Cash Surrender Value
minus any outstanding loan and loan interest.
In the first 15 Contract Years, You will incur a Surrender Charge if
You give up Your contract for its Net Cash Surrender Value, or let
Your contract lapse.
The Surrender Charge You pay includes Deferred Sales Charges and
Deferred Issue Charges. The Deferred Sales Charge is based on the
sum of two pieces.
The Deferred Sales Charge is:
26% of any premium payment in the first two Contract Years up to one
guideline annual premium.
5% of all other premium payments.
The sum of the above pieces is also limited by the Guideline Annual
Premium, times 5%, times the expected future lifetime at issue as
determined by the 1980 CSO Mortality Table or 20 years, whichever is
less.
The guideline annual premium varies for each contract. It is specified
on the contract information page of Your contract.
During the first ten contract years, the Deferred Sales Charge will be
100% of the sum of these two pieces or the maximum charge described
in the second preceding paragraph, whichever is less. Beginning in the
eleventh year, the sum or maximum will be multiplied by a percentage.
The percentage is 83.33% for year eleven, 66.67% for year twelve,
50% for year thirteen, 33.33% for year fourteen, and 16.67% for year
fifteen. After the 15th Contract Year, there is no Surrender Charge.
If there is an increase in Specified Amount (at any time), there will
also be an increase in the Guideline Annual Premium. All additions to
the Deferred Sales Charge due to this increase will be 5% of
premiums. The maximum limit will also increase by the additional
Guideline Annual Premium, times 5%, times the expected future
lifetime at the time of the increase as determined by the 1980 CSO
Mortality Table or 20 years, whichever is less. The total in the
Deferred Sales Charge prior to the increase in Specified Amount will
not be affected.
If there is a decrease in Specified Amount, there will also be a decrease
in Guideline Annual Premium. Future additions to the Deferred Sales
Charge will follow the same rules as at issue with the new Guideline
Annual Premium. Prior totals in the Deferred Sales Charge will not be
affected.
You will not incur any Deferred Sales Charge, regardless of the
amount and timing of premiums, if You keep this contract in force for
fifteen years.
The following table shows the Deferred Issue Charge which is a dollar
amount for each thousand dollars of the Specified Amount. After the
15th Contract Year, there is no Deferred Issue Charge.
Table of Deferred Issue Charges
Per Thousand of Specified Amount
Contract Contract Contract
Year Charge Year Charge Year Charge
1 $3.00 6 $3.00 11 $2.50
2 3.00 7 3.00 12 2.00
3 3.00 8 3.00 13 1.50
4 3.00 9 3.00 14 1.00
5 3.00 10 3.00 15 .50
If there has been a change in Specified Amount during the life of the
contract, the Deferred Issue Charge is applied against the highest
Specified Amount in force during the life of the contract.
YOUR CONTRACT FUND VALUE
The amount in Your Contract Fund is the sum of the amounts You
have in the General Account and in the various investment divisions of
Our Separate Account (plus the amount in Our General Account
securing any contract loan). Your Contract Fund also reflects the
various charges described above. Monthly deductions are made as of
the first day of each Contract Month. Transaction charges or Surrender
Charges are made as of the effective date of the transaction. Charges
against Our Separate Account are reflected daily. Any amount
allocated to an investment division of Our Separate Account will go up
or down depending on the investment experience of that division. You
bear this investment risk. For amounts allocated to the investment
divisions of Our Separate Account, there is no guaranteed minimum
cash value. Any amount allocated to the General Account is
guaranteed by Us.
Amounts In Our Separate Account
Amounts allocated, transferred or added to the investment divisions of
Our Separate Account are used to purchase Accumulation Units. The
amount You have in each division is represented by the value of the
Accumulation Units credited to Your Contract Fund for that division.
The number of Accumulation Units purchased or redeemed in an
investment division of Our Separate Account is calculated by dividing
the dollar amount of the transaction by the division's Accumulation
Unit Value calculated at the end of that day. The number of
Accumulation Units for an investment division at any time is the
number of Accumulation Units purchased less the number of
Accumulation Units redeemed. The value of Accumulation Units
fluctuates with the investment performance of the corresponding
portfolios of the Funds, which reflects the investment income and
realized and unrealized capital gains and losses of the portfolio and
Funds' expenses. The Accumulation Unit Values also reflect
deductions and charges We make to Our Separate Account. The
number of Accumulation Units credited to You, however, will not vary
because of changes in Accumulation Unit Values. On any given day,
the value You have in an investment division of Our Separate Account
is the Accumulation Unit Value times the number of Accumulation
Units credited to You in that division. The Accumulation Units of each
investment division of Our Separate Account have different
Accumulation Unit Values.
Accumulation Units of an investment division are purchased when
You allocate premiums, repay loans or transfer amounts to that
division. Accumulation Units are redeemed or sold when you make
withdrawals or transfer amounts from an investment division of the
Separate Account (including transfers for loans) and to pay the death
benefit when the Insured Person dies. We also redeem Accumulation
Units for monthly deductions or other charges.
How We Determine The Accumulation Unit Value
We determine Accumulation Unit Values for the investment divisions
of our Separate Account at the end of each business day. The
Accumulation Unit Value for each investment division will be set at
$10.00 on the first day there are contract transactions in Our Separate
Account associated with these contracts. After that, the Accumulation
Unit Value for any business day is equal to the Accumulation Unit
Value for the preceding business day multiplied by the net investment
factor for that division on that business day.
We determine the net investment factor for each investment division
every business day as follows:
First, We take the value of the shares belonging to the division in the
corresponding Fund portfolio at the close of business that day (before
giving effect to any contract transaction for that day, such as premium
payments or surrenders). For this purpose, We use the share value
reported to Us by the Fund.
Next, We add any dividends or capital gains distributions paid by the
Fund on that day.
Then, We divide this amount by the value of the amounts in the
investment division at the close of business on the preceding business
day (after giving effect to any contract transactions on that day).
Then, We subtract a daily asset charge for each calendar day between
business days (for example, a Monday calculation may include charges
for Saturday and Sunday). The daily charge is .0024547%, which is an
effective annual rate of 0.90%. On a current basis We currently intend
to reduce this charge to 0.50% annually (.0013664% daily) after the
tenth Contract Year but We are not obligated to reduce it. This charge
is for mortality and expense risks assumed by Us under the contract
and to cover administrative costs We incur for transactions related to
the Separate Account.
Finally, We subtract any daily charge for taxes or amounts set aside as
a reserve for taxes.
Generally, this means that We adjust Accumulation Unit Values to
reflect what happens to the Fund, and also for the mortality and
expense risk charge and any other charges.
CONTRACT FUND TRANSACTIONS
The transactions described below may have different effects on Your
Contract Fund, death benefit, Specified Amount or cost of insurance.
You should consider the net effects before combining Contract Fund
transactions. Certain transactions also have fees. Upon completion of
these transactions, You may not have Your Contract Fund allocated to
more than ten investment divisions.
Changing Your Premium And Deduction Allocation Percentages
You may change the allocation percentages of Your net premiums or
of Your monthly deductions by writing to Our Home Office and telling
Us what changes You wish to make. These changes will go into effect
as of the date We receive Your request at Our Home Office and will
affect transactions on and after that date.
Transfers Of Contract Fund Value
Currently, You may make an unlimited number of transfers of
Contract Fund value in each Contract Year without charge. We reserve
the right to assess a $25 charge after the twelfth transfer in a Contract
Year. To make a transfer, write to Our Home Office.
If We charge You for making a transfer, We will allocate the charge as
described under "Deductions and Charges - How Contract Fund
Charges Are Allocated" on page 18. All transfers included in one
transfer request count as one transfer for purposes of any fee.
You may ask Us to transfer amounts between the General Account and
any investment divisions of Our Separate Account, and among
investment divisions of Our Separate Account. The transfer will take
effect as of the date We receive Your request. The minimum amount
We will transfer on any date is $200. A smaller transfer may be made
under special circumstances mentioned in "Our Right to Change How
We Operate Our Separate Account". This minimum need not come
from any one investment division or be transferred to any one
investment division as long as the total amount transferred that day
equals the minimum.
The amount that can be transferred from the General Account to the
Separate Account in any Contract Year cannot exceed the larger of:
1. 25% of the unloaned amount in the General Account at the
beginning of the Contract Year, or
2. $1,000.
Dollar Cost Averaging.
The Dollar Cost Averaging (DCA) program enables You to make
monthly transfers of a predetermined dollar amount from the DCA
Source Account (any one investment division or the General
Account)VIP Money Market investment division into one or more of
the other investment divisions (not the General Account). By
allocating monthly, as opposed to allocating the total amount at one
time, You may reduce the impact of market fluctuations. This plan of
investing, however, does not assure a profit or protect against a loss in
declining markets.
DCA can be elected at any time by completion of the proper Request
Forms (obtained by contacting Us at the Home Office)DCA Request
Form (form number 5856) and by insuring that a sufficient amount is
in the DCA Source Account VIP Money Market investment division,
either through payment of a premium with the DCA request form,
allocation of premiums, or transfer of amounts to the DCA Source
AccountVIP Money Market investment division. Copies of the DCA
Request Formform 5856 can be obtained by contacting Us at Our
Home Office. The election will specify:
a. The DCA Source Account. The DCA Source Account is the
account from which DCA transfers will be made.that any money
received with the form is to be placed into the VIP Money Market
investment division
b. That any money received with the form is to be placed into the
DCA Source Account.
cb. T the monthly amount to be transferred to the other investment
divisions, and
dc. H how that monthly amount is to be allocated among the
investment divisions
Since the DCA program is only suitable for substantial, infrequent
premium payments, DCA is only available when the premium
payment mode is annual or if the amount in the DCA Source
AccountVIP Money Market investment division is at least equal to the
sum of $2,400 and the minimum premium at the time DCA is to begin.
The DCA Request Form must be received with any premium payment
You intend to apply to DCA.
The minimum monthly amount to be transferred using DCA is $200.
In order to begin the DCA program, the value in the VIP Money
Market investment division must be at least equal to the sum of 12
monthly transfers plus the minimum premium. When DCA is elected,
all amounts in the DCA Source AccountVIP Money Market
investment division will be available for transfer under the DCA
program. Once DCA is elected, additional premiums can be deposited
into the DCA Source AccountVIP Money Market investment division
for DCA by sending them in with a DCA Rrequest Fform.
You may change the DCA allocation percentages or DCA transfer
amounts twice each Contract Year. Any premium payments received
while the DCA program is in effect will be allocated using the
allocation percentages from the DCA R request Ff orm, unless You
specify otherwise.
If requested at issue, DCA will start at the beginning of the second
Contract Month. If requested after issue, DCA will start at the
beginning of the first Contract Month which occurs at least 30 days
from the day the request is received.
DCA will last until the value in the DCA Source AccountVIP Money
Market investment division is exhausted or until a request for
termination is received in writing from You. DCA will automatically
be terminated on the Maturity Date.
We reserve the right to end the DCA program at any time by sending
You a notice one month in advance.
Borrowing From Your Contract Fund
At any time Your contract has a Net Cash Surrender Value, You may
borrow up to 92% of the Cash Surrender Value using only Your
contract as security for the loan. If You request an additional loan, the
amounts of any outstanding loan and loan interest will be added to the
additional amount You have requested and the original loan will be
canceled. Thus, You will have only one loan outstanding at any time.
Any amount that secures a loan remains part of Your Contract Fund,
but is automatically transferred out of Our Separate Account and put in
Our General Account as collateral.
We pay You interest on this loaned amount, currently at an annual rate
of 6%. However, after the tenth Contract Year, We guarantee that the
annual rate of interest paid on the loaned portion of the Contract Fund
will equal 8% (which is equal to the interest rate charged on the
Contract Loan) for the portion of any loan that does not exceed the
Contract Fund minus the total premiums paid.
A loan taken from, or secured by, a contract may have Federal Income
Tax consequences. See "TAX EFFECTS" on page 25.
How To Request A Loan
You may request a loan by contacting Our Home Office. You may tell
Us how much of the loan You want taken from Your unloaned amount
in the General Account or from Your amounts in the investment
divisions of Our Separate Account. We will redeem units from an
investment division of Our Separate Account sufficient to cover that
part of the loan. The amounts You have in each division will be
determined as of the day We receive Your request for a loan at Our
Home Office.
If You do not tell Us how to allocate Your loan, the loan will be
allocated according to Your deduction allocation percentages. If the
loan cannot be allocated based on these percentages, We will allocate
it based on the proportions of Your unloaned amounts in the General
Account and Your value in each investment division of Our Separate
Account to the unloaned value of Your Contract Fund.
Contract Loan Interest
Interest on a contract loan accrues daily at an annual interest rate of
8%.
When Interest Is Due
Interest is due on each Contract Anniversary. If You do not pay the
interest when it is due, it will be added to Your outstanding loan and
allocated based on the deduction allocation percentages for Your
Contract Fund then in effect. This means We make an additional loan
to pay the interest and We transfer amounts from the General Account
or the investment divisions to make the loan. If we cannot allocate the
interest based on these percentages, We will allocate it as described
above for allocating Your loan.
Repaying The Loan
You may repay all or part of a contract loan at any time while Your
contract is In Force. While You have a contract loan, We assume that
any money You send Us is meant to repay the loan. If You wish to
have any of these payments be premium payments, You must tell Us in
writing.
You may choose how You want Us to allocate Your repayments. If
You do not give us instructions, We will allocate Your repayments
based on Your premium allocation percentages.
The Effects Of A Contract Loan On Your Contract Fund
A loan against Your contract will have a permanent effect on the value
of Your Contract Fund and, therefore, on Your benefits under this
contract, even if the loan is repaid. When You borrow on Your
contract, the amount of Your loan is set aside where it earns a declared
rate for loaned amounts. The loan amount will not be available for You
to invest in the divisions of Our Separate Account or the unloaned
portion of the General Account. Whether You earn more or less with
the loan amount set aside depends on the investment experience of the
investment divisions of Our Separate Account and the rates declared
for the unloaned portion of the General Account.
Your Contract May Lapse
Your loan may also affect the amount of time that Your insurance
remains in force. For example, Your contract may lapse more quickly
when You have a loan because the loaned amount cannot be used to
cover the monthly deductions that are taken from Your Contract Fund.
If these deductions exceed the Net Cash Surrender Value of Your
contract, then the lapse provisions of the contract may apply. Since the
contract permits loans up to 92% of the Cash Surrender Value , loan
repayments or additional premium payments may be required to keep
the contract in force if You borrow the maximum.
Withdrawing Money From Your Contract Fund
You may request a partial withdrawal of Your Net Cash Surrender
Value by writing to Our Home Office. You will not incur either the
Deferred Sales Charge or Deferred Issue Charge upon a partial
withdrawal. Partial withdrawals are subject to certain conditions. They
must:
be at least $200
total no more than 50% of the Net Cash Surrender Value in any
Contract Year
not cause the death benefit to fall below the minimum for which we
would issue the contract at the time
not cause the contract to fail to qualify as life insurance under
applicable tax law.
You may specify how much of the withdrawal You want taken from
each investment division. If You do not tell Us, We will make the
withdrawal on the basis of Your deduction allocation percentages. If
We cannot withdraw the amount based on Your directions or on Your
deduction allocation percentages, We will withdraw the amount based
on the proportions of Your unloaned amounts in the General Account
and the investment divisions of Our Separate Account to the total
unloaned value of Your Contract Fund.
Withdrawal Charges
When You make a partial withdrawal more than once in a Contract
Year, a charge of $25 or 2 percent of the amount withdrawn,
whichever is less, will be deducted from Your Contract Fund. If You
do not give Us instructions for deducting the charge, it will be
deducted as described under "Deductions and Charges -How Contract
Fund Charges Are Allocated" on page 18.
In general, We do not permit You to make a withdrawal on monies for
which Your premium check has not cleared your bank.
The Effects Of A Partial Withdrawal
A partial withdrawal reduces the amount You have in Your Contract
Fund. It also reduces the Cash Surrender Value and the death benefit
on a dollar-for-dollar basis. If the death benefit is based on a
percentage multiple, the reduction in death benefit could be greater. If
you selected death benefit Option 1, We will also reduce the Specified
Amount of Your contract so there will be no change in the net amount
at risk. We will send You a new contract information page to Your
contract to reflect this change. We may ask You to return Your
contract to Our Home Office to make a change. The withdrawal and
these reductions will be effective as of the date We receive Your
request at Our Home Office.
A contract loan might be better if Your need for cash is temporary.
Surrendering Your Contract For Its Net Cash Surrender Value
You may surrender Your contract for its Net Cash Surrender Value at
any time while the Insured Person is living. You may do this by
sending a written request and the contract to Our Home Office. The
Net Cash Surrender Value of Your contract equals the Cash Surrender
Value minus any outstanding loan and loan interest. During the first 15
Contract Years, the Cash Surrender Value is the amount in Your
Contract Fund minus the Surrender Charge. After 15 years, the Cash
Surrender Value and Contract Fund are equal. We will compute the
Net Cash Surrender Value as of the date We receive Your request and
the contract at Our Home Office, and all insurance coverage under
Your contract will end on that date
THE GENERAL ACCOUNT
You may allocate some or all of Your Contract Fund to the General
Account, which pays interest at a declared rate. The principal, after
deductions, is guaranteed. The General Account supports Our
insurance and annuity obligations. Because of applicable exemptive
and exclusionary provisions, interests in the General Account have not
been registered under the Securities Act of 1933, and the General
Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General
Account nor any interests therein are generally subject to regulation
under the 1933 Act or the 1940 Act. We have been advised that the
staff of the SEC has not made a review of the disclosures which are
included in this prospectus for Your information and which relate to
the General Account.
Amounts In The General Account
You may accumulate amounts in the General Account by:
allocating net premium and loan repayments,
transferring amounts from the investment divisions of Our Separate
Account, or
earning interest on amounts You already have in the General Account.
The amount You have in the General Account at any time is the sum
of all net premiums and loan repayments allocated to that Account, all
transfers and earned interest, and includes amounts securing any
contract loan You have. This amount is reduced by amounts
transferred out or withdrawn and deductions allocated to this Account.
Adding Interest To Your Amounts In The General Account
We pay interest on all amounts that You have in the General Account.
The annual interest rates will never be less than the minimum
guaranteed interest rate of 3.5%. We may, at the sole discretion of Our
Board of Directors, credit interest in excess of 3.5%. You assume the
risk that interest credited may not exceed 3.5%. We pay different rates
on unloaned and loaned amounts in the General Account. Interest is
compounded daily at an effective annual rate that equals the annual
rate declared by Our Board of Directors.
Transfers
You may request a transfer between the General Account and one or
more of the investment divisions of Our Separate Account, subject to a
limit. See "Transfers Of Contract Fund Value" on Page 20.
ADDITIONAL INFORMATION ABOUT VARIABLE UNIVERSAL
LIFE 3
Your Right To Examine The Contract
You have a right to examine the contract. If for any reason You are not
satisfied with it, You may cancel the contract within the time limits
described below. You may cancel the contract by sending it to Our
Home Office with a written request to cancel.
Your request to cancel this contract must be postmarked no later than
the latest of the following three dates:
10 days after You receive Your contract,
10 days after We mail You a written notice telling You about Your
rights to cancel (Notice of Withdrawal Right), or
45 days after You sign Part 1 of the contract application.
If You cancel Your contract, We will return the sum of all charges
deducted from premiums paid and Your Contract Fund, plus the
Contract Fund.
Insurance coverage ends when You send Your request.
Your Contract Can Lapse
Your insurance coverage under Variable Universal Life 3 continues as
long as the Net Cash Surrender Value of your contract is enough to
pay the deductions that are taken out of your Contract Fund each
month or, during the Minimum Premium Period, as long as your
premiums paid exceed the schedule of required minimum premiums. If
neither of these conditions are true at the beginning of any Contract
Month, a 61-day grace period will start, beginning on the day We send
You notice that the grace period is starting. We will notify You and
any assignees on Our records in writing that the grace period has
begun and tell You the amount of premium payment that will be
sufficient to satisfy the minimum requirement for two months.
If We receive payment of this amount before the end of the grace
period, We will use the amount You send Us to make the overdue
deductions. We will put any balance left in Your Contract Fund and
allocate it in the same manner as Your previous premium payments.
If We do not receive payment within the 61 days, Your contract will
lapse without value. We will withdraw any amount left in Your
Contract Fund. We will apply this amount to the deductions owed to
Us, including any applicable Surrender Charge. We will inform You
and any assignee at last known address that Your contract has ended
without value.
If the Insured Person dies during the grace period, We will pay the
insurance benefits to the beneficiary, minus any loan, loan interest and
overdue deductions.
You May Reinstate Your Contract
You may reinstate the contract within five years after it lapses if:
You provide evidence that the Insured Person is still insurable,
You complete an application for reinstatement, You pay premium
enough to pay all overdue monthly deductions including the premium
tax on those deductions, plus increase the Contract Fund to a level
where the Contract Fund less any contract debt equals the surrender
charges, plus cover the next two months' deductions,
You pay or restore any contract debt,
You did not end the contract by payment of the Net Cash Surrender
Value.
The Contract Date of the reinstated contract will be the beginning of
the Contract Month which coincides with or follows the date We
approve Your reinstatement application. Upon reinstatement, there will
be no further Surrender Charges applied against the contract. Previous
loans will not be reinstated.
Contract Periods, Anniversaries
We measure Contract Years, Contract Months and Contract
Anniversaries (annual and monthly) from the Contract Date shown on
the contract information page of Your contract. Each Contract Month
begins on the same day in each calendar month as the day of the month
in the Contract Date. The calendar days of 29, 30, and 31 are not used.
Our right to challenge a contract is measured from the Contract Date,
as is the suicide exclusion. These provisions are mentioned in
"LIMITS ON OUR RIGHT TO CHALLENGE THE CONTRACT" on
page 28.
Application for Insurance
When an application for one of Our contracts is completed, it is
submitted to Us. We decide whethermake the decision to issue a
contract based on the information in the application and Our standards
for issuing insurance and classifying risks. If We decide not to issue a
contract, We will return the sum of all charges deducted from
premiums paid, plus the net premiums, plus interest credited to the net
premiums.
Maturity Date
The Maturity Date is the Contract Anniversary after the Insured
Person's 100th birthday. The contract ends on that date if the Insured
Person is still alive and the maturity benefit is paid.
If the Insured Person survives to the Maturity Date, and You would
like to continue the contract, We will extend the Maturity Date if in
doing so this contract still qualifies as life insurance according to the
Internal Revenue Service and your state. By extending the Maturity
Date, the contract may not qualify as life insurance and may be subject
to tax consequences. A tax advisor should be consulted prior to
electing to extend the Maturity Date. In order to continue the contract
beyond the original Maturity Date, We will require that the death
benefit not exceed the Contract Fund on the original Maturity Date.
Generally, when We refer to the age of the insured person, We mean
his or her age on the birthday prior to that particular date.
TAX EFFECTS
Contract Proceeds
The Internal Revenue Code of 1986 (Code) (in Section 7702) defines
life insurance for tax purposes. Amendments to the Code made in 1988
place limits on certain contract charges used in determining the
maximum amount of premiums that may be paid under section 7702
for Contracts described in this prospectus. The Secretary of the
Treasury ("Treasury") has issued proposed regulations that would
specify what will be considered reasonable mortality charges for these
limits. Guidance as to how section 7702 is to be applied is, however,
limited.
With respect to a contract that is issued on the basis of a standard rate
class, while there is some uncertainty due to the lack of guidance under
section 7702, Midland believes that such a contract should meet the
section 7702 definition of a life insurance contract. With respect to a
contract that is issued on a substandard basis (i.e., a rate class
involving higher than standard mortality risk), there is even less
guidance, in particular as to how the new charge requirements are to be
applied in determining whether such a contract meets the section 7702
definition of a life insurance contract. Thus, it is not clear whether or
not such a contract would satisfy section 7702, particularly if the
contract owner pays the full amount of premiums permitted under the
contract.
If it is subsequently determined that only a lower amount of premiums
may be paid for a contract to satisfy section 7702, Midland may take
whatever steps are appropriate and reasonable to attempt to cause the
contract to comply with section 7702, including possibly refunding
any premiums paid which exceed that lower amount (together with
interest or such other earnings on any such premiums as is required by
law).
If the Specified Amount of a contract is increased or decreased, the
applicable premium limitation may change. During the first fifteen
years of the contract, there are certain events that may create taxable
ordinary income to You if at the time of the event there has been a gain
in the contract. These events include:
A decrease in the Specified Amount;
A partial withdrawal;
A change from Option 2 to Option 1; or,
Any change that otherwise reduces benefits under the contract and that
results in a cash distribution in order for the contract to continue to
comply with Section 7702 relating to premium and cash value
limitations.
Such income inclusion will also result, in certain circumstances, with
respect to cash distributions made in anticipation of reductions in
benefits under the contract.
Code Section 7702A affects the taxation of distributions (other than
proceeds paid at the death of the insured) from certain variable life
insurance contracts:
1. If premiums are paid more rapidly than the rate defined by a "7-Pay
Test," the contract will be treated as a "modified endowment contract."
2. Any contract received in exchange for a contract classified as a
modified endowment contract will be treated as a modified endowment
contract regardless of whether the contract received in the exchange
meets the 7-Pay Test.
3. Loans, including unpaid loan interest, (as well as surrenders and
withdrawals) from a modified endowment contract will be considered
distributions.
4. Distributions (including loans) from a modified endowment contract
will be taxed first as distribution of gain from the contract (to the
extent that gain exists), and then as non-taxable recovery of basis.
5. An extra tax of 10% of any distribution includable in income will be
imposed, unless such distributions are made (1) after You attain age 59
1/2, (2) on account of You becoming disabled, or (3) as substantially
equal annuity payments over Your life or life expectancy.
For contracts not classified as modified endowment contacts,
distributions will be taxed in accordance with the rules in effect prior
to the enactment of Section 7702A.
A contract that is not a modified endowment contract may be classified
as a modified endowment contract if it is "materially changed" and the
materially changed contract fails to meet the 7-Pay Test and any
distributions from such a contract will be taxed as explained above.
Material changes include a requested increase in death benefit or a
change from Option 1 to Option 2. Before making any change to a
contract, a competent tax advisor should be consulted.
Additionally, any life insurance contracts which are treated as
modified endowment contracts and which are issued by Midland
National Life or any of its affiliates:
with the same person designated as the owner;
on or after June 21, 1988; and
within any single calendar year
will be aggregated and treated as one contract for purposes of
determining any tax on distributions.
Even if a contract is not a modified endowment contract, loans at very
low or no net cost may be treated as distributions for federal income
tax purposes.
The Code (Section 817(h)) also authorizes the Secretary of the
Treasury to set standards by regulation or otherwise for the
investments of Separate Account A to be "adequately diversified" in
order for Variable Universal Life 3 to be treated as a life insurance
contract for federal tax purposes. Separate Account A, through the
Funds, intends to comply with the diversification requirements
established by the Secretary although We do not control the Funds. We
believe Separate Account A will be adequately diversified to be treated
as a life insurance contract for federal tax purposes.
In certain circumstances, owners of variable life insurance contracts
may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets
would be includable in the variable contract owner's gross income. The
IRS has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets if the contract
owner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor
control of the investments of a segregated asset account may cause the
investor (i.e., the Policyowner), rather than the insurance company, to
be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct
their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this prospectus, no
such guidance has been issued.
The ownership rights under Variable Universal Life 3 are similar to,
but different in certain respects from, those described by the IRS in
rulings in which it was determined that contract owners were not
owners of separate account assets. For example, the owner has
additional flexibility in allocating premium payments and contract
values. These differences could result in an owner being treated as the
owner of a pro rata portion of the assets of Separate Account A. In
addition, Midland does not know what standards will be set forth, if
any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Midland therefore reserves the right to
modify the contract as necessary to attempt to prevent an owner from
being considered the owner of a pro rata share of the assets of Separate
Account A or to otherwise qualify Variable Universal Life 3 for
favorable tax treatment.
Assuming a contract is a life insurance contract for federal income tax
purposes, the contract should receive the same federal income tax
treatment as fixed benefit life insurance. As a result, the life insurance
proceeds payable under either benefit option should be excludable
from the gross income of the beneficiary under Section 101 of the
Code, and You should not be deemed to be in constructive receipt of
the cash values under a contract until actual distribution.
A change of owners as well as a surrender or withdrawal, an
assignment of the contract, a change from one death benefit option to
another, and other changes reducing future death benefits may have tax
consequences depending on the circumstances of such surrender or
change. Upon complete surrender or when maturity benefits are paid,
if the amount received plus the contract debt exceeds the total
premiums paid that are not treated as previously withdrawn by You,
the excess generally will be treated as ordinary income.
Federal estate and state or local estate, inheritance and other tax
consequences of ownership or receipt of contract proceeds depend on
the circumstances of each contract owner or beneficiary.
A contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit
plans and others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of each individual
arrangement. Therefore, if You are contemplating the use of a contract
in any arrangement the value of which depends in part on its tax
consequences, You should be sure to consult a qualified tax advisor
regarding the tax attributes of the particular arrangement.
In recent years, Congress has adopted new rules relating to corporate
owned life insurance. Any business contemplating the purchase of a
new life insurance contract or a change in an existing contract should
consult a tax adviser. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or other means. For instance, the
President's 1999 Budget Proposal has recommended legislation that, if
enacted, would adversely modify the federal taxation of the contracts
described in this prospectus. It is possible that any change could be
retroactive (that is, effective prior to the date of the change). A tax
adviser could be consulted with respect to legislative development and
their effect on a Contract.
Possible Charge for Midland's Taxes
At the present time, Midland makes no charge to the Separate Account
for any Federal, state or local taxes (other than premium taxes) that it
incurs which may be attributable to such Account or to the contracts.
Midland, however, reserves the right in the future to make a charge for
any such tax or other economic burden resulting from the application
of the tax laws that it determines to be properly attributable to the
Separate Account or to the contracts.
If such a charge is made, it would be set aside as a provision for taxes
which We would keep in the affected division rather than in Our
General Account. We anticipate that Our flexible premium variable
life contractowners would benefit from any investment earnings that
are not needed to maintain this provision.
Other Tax Considerations
The foregoing discussion is general and is not intended as tax advice.
If You are concerned about these tax implications, You should consult
a competent tax adviser. This discussion is based on Our
understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these
current laws and interpretations, and We do not make any guarantee as
to the tax status of the contract. It should be further understood that the
foregoing discussion is not exhaustive and that special rules not
described in this prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state
or other tax laws.
In recent years, Congress has adopted new rules relating to corporate
owned life insurance. Any business contemplating the purchase of a
new life insurance contract or a change in an existing contract should
consult a tax adviser. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or other means. For instance, the
President's 1999 Budget Proposal has recommended legislation that, if
enacted, would adversely modify the federal taxation of the contracts
described in this prospectus. It is possible that any change could be
retroactive (that is, effective prior to the date of the change). A tax
adviser could be consulted with respect to legislative development and
their effect on a Contract.
PART 3: ADDITIONAL INFORMATION
YOUR VOTING RIGHTS AS AN OWNER
Fund Voting Rights
We invest the assets in the divisions of Our Separate Account in shares
of the corresponding portfolios of the Funds. Midland is the legal
owner of the shares and, as such, has the right to vote on certain
matters. Among other things, We may vote to:
elect the Funds' Board of Directors,
ratify the selection of independent auditors for the Funds, and
vote on any other matters described in the Funds' current prospectuses
or requiring a vote by shareholders under the Investment Company Act
of 1940.
Even though We own the shares, We give You the opportunity to tell
Us how to vote the number of shares that are allocated to Your
contract. We will vote those shares at meetings of Fund shareholders
according to Your instructions.
The Funds will determine how often shareholder meetings are held. As
We receive notice of these meetings, We will solicit Your voting
instructions. The Funds are not required to hold a meeting in any given
year.
If We do not receive instructions in time from all contractowners, We
will vote shares for which no instructions have been received in a
portfolio in the same proportion as We vote shares for which We have
received instructions in that portfolio. We will also vote any Fund
shares that We are entitled to vote directly due to amounts We have
accumulated in Our Separate Account in the same proportions that
contractowners vote. If the federal securities laws or regulations or
interpretations of them change so that We are permitted to vote shares
of the Fund in Our own right or to restrict contractowner voting, We
may do so.
How We Determine Your Voting Shares
You may participate in voting only on matters concerning the Fund
portfolios in which Your assets have been invested. We determine the
number of Fund shares in each division that are attributable to Your
contract by dividing the amount in Your Contract Fund allocated to
that division by the net asset value of one share of the corresponding
Fund portfolio as of the record date set by the Fund's Board for the
Fund's shareholders meeting. The record date for this purpose must be
at least 10 and no more than 90 days before the meeting of the Fund.
We count fractional shares.
If You have a voting interest, We will send You proxy material and a
form for giving Us voting instructions. In certain cases, We may
disregard instructions relating to changes in the Fund's adviser or the
investment policies of its portfolios. We will advise You if We do and
give Our reasons in the next semiannual report to You.
Voting Privileges Of Participants In Other Companies
Currently, shares in the Funds are owned by other insurance
companies to support their variable insurance products as well as Our
Separate Account. Those shares generally will be voted according to
the instructions of the owners of insurance contracts and contracts
issued by those other insurance companies. In certain cases, an
insurance company or some other owner of Fund shares may vote as
they choose. This will dilute the effect of the voting instructions of the
owners of Variable Universal Life 3. We do not foresee any
disadvantage to this. Nevertheless, the Fund's Board of Directors will
monitor events to identify conflicts that may arise and determine
appropriate action. If We think any Fund action is insufficient, We will
see that appropriate action is taken to protect Our contractowners.
OUR REPORTS TO CONTRACTOWNERS
Shortly after the end of the third, sixth, ninth, and twelfth Contract
Month, We will send you a report that shows the current Death Benefit
for Your contract, the value of Your Contract Fund, information about
investment divisions, the Cash Surrender Value of Your contract, the
amount of any outstanding contract loans that You may have, the
amount of any interest that You owe on the loan and information about
the current loan interest rate. The annual report will also show any
transactions involving Your Contract Fund that occurred during the
year. Transactions include Your premium allocations, Our deductions,
and any transfers or withdrawals that You made in that year.
We will also send You semi-annual reports with financial information
on the Funds, including a list of the investments held by each portfolio.
In addition, Our report will also contain any other information that is
required by the insurance supervisory official in the jurisdiction in
which this insurance contract is delivered.
Notices will be sent to You for transfers of amounts between
investment divisions and certain other contract transactions.
LIMITS ON OUR RIGHT TO CHALLENGE THE CONTRACT
We can challenge the validity of Your insurance contract (based on
material misstatements in the application) if it appears that the Insured
Person is not actually covered by the contract, under Our rules.
However, there are some limits on how and when We can challenge
the contract.
We cannot challenge the contract after it has been in effect, during the
Insured Person's lifetime, for two years from the date the contract was
issued or reinstated. (Some states may require Us to measure this in
some other way.)
We cannot challenge any contract change that requires evidence of
insurability (such as an increase in Face Amount) after the change has
been in effect for two years during the Insured Person's lifetime.
We can challenge at any time (and require proof of continuing
disability) an additional benefit that provides benefits to the Insured
Person in the event that the Insured Person becomes totally disabled.
If the Insured Person dies within the time that We may challenge the
validity of the contract, We may delay payment until We decide
whether to challenge the contract.
If the Insured Person's age or sex is misstated on any application, the
death benefit and any additional benefits provided will be those which
would be purchased by the most recent deduction for the cost of
insurance and the cost of any additional benefits at the Insured Person's
correct age and sex.
If the Insured Person commits suicide within two years after the date
on which the contract was issued or reinstated, the death benefit will
be limited to the total of all premiums that have been paid to the time
of death minus the amount of any outstanding contract loan and loan
interest and minus any partial withdrawals of Net Cash Surrender
Value. If the Insured Person commits suicide within two years after the
effective date of an increase in Specified Amount that You requested,
We will pay the Specified Amount which was in effect before the
increase, plus the monthly cost of insurance deductions for the increase
(Some states require Us to measure this time by some other date.)
YOUR PAYMENT OPTIONS
Contract benefits or other payments such as the Net Cash Surrender
Value or Death Benefit may be paid immediately in one sum or You
may choose another form of payment for all or part of the money.
Payments under these options are not affected by the investment
experience of any investment division of Our Separate Account.
Instead, interest accrues pursuant to the options chosen. If You do not
arrange for a specific form of payment before the Insured Person dies,
the beneficiary will have this choice. However, if You do make an
arrangement with Us for how the money will be paid, the beneficiary
cannot change Your choice after the Insured Person dies. Payment
Options will also be subject to Our rules at the time of selection. Our
consent is required when optional payment is selected and the payee is
either an assignee or not a natural person. Currently, these alternate
payment options are only available if the proceeds applied are $1,000
or more and any periodic payment will be at least $20.
You have the following payment options:
1. Deposit Option: The money will stay on deposit with Us for a
period that You and We agree upon. You will receive interest on the
money at a declared interest rate.
2. Installment Options: There are two ways that We pay installments:
a. Fixed Period: We will pay the amount applied in equal installments
plus applicable interest, for a specific number of years, for up to 30
years.
b. Fixed Amount: We will pay the sum in installments in an amount
that You and We agree upon. We will pay the installments until We
pay the original amount, together with any interest You have earned.
3. Monthly Life Income Option: We will pay the money as monthly
income for life. You may choose any one of 4 ways to receive the
income: We will guarantee payments for at least 10 years (called "10
Years Certain"); at least 20 years (called "20 Years Certain"); at least 5
years (called "5 Years Certain"); or payment only for life. With a life
only payment option, payments will only be made as long as the payee
is alive. Therefore, if a life only payment option is chosen and the
payee dies after the first payment, only one payment will be made.
4. Other: You may ask Us to apply the money under any option that
We make available at the time the benefit is paid.
We guarantee interest under the Deposit Option at the rate of 2.75% a
year, and under either Installment Option at 2.75% a year. We may
also allow interest under the Deposit Option and under either
Installment Option at a rate that is above the guaranteed rate.
The beneficiary or any other person who is entitled to receive payment
may name a successor to receive any amount that We would otherwise
pay to that person's estate if that person died. The person who is
entitled to receive payment may change the successor at any time.
We must approve any arrangements that involve more than one of the
payment options, or a payee who is not a natural person (for example,
a corporation), or a payee who is a fiduciary. Also, the details of all
arrangements will be subject to our rules at the time the arrangements
take effect. This includes rules on the minimum amount We will pay
under an option, minimum amounts for installment payments,
withdrawal or commutation rights (Your rights to receive payments
over time, for which We may offer You a lump sum payment), the
naming of people who are entitled to receive payment and their
successors, and the ways of proving age and survival.
You will make Your choice of a payment option (or any later changes)
and Your choice will take effect in the same way as it would if You
were changing a beneficiary. (See Your Beneficiary below). Any
amounts that We pay under the payment options will not be subject to
the claims of creditors or to legal process, to the extent that the law
provides.
YOUR BENEFICIARY
You name Your beneficiary when You apply for Your contract. The
beneficiary is entitled to the insurance benefits of the contract. You
may change the beneficiary during the Insured Person's lifetime by
writing to Our Home Office. If no beneficiary is living when the
Insured Person dies, We will pay the Death Benefit in equal shares to
the Insured Person's surviving children. If there are no surviving
children, We will pay the Death Benefit to the Insured Person's estate.
ASSIGNING YOUR CONTRACT
You may assign (transfer) Your rights in this contract to someone else
as collateral for a loan or for some other reason. If You do, You must
send a copy of the assignment to Our Home Office. We are not
responsible for any payment We make or any action We take before
We receive notice of the assignment or for the validity of the
assignment. An absolute assignment is a change of ownership.
WHEN WE PAY PROCEEDS FROM THIS CONTRACT
We will generally pay any death benefits, Net Cash Surrender Value or
loan proceeds within seven days after We receive the required form or
request (and other documents that may be required for payment of
death benefits) at Our Home Office. Death benefits are determined as
of the date of death of the Insured Person and will not be affected by
subsequent changes in the Accumulation Unit values of the investment
divisions of Our Separate Account. We pay interest from the date of
death to the date of payment.
We may, however, delay payment for one of more of the following
reasons:
We contest the contract.
We cannot determine the amount of the payment because the New
York Stock Exchange is closed, because trading in securities has been
restricted by the Securities and Exchange Commission, or because the
SEC has declared that an emergency exists.
The SEC by order permits us to delay payment to protect our
contractowners.
We may also delay any payment until Your premium checks have
cleared Your bank.
We may defer payment of any loan amount, or withdrawal or surrender
from the General Account, for up to six months after We receive Your
request.
DIVIDENDS
We do not pay any dividends on the contract described in this
prospectus.
MIDLAND'S SALES AND OTHER AGREEMENTS
Sales Agreements
The contract will be sold by individuals who, in addition to being
licensed as life insurance agents for Midland National Life, are also
registered representatives of Walnut Street Securities (WSS), the
principal underwriter of the contracts, or broker-dealers which have
entered into written sales agreements with WSS. WSS is registered
with the SEC as a broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities
Dealers, Inc. The address for Walnut Street Securities is 670 Mason
Ridge Center Drive, Suite 301, St. Louis, Missouri 63141.
During the first Contract Year, We will pay agents a commission of up
to 70% of premiums paid. For subsequent years, the commission
allowance may equal an amount up to 5% of premiums paid. Beyond
the fifteenth Contract Year, We pay no commission. Certain
persistency and production bonus may also be paid.
We may also sell Our contracts through broker-dealers registered with
the Securities and Exchange Commission under the Securities
Exchange Act of 1934 which enter into selling agreements with us.
The commission for broker-dealers will be no more than that described
above.
REGULATION
We are regulated and supervised by the South Dakota Insurance
Department. In addition, We are subject to the insurance laws and
regulations in every jurisdiction where We sell contracts. This contract
has been filed with and approved by insurance officials in such states.
As a result, the provisions of this contract may vary somewhat from
jurisdiction to jurisdiction.
We submit annual reports on Our operations and finances to insurance
officials in all the jurisdictions where We sell contracts. The officials
are responsible for reviewing our reports to be sure that we are
financially sound and that We are complying with applicable laws and
regulations.
We are also subject to various federal securities laws and regulations.
Year 2000 Compliance Issues
Midland National Life is currently in the process of updating their
administrative systems to accommodate all Year 2000 issues. Midland
does not anticipate any material financial impact in processing and
completing the changes required to comply with the Year 2000 issues.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 45 percent of first
year premium. The discount will be effected by Midland paying the
discount as the employee pays the qualifying premium. All other
contract provisions will apply.
LEGAL MATTERS
The law firm of Sutherland, Asbill & Brennan, L.L.P., Washington,
DC, has provided advice regarding certain matters relating to federal
securities laws.
LEGAL PROCEEDINGS
We are not involved in any material legal proceedings.
FINANCIAL AND ACTUARIAL
The financial statements of Midland National Life Separate Account A
and Midland National Life Insurance Company included in this
prospectus and the registration statement have been audited by
Coopers & Lybrand LLP, independent auditors, for the periods
indicated in their report which appears in this prospectus and in the
registration statement. The address for Coopers & Lybrand LLP is
IBM Park Building, Suite 1300, 650 Third Avenue South,
Minneapolis, MN 55402-4333. Such financial statements have been
included herein in reliance upon such report given upon the authority
of the firm as experts in accounting and auditing.
Actuarial matters in this prospectus have been examined by Russell A.
Evenson, F.S.A., M.A.A.A., who is Senior Vice President and Actuary
of Midland. His opinion on actuarial matters is filed as an exhibit to
the Registration Statement We filed with the Securities and Exchange
Commission.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate
Account and the variable life insurance contract described in this
prospectus with the Securities and Exchange Commission. The
Registration Statement, which is required by the Securities Act of
1933, includes additional information that is not required in this
prospectus under the rules and regulations of the SEC. If You would
like the additional information, You may obtain it from the SEC's
main office in Washington, DC You will have to pay a fee for the
material.
Management of Midland
Here is a list of our directors and officers.
Directors
Name and
Business Address
Principal Occupation
Principal Occupation During Past Five Years
John C. Watson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chairman of the Board
Chairman of the Board (October 1992 to present), Chairman of the
Board and Chief Executive Officer (October 1992 to March 1997),
Midland National Insurance Company; President and Director (1992 to
present) Consolidated Investment Services, Inc.; Chairman of the
Board, President, and Chief Executive Officer (December 1996 to
present), Sammons Financial Holdings, Inc.; Chairman of the Board
and Chief Executive Officer (December 1996 to present), North
American Company for Life and Health Insurance; President and
Director (1996 to present), Briggs ITD Corporation; Director (1996 to
present), NACOLAH Holding Corporation; Director (1996 to present),
North American Company for Life and Health of New York; Director
(1996 to present), NACOLAH Life Insurance Company; Director
(1996 to present), Institutional Founders Life Insurance Company;
Chairman of the Board (1995-present), Midland Advisors Company;
President and Director (1992 to present), CH Holdings, Inc.; Director,
(1992 to present), Sammons Enterprises Inc.; Chairman of the Board
and Chief Executive Officer (October 1992 to January 1997), Investors
Life Insurance Company of Nebraska; President and Chief Operating
Officer (1990 to October 1992), Franklin Life Insurance Company
Michael M. Masterson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chief Executive Officer and President
Chief Executive Officer and President (March 1997 to present)
President and Chief Operating Officer (March 1996 to February 1997),
Executive Vice President-Marketing (March 1995 to February 1996),
Midland National Life Insurance Company; President and Chief
Operating Officer (March 1996 to December 1996), Executive Vice
President-Marketing (March 1995 to February 1996), Investors Life
Insurance Company of Nebraska; Vice President - Individual Sales
(prior thereto), Northwestern National Life
William D. Sims
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior Vice President-Administration
Senior Vice President-Administration (since 1986), Midland National
Life Insurance Company; Senior Vice President-Administration (1986
to 1996), Investors Life Insurance Company of Nebraska.
Russell A. Evenson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior Vice President and Chief Actuary
Senior Vice President and Chief Actuary (March 1996 to present),
Senior Vice President and Actuary (prior thereto), Midland National
Life Insurance Company; Senior Vice President and Chief Actuary
(March 1996 to December 1996), Senior Vice President and Actuary
(prior thereto), Investors Life Insurance Company of Nebraska; Vice
President and Chief Actuary (1990 to 1993), Professional Insurance
Corporation
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
ExecutiveSenior Vice President and Chief Financial Officer
Executive Vice President (January 1998 to present), Midland National
Life Insurance Company; Senior Vice President and Chief Financial
Officer (October 1993 to 1998present) , Midland National Life
Insurance Company; Treasurer (January 1996 to present), Briggs ITD
Corp.; Treasurer (March 1996 to present), Sammons Financial
Holdings, Inc.; Treasurer (November 1993 to present), CH Holdings;
Treasurer (November 1993 to present), Consolidated Investment
Services, Inc.; Treasurer (November 1993 to present), Richmond
Holding Company, L.L.C.; Senior Vice President and Chief Financial
Officer (October 1993 to December 1996), Investors Life Insurance
Company of Nebraska; Partner (prior thereto), Ernst and Young
Steven C. Palmitier
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior Vice President and Chief Marketing Officer
Senior Vice President and Chief Marketing Officer (March 1997 to
present), Senior Vice President-Sales (August 1996 to February 1997),
Midland National Life Insurance Company; Senior Vice President-
Sales (prior thereto), Penn Mutual Life Insurance
Robert W. Korba
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of Directors Member
President and Director (since 1988), Sammons Enterprises, Inc.
James N. Whitson
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of Directors Member
Executive Vice President (since 1989), Sammons Enterprises, Inc.
Executive Officers (other than Directors)
Name and
Business Address
Principal Occupation
Principal Occupation During Past Five Years
E John Fromelt
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chief Investment Officer
Chief Investment Officer (since 1990), Midland National Life
Insurance Company; President (since August 1995), Midland Advisors
Company; Chief Investment Officer (1996 to present), North
American Company for Life and Health; Chief Investment Officer
(1990-1996), Investors Life Insurance Company of Nebraska
Jack L. Briggs
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President, Secretary, and General Counsel
Vice President, Secretary and General Counsel (since 1978), Midland
National Life Insurance Company; Vice President, Secretary, and
General Counsel (1978 to 1996), Investors Life Insurance Company of
Nebraska
Gary W. Helder
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President- Policy Administration
Vice President-Policy Administration (since 1991), Midland National
Life Insurance Company; Vice President-Policy Administration (1991-
1996), Investors Life Insurance Company of Nebraska
Robert W. Buchanan
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President- Marketing Services
Vice President-Marketing Services (March 1996 to present), Second
Vice President-Sales Development (prior thereto), Midland National
Life Insurance Company; Second Vice President-Sales Development
(1983 to 1996), Investors Life Insurance Company of Nebraska
Thomas M. Meyer
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President and
Chief Financial Officer
Vice President and Chief Financial Officer (January 1998 to present),
Second Vice President and Controller (1995 to 1998), Midland
National Life Insurance Company.
Appendix
Illustrations of Contract Funds, Cash Surrender Values and Death
Benefits
Following are a series of tables that illustrate how the contract funds,
cash surrender values, and death benefits of a contract change with the
investment performance of the Funds. The tables show how the
contract funds, cash surrender values, and death benefits of a contract
issued to an insured of a given age and given premium would vary
over time if the return on the assets held in each Portfolio of the Funds
were a constant gross, after tax annual rate of 0%, 6%, or 12%. The
tables on pages 31 through 33 illustrate a contract issued to a male, age
25, under a standard rate preferred non-smoker underwriting risk
classification. The tables on pages 34 through 36 illustrate a contract
issued to a male, age 40, under a standard rate preferred non-smoker
underwriting risk classification. The contract funds, cash surrender
values, and death benefits would be different from those shown if the
returns averaged 0%, 6%, and 12% over a period of years, but
fluctuated above and below those averages for individual contract
years.
The amount of the contract fund exceeds the cash surrender value
during the first fifteen contract years due to the surrender charge. For
contract years sixteen and after, the contract fund and cash surrender
value are equal, since the surrender charge has reduced to zero.
The second column shows the accumulation value of the premiums
paid at the stated interest rate. The third and sixth columns illustrate
the contract funds and the fourth and seventh columns illustrate the
cash surrender values of the contract over the designated period. The
contract funds shown in the third column and the cash values shown in
the fourth column assume the monthly charge for cost of insurance is
based upon the current cost of insurance rates. The contract funds
shown in the sixth column and the cash surrender values shown in the
seventh column assume the monthly charge for cost of insurance is
based upon the cost of insurance rates that we guarantee. The
maximum cost of insurance rates allowable under the contract are
based on the Commissioner's 1980 Standard Ordinary Mortality Table.
The fifth and eighth columns illustrate the death benefit of a contract
over the designated period. The illustrations of death benefits reflect
the same assumptions as the contract fund and cash surrender values.
The death benefit values also vary between tables, depending upon
whether Option 1 or Option 2 death benefits are illustrated.
The amounts shown for the death benefit, contract funds, and cash
surrender values reflect the fact that the net investment return of the
divisions of our Separate Account is lower than the gross, after-tax
return on the assets in the Funds, as a result of expenses paid by the
Funds and charges levied against the divisions of our Separate
Account. The illustrations also reflect the 4% sales charge deduction
from each premium, the 2.5% premium tax deduction from each
premium and the $7.00 per month expense charge (for the first fifteen
years on a current basis) as well as current and guaranteed cost of
insurance charges.
The contract values shown assume daily investment advisory fees and
operating expenses equivalent to an annual rate of .75%.79% of the
aggregate average daily net assets of the Portfolios of the Funds (the
average rate of the Portfolios for the period ending December 31,
19971996 ). The actual fees and expenses associated with the contract
may be more or less than .75%.79% and will depend on how
allocations are made to each investment division. The contract values
also take into account a daily charge to each division of Separate
Account A for assuming mortality and expense risks and
administrative charges which is equivalent to a charge at an annual rate
of .90% (.50% after year 10 on a current basis) of the average net
assets of the divisions of Separate Account A. After deductions of
these amounts, the illustrated gross investment rates of 0%, 6%, and
12% correspond to approximate net annual rates of -1.65%-1.69%,
4.35%4.31%, and 10.35%10.31%, respectively (-1.29%,
- -1.25%, 4.75%4.71%, 10.75%10.71% after year 10 on a current basis).
The hypothetical values shown in the tables do not reflect any charges
for federal income taxes against Separate Account A since Midland is
not currently making such charges. However, if, in the future, such
charges are made, the gross annual investment rate of return would
have to exceed the stated investment rates by a sufficient amount to
cover the tax charges in order to produce the contract funds, cash
surrender values, and death benefits illustrated.
The tables illustrate the contract values that would result based on
hypothetical investment rates of return if premiums are paid in full at
the beginning of each year and if no contract loans have been made.
The values would vary from those shown if the assumed annual
premium payments were paid in installments during a year. The values
would also vary if the contract owner varied the amount or frequency
of premium payments. The tables also assume that the contract owner
has not requested an increase or decrease in Specified Amount, that no
withdrawals have been made and no withdrawal charges imposed, that
no contract loans have been taken, and that no transfers have been
made and no transfer charges imposed.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 788 494 19 100,000 453 -23 100,000
2 1,614 981 468 100,000 910 397 100,000
3 2,483 1,448 897 100,000 1,361 811 100,000
4 3,394 1,908 1,320 100,000 1,805 1,217 100,000
5 4,351 2,361 1,735 100,000 2,243 1,617 100,000
6 5,357 2,807 2,144 100,000 2,673 2,010 100,000
7 6,412 3,246 2,546 100,000 3,098 2,397 100,000
8 7,520 3,679 2,941 100,000 3,504 2,766 100,000
9 8,683 4,105 3,329 100,000 3,904 3,129 100,000
10 9,905 4,524 3,711 100,000 4,287 3,474 100,000
11 11,188 4,958 4,249 100,000 4,664 3,956 100,000
12 12,535 5,375 4,783 100,000 5,025 4,433 100,000
13 13,949 5,776 5,313 100,000 5,369 4,906 100,000
14 15,434 6,162 5,843 100,000 5,696 5,377 100,000
15 16,993 6,532 6,373 100,000 6,008 5,848 100,000
16 18,630 6,977 6,977 100,000 6,293 6,293 100,000
17 20,349 7,406 7,406 100,000 6,563 6,563 100,000
18 22,154 7,809 7,809 100,000 6,807 6,807 100,000
19 24,049 8,196 8,196 100,000 7,025 7,025 100,000
20 26,039 8,558 8,558 100,000 7,218 7,218 100,000
21 28,129 8,894 8,894 100,000 7,387 7,387 100,000
22 30,323 9,216 9,216 100,000 7,532 7,532 100,000
23 32,627 9,524 9,524 100,000 7,642 7,642 100,000
24 35,045 9,808 9,808 100,000 7,729 7,729 100,000
25 37,585 10,079 10,079 100,000 7,781 7,781 100,000
30 52,321 11,133 11,133 100,000 7,334 7,334 100,000
35 71,127 11,478 11,478 100,000 5,149 5,149 100,000
40 95,130 10,335 10,335 100,000 0 0 0
</TABLE>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 788 530 54 100,000 487 12 100,000
2 1,614 1,083 570 100,000 1,008 495 100,000
3 2,483 1,649 1,099 100,000 1,553 1,003 100,000
4 3,394 2,241 1,653 100,000 2,122 1,534 100,000
5 4,351 2,859 2,233 100,000 2,717 2,092 100,000
6 5,357 3,504 2,841 100,000 3,339 2,676 100,000
7 6,412 4,179 3,478 100,000 3,988 3,288 100,000
8 7,520 4,883 4,145 100,000 4,655 3,917 100,000
9 8,683 5,619 4,844 100,000 5,352 4,577 100,000
10 9,905 6,388 5,575 100,000 6,070 5,257 100,000
11 11,188 7,220 6,511 100,000 6,819 6,110 100,000
12 12,535 8,080 7,488 100,000 7,591 6,999 100,000
13 13,949 8,972 8,509 100,000 8,387 7,924 100,000
14 15,434 9,896 9,577 100,000 9,208 8,889 100,000
15 16,993 10,854 10,695 100,000 10,055 9,896 100,000
16 18,630 11,942 11,942 100,000 10,919 10,919 100,000
17 20,349 13,072 13,072 100,000 11,812 11,812 100,000
18 22,154 14,237 14,237 100,000 12,725 12,725 100,000
19 24,049 15,449 15,449 100,000 13,659 13,659 100,000
20 26,039 16,701 16,701 100,000 14,615 14,615 100,000
21 28,129 17,996 17,996 100,000 15,596 15,596 100,000
22 30,323 19,346 19,346 100,000 16,602 16,602 100,000
23 32,627 20,755 20,755 100,000 17,625 17,625 100,000
24 35,045 22,215 22,215 100,000 18,677 18,677 100,000
25 37,585 23,741 23,741 100,000 19,750 19,750 100,000
30 52,321 32,387 32,387 100,000 25,295 25,295 100,000
35 71,127 42,975 42,975 100,000 30,820 30,820 100,000
40 95,130 55,742 55,742 100,000 35,569 35,569 100,000
</TABLE>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 788 566 90 100,000 522 46 100,000
2 1,614 1,190 677 100,000 1,111 598 100,000
3 2,483 1,868 1,318 100,000 1,761 1,211 100,000
4 3,394 2,617 2,029 100,000 2,481 1,893 100,000
5 4,351 3,445 2,819 100,000 3,276 2,650 100,000
6 5,357 4,359 3,696 100,000 4,154 3,491 100,000
7 6,412 5,369 4,668 100,000 5,125 4,424 100,000
8 7,520 6,484 5,746 100,000 6,186 5,448 100,000
9 8,683 7,717 6,942 100,000 7,358 6,583 100,000
10 9,905 9,079 8,266 100,000 8,642 7,829 100,000
11 11,188 10,623 9,914 100,000 10,062 9,353 100,000
12 12,535 12,323 11,731 100,000 11,620 11,028 100,000
13 13,949 14,197 13,735 100,000 13,331 12,868 100,000
14 15,434 16,266 15,947 100,000 15,212 14,893 100,000
15 16,993 18,549 18,390 100,000 17,281 17,122 100,000
16 18,630 21,168 21,168 100,000 19,549 19,549 100,000
17 20,349 24,063 24,063 100,000 22,047 22,047 100,000
18 22,154 27,258 27,258 100,000 24,792 24,792 100,000
19 24,049 30,794 30,794 100,000 27,811 27,811 100,000
20 26,039 34,702 34,702 100,000 31,134 31,134 100,000
21 28,129 39,025 39,025 100,000 34,796 34,796 100,000
22 30,323 43,819 43,819 100,000 38,835 38,835 100,000
23 32,627 49,137 49,137 100,000 43,286 43,286 100,000
24 35,045 55,031 55,031 108,412 48,205 48,205 100,000
25 37,585 61,576 61,576 117,610 53,637 53,637 102,447
30 52,321 106,933 106,933 167,885 90,809 90,809 142,570
35 71,127 184,439 184,439 247,148 154,040 154,040 206,413
40 95,130 320,376 320,376 390,858 267,291 267,291 326,096
</TABLE>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 1,575 1,114 458 100,000 1,061 405 100,000
2 3,229 2,200 1,469 100,000 2,096 1,365 100,000
3 4,965 3,247 2,441 100,000 3,093 2,287 100,000
4 6,788 4,268 3,387 100,000 4,053 3,172 100,000
5 8,703 5,252 4,295 100,000 4,978 4,022 100,000
6 10,713 6,199 5,168 100,000 5,869 4,837 100,000
7 12,824 7,123 6,016 100,000 6,725 5,619 100,000
8 15,040 8,023 6,841 100,000 7,538 6,356 100,000
9 17,367 8,889 7,633 100,000 8,318 7,062 100,000
10 19,810 9,733 8,401 100,000 9,057 7,726 100,000
11 22,376 10,599 9,427 100,000 9,744 8,572 100,000
12 25,069 11,436 10,448 100,000 10,381 9,393 100,000
13 27,898 12,244 11,466 100,000 10,968 10,190 100,000
14 30,868 13,025 12,482 100,000 11,486 10,943 100,000
15 33,986 13,779 13,506 100,000 11,947 11,674 100,000
16 37,261 14,597 14,597 100,000 12,331 12,331 100,000
17 40,699 15,377 15,377 100,000 12,640 12,640 100,000
18 44,309 16,122 16,122 100,000 12,873 12,873 100,000
19 48,099 16,822 16,822 100,000 13,013 13,013 100,000
20 52,079 17,468 17,468 100,000 13,059 13,059 100,000
21 56,258 18,052 18,052 100,000 13,001 13,001 100,000
22 60,646 18,574 18,574 100,000 12,820 12,820 100,000
23 65,253 19,027 19,027 100,000 12,494 12,494 100,000
24 70,091 19,401 19,401 100,000 12,012 12,012 100,000
25 75,170 19,689 19,689 100,000 11,350 11,350 100,000
30 104,641 19,495 19,495 100,000 4,568 4,568 100,000
35 142,254 16,250 16,250 100,000 0 0 0
40 190,260 7,867 7,867 100,000 0 0 0
</TABLE>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 1,575 1,190 533 100,000 1,135 479 100,000
2 3,229 2,421 1,690 100,000 2,310 1,579 100,000
3 4,965 3,685 2,879 100,000 3,516 2,710 100,000
4 6,788 4,995 4,114 100,000 4,754 3,873 100,000
5 8,703 6,342 5,386 100,000 6,027 5,071 100,000
6 10,713 7,729 6,698 100,000 7,337 6,306 100,000
7 12,824 9,169 8,063 100,000 8,686 7,580 100,000
8 15,040 10,665 9,484 100,000 10,066 8,885 100,000
9 17,367 12,209 10,953 100,000 11,490 10,234 100,000
10 19,810 13,814 12,483 100,000 12,951 11,620 100,000
11 22,376 15,545 14,374 100,000 14,439 13,268 100,000
12 25,069 17,344 16,357 100,000 15,960 14,972 100,000
13 27,898 19,216 18,438 100,000 17,514 16,736 100,000
14 30,868 21,165 20,621 100,000 19,087 18,543 100,000
15 33,986 23,195 22,922 100,000 20,690 20,416 100,000
16 37,261 25,406 25,406 100,000 22,308 22,308 100,000
17 40,699 27,706 27,706 100,000 23,945 23,945 100,000
18 44,309 30,101 30,101 100,000 25,604 25,604 100,000
19 48,099 32,590 32,590 100,000 27,272 27,272 100,000
20 52,079 35,172 35,172 100,000 28,952 28,952 100,000
21 56,258 37,847 37,847 100,000 30,642 30,642 100,000
22 60,646 40,626 40,626 100,000 32,327 32,327 100,000
23 65,253 43,510 43,510 100,000 33,998 33,998 100,000
24 70,091 46,503 46,503 100,000 35,651 35,651 100,000
25 75,170 49,613 49,613 100,000 37,275 37,275 100,000
30 104,641 67,236 67,236 100,000 44,720 44,720 100,000
35 142,254 90,238 90,238 100,000 49,546 49,546 100,000
40 190,260 123,114 123,114 129,270 47,187 47,187 100,000
</TABLE>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BENEFIT(2)
1 1,575 1,265 609 100,000 1,209 553 100,000
2 3,229 2,652 1,921 100,000 2,534 1,803 100,00
3 4,965 4,160 3,354 100,000 3,976 3,170 100,000
4 6,788 5,817 4,935 100,000 5,547 4,666 100,000
5 8,703 7,625 6,669 100,000 7,262 6,306 100,000
6 10,713 9,603 8,571 100,000 9,138 8,107 100,000
7 12,824 11,780 10,674 100,000 11,193 10,087 100,000
8 15,040 14,178 12,997 100,000 13,436 12,255 100,000
9 17,367 16,812 15,555 100,000 15,900 14,643 100,000
10 19,810 19,717 18,385 100,000 18,599 17,267 100,000
11 22,376 23,007 21,835 100,000 21,551 20,379 100,000
12 25,069 26,645 25,658 100,000 24,786 23,799 100,000
13 27,898 30,671 29,893 100,000 28,340 27,562 100,000
14 30,868 35,131 34,587 100,000 32,233 31,690 100,000
15 33,986 40,074 39,801 100,000 36,517 36,244 100,000
16 37,261 45,655 45,655 100,000 41,226 41,226 100,000
17 40,699 51,846 51,846 100,000 46,416 46,416 100,000
18 44,309 58,719 58,719 100,000 52,151 52,151 100,000
19 48,099 66,354 66,354 100,000 58,492 58,492 100,000
20 52,079 74,841 74,841 100,286 65,523 65,523 100,000
21 56,258 84,285 84,285 109,571 73,339 73,339 100,000
22 60,646 94,813 94,813 121,361 82,045 82,045 105,018
23 65,253 106,566 106,566 134,273 91,772 91,772 115,633
24 70,091 119,710 119,710 148,440 102,679 102,679 127,322
25 75,170 134,440 134,440 164,017 114,955 114,955 140,245
30 104,641 241,476 241,476 280,112 206,904 206,904 240,009
35 142,254 444,946 444,946 476,092 404,076 404,076 432,361
40 190,260 863,700 863,700 906,885 925,876 925,876 972,170
</TABLE>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING OF
EACH CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF
PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR
IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS
HAVE BEEN MADE. ZERO VALUES INDICATE LAPSE IN THE
ABSENCE OF AN ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE
OWNER AND DIFFERENT INVESTMENT RATES OF RETURN
FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER
VALUE AND DEATH BENEFIT FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR THE INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATION CAN BE MADE BY MIDLAND,
THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.
Financial Statements
The financial statements of Midland National Life Insurance Company
included in this prospectus should be distinguished from the financial
statements of the Midland National Life Separate Account A and
should be considered only as bearing upon the ability of Midland to
meet its obligations under the Contracts. They should not be
considered as bearing upon the investment performance of the assets
held in the separate account.
2 VARIABLE UNIVERSAL LIFE 3
VARIABLE UNIVERSAL LIFE 3 1
6234PMP.TXT
<PAGE>
Midland National Life Insurance Company
Separate Account A
Financial Statements
For the Years Ended December 31, 1997, 1996, and 1995
C o n t e n t s Page(s)
Report of Independent Accountants 1
Statement of Assets and Liabilities 2-3
Statements of Operations and Changes in Net Assets 4-8
Notes to Financial Statements 9-13
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Midland National Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of
Midland National Life Separate Account A (comprising, respectively, the
portfolios of the Variable Insurance Products Fund, the Variable
Insurance Products Fund II, the Variable Insurance Products Fund III,
and the American Century Variable Portfolios, Inc.) as of December 31, 1997,
and the related statements of operations and changes in net assets for each
of the three years in the period ended December 31, 1997. 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.
Our procedures included confirmation of securities owned as of December 31,
1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
portfolios constituting the Midland National Life Separate Account A at
December 31, 1997, and the results of their operations and changes in their
net assets for each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.
Minneapolis, Minnesota
March 17, 1998
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
as of DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C>
Value
Per
ASSETS Shares Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $1,393,023) 1,393,023 $ 1.00 $ 1,393,023
High Income Portfolio (cost $2,602,845) 208,467 13.58 2,830,980
Equity-Income Portfolio (cost $8,561,981) 416,742 24.28 10,118,500
Growth Portfolio (cost $14,426,025) 461,790 37.10 17,132,404
Overseas Portfolio (cost $3,521,053) 193,137 19.20 3,708,222
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $5,118,653) 325,640 18.01 5,864,777
Investment Grade Bond Portfolio (cost $780,570) 65,585 12.56 823,750
Index 500 Portfolio (cost $3,994,020) 39,922 114.39 4,566,701
Contrafund Portfolio (cost $4,525,400) 255,867 19.94 5,101,986
Asset Manager Growth Portfolio (cost $1,171,954) 79,747 16.36 1,304,663
Variable Insurance Products Fund III:
Balanced Portfolio (cost $119,638) 8,352 14.58 121,777
Growth & Income Portfolio (cost $213,483) 17,100 12.53 214,268
Growth Opportunities Portfolio (cost $520,908) 28,239 19.27 544,175
American Century Variable Portfolios, Inc.:
Balanced Portfolio (cost $51,539) 6,323 8.24 52,097
Capital Appreciation Portfolio (cost $78,339) 7,542 9.68 73,008
International Portfolio (cost $199,061) 29,198 6.84 199,713
Value Portfolio (cost $137,346) 20,139 6.93 139,559
Total investments (cost $47,415,838) $ 54,189,603
LIABILITIES
Total liabilities $ -
Net assets $ 54,189,603
</TABLE>
The accompanying notes are an integral part of the financial statements.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES - (Continued)
as of DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C>
NET ASSETS Units Value
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 97,203 $ 14.33 $ 1,393,023
High Income Portfolio 109,231 25.92 2,830,980
Equity-Income Portfolio 299,834 33.75 10,118,500
Growth Portfolio 467,695 36.63 17,132,404
Overseas Portfolio 182,042 20.37 3,708,222
Variable Insurance Products Fund II:
Asset Manager Portfolio 244,581 23.98 5,864,777
Investment Grade Bond Portfolio 51,656 15.95 823,750
Index 500 Portfolio 232,667 19.63 4,566,701
Contrafund Portfolio 314,162 16.24 5,101,986
Asset Manager Growth Portfolio 82,904 15.74 1,304,663
Variable Insurance Products Fund III:
Balanced Portfolio 10,860 11.21 121,777
Growth & Income Portfolio 17,880 11.98 214,268
Growth Opportunities Portfolio 45,554 11.95 544,175
American Century Variable Portfolios, Inc.:
Balanced Portfolio 4,655 11.19 52,097
Capital Appreciation Portfolio 6,775 10.78 73,008
International Portfolio 18,903 10.56 199,713
Value Portfolio 11,732 11.90 139,559
Net assets $ 54,189,603
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
<TABLE>
<S> <C> <C> <C>
Combined
1997 1996 1995
Investment income:
Dividend income $ 676,790 $ 353,783 $ 235,744
Capital gains distributions 1,587,492 907,775 115,007
2,264,282 1,261,558 350,751
Expenses:
Administrative expense 84,730 52,416 31,601
Mortality and expense risk 427,879 237,175 142,636
Net investment income (loss) 1,751,673 971,967 176,514
Realized and unrealized gains(losses) on investments:
Net realized gains(losses) on investments 2,741,725 1,387,105 553,768
Net unrealized appreciation(depreciation) on
investments 3,254,492 735,339 2,816,691
Net realized and unrealized gains(losses) on
investments 5,996,217 2,122,444 3,370,459
Net increase(decrease) in net assets resulting from
operations $ 7,747,890 $ 3,094,411 $ 3,546,973
Net assets at beginning of year $ 32,499,879 $ 19,649,521 $ 11,518,208
Net increase(decrease) in net assets resulting
from operations 7,747,890 3,094,411 3,546,973
Capital shares transactions:
Net premiums 21,376,417 14,348,315 7,502,546
Transfers of policy loans (1,016,654) (633,495) (394,995)
Transfers of cost of insurance (4,261,689) (2,927,460) (1,781,520)
Transfers of surrenders (2,042,224) (998,919) (725,170)
Transfers of death benefits (38,948) (13,892) (2,316)
Transfers of other terminations (75,068) (18,602) (14,205)
Interfund transfers - - -
Net increase in net assets from capital share
transactions 13,941,834 9,755,947 4,584,340
Total increase in net assets 21,689,724 12,850,358 8,131,313
Net assets at end of year $ 54,189,603 $ 32,499,879 $ 19,649,521
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio High Income Portfolio
1997 1996 1995 1997 1996 1995
$ 94,654 $ 58,559 $ 24,560 $ 104,881 $ 65,229 $ 34,582
- - - 12,963 12,762 -
94,654 58,559 24,560 117,844 77,991 34,582
3,462 2,241 875 3,598 2,332 1,308
16,588 10,139 3,958 18,244 10,553 5,906
74,604 46,179 19,727 96,002 65,106 27,368
- - - 42,799 49,881 (5,589)
- - - 137,622 19,282 88,560
- - - 180,421 69,163 82,971
$ 74,604 $ 46,179 $ 19,727 $ 276,423 $ 134,269 $ 110,339
$ 1,672,741 $ 589,269 $ 212,950 $ 1,421,414 $ 815,627 $ 482,015
74,604 46,179 19,727 276,423 134,269 110,339
1,828,298 857,355 413,585 876,690 841,221 399,047
18,183 (9,004) (2,496) (37,241) (41,674) (15,746)
(119,358) (94,185) (45,281) (207,138) (159,359) (95,111)
(914,181) (187,306) (9,216) (78,445) (54,152) (63,603)
(130) - - (1,051) - -
(1,028) (224) - (1,570) (447) (1,314)
(1,166,106) 470,657 - 581,898 (114,071) -
(354,322) 1,037,293 356,592 1,133,143 471,518 223,273
(279,718) 1,083,472 376,319 1,409,566 605,787 333,612
$ 1,393,023 $ 1,672,741 $ 589,269 $ 2,830,980 $ 1,421,414 $ 815,627
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - (Continued)
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
<TABLE>
<S> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio
1997 1996 1995
Investment income:
Dividend income $ 107,918 $ 6,019 $ 67,980
Capital gains distributions 542,585 172,545 105,457
650,503 178,564 173,437
Expenses:
Administrative expense 16,434 9,932 5,693
Mortality and expense risk 80,523 44,942 25,786
Net investment income (loss) 553,546 123,690 141,958
Realized and unrealized gains(losses) on investments:
Net realized gains(losses) on investments 465,017 344,216 118,598
Net unrealized appreciation(depreciation) on
investments 820,036 112,077 566,696
Net realized and unrealized gains(losses) on
investments 1,285,053 456,293 685,294
Net increase(decrease) in net assets resulting from
operations $ 1,838,599 $ 579,983 $ 827,252
Net assets at beginning of year $ 6,148,229 $3,721,811 $1,952,718
Net increase(decrease) in net assets resulting
from operations 1,838,599 579,983 827,252
Capital shares transactions:
Net premiums 3,188,435 2,820,841 1,361,317
Transfers of policy loans (198,994) (114,290) (57,976)
Transfers of cost of insurance (757,555) (533,174) (301,032)
Transfers of surrenders (171,987) (93,138) (55,313)
Transfers of death benefits (16,504) (131) (264)
Transfers of other terminations (17,833) (4,334) (4,891)
Interfund transfers 106,110 (229,339) -
Net increase in net assets from capital share
transactions 2,131,672 1,846,435 941,841
Total increase in net assets 3,970,271 2,426,418 1,769,093
Net assets at end of year $ 10,118,500 $ 6,148,229 $ 3,721,811
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
Variable Insurance Products Fund
Growth Portfolio Overseas Portfolio
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1997 1996 1995
$ 80,524 $ 22,193 $ 26,217 $ 47,188 $ 20,685 $ 4,975
360,439 560,363 - 187,323 22,754 4,975
440,963 582,556 26,217 234,511 43,439 9,950
28,874 19,895 12,891 6,468 4,298 2,977
152,938 90,025 55,214 17,378 19,450 16,273
259,151 472,636 (41,888) 210,665 19,691 (9,300)
1,336,185 700,698 377,876 154,287 58,004 55,223
1,180,231 469 1,483,959 (83,491) 155,462 99,903
2,516,416 701,167 1,861,835 70,796 213,466 155,126
$ 2,775,567 $1,173,803 $ 1,819,947 $ 281,461 $ 233,157 $ 145,826
$ 11,699,876 $7,817,338 $ 4,508,874 $ 2,587,815 $1,723,792 $1,212,949
2,775,567 1,173,803 1,819,947 281,461 233,157 145,826
5,149,531 4,390,266 2,541,252 1,410,695 1,053,155 779,465
(446,688) (252,514) (187,011) (91,175 (59,815) (48,974)
(1,357,432)(1,059,362) (671,659) (324,642 (263,297) (211,845)
(354,778) (309,025) (188,163) (94,010 (73,670) (152,057)
(14,755) (10,342) (1,816) (3,223) (83) -
(34,808) (6,455) (4,086) (2,361) (1,405) (1,572)
(284,109) (43,833) - (56,338) (24,019) -
2,656,961 2,708,735 1,488,517 838,946 630,866 365,017
5,432,528 3,882,538 3,308,464 1,120,407 864,023 510,843
$ 17,132,404 $11,699,876 $7,817,338 $3,708,222 $ 2,587,815 $1,723,792
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - (Continued)
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
<TABLE>
Variable Insurance Products Fund II
Asset Manager Portfolio
<S> <C> <C> <C>
1997 1996 1995
Investment income:
Dividend income $ 158,180 $ 133,666 $ 56,666
Capital gains distributions 396,791 110,216 -
554,971 243,882 56,666
Expenses:
Administrative expense 10,361 8,072 6,261
Mortality and expense risk 54,683 36,522 28,250
Net investment income (loss) 489,927 199,288 22,155
Realized and unrealized gains(losses) on investments:
Net realized gains(losses) on investments 198,545 122,556 (13,155)
Net unrealized appreciation(depreciation) on
investments 208,315 176,177 477,422
Net realized and unrealized gains(losses) on
investments 406,860 298,733 464,267
Net increase(decrease) in net assets resulting from
operations $ 896,787 $ 498,021 $ 486,422
Net assets at beginning of year $ 4,483,785 $ 3,633,749 $ 2,595,623
Net increase(decrease) in net assets resulting
from operations 896,787 498,021 486,422
Capital shares transactions:
Net premiums 1,304,321 1,212,022 1,228,465
Transfers of policy loans (100,858) (67,771) (77,688)
Transfers of cost of insurance (423,781) (401,099) (359,734)
Transfers of surrenders (123,302) (222,263) (236,821)
Transfers of death benefits (158) (2,280) (236)
Transfers of other terminations (3,731) (5,303) (2,282)
Interfund transfers (168,286) (161,291) -
Net increase in net assets from capital share
transactions 484,205 352,015 551,704
Total increase in net assets 1,380,992 850,036 1,038,126
Net assets at end of year $ 5,864,777 $ 4,483,785 $ 3,633,749
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
Variable Insurance Products Fund II
Investment Grade Bond Portfolio Index 500 Portfolio
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1997 1996 1995
$ 46,902 $ 35,859 $ 17,803 $ 17,532 $ 4,429 $ 1,202
- - - 35,574 11,389 165
46,902 35,859 17,803 53,106 15,818 1,367
1,572 1,469 1,128 5,431 1,561 297
8,015 6,648 5,140 33,893 7,065 1,334
37,315 27,742 11,535 13,782 7,192 (264)
12,052 4,931 7,242 213,675 64,340 10,309
9,013 (17,545) 66,536 455,684 83,067 33,470
21,065 (12,614) 73,778 669,359 147,407 43,779
$ 58,380 $ 15,128 $ 85,313 $ 683,141 $ 154,599 $ 43,515
$ 757,993 $ 710,276 $ 497,870 $ 1,340,570 $ 292,473 $ 55,209
58,380 15,128 85,313 683,141 154,599 43,515
233,307 241,760 200,234 2,611,727 1,028,697 227,265
2,346 (39,038) (3,183) (39,650) (17,532) (3,683)
(83,015) (80,239) (50,491) (393,476) (141,911) (29,243)
(105,722) (31,289) (19,407) (54,915) (11,092) (590)
(618) (1,056) - (1,332) - -
(505) (540) (60) (4,272) (87) -
(38,416) (57,00) - 424,908 35,423 -
7,377 32,589 127,093 2,542,990 893,498 193,749
65,757 47,717 212,406 3,226,131 1,048,097 237,264
$ 823,750 $ 757,993 $ 710,276 $ 4,566,701 $ 1,340,570 $ 292,473
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - (Continued)
for the YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
<S> <C> <C> <C>
Variable Insurance Products Fund II
Contrafund Portfolio
1997 1996 1995
Investment income:
Dividend income $ 17,687 $ - $ 1,269
Capital gains distributions 46,743 3,899 2,538
64,430 3,899 3,807
Expenses:
Administrative expense 6,563 2,164 152
Mortality and expense risk 33,820 9,790 688
Net investment income (loss) 24,047 (8,055) 2,967
Realized and unrealized gains(losses) on investments:
Net realized gains(losses) on investments 248,167 36,440 3,233
Net unrealized appreciation(depreciation) on
investments 385,213 190,170 1,202
Net realized and unrealized gains(losses) on
investments 633,380 226,610 4,435
Net increase(decrease) in net assets resulting from
operations $ 657,427 $ 218,555 $7,402
Net assets at beginning of year $ 1,919,525 $ 291,610 $ -
Net increase(decrease) in net assets resulting
from operations 657,427 218,555 7,402
Capital shares transactions:
Net premiums 2,852,974 1,487,812 296,190
Transfers of policy loans (93,023) (19,479) 1,762
Transfers of cost of insurance (414,073) (154,413) (13,744)
Transfers of surrenders (103,126) (16,096) -
Transfers of death benefits (1,177) - -
Transfers of other terminations (8,960) 193 -
Interfund transfers 292,419 111,343 -
Net increase in net assets from capital share
transactions 2,525,034 1,409,360 284,208
Total increase in net assets 3,182,461 1,627,915 291,610
Net assets at end of year $ 5,101,986 $1,919,525 $ 291,610
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
Variable Insurance Products Fund II Variable Insurance Products Fund III
<S> <C> <C> <C> <C> <C>
Asset Manager Growth Portfolio Growth & Growth
Balanced Income Opportunities
Portfolio Portfolio Portfolio
1997 1996 1995 1997 1997 1997
$ - $ 7,144 $ 490 $ - $ 1,324 $ -
772 13,847 1,872 - 4,302 -
772 20,991 2,362 - 5,626 -
1,700 452 19 25 26 143
9,040 2,041 87 320 370 1,194
(9,968) 18,498 2,256 (345) 5,230 (1,337)
65,245 6,039 31 191 473 4,463
117,585 16,180 (1,057) 2,140 786 23,265
182,830 22,219 (1,026) 2,331 1,259 27,728
$ 172,862 $ 40,717 $ 1,230 $ 1,986 $ 6,489 $ 26,391
$ 467,931 $ 53,576 $ - $ - $ - $ -
172,862 40,717 1,230 1,986 6,489 26,391
787,790 415,186 55,726 102,622 182,863 424,520
(29,528) (12,378) - - (71) -
(122,121) (40,421) (3,380) (3,050) (8,429) (19,831)
(39,420) (888) - (4) (307) (536)
- - - - - -
- - - - - -
67,149 12,139 - 20,223 33,723 113,631
663,870 373,638 52,346 119,791 207,779 517,784
836,732 414,355 53,576 121,777 214,268 544,175
$ 1,304,663 $ 467,931 $ 53,576 $ 121,777 $ 214,268 $ 544,175
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
<TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - (Continued)
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.
Capital
Balanced Appreciation International Value
Portfolio Portfolio Portfolio Portfolio
1997 1997 1997 1997
Investment income:
Dividend income $ - $ - $ - $ -
Capital gains distributions - - - -
- - - -
Expenses:
Administrative expense 5 10 38 20
Mortality and expense risk 126 141 392 214
Net investment income (loss) (131) (151) (430) (234)
Realized and unrealized gains(losses) on investments:
Net realized gains(losses) on investments 387 (425) (34) 698
Net unrealized appreciation(depreciation) on
investments 559 (5,332) 652 2,214
Net realized and unrealized gains(losses) on
investments 946 (5,757) 618 2,912
Net increase(decrease) in net assets resulting from
operations $ 815 $ (5,908) $ 188 $ 2,678
Net assets at beginning of year $ - $ - $ - $ -
Net increase(decrease) in net assets resulting
from operations 815 (5,908) 188 2,678
Capital shares transactions:
Net premiums 57,959 71,171 176,976 116,538
Transfers of policy loans - - 45 -
Transfers of cost of insurance (6,022) (4,961) (8,337) (8,468)
Transfers of surrenders (110) (126) (1,208) (47)
Transfers of death benefits - - - -
Transfers of other terminations - - - -
Interfund transfers (545) 12,832 32,049 28,858
Net increase in net assets from capital share
transactions 51,282 78,916 199,525 136,881
Total increase in net assets 52,097 73,008 199,713 139,559
Net assets at end of year $ 52,097 $ 73,008 $ 199,713 $ 139,559
</TABLE>
The accompanying notes are an integral part of the financial statements.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Significant Accounting Policies
Midland National Life Separate Account A (Separate Account), a unit investment
trust, was established as a segregated investment account of Midland National
Life Insurance Company (the Company) in accordance with the provisions of the
South Dakota Insurance laws. The assets and liabilities of the Separate
Account are clearly identified and distinguished from the other assets and
liabilities of the Company. The Separate Account is used to fund variable
universal life insurance policies of the Company.
The Separate Account invests in specified portfolios of Variable Insurance
Products Fund (VIPF), Variable Insurance Products Fund II (VIPF II), Variable
Insurance Products Fund III (VIPF III), and American Century Variable
Portfolios, Inc. (ACVP) (collectively the Funds), each diversified open-end
management companies registered under the Investment Company Act of 1940,
as directed by participants. The VIPF II Contrafund and Asset Manager Growth
portfolios were introduced in 1995. The VIPF III Balanced, Growth & Income
and Growth Opportunities portfolios and the ACVP Balanced, Capital
Appreciation, International and Value portfolios were introduced in 1997.
All other portfolios have been in existence for more than three years.
Investments in shares of the Funds are valued at the net asset values of the
respective portfolios of the Funds corresponding to the investment portfolios
of the Separate Account. Fair value of investments is also the net asset
value. Walnut Street Securities serves as the underwriter of the Separate
Account. Investment transactions are recorded on the trade date. Dividends
are automatically reinvested in shares of the Funds. The first-in, first-out
(FIFO) method is used to determine realized gains and losses on investments.
The operations of the Separate Account are included in the federal income tax
return of the Company. Under the provisions of the policies, the Company has
the right to charge the Separate Account for federal income tax attributable
to the Separate Account. No charge is currently being made against the
Separate Account for such tax since, under current law, the Company pays no
tax on investment income and capital gains reflected in variable life
insurance policy reserves. However, the Company retains the right to charge
for any federal income tax incurred which is attributable to the Separate
Account if the law is changed. Charges for state and local taxes, if any,
attributable to the Separate Account may also be made.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) Expense Charges
The Company is compensated for certain expenses as described below. The rates
for each applicable charge is described in the Separate Account's prospectus.
A contract administration fee is charged to cover the Company's recordkeeping
and other administrative expenses incurred to operate the Separate Account.
A mortality and expense risk fee is charged in return for the Company's
assumption of risks associated with adverse mortality experience or excess
administrative expenses in connection with policies issued.
The Company assumes the responsibility for providing the insurance benefits
included in the policy. The cost of insurance is determined each month based
upon the applicable insurance rate and the current death benefit. The cost
of insurance can vary from month to month since the determination of both the
insurance rate and the current death benefit depends upon a number of
variables as described in the Separate Account's prospectus.
A transfer charge is imposed on each transfer between portfolios of the
Separate Account in excess of a stipulated number of transfers in any one
contract year.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - (Continued)
(2) Expense Charges (continued)
A surrender charge may be imposed in the event of a contract surrender or
lapse within a stipulated number of years.
(3) Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments for
the years ended December 31, 1997, 1996, and 1995 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
Purchases Sales Purchases Sales Purchases Sales
Portfolio
Variable Insurance Products Fund:
Money Market $2,398,056 $ 2,679,342 $ 2,034,275 $ 949,787 $ 665,299 $ 291,399
High Income 1,762,564 534,720 1,130,421 593,263 506,889 259,469
Equity-Income 4,606,039 1,926,533 3,626,635 1,654,290 1,711,755 639,107
Growth 6,694,330 3,789,244 5,850,056 2,665,240 3,050,540 1,621,442
Overseas 1,975,804 928,568 1,305,663 654,357 951,209 604,563
Variable Insurance Products Fund II:
Asset Manager 2,167,982 1,198,071 1,858,024 1,305,947 1,549,225 985,616
Investment Grade Bond 351,091 307,112 340,129 279,745 294,633 156,524
Index 500 3,510,441 954,879 1,327,248 425,671 249,692 56,745
Contrafund 3,786,750 1,239,389 1,876,198 473,421 334,133 46,711
Asset Manager Growth 1,025,893 372,417 522,652 130,138 61,622 6,973
Variable Insurance Products Fund III:
Balanced 151,867 32,420 - - - -
Growth & Income 229,692 16,682 - - - -
Growth Opportunities 583,991 67,546 - - - -
American Century Variable Portfolios, Inc.:
Balanced 69,085 17,933 - - - -
Capital Appreciation 93,376 14,612 - - - -
International 224,848 25,753 - - - -
Value 153,593 16,945 - - - -
$ 29,785,402 $ 14,122,166 $ 19,871,301 $ 9,131,859 $ 9,374,997 $ 4,668,549
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - (Continued)
(4) Summary of Changes from Unit Transactions
Transactions in units for the years ended December 31, 1997, 1996, and 1995
were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
Purchases Sales Purchases Sales Purchases Sales
Portfolio
Variable Insurance Products Fund:
Money Markt 160,457 175,104 132,191 61,393 45,654 20,129
High Income 71,855 20,908 45,898 25,239 23,134 12,089
Equity-Income 155,294 58,396 122,028 57,300 65,454 24,740
Growth 216,574 102,996 167,406 80,887 113,881 56,756
Overseas 89,759 39,237 67,962 33,856 56,643 34,460
Variable Insurance Products Fund II:
Asset Manager 77,125 50,498 84,315 66,066 89,048 55,423
Investment Grade Bond 20,534 19,490 20,996 18,784 19,845 10,894
Index 500 204,615 48,013 81,534 25,464 18,815 3,958
Contrafund 254,844 75,480 145,795 35,584 28,468 3,881
Asset Manager Growth 71,882 23,310 39,936 10,263 5,265 606
Variable Insurance Products Fund III:
Balanced 13,593 2,733 - - - -
Growth & Income 19,277 1,397 - - - -
Growth Opportunities 51,166 5,612 - - - -
American Century Variable Portfolios, Inc.:
Balanced 6,244 1,589 - - - -
Capital Appreciation 8,033 1,258 - - - -
International 21,308 2,405 - - - -
Value 13,166 1,434 - - - -
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - (Continued)
(5) Net Assets
Net assets at December 31, 1997, consisted of the following:
<TABLE>
<S> <C> <C> <C> <C>
Accumulated
Net Net
Investment Unrealized
Capital Income and Appreciation
Share Net Realized of
Transactions Gains Investments Total
Portfolio
Variable Insurance Products Fund:
Money Market $ 1,235,505 $ 157,518 $ - $ 1,393,023
High Income 2,247,693 355,152 228,135 2,830,980
Equity-Income 6,456,131 2,105,850 1,556,519 10,118,500
Growth 10,633,134 3,792,891 2,706,379 17,132,404
Overseas 2,961,450 559,603 187,169 3,708,222
Variable Insurance Products Fund II:
Asset Manager 3,945,413 1,173,240 746,124 5,864,777
Investment Grade Bond 655,074 125,496 43,180 823,750
Index 500 3,685,140 308,880 572,681 4,566,701
Contrafund 4,218,601 306,799 576,586 5,101,986
Asset Manager Growth 1,089,854 82,100 132,709 1,304,663
Variable Insurance Products Fund III:
Balanced 119,792 (154) 2,139 121,777
Growth & Income 207,780 5,703 785 214,268
Growth Opportunities 517,782 3,126 23,267 544,175
American Century Variable Portfolios, Inc.:
Balanced 51,283 256 558 52,097
Capital Appreciation 78,915 (576) (5,331) 73,008
International 199,525 (464) 652 199,713
Value 136,882 464 2,213 139,559
$ 38,439,954 $ 8,975,884 $ 6,773,765 $54,189,603
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - (Continued)
(6) Merger
Effective January 2, 1997, Investors Life Insurance Company of Nebraska
(Investors) along with all of its assets and liabilities was merged into the
Company. Related to the merger, the Company transferred the entire amount of
assets and assumed the entire amount of liabilities of the Investors Life
Separate Account B into the Separate Account A. Separate Account B issued
certain variable universal life insurance contracts that were sponsored by
Investors Life which was a wholly-owned insurance subsidiary of the Company.
These variable universal life insurance contracts are nearly identical in all
material respects to the variable universal life insurance contracts issued by
Separate Account A. This transaction was the result of certain business
decisions whereby Investors Life was reorganized with and merged into the
Company, with the Company remaining as the surviving corporation. The
Company assumed ownership of all assets of Investors Life, including all
assets held in Separate Account B. The assumption of the Separate Account B
net assets was accomplished by purchasing similar investment funds with the
same value from each of the respective fund portfolios in Separate Account A.
This reorganization was structured so that there was no change in the rights
and benefits of persons having an interest in the variable life insurance
contracts issued by either of the separate accounts and no change in the net
asset values held by the respective participants of either of the Separate
Accounts.
MNLSEPA.TXT
<PAGE>
M idland National Life Insurance Company
Financial Statements
For the Years Ended December 31, 1997, 1996, and 1995
C o n t e n t s Page(s)
Report of Independent Accountants 1
Balance Sheets 2
Statements of Income 3
Statements of Stockholders Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-19
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Midland National Life Insurance Company:
We have audited the accompanying balance sheets of Midland National
Life Insurance Company (the Company), as of December 31, 1997 and 1996,
and the related statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Midland National Life
Insurance Company as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Minneapolis, Minnesota
March 12, 1998
MIDLAND NATIONAL LIFE INSURANCE COMPANY
BALANCE SHEETS
as of DECEMBER 31, 1997 and 1996
(Amounts in thousands, except share and per share amounts)
<TABLE>
<S> <C> <C>
ASSETS
1997 1996
Investments:
Fixed maturities $ 2,420,977 $ 1,840,902
Equity securities 145,156 215,964
Policy loans 202,129 154,090
Short-term investments 636,280 242,857
Other invested assets 29,329 18,495
Total investments 3,433,871 2,472,308
Cash 2,384 3,578
Accrued investment income 37,980 32,613
Deferred policy acquisition costs 416,767 427,218
Present value of future profits of acquired businesses 40,397 21,308
Other receivables and other assets 28,045 23,922
Separate account assets 139,072 81,516
Total assets $ 4,098,516 $ 3,062,463
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Policyholder account balances $ 2,401,302 $ 1,789,732
Policy benefit reserves 419,131 404,806
Policy claims and benefits payable 33,839 31,512
Federal income taxes 36,088 39,315
Other liabilities 90,102 90,267
Security lending liability 308,125 -
Separate account liabilities 139,072 81,516
Total liabilities 3,427,659 2,437,148
</TABLE>
<TABLE>
Commitments and contingencies
<S> <C> <C>
Stockholders' equity:
Common stock $1 par value, 2,549,439 shares authorized, issued
and outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Net unrealized appreciation of investment securities 30,838 18,825
Retained earnings 603,763 570,234
Total stockholders' equity 670,857 625,315
Total liabilities and stockholders' equity $ 4,098,516 $ 3,062,463
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
<TABLE>
STATEMENTS OF INCOME
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
(Amounts in thousands)
<S> <C> <C> <C>
1997 1996 1995
Revenues:
Premiums $ 98,668 $ 101,423 $ 100,858
Interest sensitive life and investment product charges 157,423 150,839 139,611
Net investment income 188,650 173,583 167,020
Net realized investment gains 3,561 6,839 1,762
Net unrealized gains (losses) on trading securities (641) 6,200 7,057
Other income 2,565 4,362 5,754
Total Revenue 450,226 443,246 422,062
Benefits and expenses:
Benefits incurred 146,227 151,208 139,056
Interest credited to policyholder account balances 111,333 103,618 102,339
Total benefits 257,560 254,826 241,395
Operating expenses (net of commissions & other
expenses deferred) 44,130 43,243 43,726
Amortization of deferred policy acquisition costs and
present value of future profits of acquired
businesses 56,954 53,316 51,576
Total benefits and expenses 358,644 351,385 336,697
Income before income taxes 91,582 91,861 85,365
Income tax expense 33,053 31,821 28,703
Net income $ 58,529 $ 60,040 $ 56,662
</TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
for the YEARS ENDED DECMBER 31, 1997, 1996, and 1995
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net Unrealized
Appreciation
Additional (Depreciation) Total
Common Paid-In of Investment Retained Stockholders'
Stock Capital Securities Earnings Equity
Balance at January 1, 1995 $ 2,549 $ 33,707 $ (10,003) $ 463,857 $ 490,110
Net Income - - - 56,662 56,662
Dividends paid on common stock - - - (10,325) (10,325)
Net appreciation of available for investments - - 41,030 - 41,030
Balance at December 31, 1995 2,549 33,707 31,027 510,194 577,477
Net Income - - - 60,040 60,040
Net depreciation of available for investments - - (12,202) - (12,202)
Balance at December 31, 1996 2,549 33,707 18,825 570,234 625,315
Net Income - - - 58,529 58,529
Dividends paid on common stock - - - (25,000) (25,000)
Net appreciation of avialable for
sale investments - - 12,013 - 12,013
Balance at December 31, 1997 $ 2,549 $ 33,707 $ 30,838 $ 603,763 $ 670,857
</TABLE>
The accompanying notes are an integral part of the financial statements.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
<TABLE>
STATEMENTS OF CASH FLOWS
for the YEARS ENDED DECEMBER 31, 1997, 1996, and 1995
(Amounts in thousands)
<S> <C> <C> <C>
1997 1996 1995
Cash flows from operating activities:
Net Income $ 58,529 $ 60,040 $ 56,662
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of deferred policy acquisition costs and
present value of future profits of acquired business 56,954 53,316 51,576
Net amortization of premiums and discounts on investments 2,699 5,532 4,828
Policy acquisition costs deferred (50,363) (65,285) (63,717)
Net realized investment gains (3,561) (6,839) (1,762)
Net unrealized (gains) losses on trading securities 641 (6,200) (7,057)
Net proceeds from (cost of) trading securities 99,850 5,788 (23,305)
Deferred income taxes (5,421) 12,177 (5,721)
Net interest credited and product charges on universal life
and investment policies (46,090) (47,221) (37,272)
Changes in other assets and liabilities:
Net receivables and payables (13,946) 32,863 12,346
Policy benefits 15,826 26,185 23,500
Other 122 (277) 539
Net cash provided by operating activities 115,240 70,079 10,617
Cash flows from investing activities:
Proceeds from investments sold, matured, or repaid:
Fixed maturities 1,217,086 1,422,426 911,883
Equity securities 137,510 129,827 51,567
Other invested assets 941 2,055 421
Cost of investments acquired:
Fixed maturities (1,791,522) (1,569,779) (994,486)
Equity securities (144,862) (145,096) (41,968)
Other invested assets (11,702) (14,245) (2,283)
Net change in policy loans (9,995) (11,295) (9,883)
Net change in short-term investments 93,875 (18,748) (24,963)
Net change in security lending 308,125 - (33,239)
Payment for purchase of insurance business, net of
cash acquired 23,939 - (440)
Net cash used in investing activities (176,605) (204,855) (143,391)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS ( CONTINUED)
for the YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Amounts in thousands)
<S> <C> <C> <C>
1997 1996 1995
Cash flows from financing activities:
Receipts from universal life and investment products $ 280,164 $ 285,569 $ 272,511
Benefits paid on universal life and investment products (194,993) (156,514) (129,024)
Dividends paid on common stock (25,000) - (10,325)
Net cash provided by financing activities 60,171 129,055 133,162
Increase (decrease) in cash (1,194) (5,721) 388
Cash at beginning of year 3,578 9,299 8,911
Cash at end of year $ 2,384 $ 3,578 $ 9,299
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 143 $ 166 $ 188
Income taxes, paid to parent 42,749 16,772 25,376
Non-cash operating, investing and financing activity:
Policy loans, receivables and other assets received in
assumption reinsurance agreements 38,044 - 9,723
</TABLE>
The accompanying notes are an integral part of the financial statements.
(1) Summary of Significant Accounting Policies
Organization
Midland National Life Insurance Company (Midland or the Company) is a
majority-owned subsidiary of Sammons Enterprises, Inc. (SEI). Midland
operates predominantly in the individual life and annuity business of the
life insurance industry. The Company is licensed to operate in 49 states
and the District of Columbia.
Basis of Presentation
Effective May 31, 1996, Midland sold its wholly-owned subsidiary,
North American Management, Inc. (NAM), to an unrelated party for a net
consideration which approximated the net equity of NAM at May 31, 1996. The
operations of the subsidiary, which were included through May 31, 1996, were
not material to the financial statements.
On January 2, 1997, Investors Life Insurance Company of Nebraska was
merged into Midland. Since this wholly-owned subsidiary was previously
consolidated with Midland, this merger had no impact on the financial
statements of Midland.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates. The following are
the more significant elements of the financial statements affected by the
use of estimates and assumptions:
Investment values.
Deferred policy acquisition costs.
Present value of future profits of acquired business.
Policy benefit reserves and claims reserves.
Fair value of financial instruments.
The Company is subject to the risk that interest rates will change and
cause a decrease in the value of its investments. To the extent that
fluctuations in interest rates cause the duration of assets and liabilities
to differ, the Company may have to sell assets prior to their maturity and
realize a loss.
Investments
The Company is required to classify its fixed maturity investments
(bonds and redeemable preferred stocks) and equity securities (common and
nonredeemable preferred stocks) into three categories: securities that the
Company has the positive intent and the ability to hold to maturity are
classified as "held to maturity"; securities that are held for current resale
are classified as "trading securities"; and securities not classified as held
to maturity or as trading securities are classified as "available for sale.
Fixed maturity investments classified as trading or available-for-sale are
required to be reported at fair value in the balance sheet. The Company has
no securities classified as held-to-maturity.
Trading securities are held for resale in anticipation of short-term
market movements. The Company's trading securities are stated at market
value. Gains and losses on these securities, both realized and unrealized,
are included in the determination of net income. Net cost of or proceeds
from trading securities are included in operating activities in the statements
of cash flows.
Available-for-sale securities are classified as such if not considered
trading securities or if there is not the positive intent and ability to hold
the securities to maturity. Such securities are carried at market value with
the unrealized holding gains and losses included directly in stockholders'
equity, net of related adjustments to deferred policy acquisition costs and
deferred income taxes. Cash flows from available-for-sale security
transactions are included in investing activities in the statements of cash
flows.
For CMO's and mortgage-backed securities, the Company recognizes
income using a constant effective yield based on anticipated prepayments and
the estimated economic life of the securities. When actual prepayments
differ significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the security is adjusted to the amount that
would have existed had the new effective yield been applied since the
acquisition of the security. This adjustment is included in net investment
income.
Policy loans and other invested assets are carried at unpaid principal
balances. Short-term investments are carried at amortized cost, which
approximates fair value.
Investment income is recorded when earned. Realized gains and losses
are determined on the basis of specific identification of the investments.
When a decline in value of an investment is determined to be other
than temporary, the specific investment is carried at estimated realizable
value and its original book value is reduced to reflect this impairment.
Such reductions in book value are recognized as realized investment losses
in the period in which they were written down.
The Company periodically enters into agreements to sell and
repurchase securities. The commitment to repurchase securities sold under
these agreements are reported as liabilities and the investments acquired
with the funds received from the securities sold are included in short-term
investments.
Recognition of Traditional Life, Health, and Annuity Premium Revenue and Policy
Benefits
Traditional life insurance products include those products with fixed and
guaranteed premiums and benefits. Life insurance premiums, which comprise
the majority of premium revenues, are recognized as premium income when due.
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 policy benefit reserves and the
amortization of deferred policy acquisition costs.
Liabilities for policy benefit reserves for traditional policies
generally are computed by the net level premium method based on estimated
future investment yield, mortality, morbidity, and withdrawals which were
appropriate at the time the policies were issued or acquired. Interest rate
assumptions range from 6.5% to 11%.
Recognition of Revenue and Policy Benefits for Interest Sensitive Life
Insurance Products and Investment Contracts (Interest Sensitive Policies)
Interest sensitive policies are issued on a periodic and single
premium basis. Amounts collected are credited to policyholder account
balances. Revenues from interest sensitive policies consist of charges
assessed against policyholder account balances for the cost of insurance,
policy administration, and surrender charges. Revenues also include
investment income related to the investments which support the policyholder
account balances. Policy benefits and claims that are charged to expense
include benefits incurred in the period in excess of related policyholder
account balances. Benefits also include interest credited to the
account balances.
Policy reserves for universal life and other interest-sensitive life
insurance and investment contracts are determined using the retrospective
deposit method. Policy reserves consist of the policyholder deposits and
credited interest less withdrawals and charges for mortality, administrative,
and policy expenses. Interest crediting rates ranged primarily from 3.75% to
6.75% in 1997, 3% to 7% in 1996 and 3% to 7.5% in 1995. For certain
contracts these crediting rates extend for periods in excess of one year.
Deferred Policy Acquisition Costs
Policy acquisition costs 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 from future profits. Such costs include
commissions, policy issuance, underwriting, and certain variable agency
expenses.
Deferred costs related to traditional life insurance are amortized
over the estimated premium paying period of the related policies in
proportion to the ratio of annual premium revenues to total anticipated
premium revenues.
Deferred costs related to interest sensitive policies are being
amortized over the lives of the policies (up to 25 years) in relation to the
present value of actual and estimated gross profits subject to regular
evaluation and retroactive revision to reflect actual emerging experience.
Policy acquisition costs deferred and amortized for years ended
December 31 are as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Deferred policy acquisition costs, beginning of year $ 427,218 $ 410,051 $ 415,594
Commissions deferred 40,660 55,005 52,533
Underwriting and acquisition expenses deferred 9,703 10,280 11,184
Change in offset to unrealized gains and losses (8,710) 92 (22,325)
Amortization (52,104) (48,210) (46,935)
Deferred policy acquisition costs, end of year $ 416,767 $ 427,218 $ 410,051
</TABLE>
To the extent that unrealized gains and losses on available-for-sale
securities would result in an adjustment to the amortization pattern of
deferred policy acquisition costs or present value of future profits of
acquired business had those gains or losses actually been realized, the
adjustments are recorded directly to stockholders' equity as an offset to
the unrealized gains or losses with no effect on income.
Present Value of Future Profits of Acquired Business
The present value of future profits of acquired business (PVFP)
represents the portion of the purchase price of a block of business which is
allocated to the future profits attributable to the insurance in force at the
dates of acquisition. The PVFP is amortized in relationship to the actual
and expected emergence of such future profits. The composition of the PVFP
for the years ended December 31 is summarized below:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Balance at beginning of year $ 21,308 $ 26,414 $ 31,495
Value of in force acquired 23,939 - (440)
Amortization (4,850) (5,106) (4,641)
Balance at end of year $ 40,397 $ 21,308 $ 26,414
</TABLE>
Based on current conditions and assumptions as to future events, the
Company expects to amortize approximately 20 percent of the December 31, 1997
balance of PVFP in 1998, 16 percent in 1999, 14 percent in 2000, 11 percent
in 2001, and 9 percent in 2002. The interest rates used to determine the
amortization of the PVFP purchased ranged from 5.5 percent to 6.5 percent.
Policy Claims and Benefits Payable
The liability for policy claims and benefits payable includes
provisions for reported claims and estimates for claims incurred but not
reported, based on the terms of the related policies and contracts and on
prior experience. Claim liabilities are necessarily based on estimates and
are subject to future changes in claim severity and frequency. Estimates are
periodically reviewed and adjustments to such liabilities are reflected in
current operations.
Federal Income Taxes
The Company is a member of SEI's consolidated United States
federal income tax group. The policy for intercompany allocation of federal
income taxes provides that the Company compute the provision for federal
income taxes on a separate return basis. The Company makes payment to, or
receives payment from, SEI in the amount they would have paid to, or received
from, the Internal Revenue Service had they not been members of the
consolidated tax group. The separate Company provisions and payments are
computed using the tax elections made by the Parent.
Deferred tax liabilities and assets are recognized based upon the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Separate Account
Separate account assets and liabilities represent funds held for the
exclusive benefit of variable universal life and annuity contractholders.
Fees are received for administrative expenses and for assuming certain
mortality, distribution and expense risks. Operations of the separate
accounts are not included in these financial statements.
(2) Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, short-term investments, policy loans, and other invested
assets: The carrying amounts reported in the balance sheets for
these instruments approximate their fair values.
Investment securities: Fair value for fixed maturity securities
(including redeemable preferred stocks) are based on quoted
market prices, where available. For fixed maturities not actively
traded, fair values are estimated using values obtained from
independent pricing services. In some cases, such as private
placements and certain mortgage-backed securities, fair values are
estimated by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality and
maturity of the investments. The fair value of equity securities are
based on quoted market prices.
Investment-type insurance contracts: Fair values for the
Company's liabilities under investment -type insurance contracts
are estimated using two methods. For those contracts without a
defined maturity, the fair value was estimated as the amount
payable on demand (cash surrender value). For those contracts
with known maturities, fair value is estimated using discounted
cash flow calculations using interest rates currently being offered
for similar contracts with maturities consistent with the contracts
being valued.
These fair value estimates are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in some cases, could not be realized in the immediate settlement of the
instruments. Certain financial liabilities (including non investment-type
insurance contracts) and all nonfinancial instruments are excluded from the
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The carrying value and estimated fair value of the Company's
financial instruments are as follows:
<TABLE>
<S> <C> <C> <C> <C>
December 31, 1997 December 31, 1996
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Fixed maturities - available-for-sale $ 2,420,977 $ 2,420,977 $ 1,807,362 $ 1,807,362
Fixed maturities - trading - - 33,540 33,540
Equity securities - available-for-sale 78,950 78,950 67,498 67,498
Equity securities - trading 66,206 66,206 148,466 148,466
Policy loans 202,129 202,129 154,090 154,090
Short-term investments 636,280 636,280 242,857 242,857
Other investments 29,329 29,329 18,495 18,495
Financial liabilities:
Investment-type insurance contracts 1,011,000 989,000 615,000 597,000
</TABLE>
(3) Investments and Investment Income
Fixed Maturities and Equity Security Investments
<TABLE>
The amortized cost and estimated fair value of fixed maturities and
equity securities classified as available for sale are as follows:
<S> <C> <C> <C> <C>
December 31, 1997
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government
corporations and agencies $ 625,958 $ 9,232 $ 266 $ 634,924
Obligations of U.S. states and political
subdivisions 3,201 147 - 3,348
Corporate securities 660,172 30,234 577 689,829
Mortgage-backed securities 1,055,140 22,159 109 1,077,190
Other debt securities 14,861 826 1 15,686
Total fixed maturities 2,359,332 62,598 953 2,420,977
Equity securities 69,221 10,433 704 78,950
Total available for sale $ 2,428,553 $ 73,031 $ 1,657 $ 2,499,927
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
December 31, 1996
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government
corporations and agencies $ 671,485 $ 4,798 $ 783 $ 675,500
Obligations of U.S. states and political
subdivisions 3,203 267 - 3,470
Corporate securities 522,349 26,551 961 547,939
Mortgage-backed securities 572,763 8,242 634 580,371
Other debt securities 79 3 - 82
Total fixed maturities 1,769,879 39,861 2,378 1,807,362
Equity securities 60,798 7,912 1,212 67,498
Total available for sale $ 1,830,677 $ 47,773 $ 3,590 $ 1,874,860
</TABLE>
The amortized cost of the fixed maturities and the cost of the equity
securities classified as trading securities are $0 and $66,867, respectively
at December 31, 1997 and $33,735 and $148,291, respectively, at December 31,
1996.
The net unrealized appreciation on the available-for-sale securities
is reduced by deferred policy acquisition costs and deferred income taxes at
December 31, as shown below:
<TABLE>
<S> <C> <C>
1997 1996
Gross unrealized appreciation $ 71,374 $ 44,183
Deferred policy acquisition costs (23,930) (15,220)
Deferred income taxes (16,606) (10,138)
Net unrealized appreciation of investments $ 30,838 $ 18,825
The change in net unrealized gains (losses) on available-for-sale
fixed maturity and equity security investments are as follows:
1997 1996 1995
Fixed maturities $ 24,162 $ (20,907) $ 79,603
Equity securities 3,029 1,955 5,974
Less DAC impact (8,710) 92 (22,325)
Less deferred income tax effect (6,468) 6,658 (22,222)
Net change in unrealized gains (losses) $ 12,013 $ (12,202) $ 41,030
</TABLE>
The amortized cost and estimated fair value of available-for-sale
fixed maturities at December 31, 1997, by contractual maturity, are as
follows. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<S> <C> <C>
Amortized Fair
Cost Value
Due in one year or less $ 327,750 $ 329,539
Due after one year through five years 147,408 152,516
Due after five years through ten years 190,528 200,958
Due after ten years 638,505 660,773
Securities not due at a single maturity date (primarily
mortgage-backed securities) 1,055,141 1,077,191
Total fixed maturities $ 2,359,332 $ 2,420,977
</TABLE>
Investment Income and Investment Gains (Losses)
Major categories of investment income are summarized as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Gross investment income:
Fixed maturities $ 148,640 $ 126,733 $ 121,003
Equity securities 13,831 22,202 20,885
Policy loans 11,891 10,327 9,485
Short-term investments 20,594 16,946 18,648
Other invested assets 824 553 490
Gross investment income 195,780 176,761 170,511
Investment expenses 7,130 3,178 3,491
Net investment income $ 188,650 $ 173,583 $ 167,020
</TABLE>
The major categories of investment gains and losses reflected in the
income statement are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
____________________ ____________________ ____________________
Unrealized Unrealized Unrealized
-Trading -Trading -Trading
Realized Securities Realized Securities Realizied Securities
Fixed maturities $ 2,934 $ 195 $ 8,047 $ (438) $ 14,303 $ 834
Equity securities 542 (836) (1,196) 6,638 (12,608) 6,223
Other 85 - (12) - 67 -
Net investment gains (losses) $ 3,561 $ (641) $ 6,839 $ 6,200 $ 1,762 $ 7,057
</TABLE>
Proceeds from the sale of available-for-sale securities and the gross
realized gains and losses on these sales (excluding maturities, calls and
prepayments) during 1997, 1996, and 1995 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
_____________________ _____________________ ____________________
Fixed Fixed Fixed
Maturities Equity Maturities Equity Maturities Equity
Proceeds from sales $ 801,246 $ 136,085 $ 1,020,090 $ 106,354 $ 651,092 $ 51,547
Gross realized gains 3,757 1,977 10,418 787 15,205 617
Gross realized losses 3,213 887 5,030 1,954 4,241 2,802
</TABLE>
Other
At December 31, 1997, and 1996, securities amounting to
approximately $14,366 and $16,816, respectively, were on deposit with
regulatory authorities as required by law.
The Company periodically enters into repurchase agreements with
brokerage firms. Repurchase agreements totaling $308,125 were outstanding
at December 31, 1997. No investments were outstanding under repurchase
agreements at December 31, 1996.
The Company generally strives to maintain a diversified invested
assets portfolio. Other than investments in U.S. Government or U.S.
Government Agency or Authority, the Company had no investments in one entity
which exceeded 10% of stockholders' equity at December 31, 1997, except for
investments with the following carrying values:
GTE Corporation $ 95,366
APOLLO Computers 85,267
Norfolk Southern 73,977
(4) Income Taxes
The significant components of the provision for Federal income taxes
are as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Current
$ 38,474 $ 19,644 $ 34,424
Deferred
(5,421) 12,177 (5,721)
Total Federal income tax expense
$ 33,053 $ 31,821 $ 28,703
</TABLE>
Income tax expense differs from the amounts computed by applying
the U.S. Federal income tax rate of 35% to income before income taxes as
follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
At statutory Federal income tax rate
$ 32,054 $ 32,151 $ 29,980
Dividends received deductions
(514) (1,391) (1,718)
Other, net
1,513 1,061 441
Total Federal income tax expense
$ 33,053 $ 31,821 $ 28,703
</TABLE>
The federal income tax liability as of December 31 is comprised of
the following:
<TABLE>
<S> <C> <C>
1997 1996
Net deferred income tax liability
$ 34,480 $ 33,432
Income taxes currently due
1,608 5,883
Federal income tax liability
$ 36,088 $ 39,315
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred income tax assets and deferred income
tax liabilities at December 31 are as follows:
<TABLE>
<S> <C> <C>
1997 1996
Deferred tax liabilities:
Present value of future profits of acquired business
$ 14,139 $ 7,458
Deferred policy acquisition costs 100,989 114,971
Investments 27,245 17,541
Others 906 2,909
Total deferred income tax liabilities 143,279 142,879
Deferred tax assets:
Policy liabilities and reserves 108,799 109,447
Total gross deferred income tax assets 108,799 109,447
Net deferred income tax liability $ 34,480 $ 33,432
</TABLE>
Prior to 1984, certain special deductions were allowed life insurance
companies for federal income tax purposes. These special deductions were
accumulated in a memorandum tax account designated as "Policyholders'
Surplus". Such amounts will usually become subject to tax at the then
current rates only if the accumulated balance exceeds certain maximum
limitations or certain cash distributions are deemed to be paid out of this
account. It is management's opinion that such events are not likely to
occur. Accordingly,no provision for income tax has been made on the
approximately $66,000 balance in the policyholders' surplus account at
December 31, 1997.
(5) Reinsurance
The Company is involved in both the cession and assumption of
reinsurance with other companies. Reinsurance premiums and claims ceded
and assumed for the years ended December 31 are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
Ceded Assumed Ceded Assumed Ceded Assumed
Premiums $ 17,081 $ 7,971 $ 13,759 $ 7,116 $ 13,165 $ 5,368
Claims 8,683 4,472 12,170 6,068 11,899 5,204
</TABLE>
The Company presently reinsures the excess of each individual risk
over $500 on ordinary life policies in order to spread its risk of loss.
Certain other individual health contracts are reinsured on a policy-by-policy
basis. The Company remains contingently liable for certain of the liabilities
ceded in the event the reinsurers are unable to meet their obligations under
the reinsurance agreement.
Effective January 1, 1996, the Company assumed certain policy risks
($8,900,130 of life insurance in force at December 31, 1997) from its
affiliate, North American Company for Life and Health Insurance, and its
subsidiaries. The Company has reflected a risk and profit charge of $729 and
$1,119 in other income in 1997 and 1996, respectively, under the terms of
the reinsurance contract.
Effective October 31, 1997, Midland acquired, via assumption
reinsurance, a block of life and annuity business. Under the assumption
agreement, the Company assumed approximately $574,310 of life and annuity
reserves which is reflected in the liabilities for future policy benefits
and received $550,371 of assets which was net of $23,939 of PVFP. The PVFP
asset is being amortized principally over periods up to 25 years in relation
to the present value of expected gross profits. The assets acquired included
approximately $511,877 in cash and short term instruments, $38,044 in policy
loans and $450 of other assets. The final purchase price is subject to
change following a final accounting scheduled to occur on or before April 30,
1998.
(6) Statutory Financial Data and Dividend Restrictions
The Company is domiciled in South Dakota and its statutory-basis
financial statements are prepared in accordance with accounting practices
prescribed or permitted by the insurance department of the domiciliary state.
"Prescribed" statutory accounting practices include state laws, regulations,
and general administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). "Permitted"
statutory accounting practices encompass all accounting practices that are
not prescribed. Such practices differ from state to state and company to
company.
Generally, the net assets of the Company available for distribution
to its shareholders are limited to the amounts by which the net assets, as
determined in accordance with statutory accounting practices, exceed minimum
regulatory statutory capital requirements. All payments of dividends or
other distributions to stockholders are subject to approval by regulatory
authorities. The maximum amount of dividends which can be paid by the Company
during any 12-month period, without prior approval of the insurance
commissioner, is limited according to statutory regulations and is a
function of statutory equity and statutory net income (generally, the
greater of statutory-basis net gain from operations or 10% of prior year-end
statutory-basis surplus). The company paid a stockholder dividend of $25,000
in 1997. The maximum amount of dividends payable in 1998 without prior
approval of regulatory authorities is approximately $40,306.
The statutory net income of the Company for the years ended
December 31, 1997 and 1996 is approximately $65,000 and $16,000,
respectively, and capital and surplus at December 31, 1997 and 1996 is
approximately $323,000 and $300,000, respectively, in accordance with
statutory accounting principles.
(7) Employee Benefits
Employee Retirement Plans
The Company participates in a noncontributory defined benefit
pension plan sponsored by SEI which covers substantially all home office
employees. Prior to 1996, the Company sponsored its own noncontributory
defined benefit pension plan which was merged with a similar benefit plan of
SEI on January 1, 1996. Pension benefits are generally based upon years of
service and include accruing pension cost currently, contributing the maximum
amount deductible for federal income taxes and meeting minimum funding
standards of the Employee Retirement Income Security Act of 1974 as
determined by an actuarial valuation. Plan assets consist primarily of cash
equivalents, listed stocks and bonds, and group annuity contracts.
The following table sets forth the funded status and the amounts
recognized in the financial statements at December 31 for the qualified plan.
The 1997 and 1996 amounts reflect an allocation of the Company's portion of
the SEI plan:
<TABLE>
<S> <C> <C>
1997 1996
Accumulated benefit obligation:
Vested $ 2,558 $ 2,192
Nonvested 591 283
Total accumulated benefit obligation $ 3,149 $ 2,475
Fair value of plan assets $ 3,176 $ 3,400
Projected benefit obligation (4,678) (3,786)
Funded status (1,502) (386)
Unrecognized net gain 1,385 613
Unrecognized prior service costs 25 41
Net asset/(liability) recognized in financial statements
$ (92) $ 268
</TABLE>
The net periodic pension cost included the following components:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Service cost-benefits earned during the period
$ 317 $ 285 $ 248
Interest cost on projected benefit obligation
325 291 283
Return on plan assets
(297) (619) (220)
Net amortization and deferral
15 306 (53)
Net periodic pension cost
$ 360 $ 263 $ 258
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.25% for 1997 and
1996. The average rate of increase in future compensation levels was 4.25%
for 1997 and 1996. The expected long-term rate of return on plan assets used
to develop the net periodic pension cost was 8.75% in 1997, 1996 and 1995.
The Company also participates in a noncontributory Employee Stock
Ownership Plan (ESOP) which is qualified as a stock bonus plan. All
employees are eligible to participate in this plan upon satisfying
eligibility requirements. The ESOP is sponsored by SEI. Each year the
Company makes a contribution to the ESOP as determined by the Board of SEI.
The expense for 1997, 1996, and 1995 was $1,920, $1,700, and $2,096,
respectively. All contributions to the ESOP are held in trust.
Postretirement Benefit Plan
The Company provides certain post-retirement health care and life
insurance benefits for eligible active and retired employees through a defined
benefit plan.
The actuarial and recorded liabilities for these post-retirement
benefits at December 31, none of which were funded, are as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 1,771 $ 1,718 $ 1,235
Fully eligible active plan participants
192 170 274
Other active plan participants
240 191 560
2,203 2,079 2,069
Unrecognized loss (452) (135) (101)
Accrued postretirement benefit obligation
$ 1,751 $ 1,944 $ 1,968
</TABLE>
The net periodic cost for postretirement benefits other than
pensions for the years ended December 31 included the following components:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Service cost - benefits earned during the period
$ 18 $ 16 $ 16
Interest cost on other post-retirement benefits
154 148 164
Net amortization
7 - 10
Total periodic expense
$ 179 $ 164 $ 190
</TABLE>
The weighted average annual assumed rate of increase in the per capita
cost of covered benefits (i.e. health care cost trend rate) reflects a 7.25%
rate in 1997 grading down to 4.5% in years 2006 and later. Increasing the
assumed health care cost trend rate by one percentage point would increase
the accumulated postretirement benefit obligation at December 31, 1997 by
$217 and the aggregate of the service and interest cost components of the
net periodic postretirement benefit cost for 1997 by $16. The weighted
average discount rate used in determining the accumulated postretirement
benefit obligation was 7.25% at December 31, 1997 and 1996.
(8) Commitments and Contingencies
Lease Commitments
Midland's home office building has been conveyed to the City of
Sioux Falls, South Dakota, and leased back in a transaction in which the City
issued $4,250 of Industrial Revenue Bonds for face value. The bonds are
collateralized by $2,822 of Midland's investments in government bonds. The
lease includes a purchase option under which Midland may repurchase the
building upon repayment of all bonds issued. The lease terms provide for 10
annual payments equivalent to principal of $425 beginning in 1993 and
semiannual payments through 2002 in amounts equivalent to interest at 5.5%
on the outstanding revenue bond principal. The building and land costs
have been capitalized and are carried as part of other assets and the lease
obligation as part of other liabilities.
The Company also leases certain equipment. Rental expense on
operating leases amounted to $1,208, $1,048 and $548 for the years ended
December 31, 1997, 1996, and 1995, respectively. The minimum future
rentals on capital and operating leases at December 31, 1997, are as follows:
<TABLE>
<S> <C> <C> <C>
Year ending December 31,
Capital Operating Total
1998 ........................ $ 536 $ 1,076 $ 1,612
1999 ........................ 513 1,098 1,611
2000 ........................ 489 537 1,026
2001 ........................ 466 487 953
2002 ........................ 442 498 940
Thereafter ................ - 559 559
Total ........................ $ 2,446 $ 4,255 $ 6,701
Less amount representing interest.... 321
Present value of amounts due
under capital leases ................ $ 2,125
</TABLE>
Other Contingencies
The Company is liable for guaranty fund assessments related to
certain unaffiliated insurance companies that have become insolvent. These
assessments are reflected in the operating results of the Company. The
Company is also contingently liable for any future guaranty fund assessments
related to the insolvencies of unaffiliated insurance companies. An accrual
of $2,184 has been included in the December 31, 1997 balance sheets. This
accrual was calculated by estimating the Company's share of both open and
closed insolvencies based on industry data provided to the Company.
The Company is a defendant in various lawsuits related to the normal
conduct of its insurance business. Litigation is subject to many
uncertainties and the outcome of individual litigated matters is not
predictable with assurance; however, in the opinion of management, the
ultimate resolution of such litigation will not materially impact the
Company's financial position.
(9) Other Related Party Transactions
The Company pays fees to SEI under management contracts. The
Company was charged $1,530, $1,458 and $2,778 in 1997, 1996, and 1995,
respectively, related to these contracts.
The Company pays investment management fees to an affiliate
(Midland Advisors Company). Net fees related to these services were $1,425,
$1,339 and $66 in 1997, 1996 and 1995, respectively.
The Company provided certain insurance and non-insurance services
to North American Company for Life and Health Insurance, in return for
which the Company was reimbursed $488 in 1997 for the costs incurred to
render such services.
(..continued)
The accompanying notes are an integral part of the financial statements.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands)
MNLGP97.TXT
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securi-
ties Exchange Act of 1934, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary
and periodic information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore, or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling per-
sons of the registrant pursuant to the foregoing provisions, or other-
wise, the registrant has been advised that in the opinion of the Securi-
ties 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 the registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnifi-
cation by it is against public policy as expressed in the Act and will
be governed by the final jurisdiction of such issue.
UNDRTAKE.TXT
<PAGE>
REPRESENTATIONS PURSUANT TO SECTION 26 (e) OF THE INVESTMENT COMPANY ACT
Midland National Life Insurance Company hereby represents that the
fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected
to be incurred, and the risks assumed by Midland National Life Insurance
Company.
S6FORM.TXT
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 72 pages.
The undertaking to file reports.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs *
(b) Sutherland, Asbill & Brennan, L L P ***
(c) Russell A. Evenson, FSA. ***
(d) Coopers & Lybrand, L L P ***
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to the exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Midland National Life
establishing the Separate Account A. ***
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. *
(b) Selling Agreement. *
(c) Commission schedule. *
--------------------
(4) Not applicable.
(5) Form of Contract. *
- -----------------------
* Filed previously in Pre-Effective Amendment No. 1 on January 31, 1997.
** Filed previously in Pre-Effective Amendment No. 2 on April 23, 1997.
*** Filed herewith.
<PAGE>
(6) (a) Articles of Incorporation of Midland National Life. ***
(b) By-Laws of Midland National Life. ***
(7) Not applicable.
(8) (a) Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. **
(8) (b) Amendments to Participation Agreements for Fidelity
Distributors Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. **
(8) (c) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III. ***
(8) (d) Participation Agreement for American Century Investment
Services, Inc. **
(9) Not applicable.
(10) Application Form. *
(11) Memorandum describing Midland National Life's insurance, transfer
and redemption procedures for the Contract. *
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. *
4. No financial statements are omitted from the Prospectus pursuant to
Instruction 1(b) or (c) or Part I.
5. Not applicable.
6. Opinion and Consent of Russell A. Evenson, Senior Vice President and Actuary
of Midland National Life. ***
7. Consent of Sutherland, Asbill & Brennan, L L P ***
8. Consent of Coopers & Lybrand, L L P ***
- -----------------------
* Filed previously in Pre-Effective Amendment No. 1 on January 31, 1997.
** Filed previously in Pre-Effective Amendment No. 2 on April 23, 1997.
*** Filed herewith.
CONVUL.TXT
<PAGE>
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, certifies that
it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this registration statement and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in
Sioux Falls, South Dakota, on the 24th day of April, 1998.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance
Company
By:__/s/Michael_M._Masterson_____________
President
VUL3/VEUL
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following Directors
of Midland National Life Insurance Company in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
_________________________ Chairman of the Board April 24, 1998
John C. Watson
/s/Michael_M._Masterson_____ Director, Chief Executive April 24, 1998
Michael M. Masterson Officer and President
/s/John_J._Craig_II_________ Director, Executive Vice April 24, 1998
John J. Craig II President
/s/Russell_A._Evenson_______ Director, Senior Vice April 24, 1998
Russell A. Evenson President and Chief
Actuary
/s/Steven_C._Palmitier______ Director, Senior Vice April 24, 1998
Steven C. Palmitier President and Chief
Marketing Officer
/s/Thomas_M._Meyer__________ Vice President and April 24, 1998
Thomas M. Meyer Chief Financial
Officer
_________________________ Director April 24, 1998
Robert W. Korba
_________________________ Director April 24, 1998
James N. Whitson
SECVUL2.TXT
<PAGE>
Registration No. 333-14061
POST EFFECTIVE AMENDMENT NO.1
________________________________________________________________________________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
EXHIBITS
TO
FORM S-6
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
AND
MIDLAND NATIONAL LIFE INSURANCE COMPANY
____________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EXHVUL3.TXT
<PAGE>
EXHIBIT INDEX
Exhibit
_________
1.(1) Resolution of the Board of Directors establishing
the Separate Account A.
1.(6) (a) Articles of incorporation.
1.(6) (b) By-Laws
1.(8) (c) Participation Agreement - Fidelity
6. Opinion and Consent of Russell A. Evenson, Senior
Vice President and Actuary of Midland National Life
7. Consent of Sutherland, Asbill & Brennan, L L P
8. Consent of Coopers & Lybrand, L L P
INDVUL3.TXT
<PAGE>
1. (1) Resolution of the Board of Directors establishing Separate
Account A.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
UNANIMOUS CONSENT IN LIEU OF A MEETING OF EXECUTIVE COMMITTEE
JULY 20, 1987
Pursuant to the provisions of Section 47-5-11 of the South Dakota General
Corporation Law, the undersigned Directors constituting all of the
members of the Executive Committee, do hereby give unanimous written
consent in lieu of a meeting of such Executive Committee to take the
actions indicated below:
1. Approved the following investment transactions:
Moody's/
Par Value Total S & P
or Shares Price Yield Price Rating Broker
Purchase-Bonds
Security Pacific
Series 1987-D, 8.5%, Aa3
due 5/30/2017 $1,754,546.68 93. 10.92% AA Westcap
(This purchase is a revised purchase of Security Pacific Series 1987-D
as reported in minutes dated July 8, 1987, Page 4508.)
Sale-Bonds
Avco Financial
Services, Inc.,
12 3/8%, due 9.77%(maturity) A3 Salomon
1/15/94 $1,000,000 112.31 8.23%(to 1991 A Bros.
Avco Financial
Services, Inc., 9.77%(maturity)
12 1/2%, due 8.02%(to 1990 Baa2 Salomon
10/15/93 $1,000,000 112.50 par call) A- Bros.
Purchase-Order
General Motors Accep-
tance Corp., 6.45%,
Commercial Paper, P-1 Kidder
due 7/30/87 $1,800,000 1,795,485 6.47% A-1 Peabody
Sears Roebuck Accep-
tance Corp., 6.44%,
Commercial Paper, P-1 Norwest
due 8/17/87 $1,500,000 1,491,733.33 6.44% A-1 Mpls.
General Motors Accep-
tance Corp., 6.45%
Commercial Paper, P-1 Norwest
due 8/20/87 $2,500,000 2,486,114.58 6.49% A-1 Mpls.
Butler Machinery,
6.65%, Letter of
Credit guaranteed
by Norwest Bank,
Mpls., due P-1 Norwest
8/13/87 $1,800,000 Par 6.69% A-1 Mpls.
Norwest Bank, Mpls.,
6.60%, Banker's Accep-
tance guaranteed by
Norwest Bank, Mpls., P-1 Norwest
due 8/24/87 $ 500,000 496,241.67 6.64% A-1 Mpls.
Kidder Peabody & Co.,
Repurchase Agreement
(U.S. Government
Securities) due Kidder
8/10/87 $4,200,000 Par 6 3/4% Peabody
Merrill Lynch Repur-
chase Agreement (U.S.
Government Securities) Merrill
due 9/11/87 $2,550,000 Par 6.75% Lynch
Merrill Lynch Repur-
chase Agreement (U.S.
Government Securities Merrill
due 8/19/87 $4,370,000 Par 6.80% Lynch
Merrill Lynch Money Merrill
Market Fund $2,112,595.83 Par 6.34% Lynch
Sale-Other
Merrill Lynch Money Merrill
Market Fund $2,118,000 Par 6.34% Lynch
2. Approved the following resolution:
RESOLUTION
"RESOLVED, that the President or Vice President, and Secretary or
Assistant Secretary of this Corporation be and they are hereby authorized
and directed to execute to the Commissioner of Insurance of the Virgin
Islands, a Power of Attorney, substantially as follows:
KNOW ALL MEN BY THESE PRESENTS:
That the Midland National Life Insurance Company, a corporation incorpor-
ated and organized under the laws of the State of South Dakota, now
authorized or having applied for authority to do an insurance business in
the Virgin Islands, hereby appoints the Commissioner of Insurance of said
Virgin Islands and his successors in office its true and lawful
Attorney, in and for the Virgin Islands, upon whom all lawful process
against said insurer may be served in any action or proceeding in the
Virgin Islands, subject to and in accordance with all provisions of the
Insurance Laws of said Virgin Islands in force at the time of such
service, which shall not be terminated so long as there are in effect any
contracts, or liabilities or duties, arising out of contracts, which were
issued or delivered by such insurer in the said Virgin Islands."
3. Approved the following resolution:
RESOLUTION
"BE IT RESOLVED, that the Company pursuant to the provisions of Chapter
58-28 of the South Dakota Insurance Code, hereby establishes a separate
account designated, "Midland National Life Separate Account A" (herein-
after "Separate Account A") for the following use and purposes, and
subject to such conditions as are hereinafter set forth:
FURTHER RESOLVED, that the Separate Account A shall be established for
the purpose of providing for the issuance by the Company of such variable
universal life insurance contracts (Contracts) as the Board of Directors
may designate and shall constitute a separate account into which allo-
cated amounts are paid to or held by the Company under such Contracts;
and
FURTHER RESOLVED, that the income, gains and losses, whether or not
realized, from assets allocated to the Separate Account A shall, in
accordance with the Contracts, be credited to or charged against such
account without regard to other income, gains, or losses of the Company;
and
FURTHER RESOLVED, that the fundamental investment policy of the Separate
Account A shall be to invest or reinvest the assets of the Separate
Account A in securities issued by such investment companies registered
under the Investment Company Act of 1940 as may be specified in the
respective Contracts; and
FURTHER RESOLVED, that Separate Account A shall be divided into Invest-
ment Divisions, each of which shall invest in the shares of an investment
company, and net premiums under the Contracts shall be allocated to the
eligible portfolios set forth in the Contracts in accordance with
instructions received from owners of the Contracts; and
FURTHER RESOLVED, that the Board of Directors expressly reserves the
right to add, combine, or remove any Investment Divisions of Separate
Account A as it may hereafter deem necessary or appropriate, and
FURTHER RESOLVED, that any two of the following: the President, any Vice
President, the Secretary, the Treasurer and the Controller be, and hereby
are authorized to specify from time to time by written instrument, duly
attached to and made a part of the records of the Company:
1. Those persons who shall be authorized to deposit such amount in the
Separate Account A or in each investment division thereof as may be
necessary or appropriate to facilitate the commencement of the
Separate Account A's operations;
2. Those persons who shall be authorized to transfer funds from time to
time between the Company's general account and the Separate Account A
as deemed necessary or appropriate and consistent with the terms of
the Contracts.
FURTHER RESOLVED, that the Board of Directors of the Company be, and
hereby is authorized to change the designation of the Separate Account A
to such other designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as they may require, be, and they hereby are,
authorized and directed to take all action necessary to: (a) Register
the Separate Account A as a unit investment trust under the Investment
Company Act of 1940, as amended; (b) Register the Contracts in such
amounts, which may be an indefinite amount, as the officers of the
Company shall from time to time deem appropriate under the Securities Act
of 1933; and (c) Take all other actions which are necessary in connection
with the offering of said Contracts for sale and the operation of the
Separate Account A in order to comply with the Investment Company Act of
1940, the Securities Exchange Act of 1934, the Securities Act of 1933,
and other applicable federal laws, including the filing of any amendments
to registration statements, any undertakings, and any applications for
exemptions from the Investment Company Act of 1940 or other applicable
federal laws as the officers of the Company shall deem necessary or
appropriate; and
FURTHER RESOLVED, that the President, any Vice President and the
Secretary, and each of them with full power to act without the others,
hereby are severally authorized and empowered to prepare, execute and
cause to be filed with the Securities and Exchange Commission on behalf of
the Separate Account A, and by the Company as sponsor and depositor, a
Form of Notification of Registration Statement under the Securities Act of
1933 registering the Contracts, and any and all amendments to the fore-
going on behalf of the Separate Account A and the Company and on behalf
of and as attorneys for the principal executive officer and/or the
principal financial officer and/or the principal accounting officer
and/or any other officer of the Company; and
FURTHER RESOLVED, that Jack L. Briggs and Frederick R. Bellamy are hereby
appointed as agents for service under any such registration statement
duly authorized to receive communications and notices from the Securities
and Exchange Commission with respect thereto; and
FURTHER RESOLVED, that the appropriate officers of the company be, and
they hereby are, authorized on behalf of the Separate Account A and on
behalf of the Company to take any and all action that they may deem
necessary for advisable in order to sell the Contracts, including any
registrations, filings and qualifications of the Company, its officers,
agents and employees, and the Contracts under the insurance and
securities laws of any of the states of the United States of American or
other jurisdictions, and in connection therewith to prepare, execute,
deliver and file all such applications, reports, covenants, resolutions,
applications for exemptions, consents to service or process and other
papers and instruments as may be required under such laws, and to take
any and all further action which said officers or counsel of the Company
may deem necessary or desirable (including entering into whatever agree-
ments and contracts as may be necessary) in order to maintain such
registrations or qualifications for as long as said officers or counsel
deem it to be in the best interest of the Separate Account A and the
Company; and
FURTHER RESOLVED, that the President, any Vice President and the
Secretary be, and hereby are, authorized in the names and on behalf of
the Separate Account A and the Company to execute and file irrevocable
written consents on the part of the Separate account A and the Company
to be used in such states where such consents to service of process may
be requisite under the insurance or securities laws therein in connection
with said registration or qualification of Contracts and to appoint the
appropriate state official, or such other person as may be allowed by
said insurance or securities laws, agent of the Separate Account A and
of the Company for the purpose of receiving and accepting process; and
FURTHER RESOLVED, that the President of the Company be, and hereby is
authorized to establish procedures under which the Company will institute
procedures for providing voting rights for owners of such Contracts with
respect to securities owned by the Separate Account A; and
FURTHER RESOLVED, that the President of the Company is hereby authorized
to execute such agreement or agreements as are deemed necessary and
appropriate (i) with North American Management, Inc. ("NAM"), or other
qualified entity under which NAM or such other entity will be appointed
principal underwriter and distributor for the Contracts and (ii) with
one or more qualified entities to provide administrative and/or
custodial services in connection with the establishment and maintenance
of the Separate Account A and the design, issuance, and administration of
the Contracts.
FURTHER RESOLVED, that, since it is expected that the Separate Account A
will invest in the securities issued by one or more investment companies,
the appropriate officers of the Company are hereby authorized to execute
whatever agreement or agreements as may be necessary or appropriate to
enable such investments to be made.
FINALLY RESOLVED, that the appropriate officers of the Company, and each
of them, are hereby authorized to execute and deliver all such documents
and papers and to do or cause to be done all such acts and things as are
deemed necessary or desirable to carry out the foregoing resolutions and
the intent and purposes thereof."
This Unanimous Consent in Lieu of a Meeting of the Executive Committee
is signed effective this 20th day of July, 1987.
____________________________________
William A. Rigsbee
____________________________________
Alan H. Spencer
____________________________________
Russell A. Evenson
____________________________________
Frederic A. Gottschalk
SEPACTA.TXT
<PAGE>
1.(6)(a) Articles of Incorporation of Midland National Life
Insurance Company
STATE OF SOUTH DAKOTA
STATE OF SOUTH DAKOTA GREAT SEAL 1989
OFFICE OF
THE SECRETARY OF STATE
Department of State
United States of America,
State of South Dakota,
SECRETARY'S OFFICE
This is to certify that the attached instrument of writing is a true, correct
and examined copy of the Restated Articles of Incorporation of MIDLAND NATIONAL
LIFE INSURANCE COMPANY, filed for record February 10, 1966, and all Amendments
thereto;
and the whole thereof, and has been carefully compared with the original now on
file in this office and found correct.
STATE OF SOUTH DAKOTA
GREAT SEAL 1989
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota at the City of Pierre, the Capital, on this 8th
day of September, 1980.
Secretary of State
By
Deputy
FEES $17.50
<PAGE>
Form 15
Section 61
STATE OF SOUTH DAKOTA
OFFICE OF THE SECRETARY OF STATE
RESTATED CERTIFICATE OF INCORPORATION
OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
The undersigned, as Secretary of State of the State of South Dakota, hereby
certifies that duplicate originals of Restated Articles of Incorporation of
MIDLAND NATIONAL LIFE INSURANCE COMPANY duly signed and verified pursuant to
the provisions of the South Dakota Business Corporation Act, have been
received in this office and are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of the
authority vested in me by law, hereby issues this Restated Certificate of
Incorporation of MIDLAND NATIONAL LIFE INSURANCE COMPANY and attaches hereto
a duplicate original of the Restated Articles of Incorporation.
Dated February 10, 1966, at 10:30 a.m.
15/ Alma Larson
Secretary of State
(GREAT SEAL OF THE STATE OF SOUTH DAKOTA)
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
We, William A. Rigsbee and Alan L. Austin, President and Secretary, respec-
tively, of MIDLAND NATIONAL LIFE INSURANCE COMPANY, a corporation organized
and existing under the Laws of the State of South Dakota, hereby certify that
said Corporation at an annual meeting of the stockholders of said Company held
at its office in the City of Watertown, State of South Dakota on the 4th day of
February, 1966, and acting pursuant to Section 61 of the South Dakota Business
Corporation Act, begin Chapter 22 of the Session Laws of the State of South
Dakota for the year 1965, restated its Articles of Incorporation as follows:
RESTATED ARTICLES OF INCORPORATION OF MIDLAND NATIONAL LIFE INSURANCE COMPANY
ADOPTED PURSUANT TO SECTION 61 OF THE SOUTH DAKOTA BUSINESS CORPORATION ACT,
CHAPTER 22 OF THE SESSION LAWS OF THE STATE OF SOUTH DAKOTA FOR THE YEAR 1965.
KNOW ALL MEN BY THESE PRESENTS: that we the undersigned, for ourselves, and our
associates do hereby associate ourselves together for the organization of a
Corporation, for the purpose of conducting the business of life or accident
insurance under and by virtue of the laws of the State of South Dakota, and
we do hereby certify and declare as follows, via:
ARTICLE ONE
The name of this Corporation shall be "Midland National Life Insurance
Company."
ARTICLE TWO
The term for which this Corporation shall exist shall be perpetual.
ARTICLE THREE
The purpose for which this Corporation is formed is to generally engage in
the business of writing and underwriting contracts of life, health, accident,
and all other forms of disability insurance upon either the participating or
nonparticipating plans, with authority to issue all types of contracts usually
and customarily written by legal reserve insurance companies in the United
States of America, and to generally engage in any business and have authority
to do anything provided for or permissible now or that may be hereafter
authorized under the laws of the State of South Dakota or any other State of
the Union or foreign country; to purchase, lease, or otherwise acquire
equipment for the transmission of radio energy in interstate commerce; to
construct, operate and maintain equipment for the transmission of radio
energy in interstate commerce, and to apply for and hold licenses or other
instruments of authorization from the Federal Communication Commission or such
other body or bodies as may be charged by law with the duty of regulating the
transmission or radio energy and the administration of laws pertaining,
thereto, and purchase, lease, acquire, construct, operate and maintain any and
all types of radio or television stations.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have authority to
issue shall be 50,000 of common stock of the par value of $10.00 each. Fully
paid capital stock of this Corporation shall be nonassessable and no stock
shall be hereafter issued until fully paid.
ARTICLE FIVE
The fiscal year of the said Company shall commence on the first day of January
and end on the 31st day of December of each year.
ARTICLE SIX
The address of the registered office of the Company shall be 104 South Maple
Street, Watertown, South Dakota, and the name of its initial registered agent
at such address is William A. Rigsbee.
ARTICLE SEVEN
The number of Directors of this Corporation shall be not less than five nor
more than twenty one. Each Director shall be the owner of at least fifty
shares of the common capital stock of the Company, and a majority of the
Directors must be citizens of the State of South Dakota. The number of
Directors to be elected shall be determined annually at the annual stockholders
meeting, and all Directors shall hereafter be elected annually to serve for a
period of one year, or until their successors are elected and qualified. The
presently elected Directors shall serve until the election of their successors.
ARTICLE EIGHT
The above and foregoing Restated Articles of Incorporation correctly set forth
without change the corresponding provisions of the Articles of Incorporation
as heretofore amended, and the Restated Articles of Incorporation supersede the
the original Articles of Incorporation and all Amendments thereto.
We further certify that there were subscribed and outstanding at said date
50,000 shares of common stock of said Company and no more, and no other class
of stock, and that the vote by which said Restated Articles of Incorporation
was adopted was 50,000 votes in favor thereof and no votes against the same,
so that said Restated Articles of Incorporation were adopted by unanimous
vote of all of the issued and outstanding stock of the Company.
IN WITNESS WHEREOF, WE have hereunder signed this Certificate as President and
Secretary, respectively, of the said Midland National Life Insurance Company,
and caused the seal of said Company to be attached thereto.
William A. Rigsbee
President of MIDLAND NATIONAL LIFE INSURANCE COMPANY
Alan L. Austin
Secretary of MIDLAND NATIONAL LIFE INSURANCE COMPANY
(CORPORATE SEAL)
VERIFICATION
STATE OF SOUTH DAKOTA )
SS )
COUNTY OF CODINGTON )
I, Dorothy Antritter, a Notary Public in and for the State of South Dakota, do
hereby certify that on this 8th day of February, 1966 personally appeared
before me William A. Rigsbee, who, being by me first duly sworn, declared that
he is the President of Midland National Life Insurance Company, that he signed
the foregoing Restated Articles of Incorporation as the President of the
Corporation, and that the statements therein contained are true.
WITNESS my hand and Notarial Seal.
SEAL
Dorothy Antritter
Dorothy Antritter, Notary Public, South Dakota
My Commission Expires: August 26, 1966
The above and foregoing Restated Articles of Incorporation of Midland National
Life Insurance Company are hereby approved this 9th day of February, 1966.
Roy Manning
J. Roy Manning, Commissioner of Insurance of the State of South Dakota
The above and Restated Articles of Incorporation of Midland National Life
Insurance Company are hereby approved as to form this 9th day of February,
1966.
Frank L. Farrar
Attorney General
By /S/ Alan Williamson
Assistant Attorney General
<PAGE>
Receipt No. 104413
File No. D-122
Box No.
Filed at request of -
Alan L. Austin
Midland National Life Insurance Company
Watertown, South Dakota 57201
Restated Articles of Incorporation
Of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
State of South Dakota
SS
Office of Secretary of State
Filed in the office of the Secretary of State on the 10th day of February 1966
at 10:30 a.m.
Alma Larson
Secretary of State
By ______________________________
Assistant Secretary of State
Fee Received $20.00
<PAGE>
STATE OF SOUTH DAKOTA
STATE OF SOUTH DAKOTA GREAT SEAL 1889
OFFICE OF THE SECRETARY OF STATE
Certificate of Amendment
I, ALMA LARSON, Secretary of State of the State of South Dakota, hereby certify
that duplicate originals of Amendment to Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY duly signed and verified, pursuant to the
provisions of the South Dakota corporation acts, have been received in this
office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY and attach hereto a duplicate original of the
Amendment.
IN TESTIMONY WHEREOF. I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota, at Pierre, the Capital, this 7th day of October
A.D.. 1969
Alma Larson
Secretary of State
Assistant
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Pursuant to the provisions of the South Dakota Business Corporation Act and
the Insurance Code, the undersigned corporation adopts the following Articles
of Amendment to its Restated Articles of Incorporation:
FIRST: The name of the corporation is Midland National Life Insurance Company.
SECOND: The following Amendment of the Restated Articles of Incorporation was
adopted by the shareholders of the corporation on October 3, 1969 in the manner
prescribed by said statutes: Articles Four and Seven of the Restated Articles
of Incorporation were amended so that they will read as follows:
ARTICLE FOUR
"The aggregate number of shares which the corporation shall have authority to
issue shall be 1,200,000 of common stock of the par value of $1.00 each. Each
of the 50,000 shares of common stock of the par value of $10.00 each, now
issued and outstanding, shall e equal to and are hereby changed into ten fully
paid and nonassessable common shares of this corporation having a par value of
$1.00 per share. Fully paid capital stock of this corporation shall be
nonassessable and no stock shall be hereafter issued until fully paid."
ARTICLE SEVEN
"The number of directors of this corporation shall be five. The number of
directors to be elected hereafter shall be fixed by the By-Laws of the
Company. The presently elected directors shall serve until the election and
qualification of their successors."
THIRD: The number of shares of the corporation outstanding at the time of
such adoption was 50,000 shares of common stock, and the number of shares
entitled to vote thereon was 50,000.
FOURTH: THe designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows: None.
FIFTH: The manner in which the additional number of shares provided for in
the Amendment to Article Four of the Restated Articles of Incorporation shall
be issued, is as follows: Each holder of record of one or more shares of the
capital stock of the Corporation on the date of the filing of Articles of
Amendment in the Office of the Secretary of State of the State of South Dakota
will e entitled to receive a certificate representing nine additional shares
with a par value of $1.00 per share for each share held at that time. Each
certificate outstanding immediately prior to the change will be retained by
the holder and will continue to represent the same number of shares, but they
will be shares of a part value of $1.00 per share instead of shares with a
$10.00 par value.
SIXTH: The number of shares voted for such amendment was 49,989 and the
number of shares voted against such amendment was none, 11 shares not
represented and not voting.
Dated this 3rd day of October, 1969.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By William A. Rigsbee
Its President
By Alan L. Austin
Its Secretary
(Corporate Seal)
STATE OF SOUTH DAKOTA )
SS )
COUNTY OF CODINGTON )
Before me, Sandra J. DeYoung, a notary public in and for the said County and
State, personally appeared William A. Rigsbee who acknowledged before me that
he is the President of Midland National Life Insurance Company, a South Dakota
Corporation, that he signed the foregoing Articles of Amendment to the Restated
Articles of Incorporation as his free and voluntary act and deed for the uses
and purposes therein set forth, that the facts contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 3rd day of
October, 1969.
(Seal)
Sandra J. DeYoung
Sandra J. DeYoung
Notary Public, State of South Dakota
My Commission Expires: August 1, 1975
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
as to form this 6th day of October, 1969.
GORDON J. MYDLAND
ATTORNEY GENERAL OF SOUTH DAKOTA
By Gordon J. Mydland
Assistant Attorney General
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
and triplicate original thereof was filed in my office this 6th day of October,
1969.
Warren E. Dirks
Warren E. Dirks
Commissioner of Insurance of the State of South Dakota
<PAGE>
Receipt No.
File No. D-122
Filed at request of -
Midland National Life Insurance Company
Watertown, South Dakota 57201
Articles of Amendment
to the
Restated Articles of Incorporation
Of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
State of South Dakota
SS
Office of Secretary of State
Filed in the office of the Secretary of State on the 7th day of October, 1969.
Alma Larson
Secretary of State
By ____________________________
Assistant Secretary of State
Fee received: $20.00 Filing
$140.00 increased capital
<PAGE>
STATE OF SOUTH DAKOTA
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
OFFICE OF THE SECRETARY OF STATE
Certificate of Amendment
I, ALMA LARSON, Secretary of State of the State of South Dakota, hereby certify
that duplicate originals of Amendment to Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY duly signed and verified, pursuant to the
provisions of the South Dakota corporation acts, have been received in this
office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY and attach hereto a duplicate original of the
Amendment.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota, at Pierre, the Capital, this 11th day of March
A.D. 1971.
Alma Larson
Secretary of State
Assistant
<PAGE>
Dated this 11th day of March, 1971.
(Corporate Seal)
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By William A. Rigsbee
Its President
By Alan L. Austin
Its Secretary
STATE OF SOUTH DAKOTA )
SS )
COUNTY OF CODINGTON )
Before me, E. Elayne Jensen, a notary public in and for the said Company and
State, personally appeared William A. Rigsbee who acknowledged before me that
he is the President of Midland National Life Insurance Company, a South Dakota
corporation, that he signed the foregoing Articles of Amendment to the Restated
Articles of Incorporation as his free and voluntary act and deed for the uses
and purposes therein set forth, that the facts contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 11th day of
March,1971.
(SEAL)
______________________________
E. Elayne Jensen
Notary Public, South Dakota
My Commission Expires: April 10, 1978
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
as to form this 11th day of March, 1971.
GORDON J. MYDLAND
ATTORNEY GENERAL OF SOUTH DAKOTA
BY ____________________________
Assistant Attorney General
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
and triplicate original thereof was filed in my office this 11th day of March,
1971.
Warren E. Dirks
Warren E. Dirks
Commissioner of Insurance of the
State of South Dakota
<PAGE>
Receipt No. 68656
File No. D-122
Filed at request of -
Mr. Alan Austin
Austin, Hinderaker & Hackett
25 First Avenue South West
Watertown, South Dakota 57201
Articles of Amendment
of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
State of South Dakota
SS
Office of Secretary of State
Filed in the office of the Secretary of State on the 11th day of March, 1971.
Alma Larson
Secretary of State
By
Assistant Secretary of State
Fee received: $20.00
<PAGE>
STATE OF SOUTH DAKOTA
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
OFFICE OF THE SECRETARY OF STATE
Certificate of Amendment
I, LORNA B. HERSETH, Secretary of State of the State of South Dakota, hereby
certify that duplicate originals of Amendment to Articles of Incorporation of
MIDLAND NATIONAL LIFE INSURANCE COMPANY duly signed and verified, pursuant to
the provisions of the South Dakota corporation acts, have been received in
this office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY and attach hereto a duplicate original of the
Amendment.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota, at Pierre, the Capital, this 6th day of August
A.D. 1974.
Lorna B. Herseth
Secretary of State
Assistant
<PAGE>
August 1971
RECEIVED
SECRETARY OF STATE
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Pursuant to the provisions of the South Dakota Business Corporation Act and
the Insurance Code, the undersigned corporation adopts the following Articles
of Amendment to its Restated Articles of Incorporation:
FIRST: The name of the corporation is Midland National Life Insurance Company.
SECOND: THe following Amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the corporation on July 22, 1974 in the manner
prescribed by said statutes: Article Four of the Restated Articles of
Incorporation was amended so that it will read as follows:
ARTICLE FOUR
"The aggregate number of shares which the corporation shall have authority to
issue shall be 1,562,500 of common stock of the par value of $1.00 each. Fully
paid capital stock of this corporation shall be nonassessable and no stock
shall hereafter be issued until fully paid."
THIRD: The number of shares of the corporation outstanding at the time of
such adoption was 1,200,000 shares of common stock, and the number of shares
entitled to vote thereon was 1,200,000.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows: None
FIFTH: The number of shares voted for such amendment was 1,200,000 and the
number of shares voted against such amendment was none.
Dated this 22nd day of July, 1974.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By William A. Rigsbee
Its President
By Darwin Shapiro
Its Secretary
(Corporate Seal)
STATE OF SOUTH DAKOTA )
SS )
COUNTY OF CODINGTON )
Before me, Alice Murphy, a notary public in and for the said County and
State, personally appeared William A. Rigsbee who acknowledged before me that
he is the President of Midland National Life Insurance Company, a South
Dakota corporation, that he signed the foregoing Articles of Amendment to the
Restated Articles of Incorporation as his free and voluntary act and deed for
the uses and purposes therein set forth, that the facts contained therein are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
July, 1974.
Filed this 30th day of July, 1974
(SEAL)
Lorna B. Herseth
SECRETARY OF STATE
Alice Murphy
Alice Murphy
Notary Public, South Dakota
My commission expires: 5-15-80
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
as to form this 30th day of July, 1974.
KERMIT SANDSS
ATTORNEY GENERAL OF SOUTH DAKOTA
By Kermit Sands
Assistant Attorney General
The above and foregoing Articles of Amendment to the Restated Articles of
Incorporation of Midland National Life Insurance Company are hereby approved
and triplicate original thereof was filed in my office this 31st day of July,
1974.
Ralph A. Newman
Ralph A. Newman
Director of Insurance of the
State of South Dakota
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
<PAGE>
Receipt No. 135313
File No. D-122
Filed at request of -
Darwin Shapiro
Midland National Life Insurance Company
Watertown, SD 57201
Articles of Amendment
of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
State of South Dakota
SS
Office of Secretary of State
Filed in the office of the Secretary of State on the 6th day of August, 1974.
Loran B. Herseth
Secretary of State
By
Assistant Secretary of State
Fee received: $20.00 + $50 increased capital
<PAGE>
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
OFFICE OF THE SECRETARY OF STATE
Certificate of Amendment
I, LORNA B. HERSETH, Secretary of State of the State of South Dakota, hereby
certify that duplicate originals of Amendment to Articles of Incorporation of
MIDLAND NATIONAL LIFE INSURANCE COMPANY duly signed and verified, pursuant to
the provisions of the South Dakota corporation acts, have been received in
this office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY and attach hereto a duplicate original of the
Amendment.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota, at Pierre, the Capital, this 28th day of July
A.D. 1977.
Lorna B. Herseth
Secretary of State
Assistant
Filed this 28th day of
July, 1977.
Lorna B. Herseth
SECRETARY OF STATE
<PAGE>
ARTICLES OF AMENDMENT TO
THE RESTATED ARTICLES OF INCORPORATION
OF MIDLAND NATIONAL LIFE INSURANCE
COMPANY
We, William A. Rigsbee and Darwin Shapiro, President and Secretary,
respectively, of Midland National Life Insurance Company, a corporation
organized and existing under the laws of the State of South Dakota hereby
certify that said corporation, at a special meeting of the stockholders of
said company, held at its home office in the City of Watertown, State of
South Dakota, on the 22nd day of July, 1977, amended Articles Six of the
Restated Articles of Incorporation of Midland National Life Insurance Company
so that said Restated Articles of Incorporation, as to said Article Six, now
reads as follows:
ARTICLE SIX
The address of the registered office of the Company shall be One Midland Plaza,
Sioux Falls, South Dakota, and the name of its registered agent at such address
is William A. Rigsbee.
We further certify that there were subscribed and outstanding at said date
1,512,500 shares of common stock of said company and no more and no other class
of stock. That the vote by which said amendment was adopted was 1,512,170
shares voted in favor thereof and no votes against the same so that said
amendment was adopted by a vote of 1,512,170 shares of all of the issued and
outstanding stock of the company.
IN WITNESS WHEREOF we have hereunto signed this Certificate as President and
and Secretary, respectively, of said Midland National Life Insurance Company
and caused the seal of said company to be attached thereto this 22nd day of
July, 1977.
(CORPORATE SEAL)
William A. Rigsbee
President of Midland National Life Insurance Company
Darwin Shapiro
Secretary of Midland National Life Insurance Company
STATE OF SOUTH DAKOTA
SS
COUNTY OF CODINGTON
VERIFICATION
I, Alan L. Austin, a Notary Public in and for the State of South Dakota, do
hereby certify that on this 22nd day of July, 1977, personally appeared before
me William A. Rigsbee, who, being by me first duly sworn, declared that he is
President of Midland National Life Insurance Company, that he signed the
foregoing Articles of Amendment to Restated Articles of Incorporation of
Midland National Life Insurance Company as President of the Corporation, and
that the statements therein contained are true.
Witness my hand and notarial seal.
Alan L. Austin
Notary Public, South Dakota
My Commission Expires: 8/30/81
(SEAL)
The within and foregoing Amendment to Restated Articles of Incorporation of
Midland National Life Insurance Company are hereby approved this day of
July, 1977.
_____________________________
Lowell L. Knutson
Director of the Division of Insurance of
the State of South Dakota
The within and foregoing Amendment to Restated Articles of Incorporation of
Midland National Life Insurance Company are hereby approved this 28th day of
July, 1977.
WILLIAM J. JANKLOW, Attorney General
of the State of South Dakota
BY: Clair B. Ledbetter
Assistant Attorney General
<PAGE>
CERTIFIED COPY OF AMENDMENT TO BYLAWS
OF MIDLAND NATIONAL LIFE INSURANCE COMPANY
STATE OF SOUTH DAKOTA
SS
COUNTY OF CODINGTON
I, Erwin J. Frey, do hereby certify that I am the duly elected, qualified and
acting Assistant Secretary of Midland National Life Insurance Company, that a
special meeting of the stockholders held at the offices of the Company at
Watertown, South Dakota, on July 22, 1977, at 11:00 o'clock a.m., the
stockholders, by a vote of 1,512,170 shares out of a total issued and
outstanding of 1,512,500 shares adopted a Resolution to Amend Article II,
Section 1 of the Bylaws of said Company to read as follows:
ARTICLE II
"SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of the
Company shall be held at the Home Office of the Company in the City of Sioux
Falls, Minnehaha County, South Dakota, on the second Thursday in March,
commencing at 11:00 a.m., to elect a Board of Directors and for the
transaction of such other business as shall properly come before the meeting."
Witness my hand and the seal of Midland National Life Insurance Company this
25th day of July, 1977.
(CORPORATE SEAL)
Erwin J. Frey
Assistant Secretary
Midland National Life Insurance Company
<PAGE>
SOUTH DAKOTA
Department of Commerce & Consumer Affairs
Division of Insurance
Pierre, South Dakota 57501
September 16, 1977
To: Office of the Secretary of State Attn: Pat Hofer
From: Lowell L. Knutson, Director of Insurance
Re: Articles of Amendment to the Restated Articles of Incorporation of
Midland National Life Insurance Company dated July 22, 1977.
This is to certify that the above mentioned was approved and signed by me on
the second day of August, 1977.
Lowell L. Knutson
Lowell L. Knutson
Director of Insurance
<PAGE>
Receipt No. 202694
File No. D-1222
Articles of Amendment
of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Filed at Request of
Connie Edge
Secretary
Department of Commerce &
Consumer Affairs
Division of Insurance
Pierre, SD 57501
State of South Dakota
SS
Office of Secretary of State
Filed in the office of the Secretary of State on the 28th day of July, 1977.
Lorna B. Herseth
Secretary of State
By ____________________________
Assistant Secretary of State
Fee received: $20
<PAGE>
State of South Dakota
Office of The Secretary Of State
STATE DEPARTMENT
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
United States of America,
State of South Dakota
SECRETARY'S OFFICE
This is to certify that the attached instrument of writing is a true, correct,
and examined copy of the articles of amendment of MIDLAND NATIONAL LIFE
INSURANCE COMPANY, filed with our office on February 5th, 1990;
and the whole thereof, and has been carefully compared with the original now
on file in this office and found correct.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota at the City of Pierre, the Capital, on this 5th
day of February, 1990.
Joyce Hazeltine
Secretary of State
By __________________________
Deputy Secretary of State
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
FEES: $5.00
<PAGE>
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
STATE OF SOUTH DAKOTA
Secretary of State
Certificate of Amendment
I, JOYCE HAZELTINE, Secretary of State of the State of South Dakota, hereby
certify that duplicate originals of Amendment to Articles of Incorporation of
MIDLAND NATIONAL LIFE INSURANCE COMPANY duly signed and verified pursuant to
the provisions of the South Dakota corporation acts, have been received in this
office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of MIDLAND
NATIONAL LIFE INSURANCE COMPANY and attach hereto a duplicate original of the
Amendment.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal of
the State of South Dakota, at Pierre, the Capital, this 5th day of February
A.D. 1990.
Joyce Hazeltine
Secretary of State
Deputy
STATE OF SOUTH DAKOTA
GREAT SEAL 1989
<PAGE>
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
We, William A. Rigsbee and Jack L. Briggs, President and Secretary,
respectively, of Midland National Life Insurance Company, a corporation
organized and existing under the laws of the State of South Dakota, hereby
certify that said corporation, at a special meeting of the stockholders, held
at the offices of the Company, in the City of Sioux Falls, State of South
Dakota, on the 8th day of January, 1990, amended Article Four of the Articles
of Incorporation so that the same now reads as follows:
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have the authority
to issue shall be 2,549,439 of common stock of the par value of $1.00 each.
Fully paid capital stock of this Corporation shall be nonassessable and no
stock shall be hereafter issued until fully paid.
We further certify that there were subscribed and outstanding at said date
1,499,670 shares of common stock of said Company and no more and no other
class of stock. That the vote by which said amendment was adopted was
1,499,340 in favor thereof and no votes against so that said amendment was
adopted by a unanimous vote of all of the issued and outstanding stock of the
Company.
IN WITNESS WHEREOF we have hereunto signed this certificate as President and
Secretary, respectively, of the said Midland National Life Insurance Company
and caused the seal of said Company to be attached thereto this 8th day of
January, 1990.
(CORPORATE SEAL)
William A. Rigsbee
President of Midland National Life Insurance Company
Jack Briggs
Secretary of Midland National Life Insurance Company
Filed this 5th day of February 1990.
Joyce Hazeltine
SECRETARY OF STATE
Approved as to Form
this 12th day of January 1990
Janice Stareman
ASSISTANT ATTORNEY GENERAL
FILED
January 15, 1990
South Dakota
Director of Insurance
STATE OF SOUTH DAKOTA
SS
COUNTY OF MINNEHAHA
I, Pam Wieker, a Notary Public in and for the State of South Dakota, do hereby
certify that on this 8th day of January, 1990 personally appeared before me
William A. Rigsbee, who, being by me first duly sworn, declared that he is the
President of Midland National Life Insurance Company, that he signed the
foregoing Articles of Amendment to the Articles of Incorporation of Midland
National Life Insurance Company as President of the corporation, and that the
statements therein contained are true.
Witness my hand and notarial seal.
Pam Wieker
Notary Public, South Dakota
(SEAL)
My commission Expires on August 21, 1997.
The within and foregoing Amendment to the Articles of Incorporation of Midland
National Life Insurance Company are hereby approved this ______ day of January,
1990.
___________________________
Mary Jane Cleary
Director of the Division of Insurance
of the State of South Dakota
The above and foregoing Amendment to the Articles of Incorporation of Midland
National Life Insurance Company are hereby approved this ______ day of January,
1990.
ROGER TELLINGHUISEN, Attorney General
of the State of South Dakota
By ____________________________
Assistant Attorney General
<PAGE>
State of South Dakota
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
OFFICE OF THE SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
I, JOYCE HAZELTINE, Secretary of State of the State of South Dakota, hereby
certify that duplicate of the Articles of Amendment to the Articles of
Incorporation of MIDLAND NATIONAL LIFE INSURANCE COMPANY duly signed and
verified pursuant to the provisions of the South Dakota Corporation Acts,
have been received in this office and are found to conform to law.
ACCORDINGLY and by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation and attach
hereto a duplicate of the Articles of Amendment of MIDLAND NATIONAL LIFE
INSURANCE COMPANY.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the Great Seal
of the State of South Dakota, at Pierre, the Capital, this August 15, 1997.
Joyce Hazeltine
JOYCE HAZELTINE
Secretary of State
STATE OF SOUTH DAKOTA
GREAT SEAL 1889
<PAGE>
APPROVED BY
SOUTH DAKOTA
DIVISION OF INSURANCE
08-14-97
Larry S. Johnson
Approved as to Form
this 08th day of August, 1997.
Larry S. Johnson
ASSISTANT ATTORNEY GENERAL
Filed this 15th day of
August 1997.
Joyce Hazeltine
SECRETARY OF STATE
ARTICLES OF AMENDMENT TO RESTATED
ARTICLES OF INCORPORATION OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
We, Michael M. Masterson and Jack L. Briggs, President and Secretary,
respectively, of Midland National Life Insurance Company, a corporation
organized and existing under the laws of the State of South Dakota, hereby
certify that at a special meeting of the Stockholders held at the offices of
the Company at Sioux Falls, South Dakota, on June 30, 1997, at 1:00 o'clock
p.m., the stockholders, by a vote of 2,549,439 shares out of a total issued
and outstanding of 2,549,439 shares adopted a Resolution to Amend the Restated
Articles of Incorporation of said Company to read as follows:
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
The Corporation may, as provided in and to the extent designed in the By-Laws
as may be adopted from time to time, indemnify any and all persons whom it may
have the power to indemnify under the South Dakota Business Corporation Act, as
the same may be amended and supplemented, against any and all of the expenses,
liabilities and other matters referred to in or covered by said Business
Corporation Act.
IN WITNESS WHEREOF we have hereunto signed this certificate as President and
Secretary, respectively, of the said Midland National Life Insurance Company
and caused the seal of said Company to be attached thereto this 11 day of
August, 1997.
(CORPORATE SEAL)
Michael Masterson
President of Midland National
Life Insurance Company
Jack Briggs
Secretary of Midland National
Life Insurance Company
ARTICLE.TXT
<PAGE>
1.(6)(b) By-laws of Midland National Life Insurance Company
BY-LAWS
MIDLAND NATIONAL LIFE INSURANCE COMPANY
AS AMENDED AND RESTATED THROUGH
February 20, 1976
ARTICLE I
CORPORATE POWERS
SECTION 1. CORPORATE POWERS. All the Corporate Power of this Company shall
be exercised by a Board of Directors, by the Executive Committee and by the
officers named and provided for in these by-laws and by such other officers
andagents as shall be appointed for the performance of specific duties.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of the
Company shall be held at the Home Office of the Company in the City of
Watertown, Codington County, South Dakota, on the second Thursday in March,
commencing at 11:00 a.m., to elect a Board of Directors and for the transaction
of such other business as shall properly come before the meeting.
SECTION 2. NOTICE OF ANNUAL MEETING. Notice of the annual meeting of the
stockholders shall be given by the Secretary to each stockholder appearing as
such on the books of the Company, by duly mailing notice of said meeting to his
address as shown by the books and records of said Company, at least ten days
prior to such annual meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders of the
Company may be held at the Home Office of the Company upon call in writing by
the President, the Board of Directors or whenever called in writing by
stockholders holding not less than one-tenth of the shares entitled to vote
at the meeting, provided that written notice of such special meeting, stating
the day, hour, and place thereof and stating in general terms, the business
to be transacted thereat, shall be mailed at least ten days prior to such
meeting to each stockholder at his address as the same appears on the books of
the Company.
SECTION 4. QUORUM. A majority of the common stock issued and outstanding,
represented either in person or by proxy, shall constitute a quorum for the
transaction of business and each stockholder shall be entitled to one vote for
each share of common stock outstanding in his name on the books of the Company,
whether represented in person or by proxy.
SECTION 5. ADJOURNED MEETINGS. If a quorum be not present at any annual or
special meeting, or, if on vote of the stockholders present, it shall be
deemed expedient or advisable to adjourn said meeting, said meeting may be
adjourned to such other time as shall be agreed upon by them.
If adjournment shall be taken for longer than one day, immediate notice of the
time to which the adjournment was taken shall be given in writing to all of
the stockholders.
SECTION 6. VOTING BY PROXY. No person shall be entitled to vote by virtue of
any proxy unless the proxy shall have been on file with the Secretary at least
one day before the meeting at which it is to be used.
SECTION 7. OFFICERS OF MEETINGS. The President and Secretary of the
Corporation shall act as President and Secretary respectively of all
stockholders meetings, and they shall constitute a committee to pass on the
authenticity of the proxies.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. NUMBER OF DIRECTORS AND TERM OF OFFICE. The Directors shall be
elected at the annual meeting and the number to be elected, not less than five
nor more than twenty-one, shall be determined annually by the stockholders.
The Directors shall serve for a period of one year or until the election and
qualification of their successors.
SECTION 2. VACANCIES. The Board of Directors shall have power to fill all
vacancies on the Board for the unexpired term.
SECTION 3. POWERS. THe Board of Directors shall exercise the corporate powers
of said Corporation, and shall, with the Executive Committee thereof,
hereinafter provided for, be the governing body thereof, and shall have
general management of the business and property of the Company. The Directors
shall act only as a Board and the individual Directors shall have no power as
such.
SECTION 4. MEETINGS. Regular meetings of the Board of Directors shall be held
on the second Thursday in each of the months of March, June, September and
December, and the meeting on the second Thursday in March shall be the annual
meeting thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the President or by a majority of the Board of Directors, and the
President or the Secretary shall give notice of said special meeting by mailing
same to each of the Directors at least three days before the date of the
meeting.
SECTION 6. CHAIRMAN OF BOARD OF DIRECTORS. The Board of Directors at each
annual meeting in March shall select one of their number as Chairman of the
Board of Directors during the ensuing year, and said Chairman shall preside at
each regular or special meeting of the Board of Directors. If the Chairman of
the Board shall at any time be absent, then the President or any Vice President
shall preside at said meeting.
SECTION 7. QUORUM. A majority of the Directors shall constitute a quorum for
the transaction of business at any regular, special, or adjourned meeting. A
lesser number than a quorum may adjourn the meeting to a future date.
SECTION 8. DIRECTORS FEES. Each member of the Board of Directors, if not an
officer of the Company, shall be paid for attendance at each regular or special
meeting of the Board of Directors at the rate of $100.00 per day and expense of
travel.
SECTION 9. MINUTES. Regular minutes of the proceedings of the Board of
Directors shall be kept by the Secretary of the Company, or such other person
as may be designated by the Board.
SECTION 10. REMOVAL OF DIRECTORS. At a meeting of the stockholders call
expressly for that purpose, Directors may be removed as hereinafter provided.
Any Director or the entire Board of Directors may be removed, with or without
cause, by vote of the holders of the majority of the shares then entitled to
vote at an election of Directors.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. ELECTION AND POWERS. The Board of Directors, at its regular annual
meeting, shall, at the time of electing the officers of the Company, appoint an
Executive Committee consisting of the President and not less than two nor more
than four members of the Board of Directors. The Executive Committee, when the
Board of Directors is not in session, shall have and may exercise all of the
powers of the Board of Directors allowed by law.
SECTION 2. MEETINGS. Meetings of the Executive Committee shall be held from
time to time as they are called by the President, or by any two members
thereof. No such meeting shall be held unless each member thereof shall
receive personal notice of the time and place of the meeting at least one day
prior thereto. Notice of any meeting may be waived by any member of the
Executive Committee.
SECTION 3. QUORUM. A majority of the Executive Committee shall constitute a
quorum.
SECTION 4. MINUTES. Regular minutes of the proceedings of the Executive
Committee shall be kept by the Secretary of the Company, or such other person
as may be designated by the Committee.
ARTICLE V
OFFICERS
SECTION 1. ELECTION OF OFFICERS. The officers of this Company shall consist
of a President, one or more Vice Presidents, the number of which shall be
determined by the Board of Directors, a Secretary, one or more Assistant
Secretaries and a Treasurer, each of whom shall be elected annually by the
board of Directors, and such other officers as may be determined by said Board,
each of whom shall hold his office during the pleasure of the Board, and until
his successor is elected and qualified. The Board of Directors, may, however,
employ officers or other employees of the Company for a longer term than one
year if it seems advisable. The same person may hold one or more offices.
SECTION 2. DUTIES OF OFFICERS. Company officers shall have duties as
determined by the Board of Directors from time to time.
SECTION 3. SALARIES. All salaries or other compensation of officers shall be
fixed by the Board of Directors.
SECTION 4. BOND. The officers shall give bond for the faithful performance
of their duties, in such form and amount and with such surety as may be
prescribed by the Board of Directors, with the premiums on all bonds required
to be paid by the Company.
ARTICLE VI
OFFICERS OR DIRECTORS DOING BUSINESS WITH THE COMPANY
SECTION 1. PROHIBITION AS TO CERTAIN TRANSACTIONS. No officer or director,
or any member of any committee thereof or an employee of this Company who is
charged with the duty of investing or handling the funds of the Company shall
deposit or invest such funds except in the insurer's corporate name; shall not
borrow the funds of such insurer; shall not be pecuniarily interested in any
loan, pledge or deposit, security, investments, sale, purchase, exchange,
reinsurance, or other similar transaction or property of such insurer except
as a stockholder or member; shall not take or receive to his own use any fee,
brokerage, commission, gift, or other consideration for or on account of any
such transaction made by or on behalf of such insurer.
ARTICLE VII
CAPITAL STOCK
SECTION 1. CERTIFICATE OF SHARES. Each holder of stock in this Company shall
be entitled to a stock certificate in such form and bearing such original or
facsimile signatures as authorized by the Board of Directors.
SECTION 2. TRANSFERS. Shares of the Capital stock of the Company shall be
transferred on the books of the Company and any transfer agent only by the
surrender of the original certificate by the holder thereof, or his duly
authorized attorney. The Board of Directors may authorize the use of a
transfer agent and the use of a registrar.
ARTICLE VIII
CORPORATE SEAL
SECTION 1. CORPORATE SEAL. The seal of this Corporation shall be circular
with the name of the Corporation engraved around the margin and with the words
GREAT SEAL engraved across the face. The corporate seal shall be in the
custody of the Secretary of the Company and shall be affixed to all papers
requiring the use of a seal.
ARTICLE IX
AMENDMENTS TO BY-LAWS
SECTION 1. AMENDMENTS. These by-laws may be amended or repealed, in whole or
in part, at any duly called meeting of th Board of Directors, by an affirmative
vote of the majority of the Board of Directors, or by the stockholders at any
annual or special meeting called for such purpose.
<PAGE>
CERTIFIED COPY OF AMENDMENT TO BYLAWS
OF MIDLAND NATIONAL LIFE INSURANCE COMPANY
STATE OF SOUTH DAKOTA
SS
COUNTY OF CODINGTON
I. Erwin J. Frey, do hereby certify that I am the duly elected, qualified and
acting Assistant Secretary of Midland National Life Insurance Company; that a
special meeting of the stockholders held at the offices of the Company at
Watertown, South Dakota, on July 22, 1977, at 11:00 o'clock a.m., the
stockholders, by a vote of 1,512,170 shares out of a total issued and
outstanding of 1,512,500 shares adopted a Resolution to Amend Article II,
Section 1 of the Bylaws of said Company to read as follows:
ARTICLE II
"SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of the
Company shall be held at the Home Office of the Company in the City of Sioux
Falls, Minnehaha County, South Dakota, on the second Thursday in March,
commencing at 11:00 a.m., to elect a Board of Directors and for the transaction
of such other business as shall properly come before the meeting."
Witness my hand and the seal of Midland National Life Insurance Company this
25th day of July, 1977.
(CORPORATE SEAL)
Erwin J. Frey
Assistant Secretary
Midland National Life Insurance Company
<PAGE>
Receipt No. 202694
File No. D-1222
Articles of Amendment
of
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Filed at Request of
Connie Edge
Secretary
Department of Commerce & Consumer Affairs
Division of Insurance
Pierre, SD 57501
State of South Dakota
Office of Secretary of State
Filed in the office of the Secretary of State on 28th day of July 1977.
_______________________________
Secretary of State
By ____________________________
Assistant Secretary of State
Fee Received $20
<PAGE>
APPROVED BY
SOUTH DAKOTA
DIVISION OF INSURANCE
CERTIFIED COPY OF AMENDMENT TO BY-LAWS OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
STATE OF SOUTH DAKOTA
SS
COUNTY OF MINNEHAHA
I, Jack L. Briggs, do hereby certify that I am the duly elected, qualified and
acting Secretary of Midland National Life Insurance Company; that on May 29,
1977, the Board of Directors adopted a Resolution to Amend the By-Laws of said
Company to read as follows:
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. ELECTION AND POWERS. The Board of Directors, at its regular annual
meeting, shall, at the time of electing the officers of the Company, appoint
an Executive Committee consisting of the President and two or more members of
the Board of Directors. The Executive Committee, when the Board of Directors
is not in session, shall have and may exercise all of the powers of the Board
of Directors allowed by law.
Witness my hand and the seal of Midland National Life Insurance Company this
11th day of August, 1977.
(CORPORATE SEAL)
Jack L. Briggs
Secretary
Midland National Life Insurance Company
<PAGE>
APPROVED BY
SOUTH DAKOTA
DIVISION OF INSURANCE
CERTIFIED COPY OF AMENDMENT TO BY-LAWS OF
MIDLAND NATIONAL LIFE INSURANCE COMPANY
STATE OF SOUTH DAKOTA
SS
COUNTY OF MINNEHAHA
I, Jack L. Briggs, do hereby certify that I am the duly elected, qualified and
acting Secretary of Midland National Life Insurance Company; that at a special
meeting of the Stockholders held at the offices of the Company at Sioux Falls,
South Dakota, on June 30, 1977, at 1:00 o'clock p.m., the stockholders, by a
vote of 2,549,439 shares out of a total issued and outstanding of 2,549,439
shares adopted a Resolution to Amend the By-Laws of said Company to read as
follows:
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
a) The corporation shall, to the fullest extent permitted by Sections 47-2-58.1
through 47-2-58.7 of the South Dakota Business Corporation Act, as the same may
be amended, indemnify every person who is, or was a director, officer or
employee of the corporation, or of any other corporation which he serves as
such at the request of the corporation, from and against any and all liability
and reasonable expenses that may be incurred in connection with or resulting
from any claim, action, suit or other proceeding in which he may be involved
as a party or otherwise, by reason of his being a director, officer or
employee, whether or not he continues to be such at the time such liability or
expense shall have been incurred.
b) The right of indemnification in this Section shall be in addition to any
other rights to which such director, officer or employee may otherwise be
entitled by contract, vote of either stockholders or disinterested directors
or as a matter of law; and in the event of such person's death, such rights
shall extend to his heirs and legal representatives. The provisions of this
Section are severable, and if any provision be held invalid, all other
provisions are fully in effect and the invalid provision shall only be
curtailed to the extent necessary to make it enforceable to the fullest extent
allowed by law.
c) Expenses including attorney's fees may be advanced to such director, officer
or employee as may be determined by the Board of Directors.
d) The Board of Directors, by majority vote, may elect to indemnify other
agents of the corporation on a case-by-case basis.
Witness my hand and the seal of Midland National Life Insurance Company this
11th day of August, 1977.
(CORPORATE SEAL)
Jack L. Briggs
Secretary
Midland National Life Insurance Company
BYLAWS.TXT
<PAGE>
1. (8)(c) Form of Participation Agreement between Midland National
Life Insurance Company and Fidelity VIP III
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND III,
FIDELITY DISTRIBUTORS CORPORATION
and
MIDLAND NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the
3rd day of April, 1997 by and among MIDLAND
NATIONAL LIFE INSURANCE COMPANY, (hereinafter
the "Company"), a South Dakota 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 III, 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.
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 representing the
interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made
available under this Agreement, as may be amended from
time to time by mutual agreement of the parties hereto
(each such series hereinafter referred to as a "Portfolio");
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
Company 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 life insurance 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 aforesaid variable
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
("SEC") 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 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 provisions substantially the same
as Articles I, III, V, VII and Section 2.5 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 that purchases and
redemptions of Portfolio shares offered by the then current
prospectus of the Fund shall be made in accordance with
the provisions of such prospectus. The Company agrees
that all net amounts available under the variable life and
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
(a list of such funds appearing on Schedule C to 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 funds 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.
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 (normally by 6:30 p.m. Boston time) 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 58-28 of the South Dakota 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 South Dakota 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 endowment, life insurance or annuity
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 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 South Dakota
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 South
Dakota 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 South Dakota 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 South Dakota 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
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 covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and
that said bond is issued by a reputable bonding company,
includes coverage for larceny and embezzlement, and is in
an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or
another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Underwriter in
the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with
as many printed copies of the Fund's current prospectus and
Statement of Additional Information as the Company may
reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film
containing the Fund's prospectus and Statement of
Additional Information, and such other assistance as is
reasonably necessary in order for the Company once each
year (or more frequently if the prospectus and/or Statement
of Additional Information for the Fund is amended during
the year) to have the prospectus for the Contracts and the
Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund
and the Statement of Additional Information for the
Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its
Statement of Additional Information in combination with
other fund companies' prospectuses and statements of
additional information. Except as provided in the
following three sentences, all expenses of printing and
distributing Fund prospectuses and Statements of
Additional Information shall be the expense of the
Company. For prospectuses and Statements of Additional
Information provided by the Company to its existing
owners of Contracts in order to update disclosure annually
as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company
chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund will
reimburse the Company in an amount equal to the product
of A and B where A is the number of such prospectuses
distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's
prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee
with such information as may be reasonably requested by
the Fund to assure that the Fund's expenses do not include
the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed
to existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement
of Additional Information for the Fund is available from the
Underwriter or the Company (or in the Fund's discretion,
the Prospectus shall state that such Statement is available
from the Fund).
3.3. The Fund, at its expense, shall provide the
Company with copies of its proxy statements, reports to
shareholders, and other communications (except for
prospectuses and Statements of Additional Information,
which are covered in Section 3.1) to shareholders 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 a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
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 reasonably
objects 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 reasonably objects 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.
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 each Account,
contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not
limited to, any of the following that refer to the Fund or any
affiliate of the Fund: 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 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.
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,
and all taxes on the issuance or transfer of the Fund's
shares.
5.3. The Company shall bear the expenses of
distributing the Fund's prospectus, proxy materials and
reports to owners of Contracts issued by the Company.
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 1.817-
5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by
the Fund, it will take all reasonable steps (a) to notify
Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance within the grace period
afforded by Regulation 1.817-5.
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 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 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 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 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 trustee 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 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
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 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 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.
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
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
(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 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
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 each 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 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
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
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 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 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 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 continue in full force and
effect until the first to occur of:
(a) termination by any party for any reason by sixty (60)
days advance written notice delivered to the other parties;
or
(b) termination by the Company by written notice to the
Fund and the Underwriter with respect to any Portfolio
based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter with respect to any Portfolio in
the event any of the Portfolio'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
(d) termination by the Company by written notice to the
Fund and the Underwriter with respect to any Portfolio in
the event that such Portfolio 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
(e) termination by the Company by written notice to the
Fund and the Underwriter with respect to any Portfolio in
the event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of the
Fund or the Underwriter respectively, shall determine, in
their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall determine,
in its sole judgment exercised in good faith, that either the
Fund or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(h) termination by the Fund or the Underwriter by
written notice to the Company, 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(h) shall be effective
forty five (45) days after the notice specified in Section
1.6(b) was given.
10.2. 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 10.2 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.
10.3 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 or approved 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") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. 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:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, South Dakota
Attention: Russell Evenson
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 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 SEC, 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 insurance
operations of the Company are being conducted in a
manner consistent with the California Insurance
Regulations and any other applicable law or regulations.
12.7 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.
12.8. This Agreement or any of the rights and
obligations hereunder may not be assigned by any party
without the prior written consent of all parties hereto;
provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any
affiliate of or company under common control with the
Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter
under this Agreement. The Company shall promptly notify
the Fund and the Underwriter of any change in control of
the Company.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event within
45 days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities
and Exchange Commission or any state insurance regulator,
as soon as practical after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By: __Michael_M_Masterson_____________________
Name: Michael M. Masterson
Title: Chief Executive Officer and President
VARIABLE INSURANCE PRODUCTS FUND III
By: __Gary_Burkhead____
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: __Paul_J_Hondros__
Paul J. Hondros
President
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of
Contracts Funded
Date Established by Board of Directors By Separate
Account
Midland National Life Separate Account A LT-91
(July 20, 1987) L101A1
L108A1
L109A1
Midland National Life Separate Account C A053A1
March 19, 1991
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 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 no longer needs to be sent
to each Customer by the Company either before or
together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual
Report to the Company pursuant to the terms of
Section 3.3 of the Agreement to which this Schedule
relates.
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.)
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.
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 provide a
standard form 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
SCHEDULE C
Other, non-Fidelity Investments investment companies
currently available under variable annuities or variable life
insurance issued by the Company:
American Century Variable Portfolios Inc.
Capital Appreciation Portfolio
Value Portfolio
Balanced Portfolio
International Portfolio
AGREE.TXT
<PAGE>
March 25, 1998
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
This opinion is furnished in connection with the filing of Post-
Effective Amendment No. 1 to Registration Statement No. 333-14061 on Form
S-6 ("Registration Statement") which covers premiums expected to be
received under the flexible premium Variable Universal Life Insurance 3
policy ("Policy") to be offered by Midland National Life Insurance Company.
The Prospectus included in the Registration Statement describes policies
which will be offered by Midland in each State where they have been
approved by appropriate State insurance authorities. The policy form was
prepared under my direction, and I am familiar with the Registration
Statement and Exhibits thereto. In my opinion:
1. The "sales load" as defined in paragraph (c)(4) of Rule 6e-3(T)
under the Investment Company Act of 1940, will not exceed 9
per centum of the sum of the guideline annual premiums that would
be paid during the period equal to the lesser of 20 years or the
anticipated life expectancy of the named insured based on the
1980 Commissioners Standard Ordinary Table.
2. The illustrations of death benefits, contract fund and
accumulated premiums in Appendix A of the Prospectus included in
the Registration Statement (the "Prospectus"), based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Contract. The rate structure of the Contracts
has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear to
be correspondingly more favorable to prospective purchasers of
Contracts aged 25 or 40 in the underwriting classes illustrated
than to prospective purchasers of Contracts at other ages or
underwriting classes.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to use of my name under the heading "Experts"
in the Prospectus.
Sincerely,
__/s/Russell_A._Evenson__
Russell A. Evenson, FSA, CLU, ChFC
Senior Vice President and Actuary
RAEVUL3.TXT
<PAGE>
April 20, 1998
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Universal Life 3 - Form S-6
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of the Post-Effective Amendment 3
to the Registration Statement on Form S-6 filed by Midland National Life
Insurance Company Separate Account A for certain variable life insurance
contracts (file number 333-14061). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
by: __/s/Frederick_R._Bellamy__
Frederick R. Bellamy
<PAGE>
CONSENT OF IDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post effective Amendment No. 1 to this
Registration Statement of Midland National Life Separate Account A on
Form S-6 (File No. 333-14061) of our reports dated March 17, 1998 and
March 12, 1998, on our audits of the financial statements of Midland
National Life Separate Account A, and the financial statements of Midland
National Life Insurance Company, respectively. We also consent to the
reference of our firm under the caption "Financial and Actuarial".
COOPERS & LYBRAND L.L.P.
MINNEAPOLIS, MINNESOTA
April 24, 1998
CNSNTVL3.TXT
<PAGE>
