Prospectus May 1, 1996
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
-----------------------------------------
Issued Through
UNITED OF OMAHA SEPARATE ACCOUNT C
by
UNITED OF OMAHA LIFE INSURANCE COMPANY
This Prospectus describes the Ultrannuity Series V Variable Annuity Policy
(the "Policy"), a Flexible Payment Variable Deferred Annuity offered by United
of Omaha Life Insurance Company. The Policy is designed to aid in long-term
financial planning and provides for the accumulation of capital by individuals
on a tax-deferred basis for retirement or other long-term purposes.
The Owner may allocate Net Purchase Payments to one or more of the eighteen
Eligible investments, which are the seventeen Ultrannuity Series V Subaccounts
of the United of Omaha Separate Account C (the "Variable Account") and the Fixed
Account. Assets of each Subaccount of the Variable Account are invested in a
corresponding mutual fund Portfolio. The Portfolios are described in separate
prospectuses that accompany this Prospectus. The Policy's available investment
options are:
Alger American Growth Portfolio
Alger American Small Capitalization Portfolio
Federated Prime Money Fund II("Money Market") Portfolio
Federated Fund for U.S. Government Securities Portfolio
Fidelity Asset Manager: Growth Portfolio
Fidelity Equity Income Portfolio
Fidelity Contrafund Portfolio
MFS Emerging Growth Portfolio
MFS High Income Fund Portfolio
MFS Research Portfolio
MFS World Government Portfolio
Scudder International Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price International Portfolio
T. Rowe Price Limited Term Bond Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
Fixed Account
The Accumulation Value in the Variable Account will vary in accordance with
the investment performance of the Subaccounts selected by the Owner. Therefore,
the Owner bears the entire investment risk under this Policy for all amounts
allocated to the Variable Account. Amounts allocated to the Fixed Account are
guaranteed by United of Omaha Life Insurance Company ("United of Omaha") and
will earn a specified rate of interest declared periodically.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE POLICY INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth the information that a prospective investor
should consider before investing in a Policy. A Statement of Additional
Information about the Policy and the Variable Account, which has the same date
as this Prospectus, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available at no cost to any person requesting a copy by writing United of
Omaha at its Service Office (United of Omaha Annuity Service Division, P.O. Box
419472, Kansas City, Missouri 64141-6472) or by calling 1-800-238-9354. The
table of contents of the Statement of Additional Information is included at the
end of this Prospectus.
<PAGE>
The Policy may be purchased with an initial Purchase Payment of at least
$5,000, and an Owner generally may pay additional Purchase Payments of at least
$500 each (but no additional Purchase Payments are required).
The Policy provides for periodic annuity payments to be made by United of
Omaha to the Owner, if living, for the life of the Annuitant or for some other
period, beginning on the Annuity Starting Date selected by the Owner. Prior to
the Annuity Starting Date, the Owner can transfer Accumulation Value among the
Eligible Investments, that is, among the Fixed Account and the seventeen
Subaccounts of the Variable Account (some prohibitions and restrictions apply,
especially on transfers out of the Fixed Account). The Owner can also elect to
withdraw all or a portion of the Cash Surrender Value; however, withdrawals may
be taxable, subject to a Withdrawal Charge and/or a tax penalty, and withdrawals
from the Fixed Account may be delayed.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION GENERALLY
DESCRIBE ONLY THE POLICIES AND THE VARIABLE ACCOUNT, EXCEPT WHEN THE FIXED
ACCOUNT IS SPECIFICALLY MENTIONED.
PLEASE READ THIS PROSPECTUS CAREFULLY
AND RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENT PROSPECTUS FOR EACH PORTFOLIO
- 2 -
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS ...................................................... 4
SUMMARY........................................................... 6
FINANCIAL STATEMENTS.............................................. 13
UNITED OF OMAHA LIFE INSURANCE COMPANY............................ 14
THE ELIGIBLE INVESTMENTS.......................................... 14
The Variable Account..................................... 14
Historical Performance Data.............................. 18
Standardized Performance Data........................ 18
Non-Standardized Performance Data.................... 19
The Fixed Account........................................ 21
Transfers................................................ 22
Dollar Cost Averaging.................................... 23
Asset Allocation Program................................. 23
THE POLICY........................................................ 24
Policy Application and Issuance of Policies.............. 24
Purchase Payments........................................ 24
Accumulation Value....................................... 25
Telephone Transactions................................... 26
DISTRIBUTIONS UNDER THE POLICY.................................... 26
Withdrawals.............................................. 26
Systematic Withdrawal Plan............................... 26
Annuity Payments......................................... 27
Annuity Starting Date................................ 27
Election of Payout Option............................ 27
Payout Options....................................... 27
Death Benefit............................................ 29
Death of Owner Prior to Annuity Starting Date........ 29
Death of Owner On or After Annuity Starting Date..... 30
Beneficiary.......................................... 30
IRS Required Distributions............................... 30
Restrictions Under the Texas Optional Retirement Program. 30
CHARGES AND DEDUCTIONS............................................ 30
Withdrawal Charge........................................ 30
Waiver of Withdrawal Charges............................. 31
Mortality and Expense Risk Charge ....................... 32
Administrative Charges................................... 33
Transfer Fee............................................. 33
Premium Taxes............................................ 33
Federal, State and Local Taxes........................... 33
Other Expenses Including Investment Advisory Fees........ 33
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................... 34
Tax Status of the Policy................................. 34
Taxation of Annuities.................................... 34
DISTRIBUTOR OF THE POLICIES....................................... 36
VOTING RIGHTS..................................................... 37
LEGAL PROCEEDINGS................................................. 37
STATEMENT OF ADDITIONAL INFORMATION............................... 38
- 3 -
<PAGE>
DEFINITIONS
-----------
Accumulation Unit -- An accounting unit of measure used in calculating the
Accumulation Value in the Variable Account prior to the Annuity Starting Date.
Accumulation Value -- The dollar value as of any Valuation Date prior to the
Annuity Starting Date of all amounts in the Variable Account, plus the value in
the Fixed Account.
Anniversary Value -- An amount equal to the Accumulation Value on a Policy
Anniversary.
Annuitant -- The person on whose life Annuity Payments involving life
contingencies are based. If the Annuitant is other than the Owner, the Annuitant
has no rights under the Policy.
Annuity Payment -- A payment made by United of Omaha under an annuity Payout
Option.
Annuity Purchase Value -- An amount equal to the Accumulation Value for the
Valuation Period which ends immediately preceding the Annuity Starting Date
reduced by any Withdrawal Charge, and any charge for applicable premium or
similar taxes.
Annuity Starting Date -- The date upon which Annuity Payments are to begin. The
latest Annuity Starting Date permitted is when the Annuitant attains age 95.
(Age 85 in Pennsylvania.)
Average Death Benefit Amount -- The mean of the death benefit amount on the most
recent policy anniversary and the death benefit amount on the immediately
preceding Policy Anniversary. The Average Death Benefit Amount is the basis used
to calculate the Enhanced Death Benefit Charge under Policies issued with the
Elective Death Benefit Amendment.
Beneficiary -- The person(s) or other legal entity listed by the Owner in the
Policy application and referred to in the Policy as the named beneficiary. In
the case of joint Owners, the surviving joint Owner is the primary Beneficiary
and the named Beneficiary is the contingent Beneficiary. If the named
Beneficiary does not survive the Owner, the estate of the Owner is the
Beneficiary.
Cash Surrender Value -- The Accumulation Value less any applicable Withdrawal
Charge, any applicable Policy Fee, and any applicable premium tax charge not
previously deducted, and, if the Enhanced Death Benefit is elected, the Enhanced
Death Benefit Charge.
Current Interest Rate Guarantee -- United of Omaha's guarantee to pay a declared
current interest rate on amounts under a Policy allocated to the Fixed Account.
A particular Current Interest Rate Guarantee will be in effect for at least one
year.
Date of Issue -- The date the Policy is issued, as shown on the Policy Data
Page.
Due Proof of Death -- A certified copy of a death certificate, a certified copy
of a decree of a court of competent jurisdiction as to the finding of death, a
written statement by the attending physician, or any other proof satisfactory to
United of Omaha will constitute Due Proof of Death.
Eligible Investments -- The Fixed Account and any of the Subaccounts of the
Variable Account.
Enhanced Death Benefit -- The death benefit available under Policies issued with
the Elective Death Benefit Amendment.
Enhanced Death Benefit Charge -- An amount equal to an annual rate of 0.35% of
the Average Death Benefit Amount. The Enhanced Death Benefit Charge is assessed
under each Policy issued with the Elective Death Benefit Amendment on each
Policy Anniversary or upon full surrender.
Fixed Account -- The account which consists of general account assets of United
of Omaha Life Insurance Company.
Net Purchase Payment -- A Purchase Payment less any charge for applicable
premium taxes.
- 4 -
<PAGE>
Nonqualified Policy -- A Policy other than a Qualified Policy.
Payee -- The person who receives Annuity Payments under the Policy.
Payout Option -- Any method of payment of Policy Proceeds under the Policy.
Policy -- The variable annuity policy offered by this Prospectus.
Policy Anniversary -- The same month and day as the Date of Issue in each
calendar year after the calendar year in which the Date of Issue occurs.
Policy Owner or Owner -- The person(s) who may exercise all rights and
privileges under the Policy. If there are joint Owners, the signatures of both
Owners are needed to exercise rights under the Policy. The Policy Owner may
change the ownership of the Policy or pledge it as collateral by assigning it.
Policy Year -- A Policy Year begins on the Date of Issue and each Policy
Anniversary.
Portfolio -- A Series Fund's separate investment series that is available under
the Policy.
Purchase Payment -- An amount paid to United of Omaha by the Policy Owner or on
the Policy Owner's behalf as consideration for the benefits provided by, and in
accordance with the provisions of, the Policy.
Proceeds -- The death benefit or the Annuity Purchase Value.
Qualified Policy -- A Policy that may be issued as set forth herein in
connection with a qualified plan that receives favorable tax treatment under
Section 401, 403(b), or 408 of the Internal Revenue Code of 1986, as amended.
Series Funds -- Alger American Fund, Insurance Management Series, Variable
Insurance Products Fund, Variable Insurance Products Fund II, MFS Variable
Insurance Trust, Scudder Variable Life Investment Fund, T. Rowe Price
International Series, Inc., T. Rowe Price Fixed Income Series, Inc., and T. Rowe
Price Equity Series, Inc., each of which is a diversified, open-end management
company in which the Variable Account invests.
Service Office - United of Omaha Annuity Service Division, P.O. Box 419472,
Kansas City, Missouri 64141-6472. Telephone: 1-800-238-9354.
Standard Death Benefit -- The death benefit available under Policies issued
without the Elective Death Benefit Amendment.
Subaccount -- A segregated account within the Variable Account which invests in
a specified Portfolio of one of the Series Funds.
United of Omaha -- United of Omaha Life Insurance Company, the issuer of the
Policies.
Valuation Date -- Each day that the New York Stock Exchange is open for trading.
Valuation Period -- The period commencing at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
Variable Account -- United of Omaha Separate Account C, a separate account
maintained by United of Omaha in which a portion of United of Omaha's assets has
been allocated for the Policy and certain other policies.
Written Notice or Request -- Written notice, signed by the Policy Owner, that
gives United of Omaha the information it requires and is received at the Service
Office.
- 5 -
<PAGE>
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
-----------------------------------------
SUMMARY
-------
The Policy
- ----------
The Ultrannuity Series V Variable Annuity is a Flexible Payment Variable
Deferred Annuity Policy. The Policy can be purchased on a non-tax qualified
basis ("Nonqualified Policy") or in connection with certain plans qualifying for
favorable federal income tax treatment ("Qualified Policy"). The Owner allocates
the Net Purchase Payments among the Eligible Investments offered under the
Policy by United of Omaha Life Insurance Company ("United of Omaha"). These
Eligible Investments are the seventeen Subaccounts of United of Omaha Separate
Account C (the "Variable Account") and the Fixed Account.
The Eligible Investments
- ------------------------
The Variable Account. The Variable Account is a segregated investment
account of United of Omaha. It is divided into Subaccounts, each of which
invests exclusively in shares of a corresponding mutual fund Portfolio. The
available Portfolios are: the Alger American Growth Portfolio and the Alger
American Small Capitalization Portfolio of the Alger American Fund ("Alger
Fund"); the Federated Prime Money Fund II Portfolio and the Federated Fund for
U.S. Government Securities II Portfolio of the Insurance Management Series Trust
("Insurance Management Series"); the Fidelity Equity Income Portfolio of the
Variable Insurance Products Fund ("Fidelity VIP Fund"); the Fidelity Asset
Manager: Growth Portfolio and the Fidelity Contrafund Portfolio of the Variable
Insurance Products Fund II ("Fidelity VIP Fund II"); the MFS Emerging Growth
Portfolio, the MFS High Income Fund Portfolio, the MFS Research Portfolio, and
the MFS World Government Portfolio of the MFS Variable Insurance Trust ("MFS
Trust"); the Scudder International Portfolio of the Scudder Variable Life
Investment Fund ("Scudder Fund"); the T. Rowe Price International Stock
Portfolio of T. Rowe Price International Series, Inc. ("T. Rowe Price
International Series"); the T. Rowe Price Limited-Term Bond Portfolio of T. Rowe
Price Fixed Income Series, Inc. ("T. Rowe Price Fixed Income Series"); the T.
Rowe Price Personal Strategy Balanced Portfolio, the T. Rowe Price New America
Growth Portfolio and T. Rowe Price Equity Income Portfolio of T. Rowe Price
Equity Series, Inc. ("T. Rowe Price Equity Series") (each of the Alger Fund,
Insurance Management Series, Fidelity VIP Fund, Fidelity VIP Fund II, MFS Trust,
Scudder Fund, T. Rowe Price International Series, T. Rowe Price Fixed Income
Series, and T. Rowe Price Equity Series are referred to as the "Series Funds").
Because the Accumulation Value will increase or decrease in accordance with the
investment experience of the selected Subaccounts, the Owner bears the entire
investment risk with respect to Net Purchase Payments allocated to, and amounts
transferred to, the Variable Account. (See "The Variable Account," p.14.)
The Fixed Account. The Fixed Account guarantees safety of principal and a
minimum 3% effective annual return on Net Purchase Payments allocated to, and
amounts transferred to, the Fixed Account. United of Omaha may, in ITS SOLE
DISCRETION, declare a higher current interest rate. A current interest rate is
guaranteed for at least one year. (See "The Fixed Account," p.21.)
Purchase Payments
- -----------------
A Nonqualified Policy or a Qualified Policy may be purchased with an
Initial Purchase Payment of at least $5,000. An Owner may pay additional
Purchase Payments of at least $500 each at any time prior to the Annuity
Starting Date and up to the Policy Anniversary next following such Owner's 88th
birthday. There is no deduction from Purchase Payments for sales or
administrative expenses, although a charge for any applicable premium taxes will
be deducted from Purchase Payments, and there is a Withdrawal Charge. (See
"Withdrawal Charge," p. 30.)
Net Purchase Payments will be allocated among the Eligible Investments
(that is, among the Fixed Account and/or the Subaccounts of the Variable
Account) in accordance with the allocation percentages specified by the Owner in
the Policy application. Any allocation must be in whole percentages, and the
total allocation must equal 100%. (The Policy provides for a "Free Look Period"
during which the Owner can return the Policy for a full refund of the
Accumulation Value or Purchase Payments as determined by the law of the state of
issue. In some states the Net Purchase Payment(s) allocated to the Variable
Account will be held in the Money Market Subaccount during the Free Look Period,
and then allocated among the other Subaccounts as instructed by the Owner. See
"Free Look Right," p. 12.) Allocations for additional Net Purchase Payments may
be changed by sending Written Notice to United of Omaha's Service Office or by
telephone (subject to the provisions described below under "Telephone
Transactions," p. 26.)
- 6 -
<PAGE>
Transfers
- ---------
An Owner can transfer Accumulation Value from one Subaccount to another
Subaccount or to the Fixed Account with certain limitations. The minimum amount
which may be transferred is the lesser of $500 or the entire Subaccount Value.
However, following a transfer out of a particular Subaccount, at least $500 must
remain in that Subaccount. Transfers out of the Variable Account currently may
be made as often as the Owner wishes either by telephone (subject to the
provisions described below under "Telephone Transactions," p. 26) or by sending
Written Notice to the Service Office.
There is no charge for the first 12 transfers during any Policy Year.
However, a charge of $10 may be imposed for any transfers from Subaccounts in
excess of 12 per Policy Year. No such charge will be imposed on transfers out of
the Fixed Account.
Transfers from the Fixed Account to one or more Subaccounts of the Variable
Account may be made only once each Policy Year. The maximum amount that can be
transferred out of the Fixed Account during any Policy Year will be determined
periodically by United of Omaha. Such amount will not be less than 10% of the
Fixed Account Value on the date of the transfer. (See "Transfers," p. 22.)
Transfers from the Fixed Account may be delayed up to 6 months.
Withdrawals
- -----------
The Owner may elect to surrender the Policy for its Cash Surrender Value,
or to withdraw a portion of the Cash Surrender Value ($500 minimum) at any time
prior to the earlier of the Owner's death or the Annuity Starting Date. The Cash
Surrender Value equals the Accumulation Value less any applicable Withdrawal
Charge, any applicable Policy Fee, any applicable premium taxes, and, if the
Elective Death Benefit Amendment is attached, the Enhanced Death Benefit Charge
(See p. 33). A surrender or withdrawal request must be made by Written Request,
and a request for a partial withdrawal may specify the Eligible Investment(s)
from which the withdrawal is to be made, but no more than a pro-rata amount can
be deducted from the Fixed Account. If the Owner does not provide specific
withdrawal instructions, the withdrawal will be made pro-rata from each Eligible
Investment. There is currently no limit on the frequency or timing of
withdrawals from the Variable Account, but surrenders and partial withdrawals
from the Fixed Account may be delayed for up to six months. Withdrawals may be
taxable, and subject to a Withdrawal Charge and/or a tax penalty. If the
Contract is issued pursuant to a Qualified Plan, withdrawals may be restricted
by applicable law or the terms of the Qualified Plan.
Charges and Deductions
- ----------------------
Withdrawal Charge. In order to permit maximum investment of Purchase
Payments, United of Omaha does not deduct sales or other charges at the time of
investment. However, Purchase Payments surrendered or withdrawn or applied to
provide Annuity Payments within seven years after they were made will be subject
to a Withdrawal Charge to partially cover sales expenses, but each Policy Year
up to 15% of the Accumulation Value may be withdrawn as of the date of the first
withdrawal that Policy Year without imposition of the Withdrawal Charge. In
addition, amounts applied to provide a death benefit or applied after the second
Policy Year to the Payout Option that provides a Lifetime Income (Option 4) will
not be subject to a Withdrawal Charge. The applicable Withdrawal Charge is
calculated separately as to each Purchase Payment based on the period of time
elapsed since the Purchase Payment was made. There will be no Charge imposed on
any Purchase Payments in connection with a withdrawal or surrender that occurs
more than seven years after the Purchase Payment was made. The Withdrawal Charge
is 7% of any Purchase Payment withdrawn within one year after the Purchase
Payment is made, and the percentage declines by 1% each year to zero after the
seventh year following the date of the Purchase Payment. For purposes of
calculating the Withdrawal Charge, the oldest Purchase Payment is deemed to be
withdrawn first (a first-in, first-out arrangement), and all Purchase Payments
are deemed to be withdrawn before any earnings. (See "Withdrawal Charge," p.
30.)
Account Charges. United of Omaha deducts a daily charge equal to a
percentage of the net assets in the Variable Account for the mortality and
expense risks assumed by United of Omaha. The annual rate of this charge is
1.00% of the value of each Subaccount's net assets. (See "Mortality and Expense
Risk Charge," p. 32.)
United of Omaha also deducts a daily Administrative Expense Charge from the
net assets of the Variable Account to partially cover expenses incurred by
United of Omaha in connection with the administration of the Variable Account
and the Policies. The annual rate of this charge is .20% of the value of each
Subaccount's net assets. (See "Administrative Charges," p. 33.)
The account charges for mortality and expense risks and administrative
expenses are guaranteed not to increase.
In the event the Owner elects to purchase the Enhanced Death Benefit (See
"Elective Death Benefit Amendment", p. 28), a charge equal to the annual rate of
0.35% of the Average Death Benefit Amount will be assessed on each Policy
Anniversary or pro rata upon full surrender for expenses related to the Death
Benefit under the Amendment. (See "Death Benefit", p. 29). The Enhanced Death
Benefit Charge is deducted from each Subaccount on a pro-rata basis
- 7 -
<PAGE>
through the cancellation of accumulation units. If Subaccount assets are not
sufficient to deduct the full amount of the Enhanced Death Benefit Charge, the
charge will be deducted first from Subaccount assets then from the Fixed
Account.
Annual Policy Fee. There is also an annual Policy Fee for Policy
maintenance and related administrative expenses. This fee is $30 per year and is
deducted from the Accumulation Value on the last Valuation Date of each Policy
Year (and upon complete surrender of the Policy). This fee will be waived if the
Accumulation Value is greater than $50,000 on the last Valuation Date of the
applicable Policy Year. This fee will not be increased in the future. (See
"Administrative Charges," p. 33.)
Transfer Fee. No fee is imposed for transfers from the Fixed Account or for
the first 12 transfers from Subaccounts of the Variable Account in each Policy
Year. However, a $10 Transfer Fee may be imposed for the thirteenth and each
subsequent request to transfer Accumulation Value from a Subaccount during a
single Policy Year. This fee will not be increased in the future. (See "Transfer
Fee," p. 33.)
Taxes. United of Omaha may incur premium taxes relating to the Policies.
United of Omaha will deduct any premium taxes related to a particular Policy
from Purchase Payments, upon surrender, upon death of any Owner, or at the
Annuity Starting Date. (See "Premium Taxes," p. 33.)
No deductions are currently made for federal, state, or local income taxes.
Should United of Omaha determine that charges for any such taxes should be
imposed with respect to any of the Accounts, United of Omaha may deduct such
taxes or the economic burden thereof from Purchase Payments or from amounts held
in the relevant Account. (See "Federal, State and Local Taxes," p. 33.)
Charges Against the Series Funds. The value of the net assets of the
Subaccounts of the Variable Account will reflect the investment advisory fee and
other expenses incurred by the Portfolios of the Series Funds. (See "Other
Expenses Including Investment Advisory Fees," p. 33.)
Expense Data. The charges and deductions are summarized in the following
table. The purpose of this table is to help the Owner understand the costs and
expenses that the Owner will bear directly and indirectly. This table and the
examples that follow should be considered only in conjunction with the detailed
descriptions under the heading "Charges and Deductions" of this prospectus. This
tabular information regarding expenses assumes that the entire Accumulation
Value is in the Variable Account and reflects expenses of the Variable Account
as well as of the Portfolios. In addition to the expenses listed below, a charge
for premium taxes may be applicable.
Policy Owner Transaction Expenses
================================================================================
- --------------------------------------------------------------------------------
Maximum Withdrawal Charge (as a % of each 7%
Purchase Payment Surrendered)1
- --------------------------------------------------------------------------------
Transfer Fee First 12 Transfers Per Year: NO FEE
More Than 12 in One Year: $10 each
================================================================================
Variable Account Annual Expenses (as a percentage of account value)
================================================================================
Mortality and Expense Risk Fees 1.00%
- --------------------------------------------------------------------------------
Administrative Expense Charge 0.20%
- --------------------------------------------------------------------------------
Total Variable Account Annual Expenses 1.20%
================================================================================
Other Annual Expenses
================================================================================
Annual Policy Fee $30 Per Year
- --------------------------------------------------------------------------------
Current Annual Death Benefit Charge
(as a percentage of Average Death Benefit Amount)2 0.35%
================================================================================
- --------
1 Each Policy Year up to fifteen percent (15%) of the Accumulation Value as of
the date of the first withdrawal that year can be withdrawn without a Withdrawal
Charge. Thereafter, the Withdrawal Charge is calculated separately for each
Purchase Payment withdrawn based on the number of years elapsed since the
Purchase Payment was made; it is 7% in the first year after a Purchase Payment
is made and then decreases by 1% in each successive year to 0% after the seventh
year.
2 If the Policy has been issued with the Elective Death Benefit Amendment,
the Death Benefit Charge will apply. This charge will never exceed 0.35% of the
Average Death Benefit Amount.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
========================================================
Series Fund Annual Expenses3 Management Other Total Series
(as a percentage of average net assets) Fees Expenses Fund Annual
Expenses
<S> <C> <C> <C>
===========================================================================================================
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Capitalization Portfolio 0.85% 0.07% 0.92%
Federated Prime Money Fund II Portfolio 0.50% 0.30% 0.80%
Federated Fund for U.S. Government Securities II 0.00% 0.80% 0.80%
Portfolio 0.71% 0.29% 1.00%
Fidelity VIP II Asset Manager: Growth Portfolio 0.51% 0.10% 0.61%
Fidelity VIP Equity Income Portfolio 0.61% 0.11% 0.71%
Fidelity VIP II Contrafund Portfolio 0.75% 0.25% 1.00%
MFS Emerging Growth Portfolio 0.75% 0.25% 1.00%
MFS High Income Fund Portfolio 0.75% 0.25% 1.00%
MFS Research Portfolio 0.75% 0.25% 1.00%
MFS World Government 0.88% 0.21% 1.09%
Scudder International Portfolio 0.00% 0.85% 0.85%
T. Rowe Price Equity Income Portfolio* 0.00% 1.05% 1.05%
T. Rowe Price International Portfolio* 0.00% 0.70% 0.70%
T. Rowe Price Limited-Term Bond Portfolio* 0.00% 0.85% 0.85%
T. Rowe Price New America Growth Portfolio* 0.00% 0.90% 0.90%
T. Rowe Price Personal Strategy Balanced Portfolio*
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
* T. Rowe Price Funds do not itemize management fees and other expenses.
===========================================================================================================
<FN>
- --------
3The fee and expense data regarding each Series Fund, which are fees and
expenses for 1995, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha.
</FN>
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
==================================================================================
Examples. 4 1. If the Policy is 2. If the Policy is 3. If the Policy is
An Owner would pay the following surrendered at the end annuitized at the end not surrendered and
expenses on a $1,000 investment, of the applicable time of the applicable is not annuitized
assuming a 5% annual return on period or is annuitized time period and
assets (excluding the Enhanced Death and Annuity Option 4 Annuity Option 4
Benefit): (Lifetime Income) (Lifetime Income)
is not chosen: is chosen
- ----------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio $ 84. $117. $84. $68. $22. $68.
Alger American Small Capitalization
Portfolio 85. 119. 85. 70. 22. 70.
Federated Prime Money Fund II
Portfolio 83. 115. 83. 66. 21. 66.
Federated Fund for U.S. Government
Securities II Portfolio 83. 115. 83. 66. 21. 66.
Fidelity VIP II Asset Manager:
Growth Portfolio 85. 119. 85. 70. 23. 72.
Fidelity VIP Equity Income
Portfolio 82. 109. 82. 60. 19. 60.
Fidelity VIP II Contrafund Portfolio 83. 113. 83. 64. 20. 64.
MFS Emerging Growth Portfolio 85. 122. 85. 72. 23. 72.
MFS High Income Fund Portfolio 85. 122. 85. 72. 23. 72.
MFS Research Portfolio 84. 118. 84. 69. 22. 69.
MFS World Government 85. 122. 85. 72. 23. 72.
Scudder International Portfolio 86. 122. 86. 72. 24. 75.
T. Rowe Price Equity Income
Portfolio 84. 117. 84. 68. 22. 68.
T. Rowe Price International Portfolio 86. 123. 86. 74. 24. 74.
T. Rowe Price Limited-Term Bond
Portfolio 82. 112. 82. 63. 20. 63.
T. Rowe Price New America Growth
Portfolio 84. 117. 84. 68. 22. 68.
T. Rowe Price Personal Strategy
Balanced Portfolio 84. 118. 84. 69. 22. 69.
======================================================================================================================
The assumed 5% annual return is hypothetical and should not be considered a representation or indication of past or
future expenses (in either the Variable or Fixed Account), which could be
greater or lesser than the 5% rate assumed solely for purposes of these
examples.
<FN>
- --------
4The $30 annual Policy Fee is reflected as a daily 0.10% charge in these
Examples, based on an average Accumulation Value of $30,000.
</FN>
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
==================================================================================
Examples. 5 1. If the Policy is 2. If the Policy is 3. If the Policy is
An Owner would pay the following surrendered at the end annuitized at the end not surrendered and
expenses on a $1,000 investment, of the applicable time of the applicable is not annuitized
assuming a 5% annual return on period or is annuitized time period and
assets (including the Enhanced Death and Annuity Option 4 Annuity Option 4
Benefit): (Lifetime Income) (Lifetime Income)
is not chosen: is chosen
- ----------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio $87. $128. $87. $79. $25. $79.
Alger American Small Capitalization
Portfolio 88. 130. 88. 81. 26. 81.
Federated Prime Money Fund II
Portfolio 87. 126. 87. 77. 25. 77.
Federated Fund for U.S. Government
Securities II Portfolio 87. 126. 87. 77. 25. 77.
Fidelity VIP II Asset Manager:
Growth Portfolio 89. 133. 89. 83. 27. 83.
Fidelity VIP Equity Income
Portfolio 85. 120. 85. 71. 23. 71.
Fidelity VIP II Contrafund Portfolio 86. 124. 86. 75. 24. 75.
MFS Emerging Growth Portfolio 89. 133. 89. 83. 27. 83.
MFS High Income Fund Portfolio 89. 133. 89. 83. 27. 83.
MFS Research Portfolio 88. 129. 88. 80. 25. 80.
MFS World Government 89. 133. 89. 83. 27. 83.
Scudder International Portfolio 90. 135. 90. 86. 27. 86.
T. Rowe Price Equity Income
Portfolio 87. 128. 87. 79. 25. 79.
T. Rowe Price International Portfolio 89. 134. 89. 85. 27. 85.
T. Rowe Price Limited-Term Bond
Portfolio 86. 123. 86. 74. 24. 74.
T. Rowe Price New America Growth
Portfolio 87. 128. 87. 79. 25. 79.
T. Rowe Price Personal Strategy
Balanced Portfolio 88. 129. 88. 80. 26. 80.
======================================================================================================================
</TABLE>
Death Benefit
- -------------
Standard Death Benefit. In the event that any Owner dies prior to the
Annuity Starting Date (and the Policy is in force), the death benefit payable to
the Beneficiary is calculated and is payable upon United of Omaha's receipt of
Due Proof of Death of any Owner, as well as an election of the method of
settlement. If any Owner dies, the death benefit will equal the greater of (a)
the Accumulation Value (without deduction of the Withdrawal Charge) on the later
of the date on which Due Proof of Death or an election of Payout Option is
received by United of Omaha's Service Office, less any applicable premium taxes;
or (b) the sum of Net Purchase Payments less partial withdrawals. No Withdrawal
Charge is imposed upon amounts paid as a death benefit. Subject to any
limitations of state or federal law, the death benefit may be paid as either a
lump sum cash benefit or as an Annuity. (See "Death Benefit," p. 29.)
Elective Death Benefit Amendment. If this Amendment is attached to the
Policy and the Owner dies prior to age 81, the Death Benefit under the Policy
will equal the greatest of: (1) the Accumulation Value as of the end of the
valuation period during which due proof of death and an election of a payout
option are received by United of Omaha's Service Office; (2) the greatest
Anniversary Value plus any subsequent purchase payments and less any subsequent
partial
- --------
5The $30 annual Policy Fee is reflected as a daily 0.10% charge in these
Examples, based on an average Accumulation Value of $30,000.
- 11 -
<PAGE>
withdrawals; and (3) the sum of all net purchase payments, less any partial
withdrawals, accumulated at a 4.5% annual rate of interest, not exceeding a
maximum of two times each purchase payment.
If the Owner dies after attaining age 81, the Death Benefit under the
Policy will equal the greatest of: (1) the Accumulation Value as of the end of
the valuation period during which due proof of death and an election of a payout
option are received by United of Omaha's Service Office; (2) the greatest
Anniversary Value before the Owner attained age 81, plus any subsequent purchase
payments and less any subsequent partial withdrawals; and (3) the sum of all net
purchase payments paid prior to the last Policy Anniversary before the Owner
attained age 81 less any partial withdrawals, accumulated at a 4.5% annual rate
of interest not exceeding a maximum of two times each purchase payment. If the
death benefit payable equals (3), United of Omaha will add to the Death Benefit,
any purchase payments paid after the last Policy Anniversary before the Owner
attained age 81.
Any applicable premium taxes not previously deducted will be deducted from
the death benefit payable.
Accidental Death Benefit
- ------------------------
If the Owner dies from bodily injury sustained in a common carrier
accident, United of Omaha will pay the Standard Death Benefit or the Enhanced
Death Benefit, as applicable, multiplied by two, instead of the amount that
would otherwise be payable. (See Accidental Death Benefit, p. 30).
Free Look Right
- ---------------
The Policy Owner may, until the end of the period of time specified in the
Policy, examine the Policy and return it to United of Omaha's Service Office or
the agent from whom it was purchased for a refund. The applicable period will
depend on the state in which the Policy is issued. In most states it is ten (10)
days after the Policy is delivered to the Policy Owner. Return of the Policy is
effective upon being postmarked, properly addressed, and postage pre-paid.
United of Omaha will pay the refund within seven (7) days after it receives
written notice of cancellation and the returned Policy.
In states that permit it to do so, United of Omaha will promptly refund the
Accumulation Value calculated on the date United of Omaha receives the Policy
and refund request. This amount may be more or less than the Purchase Payments
made. In other states, United of Omaha will refund the greater of Accumulation
Value or Purchase Payments made under the Policy. (In these states, any portion
of the initial Net Purchase Payment that is allocated to the Variable Account
will be held in the Money Market Subaccount for the applicable Free Look Period
plus 5 days from the date the Policy is mailed from the Service Office, to allow
for this Free Look Right; the extra days are to provide time for mail or other
delivery of the Policy.)
Federal Income Tax Consequences of Investment in the Policy
- -----------------------------------------------------------
With respect to Owners who are natural persons under existing tax law,
there should be no federal income tax on increases (if any) in the Accumulation
Value until a distribution under the Policy occurs (e.g., a withdrawal or
Annuity Payment) or is deemed to occur (e.g., a pledge or assignment of a
Policy). Generally, a portion of any distribution or deemed distribution will be
taxable as ordinary income. The taxable portion of certain distributions will be
subject to withholding unless the recipient (if permitted) elects otherwise. In
addition, a penalty tax of 10% of the amount withdrawn may apply to certain
distributions or deemed distributions under the Policy made prior to the Owner's
attaining age 59 1/2. (See "Certain Federal Income Tax Consequences," p. 34 .)
Inquiries and Written Notices and Requests
- ------------------------------------------
Any questions about procedures or the Policy, or any Written Notice or
Written Request required to be sent to United of Omaha, should be sent to United
of Omaha's Service Office: United of Omaha Annuity Service Division, P.O. Box
419472, Kansas City, MO 64141-6472. Telephone requests and inquiries may be made
by calling 1-800-238-9354. All inquiries, Notices and Requests should include
the Policy number, the Owner's name and the Annuitant's name.
Variations in Policy Provisions
- -------------------------------
Certain provisions of the Policies may vary from the descriptions in this
Prospectus in order to comply with different state laws. Any such variations
will be included in the Policy itself or in riders or amendments. Policy
provisions which may vary by state include the Free Look provision and the
Waiver of Surrender Charge provision for nursing home/hospital confinement,
disability, terminal illness or unemployment. One or a very few number of states
also require variations in the Annuity Starting Date, Termination, and Delay of
Payments or Transfers from the Fixed Account provisions.
* * *
- 12 -
<PAGE>
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE STATEMENT OF
ADDITIONAL INFORMATION AND IN THE PROSPECTUSES FOR THE SERIES FUNDS AND IN THE
POLICY, ALL OF WHICH SHOULD BE REFERRED TO FOR MORE DETAILED INFORMATION. THIS
PROSPECTUS GENERALLY DESCRIBES ONLY THE POLICY AND THE VARIABLE ACCOUNT.
SEPARATE PROSPECTUSES DESCRIBE THE SERIES FUNDS. (THERE IS NO PROSPECTUS FOR THE
FIXED ACCOUNT SINCE INTERESTS IN THE FIXED ACCOUNT ARE NOT SECURITIES. SEE "THE
FIXED ACCOUNT," P. 21.)
FINANCIAL STATEMENTS
--------------------
The Financial Statements for United of Omaha and the Series V Subaccounts
of the Variable Account and the Variable Account and the related independent
auditor's report are contained in the Statement of Additional Information, which
is available free upon request.At December 31, 1995, net assets of the Series V
Subaccounts of the Variable Account were represented by the following
Accumulation Unit Values and Accumulation Units. The Accumulation Unit Values
shown for the beginning of the period are as of June 5, 1995 (date of
inception). This information should be read in conjunction with the Variable
Account's financial statements and related notes included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
===========================================================
Accumulation Accumulation Accumulation
Unit Value* Unit Value* Units **
6/5/95 12/31/95 12/31/95
<S> <C> <C> <C>
==============================================================================================================
Alger American Growth 10 11.673 140,897
Alger American Small Capitalization 10 12.094 148,670
Federated Prime Money Fund II 1 1.023 3,065,603
Federated Fund for U.S. Government Securities II 10 10.570 122,440
Fidelity VIP II Asset Manager: Growth 10 11.269 199,570
Fidelity VIP Equity Income 10 11.596 233,679
Fidelity VIP II Contrafund 10 11.740 150,364
MFS Emerging Growth 10 11.659 123,460
MFS High Income Fund 10 10.452 87,378
MFS Research 10 10.986 117,165
MFS World Government 10 10.243 56,393
Scudder International 10 10.642 99,029
T. Rowe Price Equity Income 10 11.625 121,994
T. Rowe Price International 10 10.569 181,399
T. Rowe Price Limited-Term Bond 10 10.373 56,018
T. Rowe Price New America Growth 10 13.061 58,666
T. Rowe Price Personal Strategy Balanced 10 11.272 123,287
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
* Accumulation Unit Values are rounded to the nearest tenth of a cent.
** Accumulation Units are rounded to the nearest unit.
==============================================================================================================
</TABLE>
- 13 -
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
--------------------------------------
United of Omaha Life Insurance Company, Mutual of Omaha Plaza, Omaha,
Nebraska, 68175, is a stock life insurance company. It was incorporated under
the name United Benefit Life Insurance Company under the laws of the State of
Nebraska on August 9, 1926. In 1981, it changed its name to United of Omaha Life
Insurance Company. It is principally engaged in the sale of life insurance,
accident and health insurance, and annuity policies, and is licensed in all
states except New York and in several foreign countries and the District of
Columbia. As of December 31, 1995, United of Omaha had assets of over $6
billion. United of Omaha is a wholly-owned subsidiary of Mutual of Omaha
Insurance Company.
United of Omaha may from time to time publish (in advertisements, sales
literature and reports to Owners) the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Moody's, Standard & Poor's, and Duff & Phelps. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of United of Omaha,
and the ratings should not be considered as bearing on the investment
performance of assets held in the Variable Account. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, culminating in
the assignment of Best's Ratings. These ratings reflect A.M. Best Company's
current opinion of the relative financial strength and operating performance of
an insurance company in comparison to the norms of the life/health insurance
industry. In addition, the claims-paying ability of United of Omaha, as measured
by Moody's Insurance Credit Report, Standard and Poor's Insurance Ratings
Services, or Duff & Phelps may be referred to in such advertisements, sales
literature, or reports. These ratings are opinions regarding an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms. Such ratings do not reflect
the investment performance of the Variable Account or the degree of risk
associated with an investment in the Variable Account.
THE ELIGIBLE INVESTMENTS
------------------------
Net Purchase Payments made under a Policy may be allocated to one of the
seventeen Ultrannuity Series V Subaccounts of the Variable Account, to the Fixed
Account, or to a combination of these Eligible Investment(s).
The Variable Account
- --------------------
The United of Omaha Separate Account C of United of Omaha Life Insurance
Company (the "Variable Account") was established as a separate investment
account under the laws of the State of Nebraska on December 1, 1993. The
Variable Account will receive and invest the Net Purchase Payments under the
Policies that are allocated to it for investment in shares of a Series Fund.
The Variable Account currently is divided into seventeen Subaccounts. Each
Subaccount invests exclusively in shares of a Portfolio of one of the Series
Funds. Under Nebraska law, the assets of the Variable Account are owned by
United of Omaha, but they are held separately from the other assets of United of
Omaha and are not chargeable with any liabilities arising out of any other
separate investment account or any other business of United of Omaha which has
no specific and determinable relation to or dependence upon the Variable
Account. The income, gains and losses, realized or unrealized, from assets
allocated to the Variable Account are credited to or charged against the
Variable Account, without regard to other income, gains, or losses of United of
Omaha. Section 44-2212 of the Nebraska Statutes provides that "Any surplus or
deficit which may arise in the Variable Account by virtue of mortality
experience guaranteed by United of Omaha or by expense costs is adjusted by
withdrawals from or additions to the Variable Account so that the assets of the
Variable Account equal the liabilities." The investment performance of any
Subaccount should be entirely independent of the investment performance of
United of Omaha's general account assets or any other accounts maintained by
United of Omaha.
The Variable Account is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 as a unit
investment trust. However, the SEC does not supervise the management or the
investment practices or policies of the Variable Account or United of Omaha.
- 14 -
<PAGE>
The Series Funds. Each Subaccount of the Variable Account will invest
exclusively in shares of a specific Portfolio of one of the Series Funds, each
of which is a mutual fund registered with the SEC under the Investment Company
Act of 1940 (the "1940 Act") as an open-end, diversified investment management
company. 6 The assets of each Portfolio of each Series Fund are held separate
from the assets of that Series Fund's other Portfolios, and each Portfolio has
its own distinct investment objectives and policies. Each Portfolio operates as
a separate investment fund, and the income or losses of one Portfolio generally
have no effect on the investment performance of any other Portfolio.
Each of the Series Funds is managed by an investment adviser registered
with the SEC under the Investment Advisers Act of 1940, as amended. Each
investment manager is responsible for selecting Portfolio investments consistent
with the investment objectives and policies of the Portfolio, and conducts
securities trading for the Portfolio. Alger Management is responsible for the
overall administration of the Alger American Fund, subject to the supervision of
the Alger Fund Board of Trustees; Federated Advisers is responsible for the
portfolio investment decisions of the Insurance Management Series, subject to
direction by the Insurance Management Series Trustees; Fidelity Management &
Research Company ("FMR") is the manager of the Fidelity VIP Fund and Fidelity
VIP Fund II. On behalf of the Asset Manager: Growth Portfolio of the Fidelity
VIP Fund II, FMR has entered into sub-advisory agreements with Fidelity
Investment Management and Research (U.K.) Inc. ("FMR (U.K.)") and Fidelity
Management and Research (Far East) Inc. ("FMR Far East") pursuant to which those
entities provide research and investment recommendations with respect to
companies based outside of the United States. FMR (U.K.) primarily focuses on
companies based in Europe, and FMR Far East focuses primarily on companies based
in Asia and the Pacific Basin. Massachusetts Financial Services Company is
responsible for the management of the assets of the MFS Variable Insurance
Trust. Scudder, Stevens & Clark, Inc. manages the daily business and affairs of
the Scudder Fund, subject to policies established by the Trustees of Scudder
Fund. T. Rowe Price Associates, Inc. is responsible for selection and management
of the portfolio investments of T. Rowe Price Equity Series and T. Rowe Price
Fixed Income Series. Rowe Price-Fleming International, Inc., incorporated in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited, is responsible for selection and management of the
portfolio investments of T. Rowe Price International Series.
The investment objectives of each Portfolio are summarized as follows:
Alger American Fund
- -------------------
Alger American Growth Portfolio -- seeks long-term capital appreciation by
investing in a diversified portfolio of equity securities. Except during
temporary defensive periods, the Portfolio invests at least 65% of its
total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization within the
range of companies included in the S&P MidCap 400 Index (designed to trach
the performance of medium capitalization companies).
Alger American Small Capitalization Portfolio -- seeks long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase of the securities, have total market
capitalization with the range of companies included int he Russell 2000
Growth Index (Designed to track the performance of small capitalization
companies). The securities in such companies may have limited marketability
and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.(*)
Insurance Management Series
- ---------------------------
Federated Prime Money Fund II Portfolio -- invests in money market
instruments maturing in thirteen months or less to achieve current income
consistent with stability of principal and liquidity. The Portfolio
attempts to maintain a stable net asset value of $1.00 per share, but there
can be no assurance the Portfolio will be able to do so.
Federated Fund for U.S. Government Securities II Portfolio -- seeks current
income by investing in a diversified portfolio limited to U.S. government
securities.
- --------
6The registration of the Series Funds does not involve supervision of the
management or investment practices or policies of the Series Funds by the SEC.
- 15 -
<PAGE>
Fidelity Variable Insurance Products Fund
- -----------------------------------------
Fidelity Equity Income Portfolio -- seeks reasonable income by investing
mainly in income-producing equity securities. In selecting investments, the
Portfolio also considers the potential for capital appreciation. The
Portfolio seeks to achieve a yield that beats that of the S&P 500. The
Portfolio does not expect to invest in debt securities of companies that do
not have proven earnings or credit.(*)
Fidelity Variable Insurance Products Fund II
- --------------------------------------------
Fidelity Asset Manager: Growth Portfolio -- seeks to obtain high total
return with reduced risk over the long-term by allocating its assets among
stocks, bonds, and short-term fixed-income instruments. Although the
Portfolio seeks to reduce its overall risk by diversifying among different
types of investments, the fund aggressively invests in a wide variety of
security types, including stocks and bonds issued in developing countries
and derivative transactions. The Portfolio spreads investment risk by
limiting its holdings in any one company or industry.(*)
Fidelity Contrafund Portfolio -- seeks to increase the value of the
Portfolio's return over the long term by investing in securities of
companies that are undervalued or out-of-favor. This strategy can lead to
investments in domestic or foreign companies, many of which may not be well
known. The stocks of small companies often involve more risk than those of
larger companies. The Portfolio may use various investment techniques to
hedge the Portfolio's risk, but there is no guarantee that these strategies
will work as intended.(*)
MFS Variable Insurance Trust
- ----------------------------
MFS Emerging Growth Portfolio -- seeks to provide long-term growth of
capital through investing primarily in common stocks of emerging growth
companies, which involves greater risk than is customarily associated with
investments in more established companies. The Portfolio may invest in a
limited extent in lower rated fixed income securities or comparable unrated
securities.(*)
MFS High Income Portfolio -- seeks high current income by investing
primarily in a diversified portfolio of fixed income securities, some of
which may involve equity features. The Portfolio may invest in lower rated
fixed income securities or comparable unrated securities.(*)
MFS Research Portfolio -- seeks to provide long-term growth of capital and
future income by investing a substantial proportion of its assets in the
common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. No
more than 5% of the Portfolio's convertible securities, if any, will
consist of securities in lower rated categories or securities believed to
be of similar quality to lower rated securities. The Portfolio may invest
in a limited extent in lower rated fixed income securities or comparable
unrated securities.(*)
MFS World Government Portfolio -- seeks preservation and growth of capital,
together with moderate current income by investing its assets in an
internationally diversified portfolio consisting primarily of debt
securities and to a lesser extent equity securities. The Portfolio
investments are expected to consist primarily of securities which are of
relatively high quality and minimal credit risk. However, an error of
judgment in selecting a currency or an interest rate environment could
result in a loss of capital, and a held security whose quality deteriorates
significantly will be sold only if the Portfolio investment adviser
believes it is advantageous to do so.
Scudder Variable Life Investment Fund
- -------------------------------------
Scudder International Portfolio -- seeks long-term growth of capital
primarily through diversified holdings of marketable foreign equity
investments. The Portfolio invests in companies, wherever organized, which
do business primarily outside the United States. The Portfolio intends to
diversify investments among several countries, and does not intend to
concentrate investments in any particular industry.
- 16 -
<PAGE>
T. Rowe Price International Series, Inc.
- ----------------------------------------
T. Rowe Price International Stock Portfolio -- seeks a total return on its
assets from long-term growth of capital and income, by investing
substantially all of its assets in common stocks of established non-U.S.
companies. The Portfolio will not purchase any debt security which at the
time of purchase is rated below investment grade. This would not prevent
the Portfolio from retaining a security downgraded to below investment
grade after purchase.
T. Rowe Price Equity Series, Inc.
- ---------------------------------
T. Rowe Price New America Growth Portfolio -- seeks long-term growth of
capital through investments primarily in common stocks of U.S. growth
companies which operate in service industries believed to be above-average
performers in their fields. Total return will consist primarily of capital
appreciation or depreciation.
T. Rowe Price Equity Income Portfolio -- Seeks to provide substantial
dividend income and also capital appreciation by investing primarily in
dividend-paying common stocks of established companies.(*)
T. Rowe Price Personal Strategy Balanced Portfolio -- seeks the highest
total return over time consistent with an emphasis on both capital
appreciation and income. There are no limitations on market capitalization
or types of stock the Portfolio can hold. While bond holdings are primarily
investment grade, the Portfolio can also invest in more volatile
below-investment grade bonds.(*)
T. Rowe Price Fixed Income Series, Inc.
- ---------------------------------------
T. Rowe Price Limited Term Bond Portfolio -- seeks a high level of income
consistent with modest price fluctuation by investing primarily in
investment grade debt securities.
(*) THE PORTFOLIOS' INVESTMENT STRATEGIES MAY PROVIDE THE OPPORTUNITY OF HIGHER
THAN AVERAGE YIELDS BY INVESTING IN SECURITIES WITH HIGHER THAN AVERAGE
RISK, SUCH AS LOWER AND UNRATED DEBT AND COMPARABLE EQUITY INSTRUMENTS.
PLEASE CONSULT EACH PORTFOLIO'S SERIES FUND PROSPECTUS ACCOMPANYING THIS
PROSPECTUS FOR MORE INFORMATION ABOUT THE RISK ASSOCIATED WITH SUCH
INVESTMENTS.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES,
IS CONTAINED IN THE PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE SERIES FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT OF THE
VARIABLE ACCOUNT.
An investment in the Variable Account, or in any Portfolio, including the
Money Market Portfolio, is not insured or guaranteed by the U.S. Government and
there can be no assurance that the Money Market Portfolio will be able to
maintain a stable net asset value per share.
Addition, Deletion, or Substitution of Investments. United of Omaha does
not control the Series Funds and cannot and does not guarantee that any of the
Portfolios will always be available for Net Purchase Payments, allocations, or
transfers. United of Omaha retains the right, subject to any applicable law, to
make certain changes in the Variable Account and its investments. United of
Omaha reserves the right to eliminate the shares of any Portfolio held by a
Subaccount and to substitute shares of another Portfolio of a Series Fund, or of
another registered open-end management investment company for the shares of any
Portfolio, if the shares of the Portfolio are no longer available for investment
or if, in United of Omaha's judgment, investment in any Portfolio would be
inappropriate in view of the purposes of the Variable Account. To the extent
required by the 1940 Act, substitutions of shares attributable to an Owner's
interest in a Subaccount will not be made without prior notice to the Owner and
the prior approval of the SEC. If required, approval of or change of any
investment policy will be filed with the Insurance Department of any state in
which the Policy is sold. Nothing contained herein shall prevent the Variable
Account from purchasing other securities for other series or classes of variable
annuity policies, or from effecting an exchange between series or classes of
variable annuity policies on the basis of requests made by Owners.
New Subaccounts may be established when, in the sole discretion of United
of Omaha, marketing, tax, investment or other conditions warrant. Any new
Subaccounts may be made available to existing Owners on a basis to be
- 17 -
<PAGE>
determined by United of Omaha. Each additional Subaccount will purchase shares
in a Portfolio of a Series Fund or in another mutual fund or investment vehicle.
United of Omaha may also eliminate one or more Subaccounts if, in its sole
discretion, marketing, tax, investment or other conditions warrant such change.
In the event any Subaccount is eliminated, United of Omaha will notify Owners
and request a reallocation of the amounts invested in the eliminated Subaccount.
If no such reallocation is provided by the Owner, United of Omaha will reinvest
the amounts invested in the eliminated Subaccount in the Subaccount that invests
in the Money Market Portfolio (or in a similar portfolio of money market
instruments).
In the event of any such substitution or change, United of Omaha may, by
appropriate endorsement, make such changes in the Policies as may be necessary
or appropriate to reflect such substitution or change. Furthermore, the Variable
Account may be (i) operated as a management company under the 1940 Act or any
other form permitted by law, (ii) deregistered under the 1940 Act in the event
such registration is no longer required or (iii) combined with one or more other
separate accounts. To the extent permitted by applicable law, United of Omaha
also may transfer the assets of the Variable Account associated with the
Policies to another account or accounts.
Historical Performance Data
- ---------------------------
From time to time, United of Omaha may advertise or include in sales
literature yields, effective yields, and total returns for the Subaccounts of
the Variable Account. These figures are based on historical performance and do
not indicate or project future performance. Performance relative to certain
performance rankings and indices compiled by independent organizations may also
be advertised or included in sales literature. More detailed information as to
the calculation of performance information, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.
Standardized Performance Data. Effective yields and total returns for the
Subaccounts are based on the investment performance of the corresponding
Portfolios of the Series Funds. The Series Funds' performance in part reflects
the Series Funds' expenses. See the Prospectuses for the Series Funds.
The yield of the Money Market Subaccount refers to the annualized
income generated by an investment in the Subaccount over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in the
Subaccount is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Subaccount (except the Money Market Subaccount) refers
to the annualized income generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each period over a 12- month period and is shown as a percentage of
the investment.
Yield quotations do not reflect the Withdrawal Charge.
For the class of Policies issued with the Elective Death Benefit
Amendment, the Death Benefit Charge is included.
The total return of a Subaccount refers to return quotations assuming
Accumulation Value has been held in the Subaccount for various periods of time
including, but not limited to, a period measured from the date the Subaccount
commenced operations. When a Subaccount has been in operation for one, five, and
ten years, respectively, the total return for these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Subaccount from the beginning date of the measuring
period to the end of that period. This standardized version of average annual
total return reflects all historical investment results, less all charges and
deductions applied against the Subaccount (including any Withdrawal Charge that
would apply if an Owner terminated the Policy at the end of each period
indicated, but excluding any deductions for premium tax charges). For the class
of Policies issued with the Elective Death Benefit Amendment, the Death Benefit
Charge is included. Such standardized average annual total return information
for the Subaccounts of Policies is as follows:
-18-
<PAGE>
==============================================================================
SUBACCOUNT STANDARDIZED For the period
AVERAGE ANNUAL TOTAL RETURN TABLE from inception
to
Subaccount (date of inception - 6/5/95) 12/31/95
(Policy issued without Enhanced Death Benefit)
- ------------------------------------------------------------------------------
Alger American Growth 10.73
Alger American Small Capitalization 14.73
Federated Prime Money Fund II -3.83
Federated Fund for U.S. Government Securities -0.54
Fidelity VIP II Asset Manager: Growth 7.12
Fidelity VIP Equity Income 9.20
Fidelity VIP II Contrafund 11.12
MFS Emerging Growth 9.73
MFS High Income -1.65
MFS Research 3.38
MFS World Government -3.64
Scudder International 0.86
T. Rowe Price International -0.09
T. Rowe Price New America Growth 23.11
T. Rowe Price Equity Income 9.38
T. Rowe Price Limited-Term Bond -2.29
T. Rowe Price Personal Strategy Balanced 6.06
- ------------------------------------------------------------------------------
For the period
Subaccount (date of inception - 6/5/95) from inception
(Policy issued with Enhanced Death Benefit) to
12/31/95
- ------------------------------------------------------------------------------
Alger American Growth 10.51
Alger American Small Capitalization 14.50
Federated Prime Money Fund II -4.03
Federated Fund for U.S. Government Securities -0.74
Fidelity VIP II Asset Manager: Growth 6.91
Fidelity VIP Equity Income 8.98
Fidelity VIP II Contrafund 1-/90
MFS Emerging Growth 9.54
MFS High Income -1.82
MFS Research 3.20
MFS World Government -3.83
Scudder International 0.65
T. Rowe Price International -0.29
T. Rowe Price New America Growth 22.87
T. Rowe Price Equity Income 9.16
T. Rowe Price Limited-Term Bond -2.49
T. Rowe Price Personal Strategy Balanced 5.85
==============================================================================
- 19 -
<PAGE>
Non-Standardized Performance Data. In addition to the standard version
described above, total return performance information computed on different
non-standard bases may be used in advertisements. Average annual total return
information may be presented, computed on the same basis as described above,
except deductions will not include the Withdrawal Charge. Such non-standardized
average annual total return information for the Subaccounts of Policies is as
follows:
==============================================================================
SUBACCOUNT NON-STANDARDIZED For the period
AVERAGE ANNUAL TOTAL RETURN TABLE from inception
to
Subaccount (date of inception - 6/5/95) 12/31/95
(Policy issued without Enhanced Death Benefit)
- ------------------------------------------------------------------------------
Alger American Growth 17.74
Alger American Small Capitalization 21.98
Federated Prime Money Fund II 2.25
Federated Fund for U.S. Government Securities 5.75
Fidelity VIP II Asset Manager: Growth 13.90
Fidelity VIP Equity Income 16.11
Fidelity VIP II Contrafund 18.15
MFS Emerging Growth 16.67
MFS High Income 4.57
MFS Research 9.92
MFS World Government 2.46
Scudder International 7.24
T. Rowe Price International 6.23
T. Rowe Price New America Growth 30.90
T. Rowe Price Equity Income 16.30
T. Rowe Price Limited-Term Bond 3.89
T. Rowe Price Personal Strategy Balanced 12.77
- ------------------------------------------------------------------------------
For the period
Subaccount (date of inception - 6/5/95) from inception
(Policy issued with Enhanced Death Benefit) to
12/31/95
- ------------------------------------------------------------------------------
Alger American Growth 17.50
Alger American Small Capitalization 21.74
Federated Prime Money Fund II 2.04
Federated Fund for U.S. Government Securities 5.54
Fidelity VIP II Asset Manager: Growth 13.67
Fidelity VIP Equity Income 15.88
Fidelity VIP II Contrafund 17.91
MFS Emerging Growth 16.47
MFS High Income 4.39
MFS Research 9.73
MFS World Government 2.25
Scudder International 7.02
T. Rowe Price International 6.02
T. Rowe Price New America Growth 30.05
T. Rowe Price Equity Income 16.07
T. Rowe Price Limited-Term Bond 3.68
T. Rowe Price Personal Strategy Balanced 12.54
==============================================================================
In addition, United of Omaha may from time to time disclose average annual total
return in non-standard formats and cumulative total return for Policies funded
by the Subaccounts.
THE FIGURES ABOVE ARE NOT AN INDICATION OF PRESENT, PAST, OR FUTURE PERFORMANCE
OF THE APPLICABLE SUBACCOUNTS OR OF THE ACTUAL PORTFOLIOS AVAILABLE UNDER THE
POLICY.
- 20 -
<PAGE>
Hypthetical Performance Data. United of Omaha may, from time to time, also
disclose yield, standard total returns, and non-standard total returns for the
Portfolios of the Series Funds, including such disclosure for periods prior to
the dates the Subaccounts commenced operations. For periods prior to the date
the Subaccount commenced operations, performance information for Policies will
be calculated based on the performance of the Series Fund Portfolios and the
assumption that the Subaccounts were in existence for the same periods as those
indicated for the Series Fund Portfolios, with the level of Policy charges that
were in effect at the inception of the Subaccounts (this is referred to as
"hypothetical" performance data).
United of Omaha may also disclose average annual total returns for Series Fund
Portfolios (or comparable portfolios)
since their inception, including such disclosure for periods prior to the date
the Variable Account commenced operations.
These figures do not reflect the Variable Account or Policy expenses. Such
average annual total return information is as follows:
<TABLE>
<CAPTION>
==============================================================================================================
SERIES FUND PORTFOLIOS For the For the period
AVERAGE ANNUAL TOTAL RETURN TABLE 1-year For the 5-year from inception
period period ended to
Series Fund or Comparable Portfolio ended 12/31/95 12/31/95
(date of inception of Series Fund Portfolio) 12/31/95
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 36.37% 21.73% 19.44%
Alger American Small Capitalization (9/21/88) 44.31% 20.59% 22.60%
Federated Prime Money Fund II (11/18/94) 5.20% N/A 5.13%
Federated Fund for U.S. Government Securities (3/29/94) 8.77% N/A 6.44%
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 23.13%
Fidelity VIP Equity Income (10/9/86) 35.09% 21.32% 13.33%
Fidelity VIP II Contrafund (1/3/95) N/A N/A 39.62%
MFS Emerging Growth (6/1/95) N/A N/A 20.30%
MFS High Income (6/1/95) N/A N/A 11.30%
MFS Research (6/1/95) N/A N/A 12.08%
MFS World Government (6/1/95) N/A N/A 9.60%
Scudder International (5/1/87) 11.11% 10.40% 9.39%
T. Rowe Price International (3/1/94) 11.18% N/A 7.31%
T. Rowe Price New America Growth (3/1/94) 51.08% N/A 27.24%
T. Rowe Price Equity Income (3/1/94) 34.76% N/A 23.30%
T. Rowe Price Limited-Term Bond (5/17/94) 9.88% N/A 7.61%
T. Rowe Price Personal Strategy Balanced (12/31/94 ) 28.66% N/A 28.66%
- --------------------------------------------------------------------------------------------------------------
==============================================================================================================
</TABLE>
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or mutual fund portfolios with investment objectives similar to
each of the Subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research Data Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree of
risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of
each Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely
used measure of stock performance. This unmanaged index assumes the
- 21 -
<PAGE>
reinvestment of dividends but does not reflect any "deduction" for the expense
of operating or managing an investment portfolio. Other independent ranking
services and indices may also be used as a source of performance comparison.
United of Omaha may also report other information including the effect
of tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
The Fixed Account
This Prospectus is generally intended to serve as a disclosure document
only for the Policy and the Variable Account. For complete details regarding the
Fixed Account, see the Policy itself.
NET PURCHASE PAYMENTS ALLOCATED AND AMOUNTS TRANSFERRED TO THE FIXED
ACCOUNT BECOME PART OF THE GENERAL ACCOUNT ASSETS OF UNITED OF OMAHA. INTERESTS
IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "1933 ACT"), NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS
THEREIN ARE GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS, AND
UNITED OF OMAHA HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO
THE FIXED ACCOUNT.
The Fixed Account includes all the assets of United of Omaha except those
segregated in the Variable Account or in any other separate investment account.
The Policy Owner may allocate Net Purchase Payments to the Fixed Account at the
time of a Purchase Payment or transfer amounts from the Variable Account to the
Fixed Account. Instead of the Policy Owner bearing the investment risk, as is
the case for Accumulation Value in the Variable Account, United of Omaha bears
the full investment risk for all Accumulation Value in the Fixed Account. United
of Omaha has sole discretion to invest the assets of its general account,
including the Fixed Account, subject to applicable law.
United of Omaha guarantees that it will credit interest to amounts in the
Fixed Account at an effective rate of at least 3% per year. United of Omaha may,
IN ITS SOLE DISCRETION, credit amounts in the Fixed Account with interest at a
current interest rate in excess of 3%. Once declared, a current interest rate
will be guaranteed for at least one year. ONE TRANSFER OUT OF THE FIXED ACCOUNT
IS ALLOWED EACH POLICY YEAR. Moreover, the maximum amount that can be
transferred out of the Fixed Account during any Policy Year will be determined
by United of Omaha in its sole discretion, but will not be less than 10% of
Fixed Account Value on the date of the transfer. No charge is imposed on such
transfers. United of Omaha reserves the right to modify transfer privileges at
any time. (See "Transfers," p. 22.) Partial withdrawals from the Fixed Account
are limited to a pro rata amount (with withdrawals from the Variable Account).
Withdrawals and transfers from the Fixed Account may be delayed for up to six
months, and withdrawals may be subject to a Withdrawal Charge. (See
"Withdrawals," p. 26.) For purposes of crediting interest, the oldest payment or
transfer into the Fixed Account, plus interest allocable to that payment or
transfer, is considered to be withdrawn or transferred out first; the next
oldest payment plus interest is considered to be transferred out next, and so on
(this is a "first-in, first-out" procedure).
United of Omaha guarantees that, at any time prior to the Annuity Starting
Date, the amount in the Fixed Account allocable to a particular Policy will be
not be less than the amount of the Net Purchase Payments allocated or
transferred to the Fixed Account, plus interest at an effective rate of 3% per
year, plus any excess interest credited to amounts in the Fixed Account, less
any applicable premium or other taxes allocable to the Fixed Account, and less
any amounts deducted from the Fixed Account in connection with partial
withdrawals (including any Withdrawal Charges) or transfers to the Variable
Account.
The current interest rates will be determined by United of Omaha in its
sole discretion.
UNITED OF OMAHA'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE
THE CURRENT INTEREST RATES. UNITED OF OMAHA CANNOT PREDICT OR GUARANTEE THE
LEVEL OF FUTURE CURRENT INTEREST RATES, EXCEPT THAT UNITED OF OMAHA GUARANTEES
THAT FUTURE CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE RATE OF 3% PER
YEAR COMPOUNDED ANNUALLY. THE POLICY OWNER BEARS THE RISK THAT CURRENT INTEREST
RATES WILL NOT EXCEED AN EFFECTIVE RATE OF 3% PER YEAR.
Transfers
SUBJECT TO the limitations and restrictions described below, transfers out
of a Subaccount of the Variable Account may be made any time prior to the
Annuity Starting Date, by sending Written Notice, signed by the Policy Owner, to
the Service Office. Transfers also may be requested by telephone, subject to the
provisions described below under "Telephone Transactions," p. 26. United of
Omaha reserves the right, at any time and without notice to any party, to modify
the transfer privileges under the Policy.
- 22 -
<PAGE>
An Owner can transfer Accumulation Value from one Subaccount of the
Variable Account to another, or from the Variable Account to the Fixed Account
or from the Fixed Account to any Subaccount of the Variable Account within
certain limits. The minimum amount which may be transferred is the lesser of
$500 or the entire Subaccount Value. If the Subaccount Value remaining after a
transfer is less than $500, United of Omaha will include that amount as part of
the transfer. Transfers out of a Subaccount currently may be made as often as
the Owner wishes, subject to the minimum amount specified above (United of Omaha
reserves the right to otherwise limit or restrict transfers in the future or to
eliminate the transfer privilege). United of Omaha reserves the right to
restrict transfers from the Variable Account to the Fixed Account of amounts
previously transferred from the Fixed Account, for a period of time determined
by United of Omaha.
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. (See
"Charges and Deductions," p. 30.)
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free transfer
limit described above, and no transfer charge will be imposed on transfers from
the Fixed Account. Moreover, the maximum amount that can be transferred out of
the Fixed Account during any Policy Year will be determined by United of Omaha,
at its sole discretion, but will not be less than 10% of the Fixed Account Value
on the date of the transfer.
The Policy is designed as a long-term investment, for retirement or other
financial planning. The Policy is not intended for active trading or "market
timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management (which could occur, for example, if
it caused excessive commission expense or caused the manager to keep higher cash
reserves than otherwise). Therefore, United of Omaha reserves the right to limit
the number of Transfers from the Subaccounts of the Variable Account and the
Fixed Account if United of Omaha believes that: (a) excessive trading by the
Policy Owner or a specific Transfer request would have a detrimental effect on
Accumulation Unit values or the share prices of the Portfolios; or (b) United of
Omaha is informed by one or more of the Series Funds or the Variable Account
that the purchase or redemption of shares is to be restricted because of
excessive trading or a Transfer or group of Transfers is deemed to have a
detrimental effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, United of Omaha may accept a Policy Owner's
authorization of third party reallocation on such Owner's behalf, subject to
United of Omaha's rules. United of Omaha may suspend or cancel such acceptance
at any time. For example, third party reallocation by "market timers" could be
suspended if they cause harm to other Policy Owners. United of Omaha will notify
the Policy Owner of any such suspension or cancellation. United of Omaha may
restrict the availability of Subaccounts and the Fixed Account for Transfers
during any period in which the Policy Owner authorizes such third party to act
on his behalf. United of Omaha will give Owners prior notification of any such
restrictions. However, United of Omaha will not enforce such restrictions if it
is provided with satisfactory evidence that: (a) such third party has been
appointed by a court of competent jurisdiction to act on the Policy Owner's
behalf; or (b) such third party has been appointed by the Policy Owner to act on
his behalf for all his financial affairs.
Dollar Cost Averaging
- ---------------------
Under the Dollar Cost Averaging program, the Policy Owner can instruct
United of Omaha to automatically transfer, on a periodic basis, a predetermined
amount or percentage specified by the Policy Owner from any one Subaccount or
the Fixed Account to any Subaccount(s) of the Variable Account. The automatic
transfers can occur monthly, quarterly, semi-annually, or annually, and the
amount transferred each time must be at least $100 and must be $50 per
Subaccount. At the time the program begins, there must be at least $5,000 of
Accumulation Value in the applicable Subaccount or the Fixed Account. If
transfers are made from the Fixed Account, the maximum periodic transfer amount
is 10% of that account's value at the time of election, or a sufficient amount
to provide transfers for 10 months. There is no maximum transfer amount
requirement out of the Subaccounts of the Variable Account.
Dollar Cost Averaging results in the purchase of more Accumulation Units
when the Accumulation Unit value is low, and fewer units when the Accumulation
Unit value is high. However, there is no guarantee that the Dollar Cost
Averaging program will result in higher Accumulation Value or otherwise be
successful.
The Policy Owner can request participation in the Dollar Cost Averaging
program when purchasing the Policy or at a later date. Transfers will begin on
the first or 15th day (or, if not a Valuation Date, the next following Valuation
Date) of the month, as specified by the Owner, during which the request is
processed. The Owner can specify that only a certain number of transfers will be
made, in which case the program will terminate when that number of transfers has
been made. Otherwise, the program will terminate when the amount remaining in
the applicable Subaccount or, if applicable, the Fixed Account is less than
$500.
- 23 -
<PAGE>
The Owner can increase or decrease the amount or percentage of the
transfers or discontinue the program by sending Written Notice to the Service
Office or by telephone, if telephone transactions are authorized. There is no
charge for participation in this program.
Asset Allocation Program
- ------------------------
Under the Asset Allocation Program, the Policy Owner can instruct United of
Omaha to allocate purchase payments and Accumulation Value among the Subaccounts
of the Variable Account and the Fixed Account in accordance with allocation
instructions specified by the Policy Owner or allocation instructions
recommended by United of Omaha and approved by the Policy Owner. United of Omaha
will rebalance a Policy Owner's investment by allocating purchase payments and
transferring Accumulation Value among the Subaccounts and the Fixed Account to
ensure conformity with current allocation instructions. Rebalancing will be
performed on a quarterly, semi-annual or annual basis as specified by the Policy
Owner. Transfers of Accumulation Value made pursuant this program will not be
counted in determining whether the Transfer Fee applies. At the time the program
begins, there must be at least $10,000 of Accumulation Value under the Policy.
The Policy Owner can request participation in the Asset Allocation Program
when purchasing the Policy or at a later date. The Owner can change his
allocation percentage or discontinue the program by sending Written Notice to
the Service Office or by calling 1-(800) 238-9354. There is no charge for
participation in this program.
THE POLICY
----------
The Ultrannuity Series V Variable Annuity Policy is a Flexible Payment
Variable Deferred Annuity Policy. The rights and benefits under the Policy are
summarized below; however, the description of the Policy contained in this
Prospectus is qualified in its entirety by the Policy itself, a copy of which is
available upon request from United of Omaha. The Policy may be purchased as a
Nonqualified Policy or as a Qualified Policy. The Policy will remain in force
until surrendered for its Cash Surrender Value, or all Proceeds have been paid
under a Payout Option or as a death benefit or upon termination.
Policy Application and Issuance of Policies
- -------------------------------------------
Before it will issue a Policy, United of Omaha must receive a completed
Policy application and a minimum initial Purchase Payment of $5,000. A
Nonqualified Policy ordinarily will be issued only in respect of Owner's Age 0
through 80, and a Qualified Policy ordinarily will be issued only in respect of
Owner's Age 0 through 70 1/2. United of Omaha reserves the right to reject any
application or Purchase Payment. Under United of Omaha's Electronic Fund
Transfer program, the Owner can select a monthly payment schedule pursuant to
which purchase payments will be automatically deducted from a bank or credit
union account or other sources. The minimum size of an initial Purchase Payment
must be at least $2,000. Each subsequent monthly payment must be at least $100.
If the application can be accepted in the form received, the initial Net
Purchase Payment will be credited to the Accumulation Value within three
business days after the later of receipt of the application or receipt of the
initial Purchase Payment. If the initial Purchase Payment cannot be credited
because the application or other issuing requirements are incomplete, the
applicant will be contacted within three business days and given an explanation
for the delay, and the initial Purchase Payment will be returned at that time
unless the applicant consents to United of Omaha's retaining the initial
Purchase Payment and crediting it, net of any charge for applicable premium
taxes, as soon as the necessary requirements are completed.
The date on which the initial Net Purchase Payment is credited to the
Accumulation Value is the Date of Issue. The Date of Issue is the date used to
determine Policy Years and Policy anniversaries.
Purchase Payments
- -----------------
All initial Purchase Payment checks or drafts should be made payable to
United of Omaha Life Insurance Company and sent to the Service Office.
Additional Purchase Payments should be sent to the Service Office. The death
benefit will not take effect until the check or draft for the Purchase Payment
is honored.
Initial Purchase Payment. The minimum initial Purchase Payment that United
of Omaha currently will accept under both a Nonqualified Policy and a Qualified
Policy is $5,000 except under the Electronic Fund Transfer Program where the
minimum initial Purchase Payment is $2,000. United of Omaha reserves the right
to increase or decrease this amount. The initial Purchase Payment is the only
Purchase Payment required to be paid under a Policy.
Additional Purchase Payments. The Owner may pay additional Purchase
Payments. The minimum additional Purchase Payment under both a Nonqualified
Policy and a Qualified Policy is $500 except under the Electronic Transfer
- 24 -
<PAGE>
Program where the minimum additional Purchase Payment is $100. Additional Net
Purchase Payments will be credited to the Policy and added to the Accumulation
Value as of the Valuation Date when they are received at the Service Office.
United of Omaha will not accept any additional Purchase Payments beginning on
the Policy Anniversary following the Owner's 88th birthday.
Allocation of Net Purchase Payments. An Owner must allocate Net Purchase
Payments to one or more of the Eligible Investments. The Owner must specify the
initial allocation in the Policy application. This allocation will be used for
additional Net Purchase Payments unless the Owner requests a change of
allocation. All allocations must be made in whole percentages and must total
100%. The minimum allocation amount is $500 ($100 under the Electronic Fund
Transfer Program). If the Owner fails to specify how Net Purchase Payments are
to be allocated, the Purchase Payment(s) cannot be accepted. In states that
permit United of Omaha to refund only the Accumulation Value upon the Owner's
cancellation of the Policy during the free look period, the initial Net Purchase
Payment will be allocated to the Owner's selected Subaccounts on the Date of
Issue. In states where at least the full Purchase Payment is refunded, the
portion of the initial Net Purchase Payment (and of any additional Purchase
Payments made during the free look period) allocated to the Variable Account
will be held in the Money Market Subaccount for the applicable Free Look period
specified by the state of issue plus 5 days, from the date that the Policy is
mailed from United of Omaha's Service Office. (Since the Free Look period is
measured from the Owner's date of receipt of the Policy, the extra 5 days is to
allow for estimated time needed for delivery of the Policy.) At the end of that
period, if the Policy has not been returned for a refund, the initial Net
Purchase Payment will be invested in the Subaccounts in accordance with the
allocation instructions provided in the Owner's application. All additional Net
Purchase Payments received after the end of the free look period will be
allocated and credited to the Owner's Policy as of the Valuation Period during
which they are received.
The Owner may change the allocation instructions for future additional Net
Purchase Payments by sending Written Notice, signed by the Owner, to United of
Omaha's Service Office, or by telephone (subject to the provisions described
below under "Telephone Transactions," p. 26). The allocation change will apply
to payments received on or after the date the Written Notice or telephone
request is received.
Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to United of Omaha by check or
draft may be postponed until such time as United of Omaha determines that such
instrument has been honored.
Accumulation Value
- ------------------
On the Date of Issue, the Accumulation Value equals the initial Purchase
Payment less any charge for applicable premium taxes. On any Valuation Date
thereafter, the Accumulation Value equals the sum of the values in the Variable
Account and the Fixed Account.
The Accumulation Value is expected to change from Valuation Period to
Valuation Period, reflecting the expenses and investment experience of the
selected Eligible Investments as well as the Variable Account deductions for
charges.
The Variable Account Value. The Accumulation Value for each Subaccount is
equal to:
(a) the current number of Accumulation Units in the Subaccount for the
Policy; multiplied by
(b) the current Accumulation Unit value.
A Net Purchase Payment or transfer allocated to a Subaccount is converted
into Accumulation Units by dividing it by the Accumulation Unit value for the
Valuation Period during which the Net Purchase Payment or transfer is allocated
to the Variable Account. The initial Accumulation Unit value for each Subaccount
was set at $10 when the Subaccount was established. The Accumulation Unit value
may increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) The net asset value per share of the Portfolio multiplied by the
number of shares held in the Subaccount, before the purchase or
redemption of any shares on that date; minus
(b) the cumulative unpaid charge for the Mortality and Expense Risk
Charge and Administrative Expense Charge; minus
(c) any applicable charge for federal and state income taxes, if any;
the result divided by
(d) the total number of Accumulation Units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any
Accumulation Units on that day.
Positive investment experience of the applicable Portfolio will increase the
Accumulation Unit values and negative investment experience will decrease the
Unit values. Expenses and deductions will have a negative effect on Unit values.
- 25 -
<PAGE>
The Fixed Account Value. The Accumulation Value of the Fixed Account on any
Valuation Date is equal to:
(a) the Accumulation Value at the end of the preceding Policy Month;
plus
(b) any Net Purchase Payments credited since the end of the previous
Policy Month; plus (c) any transfers from the Subaccounts credited
to the Fixed Account since the end of the previous Policy
Month; minus
(d) any transfers from the Fixed Account to the Subaccounts since the
end of the previous Policy Month; minus
(e) any partial withdrawal and Withdrawal Charge taken from the Fixed
Account since the end of the previous Policy Month; plus
(f) interest credited on the Fixed Account balance.
United of Omaha guarantees that the Accumulation Value in the Fixed Account will
be credited with an effective annual interest rate of at least 3%.
Telephone Transactions
- ----------------------
Owners can make transfers, partial withdrawals, and/or change the
allocation of subsequent Net Purchase Payments by telephone if they have checked
the "Telephone Transaction Authorization" box in the application or if they have
subsequently authorized telephone transactions in writing. United of Omaha
and/or its Service Office will not be liable for following instructions
communicated by telephone that it believes to be genuine. However, United of
Omaha and/or its Service Office will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. If United of Omaha
and/or its Service Office fails to do so, it may be liable for any losses due to
unauthorized or fraudulent instructions. All telephone requests will be recorded
on voice recorder equipment for the protection of the Policy Owner. Owners
making telephone requests will be required to provide their social security
number and/or other information for identification purposes.
Telephone requests must be received at the Service Office no later than
4:00 p.m. Eastern time in order to be processed. Telephone transfer requests
will not be accepted after that time.
The telephone transaction privilege may be discontinued at any time as to
some or all Owners.
Non-participating Policy
- ------------------------
The Policy does not participate or share in the profits or surplus earnings
of United of Omaha. No dividends are payable on the Policy.
Termination
- -----------
If the Accumulation Value is less than $500, United of Omaha may cancel the
Policy upon 60 days' notice to the Owner. This cancellation will be considered a
full surrender of the Policy. If the Accumulation Value in any Subaccount falls
below $500, United of Omaha reserves the right to transfer the remaining
balance, without charge, to the Money Market Subaccount.
DISTRIBUTIONS UNDER THE POLICY
------------------------------
Withdrawals
- -----------
The Owner may withdraw all or a portion of the Cash Surrender Value in
exchange for a cash payment from United of Omaha. The Cash Surrender Value is
the Accumulation Value less any applicable Withdrawal Charge, any applicable
Policy Fee, any applicable premium taxes, and, if the Enhanced Death Benefit is
elected, the Enhanced Death Benefit Charge. (See "Charges and Deductions," p.
30).
The Owner may withdraw Cash Surrender Value from the Variable Account at
any time prior to the Annuity Starting Date by sending a Written Request to
United of Omaha's Service Office. The minimum amount that can be withdrawn from
any Eligible Investment is $500. After a partial withdrawal, the remaining
Accumulation Value must be at least $500. In the absence of written instructions
from the Owner, withdrawals will result in cancellation of Accumulation Units
from each applicable Subaccount and the deduction of Accumulation Value from the
Fixed Account in the ratio that the value of each such Eligible Investment bears
to the total Accumulation Value of the Policy (i.e., pro rata from each Eligible
Investment). No more than a pro-rata amount may be withdrawn from the Fixed
Account for any partial withdrawal. If the Owner requests a surrender, the
Policy must be returned to the Service Office.
Withdrawals from the Fixed Account may be delayed for up to six months.
Each Policy Year the Owner may withdraw up to 15% of Accumulation Value
without deduction of a Withdrawal Charge. Amounts withdrawn in excess of this
free withdrawal amount may be subject to the Withdrawal Charge of up to 7%. For
a discussion of the Withdrawal Charge, see "Withdrawal Charge," p. 30.
Withdrawals may be taxable and subject to a penalty tax. (See "Certain
Federal Income Tax Consequences," p. 34.)
- 26 -
<PAGE>
Since the Owner assumes the investment risk with respect to Net Purchase
Payments allocated to the Variable Account, and because surrenders and
withdrawals are subject to a Withdrawal Charge, and possibly a charge for
premium taxes, the total amount paid upon total surrender of the Policy (taking
any prior partial withdrawals into account) may be more or less than the total
Purchase Payments made. Following a surrender of the Policy, or at any time the
Accumulation Value is zero, all rights of the Owner will terminate.
Systematic Withdrawal Plan
- --------------------------
Under the Systematic Withdrawal Plan, the Policy Owner can instruct United
of Omaha to make automatic payments of a predetermined dollar amount or fixed
percentage of Accumulation Value to them monthly, quarterly, semi-annually or
annually from a specified Eligible Investment. The minimum systematic withdrawal
payment is $100. The "Request for Systematic Withdrawal" form must specify a
date for the first payment, which must be at least 30 but not more than 90 days
after the form is submitted. The Owner may specify the Eligible Investments from
which Systematic Withdrawals will be made, but no more than a pro-rata amount
can be withdrawn from the Fixed Account. If the Owner does not specify the
Eligible Investments from which Systematic Withdrawals are to be taken,
Systematic Withdrawals will be taken from each Eligible Investment in the
proportion that the Accumulation Value in each Eligible Investment bears to the
total Accumulation Value of the Policy.
The Withdrawal Charge will apply in accordance with its terms.
A qualified tax adviser should be consulted before a Systematic Withdrawal
Plan is requested since distributions under such a Plan may be taxable and
subject to a penalty tax. (See "Certain Federal Income Tax Consequences," p.
34.)
Annuity Payments
- ----------------
Payees receiving Annuity Payments under the Policy must be individuals who
receive payments in their own behalf unless otherwise agreed to by United of
Omaha. Any Payout Option chosen will be effective when United of Omaha
acknowledges it. United of Omaha may require proof of the Owner's or the
Annuitant's age or survival. The level of Annuity Payments is determined by the
Accumulation Value, the age and sex of the Annuitant, and the Payout Option
elected.
Annuity Starting Date. Unless the Annuity Starting Date is changed, Annuity
Payments under a Policy will begin on the Annuity Starting Date which is
selected by the Policy Owner at the time the Policy is applied for. The latest
Annuity Starting Date permitted is when the Annuitant attains age 95 (age 85 in
Pennsylvania). An earlier Annuity Starting Date is required for Qualified
Contracts. The Annuity Starting Date may be changed from time to time by the
Policy Owner by Written Notice to United of Omaha, provided that notice of each
change is received by United of Omaha at its Service Office at least thirty (30)
days prior to the then current Annuity Starting Date.
Election of Payout Option. The Policy Owner will choose a Payout Option, to
provide variable annuity payments or fixed annuity payments or a combination of
both, under which the Policy Proceeds will be paid to the Payee(s)shown in the
Policy application. During the lifetime of the Owner and prior to the Annuity
Starting Date, the Policy Owner may change the election, but Written Notice of
any election or change of election must be received by United of Omaha at its
Service Office at least thirty (30) days prior to the Annuity Starting Date. If
no election is made prior to the Annuity Starting Date, then the Accumulation
Value in the Variable Account will be used to provide variable Annuity Payments,
and the Accumulation Value in the Fixed Account will be used to provide fixed
Annuity Payments, and Annuity Payments will be made under Option 4 providing
lifetime income with payments guaranteed for 10 years. United of Omaha reserves
the right to pay the Proceeds in one sum when the Proceeds are less than $2,000,
or when the Payout Option chosen would result in periodic payments of less than
$20.
If the Owner dies prior to the Annuity Starting Date (and the Policy is in
force), the Beneficiary may elect to receive the death benefit under one of the
Payout Options, to the extent allowed by law and subject to the terms of any
settlement agreement. (See "Death Benefit," p. 29.)
The longer the guaranteed or projected Payout Option period, the lower the
amount of each payment. Unless the Policy Owner specifies otherwise, the
Payee shall be the Annuitant.
Fixed Annuity Payments. Fixed annuity payments are available under all six
Payout Options below. Under each fixed Payout Option the amount of each payment
will be set on the Annuity Starting Date and will not change. Annuity Payments
will begin on that date. The Annuity Purchase Value will be transferred to the
general account of United of Omaha, and the Annuity Payments will be fixed in
amount by the fixed annuity provisions selected and the age and sex (if
consideration of sex is allowed) of the Annuitant. The guaranteed effective
annual interest rate used in the Payout Options is 3%. Using a procedure
approved by its Board of Directors, United of Omaha may, AT ITS SOLE DISCRETION,
- 27 -
<PAGE>
declare additional interest to be paid or credited annually for Payout Options
1, 2, 3, or 6. Current immediate annuity rates for the same class of annuities
will be used if higher than the guaranteed amounts (guaranteed amounts are based
upon the tables contained in the Policy). The guaranteed amounts are based on
the 1983 Table "a" mortality table, and 3.0% guaranteed interest rate. Current
amounts may be obtained from United of Omaha. For further information, contact
United of Omaha at its Service Office.
Variable Annuity Payments. Only Payout Options 2, 4, and 6 are available
for variable annuity payments. The dollar amount of the first monthly annuity
payment will be determined by applying the Annuity Purchase Value allocated to
variable annuity payments to the annuity table applicable to the Payout Option
chosen. The tables are determined from the 1983 Table "a" mortality table with
an assumed investment rate of 4%. If more than one subaccount has been selected,
the Annuity Purchase Value of each subaccount is applied separately to the
annuity table to determine the amount of the first annuity payment attributable
to that particular subaccount.
All variable annuity payments other than the first will vary in
amount according to the investment performance of the applicable subaccounts.
The amount of each subsequent payment is the sum of: the number of Variable
Annuity Units for each subaccount as determined for the first annuity payment
multiplied by the value of a Variable Annuity Unit for that subaccount 10 days
prior to the date the variable annuity payment is due. This amount may increase
or decrease from month to month.
If the net investment return of a subaccount for a payment period
is equal to the pro-rated portion of the 4% annual assumed investment rate, the
variable annuity payment attributable to that subaccount for that period will
equal the payment for the prior period. To the extent that such net investment
return exceeds an annualized rate of 4% for a payment period, the payment for
that period will be greater than the payment for the prior period and to the
extent that such return for a period falls short of an anualized rate of 4%, the
payment for that period will be less than the payment for the prior period.
Transfers between fixed and variable subaccounts. After the Annuity
Commencement Date the annuitant may exchange the value of a designated number of
Variable Annuity Units of a particular subaccount into other Variable Annuity
Units, the value of which would be such that the dollar amount of an annuity
payment made on the date of the exchange would be unaffected by the fact of the
exchange. No more than four (4) exchanges may be made within each account year.
Transfers may be made between subaccounts and from a subaccount to the
fixed account. No exchanges may be made from the fixed account to the variable
subaccounts. Transfers will be made using the Variable Annuity Unit values for
the Valuation Period during which any request is received by United of Omaha.
Payout Options. The Policy provides six Payout Options which are described
below.
Option 1 -- Proceeds Held on Deposit at Interest. While the Proceeds
are held by United of Omaha, United of Omaha will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
Option 2 -- Income of a Specified Amount. The Proceeds will be paid in
monthly installments of a specified amount over at least a five year period
until the Proceeds, with interest, have been fully paid.
Option 3 -- Income for a Specified Period. The Proceeds will be paid in
installments for the number of years chosen. The monthly incomes for each $1,000
of Proceeds, shown in the table set forth in the Policy, include interest.
United of Omaha will provide the income amounts for payments other than monthly
upon request.
Option 4 -- Lifetime Income. The Proceeds will be paid as monthly
income for as long as the Annuitant lives. The following guarantees are
available:
Guaranteed Period - The monthly income will be paid for a minimum of
10 years and as long thereafter as the Annuitant lives; or
Guaranteed Amount - The monthly income will be paid until the sum of
all payments equals the Proceeds placed under this option and as
long thereafter as the Annuitant lives.
The monthly income will be the amount computed using either the Lifetime Monthly
Income Table set forth in the Policy (which is based on the 1983 Table "a"
mortality table and interest at 3%, adjusted to age last birthday) or, if more
favorable to the Annuitant, United of Omaha's then current lifetime monthly
income rates for payment of Proceeds. NOTE CAREFULLY. IF NO GUARANTEE IS
ELECTED, THEN IT WOULD BE POSSIBLE FOR ONLY ONE ANNUITY PAYMENT TO BE MADE if
the Annuitant(s) were to die before the due date of the second annuity payment;
only two Annuity Payments if the Annuitant(s) were to die before the due date of
the third annuity payment; and so forth. When the Annuitant dies, any
- 28 -
<PAGE>
remaining guaranteed Annuity Payments will be paid to the Beneficiary. When the
last Payee dies, United of Omaha will pay to the estate of that Payee any
remaining guaranteed Annuity Payments.
Option 5 -- Lump Sum. The Proceeds will be paid in one sum.
Option 6 -- Alternative Schedule. Upon request and if available, United
of Omaha will provide payments for other options, including joint and survivor
periods. Certain options may not be available in some states. If variable
Annuity Payments are being made under Option 2 or 6 and do not involve life
contingencies, then the Owner may surrender the Contract and receive the
commuted value of any unpaid Annuity Payments.
Additional information about any Payout Option may be obtained by contacting the
Service Office.
* * *
A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, the Policy Owner
has not provided United of Omaha with a written election not to have federal
income taxes withheld, United of Omaha must by law withhold such taxes from the
taxable portion of such annuity payments and remit that amount to the federal
government. Withholding is mandatory for certain Qualified Policies.
(See "Certain Federal Income Tax Consequences," p. 34.)
Death Benefit
- -------------
Death of Owner Prior to Annuity Starting Date. If any Owner or joint Owner
dies prior the Annuity Starting Date (and the Policy is in force), the Policy
will terminate, and a death benefit will be paid to the Beneficiary. The death
benefit will equal the largest of (i) the Accumulation Value (without deduction
of the Withdrawal Charge), on the later of the date on which Due Proof of Death
or an election of Payout Option is received by United of Omaha's Service Office
less any charge for applicable premium taxes; or (ii) the sum of Net Purchase
Payments, less partial withdrawals.
The death benefit is payable upon receipt of Due Proof of Death of the
first Owner to die, election of a Payout Option, and proof that such Owner died
prior to the commencement of Annuity Payments. The death benefit generally will
be paid within seven days, or as soon thereafter as United of Omaha has
sufficient information about the Beneficiary to make the payment. The
Beneficiary may receive the amount payable in a lump sum cash benefit, or,
subject to any limitation under any state or federal law, rule, or regulation,
under one of the Payout Options described above, unless a settlement agreement
is effective at the death of the Owner that prevents such election. The
Beneficiary must make such election within sixty days of the date United of
Omaha receives Due Proof of Death; otherwise a lump sum payment will be made.
If an Owner of the Policy is a corporation, trust or other nonindividual,
the primary Annuitant will be treated as an Owner of the Policy for purposes of
the death benefit. The "primary Annuitant" is that individual whose life affects
the timing or the amount of the payout under the Policy. A change in the primary
Annuitant will be treated as the death of an Owner.
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of an Owner rather than of the Annuitant.
(If the Annuitant is not an Owner and the Annuitant dies before the Annuity
Starting Date, the Owner may name a new Annuitant if such Owner(s) is not a
corporation or other non-individual or if such Owner is the trustee of a Code
Sec. 401(a) retirement plan. If the Owner does not name a new Annuitant, the
Owner will become the Annuitant.)
Elective Death Benefit Amendment. If this Amendment is attached to the
Policy and any Owner or Joint Owner dies prior to age 81, the Death Benefit will
equal the greatest of: (1) the Accumulation Value as of the end of the valuation
period during which due proof of death and an election of a payout option are
received by us; (2) the greatest Anniversary Value plus subsequent purchase
payments and less any subsequent partial withdrawals;7 and (3) the sum of all
net purchase payments, less any partial withdrawals, accumulated at a 4.5%
annual rate of interest up to a maximum of two times each purchase payment.
If any Owner or Joint Owner dies after attaining age 81, the Death Benefit
under the Amendment will equal the greatest of: (1) the Accumulation Value as of
the end of the valuation period during which due proof of death and an election
of a payout option are received by us; (2) the greatest Anniversary Value prior
to the last Policy Anniversary before the Owner attained age 81, plus any
subsequent purchase payments and less any subsequent purchase payments and less
any subsequent partial withdrawals; and (3) the sum of all net purchase payments
paid prior to the last Policy
- --------
7The Anniversary Value equals the Accumulation Value on a Policy Anniversary and
any subsequent Purchase payments less partial withdrawals and undeducted premium
tax.
- 29 -
<PAGE>
Anniversary before the Owner attained age 81, less any partial withdrawals
accumulated at a 4.5% annual rate of interest up to a maximum of two times each
purchase payment. If the death benefit payable equals (3), United of Omaha will
add to the death benefit amount, any purchase payments paid after the last
Policy Anniversary before the Owner attained age 81.
The Elective Death Benefit is not available for non-person owners.
Any applicable premium tax not previously deducted will be deducted from
the death benefit payable.
Accidental Death Benefit. If any Owner or Joint Owner dies from bodily
injury sustained in a common carrier accident, United of Omaha will pay the
Standard Death Benefit or the Enhanced Death Benefit, as applicable, multiplied
by two, instead of the amount that would otherwise be payable.
For this benefit to be payable, bodily injury must be sustained by the
Owner while a passenger in a common carrier. Death must be independent of any
sickness or other causes and must occur within 90 days of the date of the
accident. United of Omaha will pay only the Standard Death Benefit or the
Enhanced Death Benefit, if applicable, if the Owner's death results from the
following: (a) suicide; (b) an act of declared or undeclared war; (c) an injury
received while intoxicated; (d) an injury received while the owner is under the
influence of a controlled substance, unless administered on the advice of a
physician; or (e) an injury received while committing a felony or engaged in an
illegal occupation. The Accidental Death Benefit may not be available in all
states.
Death of Owner On or After Annuity Starting Date. If any Owner or joint
Owner dies on or after the Annuity Starting Date and before all the Proceeds
have been paid, any remaining Proceeds will be paid at least as rapidly as under
the Payout Option in effect at the time of the death.
Beneficiary. The Owner may change the named Beneficiary by sending Written
Notice to the Service Office unless the named Beneficiary is irrevocable. When
recorded and acknowledged by United of Omaha, the change will be effective as of
the date the Owner signed the request. The change will not apply to any payments
made or other action taken by United of Omaha before recording. If the named
Beneficiary is irrevocable, the Owner may change the named Beneficiary only by
joint written request from the Owner and the Beneficiary. If more than one named
Beneficiary is designated, and the Policy Owner fails to specify their
interests, they will share equally.
If there are joint Owners, the surviving joint Owner will be deemed the
Beneficiary, and the Beneficiary named in the Policy application or as
subsequently changed will be deemed the contingent Beneficiary. If both joint
Owners die simultaneously, the death benefit will be paid to the contingent
Beneficiary.
If the Beneficiary is the deceased Owner's surviving spouse, the spouse may
elect either to receive the death benefit, in which case the Policy will
terminate, or to continue the Policy in force with the spouse as Owner.
If the named Beneficiary does not survive the Owner, then the estate of the
Owner is the Beneficiary.
IRS Required Distribution
- -------------------------
Federal tax law requires that if a Policy Owner of a nonqualified Policy
dies before the Annuity Starting Date, then the entire value of the Policy must
generally be distributed within five years of the date of death of such Policy
Owner. Therefore, generally, any death benefit must be paid within five years
after the date of death. The five-year rule does not apply to that portion of
the Proceeds which (a) is payable to or for the benefit of an individual
Beneficiary; and (b) will be paid over the lifetime or the life expectancy of
that Beneficiary as long as payments begin not later than one year after the
date of the Owner's death. Special rules may apply to the spouse of the deceased
Owner. See "Federal Tax Matters" in the Statement of Additional Information for
a detailed description of these rules. Other required distribution rules apply
to Qualified Contracts. (See "Certain Federal Income Tax Consequences," p. 30.)
The Policy contains provisions designed to comply with these requirements.
Restrictions Under the Texas Optional Retirement Program
- --------------------------------------------------------
The Texas Educational Code permits participants in the Texas Optional
Retirement Program (ORP) to withdraw their interest in a variable annuity Policy
issued under the ORP only upon: (1) termination of employment in the Texas
public institutions of higher education; (2) retirement; (3) death or (4)
participant's attainment of age 70 1/2. Accordingly, a participant in the ORP
(or the participant's estate if the participant has died) will be required to
obtain a certificate of termination from the employer or a certificate of death
before the Policy can be redeemed.
- 30 -
<PAGE>
CHARGES AND DEDUCTIONS
----------------------
United of Omaha will make certain charges and deductions in connection with
the Policy in order to compensate it for incurring expenses in distributing the
Policy, bearing mortality and expense risks under the Policy, and administering
the Accounts and the Policies. Charges may also be made for premium taxes,
federal, state or local taxes (or the economic burden thereof), or for certain
transfers. Charges and expenses are also deducted from each Portfolio.
Withdrawal Charge
- -----------------
United of Omaha will incur expenses relating to the sale of Policies,
including commissions to registered representatives and other promotional
expenses. United of Omaha will apply a Withdrawal Charge, expressed as a
percentage of any Purchase Payment surrendered or withdrawn, in connection with
a full surrender or partial withdrawal, in order to partially cover distribution
expenses. The Withdrawal Charge may also be deducted from amounts applied to
provide Annuity Payments. The Withdrawal Charge Percentage will vary depending
upon the number of years that have elapsed since the date the Purchase Payment
was made. The amount of the Withdrawal Charge is determined by multiplying the
amount of each Purchase Payment withdrawn by the applicable Withdrawal Charge
Percentages. For purposes of determining the Withdrawal Charge, the oldest
Purchase Payment is considered to be withdrawn first; the next oldest Purchase
Payment is considered to be withdrawn next, and so on (this is a "first-in,
first-out" procedure), and all Purchase Payments are deemed to be withdrawn
before any earnings. The amount of the partial withdrawal requested plus any
Withdrawal Charge will be deducted from the Accumulation Value on the date an
Owner's Written Request is received at the Service Office. In the absence of
other instructions, partial withdrawals (including any charge) will be deducted
from the Subaccounts and the Fixed Account on a pro-rata basis. No more than a
pro-rata amount can be withdrawn from the Fixed Account. The following is the
table of Withdrawal Charge Percentages:
================================================================================
Years Since Receipt of Purchase Payment 1 2 3 4 5 6 7 8+
- --------------------------------------------------------------------------------
Applicable Withdrawal Charge Percentage 7% 6% 5% 4% 3% 2% 1% 0%
================================================================================
United of Omaha anticipates that the Withdrawal Charge will not generate
sufficient funds to pay the cost of distributing the Policies. If this charge is
insufficient to cover the distribution expenses, the deficiency will be met from
United of Omaha's general funds, which will include amounts derived from the
charge for mortality and expense risks (described below).
Each Policy year, the Owner can withdraw up to 15% of Accumulation Value,
without imposition of the Withdrawal Charge. A Withdrawal Charge will also not
be applied on the Annuity Starting Date if the Accumulation Value is applied
after the second Policy Anniversary to provide lifetime Annuity Payments under
Payout Option 4. (The Withdrawal Charge will apply to Proceeds placed under
Payout Options 1, 2, 3, 5, and 6.) No Withdrawal Charge will be imposed as a
result of any death benefit payment or, under Qualified Plans, any refund of
contributions paid in excess of the Owner's deductible amounts. United of Omaha
will not increase the withdrawal charge.
Waiver of Withdrawal Charges
- ----------------------------
United of Omaha will waive the Withdrawal Charge upon partial withdrawals
and surrenders in the event the Owner becomes confined to a hospital or nursing
home, disabled, diagnosed with a terminal illness or unemployed. Those waivers
and any restrictions associated with such waivers are set forth below:
Nursing Home Waiver. The Withdrawal Charge will not be imposed as a result
of any withdrawal made pursuant to the Owner's confinement, upon the
recommendation of a licensed physician, to the following facilities for 30 or
more consecutive days: (a) a hospital licensed or recognized as a general
hospital by the state in which it is located; (b) a hospital recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; (c)
a Medicare certified hospital; (d) a state licensed nursing home with a
registered nurse on duty 24 hours a day; and (e) a Medicare certified long term
care facility. This waiver only applies to partial withdrawals and surrenders
requested no later than 91 days of the last day of confinement to such facility.
Proof of confinement must be provided. The Nursing Home Waiver is not available
if any Owner is confined to a nursing home or hospital facility on the Date of
Issue.
United of Omaha will not accept any additional purchase payments under a
Policy once the Nursing Home Waiver has been elected. The Nursing Home Waiver
may not be available in all states.
Disability Waiver. The Withdrawal Charge will not be imposed upon any
withdrawal where either the Owner is physically disabled. United of Omaha may
require proof of such disability, including written confirmation of receipt and
approval of any claim for Social Security Disability Benefits. Proof of
continued disability may be required through the
- 31 -
<PAGE>
date of any partial withdrawal or surrender. United of Omaha reserves the right
to have any Owner claiming such disability examined by a licensed physician.
United of Omaha will not accept any additional purchase payments under a
Policy once the Disability Waiver has been elected. The Disability Waiver is not
available if any Owneris receiving Social Security Disability Benefits on the
Date of Issue or is age 65 or older. The Disability Waiver may not be available
in all states.
Terminal Illness Waiver. United of Omaha will waive the Withdrawal Charge
for any withdrawal where the Owner is diagnosed with a terminal illness. United
of Omaha may require proof of such illness including written confirmation from a
licensed physician. United of Omaha reserves the right to have an Owner
diagnosed with such illness examined by a licensed physician.
United of Omaha will not accept any additional purchase payments under a
Policy once the Terminal Illness Waiver has been elected. The Terminal Illness
Waiver is not available if any Owner is diagnosed with a terminal illness prior
to or on the Date of Issue. The Terminal Illness Waiver may not be available in
all states.
Unemployment Waiver. United of Omaha will waive the Withdrawal Charge for
any partial withdrawal or surrender in the event the Owner becomes unemployed.
The Unemployment Waiver is available upon submission of a determination letter
from a state Department of Labor indicating the Owner received unemployment
benefits for at least 60 consecutive days prior to the election of such waiver.
The Unemployment Waiver may be exercised only once and is not available if any
Owner or Annuitant is receiving unemployment benefits on the Date of Issue. The
Unemployment Waiver may not be available in all states.
Transplant Waiver. United of Omaha will waive surrender charges if the
Owner undergoes transplant surgery as an organ donor or recipient for the
following body organs: heart, liver, lung, kidney, pancreas; or as a recipient
of a bone marrow transplant. Within 91 days of surgery, the Owner must submit a
letter from a licensed physician (who is not the Owner of this policy) stating
that the Owner underwent transplant surgery for any of these organs. United of
Omaha reserves the right to have the Owner examined by a physician of its choice
and at its expense. This waiver may be exercised only once per transplant
surgery.
Residence Damage Waiver. United of Omaha will waiver surrender charges if
the Owner's primary residence suffers physicial damage in the amount of $50,000
or more. To claim this waiver, submit to United of Omaha a certified copy of a
licensed appraiser's report stating the amount of the damage. This certified
copy must be submitted with 91 days of the date of the appriaser's report.
United of Omaha reserves the right to obtain a second opinion by having the
affected residence inspected by a licensed appraiser of its choice and at its
expense, and to rely upon its appraiser's opinion. This waiver may be exercised
only once per occurrence.
Death of Spouse or Minor Dependent Waiver. United of Omaha will waive
surrender charges for withdrawals of the following percentage of Accumulation
Value made within six months of the Owner's spouse's or minor dependent(s)'
death: death of spouse, 50%; death of minor dependent(s), 25%. Proof of death
must be submitted to United of Omaha. This waiver may be exercised once for a
spouse and once for each minor dependent, subject to no more than 50% of the
Accumulation Value being withdrawn pursuant to this wiaver each year. Subsequent
withdrawals, or withdrawals above the waiver limit, are subject to the
Withdrawal Charge.
Mortality and Expense Risk Charge
- ---------------------------------
United of Omaha imposes a daily charge as compensation for bearing certain
mortality and expense risks in connection with the Policies. This charge is
equal to an annual rate of 1.00% (.0027535% daily) of the value of the net
assets in the Variable Account and it will not increase. On an annual basis,
approximately three-fourths of this charge is for mortality risks and
approximately one-fourth is for expense risks. The Mortality and Expense Risk
Charge is reflected in the accumulation unit values for each Subaccount.
Accumulation Values and Annuity Payments are not affected by changes in
actual mortality experience or by actual expenses incurred by United of Omaha.
The mortality risks assumed by United of Omaha arise from its contractual
obligations to make Annuity Payments (determined in accordance with the Annuity
tables and other provisions contained in the Policy) and to pay death benefits
prior to the Annuity Starting Date. Thus, Owners are assured that neither an
Annuitant's own longevity nor an unanticipated improvement in general life
expectancy will adversely affect the periodic Annuity Payments that the Payee
will receive under the Policy.
The expense risk assumed by United of Omaha is the risk that United of
Omaha's actual expenses in administering the Policy will exceed the amount
recovered through the Administrative Charges.
If the Mortality and Expense Risk Charge is insufficient to cover United of
Omaha's actual costs, United of Omaha will bear the loss; conversely, if the
charge is more than sufficient to cover costs, the excess will be profit to
United of Omaha. United of Omaha expects a profit from this charge. To the
extent that the proceeds of the Withdrawal Charge are insufficient to cover the
actual cost of Policy distribution, the deficiency will be met from United of
Omaha's general corporate assets, which may include amounts, if any, derived
from the Mortality and Expense Risk Charge.
- 32 -
<PAGE>
Administrative Charges
- ----------------------
In order to cover the costs of administering the Policies, United of Omaha
deducts an annual Policy Fee from the Accumulation Value and also deducts a
daily Administrative Expense Charge from the assets of each Subaccount.
The annual Policy Fee is deducted from the Accumulation Value of each
Policy on the last Valuation Date of each Policy Year prior to the Annuity
Starting Date (and upon a complete surrender). This annual Policy Fee is $30,
and it will not be increased. The annual Policy Fee will be deducted from each
Subaccount of the Variable Account in the same proportion that the Accumulation
Value in each such Subaccount bears to the total Accumulation Value in the
Variable Account. The portion of the annual Policy Fee deducted from the
Subaccounts will be deducted by cancelling Accumulation Units. This fee is
waived if the Accumulation Value exceeds $50,000 on the last Valuation Date of
the applicable Policy Year. United of Omaha does not anticipate realizing any
profit from this fee.
United of Omaha also deducts a daily Administrative Expense Charge from the
assets of each Subaccount of the Variable Account. This charge is equal to an
annual rate of .20% (.0005485% daily) of the net assets of each Subaccount of
the Variable Account. The Administrative Expense Charge will not be increased in
the future. United of Omaha does not anticipate realizing any profit from this
charge.
Enhanced Death Benefit Charge
- -----------------------------
There will be a charge made each year for expenses related to the Enhanced
Death Benefit available under the terms of the Elective Death Benefit Amendment.
United of Omaha deducts this charge through the cancellation of accumulation
units at each Policy Anniversary and at surrender to compensate it for the
increased risks associated with providing the Enhanced Death Benefit. United of
Omaha guarantees that this charge will never exceed an annual rate of 0.35% of
the Average Death Benefit Amount.
Transfer Fee
- ------------
There is no charge for transfers from the Fixed Account or for the first 12
transfers from Subaccounts of the Variable Account in each Policy Year. However,
there is a $10 fee for the thirteenth and each subsequent request made by the
Owner to transfer Accumulation Value from a Subaccount during a single Policy
Year. Any applicable Transfer Fee is deducted from the amount transferred. All
transfer requests made simultaneously will be treated as a single request. No
transfer fee will be imposed for any transfer which is not at the Owner's
request. The Transfer Fee will not increase.
Premium Taxes
- -------------
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.5%, on annuity contracts issued by insurance
companies. Premium tax rates are subject to change from time to time by
legislative and other governmental action. In addition, other governmental units
within a state may levy such taxes.
The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Policy, a charge for such taxes will be
deducted, depending on when such taxes are paid to the taxing authority, either
(a) from Purchase Payments as they are received, (b) upon payment in respect of
a Surrender of the Policy, (c) upon death of any Owner, or (d) upon application
of the Proceeds to a Payout Option.
Federal, State and Local Taxes
- ------------------------------
No charges are currently made for federal, state, or local taxes other than
premium taxes. However, United of Omaha reserves the right to deduct amounts
from the Subaccounts for such taxes or any other economic burden resulting from
imposition of the tax laws that United of Omaha determines to be properly
attributable to the Variable Account in the future.
Other Expenses Including Investment Advisory Fees
- -------------------------------------------------
Each Portfolio of the Series Funds is responsible for all of its expenses.
The net assets of each Portfolio of the Series Funds will reflect deductions in
connection with the investment advisory fee and other expenses.
For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Series Funds,
current copies of which accompany this Prospectus.
- 33 -
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
---------------------------------------
THE FOLLOWING DISCUSSION IS A GENERAL DESCRIPTION OF FEDERAL TAX
CONSIDERATIONS RELATING TO THE POLICY 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 THE POLICY. ANY PERSON CONCERNED ABOUT THESE TAX IMPLICATIONS
SHOULD CONSULT A COMPETENT TAX ADVISOR BEFORE INITIATING ANY TRANSACTION. THIS
DISCUSSION IS BASED UPON UNITED OF OMAHA'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, THIS SUMMARY DISCUSSES ONLY CERTAIN FEDERAL
INCOME TAX CONSEQUENCES TO "UNITED STATES PERSONS," AND NO ATTEMPT HAS BEEN MADE
TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS. UNITED STATES PERSONS MEANS
CITIZENS OR RESIDENTS OF THE UNITED STATES, DOMESTIC CORPORATIONS, DOMESTIC
PARTNERSHIPS AND TRUSTS OR ESTATES THAT ARE SUBJECT TO UNITED STATES FEDERAL
INCOME TAX REGARDLESS OF THE SOURCE OF THEIR INCOME.
The Policy may be purchased on a non-tax qualified basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for favorable
tax treatment ("Qualified Policy"). Qualified Policies are designed for use by
individuals whose Purchase Payments are comprised solely of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 403(b), or 408
of the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate
effect of Federal income taxes on the amounts held under a Policy, on Annuity
Payments, and on the economic benefit to the Policy Owner, the Annuitant, or the
Beneficiary depends, among other things, on the type of retirement plan, on the
tax and employment status of the individual concerned and on the employer's tax
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Policy with proceeds from a tax qualified plan and receiving
distributions from a Qualified Policy in order to continue receiving favorable
tax treatment. Therefore, purchasers of Qualified Policies should seek competent
legal and tax advice regarding the suitability of the Policy for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of the Policy. The following discussion assumes that a Qualified Policy
is purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special Federal income tax treatment.
Tax Status of the Policy
- ------------------------
The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
Taxation of Annuities
- ---------------------
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. United of Omaha believes that the Policy Owner who is a natural person
generally is not taxed on increases (if any) in the value of a Policy until
distribution occurs by withdrawing all or part of the Accumulation Value (e.g.,
partial withdrawals, full surrenders or Annuity Payments under the Payout Option
elected). For this purpose, the assignment, pledge, or agreement to assign or
pledge any portion of the Accumulation Value (and in the case of a Qualified
Policy, any portion of an interest in the qualified plan) generally will be
treated as a distribution. The taxable portion of a distribution (in the form of
a single sum payment or an annuity) is taxable as ordinary income.
The owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Policy's Accumulation
Value over the "investment in the contract" (discussed below) during the taxable
year. There are some exceptions to this rule, and a prospective Policy Owner
that is not a natural person may wish to discuss these with a competent tax
adviser.
THE FOLLOWING DISCUSSION GENERALLY APPLIES TO A POLICY OWNED BY A NATURAL
PERSON.
Surrenders and Partial Withdrawals. In the case of a surrender or partial
withdrawal (including systematic withdrawals) under a Qualified Policy, under
Section 72(e) of the Code a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
individual's total accrued benefit for balance under the retirement plan. The
"investment in the contract" generally equals the amount of any purchase
payments paid by or on behalf of any individual. For a Policy issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from a Qualified
Policy.
With respect to NONQUALIFIED POLICIES, partial withdrawals (including
systematic withdrawals) are generally treated as taxable income to the extent
that the Accumulation Value immediately before the partial withdrawal exceeds
the "investment in the contract" at that time.
- 34 -
<PAGE>
Full surrenders are treated as taxable income to the extent that the amount
received exceeds the "investment in the contract."
Annuity Payments. Although tax consequences may vary depending on the
Payout Option elected under the Policy, in general, only the portion of the
payout that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional payments is taxable.
In general there is no tax on the portion of each Annuity Payment which
represents the same ratio that the "investment in the contract" bears to the
total expected value of the Annuity Payments for the term of the payments;
however, the remainder of each Annuity Payment is taxable. Once the "investment
in the contract" has been fully recovered, the full amount of any additional
Annuity Payments is taxable. If Annuity Payments cease by reason of the death of
the Annuitant, the excess (if any) of the "investment in the contract" as of the
Annuity Starting Date over the aggregate amount of Annuity Payments received on
or after the Annuity Starting Date that was excluded from gross income is
allowable as a deduction for the last taxable year of the Annuitant.
Penalty Tax. In the case of a distribution pursuant to a Nonqualified
Policy, 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: (a) made on or after the date on which the Policy Owner attains
age 59 1/2; (b) made as a result of death or disability of a Policy Owner; (c)
received in substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the lives or life expectancies of the Policy Owner and
a "designated beneficiary"; (d) from a qualified plan; (e) allocable to
investment in the Policy before August 14, 1982; (f) under a qualified funding
asset (as defined in Code section 130(d)); (g) under an immediate annuity (as
defined in Code Section 72(u)(4)); or (h) which are purchased by an employer on
termination of certain types of qualified plans and which are held by the
employer until the employee separates from service. Other tax penalties may
apply to certain distributions under a Qualified Policy.
Death Benefit Proceeds. Amounts may be distributed from the Account because
of the death of a Policy Owner. Generally, such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full surrender as described above; or (2) if
distributed under an Annuity Payout Option, they are taxed in the same manner as
Annuity Payments, as described above.
Transfers, Assignments, or Exchanges of the Policy. A transfer of ownership
of a Policy, the designation of an Annuitant or Beneficiary who is not also the
Policy Owner, the selection of certain annuity starting dates, or the exchange
of a Policy may result in certain tax consequences to the Policy Owner that are
not discussed herein. Policy Owners contemplating any such transfer, assignment,
or exchange of a Policy should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
Multiple Policies. All nonqualified deferred annuity contracts that are
issued by United of Omaha (or its affiliates) to the same Policy Owner during
any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under section 72(e) of the
Code. 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. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and separate deferred annuity contract as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws. Any Policy Owner or prospective Policy
Owner contemplating the purchase of more than one annuity in a calendar year
should consult a tax advisor.
Withholding. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not to have
tax withheld from distributions. Effective January 1, 1994, distributions from
certain qualified plans are generally subject to mandatory withholding. Certain
states also require withholding of state income taxes whenever federal income
taxes are withheld.
Possible Changes in Taxation. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
nonqualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although as of the date of this
prospectus Congress is not actively considering any legislation regarding the
taxation of 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).
Other Tax Consequences. As noted above, the foregoing discussion of the
Federal income tax consequences under the Policy is not exhaustive and special
rules are provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal income tax consequences discussed herein
reflect United of Omaha's understanding of current law and the law may change.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Policy depend on
the individual circumstances of each Policy Owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
- 35 -
<PAGE>
Qualified Plans
- ---------------
The Policy may be used with certain qualified plans as described in the
following paragraphs. The tax rules applicable to Policy Owners in qualified
plans, including restrictions on contributions and benefits, taxation of
distributions and any tax penalties, vary according to the type of plan and the
terms and condition of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, aggregate distributions in excess
of $155,000 annually, distribution that do not satisfy specified requirements
and certain other transactions with respect to qualified plans. Therefore, no
attempt is made to provide more than general information about the use of the
Policy with qualified plans. Policy Owners, Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under qualified plans
may be subject ot the terms and conditions of the plans themselves, regardless
of the provisions of the Policy. Some retirement plans are subject to
distribution and other requirements that are not incorporated in United of
Omaha's Policy provisions or administration procedures. Policy Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the Policy
comply with applicable law. Following are brief descriptions of the
circumstances in which United of Omaha will issue the Policy in connection with
qualified plans. When issued in connection with a qualified plan, the Policy
will be amended to conform with certain requirements of the Code, and this
amendment must be approved by the applicable State Insurance Department before
the Policy is available for use with a qualified plan. The Policy may not be
available in all States for all types of qualified plans.
Qualified Pension or Profit Sharing Plans. Section 401(a) of the Code
permits employers to establish retirement plans for employees and also permits
self-employed individuals to establish retirement plans for themselves and their
employees. Subject to the Policy's purchase payment limits, the Policy may be
issued to the trustee of such plan if the trustee is the Owner and Beneficiary
of the Policy, if the trustee or the employer selects the Policy as a plan
investment, and if the trustee arranges for plan services from a party other
than United of Omaha (unless an officer of United of Omaha agrees in writing to
perform services before the Policy is issued). If the participant directs
investments under the plan, an individual Policy must be issued for each
participant. Purchasers of a Policy for use with such plans should seek
competent advice regarding the suitability of the Policy to their specific
needs. Adverse tax or other legal consequences to the plan, the participant or
to both may result if the Policy is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan establishes compliance with
all legal requirements applicable to such benefits prior to transfer of the
Policy.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity ("IRA"). Also, distribution from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis to an IRA.
Subject to the Policy's purchase payment limits, the Policy may be issued as an
IRA. Purchasers of a Policy for use as an IRA will be provided with supplemental
information required by the Internal Revenue Service. Such purchasers will have
the right to revoke their purchase within seven days of the earlier of the
establishment of the IRA or their purchase. Purchasers should seek competent
advice as to the suitability of the Policy to their specific needs. An IRA
cannot be assigned.
Tax Sheltered Annuities. Section 403(b) of the Code permits public school
employees and employees of certain types of religious, charitable, educational
and scientific organizations specified in Section 501(c)(3) of the Code to
direct the purchase of annuity contracts and, subject to certain limitations,
exclude the amount of purchase payments from gross income for income tax
purposes. This Section 403(b) annuity contract is commonly referred to as a "Tax
Sheltered Annuity". Subject to the Policy's purchase payment limits, the Policy
may be issued as a Tax Sheltered Annuity if each purchase payment is a direct
transfer from another Tax Sheltered Annuity Policy. The Policy may not be issued
to accept direct purchase payments from an employer's payroll office. In
addition, the Policy prohibits withdrawals or distributions except upon the
Annuitant's death, attainment of age 59 1/2, separation from service or
disability; and the Policy does not provide for hardship withdrawals. Purchasers
of a Policy for use as a Tax Sheltered Annuity should seek competent advice as
to the suitability of the Policy to their specific needs. A Tax Sheltered
Annuity cannot be assigned.
DISTRIBUTOR OF THE POLICIES
---------------------------
Mutual of Omaha Investor Services ("MOIS"), 10235 Regency Circle, Omaha
Nebraska 68114, is the principal underwriter of the Policies. Like United of
Omaha, MOIS is a 100% owned subsidiary of Mutual of Omaha Insurance Company.
MOIS has entered or will enter into one or more contracts with various
broker-dealers for the distribution of the Policies. MOIS is registered with the
Securities and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. Commissions paid to a
broker-dealer will be up to 7% of Purchase Payments.
- 36 -
<PAGE>
VOTING RIGHTS
-------------
To the extent required by law, United of Omaha will vote Series Fund shares
held by the Variable Account at regular and special shareholder meetings of the
Series Funds in accordance with instructions received from persons having voting
interests in the portfolios. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should be
amended or if the present interpretation thereof should change, and as a result
United of Omaha determines that it is permitted to vote Series Fund shares in
its own right, it may elect to do so. The Series Funds may not hold routine
annual Shareholder meetings.
The Policy Owner holds the voting interest in the selected Portfolios. The
number of votes that an Owner has the right to instruct will be calculated
separately for each Subaccount. The number of votes that an Owner has the right
to instruct for a particular Subaccount will be determined by dividing his or
her Accumulation Value in the Subaccount by the net asset value per share of the
corresponding Portfolio in which the Subaccount invests. Fractional shares will
be counted. Each Owner having a voting interest in a Subaccount will receive
proxy material, reports, and other materials relating to the appropriate
Portfolio.
LEGAL PROCEEDINGS
-----------------
There are no legal proceedings to which the Variable Account is a party or
to which the assets of the Variable Account are subject. United of Omaha is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Variable Account.
- 37 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
TABLE OF CONTENTS
-----------------
Page
The Policy-General Provisions........................................ 2
Owner and Joint Owner........................................... 2
Death of Annuitant.............................................. 2
Entire Policy ................................................. 2
Incontestability ............................................... 2
Deferment of Payment and Transfers.............................. 2
Misstatement of Age or Sex...................................... 2
Nonparticipating................................................ 3
Assignment .................................................. 3
Evidence of Age or Survival..................................... 3
Federal Tax Matters . . . . ......................................... 3
Tax Status of the Policy........................................ 3
Taxation of United of Omaha..................................... 4
State Regulation of United of Omaha ................................. 4
Administration . . . . . . . . ...................................... 5
Records and Reports ................................................. 5
Distribution of the Policies ........................................ 5
Custody of Assets . . . . . . . ..................................... 5
Historical Performance Data.......................................... 5
Money Market Yields ............................................ 6
Other Subaccount Yields ........................................ 6
Total Returns . . . . . . ..................................... 7
Other Performance Data.......................................... 7
Legal Matters . . . . .............................................. 7
Other Information . . . . . . ....................................... 8
Financial Statements . . . . . ..................................... 8
- 38 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
-----------------------------------------
Issued through: UNITED OF OMAHA SEPARATE ACCOUNT C
Offered by: UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza
Omaha, Nebraska 68175
This Statement of Additional information expands upon subjects discussed in
the current Prospectus for the Ultrannuity Series V Variable Annuity Policy (the
"Policy") offered by United of Omaha Life Insurance Company. You may obtain a
copy of the Prospectus dated May 1, 1996 by calling 1-800-238-9354 or by writing
to the Service Office: United of Omaha Annuity Service Division, P.O. Box
419472, Kansas City, MO 64141-6472. Terms used in the current Prospectus for the
Policy are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE POLICY AND THE SERIES
FUNDS
Dated: May 1, 1996
TABLE OF CONTENTS
-----------------
Page
The Policy-General Provisions .................................. 2
Owner and Joint Owner................................... 2
Death of Annuitant...................................... 2
Entire Policy .................................................. 2
Incontestability ....................................... 2
Deferment of Payment and Transfers...................... 2
Misstatement of Age or Sex.............................. 2
Nonparticipating........................................ 3
Assignment.............................................. 3
Evidence of Age or Survival............................. 3
Federal Tax Matters (33)........................................ 3
Tax Status of the Policy................................ 3
Taxation of United of Omaha............................. 4
State Regulation of United of Omaha............................. 4
Administration ................................................. 5
Records and Reports............................................. 4
Distribution of the Policies (26)............................... 4
Custody of Assets............................................... 5
Historical Performance Data (18)................................ 5
Money Market Yields..................................... 6
Other Subaccount Yields................................. 6
Total Returns........................................... 7
Other Performance Data.................................. 7
Legal Matters................................................... 10
Other Information............................................... 11
Financial Statements (13)....................................... 11
(Numbers in parentheses indicate corresponding sections of the Prospectus).
<PAGE>
In order to supplement the description in the Prospectus, the following
provides additional information about United of Omaha and the Policy which may
be of interest to an Owner.
THE POLICY - GENERAL PROVISIONS
-------------------------------
Owner and Joint Owner
- ---------------------
While the Owner is alive, only the Owner may exercise the rights under
the Policy. Ownership may be changed as described below under "Assignment." If
there are joint Owners, the signatures of both Owners are needed to exercise
rights under the Policy. If the Annuitant is other than the Owner, the Annuitant
has no rights under the Policy.
Death of Annuitant
- ------------------
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of the Owner rather than of the Annuitant.
If the Annuitant is not an Owner and the Annuitant dies before the
Annuity Starting Date, the Owner may name a new Annuitant if such Owner(s) is
not a corporation or other non-individual. If the Owner does not name a new
Annuitant, the Owner will become the Annuitant.
Entire Contract
- ---------------
The entire contract is the Policy, data page, any riders and the signed
application, a copy of which will be attached to the Policy. All statements made
in the application will be deemed representations and not warranties. No
statement, unless it is in the application, will be used by United of Omaha to
contest the Policy or deny a claim.
Any change of the Policy and any riders requires the consent of the
president, vice president, assistant vice president, the secretary or assistant
secretary of United of Omaha. No agent or Registered Representative has
authority to change or waive any provision of the Policy.
United of Omaha reserves the right to amend the Policies to meet the
requirements of, or take advantage of, the Internal Revenue Code, regulations or
published rulings. A Policy Owner can refuse such a change by giving Written
Notice, but a refusal may result in adverse tax consequences.
Deferment of Payment and Transfers
- ----------------------------------
United of Omaha will usually pay any amounts payable from the Variable
Account as a result of a partial withdrawal or cash surrender within seven days
after receiving written request at the Service Office in a form satisfactory to
United of Omaha. United of Omaha can postpone such payments or any transfers of
amounts between Subaccounts or into the Fixed Account if:
(a) the New York Stock Exchange is closed for other than customary
weekend and holiday closings;
(b) trading on the New York Stock Exchange is restricted;
(c) an emergency exists as determined by the Securities Exchange
Commission, as a result of which it is not reasonably practical to
dispose of securities, or not reasonably practical to determine the
value of the net assets of the Variable Account; or
(d) the Securities Exchange Commission permits delay for the protection
of security holders. The applicable rules of the Securities Exchange Commission
will govern as to whether the conditions in (c) or (d) exist.
United of Omaha may defer payment of partial withdrawals or a surrender
from the Fixed Account for up to six months from the date written request is
received at the Service Office.
Incontestability
- ----------------
United of Omaha will not contest the validity of the Policy after it has
been in force during the lifetime of the Owner for two years from the Date of
Issue.
Misstatement of Age or Sex
- --------------------------
United of Omaha may require proof of the age of the Annuitant before
making any life annuity payment. If the age or sex of the Annuitant has been
misstated, the Annuity Starting Date and Annuity Payments will be determined
using the correct age and sex. If misstatement of age or sex results in Annuity
Payments that are too large, the overpayments will be deducted from future
Annuity Payments. If United of Omaha has made payments that are too small, the
underpayments will be added to the next payment. Adjustments for overpayments or
underpayments will include 6% interest.
- 2 -
<PAGE>
Nonparticipating
- ----------------
No dividends will be paid. Neither the Owner nor the Beneficiary will
have the right to share in United of Omaha's surplus earnings or profits.
Assignment
- ----------
The Owner may change the ownership of the Policy or pledge it as
collateral by assigning it. No assignment will be binding on United of Omaha
until United of Omaha records and acknowledges it. The rights of any Payee will
be subject to a collateral assignment.
If the named Beneficiary is irrevocable, a change of ownership or a
collateral assignment may be made only by joint written request from the Owner
and the named Beneficiary. On the Annuity Starting Date, the Owner may select
another Payee, but the Owner retains all rights of ownership unless the Owner
signs an absolute assignment.
Evidence of Age or Survival
- ---------------------------
United of Omaha reserves the right to require proof of the age or
survival of any Owner, Annuitant or Payee. No payment will be made until United
of Omaha receives such proof.
Variable Annuity Units. All variable annuity payments other than the
first are determined by means of Variable Annuity Units credited to the Policy
with respect to the particular Payee. The number of Variable Annuity Units for
each applicable subaccount is the amount of the first annuity payment
attributable to that subaccount divided by the Annuity Unit Value for that
subaccount as of the Annuity Starting Date. The number of Variable Annuity Units
of each particular subaccount credited with respect to the Payee or Annuitant
then remains fixed unless a transfer of Variable Annuity Units is made as
described below. The number of Variable Annuity Units will not change as a
result of investment experience.
For any Valuation Period, the value of a Variable Annuity Unit of
a particular subaccount is the Variable Annuity Unit value during the last
Valuation Period for that particular Subaccount, multiplied by the Net
Investment Factor for that subaccount for the current Valuation Period. The
value of a subaccount may increase or decrease from one Valuation Period to the
next.
The Net Investment Factor for any subaccount for any Valuation
Period is determined by dividing (a) by (b) and then subtracting (c) from the
result where:
(a) is the net result of:
(1)the net asset value of a Portfolio share held in the subaccount
determined as of the end of the current Valuation Period, plus
(2)the per share amount of any declared and unpaid dividends or
capital gains accruing to that Portfolio, plus or minus
(3)a per share credit or charge with respect to any taxes paid or
reserved for by United of Omaha during the Valueation Period
which is determined by United of Omaha to be attributable to the
operations of the subaccount;
(b) is the net asset value per share of the Fund held in the subaccount
determined as of the end of the preceding Valuation Period plus or
minus the per share credit or charge with respect to any taxes paid
or reserved for the preceding Valuation Period; and
(c) is the asset charge factor determined by United of Omaha for the
Valuation Period to reflect the Mortality and Expense Risk Charge
and the Administrative Expense Charge deducted from the Variable
Account. This factor is equal, on an annual basis, to 1.20% of the
net asset value of the Variable Account.
The result is then multiplied by a factor that offsets the Assumed Investment
Rate used to establish the Annuity Payment Rates found in the applicable
Contract, which allows the actual investment rate to be credited. For a one day
Valuation Period the factor is 0.99989255 using an Assumed Investment Rate of 4%
per year.
FEDERAL TAX MATTERS
-------------------
Tax Status of the Policy
- ------------------------
Diversification Requirements. Section 817(h) of the Internal Revenue
Code provides that in order for a variable contract which is based on a
segregated asset account to qualify as an annuity contract under the Code, the
investments made by such account must be "adequately diversified" in accordance
with Treasury regulations. The Treasury regulations issued under Section 817(h)
(Treas. Reg. ss. 1.817-5) apply a diversification requirement to each of the
Subaccounts of the Variable Account. The Variable Account, through the Series
Funds and their Portfolios, intends to comply with those diversification
requirements. United of Omaha and the Series Funds have entered into agreements
regarding partici-
- 3 -
<PAGE>
pation in the Series Funds that requires the Series Funds and their Portfolios
to be operated in compliance with the Treasury regulations.
Owner Control. In certain circumstances, owners of variable annuity
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
includible 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
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 policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under the Policy 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
policy 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,
United of Omaha does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. United of Omaha therefore reserves the right to modify the Policy as
necessary to attempt to prevent an Owner from being considered the owner of a
pro-rata share of the assets of the Variable Account or to otherwise qualify the
Policy for favorable tax treatment.
Distribution Requirements. The Code also requires that Nonqualified
Policies contain specific provisions for distribution of Policy Proceeds upon
the death of an Owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such Policies provide that if an
Owner dies on or after the Annuity Starting Date and before the entire interest
in the Policy has been distributed, the remaining portion must be distributed at
least as rapidly as under the method in effect on the Owner's death. If an Owner
dies before the Annuity Starting Date, the entire interest in the Policy must
generally be distributed within five years after the Owner's date of death,
these requirements are considered to be satisfied if the entire interest in the
Policy is used to purchase an immediate annuity under which payments will begin
within one year of the Owner's death and will be made for the life of the
Beneficiary or for a period not extending beyond the life expectancy of the
Beneficiary. If the Beneficiary is the deceased Owner's surviving spouse, the
Policy may be continued with the Owner's surviving spouse as the new Owner. The
Policy contains provisions intended to comply with these requirements of the
Code. No regulations interpreting these requirements of the Code have yet been
issued and thus no assurance can be given that the provisions contained in the
Policies satisfy all such Code requirements. The provisions contained in the
Policies will be reviewed and modified if necessary to assure that they comply
with the Code requirements when clarified by regulation or otherwise.
Taxation of United of Omaha
- ---------------------------
United of Omaha at present is taxed as a life insurance company under
part I of Subchapter L of the Code. The Variable Account is treated as part of
United of Omaha and, accordingly, will not be taxed separately as a "regulated
investment company" under Subchapter M of the Code. United of Omaha does not
expect to incur any federal income tax liability with respect to investment
income and net capital gains arising from the activities of the Variable Account
retained as part of the reserves under the Policy. Based on this expectation, it
is anticipated that no charges will be made against the Variable Account for
federal income taxes. If, in future years, any federal income taxes or related
economic burdens are incurred by United of Omaha with respect to the Variable
Account, United of Omaha may make a charge to the Variable Account.
STATE REGULATION OF UNITED OF OMAHA
-----------------------------------
United of Omaha is subject to the laws of Nebraska governing insurance
companies and to regulation by the Nebraska Division of Insurance. An annual
statement in a prescribed form is filed with the Department of Insurance each
year covering the operation of United of Omaha for the preceding year and its
financial condition as of the end of such year. Regulation by the Department of
Insurance includes periodic examination to determine United of Omaha's contract
liabilities and reserves so that the Department may certify the items are
correct. United of Omaha's books and accounts are subject to review by the
Department of Insurance at all times and a full examination of its operations is
conducted periodically by the National Association of Insurance Commissioners.
In addition, United of Omaha is subject to regulation under the insurance laws
of other jurisdictions in which it may operate.
- 4 -
<PAGE>
ADMINISTRATION
--------------
United of Omaha has an administrative services agreement with
Continuum/Vantage Computer Systems, (the "Administrator"), P.O. Box 419472,
Kansas City, Missouri 64141-6472. The services provided by the Administrator
under the agreement include issuance and redemption of the Policies, maintenance
of records concerning the Policies, and certain valuation services.
If the Administrator does not continue to provide these services because
the administrative services agreement is not renewed or for any other reason,
United of Omaha will attempt to secure similar services from such sources as may
then be available. Services will be purchased on a basis which, in United of
Omaha's sole discretion, affords the best service at the lowest cost. United of
Omaha, however, reserves the right to select a provider of services which United
of Omaha its sole discretion, considers best able to perform such services in a
satisfactory manner even though the costs for the service may be higher than
would prevail elsewhere. If United of Omaha does not secure these services on a
basis which it deems satisfactory, it may elect to perform all or any part of
the services itself or through a subsidiary or affiliate.
RECORDS AND REPORTS
-------------------
All records and accounts relating to the Variable Account will be
maintained by United of Omaha or by its Administrator. As presently required by
the Investment Company Act of 1940 and regulations promulgated thereunder,
United of Omaha will mail to all Policy Owners at their last known address of
record, at least annually, financial statements of the Variable Account and such
other information as may be required under that Act or by any other applicable
law or regulation. Policy Owners will also receive confirmation of each
financial transaction and any other reports required by applicable state and
federal laws, rules, and regulations.
DISTRIBUTION OF THE POLICIES
----------------------------
The Policies are offered to the public through brokers licensed under
the federal securities laws and state insurance laws. The offering of the
Policies is continuous and United of Omaha does not anticipate discontinuing the
offering of the Policies. However, United of Omaha reserves the right to
discontinue the offering of the Policies.
Mutual of Omaha Investor Services, Inc. ("MOIS") will be the principal
underwriter of the Policies. The Policies will be distributed by MOIS through
retail broker-dealers. Commissions payable to a broker-dealer will be up to 7.5%
of Purchase Payments. For the fiscal year ended December 31, 1995, United of
Omaha paid $27,813,768 in total compensation to MOIS; of this amount MOIS
retained $41,741 as concessions for its services as Principal Underwriter and
for distribution concessions, with the remaining amount paid to other
broker-dealers.
CUSTODY OF ASSETS
-----------------
The assets of each of the Subaccounts of the Variable Account are held
by United of Omaha. The assets of the Variable Account are segregated and held
separate and apart from United of Omaha's general account assets. United of
Omaha or the Administrator maintains records of all purchases and redemptions of
shares of the Series Funds held by each of the Subaccounts. Additional
protection for the assets of the Variable Account is afforded by United of
Omaha's fidelity bond, presently in the amount of $10 million, covering the acts
of officers and employees of United of Omaha.
HISTORICAL PERFORMANCE DATA
---------------------------
From time to time, United of Omaha may disclose yields, total returns,
and other performance data pertaining to the Policies for a Subaccount. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the Securities and Exchange
Commission.
The yields and total returns of the Subaccounts of the Variable Account
normally will fluctuate over time. THEREFORE, THE DISCLOSED YIELDS AND TOTAL
RETURNS FOR ANY GIVEN PAST PERIOD ARE NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. A Subaccount's actual yield and total return
is affected by the types and quality of portfolio securities held by the
Portfolio and its operating expenses.
Because of the charges and deductions imposed under a Policy, the yields
and total returns for the Subaccounts will be lower than the yields and total
returns for their respective Portfolios. The yield figures will not reflect the
Withdrawal Charge. The calculations of yields, total returns, and other
performance data do not reflect the effect of any premium tax charge that may be
applicable to a particular Policy. Premium taxes currently range for 0% to 3.5%
of Purchase Payments based on the state in which the Policy is sold. For the
class of Policies issued with the Elective Death Benefit Amendment, the Death
Benefit Charge is reflected.
- 5 -
<PAGE>
Money Market Yields
From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the Money Market Portfolio or on its portfolio
securities. As of 12/31/95, this current annualized yield is $3.45.
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) at the end of the seven-day period in the value
of a hypothetical account under a Policy having a balance of one Accumulation
Unit of the Money Market Subaccount 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: (1) net income from the Portfolio
attributable to the hypothetical account; and (2) charges and deductions imposed
under the Policy which are attributable to the hypothetical account. The charges
and deductions include the per Unit charges for the hypothetical account for:
(1) the annual Policy Fee; (2) the Administrative Expense Charge; and (3) the
Mortality and Expense Risk Charge. The $30 annual Policy Fee is reflected as an
annual 0.10% charged daily, based on an anticipated average Accumulation Value
of $30,000. Yield figures will not reflect the Withdrawal Charge.
Because of the charges and deductions imposed under the Policy, the
yield for the Money Market Subaccount will be lower than the yield for the Money
Market Portfolio.
The Securities and Exchange Commission also permits United of Omaha to
disclose the effective yield of the Money Market Subaccount 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 current and effective yields on amounts held in the Money Market
Subaccount 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 Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Portfolio, the types of quality of
portfolio securities held by the Money Market Portfolio and the Money Market
Portfolio's operating expenses. Yields figures do not reflect the effect of any
Withdrawal Charge that may be applicable to a Policy. For the class of Policies
issued with the Elective Death Benefit Amendment, the Death Benefit Charge is
included.
Other Subaccount Yields
- -----------------------
From time to time, sales literature or advertisements may quote the
current annualized yield of one or more of the Subaccounts (except the Money
Market Subaccount) for a Policy for 30-day or one-month periods. The annualized
yield of a Subaccount refers to income generated by the Subaccount over a
specific 30-day or one-month period. Because the yield is annualized, the yield
generated by a Subaccount during a 30-day or one-month period is assumed to be
generated each period over a 12-month period.
The yield is computed by: (a) dividing the net investment income of the
Portfolio attributable to the Subaccount Accumulation Units less Subaccount
expenses for the period by the maximum offering price per Accumulation Unit on
the last day of the period times the daily average number of units outstanding
for the period; (b) compounding that yield for a six-month period; and (c)
multiplying that result by 2. Expenses attributable to the Subaccount include:
(a) the annual Policy Fee; (b) the Administrative Expense Charge; and (c) the
Mortality and Expense Risk Charge. The $30 annual Policy Fee is reflected as an
annual 0.10% charged daily in the yield calculation, based on an anticipated
average Accumulation Value of $30,000. For the class of Policies issued with the
Elective Death Benefit Amendment, the Death Benefit Charge is included. The
30-day or one-month yield is calculated according to the following formula:
Yield = 2 {a-b + 1} 6 - 1]
---
[ cd ]
Where:
a =-- net income of the Portfolio for the 30-day or one-month
period attributable to the Subaccount's Accumulation Units.
b =-- expenses of the Subaccount for the 30-day or one-month period.
c =-- the average number of Accumulation Units outstanding.
d =-- the Accumulation Unit value at the close of the last day in
the 30-day or one-month period.
Because of the charges and deductions imposed under the Policies, the
yield for a Subaccount will be lower than the yield for the corresponding Series
Fund Portfolio.
Yield calculations do not take into account the Withdrawal Charge under
the Policy (a maximum of 7% of the Purchase Payments surrendered or withdrawn).
- 6 -
<PAGE>
Average Annual Total Returns
- ----------------------------
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Subaccounts for various
periods of time.
When a Subaccount has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Until a Subaccount has been in operation for 10 years, United of Omaha
will always include quotes of average annual total return for the period
measured from the date the Policies were first offered for sale. Average annual
total returns for other periods of time may, from time to time, also be
disclosed.
Average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a Policy
to the redemption value of that investment as of the last day of each of the
periods. Average annual total returns will be calculated using Subaccount
Accumulation Unit values which United of Omaha calculates at the end of each
Valuation Period based on the performance of the Subaccount's underlying
Portfolio, the deductions for (a) the annual Policy Fee; (b) the Administrative
Expense Charge; and (c) the Mortality and Expense Risk Charge. The $30 annual
Policy Fee is reflected as an annual 0.10% charged daily in the calculation of
average annual total returns, based on an anticipated average Accumulation Value
of $30,000. The calculation also assumes surrender of the Policy at the end of
the period for the return quotation. Standard total returns will therefore
reflect a deduction of any applicable Withdrawal Charge. For the class of
Policies issued with the Elective Death Benefit Amendment, the deduction for the
Death Benefit Charge is also reflected. The total return will then be calculated
according to the following formula:
P(1+TR) n = ERV
Where:
P = -- a hypothetical initial Purchase Payment of $1,000.
TR = -- the average annual total return.
ERV = -- the ending redeemable value (net of any applicable
Withdrawal Charge) of the hypothetical account at the end
of the period.
n =-- the number of years in the period.
Hypthetical Performance Data. United of Omaha may, from time to time,
also disclose yield, standard total returns, and non-standard total returns for
the Portfolios of the Series Funds, including such disclosure for periods prior
to the dates the Subaccounts commenced operations. For periods prior to the date
the Subaccount commenced operations, performance information for Policies will
be calculated based on the performance of the Series Fund Portfolios and the
assumption that the Subaccounts were in existence for the same periods as those
indicated for the Series Fund Portfolios, with the level of Policy charges that
were in effect at the inception of the Subaccounts (this is referred to as
"hypothetical" performance data). Such standardized but "hypothetical average
annual total return information for the Subaccounts of Policies is as follows:
- 7 -
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================
SUBACCOUNT STANDARDIZED "HYPOTHETICAL" For 1 Yr For 5 Yr For period from
AVERAGE ANNUAL TOTAL RETURN TABLE period ended period ended inception to
12/31/95 12/31/95 12/31/95
Subaccount (date of inception of corresponding Portfolio) % % %
(Policy issued without Enhanced Death Benefit
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 28.35 19.92 17.87
Alger American Small Capitalization (9/21/88) 36.19 18.78 21.03
Federated Prime Money Fund II (11/18/94) -2.46 N/A -1.95
Federated Fund for U.S. Government Securities (3/29/94) 1.07 N/A 1.54
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 15.26
Fidelity VIP Equity Income(10/9/86) 27.09 19.52 11.89
Fidelity VIP II Contrafund (1/3/95) N/A N/A 31.56
MFS Emerging Growth (6/1/95) N/A N/A 18.59
MFS High Income (6/1/95) N/A N/A 9.87
MFS Research (6/1/95) N/A N/A 13.49
MFS World Government (6/1/94) 6.62 N/A 4.25
Scudder International (5/1/87) 3.39 8.60 7.99
T. Rowe Price International (3/194) 3.45 N/A 2.46
T. Rowe Price New America Growth (3/1/94) 42.90 N/A 22.59
T. Rowe Price Equity Income (3/1/94) 26.76 N/A 18.61
T. Rowe Price Limited Term Bond (5/17/94) 2.17 N/A 2.46
T. Rowe Price Personal Styrategy Balanced (12/31/94) 20.73 N/A 20.73
- --------------------------------------------------------------------------------------------------------------
Subaccount (date of inception of corresponding Portfolio)
(Policy issued with Enhanced Death Benefit)
- --------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 26.20 19.15 17.37
Alger American Small Capitalization (9/21/88) 33.56 18.05 20.61
Federated Prime Money Fund II (11/18/94) -2.68 N/A -1.42
Federated Fund for U.S. Government Securities (3/29/94) 0.63 N/A 1.61
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 13.84
Fidelity VIP Equity Income(10/9/86) 25.02 18.75 11.50
Fidelity VIP II Contrafund (1/3/95) N/A N/A 29.22
MFS Emerging Growth (6/1/95) N/A N/A 17.87
MFS High Income (6/1/95) N/A N/A 9.49
MFS Research (6/1/95) N/A N/A 14.75
MFS World Government (6/1/94) 5.83 N/A 4.22
Scudder International (5/1/87) 2.81 8.05 7.02
T. Rowe Price International (3/194) 2.86 N/A 2.47
T. Rowe Price New America Growth (3/1/94) 39.85 N/A 21.53
T. Rowe Price Equity Income (3/1/94) 24.70 N/A 17.76
T. Rowe Price Limited Term Bond (5/17/94) 1.66 N/A 2.50
T. Rowe Price Personal Styrategy Balanced (12/31/94) 19.06 N/A 19.06
==============================================================================================================
</TABLE>
Such non-standardized (i.e., assuming no withdrawal charge) but hypothetical
average annual total return information for the Subaccounts is as follows:
- 8 -
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================
SUBACCOUNT NON-STANDARDIZED For 1 Yr For 5 Yr For period from
"HYPOTHETICAL" period ended period ended inception to
AVERAGE ANNUAL TOTAL RETURN TABLE 12/31/95 12/31/95 12/31/95
% % %
Subaccount (date of inception of corresponding Portfolio)
(Policy issued without Enhanced Death Benefit
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 34.65 20.18 17.92
Alger American Small Capitalization (9/21/88) 42.49 19.05 21.03
Federated Prime Money Fund II (11/18/94) 3.84 N/A 3.72
Federated Fund for U.S. Government Securities (3/29/94) 7.37 N/A 5.07
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 21.56
Fidelity VIP Equity Income(10/9/86) 33.39 19.78 11.89
Fidelity VIP II Contrafund (1/3/95) N/A N/A 37.86
MFS Emerging Growth (6/1/95) N/A N/A 18.59
MFS High Income (6/1/95) N/A N/A 9.87
MFS Research (6/1/95) N/A N/A 13.49
MFS World Government (6/1/94) 12.92 N/A 8.18
Scudder International (5/1/87) 9.69 8.98 7.99
T. Rowe Price International (3/194) 9.75 N/A 5.94
T. Rowe Price New America Growth (3/1/94) 49.20 N/A 25.65
T. Rowe Price Equity Income (3/1/94) 33.06 N/A 21.74
T. Rowe Price Limited Term Bond (5/17/94) 8.46 N/A 6.21
T. Rowe Price Personal Styrategy Balanced (12/31/94) 27.03 N/A 27.03
- --------------------------------------------------------------------------------------------------------------
Subaccount (date of inception of corresponding Portfolio)
(Policy issued with Enhanced Death Benefit)
- --------------------------------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 34.19 19.77 17.51
Alger American Small Capitalization (9/21/88) 42.01 18.64 20.61
Federated Prime Money Fund II (11/18/94) 3.48 N/A 3.34
Federated Fund for U.S. Government Securities (3/29/94) 7.00 N/A 4.71
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 21.14
Fidelity VIP Equity Income(10/9/86) 32.93 19.37 11.50
Fidelity VIP II Contrafund (1/3/95) N/A N/A 37.39
MFS Emerging Growth (6/1/95) N/A N/A 17.87
MFS High Income (6/1/95) N/A N/A 9.49
MFS Research (6/1/95) N/A N/A 14.89
MFS World Government (6/1/94) 12.53 N/A 7.80
Scudder International (5/1/87) 9.31 8.61 7.62
T. Rowe Price International (3/194) 9.37 N/A 5.57
T. Rowe Price New America Growth (3/1/94) 48.69 N/A 25.22
T. Rowe Price Equity Income (3/1/94) 32.61 N/A 21.33
T. Rowe Price Limited Term Bond (5/17/94) 8.09 N/A 5.83
T. Rowe Price Personal Styrategy Balanced (12/31/94) 26.60 N/A 26.60
==============================================================================================================
</TABLE>
THE FIGURES ABOVE ARE NOT AN INDICATION OF PRESENT, PAST, OR FUTURE PERFORMANCE
OF THE APPLICABLE SUBACCOUNTS OR OF THE ACTUAL PORTFOLIOS AVAILABLE UNDER THE
POLICY.
United of Omaha may disclose Cumulative Total Returns in conjunction
with the standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = -- The Cumulative Total Return net of Subaccount recurring
charges for the period.
ERV = -- The ending redeemable value of the
hypothetical investment at the end of the period.
P = -- A hypothetical initial Purchase Payment of $1,000.
- 9 -
<PAGE>
Other Information
- -----------------
The following is a partial list of those publications which may be cited
in the Series Funds' advertising shareholder materials which contain articles
describing investment results or other data relative to one or more of the
Subaccounts. Other publications may also be cited.
Across the Board Consumer Reports Insurance Week
Advertising Age Economist Journal of Accountancy
American Banker Financial Planning Journal of the American Society
Barron's Financial World of CLU & ChFC
Best's Review Forbes Journal of Commerce
Broker World Fortune Life Association News
Business Insurance Inc. Life Insurance Selling
Business Month Institutional Investor Manager's Magazine
Business Week Insurance Forum Market Facts
Changing Times Insurance Sales Money
LEGAL MATTERS
-------------
Legal advice relating to certain matters under the federal securities
laws applicable to the issue and sale of the Policies has been provided to
United of Omaha by Sutherland, Asbill & Brennan, of Washington D.C. All matters
of state law, including the validity of the Policy and United of Omaha's
authority to issue the Policy, have been passed upon by Lawrence F. Harr,
Executive Counsel of United of Omaha.
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
Policies 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 the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies 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
--------------------
This Statement of Additional Information contains financial statements
for the Variable Account as of December 31, 1995. Coopers & Lybrand, 1200
Landmark Center, 1299 Farnam Suite 1000, Omaha, Nebraska 68102-1842 serves as
independent auditors for the Variable Account, and in that capacity audits the
Accounts Financial Statements.
The Financial Statements of United of Omaha as of December 31, 1995,
1994 and 1993 included in this Registration Statement have also been audited by
Coopers & Lybrand, Omaha, Nebraska. The financial statements of United of Omaha
should be considered only as bearing on the ability of United of Omaha to meet
its obligations under the Policies. They should not be considered as bearing on
the investment performance of the assets held in the Variable Account.
- 10 -
<PAGE>
UNITED OF OMAHA
LIFE INSURANCE COMPANY
REPORT ON AUDITS OF
FINANCIAL STATEMENTS
for the years ended
December 31, 1995, 1994 and 1993
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying balance sheets of United of Omaha Life
Insurance Company (a Nebraska corporation and a wholly-owned subsidiary of
Mutual of Omaha Insurance Company) as of December 31, 1995 and 1994, and the
related statements of operations, capital and surplus, and cash flow for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United of Omaha Life Insurance
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flow for each of the three years in the period ended December 31, 1995
in conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of Nebraska, which are considered generally accepted
accounting principles for wholly-owned subsidiaries of mutual life and health
and accident insurance companies.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
February 23, 1996
1
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31, 1995 and 1994
(in thousands)
ADMITTED ASSETS 1995 1994
---- ----
<S> <C> <C>
Bonds (Notes 2 and 3) $5,348,682 $4,461,418
Preferred stocks (Note 2) 2,967 2,967
Common stocks (Note 2) 215,614 213,357
Mortgage loans (Note 2) 1,039,336 1,140,422
Real estate occupied by the Company, net of accumulated depreciation
of $48,176 in 1995 and $44,410 in 1994 89,366 92,606
Real estate acquired in satisfaction of debt, net of accumulated
depreciation of $4,007 in 1995 and $3,659 in 1994 53,812 45,619
Investment real estate, net of accumulated depreciation
of $14,052 in 1995 and $17,224 in 1994 13,234 23,391
Policy loans 111,335 104,842
Cash and short-term investments (Note 2) 176,000 109,062
Other invested assets 46,272 26,842
---------- ----------
Total cash and invested assets 7,096,618 6,220,526
Premiums deferred and uncollected 85,015 74,022
Investment income due and accrued 73,470 67,702
Separate accounts 156,212 83,788
EDP equipment 53,474 51,950
Receivable from parent, subsidiaries and affiliates (Note 6) 7,671 13,489
Other (Note 3) 70,443 60,225
---------- ----------
Total admitted assets $7,542,903 $6,571,702
========== ==========
LIABILITIES
Aggregate reserve for policies and contracts (Note 6) $4,724,703 $3,942,869
Liability for premium and other deposit funds (Note 10) 1,746,619 1,757,187
Policy and contract claims (Note 6) 48,022 44,631
Other 71,293 59,699
---------- ----------
Total policy reserves 6,590,637 5,804,386
Interest maintenance reserve 25,378 25,725
Asset valuation reserve 106,346 99,863
General expenses due or accrued (Note 5) 32,866 28,966
Federal income taxes due or accrued (Note 4) 17,342 3,771
Separate accounts 156,184 83,779
Other (Note 3) 101,537 75,246
---------- ----------
Total liabilities 7,030,290 6,121,736
---------- ----------
CAPITAL AND SURPLUS
Capital stock, $10 par value, 900,000 shares authorized and outstanding 9,000 9,000
Gross paid-in and contributed surplus 62,724 62,724
Unassigned surplus (Notes 11 and 13) 440,889 378,242
---------- ----------
Total capital and surplus 512,613 449,966
---------- ----------
Total liabilities and capital and surplus $7,542,903 $6,571,702
========== ==========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
for the years ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Premiums and annuity considerations (Notes 6 and 7) $1,278,389 $1,198,989 $ 884,172
Other considerations and fund deposits 81,818 51,580 119,519
Net investment income (Notes 2 and 6) 526,246 444,160 413,947
Other income 25,233 32,075 32,428
---------- ---------- ----------
Total income 1,911,686 1,726,804 1,450,066
---------- ---------- ----------
Benefits and expenses:
Policyholder and beneficiary benefits (Note 6) 728,340 668,542 656,344
Increase in reserves for policyholder and
beneficiary benefits 781,059 718,113 490,118
Operating expenses and commissions (Notes 5 and 6) 284,290 273,424 231,991
Net transfers to separate accounts 41,074 23,453 17,458
---------- ---------- ----------
Total benefits and expenses 1,834,763 1,683,532 1,395,911
---------- ---------- ----------
Net gain from operations before federal
income taxes and net realized capital gains 76,923 43,272 54,155
Federal income taxes (Note 4) 30,227 25,500 35,106
---------- ---------- --------
Net gain from operations before
net realized capital gains 46,696 17,772 19,049
Net realized capital gains (losses) (Notes 2 and 6) 14,476 4,826 (8,303)
---------- ---------- --------
Net income $ 61,172 $ 22,598 $ 10,746
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
STATEMENTS OF CAPITAL AND SURPLUS
for the years ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Capital stock:
Balance at beginning and end of year $ 9,000 $ 9,000 $ 9,000
-------- -------- --------
Gross paid-in and contributed surplus:
Balance at beginning of year 62,724 12,724 12,724
Paid-in by Mutual of Omaha Insurance Company
(Note 6) - 50,000 -
--------- -------- --------
Balance at end of year 62,724 62,724 12,724
-------- -------- --------
Unassigned surplus:
Balance at beginning of year 378,242 354,608 329,731
Net income 61,172 22,598 10,746
Change in net unrealized capital gains (Note 2) 6,299 12,348 15,606
(Increase) decrease:
Non-admitted assets 1,593 (4,670) 2,314
Asset valuation reserve (6,483) (6,619) (4,249)
Other, net 66 (23) 460
-------- -------- --------
Balance at end of year 440,889 378,242 354,608
-------- -------- --------
Total capital and surplus $512,613 $449,966 $376,332
======== ======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
for the years ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash from operations:
Premiums and annuity considerations and
other fund deposits $1,343,041 $1,240,212 $ 993,237
Net investment income 512,992 434,840 416,278
Other income 21,771 53,829 130,050
---------- ---------- ----------
1,877,804 1,728,881 1,539,565
---------- ---------- ----------
Benefits 728,025 665,575 661,843
Commissions and general expenses 276,573 262,282 222,996
Federal income taxes 23,796 30,496 41,279
Increase in policy loans 6,494 3,771 2,493
Net transfers to separate accounts 41,112 23,453 17,458
---------- ---------- ----------
1,076,000 985,577 946,069
---------- ---------- ----------
Net cash from operations 801,804 743,304 593,496
Proceeds from investments sold, redeemed or matured:
Bonds 582,788 606,001 648,141
Mortgage loans 131,975 135,034 115,715
Stocks 73,863 365,849 117,256
Real estate 15,353 26,537 10,746
Other invested assets 4,392 7,781 2,565
Capital and surplus paid-in - 50,000 -
Other sources 35,893 (4,927) 4,368
---------- ---------- ----------
Total cash provided 1,646,068 1,929,580 1,492,287
---------- ---------- ----------
Cost of investments acquired:
Bonds 1,460,824 1,441,532 1,399,021
Mortgage loans 56,781 32,909 23,602
Stocks 28,873 386,130 103,278
Other invested assets 22,321 3,744 6,032
Real estate 4,897 6,256 6,594
Other uses 5,434 38,888 10,308
---------- ---------- ----------
Total cash applied 1,579,130 1,909,459 1,548,835
---------- ---------- ----------
Net change in cash and short-term investments 66,938 20,121 (56,548)
Cash and short-term investments:
Beginning of year 109,062 88,941 145,489
---------- ---------- ----------
End of year $ 176,000 $ 109,062 $ 88,941
========== ========== ==========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
5
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(dollar amounts in thousands)
1. Summary of Significant Accounting Practices:
United of Omaha Life Insurance Company (the Company) is a wholly-owned
subsidiary of Mutual of Omaha Insurance Company (Mutual of Omaha), a
mutual life and health and accident insurance company domiciled in the
State of Nebraska. The Company has insurance licenses to operate in 49
states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin
Islands. Individual life insurance and annuity products are sold
primarily through a network of career agents, direct mail, brokers,
financial planners and banks. Group business is produced by
representatives located in Mutual of Omaha group offices.
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the Insurance
Department of the State of Nebraska, which practices are considered to
be generally accepted accounting principles for mutual life and health
and accident insurance companies and their wholly-owned stock life
insurance company subsidiaries (see Note 13). Management is required to
make estimates and assumptions that affect the reported amounts of
admitted assets and liabilities as of the dates of the financial
statements and income, expenses and benefits for the years then ended.
Actual results could differ significantly from those estimates. The
principal accounting practices followed by the Company are:
(a) Investments:
Bonds are generally stated at amortized cost. Bonds not backed by
other loans are amortized using the scientific method.
Loan-backed bonds and structured securities are amortized under
the interest method using anticipated prepayments at the date of
purchase. Any significant changes in estimated cash flows from
the original purchase assumptions are accounted for using the
retrospective method. Preferred stocks are stated primarily at
cost. Common stocks of unaffiliated companies are stated at
market value and affiliated companies are valued at underlying
statutory book value. Unrealized capital gains (losses) are
reported as a component of unassigned surplus, ignoring the
effect of income taxes.
Mortgage loans and policy loans are stated at the aggregate
unpaid balance. In accordance with statutory accounting
practices, the Company records a general reserve for losses on
mortgage loans as part of the asset valuation reserve.
Home office and investment real estate are valued at cost, less
allowance for depreciation. Property acquired in satisfaction of
debt is initially valued at the lower of cost or fair market
value. Depreciation is provided on the straight-line basis over
the estimated useful lives of the related assets.
Short-term investments include all investments whose maturities,
at the time of acquisition, are one year or less and are stated
at cost which approximates market.
Investment income is recorded when earned. Realized gains and
losses on sale or maturity of investments are determined on the
specific identification basis. Any portion of invested assets
designated as "non-admitted" are excluded from the balance sheets
and recorded as a change in unrealized capital gains (losses).
(b) Asset Valuation and Interest Maintenance Reserves:
The Company establishes certain reserves as promulgated by the
National Association of Insurance Commissioners (NAIC). The Asset
Valuation Reserve (AVR) is established for the specific risk
characteristics of invested assets of the Company. The Interest
Maintenance Reserve (IMR) is established for the realized gains
and losses on the redemption of fixed income securities resulting
from changes in interest rates, net of tax. Gains and losses
pertaining to the IMR are subsequently amortized into investment
income over the expected remaining period to maturity of the
investments sold or called.
6
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
1. Summary of Significant Accounting Practices, Continued:
(c) Policy Reserves:
Policy reserves provide amounts adequate to discharge estimated
future obligations in excess of estimated premiums on policies in
force. Reserves for life policies are computed principally by the
Commissioners' Reserve Valuation Method basis or the net level
premium basis using interest rates (2.5% to 6%) and mortality
assumptions (American Experience, 1941, 1958, 1960 and 1980 CSO
Tables) prescribed by regulatory authorities. Reserves for
annuities and deposit administration contracts are computed on
the basis of interest rates ranging from 2.5% to 12.75%. Policy
and contract claim liabilities include provisions for reported
claims and estimates for claims incurred but not reported.
(d) Premiums and Related Commissions:
Premiums are recognized as income over the premium paying period.
Commissions and other expenses related to the acquisition of
policies are charged to operations as incurred.
(e) Federal Income Taxes:
The Company files a consolidated federal income tax return with
its parent and other eligible subsidiaries. The method of
allocating taxes among the companies is subject to a written
agreement approved by the Board of Directors. Each company's
provision for federal income tax expense is based on a separate
return calculation with each company recognizing tax benefits of
net operating loss carryforwards and tax credits on a separate
return basis.
The provision for federal income taxes is based on income which
is currently taxable. Deferred federal income taxes are not
provided for temporary differences between income tax and
financial reporting. The Company recognizes the benefits of
foreign tax credit and general business credit carryforwards when
realized.
(f) Non-admitted Assets:
Certain assets designated as "non-admitted" assets, principally
receivables and office furniture and equipment, are excluded from
the balance sheets. The net change in such assets is charged or
credited directly to unassigned surplus.
(g) Fair Values 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 and Other Invested Assets:
The carrying amounts reported in the balance sheets for
these instruments approximate their fair values.
Bonds: The fair values for bonds are based on quoted
market prices, where available. For bonds not actively
traded, fair values are estimated using values obtained
from independent pricing services or based on expected
future cash flows using a current market rate applicable
to the yield, credit quality and maturity of the
investments.
Unaffiliated Common Stocks: The fair values for
unaffiliated common stocks are based on quoted market
prices and are reported in the balance sheets.
Mortgage Loans: The fair value for mortgage loans is
estimated using discounted cash flow analyses, using
interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for purposes of the
calculations.
7
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
1. Summary of Significant Accounting Practices, Continued:
(g) Fair Values of Financial Instruments, Continued:
Policy Loans: The Company does not believe an estimate of
the fair value of policy loans can be made without
incurring excessive cost. Policy loans have no stated
maturities and are usually repaid by reductions to
benefits and surrenders. Because of the numerous
assumptions which would have to be made to estimate fair
value, the Company further believes that such information
would not be meaningful.
Investment Contracts: The fair values for liabilities
under investment-type-insurance contracts are estimated
using discounted cash flow calculations, based on interest
rates currently being offered for similar contracts with
maturities consistent with those remaining for the
contracts being valued.
(h) Derivatives:
The Company utilizes swap and cap arrangements, for purposes
other than trading, to hedge risk in order to manage investment
returns and to align currency rates with its insurance
obligations. The foreign currency swap arrangements are stated at
market value. The differences between the amounts paid or
received on foreign currency and interest-rate swaps are
reflected in the statements of operations. The consideration paid
for interest-rate cap arrangements are stated at amortized cost.
Interest-rate caps are amortized and recorded as an adjustment to
net investment income over the life of the investment using the
effective interest method.
The Company also invests in protected equity notes that are
stated at amortized cost and intends to hold them to maturity.
These instruments pay a very modest (or no) semi-annual or annual
coupon and pay at maturity all principal plus a "contingent"
interest coupon equal to any percentage increase in a designated
index. If the index has declined over the term of the bond, no
contingent interest is payable, but at maturity all principal
would nevertheless be payable. The designated index is typically
linked to the performance of a known stock index or basket of
indices. Interest income is recognized when earned.
(i) Separate Accounts:
The assets of the separate accounts shown in the balance sheets
primarily consist of common stocks, mutual funds and commercial
paper held by the Company for the benefit of certificate holders
under specific individual and group annuity contracts. Benefits
paid to separate account certificate holders are reflected in the
statements of operations, but are offset by transfers from the
separate accounts. The payment of such benefits and the earning
of investment income constitute the only significant activities
in the separate accounts.
(j) Reclassifications:
Certain reclassifications have been made to prior year amounts to
conform with current year presentation with no effect on net
income or total capital and surplus.
8
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
2. Investments:
The amortized cost, gross unrealized gains and losses and estimated fair
value of the Company's investments in debt securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
At December 31, 1995:
Governments $ 68,814 $ 3,600 $ 74 $ 72,340
States, territories and possessions 6,354 164 - 6,518
Political subdivisions 23,300 703 6 23,997
Special revenue 1,243,137 39,397 4,179 1,278,355
Public utilities 433,579 36,389 450 469,518
Industrial and miscellaneous 3,527,698 197,605 21,205 3,704,098
Credit-tenant loans 231,739 19,304 540 250,503
---------- -------- -------- ----------
Total $5,534,621 $297,162 $ 26,454 $5,805,329
========== ======== ======== ==========
Bonds $5,348,682
Short-term investments 185,939
$5,534,621
At December 31, 1994:
Governments $ 55,096 $ 457 $ 4,078 $ 51,475
States, territories and possessions 8,065 301 - 8,366
Political subdivisions 23,975 119 1,610 22,484
Special revenue 1,209,599 3,118 106,731 1,105,986
Public utilities 437,376 9,376 12,493 434,259
Industrial and miscellaneous 2,718,416 29,852 87,460 2,660,808
Credit-tenant loans 131,283 - 8,939 122,344
---------- -------- -------- ----------
Total $4,583,810 $ 43,223 $221,311 $4,405,722
========== ======== ======== ==========
Bonds $4,461,418
Short-term investments 122,392
$4,583,810
</TABLE>
The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, are shown below. 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.
Estimated
Amortized Fair
Cost Value
Due in one year or less $ 366,387 $ 368,589
Due after one year through five years 1,513,116 1,562,887
Due after five years through ten years 1,868,924 1,993,731
Due after ten years 1,786,194 1,880,122
---------- ----------
$5,534,621 $5,805,329
9
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
2. Investments, Continued:
The admitted value, cost and estimated fair value of the Company's
preferred and common stock investments were as follows:
<TABLE>
<CAPTION>
Estimated
Admitted Fair
Value Cost Value
<S> <C> <C> <C>
At December 31, 1995:
Preferred stocks $ - $ 398 $ -
Preferred stocks subject to mandatory
sinking funds 2,967 2,967 4,827
-------- -------- --------
Total $ 2,967 $ 3,365 $ 4,827
======== ======== ========
Common stocks, affiliated $ 68,696 $ 66,085 $ 68,696
Common stocks, unaffiliated 146,918 46,422 146,918
-------- -------- --------
Total $215,614 $112,507 $215,614
======== ======== ========
At December 31, 1994:
Preferred stocks $ - $ 398 $ -
Preferred stocks subject to mandatory
sinking funds 2,967 2,967 4,212
-------- -------- --------
Total $ 2,967 $ 3,365 $ 4,212
======== ======== ========
Common stocks, affiliated $ 89,394 $ 66,084 $ 89,394
Common stocks, unaffiliated 123,963 55,512 123,963
-------- -------- --------
Total $213,357 $121,596 $213,357
======== ======== ========
</TABLE>
The Company owns 100% of the outstanding common stock of United World Life
Insurance Company (United World), Companion Life Insurance Company
(Companion), Mutual of Omaha Structured Settlement Company - Nebraska, and
Mutual of Omaha Structured Settlement Company - Connecticut. A net
unrealized capital gain (loss) is recorded as a change in unassigned
surplus for the equity in net operating results and surplus transactions of
subsidiaries aggregating $(20,700), $4,661 and $5,462 for the years ended
December 31, 1995, 1994 and 1993, respectively (see Note 6).
The components of net investment income consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $388,690 $320,299 $277,147
Preferred stocks 399 400 405
Common stocks (Note 6) 27,756 3,651 2,598
Mortgage loans 96,891 109,279 123,011
Real estate 26,860 27,978 28,316
Policy loans 6,348 5,914 5,605
Short-term investments 6,665 4,047 3,382
Other (1,858) 497 1,701
-------- -------- --------
551,751 472,065 442,165
Investment expense (29,424) (31,414) (30,538)
Amortization of interest maintenance reserve 3,919 3,509 2,320
-------- -------- --------
$526,246 $444,160 $413,947
======== ======== ========
</TABLE>
10
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
2. Investments, Continued:
Realized capital gains and losses on invested assets consist of the
following:
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1995:
Bonds $ 4,830 $ 158 $ 4,672
Common stocks (Note 6) 36,564 663 35,901
Mortgage loans 977 8,894 (7,917)
Real estate 1,804 8,041 (6,237)
Other 1,479 185 1,294
------- ------- --------
$45,654 $17,941 27,713
======= =======
Less: Capital gains tax (Note 6) (9,665)
Transfer to IMR (3,572)
--------
Net realized capital gains $ 14,476
========
Year ended December 31, 1994:
Bonds $ 5,764 $ 145 $ 5,619
Common stocks 6,608 1,478 5,130
Mortgage loans 2,270 7,011 (4,741)
Real estate 6,540 1,922 4,618
Other 3,985 20 3,965
------- ------- --------
$25,167 $10,576 14,591
======= =======
Less: Capital gains tax (5,075)
Transfer to IMR (4,690)
Net realized capital gains $ 4,826
========
Year ended December 31, 1993:
Bonds $29,272 $ 1,931 $ 27,341
Common stocks 4,859 570 4,289
Mortgage loans 793 9,162 (8,369)
Real estate 357 3,212 (2,855)
Other 1,144 15 1,129
------- ------- --------
$36,425 $14,890 21,535
======= =======
Less: Capital gains tax (10,443)
Transfer to IMR (19,395)
Net realized capital losses $ (8,303)
========
11
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
2. Investments, Continued:
The maximum and minimum lending rates for mortgage loans during 1995 ranged
from 7.15% to 9.37%. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of insured or guaranteed or
purchase money mortgages, was 75%. At December 31, 1995, the Company held
mortgages with $2,013 of statement value with interest more than one year
overdue; total interest due equals $177. During 1995, the Company reduced
interest rates on two mortgage loans with an outstanding principal balance
of $5,023. The estimated fair value of the mortgage loan portfolio was
approximately $1,072,501 and $1,153,882 at December 31, 1995 and 1994,
respectively.
At December 31, 1995, securities with a carrying value of $2,264 were on
deposit with government agencies as required by law in various
jurisdictions in which the Company conducts business.
3. Derivative Financial Instruments:
The Company enters into interest-rate swap agreements to manage
interest-rate exposure. The primary reason for the interest-rate swap
agreements is to modify the interest-rate sensitivities of certain
investments so that they are highly correlated with the interest-rate
sensitivities of certain of the Company's insurance liabilities.
Interest-rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts.
The Company also uses interest-rate caps to more effectively manage
interest-rate risk associated with single premium deferred annuity
contracts. An interest-rate cap is a right to receive the excess of a
reference interest rate over a given rate. This allows the Company to limit
the risk associated with an increase in interest rates.
The Company purchases corporate bonds in the foreign bond markets. These
bonds are typically issued by U.S. corporations and denominated in a
variety of currencies. These bonds, on occasion, are available for purchase
in the secondary market at attractive yields. The Company enters into
currency swaps simultaneous with its foreign currency bond purchases so
that all future foreign currency-denominated interest and principal
payments on such bonds are swapped with high quality counterparties at the
time of purchase for known amounts of U.S. dollars.
Through the use of protected equity notes, the Company more cost
effectively diversifies its exposure to equity markets. Protected equity
notes help reduce the Company's exposure to fluctuations in equity
instruments by linking a substantial portion of their expected total return
to certain market indices while preserving the principal investment.
12
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
3. Derivative Financial Instruments, Continued:
The following table summarizes the Company's derivative financial
instruments. Notional amounts are used on certain instruments to express
the volume of these transactions, but do not represent the much smaller
amounts potentially subject to credit risk.
<TABLE>
<CAPTION>
Notional Statement Fair Year(s) of
Amount Value Value Maturity
<S> <C> <C> <C> <C>
At December 31, 1995:
Interest-rate swaps $202,500 $ - $(17,210) 1999 - 2003
======== ========= ========
Interest-rate caps $165,000 $ 1,343 $ 608 2000
======== ======== ========
Foreign currency swaps $ 80,729 $(32,796) $(32,796) 1996 - 1998
======== ======== ========
Protected equity notes $ - $ 48,925 $ 64,666 1997 - 2015
========= ======== ========
At December 31, 1994:
Interest-rate swaps $202,500 $ - $ (694) 1999 - 2003
======== ========= ========
Foreign currency swaps $ 84,029 $(27,142) $(27,142) 1995 - 1998
======== ======== ========
Protected equity notes $ - $ 38,925 $ 49,496 1997 - 2001
========= ======== ========
</TABLE>
The Company has considerable expertise and experience in evaluating and
managing credit risk. Each issuer or counterparty is extensively
reviewed to evaluate its financial stability prior to making the
investment and throughout the period that the investment is owned.
The Company has commitments to fund bond investments of approximately
$113,000 and mortgage loans of approximately $25,300 as of December 31,
1995. These commitments are legally binding and have fixed expiration
dates or other termination clauses that may require a payment of a fee.
In the event that the financial condition of a borrower deteriorates
materially, the commitment may be terminated. Since some of the
commitments may expire or terminate, the total commitments do not
necessarily represent future liquidity requirements.
4. Federal Income Taxes:
The provision for federal income taxes reflects an effective income tax
rate which differs from the prevailing federal income tax rate primarily
as a result of income and expense recognition differences between
financial and income tax reporting. The major differences include
capitalization and amortization of certain acquisition amounts for tax
purposes, different methods for determining statutory and tax insurance
reserves, timing of the recognition of market discount on bonds and the
acceleration of depreciation for tax purposes.
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1989. The Company is currently appealing certain
adjustments proposed by the IRS for tax years 1987 through 1989. The tax
returns for 1990 through 1992 are currently under examination.
Management believes the results of these examinations will have no
material impact on the Company's financial statements.
Under federal income tax law prior to 1984, the Company accumulated
approximately $31,615 of deferred taxable income which could become
subject to income taxes in the future under certain conditions.
Management believes the chance that those conditions will exist is
remote.
13
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
5. Retirement Benefits:
The Company participates with affiliated companies in a noncontributory
defined benefit plan covering all United States employees meeting
certain minimum requirements. Mutual of Omaha and certain subsidiaries
(the Companies) generally make annual contributions to the plan in an
amount between the minimum ERISA required contribution and the maximum
tax-deductible contribution. Funds for the plan are held in the general
and separate accounts of the Company under a group annuity contract.
Information regarding accumulated plan benefits and net assets has not
been determined on an individual company basis. The Company's employees
comprised approximately 28%, 25% and 24% of the total employee group in
1995, 1994 and 1993. The Companies expensed contributions of $9,115,
$8,746, and $8,597 in 1995, 1994 and 1993, respectively. A comparison of
accumulated plan benefits and net assets for the entire plan as of
January 1, 1995 and 1994 follows:
1995 1994
Actuarial present value of accumulated
plan benefits:
Vested $280,516 $262,457
Nonvested 1,263 1,314
-------- --------
$281,779 $263,771
Net assets available for benefits $301,773 $290,914
======== ========
Assumptions:
Annual investment return 8.0% 10.0%
Mortality table 1971 GAM 1971 GAM
Discount rate 7.93% 8.17%
The Companies also have the Mutual of Omaha 401(k) Long-Term Savings
Plan covering all United States employees who have completed one year of
service and have reached their 21st birthday. Participants may elect to
contribute 1% to 16% of their salary annually subject to plan and IRS
limitations. The Companies match at least 25% of the first 6% of the
contributions made by each participant. Contributions by the Companies
were $5,775, $5,477 and $5,114 in 1995, 1994 and 1993, respectively.
The Companies provide certain postretirement medical and life insurance
benefits to full-time employees who have worked 10 years and attained
age 55 while in service with the Companies. The level of benefits varies
with the retiree's length of service with the Companies. The medical
plan is contributory with retiree contributions adjusted annually. The
benefits are subject to cost-sharing features such as deductibles and
coinsurance. The cost of these postretirement benefits is allocated in
accordance with an intercompany cost-sharing arrangement. The Companies
use the accrual method of accounting for postretirement benefits and
elected to amortize the original transition obligation over 20 years.
14
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
5. Retirement Benefits, Continued:
The following table sets forth the Plan's funded status at December 31,
1995 and 1994:
1995 1994
Accumulated postretirement benefits obligation:
Fully eligible actives $ 9,071 $ 9,899
Retirees 72,688 72,977
-------- --------
81,759 82,876
Unrecognized transition obligation (69,716) (73,818)
Unrecognized gain 9,951 6,469
-------- --------
Total accrued expense $ 21,994 $ 15,527
======== ========
Assumptions:
Discount rate 7.25% 7.50%
Health care trend rate:
First year 8.50% 8.50 - 10.00%
Ultimate 5.00% 5.00%
Grading period 10 years 10 years
The Companies' net periodic postretirement benefit costs include the
following components:
1995 1994 1993
---- ---- ----
Service and eligibility costs $ 1,654 $ 1,839 $ 1,529
Interest costs 5,567 5,761 6,361
Net amortization and deferral (683) - -
Amortization of transition obligation 4,101 4,101 4,101
-------- -------- --------
Total benefit costs $ 10,639 $ 11,701 $ 11,991
======== ======== ========
The health care cost trend rate assumption has a significant effect on
the amounts reported. To illustrate, increasing the assumed health care
cost trend rate by one percentage point in each year would increase the
Companies' accumulated postretirement benefits obligation as of December
31, 1995 by approximately $5,995 and the estimated eligibility cost and
interest cost components of the net periodic postretirement benefit
costs for 1995 by approximately $805.
6. Related Party Transactions:
The home office properties are occupied jointly by the Company and
Mutual of Omaha. Because of this relationship, the Companies incur joint
operating expenses subject to allocation. Management believes the method
of allocating such expenses is fair and reasonable.
The Company paid $543, $431 and $363 in 1995, 1994 and 1993,
respectively, to Kirkpatrick, Pettis, Smith, Polian Inc., an affiliate,
for equity investment management services; and $350 and $12 to its
subsidiaries Mutual of Omaha Structured Settlement Company-Nebraska and
Mutual of Omaha Structured Settlement Company-Connecticut, respectively,
for assignment fees in 1995. In addition, the Company received
management fees of $140 and $31 in 1995 and 1994, respectively, from
Mutual of Omaha Structured Settlement Company-Nebraska and $11 in 1995
from Mutual of Omaha Structured Settlement Company-Connecticut for
providing management and administrative services.
15
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
6. Related Party Transactions, Continued:
In July 1995, the Company received a $25,000 extraordinary dividend from
United World. Assets distributed to the Company included cash of $1,744,
bonds with a market value of $23,113 and accrued interest on the
transferred bonds of $143. The transfer of bonds and accrued interest
occurred July 1, 1995 and the cash was transferred July 3, 1995, the
first banking day after July 1. The bonds transferred to the Company
consisted of corporate bonds, agency mortgage-backed bonds and agency
asset-backed bonds.
On August 31, 1995, the Company received $23,250 in cash from Mutual of
Omaha, for 600,000 shares of FirsTier, Inc. common stock. The gross
realized capital gain on the common stock transferred was $22,852, less
a provision for federal income taxes of $7,999.
In 1994, the Company received a $50,000 contribution to its capital and
surplus from Mutual of Omaha and the Company contributed $20,000 to the
capital and surplus of Companion.
Under the terms of a reinsurance treaty effected June 1, 1955, all
health and accident insurance written by the Company is ceded to Mutual
of Omaha. The operating results of certain lines of group health and
accident and life insurance are shared equally by the Company and Mutual
of Omaha. The amounts ceded were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Aggregate reserve for policies
and contracts $ 89,012 $ 95,404
======== ========
Policy and contract claims $127,625 $144,819
======== ========
Premium considerations $395,014 $439,361 $462,246
======== ======== ========
Policyholder and beneficiary benefits $309,876 $324,846 $326,689
======== ======== ========
Group reinsurance settlement $ 5,354 $ 11,324 $ 12,544
======== ======== ========
The Company also assumes group and individual life insurance from
Companion. The amounts assumed by the Company were as follows:
1995 1994 1993
---- ---- ----
Aggregate reserve for policies
and contracts $ 3,736 $ 3,363
======== ========
Policy and contract claims $ 2,430 $ 1,738
======== ========
Premium considerations $ 4,268 $ 5,018 $ 2,980
======== ======== ========
Policyholder and beneficiary benefits $ 3,061 $ 4,413 $ 2,065
======== ======== ========
</TABLE>
16
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
7. Reinsurance:
In the normal course of business, the Company assumes and cedes
reinsurance. The ceding of reinsurance does not discharge an insurer
from its primary legal liability to a policyholder. The Company remains
liable to the extent that a reinsurer is unable to meet its obligations.
The reconciliation of direct premiums to net premiums is as follows:
1995 1994 1993
---- ---- ----
Direct $1,658,506 $1,622,903 $1,329,489
Assumed 27,496 25,317 21,736
Ceded (407,613) (449,231) (467,053)
---------- ---------- ----------
Net $1,278,389 $1,198,989 $ 884,172
========== ========== ==========
8. Credit Arrangements:
The Company and Mutual of Omaha are authorized by their Boards of
Directors to borrow a maximum of $50,000 on a joint basis under lines of
credit. At December 31, 1995, the Company had no outstanding borrowing
against its uncommitted, uncollateralized revolving lines of credit.
Interest rates applicable to borrowing under the Company's lines of
credit arrangements are negotiated with the lender at the time of
borrowing.
9. Contingent Liabilities:
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company believes that its defenses are meritorious and the
eventual outcome of those lawsuits will not have a material effect on
the Company's financial position.
10. Annuity Actuarial Reserves:
The estimated fair value and statement value of guaranteed investment
and select maturity contracts were:
1995 1994
---- ----
Estimated fair value $1,355,355 $1,310,425
========== ==========
Statement value $1,315,730 $1,353,457
========== ==========
Fair values for the Company's insurance liabilities other than those for
investment-type insurance contracts are not required to be disclosed.
However, the fair values of liabilities under all insurance contracts
are taken into consideration in the Company's overall management of
interest-rate risk, which minimizes exposure to changing interest rates
through the matching of investment maturities with amounts due under
insurance contracts.
At December 31, 1995 and 1994, the Company held annuity reserves and
deposit fund liabilities of $924,862 and $884,215, respectively, that
were subject to discretionary withdrawal at book value with a surrender
charge of less than 5%.
17
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollar amounts in thousands)
11. Stockholder Dividend:
Regulatory restrictions limit the amount of dividends available for
distribution without prior approval of regulatory authorities. The
maximum amount of dividends which can be paid to the stockholder without
prior approval of the Director of Insurance of the State of Nebraska is
the lesser of 10% of the insurer's policyholders' surplus as of the
previous December 31 or net gain from operations for the previous
12-month period ending December 31. Based upon these restrictions, the
Company is permitted a maximum dividend distribution of $46,696 in 1996.
12. Business Risks:
The Company is subject to regulation by state insurance departments and
undergoes periodic examinations by those departments. The following is a
description of the most significant risks facing life and health
insurers and how the Company manages those risks:
Legal/Regulatory Risk is the risk that changes in the legal or
regulatory environment in which an insurer operate will occur and
create additional costs or expenses not anticipated by the
insurer in pricing its products. The Company mitigates this risk
by operating throughout the United States, thus reducing its
exposure to any single jurisdiction, and by diversifying its
products.
Credit Risk is the risk that issuers of securities owned by the
Company will default, or that other parties, including reinsurers
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy and
by maintaining sound reinsurance, credit and collection policies.
Interest-Rate Risk is the risk that interest rates will change
and cause a decrease in the value of an insurer's investments.
The Company mitigates this risk by attempting to match the
maturity schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to sell assets prior to
maturity and recognize a gain or loss.
13. Accounting Pronouncements:
The Company's financial statements are prepared on the basis of
statutory accounting principles which, for wholly-owned subsidiaries of
mutual life and health and accident insurance companies, are currently
considered to be generally accepted accounting principles (GAAP).
The Financial Accounting Standards Board (FASB) issued an Interpretation
in 1993 indicating that financial statements of mutual life and health
and accident insurance companies prepared on a statutory basis will no
longer be considered in conformity with GAAP for fiscal years beginning
after December 15, 1994. In 1995, the FASB issued a Statement which
amended the Interpretation to defer the effective date of the general
provisions of the Interpretation to fiscal years beginning after
December 15, 1995 and to extend the requirements of other FASB
Statements to mutual life and health and accident insurance companies.
The American Institute of Certified Public Accountants (AICPA) issued a
Statement of Position that provided accounting guidance for certain
participating insurance contracts of mutual life and health and accident
insurance companies in 1995. The FASB Statement and AICPA Statement of
Position are effective for GAAP financial statements issued for fiscal
years beginning after December 15, 1995.
Should the Company decide to issue comparative GAAP financial
statements, the effect of applying the pronouncements is to be reported
retroactively by restatement of prior year GAAP financial statements for
all years presented. The effects of these changes that are required for
GAAP have not been quantified. Management has not yet determined how it
will choose to comply with the provisions of the pronouncements.
18
<PAGE>
UNITED OF OMAHA
SEPARATE ACCOUNT C
REPORT ON AUDITS OF
FINANCIAL STATEMENTS
for the years ended
December 31, 1995 and 1994
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
United of Omaha Life Insurance Company
We have audited the accompanying statement of net assets of United of Omaha
Separate Account C as of December 31, 1995 and 1994, and the related statements
of operations and changes in net assets for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United of Omaha Separate
Account C as of December 31, 1995 and 1994, and the results of its operations
and changes in its net assets for the years then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 20, 1996
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF NET ASSETS
December 31, 1995 and 1994
Series I
-------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
-------------------------------- --------------------- ------------------------------------------
Asset Index Money InternationAmerica Equity Term
Growth Manager 500 Market Bond Stock Growth Income Bond
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1995
ASSETS
Investments in portfolio
shares, at cost $661,105 396,827 305,946 245,555 358,610 630,318 335,013 469,458 191,308
========== ========== ========== ========== ========== ========= ========== ========== ==========
Investments in portfolio
shares, at market value $717,058 442,745 355,507 245,555 376,897 676,199 410,094 523,290 194,398
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Net assets $717,058 442,745 355,507 245,555 376,897 676,199 410,094 523,290 194,398
========== ========== ========== ========== ========== ========= ========== ========== ==========
Accumulation units outstanding 51,568 39,609 25,921 231,966 32,410 62,496 27,420 38,350 17,648
========== ========== ========== ========== ========== ========= ========== ========== ==========
Net asset value per unit $ 13.91 11.18 13.72 1.06 11.63 10.82 14.96 13.65 11.02
========== ========== ========== ========== ========== ========= ========== ========== ==========
As of December 31, 1994
ASSETS
Investments in portfolio
shares, at cost $ 13,466 19,594 993 135,473 1,023 25,761 5,765 11,139 31,718
========== ========== ========== ========== ========== ========= ========== ========== ==========
Investments in portfolio
shares, at market value $ 13,878 19,256 1,015 135,473 999 25,319 6,040 10,987 31,039
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
LIABILITIES
Amounts payable to United of Omaha
Life Insurance Company 14 15 1 22 22 4 13 36
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Net assets $ 13,864 19,241 1,014 135,451 999 25,297 6,036 10,974 31,003
========== ========== ========== ========== ========== ========= ========== ========== ==========
Accumulation units outstanding 1,329 1,984 97 133,207 102 2,565 603 1,070 3,052
========== ========== ========== ========== ========== ========= ========== ========== ==========
Net asset value per unit $ 10.43 9.70 10.45 1.02 9.79 9.86 10.01 10.26 10.16
========== ========== ========== ========== ========== ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF NET ASSETS, CONTINUED
December 31, 1995 and 1994
Series V
-------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
-------------------------------- ---------- -----------------------------------------------------
Asset New
Manager Equity America Personal Equity Term
Contrafund Growth Income InternationaGrowth Strategy Income InternationalBond
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1995
ASSETS
Investments in portfolio
shares, at cost 1,766,298 2,289,761 2,632,278 1,039,844 738,796 1,355,743 1,360,306 1,866,531 577,026
========== ========== ========== ========== ========== ========= ========== ========== ==========
Investments in portfolio
shares, at market value 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800 1,916,743 580,948
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Net assets 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800 1,916,743 580,948
========== ========== ========== ========== ========== ========= ========== ========== ==========
Accumulation units outstanding 150,364 199,570 233,679 99,029 58,666 123,287 121,994 181,399 56,018
========== ========== ========== ========== ========== ========= ========== ========== ==========
Net asset value per unit $ 11.74 11.27 11.59 10.64 13.06 11.27 11.62 10.57 10.37
========== ========== ========== ========== ========== ========= ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF NET ASSETS, CONTINUED
December 31, 1995 and 1994
Series V
---------------------------------------------------------------------------------------
Alger Federated MFS
---------------------- --------------------- ------------------------------------------
Small American Prime U.S. World High Emerging
CapitalizatioGrowth Money Government Government Income Research Growth
----------- ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1995
ASSETS
Investments in portfolio
shares, at cost $1,813,854 1,649,458 3,136,025 1,282,344 619,577 919,323 1,263,457 1,422,576
=========== ========== ========== ========== ========= ========== ========== ==========
Investments in portfolio
shares, at market value $1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514
----------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Net assets $1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514
=========== ========== ========== ========== ========= ========== ========== ==========
Accumulation units outstanding 148,670 140,897 3,065,603 122,440 56,393 87,378 117,165 123,460
=========== ========== ========== ========== ========= ========== ========== ==========
Net asset value per unit $ 12.09 11.67 1.02 10.57 10.24 10.45 10.99 11.66
=========== ========== ========== ========== ========= ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
Series I
-------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
-------------------------------- --------------------- ------------------------------------------
Asset Index Money InternationaAmerica Equity Term
Growth Manager 500 Market Bond Stock Growth Income Bond
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1995
Reinvested dividends and capital
gain distributions $ 180 1,213 301 9,317 16,057 487 67 14,492 9,290
Mortality risk charges and
expenses (6,212) (4,186) (2,782) (2,346) (3,759) (5,816) (3,304) (4,432) (1,988)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net investment income
(expense) (6,032) (2,973) (2,481) 6,971 12,298 (5,329) (3,237) 10,060 7,302
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net realized gains (losses) 51,335 6,107 7,221 - 8,672 14,204 20,051 23,083 (266)
Net unrealized gains (losses) 55,541 46,256 49,539 - 18,311 46,323 74,806 53,984 3,769
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net gains (losses) on
investments 106,876 52,363 56,760 - 26,983 60,527 94,857 77,067 3,503
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets 100,844 49,390 54,279 6,971 39,281 55,198 91,620 87,127 10,805
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Policy purchases 812,170 444,084 340,669 1,687,720 507,554 779,041 400,288 628,482 230,791
Policy withdrawals (209,820) (69,970) (40,455) (1,584,587)(170,937) (183,337) (87,850) (203,293) (78,201)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net
assets from policyholder 602,350 374,114 300,214 103,133 336,617 595,704 312,438 425,189 152,590
transactions
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net assets 703,194 423,504 354,493 110,104 375,898 650,902 404,058 512,316 163,395
Net assets, beginning of year 13,864 19,241 1,014 135,451 999 25,297 6,036 10,974 31,003
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net assets, end of year $ 717,058 442,745 355,507 245,555 376,897 676,199 410,094 523,290 194,398
========== ========== ========== ========== ========== ========== ========== ========= =========
Accumulation unit purchases 65,591 44,206 29,101 1,634,827 47,785 77,911 33,546 53,879 22,142
Accumulation unit withdrawals (15,352) (6,581) (3,277) (1,536,068) (15,477) (17,980) (6,729) (16,599) (7,546)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in units
outstanding 50,239 37,625 25,824 98,759 32,308 59,931 26,817 37,280 14,596
Units outstanding, beginning
of year 1,329 1,984 97 133,207 102 2,565 603 1,070 3,052
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Units outstanding, end of year 51,568 39,609 25,921 231,966 32,410 62,496 27,420 38,350 17,648
========== ========== ========== ========== ========== ========== ========== ========= =========
For the year ended December 31, 1994
Reinvested dividends and capital
gain distributions - 1 - 251 30 - - 161 839
Mortality risk charges and
expenses (35) (35) (8) (73) (8) (55) (11) (40) (157)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net investment income
(expense) (35) (34) (8) 178 22 (55) (11) 121 682
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net realized gains (losses) - - - - - - - - -
Net unrealized gains (losses) 412 (338) 22 (23) (442) 275 (152) (679)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net gains (losses) on
investments 412 (338) 22 - (23) (442) 275 (152) (679)
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets 377 (372) 14 178 (1) (497) 264 (31) 3
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Policy purchases 13,487 19,613 1,000 135,273 1,000 25,794 5,772 11,005 31,000
Policy withdrawals - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net
assets from policyholder
transactions 13,487 19,613 1,000 135,273 1,000 25,794 5,772 11,005 31,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net assets 13,864 19,241 1,014 135,451 999 25,297 6,036 10,974 31,003
Net assets, beginning of year - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net assets, end of year 13,864 19,241 1,014 135,451 999 25,297 6,036 10,974 31,003
========== ========== ========== ========== ========== ========== ========== ========= =========
Accumulation unit purchases 1,329 1,984 97 133,207 102 2,565 603 1,070 3,052
Accumulation unit withdrawals - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in units
outstanding 1,329 1,984 97 133,207 102 2,565 603 1,070 3,052
Units outstanding, beginning
of year - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Units outstanding, end of year 1,329 1,984 97 133,207 102 2,565 603 1,070 3,052
========== ========== ========== ========== ========== ========== ========== ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS, CONTINUED
For the years ended December 31, 1995 and 1994
Series V
-------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
-------------------------------- ---------- -----------------------------------------------------
Asset New
Manager Equity America Personal Equity Term
Contrafund Growth Income InternationaGrowth Strategy Income InternationalBond
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1995
Reinvested dividends and
capital gain distributions $ 21,052 87,703 12,763 - - 13,097 13,684 - 4,576
Mortality risk charges and
expenses (3,440) (5,213) (4,235) (1,943) (1,535) (2,739) (2,893) (3,098) (979)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net investment income
(expense) 17,612 82,490 8,528 (1,943) (1,535) 10,358 10,791 (3,098) 3,597
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net realized gains (losses) 648 (6,780) 3,329 1,297 6,022 1,657 182 630 45
Net unrealized gains (losses) (1,473) (41,397) 76,808 13,735 27,218 33,601 57,494 50,212 3,922
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net gains (losses) on
investments (825) (48,177) 80,137 15,032 33,240 35,258 57,676 50,842 3,967
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase (decrease)
in net assets 16,787 34,313 88,665 13,089 31,705 45,616 68,467 47,744 7,564
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Policy purchases 1,829,379 2,534,948 2,725,552 1,109,625 850,222 1,381,006 1,355,232 1,931,038 591,784
Policy withdrawals (81,341) (320,897) (105,131) (69,135) (115,913) (37,278) (5,899) (62,039) (18,400)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in net
assets from policyholder
transactions 1,748,038 2,214,051 2,620,421 1,040,490 734,309 1,343,728 1,349,333 1,868,999 573,384
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in net assets 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800 1,916,743 580,948
Net assets, beginning of year - - - - - - - - -
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net assets, end of year 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800 1,916,743 580,948
========== ========== ========== ========== ========= ========= ========== ========== ==========
Accumulation unit purchases 157,743 229,399 243,665 105,654 68,110 126,843 122,813 187,685 57,913
Accumulation unit withdrawals (7,379) (29,829) (9,986) (6,625) (9,444) (3,556) (819) (6,286) (1,895)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in units
outstanding 150,364 199,570 233,679 99,029 58,666 123,287 121,994 181,399 56,018
Units outstanding, beginning
of year - - - - - - - - -
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Units outstanding, end of year 150,364 199,570 233,679 99,029 58,666 123,287 121,994 181,399 56,018
========== ========== ========== ========== ========= ========= ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS, CONTINUED
For the years ended December 31, 1995 and 1994
Series V
---------------------------------------------------------------------------------------
Alger Federated MFS
---------------------- --------------------- ------------------------------------------
Small American Prime U.S. World High Emerging
CapitalizatioGrowth Money Government Government Income Research Growth
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1995
Reinvested dividends and
capital gain distributions - - 25,326 13,022 49,168 19,568 18,552 38,005
Mortality risk charges and
expenses (2,598) (2,794) (5,889) (2,214) (864) (1,284) (1,727) (2,230)
---------- --------- ---------- ---------- ---------- ---------- --------- ---------
Net investment income
(expense) (2,598) (2794) 19,437 10,808 48,304 18,284 16,825 35,768
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net realized gains (losses) (6,715) 776 - 750 1,664 2,898 827 6,101
Net unrealized gains (losses) (15,784) (4,802) - 11,708 (41,961) (6035) 23,697 16,938
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net gains (losses) on
investments (22,499) (4,026) - 12,458 (40,297) (3,137) 24,524 23,039
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets (25,097) (6,820) 19,437 23,266 8,007 15,147 41,349 58,807
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Policy purchases 1,978,407 1,795,154 6,534,133 1,343,005 654,040 988,556 1,257,919 1,515,369
Policy withdrawals (155,240) (143,678)(3,417,545) (72,219) (84,431) (90,415) (12,114) (134,662)
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net
assets from policyholder
transactions 1,823,167 1,651,476 3,116,588 1,270,786 569,609 898,141 1,245,805 1,380,707
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in net assets 1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514
Net assets, beginning of year - - - - - - - -
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net assets, end of year 1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514
=========== ========== ========== ========== ========== ========== ========= =========
Accumulation unit purchases 161,350 153,249 6,430,464 129,643 64,841 96,273 118,459 136,247
Accumulation unit withdrawals (12,680) (12,352)(3,364,861) (7,203) (8,448) (8,895) (1,294) (12,787)
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase in units
outstanding 148,670 14,897 3,065,603 122,440 56,393 87,378 117,165 123,460
Units outstanding, beginning
of year - - - - - - - -
----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Units outstanding, end of year 148,670 140,897 3,065,603 122,440 56,393 87,378 117,165 123,460
=========== ========== ========== ========== ========== ========== ========= =========
</TABLE>
UNITED OF OMAHA SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
United of Omaha Separate Account C (Separate Account) was established by
United of Omaha Life Insurance Company on December 1, 1993, under
procedures established by Nebraska law, and is registered as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Separate Account is a segregated investment account of United of Omaha Life
Insurance Company (United of Omaha). It is divided into subaccounts, each
of which invests exclusively in shares of a corresponding mutual fund
portfolio. The available portfolios are:
Series I
Fidelity T. Rowe Price
-------- -------------
VIP Growth International Stock
VIP II Asset Manager America Growth
VIP II Index 500 Equity Income
Limited Term Bond
Scudder
-------
Money Market
Bond
Series V
Fidelity Alger
-------- -----
Contrafund Portfolio American Small Capitalization Port.
Asset Manager: Growth Portfolio American Growth Portfolio
Equity Income Portfolio
Federated
Scudder ----------
------- Prime Money Portfolio
International Portfolio U.S. Government Bond Portfolio
T. Rowe Price MFS
------------- ---
New America Growth Portfolio World Government Portfolio
Personal Strategy Balanced Port. High Income Fund Portfolio
Equity Income Portfolio Research Portfolio
International Portfolio Emerging Growth Portfolio
Limited Term Bond Portfolio
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. Summary of Significant Accounting Policies, Continued:
(a) Security Valuation and Related Investment Income:
The market value of investments is based on the closing bid prices as
of the respective year end. Investment transactions are accounted for
on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(b) Federal Income Taxes:
Operations of the Separate Account are part of, and are taxed with, the
operations of United of Omaha, which is taxed as a "life insurance
company" under the Internal Revenue Code.
(c) Reclassifications:
Certain reclassifications have been made to prior year amounts to
conform with current year presentation.
2. Account Charges:
United of Omaha deducts a daily charge as compensation for the mortality
and expense risks assumed by United of Omaha. The charge is equal on an
annual basis to a percentage of the average daily net assets of each
subaccount. United of Omaha guarantees that the mortality and expense
charge shall not increase. The percentages are:
Series I 1.25%
Series V 1.00%
United of Omaha may incur premium taxes relating to the policies. United of
Omaha will deduct a charge for any premium taxes related to a particular
policy at the time of purchase payments, upon surrender, upon death of any
owner, or at the annuity start date.
No charges are currently deducted from the Separate Account for federal or
state income taxes, since none are currently imposed. Should such taxes be
imposed in the future, United of Omaha may make deductions from the
Separate Account to pay the taxes.
United of Omaha deducts a daily administrative expense charge from the net
assets of the Separate Account. The nominal annual rate is a percentage of
the net asset value of each subaccount as follows:
Series I .15%
Series V .20%
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Account Charges, Continued:
There is also an annual policy fee of $30 that is deducted from the
accumulation value on the last valuation date of each policy year or at
complete surrender. The annual policy fee is waived if the accumulation
value is greater than $50,000 on the last valuation date of the applicable
policy year. The annual policy fee shall not increase.
On the Series V products, the policyowner has the option to purchase the
enhanced death benefit. A charge equal to the annual rate of .35% of the
average death benefit amount will be assessed on each policy anniversary or
prorata upon full surrender.
A withdrawal charge will be assessed on withdrawals in excess of a
percentage of the participant's accumulation value as of the last contract
anniversary preceding the request for the withdrawal. The allowable
withdrawal percentage is as follows:
Series I 10%
Series V 15%
The amount of the charge will depend upon the period of time elapsed since
the purchase payment (first-in, first-out arrangement) was made, as
follows:
Charge on Withdrawal
Exceeding
Purchase Payment Year Allowable Amount
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
No administrative fee is imposed for the first partial withdrawal in any
policy year. However, a withdrawal processing fee equal to the lesser of
$25 or 2% of the amount withdrawn is imposed for the second and each
subsequent withdrawal request during a single policy year. This fee will
not be increased in the future.
There is no charge for the first 12 transfers between subaccounts of the
Separate Account in each policy year. However, there is a $10 fee for the
13th and each subsequent request during a single policy year. Any
applicable transfer fee is deducted from the amount transferred. All
transfer requests made simultaneously will be treated as a single request.
No transfer fee will be imposed for any transfer which is not at the
policyowner's request. The transfer fee will not increase.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Net Assets:
<TABLE>
<CAPTION>
Total net assets (policyowners' cumulative investment accounts) consist of
the following at December 31, 1995:
Series I
------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
------------------------------- --------------------- ------------------------------------------
Asset Index Money InternationaAmerica Equity Term
Growth Manager 500 Market Bond Stock Growth Income Bond
--------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased 825,657 463,697 341,669 1,822,993 508,555 804,836 406,060 639,487 261,791
Shares sold (216,067) (74,190) (43,245)(1,587,006) (174,704)(189,209) (91,165)(2,077,660) (803,46)
Reinvested
dividends and
capital gain
distributions 180 1,213 301 9,568 16,087 487 67 14,653 10,129
Net realized gains
(losses) 51,335 6,107 7,221 - 8,672 14,204 20,051 23,084 (266)
Unrealized gains
(losses) 55,953 45,918 49,561 - 18,287 45,881 75,081 53,832 3,090
------- ------ ------- -------- ------- ------ -------- -------- --------
Net assets 717,058 442,745 355,507 245,555 376,897 676,199 410,094 523,290 194,398
======= ====== ======= ======= ======= ====== ====== ======== ======
Series V
------------------------------------------------------------------------------------------------
Fidelity Scudder T. Rowe Price
------------------------------- ---------- -----------------------------------------------------
Asset New
Manager Equity America Personal Equity Term
Contrafund Growth Income InternationaGrowth Strategy Income InternationalBond
--------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Shares purchased 1,829,379 2,534,948 2,725,552 1,109,625 850,222 1,381,006 1,355,232 1,931,038 591,784
Shares sold (84,781) (326,110) (109,366) (71,078) (117,448) (40,017) (8,792) (65,137) (19,379)
Reinvested
dividends and
capital gain
distributions 21,052 87,703 12,763 - - 13,097 13,684 - 4,576
Net realized gains
(losses) 648 (6,780) 3,329 1,297 6,022 1,657 182 630 45
Unrealized gains
(losses) (1,473) (41,397) 76,808 13,735 27,218 33,601 57,494 50,212 3,922
----- ------ ------- ------- ------- ------- --------- ------- -------
Net assets 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800 1,916,743 580,948
========= ========= ========== ========== ======== ========= ======== ======== =======
Series V
--------------------------------------------------------------------------------------
Alger Federated MFS
--------------------- --------------------- ------------------------------------------
Small American Prime U.S. World High Emerging
CapitalizatiGrowth Money Government Government Income Research Growth
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Shares purchased 1,978,407 1,795,154 6,534,133 1,343,005 654,040 988,556 1,257,919 1,515,369
Shares sold (157,838) (146,472)(3,423,434) (74,433) (85,295) (91,699) (13,841) (136,899)
Reinvested
dividends and capital
gain
distributions - - 25,326 13,022 49,168 19,568 18,552 38,005
Net realized gains
(losses) (6,715) 776 - 750 1,664 2,898 827 6,101
Unrealized gains
(losses) (15,784) (4,802) - 1,708 (41,961) (6,035) 23,697 16,938
------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net assets 1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514
========== ========== ========== ========== ========== ========== ========== =========
</TABLE>
Gross unrealized gains on investments aggregated $662,936 and $709 and
gross unrealized losses on investments aggregated $111,452 and $1,634
resulting in net unrealized gains (losses) of $551,484 and $(925) at
December 31, 1995 and 1994, respectively.
