Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account A
File Number 33-16354
Commissioners:
Enclosed for filing is a complete copy, including exhibits, of
Post-Effective Amendment Number 12 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
VULCVR.TXT
<PAGE>
Registration No. 33-16354
POST-EFFECTIVE AMENDMENT NO. 12
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, 1999 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.
----------------------------------------------------------------------
S6CVRVL.TXT
<PAGE>
VARIABLE UNIVERSAL LIFE
(Variable Universal Life)
Issued By:
Midland National Life Insurance Company
One Midland Plaza Sioux Falls, SD 57193 (605) 335-5700
Variable Universal Life is an individual variable life insurance
policy issued by Midland National Life Insurance Company.
Variable Universal Life:
provides insurance coverage with flexibility in death benefits
and premiums;
pays a death benefit if the insured person dies while the
contract is still in force;
can provide substantial cash value build-up on a tax-deferred
basis. However, there is no guaranteed cash value for amounts
you allocate to the Investment Divisions. You bear the risk of
poor investment performance for those amounts.
lets you borrow against your contract, withdraw part of the
net cash surrender value, or completely surrender your
contract. Loans and withdrawals affect the cash value, and may
affect the death benefit.
After the first premium, you may decide how much your premiums
will be and how often you wish to pay 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, then loans and withdrawals may have negative tax
consequences.
You have a limited right to examine your contract and return it
to us for a refund.
You may allocate your cash value to our General Account or up to
ten investment divisions. Each division invests in a specified
mutual fund portfolio. You can choose among the following
twenty-three investment divisions:
1. VIP Money Market Portfolio
2. VIP High Income Portfolio
3. VIP Equity-Income Portfolio
4. VIP Growth Portfolio
5. VIP Overseas Portfolio
6. VIP II Asset Manager Portfolio
7. VIP II Investment Grade Bond Portfolio
8. VIP II Contrafund Portfolio
9. VIP II Asset Manager: Growth Portfolio
10. VIP II Index 500 Portfolio
11. VIP III Growth & Income Portfolio
12. VIP III Balanced Portfolio
13. VIP III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
Your cash value in the investment divisions will increase or
decrease based on investment performance. You bear this risk.
The U.S. Government does not insure or guarantee any of these
investments. Separate prospectuses describe the investment
objectives, policies and risks of the portfolios.
The Securities and Exchange Commission has not approved or
disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is
a criminal offense.
Prospectus: May 1, 1999.
Table of Contents
PART 1: SUMMARY 4
FEATURES OF VARIABLE UNIVERSAL LIFE 4
Death Benefit Options 4
Contract Changes 5
Flexible Premium Payments 5
Additional Benefits 5
INVESTMENT CHOICES 5
YOUR CASH VALUE 6
Transfers 7
Policy Loans 7
Withdrawing Money 7
Surrendering Your Contract 7
DEDUCTIONS AND CHARGES 7
Deductions From Your Premiums 7
Deductions From Your Cash Value 8
Surrender Charges 8
Portfolio Expenses 9
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 10
Your Right To Examine This Contract 10
Your Contract Can Lapse 10
Tax Effects of Variable Universal Life 10
Illustrations 11
PART 2: DETAILED INFORMATION ABOUT VARIABLE UNIVERSAL LIFE 11
INSURANCE FEATURES 12
How the Contracts Differ From Whole
Life Insurance 12
Application for Insurance 12
Death Benefit 12
Maturity Benefit 9
Changes In Variable Universal Life 9
Changing The Face Amount of Insurance 10
Changing Your Death Benefit Option 10
When Contract Changes Go Into Effect 11
Flexible Premium Payments 11
Allocation of Premiums 12
Additional Benefits 12
SEPARATE ACCOUNT INVESTMENT CHOICES 13
Our Separate Account And Its
Investment Divisions 13
The Funds 13
Investment Policies Of The Portfolios 13
USING YOUR CASH VALUE 17
The Cash Value 17
Amounts In Our Separate Account 17
How We Determine The Accumulation Unit Value 17
Cash Value Transactions 18
Transfers Of Cash Value 18
Dollar Cost Averaging 18
Contract Loans 19
Withdrawing Money From Your Cash Value 20
Surrendering Your Contract 21
THE GENERAL ACCOUNT 21
DEDUCTIONS AND CHARGES 21
Deductions From Your Premiums 21
Charges Against The Separate Account 22
Deductions From Your Cash Value 22
Transaction Charges 23
How Cash Value Charges Are Allocated 23
Surrender Charges 24
Charges In The Funds 25
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 26
Your Right To Examine The Contract 26
Your Contract Can Lapse 27
You May Reinstate Your Contract 27
Contract Periods And Anniversaries 27
Maturity Date 27
We Own The Assets Of Our Separate Account 27
Changing the Separate Account 28
Limits On Our Right To Challenge The Contract 28
Your Payment Options 29
Your Beneficiary 30
Assigning Your Contract 30
When We Pay Proceeds From This Contract 30
TAX EFFECTS 30
Contract Proceeds 30
Possible Charge for Midland's Taxes 33
Other Tax Considerations 33
PART 3: ADDITIONAL INFORMATION 33
MIDLAND NATIONAL LIFE INSURANCE COMPANY 33
YOUR VOTING RIGHTS AS AN OWNER 33
OUR REPORTS TO CONTRACT OWNERS 34
DIVIDENDS 34
MIDLAND'S SALES AND OTHER
AGREEMENTS 34
REGULATION 35
YEAR 2000 35
DISCOUNT FOR MIDLAND EMPLOYEES 36
LEGAL MATTERS 36
FINANCIAL AND ACTUARIAL 36
ADDITIONAL INFORMATION 36
MANAGEMENT OF MIDLAND 38
ILLUSTRATIONS 41
DEFINITIONS 49
PERFORMANCE 51
FINANCIAL STATEMENTS 52
This prospectus generally describes only the variable portion of
the Contract, except where the General Account is specifically
mentioned.
Buying this contract might not be a good way of replacing your
existing insurance or adding more insurance if you already own a
flexible premium variable life insurance contract.
You should read this prospectus carefully and keep it for future
reference. You should also have and read the current
prospectuses for the funds.
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" or
"Insured Person", because the insured person and the owner may
not be the same.
There is a list of definitions at the end of this prospectus,
explaining many words and phrases used here and in the actual
insurance policy.
The detailed information appearing later in this prospectus
further explains the following summary. This summary must be
read along 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
Death Benefit Options
Variable Universal Life is life insurance on the insured person.
If the contract is in force, we will pay a death benefit when
the insured person dies. You can choose between two death
benefit options:
Option 1: death benefit equals the face amount ("Specified
Amount") of the insurance contract. This is sometimes called
a "level" death benefit.
Option 2: death benefit equals the face amount plus the cash
value. This is sometimes called a "variable" death benefit.
The death benefit may be even greater in some circumstances. See
"Death Benefit" on page 12.
We deduct any outstanding loans and unpaid charges before paying
any benefits. The beneficiary can take the death benefit in a
lump sum or under a variety of payment plans.
Whether your contract lapses or remains in force can depend on
the amount of your cash value (less any outstanding loans and
surrender charges). The cash value, in turn, depends on the
investment performance of the investment divisions you select.
(The cash value also depends on the premiums you pay and the
charges we deduct.) However, during the Minimum Premium Period,
you can keep your policy in force by paying a certain level of
premiums.
The minimum face amount is generally $50,000. However, for
insured persons, age 0 to 14 at issue, the minimum face amount
is $25,000.
Contract Changes
You may change the death benefit option you have chosen. You may
also increase or decrease the face amount of your contract,
within limits.
Flexible Premium Payments
You may pay premiums whenever and in whatever amount you want,
within certain limits. We require an initial minimum premium
based on the contract's face amount and the insured person's age
and sex.
You choose a planned periodic premium. But payment of the
planned premiums does not ensure that your contract will remain
in force. Additional premiums may be required to keep your
policy from lapsing. You need not pay premiums according to the
planned schedule. However, you can ensure that your contract
stays in force during the Minimum Premium Period by paying
premiums equal to the accumulated minimum premium amounts. See
"Flexible Premium Payments" on page 11.
Additional Benefits
You may choose to include additional benefits in the contract by
rider. These benefits may include:
a disability waiver benefit (to waive the cost of monthly
deductions)
a monthly disability benefit
an accidental death benefit
life insurance for children
family life insurance coverage
life insurance for additional insured persons
We deduct any costs of additional benefits from your cash value
monthly. See "Additional Benefits" on page 12.
INVESTMENT CHOICES
You may allocate your cash value to up to ten of the following
investment divisions:
1. Fidelity's Variable Insurance Products Fund (VIP)VIP Money
Market Portfolio
2. Fidelity's Variable Insurance Products Fund (VIP)VIP High
Income Portfolio
3. Fidelity's Variable Insurance Products Fund (VIP)VIP Equity-
Income Portfolio
4. Fidelity's Variable Insurance Products Fund (VIP)VIP Growth
Portfolio
5. Fidelity's Variable Insurance Products Fund (VIP)VIP Overseas
Portfolio
6. Fidelity's Variable Insurance Products Fund II (VIP II) VIP II
Asset Manager Portfolio
7. Fidelity's Variable Insurance Products Fund II (VIP II) VIP II
Investment Grade Bond Portfolio
8. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Contrafund Portfolio
9. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Asset Manager: Growth Portfolio
10. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Index 500 Portfolio
11. Fidelity's Variable Insurance Products Fund III (VIP III) VIP
III Growth & Income Portfolio
12. Fidelity's Variable Insurance Products Fund III (VIP III) VIP
III Balanced Portfolio
13. Fidelity's Variable Insurance Products Fund III (VIP III) VIP
III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
You bear the complete investment risk for all amounts allocated
to any of these investment divisions. You may also allocate
your cash value to our General Account, where we guarantee the
safety of principal and a minimum interest rate.
For more information, see "The Funds" on page 13.
YOUR CASH VALUE
Your cash value begins with your first premium payment. From
your premium, we deduct a premium tax and any per premium
expenses. The balance of the premium is your beginning cash
value.
Your cash value reflects:
the amount and frequency of premium payments,
deductions for the cost of insurance and expenses,
the investment performance of your chosen investment
divisions,
interest earned on amounts allocated to the General Account,
loans, and
partial withdrawals.
There is no guaranteed cash value for amounts allocated to the
investment divisions.
See "The Cash Value" on page 17.
Transfers
You may transfer your cash value between the General Account and
the various investment divisions. Transfers take effect when we
receive your request. We require a minimum amount for each
transfer, usually $200. Currently, we allow an unlimited number
of transfers. We reserve the right to chargewill charge a $25
fee after the 12th4th transfer in a contract year. There are
other limitations on transfers to and from the General Account.
See "Transfers Of Cash Value" on page 18.
Policy Loans
You may borrow your cash surrender value (the cash value less
the surrender charge). Your contract will be the sole security
for the loan. Your contract states a minimum loan amount,
usually $200. Contract loan interest accrues daily at an
annually adjusted rate. See "Contract Loans" on page 19.
Contract loan interest is not tax deductible on contracts owned
by an individual. There may be federal tax consequences for
taking a policy loan. See "TAX EFFECTS" on page 30.
Withdrawing Money
You may make a partial withdrawal from your cash value. The
current minimum withdrawal amount is $200. The maximum partial
withdrawal you can make is 20% of the net cash surrender value.
The Net Cash Surrender ValueThat is the cash surrender value
(your cash value minus any surrender charge) minus any
outstanding loan and loan interest due. Withdrawals are subject
to other requirements. If you make more than one withdrawal in
a contract year, then we deduct a service charge (no more than
$25). See "Withdrawing Money From Your Cash Value" on page 20.
Withdrawals and surrenders may have negative tax effects. See
"TAX EFFECTS" on page 30.
Surrendering Your Contract
You can surrender your contract for cash and then we will pay
you the net cash surrender value. A surrender charge may be
deducted, and taxes and a tax penalty may apply. See
"Surrendering Your Contract" on page 21.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We charge a 2.5% premium tax on each premium payment. We may
decrease or increase this charge depending on our expenses, and
we may vary this charge by state. If you elect to pay premiums
by Civil Service Allotment, we also deduct a $.46 charge from
each premium payment. See "Deductions From Your Premiums" on
page 21.
Deductions From Your Cash Value
Certain amounts are deducted from your cash value each month.
These are:
an expense charge of $5.00 (currently, we plan to make this
deduction for only the first 15 contract years),
a cost of insurance charge. The amount of this charge is
based on the insured person's attained age, sex, risk class,
and the amount of insurance under your contract; and
charges for additional benefits.
In addition, we deduct fees when you make:
a partial withdrawal of net cash surrender value more than
once in a contract year or
more than four transfers a year between investment divisions.
See "Deductions From Your Cash Value" on page 22.
We also deduct a daily charge at an annual rate of 1.10% of the
assets in every investment division. This charge is for certain
mortality and expense risks, as well as an administrative
charge.
Surrender Charges
We deduct a surrender charge only if you surrender your contract
for its net cash surrender value or let your contract lapse
during the first 15 contract years. If you keep this contract
in force for 15 years, then you will not incur a surrender
charge.
The surrender charge has two parts: a deferred sales charge and
a deferred issue charge. The deferred sales charge partially
reimburses us for our costs in selling and distributing this
contract. The deferred issue charge reimburses us for
underwriting and our other costs in issuing the contract.
The maximum deferred sales charge is:
30% of any premium payment in the first 2 contract years up to
one guideline annual premium (this varies for each contract);
and
10% of any premium payment in the first two contract years in
excess of the guideline annual premium, up to an amount equal
to the guideline premium; and
9% of all other premium payments for the next 15.5 5 guideline
annual premiums.
After six years, this charge begins to decline. There is no
surrender charge after 15 years. The amount of the deferred
sales charge depends on:
1) the amount of your premium payments,
2) when you pay your premiums and
3) when you surrender your contract or allow it to lapse.
The deferred issue charge is on a fixed schedule per thousand
dollars of face amount. It starts at $2.00 per $1,000 of face
amount for the first 6 contract years and decreases to $0.00
after the 15th contract year. This summary of the deferred
sales charge and the deferred issue charge assumes no changes in
face amount. See "Surrender Charges" on page 24.
Portfolio Expenses
Each investment division invests exclusively in a corresponding
mutual fund portfolio. Each portfolio pays an investment
advisory fee, and may also incur other operating expenses. The
total expenses for each portfolio (as a percentage of assets)
for the year ending December 31, 19981997 are shown in the table
below (except as otherwise noted).
Total
Portfolio Expenses
VIP Money Market .30% .31%
VIP High Income .70% .71%
VIP Equity-Income(1) .58%
VIP Growth(1) .68% .69%
VIP Overseas(1) .91% .92%</R
VIP II Asset Manager(1)
.64% .65%
VIP II Investment Grade Bond .57% .58%
VIP II Contrafund(1) .70% .71%
VIP II Asset Manager: Growth(1) .73% .77%
VIP II Index 500(2) .35% .28%
VIP III Growth & Income .61% .70%
VIP III Balanced(1) .59% .61%
VIP III Growth Opportunities(1) .71% .74%
American Century VP Capital Appreciation 1.00%
American Century VP Value 1.00%
American Century VP Balanced 1.00%
American Century VP International 1.47% 1.50%
American Century VP Income & Growth(4) .70%
MFS VIT Emerging Growth(3) .85% .87%
MFS VIT Research(3) .86% .88%
MFS VIT Growth with Income(3) .88% 1.00%
MFS VIT New Discovery(3) (4) 1.17% 1.15%
Lord, Abbett VC C Growth and Income .51% .52%
(1) This portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios used
credits gained as a result of uninvested cash balances 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 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent reimbursement, the total expenses
for the VIP II Index 500 would have been 0.40%.
(2)(3) MFS has agreed to bear expenses for thisthese portfolios,
such that theeach such portfolio's other expenses shall not
exceed 0.25%. Without this limitation, the other expenses and
total expenses would be
0.35%and 1.10% for the MFS VIT Growth with Income, and
4.32%0.47% and 5.22%1.37% for the MFS VIT New Discovery.
(4) The annual expenses shown for these portfolios are based on
estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset arrangement,
which reduces the series' custodian fee based upon the amount of
cash maintained by the series with its custodian and dividend
disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. The
expenses shown above do not take into account these expense
reductions, and are therefore higher than the actual expenses of
the series.
See "Charges In The Funds" on page 25.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine This Contract
You have a right to examine and cancel the contract. Your
cancellation request must be postmarked by the latest of the
following 3 dates:
10 days after you receive your contract,
10 days after we mail you a notice of this right, or
45 days after you sign the contract application.
If you cancel your contract during this period, then we will
return your cash value plus all of the charges we have deducted
from premiums or from the investment divisions or the cash
value. Expenses of the portfolios are not returned.
See "Your Right To Examine The Contract" on page 26.
Your Contract Can Lapse
Your contract remains in force if the net cash surrender value
can pay the monthly charges. In addition, during the Minimum
Premium Period, your contract will remain in force as long as
you meet the applicable minimum premium requirements. However,
the contract can lapse after the Minimum Premium Period no
matter how much you pay in premiums, if the net cash surrender
value is insufficient to pay the monthly charges (subject to the
grace period). See "Your Contract Can Lapse" on page 27.
Tax Effects of Variable Universal Life
We believe that a contract issued on the basis of a standard
rate class should qualify as a life insurance contract for
federal income tax purposes. It is unclear whether a contract
issued on a substandard basis would qualify as a life insurance
contract, particularly if you pay the full amount of premiums
permitted under the contract. If a contract does not satisfy
Section 7702 of the Internal Revenue code (defining life
insurance for tax purposes), we will take appropriate and
reasonable steps to try to get the contract to comply with
Section 7702.
If a contract qualifies as a life insurance contract for federal
income tax purposes, then the death benefit payment is not
subject to federal income tax. In addition, under current
federal tax law, you do not have to pay income tax on any
increases in your cash value as long as they remain in your
contract.
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 distributions of taxable income and then as
a return of your investment in the contract. In addition, prior
to age 59 1/2, 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
your investment in the contract and then as a distribution of
taxable income. Moreover, loans will not be treated as
distributions. Finally, distributions and loans from a contract
that is not a Modified Endowment contract are not subject to the
10% penalty tax. See "TAX EFFECTS" on page 30.
Illustrations
This prospectus includes sample projections of hypothetical
death benefits and cash surrender values, beginning on page
40.in Appendix B. These are only hypothetical figures and are
not indications of either past or anticipated future investment
performance. These hypothetical value projections may be
helpful in understanding the long-term effects of different
levels of investment performance, charges and deductions. They
may help in comparing this contract to other life insurance
contracts. They indicate that if the contract is surrendered in
the early contract years, the net cash surrender value may be
low compared to never purchasing the policy and investing the
money used as premiums at 5% per year. This demonstrates that
this contract should not be purchased as a short-term
investment.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE UNIVERSAL LIFE
INSURANCE FEATURES
This prospectus describes our Variable Universal Life contract.
There may be contractual variances because of requirements of
the state where your contract is issued.
How the Contracts Differ From Whole Life Insurance
Variable Universal Life (VUL) provides insurance coverage with
flexibility in death benefits and premium payments. It enables
you to respond to changes in your life and to take advantage of
favorable financial conditions. VUL differs from traditional
whole life insurance because you may choose the amount and
frequency of premium payments, within limits.
In addition, VUL has two types death benefit options. You may
switch back and forth between these options. Variable Universal
Life also allows you to change the face amount without
purchasing a new insurance policy. However, evidence of
insurability may be required.
Application for Insurance
To apply for a contract, you must submit a completed
application. We decide whether 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, then we will return the sum of all charges deducted
from premiums paid, plus the net premiums allocated to our
Separate Account adjusted by gains and losses, plus the Net
Premiums allocated to the General Account with interest.premiums
paid plus interest credited. The maximum issue age is 80.
Death Benefit
We pay the death benefit to the beneficiary when the insured
person dies (outstanding indebtedness will be deducted from the
proceeds). As the owner, you may choose between two death
benefit options:
Option 1 provides a benefit that equals the face amount of the
contract. This "level" death benefit is for owners who prefer
insurance coverage that does not vary in amount and has lower
insurance charges. Except as described below, the option 1
death benefit is level or fixed at the face amount.
Option 2 provides a benefit that equals the face amount of the
contract plus the cash value on the day the insured person
dies. This "variable" death benefit is for owners who prefer
to have investment performance reflected in the amount of
their insurance coverage. Under Option 2, the value of the
death benefit fluctuates with your cash value.
Under both options, Federal tax law may require a greater
benefit. This benefit is a percentage multiple of your cash
value. The percentage declines as the insured person gets older
(this is referred to as the "corridor" percentage). The death
benefit will be your cash value on the day the insured person
dies multiplied by the percentage for his or her age. For this
purpose, age is the attained age (last birthday) at the
beginning of the contract year of the insured person's death.
The percentages are shown below:
Table of Death Benefits
Based on Cash 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 Cash Value Age Is Cash Value
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%
95-100
These percentages are based on federal income 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
face amount is $100,000. The "corridor percentage" at that age
is 150%. Under Option 1, the death benefit will generally be
$100,000. However, when the cash value is greater than
$66,666.67, the corridor percentage applies and the death
benefit will be greater than $100,000 (since 150% of $66,666.67
equals $100,000). In this case, at age 55, we multiply the cash
value by a factor of 150%. So if the cash value was $70,000,
then the death benefit would be $105,000.
Under Option 2, the death benefit is the face amount plus the
cash value. In this example, if a 55 year-old had a face amount
of $100,000 and a cash value of $200,000, then the death benefit
would be $300,000. This figure results from either: (a) adding
the face amount to the cash value, or (b) multiplying the cash
value by the corridor percentage. For all cash values higher
than this level, the corridor percentage would apply.
Therefore, for every $1.00 added to the cash value above
$200,000, the death benefit would increase by $1.50 (at that
age).
Under either option, the length of time your contract remains in
force depends on the net cash surrender value of your contract
and whether you meet the Minimum Premium Period requirements.
Your coverage lasts as long as your net cash surrender value can
cover the monthly deductions from your cash value. In addition,
during the Minimum Premium Period, your contract remains in
force if the sum of your premium payments (minus any loans or
withdrawals) is greater than the sum of the monthly minimum
premiums for all of the contract months since the contract was
issued.
The investment performances of the investment divisions and the
interest earned in the General Account affect your cash value.
Therefore, the returns from these investment options can affect
the length of time your contract remains in force.
The minimum initial face amount generally is $50,000. However,
for issue ages 0 to 14, the minimum is $25,000.
Maturity Benefit
If the insured person is still living on the maturity date, we
will pay the beneficiary the cash value minus any outstanding
loans. The contract will then end. The maturity date is the
contract anniversary after the insured person's 100th birthday.
Changes In Variable Universal Life
Variable Universal Life gives you the flexibility to choose from
a variety of strategies that enable you to increase or decrease
your insurance protection.
A reduction in face amount lessens the emphasis on a contract's
insurance coverage by reducing both the death benefit and the
amount of pure insurance provided. The amount of pure insurance
is the difference between the cash value and the death benefit.
This is the amount of risk we take. A reduced amount at risk
results in lower cost of insurance deductions from your cash
value.
A partial withdrawal reduces the cash value and may reduce the
death benefit, while providing you with a cash payment, but
generally does not reduce the amount at risk. Choosing not to
make premium payments may have the effect of reducing the cash
value. Under death benefit option 1, reducing the cash value
increases the amount at risk (thereby increasing the cost of
insurance deductions) while leaving the death benefit unchanged;
under death benefit option 2, it decreases the death benefit
while leaving the amount at risk unchanged.
Increases in the face amount have the exact opposite effect of
decreases.
Changing The Face Amount of Insurance
You may change the face amount of your contract by sending a
written request to our home office. You can only change the
face amount twice each contract year. All changes are subject
to our approval and to the following conditions.
For increases:
Increases in the face amount must be at least $25,000.
To increase the face amount, you must provide satisfactory
evidence of insurability. If the insured person has become a
more expensive risk, then we charge higher cost of insurance
fees for the additional amounts of insurance (we may change
this procedure in the future).
Monthly cost of insurance deductions from your cash value will
increase. There will also be a surrender charge increase.
These begin on the date the face amount increase takes effect.
The right to examine this contract does not apply to face
amount increases. (It only applies when you first buy the
contract.)
For decreases:
You cannot reduce the face amount below the minimum we require
to issue this contract at the time of the reduction. Monthly
cost of insurance deductions from your cash value will
decrease.
The federal tax law may limit a decrease in the face amount.
If that limit applies, then your new death benefit will be
your cash value multiplied by the corridor percentage the
federal tax law specifies for the insured's age at the time of
the change.
If you request a face amount decrease after you have already
increased the face amount at substandard (i.e., higher) risk
charges, and the original face amount was at standard risk
charges, then we will first decrease the face amount that is
at substandard higher risk charges. We may change this
procedure.
Changing Your Death Benefit Option
You may change your death benefit option by sending a written
request to our home office. We require satisfactory evidence of
insurability to make this change.
If you change from option 1 to option 2, the face amount
decreases by your cash value on the date of the change. This
keeps the death benefit and amount at risk the same as before
the change. We may not allow a change in death benefit option
if it would reduce the face 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, then the face amount
increases by the amount of your cash value on the date of the
change. These increases and decreases in face 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. This is the
amount on which the cost of insurance charges are based.
When Contract Changes Go Into Effect
Any changes in the face amount or the death benefit option will
go into effect on the monthly anniversary followingof the date
we approved your request. After your request is approved, you
will receive a written notice 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. We will notify you if we do not approve a change
you request. For example, we might not approve a change that
would disqualify your contract as life insurance for income tax
purposes.
Contract changes may have negative tax consequences. See "TAX
EFFECTS" on page 30.
Flexible Premium Payments
You may choose the amount and frequency of premium payments,
within the limits described below.
Even though your premiums are flexible, your contract
information page will show a "planned" periodic premium. You
determine the planned premium when you apply and can change them
at any time. You will specify the frequency to be on a
quarterly, semi-annual or annual basis. The planned premiums
may not be enough to keep your contract in force. Planned
periodic premiums may be monthly if paid by pre-authorized
check. Premiums may be bi-weekly if paid by Civil Service
Allotment. The planned premiums may not be enough to keep your
contract in force.
The insurance goes into effect when we receive your initial
minimum premium payment (and approve your application). We
determine the initial minimum premium based on:
1) the age, sex, and premium class of the insured person,
2) the initial face amount of the contract, and
3) any additional benefits selected.
All premium payments should be payable to "Midland." After your
first premium payment, all additional premiums should be sent
directly to our home office.
We will send you premium reminders based on your planned premium
schedule. You may make the planned payment, skip the planned
payment, or change the frequency or the amount of the payment.
Generally, you may pay premiums at any time. Amounts must be at
least $50, unless made through a $30 monthly automatic payment
plan.
Payment of the planned premiums does not guarantee that your
contract will stay in force. Additional premium payments may be
necessary. The planned premiums increase when the face amount
of insurance increases.
If you send us a premium payment that would cause your contract
to cease to qualify as life insurance under Federal tax law, we
will notify you and return that portion of the premium that
would cause the disqualification.
Premium Provisions During The Minimum Premium Period. During the
Minimum Premium Period, you can keep your contract in force by
meeting a minimum premium requirement. The Minimum Premium
Period lasts until the 5th contract anniversary. A monthly
minimum premium is shown on your contract information page.
(This is not the same as the planned premiums.) The minimum
premium requirement will be satisfied if the sum of premiums you
have paid is more than the sum of the monthly minimum premiums
required to that date.
During the Minimum Premium Period, your contract will lapse if:
the net cash surrender value cannot cover the monthly
deductions from your cash value; and
the total premiums you have paid are less than the total
monthly minimum premiums required to that date.
This contract lapse can occur even if you pay all of the planned
premiums.
Premium Provisions After The Minimum Premium Period. After the
Minimum Premium Period, your contract will lapse if the net cash
surrender value cannot cover the monthly deductions from your
cash value. Paying your planned premiums may not be sufficient
to maintain your contract because of investment performance,
charges and deductions, contract changes or other factors.
Therefore, additional premiums may be necessary to keep your
contract in force.
Allocation of Premiums
Each net premium will be allocated to the investment divisions
or to our General Account on the day we receive it (except that
any premium received before we issue the contract will not be
allocated or invested until the record date). The net premium
is the premium minus a premium tax and any expense charges.
Each premium is put into your cash value according to your
instructions. Your contract application may provide directions
to allocate net premiums to our General Account or the
investment divisions. You may not allocate your cash value to
more than 10 investment divisions at any one point in time.
Your allocation instructions will apply to all of your premiums
unless you write to our home office with new instructions.
Allocation percentages may be any whole number from 010 to 100.
The sum of the allocation percentages must equal 100. Of
course, you may choose not to allocate a premium to any
particular investment division. See "THE GENERAL ACCOUNT" on
page 21. Any premium received before the record date will be
allocated after certain Underwriting and administrative
processing have been completed. This will usually take up to
three business days. When this period ends your instructions
will dictate how we allocate it.
Additional Benefits
You may include additional benefits in your contract. Certain
benefits result in an additional monthly deduction from your
cash value. You may cancel these benefits at any time. The
following briefly summarizes the additional benefits that are
currently available:
(1) Disability Waiver Benefit: With this benefit, we waive
monthly charges from the cash value if the insured person
becomes totally disabled on or after his/her 15th birthday and
the disability continues for at least 6 months. If a disability
starts before the contract anniversary following the insured
person's 60th birthday, then we will waive monthly deductions
for as long as the disability continues.
(2) Monthly Disability Benefit: With this benefit, we pay a
set amount into your cash value each month (the amount is on
your contract information page). The benefit is payable when
the insured person becomes totally disabled on or after their
15th birthday and the disability continues for at least 6
months. The disability must start before the contract
anniversary following the insured person's 60th birthday. The
benefit will continue until the insured person reaches age 65.
If the amount of benefit paid into the cash value is more than
the amount allowed under the income tax code, the monthly
benefit will be paid to the insured person.
(3) Accidental Death Benefit: We will pay an additional
benefit if the insured person dies from a physical injury that
results from an accident, provided the insured person dies
before the contract anniversary that is within a half year of
his or her 70th birthday.
(4) Children's Insurance Rider: This benefit provides term
life insurance on the lives of the insured person's children.
This includes natural children, stepchildren and legally adopted
children, between the ages of 15 days and 21 years. They are
covered until the insured person reaches age 65 or the child
reaches age 25.
(5) Family Insurance Rider: This benefit provides term life
insurance on the insured person's children as does the
Children's Insurance. It also provides decreasing term life
insurance on the insured's spouse.
(6) 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.
(7) Guaranteed Insurability Rider: This benefit provides for
additional amounts of insurance without further evidence of
insurability.
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. It is a
unit investment trust registered with the Securities and
Exchange Commission (SEC) under the Investment Company Act of
1940 but this registration does not involve any SEC supervision
of its management or investment policies. The Separate Account
meets the definition of a "Separate Account" under the federal
securities laws. The Separate Account has a number of
investment divisions, each of which invests in the shares of a
corresponding portfolio of the Funds. You may allocate part or
all of your net premiums to ten of the twenty-three investment
divisions of our Separate Account.
The Funds
Each of the 23 portfolios available under the contract is a
"series" of one of the following investment companies:
1. Fidelity's Variable Insurance Products Fund,
2. Fidelity's Variable Insurance Products Fund II,
3. Fidelity's Variable Insurance Products Fund III,
4. American Century Variable Portfolios, Inc.,
5. MFS(r) Massachusetts Financial's Variable Insurance Trusts, and
6. Lord, Abbett's Series Fund, Inc.
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 other
aspects of their operations, appear in their prospectuses, which
accompany this prospectus.
Midland may from time to time receive revenue from the Funds
and/or from their managers. The amounts of the revenue, if any,
may be based on the amount of Midland's investments in the
Funds.
Investment Policies Of The Portfolios
Each portfolio tries to achieve a specified investment objective
by following certain investment policies. A portfolio's
objectives and policies affect its returns and risks. Each
investment division's performance depends on the experience of
the corresponding portfolio. The objectives of the portfolios
are as follows:
Portfolio
Objective
VIP Money Market
Seeks as high
a level of
current income
as is consistent
with preservation
of capital and
liquidity by
investing in
U.S. dollar-
denominated
money market
securities. Seeks
to earn a
high 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 a high
level of
current income
by investing
primarily in
income-producing debt
securities
while also
considering
growth of capital.
Policy owners
Should understand
that the
fund's unit
price may be
volatile due
to the nature
of the high
yield bond
marketplace. Seeks high
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
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.Seeks
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 capital
appreciation
by investing
in common
stocks. The
adviser invests the
fund's assets
in companies
the adviser
believes have
above-average
growth
potential. Seeks capital
appreciation
by investing
in 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. 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
instruments. 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 market
instruments.
VIP II Investment Grade Bond
Seeks a high a
level of
current income
as is consistent
with the
preservation
of capital by
investing in
U.S. dollar-
denominated
investment-grade
bonds. 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
common stocks
and securities
of companies
whose value
the manager
believes is
not fully
recognized by
the public. 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
public.
VIP II Asset Manager: Growth
Seeks to
maximize total
return by
allocating its
assets among
stocks, bonds,
short-term
instruments,
and other
investments. 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. 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 potential
for capital
appreciation
earnings potential.
VIP III Balanced
Seeks both
income and
growth of
capital. When
FMR's outlook
is neutral, it
will invest
approximately
60% of the
fund's assets
in equity
securities and
will always
invest at
least 25% of
the fund's
assets in
fixed-income
senior securities. 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 capital
growth by investing
primarily in
common stocks.
Although the
fund invests
primarily in
common stocks,
it has the
ability to
purchase other
securities,
including
bonds, which
may be lower-
quality debt
securities. 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.
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
common 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.
American Century VP Income & Growth
Seeks dividend
growth, current
income, and
capital appreciation.
The Portfolio
will seek to
achieve its
investment
objective by
investing in
common stocks.
MFS VIT Emerging Growth
Seeks to
provide long-
term growth of
capital.
Dividend and
interest
income from
portfolio
securities, if
any, is
incidental to
the Series'
investment
objective of
long-term
growth
capital.
MFS VIT Research
Seeks to
provide long-
term growth of
capital and
future income.
MFS VIT Growth with Income
Seeks to
provide
reasonable
current income
and long-term
growth of
capital and
income.
MFS VIT New Discovery
Seeks capital
appreciation.
Lord, Abbett VC C Growth and Income
Seeks long-
term growth of
capital and
income without
excessive
fluctuation in
market value.
Fidelity Management & Research Company manages the VIP, VIP II,
and VIP III portfolios. American Century Investment Management,
Inc. manages the American Century VP Portfolios. MFS(r)
Massachusetts Financial Services Company manages the MFS
Variable Insurance Trusts. Lord, Abbett & Co.Company manages
the Lord, Abbett Series Fund, Inc.
The Fund portfolios available under these contracts are not
available for purchase directly by the general public, and are
not the same as the mutual funds with very similar or nearly
identical names that are sold directly to the public. However,
the investment objectives and policies of the portfolios are
very similar to the investment objectives and policies of other
(publicly available) mutual fund portfolios that have very
similar or nearly identical names and that are or may be managed
by the same investment advisor or manager. Nevertheless, the
investment performance and results of any of the Funds'
portfolios that are available under the contracts may be lower,
or higher, than the investment results of such other (publicly
available) portfolios. There can be no assurance, and no
representation made, that the investment results of any of the
available portfolios will be comparable to the investment
results of any other portfolio or mutual fund, even if the other
portfolio or mutual fund has the same investment advisor or
manager and the same investment objectives and policies and a
very similar or nearly identical name.
USING YOUR CASH VALUE
The Cash Value
Your cash value is the sum of your amounts in the various
investment divisions and in the General Account (including any
amount in our General Account securing a contract loan). Your
cash value reflects various charges. See "DEDUCTIONS AND
CHARGES" on page 21. Monthly deductions are made on the first
day of each contract month. Transaction and surrender charges
are made on the effective date of the transaction. Charges
against our Separate Account are reflected daily.
We guarantee amounts allocated to the General Account. There is
no guaranteed minimum cash value for amounts allocated to the
investment divisions of our Separate Account. You bear that
investment risk. An investment division's performance will
cause your cash value to go up or down.
Amounts In Our Separate Account
Amounts allocated or transferred to the investment divisions are
used to purchase accumulation units. Accumulation units of an
investment division are purchased when you allocate premiums,
repay loans, or transfer amounts to that division. Accumulation
units are redeemed when you make withdrawals or transfer amounts
from an investment division (including transfers for loans),
when we make monthly deductions and charges, and when we pay the
death benefit. The number of accumulation units purchased or
redeemed in an investment division is calculated by dividing the
dollar amount of the transaction by the division's accumulation
unit value at the end of that day. The value you have in an
investment division is the accumulation unit value times the
number of accumulation units credited to you. The number of
accumulation units credited to you will not vary because of
changes in accumulation unit values.
How We Determine The Accumulation Unit Value
We determine accumulation unit values for the investment
divisions at the end of each business day. Accumulation unit
values fluctuate with the investment performance of the
corresponding portfolios of the Funds. They reflect investment
income, the portfolio's realized and unrealized capital gains
and losses, the Funds' expenses, and our deductions and charges.
The accumulation unit value for each investment division is 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 previous 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:
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 transactions for
that day, such as premium payments or surrenders). We use the
share value reported to us by the Fund.
We add any dividends or capital gains distributions paid by
the portfolio on that day.
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).
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
.0030304%, which is an effective annual rate of 1.10%. (See
"Mortality and Expense Risks" and "Administrative Charges" on
page 20.)
We may subtract any daily charge for taxes or amounts set
aside as tax reserves.
Cash Value Transactions
The transactions described below may have different effects on
your cash value, death benefit, face amount, or cost of
insurance changes. You should consider the net effects before
making any cash value transactions. Certain transactions have
fees. Remember that upon completion of these transactions, you
may not have your cash value allocated to more than 10
investment divisions.
Transfers Of Cash Value
You may transfer amounts among the investment divisions and
between the General Account and any investment divisions. To
make a transfer of cash value, write to our home office. We will
assess a $25 charge after the 4th transfer in a contract year.
If we charge you for making a transfer, then we will allocate
the charge as described under "Deductions and Charges - How Cash
Value Charges Are Allocated" on page 23. Although a single
transfer request may include multiple transfers, it will be
considered a single transfer for fee purposes.
Transfer requests received before 3:00 p.m. (Central Standard
Time) will take affect on the same day if that day is a business
day. Otherwise, the transfer request will take affect on the
business day following the day we receive your request. The unit
values are determined on the day the transfer takes affect. The
minimum transfer amount is $200. The minimum amount does not
have to come from or be transferred to just one investment
division. The only requirement is that the total amount
transferred that day equals the transfer minimum.
We will not assess a transfer charge during the first two
contract years if a transfer is all of the value in our separate
account to the General Account.
The total 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. $25,000.$1,000.
These limits do not apply to transfers made in a Dollar Cost
Averaging program which occurs over a period of 12 or more
months.
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 investment division or the General Account)
into one or more of the investment divisions. 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 does not ensure a profit or protect against a loss in
declining markets. The minimum monthly amount to be transferred
using DCA is $200.
You can elect the DCA program at any time. You must complete
the proper request form, and there must be a sufficient amount
in the DCA source account. The minimum amount required in the
DCA source account for DCA to begin is the sum of $2,400 and the
minimum premium. You can get a sufficient amount by paying a
premium with the DCA request form, allocating premiums, or
transferring amounts to the DCA source account. The DCA
election will specify:
a. The DCA source account from which DCA transfers will be made,
b. That any money received with the form is to be placed into the
DCA source account,
c. The total monthly amount to be transferred to the other
investment divisions, and
d. How that monthly amount is to be allocated among the
investment divisions.
The DCA request form must be received with any premium payments
you intend to apply to DCA.
Once DCA is elected, additional premiums can be deposited into
the DCA source account by sending them in with a DCA request
form. All amounts in the DCA source account will be available
for transfer under the DCA program.
Any premium payments received while the DCA program is in effect
will be allocated using the allocation percentages from the DCA
request form, unless you specify otherwise. You may change the
DCA allocation percentages or DCA transfer amounts twice during
a contract year.
If it is requested when the contract is issued, then DCA will
start at the beginning of the 2nd contract month. If it is
requested after issue, then DCA will start at the beginning of
the 1st contract month which occurs at least 30 days after the
request is received.
DCA will last until the value in the DCA source account falls
below the allowable limit or until we receive your written
termination request. DCA automatically terminates on the
maturity date.
We reserve the right to end the DCA program by sending you one
month's notice.
Contract Loans
If your contract has a TSA Life 403(b) Endorsement, contract
loans are not available and this section is not applicable to
your contract.
Whenever your contract has a net cash surrender value, you may
borrow the cash surrender value using only your contract as
security for the loan. If you request an additional loan, then
the outstanding loan and loan interest will be added to the
additional loan amount and the original loan will be canceled.
Thus, you will only have one outstanding loan.
We pay you interest on this loaned amount, currently at an
annual rate of 6%.
A loan taken from, or secured by, a contract may have federal
income tax consequences. See "TAX EFFECTS" on page 30.
You may request a loan by contacting our home office. You should
tell us how much of the loan you want taken from your unloaned
amount in the General Account or from the Separate Account
investment divisions. If you do not tell us how to allocate
your loan, the loan will be allocated according to your
deduction allocation percentages as described under "How Cash
Value Charges Are Allocated" on page 23. If the loan cannot be
allocated this way, then we will allocate it in proportion to
the unloaned amounts of your cash value in the General Account
and each investment division. We will redeem units from each
investment division equal in value to the amount of the loan
allocated to that investment division (and transfer these
amounts to the General Account).
Contract Loan Interest. Interest on a contract loan accrues
daily at an annual interest rate of 8%.
Interest is due on each contract anniversary. If you do not pay
the interest when it is due, then it will be added to your
outstanding loan and allocated based on the deduction allocation
percentages for your cash value. This means we make an
additional loan to pay the interest and will transfer amounts
from the General Account or the investment divisions to make the
loan. If we cannot allocate the interest based on these
percentages, then we will allocate it as described above for
allocating your loan.
Repaying The Loan. You may repay all or part of a contract loan
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 serve as
premium payments, then 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 Cash Value. A loan
against your contract will have a permanent effect on your cash
value and benefits, even if the loan is repaid. When you borrow
on your contract, we transfer your loan amount into our General
Account where it earns a declared rate of interest. You cannot
invest that loan amount in any Separate Account investment
divisions. You may earn more or less on the loan amount,
depending on the performance of the investment divisions and
whether they are better or worse than the rates declared for the
unloaned portion of the General Account.
Your Contract May Lapse. Your loan may affect the amount of
time that your contract remains in force. For example, your
contract may lapse because the loaned amount cannot be used to
cover the monthly deductions that are taken from your cash
value. If these deductions are more than the net cash surrender
value of your contract, then the contract's lapse provisions may
apply. Since the contract permits loans of the cash surrender
value, loan repayments or additional premium payments may be
required to keep the contract in force, especially if you borrow
the maximum.
Withdrawing Money From Your Cash Value
You may request a partial withdrawal of your net cash surrender
value by writing to our home office. You will not incur a
deferred sales charge or deferred issue charge. Partial
withdrawals are subject to certain conditions. They must:
be at least $200,
total no more than 20% of the net cash surrender value in any
contract year,
allow the death benefit to remain above the minimum for which
we would issue the contract at that time,
allow the contract to still 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, then we will
make the withdrawal as described in "Deductions and Charges -
How Cash Value Charges Are Allocated" on page 23.
Withdrawal Charges. When you make a partial withdrawal more
than once in a contract year, a charge of $25 (or 2% of the
amount withdrawn, whichever is less), will be deducted from your
cash value. If you do not give us instructions for deducting
the charge, then it will be deducted as described under
"Deductions and Charges - How Cash Value Charges Are Allocated"
on page 23.
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 in your cash value, the cash surrender value,
and generally the death benefit on a dollar-for-dollar basis.
If the death benefit is based on the corridor percentage
multiple, then the death benefit reduction could be greater. If
you have death benefit option 1, then we will also reduce the
face amount of your contract so that there will be no change in
the net amount at risk. We will send you a new contract
information page to reflect this change. Both the withdrawal
and any reductions will be effective as of the date we receive
your request at our home office.
A contract loan might be better than a partial withdrawal if you
need temporary cash.
Surrendering Your Contract
You may surrender your contract for its net cash surrender value
while the insured person is living. You do this by sending both
a written request and the contract to our home office. The net
cash surrender value equals the cash surrender value minus any
loan outstanding (including loan interest). During the first 15
contract years, the cash surrender value is the cash value minus
the surrender charge. After 15 years, the cash surrender value
equals the cash value. We will compute the net cash surrender
value as of the date we receive your request and contract at our
home office. All of your insurance coverage will end on that
date.
THE GENERAL ACCOUNT
You may allocate all or some of your cash value to the General
Account. The General Account pays interest at a declared rate.
We guarantee the principal after deductions. 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.
You may accumulate amounts in the General Account by:
allocating net premium and loan payments,
transferring amounts from the investment divisions,
securing any contract loans, or
earning interest on amounts you already have in the General
Account.
This amount is reduced by transfers, withdrawals, and allocated
deductions.
We pay interest on all your amounts in the General Account. The
annual interest rates will never be less than 4.5%. We may, at
our sole discretion, credit interest in excess of 4.5%. You
assume the risk that interest credited may not exceed 4.5%. We
may pay different rates on unloaned and loaned amounts in the
General Account. Interest compounds daily at an effective
annual rate that equals the annual rate we declared.
You may request a transfer between the General Account and one
or more of the investment divisions, within limits. See
"Transfers of Cash Value".
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a premium tax charge and, in some cases, a service
charge from each premium. The rest of each premium (called the
net premium) is placed in your cash value.
Premium Tax Charge. Some states and other jurisdictions
(cities, counties, municipalities) tax premium payments and some
levy other charges. We deduct 2.5% of each premium for those
tax charges. These tax rates currently range from 0.75% to 4%.
We expect to pay at least 2.5% of most premiums in premium tax
because of certain retaliatory provisions in the premium tax
regulations. If we pay less, then we may reduce 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 vary with the amount of the
premium.
We may increase this charge if our premium tax expenses
increase. We reserve the right to vary this charge by state. If
we make such a change, then we will notify you.
Service Charge. If you have chosen the Civil Service Allotment
Mode, then we deduct $.46 from each premium payment. The $.46
covers the extra expenses we incur in processing bi-weekly
premium payments.
Charges Against The Separate Account
Fees and charges allocated to the investment divisions reduce
the amount in your cash value.
Mortality and Expense Risks. We charge for assuming mortality
and expense risks. We guarantee that monthly administrative and
insurance deductions from your cash value will never be greater
than the maximum amounts shown in your contract. The mortality
risk we assume is that insured people will live for shorter
periods than we estimated. When this happens, we have to pay a
greater amount of death benefits than we expected. The expense
risk we assume is that the cost of issuing and administering
contracts will be greater than we expected. We 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. The investment divisions'
accumulation unit values reflect this charge. See "Using Your
Cash Value - How We Determine The Accumulation Unit Value" on
page 17. If the money we collect from this charge is not
needed, then we profit. We expect to make money 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.
Administrative Charges. We charge to cover our record-keeping
and other administrative expenses. This charge includes expenses
for purchaseing, selling, and transferring shares from the
Funds. The effective annual rate of this charge is 0.20% of the
value of the assets in the separate account, attributable to the
Variable Universal Life. The investment divisions' accumulation
unit values reflect this charge. This charge will reimburse Us
for expenses. We do not expect to make any money from this
charge.
Tax Reserve. We reserve the right to charge for taxes or tax
reserves, which may reduce the investment performance of the
investment divisions. Currently, no such charge is made.
Deductions From Your Cash Value
At the beginning of each contract month (including the contract
date), the following three deductions are taken from your cash
value:
1. Expense Charge: This charge is $5.00 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 covers the continuing costs of
maintaining your contract, such as premium billing and
collections, claim processing, contract transactions, record
keeping, communications with owners, and other expense and
overhead items.
2. Charges for Additional Benefits: Monthly deductions are made
for the cost of any additional benefits. 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. If the current
death benefit for the month is increased due to the
requirements of Federal tax law, then your amount at risk for
the month will also increase. For this purpose, your cash
value amount 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.
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 place the insured person that is a standard risk in
the non-smoker and smoker rate classes. 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, 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, nonsmoker, standard
risk at various ages. (In Montana, there are no distinctions
based on sex.)
If Variable Universal Life is purchased in connection with an
employment-related insurance or benefit plan, employers and
employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of
1964. In 1983, the United States Supreme Court held 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 (Non-Smoker)
Age Rate Rate
5 $.07 $.07
15 .12 .11
25 .15 .13
35 .18 .13
45 .39 .23
55 .91 .54
65 2.22 1.31
For a male, non-smoker, age 35, with a $100,000 face amount
option 1 contract and an initial premium of $1,000, the cost of
insurance for the first month will be $12.87. This example
assumes the expense charge ($5.00 per month) and current cost of
insurance rate ($.13 per $1,000).
The non-smoker cost of insurance rates are lower than the smoker
cost of insurance rates.We offer lower 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 habits. The
reduced cost of insurance rates depends on such variables as the
attained age and sex of the insured.
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 of investment earnings, mortality, the
length of time contracts will remain in effect, expenses, and
taxes.
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 move transfers
of Cash Value among investment divisions. We reserve the right
to assess a $25 charge after the 12th transfer in a contract
year.We will assess a $25 charge after the 4th transfer in a
Contract Year.
How Cash Value Charges Are Allocated
Generally, deductions from your cash value for monthly or
partial withdrawal charges are made from the investment
divisions and the unloaned portion of the General Account. They
are made in accordance with your specified deduction allocation
percentages unless you instruct us otherwise. Your deduction
allocation percentages may be any whole numbers (from 010 to
100) which add up to 100. 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 of (a) to
(b) where (a) is your unloaned amounts in the General Account
and your amounts in the investment divisions and (b) isto the
total unloaned amount of your cash value.
Deductions for transfer charges are made equally between the
investment divisions from which the transfer was made. For
example, if the transfer is made from two investment divisions,
then the transfer charge assessed to each of the investment
divisions will be $12.50.
Surrender Charges
We incur various sales and promotional expenses in selling
Variable Universal Life. These include commissions, the cost of
preparing sales literature, promotional activities, and other
distribution expenses. We also incur expenses for underwriting,
printing contract forms and prospectuses, and entering
information in our records.
The surrender charge is the difference between the amount in
your cash value and your contract's cash surrender value for the
first 15 contract years. It 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 expenses in that year.
We anticipate that the sales charge and surrender charge will
not fully cover our sales expenses. If sales expenses are not
covered by the sales and surrender charges, we will cover them
with other funds. The net cash surrender value, the amount we
pay you if you surrender your contract for cash, equals the cash
surrender value minus any outstanding loan and loan interest.
The surrender charge includes deferred sales charges and
deferred issue charges. The deferred sales charge is the sum of
three pieces:
(1) 30% of any premium payment in the first two contract years up
to one guideline annual premium;
(2) 10% of any premium payment in the first two contract years in
excess of the guideline annual premium, up to an amount equal
to the guideline annual premium; and
(3) 9% of all other premium payments for the next 15.55 guideline
annual premiums.
The sum of the above pieces is also limited by the Guideline
Annual Premium, times 9%, times the lesser of 20 years or the
expected future lifetime at issue as determined by the 1980 CSO
Mortality Table. Your contract information page specifies the
guideline annual premium. It varies for each contract.
During the first 6 contract years, the maximum deferred sales
charge may be imposed. Beginning in the 7th year, the maximum
deferred sales charge will be multiplied by a percentage:
Contract Year Percentage Multiple
7 90%
8 80%
9 70%
10 60%
11 50%
12 40%
13 30%
14 20%
15 10%
16 and up 0%
If there is an increase in face amount, there will also be an
increase in the Guideline Annual Premium. All additions to the
deferred sales charge, due to this increase, will be 9% of
premiums. The maximum limit will also increase by the
additional Guideline Annual Premium, times 9%, times the lesser
of 20 years or the expected future lifetime (determined at the
time of the increase using the 1980 CSO) Mortality Table). The
total in the deferred sales charge prior to the increase in face
amount will not be affected.
If there is a decrease in the face 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 per $1,000
of the face amount. After the 15th contract year, there is no
deferred issue charge.
Table of Deferred Issue Charges
Per Thousand of Face Amount
Contract
Year Charge
1-6 $ 2.00
7 $ 1.80
8 $ 1.60
9 $ 1.40
10 $ 1.20
11 $ 1.00
12 $ .80
13 $ .60
14 $ .40
15 $ .20
16+ $ .00
If there has been a change in face amount during the life of the
contract, then the deferred issue charge is applied against the
highest face amount in force during the life of the contract.
Accordingly, the maximum surrender charge is 30% of premium
paid, plus $2.00 per thousand of Face Amount. However, as
explained above, in most cases, the surrender charge will be
less than the maximum.
Charges In The Funds
The Funds charge for managing investments and providing
services. Each portfolio's charges vary.
The VIP, the VIP II, and the VIP III Portfolios have an annual
management fee. That fee is the sum of an individual fund fee
rate and a group fee rate based on the monthly average net
assets of Fidelity Management & Research Company's mutual funds.
In addition, each of these portfolios' total operating expenses
includes fees for management and shareholder services and other
expenses (custodial, legal, accounting, and other miscellaneous
fees). See the VIP, VIP II and VIP III prospectuses 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, 19981997 , 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, 19981997 , (except as otherwise noted) are
shown in the table below.
The MFS Portfolios have annual management fees that are based on
the monthly average of the net assets in each of the portfolios.
See the MFS Portfolios prospectus for details. The expenses for
the year ending December 31, 19981997 , (except as otherwise
noted) are shown in the table below.
The Lord, Abbett Portfolios has anhave annual management fees
that isare based on the monthly average of the net assets in
each of the portfolios. See the Lord, Abbett Portfolios
prospectus for details. The expenses for the year ending
December 31, 19981997 , (except as otherwise noted) are shown in
the table below.
Management
Fee Other
Portfolio Expenses Expenses Total
VIP Money Market .20.21% .10% .30.31%
VIP High Income .58.59% .12% .70.71%
VIP Equity-Income(1) .49.50% .09.08% .58%
VIP Growth(1) .59.60% .09% .68.69%
VIP Overseas(1) .74.75% .17% .91.92%
VIP II Asset Manager(1) .54.55% .10% .64.65%
VIP II Investment
Grade Bond .43.44% .14% .57.58%
VIP II Contrafund(1) .59.60% .11% .70.71%
VIP II Asset
Manager: Growth(1) .59.60% .14.17% .73.77%
VIP II Index 500(1)(2) .24% .11.04% .35.28%
VIP III Growth &
Income(1) .49% .12.21% .61.70%
VIP III Balanced(1) .44.45% .15.16% .59.61%
VIP III Growth
Opportunities(1) .59.60% .12.14% .71.74%
American Century VP
Capital Appreciation 1.00% .00% 1.00%
American Century VP
Value 1.00% .00% 1.00%
American Century VP
Balanced 1.00% .00% 1.00%
American Century VP
International 1.471.50% .00% 1.471.50%
American Century VP
Income & Growth(4) .70% .00% .70
MFS VIT Emerging
Growth(3) .75% .10.12% .85.87%
MFS VIT Research(3) .75% .11.13% .86.88%
MFS VIT Growth
With Income(3) .75% .13.25% .881.00%
MFS VIT New
Discovery(2) (3) (4) .90% .27.25% 1.171.15%
Lord, Abbett VC C
Growth and Income .50% .01.02% .51.52%
(1) The portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios used
credits gained as a result of uninvested cash balances 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 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent such 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.
(2)(3) MFS has agreed to bear expenses for thisthese portfolios
(subject to reimbursement by these portfolios) such that theeach
such portfolio's other expenses shall not exceed 0.25%. Without
this limitation, the other expenses and total expenses would be:
Other Total
Expenses Expenses
MFS VIT Growth with Income 0.35% 1.10%
MFS VIT New Discovery 4.320.47% 5.221.37%
(4) The expenses are based on estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset arrangement,
which reduces the series' custodian fee based upon the amount of
cash maintained by the series with its custodian and dividend
disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. The
expenses shown above do not take into account these expense
reductions, and are therefore higher than the actual expenses of
the series.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine The Contract
You have a right to examine the contract. If for any reason you
are not satisfied with it, then you may cancel the contract.
You cancel the contract by sending it to our home office along
with a written cancellation request. Your cancellation request
must be postmarked by 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, then we will return all of the
charges deducted from your paid premiums and cash value, plus
the cash value.
Insurance coverage ends when you send your request.
Your Contract Can Lapse
Your Variable Universal Life insurance coverage continues as
long as the net cash surrender value of your contract is enough
to pay the monthly deductions that are taken out of your cash
value. During the Minimum Premium Period, coverage continues if
your paid premiums exceed the schedule of required minimum
premiums. If neither of these conditions is true at the
beginning of any contract month, we will send written
notification to you and any assignees on our records that a 61-
day grace period has begun. This will tell you the amount of
premium payment that is needed to satisfy the minimum
requirement for two months.
If we receive payment of this amount before the end of the grace
period, then we will use that amount to pay the overdue
deductions. We will put any remaining balance in your cash
value and allocate it in the same manner as your previous
premium payments.
If we do not receive payment within 61 days, then your contract
will lapse without value. We will withdraw any amount left in
your cash value. We will apply this amount to the deductions
owed to us, including any applicable surrender charge. We will
inform you and any assignee 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 did not surrender the contract for its net cash surrender
value. To reinstate the contract, you must:
complete an application for reinstatement,
provide evidence that the insured person is still insurable,
pay enough premium to cover all overdue monthly deductions,
including the premium tax on those deductions,
increase the cash value so that the cash value minus any
contract debt equals the surrender charges,
cover the next two months' deductions, and
pay or restore any contract debt.
The contract date of the reinstated contract will be the
beginning of the contract month that coincides with or follows
the date that 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 And Anniversaries
We measure contract years, contract months, and contract
anniversaries from the contract date shown on your contract
information page. Each contract month begins on the same day in
each calendar month. The calendar days of 29, 30, and 31 are
not used. Our right to challenge a contract and the suicide
exclusion are measured from the contract date. See "Limits On
Our Right To Challenge The Contract" on page 28.
Maturity Date
The maturity date is the first 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.
We Own The Assets Of Our Separate Account
We own the assets of our Separate Account and use them to
support your contract and other variable life contracts. We may
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.
The assets in the Separate Account generally are not changeable
with liabilities arising out of any other business we conduct.
Under certain unlikely circumstances, one investment division of
the Separate Account may be liable for claims relating to the
operations of another division.
Changing the Separate Account
We have the right to modify how we operate our Separate Account.
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;
withdraw assets relating to Variable Universal Life from one
investment division and put them into another;
eliminate the shares of a portfolio and substitute shares of
another portfolio of the Funds or another open-end investment
company. This may happen if the shares of the portfolio are
no longer available for investment or, if in our judgment,
further investment in the portfolio is 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 interested
parties employees of Midland);
disregard instructions from contract owners regarding a change
in the investment objectives of the portfolio or the approval
or disapproval of an investment advisory contract. (We would
do so only if required by state insurance regulatory
authorities or otherwise pursuant to insurance law or
regulation); and
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. In choosing these
investments, we will rely on our own or outside counsel for
advice. In addition, we may disapprove of any change in
investment advisors or in investment policies unless a law or
regulation provides differently.
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. There are 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 during the time that we may challenge
the validity of the contract, then 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, then the death benefit and any additional benefits
will be changed. They 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, then the
death benefit will be limited to the total of all paid premiums
minus the amount of any outstanding contract loan and loan
interest minus any partial withdrawals of net cash surrender
value. If the insured person commits suicide within two years
after the effective date of your requested face amount increase,
then we will pay the face 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
You may choose for contract benefits and other payments (such as
the net cash surrender value or death benefit) to be paid
immediately in one lump sum or in another form of payment.
Payments under these options are not affected by the investment
performance of any investment division. Instead, interest
accrues pursuant to the option chosen. If you do not arrange
for a specific form of payment before the insured person dies,
then the beneficiary will have this choice. However, if you do
make an arrangement with us for how the money will be paid, then
the beneficiary cannot change your choice. Payment options will
also be subject to our rules at the time of selection. Our
consent is required when an optional payment is selected and the
payee is either an assignee or not a natural person (i.e., a
corporation). Currently, these alternate payment options are
only available if the proceeds applied are more than $1,000 and
periodic payments are at least $20.
You have the following payment options:
1. Deposit Option: The money will stay on deposit with us
for a period that 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 specified time,
up to 30 years.
b. Fixed Amount: We will pay the sum in installments in an
amount that we agree upon. We will continue to 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 from 1 of 4 ways to
receive the income. We will guarantee payments for:
(1) at least 5 years (called "5 Years Certain");
(2) at least 10 years (called "10 Years Certain");
(3) at least 20 years (called "20 Years Certain"); or
(4) payment for life. With a life only payment option,
payments will only be made as long as the payee is alive.
Therefore, if 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 and installation options
at 2.75% a year, but we may allow a higher rate of interest.
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 a fiduciary or not a
natural person. Also, the details of all arrangements will be
subject to our rules at the time the arrangements take effect.
These include:
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 choose 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 in your contract application. 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, then we will
pay the death benefit, in equal shares, to the insured person's
surviving children. If there are no surviving children, then we
will pay the death benefit to the insured person's estate.
Assigning Your Contract
You may assign your rights in this contract. You must send a
copy of the assignment to our home office. We are not
responsible for the validity of the assignment or for any
payment we make or any action we take before we receive notice
of the assignment. An absolute assignment is a change of
ownership. There may be tax consequences.
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 receiving the
required form(s) at our home office. Death benefits are
determined as of the date of the insured person's death and will
not be affected by subsequent changes in the accumulation unit
values of the investment divisions. We pay interest from the
date of death to the date of payment.
We may delay payment for one or more of the following reasons:
(1) We contest the contract.
(2) We cannot determine the amount of the payment because the New
York Stock Exchange is closed, the SEC has restricted trading
in securities, or the SEC has declared that an emergency
exists.
(3) The SEC, by order, permits us to delay payment to protect our
contract owners.
We may also delay any payment until your premium checks have
cleared your bank. We may defer payment of any loan amount,
withdrawal, or surrender from the General Account for up to six
months after we receive your request.
TAX EFFECTS
Contract Proceeds
The Internal Revenue Code of 1986 ("Code"), Section 7702,
defines life insurance for tax purposes. The Code places limits
on certain contract charges used in determining the maximum
amount of premiums that may be paid under Section 7702. There
is limited guidance as to how to apply Section 7702.
Midland believes that a standard rate class contract should meet
the Section 7702 definition of a life insurance contract
(although there is some uncertainty). For a contract issued on
a substandard basis (i.e., a rate class involving higher than
standard mortality risk), there may be more uncertainty whether
it meets the Section 7702 definition of a life insurance
contract. It is not clear whether 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,
then Midland may take appropriate and reasonable steps to cause
the contract to comply with Section 7702. These may include
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 a contract's face amount changes, then the applicable premium
limitation may also change. During the first 15 contract years,
there are certain events that may create taxable ordinary income
for you if at the time of the event there has been a gain in the
contract. These events include:
A decrease in the face amount;
A partial withdrawal;
A change from death benefit 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 may result 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 death benefits) from certain Variable Life insurance
contracts as follows:
1. If premiums are paid more rapidly than the rate defined
by a 7-Pay Test, then 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), 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 a taxable distribution of gain
from the contract (to the extent that gain exists), and then
as non-taxable recovery of basis.
5. The Code imposes an extra "penalty" tax of 10% on any
distribution from a Modified Endowment Contract includable in
income, unless such distributions are made (a) after you
attain age 59 1/2, (b) on account of you becoming disabled, or
(c) as substantially equal annuity payments over your life or
life expectancy.
A contract that is not a Modified Endowment contract may be
classified as a Modified Endowment contract if it is "materially
changed" and fails to meet the 7-Pay Test. 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
contractual changes, a competent tax advisor should be
consulted.
Any life insurance contracts which are treated as Modified
Endowment contracts and are issued by Midland 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.
For contracts not classified as Modified Endowment contracts,
distributions generally will be treated first as a return of
your investment in the contract, and then taxed as ordinary
income to the extent that they exceed your investment in the
contract (which generally is the total premiums paid plus any
contract debt).
The Code (Section 817(h)) also authorizes the Secretary of the
Treasury to set standards, by regulation or otherwise, for the
investments of Variable Life insurance Separate Accounts to be
"adequately diversified" in order for the contracts to be
treated as life insurance contracts for federal tax purposes. We
believe Separate Account A, through its investments in the
Funds, will be adequately diversified, although we do not
control the Funds.
Owners of Variable Life insurance contracts may be considered,
for Federal income tax purposes, the owners of the assets of the
Separate Account used to support their contracts. In those
circumstances, income and gains from the Separate Account assets
are included 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 policy owner), rather than the insurance company, to
be treated as the owner of the assets in the account." This
announcement also stated that regulations or rulings would issue
guidance on the "extent to which policyholders may direct their
investments to particular sub-accounts 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 are similar
to, but different 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.
Midland does not know what standards will be set forth 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 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.
Surrenders, withdrawals, and contract changes may have tax
consequences. These include a change of owners, an assignment of
the contract, a change from one death benefit option to another,
and other changes reducing future death benefits. Upon complete
surrender or when maturity benefits are paid, if the amount
received plus the contract debt is more than the total premiums
paid that are not treated as previously withdrawn by you, then
the excess generally will be treated as ordinary income.
Federal, state and 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, or
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 which the value depends in part on its tax
consequences, then you should 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 advisor.
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 would negatively 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 advisor should be consulted with
respect to actual and prospective changes in taxation.
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 reserves the right to make
a charge for any such tax or other economic burden resulting
from the application of the tax laws.
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.
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 advisor. This discussion is based
on our understanding of the Internal Revenue Service's current
interpretation of the present federal income tax laws. 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 complete
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.
PART 3: ADDITIONAL INFORMATION
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 officers and directors are listed beginning on page
39in Appendix A.
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.
YOUR VOTING RIGHTS AS AN OWNER
We invest the assets of our Separate Account divisions in shares
of the Funds' portfolios. Midland is the legal owner of the
shares and has the right to vote on certain matters. Among other
things, we may vote:
to elect the Funds' Board of Directors,
to ratify the selection of independent auditors for the Funds,
and
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 at shareholder meetings according
to your instructions.
The Funds will determine how often shareholder meetings are
held. As we receive notice of these meetings, we will ask for
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 contract
owners, then we will vote those shares 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 alone are
entitled to vote in the same proportions that contract owners
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 contract
owner voting, then we may do so.
You may participate in voting only on matters concerning the
Fund portfolios in which your cash value has been invested. We
determine your voting shares in each division by dividing the
amount of your cash value allocated to that division by the net
asset value of one share of the corresponding Fund portfolio.
This is determined as of the record date set by the Funds' Board
for the shareholders meeting. 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 Funds'
advisor or the investment policies of its portfolios. We will
advise you if we do.
Other insurance companies own shares in the Funds to support
their Variable insurance products. We do not foresee any
disadvantage to this. Nevertheless, the Funds' Board of
Directors will monitor events to identify conflicts that may
arise and determine appropriate action. If we disagree with any
Fund action, then we will see that appropriate action is taken
to protect our contract owners.
OUR REPORTS TO CONTRACT OWNERS
Shortly after the end of the third, sixth, ninth, and twelfth
contract months, we will send you reports that show:
the current death benefit for your contract,
your cash value,
information about investment divisions,
the cash surrender value of your contract,
the amount of your outstanding contract loans,
the amount of any interest that you owe on the loan, and
information about the current loan interest rate.
The annual report will show any transactions involving your cash
value that occurred during the year. Transactions include your
premium allocations, our deductions, and your transfers or
withdrawals.
We will send you semi-annual reports with financial information
on the Funds, including a list of the investments held by each
portfolio.
Our report also contains 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.
DIVIDENDS
We do not pay any dividends on the contract described in this
prospectus.
MIDLAND'S SALES AND OTHER AGREEMENTS
The contract will be sold by individuals who, in addition to
being licensed as life insurance agents for Midland National
Life, are registered representatives of Walnut Street Securities
(WSS) or broker-dealers who have entered into written sales
agreements with WSS. WSS, the principal underwriter of the
contracts, 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 65% of premiums paid. For subsequent years, the
commission allowance may equal an amount up to 5% of premiums
paid. After the 15th contract year, we pay no commission.
Certain persistency and production bonuses may be paid.
We may sell our contracts through broker-dealers registered with
the Securities and Exchange Commission under the Securities
Exchange Act of 1934 that 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. 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 those states. 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 are
complying with the applicable laws and regulations.
We are also subject to various federal securities laws and
regulations.
YEAR 2000
The Year 2000 issue (Y2K) relates to the ability of computer
systems to properly recognize a four-digit year code. Many
computer systems only allowed for a two-digit year code and thus
years such as 1998 were simply recognized as 98. Using a two-
digit year code for the years 2000 and beyond could result in
errors and miscalculations.
Midland National Life relies extensively on computer systems in
its daily operations. Several years ago, we began implementing a
Plan to modify all of our computer systems to properly recognize
the year 2000. Our Y2K Plan focused on assuring compliance in
the following areas: Information Technology ("IT") and non-
information ("non-IT") hardware, operating systems, software
applications and custom applications. We are in the process of
the remediation and testing of other systems, including
telephone, heating and cooling, mechanical and other equipment
having embedded, date sensitive technology for Year 2000
compliance, In addition, we are reviewing the Year 2000
compliance status of our mission critical customers, vendors and
service providers.
We have upgraded our mainframe computer hardware, systems
software and applications software to address Y2K issues and we
expect to complete compliance testing by June 30, 1999. Most of
our systems run on the IBM mainframe computer platform, where
future dated systems testing has been performed through December
31, 2000. We are in the process of updating and testing hardware
and software running on personal computer (PC) platforms and
expect to have any Y2K issues resolved by June 30, 1999.
Y2K issues have been handled primarily by our internal staff. We
spent approximately $800,000 on the Year 2000 project through
the end of 1998 and estimate additional expenditures of $250,000
for the balance of the project. Due to our early start in
addressing Y2K issues, the number of other IT projects delayed
due to Y2K has been very limited.
We are currently in the process of developing a Y2K Contingency
Plan and will involve representatives from our IT and non-IT
business units in the planning process. The Y2K Contingency Plan
may include potential Y2K issues generated within our own
Company and potential Y2K issues generated by third parties that
have a mission critical business relationship with us.
While we cannot guarantee that our computer systems nor those of
the parties with which we conduct business will properly
function once the year 2000 is reached, Midland National Life is
committed to maintaining reliable computer systems which
properly recognize the year 2000.
Midland National Life is in the process of updating
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
Year 2000 issues.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 25%45% of
first year premiums. Midland will pay off the discount as the
employee pays the qualifying premium. All other contract
provisions will apply.
LEGAL MATTERS
The law firm of Sutherland Asbill & Brennan LLP, Washington, DC,
has provided advice regarding certain matters relating to
federal securities laws.
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 PricewaterhouseCoopers LLPCoopers & Lybrand LLP,
independent auditors, for the periods indicated in their report
which appears in this prospectus and in the registration
statement. The address for PricewaterhouseCoopers LLPCoopers &
Lybrand LLP is IBM Park Building, Suite 1300, 650 Third Avenue
South, Minneapolis, Minnesota 55402-4333. The financial
statements have been included in reliance upon reports 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 Corporate 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, then 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 57193-0001
Chairman of
the Board,
President and
Chief
Executive
OfficerChief
Executive
Officer and
President
Chairman of the Board (March
1999 to present), 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
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Executive
Vice
President
Executive Vice President
(January 1998 to present),
Midland National Life
Insurance Company; Senior Vice
President and Chief Financial
Officer (October 1993 to
1998), 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.; Partner
(prior thereto), Ernst and
Young
Russell A. Evenson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
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
Executive
Vice
President
Executive Vice President
(January 1998 to present),
Midland National Life
Insurance Company; Senior Vice
President and Chief Financial
Officer (October 1993 to
1998), 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 57193-0001
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, Vice
President
President and Director (since
1988), Sammons Enterprises,
Inc.; Vice President (August
1998 to present), Midland
National Life Insurance
Company
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)
Unless otherwise indicated, the addresses for the following are One
Midland Plaza, Sioux Falls, SD 57193-0001
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
Senior Vice President,
Chief
Investment
Officer
Senior Vice President, 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
Stephen P. Horvat, Jr.
Midland National Life Insurance Company
Senior Vice
President
Senior Vice President (January
1997 to present), Midland
National Life Insurance
Company; Shareholder (June
1996 to December 1997),
Sorling Law Firm; Senior Vice
President, General Counsel &
Secretary (prior thereto),
Franklin Life Insurance
Company
Gary J. Gaspar
North American Company for Life &
Health
Insurance
222 South
Riverside
Plaza
Chicago, IL
60606-5929
Senior Vice
President &
Chief
Information
Officer
Senior Vice President & Chief
Information Officer (August
1998 to present), Midland
National Life Insurance
Company; Senior Vice President
Information Systems Officer
(1985 to present); North
American Company for Life &
Health Insurance
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
Julia B. Roper
North American Company for
Life &
Health
Insurance
222 South
Riverside
Plaza
Chicago, IL
60606-5929
Vice
President &
Chief
Compliance
Officer
Vice President & Chief
Compliance Officer (August
1998 to present), Midland
National Life Insurance
Company; Vice President &
Chief Compliance Officer
(September 1997 to present),
North American Company for
Life & Health Insurance;
Assistant Vice President
(prior thereto), CNA Insurance
Companies
Joseph B. Moran
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice
President -
Parkway
Mortgage
Division
Vice President - Parkway
Mortgage Division (January
1999 to present), Midland
National Life Insurance
Company; Executive Vice
President (prior thereto),
Parkway Mortgage, Inc.
James T. Fehon
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice
President -
Parkway
Mortgage
Division
Vice President - Parkway
Mortgage Division (January
1999 to present), Midland
National Life Insurance
Company; Executive Vice
President (prior thereto),
Parkway Mortgage, Inc.
Illustration
Following are a series of tables that illustrate how the cash
values, cash surrender values, and death benefits of a contract
change with the investment performance of the Funds. The tables
show how the cash values, 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 38
through 40 illustrate a contract issued to a male, age 25, under
a standard rate non-smoker underwriting risk classification. The
tables on pages 41 through 43 illustrate a contract issued to a
male, age 40, under a standard rate non-smoker underwriting risk
classification. The cash values, 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 cash value exceeds the cash surrender value
during the first fifteen contract years due to the surrender
charge. For contract years sixteen and after, the cash value 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 cash values and the fourth and seventh columns
illustrate the cash surrender values of the contract over the
designated period. The cash values 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 cash values 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 cash value 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, cash values, 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 2.5% premium tax deduction from each premium and the
$5.00 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 .76%.75%
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, 19981997 ). The actual fees and expenses
associated with the contract may be more or less than .76%.75%
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 1.10% 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 -1.86%, 4.14%, and 10.14%,-1.76%, 4.24%, and 10.24%,
respectively.
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 cash values, 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 face 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 - VUL
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
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)
1 788 516 101 100,000 481 66 100,000
2 1,614 1,036 547 100,000 966 476 100,000
3 2,483 1,546 989 100,000 1,442 885 100,000
4 3,394 2,048 1,424 100,000 1,911 1,286 100,000
5 4,351 2,541 1,849 100,000 2,371 1,679 100,000
6 5,357 3,025 2,266 100,000 2,812 2,053 100,000
7 6,412 3,501 2,757 100,000 3,246 2,502 100,000
8 7,520 3,969 3,253 100,000 3,661 2,945 100,000
9 8,683 4,428 3,755 100,000 4,069 3,395 100,000
10 9,905 4,880 4,262 100,000 4,458 3,841 100,000
11 11,188 5,313 4,764 100,000 4,830 4,282 100,000
12 12,535 5,738 5,272 100,000 5,185 4,719 100,000
13 13,949 6,144 5,775 100,000 5,512 5,142 100,000
14 15,434 6,533 6,273 100,000 5,822 5,562 100,000
15 16,993 6,904 6,767 100,000 6,104 5,968 100,000
16 18,630 7,317 7,317 100,000 6,360 6,360 100,000
17 20,349 7,724 7,724 100,000 6,579 6,579 100,000
18 22,154 8,112 8,112 100,000 6,772 6,772 100,000
19 24,049 8,473 8,473 100,000 6,930 6,930 100,000
20 26,039 8,816 8,816 100,000 7,062 7,062 100,000
21 28,129 9,133 9,133 100,000 7,160 7,160 100,000
22 30,323 9,423 9,423 100,000 7,213 7,213 100,000
23 32,627 9,687 9,687 100,000 7,232 7,232 100,000
24 35,045 9,925 9,925 100,000 7,206 7,206 100,000
25 37,585 10,139 10,139 100,000 7,137 7,137 100,000
30 52,321 10,753 10,753 100,000 5,927 5,927 100,000
35 71,127 10,249 10,249 100,000 2,579 2,579 100,000
40 95,130 7,933 7,933 100,000 0 0 0
1. 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.
2. 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 - VUL
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
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)
1 788 554 139 100,000 517 102 100,000
2 1,614 1,143 654 100,000 1,069 580 100,000
3 2,483 1,758 1,202 100,000 1,644 1,088 100,000
4 3,394 2,400 1,775 100,000 2,245 1,620 100,000
5 4,351 3,068 2,377 100,000 2,871 2,179 100,000
6 5,357 3,766 3,006 100,000 3,512 2,753 100,000
7 6,412 4,493 3,749 100,000 4,182 3,437 100,000
8 7,520 5,251 4,535 100,000 4,868 4,153 100,000
9 8,683 6,041 5,368 100,000 5,584 4,911 100,000
10 9,905 6,866 6,248 100,000 6,320 5,702 100,000
11 11,188 7,714 7,166 100,000 7,076 6,528 100,000
12 12,535 8,599 8,133 100,000 7,854 7,389 100,000
13 13,949 9,510 9,141 100,000 8,644 8,275 100,000
14 15,434 10,450 10,190 100,000 9,457 9,198 100,000
15 16,993 11,420 11,283 100,000 10,285 10,148 100,000
16 18,630 12,482 12,482 100,000 11,127 11,127 100,000
17 20,349 13,590 13,590 100,000 11,974 11,974 100,000
18 22,154 14,735 14,735 100,000 12,838 12,838 100,000
19 24,049 15,910 15,910 100,000 13,709 13,709 100,000
20 26,039 17,126 17,126 100,000 14,598 14,598 100,000
21 28,129 18,375 18,375 100,000 15,498 15,498 100,000
22 30,323 19,660 19,660 100,000 16,397 16,397 100,000
23 32,627 20,982 20,982 100,000 17,309 17,309 100,000
24 35,045 22,344 22,344 100,000 18,223 18,223 100,000
25 37,585 23,748 23,748 100,000 19,140 19,140 100,000
30 52,321 31,421 31,421 100,000 23,624 23,624 100,000
35 71,127 40,143 40,143 100,000 27,378 27,378 100,000
40 95,130 49,935 49,935 100,000 29,373 29,373 100,000
1. 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.
2. 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 - VUL
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
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)
1 788 591 176 100,000 553 138 100,000
2 1,614 1,256 767 100,000 1,177 687 100,000
3 2,483 1,989 1,432 100,000 1,864 1,307 100,000
4 3,394 2,797 2,173 100,000 2,623 1,999 100,000
5 4,351 3,689 2,997 100,000 3,460 2,768 100,000
6 5,357 4,672 3,913 100,000 4,371 3,612 100,000
7 6,412 5,756 5,012 100,000 5,376 4,632 100,000
8 7,520 6,952 6,237 100,000 6,473 5,758 100,000
9 8,683 8,271 7,598 100,000 7,684 7,011 100,000
10 9,905 9,726 9,108 100,000 9,009 8,392 100,000
11 11,188 11,318 10,770 100,000 10,460 9,912 100,000
12 12,535 13,075 12,610 100,000 12,050 11,584 100,000
13 13,949 15,002 14,633 100,000 13,783 13,414 100,000
14 15,434 17,117 16,857 100,000 15,686 15,426 100,000
15 16,993 19,440 19,304 100,000 17,767 17,630 100,000
16 18,630 22,057 22,057 100,000 20,044 20,044 100,000
17 20,349 24,944 24,944 100,000 22,531 22,531 100,000
18 22,154 28,121 28,121 100,000 25,260 25,260 100,000
19 24,049 31,610 31,610 100,000 28,249 28,249 100,000
20 26,039 35,453 35,453 100,000 31,537 31,537 100,000
21 28,129 39,680 39,680 100,000 35,148 35,148 100,000
22 30,323 44,332 44,332 100,000 39,113 39,113 100,000
23 32,627 49,459 49,459 100,401 43,480 43,480 100,000
24 35,045 55,099 55,099 108,545 48,289 48,289 100,000
25 37,585 61,290 61,290 117,064 53,591 53,591 102,359
30 52,321 102,661 102,661 161,177 88,813 88,813 139,436
35 71,127 168,877 168,877 226,296 144,565 144,565 193,718
40 95,130 274,703 274,703 335,137 232,762 232,762 283,969
1. 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.
2. 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 - VUL
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
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 1,188 553 100,000 1,071 436 100,000
2 3,229 2,357 1,573 100,000 2,090 1,306 100,000
3 4,965 3,494 2,575 100,000 3,071 2,152 100,000
4 6,788 4,590 3,536 100,000 4,002 2,949 100,000
5 8,703 5,656 4,468 100,000 4,898 3,709 100,000
6 10,713 6,684 5,360 100,000 5,747 4,424 100,000
7 12,824 7,672 6,360 100,000 6,540 5,227 100,000
8 15,040 8,624 7,349 100,000 7,290 6,015 100,000
9 17,367 9,539 8,329 100,000 7,985 6,775 100,000
10 19,810 10,419 9,301 100,000 8,629 7,510 100,000
11 22,376 11,265 10,266 100,000 9,221 8,222 100,000
12 25,069 12,077 11,224 100,000 9,743 8,889 100,000
13 27,898 12,847 12,166 100,000 10,205 9,524 100,000
14 30,868 13,564 13,083 100,000 10,588 10,107 100,000
15 33,986 14,231 13,977 100,000 10,894 10,640 100,000
16 37,261 14,908 14,908 100,000 11,112 11,112 100,000
17 40,699 15,527 15,527 100,000 11,235 11,235 100,000
18 44,309 16,098 16,098 100,000 11,261 11,261 100,000
19 48,099 16,613 16,613 100,000 11,193 11,193 100,000
20 52,079 17,063 17,063 100,000 11,009 11,009 100,000
21 56,258 17,450 17,450 100,000 10,710 10,710 100,000
22 60,646 17,735 17,735 100,000 10,273 10,273 100,000
23 65,253 17,941 17,941 100,000 9,675 9,675 100,000
24 70,091 18,057 18,057 100,000 8,904 8,904 100,000
25 75,170 18,076 18,076 100,000 7,935 7,935 100,000
30 104,641 16,307 16,307 100,000 0 0 0
35 142,254 9,990 9,990 100,000 0 0 0
40 190,260 0 0 0 0 0 0
1. 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.
2. 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 - VUL
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
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 1,268 633 100,000 1,147 511 100,000
2 3,229 2,591 1,807 100,000 2,309 1,525 100,000
3 4,965 3,960 3,041 100,000 3,499 2,580 100,000
4 6,788 5,364 4,311 100,000 4,708 3,655 100,000
5 8,703 6,819 5,631 100,000 5,950 4,761 100,000
6 10,713 8,316 6,992 100,000 7,214 5,890 100,000
7 12,824 9,856 8,543 100,000 8,492 7,179 100,000
8 15,040 11,443 10,168 100,000 9,796 8,521 100,000
9 17,367 13,079 11,869 100,000 11,118 9,908 100,000
10 19,810 14,767 13,649 100,000 12,460 11,341 100,000
11 22,376 16,512 15,512 100,000 13,824 12,824 100,000
12 25,069 18,315 17,462 100,000 15,192 14,338 100,000
13 27,898 20,171 19,491 100,000 16,576 15,895 100,000
14 30,868 22,075 21,594 100,000 17,958 17,477 100,000
15 33,986 24,029 23,775 100,000 19,341 19,088 100,000
16 37,261 26,100 26,100 100,000 20,718 20,718 100,000
17 40,699 28,225 28,225 100,000 22,081 22,081 100,000
18 44,309 30,418 30,418 100,000 23,433 23,433 100,000
19 48,099 32,676 32,676 100,000 24,775 24,775 100,000
20 52,079 34,997 34,997 100,000 26,093 26,093 100,000
21 56,258 37,387 37,387 100,000 27,388 27,388 100,000
22 60,646 39,824 39,824 100,000 28,644 28,644 100,000
23 65,253 42,330 42,330 100,000 29,847 29,847 100,000
24 70,091 44,908 44,908 100,000 30,989 30,989 100,000
25 75,170 47,559 47,559 100,000 32,053 32,053 100,000
30 104,641 62,105 62,105 100,000 35,704 35,704 100,000
35 142,254 79,861 79,861 100,000 33,855 33,855 100,000
40 190,260 103,679 103,679 108,863 17,373 17,373 100,000
1. 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.
2. 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 - VUL
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
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 1,348 713 100,000 1,223 588 100,000
2 3,229 2,835 2,051 100,000 2,537 1,753 100,000
3 4,965 4,464 3,546 100,000 3,965 3,046 100,000
4 6,788 6,239 5,185 100,000 5,507 4,454 100,000
5 8,703 8,186 6,997 100,000 7,190 6,001 100,000
6 10,713 10,312 8,988 100,000 9,016 7,692 100,000
7 12,824 12,638 11,326 100,000 10,991 9,678 100,000
8 15,040 15,186 13,911 100,000 13,145 11,870 100,000
9 17,367 17,980 16,770 100,000 15,487 14,277 100,000
10 19,810 21,048 19,929 100,000 18,041 16,923 100,000
11 22,376 24,419 23,419 100,000 20,831 19,831 100,000
12 25,069 28,127 27,274 100,000 23,866 23,013 100,000
13 27,898 32,202 31,522 100,000 27,188 26,508 100,000
14 30,868 36,678 36,197 100,000 30,815 30,334 100,000
15 33,986 41,600 41,346 100,000 34,787 34,533 100,000
16 37,261 47,087 47,087 100,000 39,142 39,142 100,000
17 40,699 53,134 53,134 100,000 43,924 43,924 100,000
18 44,309 59,816 59,816 100,000 49,194 49,194 100,000
19 48,099 67,203 67,203 100,000 55,021 55,021 100,000
20 52,079 75,380 75,380 101,010 61,472 61,472 100,000
21 56,258 84,406 84,406 109,728 68,639 68,639 100,000
22 60,646 94,306 94,306 120,712 76,622 76,622 100,000
23 65,253 105,175 105,175 132,520 85,484 85,484 107,710
24 70,091 117,106 117,106 145,211 95,195 95,195 118,042
25 75,170 130,206 130,206 158,852 105,831 105,831 129,113
30 104,641 217,439 217,439 252,229 176,017 176,017 204,179
35 142,254 356,892 356,892 381,875 287,072 287,072 307,167
40 190,260 581,704 581,704 610,789 465,401 465,401 488,671
1. 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.
2. 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.
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 Exchange is open are the day after
Thanksgiving, the day beforeand Christmas Eve Day, and New
Year's 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.
Cash Value is the value of your contract fund.
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.
Evidence of Insurability means evidence, satisfactory to us,
that the insured person is insurable and meets our underwriting
standards.
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.
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.
Investment Division means a division of Separate Account A which
invests exclusively in the shares of a specified Portfolio of
the Fund.
Minimum Premium Period: The period of time beginning on the
Contract Date and ending five years from the Contract Date.
Modified Endowment Contract is a contract where premiums are
paid more rapidly than the rate defined by a 7-Pay Test.
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 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.
Surrender Charges means a charge made only upon surrender of the
contract. It includes a charge for sales related expenses and
issue related expenses.
Performance
Performance information for the investment divisions may appear
in reports and advertising to current and prospective owners.
We base the performance information on the investment experience
of the investment division and the Funds. The information does
not indicate or represent future performance.
Total return quotations reflect changes in Funds' share prices,
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 premium tax charge, and any per premium expense
charge), the monthly deduction from the cash value (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. Average annual total returns
tend to smooth out variations in an investment division's
returns and are not the same as actual year-by-year results.
Midland may advertise performance figures for the investment
divisions based on the performance of a portfolio before the
Separate Account commenced operations.
Midland may provide individual hypothetical illustrations of
cash value, cash surrender value, and death benefits based on
the Funds' historical investment returns. These illustrations
will reflect the deduction 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 cash value, and the surrender charge. The
illustrations do not indicate what contract benefits will be in
the future.
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.
4909ED.txt
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Statement of Assets 2-3
Statements of Operations and
Changes in Net Assets 4-9
Notes to Financial Statements 10-15
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying statement of assets and the
related statements of operations and changes in net assets present
fairly, in all material respects, the financial position 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, the American Century Variable
Portfolios, Inc., the Massachusetts Financial Services, and the
Lord, Abbett & Company) as of December 31, 1998, and the related
statements of operations and changes in net assets for each of the
three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of Midland National Life
Insurance Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
March 26, 1999
Midland National Life Insurance Company
Separate Account A
Statement of Assets
as of December 31, 1998
<TABLE>
<S> <C> <C>
Value
Per
ASSETS Shares Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $2,731,098) 2,731,098 $ 1.00 $2,731,098
High Income Portfolio (cost $3,396,027) 274,412 11.53 3,163,974
Equity-Income Portfolio (cost $13,877,294) 618,850 25.42 15,731,177
Growth Portfolio (cost $21,656,697) 635,255 44.87 28,503,893
Overseas Portfolio (cost $4,629,466) 244,142 20.05 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $6,523,158) 401,292 18.16 7,287,457
Investment Grade Bond Portfolio (cost $1,078,462) 88,153 12.96 1,142,457
Index 500 Portfolio (cost $10,269,373) 86,530 141.25 12,222,424
Contrafund Portfolio (cost $9,020,995) 451,333 24.44 11,030,567
Asset Manager Growth Portfolio (cost $2,475,691) 161,856 17.03 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio (cost $618,952) 41,559 16.11 669,509
Growth & Income Portfolio (cost $1,612,836) 112,272 16.15 1,813,193
Growth Opportunities Portfolio (cost $3,135,150) 155,276 22.88 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio (cost $310,679) 39,542 8.34 329,779
Capital Appreciation Portfolio (cost $208,500) 24,118 9.02 217,542
International Portfolio (cost $1,121,676) 154,502 7.62 1,177,307
Value Portfolio (cost $757,203) 115,688 6.73 778,580
Income & Growth Portfolio (cost $31,396) 4,797 6.78 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio (cost $49,389) 2,632 21.47 56,516
Growth & Income Portfolio (cost $10,771) 565 20.11 11,356
New Discovery Portfolio (cost $1,833) 193 10.22 1,975
Research Portfolio (cost $204,426) 12,885 19.05 245,451
Lord, Abbett & Company:
Growth & Income Portfolio (cost $64,942) 3,086 20.64 63,724
Total investments (cost $83,786,014) $98,414,651
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statement of Assets, Continued
as of December 31, 1998
<S> <C> <C>
Value
Per
NET ASSETS Units Unit
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 208,987 $13.07 $2,731,098
High Income Portfolio 164,127 19.28 3,163,974
Equity-Income Portfolio 623,207 25.24 15,731,177
Growth Portfolio 752,627 37.87 28,503,893
Overseas Portfolio 244,770 20.00 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio 292,241 24.94 7,287,457
Investment Grade Bond Portfolio 73,197 15.61 1,142,457
Index 500 Portfolio 630,981 19.37 12,222,424
Contrafund Portfolio 596,283 18.50 11,030,567
Asset Manager Growth Portfolio 170,821 16.14 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio 51,474 13.01 669,509
Growth & Income Portfolio 118,401 15.31 1,813,193
Growth Opportunities Portfolio 243,892 14.57 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio 25,768 12.80 329,779
Capital Appreciation Portfolio 20,937 10.39 217,542
International Portfolio 95,377 12.34 1,177,307
Value Portfolio 63,538 12.25 778,580
Income & Growth Portfolio 2,723 11.94 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio 4,492 12.58 56,516
Growth & Income Portfolio 982 11.56 11,356
New Discovery Portfolio 153 12.91 1,975
Research Portfolio 20,875 11.76 245,451
Lord, Abbett & Company:
Growth & Income Portfolio 5,930 10.75 63,724
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Combined
1998 1997 1996
Investment income:
Dividend income $980,408 $676,790 $353,783
Capital gains distributions 4,404,907 1,587,492 907,775
385,315 2,264,282 1,261,558
Expenses:
Administrative expense 112,287 84,730 52,416
Mortality and expense risk 660,451 427,879 237,175
Net investment income 4,612,577 1,751,673 971,967
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 2,782,785 2,741,725 1,387,105
Net unrealized appreciation (depreciation) on
investments 7,854,876 3,254,492 735,339
Net realized and unrealized gains (losses) on
investments 10,637,661 5,996,217 2,122,444
Net increase (decrease) in net assets resulting
from operations $15,250,238 $7,747,890 $3,094,411
Net assets at beginning of year $54,189,603 $32,499,879 $19,649,521
Net increase (decrease) in net assets resulting from
operations 15,250,238 7,747,890 3,094,411
Capital shares transactions
Net premiums 40,629,334 21,376,417 14,348,315
Transfers of policy loans (1,812,692) (1,016,654) (633,495)
Transfers of cost of insurance (6,444,223) (4,261,689) (2,927,460)
Transfers of surrenders (3,055,075) (2,042,224) (998,919)
Transfers of death benefits (144,047) (38,948) (13,892)
Transfers of other terminations (198,487) (75,068) (18,602)
Interfund transfers
Net increase in net assets from capital share
Transactions 28,974,810 13,941,834 9,755,947
Total increase in net assets 44,225,048 21,689,724 12,850,358
Net assets at end of year $98,414,651 $54,189,603 $32,499,879
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio High Income Portfolio
1998 1997 1996 1998 1997 1996
$123,409 $94,654 $58,559 $178,129 $104,881 $65,229
113,186 12,963 12,762
123,409 94,654 58,559 291,315 117,844 77,991
2,905 3,462 2,241 4,792 3,598 2,332
20,969 16,588 10,139 26,040 18,244 10,553
99,535 74,604 46,179 260,483 96,002 65,106
44,450 42,799 49,881
(460,189) 137,622 19,282
(415,739) 180,421 69,163
$99,535 $74,604 $46,179 $(155,256) $276,423 $134,269
$1,393,023 $1,672,741 $589,269 $2,830,980 $1,421,414 $815,627
99,535 74,604 46,179 (155,256) 276,423 134,269
1,970,072 1,828,298 857,355 1,477,592 876,690 841,221
(96,356) 18,183 (9,004) (94,338) (37,241) (41,674)
(148,349) (119,358) (94,185) (251,359) (207,138) (159,359)
(450,390) (914,181) (187,306) (287,811) (78,445) (54,152)
(130) (336) (1,051)
(519) (1,028) (224) (2,422) (1,570) (447)
(35,918) (1,166,106) 470,657 (353,076) 581,898 (114,071)
1,238,540 (354,322) 1,037,293 488,250 1,133,143 471,518
1,338,075 (279,718) 1,083,472 332,994 1,409,566 605,787
$2,731,098 $1,393,023 $1,672,741 $3,163,974 $2,830,980 $1,421,414
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio
1998 1997 1996
Investment income:
Dividend income $145,189 $107,918 $6,019
Capital gains distributions 516,702 542,585 172,545
661,891 650,503 178,564
Expenses:
Administrative expense 20,642 16,434 9,932
Mortality and expense risk 114,253 80,523 44,942
Net investment income 526,996 553,546 123,690
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 464,171 465,017 344,216
Net unrealized appreciation (depreciation) on
investments 297,365 820,036 112,077
Net realized and unrealized gains on
investments 761,536 1,285,053 456,293
Net increase in net assets resulting
from operations $1,288,532 $1,838,599 $579,983
Net assets at beginning of year $10,118,500 $6,148,229 $3,721,811
Net increase in net assets resulting from
operations $1,288,532 $1,838,599 $579,983
Capital shares transactions:
Net premiums 6,101,737 3,188,435 2,820,841
Transfers of policy loans (286,720) (198,994) (114,290)
Transfers of cost of insurance (1,071,429) (757,555) (533,174)
Transfers of surrenders (380,774) (171,987) (93,138)
Transfers of death benefits (42,005) (16,504) (131)
Transfers of other terminations (43,973) (17,833) (4,334)
Interfund transfers 47,309 106,110 (229,339)
Net increase in net assets from capital share
transactions 4,324,145 2,131,672 1,846,435
Total increase in net assets 5,612,677 3,970,271 2,426,418
Net assets at end of year $15,731,177 $10,118,500 $6,148,229
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Growth Portfolio Overseas Portfolio
1998 1997 1996 1998 1997 1996
$90,127 $80,524 $22,193 $74,765 $47,188 $20,685
2,357,538 360,439 560,363 220,360 187,323 22,754
2,447,665 440,963 582,556 295,125 234,511 43,439
38,417 28,874 19,895 7,786 6,468 4,298
197,513 152,938 90,025 39,797 17,378 19,450
2,211,735 259,151 472,636 247,542 210,665 19,691
998,269 1,336,185 700,698 101,507 154,287 58,004
4,140,818 1,180,231 469 78,405 (83,491) 155,462
5,139,087 2,516,416 701,167 179,912 70,796 213,466
$7,350,822 $2,775,567 $1,173,803 $427,454 $281,461 $233,157
$17,132,404 $11,699,876 $7,817,338 $3,708,222 $2,587,815 $1,723,792
7,350,822 2,775,567 1,173,803 427,454 281,461 233,157
7,318,889 5,149,531 4,390,266 1,583,685 1,410,695 1,053,155
(590,467) (446,688) (252,514) (97,787) (91,175) (59,815)
(1,601,618) (1,357,432) (1,059,362) (366,371) (324,642) (263,297)
(817,281) (354,778) (309,025) (255,013) (94,010) (73,670)
(23,796) (14,755) (10,342) (4,169) (3,223) (83)
(57,078) (34,808) (6,455) (3,207) (2,361) (1,405)
(207,982) (284,109) (43,833) (97,774) (56,338) (24,019)
4,020,667 2,656,961 2,708,735 759,364 838,946 630,866
11,371,489 5,432,528 3,882,538 1,186,818 1,120,407 864,023
$28,503,893 $17,132,404 $11,699,876 $4,895,040 $3,708,222 $2,587,815
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Variable Insurance Products Fund II
Asset Manager Portfolio
1998 1997 1996
Investment income:
Dividend income $187,684 $158,180 $133,666
Capital gains distributions 563,053 396,791 110,216
750,737 554,971 243,882
Expenses:
Administrative expense 12,260 10,361 8,072
Mortality and expense risk 58,657 54,683 36,522
Net investment income 679,820 489,927 199,288
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 155,701 198,545 122,556
Net unrealized appreciation (depreciation) on
investments 18,174 208,315 176,177
Net realized and unrealized gains (losses) on
investments 173,875 406,860 298,733
Net increase in net assets resulting
from operations $853,695 $896,787 $498,021
Net assets at beginning of year $5,864,777 $4,483,785 $3,633,749
Net increase in net assets resulting from
operations 853,695 896,787 498,021
Capital shares transactions:
Net premiums 1,504,185 1,304,321 1,212,022
Transfers of policy loans (174,116) (100,858) (67,771)
Transfers of cost of insurance (449,699) (423,781) (401,099)
Transfers of surrenders (249,884) (123,302) (222,263)
Transfers of death benefits (12,156) (158) (2,280)
Transfers of other terminations (15,437) (3,731) (5,303)
Interfund transfers (33,908) (168,286) (161,291)
Net increase in net assets from capital share
transactions 568,985 484,205 352,015
Total increase in net assets 1,422,680 1,380,992 850,036
Net assets at end of year $7,287,457 $5,864,777 $4,483,785
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund II
Investment Grade Bond Portfolio Index 500 Portfolio
1998 1997 1996 1998 1997 1996
$39,734 $46,902 $35,859 $58,842 $17,532 $4,429
4,714 136,288 35,574 11,389
44,448 46,902 35,859 195,130 53,106 15,818
1,721 1,572 1,469 9,557 5,431 1,561
8,643 8,015 6,648 71,255 33,893 7,065
34,084 37,315 27,742 114,318 13,782 7,192
15,445 12,052 4,931 478,120 213,675 64,340
20,815 9,013 (17,545) 1,380,373 455,684 83,067
36,260 21,065 (12,614) 1,858,493 669,359 147,407
$70,344 $58,380 $15,128 $1,972,811 $683,141 $154,599
$823,750 $757,993 $710,276 $4,566,701 $1,340,570 $292,473
70,344 58,380 15,128 1,972,811 683,141 154,599
397,712 233,307 241,760 6,643,119 2,611,727 1,028,697
(10,939) 2,346 (39,038) (200,663) (39,650) (17,532)
(88,089) (83,015) (80,239) (886,807) (393,476) (141,911)
(53,582) (105,722) (31,289) (183,244) (54,915) (11,092)
(3,204) (618) (1,056) (16,201) (1,332)
(927) (505) (540) (17,516) (4,272) (87)
7,392 (38,416) (57,009) 344,224 424,908 35,423
248,363 7,377 32,589 5,682,912 2,542,990 893,498
318,707 65,757 47,717 7,655,723 3,226,131 1,048,097
$1,142,457 $823,750 $757,993 $12,222,424 $4,566,701 $1,340,570
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund II
Contrafund Portfolio
1998 1997 1996
Investment income:
Dividend income $37,587 $17,687 $
Capital gains distributions 276,533 46,743 3,899
314,120 64,430 3,899
Expenses:
Administrative expense 10,181 6,563 2,164
Mortality and expense risk 68,560 33,820 9,790
Net investment income (loss) 235,379 24,047 (8,055)
Realized and unrealized gains on investments:
Net realized gains on investments 405,977 248,167 36,440
Net unrealized appreciation on
investments 1,432,988 385,213 190,170
Net realized and unrealized gains on
investments 1,838,965 633,380 226,610
Net increase in net assets resulting
from operations $2,074,344 $657,427 $218,555
Net assets at beginning of year $5,101,986 $1,919,525 $291,610
Net increase in net assets resulting from
operations 2,074,344 657,427 218,555
Capital shares transactions:
Net premiums 5,148,927 2,852,974 1,487,812
Transfers of policy loans (203,142) (93,023) (19,479)
Transfers of cost of insurance (746,910) (414,073) (154,413)
Transfers of surrenders (248,949) (103,126) (16,096)
Transfers of death benefits (24,534) (1,177)
Transfers of other terminations (34,555) (8,960) 193
Interfund transfers (36,600) 292,419 111,343
Net increase in net assets from capital share
transactions 3,854,237 2,525,034 1,409,360
Total increase in net assets 5,928,581 3,182,461 1,627,915
Net assets at end of year $11,030,567 $5,101,986 $1,919,525
</TABLE>
<TABLE>
<S> <C> <C> <C>
Variable Insurance Products II Variable Insurance Products Fund III
Growth & Income
Asset Manager Growth Portfolio Balanced Portfolio Portfolio
1998 1997 1996 1998 1997 1998 1997
$28,628 $ $7,144 $3,696 $ $ $1,324
133,880 772 13,847 5,647 1,443 4,302
162,508 772 20,991 9,343 1,443 5,626
2,638 1,700 452 62 25 218 26
17,363 9,040 2,041 3,005 320 6,973 370
142,507 (9,968) 18,498 6,276 (345) (5,748) 5,230
30,155 65,245 6,039 6,509 191 37,985 473
148,003 117,585 16,180 48,417 2,140 199,570 786
178,158 182,830 22,219 54,926 2,331 237,555 1,259
$320,665 $172,862 $40,717 $61,202 $1,986 $231,807 $6,489
$1,304,663 $467,931 $53,576 $121,777 $ $214,268 $
320,665 172,862 40,717 61,202 1,986 231,807 6,489
1,392,497 787,790 415,186 539,114 102,622 1,372,004 182,863
(10,349) (29,528) (12,378) (5,099) (9,957) (71)
(221,079) (122,121) (40,421) (45,367) (3,050) (110,453) (8,429)
(21,053) (39,420) (888) (11,935) (4) (4,601) (307)
(91)
(5,348) (433)
(3,502) 67,149 12,139 9,817 20,223 120,558 33,723
1,131,075 663,870 373,638 486,530 119,791 1,367,118 207,779
1,451,740 836,732 414,355 547,732 121,777 1,598,925 214,268
$2,756,403 $1,304,663 $467,931 $669,509 $121,777 $1,813,193 $214,268
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Products Fund III
Growth Opportunities
Portfolio
1998 1997
Investment income:
Dividend income $8,299 $
Capital gains distributions 28,848 37,147
Expenses:
Administrative expense 639 143
Mortality and expense risk 15,685 1,194
Net investment income (loss) 20,823 (1,337)
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 50,809 4,463
Net unrealized appreciation (depreciation) on investments 394,294 23,265
Net realized and unrealized gains (losses) on investments445,103 27,728
Net increase (decrease) in net assets
resulting from operations $465,926 $26,391
Net assets at beginning of year $544,175 $
Net increase (decrease) in net assets
resulting from operations 465,926 26,391
Capital shares transactions:
Net premiums 2,646,226 424,520
Transfers of policy loans (9,991)
Transfers of cost of insurance (234,192) (19,831)
Transfers of surrenders (27,363) (536)
Transfers of death benefits
Transfers of other terminations (6,801)
Interfund transfers 174,729 113,631
Net increase in net assets from capital
share transactions 2,542,608 517,784
Total increase in net assets 3,008,534 544,175
Net assets at end of year $3,552,709 $544,175
</TABLE>
<TABLE>
American Century Variable Portfolios, Inc.
Capital Appreciation
<S> <C> <C> <C> <C> <C>
Balanced Portfolio Portfolio International Portfolio
1998 1997 1998 1997 1998 1997
$1,086 $ $ $ $1,827 $ 6,735
4,895 18,759
7,821 4,895 20,586
20 5 41 10 239 38
1,392 126 1,207 141 5,145 392
6,409 (131) 3,647 (151) 15,202 (430)
(1,944) 387 (14,210) (425) 18,863 (34)
18,540 559 14,374 (5,332) 54,979 652
16,596 946 164 (5,757) 73,842 618
$23,005 $815 $3,811 $(5,908) $89,044 $188
$52,097 $ $73,008 $ $199,713 $
23,005 815 3,811 (5,908) 89,044 188
288,299 57,959 183,887 71,171 1,002,411 176,976
(5,411) (241) (5,436) 45
(24,458) (6,022) (29,375) (4,961) (82,794) (8,337)
(5,978) (110) (13,744) (126) (12,709) (1,208)
(5,006) (5,265)
7,231 (545) 196 12,832 (7,657) 32,049
254,677 51,282 140,723 78,916 888,550 199,525
277,682 52,097 144,534 73,008 977,594 199,713
$329,779 $52,097 $217,542 $73,008 $1,177,307 $199,713
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
American Century Variable
Portfolios, Inc.
Income &
Growth
Value Portfolio Portfolio
1998 1997 1998
Investment income:
Dividend income $1,367 $ $39
Capital gains distributions 16,326
17,693 39
Expenses:
Administrative expense 111 20
Mortality and expense risk 3,549 214 10
Net investment income (loss) 14,033 (234) 29
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments (10,206) 698 38
Net unrealized appreciation (depreciation) on
investments 19,163 2,214 1,125
Net realized and unrealized gains (losses) on
investments 8,957 2,912 1,163
Net increase (decrease) in net assets resulting
from operations $22,990 $2,678 $1,192
Net assets at beginning of year $139,559 $ $
Net increase (decrease) in net assets resulting from
operations 22,990 2,678 1,192
Capital shares transactions:
Net premiums 699,611 116,538 30,706
Transfers of policy loans (11,530)
Transfers of cost of insurance (82,653) (8,468) (128)
Transfers of surrenders (24,446) (47)
Transfers of death benefits (17,555)
Transfers of other terminations
Interfund transfers 52,604 28,858 750
Net increase in net assets from capital share
transactions 616,031 136,881 31,328
Total increase in net assets 639,021 139,559 32,520
Net assets at end of year $778,580 $139,559 $32,520
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Lord, Abbett
Massachusetts Financial Services & Company
Emerging Growth & New Growth &
Growth Income Discovery Research Income
Portfolio Portfolio Portfolio Portfolio Portfolio
1998 1998 1998 1998 1998
$ $ $ $ $
4 54
46 5 1 349 34
(50) (5) (1) (403) (34)
146 8 15 909 68
7,127 585 142 41,025 (1,217)
7,273 593 157 41,934 (1,149)
$7,223 $588 $156 $41,531 $(1,183)
$ $ $ $ $
7,223 588 156 41,531 (1,183)
47,502 10,680 1,842 204,167 64,470
(150)
(315) (120) (23) (2,238) (397)
(918) (5,394) (6)
3,024 208 7,535 840
49,293 10,768 1,819 203,920 64,907
56,516 11,356 1,975 245,451 63,724
$56,516 $11,356 $1,975 $245,451 $63,724
</TABLE>
1. Organization and Significant Accounting Policies:
Organization:
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"), American Century Variable Portfolios,
Inc. ("ACVP"), Massachusetts Financial Services ("MFS"), and
Lord, Abbett & Company ("LAC") (collectively "the Funds"), each
diversified open-end management companies registered under the
Investment Company Act of 1940, as directed by participants.
The VIPF III Balanced, Growth & Income and Growth Opportunities
portfolios and the ACVP Balanced, Capital Appreciation,
International and Value portfolios were introduced in 1997.
The ACVP Income & Growth portfolio, the MFS Emerging Growth,
Growth & Income, New Discovery and Research portfolios as well
as the LAC's Growth & Income portfolio were each introduced in
1998. 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.
Federal Income Taxes:
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
1. Organization and Significant Accounting Policies,
continued:
Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Merger:
Effective January 2, 1997, Investors Life Insurance Company of
Nebraska ("Investors Life") was merged into the Company.
Related to this merger all of the assets and liabilities of
Investors Life were transferred to Midland including the assets
of Investors Life's Separate Account B, which were merged into
Midland's Separate Account A. The merger of the Separate
Account B assets into Midland's Separate Account A was possible
as the variable universal life insurance contracts were
identical in all material respects to the contracts issued by
Separate Account A. This merger of separate account assets was
structured so that there was no change in the rights and
benefits of persons owning contracts with either separate
accounts and no change in the net asset values held by the
respective participants of either of the separate accounts.
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
2. Expense Charges, continued:
? 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.
? A surrender charge may be imposed in the event of a contract
surrender or lapse within a stipulated number of years.
<TABLE>
3. Purchases and Sales of Investment Securities:
The aggregate cost of purchases and proceeds from sales of investments for the years ended
December 31, 1998, 1997, and 1996 were as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance
Products Fund:
Money Market $3,703,516 $2,365,443 $2,398,056 $2,679,342 $2,034,275 $949,787
High Income 2,203,912 1,455,179 1,762,564 534,720 1,130,421 593,263
Equity-Income 8,012,948 3,161,806 4,606,039 1,926,533 3,626,635 1,654,290
Growth 11,455,665 5,223,262 6,694,330 3,789,244 5,850,056 2,665,240
Overseas 2,210,743 1,203,837 1,975,804 928,568 1,305,663 654,357
Variable Insurance
Products
Fund II:
Asset Manager 2,586,539 1,337,735 2,167,982 1,198,071 1,858,024 1,305,947
Investment Grade
Bond 643,163 360,716 351,091 307,112 340,129 279,245
Index 500 8,451,405 2,654,171 3,510,441 954,879 1,327,248 425,671
Contrafund 6,631,801 2,542,183 3,786,750 1,239,389 1,876,198 473,421
Asset Manager
Growth 1,849,012 575,429 1,025,893 372,417 522,652 130,138
Variable Insurance
Products
Fund III:
Balanced 732,611 239,805 151,867 32,420
Growth & Income 1,662,264 300,895 229,692 16,682
Growth Oppor-
tunities 3,263,185 699,754 583,991 67,546
American Century
Variable
Portfolios, Inc.:
Balanced 335,438 74,354 69,085 17,933
Capital Apprecia-
tion 242,481 98,110 93,376 14,612
International 1,186,094 282,341 224,848 25,753
911,411 281,349 153,593 16,945
Income & Growth 32,015 657
Massachusetts
Financial
Services:
Emerging Growth 50,012 769
Growth & Income 10,927 164
New Discovery 1,904 86
Research 216,124 12,607
Lord, Abbett &
Company:
Growth & Income 65,826 952
$56,458,996 $22,871,604 $29,785,402 $14,122,166 $19,871,301 $9,131,859
</TABLE>
<TABLE>
4. Summary of Changes from Unit Transactions:
Transactions in units for the years ended December 31, 1998, 1997, and 1996 were
as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance Products
Fund:
Money Market 295,836 184,053 160,457 175,104 132,191 61,393
High Income 121,025 66,129 71,855 20,908 45,898 25,239
Equity-Income 455,774 132,401 155,294 58,396 122,028 57,300
Growth 444,888 159,955 216,574 102,996 167,406 80,887
Overseas 122,745 60,018 89,759 39,237 67,962 33,856
Variable Insurance Products
Fund II:
Asset Manager 102,475 54,816 77,125 50,498 84,315 66,066
Investment Grade Bond 44,592 23,051 20,534 19,490 20,996 18,784
Index 500 555,532 157,217 204,615 48,013 81,534 25,464
Contrafund 438,316 156,194 254,844 75,480 145,795 35,584
Asset Manager Growth 126,892 38,975 71,882 23,310 39,936 10,263
Variable Insurance Products
Fund III
Balanced 60,349 19,734 13,593 2,733
Growth & Income 121,924 21,402 19,277 1,397
Growth Opportunities 251,295 52,957 51,166 5,612
American Century Variable
Portfolios, Inc.:
Balanced 27,213 6,100 6,244 1,589
Capital Appreciation 23,494 9,333 8,033 1,258
International 98,873 22,399 21,308 2,405
Value 74,591 22,784 13,166 1,434
Income & Growth 2,779 57
Massachusetts Financial Services:
Emerging Growth 4,556 63
Growth & Income 997 14
New Discovery 160 7
Research 22,120 1,245
Lord, Abbett & Company:
Growth & Income 6,014 84
</TABLE>
<TABLE>
5. Net Assets:
Net assets at December 31, 1998, consisted of the following:
<S> <C> <C> <C>
Accumulated
Net Investment Net
Capital Income an Unrealized
Share Net Realized Appreciation
Portfolio Transactions Gains of Investments Total
Variable Insurance Products Fund:
Money Market 2,474,045 257,053 2,731,098
High Income 2,735,943 660,085 (232,054) 3,163,974
Equity-Income 10,780,276 3,097,017 1,853,884 15,731,177
Growth 14,653,801 7,002,895 6,847,197 28,503,893
Overseas 3,720,814 908,652 265,574 4,895,040
Variable Insurance Products Fund II:
Asset Manager 4,514,398 2,008,761 764,298 7,287,457
Investment Grade Bond 903,437 175,025 63,995 1,142,457
Index 500 9,368,052 901,318 1,953,054 12,222,424
Contrafund 8,072,838 948,155 2,009,574 11,030,567
Asset Manager Growth 2,220,929 254,762 280,712 2,756,403
Variable Insurance Products Fund III:
Balanced 606,322 12,631 50,556 669,509
Growth & Income 1,574,898 37,940 200,355 1,813,193
Growth Opportunities 3,060,390 74,758 417,561 3,552,709
American Century Variable
Portfolios, Inc.:
Balanced 305,960 4,721 19,098 329,779
Capital Appreciation 219,638 (11,139) 9,043 217,542
International 1,088,075 33,601 55,631 1,177,307
Value 752,913 4,291 21,376 778,580
Income & Growth 31,328 67 1,125 32,520
Massachusetts Financial Services:
Emerging Growth 49,293 96 7,127 56,516
Growth & Income 10,768 3 585 11,356
New Discovery 1,819 14 142 1,975
Research 203,920 506 41,025 245,451
Lord, Abbett & Company:
Growth & Income 64,907 34 (1,217) 63,724
67,414,764 16,371,246 14,628,641 98,414,651
</TABLE>
The accompanying notes are an integral part of the
financial statements.
2 The accompanying notes are an integral part of the
financial statements.
3 The accompanying notes are an integral part of the
financial statements.
4 The accompanying notes are an integral part of the
financial statements.
5 The accompanying notes are an integral part of the
financial statements.
6 The accompanying notes are an integral part of the
financial statements.
7 The accompanying notes are an integral part of the
financial statements.
8 The accompanying notes are an integral part of the
financial statements.
9 Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements
18
Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements, Continued
NEWSPA98
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Balance Sheets 2
Statements of Income 3
Statements of Stockholder's Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-23
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying balance sheets and the related
statements of income, stockholder's equity, and cash flows present
fairly, in all material respects, the financial position of Midland
National Life Insurance Company as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of Midland National Life Insurance Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
March 10, 1999
Midland National Life Insurance Company
Balance Sheets
as of December 31, 1998 and 1997
(Amounts in thousands, except share and per share amounts)
ASSETS 1998 1997
Investments:
Fixed maturities $2,281,730 $2,420,977
Equity securities 327,309 145,156
Policy loans 213,267 202,129
Short-term investments 280,943 636,280
Other invested assets 37,076 29,329
Total investments 3,140,325 3,433,871
Cash 754 2,384
Accrued investment income 38,555 37,980
Deferred policy acquisition costs 417,164 416,767
Present value of future profits of
acquired businesses 31,162 40,397
Other receivables and other assets 14,407 28,045
Separate accounts assets 249,145 139,072
Total assets $3,891,512 $4,098,516
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policyholder account balances $2,307,893 $2,401,302
Policy benefit reserves 419,615 419,131
Policy claims and benefits payable 30,393 33,839
Federal income taxes 20,566 36,088
Other liabilities 100,867 90,102
Security lending liability 50,500 308,125
Separate account liabilities 249,145 139,072
Total liabilities 3,178,979 3,427,659
Commitments and contingencies
Stockholder's equity:
Common stock, $1 par value, 2,549,439 shares
authorized, 2,548,878 shares outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Accumulated other comprehensive income 26,826 30,838
Retained earnings 649,629 603,763
Less treasury stock (561 shares), at cost (178)
Total stockholder's equity 712,533 670,857
Total liabilities and stockholder's equity $3,891,512 $4,098,516
Midland National Life Insurance Company
Statements of Income
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
1998 1997 1996
Revenues:
Premiums $94,495 $98,668 $101,423
Interest sensitive life and
investment product charges 159,115 157,423 150,839
Net investment income 224,939 188,650 173,583
Net realized investment (losses)
gains (6,489) 3,561 6,839
Net unrealized gains (losses) on
trading securities 2,847 (641) 6,200
Other income 3,157 2,565 4,362
Total revenue 478,064 450,226 443,246
Benefits and expenses:
Benefits incurred 137,313 146,227 151,208
Interest credited to policyholder
account balances 133,529 111,333 103,618
Total benefits 270,842 257,560 254,826
Operating expenses (net of
commissions and other expenses
deferred) 47,549 44,130 43,243
Amortization of deferred policy
acquisition costs and present
value of future profits of
acquired businesses 66,189 56,954 53,316
Total benefits and expenses 384,580 358,644 351,385
Income before income taxes 93,484 91,582 91,861
Income tax expense 32,618 33,053 31,821
Net income $60,866 $58,529 $60,040
<TABLE>
Midland National Life Insurance Company
Statements of Stockholder's Equity
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C> <C>
Accumulated
Additional Other Less Total
Common Paid-in Comprehensive Comprehensive Retained Treasury Stockholder's
Stock Capital Income Income Earnings Stock Equity
Balance at January 1, 1996 $2,549 $33,707 $31,027 $510,194 $577,477
Comprehensive income:
Net income $60,040 60,040 60,040
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (12,202) (12,202) (12,202)
Total comprehensive income $47,838
Balance at December 31, 1996 2,549 33,707 18,825 570,234 625,315
Comprehensive income:
Net income 58,529 58,529 58,529
Other comprehensive income:
Net appreciation on available-for-sale investments 12,013 12,013 12,013
Total comprehensive income $70,542
Dividends paid on common stock (25,000) (25,000)
Balance at December 31, 1997 2,549 33,707 30,838 603,763 670,857
Comprehensive income:
Net income 60,866 60,866 60,866
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (4,012) (4,012) (4,012)
Total comprehensive income $56,854
Dividends paid on common stock (15,000) (15,000)
Repurchase of minority interest shares (178) (178)
Balance at December 31, 1998 $2,549 $33,707 $26,826 $649,629 $(178) $712,533
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities:
Net income $60,866 $58,529 $60,040
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 66,189 56,954 53,316
Net amortization of premiums and discounts on
investments 4,325 2,699 5,532
Policy acquisition costs deferred (54,611) (50,363) (65,285)
Net realized investment (gains) losses 6,489 (3,561) (6,839)
Net unrealized (gains) losses on
trading securities (2,847) 641 (6,200)
Net proceeds from (cost of) trading
securities (37,769) 99,850 5,788
Deferred income taxes (10,849) (5,421) 12,177
Net interest credited and product charges on
charges on universal life and
investment policies (25,586) (46,090) (47,221)
Changes in other assets and liabilities:
Net receivables and payables 22,190 (13,946) 32,863
Policy benefits 8,397 15,826 26,185
Other 1,173 122 (277)
Net cash provided by operating
activities 37,967 115,240 70,079
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities 1,405,391 1,217,086 1,422,426
Equity securities 304,589 137,510 129,827
Other invested assets 2,601 941 2,055
Cost of investments acquired:
Fixed maturities 1,281,839) (1,791,522)(1,569,779)
Equity securities (451,181) (144,862) (145,096)
Other invested assets (10,346) (11,702) (14,245)
Net change in policy loans (11,138) (9,995) (11,295)
Net change in short-term investments 355,337 93,875 (18,748)
Net change in security lending (257,625) 308,125
Payment for purchase of insurance business, net of
cash acquired (1,026) 23,939
Net cash provided by (used in)
investing activities 54,763 (176,605) (204,855)
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows, Continued
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from financing activities:
Receipts from universal life
and investment products 317,398 280,164 285,569
Benefits paid on universal life
and investment products (396,580) (194,993) (156,514)
Dividends paid on common stock (15,000) (25,000)
Repurchase of minority interest shares (178)
Net cash provided by (used in)
financing activities (94,360) 60,171 129,055
Increase (decrease) in cash (1,630) (1,194) (5,721)
Cash at beginning of year 2,384 3,578 9,299
Cash at end of year 754 2,384 3,578
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $119 $143 $166
Income taxes, paid to parent 45,980 42,749 16,772
Noncash operating, investing and financing
Policy loans, receivables and other assets
received in assumption reinsurance
agreements 70 38,044
</TABLE>
1. Summary of Significant Accounting Policies:
Organization:
Midland National Life Insurance Company ("Midland" or the
"Company") is a wholly-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.
1. Summary of Significant Accounting Policies, continued:
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". 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 as other comprehensive income
in stockholder's equity, net of related adjustments to deferred
policy acquisition costs, deferred income taxes and the
accumulated unrealized holding gains (losses) on securities sold
which are released into income as realized investment gains.
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.
1. Summary of Significant Accounting Policies, continued:
Investments, continued:
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.
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 future policy benefits 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% to 6.5% in
1998, 3.75% to 6.75% in 1997 and 3% to 7% in 1996. For certain
contracts these crediting rates extend for periods in excess of
one year.
1. Summary of Significant Accounting Pollicies, continued:
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:
1998 1997 1996
Deferred policy acquisition costs,
beginning of year 416,767 427,218 410,051
Commissions deferred 44,072 40,660 55,005
Underwriting and acquisition expenses
deferred 10,539 9,703 10,280
Change in offset to unrealized gains
and losses 3,766 (8,710) 92
Amortization (57,980) (52,104) (48,210)
Deferred policy acquisition costs,
end of year 417,164 416,767 427,218
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
stockholder's equity through other comprehensive income as an
offset to the unrealized gains or losses.
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:
1. Summary of Significant Accounting Policies, continued:
Present Value of Future Profits of Acquired Business, continued:
1998 1997 1996
Balance at beginning of year 40,397 21,308 26,414
Value of in-force acquired 23,939
Adjustment to purchase price (1,026)
Amortization (8,209) (4,850) (5,106)
Balance at end of year 31,162 40,397 21,308
Based on current conditions and assumptions as to future events,
the Company expects to amortize approximately 18 percent of the
December 31, 1998 balance of PVFP in 1999, 15 percent in 2000, 12
percent in 2001, 10 percent in 2002, and 9 percent in 2003. 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.
1. Summary of Significant Accounting Policies, continued:
Comprehensive Income:
During 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income."
The standard requires the reporting of comprehensive income in
addition to net income from operations. Comprehensive income is
a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has
not been recognized in the calculation of net income.
Comprehensive income for the Company includes net income and
unrealized gains and losses (other comprehensive income) on
available-for-sale securities. The adoption of this statement
does not impact the overall financial position or stockholder's
equity of the Company.
Security Lending:
The Company periodically enters into agreements to sell and
repurchase securities. Securities out on loan are required to be
100% collateralized. Short-term investments of $50,500 and the
related liability representing the collateral received is
reflected on the balance sheets as of December 31, 1998.
Treasury Stock:
During the fourth quarter of 1998, the Company purchased its
remaining outstanding minority shares from the lone minority
shareholder for $178. The shares are retained as treasury stock
as a reduction to stockholder's equity.
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.
2. Fair Value of Financial Instruments, continued:
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 is 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:
December 31, 1998 December 31, 1997
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Fixed maturities,
available-for-sale $2,281,730 $2,281,730 $2,420,977 $2,420,977
Equity securities,
available-for-sale 221,325 221,325 78,950 78,950
Equity securities,
trading 105,984 105,984 66,206 66,206
Policy loans 213,267 213,267 202,129 202,129
Short-term investments 280,943 280,943 636,280 636,280
Other investments 37,076 37,076 29,329 29,329
Financial liabilities:
Investment-type insurance
Contracts 866,000 850,000 1,011,000 989,000
3. Investments and Investment Income:
Fixed Maturities and Equity Security Investments:
The amortized cost and estimated fair value of fixed maturities
and equity securities classified as available for sale are as
follows:
December 31, 1998
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 $208,581 $14,285 $378 $222,488
Corporate securities 1,052,442 30,366 15,546 1,067,262
Mortgage-backed securities 955,785 22,225 1,093 976,917
Other debt securities 14,861 225 23 15,063
Total fixed maturities 2,231,669 67,101 17,040 2,281,730
Equity securities 209,952 15,403 4,030 221,325
Total available for sale $2,441,621 $82,504 $21,070 $2,503,055
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
The cost of the equity securities classified as trading
securities are $103,798 and $66,867, respectively at December 31,
1998 and December 31, 1997.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
The unrealized appreciation on the available-for-sale securities
in 1998 and 1997 is reduced by deferred policy acquisition costs
and deferred income taxes and is reflected as accumulated other
comprehensive income in the statements of stockholder's equity:
1998 1997
Gross unrealized appreciation $61,434 $71,374
Deferred policy acquisition costs (20,164) (23,930)
Deferred income taxes (14,444) (16,606)
Accumulated other comprehensive income $26,826 $30,838
The other comprehensive income in 1998 and 1997 is comprised of
the change in unrealized gains (losses) on available-for-sale
fixed maturities and equity security investments arising during
the period less the realized gains (losses) included in income,
deferred policy acquisition costs and deferred income taxes as
follows:
1998 1997 1996
Unrealized holding gains (losses) arising in the
current period:
Fixed maturities $(11,399) $27,096 $(12,860)
Equity securities (5,025) 3,571 759
Less reclassification adjustment for (gains)
losses released into income 6,484 (3,476) (6,851)
Less DAC impact 3,766 (8,710) 92
Less deferred income tax effect 2,162 (6,468) 6,658
Net other comprehensive income $(4,012) $12,013 $(12,202)
The amortized cost and estimated fair value of available-for-sale
fixed maturities at December 31, 1998, 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.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
Estimated
Amortized Cost Fair Value
Due in one year or less $66,556 $67,164
Due after one year through five years 94,231 96,047
Due after five years through ten years 297,052 313,506
Due after ten years 818,045 828,096
Securities not due at a single
maturity date (primarily mortgage-
backed securities) 955,785 976,917
Total fixed maturities $2,231,669 $2,281,730
Investment Income and Investment Gains (Losses):
Major categories of investment income are summarized as follows:
1998 1997 1996
Gross investment income:
Fixed maturities $173,475 $148,640 $126,733
Equity securities 22,563 13,831 22,202
Policy loans 15,331 11,891 10,327
Short-term investments 24,308 20,594 16,946
Other invested assets 2,730 824 553
Total gross investment income 238,407 195,780 176,761
Investment expenses 13,468 7,130 3,178
Net investment income $224,939 $188,650 $173,583
The major categories of investment gains and losses reflected in
the income statement are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
1998 1997 1996
Unrealized - Unrealized - Unrealized -
Trading Trading Trading
Realized Securities Realized Securities Realized Securities
Fixed maturities $185 $2,934 $195 $8,047 $(438)
Equity securities (6,669) 2,847 542 (836) (1,196) 6,638
Other (5) 85 (12)
Net investment gains
(losses) $(6,489) $2,847 $3,561 $(641) $6,839 $6,200
</TABLE>
3. Investments and Investment Income, continued:
Investment Income and Investment Gains (Losses), continued:
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 1998, 1997, and 1996
were as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997 1996
Fixed Fixed Fixed
Maturities Equity Maturities Equity Maturities Equity
Proceeds from sales $744,300 $304,589 $801,246 $136,085 $1,020,090 $106,354
Gross realized gains 7,527 442 3,757 1,977 10,418 787
Gross realized losses 7,313 6,303 3,213 887 5,030 1,954
</TABLE>
Other:
At December 31, 1998, and 1997, securities amounting to
approximately $14,993 and $14,366, respectively, were on deposit
with regulatory authorities as required by law.
At December 31, 1998, and 1997, the Company entered into
repurchase agreements with brokerage firms totaling $50,500 and
$308,125, respectively.
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 stockholder's
equity at December 31, 1998, except for the following investment
with the following carrying value:
Residential Funding $75,527
4. Income Taxes:
The significant components of the provision for Federal income
taxes are as follows:
1998 1997 1996
Current $43,467 $38,474 $19,644
Deferred (10,849) (5,421) 12,177
Total federal income tax expense $32,618 $33,053 $31,821
4. Income Taxes, continued:
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:
1998 1997 1996
At statutory federal income tax rate $32,720 $32,054 $32,151
Dividends received deductions (191) (514) (1,391)
Other, net 89 1,513 1,061
Total federal income tax expense $32,618 $33,053 $31,821
The federal income tax liability as of December 31 is comprised
of the following:
1998 1997
Net deferred income tax liability $21,470 $34,480
Income taxes currently (receivable) due (904) 1,608
Federal income tax liability $20,566 $36,088
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:
1998 1997
Deferred tax liabilities:
Present value of future profits of acquired business $10,907 $14,139
Deferred policy acquisition costs 99,192 100,989
Investments 22,154 27,245
Other 906
Total deferred income tax liabilities 132,253 143,279
Deferred tax assets:
Policy liabilities and reserves 108,973 108,799
Other 1,810
Total gross deferred income tax assets 110,783 108,799
Net deferred income tax liability $21,470 $34,480
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, 1998.
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:
1998 1997 1996
Ceded Assumed Ceded Assumed Ceded Assumed
Premiums $20,280 $6,106 $17,081 $7,971 $13,759 $7,116
Claims 11,495 5,954 8,683 4,472 12,170 6,068
The Company generally 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 in 1996, the Company assumed certain policy risks from
its affiliate, North American Company for Life and Health
Insurance, and its subsidiaries. The company fulfilled its
obligation on this assumption contract and was released of this
risk effective December 31, 1998. The Company has reflected risk
and profit charges 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.
In accordance with the agreement, the final purchase price was
determined in 1998 which reduced the PVFP asset to $22,913 and
the life and annuity reserves assumed to $573,284.
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.
6. Statutory Financial Data and Dividend Restrictions, continued:
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 $15,000 and
$25,000 in 1998 and 1997, respectively. The maximum amount of
dividends payable in 1999 without prior approval of regulatory
authorities is approximately $60,000.
The statutory net income of the Company for the years ended
December 31, 1998 and 1997 is approximately $75,000 and $65,000,
respectively, and capital and surplus at December 31, 1998 and
1997 is approximately $384,000 and $323,000, respectively, in
accordance with statutory accounting principles.
7. Employee Benefits:
The Company participates in qualified pensions and other
postretirement benefit plans sponsored by SEI. The Company also
provides certain post-retirement health care and life insurance
benefits for eligible active and retired employees through a
defined benefit plan. The following table summarizes the benefit
obligations, the fair value of plan assets and the funded status
over the two-year period ended December 31, 1998. The amounts
reflect an allocation of the Company's portion of the SEI plan:
Pension Benefits Other Benefits
1998 1997 1998 1997
Benefit obligation at
December 31 $6,420 $4,678 $1,718 $2,203
Fair value of plan assets at
December 31 3,642 3,176
Funded status at December 31 $(2,778) $(1,502) $(1,718) $(2,203)
Accrued benefit liability
recognized in financial
statements $616 $92 $1,650 $1,751
7. Employee Benefits, continued:
The Company's post-retirement benefit plan is not funded;
therefore, it has no plan assets.
The amounts of contributions made to and benefits paid from the
plan are as follows:
Pension Benefits Other Benefits
1998 1997 1998 1997
Employer contributions $ $ $227 $172
Employee contributions 56 56
Benefit payments 197 444 283 228
The following table provides the net periodic benefit cost for
the years ended 1998, 1997 and 1996:
Pension Benefits Other Benefits
1998 1997 1996 1998 1997 1996
Net periodic benefit costs $524 $360 $263 $126 $179 $164
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
Pension Benefits Other Benefits
1998 1997 1998 1997
Weighted-average assumptions
as of December 31:
Discount rate 7.00% 7.25% 7.00% 7.25%
Expected return on plan
assets 8.75% 8.75% N/A N/A
Rate of compensation
increase 4.25% 4.25% N/A N/A
For measurement purposes, a 6.5% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1998. The rate was assumed to decrease gradually each year to a
rate of 4.5% for 2006 and remain at that level thereafter.
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 1998, 1997, and
1996 was $1,725, $1,920, and $1,700, respectively. All
contributions to the ESOP are held in trust.
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 $2,571 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 $1,511, $1,208 and $1,048 for the
years ended December 31, 1998, 1997, and 1996, respectively. The
minimum future rentals on capital and operating leases at
December 31, 1998, are as follows:
Year Ending December 31 Capital Operating Total
1999 $513 $1,823 $2,336
2000 489 1,827 2,316
2001 466 1,448 1,914
2002 442 191 633
2003 191 191
Thereafter 705 705
Total 1,910 $6,185 $8,095
Less amount representing interest 210
Present value of amounts due
under capital leases $1,700
Other Contingencies:
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 $1,552, $1,530 and $1,458 in 1998, 1997, and
1996, respectively, related to these contracts.
The Company pays investment management fees to an affiliate
(Midland Advisors Company). Net fees related to these services
were $1,855, $1,425 and $1,339 in 1998, 1997 and 1996,
respectively.
The Company provided certain insurance and non-insurance services
to North American Company for Life and Health Insurance ("North
American"), beginning in 1997. The Company was reimbursed $1,465
and $488 in 1998 and 1997, respectively, for the costs incurred
to render such services.
The Company sold certain securities to North American at the
current market value of $15,856, incurring a realized loss of
$2,736 in 1998. In addition the Company acquired securities
totaling $22,679 from North American
10. Subsequent Event:
Effective January 4, 1999, the Company received a contribution
from SEI totaling $64,000. These funds were then applied to
purchase substantially all of the assets of Parkway Mortgage Inc.
("Parkway"), a mortgage broker. In addition, the Company agreed
to assume responsibility for the warehouse line-of-credit to fund
loan originations.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Midland National Life Insurance Company
Notes to Financial Statements
(Amounts in thousands)
Midland National Life Insurance Company
Notes to Financial Statements, Continued
(Amounts in thousands)
NEWMGP98
<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 50 pages.
The undertaking to file reports.
Representations pursuant to Section 26(e) of the Investment
Company Act.
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs 2
(b) Sutherland Asbill & Brennan L L P 8
(c) Russell A. Evenson, FSA. 8
(d) PricewaterhouseCoopers L L P 8
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. 1
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. 7
(b) Selling Agreement. 2
(c) Commission schedule. 2
--------------------
(4) Not applicable.
(5) Form of Contract. 3
1 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 2 to Form S-6, File No. 333-14061,
for Midland National Life Separate Account A, on April 28, 1998.
2 Filed previously in Pre-Effective Amendment No. 1 on December 10, 1987.
3 Filed previously in Post Effective Amendment No. 3 on April 28, 1989.
4 Filed previously in Post Effective Amendment No. 4 on April 30, 1990.
5 Filed previously in Post Effective Amendment No. 5 on April 29, 1991.
6 Filed previously in Post Effective Amendment No. 6 on April 29, 1992.
7 Filed previously in Post Effective Amendment No. 11 on April 29, 1997.
8 Filed herewith.
9 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 3 to Form S-6, File No. 333-14061,
for Midland National Life Separate Account A, on April 1999.
<PAGE>
(6) (a) Articles of Incorporation of Midland National Life. 1
(b) By-Laws of Midland National Life. 1
(7) Not applicable.
(8) (a) Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund, and
Variable Products Fund II. 5
(8) (b) Amendments to Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund and Variable
Products Fund II. 6
(8) (c) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III 7
(8) (d) Participation Agreement for American Century Investment
Services, Inc. 7
(8) (e) Participation Agreement for Massachusetts Financial Variable
Insurance Trusts. 9
(8) (f) Participation Agreement for Lord Abbett Series Funds, Inc. 9
(9) Not applicable.
(10) Application Form. 3
(11) Memorandum describing Midland National Life's insurance, transfer
and redemption procedures for the Contract. 4
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. 2
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. 8
7. Consent of Sutherland Asbill & Brennan L L P 8
8. Consent of PricewaterhouseCoopers L L P 8
1 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 2 to Form S-6, File No. 333-14061,
for Midland National Life Separate Account A, on April 28, 1998.
2 Filed previously in Pre-Effective Amendment No. 1 on December 10, 1987.
3 Filed previously in Post Effective Amendment No. 3 on April 28, 1989.
4 Filed previously in Post Effective Amendment No. 4 on April 30, 1990.
5 Filed previously in Post Effective Amendment No. 5 on April 29, 1991.
6 Filed previously in Post Effective Amendment No. 6 on April 29, 1992.
7 Filed previously in Post Effective Amendment No. 11 on April 29, 1997.
8 Filed herewith.
9 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 3 to Form S-6, File No. 333-14061,
for Midland National Life Separate Account A, on April 1999.
CONVUL.txt
<PAGE>
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, 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 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:________________________________
President
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
--------- ----- ----
__/s/Michael Masterson_ Director, Chairman of the April 5, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
__/s/ John J. Craig___ Director, Executive Vice April 5, 1999
John J. Craig II President
/s/ Russell A. Evenson Director, Senior Vice April 5, 1999
Russell A. Evenson President and Chief
Actuary
_/s/ Steven C. Palmitier Director, Senior Vice April 5, 1999
Steven C. Palmitier President and Chief
Marketing Officer
__/s/ Thomas M. Meyer__ Vice President and April 5, 1999
Thomas M. Meyer Chief Financial
Officer
_________________________ Director and Vice President April 5, 1999
Robert W. Korba
SECVUL
<PAGE>
SIGNATURE
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, certifies
that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities
Act of 1933 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 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:_/s/ John J. Craig II_______________
John J. Craig II
Executive Vice President
SECSIG1
<PAGE>
Registration No. 33-16354
POST EFFECTIVE AMENDMENT NO.12
________________________________________________________________________________
- --------------------------------------------------------------------------------
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
____________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EXHVUL.TXT
<PAGE>
EXHIBIT INDEX
Exhibit
_________
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 PricewaterhouseCoopers, L L P
INDVUL.TXT
<PAGE>
April 5, 1999
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. 12 to Registration Statement No. 33-16354 on
Form S-6 ("Registration Statement") which covers premiums expected to
be received under the flexible premium Variable Universal Life
Insurance 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:
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
RAEVUL.TXT
<PAGE>
April 26, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Universal Life
Form S-6, File No. 33-16354
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
No. 12 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 No. 33-16354). 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. 12 to this
Registration Statement of Midland National Life Separate Account A on
Form S-6 (File No. 33-16354) of our reports dated March 26, 1999 and
March 17, 1999, 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".
PRICEWATERHOUSECOOPERS L L P
MINNEAPOLIS, MINNESOTA
April 23, 1999
CNSNTVL.TXT
<PAGE>
