Prospectus May 1, 1996
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THE ULTRANNUITY SERIES I VARIABLE ANNUITY
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Issued Through
UNITED OF OMAHA SEPARATE ACCOUNT C
by
UNITED OF OMAHA LIFE INSURANCE COMPANY
This Prospectus describes the Ultrannuity Series I 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 ten
Eligible investments, which are the nine Ultrannuity Series I 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:
Fidelity VIP Growth T. Rowe Price International Stock
Fidelity VIP II Index 500 T. Rowe Price Equity Income
Fidelity VIP II Asset Manager T. Rowe Price New America Growth
Scudder Money Market T. Rowe Price Limited-Term Bond
Scudder Bond 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 POLICES INVOLVE 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.
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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 nine 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
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TABLE OF CONTENTS
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Page
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DEFINITIONS ...................................................... 4
SUMMARY........................................................... 6
FINANCIAL STATEMENTS.............................................. 12
UNITED OF OMAHA LIFE INSURANCE COMPANY............................ 13
THE ELIGIBLE INVESTMENTS.......................................... 13
The Variable Account....................................... 13
The Fixed Account.......................................... 16
Transfers.................................................. 16
Dollar Cost Averaging...................................... 17
THE POLICY........................................................ 17
Policy Application and Issuance of Policies................ 18
Purchase Payments.......................................... 18
Accumulation Value......................................... 19
Telephone Transactions..................................... 20
DISTRIBUTIONS UNDER THE POLICY.................................... 20
Withdrawals....................................................... 20
Systematic Withdrawal Plan................................. 21
Annuity Payments........................................... 21
Annuity Starting Date.................................. 21
Election of Payout Option.............................. 21
Payout Options......................................... 21
Death Benefit.............................................. 23
Death of Owner Prior to Annuity Starting Date.......... 23
Death of Owner On or After Annuity Starting Date....... 23
Beneficiary............................................ 23
IRS Required Distributions................................. 23
Restrictions Under the Texas Optional Retirement Program... 24
CHARGES AND DEDUCTIONS............................................ 24
Withdrawal Charge.......................................... 24
Mortality and Expense Risk Charge ......................... 25
Administrative Charges..................................... 25
Transfer Fee............................................... 25
Premium Taxes.............................................. 26
Federal, State and Local Taxes............................. 26
Other Expenses Including Investment Advisory Fees.......... 26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................... 26
Tax Status of the Policy................................... 27
Taxation of Annuities...................................... 27
HISTORICAL PERFORMANCE DATA....................................... 29
Standardized Performance Data.............................. 30
Non-Standardized Performance Data.......................... 30
DISTRIBUTOR OF THE POLICIES....................................... 32
VOTING RIGHTS..................................................... 32
LEGAL PROCEEDINGS................................................. 32
STATEMENT OF ADDITIONAL INFORMATION............................... 33
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DEFINITIONS
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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.
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.)
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, the annual Policy Fee, and any applicable premium tax charge not
previously deducted.
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 Schedule
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.
Fixed Account -- The account which consists of the general account assets of
United of Omaha Life Insurance Company.
Net Purchase Payment -- A Purchase Payment less any charge for applicable
premium taxes.
Nonqualified Policy -- A Policy other than a Qualified Policy.
Payee -- The person who receives Annuity Payments under the Policy.
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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 prior to the Annuity Starting Date. 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 receives favorable tax treatment under Section
401, 403, 408, or 457 of the Internal Revenue Code of 1986, as amended.
Series Funds -- Variable Insurance Products Fund, Variable Insurance Products
Fund II, 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.
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 -- The Variable Account will be valued 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.
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THE ULTRANNUITY SERIES I VARIABLE ANNUITY
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SUMMARY
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The Policy
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The Ultrannuity Series I 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 nine Ultrannuity Series I Subaccounts of United of
Omaha Separate Account C (the "Variable Account") and the Fixed Account.
The Eligible Investments
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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 Growth Portfolio of the Variable Insurance
Products Fund ("Fidelity VIP Fund"); the Asset Manager Portfolio and the Index
500 Portfolio of the Variable Insurance Products Fund II ("Fidelity VIP Fund
II"); the Money Market Portfolio and Bond Portfolio of the Scudder Variable Life
Investment Fund ("Scudder Fund"); the International Stock Portfolio of T. Rowe
Price International Series, Inc. ("T. Rowe Price International Series"); the
Limited-Term Bond Portfolio of T. Rowe Price Fixed Income Series, Inc. ("T. Rowe
Price Fixed Income Series"); and the New America Growth Portfolio and Equity
Income Portfolio of T. Rowe Price Equity Series, Inc. ("T. Rowe Price Equity
Series") (each of the Fidelity VIP Fund, Fidelity VIP Fund II, 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.13.)
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.16.)
Purchase Payments
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A Policy may be purchased with an Initial Purchase Payment of at least
$5,000 either on a non-tax qualified basis ("Nonqualified Policy") or in
connection with retirement plans or individual retirement accounts that qualify
for favorable federal income tax treatment ("Qualified Policy"). An Owner may
pay additional Purchase Payments of at least $500 each at any time prior to the
Annuity Starting Date. 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. 24.)
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. 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. 11.)
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. 20.)
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<PAGE>
Transfers
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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. 20) 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.16.)
Withdrawals
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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, the annual Policy Fee, and any charge for applicable premium taxes. 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
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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
Annuity Payments within seven years after they were made will be subject to a
Withdrawal Charge to partially cover sales expenses, but up to 10% of total
Purchase Payments (less previous withdrawals) may be withdrawn each 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. 24.)
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 nominal annual rate of this charge
is 1.25% of the value of each Subaccount's net assets. (See "Mortality and
Expense Risk Charge," p. 25.)
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
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<PAGE>
and the Policies. The nominal annual rate of this charge is .15% of the
value of each Subaccount's net assets. (See "Administrative Charges," p. 25.)
The account charges for mortality and expense risks and administrative
expenses are guaranteed not to increase.
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 of the Subaccounts 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, or if the Accumulation Value in the
Subaccounts is less than the annual Policy Fee. This fee will not be increased
in the future. (See "Administrative Charges," p. 25.)
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.25.)
Taxes. 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 from Purchase Payments, upon surrender, upon death of any
Owner, or at the Annuity Starting Date. (See "Premium Taxes," p. 26.)
No charges 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 charges
for 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.26.)
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.26.)
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<PAGE>
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
================================================================================
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Maximum Withdrawal Charge (as a % of each 7%
Purchase Payment Surrendered)1
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Annual Policy Fee $30 Per Year
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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 1.25%
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Administrative Expense Charge 0.15%
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Total Variable Account 1.40%
Annual Expenses
========================================================================
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1 Up to ten percent (10%)of total Purchase Payments not previously withdrawn can
be withdrawn each year 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.
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<PAGE>
====================================
Series Fund Annual Expenses2 Management Other Total Series
(as a percentage of average net assets) Fees Expenses Fund Annual
Expenses
================================================================================
Fidelity VIP Growth Portfolio 0.610% 0.090% 0.70%
Fidelity VIP II Asset Manager Portfolio 0.710% 0.080% 0.79%
Fidelity VIP II Index 500 Portfolio* 0.000% 0.280% 0.28%
Scudder Money Market Portfolio 0.370% 0.190% 0.56%
Scudder Bond Portfolio 0.475% 0.105% 0.58%
T. Rowe Price International Stock Portfolio** 0.000% 1.050% 1.05%
T. Rowe Price New America Growth Portfolio** 0.000% 0.850% 0.85%
T. Rowe Price Equity Income Portfolio** 0.000% 0.850% 0.85%
T. Rowe Price Limited-Term Bond Portfolio** 0.000% 0.700% 0.70%
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* Fidelity VIP II Index 500 Portfolio imposes a flat fee of 0.28%.
** T. Rowe Price Funds do not itemize management fees and other expenses.
================================================================================
<TABLE>
<CAPTION>
====================================================================================
Examples. 3 1. Surrender Policy at 2. Annuitize Policy at 3. Policy is not
An Owner would pay the followinend of the time period the end of the time surrendered and is not
expenses on a $1,000 investmentor annuitize and period and Annuity annuitized
assuming a 5% annual return on Annuity Option 4 Option 4 (Lifetime
assets: (Lifetime Income) is Income) IS chosen
NOT chosen
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1Yr 3Yr 5Yr 10 1Yr 3Yr 5Yr 10 1Yr 3Yr 5Yr 10Yr
Yr Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $85 114 148 274 85 69 121 274 22 69 121 274
Fidelity VIP II Asset Manager 86 117 153 285 86 72 126 285 23 72 126 285
Fidelity VIP II Index 500 81 101 125 221 81 56 98 221 18 56 98 221
Scudder Money Market 84 110 140 257 84 65 113 257 21 65 113 257
Scudder Bond Portfolio 84 110 141 259 84 65 114 259 21 65 114 259
T. Rowe Price International Sto89 125 167 318 89 80 140 318 26 80 140 318
T. Rowe Price New America Growt87 119 156 293 87 74 129 293 24 74 129 293
T. Rowe Equity Income 87 119 156 293 87 74 129 293 24 74 129 293
T. Rowe Limited-Term Bond 85 114 148 274 85 69 121 274 22 69 121 274
==================================================================================================================
<FN>
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2The fee and expense data regarding each Series Fund was provided to United of
Omaha by the Series Fund. The Series Funds are not affiliated with United of
Omaha. United of Omaha has no reason to doubt the accuracy of that information,
but has not verified those figures. In preparing the table above and the
examples, United of Omaha has relied on the figures provided by the Series
Funds. 3The $30 annual Policy Fee is reflected as a daily 0.10% charge in these
Examples, based on an actual average Accumulation Value of $30,000.
</FN>
</TABLE>
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<PAGE>
The Examples provided above are intended to assist the Owner in
understanding the costs and expenses that will be borne, directly or indirectly.
These include the expenses of the Series Funds for the year ended December 31,
1995. See "Charges and Deductions," p. 24, and the Series Funds' prospectuses.
The Examples also assume that no transfer fees or premium tax charges have been
assessed.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The
Assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual returns (in either the Variable Account
or the Fixed Account), which may be greater or lesser than the assumed amount.
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
prior to age 76, the death benefit will equal the greatest 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 charge for applicable premium
taxes; or (b) the sum of Net Purchase Payments less partial withdrawals; or (c)
in Policy Year eight and later, the Accumulation Value as of the most recent
7-year Policy Anniversary, less amounts subsequently withdrawn and less any
charge for applicable premium taxes. (If any Owner dies upon or after attainment
of age 76, the death benefit will equal the greater of (a) and (b), above.) 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.23.)
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 15 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.26.)
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.
- 11 -
<PAGE>
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 endorsements.
* * *
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. 16.)
FINANCIAL STATEMENTS
The Financial Statements for United of Omaha and the Ultrannuity Series I
Subaccounts of the Variable Account and the related independent auditor's
reports are contained in the Statement of Additional Information, which is
available free upon request.
CONDENSED FINANCIAL INFORMATION
The Financial Statements for United of Omaha, the Ultrannuity Series I
Subaccounts of 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 Ultrannuity
Series I 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 1, 1994 (Commencement
Date). 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 Unit Value* Accumulation Units**
Subaccount
----------------------------------------------------------------
Com- Year Year Year Year
mence- Ended Ended Ended Ended
ment 12/31/94 12/31/95 12/31/94 12/31/95
Date
<S> <C> <C> <C> <C> <C>
===============================================================================================
Fidelity Growth Portfolio 10 10.418 13.905 1,327 51,568
Fidelity VIP II Asset Manager 10 9.693 11.179 1,984 39,609
Fidelity VIP II Index 500 10 10.136 13.712 97 25,921
Scudder Money Market 1 1.017 1.059 133,207 231,966
Scudder Bond Portfolio 10 9.980 11.629 102 32,410
T. Rowe Price International Stock 10 9.870 10.820 2,565 64,496
T. Rowe Price New America Growth 10 10.037 14.954 603 27,420
T. Rowe Price Equity Income 10 10.268 13.644 1,070 38,350
T. Rowe Price Limited Term Bond 10 10.168 11.016 3,052 17,648
===============================================================================================
* Accumulation Unit Values are rounded to the nearest tenth of a cent.
** Accumulation Units are rounded to the nearest unit.
</TABLE>
- 12 -
<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
nine Series I 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 nine 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. 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.
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
- 13 -
<PAGE>
of 1940 (the "1940 Act") as an open-end, diversified management investment
company. 4 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. Fidelity Management & Research Company
("FMR") is the manager of the Fidelity VIP Fund and Fidelity VIP Fund II. On
behalf of the Asset Manager 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.
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:
Fidelity Variable Insurance Products Fund
Growth Portfolio -- seeks to achieve capital appreciation. The Portfolio
normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital Appreciation may also be
found in other types of securities, including bonds and preferred stocks.
Fidelity Variable Insurance Products Fund II
Asset Manager 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.
Index 500 Portfolio -- seeks investment results that correspond to the total
return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the Standard
& Poor's 500 Composite Stock Price Index, while keeping transaction costs
low.
Scudder Variable Life Investment Fund
Money Market Portfolio -- seeks to maintain stability of capital and,
consistent therewith, to maintain the liquidity of capital and to provide
current income. The Portfolio seeks to maintain a constant current net asset
value of $1.00 per share, although in certain circumstances this may not be
possible.
Bond Portfolio -- seeks a high level of income consistent with a high
quality portfolio of debt securities. Under normal circumstances, the
Portfolio invests at least 65 percent of its assets in bonds, including
those of the U.S. Government and its agencies, and those corporations and
other notes and bonds paying high current income.
T. Rowe Price International Series, Inc.
International Stock Portfolio -- seeks a total return on its assets from
long-term growth of capital and income, through investments primarily in
established non-U.S. companies.
- --------
4The registration of the Series Funds does not involve supervision of the
management or investment practices or policies of the Series Funds by the SEC.
- 14 -
<PAGE>
T. Rowe Price Equity Series, Inc.
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.
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 Fixed Income Series, Inc.
Limited-Term Bond Portfolio -- seeks a high level of income consistent with
modest price fluctuation by investing primarily in investment grade debt
securities.
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 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.
- 15 -
<PAGE>
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 3.0% 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 3.0%. 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 terminate, suspend, or modify
transfer privileges at any time. (See "Transfers," p.16.) 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. 20.) 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 3.0% 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
surrenders (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 3.0%
PER YEAR COMPOUNDED ANNUALLY. THE POLICY OWNER BEARS THE RISK THAT CURRENT
INTEREST RATES WILL NOT EXCEED AN EFFECTIVE RATE OF 3.0% 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. 20. United of
Omaha reserves the right, at any time and without notice to any party, to
terminate, suspend, or modify the transfer privileges under the Policy.
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 reserves the right, at its discretion,
- 16 -
<PAGE>
either to deny the transfer request or to 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 will 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. 24.)
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.
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
believe 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 transfers on such Owner's behalf, subject to United
of Omaha's rules. United of Omaha may suspend or cancel such acceptance at any
time. 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 the Money Market
Subaccount or the Fixed Account to any Subaccount 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 Money Market Subaccount or, if applicable, the Fixed
Account to cover at least one year's transfers.
Dollar Cost Averaging results in the purchase of more Accumulation Units
when the Accumulation Unit value is low, and less 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 in the Money
Market Subaccount or, if applicable, the Fixed Account is insufficient for the
next transfer.
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.
THE POLICY
----------
The Ultrannuity Series I 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
- 17 -
<PAGE>
Policy may be purchased on a non-tax qualified basis ("Nonqualified Policy") or
in connection with retirement plans or individual retirement accounts that
qualify for favorable income tax treatment ("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 two 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 five 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. While the Annuitant and Owner are living, 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 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 reserves the right to limit the
number of Purchase Payments in any Policy Year.) 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. United of Omaha reserves the right
to limit the number of Subaccounts to which allocations may be made at any one
time. 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 15 days from the date that the
Policy is mailed from United of Omaha's Service Office.
- 18 -
<PAGE>
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. 20). 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 investment experience of the selected Eligible
Investments as well as the 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.
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, 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%.
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<PAGE>
Telephone Transactions
Owners can make transfers, 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, the annual Policy
Fee, and any charge for applicable premium taxes. (See "Charges and Deductions,"
p. 24).
The Owner may withdraw Cash Surrender Value from the Variable Account at any
time during the life of the Annuitant and of the Owner and 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 10% of total Purchase Payments
(less any previous withdrawals), 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. 24.
Withdrawals may be taxable and subject to a penalty tax. (See "Certain
Federal Income Tax Consequences," p. 26.)
Since the Owner assumes the investment risk with respect to Net Purchase
Payments allocated to the Variable Account because of the charges and
deductions, 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 surrenders 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
and Annuitant will terminate.
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<PAGE>
Systematic Withdrawal Plan
After the first Policy Year, 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.
26.)
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 Payee's
age or survival.
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,
under which the Policy Proceeds will be paid to the Payee(s), in the Policy
application. However, 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, Annuity Payments will be
made under Option 4 providing lifetime income with guaranteed payments 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 another amount established by United of
Omaha from time to time, 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. 23.) Annuity Payments will be
made only on a fixed basis.
Unless the Policy Owner specifies otherwise, the Payee shall be the
Annuitant.
Supplementary Policy. Once Proceeds become payable and a choice has been
made, United of Omaha will issue a Supplementary Policy in exchange for the
Policy setting forth the terms of the option elected. The Supplementary Policy
will name the payees and will describe the payment schedule.
Payout Options. The Policy provides six Payout Options which are described
below.
NOTE CAREFULLY: UNDER PAYOUT OPTION 4, 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 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 Annuity Payments.
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, declare additional interest to be paid or credited
annually for Payout Options 1, 2, 3, or 6.
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<PAGE>
Under each 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 Accumulation 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. For further information, contact United of Omaha at
its Service Office.
Guaranteed Values. There are six Payout Options. They are all fixed rate
options; variable Payout Options are not available.
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.
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.
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, based on a 3% guaranteed interest rate. Current
amounts may be obtained from United of Omaha. 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. 26.)
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<PAGE>
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. If any
Owner or joint Owner dies prior to age 76, 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; (ii) the sum of Net Purchase Payments, less
partial withdrawals; or (iii) in Policy Year eight and later, the Accumulation
Value as of the most recent 7-year Policy Anniversary, less any amounts
subsequently withdrawn and less any charge for applicable premium taxes. If any
Owner or joint Owner dies upon or after attainment of age 76 the death benefit
will equal the larger of (i) and (ii), above.
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 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 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.)
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 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
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<PAGE>
rules apply to Qualified Contracts. (See "Certain Federal Income Tax
Consequences, " p. 26.) 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; or (3) death.
Accordingly, a participant in the ORP (or the partic- ipant'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.
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 or fee) 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 Percentag 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 10% of total Purchase
Payments (less any previous withdrawals), 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.) Further,
no Withdrawal Charge will be imposed as a result of any death benefit payment,
any withdrawal made pursuant to the Policy's Nursing Home Rider (which may not
be available in all states) or, under Qualified Plans, any refund of
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<PAGE>
contributions paid in excess of the Owner's deductible amounts. United of
Omaha will not increase 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 nominal annual rate of 1.25% (0.0034462% daily) of the value of the
net assets in the Variable Account and it will not increase. On an annual basis,
approximately 0.95% is for mortality risks and approximately 0.30% 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.
United of Omaha also bears substantial risk in connection with its death
benefit guarantee for Owners who have not yet attained age 76, since United of
Omaha will pay a death benefit equal to the Purchase Payments, less withdrawals,
or the Accumulation Value on the most recent 7-year Policy Anniversary, less
subsequent withdrawals, if either of those amounts is higher than the
Accumulation Value when the death benefit is payable.
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.
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. If the Accumulation Value in the Subaccounts is less than the
Policy Fee, the Policy Fee will not be charged. 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
nominal annual rate of .15% (0.0004112% 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.
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.
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<PAGE>
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.
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), 408, or
457 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 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.
- 26 -
<PAGE>
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 contract's 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. 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: (1) made on or after the date on which the Policy Owner attains
age 59 1/2; (2) made as a result of death or disability of the Policy Owner; (3)
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"; (4) from a qualified plan; (5) allocable to
investment in the Policy before August 14, 1982; (6) under a qualified funding
asset (as defined in Code section 130(d)); (7) under an immediate annuity (as
defined in Code Section 72(u)(4)); or (8) 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.
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<PAGE>
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 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. For these
purposes, the investment in the contract is not affected by the Owner's death.
That is, the investment in the Policy remains the amount of any Purchase
Payments paid which were not excluded from gross income.
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. The Policy Owner 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, although withholding is mandatory for certain
types of Qualified Policies.
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.
Qualified Plans
The Policy is designed for use with several types of qualified plans. 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 conditions of the plan
itself. Various tax penalties may apply to contributions in excess of specified
limits, aggregate distributions in excess of $150,000 annually, distributions
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 the various types of
qualified plans. Policy Owners, Annuitants and Beneficiaries are cautioned that
the rights of any person to any benefits under qualified plans may be subject to
the terms and conditions of the plans themselves, regardless of the terms and
conditions of the Policy. Some retirement plans are subject to distribution and
other requirements that are not incorporated into United
- 28 -
<PAGE>
of Omaha's Policy administration procedures. Policy Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Policies comply with applicable law.
Following are brief descriptions of the various types of qualified plans in
connection with which United of Omaha may be able to issue the Policy: POLICIES
FOR ALL TYPES OF QUALIFIED PLANS MAY NOT BE AVAILABLE IN ALL STATES. When issued
in connection with a qualified plan, the Policy will be amended as necessary to
conform to the requirements of the Code.
Qualified Pension and Profit Sharing Plans. Sections 401(a) of the Code
permits corporate employers to establish various types of retirement plans for
employees. Such retirement plans may permit the purchase of the Policy in order
to accumulate retirement savings under the plans. In Contracts issued to such
retirement plans, the Plan trustee shall be the Owner and the Annuitant.
The Self-Employed Individuals' Tax Retirement Act of 1962, as amended,
commonly referred to as "H.R. 10," permits self-employed individuals to
establish qualified plans for themselves and their employees. Purchasers of a
Policy for use with such plans should seek competent advice regarding the
suitability of the proposed plan documents and the Policy to their specific
needs.
Adverse tax or other legal consequences to the plan, to 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 complies with all legal
requirements applicable to such benefits prior to transfer of the Policy.
Individual Retirement Annuities and Individual Retirement Accounts. Section
408 of the Code permits eligible individuals to contribute to an individual
retirement program known as an Individual Retirement Annuity or Individual
Retirement Account (each hereinafter referred to as "IRA"). Also, distributions
from certain other types of qualified plans may be "rolled over" on a
tax-deferred basis into an IRA. IRAs are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. The sale of a Policy for use with an IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a Policy
for use with IRAs will be provided with supplemental information required by the
Internal Revenue Service or other appropriate agency. 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 for use with IRAs. The Internal
Revenue Service has not reviewed the Policy for qualification as an IRA, and has
not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Policy comports with IRA qualification
requirements.
Restrictions under Qualified Policies. Other restrictions with respect to
the election, commencement, or distribution of benefits may apply under
Qualified Policies or under the terms of the plans in respect of which Qualified
Policies are issued.
General
At the time the initial Purchase Payment is made, a prospective purchaser
must specify whether he or she is purchasing a Nonqualified Policy or a
Qualified Policy. If the initial Purchase Payment is derived from an exchange or
surrender of another annuity contract, United of Omaha may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. United of Omaha will require that
persons purchase separate Policies if they desire to invest monies qualifying
for different annuity tax treatment under the Code. Each such separate Policy
would require the minimum initial Purchase Payment stated above. Additional
Purchase Payments under a Policy must qualify for the same federal income tax
treatment as the initial Purchase Payment under the Policy; United of Omaha will
not accept an additional Purchase Payment under a Policy if the Federal income
tax treatment of such Purchase Payment would be different from that of the
initial Purchase Payment.
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 EARNINGS 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
- 29 -
<PAGE>
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.
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). Such
standardized average annual total return information for the Subaccounts of
Policies is as follows:
================================================================
SUBACCOUNT STANDARDIZED Since One-Year
AVERAGE ANNUAL TOTAL RETURN TABLE inception to ended
Subaccount (date of inception - 6/1/94) 12/31/95 12/31/95
- ----------------------------------------------------------------
Fidelity VIP Growth 19.51 27.10
Fideltiy VIP II Asset Manager 3.34 8.84
Fidelity VIP II Index 500 18.40 28.90
Scudder Money Market -0.33 2.21
Scudder Bond 6.10 10.13
T. Rowe Price International 1.10 3.24
T. Rowe Price New America Growth 25.39 42.61
T. Rowe Price Equity Income 18.01 26.50
T. Rowe Price Limited-Term Bond 2.26 1.95
================================================================
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:
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<PAGE>
================================================================
SUBACCOUNT NON-STANDARDIZED Since One-Year
AVERAGE ANNUAL TOTAL RETURN TABLE inception to ended
Subaccount (date of inception - 6/1/94) 12/31/95 12/31/95
- ----------------------------------------------------------------
Fidelity VIP Growth 23.06 33.40
Fideltiy VIP II Asset Manager 7.26 15.24
Fidelity VIP II Index 500 21.98 35.20
Scudder Money Market 3.61 4.09
Scudder Bond 9.91 16.43
T. Rowe Price International 5.01 9.54
T. Rowe Price New America Growth 28.85 48.91
T. Rowe Price Equity Income 21.58 32.80
T. Rowe Price Limited-Term Bond 6.14 8.25
================================================================
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.
United of Omaha may also disclose average annual total returns for Series Fund
Portfolios since their inception, including such disclosure for periods prior to
the date the Variable Account commenced operations. Such average annual total
return information is as follows:
<TABLE>
<CAPTION>
===========================================================================================
For the period
from inception
For the 1-year For the 5-year of Series Fund
Series Fund period ended period ended Portfolio to
(date of inception) 12/31/95 12/31/95 12/31/95
% % %
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Fidelity VIP Growth (10/9/86) 35.36 20.78 14.83
Fidelity VIP II Asset Manager (9/6/89) 16.96 12.76 11.24
Fidelity VIP II Index 500 (8/27/92) 37.19 N/A 15.44
Scudder Money Market () 5.65 4.20 5.72
Scudder Bond Portfolio (7/16/85) 18.17 9.74 9.04
T. Rowe Price International (3/31/94) 11.18 N/A 7.31
T. Rowe Price New America Growth (3/31/94 51.08 N/A 27.24
T. Rowe Price Equity Income (3/31/94) 34.76 N/A 23.30
T. Rowe Price Limited-Term Bond (5/17/94) 9.88 N/A 7.61
===========================================================================================
</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
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<PAGE>
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 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.
DISTRIBUTOR OF THE POLICIES
---------------------------
Mutual of Omaha Investor Services ("MOIS") is the principal underwriter of
the Policies. 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.
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.
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<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.............................................. 3
Owner and Joint Owner.................................................. 3
Death of Annuitant..................................................... 3
Entire Policy ........................................................ 3
Incontestability ...................................................... 3
Deferment of Payment and Transfers..................................... 3
Misstatement of Age or Sex............................................. 3
Nonparticipating....................................................... 4
Assignment ........................................................... 4
Evidence of Age or Survival............................................ 4
Nursing Home Rider..................................................... 4
Federal Tax Matters . . . . ............................................... 4
Tax Status of the Policy............................................... 4
Taxation of United of Omaha............................................ 5
Investment Experience ..................................................... 5
State Regulation of United of Omaha ....................................... 5
Administration . . . . . . . . ............................................ 6
Records and Reports ....................................................... 6
Distribution of the Policies .............................................. 6
Custody of Assets . . . . . . . ........................................... 6
Historical Performance Data................................................ 6
Money Market Yields ................................................... 7
Other Subaccount Yields ............................................... 7
Total Returns . . . . . . ............................................ 8
Other Performance Data................................................. 9
Legal Matters . . . . ................................................. 10
Other Information . . . . . . ............................................. 10
Financial Statements . . . . . ........................................... 10
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ULTRANNUITY SERIES I 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 I 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
<PAGE>
TABLE OF CONTENTS
Page
The Policy-General Provisions .......................................... 3
Owner and Joint Owner............................................. 3
Death of Annuitant................................................ 3
Entire Policy .................................................... 3
Incontestability ................................................. 3
Deferment of Payment and Transfers................................ 3
Misstatement of Age or Sex........................................ 3
Nonparticipating.................................................. 4
Assignment........................................................ 4
Evidence of Age or Survival....................................... 4
Nursing Home Rider ............................................... 4
Federal Tax Matters (26)................................................ 4
Tax Status of the Policy.......................................... 4
Taxation of United of Omaha....................................... 5
Investment Experience .................................................. 5
State Regulation of United of Omaha..................................... 5
Administration ......................................................... 6
Records and Reports..................................................... 6
Distribution of the Policies (32)....................................... 6
Custody of Assets....................................................... 6
Historical Performance Data (29)........................................ 6
Money Market Yields............................................... 7
Other Subaccount Yields........................................... 7
Total Returns..................................................... 8
Other Performance Data............................................ 9
Legal Matters........................................................... 10
Other Information....................................................... 10
Financial Statements (12 )............................................. 10
(Numbers in parenthesis indicate corresponding sections of the Prospectus).
- 2 -
<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, in the absence of fraud, 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
- 3 -
<PAGE>
small, the underpayments will be added to the next payment. Adjustments for
overpayments or underpayments will include 6% interest.
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.
Nursing Home Rider
Except in the limited circumstances described below, a Nursing Home Rider
will be issued automatically upon the issuance of each Policy. The Nursing Home
Rider provides for a waiver of the Policy's Withdrawal Charge provisions upon
the Owner's confinement to a nursing home. There is no additional charge for the
issuance of the Nursing Home Rider, which is available only at the issuance of
the Policy. A Nursing Home Rider will not be issued in connection with a Policy,
the Owner of which is already confined to a nursing home upon the Policy's Date
of Issue. The Nursing Home Rider may not be available in all states.
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 participation 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."
- 4 -
<PAGE>
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.
- 5 -
<PAGE>
ADMINISTRATION
--------------
United of Omaha has an administrative services agreement with 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%
of Purchase Payments. For the fiscal year ended December 31, 1994, United of
Omaha paid $470 in total compensation to MOIS, and in fiscal year ended December
31, 1995 the amount was $4,655; of this amount MOIS retained $0 in 1994 and $0
in 1995 as concessions for its services as principal underwriter and for
distribution concessions, with the remaining amount paid by MOIS to other
distributing 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
- 6 -
<PAGE>
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.
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.
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 a
daily 0.10% charge, based on an anticipated average Accumulation Value of
$30,000. Yield figures will not reflect the Withdrawal Charge. The annualized
yield for the seven day period ending December 31, 1995 is 4.0%.
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.
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.
- 7 -
<PAGE>
The yield is computed by: (1) 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; (2) compounding that yield for a six-month period; and (3)
multiplying that result by 2. Expenses attributable to the Subaccount include:
(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 a
daily 0.10% charge in the yield calculation, based on an anticipated average
Accumulation Value of $30,000. 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).
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 (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 a daily 0.10% charge 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. The total return will then be
calculated according to the following formula:
- 8 -
<PAGE>
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.
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.
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 Insurance Week National Underwriter
Advertising Age Journal of Accountancy Nation's Business
American Banker Journal of the American Morningstar, Inc.
Barron's Society of CLU & ChFC New York Times
Best's Review Journal of Commerce New Choices
Broker World Life Association News (formerly 50 Plus)
Business Insurance Life Insurance Selling
Business Month Manager's Magazine
Business Week MarketFacts
Changing Times Money
Consumer Reports
Economist
Financial Planning
Financial World
Forbes
Fortune
Inc.
Institutional Investor
Insurance Forum
Insurance Sales
- 9 -
<PAGE>
Pensions & Investments U.S. Banker
Pension World Wall Street Journal
Round the Table Working Woman
Rough Notes
VARDs
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
--------------------
The Financial Statements for the Ultrannuity Series I Subaccounts of the
Variable Account as of December 31, 1995 included in this Registration Statement
have been audited by Coopers & Lybrand, Omaha, Nebraska.
The Financial Statements of United of Omaha as of December 31, 1995, 1994
and 1993 included in this Registration Statement have been audited by Coopers &
Lybrand, Omaha, Nebraska.
- 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.
