Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account A
File Number 333-14061
Commissioners:
Enclosed for filing is a copy of Post Effective Amendment Number 2
to the above referenced Form S-6 Registration Statement.
This amendment is being filed pursuant to paragraph (a) of Rule 485.
As discussed in a recent conversation with Kevin Mc Enery, this filing
represents a "template" filing for our:
Variable Universal Life (33-16354), last filed April 28, 1997.
Variable Universal Life 2 (33-76318), last filed April 28, 1997.
Variable Executive Universal Life (333-14081), last filed April 28, 1998.
The 333-14061 was last filed April 28, 1998.
Our representation pursuant to Section 26(e) will be made by amendment.
Attached is a courtesy copy of the filing.
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
VUL3PECVR.TXT
<PAGE>
Registration No. 333-14061
POST-EFFECTIVE AMENDMENT NO. 2
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)
___ on May 01, 1999 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a) (i)
_X_ on __March_30,_1999__ 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.
----------------------------------------------------------------------
S6PECVL3.TXT
<PAGE>
VARIABLE UNIVERSAL LIFE 3
(Variable Universal Life 3)
Issued By:
Midland National Life Insurance Company
One Midland Plaza, Sioux Falls, SD 57193 (605) 335-5700
Variable Universal Life 3 is an individual variable life insurance
policy issued by Midland National Life Insurance Company. Variable
Universal Life 3:
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 and you bear the risk of
poor investment performance; 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 VCC 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 3
FEATURES OF VARIABLE UNIVERSAL LIFE 3 3
Death Benefit Options 3
Contract Changes 3
Flexible Premium Payments 3
Additional Benefits 3
INVESTMENT CHOICES 4
YOUR CASH VALUE 4
Transfers 4
Policy Loans 4
Withdrawing Money 5
Surrendering Your Contract 5
DEDUCTIONS AND CHARGES 5
Deductions From Your Premiums 5
Deductions From Your Cash Value 5
Surrender Charges 5
Portfolio Expenses 6
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 7
Your Right To Examine This Contract 7
Your Contract Can Lapse 7
Tax Effects of Variable Universal Life 3 7
Illustrations 7
PART 2: DETAILED INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3 8
INSURANCE FEATURES 8
How the Contracts Differ From Whole Life Insurance 8
Application for Insurance 8
Death Benefit 8
Maturity Benefit 9
Changes In Variable Universal Life 3 9
Changing The Face Amount of Insurance 10
Changing Your Death Benefit Option 10
When Contract Changes Go Into Effect 10
Flexible Premium Payments 11
Allocation of Premiums 12
Additional Benefits 12
Automatic Benefit Increase Provision 13
SEPARATE ACCOUNT INVESTMENT CHOICES 14
Our Separate Account And Its Investment Divisions 14
The Funds 14
Investment Policies Of The Portfolios 14
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 20
THE GENERAL ACCOUNT 20
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 23
Charges In The Funds 24
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 26
Your Right To Examine The Contract 26
Your Contract Can Lapse 26
You May Reinstate Your Contract 26
Contract Periods And Anniversaries 26
Maturity Date 27
We Own The Assets Of Our Separate Account 27
Changing the Separate Account 27
Limits On Our Right To Challenge The Contract 27
Your Payment Options 28
Your Beneficiary 29
Assigning Your Contract 29
When We Pay Proceeds From This Contract 29
TAX EFFECTS 29
Contract Proceeds 29
Possible Charge for Midland's Taxes 32
Other Tax Considerations 32
PART 3: ADDITIONAL INFORMATION 32
MIDLAND NATIONAL LIFE INSURANCE COMPANY 32
YOUR VOTING RIGHTS AS AN OWNER 33
OUR REPORTS TO CONTRACT OWNERS 33
DIVIDENDS 33
MIDLAND'S SALES AND OTHER AGREEMENTS 34
REGULATION 34
YEAR 2000 34
DISCOUNT FOR MIDLAND EMPLOYEES 34
LEGAL MATTERS 34
FINANCIAL AND ACTUARIAL 34
ADDITIONAL INFORMATION 35
APPENDIX A: MANAGEMENT OF MIDLAND 36
APPENDIX B: ILLUSTRATIONS 38
APPENDIX C: DEFINITIONS 46
APPENDIX D: PERFORMANCE 48
APPENDIX E: FINANCIAL STATEMENTS 49
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 3
Death Benefit Options
Variable Universal Life 3 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 8.
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; and
insured persons, age 20 to 44 at issue and in the preferred non-
smoker rate class, the minimum face amount is $100,000.
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
an accelerated death benefit in the event of a terminal illness.
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. 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 VCC 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 14.
YOUR CASH VALUE
Your cash value begins with your first premium payment. From your
premium we deduct a sales charge, 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 charge a $25 fee after the 12th
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 up to 92% of 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 29.
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 50% of the net cash surrender value. That
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 29.
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 20.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a 4% sales charge from each premium payment. This
charge partially reimburses us for the selling and distributing costs of
this contract. We also 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 $7.00 (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 twelve transfers a year between investment divisions.
(We currently waive this charge).
See "Deductions From Your Cash Value" on page 22.
We also deduct a daily charge at an annual rate of 0.90% of the assets
in every investment division. This charge is for certain mortality and
expense risks.
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:
26% of any premium payment in the first 2 contract years up to one
guideline annual premium (this varies for each contract); and
5% of all other premium payments.
After ten 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 $3.00 per $1,000 of face amount for the
first 10 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 23.
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, 1997 are shown in the table below (except as otherwise
noted).
Total
Portfolio Expenses
VIP Money Market .31%
VIP High Income .71%
VIP Equity-Income(1) .58%
VIP Growth(1) .69%
VIP Overseas(1) .92%
VIP II Asset Manager(1) .65%
VIP II Investment Grade Bond .58%
VIP II Contrafund(1) .71%
VIP II Asset Manager: Growth(1) .77%
VIP II Index 500(2) .28%
VIP III Growth & Income .70%
VIP III Balanced(1) .61%
VIP III Growth Opportunities(1) .74%
American Century VP Capital Appreciation 1.00%
American Century VP Value 1.00%
American Century VP Balanced 1.00%
American Century VP International 1.50%
American Century VP Income & Growth(4) .70%
MFS VIT Emerging Growth .87%
MFS VIT Research .88%
MFS VIT Growth with Income(3) 1.00%
MFS VIT New Discovery(3) (4) 1.15%
Lord Abbett VCC Growth and Income .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 0.67%
VIP Overseas 0.90%
VIP II Asset Manager 0.64%
VIP II Contrafund 0.78%
VIP II Asset Manager: Growth 0.76%
VIP III Balanced 0.60%
VIP III Growth Opportunities 0.73%
(2) The 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%.
(3) MFS has agreed to bear expenses for these portfolios, such that each
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
0.47% and 1.37% for the MFS VIT New Discovery.
(4) The annual expenses shown for these portfolios are based on
estimated expenses for 1998.
See "Charges In The Funds" on page 24.
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 26.
Tax Effects of Variable Universal Life 3
We believe that a contract issued on the basis of a standard rate class
should quality 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 29.
Illustrations
This prospectus includes sample projections of hypothetical death
benefits and cash surrender values, 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
premiums accumulated at interest. This demonstrates that this
contract should not be purchased as a short-term investment.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE UNIVERSAL LIFE 3
INSURANCE FEATURES
This prospectus describes our Variable Universal Life 3 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 3 (VUL-3) 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-3 differs from traditional whole life
insurance because you may choose the amount and frequency of
premium payments, within limits.
In addition, VUL-3 has two types death benefit options. You may
switch back and forth between these options. Variable Universal Life
3 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
and interest credited to the net premiums] [return your premium]. 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%
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
were $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. For issue ages
0 to 14, the minimum is $25,000. For insured persons age 20 to 44 at
issue and in the preferred non-smoker rate class, the minimum face
amount is $100,000.
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. In certain circumstances,
you may extend the maturity date. See "Maturity Date" on page 27.
Changes In Variable Universal Life 3
Variable Universal Life 3 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 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 act 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 a
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 of 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 29.
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 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. This includes increases resulting from the
Automatic Benefit Increase provision. (See "Automatic Benefit
Increase Provision" on page 13 for details on how and when the
increases are applied.)
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. In most states, the
Minimum Premium Period lasts until the later of the 5th contract
anniversary or the insured's 70th birthday. 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, less your loans
or withdrawals, is more than the sum of the monthly minimum
premiums required to that date. The minimum premium increases
when the face amount increases.
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 we issue the contract). The net premium is the premium
minus a sales charge, 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
10 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 20.
Any premium received before the record date will be held and earn
interest in the General Account until the day after the record date.
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 65th 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 65th
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.
(8) Living Needs Rider: This benefit provides an accelerated death
benefit as payment of an "Advanced Sum," in the event the insured
person is expected to die within 12 months.
You can choose the death benefit amount to accelerate at the time of
the claim. The maximum advanced sum is 50% of the eligible death
benefit (which is the death benefit of the contract plus the sum of any
additional death benefits on the life of the insured person provided by
any eligible riders). Currently, there is a maximum of $250,000 and a
minimum of $5,000.
There is no charge for this benefit prior to the time of a payment. The
amount of the advanced sum is reduced by expected future interest and
may be reduced by a charge for administrative expenses.
On the day we pay the accelerated benefit, we will reduce the
following in proportion to the reduction in the eligible death benefit:
a. the death benefit of the contract and of each eligible rider
b. the face amount
c. any cash values
d. any outstanding loan
When we reduce the cash value, we allocate the reduction based on the
proportion that your unloaned amounts in the General Account and
your amounts in the investment divisions bear to the total unloaned
portion of your cash value.
Pursuant to the Health Insurance Portability and Accountability
Act of 1996, we believe that for federal income tax purposes an
advanced sum payment made under the living needs rider should
be fully excludable from the gross income of the beneficiary, as
long as the beneficiary is the insured person under the contract.
However, you should consult a qualified tax advisor about the
consequences of adding this rider to a contract or requesting an
advanced sum payment under this rider.
Automatic Benefit Increase Provision
The Automatic Benefit Increase (ABI) provision is a contract rider
that allows for face amount increases to keep pace with inflation. All
standard issues of regularly underwritten policies include the ABI
provision, except where the issue age of the primary insured is older
than 55. In addition, the ABI provision is not included where the
billing mode is military government allotment, civil service allotment
or list bill.
The ABI can automatically increase your face amount every two
years, based on increases in the Consumer Price Index. The increases
will occur on the 2nd contract anniversary and every two years
thereafter, unless you reject an increase. The increases continue until
the rider terminates. We send you a notice about the increase amounts
at least 30 days before the increase date. You have the right to reject
any increase in face amount by sending us a notice before it takes
effect. If you reject an increase, then the ABI provision terminates.
(See your ABI rider for exact details.)
We calculate each face amount increase under the ABI provision as
follows:
(a) The eligible face amount, multiplied by
(b) The Consumer Price Index 5 months before the increase date,
divided by
(c) The Consumer Price Index 29 months before the increase date,
minus the eligible face amount from part (a). The eligible face
amount is the sum of the portions of the face amount of insurance
that are in the non-smoker, ordinary or preferred premium class.
The maximum increase is the lesser of $50,000 or 20% of the eligible
face amount. The ABI provision automatically terminates once the
total of the increases is more than twice the initial face amount. The
Consumer Price Index is the U.S. Consumer Price Index for all urban
consumers as published by the U.S. Department of Labor. (See your
policy form for more details on this index.)
The ABI provision does not require separate monthly charges, but it
does affect the amount of your monthly cost of insurance charge by
increasing your face amount. (See "Deductions From Your Cash
Value" on page 22.)
ABI increases also increase the planned and minimum premiums. (See
Your ABI Rider and Your Base Contract Policy Form for exact
details.)
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. 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 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 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.
VIP Growth 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.
VIP II Asset Manager Seeks high total return with reduced risk
over the long-term by allocating its assets
among domestic and foreign stocks, bonds
and short-term money market instruments.
VIP II Investment
Grade Bond Seeks as high a level of current income as is
consistent with the preservation of capital
by investing in a broad range of investment
grade fixed income securities.
VIP II Contrafund Seeks to achieve capital appreciation over
the long term by investing in securities of
companies whose value the manager
believes is not recognized fully by the
public.
VIP II
Asset Manager: Growth Seeks to maximize total return over the long
term through investments in stocks, bonds,
and short-term instruments. This portfolio
has a heavier emphasis on stocks than the
Asset Manager Portfolio.
VIP II Index 500 Seeks to provide investment results that
correspond to the total return of common
stocks publicly traded in the United States
by duplicating the composition and total
return of the Standard & Poor's Composite
Index of 500 Stocks. This is designed as a
long-term investment option.
VIP III Growth & Income Seeks high total return, combining current
income and capital appreciation. Invests
mainly in stocks that pay current dividends
and show earnings potential.
VIP III Balanced Seeks to balance the growth potential of
stocks with the possible income cushion of
bonds. Invests in broad selection of stocks,
bonds and convertible securities.
VIP III Growth Oppor.: 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 & 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 VCC 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. Massachusetts
Financial Services Company manages the MFS Variable Insurance
Trusts. Lord Abbett & 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 is 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), we make monthly deductions
and charges, and to 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 initially set at $10.00. 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 .0024547%,
which is an effective annual rate of 0.90%. (See "Mortality and
Expense Risks" on page 21.)
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. Currently, you may
make an unlimited number of transfers of cash value in each contract
year. But we reserve the right to assess a $25 charge after the 12th
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.
The transfer takes effect on the date we receive your request. 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.
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. $1,000.
Dollar Cost Averaging
The Dollar Cost Averaging (DCA) program enables you to make
monthly transfers of a predetermined dollar amount from the DCA
source account (any 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 insure 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
Whenever your contract has a net cash surrender value, you may
borrow up to 92% of the cash surrender value using only your contract
as security for the loan. If you request an additional loan, 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%. After the 10th contract year, we guarantee that the annual rate
of interest paid on the loaned portion of the cash value will equal 8%
(which is equal to the interest rate charged on the contract loan) for
the portion of the loan that is from earnings (that is, the portion that
does not exceed the cash value minus total premiums paid).
A loan taken from, or secured by, a contract may have federal income
tax consequences. See "TAX EFFECTS" on page 29.
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
up to 92% 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 50% 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 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 3.5%. We may, at our
sole discretion, credit interest in excess of 3.5%. You assume the
risk that interest credited may not exceed 3.5%. 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 sales charge, 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.
Sales Charge. We deduct a 4% sales charge from each premium
payment. This charge partially reimburses us for the selling and
distributing costs of this contract. These include commissions and the
costs of preparing sales literature and printing prospectuses. (We also
deduct a deferred sales charge if you surrender your contract for its net
cash surrender value or let your contract lapse in the first 15 years.
See "Surrender Charges" on page 23.)
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-3. We currently intend to
reduce this charge to 0.50% after the 10th contract year (this is not
guaranteed). 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.
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 $7.00 per month (currently we
plan to make this deduction for the first 15 years only, but we
reserve the right to deduct it throughout the life of the contract).
This charge 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 following rate classes:
preferred non-smoker, non-smoker, and smoker. The insured person
may also be placed in a rate class involving a higher mortality risk,
known as a substandard class. We may change the cost of insurance
rates, but they will never be more than the guaranteed maximum rates
set forth in your contract. The maximum charges are based on the
charges specified in the Commissioner's 1980 Standard Ordinary
Mortality Table. The table below shows the current and guaranteed
maximum monthly cost of insurance rates per $1,000 of amount at risk
for a male, preferred, nonsmoker, standard risk at various ages. (In
Montana, there are no distinctions based on sex.)
If Variable Universal Life 3 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 (Preferred Non-Smoker)
Age Rate Rate
5 $.07 $.05
15 .11 .11
25 .13 .09
35 .14 .10
45 .29 .23
55 .69 .39
65 1.87 1.01
For a male preferred non-smoker, age 35, with a $100,000 face
amount option 1 contract and an initial premium of $1,000, the cost of
insurance for the first month will be $9.91. This example assumes the
expense charge ($7.00 per month) and current cost of insurance rate
($.10 per $1,000).
We offer lower 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.
The preferred non-smoker cost of insurance rates are lower than the
non-smoker cost of insurance rates. To qualify for the preferred non-
smoker class, the insured person must be age 20 or over and meet
certain underwriting requirements.
Changes in Monthly Charges. Any changes in the cost of insurance,
charges for additional benefits or expense charges will be by class of
insured and will be based on changes in future expectations of
investment earnings, mortality, the length of time contracts will
remain in effect, expenses and taxes.
Automatic Benefit Increase Charges. There is no separate charge for
the Automatic Benefit Increase (ABI) provision. However, as the
automatic increases are applied (see page 13 for exact details) the face
amount of insurance will increase. The face amount increase will
cause an increase in the amount at risk and the monthly cost of
insurance charge.
Transaction Charges
In addition to the deductions described above, we charge fees for
certain contract transactions:
Partial Withdrawal of Net Cash Surrender Value. You may make
one partial withdrawal during each Contract Year without a charge.
There is an administrative charge of $25 or 2 percent of the amount
withdrawn, whichever is less, each time You make a partial
withdrawal if more than one withdrawal is made during a year.
Transfers. Currently, we do not charge when You make transfers of
Contract Fund value among investment divisions. We reserve the
right to assess a $25 charge after the twelfth transfer in a Contract
Year.
How 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 10 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) your unloaned amounts
in the General Account and your amounts in the investment divisions
(b) to 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 3. 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 two pieces:
(1) 26% of any premium payment in the first 2 contract years up to
one guideline annual premium.
(2) 5% of all other premium payments.
The sum of the above pieces is also limited by the Guideline Annual
Premium, times 5%, times the lesser of the expected future lifetime at
issue as determined by the 1980 CSO Mortality Table or 20 years.
Your contract information page specifies the guideline annual
premium. It varies for each contract.
During the first 10 contract years, the maximum deferred sales charge
may be imposed. Beginning in the 11th year the maximum deferred
sales charge will be multiplied by a percentage:
Contract Year Percentage Multiple
11 83.33%
12 66.67%
13 50.00%
14 33.33%
15 16.67%
16 and up 0.00%
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 5% of premiums. The maximum
limit will also increase by the additional Guideline Annual Premium,
times 5%, times the expected future lifetime or 20 years. 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
1-10 $3.00
11 $2.50
12 $2.00
13 $1.50
14 $1.00
15 $0.50
16+ $0.00
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.
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,
1997, 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,
1997, (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, 1997, (except as otherwise noted) are shown in
the table below.
The Lord, Abbett Portfolios have annual management fees that are
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, 1997, (except as otherwise
noted) are shown in the table below.
Management Other Total
Portfolio Fee Expenses
Expenses
VIP Money Market .21% .10% .31%
VIP High Income .59% .12% .71%
VIP Equity-Income(1) .50% .08% .58%
VIP Growth(1) .60% .09% .69%
VIP Overseas(1) .75% .17% .92%
VIP II Asset Manager(1) .55% .10% .65%
VIP II Investment
Grade Bond .44% .14% .58%
VIP II Contrafund(1) .60% .11% .71%
VIP II Asset
Manager: Growth(1) .60% .17% .77%
VIP II Index 500(2) .24% .04% .28%
VIP III Growth &
Income .49% .21% .70%
VIP III Balanced(1) .45% .16% .61%
VIP III Growth
Opportunities(1) .60% .14% .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 1.50% .00% 1.50%
American Century VP
Income & Growth(4) .70% .00% .70
MFS VIT Emerging
Growth .75% .12% .87%
MFS VIT Research .75% .13% .88%
MFS VIT Growth
With Income(3) .75% .25% 1.00%
MFS VIT New
Discovery(3) (4) .90% .25% 1.15%
Lord Abbett VCC
Growth and Income .50% .02% .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 0.67%
VIP Overseas 0.90%
VIP II Asset Manager 0.64%
VIP II Contrafund 0.78%
VIP II Asset Manager: Growth 0.76%
VIP III Balanced 0.60%
VIP III Growth Opportunities 0.73%
(2) The 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.
(3) MFS has agreed to bear expenses for these portfolios (subject to
reimbursement by these portfolios) such that each 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 0.47% 1.37%
(4) The expenses are based on estimated expenses for 1998.
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 3 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 27.
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.
If the insured person survives to the maturity date and you would like
to continue the contract, we will extend the maturity date as long as
this contract still qualifies as life insurance according to the Internal
Revenue Service and your state. If the maturity date is extended, the
contract may not qualify as life insurance and there may be tax
consequences. A tax advisor should be consulted before you elect to
extend the maturity date. In order to continue the contract beyond the
original maturity date, we require that the death benefit not exceed the
cash value on the original maturity date.
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 3 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 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 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 3 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 3 for favorable tax treatment.
Assuming a contract is a life insurance contract for federal income tax
purposes, the contract should receive the same federal income tax treat-
ment 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 be sure
to consult a qualified tax advisor regarding the tax attributes of the
particular arrangement.
In recent years, Congress has adopted new rules relating to corporate
owned life insurance. Any business contemplating the purchase of a
new life insurance contract or a change in an existing contract should
consult a tax 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 could 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 effected 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 in
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 70% 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
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 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
Coopers & Lybrand LLP, independent auditors, for the periods
indicated in their report which appears in this prospectus and in the
registration statement. The address for Coopers & Lybrand LLP is
IBM Park Building, Suite 1300, 650 Third Avenue South,
Minneapolis, 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 Chief
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.
APPENDIX A: Management of Midland
Here is a list of our directors and officers.
Directors
Name and
Business Address
Principal Occupation
Principal Occupation During
Past Five Years
John C. Watson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chairman of the Board
Chairman of the Board
(October 1992 to present), Chairman of the Board and
Chief Executive Officer (October 1992 to March 1997), Midland
National Insurance Company; President and Director (1992 to present)
Consolidated Investment Services, Inc.; Chairman of the Board,
President, and Chief Executive Officer (December 1996 to present),
Sammons Financial Holdings, Inc.; Chairman of the Board and Chief
Executive Officer (December 1996 to present), North American
Company for Life and Health Insurance; President and Director (1996
to present), Briggs ITD Corporation; Director (1996 to present),
NACOLAH Holding Corporation; Director (1996 to present), North
American Company for Life and Health of New York; Director (1996
to present), NACOLAH Life Insurance Company; Director (1996 to
present), Institutional Founders Life Insurance Company; Chairman of
the Board (1995-present), Midland Advisors Company; President and
Director (1992 to present), CH Holdings, Inc.; Director, (1992 to
present), Sammons Enterprises Inc.; Chairman of the Board and Chief
Executive Officer (October 1992 to January 1997), Investors Life
Insurance Company of Nebraska; President and Chief Operating
Officer (1990 to October 1992), Franklin Life Insurance Company
Michael M. Masterson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chief Executive Officer and President
Chief Executive Officer and
President (March 1997 to present) President and Chief Operating Officer
March 1996 to February 1997), Executive Vice President-Marketing
(March 1995 to February 1996), Midland National Life Insurance
Company; President and Chief Operating Officer (March 1996 to
December 1996), Executive Vice President-Marketing (March 1995 to
February 1996), Investors Life Insurance Company of Nebraska; Vice
President - Individual Sales (prior thereto), Northwestern National
Life
Russell A. Evenson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior Vice President and Chief Actuary
Senior Vice
President & 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
Senior Vice President and Chief
Marketing Officer
Senior Vice President and Chief
Marketing Officer (March 1997 to present), Senior Vice President-
Sales (August 1996 to February 1997), Midland National Life
Insurance Company; Senior Vice President-Sales (prior thereto), Penn
Mutual Life Insurance
Robert W. Korba
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of Directors Member
President and Director
(since 1988), Sammons Enterprises, Inc.
Executive Officers (other than Directors)
Name and
Business Address
Principal Occupation
Principal Occupation
During Past Five Years
E John Fromelt
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chief Investment Officer
Chief
Investment Officer (since 1990), Midland National Life Insurance
Company; President (since August 1995), Midland Advisors
Company; Chief Investment Officer (1996 to present), North
American Company for Life and Health; Chief Investment Officer
(1990-1996), Investors Life Insurance Company of Nebraska
Jack L. Briggs
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President, Secretary, and General
Counsel
Vice President, Secretary and General
Counsel (since 1978), Midland National Life Insurance Company;
Vice President, Secretary, and General Counsel (1978 to 1996),
Investors Life Insurance Company of Nebraska
Gary W. Helder
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President-Policy Administration
Vice President
Policy Administration (since 1991), Midland National Life Insurance
Company; Vice President-Policy Administration (1991-1996), Investors Life
Insurance Company of Nebraska
Robert W. Buchanan
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President- Marketing Services
Vice President-
Marketing Services (March 1996 to present), Second Vice President-Sales
Development (prior thereto), Midland National Life Insurance Company;
Second Vice President-Sales Development (1983 to 1996), Investors Life
Insurance Company of Nebraska
Thomas M. Meyer
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President and Chief Financial
Officer
Vice President and Chief Financial
Officer (January 1998 to present), Second Vice President and
Controller (1995 to 1998), Midland National Life Insurance Company
APPENDIX B: 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 31 through 33 illustrate a contract issued to a male, age 25,
under a standard rate preferred non-smoker underwriting risk
classification. The tables on pages 34 through 36 illustrate a contract
issued to a male, age 40, under a standard rate preferred non-smoker
underwriting risk classification. The 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 4% sales charge deduction
from each premium, the 2.5% premium tax deduction from each
premium and the $7.00 per month expense charge (for the first fifteen
years on a current basis) as well as current and guaranteed cost of
insurance charges.
The contract values shown assume daily investment advisory fees and
operating expenses equivalent to an annual rate of .75% 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,
1997). The actual fees and expenses associated with the contract may
be more or less than .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 .90% (.50% after
year 10 on a current basis) of the average net assets of the divisions of
Separate Account A. After deductions of these amounts, the illustrated
gross investment rates of 0%, 6%, and 12% correspond to approximate
net annual rates of -1.65%, 4.35%, and 10.35%, respectively (-1.25%,
4.75%, 10.75% after year 10 on a current basis).
The hypothetical values shown in the tables do not reflect any charges
for federal income taxes against Separate Account A since Midland is
not currently making such charges. However, if, in the future, such
charges are made, the gross annual investment rate of return would
have to exceed the stated investment rates by a sufficient amount to
cover the tax charges in order to produce the 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.
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 494 19 100,000 453 -23 100,000
2 1,614 981 468 100,000 910 397 100,000
3 2,483 1,448 897 100,000 1,361 811 100,000
4 3,394 1,908 1,320 100,000 1,805 1,217 100,000
5 4,351 2,361 1,735 100,000 2,243 1,617 100,000
6 5,357 2,807 2,144 100,000 2,673 2,010 100,000
7 6,412 3,246 2,546 100,000 3,098 2,397 100,000
8 7,520 3,679 2,941 100,000 3,504 2,766 100,000
9 8,683 4,105 3,329 100,000 3,904 3,129 100,000
10 9,905 4,524 3,711 100,000 4,287 3,474 100,000
11 11,188 4,958 4,249 100,000 4,664 3,956 100,000
12 12,535 5,375 4,783 100,000 5,025 4,433 100,000
13 13,949 5,776 5,313 100,000 5,369 4,906 100,000
14 15,434 6,162 5,843 100,000 5,696 5,377 100,000
15 16,993 6,532 6,373 100,000 6,008 5,848 100,000
16 18,630 6,977 6,977 100,000 6,293 6,293 100,000
17 20,349 7,406 7,406 100,000 6,563 6,563 100,000
18 22,154 7,809 7,809 100,000 6,807 6,807 100,000
19 24,049 8,196 8,196 100,000 7,025 7,025 100,000
20 26,039 8,558 8,558 100,000 7,218 7,218 100,000
21 28,129 8,894 8,894 100,000 7,387 7,387 100,000
22 30,323 9,216 9,216 100,000 7,532 7,532 100,000
23 32,627 9,524 9,524 100,000 7,642 7,642 100,000
24 35,045 9,808 9,808 100,000 7,729 7,729 100,000
25 37,585 10,079 10,079 100,000 7,781 7,781 100,000
30 52,321 11,133 11,133 100,000 7,334 7,334 100,000
35 71,127 11,478 11,478 100,000 5,149 5,149 100,000
40 95,130 10,335 10,335 100,000 0 0 0
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.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 530 54 100,000 487 12 100,000
2 1,614 1,083 570 100,000 1,008 495 100,000
3 2,483 1,649 1,099 100,000 1,553 1,003 100,000
4 3,394 2,241 1,653 100,000 2,122 1,534 100,000
5 4,351 2,859 2,233 100,000 2,717 2,092 100,000
6 5,357 3,504 2,841 100,000 3,339 2,676 100,000
7 6,412 4,179 3,478 100,000 3,988 3,288 100,000
8 7,520 4,883 4,145 100,000 4,655 3,917 100,000
9 8,683 5,619 4,844 100,000 5,352 4,577 100,000
10 9,905 6,388 5,575 100,000 6,070 5,257 100,000
11 11,188 7,220 6,511 100,000 6,819 6,110 100,000
12 12,535 8,080 7,488 100,000 7,591 6,999 100,000
13 13,949 8,972 8,509 100,000 8,387 7,924 100,000
14 15,434 9,896 9,577 100,000 9,208 8,889 100,000
15 16,993 10,854 10,695 100,000 10,055 9,896 100,000
16 18,630 11,942 11,942 100,000 10,919 10,919 100,000
17 20,349 13,072 13,072 100,000 11,812 11,812 100,000
18 22,154 14,237 14,237 100,000 12,725 12,725 100,000
19 24,049 15,449 15,449 100,000 13,659 13,659 100,000
20 26,039 16,701 16,701 100,000 14,615 14,615 100,000
21 28,129 17,996 17,996 100,000 15,596 15,596 100,000
22 30,323 19,346 19,346 100,000 16,602 16,602 100,000
23 32,627 20,755 20,755 100,000 17,625 17,625 100,000
24 35,045 22,215 22,215 100,000 18,677 18,677 100,000
25 37,585 23,741 23,741 100,000 19,750 19,750 100,000
30 52,321 32,387 32,387 100,000 25,295 25,295 100,000
35 71,127 42,975 42,975 100,000 30,820 30,820 100,000
40 95,130 55,742 55,742 100,000 35,569 35,569 100,000
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.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 566 90 100,000 522 46 100,000
2 1,614 1,190 677 100,000 1,111 598 100,000
3 2,483 1,868 1,318 100,000 1,761 1,211 100,000
4 3,394 2,617 2,029 100,000 2,481 1,893 100,000
5 4,351 3,445 2,819 100,000 3,276 2,650 100,000
6 5,357 4,359 3,696 100,000 4,154 3,491 100,000
7 6,412 5,369 4,668 100,000 5,125 4,424 100,000
8 7,520 6,484 5,746 100,000 6,186 5,448 100,000
9 8,683 7,717 6,942 100,000 7,358 6,583 100,000
10 9,905 9,079 8,266 100,000 8,642 7,829 100,000
11 11,188 10,623 9,914 100,000 10,062 9,353 100,000
12 12,535 12,323 11,731 100,000 11,620 11,028 100,000
13 13,949 14,197 13,735 100,000 13,331 12,868 100,000
14 15,434 16,266 15,947 100,000 15,212 14,893 100,000
15 16,993 18,549 18,390 100,000 17,281 17,122 100,000
16 18,630 21,168 21,168 100,000 19,549 19,549 100,000
17 20,349 24,063 24,063 100,000 22,047 22,047 100,000
18 22,154 27,258 27,258 100,000 24,792 24,792 100,000
19 24,049 30,794 30,794 100,000 27,811 27,811 100,000
20 26,039 34,702 34,702 100,000 31,134 31,134 100,000
21 28,129 39,025 39,025 100,000 34,796 34,796 100,000
22 30,323 43,819 43,819 100,000 38,835 38,835 100,000
23 32,627 49,137 49,137 100,000 43,286 43,286 100,000
24 35,045 55,031 55,031 108,412 48,205 48,205 100,000
25 37,585 61,576 61,576 117,610 53,637 53,637 102,447
30 52,321 106,933 106,933 167,885 90,809 90,809 142,570
35 71,127 184,439 184,439 247,148 154,040 154,040 206,413
40 95,130 320,376 320,376 390,858 267,291 267,291 326,096
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.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,114 458 100,000 1,061 405 100,000
2 3,229 2,200 1,469 100,000 2,096 1,365 100,000
3 4,965 3,247 2,441 100,000 3,093 2,287 100,000
4 6,788 4,268 3,387 100,000 4,053 3,172 100,000
5 8,703 5,252 4,295 100,000 4,978 4,022 100,000
6 10,713 6,199 5,168 100,000 5,869 4,837 100,000
7 12,824 7,123 6,016 100,000 6,725 5,619 100,000
8 15,040 8,023 6,841 100,000 7,538 6,356 100,000
9 17,367 8,889 7,633 100,000 8,318 7,062 100,000
10 19,810 9,733 8,401 100,000 9,057 7,726 100,000
11 22,376 10,599 9,427 100,000 9,744 8,572 100,000
12 25,069 11,436 10,448 100,000 10,381 9,393 100,000
13 27,898 12,244 11,466 100,000 10,968 10,190 100,000
14 30,868 13,025 12,482 100,000 11,486 10,943 100,000
15 33,986 13,779 13,506 100,000 11,947 11,674 100,000
16 37,261 14,597 14,597 100,000 12,331 12,331 100,000
17 40,699 15,377 15,377 100,000 12,640 12,640 100,000
18 44,309 16,122 16,122 100,000 12,873 12,873 100,000
19 48,099 16,822 16,822 100,000 13,013 13,013 100,000
20 52,079 17,468 17,468 100,000 13,059 13,059 100,000
21 56,258 18,052 18,052 100,000 13,001 13,001 100,000
22 60,646 18,574 18,574 100,000 12,820 12,820 100,000
23 65,253 19,027 19,027 100,000 12,494 12,494 100,000
24 70,091 19,401 19,401 100,000 12,012 12,012 100,000
25 75,170 19,689 19,689 100,000 11,350 11,350 100,000
30 104,641 19,495 19,495 100,000 4,568 4,568 100,000
35 142,254 16,250 16,250 100,000 0 0 0
40 190,260 7,867 7,867 100,000 0 0 0
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.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,190 533 100,000 1,135 479 100,000
2 3,229 2,421 1,690 100,000 2,310 1,579 100,000
3 4,965 3,685 2,879 100,000 3,516 2,710 100,000
4 6,788 4,995 4,114 100,000 4,754 3,873 100,000
5 8,703 6,342 5,386 100,000 6,027 5,071 100,000
6 10,713 7,729 6,698 100,000 7,337 6,306 100,000
7 12,824 9,169 8,063 100,000 8,686 7,580 100,000
8 15,040 10,665 9,484 100,000 10,066 8,885 100,000
9 17,367 12,209 10,953 100,000 11,490 10,234 100,000
10 19,810 13,814 12,483 100,000 12,951 11,620 100,000
11 22,376 15,545 14,374 100,000 14,439 13,268 100,000
12 25,069 17,344 16,357 100,000 15,960 14,972 100,000
13 27,898 19,216 18,438 100,000 17,514 16,736 100,000
14 30,868 21,165 20,621 100,000 19,087 18,543 100,000
15 33,986 23,195 22,922 100,000 20,690 20,416 100,000
16 37,261 25,406 25,406 100,000 22,308 22,308 100,000
17 40,699 27,706 27,706 100,000 23,945 23,945 100,000
18 44,309 30,101 30,101 100,000 25,604 25,604 100,000
19 48,099 32,590 32,590 100,000 27,272 27,272 100,000
20 52,079 35,172 35,172 100,000 28,952 28,952 100,000
21 56,258 37,847 37,847 100,000 30,642 30,642 100,000
22 60,646 40,626 40,626 100,000 32,327 32,327 100,000
23 65,253 43,510 43,510 100,000 33,998 33,998 100,000
24 70,091 46,503 46,503 100,000 35,651 35,651 100,000
25 75,170 49,613 49,613 100,000 37,275 37,275 100,000
30 104,641 67,236 67,236 100,000 44,720 44,720 100,000
35 142,254 90,238 90,238 100,000 49,546 49,546 100,000
40 190,260 123,114 123,114 129,270 47,187 47,187 100,000
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.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,265 609 100,000 1,209 553 100,000
2 3,229 2,652 1,921 100,000 2,534 1,803 100,000
3 4,965 4,160 3,354 100,000 3,976 3,170 100,000
4 6,788 5,817 4,935 100,000 5,547 4,666 100,000
5 8,703 7,625 6,669 100,000 7,262 6,306 100,000
6 10,713 9,603 8,571 100,000 9,138 8,107 100,000
7 12,824 11,780 10,674 100,000 11,193 10,087 100,000
8 15,040 14,178 12,997 100,000 13,436 12,255 100,000
9 17,367 16,812 15,555 100,000 15,900 14,643 100,000
10 19,810 19,717 18,385 100,000 18,599 17,267 100,000
11 22,376 23,007 21,835 100,000 21,551 20,379 100,000
12 25,069 26,645 25,658 100,000 24,786 23,799 100,000
13 27,898 30,671 29,893 100,000 28,340 27,562 100,000
14 30,868 35,131 34,587 100,000 32,233 31,690 100,000
15 33,986 40,074 39,801 100,000 36,517 36,244 100,000
16 37,261 45,655 45,655 100,000 41,226 41,226 100,000
17 40,699 51,846 51,846 100,000 46,416 46,416 100,000
18 44,309 58,719 58,719 100,000 52,151 52,151 100,000
19 48,099 66,354 66,354 100,000 58,492 58,492 100,000
20 52,079 74,841 74,841 100,286 65,523 65,523 100,000
21 56,258 84,285 84,285 109,571 73,339 73,339 100,000
22 60,646 94,813 94,813 121,361 82,045 82,045 105,018
23 65,253 106,566 106,566 134,273 91,772 91,772 115,633
24 70,091 119,710 119,710 148,440 102,679 102,679 127,322
25 75,170 134,440 134,440 164,017 114,955 114,955 140,245
30 104,641 241,476 241,476 280,112 206,904 206,904 240,009
35 142,254 444,946 444,946 476,092 404,076 404,076 432,361
40 190,260 863,700 863,700 906,885 925,876 925,876 972,170
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.
</TABLE>
APPENDIX C: 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,
and Christmas Eve Day. These days along with the days the New York
Stock Exchange is not open for trading will not be counted as Business
Days.
Contract Fund means the total amount of monies in our Separate
Account A attributable to your in force contract. It also includes
monies in our General Account for your contract.
Cash Surrender Value means the Contract Fund on the date of
surrender, less any Surrender Charges.
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: For all contracts except those issued in
Massachusetts or Pennsylvania, this is the period of time beginning on
the Contract Date and ending on the later of attained age 70 or five
years from the Contract Date. For contracts issued in Pennsylvania
where the issue age is 50 or younger, this period of time is for 20 years
from the Contract Date. For contracts issued in Massachusetts, this
period of time is for 5 years from the Contract Date.
Monthly Anniversary means the day of each month that has the same
numerical date as the Contract Date.
Net Cash Surrender Value means the Cash Surrender Value less any
outstanding contract loan.
Net Premium means the premium paid less any deduction for
premium taxes, less any deduction for the sales charge and less any
per premium expenses.
Record Date means the date the contract is recorded on Our books as
an In Force contract.
Separate Account means Our Separate Account A which receives and
invests your net premiums under the contract.
Surrender Charges means a charge made only upon surrender of the
contract. It includes a charge for sales related expenses and issue
related expenses.
APPENDIX D: 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 sales
charge, 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.
APPENDIX E: 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.
6234PMP1.TXT
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securi-
ties Exchange Act of 1934, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary
and periodic information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore, or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling per-
sons of the registrant pursuant to the foregoing provisions, or other-
wise, the registrant has been advised that in the opinion of the Securi-
ties and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnifi-
cation by it is against public policy as expressed in the Act and will
be governed by the final jurisdiction of such issue.
UNDRTAKE.TXT
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 49 pages.
The undertaking to file reports.
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs 4
(b) Sutherland, Asbill & Brennan, L L P 4
(c) Russell A. Evenson, FSA. 4
(d) Coopers & Lybrand, L L P 4
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. 3
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. 1
(b) Selling Agreement. 1
(c) Commission schedule. 1
--------------------
(4) Not applicable.
(5) Form of Contract. 1
- -----------------------
1 Filed previously in Pre-Effective Amendment No. 1 to this Form S-6
Registration Statement (File No. 333-14061) on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 to this Form S-6
Registration Statement (File No. 333-14061) on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 to this Form S-6
Registration Statement (File No. 333-14061) on April 28, 1998.
4 To be filed by amendment.
<PAGE>
(6) (a) Articles of Incorporation of Midland National Life. 3
(b) By-Laws of Midland National Life. 3
(7) Not applicable.
(8) (a) Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. 2
(8) (b) Amendments to Participation Agreements for Fidelity
Distributors Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. 2
(8) (c) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III. 3
(8) (d) Participation Agreement for American Century Investment
Services, Inc. 2
(9) Not applicable.
(10) Application Form. 1
(11) Memorandum describing Midland National Life's insurance, transfer
and redemption procedures for the Contract. 1
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. 1
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. 4
7. Consent of Sutherland, Asbill & Brennan, L L P 4
8. Consent of Coopers & Lybrand, L L P 4
- -----------------------
1 Filed previously in Pre-Effective Amendment No. 1 to this Form S-6
Registration Statement (File No. 333-14061) on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 to this Form S-6
Registration Statement (File No. 333-14061) on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 to this Form S-6
Registration Statement (File No. 333-14061) on April 28, 1998.
4 To be filed by amendment.
CONPEVL3.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 11th day of January, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:/s/_Michael M. Masterson________________
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 M. Masterson__ Director, Chairman of the January 11, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
/s/_John J. Craig______ Director, Executive Vice January 11, 1999
John J. Craig II President
/s/_Russell Evenson___ Director, Senior Vice January 11, 1999
Russell A. Evenson President and Chief
Actuary
/s/_Steven_Palmitier___ Director, Senior Vice January 11, 1999
Steven C. Palmitier President and Chief
Marketing Officer
/s/_Thomas_Meyer_______ Vice President and January 11, 1999
Thomas M. Meyer Chief Financial
Officer
_______________________ Director and Vice President January 11, 1999
Robert W. Korba
SECPEVL2.TXT
<PAGE>