Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account C
File Number 33-64016
Commissioners:
Enclosed for filing is a copy, including exhibits of Post-Effective
Amendment Number 10 to the above referenced Form N-4 Registration Statement.
This amendment is being filed pursuant to paragraph (b) Rule 485,
and pursuant to subparagraph (b) (4) of that Rule, we certify the
amendment does not contain disclosure which would render it ineligible
to become effective pursuant to said paragraph (b).
If you have any comments or questions about this filing, please contact
Fred Bellamy of Sutherland Asbill and Brennan at 202-383-0126.
Sincerely,
Paul M. Phalen, CLU, FLMI
Assistant Vice-President
Variable Services
VA2CVR.TXT
<PAGE>
Registration No. 33-64016
FORM N-4
--------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___
Pre-Effective Amendment No. ___
Post-Effective Amendment No. _10_
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _10_
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT C
(Exact Name of Registrant)
MIDLAND NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
One Midland Plaza
Sioux Falls, SD 57193
(Address of Depositor's Principal Executive Office)
605-335-5700
(Depositor's Telephone Number, including Area Code:
_________________________
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)
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) of Rule 485
_X_ on April 28, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a) (i) of Rule 485
___ on ___(date)________ pursuant to paragraph (a) (ii) 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.
Titles of Securities Being Registered: __Variable_Annuity_Contracts__
Variable_Annuity_II Contracts__
N4VA2
<PAGE>
Variable Annuity II
Prospectus
May 1, 1999 2000
Please read this prospectus for details on the contract
being offered to you and keep it for future reference.
This prospectus sets forth the information that a
prospective investor should know before investing.
A Statement of Additional Information ("SAI") about
the contract and Separate Account C is available by
checking the appropriate box on the application form
or by writing to Midland at:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
(605) 335-5700
The SAI, dated May 1, 1999 2000 , has been filed
with the U.S. Securities and Exchange Commission
("SEC") and is incorporated herein by reference. The
table of contents of the SAI is included at the end of
this prospectus.
The SEC 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.
The contracts involve investment risk, including
possible loss of principal. The contracts are not a
deposit of, or guaranteed or endorsed by, any
bank or depository institution, and the contract is
not federally insured by the federal deposit
insurance corporation or any other agency.
This prospectus is valid only when accompanied
by the Funds' current prospectuses.
You may allocate your premiums to our General
Account and/or to up to 10 mutual fund Portfolios.
Flexible Premium Deferred Variable Annuity
Contract (Variable Annuity II)
issued by
Midland National Life Insurance Company
through
Midland National Life Separate Account C
The prospectuses for the following Funds:
Fidelity's Variable Insurance Products Funds
Initial Class ,
American Century's Variable Portfolio Inc.,
MFS(r) Variable Insurance Trusts, and
Lord Abbett's Series Funds, Inc.,
describe the investment objectives, policies, and risks
of the Funds' portfolios that are available under the
contracts:
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
Portfolio
19 MFS VIT Emerging Growth Portfolio Series
20 MFS VIT Research Portfolio Series
21 MFS VIT Growth with Income Portfolio
Series
22 MFS VIT New Discovery Portfolio Series
23 Lord Abbett VC Series Fund, Inc. Growth and
Income Portfolio (hereinafter referred to as Lord
Abbett VC Growth and Income Portfolio)
Lord Abbett Series Fund Inc. Mid-Cap Value
Portfolio (hereinafter referred to as Lord Abbett
VC Mid-Cap Value Portfolio)
Lord Abbett Series Fund Inc. International
Portfolio (hereinafter referred to as Lord Abbett
VC International Portfolio)
Table of Contents
Definitions 3
SUMMARY 4
Features of Variable Annuity II 4
Investment Choices 4
Withdrawals 5
Charges Under the Contracts 6
Fee Table 8
Additional Information About Variable Annuity II 13
SEPARATE ACCOUNT C AND THE FUNDS 13
Our Separate Account And Its Investment Divisions 13
The Funds 13
Investment Policies Of The Funds' Portfolios 14
We Own The Assets Of Our Separate Account 16
Our Right To Change How We Operate Our Separate
Account 16
DETAILED INFORMATION ABOUT THE
CONTRACT 17
Requirements for Issuance of a Contract 17
Free Look 18
Allocation of Premiums 18
Changing Your Premium Allocation Percentages 18
Transfers of Contract Value 18
Dollar Cost Averaging 18
Portfolio Rebalancing 19
Systematic Withdrawals 19
Withdrawals 20
Loans 20
Death Benefit 20
Your Contract Value 24
Amounts In Our Separate Account 24
The General Account 22
CHARGES, FEES AND DEDUCTIONS 23
Sales Charges on Withdrawals 23
Free Withdrawal Amount 26
Administrative Charge 24
Mortality and Expense Risk Charge 24
Contract Maintenance Charge 24
Premium Taxes 24
Transfer Charge 24
Charges In The Funds 27
FEDERAL TAX STATUS 27
Introduction 27
Diversification 27
Taxation of Annuities in General 26
Our Income Taxes 32
Withholding 29
MATURITY DATE 29
SELECTING AN ANNUITY OPTION 32
Fixed Options 32
Variable Options 31
Transfers after the Maturity Date 31
ADDITIONAL INFORMATION 32
Midland National Life Insurance Company 32
Your Voting Rights As an Owner 32
Our Reports to Owners 36
Contract Periods, Anniversaries 33
Dividends 33
Performance 33
Your Beneficiary 34
Assigning Your Contract 34
When We Pay Proceeds From This Contract 34
Sales Agreements 34
Regulation 34
Year 2000 Compliance Issues 35
Discount for Midland Employees of Sammons
Enterprises, Inc. 38
Legal Matters 39
Experts Financials 39
Statement of Additional Information 39
Condensed Financial Statements 41
Definitions
Accumulation Unit means the units credited to each
investment division in the Separate Account before
the maturity date.
Annuitant means the person, designated by the
owner, upon whose life annuity payments are
intended to be based on the maturity date.
Annuity Unit means the units in the Separate
Account, after the maturity date that are used to
determine the amount of the annuity payment.
Attained Age means the issue age plus the number of
complete Contract Years since the Contract Date.
Beneficiary means the person or persons to whom
the contract's death benefit is paid when the annuitant
dies before the maturity date.
Business Day means any day we are open and the
New York Stock Exchange is open for trading. The
holidays which we are closed, but the New York
Stock Exchange is open are the day after
Thanksgiving the day before Christmas Eve Day and
New Year's Eve Day and December 26, 2000. These
days along with the days the New York Stock
Exchange is not open for trading will not be counted
as business days.
Cash Surrender Value means the Contract Value on
the date of surrender minus the contract maintenance
charge and any contingent deferred sales charge.
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 Value means the total amount of monies in
our Separate Account C attributable to your in force
contract. It also includes monies in our General
Account for your contract.
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 if the annuitant dies before the maturity date.
Funds mean the investment companies, more
commonly called mutual funds, available for
investment by Separate Account C on the Contract
Date or as later changed by us.
Home Executive Office means where you write to us
to pay premiums or take other action, such as
transfers between investment divisions. The address
is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
In Force means the Annuitant's life remains insured
under the terms of the contract.
Investment Division means a division of Separate
Account C which invests exclusively in the shares of
a specified portfolio of the Funds.
Issue Age means the age of the annuitant on his/her
birthday that is nearest to the Contract Date.
Maturity Date means the date, specified in the
contract, when annuity payments are to begin.
Net Premium means your premium payment minus
any premium tax charge.
Owner means the person who purchases an
Individual Variable Annuity Contract and makes the
premium payments. The owner has all rights in the
contract before the maturity date, including the rights
to make withdrawals or surrender the contract, to
designate and change the beneficiaries who will
receive the proceeds at the annuitant's death before
the maturity date, to transfer funds among the
investment divisions, and to designate a mode of
settlement for the annuitant on the maturity date.
Payee means the person who is entitled to receive
annuity payments after an annuity is effected. On or
after the maturity date, the annuitant will be the
payee. Before the maturity date, you will be the
payee.
Separate Account means our Separate Account C
which receives and invests your premiums under the
contract.
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
"annuitant", because the annuitant and the owner may
might not be the same.
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.
Features of Variable Annuity II
The individual flexible premium deferred variable
annuity contracts described in this prospectus provide
for accumulation of the contract value and payment
of annuity payments on a fixed or variable basis.
Variable payment options are not available in certain
states. The contracts are designed to aid individuals
in long term planning for retirement or other long
term purposes.
The contracts are available for retirement plans which
that do not qualify for the special federal tax
advantages available under the Internal Revenue
Code (Non-Qualified Plans) and for retirement plans
which do qualify for those tax advantages (Qualified
Plans).
This prospectus generally describes only the variable
portion of the contract, except where the General
Account is specifically mentioned.
The Variable Annuity II pays a death benefit when
the annuitant dies before the maturity date if the
contract is still in force. The death benefit is equal to
the greater of (a) the contract value, (b) premiums
paid less withdrawals, or (c) the guaranteed minimum
death benefit.
Your Contract Value
Your contract value depends on:
the amount and frequency of premium payments,
the selected portfolio's investment experience,
interest earned on amounts allocated to the General
Account,
withdrawals, and
charges and deductions.
You bear the investment risk under the Variable
Annuity II (except for amounts in the General
Account) . There is no minimum guaranteed cash
value with respect to any amounts allocated to the
Separate Account. (See "Your Contract Value" on
page 24.)
Flexible Premium Payments
You may pay premiums whenever you want and in
whatever amount you want, within certain limits. We
require an initial minimum premium of at least
$2,000; other premium payments must be at least
$50. (Currently, we waive the initial minimum
premium requirement for certain qualified contracts
enrolled in a bank draft investment program or
payroll deduction plan.)
You will choose a planned periodic premium. You
need not pay premiums according to the planned
schedule.
Investment Choices
You may allocate your contract value to up to ten of
the investment divisions of our Separate Account.
You may also allocate your contract value to our
General Account, which pays interest at a declared
rate.
Each of the Separate Account investment divisions
invests in shares of a corresponding portfolio of one
of the following "series" type mutual funds:
(1) Fidelity's Variable Insurance Products Fund
(VIP), (2) Fidelity's Variable Insurance Products
Fund II (VIP II), (3) Fidelity's Variable Insurance
Products Fund III (VIP III), (4) American Century's
Variable Portfolios, Inc., (5) MFS(r) Variable
Insurance Trusts, and (6) Lord Abbett's Series Fund,
Inc. The portfolios have different investment policies
and objectives.
For a full description of the portfolios, see the Funds'
prospectuses, which accompany this prospectus. (See
The Funds on page 13.)
The investment divisions that invest in portfolios of
Fidelity's Variable Insurance Products Fund are:
VIP Money Market Portfolio
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
The investment divisions that invest in portfolios of
Fidelity's Variable Insurance Products Fund II are:
VIP II Asset Manager Portfolio
VIP II Investment Grade Bond Portfolio
VIP II Contrafund Portfolio
VIP II Asset Manager: Growth Portfolio
VIP II Index 500 Portfolio
The investment divisions that invest in portfolios of
Fidelity's Variable Insurance Products Fund III are:
VIP III Growth & Income Portfolio
VIP III Balanced Portfolio
VIP III Growth Opportunities Portfolio
The investment divisions that invest in portfolios of
the American Century Variable Portfolios, Inc. are:
VP Capital Appreciation Portfolio
VP Value Portfolio
VP Balanced Portfolio
VP International Portfolio
VP Income & Growth Portfolio
The investment divisions that invest in portfolios of
the MFS(r) Variable Insurance Trusts are:
VIT Emerging Growth Portfolio Series
VIT Research Series
VIT Growth with Income Series
VIT New Discovery Series
The investment divisions that invests in a portfolio of
the Lord Abbett Series Fund, Inc. is are :
VC Growth and & Income Portfolio
VC Mid-Cap Value Portfolio
VC International Portfolio
Each portfolio pays a different investment
management or advisory fee and different operating
expenses. The fees and expenses for the year ending
December 31, 1998 1999 are shown under the table
of Portfolio Annual Expenses.
See "Investment Policies Of The Funds' Portfolios"
on page 14, and "Charges In The Funds" on page 27.
Withdrawals
You may generally withdraw all or part of your cash
surrender value at any time, before annuity payments
begin. You may also elect a systematic withdrawal
option (See "Systematic Withdrawals" on page 19.)
(Your retirement plan may restrict withdrawals.) A
We may impose a contingent deferred sales charge
may be imposed on any withdrawal (including
withdrawals to begin annuity payments) , and upon
full withdrawal we may also deduct a contract
maintenance charge may also be imposed . The
amount you request plus any deferred sales charge
will be deducted from your contract value. You may
take a withdrawal in a lump sum or use it to purchase
an annuity that will continue as long as you live or for
some other period you select. A withdrawal may
have negative tax consequences, including a 10% tax
penalty on certain withdrawals prior to age 59 1/2.
Three years after the contract date, the contingent
deferred sales charge will be waived upon the
withdrawal of funds to effect a life annuity. (See
"Sales Charges on Withdrawals" on page 25,
"FEDERAL TAX STATUS" on page 27, and
"SELECTING AN ANNUITY" on page 32.)
Withdrawals from contracts used in connection with
tax-qualified retirement plans may be restricted or
penalized by the terms of the plan or applicable law.
Charges Under the Contracts
Sales Charge
Sales expenses are not deducted from premium
payments. However, a contingent deferred sales
charge may be assessed against contract values when
they are withdrawn, including withdrawals to effect
an annuity and systematic withdrawals. (See "Sales
Charges on Withdrawals" on page 25.)
The length of time between the receipt of each
premium payment and the withdrawal determines the
contingent deferred sales charge. For this purpose,
premium payments will be deemed to be withdrawn
in the order in which they are received and all
withdrawals will be made first from premium
payments and then from other contract values. The
charge is a percentage of the premiums and is as
follows:
Length of Time Contingent
From Premium Payment Deferred Sales
(Number of Years) Charge
0-1 8%
1-2 8%
2-3 7%
3-4 7%
4-5 6%
5-6 5%
6-7 4%
7-8 2%
8 or more 0%
No contingent deferred sales charge will be assessed
upon:
(a) payment of death proceeds under the contract, or
(b) exercise of the free withdrawal privilege.
In addition, Midland will not assess a contingent
deferred sales charge on either a full or partial
surrender withdrawal [( subject to approval of the
state insurance authorities ]) after the first contract
anniversary if:
(a) our home executive office receives written proof
that the owner is confined in a state licensed in-
patient nursing facility for a total of 90 days,
provided we receive your withdrawal request
before or within 90 days after discharge from
such facilities; or
(b) a licensed physician provides a written statement
to us that the owner is expected to die within the
next 12 months due to a non-correctable medical
condition. The licensed physician cannot be the
owner or part of the owner's immediate family.
We reserve the right to have a physician of our
choice examine the owner.
Withdrawals may be subject to tax consequences.
(See "Withdrawals" on page 20 and "FEDERAL
TAX STATUS" on page 27.)
Free Withdrawal Amount
You may make a withdrawal from your contract
value of up to 10% of the total premiums paid (as
determined on the date of the requested withdrawal),
minus any withdrawals made in the prior 12 months,
without incurring a contingent deferred sales charge.
(See "Free Withdrawal Amount" on page 26.)
Mortality and Expense Risk Charge
Midland deducts a 1.25% per annum charge against
all contract values held in the Separate Account for
assuming the mortality and expense risks under the
contract. (See "Mortality and Expense Risk Charge"
on page 26.)
Administration and Maintenance Fee
An administration charge of 0.15% per annum is
deducted from all contract values held in the Separate
Account. In addition, a maintenance charge of $35 is
deducted annually from each contract. Currently, we
waive the $35 annual maintenance charge for
contracts with a value of $50,000 or more on the
contract anniversary. (See "CHARGES, FEES AND
DEDUCTIONS" on page 25.)
Premium Taxes
Currently, we do not deduct for premium taxes. We
reserve the right to deduct for premium taxes for
contracts sold in states that charge a premium tax.
Midland will deduct from all premium payments the
amount of any premium taxes levied by a state or any
government entity. (See Premium Taxes on page 24).
Because of the contingent deferred sales charge and
other expenses, the contracts are not appropriate for
short-term investment. The contracts may be most
appropriate for those who have already made
maximum use of other tax favored investment plans
such as IRAs and 401(k) plans. The tax-deferred
feature of the contracts is most favorable to those in
high tax brackets. The tax-deferred feature is not
necessary for a tax-qualified plan. In such instances,
purchasers should consider whether other features,
such as the death benefit and lifetime annuity
payments, make the contract appropriate for their
purposes
FEE TABLE
This information is intended to assist you in understanding the various costs
and expenses that you will bear. It
reflects expenses of the Separate Account as well as the portfolios.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of premium payments)
None
Transfer Fee (there is currently no charge for transfers. We reserve
the right to charge $25 for each transfer in excess of 12 in one
contract year. None
Maximum Deferred Sales Load (as a percentage of premiums withdrawn)
8.00%
Annual Contract Maintenance Charge(1) $35.00
Separate Account Annual Expenses (as a percentage of average daily Contract
Value)
Mortality and Expense Risk 1.25%
Administration Fees 0.15%
Total Separate Account Expenses 1.40%
(1) The contract maintenance charge is an annual $35 charge
per contract. It is deducted proportionally from the
investment divisions in use at the time of the charge.
The contract maintenance charge has been reflected in
the examples by a method intended to show the "average"
impact of the contract maintenance charge on an investment
in the Separate Account. The contract maintenance charge
is deducted only when the accumulated value is less
than $50,000. In the example, the contract maintenance
charge is approximated as a 0.12% 0.11% annual asset
charge based on the experience of the contracts.
PORTFOLIO ANNUAL EXPENSES(1)
(as a percentage of Portfolio average net assets after fee waivers and
after expense reimbursement but before
any reductions for custodian and transfer agent expenses .)
TOTAL
MANAGEMENT OTHER ANNUAL
FEES EXPENSES EXPENSES(2)
VIP Money Market Portfolio 0.20% 0.18% 0.10% 0.09% 0.30% 0.27%
VIP High Income Portfolio 0.58% 0.12% 0.11% 0.70% 0.69%
VIP Equity-Income(3) Portfolio 0.49% 0.48% 0.08% 0.09% 0.57%
VIP Growth(3) Portfolio 0.59% 0.58% 0.07% 0.08% 0.66%
VIP Overseas(3) Portfolio 0.74% 0.73% 0.15% 0.18% 0.89% 0.91%
VIP II Asset Manager(3) Portfolio 0.54% 0.53% 0.09% 0.10% 0.63% 0.63%
VIP II Investment Grade Bond Portfolio 0.43% 0.14% 0.11% 0.57% 0.54%
VIP II Contrafund(3) Portfolio 0.59% 0.58% 0.07% 0.09% 0.66% 0.67%
VIP II Asset Manager: Growth(3) Portfolio0.59% 0.58% 0.13% 0.72% 0.71%
VIP II Index 500(3) (4) Portfolio 0.24% 0.04% 0.28%
VIP III Growth & Income(3) Portfolio0.49% 0.48% 0.11% 0.12% 0.60%
VIP III Balanced(3) Portfolio 0.44% 0.43% 0.14% 0.58% 0.57%
VIP III Growth Opportunities(3) Portfolio 0.59% 0.58% 0.11% 0.70% 0.69%
American Century VP Capital Appreciation Portfolio1.00%0.00% 1.00%
American Century VP Value Portfolio 1.00% 0.00% 1.00%
American Century VP Balanced Portfolio1.00% 0.90%0.00%1.00% 0.90%
American Century VP International Portfolio1.47% 1.34%0.00% 1.47% 1.34%
American Century VP Income & Growth Portfolio 0.70%0.00% 0.70%
TOTAL
MANAGEMENT OTHER ANNUAL
FEES EXPENSES EXPENSES(2)
MFS VIT Emerging Growth(4) (5) Series 0.75% 0.10% 0.09% 0.85% 0.84%
MFS VIT Research(4) (5) Series 0.75% 0.11% 0.86%
MFS VIT Growth with Income(4) (5) Series 0.75% 0.13% 0.88%
MFS VIT New Discovery(4) (5) (6) Series 0.90% 0.27% 0.17% 1.17% 1.07%
Lord Abbett VC Growth and & Income Portfolio0.50% 0.01% 0.37% 0.51% 0.87%
Lord Abbett VC Mid-Cap Value(7) Portfolio 0.75% 0.35% 1.10%
Lord Abbett VC International(7) Portfolio 1.00% 0.35% 1.35%
(1) The fund data was provided by the funds or their managers. Midland has not
independently verified the
accuracy of the Fund data.
(2) The annual expenses shown are based on actual expenses for 1998 1999.
The expenses shown for Fidelity's
VIP, VIP II and VIP III Portfolios are those applicable to the Initial
Class.
(3) A portion of the brokerage commissions the fund paid was used to reduce its
expenses. In addition, certain
funds have entered into arrangements with their custodian and transfer agent
whereby credits realized as a result of
uninvested cash balances were used to reduce custodian and transfer agent
expenses. Without Including these
reductions, total operating expenses would have been as follows:
VIP Equity-Income Portfolio 0.58% 0.56%
VIP Growth Portfolio 0.68% 0.65%
VIP Overseas Portfolio 0.91% 0.87%
VIP II Asset Manager Portfolio 0.64% 0.62%
VIP II Index 500 0.35%
VIP II Contrafund Portfolio 0.70% 0.65%
VIP II Asset Manager: Growth Portfolio0.73% 0.70%
VIP III Balanced Portfolio 0.59% 0.55%
VIP III Growth Opportunities Portfolio0.71% 0.68%
VIP III Growth & Income Portfolio 0.61% 0.59%
(4) - Fidelity Management and Research agreed to reimburse a portion of the
VIP II Index 500 expenses during 1999. Without this reimbursement,
the VIP II Index 500 would have had total expenses of 0.34%.(4)
(5) Each of the MFS Series has an expense offset arrangement,
which reduces the series' custodian fee based upon the amount of
cash maintained by the series with its custodian and dividend
disbursing agent. Each series may enter into other such arrangements
and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. The expenses shown above
do not take into account these expense reductions, and are
therefore higher than the actual expenses of the series.
Including these reductions, the total expenses would
have been as follows:
MFS VIT Emerging Growth Series 0.83%
MFS VIT Research Series 0.85%
MFS VIT Growth With Income Series 0.87%
MFS VIT New Discovery Series 1.05%
(5) (6) MFS has agreed to bear expenses for this portfolio, such that the
portfolio's other expenses shall not exceed
0.25% 0.15% . Without this limitation, the other expenses and total
expenses would have been:
4.32% 1.59% and 5.22% 2.49% for the MFS VIT New Discovery.
(7) - Lord, Abbett & Co has agreed to reimburse a portion of the expenses
for the VC Mid-Cap Value and VC
International Portfolios. Without this reimbursement, the total expense would
have been 3.72% for the Mid-Cap
Value and 5.22% for the VC International Portfolios.
EXAMPLES
If you surrender or annuitize your contract at the end of the applicable time
period, you would pay the following
expenses on a $1,000 investment, assuming a 5% annual return on assets:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
VIP Money Market Portfolio 98 127 126 159156 214209
VIP High Income Portfolio 103102 139 179178 255253
VIP Equity-Income Portfolio 101 135 172 242241
VIP Growth(3) Portfolio 102 138 177176 251250
VIP Overseas(3) Portfolio 104105 145 189 275276
VIP II Investment Grade Bond Portfolio 101 135134 172170 242238
VIP II Asset Manager(3) Portfolio 102 137 175 248
VIP II Index 500(3) Portfolio 98 127 126 157 212 211
VIP II Contrafund(3) Portfolio 102 138 177 251
VIP II Asset Manager: Growth(3) Portfolio103 140 139 180 179 257 255
VIP III Balanced(3) Portfolio 101 136 135 173 172 243 241
VIP III Growth Opportunities(3) Portfolio103102 139 179 178 255 253
VIP III Growth & Income(3) Portfolio 102101 136 174 173 245 244
American Century VP Capital Appreciation Portfolio106105148 194 286 285
American Century VP Balanced Portfolio 106104 148145 194189 286 275
American Century VP Value Portfolio 106105 148 194 286 285
American Century VP International Portfolio110 109 162159 217 211 331 319
American Century VP Income & Growth Portfolio103102 139 179178 255 254
MFS VIT Emerging Growth(4) Series 104 144 143 187 186 271 269
MFS VIT Research(4) Series 104 144 187 272 271
MFS VIT Growth with Income(4) Series 104 145 188 274 273
MFS VIT New Discovery(4) (5) Series 107106 154 150 202 197 302 291
Lord Abbett VC Growth and Income Portfolio101104134 144 169 187 236 272
Lord Abbett VC Mid-Cap Value Portfolio 106 151 199 294
Lord Abbett VC International Portfolio 109 159 211 319
If you do not surrender your contract, you would pay the following
expenses on a $1,000 investment, assuming 5% annual return on assets:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
VIP Money Market Portfolio 18 57 56 99 96 214 209
VIP High Income Portfolio 23 22 69 119 118 255 253
VIP Equity-Income Portfolio 21 65 112 242 241
VIP Growth(3) Portfolio 22 68 117 116 251 250
VIP Overseas(3) Portfolio 24 25 75 129 275 276
VIP II Investment Grade Bond Portfolio 21 65 64 112 110 242 238
VIP II Asset Manager(3) Portfolio 22 67 115 248
VIP II Index 500(3) Portfolio 18 57 56 97 212 211
VIP II Contrafund(3) Portfolio 22 68 117 251
VIP II Asset Manager: Growth(3) Portfolio23 70 69 120 119 257 255
VIP III Balanced(3) Portfolio 21 66 65 113 112 243 241
VIP III Growth Opportunities(3) Portfolio 23 22 69 119 118 255 253
VIP III Growth & Income(3) Portfolio 22 21 66 114 113 245 244
American Century VP Capital Appreciation Portfolio26 2578 134 286 285
American Century VP Balanced Portfolio 26 24 78 75 134 129 286 275
American Century VP Value Portfolio 26 25 78 134 286 285
American Century VP International Portfolio30 2992 89 157 151 331 319
American Century VP Income & Growth Portfolio23 22 69 119 118 255 254
MFS VIT Emerging Growth(4) Series 24 74 73 127 126 271 269
MFS VIT Research(4) Series 24 74 127 272 271
MFS VIT Growth with Income(4) Series 24 75 128 274 273
MFS VIT New Discovery(4) (5) Series 27 26 84 80 142 137 302 291
Lord Abbett VC Growth and Income Portfolio21 24 64 74 109 127 236 272
Lord Abbett VC Mid-Cap Value Portfolio 26 81 139 294
Lord Abbett VC International Portfolio 29 89 151 319
The examples are based on actual expenses for 1998 1999 .
Actual expenses reflected are net of before any fee
waivers or but after expense reimbursements.
The examples should not be considered a representation of past
or future expenses. Actual expenses may be greater
or less than those shown. The assumed 5% annual return is
hypothetical; past or future annual returns may be
greater or lesser than the assumed amount. These examples
reflect the $35 annual contract maintenance charge as
an annual charge of 0.12% 0.11% of assets based on an
average cash value of $30,000 $33,000 .
Additional Information About
Variable Annuity II
Your "Free Look" Right
You have a right to examine the contract and return it
to us. Your request must be postmarked no later than
10 days after you receive your contract. During the
"free look" period your premium will be allocated to
the VIP Money Market Investment Division. (See
"Free Look" on page 18 for more details.)
Transfers
You may transfer your contract value among the
investment divisions and between the General
Account and the investment divisions. Transfers take
effect on the date we receive your request. We
require minimum amounts, usually $200, for each
transfer. Transfers are not permitted before the end
of the "free look" period or after annuity payments
begin.
Currently, we do not charge for making transfers.
However, we reserve the right to assess a $25
administrative charge after the 12th transfer in a
contract year.
For limitations on transfers to and from the General
Account, see "The General Account" on page 24.
Financial Information
Condensed financial information for the Separate
Account begins at page 37 41 of this prospectus. Our
financial statements, and full financial statements for
the Separate Account, are in the Statement of
Additional Information.
Inquiries
If you have any questions about your contract or need
to make changes, then contact your financial
representative who sold you the contract, or contact
us at:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, South Dakota 57193
(605) 335-5700
SEPARATE ACCOUNT C AND THE FUNDS
Our Separate Account And Its
Investment Divisions
The "Separate Account" is our Separate Account C,
established under the insurance laws of the State of
South Dakota in March, 1991. It is a unit investment
trust registered with the Securities and Exchange
Commission (SEC) under the Investment Company
Act of 1940. This registration does not involve any
SEC supervision of its management or investment
policies. The Separate Account has a number of
investment divisions, each of which invests in shares
of a corresponding portfolio of the Funds. You may
allocate part or all of your net premiums to any 10 of
the 23 25 investment divisions of our Separate
Account.
The Funds
Each of the 23 25 portfolios available under the
contract is commonly called a mutual fund. Each one
is a "series" of one of the following open-end
diversified investment companies:
(a) Fidelity's Variable Insurance Products Fund
Initial Class,
(b) Fidelity's Variable Insurance Products Fund II
Initial Class,
(c) Fidelity's Variable Insurance Products Fund III
Initial Class,
(d) American Century Variable Portfolios, Inc.,
(e) MFS(r) Variable Insurance Trusts, and
(f) Lord Abbett's Series Fund, Inc.
Our Separate Account buys and sells the shares of
each portfolio at net asset value (with no sales
charge). More detailed information about the
portfolios and their investment objectives, policies,
risks, expenses and other aspects of their operations,
appear in their prospectuses, which accompany this
prospectus and in the Funds' Statements of
Additional Information. You should read the Funds'
prospectuses carefully before allocating or
transferring money to any portfolio.
We may from time to time receive revenue from the
Funds and/or from their managers. The amounts of
the revenue, if any, may vary from portfolio to
portfolio and may be based on the amount of our
investments in the Funds.
Investment Policies Of The Funds' 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 Market
Money Portfolio
Seeks as high a level of current
income as is consistent with
preservation of capital and
liquidity by investing in U.S.
dollar-denominated money
market securities.
VIP High Income
Portfolio
Seeks a high level of current
income by investing primarily
in income-producing debt
securities while also
considering growth of capital.
Policy Contract owners should
understand that the fund's unit
price may be volatile due to the
nature of the high yield bond
marketplace.
VIP Equity-
Income Portfolio
Seeks reasonable income by
investing primarily in income-
producing equity securities. In
choosing these securities, the
Investment 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
Portfolio
Seeks capital appreciation by
investing in common stocks.
The adviser invests the fund's
assets in companies the adviser
believes have above-average
growth potential.
VIP Overseas
Portfolio
Seeks long-term growth of
capital, primarily through
investments in foreign
securities.
VIP II Asset
Manager Portfolio
Seeks high total return with
reduced risk over the long term
by allocating its assets among
domestic and foreign stocks,
bonds and short-term
instruments.
VIP II Investment
Grade Bond
Portfolio
Seeks a as high a level of
current income as is consistent
with the preservation of capital
by investing in U.S. dollar-
denominated investment-grade
bonds.
VIP II Contrafund
Portfolio
Seeks to achieve capital
appreciation over the long term
by investing in common stocks
and securities of companies
whose value the manager
believes is not fully recognized
by the public.
VIP II Asset
Manager:
Growth
Seeks to maximize total return
by allocating its assets among
stocks, bonds, short-term
instruments, and other
investments.
VIP II Index 500
Portfolio
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.
VIP III Growth &
Income Portfolio
Seeks high total return,
combining current income and
capital appreciation. Invests
mainly in stocks that pay
current dividends and show
potential for capital
appreciation.
VIP III Balanced
Portfolio
Seeks both income and growth
of capital. When FMR's the
Investment Manager's outlook
is neutral, it will invest
approximately 60% of the
fund's assets in equity securities
and will always invest at least
25% of the fund's assets in
fixed-income senior securities.
VIP III Growth
Opportunities
Portfolio
Seeks capital growth by
investing primarily in common
stocks. Although the fund
invests primarily in common
stocks, it has the ability to
purchase other securities,
including bonds, which may be
lower-quality debt securities.
American Century
VP Capital
Appreciation
Portfolio
Seeks capital growth by
investing primarily in common
stocks that management
considers to have better-than-
average prospects for
appreciation.
American Century
VP Value
Portfolio
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
Portfolio
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
Portfolio
Seeks capital growth by
investing primarily in securities
of foreign companies that
management believes to have
potential for appreciation.
American Century
VP Income &
Growth Portfolio
Seeks dividend growth, current
income and capital appreciation.
The Portfolio will seek to
achieve its investment objective
by investing in common stocks.
MFS VIT
Emerging Growth
Series
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 Series
Seeks to provide long-term
growth of capital and future
income.
MFS VIT Growth
with Income
Series
Seeks to provide reasonable
current income and long-term
growth of capital and income.
MFS VIT New
Discovery Series
Seeks capital appreciation.
Lord Abbett VC
Growth and
Income Portfolio
Seeks long-term growth of
capital and income without
excessive fluctuation in market
value.
Lord Abbett VC
Mid-Cap Portfolio
Seeks Capital Appreciation
through investments primarily
in equity securities which are
believed to be undervalued in
the marketplace.
Lord Abbett VC
International
Seeks long-term capital
appreciation invests primarily in
equity securities of non-U.S.
issuers.
Fidelity Management & Research Company manages
the VIP, VIP II and VIP III portfolios. American
Century Investment Management, Inc. manages the
American Century VP portfolios. MFS(r) Services
Company manages the MFS Variable Insurance
Trusts. Lord Abbett & Co. manages the Lord Abbett
Series Fund, Inc.
The Funds sell their shares to separate accounts of
various insurance companies to support both variable
life insurance and variable annuity contracts, and to
qualified retirement plans. We currently do not
foresee any disadvantages to our contract owners
arising from this use of the Funds for mixed and
shared funding. The Funds will monitor for possible
conflicts arising out of this practice. If any such
conflict or disadvantage does arise, we and/or the
applicable Fund may take appropriate action to
protect your interests.
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
adviser 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 adviser or manager and the same
investment objectives and policies and a very similar
or nearly identical name.
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
annuity 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 may not be charged with liabilities arising
out of our other business. The obligations under the
contracts are our obligations. The income, gains and
losses (realized and unrealized) of the Separate
Account are credited to or charged against the
Separate Account without regard to our other income,
gains, or losses. Under certain unlikely
circumstances, one investment division of the
Separate Account may be liable for claims relating to
the operations of another division.
Our Right To Change How We Operate Our
Separate Account
We have the right to modify how we operate Separate
Account C. In making any changes, we may not seek
approval of contract owners (unless approval is
required by law). 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 our variable annuities
from one investment division and put them into
another;
eliminate a portfolio's shares and substitute shares
of another portfolio of the Funds or another open-
end, registered investment company. This may
happen if the portfolio's shares are no longer
available for investment or, if in our judgment,
further investment in the portfolio is inappropriate
in view of Separate Account C's purposes;
end the registration of our Separate Account under
the Investment Company Act of 1940;
operate our Separate Account under the direction
of a committee or discharge such a committee at
any time (the committee may be composed
entirely of "interested persons" of Midland under
the Investment Company Act of 1940);
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 addition, we may
disapprove any change in investment advisers or
investment policies unless a law or regulation
provides differently.
If any changes are made that result in a material
change in the underlying investments of any
investment division, then you will be notified. We
may, for example, cause the investment division to
invest in a mutual fund other than or in addition to
the current portfolios.
You may want to transfer the amount in that
investment division as a result of changes we have
made.
If you wish to transfer the amount you have in that
investment division to another division of our
Separate Account, or to our General Account, then
you may do so, without charge, by writing to our
home executive office. At the same time, you may
also change how your net premiums are allocated.
DETAILED INFORMATION ABOUT THE
CONTRACT
Requirements for Issuance of a Contract
To buy a contract, you must send us an application
form and an initial premium payment of at least
$2,000. If you enroll in a bank draft investment
program or payroll deduction plan for a qualified
contract and the monthly premium is at least $100,
then the initial premium amount can be lower. This
sale must take place through a representative who is
licensed and registered to sell the contract. Once we
accept your application, you will be issued a contract
that sets forth precisely your rights and our
obligations. Additional premium payments, of at
least $50, may then be made by check or money order
payable to Midland and mailed to the home executive
office.
If your application is complete, then we will accept or
reject it within two business days of receipt. If the
application is incomplete, then we will attempt to
complete it within five business days. If it is not
complete at the end of this period, then we will
inform you of the reason for the delay and the
premium payment will be returned immediately.
unless Note that you let may specifically consent
to
us keep ing the premium payment until the application
is complete. Your initial net premium payment will
be allocated to the VIP Money Market Investment
Division as of the business day we receive it or we
accept your application, whichever is later. Each net
premium received after the "Free Look" period will
be allocated to our Separate Account or General
Account on the day of receipt.
Free Look
You have a 10-day Free Look period after you
receive your contract. You may review it and decide
whether to keep it or cancel it. If you want to cancel
the contract, then you must return it to the agent who
sold it to you or to our home executive office. If you
cancel your contract, then we will return the greater
of:
(1) the premium paid, or
(2) the contract value plus the sum of all charges
deducted from the contract value.
The length of the Free Look period may vary in
certain states in compliance with specific regulations
and legal requirements.
Allocation of Net Premiums
We allocate your entire contract value to the VIP
Money Market Investment Division during the "Free
Look" period. You will specify your desired
premium allocation on the contract's application
form. Your instructions in your application will
dictate how to allocate your contract value at the end
of the Free Look period (which is administratively
assumed to be 15 days after the contract date for
reallocation purposes). Allocation percentages may
be any whole number (from 0 to 100) and the sum
must equal 100. The allocation instructions in your
application will apply to all other premiums you pay,
unless you change subsequent premium allocations
by providing us with written instructions. You may
not allocate your contract value to more than 10
investment divisions of our Separate Account at any
point in time. In certain states, allocations to and
transfers to and from the General Account are not
permitted.
Changing Your Premium Allocation Percentages
You may change the allocation percentages of your
premiums by writing to our home executive office
and telling us what changes you wish to make. These
changes will affect transactions as of the date we
receive your request at our home executive office.
While the Dollar Cost Averaging program is in effect,
the allocation percentages that apply to any premiums
received will be the DCA allocation percentages
unless you specify otherwise. (See "Dollar Cost
Averaging" on page 18).
Transfers of Contract Value
You may transfer amounts among the investment
divisions and between the General Account and any
investment division. Write to our home executive
office to make a transfer of contract value. Currently,
you may make an unlimited number of transfers of
contract value in each contract year. But we reserve
the right to assess a $25 charge after the 12th transfer
in a contract year.
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. For limitations on
transfers to and from the General Account, see "The
General Account" on page 24.
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. This program
may reduce the impact of market fluctuations by
allocating monthly, as opposed to allocating the total
amount at one time. 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 forms and there
must be a sufficient amount in the DCA source
account. DCA is only available if the amount in the
DCA source account is at least $2,400 at the time
DCA is to begin. 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. Copies of the DCA request
form can be obtained by contacting us at our home
executive office. The election will specify:
(a) The DCA source account from which 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 payment you intend to apply to DCA.
Once you elect DCA, 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 second contract
month. If it is requested after issue, then DCA will
start at the beginning of the first contract month
which occurs at least 30 days after the day 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.
Portfolio Rebalancing
The Portfolio Rebalancing Option allows contract
owners, who are not Dollar Cost Averaging, to reset
the percentage of contract value allocated to each
investment division to a pre-set level. (For example,
an owner may specify 30% in the VIP Growth
Investment Division, 40% in the VIP High Income
Investment Division and 30% in the VIP II Overseas
Investment Division.) Loaned monies in the General
Account are not available for Portfolio Rebalancing.
If you elect this option, then at each contract
anniversary We will transfer the amounts needed to
"rebalance" the contract value to your specified
percentages. Rebalancing may result in transferring
amounts from an investment division earning a
relatively high return to one earning a relatively low
return.
Even with the Portfolio Rebalancing option, the
contract value may only be allocated to up to 10
investment divisions. We reserve the right to end the
Portfolio Rebalancing option by sending you one
month's notice. However, you can not change the
election allocated to the General Account by more
than 10% at any one time. Contact us at our home
executive office to elect the Portfolio Rebalancing
option.
Systematic Withdrawals
The Systematic Withdrawal feature allows you to
have a portion of the contract value withdrawn
automatically. Under this feature, you may elect to
receive preauthorized scheduled partial withdrawals.
These payments can be made only while the
annuitant is living, before the maturity date, and after
the Free Look period. You may elect this option by
sending a properly completed Preauthorized
Systematic Withdrawal Request Form to our home
executive office. You may designate the systematic
withdrawal amount or the period for systematic
withdrawal payments. You will also designate the
desired frequency of the systematic withdrawals,
which may be monthly, quarterly, semi-annually or
annually. See your contract for details on systematic
withdrawal options and when each begins.
Each systematic withdrawal is made at the end of the
scheduled business day. If the New York Stock
Exchange is closed on the day when the withdrawal is
to be made, then the withdrawal will be processed on
the next business day. You should designate the
investment(s) from which the withdrawals should be
made. Otherwise, the deduction caused by the
systematic withdrawal will be allocated
proportionately to your contract value in the
investment divisions and the General Account.
You can stop or modify the systematic withdrawals
by sending us a written request, with at least 30 days
notice. A proper written request must include the
written consent of any effective assignee or
irrevocable beneficiary, if applicable. Systematic
withdrawals over a fixed period or over the
annuitant's life expectancy cannot be changed.
(Depending on the state your policy was issued in,
you may be allowed to make the change.)
Each systematic withdrawal must be at least $100.
We reserve the right to change the required minimum
systematic withdrawal amount. Upon payment, we
reduce the contract value by an amount equal to the
payment proceeds plus any applicable contingent
deferred sales charge. (See "Sales Charges on
Withdrawals" on page 25.) The contingent deferred
sales charge applies to systematic withdrawals in the
same manner as it applies to other withdrawals.
However, systematic withdrawals taken to satisfy IRS
required minimum withdrawals and paid under a life
expectancy option will not be subject to a contingent
deferred sales charge. Any systematic withdrawal
that equals or exceeds the cash surrender value will
be treated as a complete withdrawal. In no event will
payment of a systematic withdrawal exceed the cash
surrender value. The contract will automatically
terminate if a systematic withdrawal causes the
contract's cash surrender value to equal zero.
Systematic withdrawals generally are included in the
contract owner's gross income for tax purposes in the
year in which the withdrawal occurs, and may be
subject to a penalty tax of 10% before age 59-1/2.
(See "Taxation of Annuities in General" on page 29.)
Additional terms and conditions for the systematic
withdrawal program are set forth in your contract and
in the application for the program.
Withdrawals
You may withdraw all or part of your cash surrender
value by sending us a written request. (Withdrawals
may be restricted by a retirement arrangement under
which you are covered.) Partial withdrawals from an
investment division or the General Account,
however, must be made in amounts of $500 or more
(except for Systematic withdrawals described above)
and cannot reduce your contract value to less than
$1,000. If a withdrawal results in less than $1,000
remaining, then the entire contract value must be
withdrawn.
Any applicable contingent deferred sales charge and
any required tax withholding will be deducted from
the amount paid. In addition, upon full withdrawal a
contract maintenance charge is also subtracted.
We will generally pay the withdrawal amount from
the Separate Account within seven days after we
receive a properly completed withdrawal request.
We may defer payment for a longer period only
when:
trading on the New York Stock Exchange is
restricted as defined by the SEC;
the New York Stock Exchange is closed (other
than customary weekend and holiday closing);
an emergency exists as defined by the SEC as a
result of which disposal of the Separate Account's
securities or determination of the net asset value of
each investment division is not reasonably
practicable; or
for such other periods as the SEC may by order
permit for the protection of owners.
We expect to pay the withdrawal amount from the
General Account promptly, but we have the right to
delay payment for up to six months.
Unless you specify otherwise, your withdrawal will
be allocated among all investment divisions and the
General Account in the same proportion as your
contract value bears to each investment division and
the General Account. This allocation is subject to
minimum amount requirements. The contingent
deferred sales charge will be determined without
reference to the source of the withdrawal. The charge
will be based on the length of time between premium
payments and withdrawals. (See "CHARGES, FEES
AND DEDUCTIONS" on page 25.)
A withdrawal will generally have Federal income tax
consequences that can include tax penalties and tax
withholding. You should consult your tax advisor
before making a withdrawal. (See "FEDERAL TAX
STATUS" on page 27.)
Under certain types of retirement arrangements, the
Retirement Equity Act of 1984 provides that, in the
case of a married participant, a withdrawal request
must include the consent of the participant's spouse.
This consent must contain the participant's signature
and the notarized or properly witnessed signature of
the participant's spouse. These spousal consent
requirements generally apply to married participants
in most qualified pension plans, including plans for
self-employed individuals and the Section 403(b)
annuities that are considered employee pension
benefit plans under the Employee Retirement Income
Security Act of 1974 (ERISA). You should check the
terms of your retirement plan and consult with a tax
advisor before making a withdrawal.
Participants in the Texas Optional Retirement
Program may not make a withdrawal from a contract
(including withdrawals to establish an annuity) prior
to retirement except in the case of termination of
employment in the Texas public institutions of higher
education, death, or total disability. Such proceeds
may, however, be used to fund another eligible
vehicle.
Withdrawals from Section 403(b) plans are also
severely restricted. (See "FEDERAL TAX STATUS"
on page 27.)
Loans
Prior to the maturity date, owners of contracts issued
in connection with Section 403(b) or Section 401 (k)
qualified plans may request a loan using the contract
as security for the loan. Loans are subject to
provisions of the Internal Revenue Code and the
terms of the retirement program. You should consult
a tax advisor before requesting a loan.
Only one loan can be made within a 12 month period.
The loan amount must be at least $2,000 and must not
exceed the contract value minus any applicable
contingent deferred sales charge minus any
outstanding prior loans minus loan interest to the end
of the next contract year.
(1) The contract value, minus
(2) Any applicable contingent deferred sales charge,
minus
(3) Any outstanding prior loans, minus
(4) Loan interest to the end of the next contract year.
The portion of the contract value that is equal to the
loan amount will be held in the General Account and
will earn interest at a rate of 3% per year. When a
loan is requested, 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, then it will be allocated among all
investment divisions and the General Account in the
same proportion as the value of your interest in each
division bears to your total contract value. We will
redeem units from each investment division equal in
value to the amount of the loan allocated to that
investment division.
We charge interest on loans at the rate of 5% per
year. Loan interest is due on each contract
anniversary. Unpaid interest will be added to the
loan and accrue interest. If the total loan plus loan
interest equals or exceeds the contract value minus
any applicable contingent deferred sales charge and
withholding taxes, then the contract will terminate
with no further value. In such case, we will give you
at least 31 days written notice.
The total loan plus loan interest will be deducted
from any amount applied under a payment option or
otherwise payable under the contract.
The loan agreement will describe the amount,
duration, and restrictions on the loan. In general,
loans must be repaid in monthly or quarterly
installments within 5 years. You are allowed a 30-
day grace period from the installment due date. If a
quarterly installment is not received within the grace
period, then a deemed distribution of the entire
amount of the outstanding loan principal, interest
due, and any applicable charges under this contract,
including any withdrawal charge, will be made. This
deemed distribution may be subject to income and
penalty tax under the Internal Revenue Code and may
adversely affect the treatment of the contract under
Internal Revenue Code section 403(b).
If the amount or duration of the loan violates Internal
Revenue Code requirements, then you may be subject
to income tax or a penalty. IRS authorities and the
Department of Labor suggest that in certain
circumstances a loan may result in adverse tax and
ERISA consequences for Section 403(b) or Section
401 (k) programs. You should consult a tax advisor
before taking a loan.
A loan has a permanent effect on the contract value
because the investment experience of the investment
divisions will apply only to the unborrowed portion
of the contract value. The longer a loan is
outstanding, the greater the effect is likely to be. The
effect could be favorable or unfavorable. If the net
investment results are greater than 3% while the loan
is outstanding, then the contract value will not
increase as rapidly as it would have if no debt were
outstanding. If net investment results are below 3%,
then the contract value will be higher than it would
have been had no loan been outstanding.
Death Benefit
If the annuitant is an owner and dies before the
maturity date, then the death benefit must be paid
within 5 years of the annuitant's death (other than
amounts payable to, or for the benefits of, the
surviving spouse of the annuitant as the contingent
owner). The value of the death benefit, as described
below, will be determined on the business day that
following the date our home executive office
receives:
(a) due proof of death and
(b) an election form of how the death benefit is to be
paid.
Unless a payment option is selected within 90 days
after we receive due proof of death, the death benefit
will be paid as a lump sum.
If the annuitant is not an owner and an owner dies
before the maturity date, the contingent owner will
become the owner. If no contingent owner has been
named or is living, ownership will pass to the
owner's estate. If the spouse is named as the
contingent owner, then the contract will continue
with the spouse now being the owner. If the
surviving spouse has not been named as the
contingent owner, then the contract ends and the
contract value (not the death benefit) must be paid
out within 5 years of the owner's death.
If an owner dies on or after the maturity date, then
any remaining amounts, other than amounts payable
to, or for the benefit of, the owner's surviving spouse,
must be paid at the same rate as the benefits were
being paid at the time of the owner's death. Other
rules relating to distributions at death apply to
qualified contracts.
Death Benefit on the Annuitant's Death Prior to
the Maturity Date
The death benefit is only paid on the annuitant's
death prior to the maturity date (not on the death of
the owner unless the owner is also the annuitant).
Any loan amount and loan accrued interest
outstanding will reduce the death benefit proceeds.
(See "Loans" on page 21.) The death benefit paid to
the beneficiary will be the greater of:
(a) The current contract value. For this purpose, the
current contract value is the value on the business
day following the date we receive at our home
executive office the latest of:
(1) due proof of death and
(2) An election form of how the death proceeds
are to be paid (or 90 days after we receive due
proof of death, if no election form is received), or
(b) 100% of the total premium payments made to
your contract, reduced by any prior withdrawals,
(including any deferred sales load) or
(c) The guaranteed minimum death benefit as
defined below.
Guaranteed Minimum Death Benefit (GMDB)
In general, the guaranteed minimum death benefit is
the highest contract value on any contract anniversary
prior to death and prior to age 81, adjusted for any
withdrawals (see the following example for how
withdrawals impact the guaranteed minimum death
benefit).
The guaranteed minimum death benefit is zero upon
issuance of the contract. The guaranteed minimum
death benefit is recalculated on the first contract
anniversary and every year thereafter, until the
contract anniversary immediately preceding the
earlier of the annuitant's date of death or the
annuitant's 81st birthday. The purpose of the
recalculation is to give you the benefit of any positive
investment experience under your contract. Your
contract's investment experience can cause the
guaranteed minimum death benefit to increase on the
recalculation date, but cannot cause it to decrease.
The guaranteed minimum death benefit determined
on a recalculation date is the larger of:
(a) The guaranteed minimum death benefit that
applied to your contract immediately prior to the
recalculation date, or
(b) The contract value on the recalculation date
of
the recalculation.
The new guaranteed minimum death benefit applies
to your contract until the next contract anniversary, or
until you make a premium payment or withdrawal.
Any subsequent premium payments will immediately
increase your guaranteed minimum death benefit by
the amount of the net premium payment. Any partial
withdrawal will immediately decrease your
guaranteed minimum death benefit by the percentage
of the contract value being withdrawn. (The decrease
in GMDB could be more or less than the dollar
amount withdrawn.)
Example: Assume that a contract is issued with a
$10,000 premium on 5/1/1998 to an owner at attained
age 55. No further premiums are made and no
withdrawals are made during the first year. Assume
that on the contract anniversary on 5/1/1999 the
contract value is $12,000. The guaranteed minimum
death benefit is reset on 5/1/1999 to $12,000.
Assume that the contract value increases to $15,000
on 5/1/2000 and decreases to $13,000 on 5/1/2001.
The guaranteed minimum death benefit on 5/1/2001
is $15,000.
Assume that by 7/1/2001, the contract value increases
to $14,000 and you request a partial withdrawal of
$2,800 or 20% of your contract value on that date.
The guaranteed minimum death benefit immediately
following the partial withdrawal is $12,000 =
[$15,000 - .20($15,000)]. (In this example, the
contingent deferred sales charge would be taken out
of the $2,800 withdrawn.)
Assume that on 9/1/2001 the contract value decreases
to $8,000. The guaranteed minimum death benefit
remains at $12,000 and the death proceeds payable on
9/1/2001 are $12,000.
Your Contract Value
Your contract 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 contract
value reflects various charges. Transaction and sales
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 contract
value for amounts allocated to the investment
divisions of our Separate Account. You bear the
investment risk. An investment division's
performance will cause your contract value to go up
or down.
Amounts In Our Separate Account
The amount you have in each division is represented
by the value of the accumulation units credited to
your contract value for that division. The value you
have in an investment division is the accumulation
unit value times the number of accumulation units
credited to you. Amounts allocated, transferred or
added to the investment divisions are used to
purchase accumulation units. Accumulation units of
an investment division are purchased when you
allocate net premiums, or transfer amounts to that
division. Accumulation units are sold or redeemed
when you make withdrawals or transfer amounts
from an investment division, and to pay the death
benefit when the annuitant dies. We also redeem
units to pay for certain charges.
We calculate the number of accumulation units
purchased or redeemed in an investment division by
dividing the dollar amount of the transaction by the
division's accumulation unit value at the end of that
day. The number of accumulation units credited to
you will not vary because of changes in accumulation
unit values.
The accumulation units of each investment division
have different accumulation unit values. We
determine accumulation unit values for the
investment divisions at the end of each business day.
If the New York Stock Exchange is not open that day,
then the transaction will be processed on the next
business day. The accumulation unit value for each
investment division is initially set at $10.00.
Accumulation unit values fluctuate with the
investment performance of the corresponding
portfolios of the Funds. They reflect investment
income, the portfolios' realized and unrealized capital
gains and losses, and the Funds' expenses. The
accumulation unit values also reflect the daily asset
charge we make to deduct from our Separate Account
at an effective annual rate of 1.40%. Additional
information on the accumulation unit values is
contained in the Statement of Additional Information.
The General Account
You may allocate some or all of your contract value
to the General Account, subject to certain limitations
described below. The General Account pays interest
at a declared rate. We guarantee the principal after
deductions. The General Account supports our
insurance and annuity obligations. Certain states do
not permit allocations and transfers to and from the
General Account. 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 reviewed the disclosures that are included in
this prospectus which relate to the General
Account.
You may accumulate amounts in the General
Account by:
allocating net premiums,
transferring amounts from the investment
divisions, or
earning interest on amounts you already have in
the General Account.
Transfers, withdrawals and allocated deductions
reduce this amount. $250,000 is the maximum
amount that, over the contract's life, you can allocate
to the General Account through allocating net
premiums and net transfers (amounts transferred in
minus amounts transferred out).
We pay interest on all your amounts in the General
Account. The annual interest rate has a minimum
guarantee of 3.0%. We may, at our sole discretion,
credit interest in excess of 3.0%. You assume the
risk that interest credited may not exceed 3.0%.
Currently, we intend to guarantee the interest rate for
one year periods, starting at the beginning of each
calendar year. Interest is compounded daily at an
effective annual rate that equals the annual rate we
declare.
You may transfer amounts among the investment
divisions and between the General Account and any
investment divisions. However, only 2 transfers are
allowed from out of the General Account per contract
year. The total amount transferred from out of the
General Account in any contract year is limited to the
larger of:
(a) the 25% of the unloaned amount in the General
Account at the beginning of the contract year, or
(b) $25,000 $25,000 (We reserve the right to lower
this to $1,000).
These limits do no apply to transfers made in a Dollar
Cost Averaging or portfolio rebalancing program that
occurs over a time period of 12 or more months.
The General Account may not be available in all
states. Your state of issue will determine if the
General Account is available on your contract.
Please check your policy form to see if the General
Account is available on your contract.
CHARGES, FEES AND DEDUCTIONS
Sales Charges on Withdrawals
A We may deduct a contingent deferred sales charge
may be imposed on a from any withdrawal of
premiums (including a withdrawal to effect an
annuity and on Systematic Withdrawals). 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. If the
contingent deferred sales charge is insufficient to
cover all distribution expenses, then the deficiency
will be met from our surplus that may be, in part,
derived from the charges for the assumption of
mortality and expense risk s charges (described
below). For the purpose of determining the
contingent deferred sales charge, any amount that you
withdraw will be treated as being from premiums
first, and then from investment income. There is no
sales charge on the investment income withdrawn.
The length of time between each premium payment
and withdrawal determines the amount of the
contingent deferred sales charge. Premium payments
are considered withdrawn in the order that they were
received.
The charge is a percentage of the gross (premiums
before deduction for premium tax) premiums
withdrawn and equals:
Length of Time from Contingent
Premium Payment Deferred Sales
(Number of Years) Charge
0-1 8%
1-2 8%
2-3 7%
3-4 7%
4-5 6%
5-6 5%
6-7 4%
7-8 2%
8+ 0%
We will waive the contingent deferred sales charge
on either a full or partial surrender after the first
contract anniversary, if:
(1) written proof is given to us at our home
executive office that the owner is confined in
a state licensed inpatient nursing facility for a
total of 90 days, provided we receive your
withdrawal request within 90 days after
discharge from such facilities; or
(2) A licensed physician provides a an acceptable
written statement to us that the owner is
expected to die within the next 12 months due
to a non-correctable medical condition. The
licensed physician cannot be the owner or part
of the owner's immediate family.
This waiver is subject to approval of state insurance
authorities.
If you make a full surrender after the contract has
been in force for 3 years, and use the proceeds to
purchase a life income annuity option from us, then
we will waive the contingent deferred sales charge.
Amounts withdrawn under the contract to comply
with IRS minimum distribution rules and paid under
a life expectancy option will not be subject to a
contingent deferred sales charge. Amounts
withdrawn to comply with IRS minimum distribution
rules will reduce the amount available under the Free
Withdrawal Amount.
Free Withdrawal Amount
You may withdraw 10% of the total net (premiums
after deduction for premium tax) premiums paid
without incurring a contingent deferred sales charge.
The value of 10% of the total premiums paid is
determined on the date of the requested withdrawal.
The full 10% is available only if no other withdrawals
have been taken in the prior 12 month period. Any
withdrawal taken within the last 12 months will
reduce the amount that can be taken without incurring
a contingent deferred sales charge. No more than
10% of premiums paid will be available in any 12
month period without incurring a contingent deferred
sales charge.
Administrative Charge
We charge for our administrative expenses in
operating the Separate Account at an effective annual
rate of 0.15% of the value of the assets in the
Separate Account. The investment divisions'
accumulation unit values reflect this charge. We
cannot increase this charge.
Mortality and Expense Risk Charge
We charge for mortality and expense risks at an
effective annual rate of 1.25% of the value of the
assets in the Separate Account. The investment
divisions' accumulation unit values reflect this
charge. We cannot increase this charge. We expect
to profit from this charge. We may use the profit for
any purpose including paying distribution expenses.
Contract Maintenance Charge
We deduct a contract maintenance charge of $35 on
each contract anniversary on or before the maturity
date. We waive this charge if your contract value is
$50,000 or more on the contract anniversary. This
charge is for our record keeping and other expenses
incurred in maintaining the contracts. We deduct this
charge from each investment division and the General
Account in the same proportion as the value of your
interest in each has to the total contract value. If the
contract is surrendered during a contract year and the
contract value is less than $50,000, then we will
deduct the full contract maintenance charge for the
current contract year at that time.
We may reduce the contract maintenance charge for
contracts issued in a manner that results in a savings
of administrative expenses. The amount of
reductions will be considered on a case-by-case basis
and reflect our expected reductions in administrative
expenses.
Premium Taxes
Midland will deduct from all premium payments a
charge for any premium taxes levied by a state or any
other governmental entity. Premium taxes currently
levied by certain jurisdictions vary from 0% to 2.0%.
This range is subject to change. The company
currently deducts such charges from contracts issued
in the states of South Dakota, Wyoming, Maine, West
Virginia and the territory of Puerto Rico. These
states and jurisdictions are subject to change.
Transfer Charge
Currently, we do not charge you for making transfers
of contract value among investment divisions. 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 to the investment divisions from
which the transfer is being made. For example, if the
transfer is made from two investment divisions, then
a $12.50 transfer charge will be allocated to each of
the investment divisions. All transfers included in
one transfer request count as only one transfer for
purposes of any fee.
The Funds charge their portfolios for managing
investments and providing services. The portfolios
may also pay operating expenses. Each portfolios'
charges and expenses vary.
See the Funds' prospectuses for more information.
Also see the "FEE TABLE" on page 8.
FEDERAL TAX STATUS
Introduction
The following discussion is general and is not
intended as tax advice.
This discussion is not intended to address the tax
consequences resulting from all of the situations in
which a person may be entitled to or may receive a
distribution under a contract. Any person concerned
about these tax implications should consult a
competent tax advisor before making a premium
payment. This discussion is based upon Midland's
understanding of the present Federal income tax laws
as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the
likelihood of the continuation of the present Federal
income tax laws or of the current interpretation by the
Internal Revenue Service. Moreover, no attempt has
been made to consider any applicable state or other
tax laws.
The qualified contracts are designed for use by
individuals in connection with retirement plans which
are intended to qualify for special income tax
treatment under Sections 401, 403(a), 403(b) , or 408
or 408A of the Internal Revenue Code (the "Code").
The ultimate effect of Federal income taxes on the
contributions, contract value, on annuity payments
and on the economic benefit to the owner, the
annuitant or the beneficiary depends on the type of
retirement plan, on the tax and employment status of
the individual concerned and on our tax status. In
addition, certain requirements must be satisfied in
purchasing a qualified contract in connection with a
tax qualified plan in order to receive favorable tax
treatment. These retirement plans may permit the
purchase of the contracts to accumulate retirement
savings under the plans. Adverse tax or other legal
consequences to the plan and/or to the participant
may result if this contract is assigned or transferred to
any individual as a means to provide benefit
payments, unless the plan complies with all legal
requirements applicable to such benefits prior to
transfer of the contract. With respect to qualified
contracts an endorsement of the contract and/or
limitations or penalties imposed by the Internal
Revenue Code may impose limits on premiums,
withdrawals, distributions or benefits, or on other
provisions of the contracts. Some retirement plans
are subject to distribution and other requirements that
are not incorporated into our contract administrative
procedures. Owners, participants and beneficiaries
are responsible for determining that contributions,
distributions and other transactions with respect to
the contracts comply with applicable law. Therefore,
purchasers of qualified contracts should seek
competent legal and tax advice regarding the
suitability of the contract for their situation, the
applicable requirements and the tax treatment of the
rights and benefits of a contract. The following
discussion assumes the qualified contracts are
purchased in connection with retirement plans that
qualify for special Federal income tax treatment
described above.
Diversification
Section 817(h) of the Code imposes certain
diversification standards on the underlying assets of
variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an
annuity contract for any period (and any subsequent
period) for which the investments are not, in
accordance with regulations prescribed by the United
States Treasury Department (Treasury Department),
adequately diversified. Disqualification of the
contract as an annuity contract would result in
imposition of Federal income tax to the contract
owner with respect to earnings allocable to the
contract prior to the receipt of payments under the
contract.
We intend that all Funds underlying the contracts will
be managed in such a manner as to comply with these
diversification requirements.
In certain circumstances, owners of variable contracts
may be considered the owners, for Federal income
tax purposes, of the assets of the Separate Account
used to support their contracts. In those
circumstances, income and gains from the Separate
Account assets would be 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 contract
owner), rather than the insurance company, to be
treated as the owner of the assets in the account."
This announcement also stated that guidance would
be issued by way of regulations or rulings on the
"extent to which policy-owners may direct their
investments to particular sub-accounts without being
treated as owners of the underlying assets."
The ownership rights under the contract are similar
to, but different in certain respects from, those
described by the IRS in rulings in which it was
determined that policy 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 the Separate Account. In
addition, we do not know what standards will be set
forth, if any, in the regulations or rulings that the
Treasury Department has stated it expects to issue.
We therefore reserve 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 the Separate Account.
Taxation of Annuities in General
Nonqualified Policies.
The following discussion assumes that the contract
will qualify as an annuity contract for Federal income
tax purposes. "Investment in the Contract" refers to
premiums paid minus any prior withdrawals of
premiums where prior withdrawals are treated as
being earnings first.
Section 72 of the Code governs taxation of annuities
in general. We believe that the owner generally is not
taxed on increases in contract value until distribution
occurs either in the form of a lump sum received by
withdrawing all or part of the contract value (i.e.,
"withdrawals") or as annuity payments under the
annuity income option elected. The exception to this
rule is the treatment afforded to owners that are not
natural persons. Generally, an owner of a contract
who is not a natural person must include in income
any increase in the excess of the owner's contract
value over the owner's Investment in the Contract
during the taxable year, even if no distribution
occurs. There are, however, exceptions to this rule
that you may wish to discuss with your tax counsel.
The following discussion applies to contracts owned
by natural persons.
The taxable portion of a distribution (in the form of
an annuity or lump sum payment) is taxed as ordinary
income. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the
contract value generally will be treated as a
distribution.
Generally, in the case of a withdrawal under a
nonqualified contract, amounts received are first
treated as taxable income to the extent that the
contract value immediately before the withdrawal
exceeds the Investment in the Contract at that time.
Any additional amount is not taxable.
Although the tax consequences may vary depending
on the annuity income option elected under the in
general, only the portion of the annuity payment that
represents the amount by which the contract value
exceeds the Investment in the Contract will be taxed.
For fixed annuity payments, in general, there is no tax
on the amount of each payment which represents the
same ratio that the Investment in the Contract bears
to the total expected value of the annuity payment for
the term of the payment; however, the remainder of
each annuity payment is taxable . For variable
annuity payments, in general, a specific dollar
amount of each payment is not taxed. The dollar
amount is determined by dividing the Investment in
the Contract by the total number of expected periodic
payments. The remainder of each annuity payment is
taxable.
Any distribution (as either fixed or variable
payments) received after you have recovered the
investment in the contract will be fully taxable.
Amounts may be distributed from a contract because
of the death of the owner or an annuitant. Generally,
such amounts are included in the income of the
recipient as follows:
(a) if distributed in a lump sum, they are taxed in the
same manner as a withdrawal from the contract;
or
(b) if distributed under a payment option, they are
taxed in the same way as annuity payments.
For these purposes, the Investment in the Contract is
not affected by an owner's or annuitant's death. That
is, the Investment in the Contract remains the amount
of any premiums paid which were not excluded from
gross income.
In the case of a distribution pursuant to a
nonqualified contract, there may be imposed a federal
penalty tax equal to 10% of the amount treated as
taxable income. In general, however, there is no
penalty tax on distributions:
(1) made on or after the date on which the owner is
actual age 59-1/2,
(2) made as a result of death or disability of the
owner, or
(3) received in substantially equal payments as a life
annuity (subject to special "recapture" rules if the
series of payments is subsequently modified).
Other tax penalties may apply to certain distributions
under a Qualified Contract.
Possible Changes in Taxation. In past years,
legislation has been proposed from time to time that
would have adversely modified the federal taxation of
certain annuities. There is always the possibility that
the tax treatment of annuities could change by
legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover,
it is also possible that any change could be retroactive
(that is, effective prior to the date of the change.)
Transfers, Assignments or Exchanges of a
Contract. A transfer of a contract's ownership, the
designation of an annuitant, payee or other
beneficiary who is not also the owner, the change of
an annuitant, the selection of certain maturity dates or
the exchange of a contract may result in certain tax
consequences to the owner that are not discussed
herein. An owner contemplating any such transfer,
assignment , selection or exchange of a contract
should contact a competent tax advisor with respect
to the potential tax effects of such transaction.
Multiple Contracts
All nonqualified deferred annuity contracts entered
into after October 12, 1988 that are issued by the
same insurance company (or its affiliates) to the same
owner during any calendar year are treated as one
annuity contract for purposes of determining the
amount included in gross income under Code Section
72 (a) (c). This rule could affect the time when
income is taxable and the amount that might be
subject to the 10% penalty tax described above. In
addition, the Treasury Department has specific
authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. There
may also be other situations in which the Treasury
may conclude that it would be appropriate to
aggregate two or more annuity contracts purchased
by the same owner. Accordingly, a contract owner
should consult a competent tax advisor before
purchasing more than one annuity contract.
Qualified Policies
The rules governing the tax treatment of distributions
under qualified plans vary according to the type of
plan and the terms and conditions of the plan itself.
Generally, in the case of a distribution to a participant
or beneficiary under a contract purchased in
connection with these plans, only the portion of the
payment in excess of the Investment in the Contract
allocated to that payment is subject to tax. The
Investment in the Contract equals the portion of
premiums invested in the contract that were not
excluded from your gross income, and may be zero.
In general, for allowed withdrawals, a ratable portion
of the amount received is taxable, based on the ratio
of the Investment in the Contract to the total contract
value. The amount excluded from a taxpayer's
income will be limited to an aggregate cap equal to
the Investment in the Contract. The taxable portion
of annuity payments is generally determined under
the same rules applicable to nonqualified contracts.
However, special favorable tax treatment may be
available for certain distributions (including lump
sum distributions). Adverse tax consequences may
result from distributions prior to age 59-1/2 (subject
to certain exceptions), distributions that do not
conform to specified commencement and minimum
distribution rules, and in certain other circumstances.
For qualified plans under Section 401(a), 403(a), and
403(b), and 457, the Code requires that distributions
generally must commence no later than the later of
April 1 of the calendar year following the calendar
year in which you (or the plan participant) (i) reach
age 70 1/2 or (ii) retire, and must be made in a
specified form or manner. If the plan participant is a
"5 percent owner" (as defined in the Code),
distributions generally must begin no later than April
1 of the calendar year following the calendar year in
which you (or the plan participant) reach age 70 1/2.
For IRAs described in Section 408, distributions
generally must commence no later than the later of
April 1 of the calendar year following the calendar
year in which you (or the plan participant) reach age
70 1/2. Roth IRAs under Section 408A do not
require distributions at any time prior to your death.
Under Code section 403(b), payments made by public
school systems and certain tax exempt organizations
to purchase annuity contracts for their employees are
excludable from the gross income of the employee,
subject to certain limitations. However, these
payments may be subject to FICA (Social Security)
taxes. A Qualified Contract issued as a tax-sheltered
annuity under section 403(b) will be amended as
necessary to conform to the requirements of the
Code. Code section 403(b)(11) restricts the
distribution under Code section 403(b) annuity
contracts of:
(1) elective contributions made in years beginning
after December 31, 1988;
(2) earnings on those contributions; and
(3) earnings in such years on amounts held as of the
last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon
death of the employee, attainment of age 59-1/2, or
hardship. In addition, income attributable to elective
contributions may not be distributed in the case of
hardship.
Code sections 219 and 408 permit individuals or their
employers to contribute to an individual retirement
program known as an "Individual Retirement
Annuity" or "IRA." Individual Retirement Annuities
are subject to limitations on the amount that may be
contributed and deducted and the time when
distributions may commence. In addition,
distributions from certain other types of retirement
plans may be placed into an Individual Retirement
Annuity on a tax deferred basis. Employers may
establish Simplified Employee Pension (SEP) Plans
to provide IRA contributions on behalf of their
employees.
Roth IRAs, as described in Code section 408A,
permit certain elegible individuals to contribute to
make non-deductible contributions to a Roth IRA in
cash or as a rollover or transfer from another Roth
IRA or other IRA. A rollover from or conversion of
an IRA to a Roth IRA is generally subject to tax and
other special rules apply. You may wish to consult a
tax advisor before combining any converted amounts
with any other Roth IRA contributions, including any
other conversion amounts from other tax years.
Distributions from a Roth IRA generally are not
taxed, except that, once aggregate distributions
exceed contributions to the Roth IRA, income tax and
a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions)
or (2) during the five taxable years starting with the
year in which the first contribution is made to any
Roth IRA. A 10% penalty tax may apply to amounts
attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning
with the year in which the conversion was made.
Code section 401(a) allows employers to establish
various types of retirement plans for employees, and
permit self-employed individuals to establish
retirement plans for themselves and their employees.
These retirement plans may permit the purchase of
the contracts to accumulate retirement savings under
the plans. Adverse tax consequences to the plan, to
the participant, or to both may result if this contract is
assigned or transferred to any individual as a means
to provide benefit payments.
Our Income Taxes
The operations of our Separate Account are included
in our Federal income tax return and we pay no tax
on investment income and capital gains reflected in
variable annuity contract reserves. However, the
1990 Tax Act requires a negative reserve, based on
premiums, to be established. This reserve will cause
our taxable income to increase. We reserve the right
to charge the Separate Account for this and any other
such taxes in the future if the tax law changes and We
incur additional Federal income taxes which are
attributable to our Separate Account. This charge
will be set aside as a provision for taxes which we
will keep in the investment divisions rather than in
our General Account. We anticipate that owners
would benefit from any investment earnings that are
not needed to maintain this provision.
We may have to pay state and local taxes (in addition
to applicable taxes based on premiums) in several
states. At present, these taxes are not substantial. If
they increase, however, then charges may be made
for such taxes when they are attributable to our
Separate Account.
Withholding
Distributions from contracts generally are subject to
withholding for your Federal income tax liability.
The withholding rate varies according to the type of
distribution and your tax status. You will be
provided the opportunity to elect not to have tax
withheld from distributions.
"Eligible rollover distributions" from section 401(a)
plans , 403(a) annuities and 403(b) tax-sheltered
annuities are subject to a mandatory federal income
tax withholding of 20%. An eligible rollover
distribution is the taxable portion of any distribution
from such a plan, except certain distributions such as
distributions required by the Code or distributions in
a specified annuity form. If you choose a "direct
rollover" from the plan to another tax-qualified plan
or IRA, then the 20% withholding does not apply.
The Interest and Dividend Tax Compliance Act of
1983 requires recipients, including those who have
elected out of withholding, to supply their Taxpayer
Identification Number (Social Security Number) to
payers of distributions for tax reporting purposes.
Failure to furnish this number when required may
result in the imposition of a tax penalty and will
subject the distribution to the withholding
requirements of the law described above.
MATURITY DATE
The maturity date is the contract anniversary nearest
the annuitant's attained age 90 (unless restricted by
the laws of the state in which this contract is
delivered)). You may elect a different maturity date
in the application or by sending a written request to
us at least 31 days before the requested new maturity
date. The requested maturity date must be a contract
anniversary. The requested maturity date cannot be
later than the annuitant's attained age 90 and cannot
be earlier than the 10th contract anniversary. For
qualified contracts the requested maturity date cannot
be earlier than the annuitant attained age 59-1/2.
If you have not previously specified otherwise and
have not elected certain systematic withdrawal
options, then on the maturity date you may:
1. take the cash surrender value (in some states, the
contract value) in one lump sum, or
2. convert the contract value into an annuity payable
to the annuitant under one or more of the
payment options described below.
SELECTING AN ANNUITY OPTION
You may apply the proceeds of a withdrawal to effect
an annuity. Unless you choose otherwise, the amount
of the proceeds from the General Account will be
applied to a 10 year certain and life fixed payout and
the amount of the proceeds from the Separate
Account will be applied to a 10 year certain and life
variable payout. The first monthly annuity payment
will be made within one month after the maturity
date. Variable payment options are not available in
certain states.
Currently, the payment options are only available if
the proceeds applied are $1,000 or more and the first
periodic payment will be at least $20.
The payee's actual age will affect each payment
amount for annuity income options involving life
income. The amount of each annuity payment to
older payees will be greater than for younger payees
because payments to older payees are expected to be
fewer in number. For annuity income options that do
not involve life income, the length of the payment
period will affect the amount of each payment. With
a shorter period, the amount of each annuity payment
will be greater. Payments that occur more frequently
will be smaller than those occurring less frequently.
The payee 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.
Payment options will be subject to our rules at the
time of selection. We must approve any
arrangements that involve more than one of the
payment options, or a payee who is not a natural
person (for example, a corporation), or a payee who
is a fiduciary or an assignee. Also, the details of all
arrangements will be subject to our rules at the time
the arrangements take effect. This includes
rules on the minimum amount we will pay under
an option,
minimum amounts for installment payments,
withdrawal or commutation rights (your rights to
receive payments over time, for which we may
offer you a lump sum payment),
the naming of people who are entitled to receive
payment and their successors, and
the ways of proving age and survival.
You choose a payment option when you apply for a
contract and may change it by writing to our home
executive office.
Fixed Options
Payments under the fixed options are not affected by
the investment experience of any investment division.
The value as of the maturity date will be applied to
the fixed option selected. Thereafter, interest or
payments are fixed according to the options chosen.
The following fixed options are available:
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 3 ways to receive the income.
We will guarantee payments for:
(a) at least 10 years (called "10 Years Certain
and Life");
(b) at least 20 years (called "20 Years Certain
and Life"); or
(c) payment only 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, then
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 fixed options at a
rate of 2.75% a year. We may also credit interest
under the fixed deposit options at a rate that is above
the 2.75% guaranteed rate (this is at our complete
discretion) .
Variable Options
Payments under the variable options will vary in
amount depending on the investment experience of
the investment divisions. Variable payment options
are not available in certain states.
The annuity tables contained in the contract are based
on a 5% (five percent) assumed investment rate. This
is a fulcrum rate around which variable annuity
payments will fluctuate to reflect whether the
investment experience of the investment divisions is
better or worse than the assumed investment rate. If
the actual investment experience exceeds the
assumed investment rate, then the payment will
increase. Conversely, if the actual investment
experience is less than the assumed investment rate,
then payments will decrease.
We determine the amount of the first monthly
variable payment by applying the value in each
investment division (as of a date not more than 10
business days prior to the maturity date) to the
appropriate rate (from the annuity tables in the
contract) for the payout options selected using the
payee's age and sex (where permissible). The amount
of the first payment will then be used to determine
the number of annuity units for each investment
division. The number of annuity units is used to
determine the amount of subsequent variable
payments.
The annuity unit value for each investment division
will be set at $10 on the first day there are contract
transactions in our Separate Account. Thereafter the
annuity unit value will vary with the investment
experience of the investment division and will reflect
the daily asset charge we make at an effective annual
rate of 1.40%. The annuity unit value will increase if
the net investment experience (investment experience
minus the asset charge) is greater than the 5%
assumed investment rate. The annuity unit value will
decrease if the net investment experience is less than
the 5% assumed investment rate.
The amount of each subsequent variable payment will
be determined for each investment division by
multiplying the number of annuity units by the
annuity unit value.
Additional information on the variable annuity
payments is contained in the Statement of Additional
Information that can be obtained by writing to our
home executive office.
The following variable options are available:
1. Monthly Life Income Option: We will pay the
money as monthly income for life. You may
choose from 1 of 3 ways to receive the income.
We will guarantee payments for:
(a) at least 10 years (called "10 Years Certain
and Life");
(b) at least 20 years (called "20 Years Certain
and Life"); or
(c) payment only for life. With a life only
payment option, payments will only be made
as long as the annuitant payee is alive.
Therefore, if the payee dies after the first
payment, only one payment will be made.
2. Other: You may ask us to apply the money under
any option that we make available at the time the
benefit is paid.
Transfers after the Maturity Date
After the maturity date, one transfer per contract year
may be made among the investment divisions. The
transfer will take effect as of the date we receive your
request. The transfer request must be received at
least 10 business days before the due date of the first
annuity payment to which the change will apply.
Transfers after the annuity payments have started will
be based on the annuity unit values. There will be no
transfer charge for this transfer. No transfers are
allowed from a fixed annuity option to a variable
annuity option or vice versa.
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 were redomesticated to Iowa in 1999. We are
licensed to do business in 49 states, the District of
Columbia, and Puerto Rico. Our address is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
(605) 335-5700
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
Fund Voting Rights
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,
on any other matters described in the Funds'
current prospectuses or requiring a vote by
shareholders under the Investment Company Act
of 1940, and
to change the investment objectives and policies.
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 shareholders 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 owner voting, then we may do so.
How We Determine Your Voting Shares
You may participate in voting only on matters
concerning the Fund portfolios in which your contract
value has been invested. We determine your voting
shares in each division by dividing the amount of
your contract 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 Fund's Board for the shareholders
meeting. We count fractional shares.
If you have a voting interest, then we will send you
proxy material and a form for giving us voting
instructions. In certain cases, we may disregard
instructions relating to changes in the Fund's adviser
or the investment policies of its portfolios. We will
advise you if we do.
Voting Privileges Of Participants In Other
Companies
Other insurance companies own shares in the Funds
to support their variable life insurance and variable
annuity 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. If we ever believe that any of the Funds'
portfolios are so large as to materiality impair its
investment performance, then we will examine other
investment options.
Our Reports to Owners
Shortly after the end of each contract year, we will
send you a report that shows
your contract value, and
any transactions involving your contract value that
occurred during the year. Transactions include
your premium allocations, transfers and
withdrawals made in that year.
We will also send you semi-annual reports with
financial information on the Funds, including a list of
the investments held by each portfolio.
Confirmation notices will be sent to you for
premiums, transfers of amounts between investment
divisions and certain other contract transactions.
Contract Periods, Anniversaries
We measure contract years, contract months and
contract anniversaries from the contract date shown
on your contract's information page. Each contract
month begins on the same day in each contract
month. The calendar days of 29, 30, and 31 are not
used.
Dividends
We do not pay any dividends on the contract
described in this prospectus.
Performance
Performance information for the investment divisions
may appear in reports and advertising to current and
prospective owners. The performance information is
based on the historical investment experience of the
investment division and the portfolios and does not
indicate or represent future performance.
Total returns are based on the overall dollar or
percentage change in value of a hypothetical
investment. Total return quotations reflect changes in
portfolio share price, the automatic reinvestment by
the Separate Account of all distributions and the
deduction of applicable charges (including any
contingent deferred sales charges that would apply if
you surrendered the contract at the end of the period
indicated). Quotations of total return may also be
shown that do not take into account certain
contractual charges such as the contingent deferred
sales charge. The total return percentage will be
higher under this method than under the standard
method described above.
A cumulative total return reflects performance over a
stated period of time. If the performance had been
constant over the entire period, then an average
annual total return reflects the hypothetical annually
compounded return that would have produced the
same cumulative total return. Because average
annual total returns tend to smooth out variations in
an investment division's returns, you should
recognize that they are not the same as actual year-
by-year results.
Some investment divisions may also advertise yield.
These measures reflect the income generated by an
investment in the investment divisions over a
specified period of time. This income is annualized
and shown as a percentage. Yields do not take into
account capital gains or losses or the contingent
deferred sales charge. The standard quotations of
yield reflect the contract maintenance charge.
The VIP Money Market investment division may
advertise its current and effective yield. Current
yield reflects the income generated by an investment
in the investment division over a 7 day period.
Effective yield is calculated in a similar manner
except that income earned is assumed to be
reinvested. The VIP II Investment Grade Bond and
the VIP High Income investment divisions may
advertise a 30 day yield which reflects the income
generated by an investment in the investment division
over a 30 day period.
Midland may also advertise performance figures for
the investment divisions based on the performance of
a portfolio prior to the time the Separate Account
commenced operations.
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 annuitant's lifetime by
writing to our home executive office. If no
beneficiary is living when the annuitant dies, then we
will pay the death benefit to the annuitant's estate.
Assigning Your Contract
You may assign your rights in this contract. You
must send a copy of the assignment to our home
executive 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,
withdrawals, or loans within seven days after
receiving the required form(s) at our home executive
office. Death benefits are determined as of the date
we receive due proof of death and the election of how
the death benefit is to be paid.
We may delay payment for one or more of the
following reasons:
1) We cannot determine the amount of the payment
because:
a) the New York Stock Exchange is closed,
b) trading in securities has been restricted by the
SEC, or
c) the SEC has declared that an emergency exists,
2) the SEC by order permits us to delay payment to
protect our owners, or
3) your premium checks have not cleared your bank.
We may defer payment of any withdrawal or
surrender from the General Account, for up to 6
months after we receive your request.
Sales 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 mailing address for WSS is:
670 Mason Ridge Center
Suite 300
St. Louis, Missouri 63141-8557
We will pay agents a commission of up to 6.5%
7.75% of premiums paid. We may sell our contracts
through broker-dealers registered with the SEC 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, except in the first year when we may pay 6.7%
of premiums.
Regulation
We are regulated and supervised by the South Dakota
Iowa 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 Compliance Issues
The Year 2000 issue (Y2K) relates to the ability of
computer systems to properly recognize a four-digit
year code. Many computer systems only allowed for
a two-digit year code and thus years such as 1998
were simply recognized as 98. Using a two-digit year
code for the years 2000 and beyond could result in
errors and miscalculations.
Midland National Life relies extensively on computer
systems in its daily operations. Several years ago, we
began implementing a Plan to modify all of our
computer systems to properly recognize the year
2000. Our Y2K Plan focused on assuring compliance
in the following areas: Information Technology
("IT") and non-information ("non-IT") hardware,
operating systems, software applications and custom
applications. We are in the process of the remediation
and testing of other systems, including telephone,
heating and cooling, mechanical and other equipment
having embedded, date sensitive technology for Year
2000 compliance, In addition, we are reviewing the
Year 2000 compliance status of our mission critical
customers, vendors and service providers.
We have upgraded our mainframe computer
hardware, systems software and applications software
to address Y2K issues and we expect to complete
compliance testing by June 30, 1999. Most of our
systems run on the IBM mainframe computer
platform, where future dated systems testing has been
performed through December 31, 2000. We are in the
process of updating and testing hardware and
software running on personal computer (PC)
platforms and expect to have any Y2K issues
resolved by June 30, 1999.
Y2K issues have been handled primarily by our
internal staff. We spent approximately $800,000 on
the Year 2000 project through the end of 1998 and
estimate additional expenditures of $250,000 for the
balance of the project. Due to our early start in
addressing Y2K issues, the number of other IT
projects delayed due to Y2K has been very limited.
We are currently in the process of developing a Y2K
Contingency Plan and will involve representatives
from our IT and non-IT business units in the planning
process. The Y2K Contingency Plan may include
potential Y2K issues generated within our own
Company and potential Y2K issues generated by
third parties that have a mission critical business
relationship with us.
While we cannot guarantee that our computer
systems nor those of the parties with which we
conduct business will properly function once the year
2000 is reached, Midland National Life is committed
to maintaining reliable computer systems which
properly recognize the year 2000.
Discount for Midland Employees of Sammons
Enterprises, Inc.
Midland Employees of Sammons Enterprises, Inc.,
may receive a premium contribution to the contract of
65% of the first year commission that would
normally have been paid on the employee's first year
premiums. Midland will pay this contribution.
Midland is a subsidiary of Sammons Enterprises,
Inc., and additional premium payments contributed
solely by Midland National Life will be paid into the
employee's policy during the first year.
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.
Experts Financials
The financial statements of Midland National Life
Separate Account C and Midland National Life
Insurance Company, included in the registration
statement, have been audited by
PricewaterhouseCoopers LLP, independent auditors,
for the periods indicated in their report which appears
in the registration statement. The address for
PricewaterhouseCoopers LLP is:
IBM Park Building
Suite 1300
650 Third Avenue South
Minneapolis, MN 55402-4333
The financial statements audited by
PricewaterhouseCoopers LLP have been included in
reliance on their reports given upon their authority as
experts in accounting and auditing.
Statement of Additional Information
A Statement of Additional Information is available
which contains more details concerning the subjects
discussed in this prospectus. This Statement of
Additional Information can be acquired by checking
the appropriate box on the application form, by
writing our home executive office, or by calling the
Statement of Additional Information Toll Free
number at 1 800-272-1642. The following is the
Table of Contents for the Statement of Additional
Information:
TABLE OF CONTENTS
Page
THE CONTRACT
Non-Participation 3
Misstatement of Age or Sex 3
Proof of Existence and Age 3
Assignment 3
Annuity Data 3
Incontestability 3
Ownership 3
Entire Contract 3
Changes in the Contract 3
Protection of Benefits 3
Accumulation Unit Value 3
Annuity Payments 4
CALCULATION OF YIELDS AND TOTAL RETURNS
VIP Money Market Investment Division Yield Calculation 4
Other Investment Division Yield Calculations 5
Standard Total Return Calculations Assuming Surrender 5
Other Performance Data 6
Adjusted Historical Performance Data 7
FEDERAL TAX MATTERS
Tax Free Exchanges (1035) 10
Required Distributions 10
DISTRIBUTION OF THE CONTRACT 10
SAFEKEEPING OF ACCOUNT ASSETS 10
STATE REGULATION 11
RECORDS AND REPORTS 11
LEGAL PROCEEDINGS 11
LEGAL MATTERS 11
EXPERTS 11
OTHER INFORMATION 11
FINANCIAL STATEMENTS 11
CONDENSED FINANCIAL INFORMATION
Accumulation Number of
Unit Value at Accumulation Accumulation
Investment Beginning of Unit Value at Units at End of
Division Period End of Period Period
VIP Money Market
1993(1) 10.00 10.02 3,675
1994 10.02 10.31 207,115
1995 10.31 10.76 320,841
1996 10.76 11.18 450,641
1997 11.18 11.63 534,936
1998 11.63 12.08 1,031,930
1999 12.08 12.52 1,259,530
VIP High Income
1993(1) 10.00 10.22 268
1994 10.2 29.93 70,977
1995 9.93 11.83 139,335
1996 11.83 13.26 221,760
1997 13.26 13.58 221,760
1998 13.58 14.51 443,482
1999 14.51 15.48 457,402
VIP Equity-Income
1993(1) 10.00 10.16 2,861
1994 10.16 10.71 163,874
1995 10.71 14.35 385,807
1996 14.35 16.09 696,083
1997 16.09 20.33 929,862
1998 20.33 22.37 1,212,515
1999 22.37 23.46 1,292,017
VIP Growth
1993 10.00 10.09 2,539
1994 10.09 9.80 160,540
1995 9.80 13.32 347,738
1996 13.32 15.01 700,985
1997 15.01 18.28 917,650
1998 18.28 25.14 1,102,018
1999 25.14 34.07 1,444,405
VIP Overseas
1993(1) 10.00 10.40 1,706
1994 10.40 10.37 147,456
1995 10.37 11.36 217,322
1996 11.36 12.59 282,107
1997 12.59 13.85 336,988
1998 13.85 15.39 300,975
1999 15.39 21.65 293,703
VIP II Asset Manager
1993(1) 10.00 10.48 11,474
1994 10.48 9.67 280,056
1995 9.67 11.22 362,467
1996 11.22 12.65 447,842
1997 12.65 15.05 534,109
1998 15.05 17.06 585,516
1999 17.06 18.70 603,487
VIP II Investment Grade Bond
1993(1) 10.00 10.06 124
1994 10.06 9.52 31,444
1995 9.52 11.03 52,431
1996 11.03 11.22 97,711
1997 11.22 12.06 136,067
1998 12.06 12.94 343,788
1999 12.94 12.63 426,095
VIP II Contrafund
1995(2) 10.00 11.84 35,906
1996 11.84 14.17 187,702
1997 14.17 17.34 397,591
1998 17.34 22.22 582,354
1999 22.22 27.23 809,424
Accumulation Number of
Unit Value at Accumulation Accumulation
Investment Beginning of Unit Value at Units at End of
Division Period End of Period Period
VIP II Asset Manager: Growth
1995(2) 10.00 11.48 13,682
1996 11.48 13.56 71,781
1997 13.56 16.72 176,790
1998 16.72 19.38 255,206
1999 19.38 22.03 308,652
VIP II Index 500
1993(1) 10.00 10.15 22
1994 10.15 10.11 32,675
1995 10.11 13.79 71,305
1996 13.79 16.57 256,789
1997 16.57 21.67 497,7741
1998 21.67 27.42 870,732
1999 27.42 32.59 1,332,497
VIP III Growth & Income
1997 10.00 12.36 54,877
1998 12.36 15.79 301,273
1999 15.79 17.00 533,307
VIP III Balanced
1997(3) 10.00 11.45 39,701
1998 11.45 13.28 146,152
1999 13.28 13.70 266,510
VIP III Growth Opportunities
1997(3) 10.00 12.28 75,926
1998 12.28 15.08 320,588
1999 15.08 15.51 499,339
American Century VP Capital Appreciation
1997(3) 10.00 11.35 13,870
1998 11.35 10.94 43,157
1999 10.94 17.76 56,765
American Century VP Value
1997(3) 10.00 12.26 44,666
1998 12.26 12.66 141,481
1999 12.66 12.39 140,385
American Century VP Balanced
1997(3) 10.00 11.40 13,519
1998 11.40 13.01 45,229
1999 13.01 14.12 60,982
American Century VP International
1997(3) 10.00 10.93 34,973
1998 10.93 12.79 91,430
1999 12.79 20.70 137,562
American Century VP Income & Growth
1998(4) 10.00 11.92 12,172
1999 11.92 13.88 84,497
MFS VIT Emerging Growth
1998(4) 10.00 12.56 10,106
1999 12.56 21.89 168,739
MFS VIT Research
1998(4) 10.00 11.78 9,782
1999 11.78 14.41 106,941
MFS VIT Growth with Income
1998(4) 10.00 11.54 2,539
1999 11.54 12.14 55,568
MFS VIT New Discovery
1998(4) 10.00 12.89 84
1999 12.89 22.06 22,846
Lord Abbett VC Growth and Income
1998(4) 10.00 10.72 14,051
1999 10.72 13.19 81,150
Lord Abbett VC Mid-Cap Value(5)
1999 10.00 10.28 2,846
Lord Abbett VC International(5)
1999 10.00 12.87 818
(1) Period from 10/24/93 to 12/31/93
(2) Period from 5/1/95 to 12/31/95
(3) Period from 5/1/97 to 12/31/97
(4) Period from 10/1/98 to 12/31/98
(5) Period from 9/15/99 to 12/31/99
VA200.txt
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR THE
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY II
CONTRACT
Offered by
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Through Midland National Life Separate Account C
This Statement of Additional Information expands
upon subjects discussed in the current Prospectus
for the Flexible Premium Deferred Variable Annuity
II Contract ("Contract") offered by Midland National
Life Insurance Company. You may obtain a copy of the
Prospectus dated May 1, 1999, by writing to Midland
National Life Insurance Company, One Midland Plaza,
Sioux Falls, SD 57193. Terms used in the current
Prospectus for the Contract are incorporated in this
Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION
WITH THE PROSPECTUS FOR THE POLICY CONTRACT<1R>.
Dated May 1,
1999 2000<1R>
TABLE OF CONTENTS
Page
THE CONTRACT
Non-Participation 3
Misstatement of Age or Sex 3
Proof of Existence and Age 3
Assignment 3
Annuity Data 3
Incontestability 3
Ownership 3
Entire Contract 3
Changes in the Contract 3
Protection of Benefits 3
Accumulation Unit Value 3
Annuity Payments 4
CALCULATION OF YIELDS AND TOTAL RETURNS
VIP Money Market Investment Division Yield
Calculation 4
Other Investment Division Yield Calculations 5
Standard Total Return Calculations Assuming
Surrender 5
Other Performance Data 7
Adjusted HistoricalPerformance Data 8
FEDERAL TAX MATTERS
Tax Free Exchanges (1035) 11
Required Distributions 11
DISTRIBUTION OF THE CONTRACT 11
SAFEKEEPING OF ACCOUNT ASSETS 12
STATE REGULATION 12
RECORDS AND REPORTS 12
LEGAL PROCEEDINGS 12
LEGAL MATTERS 12
EXPERTS 12
OTHER INFORMATION 12
FINANCIAL STATEMENTS 13
THE CONTRACT
Non-Participation
The Contracts are non-participating. No dividends
are payable and the Contracts will not share in the
profits or surplus earnings of Midland.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any other
payee has been misstated in the application, the
Annuity payable under the Contract will be whatever
the Contract Value of the Contract would purchase on
the basis of the correct age or sex of the Annuitant
and/or other payee, if any, on the date Annuity
Payments begin. Any overpayment or underpayments by
Midland as a result of any such misstatement will be
corrected using an interest rate of 6% per year.
Proof of Existence and Age
Before making any payment under the Contract, we may
require proof of the existence and/or proof of the
age of the Owner or Annuitant.
Assignment
No assignment of a Contract will be binding on
Midland unless made in writing and sent to us at our
Home Executive<1R> Office. Midland is not
responsible for the adequacy of any assignment. The
Owner's rights and the interest of any Beneficiary
not designated irrevocably will be subject to the
rights of any assignee of record.
Annuity Data
We will not be liable for obligations which depend
on receiving information from a payee until such
information is received in a satisfactory form.
Incontestability
The Contract is incontestable after it has been in
force, during the Annuitant's lifetime, for two
years.
Ownership
Before the Annuitant's death, only the Owner will be
entitled to the rights granted by the Contract or
allowed by Midland under the Contract, except that
the right to choose a Payment Option will belong to
the Payee, unless otherwise specified. If the Owner
is an individual and dies before the Annuitant, the
rights of the Owner belong to the estate of the
Owner unless this Contract has been endorsed to
provide otherwise.
Entire Contract
We have issued the Contract in consideration of the
application and payment of the first premium. A copy
of the application is attached to and is a part of
the Contract. The Policy Form with the application
and any riders make the entire Contract. All
statements made by or for the Annuitant are
considered representations and not warranties.
Midland will not use any statement in defense of a
claim unless it is made in the application and a
copy of the application is attached to the Contract
when issued.
Changes in the Contract
Only Midland's President, a Vice President, the
Secretary or an Assistant Secretary of our Company
have the authority to make any change in the
Contract and then only in writing. We will not be
bound by any promise or representation made by any
other person.
Midland may not change or amend the Contract, except
as expressly provided in the Contract, without the
Owner's consent. However, we may change or amend the
Contract if such change or amendment is necessary
for the Contract to comply with any state or federal
law, rule or regulation.
Protection of Benefits
To the extent permitted by law, no benefit under the
Contract will be subject to any claim or process of
law by any creditor.
Accumulation Unit Value
We determine Accumulation Unit Values for the
Investment Division of Our Separate Account at the
end of each Business Day. The Accumulation Unit
Value for each Investment Division was set at $10.00
on the first day there were contract transactions in
Our Separate Account. After that, the Accumulation
Unit Value for any Business Day is equal to the
Accumulation Unit Value for the preceding Business
Day multiplied by the net investment factor for that
division on that Business Day.
We determine the net investment factor for each
Investment Division every Business Day as follows:
* First, We take the value of the shares belonging
to the division (including any shares from
reinvested dividends or capital gain distributions)
in the corresponding Fund portfolio at the close of
business that day (before giving effect to any
contract transaction for that day, such as premium
payments or surrenders). For this purpose, We use
the share value reported to Us by the Fund.
Then, We divide this amount by the value of the
amounts in the Investment Division at the close of
business on the preceding Business Day (after giving
effect to any contract transactions on that day).
Then, We subtract a daily asset charge for each
calendar day between Business Days (for example, a
Monday calculation may include charges for Saturday,
Sunday, and Monday). The daily charge is .0038626%
which is an effective annual rate of 1.40%. This
charge is for mortality and expense risks assumed by
Us under the contract and to cover administrative
costs We incur for transactions related to the
Separate Account.
Finally, We reserve the right to subtract any
other daily charge for taxes or amounts set aside as
a reserve for taxes. Generally, this means that We
would adjust unit values to reflect what happens to
the Funds, and also for any charges.
Annuity Payments
The amount of each fixed annuity payment will be set
on the Maturity Date and will not subsequently be
affected by the investment performance of the
Investment Divisions.
The amount of each variable annuity payment will be
affected by the investment performance of the
Investment Divisions. Variable payment options are
not available in certain states.
The dollar amount of the first monthly variable
annuity payment is computed for each Investment
Division by applying the value in the Investment
Division, as of a date not more than 10 business
days prior to the Maturity Date, to the appropriate
rate for the payout option selected using the age
and sex (where permissible) of the Annuitant. The
number of Annuity Units for each Investment Division
is then calculated by dividing the first variable
annuity payment for that Investment Division by the
Investment Division's Annuity Unit Value as of the
same date.
The dollar amount of each subsequent payment from an
Investment Division is equal to the number of
Annuity Units for that Investment Division times the
Annuity Unit value for that Investment Division as
of a uniformly applied date not more than ten
business days before the annuity payment is due.
The payment made to the Annuitant for the first
payment and all subsequent payments will be the sum
of the payment amounts for each Investment Division.
The Annuity Unit Value for each Investment Division
was set at $10 on the first day there were contract
transactions in Our Separate Account. After that,
the Annuity Unit Value for any business day is equal
to (1) multiplied by (2) multiplied by (3) where:
(1) = the Annuity Unit Value for the preceding
business day:
(2) = the net investment factor (as described above)
for that division on that business day.
(3) = the investment result adjustment factor
(.99986634 per day), which recognizes an assumed
interest rate of 5% per year used in determining the
annuity payment amounts.
Transfers after the Maturity Date will only be
allowed once per Contract Year and will be made
using the Annuity Unit Value for the Investment
Divisions on the date the request for transfer is
received. On the transfer date, the number of
Annuity Units transferred from the Investment
Division is multiplied by the Annuity Unit Value for
that Investment Division to determine the value
being transferred. This value is then transferred
into the indicated Investment Division(s) by
converting this value into Annuity Units of the
proper Investment Division(s). The Annuity Units are
determined by dividing the value being transferred
into an Investment Division by the Annuity Unit
value of the Investment Division on the transfer
date. The transfer shall result in the same dollar
amount of variable annuity payment on the date of
transfer.
CALCULATION OF YIELDS AND TOTAL RETURNS
VIP Money Market Investment Division Yield
Calculation
In accordance with regulations adopted by the
Securities and Exchange Commission, Midland is
required to compute the VIP Money Market Investment
Division's current annualized yield for a seven-day
period in a manner which does not take into
consideration any realized or unrealized gains or
losses or shares of the VIP Money Market Portfolio
or on its portfolio securities. This current
annualized yield is computed by determining the net
change (exclusive of realized gains and losses on
the sale of securities and unrealized appreciation
and depreciation and income other than investment
income) in the value of a hypothetical account
having a balance of one unit of the VIP Money Market
Investment Division at the beginning of such seven-
day period, dividing such net change in account
value by the value of the account at the beginning
of the period to determine the base period return
and annualizing this quotient on a 365-day basis.
The net change in account value reflects the
deductions for the contract maintenance charge,
annual administrative expenses, the mortality and
expense risk charge, and income and expenses accrued
during the period. Because of these deductions, the
yield for the VIP Money Market Investment Division
of the Separate Account will be lower than the yield
for the VIP Money Market Portfolio or any comparable
substitute funding vehicle.
The Securities and Exchange Commission also permits
Midland to disclose the effective yield of the VIP
Money Market Investment Division for the same seven-
day period, determined on a compounded basis. The
effective yield is calculated by compounding the
unannualized base period return by adding one to the
base period return, raising the sum to a power equal
to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the VIP Money Market
Investment Division normally will fluctuate on a
daily basis. Therefore, the disclosed yield for any
given past period is not an indication or
representation of future yields or rates of return.
The VIP Money Market Investment Division's actual
yield is affected by changes in interest rates on
money market securities, average portfolio maturity
of the VIP Money Market Portfolio or substitute
funding vehicle, the types and quality of portfolio
securities held by the VIP Money Market Portfolio or
substitute funding vehicle, and operating expenses.
In addition, the yield figures do not reflect the
effect of any Contingent Deferred Sales Charge that
may be applicable to a particular Contract. The
annualized yield for the seven-day period ending
12/31/98 12/31/99<1R> was
3.60% 2.36%<1R>.
Other Investment Division Yield Calculations
Midland may from time to time disclose the current
annualized yield of one or more of the Investment
Divisions (except the Money Market Investment
Division) for 30-day periods. The annualized yield
of an Investment Division refers to income generated
by the Investment Division over a specified 30-day
period. Because the yield is annualized, the yield
generated by an Investment Division during the 30-
day period is assumed to be generated each 30-day
period. This yield is computed by dividing the net
investment income per accumulation unit earned
during the period by the price per unit on the last
day of the period, according to the following
formula:
YIELD = 2 [ (a - b + 1)6 - 1 ]
cd
Where: a = net investment income earned
during the period by the Fund (or substitute funding
vehicle) attributable to shares owned by
the Investment Division.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of units
outstanding during the period.
d = the maximum offering price per unit on
the last day of the period.
Net investment income will be determined in
accordance with rules established by the Securities
and Exchange Commission. Accrued expenses will
include all recurring fees that are charged to all
Owner accounts. The yield calculations do not
reflect the effect of any Contingent Deferred Sales
Charges that may be applicable to a particular
Contract. Contingent Deferred Sales Charges range
from 8% to 0% of the amount of Premium withdrawn
depending on the time elapsed between each premium
payment and the withdrawal.
Because of the charges and deductions imposed by the
Separate Account the yield of the Investment
Division will be lower than the yield for the
corresponding Fund. The yield on amounts held in the
Investment Divisions normally will fluctuate over
time. Therefore, the disclosed yield for any given
past period is not an indication or representation
of future yields or rates of return. The Investment
Division's actual yield will be affected by the
types and quality of portfolio securities held by
the Fund, and its operating expenses.
We currently do not advertise yields for any
Investment Division.
Standard Total Return Calculations Assuming
Surrender
Midland may from time to time also disclose average
annual total returns for one or more of the
Investment Divisions for various periods of time.
Average annual total return quotations are computed
by finding the average annual compounded rates of
return over one, five and ten year periods that
would equate the initial amount invested to the
ending redeemable value, according to the following
formula:
P (1 + T)n = ERV
Where: P = an assumed initial payment of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of an assumed
$1,000 payment made at the beginning of the one,
five, or ten-year period, at the end of the
one, five, or ten-year period (or fractional portion
thereof).
All recurring fees that are charged to all Owner
accounts are recognized in the ending redeemable
value. The standard average annual total return
calculations which assume the Contract is
surrendered will reflect the effect of Contingent
Deferred Sales Charges that may be applicable to a
particular period.
The following is the average annual total return
information for the Investment Divisions of Separate
Account C based on the assumption that the contract
is surrendered at the end of the time period shown.
The returns reflect the impact of any applicable
contingent deferred sales charge.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market(10/24/93)
2.70% 3.12% -4.60% -3.65% 2.89%<1R>
VIP II Investment Grade Bond(10/24/93)
4.12%3.25%-0.02% -9.78% 4.77%<1R>
VIP High Income(10/24/93)
6.54% 6.80% -13.01% -0.71% 8.39%<1R>
VIP II Asset Manager(10/24/93)
10.04% 10.18% 6.09% 2.19% 13.21%<1R>
VIP II Index 500(10/24/93)
20.87% 20.70% 19.18% 11.48% 25.79%<1R>
VIP Equity-Income(10/24/93)
16.12% 14.37% 2.72% -2.51% 16.22%<1R>
VIP Growth(10/24/93)
18.82% 21.58%30.19% 28.17% 27.37%<1R>
VIP Overseas(10/24/93)
7.80% 12.87%3.82%33.28% 14.97%<1R>
VIP II Contrafund(10/24/93)
23.22% 23.28% 20.81% 15.17% N/A<1R>
VIP II Asset Manager: Growth(5/1/95)
18.56%17.68% 8.58% 6.30% N/A<1R>
VIP III Balanced(5/1/97)
14.55% 10.43% 8.65% -4.26% N/A<1R>
VIP III Growth & Income(5/1/97)
27.78% 20.18% 20.43% 0.29% N/A<1R>
VIP III Growth Opportunities(5/1/97)
24.12%15.94% 15.52% -4.53% N/A<1R>
American Century VP Balanced(5/1/97)
13.05%11.77% 6.56% 1.17% N/A<1R>
AmericanCenturyVPCapitalAppreciation(5/1/97)
1.24% 22.24%-10.88%54.88%N/A<1R>
American Century VP Value(5/1/97)
11.13% 6.14% -4.07% -9.59% N/A<1R>
American Century VP International(5/1/97)
11.85% 29.71%9.60% 54.40% N/A<1R>
American Century VP Income & Growth(10/1/98)
N/A 24.46% N/A 9.02% N/A<1R>
MFS VIT Emerging Growth Series (10/1/98)
N/A82.15% N/A 66.90% N/A<1R>
MFS VIT Reserach Series (10/1/98)
N/A 28.49% N/A 14.96% N/A<1R>
MFS VIT Growth with Income Series(10/1/98)
N/A 11.12% N/A -2.15% N/A<1R>
MFS VIT New Discovery Series(10/1/98)
N/A 83.31% N/A 63.64% N/A<1R>
Lord Abbett VC
C<1R> Growth and Income(10/1/98)
N/A 19.35%N/A 7.76% N/A<1R>
Lord Abbett VC Mid-Cap Value(10/1/99)N/A N/A N/A
Lord Abbett VC International (10/1/99)N/A N/A N/A<1R>
N/A - The return information for the funds are not
reflected as the funds had not been included in
Midland National Life Separate Account C
for more
than 12 months at 12/31/1998 for the time period
shown. No returns are shown for the Lord Abbett VC
Mid-Cap Value or Lord Abbett VC International since
such funds had not been included in Midland National
Life Separate Account C for more than 12 months at
12/31/99.<1R>
Midland may from time to time also disclose average
annual total returns in a format which assumes the
Contract is kept in-force through the time period
shown. Such returns will be identical to the format
which assumes the Contract is surrendered except
that the Contingent Deferred Sales Charge percentage
will be assumed to be 0%. The returns which assume
the Contract is kept in-force will only be shown in
conjunction with returns which assume the Contract
is surrendered.
The following is the average annual total return
information for the Investment Division of Separate
Account C based on the assumption that the contract
is kept in-force through the end of the time period
shown. The contingent deferred sales charges are set
to zero.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (10/24/93)
3.61% 2.61% 3.55% 3.84%<1R>
VIP II Investment Grade Bond (10/24/93)
4.98%3.74% 7.18% -2.58% 5.65%<1R>
VIP High Income (10/24/93)
7.33% 7.21% -5.81% 6.49% 9.16%<1R>
VIP II Asset Manager (10/24/93)
10.73% 10.53% 13.29% 9.39% 13.86%<1R>
VIP II Index 500 (10/24/93)
21.34% 20.92% 26.38% 18.68% 26.22%<1R>
VIP Equity-Income (10/24/93)
16.67% 14.66% 9.91% 4.69% 16.80%<1R>
VIP Growth (10/24/93)
19.32% 21.79% 37.39%35.37% 27.77%<1R>
VIP Overseas (10/24/93)
8.55% 13.18% 11.02%40.48% 15.58%<1R>
VIP II Contrafund (10/24/93)
24.19% 23.81% 28.01% 22.37% N/A<1R>
VIP II Asset Manager: Growth (5/1/95)
19.64%18.31% 15.78% 13.50% N/A<1R>
VIP III Balanced (5/1/97)
18.44% 12.40% 15.85% 2.94% N/A<1R>
VIP III Growth & Income (5/1/97)
31.41% 21.90% 27.63% 7.49% N/A<1R>
VIP III Growth Opportunities (5/1/97)
27.82%17.76% 22.72% 2.67% N/A<1R>
American Century VP Balanced (5/1/97)
16.98%13.70% 13.76% 8.37% N/A<1R>
AmericanCenturyVPCapitalAppreciation(5/1/97)
5.46% 23.91%-3.68% 62.08%N/A<1R>
American Century VP Value (5/1/97)
15.11% 8.24% 3.14% -2.38% N/A<1R>
American Century VP International (5/1/97)
15.81% 31.23%16.80% 61.60% N/A<1R>
American Century VP Income & Growth (10/1/98)
N/A 29.89% N/A 16.22% N/A<1R>
MFS VIT Emerging Growth Series (10/1/98)
N/A87.10% N/A 74.10% N/A<1R>
MFS VIT Research Series (10/1/98)
N/A 33.88% N/A 22.16% N/A<1R>
MFS VIT Growth with Income Series (10/1/98)
N/A 16.70% N/A 5.05% N/A<1R>
MFS VIT New Discovery Series (10/1/98)
N/A88.25% N/A 70.84% N/A
Lord Abbett VC
C<1R> Growth and Income(10/1/98)
N/A 24.83%N/A 14.96%N/A
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A
N/A<1R>
N/A - The return information for these Investment
Divisions is not reflected as the funds had not been
included in Midland National Life Separate Account C
for more than 12 months at 12/31/1998 for the
time period shown. No returns are shown for the
Lord Abbett VC Mid-Cap Value or Lord Abbett VC
International since such funds had not been included
in Midland National Life Separate Account C for more
than 12 months at 12/31/99.<1R>
Other Performance Data
Midland may from time to time also disclose
cumulative total returns in conjunction with the
annual returns described above. The cumulative
returns will be calculated using the following
formula. The cumulative returns which assume the
Contract is kept in-force assume that the Contingent
Deferred Sales Charge percentage will be zero.
CTR = [ERV/P] - 1
Where: CTR = the cumulative total return net of
Investment Division recurring charges for the
period.
ERV = ending redeemable value of an assumed
$1,000 payment at the beginning of the one, five, or
ten year period at the end of the one,
five, or ten-year period (or fractional portion
thereof).
P = an assumed initial payment of
$1,000
The returns which assume the Contract is kept in-
force will only be shown in conjunction with returns
which assume the Contract is surrendered.
Midland may also disclose the value of an assumed
payment of $10,000 (or other amounts) at the end of
various periods of time.
The following is the cumulative total return
information for the Investment Division of Separate
Account C. The returns are based on the assumption
that the contract is surrendered at the end of the
time period shown and the returns reflect the impact
of any applicable Contingent Deferred Sales Charge.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
Investment Grade Bond (10/24/93)
23.28% 21.91%-0.02% -9.78% 26.24%<1R>
VIP High Income (10/24/93)
38.95% 50.26% -13.01% -0.71% 49.60%<1R>
VIP II Asset Manager (10/24/93)
64.30% 82.22% 6.09% 2.19% 85.96%<1R>
VIP II Index 500 (10/24/93)
167.44% 220.43% 19.18% 11.48% 214.94%<1R>
VIP Equity-Income (10/24/93)
117.16% 129.59% 2.72% -2.51% 112.03%<1R>
VIP Growth (10/24/93)
144.67% 235.13% 30.19% 28.17% 235.22%<1R>
VIP Overseas (10/24/93)
47.67% 111.57% 3.82% 33.28% 100.87%<1R>
VIP II Contrafund (10/24/93)
115.22% 165.80%20.81% 15.17% N/A<1R>
VIP II Asset Manager: Growth (5/1/95)
86.85% 113.93%8.58% 6.30% N/A<1R>
VIP III Balanced (5/1/97)
25.43% 30.31% 8.65% -4.26% N/A<1R>
VIP III Growth & Income (5/1/97)
50.54% 63.33% 20.43% 0.29% N/A<1R>
VIP III Growth Opportunities (5/1/97)
43.41% 48.39% 15.52% -4.53% N/A<1R>
American Century VP Balanced (5/1/97)
22.71% 34.56% 6.56% 1.17% N/A<1R>
AmericanCenturyVPCapital Appreciation(5/1/97)
2.08%70.90%-10.88% 54.88%N/A<1R>
American Century VP Value (5/1/97)
19.26% 17.23% -4.07% -9.59% N/A<1R>
American Century VP International (5/1/97)
20.55% 100.22% 9.60% 54.40%N/A<1R>
American Century VP Income & Growth (10/1/98)
N/A 31.44% N/A 9.02% N/A<1R>
MFS VIT Emerging Growth Series (10/1/98)
N/A 111.53% N/A 66.90% N/A<1R>
MFS VIT Research Series (10/1/98
N/A 36.78%N/A 14.96% N/A<1R>
MFS VIT Growth with Income Series (10/1/98)
N/A 14.08% N/A -2.15% N/A<1R>
MFS VIT New Discovery Series (10/1/98)
N/A113.21% N/A 63.64% N/A<1R>
Lord Abbett VC
C<1R> Growth and Income (10/1/98)
N/A 24.73%N/A 7.76%N/A
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A N/A<1R>
N/A - The return information for these Investment
Divisions is not reflected as the funds had not been
included in Midland National Life Separate Account C
for more than 12 months at 12/31/1998 for the
time period shown. No returns are shown for the
Lord Abbett VC Mid-Cap Value or Lord Abbett VC
International since such funds had not been included
in Midland National Life Separate Account C for more
than 12 months at 12/31/99.<1R>
The following is the cumulative total return
information for the Investment Division of Separate
Account C. The returns are based on the assumption
that the contract is kept in-force through the end
of the time period shown and the contingent deferred
sales charges are set to zero.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (10/24/93)
20.20% 24.54% 2.61% 3.55% 20.73%<1R>
VIP II Investment Grade Bond (10/24/93)
28.68%25.51%7.18% -2.58% 31.63%<1R>
VIP High Income (10/24/93)
44.35% 53.86% -5.81% 6.49% 54.99%<1R>
VIP II Asset Manager (10/24/93)
69.70% 85.82% 13.29% 9.39% 91.36%<1R>
VIP II Index 500 (10/24/93)
172.84% 224.03% 26.38% 18.68% 220.36%<1R>
VIP Equity-Income (10/24/93)
122.56% 133.19% 9.91% 4.69% 117.38%<1R>
VIP Growth (10/24/93)
150.07% 238.73% 37.39% 35.37% 240.52%<1R>
VIP Overseas (10/24/93)
53.07% 115.17% 11.02%40.48% 106.26%<1R>
VIP II Contrafund (10/24/93)
121.52% 171.20%28.01% 22.37% N/A<1R>
VIP II Asset Manager: Growth (5/1/95)
93.15%119.33% 15.78% 13.50% N/A<1R>
VIP III Balanced (5/1/97)
32.63% 36.61% 15.85% 2.94% N/A<1R>
VIP III Growth & Income (5/1/97)
57.74% 69.63% 27.63% 7.94% N/A<1R>
VIP III Growth Opportunities (5/1/97)
50.61%54.69% 22.72% 2.67% N/A<1R>
American Century VP Balanced (5/1/97)
29.91%40.86% 13.76% 8.37% N/A<1R>
AmericanCenturyVPCapitalAppreciation 5/1/97)
9.28%77.20%-3.68%62.08% N/A<1R>
American Century VP Value (5/1/97)
26.46% 23.53% 3.14% -2.38% N/A<1R>
American Century VP International (5/1/97)
27.75%106.52%16.80%61.60% N/A<1R>
American Century VP Income & Growtn (10/1/98)
N/A 38.64%N/A 16.22% N/A<1R>
MFS VIT Emerging Growth Series (10/1/98)
N/A118.73% N/A 74.10% N/A<1R>
MFS VIT Research Series (10/1/98)
N/A 43.98% N/A 22.16% N/A<1R>
MFS VIT Growth with Income Series (10/1/98)
N/A 21.28% N/A 5.05% N/A<1R>
MFS VIT New Discovery Series (10/1/98)
N/A120.41% N/A 70.84% N/A<1R>
Lord Abbett VC
C<1R> Growth and Income (10/1/98)
N/A 31.93%N/A14.96%N/A
Lord Abbett VC Mid-Cap Value (9/15/99) N/A N/A N/A
Lord Abbett VC International (9/15/99) N/A N/A N/A<1R>
N/A - The return information for the funds are not
reflected as the funds had not been included in
Midland National Life Separate Account C
for more
than 12 months at 12/31/1998 for the time period
shown. No returns are shown for the Lord Abbett VC
Mid-Cap Value or Lord Abbett VC International since
such funds had not been included in Midland National
Life Separate Account C for more than 12 months at
12/31/99.<1R>
Adjusted Historical Performance Data
Midland may also disclose adjusted historical
performance data for an Investment Division for
periods before the Investment Division commenced
operations, based on the assumption that the
Investment Division was in existence before it
actually was, and that the Investment Division had
been invested in a particular portfolio that was in
existence prior to the Investment Division's
commencement of operations. The portfolio used for
these calculations will be the actual portfolio that
the Investment Division will invest in.
Adjusted historical performance data of this type
will be calculated as follows. First, the value of a
hypothetical $1,000 investment in the applicable
portfolio is calculated on a monthly basis by
comparing the net asset value per share at the
beginning of the month with the net asset value per
share at the end of the month (adjusted for any
dividend distributions during the month), and the
resulting ratio is applied to the value of the
investment at the beginning of the month to get the
gross value of the investment at the end of the
month. Second, that gross value is then reduced by a
"Contract Charges" factor to reflect the charges
imposed under the Contract. This Contract Charges
factor is calculated by adding the daily charge for
mortality and expense risks (1.25% annually) to the
daily Administrative Charge (0.15% annually), and
then adding an additional amount that adjusts for
the annual $35 Contract Maintenance Charge. This
additional amount is based on an average Contract
Value of
$30,000 $33,000<1R>, so it is calculated
as $35
/$30,000 $33,000<1R>, or
0.12% 0.11%<1R>
annually. The total of these three amounts is then
divided by 12 to get the monthly Contract Charges
factor, which is then applied to the value of the
hypothetical initial payment in the applicable
portfolio to get the value in the Investment
Division. The Contract Charges factor is assumed to
be deducted at the beginning of each month. In this
manner, the Ending Redeemable Value ("ERV") of an
assumed $1,000 initial payment in the Investment
Division is calculated each month during the
applicable period, to get the ERV at the end of the
period. Third, that ERV is then utilized in the
formulas above.
This type of performance data may be disclosed on
both an average annual total return and a cumulative
total return basis. Moreover, it may be disclosed
assuming that the Contract is not surrendered (i.e.,
with no deduction for the Contingent Deferred Sales
Charge) and assuming that the Contract is
surrendered at the end of the applicable period
(i.e., reflecting a deduction for any applicable
Contingent Deferred Sales Charge).
The following is the average annual total return
information based on the assumption that the
Contract is surrendered at the end of the time
period shown. The impact of any applicable
Contingent Deferred Sales Charges are reflected in
the returns. The returns assume that each of the
Investment Divisions had been available to Separate
Account C since the Portfolio Inception date.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (4/1/82)
5.08% 5.06% 3.92% 3.66% 2.46% 2.89%<1R>
VIP II Investment Grade Bond (12/5/88)
6.67%5.80%6.69% 5.54%4.16% 4.77%<1R>
VIP High Income (9/19/85)
9.37% 9.17%9.38% 10.71% 6.29% 8.39%<1R>
VIP II Asset Manager (9/6/89)
11.23% 11.05% N/A 11.41% 9.35% 13.21%<1R>
VIP II Index 500 (8/27/92)
19.05% 19.11% N/A 21.35% 25.79%<1R>
VIP Equity-Income (10/9/86)
12.64% 12.02% 13.86% 12.74%16.38%16.22%<1R>
VIP Growth (10/9/86)
15.55% 16.94% 17.59%18.11% 19.36% 27.37%<1R>
VIP Overseas (1/28/87)
6.90% 9.18% 8.39%9.72% 7.21% 14.97%<1R>
VIP II Contrafund (1/3/95)
25.88% 25.36% N/A N/A<1R>
VIP II Asset Manager: Growth (1/3/95)
18.64%17.77% N/A N/A<1R>
VIP III Balanced (1/3/95)
12.98% 11.04% N/A N/A 11.05%<1R>
VIP III Growth & Income (12/31/96)
24.29% 18.76% N/A N/A<1R>
VIP III Growth Opportunities (1/3/95)
23.47%19.10%N/AN/A 19.11%<1R>
American Century VP Balanced (5/1/91)
9.79%9.74%N/A 10.27% 12.51%<1R>
Amer Cent VPCapitalAppreciation(11/20/87)
6.56%10.31%7.03%9.69%0.62%11.90%<1R>
American Century VP Value (5/1/96)
12.13% 7.98% N/A N/A<1R>
American Century VP International (5/1/94)
9.64% 17.83% N/A N/A 21.92%<1R>
American Century VP Income & Growth (10/30/97)
22.44% 20.34% N/A N/A<1R>
MFS VIT Emerging Growth Series (7/24/95)
23.35%33.84% N/A N/A<1R>
MFS VIT Research Series (7/26/95)
19.29% 20.27% N/A N/A<1R>
MFS VIT Growth with Income Series (10/9/95)
22.67% 18.49% N/A N/A<1R>
MFS VIT New Discovery Series (5/1/98)
-9.12% 35.19% N/A N/A<1R>
Lord AbbetttVC
C<1R>Grwth andInc(12/11/89)
13.40%14.43%N/A14.47%13.37%18.17%
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A N/A
No returns are shown for the Lord Abbett VC Mid-Cap
Value or Lord Abbett VC International since funds
had not been in existence for more than 12 months at
12/31/99.<1R>
The following is the average annual total return
information based on the assumption that the
Contract is kept in-force through the end of the
time period shown. The Contingent Deferred Sales
Charges are assumed to be zero. The returns assume
that each of the Investment Divisions had been
available to Separate Account C since the Portfolio
Inception date.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (4/1/82)
5.08% 5.06% 3.92% 3.66% 3.42% 3.84%<1R>
VIP II Investment Grade Bond (12/5/88)
6.67%5.80%6.69% 5.54%5.06%5.65%<1R>
VIP High Income (9/19/85)
9.37% 9.17%9.38% 10.71% 7.13% 9.16%<1R>
VIP II Asset Manager (9/6/89)
11.23% 11.05% N/A11.41% 10.10% 13.86%<1R>
VIP II Index 500 (8/27/92)
19.27% 19.19% N/A 21.84% 26.22%<1R>
VIP Equity-Income (10/9/86)
12.64% 12.02% 13.86% 12.74%16.96% 16.80%<1R>
VIP Growth (10/9/86)
15.55% 16.94% 17.59%18.11%19.89% 27.77%<1R>
VIP Overseas (1/28/87)
6.90% 9.18% 8.39%9.72% 8.02% 15.58%<1R>
VIP II Contrafund (1/3/95)
26.67% 25.80%<1R> N/A N/A
VIP II Asset Manager: Growth (1/3/95)
19.57%18.33%<1R>N/A N/A
VIP III Balanced (1/3/95)
14.06% 11.74%<1R> N/A
N/A 11.75%<1R>
VIP III Growth & Income (12/31/96)
27.15%20.23%<1R> N/A N/A
VIP III Growth Opportunities (1/3/95)
24.30%19.63%<1R>N/A
N/A 19.64%<1R>
American Century VP Balanced (5/1/91)
9.79%9.74%<1R>N/A
10.99% 13.18%<1R>
Amer Cen VP Cap Appreciation(11/20/87)
6.56%10.31%7.03%9.69%1.66%12.58%<1R>
American Century VP Value (5/1/96)
14.05%9.36%<1R> N/A N/A
American Century VP International5/1/94)
10.46%18.19%<1R>N/A
N/A22.41%<1R>
American Century VP Income & Growth (10/30/97)
28.36% 22.65%<1R>N/A N/A
MFS VIT Emerging Growth Series (7/24/95)
24.43%34.29%<1R> N/A N/A
MFS VIT Research Series (7/26/95)
20.47%20.91%<1R> N/A N/A
MFS VIT Growth with Income Series (10/9/95)
23.89% 19.22%<1R> N/A N/A
MFS VIT New Discovery Series (5/1/98)
1.51% 36.68%<1R> N/A N/A
Lord AbbettVC
C<1R>Grwth and Inc(12/11/89)
13.40%14.43%N/A14.47%14.02%18.72%
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A N/A
No returns are shown for the Lord Abbett VC Mid-Cap
Value or Lord Abbett VC International since funds
had not been in existence for more than 12 months at
12/31/99.<1R>
The following is the cumulative total return
information based on the assumption that the
Contract is surrendered at the end of the time
period shown. The impact of any applicable
Contingent Deferred Sales Charges are reflected in
the returns. The returns assume that each of the
Investment Divisions had been available to Separate
Account C since the Portfolio Inception date.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (4/1/82)
129.47% 140.38%46.89% 43.26% 12.92% 15.31%<1R>
VIP II Investment Grade Bond(12/5/88)
91.61%86.67%91.09%71.46%22.60%26.24%<1R>
VIP High Income (9/19/85)
228.93% 250.29%145.12% 176.61%35.66% 49.60%<1R>
VIP II Asset Manager (9/6/89)
169.84% 195.18%N/A 194.61% 56.35% 85.96%<1R>
VIP II Index 500 (8/27/92)
202.52% 261.49%<1R> N/A 214.94%
VIP Equity-Income (10/9/86)
329.25% 349.40%266.19% 231.73%113.50% 112.03%<1R>
VIP Growth (10/9/86)
485.89% 693.09% 405.48% 428.28% 142.27% 235.22%<1R>
VIP Overseas (1/28/87)
121.71% 211.47%123.82% 152.85% 41.64% 100.87%<1R>
VIP II Contrafund (1/3/95)
150.80% 209.21%<1R> N/A N/A
VIP II Asset Manager: Growth (1/3/95)
97.93% 126.39%<1R> N/A N/A
VIP III Balanced (1/3/95)
62.81% 68.68%<1R> N/A
N/A 68.89%<1R>
VIP III Growth & Income (12/31/96)
54.47% 67.49%<1R> N/A N/A
VIP III Growth Opportunities (1/3/95)
132.15% 139.40%<1R> N/A
N/A 39.74%<1R>
Amer Cent VP Balanced (5/1/91)
104.78% 123.90%<1R> N/A
63.04% 0.28%<1R>
AmerCentVPCapitalApp(11/20/87)
102.69%228.52%97.27%152.16%7.14%75.45%<1R>
American Century VP Value (5/1/96)
35.73% 32.54%<1R> N/A N/A
American Century VP International (5/1/94)
53.72% 153.54%<1R> N/A N/A
American Century VP Income & Growth (10/30/97)
26.72% 49.43%<1R>N/A N/A
MRS VIT Emerging Growth Series (7/24/98)
105.88%264.93%<1R> N/A N/A
MFS VIT Research Series (7/26/95)
83.31% 126.79%<1R> N/A N/A
MFS VIT Growth with Income Series (10/9/95)
93.47% 104.95%<1R> N/A N/A
MFS VIT New Discovery Series (5/1/98)
-6.19% 65.37%<1R> N/A N/A
LordAbbVC
C<1R>GrwthandInc(12/11/89)
212.54%288.15%N/A 286.29%87.28%130.43%
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A N/A
No returns are shown for the Lord Abbett VC Mid-Cap
Value or Lord Abbett VC International since funds
had not been in existence for more than 12 months at
12/31/99.<1R>
The following is the cumulative total return
information based on the assumption that the
Contract is kept in-force through the end of the
time period shown. The Contingent Deferred Sales
Charges are assumed to be zero. The returns assume
that each of the Investment Divisions had been
available to Separate Account C since the Portfolio
Inception date.
Investment Division Inception of the 1-Year Period
5-Year Period<1R>
with Investment Division Ended
Ended<1R>
Inception Date to 12/31/
98 99<1R>12/31/
98 99<1R> 12/31/99<1R>
VIP Money Market (4/1/82)
129.47% 140.38%46.89%% 43.26% 18.31% 20.73%<1R>
VIP II InvestmentGrade Bond(12/5/88)
91.61% 86.67%91.09%71.46%27.99%11.63%<1R>
VIP High Income (9/19/85)
228.93% 250.29%145.12%% 176.61% 41.11%14.99%<1R>
VIP II Asset Manager(9/6/89)
169.84%195.18%<1R>N/A%
194.61%61.78%91.36%<1R>
VIP II Index 500 (8/27/92)
206.12% 263.29%<1R>N/A%
168.50% 220.36%<1R>
VIP Equity-Income (10/9/86)
329.25% 349.40%266.19%% 231.73%118.87%117.38%<1R>
VIP Growth (10/9/86)
485.89% 693.09%405.48%% 428.28% 147.69% 240.52%<1R>
VIP Overseas (1/28/87)
121.71% 211.47%123.82%% 152.85% 47.07% 106.26%<1R>
VIP II Contrafund (1/3/95)
157.10% 214.61%<1R> N/A N/A
VIP II Asset Manager: Growth (1/3/95)
104.23%131.79%<1R> N/A N/A
VIP III Balanced (1/3/95)
69.11% 74.08%<1R> N/A
N/A % 74.28%<1R>
VIP III Growth & Income (12/31/96)
61.67%73.79%<1R> N/A N/A
VIP III Growth Opportunities (1/3/95)
138.45% 144.80%<1R> N/A
N/A145.12%<1R>
American Century VP Balanced (5/1/91)
104.78%123.90%<1R>N/A
68.43%85.72%<1R>
Amer Cent VP Capital App(11/20/87)
102.69%228.52%97.27% 152.16%8.58% 0.84%<1R>
American Century VP Value (5/1/96)
42.03% 38.84%<1R> N/A N/A
Amer Cent VP International (5/1/94)
59.12% 158.04%<1R>N/A
N/A174.84%<1R>
Amer Cent VP Income & Growth (10/30/97)
33.92% 55.73%<1R> N/A N/A
MFS VIT Emerging Growth Series (7/24/95)
112.18%270.33%<1R> N/A N/A
MFS VIT Research Series (7/26/95)
89.61%132.19%<1R> N/A N/A
MFS VIT Growth with Income Series (10/9/95)
99.77% 110.35%<1R> N/A N/A
MFS VIT New Discovery Series 5/1/98)
1.01% 72.57%<1R> N/A N/A
LordAbbVC
C<1R>Grwth and Inc(12/11/89)
212.54%288.15%N/A286.29%92.71%135.84%
Lord Abbett VC Mid-Cap Value (10/1/99) N/A N/A N/A
Lord Abbett VC International (10/1/99) N/A N/A N/A
No returns are shown for the Lord Abbett VC Mid-Cap
Value or Lord Abbett VC International since funds
had not been in existence for more than 12 months at
12/31/99.<1R>
FEDERAL TAX MATTERS
Tax-Free Exchanges (Section 1035)
Midland accepts Premiums which are the proceeds of a
Contract in a transaction qualifying for a tax-free
exchange under Section 1035 of the Internal Revenue
Code. Except as required by federal law in
calculating the basis of the Contract, the Company
does not differentiate between Section 1035 Premiums
and non-Section 1035 Premiums.
We also accept "rollovers" from Contracts qualifying
as individual retirement annuities or accounts
(IRAs), or any other qualified contract which is
eligible to "rollover" into an IRA (except 403(b)
contracts). The Company differentiates between
nonqualified Contracts and IRAs to the extent
necessary to comply with federal tax laws.
Required Distributions
In order to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the
code requires any Nonqualified Contract to provide
that (a) if any Owner dies on or after the Annuity
Date but prior to the time the entire interest in
the Contract has been distributed, the remaining
portion of such interest will be distributed at
least as rapidly as under the method of distribution
being used as of the date of that Owner's death; and
(b) if any Owner dies prior to the annuity starting
date, the entire interest in the Contract will be
distributed (1) within five years after the date of
that Owner's death, or (2) as Annuity payments which
will begin within one year of that Owner's death and
which will be made over the life of the Owner's
"Designated Beneficiary" or over a period not
extending beyond the life expectancy of that
Beneficiary. The Owner's "Designated Beneficiary" is
the person to whom ownership of the Contract passes
by reason of death and must be a natural person.
However, if the Owner's Designated Beneficiary is
the surviving spouse of the Owner, the Contract may
be continued with the surviving spouse as the new
Owner.
The Nonqualified Contracts contain provisions which
are intended to comply with the requirements of
section 72(s) of the Code, although no regulations
interpreting these requirements have yet been
issued. We intend to review such provisions and
modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when
clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
DISTRIBUTION OF THE CONTRACT
Walnut Street Securities (WSS), the principal
underwriter of the Contract, is registered with the
Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a broker-dealer
and is a member of the National Association of
Securities Dealers, Inc. The address for WSS is as
follows: Walnut Street Securities, 670 Mason Ridge
Center, Suite 300, St. Louis, MO 63141-8557.
The Contracts are offered to the public through
brokers, licensed under the federal securities laws
and state insurance laws, that have entered into
agreements with WSS. The offering of the Contracts
is continuous and WSS does not anticipate
discontinuing the offering of the Contracts.
However, WSS does reserve the right to discontinue
the offering of the Contracts
. Beginning January
1, 1998<1R> Midland will pay an underwriting
commission to WSS equal to
0.1625% 0.09688%<1R>
of all Variable Annuity II premiums.
Prior to June 1, 1996 Midland paid underwriting
commissions to North American Management (NAM) since
NAM was the principal underwriter of Midland's
Variable Annuity contracts during this time.<1R> The
following table shows the aggregate dollar amount of
underwriting commissions paid to NAM during the last
three years.
Such underwriting commissions are
not paid to WSS.<1R>
Underwriting
Year Commissions
1996 $9,593.61<1R>
1997 0
1998
0 $2,857,416
1999 $4,074,697<1R>
2000
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by
Midland. The assets are kept physically segregated
and held separate and apart from our general account
assets. Records are maintained of all Premiums and
redemptions of Fund shares held by each of the
Investment Divisions.
STATE REGULATION
Midland is subject to the insurance laws and
regulations of all the states where it is licensed
to operate. The availability of certain contract
rights and provisions depends on state approval
and/or filing and review processes. Where required
by state law or regulation, the Contracts will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate
Account will be maintained by Midland. As presently
required by the Investment Company Act of 1940 and
regulations promulgated thereunder, reports
containing such information as may be required under
that Act or by any other applicable law or
regulation will be sent to Owners semi-annually at
their last known address of record.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate
Account is a party or to which the assets of the
Separate Account are subject that are material to
the Contracts. We are not involved in any litigation
that is of material importance in relation to our
total assets or that relates to the Separate
Account.
LEGAL MATTERS
Legal advice regarding certain matters relating to
the federal securities laws applicable to the issue
and sale of the Contracts has been provided by
Sutherland, Asbill & Brennan LLP, of Washington,
D.C.
EXPERTS
The financial statements of Midland National Life
Separate Account C and Midland National Life
Insurance Company included in this Statement of
Additional Information and Registration Statement
have been audited by PricewaterhouseCoopers LLP,
independent auditors, for the periods indicated in
their report thereon which appears elsewhere herein
and in the Registration Statement. The financial
statements and schedules audited by
PricewaterhouseCoopers LLP have been included in
reliance on their report, given on their authority
as experts in accounting and auditing. The mailing
address for PricewaterhouseCoopers LLP is as
follows:
PricewaterhouseCoopers LLP
IBM Park Building, Suite 1300
650 Third Avenue S.
Minneapolis, MN 55402-4333
OTHER INFORMATION
A Registration Statement has been filed with the
Securities and Exchange Commission under the
Securities Act of 1933 as amended, with respect to
the Contracts discussed in this Statement of
Additional Information. Not all of the information
set forth in the Registration Statement, amendments
and exhibits thereto has been included in this
Statement of Additional Information. Statements
contained in this Statement of Additional
Information concerning the content of the Contracts
and other legal instruments are intended to be
summaries. For a complete statement of the terms of
these documents, reference should be made to the
instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The financial statements of Midland National Life
Insurance Company should be considered only as
bearing on the ability of Midland to meet its
obligations under the Contracts. They should not be
considered as bearing on the investment performance
of Separate Account C.
VAIISAI00.txt
<PAGE>
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying statement of assets and the related
statements of operations and changes in net assets present fairly, in all
material respects, the financial position of Midland National Life Insurance
Company Separate Account C (comprising, respectively, the portfolios of the
Variable Insurance Products Fund, the Variable Insurance Products Fund II,
the Variable Insurance Products Fund III, the American Century Variable
Portfolios, Inc., the Massachusetts Financial Services, and the Lord, Abbett &
Company) at December 31, 1999, and the related statements of operations
and changes in net assets for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of Midland National Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
March 31, 2000
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statement of Assets
at December 31, 1999
<S> <C> <C> <C>
Value
Per
ASSETS Shares Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $15,789,032) 15,789,032 1.00 $15,789,032
High Income Portfolio (cost $7,361,713) 626,056 11.31 7,080,699
Equity-Income Portfolio (cost $27,513,441) 1,178,923 25.71 30,310,122
Growth Portfolio (cost $34,930,997) 895,947 54.93 49,214,344
Overseas Portfolio (cost $4,488,362) 231,713 27.44 6,358,194
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $10,112,350) 604,399 18.67 11,284,126
Investment Grade Bond Portfolio (cost $5,501,125)442,692 12.16 5,383,130
Index 500 Portfolio (cost $34,918,785) 259,376 167.41 43,422,060
Contrafund Portfolio (cost $16,955,708) 756,195 29.15 22,043,087
Asset Manager: Growth Portfolio (cost $5,873,758)369,997 18.38 6,800,541
Variable Insurance Products Fund III:
Balanced Portfolio (cost $3,536,797) 228,132 16.00 3,650,118
Growth & Income Portfolio (cost $8,176,504) 524,186 17.30 9,068,414
Growth Opportunities Portfolio (cost $7,188,767) 334,511 23.15 7,743,927
American Century Variable Portfolios, Inc.:
Balanced Portfolio (cost $847,585) 110,555 7.79 861,226
Capital Appreciation Portfolio (cost $636,019) 67,935 14.84 1,008,162
International Portfolio (cost $1,803,295) 227,803 12.50 2,847,535
Value Portfolio (cost $1,864,455) 292,233 5.95 1,738,787
Income & Growth Portfolio (cost $1,057,602) 146,601 8.00 1,172,804
Massachusetts Financial Services:
VIT Emerging Growth Series (cost $2,461,387) 97,355 37.94 3,693,666
VIT Growth with Income Series (cost $646,302) 31,666 21.31 674,806
VIT New Discovery Series (cost $388,858) 29,179 17.27 503,926
VIT Research Series (cost $1,317,527) 66,040 23.34 1,541,364
Lord, Abbett & Company:
VC Growth & Income Portfolio (cost $1,080,958) 48,317 22.16 1,070,711
VC Mid-Cap Value Portfolio ($28,190) 2,978 9.82 29,249
VC International Portfolio ($9,629) 888 11.86 10,528
Total investments (cost $194,489,146) 233,300,558
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statement of Assets, Continued
at December 31, 1999
<S> <C> <C> <C>
Value
Per
NET ASSETS Units Unit
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 1,259,530 12.54 $15,789,032
High Income Portfolio 457,402 15.48 7,080,699
Equity-Income Portfolio 1,292,017 23.46 30,310,122
Growth Portfolio 1,444,405 34.07 49,214,344
Overseas Portfolio 293,703 21.65 6,358,194
Variable Insurance Products Fund II:
Asset Manager Portfolio 603,487 18.70 11,284,126
Investment Grade Bond Portfolio 426,095 12.63 5,383,130
Index 500 Portfolio 1,332,497 32.59 43,422,060
Contrafund Portfolio 809,424 27.23 22,043,087
Asset Manager: Growth Portfolio 308,652 22.03 6,800,541
Variable Insurance Products Fund III:
Balanced Portfolio 266,510 13.70 3,650,118
Growth & Income Portfolio 533,307 17.00 9,068,414
Growth Opportunities Portfolio 499,339 15.51 7,743,927
American Century Variable Portfolios, Inc.:
Balanced Portfolio 60,982 14.12 861,226
Capital Appreciation Portfolio 56,765 17.76 1,008,162
International Portfolio 137,562 20.70 2,847,535
Value Portfolio 140,385 12.39 1,738,787
Income & Growth Portfolio 84,497 13.88 1,172,804
Massachusetts Financial Services:
VIT Emerging Growth Series 168,739 21.89 3,693,666
VIT Growth with Income Series 55,568 12.14 674,806
VIT New Discovery Series 22,847 22.06 503,926
VIT Research Series 106,941 14.41 1,541,364
Lord, Abbett & Company:
VC Growth & Income Portfolio 81,150 13.19 1,070,711
VC Mid-Cap Value Portfolio 2,846 10.28 29,249
VC International Portfolio 818 12.87 10,528
Net assets $233,300,558
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets
For the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
Combined
1999 1998 1997
Investment income:
Dividend income $2,978,989 $1,855,034 $1,222,960
Capital gains distributions 6,033,384 5,675,705 2,351,461
9,012,373 7,530,739 3,574,421
Expenses:
Administrative expense 280,390 168,950 99,060
Mortality and expense risk 2,510,395 1,520,704 884,316
Net investment income 6,221,588 5,841,085 2,591,045
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 7,020,695 4,099,295 2,325,825
Net unrealized appreciation (depreciation) on
Investments 17,547,652 9,895,409 6,604,328
Net realized and unrealized gains (losses) on
Investments 24,568,347 13,994,704 8,930,153
Net increase (decrease) in net assets resulting
from operations $30,789,935 $19,835,789 $11,521,198
Net assets at beginning of year $150,730,459 $84,882,243 $47,905,622
Net increase (decrease) in net assets resulting from
Operations 30,789,935 19,835,789 11,521,198
Capital shares transactions:
Net premiums 63,727,881 57,035,498 29,710,164
Transfers of policy loans (184,136) (239,919) 64,214
Transfers of surrenders (8,871,246) (9,129,836) 3,059,123)
Transfers of death benefits (401,144) (153,431) (69,204)
Transfers of other terminations (3,461,010) (1,499,885) 1,190,628)
Interfund and net transfers to general account 969,819 - -
Net increase in net assets from capital share
Transactions 51,780,164 46,012,427 25,455,423
Total increase in net assets 82,570,099 65,848,216 36,976,621
Net assets at end of year $233,300,558 $150,730,459 $84,882,243
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio High Income Portfolio
1999 1998 1997 1999 1998 1997
$ 703,466 $436,463 $300,220 $613,686 $345,800 $222,895
22,941 219,727 27,549
703,466 436,463 300,220 636,627 565,527 250,444
20,870 12,375 8,443 10,492 8,514 5,683
181,649 107,724 74,591 94,482 76,520 51,637
500,947 316,364 217,186 531,653 480,493 193,124
(228,826) 32,833 120,453
128,297 (873,410) 238,019
(100,529) (840,577) 358,472
$500,947 $316,364 $217,186 $431,124 $(360,084) $551,596
$ 12,473,870 $6,219,257 $5,037,632 $6,437,316 $4,692,229 $2,941,240
500,947 316,364 217,186 431,124 (360,084) 551,596
8,660,228 11,300,710 4,354,516 1,391,786 2,769,358 1,505,730
(62,973) 1,026 3,183 1,451 (1,161) 8,735
(1,196,313) (2,868,366) (720,053) (303,839) (728,562) (193,053)
(19,647) (34,218) (9,075)
(583,055) (187,199) (192,221) (145,565) (91,242) (54,516)
(3,984,025) (2,307,922) (2,480,986) (697,356) 156,778 (58,428)
2,814,215 5,938,249 964,439 212,259 2,105,171 1,199,393
3,315,162 6,254,613 1,181,625 643,383 1,745,087 1,750,989
$15,789,032 $12,473,870 $6,219,257 $7,080,699 $6,437,316 $4,692,229
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets, Continued
For the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio
1999 1998 1997
Investment income:
Dividend income $407,328 $272,867 $205,546
Capital gains distributions 900,409 971,085 1,033,441
1,307,737 1,243,952 1,238,987
Expenses:
Administrative expense 44,566 34,579 22,633
Mortality and expense risk 400,671 312,129 196,772
Net investment income (loss) 862,500 897,244 1,019,582
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 1,303,519 820,340 544,429
Net unrealized appreciation (depreciation) on
Investments (935,246) 462,810 1,828,524
Net realized and unrealized gains (losses) on
Investments 368,273 1,283,150 2,372,953
Net increase (decrease) in net assets resulting
from operations $1,230,773 $2,180,394 $3,392,535
Net assets at beginning of year $27,130,618 $18,903,655 $11,202,976
Net increase (decrease) in net assets resulting from
Operations 1,230,773 2,180,394 3,392,535
Capital shares transactions:
Net premiums 5,363,478 7,033,996 4,729,107
Transfers of policy loans (42,001) (7,815) 18,935
Transfers of surrenders (1,660,446) (998,478) (494,451)
Transfers of death benefits (62,841) (56,152) (1,512)
Transfers of other terminations (520,582) (250,351) (268,311)
Interfund and net transfers to general account (1,128,877) 325,369 324,376
Net increase in net assets from capital share
Transactions 1,948,731 6,046,569 4,308,144
Total increase in net assets 3,179,504 8,226,963 7,700,679
Net assets at end of year $30,310,122 $27,130,618 $18,903,655
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Growth Portfolio Overseas Portfolio
1999 1998 1997 1999 1998 1997
$ 49,711 $ 86,915 $ 75,678 $ 70,311 $ 89,108 $ 65,176
3,125,561 2,273,513 338,750 113,405 262,634 258,730
3,175,272 2,360,428 414,428 183,716 351,742 323,906
53,575 31,608 20,920 7,244 7,131 6,503
479,144 287,311 200,814 66,149 65,879 65,711
2,642,553 2,041,509 192,694 110,323 278,732 251,692
1,959,438 669,341 691,123 170,861 251,364 98,094
7,168,644 4,319,239 1,712,204 1,512,914 (54,181) 2,092
9,128,082 4,988,580 2,403,327 1,683,775 197,183 100,186
$11,770,635 $7,030,089 $2,596,021 $1,794,098 $475,915 $351,878
$27,707,561 $16,774,778 $10,524,695 $4,635,216 $4,666,058 $3,551,260
11,770,635 7,030,089 2,596,021 1,794,098 475,915 351,878
10,039,894 5,293,591 4,634,527 464,119 565,888 949,784
(19,963) (27,860) 4,007 (162) (268) 2,943
(2,070,908) (1,012,070) (676,615) (257,078) (601,662) (176,955)
(34,780) (49,021) (1,076) (11,917) (20,400) (8,437)
(508,824) (181,637) (177,990) (87,796) (73,320) (46,889)
2,330,729 (120,309) (128,791) (178,286) (376,995) 42,474
9,736,148 3,902,694 3,654,062 (71,120) (506,757) 762,920
21,506,783 10,932,783 6,250,083 1,722,978 (30,842) 1,114,798
$49,214,344 $27,707,561 $16,774,778 $6,358,194 $4,635,216 $4,666,058
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets, Continued
For the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
Variable Insurance Products Fund II
Asset Manager Portfolio
1999 1998 1997
Investment income:
Dividend income $ 328,912 $ 255,496 $ 200,876
Capital gains distributions 416,622 766,487 503,893
745,534 1,021,983 704,769
Expenses:
Administrative expense 15,747 13,340 10,160
Mortality and expense risk 140,910 119,898 92,524
Net investment income (loss) 588,877 888,745 602,085
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 290,650 276,757 134,752
Net unrealized appreciation (depreciation) on
Investments 77,798 (37,623) 410,196
Net realized and unrealized gains (losses) on
Investments 368,448 239,134 544,948
Net increase (decrease) in net assets resulting
from operations $957,325 $1,127,879 $1,147,033
Net assets at beginning of year $9,994,590 $8,036,950 $5,664,702
Net increase (decrease) in net assets resulting from
Operations 957,325 1,127,879 1,147,033
Capital shares transactions:
Net premiums 1,652,160 1,647,691 1,501,724
Transfers of policy loans 4,995 781 13,379
Transfers of surrenders (667,529) (700,495) (313,519)
Transfers of death benefits (87,135) (19,872)
Transfers of other terminations (149,818) (163,587) (136,227)
Interfund and net transfers to general account (420,462) 45,371 179,730
Net increase in net assets from capital share
Transactions 332,211 829,761 1,225,215
Total increase in net assets 1,289,536 1,957,640 2,372,248
Net assets at end of year $11,284,126 $9,994,590 $8,036,950
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund II
Investment Grade Bond Portfolio Index 500 Portfolio
1999 1998 1997 1999 1998 1997
$ 189,896 $ 79,445 $ 70,099 $ 244,796 $ 137,495 $ 53,290
59,575 9,426 166,112 318,462 108,132
249,471 88,871 70,099 410,908 455,957 161,422
8,037 3,933 2,034 49,038 24,798 11,229
71,016 34,906 19,012 440,306 223,789 81,297
170,418 50,032 49,053 (78,436) 207,370 68,896
(5,194) 42,970 9,788 1,804,895 1,233,566 513,374
(299,351) 95,639 42,600 4,144,885 2,634,811 1,209,776
(304,545) 138,609 52,388 5,949,780 3,868,377 1,723,150
$ (134,127) $188,641 $101,441 $5,871,344 $4,075,747 $1,792,046
$4,451,512 $1,641,646 $1,096,280 $23,878,794 $10,788,748 $4,253,767
(134,127) 188,641 101,441 5,871,344 4,075,747 1,792,046
2,156,896 2,609,124 612,100 12,979,359 9,690,307 4,538,389
2,656 (11,442) 1,539 (18,661) (54,944) 3,990
(345,265) (116,906) (62,059) (1,072,745) (1,003,115) (231,487)
(43,057) (28,360) (27,858) (19,852)
(63,101) (56,620) (37,391) (560,725) (180,785) (150,241)
(642,384) 197,069 (70,264) 2,373,054 590,694 602,136
1,065,745 2,621,225 443,925 13,671,922 9,014,299 4,742,935
931,618 2,809,866 545,366 19,543,266 13,090,046 6,534,981
$5,383,130 $4,451,512 $1,641,646 $43,422,060 $23,878,794 $10,788,748
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets, Continued
For the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
Variable Insurance Products Fund II
Contrafund Portfolio
1999 1998 1997
Investment income:
Dividend income $ 65,432 $ 51,154 $ 25,593
Capital gains distributions 479,834 376,347 67,639
545,266 427,501 93,232
Expenses:
Administrative expense 24,746 14,264 7,064
Mortality and expense risk 223,508 129,425 63,428
Net investment income (loss) 297,012 283,812 22,740
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 1,018,462 498,083 139,059
Net unrealized appreciation (depreciation) on
Investments 2,333,521 1,742,246 730,282
Net realized and unrealized gains (losses) on
Investments 3,351,983 2,240,329 869,341
Net increase (decrease) in net assets resulting
from operations $3,648,995 $2,524,141 $892,081
Net assets at beginning of year $12,944,327 $6,895,729 $2,659,591
Net increase (decrease) in net assets resulting from
Operations 3,648,995 2,524,141 892,081
Capital shares transactions:
Net premiums 5,594,931 4,060,420 2,954,381
Transfers of policy loans (2,141) (27,929) 4,276
Transfers of surrenders (669,452) (493,218) (156,257)
Transfers of death benefits (35,458) (9,380)
Transfers of other terminations (321,907) (152,896) (70,573)
Interfund and net transfers to general account883,792 138,080 621,610
Net increase in net assets from capital share
Transactions 5,449,765 3,524,457 3,344,057
Total increase in net assets 9,098,760 6,048,598 4,236,138
Net assets at end of year $22,043,087 $12,944,327 $6,895,729
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products II Variable Insurance Products Fund III
Asset Manager: Growth Portfolio Balanced Portfolio
1999 1998 1997 1999 1998 1997
$ 121,753 $ 64,271 $ $ 48,703 $ 12,482 $
201,931 300,563 1,669 56,601 19,070
323,684 364,834 1,669 105,304 31,552
8,823 5,833 2,962 4,455 1,490 167
80,280 53,144 26,529 39,406 13,014 1,395
234,581 305,857 (27,822) 61,443 17,048 (1,562)
201,802 121,005 48,017 48,144 10,601 3,054
347,897 169,827 363,630 (30,812) 132,761 11,372
549,699 290,832 411,647 17,332 143,362 14,426
$ 784,280 $ 596,689 $383,825 $ 78,775 $160,410 $12,864
$4,947,729 $2,956,656 $973,479 $1,941,731 $454,728 $
784,280 596,689 383,825 78,775 160,410 12,864
1,259,896 1,483,303 1,266,684 1,659,319 1,271,252 332,310
(10,248) (23,118) 3,227 (8,898) (17,484)
(133,855) (186,830) (24,842) (48,002) (43,612) (11)
(10,660) (8,586)
(158,543) (84,533) (35,261) (46,830) (13,646) (4,077)
121,942 205,562 389,544 82,609 130,083 113,642
1,068,532 1,394,384 1,599,352 1,629,612 1,326,593 441,864
1,852,812 1,991,073 1,983,177 1,708,387 1,487,003 454,728
$6,800,541 $4,947,729 $2,956,656 $3,650,118 $1,941,731 $454,728
</TABLE>
<TABLE>
<S> <C> <C>
Variable Insurance Products Fund III
Growth & Income Portfolio
1999 1998 1997
$ 31,870 $ $ 3,587
63,740 4,138 11,658
95,610 4,138 15,245
10,667 3,381 293
94,947 29,192 2,465
(10,004) (28,435) 12,487
247,612 65,638 8,345
258,233 618,738 14,939
505,845 684,376 23,284
$ 495,841 $ 655,941 $ 35,771
$4,759,121 $ 678,443 $
495,841 655,941 35,771
3,780,951 3,298,663 583,629
(11,750) (37,622)
(73,729) (70,135) (7,194)
(8,978)
(91,071) (15,091)
218,029 248,922 66,237
3,813,452 3,424,737 642,672
4,309,293 4,080,678 678,443
$9,068,414 $4,759,121 $678,443
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
Variable Insurance Products Fund III
Growth Opportunities Portfolio
1999 1998 1997
Investment income:
Dividend income $ 51,200 $ 12,462 $
Capital gains distributions 95,722 43,319
146,922 55,781
Expenses:
Administrative expense 9,771 3,873 360
Mortality and expense risk 88,230 34,020 3,026
Net investment income (loss) 48,921 17,888 (3,386)
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 171,585 72,022 8,933
Net unrealized appreciation (depreciation) on
Investments (52,308) 570,415 37,052
Net realized and unrealized gains (losses) on
Investments 119,277 642,437 45,985
Net increase (decrease) in net assets resulting
from operations $ 168,198 $ 660,325 $ 42,599
Net assets at beginning of year $4,835,642 $932,079 $
Net increase (decrease) in net assets resulting from
Operations 168,198 660,325 42,599
Capital shares transactions:
Net premiums 2,732,213 3,172,501 715,419
Transfers of policy loans (4,443) (11,920)
Transfers of surrenders (109,451) (135,082) (631)
Transfers of death benefits (8,941)
Transfers of other terminations (108,830) (27,043) (16,931)
Interfund and net transfers to general account 239,539 244,782 191,623
Net increase in net assets from capital share
Transactions 2,740,087 3,243,238 889,480
Total increase in net assets 2,908,285 3,903,563 932,079
Net assets at end of year $7,743,927 $4,835,642 $932,079
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.
Balanced Portfolio Capital Appreciation Portfolio International Portfolio
1999 1998 1997 1999 1998 1997 1999 1998 1997
$ 11,995 $ 3,481 $ $ $ $ $ $ 2,742 $
82,763 21,588 9,181 28,153
94,758 25,069 9,181 30,895
1,038 508 78 904 391 107 2,355 1,127 182
9,231 4,456 646 8,144 3,513 900 20,974 10,022 1,510
84,489 20,105 (724) (9,048) 5,277 (1,007) (23,329) 19,746 (1,692)
(6,468) (2,099) 73 (8,229) (9,962) 5,583 25,436 4,464 30
(13,667) 25,457 1,852 367,555 19,781 (15,193) 992,347 56,812 (4,918)
(20,135) 23,358 1,925 359,326 9,819 (9,610) 1,017,783 61,276 (4,888)
$ 64,354 $ 43,463 $ 1,201 $350,278 $ 15,096 $ (10,617) $ 994,454 $ 81,022 $ (6,580)
$588,604 $154,125 $473,579 $157,393 $1,170,066 $ 382,210 $
64,354 43,463 1,201 350,278 15,096 (10,617) 994,454 81,022 (6,580)
242,591 332,426 126,660 114,291 269,862 246,807 536,161 705,423 334,703
(2,014) (4,834) 181 (766) (660) (645)
(26,643) (9,952) (104) (14,429) (20,297) (31) (13,742) (52,917) (174)
(8,212) (7,035) (11,005) (192) (13,635) (2,178)
2,546 80,411 26,368 95,267 52,483 (78,766) 174,891 57,151 54,261
208,268 391,016 152,924 184,305 301,090 168,010 683,015 706,834 388,790
272,622 434,479 154,125 534,583 316,186 157,393 1,677,469 787,856 382,210
$861,226 $588,604 $154,125 $1,008,162 $473,579 $157,393 $2,847,535 $1,170,066 $382,210
</TABLE>
Midland National Life Insurance Company
Separate Account C
<TABLE>
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1999, 1998 and 1997
<S> <C> <C> <C>
<C> <C>
American Century Variable Portfolios, Inc.
Income & Growth
Value Portfolio Portfolio
1999 1998 1997 1999 1998
Investment income:
Dividend income $ 17,599 $ 4,356 $ $ 73 $ 497
Capital gains distributions 166,732 52,012
184,331 56,368 73 497
Expenses:
Administrative expense 2,697 1,733 242 990 21
Mortality and expense risk 24,804 15,151 2,059 8,637 178
Net investment income (loss) 156,830 39,484 (2,301) (9,554) 298
Realized and unrealized gains (losses) on investments:
Net realized gains on investments (75,400) 12,052 718 16,206 31
Net unrealized appreciation (depreciation) on
Investments (136,115) (11,455) 21,901 106,838 8,364
Net realized and unrealized gains (losses) on
Investments (211,515) 597 22,619 123,044 8,395
Net increase (decrease) in net assets resulting
from operations $ (54,685) $ 40,081 $20,318 $113,490 $8,693
Net assets at beginning of year 1,791,579 $ 547,559 $ $145,186 $
Net increase (decrease) in net assets resulting from
Operations (54,685) 40,081 20,318 113,490 8,693
Capital shares transactions:
Net premiums 294,033 1,133,687 323,694 716,429 133,891
Transfers of policy loans (1,318) (13,918) (5,394)
Transfers of surrenders (82,358) (87,563) (1,687) (21,890)
Transfers of death benefits (6,566)
Transfers of other terminations (41,902) (12,235) (13,912)
Interfund and net transfers to general account(159,996) 183,968 205,234 238,895 2,602
Net increase in net assets from capital share
Transactions 1,893 1,203,939 527,241 914,128 136,493
Total increase in net assets (52,792) 1,244,020 547,559 1,027,618 145,186
Net assets at end of year $1,738,787 $1,791,579 $547,559 $1,172,804 $145,186
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Massachusetts Financial Services
VIT Emerging Growth VIT Growth with Income VIT New VIT
Series Series Discovery Series Research Series
1999 1998 1999 1998 1999 1998 1999 1998
$ $ $ 733 $ $ 7,690 $ $ 657 $
879 3,473
1,612 7,690 4,130
1,828 11 498 3 141 1,082 11
15,743 92 4,365 29 1,201 9,349 91
(17,571) (103) (3,251) (32) 6,348 (6,301) (102)
48,155 54 1,688 100 8,132 14,984 13
1,221,538 10,742 26,979 1,525 114,984 84 217,509 6,328
1,269,693 10,796 28,667 1,625 123,116 84 232,493 6,341
$1,252,122 $10,693 $25,416 $1,593 $129,464 $ 84 $226,192 $6,239
$ 126,969 $ $29,309 $ $ 1,095 $ $115,273 $
1,252,122 10,693 25,416 1,593 129,464 84 226,192 6,239
1,589,235 115,681 542,188 22,610 242,984 1,011 1,005,242 75,777
(2,873) 80
(57,677) (5,023) (110) (32,384)
(9,778) (295) (4,824) (6,024)
795,668 890 87,740 5,216 130,383 232,985 33,257
2,314,575 116,276 620,081 27,716 373,367 1,011 1,199,899 109,034
3,566,697 126,969 645,497 29,309 502,831 1,095 1,426,091 115,273
$3,693,666$126,969 $674,806 $29,309 $503,926 $1,095 $1,541,364 $115,273
</TABLE>
<TABLE>
<S> <C> <C> <C>
Lord, Abbett & Company
VC Growth & Income VC Mid-Cap VC
Value International
Portfolio Portfolio Portfolio
1999 1998 1999 1999
$ 19,875 $ $ 137 $ 23
69,394 833
89,269 137 856
820 26 4 2
7,201 221 35 13
81,248 (247) 98 841
13,240 122 1 2
(6,745) (3,501) 1,058 899
6,495 (3,379) 1,059 901
$ 87,743 $ (3,626) $ 1,157 $ 1,742
$ 150,772 $ $ $
87,743 (3,626) 1,157 1,742
697,288 48,326 12,209
(8,488) (466)
(5,071)
148,467 106,538 15,883 8,786
832,196 154,398 28,092 8,786
919,939 150,772 29,249 10,528
$1,070,711 $150,772 $29,249 $10,528
</TABLE>
1. Organization and Significant Accounting Policies:
Organization:
Midland National Life Separate Account C ("Separate Account"), a unit
investment trust, is a segregated investment account of Midland National Life
Insurance Company (the "Company") in accordance with the provisions of
the Iowa Insurance laws. The assets and liabilities of the Separate Account
are clearly identified and distinguished from the other assets
and liabilities of the Company. The Separate Account is used
to fund variable annuity contracts of the Company. Walnut Street
Securities serves as the underwriter of the Separate Account.
Investments:
The Separate Account invests in specified portfolios of Variable Insurance
Products Fund ("VIPF"), Variable Insurance Products Fund II ("VIPF II"),
Variable Insurance Products Fund III ("VIPF III"), American Century
Variable Portfolios, Inc. ("ACVP"), Massachusetts Financial Services
("MFS"), and Lord, Abbett & Company ("LAC") (collectively "the Funds"),
each diversified open-end management companies registered under the
Investment Company Act of 1940, as directed by participants. The VIPF III
Balanced, Growth & Income and Growth Opportunities Portfolios and the
ACVP Balanced, Capital Appreciation, International and Value portfolios
were introduced in 1997. The ACVP Income & Growth portfolio, the MFS
Emerging Growth, Growth with Income, New Discovery and Research
portfolios as well as the LAC's Growth & Income portfolio were each
introduced in 1998. The LAC Mid-Cap Value and International portfolios
were introduced in 1999. All other portfolios have been in existence for more
than three years.
Investments in shares of the Funds are valued at the net asset values (fair
values) of the respective portfolios of the Funds corresponding to the
investment portfolios of the Separate Account. Investment transactions are
recorded on the trade date. Dividends are automatically reinvested in shares
of the Funds.
Investment income is recorded when earned. The first-in, first-out (FIFO)
method is used to determine realized gains and losses on investments.
Dividend and capital gain distributions are recorded as income on the ex-
dividend date.
Federal Income Taxes:
The operations of the Separate Account are included in the federal income tax
return of the Company. Under the provisions of the policies, the Company
has the right to charge the Separate Account for federal income tax
attributable to the Separate Account. No charge is currently being made
against the Separate Account for such tax since, under current law, the
Company pays no tax on investment income and capital gains reflected in
variable annuity policy reserves. However, the Company retains the right to
charge for any federal income tax incurred which is attributable to the
Separate Account if the law is changed. Charges for state and local taxes, if
any, attributable to the Separate Account may also be made.
1. Organization and Significant Accounting Policies, continued:
Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Merger:
Effective January 2, 1997, Investors Life Insurance Company of Nebraska
("Investors Life") was merged into the Company. Related to this merger all
of the assets and liabilities of Investors Life were transferred to Midland
including the assets of Investors Life's Separate Account D, which were
merged into Midland's Separate Account C. The merger of the Separate
Account D assets into Midland's Separate Account C was possible as the
variable annuity insurance contracts were identical in all material respects to
the contracts issued by Separate Account C. This merger of separate account
assets was structured so that there was no change in the rights and benefits of
persons owning contracts with either separate accounts and no change in the
net asset values held by the respective participants of either of the separate
accounts.
2. Expense Charges:
The Company is compensated for certain expenses as described below. The
rates of each applicable charge is described in the Separate Account's
prospectus.
A contract administration fee is charged to cover the Company's
recordkeeping and other administrative expenses incurred to operate the
Separate Account. This fee is allocated to the individual portfolios of the
Funds based on the net asset value of the portfolios in proportion to the
total net asset value of the Separate Account.
A mortality and expense risk fee is charged in return for the Company's
assumption of risks associated with adverse mortality experience or
excess administrative expenses in connection with policies issued. This
fee is charged directly to the individual portfolios of the Funds based on
the net asset value of the portfolio.
An annual charge is deducted from the Separate Account value at the end
of each contract year, upon full withdrawal or at maturity.
A transfer charge is imposed on each transfer between portfolios of the
Separate Account in excess of a stipulated number of transfers in any one
contract year. A deferred sales charge may be imposed in the event of a
full or partial withdrawal within the stipulated number of years.
3. Purchases and Sales of Investment Securities:
<TABLE>
The aggregate cost of purchases and proceeds from sales of investments for
the years ended December 31, 1999, 1998, and 1997 were as follows:
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance Products
Fund:
Money Market 69,653,533 $66,338,371 $58,682,698 $52,428,084 $27,625,059 $26,449,130
High Income 2,537,416 1,793,505 4,668,527 2,082,862 2,232,925 843,780
Equity-Income 8,132,130 5,320,898 9,980,544 3,036,731 7,242,522 1,928,035
Growth 17,767,430 5,388,729 8,654,016 2,709,812 5,841,516 2,007,309
Overseas 1,076,806 1,037,604 1,235,489 1,463,514 1,628,137 617,620
Variable Insurance Products
Fund II:
Asset Manager 3,087,413 2,166,324 3,260,450 1,541,944 2,698,162 877,678
Investment Grade Bond 3,886,724 2,650,561 3,291,279 620,021 794,153 302,555
Index 500 18,350,998 4,757,512 12,815,098 3,593,428 6,785,096 1,978,193
Contrafund 8,593,440 2,846,664 5,501,476 1,693,206 3,996,318 632,611
Asset Manager: Growth 2,284,930 981,817 2,250,687 550,446 1,796,206 225,801
Variable Insurance Products
Fund III:
Balanced 2,421,633 730,578 1,566,172 222,531 496,055 55,752
Growth & Income 5,141,454 1,338,006 3,879,201 482,899 762,183 107,025
Growth Opportunities 4,116,879 1,327,871 4,046,506 785,381 974,459 88,365
American Century Variable
Portfolios, Inc.:
Balanced 505,555 212,798 484,206 73,085 152,934 733
Capital Appreciation 255,575 80,317 341,579 35,214 285,178 118,174
International 809,156 149,470 827,915 101,335 388,860 1,762
Value 771,790 613,068 1,564,861 321,438 542,142 17,201
Income & Growth 1,030,538 125,965 136,991 199
Massachusetts Financial
Services:
VIT Emerging Growth 2,522,488 225,483 116,572 398
VIT Growth with Income 641,616 24,786 28,365 681
VIT New Discovery 410,588 30,873 1,011
VIT Research 1,805,962 612,363 109,033 101
Lord, Abbett & Company:
VC Growth & Income 1,077,732 65,352
VC Mid-Cap Value 28,229 40
VC International 9,642 15 155,023 872
$156,919,657 $98,818,970 $123,597,699 $71,744,182 $64,241,905 $36,251,724
</TABLE>
4. Summary of Changes from Unit Transactions:
<TABLE>
Transactions in units for the years ended December 31, 1999, 1998, and 1997
were as follows:
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance Products
Fund:
Money Market 5,592,166 5,364,567 4,894,728 4,397,734 2,382,178 2,297,883
High Income 125,102 111,182 268,215 129,662 137,806 54,636
Equity-Income 289,858 210,357 410,330 127,676 328,286 94,507
Growth 515,407 173,021 299,160 114,792 325,656 108,991
Overseas 51,631 58,904 58,771 94,783 93,231 38,350
Variable Insurance Products
Fund II:
Asset Manager 133,311 115,340 140,855 89,449 142,316 56,049
Investment Grade Bond 284,337 202,030 253,553 45,832 62,875 24,519
Index 500 606,518 144,754 510,263 137,304 339,992 99,007
Contrafund 335,380 108,310 266,211 81,447 246,458 36,569
Asset Manager: Growth 97,565 44,120 105,393 26,976 117,819 12,810
Variable Insurance Products
Fund III:
Balanced 171,651 51,293 123,529 17,078 44,550 4,849
Growth & Income 305,793 73,759 278,633 32,237 63,719 8,842
Growth Opportunities 259,336 80,585 300,626 55,963 83,073 7,147
American Century Variable
Portfolios, Inc.:
Balanced 31,091 15,339 37,294 5,584 13,519
Capital Appreciation 19,577 6,070 32,484 3,096 23,010 9,140
International 55,264 9,133 63,698 7,241 34,978 5
Value 45,654 46,751 120,733 23,917 46,055 1,389
Income & Growth 81,543 9,219 12,173
Massachusetts Financial
Services:
VIT Emerging Growth 172,528 13,896 10,131 25
VIT Growth with Income 54,764 1,735 2,598 59
VIT New Discovery 24,005 1,244 85
VIT Research 146,051 48,892 9,782
Lord, Abbett & Company:
VC Growth & Income 86,058 18,960
VC Mid-Cap Value 2,846
VC International 818 14,108 56
</TABLE>
5. Net Assets:
<TABLE>
Net assets at December 31, 1999, consisted of the following:
<S> <C> <C> <C>
Accumulated
Net Investment Net
Capital Income and Unrealized
Share Net Realized Appreciation
Portfolio Transactions Gains of Investments Total
Variable Insurance Products Fund:
Money Market $14,417,966 $1,371,066 $ $15,789,032
High Income 6,042,067 1,319,646 (281,014) 7,080,699
Equity-Income 21,496,007 6,017,433 2,796,682 30,310,122
Growth 26,164,994 8,766,002 14,283,348 49,214,344
Overseas 3,295,407 1,192,956 1,869,831 6,358,194
Variable Insurance Products Fund II:
Asset Manager 7,075,807 3,036,542 1,171,777 11,284,126
Investment Grade Bond 5,143,471 357,654 (117,995) 5,383,130
Index 500 31,021,816 3,896,968 8,503,276 43,422,060
Contrafund 14,670,131 2,285,577 5,087,379 22,043,087
Asset Manager: Growth 4,942,848 930,910 926,783 6,800,541
Variable Insurance Products Fund III:
Balanced 3,398,070 138,728 113,320 3,650,118
Growth & Income 7,880,860 295,643 891,911 9,068,414
Growth Opportunities 6,872,805 315,963 555,159 7,743,927
American Century Variable
Portfolios, Inc.:
Balanced 752,209 95,376 13,641 861,226
Capital Appreciation 653,406 (17,386) 372,142 1,008,162
International 1,778,639 24,655 1,044,241 2,847,535
Value 1,733,074 131,383 (125,670) 1,738,787
Income & Growth 1,050,621 6,981 115,202 1,172,804
Massachusetts Financial Services:
VIT Emerging Growth 2,430,851 30,535 1,232,280 3,693,666
VIT Growth with Income 647,797 (1,495) 28,504 674,806
VIT New Discovery 374,378 14,480 115,068 503,926
VIT Research 1,308,933 8,594 223,837 1,541,364
Lord, Abbett & Company:
VC Growth & Income 986,594 94,365 (10,248) 1,070,711
VC Mid-Cap Value 28,092 99 1,058 29,249
VC International 8,786 843 899 10,528
$164,175,629 $30,313,518 $38,811,411 $233,300,558
</TABLE>
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
MNLSAC99.txt
<PAGE>
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying balance sheets and the related statements
of income, stockholder's equity, and cash flows present fairly, in all material
respects, the financial position of Midland National Life Insurance Company
(the "Company") at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
March 10, 2000
Midland National Life Insurance Company
<TABLE>
<S> <C> <C> <C>
Balance Sheets
at December 31, 1999 and 1998
(Amounts in thousands, except share and per share amounts)
ASSETS 1999 1998
Investments:
Fixed maturities $2,097,305 $2,281,730
Equity securities 364,462 327,309
Policy loans 217,012 213,267
Short-term investments 102,829 280,943
Other invested assets 65,011 37,076
Total investments 2,846,619 3,140,325
Cash 2,105 754
Accrued investment income 40,683 38,555
Deferred policy acquisition costs 493,914 417,164
Present value of future profits of acquired businesses 23,473 31,162
Federal income taxes receivable 30,415
Other receivables and other assets 34,683 14,407
Separate accounts assets 394,266 249,145
Total assets $3,866,158 $3,891,512
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policyholder account balances $2,280,369 $2,307,893
Policy benefit reserves 431,266 419,615
Policy claims and benefits payable 31,698 30,393
Federal income taxes payable 20,566
Other liabilities 100,139 100,867
Security lending liability 50,500
Separate account liabilities 394,266 249,145
Total liabilities 3,237,738 3,178,979
</TABLE>
<TABLE>
<S> <C> <C>
Commitments and contingencies
Stockholder's equity:
Common stock, $1 par value, 2,549,439 shares authorized,
2,548,878 shares outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Accumulated other comprehensive (loss) income (51,130) 26,826
Retained earnings 643,294 649,629
Less treasury stock (561 shares), at cost (178)
Total stockholder's equity 628,420 712,533
Total liabilities and stockholder's equity $3,866,158 $3,891,512
Midland National Life Insurance Company
</TABLE>
<TABLE>
<S> <C> <C> <C>
Statements of Income
for the years ended December 31, 1999, 1998, and 1997
(Amounts in thousands)
1999 1998 1997
Revenues:
Premiums $ 98,169 $94,495 $98,668
Interest sensitive life and investment product charges
159,927 159,115 157,423
Net investment income 225,642 224,939 188,650
Net realized investment (losses) gains (9,751) (6,489) 3,561
Net unrealized (losses) gains on trading securities
(16,124) 2,847 (641)
Other income 4,691 3,157 2,565
Total revenue 462,554 478,064 450,226
Benefits and expenses:
Benefits incurred 139,943 137,313 146,227
Interest credited to policyholder account balances
127,786 133,529 111,333
Total benefits 267,729 270,842 257,560
Operating expenses (net of commissions and other expenses
deferred) 46,283 47,549 44,130
Amortization of deferred policy acquisition costs and present
value of future profits of acquired businesses 65,695 66,189 56,954
Total benefits and expenses 379,707 384,580 358,644
Income before income taxes 82,847 93,484 91,582
Income tax expense 29,004 32,618 33,053
Net income $53,843 $60,866 $58,529
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Midland National Life Insurance Company
Statements of Stockholder's Equity
for the years ended December 31, 1999, 1998, and 1997
(Amounts in thousands)
Accumulated
Additional Other Less Total
Common Paid-in Comprehensive Comprehensive Retained Treasury Stockholder's
Stock Capital Income (Loss) Income (Loss) Earnings Stock Equity
Balance at December 31, 1996
$2,549 $33,707 $18,825 $570,234 $625,315
Comprehensive income:
Net income $58,529 58,529 58,529
Other comprehensive income:
Net unrealized gain on available-for-sale investments
12,013 12,013 12,013
Total comprehensive income $70,542
Dividends paid on common stock (25,000) (25,000)
Balance at December 31, 1997
2,549 33,707 30,838 603,763 670,857
Comprehensive income:
Net income 60,866 60,866 60,866
</TABLE>
Other comprehensive income:
<TABLE>
<S> <C> <C> <C>
Net unrealized loss on available-for-sale investments
(4,012) (4,012) (4,012)
Total comprehensive income $56,854
Dividends paid on common stock (15,000) (15,000)
Repurchase of minority interest shares $(178) (178)
Balance at December 31, 1998
2,549 33,707 26,826 649,629 (178) 712,533
Comprehensive (loss):
Net income 53,843 53,843 53,843
Other comprehensive (loss):
Net unrealized loss on available-for-sale investments
(77,956) (77,956) (77,956)
Total comprehensive (loss) $(24,113)
Dividends paid on common stock (60,000) (60,000)
Retirement of treasury stock (178) 178
Balance at December 31, 1999
$2,549 $33,707 $(51,130) $643,294 $ $628,420
</TABLE>
Midland National Life Insurance Company
<TABLE>
<S> <C> <C> <C>
Statements of Cash Flows
for the years ended December 31, 1999, 1998, and 1997
(Amounts in thousands)
1999 1998 1997
Cash flows from operating activities:
Net income $ 53,843 $ 60,866 $ 58,529
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred policy acquisition costs
and present value of future profits of acquired
business 65,695 66,189 56,954
Net amortization of premiums and discounts on
Investments (1,948) 4,325 2,699
Policy acquisition costs deferred (66,199) (54,611) (50,363)
Net realized investment losses (gains) 9,751 6,489 (3,561)
Net unrealized losses (gains) on trading securities
16,124 (2,847) 641
Net proceeds from (cost of) trading securities
15,011 (37,769) 99,850
Deferred income taxes (2,808) (10,849) (5,421)
Net interest credited and product charges on
universal life and investment policies (32,140) (25,586) (46,090)
Changes in other assets and liabilities:
Net receivables and payables (28,682) 22,190 (13,946)
Policy benefits 13,555 8,397 15,826
Other (646) 1,173 122
Net cash provided by operating activities 41,556 37,967 115,240
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities 957,817 1,405,391 1,217,086
Equity securities 183,458 304,589 137,510
Other invested assets 535 2,601 941
Cost of investments acquired:
Fixed maturities (927,119) (1,281,839) (1,791,522)
Equity securities (294,286) (451,181) (144,862)
Other invested assets (28,498) (10,346) (11,702)
Net change in policy loans (3,745) (11,138) (9,995)
Net change in short-term investments 178,114 355,337 93,875
Net change in security lending (50,500) (257,625) 308,125
Payment for purchase of insurance business, net of
cash acquired (1,026) 23,939
Net cash provided by (used in) investing activities
15,776 54,763 (176,605)
</TABLE>
Midland National Life Insurance Company
<TABLE>
<S> <C> <C> <C>
Statements of Cash Flows, Continued
for the years ended December 31, 1999, 1998, and 1997
(Amounts in thousands)
1999 1998 1997
Cash flows from financing activities:
Receipts from universal life and investment products $355,962 $317,398 $280,164
Benefits paid on universal life and investment
products (351,943) (396,580) (194,993)
Dividends paid on common stock (60,000) (15,000) (25,000)
Repurchase of minority interest shares (178)
Net cash (used in) provided by financing activities (55,981) (94,360) 60,171
Increase (decrease) in cash 1,351 (1,630) (1,194)
Cash at beginning of year 754 2,384 3,578
Cash at end of year $ 2,105 $ 754 $ 2,384
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 96 $ 119 $ 143
Income taxes, paid to parent 36,976 45,980 42,749
Noncash operating, investing and financing activity:
Policy loans, receivables and other assets
received in assumption reinsurance
agreements
70 38,044
</TABLE>
1. Summary of Significant Accounting Policies:
Organization:
Midland National Life Insurance Company ("Midland" or the
"Company") is a wholly-owned subsidiary of Sammons Enterprises,
Inc. ("SEI"). Midland operates predominantly in the individual life and
annuity business of the life insurance industry. The Company is
licensed to operate in 49 states and the District of Columbia.
Basis of Presentation:
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period.
Actual results could differ significantly from those estimates.
The Company is subject to the risk that interest rates will change and
cause a decrease in the value of its investments. To the extent that
fluctuations in interest rates cause the duration of assets and liabilities
to differ, the Company may have to sell assets prior to their maturity
and realize a loss.
Investments:
The Company is required to classify its fixed maturity investments
(bonds and redeemable preferred stocks) and equity securities
(common and nonredeemable preferred stocks) into three categories:
securities that the Company has the positive intent and the ability to
hold to maturity are classified as "held-to-maturity"; securities that are
held for current resale are classified as "trading securities"; and
securities not classified as held-to-maturity or as trading securities are
classified as "available-for-sale." Investments classified as trading or
available-for-sale are required to be reported at fair value in the balance
sheet. The Company has no securities classified as held-to-maturity.
Trading securities are held for resale in anticipation of short-term
market movements. The Company's trading securities are stated at
market value. Gains and losses on these securities, both realized and
unrealized, are included in the determination of net income. Net cost of
or proceeds from trading securities are included in operating activities
in the statements of cash flows.
1. Summary of Significant Accounting Policies, continued:
Investments, continued:
Available-for-sale securities are classified as such if not considered
trading securities or if there is not the positive intent and ability to hold
the securities to maturity. Such securities are carried at market value
with the unrealized holding gains and losses included as other
comprehensive income in stockholder's equity, net of related
adjustments to deferred policy acquisition costs, deferred income taxes
and the accumulated unrealized holding gains (losses) on securities sold
which are released into income as realized investment gains. Cash
flows from available-for-sale security transactions are included in
investing activities in the statements of cash flows.
For CMO's and mortgage-backed securities, the Company recognizes
income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities. When
actual prepayments differ significantly from anticipated prepayments,
the effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the security is
adjusted to the amount that would have existed had the new effective
yield been applied since the acquisition of the security. This
adjustment is included in net investment income.
Policy loans and other invested assets are carried at unpaid principal
balances. Short-term investments are carried at amortized cost, which
approximates fair value.
Investment income is recorded when earned. Realized gains and losses
are determined on the basis of specific identification of the investments.
When a decline in value of an investment is determined to be other than
temporary, the specific investment is carried at estimated realizable
value and its original book value is reduced to reflect this impairment.
Such reductions in book value are recognized as realized investment
losses in the period in which they were written down.
1. Summary of Significant Accounting Policies, continued:
Recognition of Traditional Life, Health, and Annuity Premium
Revenue and Policy Benefits:
Traditional life insurance products include those products with fixed
and guaranteed premiums and benefits. Life insurance premiums,
which comprise the majority of premium revenues, are recognized as
premium income when due. Benefits and expenses are associated with
earned premiums so as to result in recognition of profits over the life of
the contracts. This association is accomplished by means of the
provision for policy benefit reserves and the amortization of deferred
policy acquisition costs.
Liabilities for future policy benefits for traditional policies generally
are computed by the net level premium method based on estimated
future investment yield, mortality, morbidity, and withdrawals which
were appropriate at the time the policies were issued or acquired.
Interest rate assumptions range primarily from 6.25% to 11.25%.
Recognition of Revenue and Policy Benefits for Interest Sensitive
Life Insurance Products and Investment Contracts (Interest
Sensitive Policies):
Interest sensitive policies are issued on a periodic and single premium
basis. Amounts collected are credited to policyholder account
balances. Revenues from interest sensitive policies consist of charges
assessed against policyholder account balances for the cost of
insurance, policy administration, and surrender charges. Revenues also
include investment income related to the investments which support the
policyholder account balances. Policy benefits and claims that are
charged to expense include benefits incurred in the period in excess of
related policyholder account balances. Benefits also include interest
credited to the account balances.
Policy reserves for universal life and other interest sensitive life
insurance and investment contracts are determined using the
retrospective deposit method. Policy reserves consist of the
policyholder deposits and credited interest less withdrawals and
charges for mortality, administrative, and policy expenses. Interest
crediting rates ranged primarily from 2.75% to 6.5% in 1999, 3% to
6.5% in 1998 and 3.75% to 6.75% in 1997. For certain contracts, these
crediting rates extend for periods in excess of one year.
1. Summary of Significant Accounting Pollicies, continued:
Deferred Policy Acquisition Costs:
Policy acquisition costs which vary with, and are primarily related to
the production of new business, have been deferred to the extent that
such costs are deemed recoverable from future profits. Such costs
include commissions, policy issuance, underwriting, and certain
variable agency expenses.
Deferred costs related to traditional life insurance are amortized over
the estimated premium paying period of the related policies in
proportion to the ratio of annual premium revenues to total anticipated
premium revenues.
Deferred costs related to interest sensitive policies are being amortized
over the lives of the policies (up to 25 years) in relation to the present
value of actual and estimated gross profits subject to regular evaluation
and retroactive revision to reflect actual emerging experience.
<TABLE>
<S> <C> <C> <C>
Policy acquisition costs deferred and amortized for years ended
December 31 are as follows:
1999 1998 1997
Deferred policy acquisition costs, beginning
of year $417,164 $416,767 $427,218
Commissions deferred 54,348 44,072 40,660
Underwriting and acquisition expenses deferred 11,851 10,539 9,703
Change in offset to unrealized gains and losses 68,557 3,766 (8,710)
Amortization (58,006) (57,980) (52,104)
Deferred policy acquisition costs, end of year $493,914 $417,164 $416,767
</TABLE>
To the extent that unrealized gains and losses on available-for-sale
securities would result in an adjustment to the amortization pattern of
deferred policy acquisition costs or present value of future profits of
acquired business had those gains or losses actually been realized, the
adjustments are recorded directly to stockholder's equity through other
comprehensive income as an offset to the unrealized gains or losses.
1. Summary of Significant Accounting Policies, continued:
Present Value of Future Profits of Acquired Business:
The present value of future profits of acquired business ("PVFP")
represents the portion of the purchase price of a block of business
which is allocated to the future profits attributable to the insurance in
force at the dates of acquisition. The PVFP is amortized in relationship
to the actual and expected emergence of such future profits. The
composition of the PVFP for the years ended December 31 is
summarized below:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
Balance at beginning of year $31,162 $40,397 $21,308
Value of in-force acquired 23,939
Adjustment to purchase price (1,026)
Amortization (7,689) (8,209) (4,850)
Balance at end of year $23,473 $31,162 $40,397
</TABLE>
Based on current conditions and assumptions as to future events, the
Company expects to amortize approximately 24% of the December 31,
1999 balance of PVFP in 2000, 22% in 2001, 20% in 2002, 5% in
2003, and 4% in 2004. The interest rates used to determine the
amortization of the PVFP purchased ranged from 5.5% to 6.5%.
Policy Claims and Benefits Payable:
The liability for policy claims and benefits payable includes provisions
for reported claims and estimates for claims incurred but not reported,
based on the terms of the related policies and contracts and on prior
experience. Claim liabilities are necessarily based on estimates and are
subject to future changes in claim severity and frequency. Estimates are
periodically reviewed and adjustments to such liabilities are reflected in
current operations.
Federal Income Taxes:
The Company is a member of SEI's consolidated United States federal
income tax group. The policy for intercompany allocation of federal
income taxes provides that the Company compute the provision for
federal income taxes on a separate return basis. The Company makes
payment to, or receives payment from, SEI in the amount they would
have paid to, or received from, the Internal Revenue Service had they
not been members of the consolidated tax group. The separate
Company provisions and payments are computed using the tax
elections made by SEI.
Deferred tax liabilities and assets are recognized based upon the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
1. Summary of Significant Accounting Policies, continued:
Separate Account:
Separate account assets and liabilities represent funds held for the
exclusive benefit of variable universal life and annuity contractholders.
Fees are received for administrative expenses and for assuming certain
mortality, distribution and expense risks. Operations of the separate
accounts are not included in these financial statements.
Comprehensive Income:
The Company follows Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income," which requires the reporting
of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net
income. Comprehensive income for the Company includes net income
and unrealized gains and losses (other comprehensive income) on
available-for-sale securities.
Security Lending:
The Company periodically enters into agreements to sell and
repurchase securities. Securities out on loan are required to be 100%
collateralized. Short-term investments of $50,500 and the related
liability representing the collateral received is reflected on the balance
sheet as of December 31, 1998. There were no such agreements as of
December 31, 1999.
Treasury Stock:
During the fourth quarter of 1998, the Company purchased its
remaining outstanding minority shares from the lone minority
stockholder for $178. In 1998 the shares were retained as treasury
stock as a reduction to stockholder's equity and were retired during
1999.
2. Fair Value of Financial Instruments:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, Short-Term Investments, Policy Loans and Other Invested
Assets:
The carrying amounts reported in the balance sheets for these
instruments approximate their fair values.
2. Fair Value of Financial Instruments, continued:
Investment Securities:
Fair value for fixed maturity securities (including redeemable preferred
stocks) are based on quoted market prices, where available. For fixed
maturities not actively traded, fair values are estimated using values
obtained from independent pricing services. In some cases, such as
private placements and certain mortgage-backed securities, fair values
are estimated by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair value of equity securities are based on quoted
market prices.
Investment-Type Insurance Contracts:
Fair values for the Company's liabilities under investment-type
insurance contracts are estimated using two methods. For those
contracts without a defined maturity, the fair value is estimated as the
amount payable on demand (cash surrender value). For those contracts
with known maturities, fair value is estimated using discounted cash
flow calculations using interest rates currently being offered for similar
contracts with maturities consistent with the contracts being valued.
These fair value estimates are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could
cause these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in some cases, could not be realized in the immediate
settlement of the instruments. Certain financial liabilities (including
non investment-type insurance contracts) and all nonfinancial
instruments are excluded from the disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
2. Fair Value of Financial Instruments, continued:
Investment-Type Insurance Contracts, continued:
<TABLE>
<S> <C> <C> <C> <C>
The carrying value and estimated fair value of the Company's financial
instruments are as follows:
December 31, 1999 December 31, 1998
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Fixed maturities, available-for-
sale $2,097,305 $2,097,305 $2,281,730 $2,281,730
Equity securities, available-for-
sale 293,892 293,892 221,325 221,325
Equity securities, trading 70,570 70,570 105,984 105,984
Policy loans 217,012 217,012 213,267 213,267
Short-term investments 102,829 102,829 280,943 280,943
Other investments 65,011 65,011 37,076 37,076
Financial liabilities:
Investment-type insurance
contracts 810,219 796,148 866,000 850,000
</TABLE>
3. Investments and Investment Income:
Fixed Maturities and Equity Security Investments:
<TABLE>
<S> <C> <C> <C> <C> <C>
The amortized cost and estimated fair value of fixed maturities and
equity securities classified as available-for-sale are as follows:
December 31, 1999
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government corporations
and agencies $ 142,991 $ 1,619 $ 2,512 $ 142,098
Corporate securities 1,156,301 8,186 76,620 1,087,867
Mortgage-backed securities 885,155 475 33,348 852,282
Other debt securities 14,861 225 28 15,058
Total fixed maturities 2,199,308 10,505 112,508 2,097,305
Equity securities 318,944 11,521 36,573 293,892
Total available-for-sale $2,518,252 $22,026 $149,081 $2,391,197
</TABLE>
3. Investments and Investment Income, continued:
Fixed Maturities and Equity Security Investments, continued:
<TABLE>
<S> <C> <C> <C> <C>
December 31, 1999
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government corporations
and agencies $ 208,581 $14,285 $ 378 $ 222,488
Corporate securities 1,052,442 30,366 15,546 1,067,262
Mortgage-backed securities 955,785 22,225 1,093 976,917
Other debt securities 14,861 225 23 15,063
Total fixed maturities 2,231,669 67,101 17,040 2,281,730
Equity securities 209,952 15,403 4,030 221,325
Total available-for-sale $2,441,621 $82,504 $21,070 $2,503,055
</TABLE>
The cost of the equity securities classified as trading securities are
$84,509 and $103,798, respectively, at December 31, 1999 and
December 31, 1998.
The unrealized (depreciation) appreciation on the available-for-sale
securities in 1999 and 1998 is reduced by deferred policy acquisition
costs and deferred income taxes and is reflected as accumulated other
comprehensive (loss) income in the statements of stockholder's equity:
<TABLE>
<S> <C> <C>
1999 1998
Gross unrealized (depreciation) appreciation $(127,055) $61,434
Deferred policy acquisition costs 48,393 (20,164)
Deferred income taxes 27,532 (14,444)
Accumulated other comprehensive (loss) income $ (51,130) $26,826
</TABLE>
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
The other comprehensive (loss) income in 1999 and 1998 is comprised
of the change in unrealized gains (losses) on available-for-sale fixed
maturities and equity security investments arising during the period less
the realized gains (losses) included in income, deferred policy
acquisition costs and deferred income taxes as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
Unrealized holding gains (losses) arising in the
current period:
Fixed maturities $(155,733) $(11,399) $27,096
Equity securities (42,539) (5,025) 3,571
Less reclassification adjustment for (gains)
losses released into income 9,783 6,484 (3,476)
Less DAC impact 68,557 3,766 (8,710)
Less deferred income tax effect 41,976 2,162 (6,468)
Net other comprehensive (loss) income $ (77,956) $ (4,012) $12,013
</TABLE>
The amortized cost and estimated fair value of available-for-sale fixed
maturities at December 31, 1999, by contractual maturity, are as
follows. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<TABLE>
<S> <C> <C>
Amortized Estimated
Cost Fair Value
Due in one year or less $ 9,823 $ 9,951
Due after one year through five years 184,351 182,854
Due after five years through ten years 322,800 313,832
Due after ten years 797,179 738,387
Securities not due at a single maturity date (primarily mortgage-
backed securities) 885,155 852,281
Total fixed maturities $2,199,308 $2,097,305
</TABLE>
3. Investments and Investment Income, continued:
Investment Income and Investment (Losses) Gains:
Major categories of investment income are summarized as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
Gross investment income:
Fixed maturities $168,511 $173,475 $148,640
Equity securities 31,366 22,563 13,831
Policy loans 15,913 15,331 11,891
Short-term investments 10,690 24,308 20,594
Other invested assets 3,202 2,730 824
Total gross investment income 229,682 238,407 195,780
Investment expenses 4,040 13,468 7,130
Net investment income $225,642 $224,939 $188,650
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
The major categories of investment gains and losses reflected in the
income statement are summarized as follows:
1999 1998 1997
Unrealized - Unrealized - Unrealized -
Trading Trading Trading
Realized Securities Realized Securities Realized Securities
Gross investment income:
Fixed maturities $ (3,668) $ 185 $ 2,934 $ 195
Equity securities (6,115) $(16,124) (6,669) $ 2,847 542 (836)
Other 32 (5) 85
Net investment
(losses) gains $ (9,751) $(16,124) $ (6,489) $ 2,847 $ 3,561 $ (641)
</TABLE>
Proceeds from the sale of available-for-sale securities and the gross
realized gains and losses on these sales (excluding maturities, calls and
prepayments) during 1999, 1998, and 1997 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
Fixed Fixed Fixed
Maturities Equity Maturities Equity Maturities Equity
Proceeds from sales $629,645 $168,763 $744,300 $304,589 $801,246 $136,085
Gross realized gains 4,579 1,514 7,527 442 3,757 1,977
Gross realized losses (8,443) (3,265) (7,313) (6,303) (3,213) (887)
</TABLE>
3. Investments and Investment Income, continued:
Other:
At December 31, 1999, and 1998, securities amounting to
approximately $14,986 and $14,993, respectively, were on deposit with
regulatory authorities as required by law.
The Company generally strives to maintain a diversified invested assets
portfolio. Other than investments in U.S. Government or U.S.
Government Agency or Authority, the Company had no investments in
one entity which exceeded 10% of stockholder's equity at December
31, 1999, except for the following investment with the following
carrying value:
Norwest $71,490
4. Income Taxes:
<TABLE>
<S> <C> <C>
The significant components of the provision for federal income taxes
are as follows:
1999 1998 1997
Current $31,812 $43,467 $38,474
Deferred (2,808) (10,849) (5,421)
Total federal income tax expense $29,004 $32,618 $33,053
Income tax expense differs from the amounts computed by applying the
U.S. Federal income tax rate of 35% to income before income taxes as
follows:
1999 1998 1997
At statutory federal income tax rate $28,997 $32,720 $32,054
Dividends received deductions (522) (191) (514)
Other, net 529 89 1,513
Total federal income tax expense $29,004 $32,618 $33,053
</TABLE>
The federal income tax (asset) liability as of December 31 is comprised
of the following:
1999 1998
Net deferred income tax (asset) liability $(23,315) $21,470
Income taxes currently receivable (7,100) (904)
Federal income tax (asset) liability $(30,415) $20,566
4. Income Taxes, continued:
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax
liabilities at December 31 are as follows:
<TABLE>
<S> <C> <C>
1999 1998
Deferred tax liabilities:
Present value of future profits of acquired business $ 8,216 $10,907
Deferred policy acquisition costs 124,098 99,192
Investments 22,154
Total deferred income tax liabilities 132,314 132,253
Deferred tax assets:
Policy liabilities and reserves 106,069 108,973
Investments 48,599
Other, net 961 1,810
Total gross deferred income tax assets 155,629 110,783
Net deferred income tax (asset) liability $(23,315) $ 21,470
</TABLE>
Prior to 1984, certain special deductions were allowed life insurance
companies for federal income tax purposes. These special deductions
were accumulated in a memorandum tax account designated as
"Policyholders' Surplus." Such amounts will usually become subject
to tax at the then current rates only if the accumulated balance exceeds
certain maximum limitations or certain cash distributions are deemed to
be paid out of this account. It is management's opinion that such
events are not likely to occur. Accordingly, no provision for income
tax has been made on the approximately $66,000 balance in the
policyholders' surplus account at December 31, 1999.
5. Reinsurance:
The Company is involved in both the cession and assumption of
reinsurance with other companies. Reinsurance premiums and claims
ceded and assumed for the years ended December 31 are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Balance Sheets
1999 1998 1997
Ceded Assumed Ceded Assumed Ceded Assumed
Premiums $20,244 $ 4,910 $20,280 $ 6,106 $17,081 $7,971
Claims 10,529 4,777 11,495 5,954 8,683 4,472
</TABLE>
5. Reinsurance, continued:
The Company generally reinsures the excess of each individual risk
over $500 on ordinary life policies in order to spread its risk of loss.
Certain other individual health contracts are reinsured on a policy-by-
policy basis. The Company remains contingently liable for certain of
the liabilities ceded in the event the reinsurers are unable to meet their
obligations under the reinsurance agreement.
Effective in 1996, the Company assumed certain policy risks from its
affiliate, North American Company for Life and Health Insurance, and
its subsidiaries. The Company fulfilled its obligation on this
assumption contract and was released of this risk effective December
31, 1998. The Company has reflected risk and profit charges of $729
in other income in 1997 under the terms of the reinsurance contract.
Effective October 31, 1997, Midland acquired, via assumption
reinsurance, a block of life and annuity business. Under the assumption
agreement, the Company assumed approximately $574,310 of life and
annuity reserves which is reflected in the liabilities for future policy
benefits and received $550,371 of assets which was net of $23,939 of
PVFP. The PVFP asset is being amortized principally over periods up
to 25 years in relation to the present value of expected gross profits.
The assets acquired included approximately $511,877 in cash and short
term instruments, $38,044 in policy loans and $450 of other assets. In
accordance with the agreement, the final purchase price was
determined in 1998 which reduced the PVFP asset to $22,913 and the
life and annuity reserves assumed to $573,284.
6. Statutory Financial Data and Dividend Restrictions:
In 1999, the Company redomesticated in Iowa and its statutory-basis
financial statements are prepared in accordance with accounting
practices prescribed or permitted by the insurance department of the
domiciliary state. "Prescribed" statutory accounting practices include
state laws, regulations, and general administrative rules, as well as a
variety of publications of the National Association of Insurance
Commissioners ("NAIC"). "Permitted" statutory accounting practices
encompass all accounting practices that are not prescribed. Such
practices differ from state to state and company to company.
6. Statutory Financial Data and Dividend Restrictions,
continued:
Generally, the net assets of the Company available for distribution to its
stockholders are limited to the amounts by which the net assets, as
determined in accordance with statutory accounting practices, exceed
minimum regulatory statutory capital requirements. All payments of
dividends or other distributions to stockholders are subject to approval
by regulatory authorities. The maximum amount of dividends which
can be paid by the Company during any 12-month period, without prior
approval of the insurance commissioner, is limited according to
statutory regulations and is a function of statutory equity and statutory
net income (generally, the greater of statutory-basis net gain from
operations or 10% of prior year-end statutory-basis surplus). The
Company paid a statutory stockholder dividend of $126,000 and
$15,000 in 1999 and 1998, respectively. Dividends payable in 2000
will require prior approval of regulatory authorities.
The statutory net income of the Company for the years ended
December 31, 1999 and 1998 is approximately $69,000 and $75,000,
respectively, and capital and surplus at December 31, 1999 and 1998 is
approximately $386,000 and $384,000, respectively, in accordance
with statutory accounting principles.
7. Employee Benefits:
The Company participates in qualified pensions and other
postretirement benefit plans sponsored by SEI. The Company also
provides certain postretirement health care and life insurance benefits
for eligible active and retired employees through a defined benefit plan.
The following table summarizes the benefit obligations, the fair value
of plan assets and the funded status over the two-year period ended
December 31, 1999. The amounts reflect an allocation of the
Company's portion of the SEI plan:
<TABLE>
<S> <C> <C> <C> <C>
Pension Benefits Other Benefits
1999 1998 1999 1998
Benefit obligation at
December 31 $ 6,421 $ 6,420 $ 1,327 $ 1,718
Fair value of plan assets at
December 31 3,962 3,642
Funded status at December 31 $(2,459) $(2,778) $(1,327) $(1,718)
Accrued benefit liability
recognized in financial
statements $ 1,292 $ 616 $ 1,650 $ 1,650
</TABLE>
7. Employee Benefits, continued:
The Company's postretirement benefit plan is not funded; therefore, it
has no plan assets.
The amounts of contributions made to and benefits paid from the plan
are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Balance Sheets
Pension Benefits Other Benefits
1999 1998 1999 1998
Employer contributions $ 123 $ 227
Employee contributions 57 56
Benefit payments $ 184 $ 197 180 283
</TABLE>
The following table provides the net periodic benefit cost for the years
ended 1999, 1998, and 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
Net periodic benefit costs $ 676 $ 524 $ 360 $ 123 $ 126 $ 179
</TABLE>
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
<TABLE>
<S> <C> <C> <C> <C>
Pension Benefits Other Benefits
1999 1998 1999 1998
Weighted-average assumptions
as of December 31:
Discount rate 7.75% 7.00% 7.75% 7.00%
Expected return on plan
assets 8.75% 8.75% N/A N/A
Rate of compensation
increase 4.25% 4.25% N/A N/A
</TABLE>
For measurement purposes, a 6.5% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The
rate was assumed to decrease gradually each year to a rate of 4.5% for
2006 and remain at that level thereafter.
The Company also participates in a noncontributory Employee Stock
Ownership Plan ("ESOP") which is qualified as a stock bonus plan.
All employees are eligible to participate in this plan upon satisfying
eligibility requirements. The ESOP is sponsored by SEI. Each year the
Company makes a contribution to the ESOP as determined by the
Board of SEI. The contributions to the ESOP for 1999, 1998, and 1997
was $1,375, $1,381, and 1,294, respectively. The expense for 1999,
1998, and 1997 was $1,306, $1,725, and $1,920, respectively. All
contributions to the ESOP are held in trust.
8. Commitments and Contingencies:
Lease Commitments:
Midland's home office building has been conveyed to the City of Sioux
Falls, South Dakota, and leased back in a transaction in which the City
issued $4,250 of Industrial Revenue Bonds for face value. The bonds
are collateralized by $2,300 of Midland's investments in government
bonds. The lease includes a purchase option under which Midland may
repurchase the building upon repayment of all bonds issued. The lease
terms provide for 10 annual payments equivalent to principal of $425
beginning in 1993 and semiannual payments through 2002 in amounts
equivalent to interest at 5.5% on the outstanding revenue bond
principal. The building and land costs have been capitalized and are
carried as part of other assets and the lease obligation as part of other
liabilities.
The Company also leases certain equipment. Rental expense on
operating leases amounted to $2,004, $1,511, and $1,208 for the years
ended December 31, 1999, 1998, and 1997, respectively. The
minimum future rentals on capital and operating leases at December 31,
1999, are as follows:
<TABLE>
<S> <C> <C> <C>
Balance Sheets
Year Ending December 31 Capital Operating Total
2000 $ 490 $2,086 $2,576
2001 466 1,727 2,193
2002 442 351 793
2003 351 351
2004 351 351
Thereafter 647 647
Total 1,398 $5,513 $6,911
</TABLE>
Less amount representing interest 123
Present value of amounts due under capital leases $1,275
Other Contingencies:
The Company is a defendant in various lawsuits related to the normal
conduct of its insurance business. Litigation is subject to many
uncertainties and the outcome of individual litigated matters is not
predictable with assurance; however, in the opinion of management, the
ultimate resolution of such litigation will not materially impact the
Company's financial position.
9. Other Related Party Transactions:
The Company pays fees to SEI under management contracts. The
Company was charged $3,022, $1,552, and $1,530 in 1999, 1998, and
1997, respectively, related to these contracts.
The Company pays investment management fees to an affiliate
(Midland Advisors Company). Net fees related to these services were
$1,688, $1,855, and $1,425 in 1999, 1998, and 1997, respectively.
The Company provided certain insurance and non-insurance services to
North American Company for Life and Health Insurance ("North
American"), beginning in 1997. The Company was reimbursed $4,786,
$1,465, and $488 in 1999, 1998, and 1997, respectively, for the costs
incurred to render such services.
In 1998, the Company sold certain securities to North American at the
current market value of $15,856, incurring a realized loss of $2,736. In
addition, the Company acquired securities totaling $22,679 from North
American.
10. Mortgage Loan Operations
In January 1999, the Company acquired a mortgage loan operation
whose primary business was to underwrite, originate and resell
mortgage loans with the intent of dividending the remaining net assets
to SEI during 1999. Effective December 1, 1999, this operation was
dividended to SEI at the remaining value of the underlying assets. Due
to the temporary nature of the transaction, the capital contributed of
$67,554, the losses for the 11 months of $1,602, and the ultimate
dividend have been excluded from the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Midland National Life Insurance Company
Notes to Financial Statements, Continued
(Amounts in thousands)
Midland National Life Insurance Company
Notes to Financial Statements
(Amounts in thousands)
MNLGAP99.txt
<PAGE>
Part C.
Item 24.
(a) Financial Statements
Financial statements are included in Part B of the Registration
Statement.
(b) Exhibits:
(1) Resolution of the Board of Directors of Midland National Life
Insurance Company authorizing establishment of Separate
Account C. (2)
(2) Not Applicable
(3) (a) Principal Underwriting Agreement between Midland
National Life Insurance Company and Walnut Street
Securities (2)
(b) Registered Representative Contract (2)
(4) (a) Form A053A1 Flexible Premium Deferred Variable Annuity
Contract (2)
(b) Maturity Date Endorsement for Qualified Contracts (2)
(c) Endorsement for Tax Sheltered Annuity (2)
(d) Form A057A1 Flexible Premium Deferred Variable Annuity
Contract (2)
(5) (a) Form of Application for Flexible Premium Deferred Variable
Annuity Contract A053A1 and A057A1 (2)
(b) Supplement to Application (2)
(6) (a) Articles of Incorporation of Midland National Life Insurance
Company (2)
(b) By-laws of Midland National Life Insurance Company (2)
(7) Not Applicable
(8) (a) Form of Participation Agreement between Midland National Life
Insurance Company and Fidelity VIP I and VIP II (2)
(b) Form of Participation Agreement between Midland National Life
Insurance Company and Fidelity VIP III (2)
(c) Form of Participation Agreement between Midland National Life
Insurance Company and American Century Investment Services
Inc. (2)
(d) Participation Agreement for Massachusetts Financial
Variable Insurance Trusts. (3)
(e) Participation Agreement for Lord Abbett Series
Funds, Inc. (3)
(9) Opinion and Consent of Counsel (2)
(10) (a) Consent of Counsel (4)
(b) Consent of Independent Auditors (4)
(11) Not Applicable
(12) Not Applicable
(13) Performance Data Calculations (1)
(1) Filed with Post-effective Amendment #2 of this form N-4 Registration
Statement, file number 33-64016 (April 30, 1995).
(2) Filed with Post-effective Amendment #6 of this form N-4 Registration
Statement, file number 33-64016 (April 30, 1998).
(3) Filed with Post-effective Amendment #9 of this form N-4 Registration
Statement, file number 33-64016 (April 30, 1999).
(4) Filed herewith.
<PAGE>
Item 25.
Below is a list of our directors and executive officers.
Directors
Name and Position with Principal Occupation
Business Address Midland During Past Five Years
Michael M. Masterson Chairman of the Chairman of the Board (March 1999 to
Midland National Life Board, Chief present) Chief Executive Officer and
One Midland Plaza Executive Officer President (March 1997 to present)
Sioux Falls, SD 57193 and President President and Chief Operating
Officer (March 1996 to February
1997), Executive Vice President-
Marketing (March 1995 to February
1996), Midland National Life
Insurance Company; Vice President-
Individual Sales (prior thereto)
Northwestern National Life
John J. Craig, II Executive Executive Vice President (January
Midland National Life Vice President 19998 to present), Midland National
One Midland Plaza Life Insurance Company; Senior Vice
Sioux Falls, SD 57193-0001 President and Chief Financial Officer
(October 1993 to 1998), Midland
National Life Insurance Company;
(January 1996 to present), Briggs
ITD Corp.; Treasurer (March 1996
to present), Sammons Financial
Holdings, Inc.; Treasurer
(November 1993 to present), CH
Holdings; Treasurer (November
1993 to present), Consolidated
Investment Services, Inc.;
Treasurer (November 1993 to
present), Richmond Holding
Company, L.L.C.; Partner (prior
thereto), Ernst and Young.
Steven C. Palmitier Senior Vice Senior Vice President and Chief
Midland National Life President and Marketing Officer (August 1996
One Midland Plaza Chief Marketing to present), Midland National
Sioux Falls, SD 57193 Officer Life Insurance Company; Senior
Vice President-Sales (prior
thereto), Penn Mutual Life
Insurance
Donald J. Iverson Senior Vice Senior Vice President and Corporate
Midland National Life President and Actuary (November 1999 to Present);
One Midland Plaza Corporate Vice President - Chief Actuary (prior
Sioux Falls, SD 57193 Actuary thereto), ALLIED Life Insurance
Stephen P. Horvat, Jr. Senior Vice Senior Vice President (January
Midland National Life President to present), Midland National
Insurance Company Life Insurance Company; Shareholder
(June 1996 to December 1997),
Sorling Law Firm; Senior Vice
President, General Counsel and
Secretary (prior thereto), Franklin
Life Insurance Company
Robert W. Korba Board of President and Director (since
Sammons Enterprises, Inc Directors 1988), Sammons Enterprises, Inc.
300 Crescent CT Member
Dallas, TX 75201
Executive Officers (other than Directors)
E John Fromelt Senior Vice Chief Investment Officer (since
Midland National Life President and 1990), Midland National Life
One Midland Plaza Chief Investment Insurance Company; President
Sioux Falls, SD 57193 Officer since August 1995), Midland
Advisors Company; Chief
Investment Officer (1996 to
present), North American Company
for Life and Health
Stephen P. Horvat, Jr. Senior Vice Senior Vice President (January
Midland National Life President to present), Midland National
Insurance Company Life Insurance Company; Shareholder
(June 1996 to December 1997),
Sorling Law Firm; Senior Vice
President, General Counsel and
Secretary (prior thereto), Franklin
Life Insurance Company
Gary J. Gaspar Senior Vice Senior Vice President and Chief
North American President & Information Officer (August 1998
Company for Life & Chief to present), Midland National Life
Health Insurance Information Insurance Company; Senior Vice
222 South Riverside Officer Information Systems Officer (1985
Chicago, IL 60606-5929 to present; North American Company
for Life and Health Insurance
Jack L. Briggs Vice President, Vice President, Secretary and
Midland National Life Secretary, and General Counsel (since 1978),
General Counsel Midland National Life Insurance
Company
Gary W. Helder Vice President- Vice President-Policy
Midland National Life Policy Administration (since 1991),
Administration Midland National Life Insurance
Company
Robert W. Buchanan Vice President- Vice President-Marketing
Midland National Life Marketing Services (March 1996 to
Services present), Second Vice President-
Sales Development (prior
thereto), Midland National Life
Insurance Company
Thomas M. Meyer Sen.Vice President Vice President and Chief Financial
Midland National Life and Chief Officer (January 1998 to present),
Financial Officer Second Vice President and Controller
(1995 to 1998), Midland National Life
Insurance Company
Julia B. Roper Vice President & Vice President and Chief Compliance
North American Chief Compliance Officer (August 1998 to present),
Company for Life & Officer Midland National Life Insurance
Health Insurance Company; Vice President & Chief
222 South Riverside Compliance Officer (September 1997
Chicago, IL 60606-5929 to present), North American Company
for Life & Health Insurance;
Assistant Vice President (prior
Thereto), CAN Insurance Companies
Jon P. Newsome Executive Vice Executive Vice President - Annuity
Midland National Life - President - Division (April 1999 to Present);
Annuity Division Annuity Division Executive Vice President (September
7755 Office Plaza 1996 to February 1999), Conseco
Drive N. #105 Marketing, LLC; Chairman and CEO
West Des Moines,IA 50266 (November 1995 to September 1996),
American Life & Casualty Ins. Co.
Esfandyar Dinshaw Vice President - Vice President - Annuity Division
Midland National Life - Annuity Divsion (April 1999 to Present); Vice
Annuity Division President - Actuarial (September
7755 Office Plaza 1996 to April 1999), Conseco; Vice
Drive N. #105 President-Actuarial (January 1991
West Des Moines,IA 50266 to August 1996), American Life &
Casualty Co.
Item 26. Persons Controlled by or Under Common Control With the Depositor.
The Depositor, Midland National Life Insurance Company (Midland) is a
subsidiary of Sammons Enterprises, Incorporated. The Registrant is a
segregated asset account of Midland.
The following indicates the persons controlled by or under common control
with Midland:
Estate of Charles A. Sammons
I. Sammons Enterprises, Inc. (Delaware Corp) 89.88%
II. COMMUNICATIONS - Sammons Communications, Inc. (Delaware Corp) 100%
Sammons Communications of New Jersey, Inc. (New Jersey Corp) 100%
Oxford Valley Cable Vision, Inc. (Pennsylvania Corp) 88%
SGS, Inc. (Delaware Corp.) 100%
Sammons Communication of Pennsylvania, Inc. (Delaware Corp) 100%
III. Consolidated Investment Services Inc. (Nevada Corp) 100%
Richmond Holding Company, LLC (Delaware LLC) 5%
A. Financial Services
Sammons Financial Holdings, Inc. (Delaware Corp) 100%
Midland National Life Insurance Company (Iowa Corp) 100%
(FEDID #46-0164570 NAIC CO Code 66044 IA)
NACOLAH Holding Corporation (Delaware Corp) 100%
(FEDID #36-412699)
Institutional Founders Life Insurance Company (Ill. Corp.) 100%,
FEDID No. 36-3508234, NAIC Co. Code 85707, Group Code 0431 IL
North American Company for Life & Health Insurance (Ill.Corp)100%
FEDID No. 36-2428931, NAIC Co. Code 66974, Group Code 0431 IL
North American Company for Life & Health Insurance of
New York (New York Corp.), 100%
FEDID No. 361556010, NAIC Co. Code 91286, Group Code 0431 NY
NACOLAH Life Insurance Company (Ill. Corp.) 100%
FEDID No. 36-3723034, NAIC Co. Code 85456, Group Code 0431 IL
NACOLAH Ventures, L.L.C. (Delaware Corp.), FEDID No. 36-3495904
Midland Advisors Company (South Dakota Corp.) 100%
Parkway Holdings, Inc. (Delaware Corp) 100%
Parkway Mortgage, Inc. (Delaware Corp.) 100%
B. ALLIED
CH Holdings Inc. (Delaware Corp) 100%
Sammons Corporation (Texas Corp) 100%
Otter, Inc. (Oklahoma Corp.) 100%
Cathedral Hill Hotel, Inc. (Delaware Corp) 100%
GBH Venture Co., Inc. (Delaware Corp.) 100%
Grand Bahama Hotel Company (Delaware Corp) 100%
Jack Tar Grand Bahama Limited (Bahama Corp) 100%
C. WATER
Mountain Valley Spring Company (Arkansas Corp) 100%
Water Lines Inc. (Arkansas Corp) 100%
D. SUPPLY AND SERVICE
Sammons Distribution Holdings, Inc. (Delaware Corp.) 100%
Vinson Supply Company (Delaware Corp) 100%
Vinson Supply (UK) LTD. (United Kingdom Corp) 50%
Myron C. Jacobs Supply Company (Oklahoma Corp) 100%
Composite Thread Protectors, Inc. (Pennsylvania Corp) 100%
Vinson Process Controls Company (Delaware Corp.) 100%
Sammons Distribution Inc. (Delaware Corp.) 100%
Briggs-Weaver Inc. (Delaware Corp) 100%
TMIS Inc. (Texas Corp) 100%
B-W Max, Inc. (Delaware Corp)100%
B-W Max Inc. (Delaware Corp)100%
Abastecedora de Services Indutriales y Productos S.A.
de C.V. (ASPI) (Mexico Corp.)
Personal Para Services Intogrados de Mexico
S.A. (Personal) (Mexico Corp)
Especialistas en Systems de Distribucion Industrial
S.A. de C.V. (ESDI) (Mexico Corp.)
Especialistas en Procuramiento Industrial
S.A. de C.V. (EPI) (Mexico Corp.)
Sealing Specialists of Texas, Inc. (Texas Corp) 100%
E. Equipment Sales and Rentals
Briggs ITD Corp. (Delaware Corp.) 100%
Briggs Equipment Trust (Delaware Business Trust) 100%
Briggs Equipment Mexico Inc. (Delaware Corp.) 100%
Montacargras Yale de Mexico S. A. de C.V. (YALESA)
(Mexico Corp.)
Briggs Equipment S.A. de C.V. (BESA) (Mexico Corp.)
F. Real Estate
Crestpark LP Inc. (Delaware Corp.) 100%
Crestpark Holding Inc. (Delaware Corp.) 100%
Sammons Venture Properties, Inc. (Delaware Corp.) 100%
Sammons Realty Corporation (Delaware Corp.) 100%
Sammons Legacy Venture GP Inc. (Delaware Corp) 100%
Sammons Legacy Venture LP Inc. (Delaware Corp) 100%
Sammons Income Properties Inc. (Delaware Corp) 100%
Sammons Eiger Venture, Inc. (Delaware Corp) 100%
G. Tourism
The Grove Park Inn Resort Inc. (Delaware Corp) 100%
Adventure Tours USA, Inc. (Delaware Corp) 100%
Santo Tours and Travel Inc. (New York Corp) 100%
ATUSA Inc. (Delaware Corp) 100%
Item 27. Number of Contract Owners
As of December 31, 1999 there were 2,332 holders of nonqualified
contracts and 4,806 holders of qualified contracts.
Item 28. Indemnification
The Company indemnifies actions against all officers, directors, and
employees to the full extent permitted by South Dakota law. This
includes any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative, or
investigative. Such indemnification includes expenses, judgments,
fines, and amounts paid in settlement of such actions, suits, or
proceedings.
Item 29a.Relationship of Principal Underwriter to Other Investment Companies
Walnut Street Securities, the principal underwriter of the Registrant is
also the principal underwriter for flexible premium variable life insurance
contracts issued through Midland National Life Separate Account A.
Walnut Street Securities, the principal underwriter of the Registrant is
also the principal underwriter for General American Life Insurance
Company as well as Paragon Life Insurance Company.
Item 29b.Principal Underwriters
Unless otherwise noted, the address of each director and executive
officer of Walnut Street Securities is 400 South 4th Street, Suite 100,
St.Louis MO 63102
Name and Principal Position and Offices
Business Address With Walnut Street Securities
Richard J. Miller Pres., CEO, Dir.
Mabeline Julien Assistant Treasurer
James Koeger Assistant Treasurer
E. Thomas Hughes, Jr. Treasurer
Maureen Sheehan Assistant Secretary
Joyce Hillebrand Assistant Secretary
Norman Lazarus CCO, Vice President - Compliance
Don Wuller Sr.V.P.Admin, CFO
Dona Barber Dir.
Mathew P. McCauley Dir., Vice President, General Counsel &
Secretary
Bernard H. Wolzenski Dir.
Stephen Palmitier Dir.
Kevin Eichner Dir. , Chairman
Item 29c.Compensation of Principal Underwriters
The following commissions and other compensation were received by each
principal underwriter, directly or indirectly, from the Registrant
during the Registrant's last fiscal year:
(1) (2) (3) (4) (5)
Net
Name of Underwriting
Principal Discount and Compensation Brokerage
Underwriter Commissions On Redemption Commissions Compensation
Walnut Street 4,074,697 0 0 0
Securities
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by Midland National Life Insurance Company at:
One Midland Plaza
Sioux Falls, SD 57193
Item 31. Management Services
No management related services are provided to the Registrant, except as
discussed in Parts A and B.
Item 32. Undertakings and Representations - Midland National Life
Insurance Company represents that all fees and charges deducted under
the contract in the aggregate are reasonable in relation to the services
rendered, the expenses to be incurred and the risk assumed by Midland
National Life Insurance Company.
(a) A post-effective amendment to this registration statement will be filed as
frequently as is necessary to ensure that the audited financial
statement in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may
be accepted.
(b) Any application to purchase a contract offered by the prospectus will
include a space that an applicant can check to request a Statement of
Additional Information.
(c) Any Statement of Additional Information and any financial statements
required to be made available under this form will be delivered promptly
upon written or oral request.
Section 403(b) Representation
Registrant represents that it is relying on a no-action letter dated November
28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88),
regarding sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act
of 1940, in connection with redeemability restrictions on Section 403(b)
Contracts, and that paragraphs numbered (1) through (4) of that letter will
be complied with.
Statement Pursuant to Rule 6c-7
Midland National Life and Separate Account C rely on 17 C.F.R. Section 270.6c-7
and represent that the provisions of that Rule have been or will be complied
with. Accordingly, Midland National Life and Separate Account C are exempt
from the provisions of Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940 with respect to any variable annuity contract participating
in such account to the extent necessary to permit compliance with the Texas
Optional Retirement Program.
VAITEM24
<PAGE>
SIGNATURES
__________
As required by the Securities Act of 1933, and under the Investment
Company act of 1940, the Registrant, Midland National Life Separate
Account C certifies that it meets all the requirements for effectiveness
of this registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement
to be signed on its behalf in the City of Sioux Falls, South Dakota, on
the 5th day of April, 2000.
Midland National Life Separate Account C
(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 April 5, 2000
Michael M. Masterson Board, Chief Executive
Officer and President
/s/John J. Craig II_____ Director, Executive Vice April 5, 2000
John J. Craig II President and Chief
Operating Officer
/s/Donald J. Iverson____ Director, Senior Vice April 5, 2000
Donald J. Iverson President and Chief
Actuary
/s/Steven C. Palmitier__ Director, Senior Vice April 5, 2000
Steven C. Palmitier President and Chief
Marketing Officer
/s/Stephen P. Horvat, Jr. Director, Senior Vice April 5, 2000
Stephen P. Horvat, Jr. President - Legal
_____________________ Director and Vice President April 5, 2000
Robert W. Korba
SepCSig1.txt
<PAGE>
Registration No. 33-64016
POST EFFECTIVE AMENDMENT NO. 10
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
MNL SEPARATE ACCOUNT C
AND
MIDLAND NATIONAL LIFE INSURANCE COMPANY
______________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
EXHIBIT INDEX
Item 24.
(10) (a) Consent of Counsel
(b) Consent of Independent Auditors
EXHBTVA
<PAGE>
April 14, 2000
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Annuity Form N-4
File No. 33-64016
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of the
Post-Effective Amendment No. 10 to the Registration Statement on Form N-4
filed by Midland National Life Insurance Company Separate Account C for
certain variable annuity contracts (File No. 33-64016). In giving this
consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND ASBILL & BRENNAN L L P
by: __/s/Frederick_R._Bellamy__
Frederick R. Bellamy
SABVAII.txt
<PAGE>
CONSENT OF IDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post effective Amendment No. 10 to this
Registration Statement of Midland National Life Separate Account C on
Form N-4 (File No. 33-64016) of our reports dated March 31, 2000 and
March 10, 2000, on our audits of the financial statements of Midland
National Life Separate Account C, and the financial statements of Midland
National Life Insurance Company, respectively. We also consent to the
reference of our firm under the caption "Financial" in such Registration
Statement.
PRICEWATERHOUSECOOPERS L L P
MINNEAPOLIS, MINNESOTA
April 20, 2000
PWCVA2.txt
<PAGE>
