AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1998
REGISTRATION NO. 333-51051
811-8190
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO.__ [ ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 12
UNITED OF OMAHA SEPARATE ACCOUNT C
(EXACT NAME OF REGISTRANT)
UNITED OF OMAHA LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
Mutual of Omaha Plaza, Omaha, Nebraska, 68175
NAME AND ADDRESS OF AGENT FOR SERVICE:
Kenneth W. Reitz, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska, 68175-1008
Telephone: (402) 351-5087
Fax: (402 351-5906
Internet: [email protected]
Approximate date of proposed public offering: As soon
as practical after effectiveness of the Registration Statement.
FLEXIBLE PAYMENT VARIABLE DEFERRED ANNUITY POLICY
(TITLE, AMOUNT, AND PROPOSED MAXIMUM OFFERING PRICE OF
SECURITIES BEING REGISTERED)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
declares that an indefinite amount of securities are being registered under the
Securities Act of 1933.
-------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page...................... Cover Page
2. Definitions..................... Definitions
3. Synopsis........................ Summary; Historical Performance Data
4. Condensed Financial Information. Financial Statements
5. General
(a) Depositor....................... United of Omaha Life Insurance Company
(b) Registrant...................... The Variable Account
(c) Portfolio Company............... The Series Funds
(d) Fund Prospectus................. The Series Funds
(e) Voting Rights................... Voting Rights
6. Deductions and Expenses
(a) General......................... Charges and Deductions
(b) Sales Load %.................... N/A
(c) Special Purchase Plan........... N/A
(d) Commissions..................... Distributor of the Policies
(e) Expenses - Registrant........... N/A
(f) Fund Expenses................... Expenses Including Investment
Advisory Fees
(g) Organizational Expenses......... N/A
7. Policies
(a) Persons with Rights............. The Policy; Election of Annuity Option;
Determination of Annuity Payments; Annuity
Starting Date; Ownership of the Policy;
Voting Rights
(b) (i) Allocation of Premium
Payments.................. Allocation of Purchase Payments
(ii) Transfers................. Transfers
(iii) Exchanges................. N/A
(c) Changes......................... Addition, Deletion or Substitution of
Investments; Election of Annuity Option;
Annuity Starting Date; Beneficiary;
Ownership of the Policy
(d) Inquiries....................... Summary
8. Annuity Period.................. Payout Options
9. Death Benefit................... Death of Annuitant or Owner Prior to
Annuity Starting Date
10. Purchase and Policy Values
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(a) Purchases....................... Policy Application and Issuance of
Policies; Purchase Payments
(b) Valuation....................... Accumulation Value; The Variable Account
Value
(c) Daily Calculation............... The Variable Account Value
(d) Underwriter..................... Distributor of the Policies
11. Redemptions
(a) By Owners....................... Withdrawals
By Annuitant.................... N/A
(b) Texas ORP....................... Restrictions Under the Texas Optional
Retirement Program
(c) Check Delay..................... Payment not Honored by Bank
(d) Lapse........................... N/A
(e) Free Look....................... Summary
12. Taxes........................... Certain Federal Income Tax Consequences
13. Legal Proceedings............... Legal Proceedings
14. Table of Contents for the
Statement of Statement of Additional
Additional Information.............. Information
PART B
Item of Form N-4 Statement of Additional
Information Caption
15. Cover Page..................... Cover Page
16. Table of Contents.............. Table of Contents
17. General Information
and History.................... (Prospectus) United of Omaha Life Insurance
Company
18. Services
(a) Fees and Expenses
of Registrant.................. N/A
(b) Management Policies............ N/A
(c) Custodian...................... Custody of Assets
Independent
Auditors ..................... Independent Auditors
(d) Assets of Registrant........... Custody of Assets
(e) Affiliated Person.............. N/A
(f) Principal Underwriter.......... Distribution of the Policies
19. Purchase of Securities
Being Offered.................. Distribution of the Policies
Offering Sales Load............ N/A
20. Underwriters................... Distribution of the Policies; (Prospectus)
Distributor of the Policies
21. Calculation of Performance
Data Calculation of Yields and Total Returns;
Other Performance Data
22. Annuity Payments............... (Prospectus) Election of Payout Option;
(Prospectus) Determination of Annuity
Payments
23. Financial Statements........... Financial Statements
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PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits........................ Financial Statements and Exhibits
(a) Financial Statements............ Financial Statements
(b) Exhibits........................ Exhibits
25. Directors and Officers of....... Directors and Officers of the
the Depositor................... Depositor
26. Persons Controlled By or
Under Common Control
with the Depositor Persons Controlled By or Under Common
or Registrant................... Control with the Depositor or Registrant
27. Number of Policy Owners......... Number of Policy Owners
28. Indemnification................. Indemnification
29. Principal Underwriters.......... Principal Underwriters
30. Location of Accounts
and Records..................... Location of Accounts and Records
31. Management Services............. Management Services
32. Undertakings.................... Undertakings
Signature Page...................... Signatures
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[GRAPHIC OMITTED] PROSPECTUS: Dated August___, 1998
ULTRA-ACCESS
Flexible Payment Variable
Deferred Annuity Policy
This Prospectus describes the Ultra-Access Variable Annuity Policy (the
"Policy"), a Flexible Payment Variable Deferred Annuity offered by UNITED OF
OMAHA LIFE INSURANCE COMPANY ("we, us, our, United of Omaha"). 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 ("you, your") may allocate Net Purchase Payments to one or more of
the 27 Eligible investments, which are the 25 Ultra-Access Variable Annuity
Subaccounts of the UNITED OF OMAHA SEPARATE ACCOUNT C (the "Variable Account")
and the Fixed Account or Systematic Transfer Account. Assets of each Subaccount
of the Variable Account are invested in a corresponding mutual fund Portfolio.
The mutual funds offered through the Policy, while they may have the same or
similar names of retail mutual funds, are not the same as those funds. By law,
the Policy may not offer those retail mutual funds, so it offers funds whose
names and characteristics may be similar to them but whose performance is not
necessarily related to the retail funds. The Portfolios are described in
separate prospectuses that accompany this Prospectus. The Policy's available
investment options are:
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FEDERATED PRIME MONEY FUND II ("MONEY MARKET") PORTFOLIO
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES PORTFOLIO
FIDELITY ASSET MANAGER: GROWTH PORTFOLIO
FIDELITY EQUITY INCOME PORTFOLIO
FIDELITY CONTRAFUND PORTFOLIO
FIDELITY INDEX 500 PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
MFS HIGH INCOME FUND PORTFOLIO
MFS RESEARCH PORTFOLIO
MFS WORLD GOVERNMENT PORTFOLIO
MFS VALUE SERIES PORTFOLIO
MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
MORGAN STANLEY FIXED INCOME PORTFOLIO
PIONEER CAPITAL GROWTH PORTFOLIO
PIONEER REAL ESTATE PORTFOLIO
SCUDDER GLOBAL DISCOVERY PORTFOLIO
SCUDDER GROWTH & INCOME PORTFOLIO
SCUDDER INTERNATIONAL PORTFOLIO
T. ROWE PRICE EQUITY INCOME PORTFOLIO
T. ROWE PRICE INTERNATIONAL PORTFOLIO
T. ROWE PRICE LIMITED TERM BOND PORTFOLIO
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
FIXED ACCOUNT
SYSTEMATIC TRANSFER ACCOUNT
The Accumulation Value in the Variable Account will vary in accordance with
the investment performance of the Subaccounts selected by the Owner. This means
you bear the entire investment risk under this Policy for all amounts allocated
to the Variable Account. Amounts allocated to the Fixed Account or Systematic
Transfer Account are guaranteed by us and will earn a specified rate of interest
declared periodically.
It may not always be in your best interest to replace existing annuity coverage
with the Policy described in this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THE
POLICY INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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This Prospectus sets forth information you 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.You may obtain a copy of the Statement of Additional Information at no
cost by writing to us at our Service Office (United of Omaha Variable Product
Service, P.O. Box 8430, Omaha, Nebraska 68108-0430) or by calling us at
1-800-238-9354. The table of contents of the Statement of Additional Information
is included at the end of this Prospectus.
The Policy may be purchased with an initial Purchase Payment of at least
$5,000. 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 us to you, if
living, for the life of the Annuitant or for some other period, beginning on the
Annuity Starting Date selected by you. Prior to the Annuity Starting Date, you
can transfer Accumulation Value among the Eligible Investments, that is, among
the Fixed Account or Systematic Transfer Account and the 25 Subaccounts of the
Variable Account (some prohibitions and restrictions apply, especially on
transfers out of the Fixed Account or Systematic Transfer Account). You can also
elect to withdraw all or a portion of the Cash Surrender Value; however,
withdrawals may be taxable, subject to a tax penalty, and withdrawals from the
Fixed Account or Systematic Transfer Account may be delayed.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION GENERALLY DESCRIBE
ONLY THE POLICIES AND THE VARIABLE ACCOUNT, EXCEPT WHEN THE FIXED ACCOUNT IS
SPECIFICALLY MENTIONED.
PLEASE READ THIS PROSPECTUS CAREFULLY
AND RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENT PROSPECTUS FOR EACH PORTFOLIO
2
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TABLE OF CONTENTS
Page
DEFINITIONS ................................................................ 4
SUMMARY ................................................................... 5
FINANCIAL STATEMENTS........................................................ 10
UNITED OF OMAHA LIFE INSURANCE COMPANY...................................... 10
THE ELIGIBLE INVESTMENTS.................................................... 11
The Variable Account
Historical Performance Data
Standardized Performance Data
The Fixed Account and The Systematic Transfer Account
Transfers
Dollar Cost Averaging
Asset Allocation Program
THE POLICY.................................................................. 21
Policy Application and Issuance of Policies
Purchase Payments
Accumulation Value
Telephone Transactions
DISTRIBUTIONS UNDER THE POLICY.............................................. 23
Withdrawals
Systematic Withdrawal Plan
Annuity Payments
Annuity Starting Date
Election of Payout Option
Payout Options
Death Benefit
Death of Owner Prior to Annuity Starting Date
Accidental Death Benefit
Death of Owner On or After Annuity Starting Date
Beneficiary
IRS Required Distributions
Restrictions Under the Texas Optional Retirement Program
CHARGES AND DEDUCTIONS...................................................... 27
Withdrawal Charge
Mortality and Expense Risk Charge
Administrative Charges
Transfer Fee
Premium Taxes
Federal, State and Local Taxes
Other Expenses Including Investment Advisory Fees
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 28
Tax Status of the Policy
Taxation of Annuities
DISTRIBUTOR OF THE POLICIES................................................. 32
VOTING RIGHTS............................................................... 32
PREPARING FOR THE YEAR 2000................................................. 32
LEGAL PROCEEDINGS........................................................... 32
STATEMENT OF ADDITIONAL INFORMATION......................................... 33
3
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DEFINITIONS
Accumulation Unit -- An accounting unit of measure used in calculating the
Accumulation Value in the Variable Account prior to the Annuity Starting Date.
Accumulation Value -- The dollar value as of any Valuation Date prior to the
Annuity Starting Date of all amounts accumulated under the Policy.
Anniversary Value -- An amount equal to the Accumulation Value on a Policy
Anniversary.
Annuitant -- The person on whose life Annuity Payments involving life
contingencies are based. If the Annuitant is other than the Owner, the Annuitant
has no rights under the Policy.
Annuity Payment -- A payment made by United of Omaha under an annuity Payout
Option.
Annuity Purchase Value -- An amount equal to the Accumulation Value for the
Valuation Period which ends immediately preceding the Annuity Starting Date
reduced by any Withdrawal Charge, and any charge for applicable premium or
similar taxes.
Annuity Starting Date -- The date upon which Annuity Payments are to begin. The
latest Annuity Starting Date permitted is when the Annuitant attains age 95.
(Age 85 in Pennsylvania.)
Beneficiary -- The person(s) or other legal entity listed by the Owner in the
Policy application and referred to in the Policy as the named beneficiary. In
the case of joint Owners, the surviving joint Owner is the primary Beneficiary
and the named Beneficiary is the contingent Beneficiary. If the named
Beneficiary does not survive the Owner, the estate of the Owner is the
Beneficiary.
Cash Surrender Value -- The Accumulation Value less any applicable Withdrawal
Charge, any applicable Policy Fee, and any applicable premium tax charge not
previously deducted.
Current Interest Rate Guarantee -- Our guarantee to pay a declared current
interest rate on amounts under a Policy allocated to the Fixed Account or to
amounts allocated to the Systematic Transfer Account. A particular Current
Interest Rate Guarantee will be in effect for at least one year.
Date of Issue -- The date the Policy is issued, as shown on the Policy Data
Page.
Due Proof of Death -- A certified copy of a death certificate, a certified copy
of a decree of a court of competent jurisdiction as to the finding of death, a
written statement by the attending physician, or any other proof satisfactory to
us will constitute Due Proof of Death.
Eligible Investments -- The Fixed Account and any of the Subaccounts of the
Variable Account.
Fixed Account -- An account which consists of general account assets of United
of Omaha Life Insurance Company.
Net Purchase Payment -- A Purchase Payment less any charge for applicable
premium taxes.
Nonqualified Policy -- A Policy other than a Qualified Policy.
Payee -- The person who receives Annuity Payments under the Policy.
Payout Option -- Any method of payment of Policy Proceeds under the Policy.
Policy -- The variable annuity policy offered by this Prospectus.
Policy Anniversary -- The same month and day as the Date of Issue in each
calendar year after the calendar year in which the Date of Issue occurs.
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Policy Owner or Owner ("you, your") -- The person(s) who may exercise all rights
and privileges under the Policy. If there are joint Owners, the signatures of
both Owners are needed to exercise rights under the Policy. The Policy Owner may
change the ownership of the Policy or pledge it as collateral by assigning it.
Policy Year -- A Policy Year begins on the Date of Issue and each Policy
Anniversary.
Portfolio -- A Series Fund's separate investment series that is available under
the Policy.
Purchase Payment -- An amount paid to United of Omaha by the Policy Owner or on
the Policy Owner's behalf as consideration for the benefits provided by, and in
accordance with the provisions of, the Policy.
Proceeds -- The death benefit or the Annuity Purchase Value.
Qualified Policy -- A Policy that may be issued as set forth herein in
connection with a qualified plan that receives favorable tax treatment under
Section 401, 403(b), or 408 of the Internal Revenue Code of 1986, as amended.
Series Funds -- Diversified, open-end investment management companies in which
the Variable Account invests.
Service Office - United of Omaha Variable Product Service, P.O. Box 8430, Omaha,
Nebraska 68108-0430. 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.
Systematic Transfer Account -- An account which consists of general account
assets of United of Omaha Life Insurance Company and is available for use
exclusively by Owners electing to participating in the Systematic Transfer
Enrollment Program.
United of Omaha ("we, us, our") - The issuer of the Policies: United of Omaha
Life Insurance Company, Mutual of Omaha Plaza, Omaha, Nebraska 68175. Please use
our Service Office address for communications regarding the Policies.
Valuation Date -- Each day that the New York Stock Exchange is open for trading.
Valuation Period -- The period commencing at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
Variable Account -- United of Omaha Separate Account C, a separate account
maintained by us in which a portion of our assets has been allocated for the
Policy and certain other policies.
Written Notice or Request -- Written notice, signed by the Policy Owner, that
gives us the information we require and is received at our Service Office.
SUMMARY
THE POLICY
The Ultra-Access Variable Annuity is a Flexible Payment Variable Deferred
Annuity Policy. You may purchase the Policy on a non-tax qualified basis
("Nonqualified Policy") or in connection with certain plans qualifying for
favorable federal income tax treatment ("Qualified Policy"). You allocate the
Net Purchase Payments among one of the 25 Variable Account Subaccounts and the
Fixed Account or Systematic Transfer Account (the Eligible Investments).
THE ELIGIBLE INVESTMENTS
THE VARIABLE ACCOUNT. The Variable Account is a segregated investment
account of United of Omaha. It is divided into Subaccounts, each of which
invests exclusively in shares of a corresponding mutual fund Portfolio. The
available Portfolios are identified on the first page of this prospectus and are
described more fully later in this prospectus. Because the Accumulation Value
will increase or decrease in accordance with the investment experience of the
selected Subaccounts, you bear the entire investment risk with respect to Net
Purchase Payments allocated to, and amounts transferred to, the Variable
Account. (See "THE ELIGIBLE INVESTMENTS: The Variable Account.")
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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. We may, in our sole discretion,
declare a higher current interest rate. A current interest rate is guaranteed
for at least one year. (See "THE ELIGIBLE INVESTMENTS: The Fixed Account and the
Systematic Transfer Account." )
THE SYSTEMATIC TRANSFER ACCOUNT. The Systematic Transfer Account is a fixed
account to which your assets may initially be allocated if you elect to
participate in the Systematic Transfer Enrollment Program to automatically
transfer a predetermined dollar amount on a monthly basis to any of the
subaccounts chosen at the time of application. The Systematic Transfer 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.
We may, in our sole discretion, declare a higher current interest rate. A
current interest rate is guaranteed for at least one year. (See "THE ELIGIBLE
INVESTMENTS: The Fixed Account and Systematic Transfer Account.")
PURCHASE PAYMENTS
A Nonqualified Policy or a Qualified Policy may be purchased with an
Initial Purchase Payment of at least $5,000. You may pay additional Purchase
Payments of at least $500 each at any time prior to the Annuity Starting Date
and up to the Policy Anniversary next following your 88th birthday. There is no
deduction from Purchase Payments for sales or administrative expenses, although
a charge for any applicable premium taxes will be deducted from Purchase
Payments. (See "CHARGES AND DEDUCTIONS." )
Net Purchase Payments will be allocated among the Eligible Investments
pursuant to the allocation percentages you specify 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 you can return
the Policy for a full refund of the Accumulation Value or Purchase Payments as
determined by the law of the state of issue. In some states the Net Purchase
Payment(s) allocated to the Variable Account will be held in the Money Market
Subaccount during the Free Look Period, and then allocated among the other
Subaccounts you chose. See "SUMMARY: Free Look Right.") Allocations for
additional Net Purchase Payments may be changed by sending Written Notice to our
Service Office or by telephone (subject to the provisions described below under
"THE POLICY: Telephone Transactions.")
TRANSFERS
You 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, if following a transfer out of a particular Subaccount less than $500
remains in that Subaccount, then you must transfer that entire Subaccount Value.
Transfers out of the Variable Account currently may be made as often as you wish
either by telephone (subject to the provisions described below under "THE
POLICY: Telephone Transactions.") or by sending Written Notice to our 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 or the Systematic Transfer 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 is 10% of the Fixed
Account Value on the date of the transfer. (See "THE ELIGIBLE INVESTMENTS:
Transfers.") Transfers from the Fixed Account may be delayed up to 6 months.
All funds deposited in the Systematic Transfer Account will be
automatically transferred to the subaccounts or the Fixed Account within 13
months of deposit pursuant to your instructions. These transfers do not count
toward the 12 free transfers allowed each policy year. You may not transfer
funds to the Systematic Transfer Account. No additional funds (other than funds
designated in the application to be transferred into the Policy pursuant to an
Internal Revenue Code Section 1035 transfer) may be allocated to the Systematic
Transfer Account after the Date of Policy Issue. (See "THE ELIGIBLE INVESTMENTS:
Transfers.")
WITHDRAWALS
You 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 Policy Fee,
and any 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 or Systematic Transfer
Account. If you do 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
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surrenders and partial withdrawals from the Fixed Account or Systematic Transfer
Account may be delayed for up to six months. Withdrawals may be taxable, and
subject to a tax penalty. (See "CHARGES AND DEDUCTIONS: Federal, State and Local
Taxes.") If the Contract is issued pursuant to a Qualified Plan, withdrawals may
be restricted by applicable law or the terms of the Qualified Plan.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE. There is no charge to withdraw Purchase Payments or
apply them to provide Annuity Payments.
ACCOUNT CHARGES. We deduct a daily charge equal to a percentage of the net
assets in the Variable Account for the mortality and expense risks assumed by
United of Omaha. The annual rate of this charge is 1.40% of the value of each
Subaccount's net assets. (See "CHARGES AND DEDUCTIONS: Mortality and Expense
Risk Charge.")
We also deduct a daily Administrative Expense Charge from the net assets of
the Variable Account to partially cover expenses incurred by us in connection
with the administration of the Variable Account and the Policies. The annual
rate of this charge is .20% of the value of each Subaccount's net assets. (See
"CHARGES AND DEDUCTIONS: Administrative Charges.")
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 on the last Valuation Date of each Policy
Year (and upon complete surrender of the Policy). This fee will be waived if the
Accumulation Value is greater than $50,000 on the last Valuation Date of the
applicable Policy Year. This fee will not be increased in the future. (See
"CHARGES AND DEDUCTIONS: Administrative Charges.")
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 is 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 "CHARGES
AND DEDUCTIONS: Transfer Fee.")
TAXES. We may incur premium taxes relating to the Policies. We will deduct
any premium taxes related to a particular Policy from Purchase Payments, upon
surrender, upon death of any Owner, or at the Annuity Starting Date. (See
"CHARGES AND DEDUCTIONS: Premium Taxes.")
No deductions are currently made for federal, state, or local income taxes.
Should we determine that charges for any such taxes should be imposed with
respect to any of the Accounts, we may deduct charges for such taxes or the
economic burden thereof from Purchase Payments or from amounts held in the
relevant Account. (See "CHARGES AND DEDUCTIONS: Federal, State and Local
Taxes.")
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 "CHARGES AND
DEDUCTIONS: Other Expenses Including Investment Advisory Fees.")
EXPENSE DATA. The charges and deductions are summarized in the following
table. The purpose of this table is to help you 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
Transfer Fee - First 12 Transfers Per Year: NO FEE
- Over 12 Transfers in One Year: $10 each
VARIABLE ACCOUNT ANNUAL EXPENSES (% of account value)
Mortality and Expense Risk Fees 1.40%
Administrative Expense Charge 0.20%
TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES 1.60%
OTHER ANNUAL EXPENSES
Annual Policy Fee $30 Per Year
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SERIES FUND ANNUAL EXPENSES 1/ MANAGEMENT OTHER TOTAL SERIES
(as a percentage of average net assets) FEES EXPENSES FUND ANNUAL
EXPENSES
=============================================== ---------- ---------- =========
Portfolio:
Alger American Growth 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.04% 0.89%
Federated Prime Money Fund II * 0.30% 0.50% 0.80%
Federated Fund for U.S. Government Securities II *0.15% 0.65% 0.80%
Fidelity VIP II Asset Manager: Growth *** 0.65% 0.22% 0.87%
Fidelity VIP II Contrafund *** 0.61% 0.13% 0.74%
Fidelity VIP Equity Income *** 0.51% 0.07% 0.58%
Fidelity VIP II Index 500 0.13% 0.15% 0.28%
MFS Emerging Growth 0.75% 0.25% 1.00%
MFS High Income Fund 0.75% 0.25% 1.00%
MFS Research 0.75% 0.25% 1.00%
MFS Value Series 0.75% 0.25% 1.00%
MFS World Government 0.75% 0.25% 1.00%
Morgan Stanley Emerging Markets Equity ** 0.00% 1.75% 1.75%
Morgan Stanley Fixed Income ** 0.00% 0.70% 0.70%
Pioneer Capital Growth 0.65% 0.14% 0.79%
Pioneer Real Estate ** 0.88% 0.37% 1.25%
Scudder Global Discovery ** 0.67% 1.08%*****1.75%
Scudder Growth & Income *** 0.48% 0.32%*****0.80%
Scudder International 0.83% 0.17% 1.00%
T. Rowe Price Equity Income **** 0.00% 0.85% 0.85%
T. Rowe Price International **** 0.00% 1.05% 1.05%
T. Rowe Price Limited-Term Bond **** 0.00% 0.70% 0.70%
T. Rowe Price New America Growth **** 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced **** 0.00% 0.90% 0.90%
----------------------------------------------- ---------- --------- =========
==============================================================================
* Both Federated Prime Money Fund II and Federated Fund for U.S. Government
Securities II currently bundle their fees and expenses and limit the total
charge. Absent any fee waiver or expense reimbursement, the total fees and
expenses for each fund would have been 1.00% and 1.25% respectively.
** Without fee waiver or expense reimbursement limits the following funds
would have had the charges set forth below:
MANAGEMENT OTHER TOTAL
FEES EXPENSES EXPENSES
---------------------------------------------
Fidelity VIP II Index 500 0.28% 0.15% 0.43%
Morgan Stanley Emerging
Markets Equity 1.25% 2.87% 4.12%
Morgan Stanley Fixed Income 0.40% 1.31% 1.71%
Pioneer Real Estate 0.88% 0.48% 1.36%
Scudder Global Discovery 0.98% 2.00%***** 2.98%
*** These funds have voluntarily agreed to limit their total annual expenses to
the limits shown below:
Fidelity VIP II Asset Manager: Growth and Fidelity VIP II Contrafund - 1.00%
Fidelity VIP Equity Income and Scudder Growth & Income - 1.50%
**** T.Rowe Price Funds do not itemize management fees and other expenses.
***** Includes .25% 12b-1 fee assessed for payment of distribution
administration expenses.
===============================================================================
1/ The fee and expense data regarding each Series Fund, which are fees and
expenses for 1997, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha.
8
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- ------------------------------------------- =============================
EXAMPLES.2/ POLICY IS SURRENDERED,
AN OWNER WOULD PAY THE FOLLOWING EXPENSES ANNUITIZED, OR CONTINUED
ON A $1,000 INVESTMENT, ASSUMING A 5% IN FORCE AT END OF THE TIME
ANNUAL RETURN ON ASSETS: PERIOD.
$
- ------------------------------------------- =============================
Portfolio 1Yr 3Yr 5Yr 10Yr
=========================================== ====== ======= ======= ======
Alger American Growth 25 78 137 311
Alger American Small Capitalization 26 81 143 323
Federated Prime Money Fund II 25 79 138 312
Federated Fund for U.S. Government
Securities II 25 79 138 312
Fidelity VIP II Asset Manager: Growth 26 81 141 321
Fidelity VIP II Contrafund 24 77 137 304
Fidelity VIP Equity Income 23 72 125 284
Fidelity VIP II Index 500 20 62 109 246
MFS Emerging Growth 27 85 149 337
MFS High Income Fund 27 85 149 337
MFS Research 27 85 149 337
MFS Value Series 27 85 149 337
MFS World Government 27 85 149 337
Morgan Stanley Emerging Markets Equity 35 109 190 431
Morgan Stanley Fixed Income 24 76 132 299
Pioneer Capital Growth 25 78 137 311
Pioneer Real Estate 30 93 162 368
Scudder Global Discovery 35 109 190 431
Scudder Growth & Income 25 79 138 312
Scudder International 27 85 149 337
T. Rowe Price Equity Income 26 80 140 318
T. Rowe Price International 28 87 151 343
T. Rowe Price Limited-Term Bond 24 76 132 299
T. Rowe Price New America Growth 26 80 140 318
T. Rowe Price Personal Strategy Balanced 26 82 143 324
=========================================== ====== ======= ======= ======
These examples should not be considered representations of past or future
expenses. Actual expenses paid may be greater than or less than those shown,
subject to the guarantees in the Policy. The assumed 5% annual rate of return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than this assumed rate.
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 our receipt of Due Proof of Death of any Owner, as well as
an election of the method of settlement. If any Owner dies, the death benefit
will equal the greater of (a) the Accumulation Value on the later of the date on
which Due Proof of Death or an election of Payout Option is received by our
Service Office, less any applicable premium taxes; or (b) the sum of Net
Purchase Payments less partial withdrawals. 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 "DISTRIBUTIONS UNDER THE POLICY: Death Benefit.")
Any applicable premium taxes not previously deducted will be deducted from
the death benefit payable.
2/ The $30 annual Policy Fee is reflected as a daily 0.10% charge in these
Examples, based on an average Accumulation Value of $30,000.
9
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ACCIDENTAL DEATH BENEFIT
If you dies from bodily injury sustained in a common carrier accident, we
will pay the Death Benefit, as applicable, multiplied by two, instead of the
amount that would otherwise be payable.
(See Accidental Death Benefit, p. 30).
FREE LOOK RIGHT
You may review the Policy for a period of time and return it to our Service
Office or the agent you purchased it from 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 you received the Policy. Return of the Policy is effective upon
being postmarked, properly addressed, and postage pre-paid. We will pay the
refund within seven (7) days after we receive written notice of cancellation and
the returned Policy.
In states that permit us to do so, we will promptly refund the Accumulation
Value calculated on the date we receive the Policy and refund request. This
amount may be more or less than the Purchase Payments made. In other states, we
will refund the greater of Accumulation Value or Purchase Payments made under
the Policy. (In these states, any portion of the initial Net Purchase Payment
that is allocated to the Variable Account will be held in the Money Market
Subaccount for the applicable Free Look Period plus 5 days from the date the
Policy is mailed from our 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 your
attaining age 59 1/2. (See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES.")
INQUIRIES AND WRITTEN NOTICES AND REQUESTS
Send Written Notices, Written Requests or your questions about the Policy to
us at: United of Omaha Variable Product Service, P.O. Box 8430, Omaha, Nebraska
68108-0430. Telephone requests and inquiries may be made by calling
1-800-238-9354. All inquiries, Notices and Requests should include the Policy
number, the Owner's name and the Annuitant's name.
VARIATIONS IN POLICY PROVISIONS
Certain provisions of the Policies may vary from the descriptions in this
Prospectus in order to comply with different state laws. Any such variations
will be included in the Policy itself or in riders or amendments. A policy
provision which may vary by state is the Free Look provision. One or a very few
number of states also require variations in the Annuity Starting Date,
Termination, and Delay of Payments or Transfers from the Fixed Account
provisions.
* * *
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 OR SYSTEMATIC TRANSFER ACCOUNT SINCE INTERESTS IN THE FIXED
ACCOUNT AND SYSTEMATIC TRANSFER ACCOUNT ARE NOT SECURITIES. SEE "THE ELIGIBLE
INVESTMENTS: THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER ACCOUNT.,")
FINANCIAL STATEMENTS
Our Financial Statements and the related independent auditor's report are
contained in the Statement of Additional Information, which is available free
upon request. Since this the first prospectus for the Ultra-Access variable
annuity Contracts, sales had not yet begun as of the effective date of this
prospectus. Therefore, no condensed financial information is presented for such
Contracts.
UNITED OF OMAHA LIFE INSURANCE COMPANY
We are a stock life insurance company. We incorporated under the name United
Benefit Life Insurance Company under the laws of the State of Nebraska on August
9, 1926. In 1981, we changed our name to United of Omaha Life Insurance Company.
We are principally engaged in the sale of life insurance, accident and health
insurance, and annuity policies, and are licensed in all states except New York
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and in several foreign countries and the District of Columbia. As of December
31, 1997, United of Omaha had assets of over $9.2 billion. We are a wholly-owned
subsidiary of Mutual of Omaha Insurance Company.
We may from time to time publish the ratings and other information assigned
to us 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 our financial strength and/or claims-paying ability. The ratings should
not be considered as bearing on the investment performance or safety 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 our
relative financial strength and operating performance in comparison to the norms
of the life/health insurance industry. In addition, we may publish rating and
other information about our claims-paying ability, as measured by Moody's
Insurance Credit Report, Standard and Poor's Insurance Ratings Services, or Duff
& Phelps. These ratings are opinions regarding our financial capacity to meet
the obligations of our 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 25
Ultra-Access Subaccounts of the Variable Account, to the Fixed Account, or to a
combination of these Eligible Investment(s).
THE VARIABLE ACCOUNT
United of Omaha Separate Account C (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 25 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 us,
but they are held separately from our other assets and are not chargeable with
any liabilities arising out of any other separate investment account or any of
our other business 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 our other income, gains,
or losses. Section 44-2212 of the Nebraska Statutes provides that "Any surplus
or deficit which may arise in the Variable Account by virtue of mortality
experience guaranteed by [United of Omaha] or by expense costs is adjusted by
withdrawals from or additions to the Variable Account so that the assets of the
Variable Account equal the liabilities." The investment performance of any
Subaccount should be entirely independent of the investment performance of our
general account assets or any other accounts maintained by us.
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 invests exclusively
in shares of a specific Portfolio of one of the Series Funds, each of which is a
mutual fund registered with the SEC under the Investment Company Act of 1940
(the "1940 Act") as an open-end, diversified investment management company. 3/
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.
The Variable Account Portfolios, while they may have the same or similar
names of retail mutual funds, are not the same as those funds. By law, insurance
product variable account portfolios and retail mutual funds must be separate
investment pools. A variable account portfolio and a retail mutual fund may have
similar names, the same or similar investment objective and strategy, and the
same investment manager. Even when these similarities exist, however, the
investment manager is under no obligation to ensure that the Variable Account
Portfolio and the retail mutual fund have duplicate holdings, trading activity
or performance. Any similarities in this regard are coincidental, and the
Variable Account Portfolio and retail mutual fund may differ substantially in
these areas. The investment manager's obligation is to attempt to achieve the
3/ The registration of the Series Funds does not involve supervision of the
management or investment practices or policies of the Series Funds by the SEC.
11
<PAGE>
investment objective stated in the prospectus. For information about the
performance history of any Variable Account Portfolio, please refer to further
disclosure in this Prospectus or in the Series Fund prospectus for that
particular Variable Account Portfolio.
The Variable Account Portfolios, their investment objectives and investment
advisers are summarized as follows:
ALGER AMERICAN FUND - ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term
capital appreciation by investing in a diversified portfolio of equity
securities, primarily of companies with total market capitalization of $1
billion or greater. (1)
ALGER AMERICAN FUND - ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO --
seeks long-term capital appreciation by investing in a diversified portfolio
of equity securities, primarily of smaller, newer companies with total
market capitalization of less than $1 billion. The securities of such
companies may have limited marketability and may be subject to more abrupt
or erratic price changes than securities of larger, more established
companies or the market averages in general.(1) (*)
INSURANCE MANAGEMENT SERIES - FEDERATED PRIME MONEY FUND II PORTFOLIO --
invests in money market instruments maturing in thirteen months or less to
achieve current income consistent with stability of principal and liquidity.
The Portfolio attempts to maintain a stable net asset value of $1.00 per
share, but there can be no assurance the Portfolio will be able to do so.
(2)
INSURANCE MANAGEMENT SERIES - FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES
II PORTFOLIO --seeks current income by investing in a diversified portfolio
limited to U.S. government securities. (2)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY VIP II ASSET
MANAGER: GROWTH PORTFOLIO -- seeks to obtain high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds, and
short-term fixed-income instruments. Although the Portfolio seeks to reduce
its overall risk by diversifying among different types of investments, the
fund aggressively invests in a wide variety of security types, including
stocks and bonds issued in developing countries and derivative transactions.
The Portfolio spreads investment risk by limiting its holdings in any one
company or industry.(3, 4) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND - FIDELITY VIP EQUITY-INCOME
PORTFOLIO -- seeks reasonable income by investing mainly in income-producing
equity securities. In selecting investments, the Portfolio also considers
the potential for capital appreciation. The Portfolio seeks to achieve a
return that surpasses that of the S&P 500. The Portfolio does not expect to
invest in debt securities of companies that do not have proven earnings or
credit.(3)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY CONTRAFUND
PORTFOLIO -- seeks to increase the value of the Portfolio over the long term
by investing in securities of companies that are undervalued or
out-of-favor. This strategy can lead to investments in domestic or foreign
companies, many of which may not be well known. The stocks of small
companies often involve more risk than those of larger companies. The
Portfolio may use various investment techniques to hedge the Portfolio's
risk, but there is no guarantee that these strategies will work as
intended.(3) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY INDEX 500 PORTFOLIO
-- seeks to match the total return of the S&P 500 while keeping expenses
low. The Portfolio utilizes a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. Normally 80% (65% if
fund assets are below $20 million) of the fund's assets are invested in
equity securities of companies that compose the S&P 500. The Standard &
Poor's Corporation is neither an affiliate nor a sponsor of the fund.
MFS VARIABLE INSURANCE TRUST - MFS EMERGING GROWTH PORTFOLIO -- seeks to
provide long-term growth of capital through investing primarily in common
stocks of emerging growth companies, which involves greater risk than is
customarily associated with investments in more established companies. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS HIGH INCOME PORTFOLIO -- seeks high
current income by investing primarily in a diversified portfolio of fixed
income securities, some of which may involve equity features. The Portfolio
may invest in lower rated fixed income securities or comparable unrated
securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS RESEARCH PORTFOLIO -- seeks to provide
long-term growth of capital and future income by investing a substantial
12
<PAGE>
portion of its assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average prospects
for long-term growth. No more than 5% of the Portfolio's convertible
securities, if any, will consist of securities in lower rated categories or
securities believed to be of similar quality to lower rated securities. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS VALUE SERIES PORTFOLIO -- seeks capital
appreciation by investing primarily in common stocks, including to a limited
extent foreign securities which are not traded on a U.S. exchange. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities. (5) (*)
MFS VARIABLE INSURANCE TRUST - MFS WORLD GOVERNMENT PORTFOLIO -- seeks
preservation and growth of capital, together with moderate current income by
investing its assets in an internationally diversified portfolio consisting
primarily of debt securities and, to a lesser extent, equity securities. The
Portfolio investments are expected to consist primarily of securities which
are of relatively high quality and minimal credit risk. However, an error of
judgment in selecting a currency or an interest rate environment could
result in a loss of capital, and a held security whose quality deteriorates
significantly will be sold only if the Portfolio investment adviser believes
it is advantageous to do so. (5)
MORGAN STANLEY UNIVERSAL FUNDS, INC.- MORGAN STANLEY EMERGING MARKETS EQUITY
PORTFOLIO. --seeks long-term capital appreciation by investing primarily in
common and preferred stocks and other equity securities of emerging market
country issuers. The Adviser's approach is to focus the portfolio's
investments on those emerging market countries in which it believes the
economies are developing strongly and in which the markets are becoming more
sophisticated. Investing in many such countries is not feasible or may
involve unacceptable political risks. Emerging market country securities
pose greater liquidity risks and other risks than securities of companies
located in developed countries and traded in more established markets. (6)
MORGAN STANLEY UNIVERSAL FUNDS, INC. - MORGAN STANLEY FIXED INCOME
PORTFOLIO. - seeks to achieve above-average total return over a market
cycle of three to five years by investing in a diversified portfolio of
U.S. Governments and Agencies, corporate bonds, foreign bonds, mortgage
backed securities primarily of domestic issuers, and other fixed income
securities and derivatives.(7)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER CAPITAL GROWTH PORTFOLIO -- seeks
capital appreciation by investing in a diversified portfolio of securities
consisting primarily of common stocks.(8)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER REAL ESTATE PORTFOLIO -- seeks
long-term growth of capital by investing primarily in securities of real
estate investment trusts (REITs) and other real estate industry companies.
Current income is the Portfolio's secondary investment objective.(8)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GLOBAL DISCOVERY PORTFOLIO
-- seeks above-average capital appreciation over the long term by investing
primarily in the equity securities of small companies located throughout the
world, including to a limited extent in lower rated fixed income securities
or comparable unrated securities. Since the Portfolio normally will invest
in both U.S. and foreign securities markets, changes in the Portfolio's unit
value may have a low correlation with movements in the U.S. markets. (9)(*)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GROWTH & INCOME PORTFOLIO --
seeks long term growth of capital, current income and growth of income by
investing primarily in common stocks, preferred stocks, and securities
convertible into common stocks of companies which offer the prospect for
growth of earnings while paying higher than average current dividends. (9)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER INTERNATIONAL PORTFOLIO --
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments. The Portfolio invests in companies,
wherever organized, which do business primarily outside the United States.
The Portfolio intends to diversify investments among several countries, and
does not intend to concentrate investments in any particular industry.
(9)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE EQUITY INCOME PORTFOLIO
-- Seeks to provide substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established companies.(11)
13
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T. ROWE PRICE INTERNATIONAL SERIES, INC. - T. ROWE PRICE INTERNATIONAL
STOCK PORTFOLIO -- seeks a total return on its assets from long-term growth
of capital and income, by investing substantially all of its assets in
common stocks of established non-U.S. companies. (10)
T. ROWE PRICE FIXED INCOME SERIES, INC. - T. ROWE PRICE LIMITED-TERM BOND
PORTFOLIO -- seeks a high level of income consistent with modest price
fluctuation by investing primarily in investment grade debt securities.
(10)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE NEW AMERICA GROWTH
PORTFOLIO -- seeks long-term growth of capital through investments primarily
in common stocks of U.S. growth companies which operate in service
industries believed to be above-average performers in their fields. Total
return will consist primarily of capital appreciation or depreciation. (11)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE PERSONAL STRATEGY
BALANCED PORTFOLIO -- seeks the highest total return over time consistent
with an emphasis on both capital appreciation and income. There are no
limitations on market capitalization or types of stock the Portfolio can
hold. While bond holdings are primarily investment grade, the Portfolio can
also invest in more volatile below-investment grade bonds.(11) (*)
INVESTMENT ADVISERS AND SUBADVISERS OF THE SERIES FUNDS:
(1) Fred Alger Management, Inc.
(2) Federated Advisors.
(3) Fidelity Management & Research Company.
(4) Fidelity Investment Management and Research (U.K.) Inc., and
Fidelity Management and Research Far East Inc., regarding
research and investment recommendations with respect to companies
based outside the United States.
(5) Massachusetts Financial Services Company.
(6) Morgan Stanley Asset Management, Inc.
(7) Miller Anderson & Sherrerd, LLP.
(8) Pioneer Fund Group.
(9) Scudder Kemper Investments, Inc.
(10) Rowe Price-Fleming International, Inc., a joint venture between
T.Rowe Price Associates, Inc. and Robert Fleming Holdings Limited
(11) T. Rowe Price Associates, Inc.
- -----------------
(*) THESE PORTFOLIOS' INVESTMENT STRATEGIES MAY PROVIDE THE OPPORTUNITY FOR
HIGHER THAN AVERAGE RETURNS BY INVESTING IN SECURITIES WITH HIGHER THAN
AVERAGE RISK, SUCH AS LOWER RATED AND UNRATED DEBT AND COMPARABLE EQUITY
INSTRUMENTS. PLEASE CONSULT EACH PORTFOLIO'S PROSPECTUS ACCOMPANYING THIS
PROSPECTUS FOR MORE INFORMATION ABOUT THE RISK ASSOCIATED WITH SUCH
INVESTMENTS.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES,
IS CONTAINED IN THE PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE SERIES FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT OF THE
VARIABLE ACCOUNT.
An investment in the Variable Account, or in any Portfolio, including the
Money Market Portfolio, is not insured or guaranteed by the U.S. Government and
there can be no assurance that the Money Market Portfolio will be able to
maintain a stable net asset value per share.
We may receive compensation from certain Portfolios and/or affiliate(s) of
certain of the Portfolios. The amounts may be based upon an annual percentage of
the average assets held in that Portfolio by the Variable Account. These amounts
are intended to compensate us for administrative and other services we provide
on behalf of the Portfolios.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS. We do not control the
Series Funds and cannot and do not guarantee that any of the Portfolios will
always be available for Net Purchase Payments, allocations, or transfers. We
retain the right, subject to any applicable law, to make certain changes in the
Variable Account and its investments. We reserve 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
14
<PAGE>
investment company for the shares of any Portfolio, if the shares of the
Portfolio are no longer available for investment or if, in our 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 your interest in a Subaccount will not be made without
prior notice to you 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 our sole discretion, marketing,
tax, investment or other conditions warrant. Any new Subaccounts may be made
available to existing Owners on a basis to be determined by us. Each additional
Subaccount will purchase shares in a Portfolio of a Series Fund or in another
mutual fund or investment vehicle. We may also eliminate one or more Subaccounts
if, in its sole discretion, marketing, tax, investment or other conditions
warrant such change. If any Subaccount is eliminated, we will notify you and
request a reallocation of the amounts invested in the eliminated Subaccount. If
you do not provide us with reallocation instructions, we 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, we 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, we also may
transfer the assets of the Variable Account associated with the Policies to
another account or accounts.
HISTORICAL PERFORMANCE DATA
From time to time, we may advertise or include in sales literature yields,
effective yields, and total returns for the Subaccounts of the Variable Account.
THESE FIGURES ARE BASED ON HISTORICAL PERFORMANCE AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Performance relative to certain performance rankings and
indices compiled by independent organizations may also be advertised or included
in sales literature. More detailed information as to the calculation of
performance information, as well as comparisons with unmanaged market indices,
appears in the Statement of Additional Information.
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.
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 excluding any deductions for premium
tax charges.
15
<PAGE>
ADJUSTED HISTORICAL PERFORMANCE DATA. We may, from time to time, also
disclose yield and total returns for the Portfolios of the Series
Funds, including such disclosure for periods prior to the dates the Subaccounts
commenced operations. For periods prior to the date the Subaccount commenced
operations, performance information for Policies will be calculated based on the
performance of the Series Fund Portfolios and the assumption that the
Subaccounts were in existence for the same periods as those indicated for the
Series Fund Portfolios, with the level of Policy charges that are currently in
effect (this is referred to as "adjusted historical" performance data). Such
"adjusted historical" average annual total return information
for the Subaccounts of Policies is as follows:
<TABLE>
<CAPTION>
================================================ --------- --------- ------------ ===========
SUBACCOUNT 1 Year 5 Years 10 Years Since
"ADJUSTED HISTORICAL" Ended Ended Ended Inception
AVERAGE ANNUAL TOTAL RETURN TABLE 12/31/97 12/31/97 12/31/97 to
Subaccount (date of inception of corresponding % % % 12/31/97
Portfolio) %
================================================ ========= ========= ============ ===========
<S> <C> <C> <C> <C>
Alger American Growth (1/9/89) 23.66 17.30 N/A 17.44
Alger American Small Capitalization (9/21/88) 9.53 10.77 N/A 17.24
Federated Prime Money Fund II (11/21/94) 3.17 N/A N/A 3.14
Federated Fund for U.S. Government
Securities (3/28/94) 6.76 N/A N/A 4.59
Fidelity VIP II Asset Manager: Growth (1/3/95) 23.00 N/A N/A 20.72
Fidelity VIP II Contrafund (1/3/95) 22.08 N/A N/A 26.07
Fidelity VIP Equity Income (10/9/86) 25.99 18.16 14.78 12.75
Fidelity VIP II Index 500 (8/27/92) 30.51 17.92 N/A 17.86
MFS Emerging Growth (7/24/95) 19.88 N/A N/A 21.45
MFS High Income (7/26/95) 11.72 N/A N/A 10.74
MFS Research (7/26/95) 18.26 N/A N/A 20.08
MFS Value Series (8/14/96) 24.37 N/A N/A 22.49
MFS World Government (6/14/94) -2.80 N/A N/A 3.14
Morgan Stanley Emerging Markets
Equity (10/1/96) -1.18 N/A N/A -2.89
Morgan Stanley Fixed Income (1/2/97) 8.09 N/A N/A 8.09
Pioneer Capital Growth (3/1/95) 22.62 N/A N/A 18.09
Pioneer Real Estate (3/1/95) 19.17 N/A N/A 23.81
Scudder Global Discovery (5/2/97) N/A N/A N/A 15.18
Scudder Growth & Income (5/1/97) N/A N/A N/A 21.28
Scudder International (5/1/87) 7.24 11.81 9.93 8.01
T. Rowe Price International (3/31/94) 1.36 N/A N/A 6.26
T. Rowe Price New America Growth (3/31/94) 19.11 N/A N/A 21.62
T. Rowe Price Equity Income (3/31/94) 26.72 N/A N/A 21.69
T. Rowe Price Limited-Term Bond (5/13/94) 4.95 N/A N/A 4.36
T. Rowe Price Personal Strategy
Balanced (12/31/94) 16.07 N/A N/A 18.13
================================================ ========= ========= ============ ===========
</TABLE>
THE FIGURES ABOVE DO NOT INDICATE PRESENT, PAST, OR FUTURE PERFORMANCE OF THE
APPLICABLE SUBACCOUNTS OR OF THE ACTUAL PORTFOLIOS AVAILABLE UNDER THE POLICY.
PORTFOLIO PERFORMANCE DATA. We may also disclose average annual total returns
for Series Fund Portfolios (or comparable portfolios) since their inception,
including such disclosure for periods prior to the date the Variable Account
commenced operations. These figures do not reflect the Variable Account or
Policy expenses. Such average annual total return information is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------- ---------- ---------- --------- =============
SERIES FUND 1 Year 5 Years 10 Years Since
AVERAGE ANNUAL TOTAL RETURN Ended Ended Ended Inception
(date of inception) 12/31/97 12/31/97 12/31/97 to 12/31/97
% % % %
- -------------------------------------------------- ---------- ---------- --------- =============
<S> <C> <C> <C> <C>
Alger American Growth (1/9/89) 24.80 17.76 N/A 19.43
Alger American Small Capitalization (9/21/88) 18.75 11.21 N/A 19.23
Federated Prime Money Fund II (11/21/94) 4.93 N/A N/A 4.95
Federated Fund for U.S. Government
Securities (3/28/94) 8.58 N/A N/A 6.40
Fidelity VIP II Asset Manager: Growth (1/3/95) 25.07 N/A N/A 22.73
Fidelity VIP II Contrafund (1/3/95) 24.14 N/A N/A 28.16
Fidelity VIP Equity Income (10/9/86) 28.11 20.16 16.72 14.66
Fidelity VIP II Index 500 (8/27/92) 32.82 19.91 N/A 19.87
MFS Emerging Growth (7/24/95) 21.90 N/A N/A 23.53
MFS High Income (7/26/95) 13.62 N/A N/A 12.66
MFS Research (7/26/95) 20.26 N/A N/A 22.13
16
<PAGE>
MFS Value Series (8/14/96) 26.47 N/A N/A 25.99
MFS World Government (6/14/94) 1.13 N/A N/A 4.92
Morgan Stanley Emerging Markets Equity (10/1/96) 0.52 N/A N/A -1.22
Morgan Stanley Fixed Income (1/2/97) N/A N/A N/A 9.93
Pioneer Capital Growth (3/1/95) 22.98 N/A N/A 18.39
Pioneer Real Estate (3/1/95) 19.50 N/A N/A 24.16
Scudder Global Discovery (5/2/97) N/A N/A N/A 14.03
Scudder Growth & Income (5/1/97) N/A N/A N/A 22.89
Scudder International (5/1/87) 9.07 13.71 11.79 9.84
T. Rowe Price International (3/31/94) 3.09 N/A N/A 8.07
T. Rowe Price New America Growth (3/31/94) 21.12 N/A N/A 23.66
T. Rowe Price Equity Income (3/31/94) 28.85 N/A N/A 23.73
T. Rowe Price Limited-Term Bond (5/13/94) 6.74 N/A N/A 6.16
T. Rowe Price Personal Strategy Balanced (12/31/94) 18.04 N/A N/A 20.13
================================================== ========== ========== ========= =============
</TABLE>
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or mutual fund portfolios with investment objectives similar to
each of the Subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research Data Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree of
risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the 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.
We may also report other information including the effect of tax-deferred
compounding on a Subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from Subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the underlying portfolio's
investment experience is positive.
THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER 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 and the Systematic Transfer Account, see the Policy itself.
The Systematic Transfer Account is the fixed account option used if, at the
time of your application, you elect to participate in the Systematic Transfer
Enrollment Program ("STEP program"), which is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the subaccounts which
are chosen at the time of application. The allocation and the predetermined
dollar amount may not be changed. You must make a minimum allocation of $5,000
to the Systematic Transfer Account in order to participate in the STEP program.
No additional funds (other than funds designated in the application to be
transferred into the Policy pursuant to an Internal Revenue Code Section 1035
transfer) may be allocated to the Systematic Transfer Account after the Date of
Issue.
NET PURCHASE PAYMENTS ALLOCATED TO THE SYSTEMATIC TRANSFER ACCOUNT AND NET
PURCHASE PAYMENTS ALLOCATED AND AMOUNTS TRANSFERRED TO THE FIXED ACCOUNT BECOME
PART OF OUR GENERAL ACCOUNT ASSETS. 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 THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH
RELATE TO THE FIXED ACCOUNT.
The Fixed Account and the Systematic Transfer Account includes all our assets
except those segregated in the Variable Account or in any other separate
investment account. You 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 you bearing the investment risk, as is the case
17
<PAGE>
for Accumulation Value in the Variable Account, we bear the full investment risk
for all Accumulation Value in the Fixed Account. We have sole discretion to
invest the assets of its general account, including the Fixed Account, subject
to applicable law.
We guarantee that we will credit interest to amounts in the Fixed Account and
the Systematic Transfer Account at an effective rate of at least 3% per year. We
may, IN OUR SOLE DISCRETION, credit amounts in the Fixed Account and the
Systematic Transfer Account with interest at a current interest rate in excess
of 3%. Once declared, a current interest rate will be guaranteed for at least
one year. Different amounts of interest may be credited to the Systematic
Transfer Account and the Fixed Account. 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 is 10% of Fixed Account Value on
the date of the transfer. No charge is imposed on such transfers. Funds
allocated to the Systematic Transfer Account must be completely transferred to
subaccounts or the Fixed Account within 13 months of deposit. Such transfers
from the Systematic Transfer Account do not count toward the 12 free transfers
between subaccounts or to the Fixed Account allowed each Policy year. You may
not transfer funds to the Systematic Transfer Account. We reserve the right to
modify transfer privileges at any time. (See "THE ELIGIBLE INVESTMENTS:
Transfers.") 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 and the Systematic Transfer Account may be
delayed for up to six months. (See "DISTRIBUTIONS UNDER THE POLICY:
Withdrawals." ) 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).
We guarantee that, at any time prior to the Annuity Starting Date, the amount
in the Fixed Account or Systematic Transfer 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 or allocated to the Systematic
Transfer Account, plus interest at an effective rate of 3% per year, plus any
excess interest credited to amounts in the Fixed Account or Systematic Transfer
Account, less any applicable premium or other taxes allocable to the Fixed
Account or Systematic Transfer Account, and less any amounts deducted from the
Fixed Account or Systematic Transfer Account in connection with partial
withdrawals or transfers to the Variable Account.
The current interest rates will be determined by us in our sole discretion.
OUR MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE CURRENT
INTEREST RATES IN THE FIXED ACCOUNT AND THE SYSTEMATIC TRANSFER ACCOUNT. THE
RATE OF INTEREST CREDITED TO EACH DEPOSIT INTO THE SYSTEMATIC TRANSFER ACCOUNT
IS FIXED ON THE DATE OF EACH DEPOSIT. WE CANNOT PREDICT OR GUARANTEE THE LEVEL
OF FUTURE CURRENT INTEREST RATES, EXCEPT THAT WE GUARANTEE THAT FUTURE CURRENT
INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE RATE OF 3% PER YEAR COMPOUNDED
ANNUALLY. YOU BEAR THE RISK THAT CURRENT INTEREST RATES WILL NOT EXCEED AN
EFFECTIVE RATE OF 3% PER YEAR.
TRANSFERS
Subject to the limitations and restrictions described below, you may transfer
Accumulation Value out of a Subaccount of the Variable Account any time prior to
the Annuity Starting Date. Do so by sending Written Notice, signed by you, to
our Service Office. Transfers also may be requested by telephone, subject to the
provisions described below under "THE POLICY: Telephone Transactions." We
reserve the right, at any time and without notice to any party, to modify the
transfer privileges under the Policy.
You 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, we will include that amount as part of the transfer. Transfers
out of a Subaccount currently may be made as often as you wish, subject to the
minimum amount specified above. (We reserve the right to otherwise limit or
restrict transfers in the future or to eliminate the transfer privilege.) We
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 us.
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. (See
"CHARGES AND DEDUCTIONS.")
Transfers from the Fixed Account currently may be made only 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 is 10% of the Fixed Account Value on
the date of the transfer.
All funds allocated to the Systematic Transfer Account will be automatically
transferred to subaccounts or the Fixed Account within 13 months of deposit
18
<PAGE>
pursuant to the Owner's allocation instructions but at a monthly rate of not
less than 1/12th of the amount allocated to the Systematic Transfer Account.
Transfers from the Systematic Transfer Account do not count toward the 12 free
transfer limit described above, and no transfer charge will be imposed on
transfers from the Systematic Transfer Account.
The Policy is designed as a long-term investment, for retirement or other
financial planning. The Policy is not intended for active trading or "market
timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management (which could occur, for example, if
it caused excessive commission expense or caused the manager to keep higher cash
reserves than otherwise). Therefore, we reserve the right to limit the number of
Transfers from the Subaccounts of the Variable Account and the Fixed Account if
we believe that: (a) excessive trading by you or a specific Transfer request
would have a detrimental effect on Accumulation Unit values or the share prices
of the Portfolios; or (b) we are 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, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. For example, third party reallocation by "market timers"
could be suspended if they cause harm to other Policy Owners. We will notify you
of any such suspension or cancellation. We may restrict the availability of
Subaccounts and the Fixed Account for Transfers during any period in which you
authorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such
restrictions if we are provided with satisfactory evidence that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) you appoint such third party to act on your behalf for all your
financial affairs.
DOLLAR COST AVERAGING
Under the Dollar Cost Averaging program, you can instruct us to automatically
transfer, on a periodic basis, a predetermined amount or percentage you specify
from any one Subaccount or the Fixed Account to any Subaccount(s) of the
Variable Account. The automatic transfers can occur monthly, quarterly,
semi-annually, or annually, and the amount transferred each time must be at
least $100 and must be $50 per Subaccount. At the time the program begins, there
must be at least $5,000 of Accumulation Value in the applicable Subaccount or
the Fixed Account. If transfers are made from the Fixed Account, the maximum
periodic transfer amount is 10% of that account's value at the time of the first
Dollar Cost Averaging transfer. There is no maximum transfer amount requirement
out of the Subaccounts of the Variable Account.
If a percentage is specified for Dollar Cost Averaging transfers, the
percentage is calculated on the date each transfer is processed. This means the
amount of the transfer may vary with each transaction, and is dependent upon the
Accumulation Value of the Subaccount(s) or Fixed Account from which the transfer
is to be made. If a predetermined dollar amount is specified for Dollar Cost
Averaging transfers, the amount of the transfer will not vary with each
transaction regardless of changes in the Accumulation Value of the Subaccount(s)
or Fixed Account from which transfers are made. The predetermined dollar amount
may be changed by providing us with Written Notice.
Dollar Cost Averaging results in the purchase of more Accumulation Units when
the Accumulation Unit value is low, and fewer units when the Accumulation Unit
value is high. However, there is no guarantee that the Dollar Cost Averaging
program will result in higher Accumulation Value or otherwise be successful.
You can request participation in the Dollar Cost Averaging program when
purchasing the Policy or at a later date. Dollar Cost Averaging program
transfers cannot begin before the end of a Policy's free look (a/k/a "right to
examine") period. Transfers will begin on the 1st through the 28th day (or, if
not a Valuation Date, the next following Valuation Date), as specified by you,
following the Policy's free look period. If no date is selected, the Dollar Cost
Averaging program will begin on the next Policy monthly anniversary following
the date the Policy's free look period ends. You can specify that only a certain
number of transfers will be made, in which case the program will terminate when
that number of transfers has been made. Otherwise, the program will terminate
when the amount remaining in the applicable Subaccount or, if applicable, the
Fixed Account is less than $500.
You can increase or decrease the amount or percentage of the transfers or
discontinue the program by sending Written Notice to our Service Office or by
telephone, if telephone transactions are authorized. There is no charge for
participation in this program.
SYSTEMATIC TRANSFER ENROLLMENT PROGRAM ("STEP PROGRAM")
At the time of application, you may elect to participate in the Systematic
Transfer Enrollment Program to automatically transfer funds on a monthly basis
from the Systematic Transfer Account to any of the Subaccounts of the Variable
Account or to the Fixed Account which are chosen by you at the time of
application. At the time the program begins, there must be at least $5,000 of
Accumulation Value in the Systematic Transfer Account, and the monthly dollar
amount to be transferred must be no less than 1/12th of the amount sufficient to
transfer the entire amount in the Systematic Transfer Account within 13 months
of deposit, and must allocate at least $50 per Subaccount. The allocation and
the dollar amount to be transferred each month may not be changed. No new
purchase payments (other than funds designated in the application to be
19
<PAGE>
transferred into the Policy pursuant to an Internal Revenue Code Section 1035
transfer) may be allocated to this account after the Policy Issue Date. Upon
receipt of funds by IRC Section 1035 transfer, the 13 month period requirement
is restarted from the date the transfer is received, and the 1/12th minimum
monthly transfer amount is recalculated. No transfers may be made into the
Systematic Transfer Account. There is no charge for participation in this
program.
Like the Dollar Cost Averaging program, the STEP program results in the
purchase of more Accumulation Units when the Accumulation Unit value is low, and
fewer units when the Accumulation Unit value is high. However, there is no
guarantee that the STEP program will result in higher Accumulation Value or
otherwise be successful. Use the STEP program if you desire to have most of your
Policy funds allocated to Subaccounts of the Variable Account within a 13 month
period by using dollar cost averaging concepts. If you desire is to move your
Policy funds from a guaranteed interest fixed account into subaccounts of the
Variable Account over a longer time period using the same concepts, you use the
Dollar Cost Averaging program. Under the STEP program, all funds remaining in
the Systematic Transfer Account on the date of the 13th monthly transfer date
will be transferred to the Subaccounts designated by you in a pro rata amount
consistent with your allocation instructions.
STEP program transfers cannot begin before the end of the Policy's free look
(a/k/a "right to examine") period. Transfers will begin on the 1st through the
28th day (or, if not a Valuation Date, the next following Valuation Date), as
specified by you, following the free look period. If no date is selected, the
STEP program will begin on the next Policy monthly anniversary following the
date the Policy's free look period ends. The program will terminate the earlier
of the date when the amount in the Systematic Transfer Account have been fully
transferred or the date of the 13th monthly STEP program transfer.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, you can instruct us to allocate purchase
payments and Accumulation Value among the Subaccounts of the Variable Account
and the Fixed Account in accordance with your allocation instructions. We will
rebalance your investment by allocating purchase payments and transferring
Accumulation Value among the Subaccounts and the Fixed Account to ensure
conformity with current allocation instructions. Rebalancing will be performed
on a quarterly, semi-annual or annual basis as specified by you. Transfers of
Accumulation Value made pursuant this program will not be counted in determining
whether the Transfer Fee applies. At the time the program begins, there must be
at least $10,000 of Accumulation Value under the Policy. ........The asset
allocations are divided into 5 asset allocation models, with subaccount
allocations in each. The 5 models are: Principal Preserver (conservative),
Portfolio Protector (moderately conservative), Income Builder (moderate),
Capital Accumulator (moderately aggressive), and Equity Maximizer (aggressive).
United of Omaha uses the services of Ibbotson Associates to develop subaccount
allocations for each model. Ibbotson Associates is a Chicago-based investment
consulting firm specializing in applying investment theories and empirical
findings (such as historical return data collected on the subaccount portfolios)
to quantify the benefits of diversification for particular investment profiles.
The current subaccount allocations for each asset allocation model are
as follows:
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ ------------------------------------------------------------------------
ASSET ALLOCATION MODEL
ALLOCATIONS
- ------------------------------ ------------------------------------------------------------------------
- ------------------------------ -------------- -------------- ------------- -------------- -------------
PORTFOLIO PRINCIPAL PORTFOLIO INCOME CAPITAL EQUITY
(LISTED AGGRESSIVE CONSERVER PROTECTOR BUILDER ACCUMULATOR MAXIMIZER
(CONSERVATIVE) (MODERATELY (MODERATE) (MODERATELY (AGGRESSIVE)
TO CONSERVATIVE) CONSERVATIVE) AGGRESSIVE)
% % % % %
- ------------------------------ -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alger American Small
Capitalization 5 4 10 12
Pioneer Real Estate Growth 4 5 6
T.Rowe Price International 6 13 22 25
Scudder International 16
MFS High Income 4 5 5
T.Rowe Price New America
Growth 10
MFS Value Series 5 10 15 10
Fidelity VIP II Index 500 5 10 15 12 16
T.Rowe Price Equity Income 10 20
Fidelity VIP Equity Income 8 16 16
MFS World Government 3 5 5
Federated Fund for U.S.
Government Securities 5
T.Rowe Price Limited-Term Bond 50 37 20 16
Morgan Stanley Fixed Income Bond 5
Federated Prime Money Fund II 19 10 5
- ------------------------------ -------------- -------------- ------------- -------------- -------------
</TABLE>
You can request participation in the Asset Allocation Program when purchasing
the Policy or at a later date. You can change his allocation percentage or
discontinue the program by sending Written Notice to our Service Office or by
calling 1-(800) 238-9354. There is no charge for participation in this program.
THE POLICY
The Ultra-Access 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 us. The Policy may be purchased as a Nonqualified Policy or as
a Qualified Policy. The Policy will remain in force until surrendered for its
Cash Surrender Value, or all Proceeds have been paid under a Payout Option or as
a death benefit or upon termination.
POLICY APPLICATION AND ISSUANCE OF POLICIES
Before we will issue a Policy, we 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 85, and a
Qualified Policy ordinarily will be issued only in respect of Owner's Age 0
through 70 1/2. We reserve the right to reject any application or Purchase
Payment.
Under our Electronic Fund Transfer program, you 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 your application is complete and we can accept it, we will credit your
initial Net Purchase Payment 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, we will contact you
within five business days and give you an explanation for the delay; your
initial Purchase Payment will be returned at that time unless you consent to our
retaining and crediting it, net of any charge for applicable premium taxes, as
soon as the necessary requirements are completed.
The date on which we credit the initial Net Purchase Payment to the
Accumulation Value is the Date of Issue, and is the date used to determine
Policy Years and Policy anniversaries.
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PURCHASE PAYMENTS
Make Purchase Payment checks or drafts payable to us and send them to our
Service Office or give them to your United of Omaha representative who will
forward them to us. 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 we currently
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. We reserve 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. You 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 your Policy and added to the Accumulation Value as of the
Valuation Date when our Service Office receives them. We will not accept any
additional Purchase Payments beginning on the Policy Anniversary following the
your 88th birthday.
ALLOCATION OF NET PURCHASE PAYMENTS. You must allocate Net Purchase Payments
to one or more of the Eligible Investments. You must specify the initial
allocation in the Policy application. This allocation will be used for
additional Net Purchase Payments unless you request a change of allocation. All
allocations must be made in whole percentages and must total 100%. The minimum
allocation amount is $500 ($100 under the Electronic Fund Transfer Program). If
you fail to specify how Net Purchase Payments are to be allocated, we will not
accept your Purchase Payment(s). In states that permit us to refund only the
Accumulation Value upon your cancellation of the Policy during the free look
period, your initial Net Purchase Payment will be allocated to your selected
Subaccounts on the Date of Issue. In states where at least the full Purchase
Payment is refunded, we will hold 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 in the Money Market Subaccount for the
applicable Free Look period specified by the state of issue plus 5 days, from
the date that your Policy is mailed from our Service Office. (Since the Free
Look period is measured from your date of receipt of the Policy, the extra 5
days is to allow for estimated time needed for delivery of the Policy.) At the
end of that period, if your Policy has not been returned for a refund, we will
invest the initial Net Purchase Payment in the Subaccounts in accordance with
the allocation instructions provided in your application. All additional Net
Purchase Payments received after the end of the free look period will be
allocated and credited to your Policy as of the Valuation Period during which
they are received.
You may change the allocation instructions for future additional Net Purchase
Payments by sending Written Notice, signed by you, to our Service Office, or by
telephone (subject to the provisions described below under "THE POLICY:
Telephone Transactions."). 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 us by check or draft may be
postponed until such time as we determine that such instrument has been honored.
Payment by certified check, banker's draft, or cashier's check will be promptly
applied.
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, the Fixed Account and the Systematic Transfer Account.
The Accumulation Value is expected to change from Valuation Period to
Valuation Period, reflecting the expenses and investment experience of (or
interest credited to) the selected Eligible Investments as well as the Variable
Account deductions for charges.
THE VARIABLE ACCOUNT VALUE. The Accumulation Value for each Subaccount is
equal to:
(a) the current number of Accumulation Units in the Subaccount for the
Policy; multiplied by
(b) the current Accumulation Unit value.
A Net Purchase Payment or transfer allocated to a Subaccount is converted
into Accumulation Units by dividing it by the Accumulation Unit value for the
Valuation Period during which the Net Purchase Payment or transfer is allocated
to the Variable Account. The initial Accumulation Unit value for each Subaccount
was set at $10 when the Subaccount was established. The Accumulation Unit value
may increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) The net asset value per share of the Portfolio multiplied by
the number of shares held in the Subaccount, before the purchase or
redemption of any shares on that date; minus
(b) the cumulative unpaid charge for the Mortality and Expense Risk
Charge and Administrative Expense Charge; minus
(c) any applicable charge for federal and state income taxes, if any;
the result divided by
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(d) the total number of Accumulation Units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any
Accumulation Units on that day.
Positive investment experience of the applicable Portfolio will increase the
Accumulation Unit values and negative investment experience will decrease the
Unit values. Expenses and deductions will have a negative effect on Unit values.
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 taken from the Fixed Account since the end
of the previous Policy Month; plus
(f) interest credited on the Fixed Account balance.
We guarantee that the Accumulation Value in the Fixed Account will be credited
with an effective annual interest rate of at least 3%.
THE SYSTEMATIC TRANSFER ACCOUNT VALUE. The Accumulation Value of the
Systematic Transfer Account on any Valuation Date is equal to:
(a) the value at the Issue Date; plus
(b) any transfers from the Systematic Transfer Account to the
Subaccounts since the end of the previous Policy Month; plus
(c) interest credited on the Systematic Account balance.
We guarantee the Accumulation Value in the Systematic Transfer Account will be
credited with an effective interest rate of at least 3%.
TELEPHONE TRANSACTIONS
You can make transfers, partial withdrawals of $10,000 or less, and/or
change the allocation of subsequent Net Purchase Payments by telephone if you
checked the "Telephone Transaction Authorization" box in the application or
subsequently authorized telephone transactions in writing. (Requests to withdraw
amounts exceeding $10,000 must be made in writing, signed by you.) We will not
be liable for following instructions communicated by telephone that we believe
to be genuine. However, we will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If we fail 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 your
protection. You may be required to provide your social security number and/or
other information for identification purposes when you make requests by
telephone.
Telephone requests must be received at our 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 our profits or surplus
earnings. No dividends are payable on the Policy.
TERMINATION
If the Accumulation Value is less than $500, we may cancel the Policy upon
60 days' notice to the you. This cancellation will be considered a full
surrender of the Policy. If the Accumulation Value in any Subaccount falls below
$500, we reserve the right to transfer the remaining balance, without charge, to
the Money Market Subaccount.
DISTRIBUTIONS UNDER THE POLICY
WITHDRAWALS
You may withdraw all or a portion of the Cash Surrender Value in exchange
for a cash payment from us. The Cash Surrender Value is the Accumulation Value
less any applicable Policy Fee and any applicable premium taxes. (See "CHARGES
AND DEDUCTIONS.")
You may withdraw Cash Surrender Value from the Variable Account at any time
prior to the Annuity Starting Date by sending a Written Request to our 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 other written instructions from you, withdrawals
will result in cancellation of Accumulation Units from each applicable
Subaccount and the deduction of Accumulation Value from the Fixed Account or
Systematic Transfer 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
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from the Fixed Account or Systematic Transfer Account for any partial
withdrawal. Withdrawals from the Systematic Transfer Account will not affect the
minimum monthly transfer amount from that Account, so will cause the total
amount to be transferred to be complete in less time than originally
anticipated. If you request a surrender, the Policy must be returned to our
Service Office.
Withdrawals from the Fixed Account and Systematic Transfer Account may be
delayed for up to six months.
Withdrawals may be taxable and subject to a penalty tax. (See "CHARGES AND
DEDUCTIONS: Certain Federal Income Tax Consequences.")
Since you assume the investment risk with respect to Net Purchase Payments
allocated to the Variable Account, and because surrenders and withdrawals are
possibly subject to a charge for premium taxes, the total amount paid upon total
surrender of the Policy (taking any prior partial withdrawals into account) may
be more or less than the total Purchase Payments made. Following a surrender of
the Policy, or at any time the Accumulation Value is zero, all your rights in
the Policy will terminate.
SYSTEMATIC WITHDRAWAL PLAN
Under the Systematic Withdrawal Plan, the you can instruct us 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. You 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 or Systematic Transfer Account. If you do 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.
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 "CHARGES AND DEDUCTIONS: Certain Federal Income
Tax Consequences.")
ANNUITY PAYMENTS
Payees receiving Annuity Payments under the Policy must be individuals who
receive payments in their own behalf unless otherwise agreed to us. Any Payout
Option chosen will be effective when we acknowledges it. We may require proof of
your or the Annuitant's age or survival. The level of Annuity Payments is
determined by the Accumulation Value, the age and sex of the Annuitant, and the
Payout Option elected. Where required by law, Annuity Payments will be
determined without regard to the Annuitant's sex.
ANNUITY STARTING DATE. Unless the Annuity Starting Date is changed, Annuity
Payments under a Policy will begin on the Annuity Starting Date you selected on
your Policy application. The Annuity Starting Date may not be any earlier than
the second Policy Anniversary. The Payout Options available between the second
and eighth Policy Anniversary are Options 2 or 3 provided payment installments
are over a period of at least eight years, or Option 4. After the eighth Policy
Anniversary, all Payout Options are available.
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. You may change the Annuity Starting Date by sending
Written Notice to us, provided that we receive your notice at our Service Office
at least thirty (30) days prior to the then current Annuity Starting Date.
ELECTION OF PAYOUT OPTION. You will choose a Payout Option, to provide
variable annuity payments or fixed annuity payments or a combination of both,
under which the Policy Proceeds will be paid to the Payee(s)shown in the Policy
application. During your lifetime and prior to the Annuity Starting Date, you
may change the election, but Written Notice of any election or change of
election must be received by you at our Service Office at least thirty (30) days
prior to the Annuity Starting Date. If no election is made prior to the Annuity
Starting Date, then the Accumulation Value in the Variable Account will be used
to provide variable Annuity Payments, and the Accumulation Value in the Fixed
Account will be used to provide fixed Annuity Payments, and Annuity Payments
will be made under Option 4 providing lifetime income with payments guaranteed
for 10 years. We reserve the right to pay the Proceeds in one sum when the
Proceeds are less than $2,000, or when the Payout Option chosen would result in
periodic payments of less than $20.
If you die 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 "DISTRIBUTIONS UNDER THE POLICY: Death Benefit.")
The longer the guaranteed or projected Payout Option period, the lower the
amount of each payment.
Unless you specify otherwise, the Payee shall be the Annuitant.
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FIXED ANNUITY PAYMENTS. Fixed annuity payments are available under all six
Payout Options below. Under each fixed Payout Option the amount of each payment
will be set on the Annuity Starting Date and will not change. Annuity Payments
will begin on that date. The Annuity Purchase Value will be transferred to our
general account, and the Annuity Payments will be fixed in amount by the fixed
annuity provisions selected and the age and sex (if consideration of sex is
allowed) of the Annuitant. The guaranteed effective annual interest rate used in
the Payout Options is 3%. Using a procedure approved by our Board of Directors,
we may, at its sole discretion, declare additional interest to be paid or
credited annually for Payout Options 1, 2, 3, or 6. Current immediate annuity
rates for the same class of annuities will be used if higher than the guaranteed
amounts (guaranteed amounts are based upon the tables contained in the Policy).
The guaranteed amounts are based on the 1983 Table "A" mortality table, and 3.0%
guaranteed interest rate. Current amounts may be obtained from us. For further
information, contact our Service Office.
VARIABLE ANNUITY PAYMENTS. Only Payout Options 2, 4, and 6 are available
for variable annuity payments. The dollar amount of the first monthly annuity
payment will be determined by applying the Annuity Purchase Value allocated to
variable annuity payments to the annuity table applicable to the Payout Option
chosen. The tables are determined from the 1983 Table "a" mortality table with
an assumed investment rate of 4%. If more than one subaccount has been selected,
the Annuity Purchase Value of each subaccount is applied separately to the
annuity table to determine the amount of the first annuity payment attributable
to that particular subaccount.
All variable annuity payments other than the first will vary in amount
according to the investment performance of the applicable subaccounts. The
amount of each subsequent payment is the sum of: the number of Variable Annuity
Units for each subaccount as determined for the first annuity payment multiplied
by the value of a Variable Annuity Unit for that subaccount 10 days prior to the
date the variable annuity payment is due. This amount may increase or decrease
from month to month.
If the net investment return of a subaccount for a payment period is equal
to the pro-rated portion of the 4% annual assumed investment rate, the variable
annuity payment attributable to that subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 4% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 4%, the
payment for that period will be less than the payment for the prior period.
TRANSFERS BETWEEN FIXED AND VARIABLE SUBACCOUNTS. After the Annuity
Starting Date, the annuitant may exchange the value of a designated number of
Variable Annuity Units of a particular subaccount into other Variable Annuity
Units, the value of which would be such that the dollar amount of an annuity
payment made on the date of the exchange would be unaffected by the fact of the
exchange. No more than four (4) exchanges may be made within each account year.
Transfers may be made between subaccounts and from a subaccount to the
fixed account. No exchanges may be made from the fixed account to the variable
subaccounts. Transfers will be made using the Variable Annuity Unit values for
the Valuation Period during which any request is received by our Service Office.
PAYOUT OPTIONS. The Policy provides six Payout Options which are described
below.
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the proceeds
are held by us, we 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. If a variable Payout Option is chosen, all
variable annuity payments, other than the first variable annuity payment, will
vary in amount according to the investment performance of the applicable
Subaccounts (see "DISTRIBUTIONS UNDER THE POLICY: Variable Annuity Payments.").
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Note Carefully. If no guarantee is elected, then it would be possible for
only one Annuity Payment to be made if the Annuitant(s) were to die before the
due date of the second annuity payment; only two Annuity Payments if the
Annuitant(s) were to die before the due date of the third annuity payment; and
so forth.
When the Annuitant dies, any remaining guaranteed Annuity Payments will be
paid to the Beneficiary. When the last Payee dies, we will pay to the estate of
that Payee any remaining guaranteed Annuity Payments.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available, we
will provide payments for other options, including joint and survivor periods.
Certain options may not be available in some states. If variable Annuity
Payments are being made under Option 2 or 6 and do not involve life
contingencies, then the Owner may surrender the Contract and receive the
commuted value of any unpaid Annuity Payments.
Additional information about any Payout Option may be obtained by contacting our
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, you have not
provided us with a written election not to have federal income taxes withheld,
we 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 "CHARGES AND DEDUCTIONS: Certain
Federal Income Tax Consequences.")
DEATH BENEFIT
DEATH OF OWNER PRIOR TO ANNUITY STARTING DATE. If any Owner or joint Owner
dies prior the Annuity Starting Date (and the Policy is in force), the Policy
will terminate, and a death benefit will be paid to the Beneficiary. The death
benefit will equal the largest of (i) the Accumulation Value, on the later of
the date on which Due Proof of Death or an election of Payout Option is received
our Service Office, less any charge for applicable premium taxes; or (ii) the
sum of Net Purchase Payments, less partial withdrawals.
The death benefit is payable upon receipt of Due Proof of Death of the
first Owner to die, election of a Payout Option, and proof that such Owner died
prior to the commencement of Annuity Payments. The death benefit generally will
be paid within seven days, or as soon thereafter as we have 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 we receive Due Proof of Death;
otherwise a lump sum payment will be made.
If an Owner of the Policy is a corporation, trust or other nonindividual,
the primary Annuitant will be treated as an Owner of the Policy for purposes of
the death benefit. The "primary Annuitant" is that individual whose life affects
the timing or the amount of the payout under the Policy. A change in the primary
Annuitant will be treated as the death of an Owner.
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of an Owner rather than of the Annuitant.
(If the Annuitant is not an Owner and the Annuitant dies before the Annuity
Starting Date, the Owner may name a new Annuitant if such Owner(s) is not a
corporation or other non-individual or if such Owner is the trustee of a Code
Sec. 401(a) retirement plan. If the Owner does not name a new Annuitant, the
Owner will become the Annuitant.)
Any applicable premium tax not previously deducted will be deducted from
the death benefit payable.
ACCIDENTAL DEATH BENEFIT. If any Owner or Joint Owner dies from bodily
injury sustained in a common carrier accident, we will pay the Death Benefit,
multiplied by two, instead of the amount that would otherwise be payable.
For this benefit to be payable, you must sustain bodily injury while a
passenger in a common carrier. Death must be independent of any sickness or
other causes and must occur within 90 days of the date of the accident. We will
pay only the Death Benefit if your death results from the following: (a)
suicide; (b) an act of declared or undeclared war; (c) an injury received while
intoxicated; (d) an injury received while the owner is under the influence of a
controlled substance, unless administered on the advice of a physician; or (e)
an injury received while committing a felony or engaged in an illegal
occupation. The Accidental Death Benefit may not be available in all states.
DEATH OF OWNER ON OR AFTER ANNUITY STARTING DATE. If any Owner or joint
Owner dies on or after the Annuity Starting Date and before all the Proceeds
have been paid, any remaining Proceeds will be paid at least as rapidly as under
the Payout Option in effect at the time of the death.
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BENEFICIARY. You may change the named Beneficiary by sending Written Notice
to our Service Office unless the named Beneficiary is irrevocable. When we
record and acknowledge the change, it will be effective as of the date you
signed the request. The change will not apply to any payments made or other
action taken by us before recording. If the named Beneficiary is irrevocable,
you may change the named Beneficiary only by joint written request from you and
the Beneficiary. If more than one named Beneficiary is designated, and you fail
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 your 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 you, then your estate is the
Beneficiary.
IRS REQUIRED DISTRIBUTION
Federal tax law requires that if a Policy Owner of a nonqualified Policy
dies before the Annuity Starting Date, then the entire value of the Policy must
generally be distributed within five years of the date of death of such Policy
Owner. Therefore, generally, any death benefit must be paid within five years
after the date of death. The five-year rule does not apply to that portion of
the Proceeds which (a) is payable to or for the benefit of an individual
Beneficiary; and (b) will be paid over the lifetime or the life expectancy of
that Beneficiary as long as payments begin not later than one year after the
date of the Owner's death. Special rules may apply to the spouse of the deceased
Owner. See "Federal Tax Matters" in the Statement of Additional Information for
a detailed description of these rules. Other required distribution rules apply
to Qualified Contracts. (See "CHARGES AND DEDUCTIONS: Certain Federal Income Tax
Consequences.") The Policy contains provisions designed to comply with these
requirements.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
The Texas Educational Code permits participants in the Texas Optional
Retirement Program (ORP) to withdraw their interest in a variable annuity Policy
issued under the ORP only upon: (1) termination of employment in the Texas
public institutions of higher education; (2) retirement; (3) death or (4)
participant's attainment of age 70 1/2. Accordingly, a participant in the ORP
(or the participant's estate if the participant has died) will be required to
obtain a certificate of termination from the employer or a certificate of death
before the Policy can be redeemed.
CHARGES AND DEDUCTIONS
We 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
We impose no charges upon withdrawals of Purchase Payments from the Policy
or from amounts applied to provide Annuity Benefits.
MORTALITY AND EXPENSE RISK CHARGE
We impose a daily charge as compensation for bearing certain mortality and
expense risks in connection with the Policies. This charge is equal to an annual
rate of 1.40% (.000038626% daily) of the value of the net assets in the Variable
Account and it will not increase. 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 us. The mortality
risks we assume arise from our 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, you 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 your Policy.
The expense risk assumed by us is the risk that our 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 our
actual costs, we will bear the loss; conversely, if the charge is more than
sufficient to cover costs, the excess will be profit to us. We expect a profit
from this charge.
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ADMINISTRATIVE CHARGES
In order to cover the costs of administering the Policies, we deduct 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 canceling Accumulation Units. This fee is waived
if the Accumulation Value exceeds $50,000 on the last Valuation Date of the
applicable Policy Year. The fee is also waived for sales of the Policy to
employees of United of Omaha or its affiliated companies.
We also deduct a daily Administrative Expense Charge from the assets of
each Subaccount of the Variable Account. This charge is equal to an annual rate
of .20% (.000005485% daily) of the net assets of each Subaccount of the Variable
Account. The Administrative Expense Charge will not be increased in the future.
TRANSFER FEE
There is no charge for transfers from the Fixed Account or Systematic
Transfer 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 your request.
The Transfer Fee will not increase.
PREMIUM TAXES
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.5%, on annuity contracts issued by insurance
companies. Premium tax rates are subject to change from time to time by
legislative and other governmental action. In addition, other governmental units
within a state may levy such taxes.
The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to your Policy, a charge for such taxes will be
deducted (except in Oregon), 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, we reserve the right to deduct amounts from the
Subaccounts for such taxes or any other economic burden resulting from
imposition of the tax laws that we determine 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 Summary of this Prospectus and 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 OUR 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.
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The Policy may be purchased on a non-tax qualified basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for favorable
tax treatment ("Qualified Policy"). Qualified Policies are designed for use by
individuals whose Purchase Payments are comprised solely of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 403(b), or 408A
of the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate
effect of Federal income taxes on the amounts held under a Policy, on Annuity
Payments, and on the economic benefit to the Policy Owner, the Annuitant, or the
Beneficiary depends, among other things, on the type of retirement plan, on the
tax and employment status of the individual concerned and on the employer's tax
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Policy with proceeds from a tax qualified plan and receiving
distributions from a Qualified Policy in order to continue receiving favorable
tax treatment. Therefore, purchasers of Qualified Policies should seek competent
legal and tax advice regarding the suitability of the Policy for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of the Policy. The following discussion assumes that a Qualified Policy
is purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special Federal income tax treatment.
TAX STATUS OF THE POLICY
The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
TAXATION OF ANNUITIES
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. We believe that the Policy Owner who is a natural person generally is
not taxed on increases (if any) in the value of a Policy until distribution
occurs by withdrawing all or part of the Accumulation Value (e.g., partial
withdrawals, full surrenders or Annuity Payments under the Payout Option
elected). For this purpose, the assignment, pledge, or agreement to assign or
pledge any portion of the Accumulation Value (and in the case of a Qualified
Policy, any portion of an interest in the qualified plan) generally will be
treated as a distribution. The taxable portion of a distribution (in the form of
a single sum payment or an annuity) is taxable as ordinary income.
The owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Policy's Accumulation
Value over the "investment in the contract" (discussed below) during the taxable
year. There are some exceptions to this rule, and a prospective Policy Owner
that is not a natural person may wish to discuss these with a competent tax
adviser.
THE FOLLOWING DISCUSSION GENERALLY APPLIES TO A POLICY OWNED BY A NATURAL
PERSON.
SURRENDERS AND PARTIAL WITHDRAWALS. In the case of a surrender or partial
withdrawal (including systematic withdrawals) under a Qualified Policy, under
Section 72(e) of the Code a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
individual's total accrued benefit for balance under the retirement plan. The
"investment in the contract" generally equals the amount of any purchase
payments paid by or on behalf of any individual. For a Policy issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from a Qualified
Policy.
With respect to Nonqualified Policies, partial withdrawals (including
systematic withdrawals) are generally treated as taxable income to the extent
that the Accumulation Value immediately before the partial withdrawal exceeds
the "investment in the contract" at that time.
Full surrenders are treated as taxable income to the extent that the amount
received exceeds the "investment in the contract."
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
Payout Option elected under the Policy, in general, only the portion of the
payout that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional payments is taxable.
In general there is no tax on the portion of each Annuity Payment which
represents the same ratio that the "investment in the contract" bears to the
total expected value of the Annuity Payments for the term of the payments;
however, the remainder of each Annuity Payment is taxable. Once the "investment
in the contract" has been fully recovered, the full amount of any additional
Annuity Payments is taxable. If Annuity Payments cease by reason of the death of
the Annuitant, the excess (if any) of the "investment in the contract" as of the
Annuity Starting Date over the aggregate amount of Annuity Payments received on
or after the Annuity Starting Date that was excluded from gross income is
allowable as a deduction for the last taxable year of the Annuitant.
PENALTY TAX. In the case of a distribution pursuant to a Nonqualified
Policy, there may be imposed a Federal penalty tax equal to 10% of the amount
treated as taxable income. In general, however, there is no penalty tax on
distributions: (a) made on or after the date on which the Policy Owner attains
age 59 1/2; (b) made as a result of death or disability of a Policy Owner; (c)
received in substantially equal periodic payments as a life annuity or a joint
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and survivor annuity for the lives or life expectancies of the Policy Owner and
a "designated beneficiary"; (d) from a qualified plan; (e) allocable to
investment in the Policy before August 14, 1982; (f) under a qualified funding
asset (as defined in Code section 130(d)); (g) under an immediate annuity (as
defined in Code Section 72(u)(4)); or (h) which are purchased by an employer on
termination of certain types of qualified plans and which are held by the
employer until the employee separates from service. Other tax penalties may
apply to certain distributions under a Qualified Policy.
DEATH BENEFIT PROCEEDS. Amounts may be distributed from the Account because
of the death of a Policy Owner. Generally, such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full surrender as described above; or (2) if
distributed under an Annuity Payout Option, they are taxed in the same manner as
Annuity Payments, as described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE POLICY. A transfer of ownership
of a Policy, the designation of an Annuitant or Beneficiary who is not also the
Policy Owner, the selection of certain annuity starting dates, or the exchange
of a Policy may result in certain tax consequences to the Policy Owner that are
not discussed herein. Policy Owners contemplating any such transfer, assignment,
or exchange of a Policy should contact a competent tax adviser with respect to
the potential tax effects of such a transaction.
MULTIPLE POLICIES. All nonqualified deferred annuity contracts that are
issued by United of Omaha (or its affiliates) to the same Policy Owner during
any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under section 72(e) of the
Code. In addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of section 72(e) through the serial
purchase of annuity contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and separate deferred annuity contract as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws. Any Policy Owner or prospective Policy
Owner contemplating the purchase of more than one annuity in a calendar year
should consult a tax advisor.
WITHHOLDING. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not to have
tax withheld from distributions. Effective January 1, 1994, distributions from
certain qualified plans are generally subject to mandatory withholding. Certain
states also require withholding of state income taxes whenever federal income
taxes are withheld.
POSSIBLE CHANGES IN TAXATION. Legislation has been proposed in 1998 that, if
enacted, would adversely affect the federal taxation of certain insurance and
annuity contracts. For example, one proposal would tax transfers among
investment options and tax exchanges involving variable insurance contracts. A
second proposal would reduce the "investment in the contract" under Cash Value
Life insurance and certain annuity contracts by certain amounts, thereby
increasing the amount of income for purposes of computing gain. Although the
likelihood of there being any changes is uncertain, there is always the
possibility that the tax treatment of the Policies could change by legislation
or other means. Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change). You should
consult a tax advisor with respect to legislative developments and their effect
on the Policy.
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 may be used with certain qualified plans as described in the
following paragraphs. The tax rules applicable to Policy Owners in qualified
plans, including restrictions on contributions and benefits, taxation of
distributions and any tax penalties, vary according to the type of plan and the
terms and condition of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, distribution that do not satisfy
specified requirements and certain other transactions with respect to qualified
plans. Therefore, no attempt is made to provide more than general information
about the use of the Policy with qualified plans. Policy Owners, Annuitants and
Beneficiaries are cautioned that the rights of any person to any benefits under
qualified plans may be subject to the terms and conditions of the plans
themselves, regardless of the provisions of the Policy. Some retirement plans
are subject to distribution and other requirements that are not incorporated in
United of Omaha's Policy provisions or administration procedures. Policy Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the Policy
comply with applicable law. Following are brief descriptions of the
circumstances in which United of Omaha will issue the Policy in connection with
qualified plans. When issued in connection with a qualified plan, the Policy
will be amended to conform with certain requirements of the Code, and this
amendment must be approved by the applicable State Insurance Department before
the Policy is available for use with a qualified plan. The Policy may not be
available in all States for all types of qualified plans.
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For qualified plans under Section 401(a) and 403(b), the Code requires that
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Policy Owner (or plan
participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Policy Owner (or
plan participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of the
calendar year following the calendar year in which the Policy Owner (or plan
participant) reaches age 70 1/2. Roth IRAs under Section 408A do not require
distributions at any time prior to the Policy Owner's death.
QUALIFIED PENSION OR PROFIT SHARING PLANS. Section 401(a) of the Code
permits employers to establish retirement plans for employees and also permits
self-employed individuals to establish retirement plans for themselves and their
employees. Subject to the Policy's purchase payment limits, the Policy may be
issued to the trustee of such plan if the trustee is the Owner and Beneficiary
of the Policy, if the trustee or the employer selects the Policy as a plan
investment, and if the trustee arranges for plan services from a party other
than United of Omaha (unless an officer of United of Omaha agrees in writing to
perform services before the Policy is issued). If the participant directs
investments under the plan, an individual Policy must be issued for each
participant. Purchasers of a Policy for use with such plans should seek
competent advice regarding the suitability of the Policy to their specific
needs. Adverse tax or other legal consequences to the plan, the participant or
to both may result if the Policy is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan establishes compliance with
all legal requirements applicable to such benefits prior to transfer of the
Policy. INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an Individual Retirement Annuity ("IRA"). Also, distribution from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis to an IRA.
The Taxpayer Relief Act of 1997 added several features to the IRA permitting
withdrawals prior to age 59 1/2 without federal tax penalty for such uses as
purchase of a first residence and education. This Act also created a new kind of
IRA, known as a "Roth IRA." Unlike the traditional IRA, deposits in a Roth IRA
are not deductible, but if certain specified conditions are met, distributions
from Roth IRA's can be tax free. Assets in a Roth IRA accumulate on a
tax-deferred, and potentially tax-free, basis. Subject to the Policy's purchase
payment limits, the Policy may be issued as an IRA or Roth IRA. Purchasers of a
Policy for use as an IRA or Roth IRA will be provided with supplemental
information required by the Internal Revenue Service. Such purchasers will have
the right to revoke their purchase within seven days of the earlier of the
establishment of the IRA/Roth IRA or their purchase. Purchasers should seek
competent advice as to the suitability of the Policy to their specific needs. An
IRA or Roth IRA cannot be assigned.
SIMPLE RETIREMENT ACCOUNTS. Certain small employers may establish Simple
Retirement Accounts as provided by Section 408(p) of the Code, under which
employees may elect to defer up to $6,000 (as increased for cost of living
adjustments) as a percentage of compensation. The sponsoring employer is
required to make a matching contribution on behalf of contributing employees.
Distributions from a Simple Retirement Account are subject to the same
restrictions that apply to IRA distributions and are taxed as ordinary income.
Subject to certain exceptions, premature distributions prior to age 59 1/2 are
subject to a 10% penalty tax, which is increased to 25% if the distribution
occurs within the first two years after the commencement of the employee's
participation in the plan. The failure of the Simple Retirement Account to meet
Code requirements may result in adverse tax consequences.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code permits public school
employees and employees of certain types of religious, charitable, educational
and scientific organizations specified in Section 501(c)(3) of the Code to
direct the purchase of annuity contracts and, subject to certain limitations,
exclude the amount of purchase payments from gross income for income tax
purposes. This Section 403(b) annuity contract is commonly referred to as a "Tax
Sheltered Annuity". Subject to the Policy's purchase payment limits, the Policy
may be issued as a Tax Sheltered Annuity if each purchase payment is a direct
transfer from another Tax Sheltered Annuity Policy. The Policy may not be issued
to accept direct purchase payments from an employer's payroll office. In
addition, the Policy prohibits withdrawals or distributions except upon the
Annuitant's death, attainment of age 59 1/2, separation from service or
disability; and the Policy does not provide for hardship withdrawals. Purchasers
of a Policy for use as a Tax Sheltered Annuity should seek competent advice as
to the suitability of the Policy to their specific needs. A Tax Sheltered
Annuity cannot be assigned.
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DISTRIBUTOR OF THE POLICIES
Mutual of Omaha Investor Services, Inc. ("MOIS"), Mutual of Omaha Plaza,
Omaha Nebraska 68175, is the principal underwriter of the Policies. Like United
of Omaha, MOIS is a 100% owned subsidiary of Mutual of Omaha Insurance Company.
MOIS has entered or will enter into one or more contracts with various
broker-dealers for the distribution of the Policies. MOIS is registered with the
Securities and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. Commissions paid to a
broker-dealer will be up to 7 1/2% of Purchase Payments.
VOTING RIGHTS
To the extent required by law, we 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 we determine that
we are 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.
You hold the voting interest in the selected Portfolios. The number of
votes that you have the right to instruct will be calculated separately for each
Subaccount. The number of votes that you have the right to instruct for a
particular Subaccount will be determined by dividing your 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.
PREPARING FOR YEAR 2000
Like all financial services providers, we utilize systems that may be
affected by Year 2000 transition issues and relies upon service providers,
including investment managers, whose own systems may also be affected. We have
developed, and are in the process of implementing a Year 2000 transition plan,
and are confirming that our service providers are also so engaged. The resources
that are being devoted to this effort are substantial. It is difficult to
predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on us. However, as
of the date of this prospectus, we do not anticipate that you will experience
negative effects on your investment, or on the services provided in connection
therewith, as a result of Year 2000 transition implementation.
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. We are not involved in
any litigation that is of material importance in relation to our total assets or
that relates to the Variable Account.
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STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
TABLE OF CONTENTS
Page
The Policy-General Provisions.................................... 2
Owner and Joint Owner....................................... 2
Death of Annuitant.......................................... 2
Entire Contract............................................. 2
Deferment of Payment and Transfers.......................... 2
Incontestability ........................................... 2
Misstatement of Age or Sex.................................. 2
Nonparticipating............................................ 3
Assignment .............................................. 3
Evidence of Age or Survival................................. 3
Federal Tax Matters.............................................. 3
Tax Status of the Policy.................................... 3
Taxation of United of Omaha................................. 4
State Regulation of United of Omaha ............................. 4
Administration .............................................. 5
Records and Reports ............................................. 5
Distribution of the Policies .................................... 5
Custody of Assets .............................................. 5
Historical Performance Data...................................... 5
Money Market Yields ........................................ 5
Other Subaccount Yields .................................... 6
Total Returns .............................................. 6
Other Performance Data...................................... 7
Legal Matters .............................................. 7
Other Information .............................................. 7
Financial Statements............................................. 7
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STATEMENT OF ADDITIONAL INFORMATION
THE ULTRA-ACCESS 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 Ultra-Access Variable Annuity Policy (the
"Policy") offered by United of Omaha Life Insurance Company ("we, us, our,
United of Omaha"). You may obtain a copy of the Prospectus dated August __, 1998
by calling 1-800-238-9354 or by writing to the Service Office: United of Omaha
Variable Product Service, P.O. Box 8430, Omaha, Nebraska 68108-0430. 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: August___, 1998
TABLE OF CONTENTS
Page
The Policy-General Provisions ...........................................2
Owner and Joint Owner...............................................2
Death of Annuitant..................................................2
Entire Contract ....................................................2
Deferment of Payment and Transfers..................................2
Incontestability .................................................. 2
Misstatement of Age or Sex..........................................2
Nonparticipating....................................................3
Assignment..........................................................3
Evidence of Age or Survival.........................................3
Federal Tax Matters .....................................................3
Tax Status of the Policy............................................3
Taxation of United of Omaha.........................................4
State Regulation of United of Omaha......................................4
Administration ..........................................................5
Records and Reports......................................................5
Distribution of the Policies ............................................5
Custody of Assets........................................................5
Historical Performance Data .............................................5
Money Market Yields.................................................6
Other Subaccount Yields.............................................6
Total Returns.......................................................7
Other Performance Data..............................................7
Legal Matters............................................................10
Other Information........................................................10
Financial Statements ....................................................10
(Numbers in parentheses indicate corresponding sections of the Prospectus).
<PAGE>
In order to supplement the description in the Prospectus, the following
provides additional information about United of Omaha and the Policy which may
be of interest to an Owner ("you, your").
THE POLICY - GENERAL PROVISIONS
OWNER AND JOINT OWNER
While you are alive, only you may exercise the rights under the Policy.
Ownership may be changed as described below under "Assignment." If there are
joint Owners, the signatures of both Owners are needed to exercise rights under
the Policy. If the Annuitant is other than the Owner, the Annuitant has no
rights under the Policy.
DEATH OF ANNUITANT
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of the Owner rather than of the Annuitant.
If the Annuitant is not an Owner and the Annuitant dies before the Annuity
Starting Date, the Owner may name a new Annuitant if such Owner(s) is not a
corporation or other non-individual. If the Owner does not name a new Annuitant,
the Owner will become the Annuitant.
ENTIRE CONTRACT
The entire contract is the Policy, data page, any riders and the signed
application, a copy of which will be attached to the Policy. All statements made
in the application will be deemed representations and not warranties. No
statement, unless it is in the application, will be used by us 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.
We reserve 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
We 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 us. We
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.
We may defer transfers, payment of partial withdrawals or a surrender
from the Fixed Account for up to six months from the date written request is
received at our Service Office.
INCONTESTABILITY
We will not contest the validity of the Policy after the Date of Issue.
MISSTATEMENT OF AGE OR SEX
We 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 we
have made payments that are too small, the underpayments will be added to the
next payment. Adjustments for overpayments or underpayments will include 6%
interest.
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NONPARTICIPATING
No dividends will be paid. Neither you nor the Beneficiary will have the
right to share in our surplus earnings or profits.
ASSIGNMENT
You may change the ownership of the Policy or pledge it as collateral by
assigning it. No assignment will be binding on us until we record and
acknowledge 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 you and
your named Beneficiary. On the Annuity Starting Date, you may select another
Payee, but you retain all rights of ownership unless you signs an absolute
assignment.
EVIDENCE OF AGE OR SURVIVAL
We reserve the right to require proof of the age or survival of any
Owner, Annuitant or Payee. No payment will be made until we receives such proof.
VARIABLE ANNUITY UNITS.
All variable annuity payments other than the first are determined by
means of Variable Annuity Units credited to the Policy with respect to the
particular Payee. The number of Variable Annuity Units for each applicable
subaccount is the amount of the first annuity payment attributable to that
subaccount divided by the Annuity Unit Value for that subaccount as of the
Annuity Starting Date. The number of Variable Annuity Units of each particular
subaccount credited with respect to the Payee or Annuitant then remains fixed
unless a transfer of Variable Annuity Units is made as described below. The
number of Variable Annuity Units will not change as a result of investment
experience.
For any Valuation Period, the value of a Variable Annuity Unit of
a particular subaccount is the Variable Annuity Unit value during the last
Valuation Period for that particular Subaccount, multiplied by the Net
Investment Factor for that subaccount for the current Valuation Period. The
value of a subaccount may increase or decrease from one Valuation Period to the
next.
The Net Investment Factor for any subaccount for any Valuation
Period is determined by dividing (a) by (b) and then subtracting (c) from the
result where:
(a) is the net result of:
(1)the net asset value of a Portfolio share held in the subaccount
determined as of the end of the current Valuation Period, plus
(2)the per share amount of any declared and unpaid dividends or
capital gains accruing to that Portfolio, plus or minus
(3)a per share credit or charge with respect to any taxes paid or
reserved for by us during the Valuation Period which is
determined by us to be attributable to the operations of the
subaccount;
(b) is the net asset value per share of the Fund held in the subaccount
determined as of the end of the preceding Valuation Period plus or
minus the per share credit or charge with respect to any taxes paid
or reserved for the preceding Valuation Period; and
(c) is the asset charge factor determined by us for the Valuation Period
to reflect the Mortality and Expense Risk Charge and the
Administrative Expense Charge deducted from the Variable Account.
This factor is equal, on an annual basis, to 1.20% of the net asset
value of the Variable Account.
The result is then multiplied by a factor that offsets the Assumed Investment
Rate used to establish the Annuity Payment Rates found in the applicable
Contract, which allows the actual investment rate to be credited. For a one day
Valuation Period the factor is 0.99989255 using an Assumed Investment Rate of 4%
per year.
FEDERAL TAX MATTERS
TAX STATUS OF THE POLICY
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Internal Revenue
Code provides that in order for a variable contract which is based on a
segregated asset account to qualify as an annuity contract under the Code, the
investments made by such account must be "adequately diversified" in accordance
with Treasury regulations. The Treasury regulations issued under Section 817(h)
(Treas. Reg. ss. 1.817-5) apply a diversification requirement to each of the
Subaccounts of the Variable Account. The Variable Account, through the Series
Funds and their Portfolios, intends to comply with those diversification
requirements. United of Omaha and the Series Funds have entered into agreements
regarding participation in the Series Funds that requires the Series Funds and
their Portfolios to be operated in compliance with the Treasury regulations.
3
<PAGE>
OWNER CONTROL. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the contract owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. The Treasury Department also announced, in connection with the issuance
of regulations concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
Owner), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
policy values. These differences could result in you being treated as the owner
of a pro-rata portion of the assets of the Separate Account. In addition, we do
not know what standards will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to issue. We therefore
reserves the right to modify the Policy as necessary to attempt to prevent you
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
your death. In order to be treated as an annuity contract for federal income tax
purposes, the Code requires that such Policies provide that if you die 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 your death. If you die before the Annuity
Starting Date, the entire interest in the Policy must generally be distributed
within five years after your 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 your 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 your
surviving spouse, the Policy may be continued with your 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. We do 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 us with respect to the Variable Account, we 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 our contract liabilities
and reserves so that the Department may certify the items are correct. OUR 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, we are subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
4
<PAGE>
ADMINISTRATION
We perform all administration for the Policies.
RECORDS AND REPORTS
All records and accounts relating to the Variable Account will be
maintained by us. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, we 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 we do not anticipate discontinuing the offering of
the Policies. However, we reserve the right to discontinue the offering of the
Policies.
Mutual of Omaha Investor Services, Inc. ("MOIS") will be the principal
underwriter of the Policies. The Policies will be distributed by MOIS through
retail broker-dealers. Commissions payable to a broker-dealer will be up to 7.5%
of Purchase Payments.
CUSTODY OF ASSETS
The assets of each of the Subaccounts of the Variable Account are held
by us. The assets of the Variable Account are segregated and held separate and
apart from our general account assets. We maintain 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 our
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, we may disclose yields, total returns, and other
performance data pertaining to the Policies for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the Securities and Exchange Commission.
The yields and total returns of the Subaccounts of the Variable Account
normally will fluctuate over time. THEREFORE, THE DISCLOSED YIELDS AND TOTAL
RETURNS FOR ANY GIVEN PAST PERIOD ARE NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. A Subaccount's actual yield and total return
is affected by the types and quality of portfolio securities held by the
Portfolio and its operating expenses.
Because of the charges and deductions imposed under a Policy, the yields
and total returns for the Subaccounts will be lower than the yields and total
returns for their respective Portfolios. The 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, unrealized
appreciation and depreciation, and excluding income other than investment
income) at the end of the seven-day period in the value of a hypothetical
account under a Policy having a balance of one Accumulation Unit of the Money
Market Subaccount at the beginning of the period to determine the base period
return, and annualizing this quotient on a 365-day basis. The net change in
account value reflects: (1) net income from the Portfolio attributable to the
hypothetical account; and (2) charges and deductions imposed under the Policy
which are attributable to the hypothetical account. The charges and deductions
include the per Unit charges for the hypothetical account for: (1) the annual
Policy Fee; (2) the Administrative Expense Charge; and (3) the Mortality and
Expense Risk Charge. The $30 annual Policy Fee is reflected as an annual 0.10%
charged daily, based on an average Accumulation Value of $30,000.
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 us 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.
5
<PAGE>
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.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the
current annualized yield of one or more of the Subaccounts (except the Money
Market Subaccount) for a Policy for 30-day or one-month periods. The annualized
yield of a Subaccount refers to income generated by the Subaccount over a
specific 30-day or one-month period. Because the yield is annualized, the yield
generated by a Subaccount during a 30-day or one-month period is assumed to be
generated each period over a 12-month period.
The yield is computed by: (a) dividing the net investment income of the
Portfolio attributable to the Subaccount Accumulation Units less Subaccount
expenses for the period by the maximum offering price per Accumulation Unit on
the last day of the period times the daily average number of units outstanding
for the period; (b) compounding that yield for a six-month period; and (c)
multiplying that result by 2. Expenses attributable to the Subaccount include:
(a) the annual Policy Fee; (b) the Administrative Expense Charge; and (c) the
Mortality and Expense Risk Charge. The $30 annual Policy Fee is reflected as an
annual 0.10% charged daily in the yield calculation, based on an 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.
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 we calculate at the end of each Valuation Period
based on the performance of the Subaccount's underlying Portfolio, the
deductions for (a) the annual Policy Fee; (b) the Administrative Expense Charge;
and (c) the Mortality and Expense Risk Charge. The $30 annual Policy Fee is
reflected as an annual 0.10% charged daily in the calculation of average annual
total returns, based on an anticipated average Accumulation Value of $30,000.
The calculation also assumes surrender of the Policy at the end of the period
for the return quotation. The total return will then be calculated according to
the following formula:
P(1+TR) n = ERV
Where:
P =-- a hypothetical initial Purchase Payment of $1,000.
TR =-- the average annual total return.
ERV =-- the ending redeemable value of the hypothetical
account at the end of the period.
n =-- the number of years in the period.
6
<PAGE>
We 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
Advertising Age
American Banker
Barron's
Best's Review
Broker World
Business Insurance
Business Month
Business Week
Changing Times
Consumer Reports
Economist
Financial Planning
Financial World
Forbes
Fortune
Inc.
Institutional Investor
Insurance Forum
Insurance Sales
Insurance Week
Journal of Accountancy
Journal of the American Society of CLU & ChFC
Journal of Commerce
Life Association News
Life Insurance Selling
Manager's Magazine
Market Facts
Money
LEGAL MATTERS
We know of no material legal proceedings pending to which the Variable
Account is a party or which would materially affect the Variable Account. We are
not involved in any litigation of material importance to our total assets or to
the Variable Account. Legal matters in connection with the Policy have been
passed upon by our Law Staff.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the terms
of these documents, reference should be made to the instruments filed with the
Securities and Exchange Commission.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements
for the Variable Account as of December 31, 1997 and for the years ended
December 31, 1997 and 1996 which have been audited by Deloitte & Touche, LLP,
independent auditors, Omaha, Nebraska, as stated in their report appearing
herein.
The Financial Statements of United of Omaha Life Insurance Company as of
and for the years ended December 31, 1997 and 1996 included in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, Omaha, Nebraska, as stated in their report appearing herein. The
financial statements of United of Omaha Life Insurance Company for the year
ended December 31, 1995 have been audited by PricewaterhouseCoopers, L.L.P.,
independent auditors, Omaha, Nebraska, as stated in their report appearing
herein. The financial statements of United of Omaha Life Insurance Company
should be considered only as bearing on the ability of United of Omaha to meet
its obligations under the Policies. They should not be considered as bearing on
the investment performance of the assets held in the Variable Account.
7
<PAGE>
- -------------------------------------------------------------------
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS'
REPORT
DECEMBER 31, 1997, 1996 AND 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statutory statements of admitted assets,
liabilities, and surplus of United of Omaha Life Insurance Company (a
wholly-owned subsidiary of Mutual of Omaha Insurance Company) as of December 31,
1997 and 1996, and the related statutory statements of income, changes in
surplus, and cash flows for the years then ended. Our responsibility is to
express an opinion on these financial statements based on our audits. The
financial statements of United of Omaha Life Insurance Company for the year
ended December 31, 1995 were audited by other auditors whose report, dated April
9, 1997, expressed an unqualified opinion on the presentation of those financial
statements in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Nebraska and also expressed an opinion
that the financial statements were not presented in conformity with generally
accepted accounting principles. The financial statements are the responsibility
of the Company's management.
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.
As more fully described in Note 1 to the financial statements, the Company has
prepared these financial statements in conformity with accounting practices
prescribed or permitted by the Insurance Department of the State of Nebraska.
Those practices differ from generally accepted accounting principles. The
effects on the financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are not
reasonably determinable, but are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of United of Omaha Life Insurance Company as of December 31, 1997 and 1996, or
the results of its operations or its cash flows for the years then ended.
<PAGE>
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and surplus
of United of Omaha Life Insurance Company as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for the years then ended, on
the basis of accounting described in Note 1.
DELOITTE & TOUCHE LLP
February 17, 1998
<PAGE>
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statements of operations, capital and surplus,
and cash flows of United of Omaha Life Insurance Company (a Nebraska Corporation
and wholly-owned subsidiary of Mutual of Omaha Insurance Company) for the year
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to report on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our originally issued report dated February 23, 1996, we expressed an opinion
that the 1995 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of Nebraska,
presented fairly, in all material respects, the results of United of Omaha Life
Insurance Company's operations and its cash flow for the year ended December 31,
1995 in conformity with generally accepted accounting principles. As described
in Note 1 to the financial statements, pursuant to the provisions of Statement
of Financial Accounting Standards Board Interpretation 40, Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises, as amended ("FIN 40"), financial statements of mutual life
insurance enterprises for periods ending on or before December 15, 1996,
prepared using accounting practices prescribed or permitted by insurance
regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles.
Accordingly, our present opinion on the presentation of the 1995 financial
statements in accordance with generally accepted accounting principles, as
presented herein, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the results of United
of Omaha Life Insurance Company's operations and its cash flows for the year
ended December 31, 1995.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of United of Omaha Life Insurance Company's
operations and its cash flows for the year ended December 31, 1995, I conformity
with accounting practices prescribed or permitted by the Insurance Department of
the State of Nebraska.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
February 23, 1996 (except for the change in Our opinion as required by FIN 40,
for which the date is April 9, 1997)
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------
ADMITTED ASSETS 1997 1996
Cash and invested assets:
<S> <C> <C>
Bonds 6,921,762 6,194,033
Preferred stocks 3,955 2,967
Common stocks 96,599 206,792
Mortgage loans 587,413 914,877
Real estate occupied by the Company,
net of accumulated depreciation of $55,634 in 1997 -
and $51,913 in 1996 82,536 85,958
Real estate acquired in satisfaction of debt,
net of accumulated depreciation of $2,809 in 1997
and $3,418 in 1996 24,103 47,288
Investment in real estate,
net of accumulated depreciation of
$3,836 in 1997 and $14,576 in 1996 2,426 9,930
Policy loans 125,623 118,150
Cash and short-term investments 115,195 117,502
Other invested assets 75,603 70,027
------- ------
Total cash and invested assets 8,035,215 7,767,524
Premiums deferred and uncollected 105,487 94,802
Investment income due and accrued 81,723 75,193
Electronic data processing equipment, net of accumulated depreciation
of $70,130 in 1997 and $56,352 in 1996 43,989 44,971
Receivable from parent, subsidiaries and affiliates 36,856 8,075
Other assets 55,383 47,050
Separate accounts assets 927,950 499,423
-------- -------
Total admitted assets 9,286,603 8,537,038
========== =========
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts 5,880,532 5,427,996
Liability for premium and other deposit funds 1,527,069 1,670,294
Policy and contract claims 68,226 49,317
Other 75,725 74,171
------- ------
Total policy reserves 7,551,552 7,221,778
Interest maintenance reserve 18,902 26,872
Asset valuation reserve 94,144 114,495
General expenses and taxes due or accrued 30,843 35,147
Federal income taxes due or accrued 17,739 20,241
Other liabilities 77,148 84,293
Separate accounts liabilities 908,200 499,392
-------- -------
Total liabilities 8,698,528 8,002,218
---------- ---------
SURPLUS
Capital stock, $10 par value, 900,000 shares authorized issued and outstanding 9,000 9,000
Gross paid-in and contributed surplus 62,724 62,724
Unassigned surplus 516,351 463,096
-------- -------
Total surplus 588,075 534,820
-------- -------
Total liabilities and surplus 9,286,603 8,537,038
========== =========
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995
Income:
<S> <C> <C> <C>
Net premiums and annuity considerations 1,187,104 1,285,507 1,278,389
Other considerations and fund deposits 293,228 260,508 81,818
Net investment income 587,480 546,634 526,246
Other income 25,019 20,604 25,233
------- ------- ------
Total income 2,092,831 2,113,253 1,911,686
---------- ---------- ---------
Benefits and expenses:
Policyholder and beneficiary benefits 1,030,686 890,668 728,340
Increase in reserves for policyholder and beneficiary benefits 365,393 561,185 781,059
Commissions 130,343 126,692 98,132
Operating expenses 203,684 175,723 186,158
Expense realignment costs 4,442 9,099 -
Net transfers to separate accounts 278,480 277,638 41,074
-------- -------- ------
Total benefits and expenses 2,013,028 2,041,005 1,834,763
---------- ---------- ---------
Net gain from operations before federal income taxes and
net realized capital gains 79,803 72,248 76,923
Federal income taxes 37,918 41,101 30,227
------- ------- ------
Net gain from operations before net realized capital gains 41,885 31,147 46,696
Net realized capital gains 51,537 23,461 14,476
------- ------- ------
Net income 93,422 54,608 61,172
======= ======= ======
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
1997 1996 1995
Capital stock:
<S> <C> <C> <C>
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 62,724 62,724
------- ------- ------
Unassigned surplus:
Balance at beginning of year 463,096 440,889 378,242
Net income 93,422 54,608 61,172
Change in net unrealized capital gains and losses (45,543) (23,064) 6,299
(Increase) decrease in:
Non-admitted assets (15,448) 2,561 1,593
Asset valuation reserve 20,352 (8,150) (6,483)
Additional pension plan contribution - (3,599) -
Change in group pension reserve valuation basis 17,437 - -
Adoption of actuarial guidelines (17,235) - -
Surplus contributed to separate account (20,000) - -
Change in surplus in separate account 20,000 - -
Other, net 270 (149) 66
---- ----- --
Balance at end of year 516,351 463,096 440,889
-------- -------- -------
Total surplus 588,075 534,820 512,613
======== ======== =======
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995
Cash from operations:
<S> <C> <C> <C>
Premiums, considerations and other fund deposits 1,467,305 1,539,502 1,343,041
Net investment income 572,888 537,288 512,992
Other income 24,599 20,642 21,771
Benefits (1,015,334) (888,661) (728,025)
Commissions and general expenses (358,217) (314,100) (276,574)
Federal income taxes (50,033) (42,235) (23,796)
Net transfers to separate accounts (291,034) (292,935) (41,112)
--------- --------- --------
Net cash from operations 350,174 559,501 808,297
-------- -------- -------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 1,061,409 992,065 582,788
Mortgage loans 335,103 132,406 131,975
Stocks 143,363 52,062 73,863
Real estate 37,927 18,601 15,353
Other invested assets 40,376 32,150 4,391
Tax on capital gains (15,797) (9,665) (2,525)
Cost of investments acquired:
Bonds (1,774,643) (1,818,632) (1,460,824)
Mortgage loans (19,863) (22,607) (56,781)
Stocks (23,479) (25,848) (28,873)
Other invested assets (27,564) (53,150) (22,321)
Real estate (3,082) (4,205) (4,897)
Net increase in policy loans (7,474) (6,815) (6,494)
------- ------- -------
Net cash from investments (253,724) (713,638) (774,345)
--------- --------- ---------
Cash from financing and other sources:
Other cash provided 18,881 102,623 38,420
Other cash used (117,637) (6,984) (5,434)
--------- ------- -------
Net cash from financing and other sources (98,756) 95,639 32,986
-------- ------- ------
Net change in cash and short-term investments (2,307) (58,498) 66,938
Cash and short-term investments:
Beginning of year 117,502 176,000 109,062
-------- -------- -------
End of year 115,195 117,502 176,000
======== ======== =======
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - United of Omaha Life Insurance Company (the Company)
is a wholly-owned subsidiary of Mutual of Omaha Insurance Company (Mutual
of Omaha), a mutual health and accident and life insurance company
domiciled in the State of Nebraska. At December 31, 1997, the Company owned
100% of the outstanding common stock of the following entities: Companion
Life Insurance Company (Companion), United World Life Insurance Company
(United World), Mutual of Omaha Structured Settlement Company-Connecticut
(MOSSCO-CT), and Mutual of Omaha Structured Settlement Company-New York
(MOSSCO-NY). 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 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 throughout the country.
BASIS OF PRESENTATION - The accompanying financial statements have been
prepared in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Nebraska. Prescribed statutory
accounting practices are contained in a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices which may not
necessarily be prescribed but are not prohibited.
The accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with generally accepted
accounting principles. The most significant differences include: (a) bonds
are generally carried at amortized cost rather than being valued at either
amortized cost or fair value based on their classification according to the
Company's ability and intent to hold or trade the securities; (b)
acquisition costs, such as commissions and other costs related to acquiring
new business, are charged to operations as incurred and not deferred,
whereas premiums are taken into income on a pro rata basis over the
respective term of the policies; (c) deferred federal income taxes are not
provided for temporary differences between tax and financial reporting; (d)
no provision has been made for federal income taxes on unrealized
appreciation of investments which are carried at market value; (e) asset
valuation reserves (AVR) and interest maintenance reserves (IMR) are
established; (f) different actuarial assumptions are used for calculating
certain policy reserves; (g) changes in certain assets designated as
"non-admitted" have been charged to unassigned surplus; and (h) the change
in the underlying book value of wholly-owned subsidiaries is reported as a
change in net unrealized capital gains (losses), a component of unassigned
surplus, rather than as a component of the Company's net income/loss. The
effect of the foregoing differences on the accompanying statutory financial
statements are not reasonably determinable, but was presumed to be
material.
USE OF ESTIMATES - The preparation of financial statements in accordance
with statutory accounting principles requires management to make estimate
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
<PAGE>
INVESTMENTS - Bonds are generally stated at amortized cost. Premiums and
discounts on bonds not backed by other loans are amortized using the
scientific method. Premiums and discounts on loan-backed bonds and
structured securities are amortized using the interest method based on
anticipated prepayments at the date of purchase. 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 estimated fair value and
stocks of affiliated companies (principally insurance companies) are valued
at underlying book value. The change in the stated value is recorded as a
change in unrealized capital gains (losses), 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" is excluded from the statutory statements of admitted
assets, liabilities and surplus.
ASSET VALUATION AND INTEREST MAINTENANCE RESERVES - The Company establishes
certain reserves as promulgated by the NAIC. The AVR is established for the
specific risk characteristics of invested assets of the Company. The 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.
POLICY RESERVES - Policy reserves provide amounts adequate to discharge
estimated future obligations in excess of estimated future premiums on
policies in force. Reserves for life policies are computed principally by
using the Commissioners' Reserve Valuation Method (CRVM) or the Net Level
Premium Method with assumed interest rates (2.5% to 6%) and mortality
(American Experience, 1941 CSO, 1958 CSO, 1960 CSG and 1980 CSO tables) as
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. To the extent the ultimate liability differs from the amounts
recorded, such differences are reflected in operations when additional
information becomes known.
During 1997, the Company adopted two actuarial guidelines. The total impact
of the adoption of these guidelines was a $17,235 decrease in unassigned
surplus. The Company also recorded a reduction in group pension reserves
based on a change in estimate in the calculation of these reserves. The
impact of this change in estimate was a $17,437 increase in unassigned
surplus.
PREMIUMS AND RELATED COMMISSIONS - Premiums are recognized as income over
the premium paying period of the policies. Commissions and other expenses
related to the acquisition of policies are charged to operations as
incurred.
<PAGE>
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 taxes 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 statutory reporting. The
Company recognizes the benefits of net operating loss, foreign tax credit,
and general business credit carryforwards when realized.
NON-ADMITTED ASSETS - Certain assets designated as "non-admitted",
principally receivables greater than ninety days due and office furniture
and equipment, are excluded from the statutory statements of admitted
assets, liabilities, and surplus. The net change in such assets is charged
or credited directly to unassigned surplus.
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 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.
AFFILIATED COMMON STOCK - The fair values for affiliated common stocks
are based on the Company's equity in the underlying book value.
PREFERRED STOCKS - The fair values for preferred stocks are based on
quoted market prices.
MORTGAGE LOANS - The fair values for mortgage loans are estimated using
discounted cash flow calculations which are based on interest rates
currently being offered for similar loans to borrowers with similar
credit ratings, credit quality, and maturity of the investments.
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 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, which are based on interest rates currently being
offered for similar contracts with maturities consistent with those
remaining for the contracts being valued.
DERIVATIVES - The fair value of interest-rate swaps, foreign currency
swaps and interest-rate caps represents the amount at which the contracts
could be settled based upon estimates obtained from issuing brokers. The
fair value of equity linked notes represents the appreciation of the
underlying debt security based upon the accumulative return of the
designated index.
<PAGE>
DERIVATIVES - The Company utilizes derivative financial instruments as part
of an overall interest rate risk management strategy. Derivative financial
instruments utilized by the Company include interest rate swaps, interest
rate caps, foreign currency swaps and equity linked notes. The Company does
not engage in trading of the instruments.
Derivative financial instruments involve, to varying degrees, elements of
credit and market risk which are not recognized on the statutory statement
of admitted assets, liabilities, and surplus. Credit risk is defined as the
possibility that a loss may occur from the failure of another party to
perform in accordance with the terms of the contract which exceeds the
value of existing collateral, if any. Market risk is the possibility that
future changes in market conditions may make the derivative financial
instrument less valuable. The Company evaluates the risk associated with
derivatives in much the same way as the risks with on-balance sheet
financial instruments. The derivative's risk of credit loss is generally a
small fraction of the notional value of the instrument and is represented
by the fair value of the derivative financial instrument. The Company
attempts to limit its credit risk by dealing with creditworthy
counterparties and obtaining collateral where appropriate.
Interest-rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Net settlement amounts are reported as
adjustments to interest income on an accrual basis over the life of the
swap agreement.
Interest-rate caps represent a right to receive the excess of a referenced
interest rate over a given rate. 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.
Foreign currency swaps are stated at market value. The differences between
the amounts paid or received on foreign currency swaps are reflected in the
statutory statements of income. The change in estimated fair value is
recorded as a change in unrealized gains (losses).
The Company also invests in equity linked notes that are stated at
amortized cost. These instruments pay interest based on a very modest (or
no) semi-annual or annual coupon rate and pay at maturity all principal
plus "contingent" interest based on a coupon rate equal to the percentage
increase in a designated index. If the index has declined over the term of
the note, 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 accrued at the coupon rate while "contingent" interest is
recognized upon maturity.
SEPARATE ACCOUNTS - The assets of the separate accounts shown in the
statutory statements of admitted assets, liabilities, and surplus are
carried at fair value and consist primarily 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 statutory
statements of income, 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.
RECLASSIFICATIONS - Certain reclassifications have been made to the prior
year amounts to conform with current year presentation with no changes to
unassigned surplus or net income.
<PAGE>
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of the Company's investment securities were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1997:
<S> <C> <C> <C> <C>
U.S. Governments 58,738 1,010 43 59,705
States, territories and possessions 130 3 - 133
Political subdivisions 11,068 118 1 11,185
Mortgage-backed securities 281,614 7,452 258 288,808
Special revenue 60,518 3,453 4 63,967
Public utilities 428,968 25,627 151 454,444
Industrial and miscellaneous 4,392,543 161,013 26,560 4,526,996
Collateralized mortgage obligations 1,563,787 48,341 4,982 1,607,146
Credit-tenant loans 248,796 17,543 359 265,980
-------- ------- ---- -------
Total 7,046,162 264,560 32,358 7,278,364
========== ======== ======= =========
Bonds 6,921,762
Short-term investments 124,400
7,046,162
Preferred stocks 3,955 1,937 - 5,892
====== ====== == =====
Common stocks:
Affiliated 66,086 14,609 - 80,695
Unaffiliated 435 15,546 77 15,904
---- ------- --- ------
66,521 30,155 77 96,599
======= ======= === ======
<PAGE>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
AT DECEMBER 31, 1996:
U.S. Governments 53,506 303 975 52,834
States, territories and possessions 1,187 46 - 1,233
Political subdivisions 11,579 21 232 11,368
Mortgage backed securities 170,463 2,684 808 172,339
Special revenue 73,681 3,139 - 76,820
Public utilities 416,189 21,892 995 437,086
Industrial and miscellaneous 3,787,554 106,623 46,452 3,847,725
Collateralized mortgage obligations 1,541,893 29,372 16,816 1,554,449
Credit-tenant loans 277,025 10,186 2,557 284,654
-------- ------- ------ -------
Total 6,333,077 174,266 68,835 6,438,508
========== ======== ======= =========
Bonds 6,194,033
Short-term investments 139,044
6,333,077
Preferred stocks 2,967 1,899 - 4,866
====== ====== == =====
Common stocks:
Affiliated 66,086 7,514 - 73,600
Unaffiliated 61,054 74,540 2,402 133,192
------- ------- ------ -------
127,140 82,054 2,402 206,792
======== ======= ====== =======
</TABLE>
<PAGE>
The amortized cost and estimated fair value of debt securities at December
31, 1997, 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.
AMORTIZED ESTIMATED
COST FAIR VALUE
Due in one year or less 231,132 231,738
Due after one year through five years 1,431,804 1,457,094
Due after five years through ten years 1,300,236 1,339,306
Due after ten years 2,237,589 2,354,273
---------- ---------
5,200,761 5,382,411
Collateralized mortgage obligations
and mortgage backed
securities 1,845,400 1,895,953
---------- ---------
- -
7,046,161 7,278,364
The sources of net investment income were as follows:
1997 1996 1995
Bonds 501,101 439,884 388,690
Preferred stocks 399 399 399
Common stocks 449 1,789 27,756
Mortgage loans 70,469 87,035 96,891
Real estate 25,531 29,860 26,860
Policy loans 7,454 6,855 6,348
Short-term investments 4,658 7,339 6,665
Other (1,239) (2,732) (1,858)
------- ------- -------
608,822 570,429 551,751
Investment expense (25,194) (28,270) (29,424)
Amortization of interest maintenance reserve 3,852 4,475 3,919
------ ------ -----
587,480 546,634 526,246
======== ======== =======
<PAGE>
Gross realized gains and losses from investment securities consist of the
following:
NET
GROSS GROSS REALIZED
REALIZED REALIZED GAINS
GAINS LOSSES (LOSSES)
YEAR ENDED DECEMBER 31, 1997:
Bonds 8,304 5,237 3,067
Common stocks 64,382 4,130 60,252
Mortgage loans 1,520 5,318 (3,798)
Real estate 2,800 5,109 (2,309)
Derivative instruments 8 8,911 (8,903)
Other 24,572 48 24,524
------- --- ------
101,586 28,753 72,833
======== =======
Capital gains tax (25,411)
Net IMR capital losses 4,116
Net realized capital gains 51,538
YEAR ENDED DECEMBER 31, 1996:
Bonds 9,290 1,489 7,801
Common stocks 41,198 351 40,847
Mortgage loans 660 7,618 (6,958)
Real estate 2,690 2,949 (259)
Other 3,830 34 3,796
------ --- -----
57,668 12,441 45,227
======= =======
Capital gains tax (15,798)
Net IMR capital gains (5,968)
Net realized capital gains 23,461
YEAR ENDED DECEMBER 31, 1995:
Bonds 4,830 158 4,672
Common stocks 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
======= =======
Capital gains tax (9,665)
Net IMR capital gains (3,572)
Net realized capital gains 14,476
Proceeds from the sale of bonds were $265,701, $197,362 and $56,355 during
1997, 1996 and 1995, respectively.
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum and minimum lending rates for mortgage
loans during 1997 ranged from 7.57% to 8.15%. The maximum percentage of any
one loan to the value of security at the time of the loan, exclusive of
insured, guaranteed or purchase money mortgages, was 75%. The estimated
fair value of the mortgage loan portfolio was approximately $625,176 and
$928,621 at December 31, 1997 and 1996, respectively.
<PAGE>
The Company's mortgage loans finance various types of commercial properties
throughout the United States. The geographic distributions of the mortgage
loans were as follows at December 31, 1997 and 1996:
1997 1996
California 51,109 87,778
Nebraska 34,435 53,118
Missouri 26,734 49,422
Indiana 23,145 49,004
Washington 31,426 44,615
All other states 420,564 630,940
-------- -------
587,413 914,877
The following table summarizes the non-performing and restructured mortgage
loans at December 31, 1997 and 1996:
1997 1996
Non-performing 7,145 8,917
Restructured - 13,501
-- ------
7,145 22,418
At December 31, 1997, securities with an amortized cost of $5,469 were on
deposit with government agencies as required by law in various
jurisdictions in which the Company conducts business.
The Company has a securities lending program whereby securities are loaned
to third parties, primarily major brokerage firms. Company policy requires
a minimum of 102% of the fair value of the loaned securities to be
separately maintained as collateral for the loans. The collateral is
recorded in memorandum records and is not reflected in the accompanying
statutory statements of admitted assets, liabilities and surplus. To
further minimize the credit risks related to this lending program, the
Company regularly monitors the financial condition of counterparties to
these agreements and also receives an indemnification from the financial
intermediary who structures the transactions.
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 insurance liabilities.
The Company also uses interest-rate caps to more effectively manage
interest-rate risk associated with single premium deferred annuity
contracts. 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.
<PAGE>
The Company uses equity linked notes to more cost effectively diversify its
exposure to equity markets and as an asset replication instrument to match
the liabilities of certain group annuity contracts where the customer seeks
equity market participation. Equity linked 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 invested principal.
During 1997 the Company terminated two interest rate swap transactions with
a combined notional amount of $200,000 at a cost of approximately $8,900.
This amount was charged to IMR in accordance with statutory accounting
principles. These swaps were replaced with four other interest-rate swap
agreements with a combined notional amount of $200,000. Terms of the new
interest-rate swaps allow for more frequent repricing of the variable paid
by the Company thereby reducing their exposure.
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>
ESTIMATED
NOTIONAL STATEMENT FAIR YEAR(S) OF INTEREST RATE
AMOUNT VALUE VALUE MATURITY PAID RECEIVED
At December 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
Interest-rate swaps 202,500 - 5,399 2002 - 2003 6.97 % 6.50 %
======== == ======
Interest-rate caps 470,000 3,269 14 2000 - 2002 - -
======== ====== ===
Foreign currency swaps 6,500 (268) (268) 1998 - -
====== ===== =====
Equity linked notes 101,000 4,721 41,226 2001 - 2016 - -
======== ====== =======
At December 31, 1996:
Interest-rate swaps 202,500 - (9,259)1999 - 2003 8.45 % 6.24 %
======== == =======
Interest-rate caps 320,000 2,739 1,883 2000 - 2001 - -
======== ====== ======
Foreign currency swaps 21,503 (10,401) (10,401)1997 - 1998 - -
======= ======== ========
Equity linked notes 109,925 5,902 41,289 1997 - 2016 - -
======== ====== =======
</TABLE>
The Company has considerable experience in evaluating and managing credit
risk. Each issuer or counterparty is extensively reviewed to evaluate its
financial stability before entering into each agreement and throughout the
period that the financial instrument is owned.
The Company has commitments to fund bond investments of approximately
$60,900 and mortgage loans of approximately $1,900 as of December 31, 1997.
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 statutory
and income tax reporting. The major differences include capitalization and
amortization of certain policy acquisition amounts for tax purposes,
different methods for determining statutory and tax insurance reserves,
timing of the recognition of market discount on bonds and certain accrued
expenses, and the acceleration of depreciation for tax purposes.
<PAGE>
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1992. The Company is currently appealing certain
adjustments proposed by the IRS for tax years 1987 through 1992. The tax
returns for 1993 through 1995 are currently under examination. Management
believes the results of these examinations will have no material impact on
the Company's statutory 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.
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
(collectively referred to as 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 and in domestic equity and international common
stock funds.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's allocation of
salary expense was approximately 30% of the total Companies' salary expense
in 1997, and approximately 28% in 1996 and 1995. The Companies expensed
contributions of $7,972, $12,152 and $9,115 in 1997, 1996 and 1995,
respectively. During 1996, the Companies changed mortality tables from 1971
group annuity mortality table to the 1983 group annuity mortality table. As
a result of the table change, the actuarial present value of accrued
benefits as of January 1, 1996, increased by $21,637. The Companies made an
additional contribution of $21,637 and recorded it net of federal income
taxes of $7,573 as a direct charge to surplus.
The plan was amended effective January 1, 1997 to include a Postretirement
Medical 401(h) Account for the funding of certain postretirement medical
benefits provided by the Companies. In September 1997, the Companies
contributed approximately $2,600 to this account.
A comparison of accrued benefits and net assets for the entire plan as of
January 1, 1997 and 1996 follows:
1997 1996
Actuarial present value of accrued benefits:
Vested 380,495 352,736
Nonvested 2,204 4,036
------ -----
382,699 356,772
Net assets available for benefits 369,871 324,925
======== =======
Assumptions:
Annual investment return 9.00 % 9.00 %
Mortality table 1983 GAM 1983 GAM
Discount rate 7.37 % 7.62 %
<PAGE>
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. The Companies match up to an additional 75% of the first
6% of the contributions made by each participant if certain company-wide
performance measures are met. Contributions by the Companies were $8,428,
$5,600 and $5,775 in 1997, 1996 and 1995, respectively.
The Companies provide certain postretirement medical and life insurance
benefits. The Companies subsidize these benefits with certain limitations
to retirees and eligible employee groups. Employees retiring on or before
December 31, 1997, were eligible for the full subsidy if they were at least
age 55 with at least 10 years of service and 10 years of continuous
coverage under one of the Companies' health plans. Employees retiring after
December 31, 1997, must be at least age 60 with at least 15 years of
service and 15 years of continuous coverage under one of the Companies'
health plans. Employees hired on or after January 1, 1995, are not eligible
for a subsidy. The cost of these postretirement benefits is allocated to
the Companies based on an actuarial valuation. The Companies use the
accrual method of accounting for postretirement benefits and elected to
amortize the original transition obligation over 20 years. During the year
ended December 31, 1997, liabilities of $7,027 that were previously
recorded by the Company and certain affiliates for postretirement benefits,
were paid to Mutual of Omaha.
The following table compares the accumulated benefit obligation and the
accrued liability for the Companies' postretirement benefits at December
31, 1997 and 1996:
1997 1996
Accumulated postretirement benefits obligation:
Fully eligible actives 9,695 8,008
Retirees 76,208 76,136
------- ------
85,903 84,144
Plan assets in Postretirement Medical 401(h) Account (2,713)
Unrecognized transition obligation (60,275) (64,294)
Unrecognized gain 9,459 7,928
------ -----
Total accrued postretirement benefit liability 32,374 27,778
======= ======
Assumptions:
Discount rate 7.25 % 7.50 %
Health care cost trend rate:
First year 5.00 % 8.50 %
Ultimate 5.00 % 5.00 %
Grading period - 8 years
The Companies' net periodic postretirement benefit costs include the
following components:
997 1996 1995
Eligibility costs 1,598 1,385 1,654
Interest costs 5,986 5,909 5,567
Net amortization and deferral 55 - (683)
Amortization of transition obligation 4,018 4,018 4,101
Return on assets (55) - -
---- - -
Total benefit costs 11,602 11,312 10,639
======= ====== ======
<PAGE>
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, 1997, by approximately $6,200 and the estimated eligibility cost and
interest cost components of the net periodic postretirement benefit costs
for 1997 by approximately $800.
6. RELATED PARTY TRANSACTIONS
The home office properties are occupied jointly by the Company, Mutual of
Omaha and certain affiliates. 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 received management and administrative service fees from
MOSSCO-NY and MOSSCO-CT of $106 for the year ended December 31, 1997 and
$349 and $151 from MOSSCO-NE, MOSSCO-NY and MOSSCO-CT for the years ended
December 31, 1996 and 1995, respectively.
The Company paid $427, $444 and $543 during 1997, 1996 and 1995,
respectively, to Kirkpatrick, Pettis, Smith, Polian, Inc., an affiliate,
for equity investment management services. In addition, the Company paid
assignment fees of $165 to MOSSCO-NY and MOSSCO-CT for the year ended
December 31, 1997 and $439 and $361 to MOSSCO-NE, MOSSCO-NY and MOSSCO-CT
for the years ended December 31, 1996 and 1995, respectively.
On January 2, 1996, the Company sold 7,580 shares of First National of
Nebraska, Inc. common stock to Mutual of Omaha for $27,667. The share price
was determined by the stock's publicly traded market value at the date of
the transaction. The Company recognized a realized gain of $27,632 and
related federal income taxes were $9,671.
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 by the Company and included in the statutory statements of
admitted assets, liabilities and surplus were as follows:
1997 1996
Aggregate reserve for policies and contracts 92,276 88,332
======= ======
Policy and contract claims 92,555 104,874
======= =======
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1997 1996 1995
Premium considerations 378,854 368,126 395,014
======== ======= =======
Policyholder and beneficiary benefits 286,033 273,576 309,876
======== ======= =======
Group reinsurance settlement expense (10,405) (2,818) 5,354
======== ======= =======
<PAGE>
The Company also assumes group and individual life insurance from
Companion. In 1997, the Company entered into a coinsurance treaty with
Companion relating to bank annuity business in which Companion cedes 75% of
the related premiums to the Company and the Company pays 75% of the related
benefits. The total amounts assumed by the Company relating to the treaties
with Companion and included in the statutory statements of admitted assets,
liabilities and surplus were as follows:
1997 1996
Aggregate reserve for policies and contracts 30,498 3,749
======= =====
Policy and contract claims 2,370 2,125
====== =====
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1997 1996 1995
Premium considerations $ 31,343 $ 2,668 $ 4,268
========= ======= =======
Policyholder and beneficiary benefits $ 3,151 $ 2,390 $ 3,061
======== ======= =======
7. REINSURANCE
In the normal course of business, the Company assumes and cedes insurance
business. The ceding of insurance business 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 total premiums to net premiums is as follows:
1997 1996 1995
Direct 1,541,126 1,641,295 1,658,506
Assumed 54,892 26,581 27,496
Ceded (408,914) (382,369) (407,613)
--------- --------- ---------
Net 1,187,104 1,285,507 1,278,389
========== ========== =========
8. CREDIT ARRANGEMENTS
The Company and Mutual of Omaha are authorized by their Boards of Directors
to borrow a maximum of $75,000 on a joint basis under certain lines of
credit. At December 31, 1997, the Company had no outstanding borrowings
against its uncommitted, uncollateralized revolving lines of credit.
Interest rates applicable to borrowings under lines of credit 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.
<PAGE>
10. DEPOSIT FUNDS
The estimated fair value and statement value of guaranteed investment and
select maturity contracts were:
1997 1996
Estimated fair value 1,118,746 1,200,031
========== =========
Statement value 1,119,540 1,247,546
========== =========
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, 1997 and 1996, the Company held annuity reserves and
deposit fund liabilities of $1,256,277 and $1,092,555, respectively, that
were subject to discretionary withdrawal at book value with a surrender
charge of less than 5%.
11. STOCKHOLDER DIVIDENDS
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
greater of 10% of the insurer's surplus as of the previous December 31 or
net gain from operations for the previous twelve month period ending
December 31. Based upon these restrictions, the Company is permitted a
maximum dividend distribution of $57,907 in 1998.
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 operates 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, the Company may
have to sell assets prior to maturity and recognize a gain or loss.
<PAGE>
13. EXPENSE REALIGNMENT COSTS
In March 1996, the Companies announced the elimination of approximately
1,000 positions as a part of the initiative to reduce operating costs 15%
by the end of 1997. The Companies incurred approximately $13,400 and
$27,300 of severance and related costs, consulting fees and other one-time
costs associated with expense realignment activities during 1997 and 1996,
respectively.
<PAGE>
UNITED OF OMAHA
SEPARATE ACCOUNT C
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT AS OF
DECEMBER 31, 1997 AND FOR THE TWO YEARS
ENDED DECEMBER 31, 1997 AND 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
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, 1997, and the related statements of
operations and changes in net assets for the years ended December 31, 1997 and
1996. Our responsibility is to express an opinion on these financial statements
based on our audits. The financial statements are the responsibility of the
Company's management.
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. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian and brokers. 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, 1997, and the results of its operations and changes
in its net assets for the two years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles.
March 23, 1998
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES I
----------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
------------------------------- ------------------ ------------------------------
NEW LIMITED
ASSET INDEX MONEY AMERICA EQUITY TERM
ASSETS GROWTH MANAGER 500 MARKET BOND INTERN. GROWTH INCOME BOND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in portfolio shares, at cost 829,244 546,027 308,319 118,421 312,990 564,853 423,054 481,634 62,764
======== ======== ======= ======= ========= ======= ======== ====== ======
Investments in portfolio shares, at market value 945,705 638,955 425,808 118,421 324,479 564,996 553,536 596,540 63,297
-------- -------- ------- ------- --------- -------- -------- ----- ------
Net assets 945,705 638,955 425,808 118,421 324,479 564,996 553,536 596,540 63,297
======== ======== ======= ====== ========= ======= ========= ====== ======
Accumulation units outstanding 49,383 42,522 19,599 104,050 25,593 45,421 26,178 29,193 5,363
======= ======= ====== ======== ======= ======= ======= ====== =====
Net asset value per unit 19.15 15.03 21.73 1.14 12.68 12.44 21.15 20.43 11.80
====== ====== ===== ===== ====== ====== ====== ===== =====
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIDELITY SCUDDER
-------------------------------------------------- --------------------------------------
MANAGER: EQUITY INDEX GLOBAL GROWTH &
ASSETS NTRAFUND GROWTH INCOME 500 INTERNATIONAL DISCOVERY INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in portfolio shares,
at cost 2,884,002 36,998,700 49,862,083 9,670,798 29,355,974 2,207,423 6,576,048
========== =========== =========== ========== =========== ========== ==========
Investments in portfolio shares,
at market value 1,636,492 45,351,872 58,464,437 10,087,352 31,101,079 2,228,106 6,846,075
---------- ----------- ----------- ----------- ----------- ---------- ----------
Net assets 1,636,492 45,351,872 58,464,437 10,087,352 31,101,079 2,228,106 6,846,075
========== =========== =========== =========== =========== ========== ==========
Accumulation units outstanding 2,992,115 2,748,520 3,528,096 829,118 2,391,655 194,110 561,594
========== ========== ========== ======== ========== ======== ========
Net asset value per unit $ 17.26 $ 16.50 $ 16.57 $ 12.17 $ 13.00 $ 11.48 $ 12.19
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES V
-----------------------------------------------------------------------------------------------------------
T. ROWE PRICE ALGER FEDERATED
---------------------------------------------------------------- ---------------------- -----------------
NEW PERSONAL LIMITED AMERICAN PRIME U.S.
AMERICA STRATEGY EQUITY TERM SMALL AMERICAN MONEY GOVERNMENT
ASSETS GROWTH BALANCED INCOME INTERNATIONAL BOND APITALIZATION GROWTH FUND II SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in portfolio
shares, at cost 24,739,664 37,022,536 57,385,528 34,785,818 14,407,620 26,276,202 25,898,601 21,386,283 20,399,555
=========== =========== =========== =========== ========== =========== ========== =========== ==========
Investments in portfolio
shares, at
market value 29,666,686 41,428,123 67,084,455 34,855,396 14,536,276 27,677,690 31,156,165 21,386,283 21,301,847
----------- ----------- ----------- ----------- ---------- ----------- ---------- ----------- ----------
Net assets 29,666,686 41,428,123 67,084,455 34,855,396 14,536,276 27,677,690 31,156,165 21,386,283 21,301,847
=========== =========== =========== =========== ========== =========== ========== =========== ==========
Accumulation units
outstanding 1,599,824 2,792,934 3,837,388 2,857,269 1,302,580 2,021,476 1,918,481 19,485,024 1,824,790
========== ========== ========== ========== ========= ========== ========= =========== =========
Net asset value per unit $ 18.54 $ 14.83 $ 17.48 12.20 $ 11.16 $ 13.69 $ 16.24 $ 1.10 $ 11.67
======= ======= ======== ======== ======== ======== ======= ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES V
---------------------------------------------------------------------------------------
MFS PIONEER
--------------------------------------------------------------------------------
HIGH
WORLD VALUE INCOME EMERGING REAL CAPITAL
ASSETS GOVERNMENT SERIES FUND RESEARCH GROWTH ESTATE GROWTH TOTAL
Investments in portfolio shares,
at cost 13,351,071 3,879,074 21,332,892 36,056,371 41,584,978 5,004,526 4,470,845 569,183,898
=========== ========== =========== ========== =========== ========== ========== ===========
Investments in portfolio shares,
at market value 13,397,416 3,621,584 22,415,278 41,154,486 46,926,255 5,241,177 4,513,971 636,310,238
----------- ---------- ----------- ---------- ----------- ---------- ---------- -----------
Net assets 13,397,416 3,621,584 22,415,278 41,154,486 46,926,255 5,241,177 4,513,971 636,310,238
=========== ========== =========== ========== =========== ========== ========== ===========
Accumulation units outstanding 1,302,843 292,197 1,729,635 2,608,735 2,890,806 428,572 383,956
========== ======== ========== ========= ========== ======== =======
Net asset value per unit $ 10.28 $ 12.39 $ 12.96 $ 15.78 $ 16.23 $ 12.23 $ 11.76
======== ======== ======== ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES I
----------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
-------------------------------- ---------------- ----------------------------------
NEW LIMITED
ASSET INDEX MONEY AMERICA EQUITY TERM
1997 GROWTH MANAGER 500 MARKET BOND INTERN. GROWTH INCOME BOND
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends and capital gain distributions 28,533 61,409 11,589 5,069 20,453 12,584 1,295 30,857 4,337
Expense:
Mortality risk charges (10,875) (7,248) (4,933) (1,253) (3,987) (8,242) (6,326) (6,631) (917)
Administrative expenses (1,298) (865) (589) (150) (476) (983) (755) (791) (110)
------- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income (expense) 16,360 53,296 6,067 3,666 15,990 3,359 (5,786) 23,435 3,310
------- ------- ------ ------ ------- ------ ------- ------- -----
Gains (losses) on investments:
Net realized gains (losses) 77,035 8,473 29,983 - 735 47,137 15,634 30,791 (778)
Net change in unrealized gains (losses) 74,772 37,964 69,782 - 6,591 (50,959) 82,137 72,058 936
------- ------- ------- -- ------ -------- ------- ------- ---
Net gains (losses) on investments 151,807 46,437 99,765 - 7,326 (3,822) 97,771 102,849 158
-------- ------- ------- -- ------ ------- ------- -------- ---
Increase (decrease) in net assets from
operations 168,167 99,733 105,832 3,666 23,316 (463) 91,985 126,284 3,468
======== ======= ======== ====== ======= ===== ======= ======== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES V
-------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
---------------------------------------------- ------------------------------------------------
ASSET NEW PERSONAL
MANAGER: EQUITY INDEX GLOBAL GROWTH & AMERICA sTRATEGY
1997 (CONTINUED) CONTRAFUND GROWTH INCOME 500 INTERN. DISCOVERY INCOME GROWTH BALANCED
Investment income:
Dividends and capital gain
<S> <C> <C> <C> <C> <C> <C> <C>
distributions 833,552 37,343 3,268,324 - 415,666 - 36,878 69,250 1,697,950
Expense:
Mortality risk charges (387,501) (352,850) (443,565) (27,602) (230,224) (8,930) (21,066) (227,567) (319,689)
Administrative expenses (77,191) (70,288) (88,359) (5,487) (45,860) (1,779) (4,197) (45,331) (63,683)
-------- -------- -------- ------- -------- ------- ------- -------- --------
Net investment income
(expense) 368,860 (385,795) 2,736,400 (33,089) 139,582 (10,709) 11,615 (203,648) 1,314,578
-------- --------- ---------- -------- -------- -------- ------- --------- ----------
Gains (losses) on investments:
Net realized gains 629,484 365,565 655,557 17,387 264,676 21,330 20,076 221,401 100,725
Net change in unrealized gains 6,710,488 7,280,611 6,572,810 416,554 799,404 20,683 270,027 4,398,725 3,522,132
---------- ---------- ---------- -------- -------- ------- -------- ---------- ----------
Net gains on investments7,339,972 7,646,176 7,228,367 433,941 1,064,080 42,013 290,103 4,620,126 3,622,857
---------- ---------- ---------- -------- ---------- ------- -------- ---------- ----------
Increase in net assets from oper. 7,708,832 7,260,381 9,964,767 400,852 1,203,662 31,304 301,718 4,416,478 4,937,435
========== ========== ========== ======== ========== ======= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
SERIES V
--------------------------------------------------------------------------------------
T. ROWE PRICE ALGER FEDERATED
------------------------------- -------------------------- ------------------------
LIMITED AMERICAN PRIME U.S.
EQUITY TERM SMALL AMERICAN MONEY GOVERNMENT
1997 (CONTINUED) INCOME INTERNATIONAL BOND APITALIZATION GROWTH FUND II SECURITIES
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends and capital gain distributions 3,148,705 780,803 591,649 838,472 220,950 1,163,294 579,257
Expense:
Mortality risk charges (464,582) (315,794) (100,026) (232,871) (253,653) (241,854) (166,080)
Administrative expenses (92,545) (62,907) (19,925) (46,388) (50,528) (48,178) (33,084)
-------- -------- -------- -------- -------- -------- -------
Net investment income (expense) 2,591,578 402,102 471,698 559,213 (83,231) 873,262 380,093
---------- -------- -------- -------- -------- -------- -------
Gains (losses) on investments:
Net realized gains (losses) 389,805 751,583 (20,027) 165,014 561,387 - 38,905
Net change in unrealized gains (losses) 8,011,281 (979,177) 117,407 1,643,596 4,429,566 - 817,166
---------- --------- -------- ---------- ---------- -- -------
Net gains (losses) on investments8,401,086 (227,594) 97,380 1,808,610 4,990,953 - 856,071
---------- --------- ------- ---------- ---------- -- -------
Increase in net assets from operations 10,992,664 174,508 569,078 2,367,823 4,907,722 873,262 1,236,164
=========== ======== ======== ========== ========== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
SERIES V
-------------------------------------------------------------------------
PIONEER
------------------------------------------------------- --------------------
HIGH
WORLD VALUE INCOME EMERGING REAL CAPITAL
1997 (CONTINUED) GOVERNMENT SERIES FUND RESEARCH GROWTH ESTATE GROWTH TOTAL
Investment income:
<S> <C> <C> <C> <C> <C>
Dividends and capital gain distributions 229,599 466,662 - - - 73,322 3,234 14,631,036
Expense:
Mortality risk charges (110,782) (10,528) (171,729) (308,011) (396,905) (14,804) (12,367) (4,869,392)
Administrative expenses (22,068) (2,097) (34,208) (61,356) (79,064) (2,949) (2,464) (965,953)
-------- ------- -------- -------- -------- ------- ------- ---------
Net investment income (expense) 96,749 454,037 (205,937) (369,367) (475,969) 55,569 (11,597) 8,795,691
------- -------- --------- --------- --------- ------- -------- ---------
Gains (losses) on investments:
Net realized gains 20,167 4,244 1,241,723 1,073,282 1,843,154 48,987 1,476 8,624,911
Net change in unrealized gains (losses) (302,708) (257,490) 1,013,285 4,051,206 5,506,481 236,651 43,126 54,615,105
--------- --------- ---------- ---------- ---------- -------- ------- ----------
Net gains (losses) on investments (282,541) (253,246) 2,255,008 5,124,488 7,349,635 285,638 44,602 63,240,016
--------- --------- ---------- ---------- ---------- -------- ------- ----------
Increase (decrease) in net assets from operati (185,792) 200,791 2,049,071 4,755,121 6,873,666 341,207 33,005 72,035,707
========= ======== ========== ========== ========== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ASSET INDEX MONEY AMERICA EQUITY TERM
1996 GROWTH MANAGER 500 MARKET BOND INTERN. GROWTH INCOME BOND
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends and capital gain distributions 50,482 30,416 15,604 8,123 31,760 15,596 14,802 18,036 7,624
Expense:
Mortality risk charges (9,616) (6,222) (4,774) (2,104) (4,272) (8,716) (5,889) (6,270) (1,651)
Administrative expenses (1,148) (742) (570) (250) (510) (1,030) (702) (748) (197)
------- ----- ----- ----- ----- ------- ----- ----- -----
Net investment income 39,718 23,452 10,260 5,769 26,978 5,850 8,211 11,018 5,776
------- ------- ------- ------ ------- ------ ------ ------- -----
Gains (losses) on investments:
Net realized gains (losses) 63,433 28,483 65,211 - (6,984) 74,996 94,845 85,226 (1,281)
Net change in unrealized gains (losses) (14,264) 9,046 (1,854) - (13,389) 5,222 (26,737) (10,984) (3,493)
-------- ------ ------- -- -------- ------ -------- -------- -------
Net gains (losses) on investments 49,169 37,529 63,357 - (20,373) 80,218 68,108 74,242 (4,774)
------- ------- ------- -- -------- ------- ------- ------- -------
Increase in net assets from operations 88,887 60,981 73,617 5,769 6,605 86,068 76,319 85,260 1,002
======= ======= ======= ====== ====== ======= ======= ======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES V
-----------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
------------------------------------- ------------- -----------------------------------------------
ASSET NEW PERSONAL LIMITED
MANAGER: EQUITY AMERICA STRATEGY EQUITY TERM
1996 (CONTINUED) CONTRAFUND GROWTH INCOME INTERNATIONAL GROWTH BALANCED INCOME INTERN. BOND
Investment income:
Dividends and capital gain
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
distributions 28,266 962,332 198,092 90,929 136,780 756,282 533,897 279,801 186,164
Expense:
Mortality risk charges (135,430) (106,908) (160,191) (90,700) (64,320) (99,611) (116,970) (109,197) (32,180)
Administrative expenses (26,978) (21,296) (31,910) (18,067) (12,813) (19,843) (23,300) (21,752) (6,410)
-------- -------- -------- -------- -------- -------- -------- -------- -------
Net investment income
(expense) (134,142) 834,128 5,991 (17,838) 59,647 636,828 393,627 148,852 147,574
--------- -------- ------ -------- ------- -------- -------- -------- -------
Gains (losses) on investments:
Net realized gains (losses) 853,257 26,270 66,968 142,614 270,938 71,841 139,631 211,865 (8,394)
Net change in unrealized gains 2,043,475 1,113,958 1,952,736 931,966 501,079 849,854 1,630,152 998,543 7,327
---------- ---------- ---------- -------- -------- -------- ---------- -------- -----
Net gains (losses) on
investments 2,896,732 1,140,228 2,019,704 1,074,580 772,017 921,695 1,769,783 1,210,408 (1,067)
---------- ---------- ---------- ---------- -------- -------- ---------- ---------- -------
Increase in net assets from oper. 2,762,590 1,974,356 2,025,695 1,056,742 831,664 1,558,523 2,163,410 1,359,260 146,507
========== ========== ========== ========== ================== ========== ========== =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES V
----------------------------------------------------------------------------------------------------
ALGER FEDERATED MFS
------------------------- ---------------------- -----------------------------------------------
AMERICAN PRIME U.S. HIGH
SMALL AMERICAN MONEY GOVERNMENT WORLD INCOME EMERGING
1996 (CONTINUED) CAPITALIZ. GROWTH FUND II SECURITIES GOVERNMENT FUND RESEARCH GROWTH TOTAL
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends and capital gain
distributions 32,685 209,881 648,902 383,899 - 540,303 256,668 208,228 5,645,552
Expense:
Mortality risk charges (104,230) (94,179) (140,860) (64,766) (49,278) (59,294) (79,687) (127,116) (1,684,431)
Administrative expenses (18,557) (19,041) (28,060) (12,901) (9,816) (11,812) (15,874) (25,322) (329,649)
-------- -------- -------- -------- ------- -------- -------- -------- ---------
Net investment
income (expense) (90,102) 96,661 479,982 306,232 (59,094) 469,197 161,107 55,790 3,631,472
-------- ------- -------- -------- -------- -------- -------- ------- ---------
Gains (losses) on investments:
Net realized gains (losses) 74,642 14,309 - (49,646) (67,457) 152,606 214,289 774,322 3,291,984
Net change in unrealized gains
(losses) (226,324) 829,801 - 73,418 391,014 75,136 1,023,212 (182,142) 11,956,752
--------- -------- -- ------- -------- ------- ---------- --------- ----------
Net gains (losses) on
investments (151,682) 844,110 - 23,772 323,557 227,742 1,237,501 592,180 15,248,736
--------- -------- -- ------- -------- -------- ---------- -------- ----------
Increase (decrease) in net assets
from oper. (241,784) 940,771 479,982 330,004 264,463 696,939 1,398,608 647,970 18,880,208
========= ======== ======== ======== ======== ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES I
----------------------------------------------------------------------------------------
FIDELITY SCUDDER
------------------------------------------ ----------------------------
ASSET INDEX MONEY
1997 GROWTH MANAGER 500 MARKET BOND
From operations:
<S> <C> <C> <C> <C> <C>
Net investment incom
expenses 16,360 53,296 6,067 3,666 15,990
Net realized gains (77,035) 8,473 29,983 - 735
Net change in unrealized
gains 74,772 (lo37,964 69,782 - 6,591
------ ------- ------- -- ------
168,167 99,733 105,832 3,666 23,316
-------- ------- -------- ------ -------
From policyowner transactions:
Policy purchases 196,856 84,933 6,287 635,356 102,548
Policy withdrawals(282,373) (47,931) (78,917) (543,406) (205,263)
--------- -------- -------- --------- ---------
(85,517) 37,002 (72,630) 91,950 (102,715)
-------- ------- -------- ------- ---------
Increase (decrease) in
assets 82,650 136,735 33,202 95,616 (79,399)
Net assets, beginning863,055 502,220 392,606 22,805 403,878
------- -------- -------- ------- --------
Net assets, end of
year 945,705 638,955 425,808 118,421 324,479
======== ======== ======== ======== ========
Accumulation unit
purchase 11,390 6,364 316 558,453 8,629
Accumulation unit
withdrawals (16,881) (3,599) (4,351) (475,143) (17,294)
-------- ------- ------- --------- --------
Net increase (decrease
in units outstanding (5,491) 2,765 (4,035) 83,310 (8,665)
Units outstanding,
beginning of year 54,874 39,757 23,634 20,740 34,258
------ ------- ------- ------- -------
Units outstanding,
end of year 49,383 42,522 19,599 104,050 25,593
====== ======= ======= ======== =======
------------------------------------------------------------
T. ROWE PRICE
--------------------------------------------------------
NEW LIMITED
AMERICA EQUITY TERM
INTERNATIONAL GROWTH INCOME BOND
<C> <C> <C> <C>
$ 3,359.00 $ (5,786.00) $ 23,435.00 $ 3,310.00
47,137.00 15,634.00 30,791.00 (778.00
(50,959.00) 82,137.00 72,058.00 936.00
----------- ---------- ---------- ------
(463.00) 91,985.00 126,284.00 3,468.00
-------- ---------- ----------- --------
240,931.00 31,103.00 101,705.00 4,401.00
(456,332.00) (66,700.00) (178,913.00) (34,960.00
------------ ----------- ------------ ----------
(215,401.00) (35,597.00) (77,208.00) (30,559.00
------------ ----------- ----------- ----------
(215,864.00) 56,388.00 49,076.00 (27,091.00
780,860.00 497,148.00 547,464.00 90,388.00
----------- ----------- ----------- ---------
$ 564,996.00 $ 553,536.00 $ 596,540.00 $ 63,297.00
============= ============= ============= ===========
18,532.00 1,743.00 5,558.00 385.00
(36,915.00) (3,634.00) (10,394.00) (3,081.00
----------- ---------- ----------- ---------
(18,383.00) (1,891.00) (4,836.00) (2,696.00
63,804.00 28,069.00 34,029.00 8,059.00
---------- ---------- ---------- --------
45,421.00 26,178.00 29,193.00 5,363.00
========== ========== ========== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Series I
Fidelity Scudder T. Rowe Price
New Limited
Asset Index Money America Equity Term
1997 Growth Manager 500 Market Bond InternatioGrowth Income Bond
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net invest$16,360ome$53,296se) $6,067 $3,666 $15,990 $3,359 ($5,786) $23,435 $3,310
Net realized77,035 (los8,473 29,983 - 735 47,137 15,634 30,791 -778
Net change i74,772aliz37,964ns (l69,782 - 6,591 -50,959 82,137 72,058 936
168,167 99,733 105,832 3,666 23,316 -463 91,985 126,284 3,468
From policyowner transactions:
Policy purc196,856 84,933 6,287 635,356 102,548 240,931 31,103 101,705 4,401
Policy wit-282,373 -47,931 -78,917 -543,406 -205,263 -456,332 -66,700 -178,913 -34,960
-85,517 37,002 -72,630 91,950 -102,715 -215,401 -35,597 -77,208 -30,559
Increase (decr82,650in 136,735ets 33,202 95,616 -79,399 -215,864 56,388 49,076 -27,091
Net assets, b863,055g o502,220 392,606 22,805 403,878 780,860 497,148 547,464 90,388
Net assets, $945,705ea$638,955 $425,808 $118,421 $324,479 $564,996 $553,536 $596,540 $63,297
Accumulation u11,390rchas6,364 316 558,453 8,629 18,532 1,743 5,558 385
Accumulation -16,881thdr-3,599 -4,351 -475,143 -17,294 -36,915 -3,634 -10,394 -3,081
Net increase (-5,491se) i2,765ts ou-4,035ing 83,310 -8,665 -18,383 -1,891 -4,836 -2,696
Units outstand54,874egin39,757f yea23,634 20,740 34,258 63,804 28,069 34,029 8,059
Units outstand49,383nd o42,522 19,599 104,050 25,593 45,421 26,178 29,193 5,363
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES V
-----------------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
---------------------------------------- --------------------------------------- ------------------------
ASSET NEW PERSONAL
MANAGER: EQUITY INDEX GLOBAL ROWTH & AMERICA TRATEGY
1997 (CONTINUED) ONTRAFUND GROWTH INCOME 500 INTERNATIONAL DISCOVERY INCOME GROWTH ALANCED
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income
(expense) 368,860 (385,795) 2,736,400 (33,089) 139,582 (10,709) 11,615 (203,648) 1,314,578
Net realized gains 629,484 365,565 655,557 17,387 264,676 21,330 20,076 221,401 100,725
Net change in
unrealized gains 6,710,488 7,280,611 6,572,810 416,554 799,404 20,683 270,027 4,398,725 3,522,132
---------- ---------- ---------- -------- -------- ------- -------- ---------- ----------
7,708,832 7,260,381 9,964,767 400,852 1,203,662 31,304 301,718 4,416,478 4,937,435
---------- ---------- ---------- -------- ---------- ------- -------- ---------- ----------
From policyowner
transactions:
Policy purchases 22,379,007 17,334,055 22,761,995 9,857,232 16,095,092 2,463,504 6,650,954 12,184,226 15,294,651
Policy withdrawals (3,567,820)(1,344,564) (3,806,596) (170,732) (1,517,313) (266,702) (106,597) (1,147,692) (467,115)
---------------------- ----------- --------- ----------- --------- --------- ----------- ---------
18,811,187 15,989,491 18,955,399 9,686,500 14,577,779 2,196,802 6,544,357 11,036,534 14,827,536
---------------------- ----------- ---------- ----------- -------------------- ----------------------
Increase in net assets 26,520,019 23,249,872 28,920,166 10,087,352 15,781,441 2,228,106 6,846,075 15,453,012 19,764,971
Net assets, beginning
of year 25,116,473 22,102,000 29,544,271 - 15,319,638 - - 14,213,674 21,663,152
---------------------- ----------- -- ----------- -- -- ----------------------
Net assets, end of year 51,636,492 45,351,872 58,464,437 10,087,352 31,101,079 2,228,106 6,846,075 29,666,686 41,428,123
====================== =========== =========== =========== ==================== =========== ===========
Accumulation unit
purchases 1,465,961 1,212,666 1,553,926 846,841 1,254,739 217,515 572,374 762,008 1,148,375
Accumulation unit
withdrawals (259,120) (119,180) (282,508) (17,723) (132,541) (23,405) (10,780) (79,439) (58,658)
--------- --------- --------- -------- --------- -------- -------- -------- --------
Net increase in units
outstanding 1,206,841 1,093,486 1,271,418 829,118 1,122,198 194,110 561,594 682,569 1,089,717
Units outstanding,
beginning of year 1,785,274 1,655,034 2,256,678 - 1,269,457 - - 917,255 1,703,217
---------- ---------- ---------- -- ---------- -- -- -------- ----------
Units outstanding,
end of year 2,992,115 2,748,520 3,528,096 829,118 2,391,655 194,110 561,594 1,599,824 2,792,934
========== ========== ========== ======== ========== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of These financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES V
---------------------------------------------------------------------------------------
T. ROWE PRICE ALGER FEDERATED
-------------------------------------- --------------------------- -----------------
LIMITED AMERICAN PRIME U.S.
EQUITY TERM SMALL AMERICAN MONEY GOVERNMENT
1997 (CONTINUED) INCOME INTERNATIONAL BOND CAPITALIZATION GROWTH FUND II SECURITIES
From operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense) 2,591,578 402,102 471,698 559,213 (83,231) 873,262 380,093
Net realized gains (losses) 389,805 751,583 (20,027) 165,014 561,387 38,905
Net change in unrealized gains (losses) 8,011,281 (979,177) 117,407 1,643,596 4,429,566 - 817,166
---------- --------- -------- ---------- ---------- -- -------
10,992,664 174,508 569,078 2,367,823 4,907,722 873,262 1,236,164
----------- -------- -------- ---------- ---------- -------- ---------
From policyowner transactions:
Policy purchases 31,761,358 20,600,651 8,192,864 11,476,371 11,315,296 74,848,619 9,443,646
Policy withdrawals (1,228,303) (6,720,610) (907,574) (4,517,065) (2,832,455) (77,124,634) (1,657,930)
----------- ----------- --------- ----------- ----------- ------------ ----------
30,533,055 13,880,041 7,285,290 6,959,306 8,482,841 (2,276,015) 7,785,716
----------- ----------- ---------- ---------- ---------- ----------- ---------
Increase (decrease) in net assets 41,525,719 14,054,549 7,854,368 9,327,129 13,390,563 (1,402,753) 9,021,880
Net assets, beginning of year 25,558,736 20,800,847 6,681,908 18,350,561 17,765,602 22,789,036 12,279,967
----------- ----------- ---------- ----------- ----------- ----------- ----------
Net assets, end of year 67,084,455 34,855,396 14,536,276 27,677,690 31,156,165 21,386,283 21,301,847
=========== =========== =========== =========== =========== =========== ==========
Accumulation unit purchases 2,082,909 1,684,252 763,943 906,849 767,866 69,996,486 856,007
Accumulation unit withdrawals (106,819) (563,767) (92,800) (359,479) (208,267) (72,037,285) (159,756
--------- --------- -------- --------- --------- ------------ --------
Net increase (decrease) in
units outstanding 1,976,090 1,120,485 671,143 547,370 559,599 (2,040,799) 696,251
Units outstanding, beginning of year 1,861,298 1,736,784 631,437 1,474,106 1,358,882 21,525,823 1,128,539
---------- ---------- -------- ---------- ---------- ----------- ---------
Units outstanding, end of year 3,837,388 2,857,269 1,302,580 2,021,476 1,918,481 19,485,024 1,824,790
========== ========== ========== ========== ========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES V
-----------------------------------------------------------------------------------------------
MFS PIONEER
---------------------------------------------------------------- -----------------------
HIGH
WORLD VALUE INCOME EMERGING REAL CAPITAL
1997 (CONTINUED) GOVERNMENT SERIES FUND RESEARCH GROWTH ESTATE GROWTH TOTAL
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense 96,749 454,037 (205,937) (369,367) (475,969) 55,569 (11,597) 8,795,691
Net realized gains 20,167 4,244 1,241,723 1,073,282 1,843,154 48,987 1,476 8,624,911
Net change in unrealized
gains (losses) (302,708) (257,490) 1,013,285 4,051,206 5,506,481 236,651 43,126 54,615,105
--------- --------- ---------- ---------- ---------- -------- ------- ----------
(185,792) 200,791 2,049,071 4,755,121 6,873,666 341,207 33,005 72,035,707
--------- -------- ---------- ---------- ---------- -------- ------- ----------
From policyowner transactions:
Policy purchases 5,546,808 3,434,948 24,758,400 22,797,803 38,214,835 5,315,096 4,483,329 398,614,860
Policy withdrawals (592,574) (14,155) (14,313,806) (4,738,734) 23,155,716) (415,126) (2,363) (152,510,971)
--------- -------- ------------ ----------- ----------- --------- ------- -------------
4,954,234 3,420,793 10,444,594 18,059,069 15,059,119 4,899,970 4,480,966 246,103,889
---------- ---------- ----------- ----------- ----------- ---------- ---------- -----------
Increase in net assets 4,768,442 3,621,584 12,493,665 22,814,190 21,932,785 5,241,177 4,513,971 318,139,596
Net assets, beginning of year 8,628,974 - 9,921,613 18,340,296 24,993,470 - - 318,170,642
---------- -- ---------- ----------- ----------- -- -- -----------
Net assets, end of year 13,397,416 3,621,584 22,415,278 41,154,486 46,926,255 5,241,177 4,513,971 636,310,238
=========== ========== =========== =========== =========== ========== ========== ===========
Accumulation unit purchases 552,637 294,523 2,032,372 1,566,127 2,635,503 465,341 385,493
Accumulation unit withdrawals (69,480) (2,326) (1,162,098) (338,708) (1,598,843) (36,769) (1,537)
-------- ------- ----------- --------- ----------- -------- -------
Net increase in units
outstanding 483,157 292,197 870,274 1,227,419 1,036,660 428,572 383,956
Units outstanding,
beginning of year 819,686 - 859,361 1,381,316 1,854,146 - -
-------- -- -------- ---------- ---------- -- -
Units outstanding, end of year 1,302,843 292,197 1,729,635 2,608,735 2,890,806 428,572 383,956
========== ======== ========== ========== ========== ======== =======
</TABLE>
The accompanying notes are an integra. of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
--------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
-------------------------------- ------------------------ ------------------------------------
NEW LIMITED
ASSET INDEX MONEY AMERICA EQUITY TERM
1996 ROWTH MANAGER 500 MARKET BOND INTERNATIONAL GROWTH INCOME BOND
From operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income 39,718 23,452 10,260 5,769 26,978 5,850 8,211 11,018 5,776
Net realized gains (losses) 63,433 28,483 65,211 - (6,984) 74,996 94,845 85,226 (1,281)
Net change in unrealized
gains (losses) (14,264) 9,046 (1,854) - (13,389) 5,222 (26,737) (10,984) (3,493)
-------- ------ ------- -- -------- ------ -------- -------- -------
88,887 60,981 73,617 5,769 6,605 86,068 76,319 85,260 1,002
------- ------- ------- ------ ------ ------- ------- ------- -----
From policyowner transactions:
Policy purchases 576,908 225,912 318,093 1,935,551 498,979 657,977 354,624 497,476 77,168
Policy withdrawals (519,798) (227,418) (354,611) (2,164,070) (478,603) (639,384) (343,889) 558,562) (182,180)
--------- --------- --------- ----------- --------- --------- --------- -------- ---------
57,110 (1,506) (36,518) (228,519) 20,376 18,593 10,735 (61,086) (105,012)
------- ------- -------- --------- ------- ------- ------- -------- ---------
Increase (decrease) in net assets 145,997 59,475 37,099 (222,750) 26,981 104,661 87,054 24,174 (104,010)
Net assets, beginning of year 717,058 442,745 355,507 245,555 376,897 676,199 410,094 523,290 194,398
-------- -------- -------- -------- -------- -------- -------- -------- -------
Net assets, end of year 863,055 502,220 392,606 22,805 403,878 780,860 497,148 547,464 90,388
======== ======== ======== ======= ======== ======== ======== ======== ======
Accumulation unit purchases 38,413 19,583 21,578 1,798,321 43,899 57,565 21,755 34,541 7,101
Accumulation unit withdrawals (35,107) (19,435) (23,865) (2,009,547) (42,051) (56,257) (21,106) (38,862) (16,690)
-------- -------- -------- ----------- -------- -------- -------- -------- --------
Net increase (decrease) in
units outstanding 3,306 148 (2,287) (211,226) 1,848 1,308 649 (4,321) (9,589)
Units outstanding, beginning of year51,568 39,609 25,921 231,966 32,410 62,496 27,420 38,350 17,648
------- ------- ------- -------- ------- ------- ------- ------- ------
Units outstanding, end of year 54,874 39,757 23,634 20,740 34,258 63,804 28,069 34,029 8,059
======= ======= ======= ======= ======= ======= ======= ======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
SERIES V
----------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
---------------------------------------- ------------- ------------------------------------------
ASSET NEW PERSONAL
MANAGER: EQUITY AMERICA STRATEGY EQUITY
1996 (CONTINUED) CONTRAFUND GROWTH INCOME INTERNATIONAL GROWTH BALANCED INCOME
From operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (expense) (134,142) 834,128 5,991 (17,838) 59,647 636,828 393,627
Net realized gains (losses) 853,257 26,270 66,968 142,614 270,938 71,841 139,631
Net change in unrealized gains 2,043,475 1,113,958 1,952,736 931,966 501,079 849,854 1,630,152
---------- ---------- ---------- -------- -------- -------- ----------
2,762,590 1,974,356 2,025,695 1,056,742 831,664 1,558,523 2,163,410
---------- ---------- ---------- ---------- -------- ---------- ----------
From policyowner transactions:
Policy purchases 28,902,535 18,900,374 28,928,271 17,755,845 14,607,377 20,255,902 23,732,206
Policy withdrawals (8,313,477) (1,021,094) (4,118,781) (4,546,528) (1,991,381) (1,540,617) (1,754,680)
----------- ----------- ----------- ----------- ----------- ----------- -----------
20,589,058 17,879,280 24,809,490 13,209,317 12,615,996 18,715,285 21,977,526
----------- ----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets 23,351,648 19,853,636 26,835,185 14,266,059 13,447,660 20,273,808 24,140,936
Net assets, beginning of year 1,764,825 2,248,364 2,709,086 1,053,579 766,014 1,389,344 1,417,800
---------- ---------- ---------- ---------- -------- ---------- ----------
Net assets, end of year 25,116,473 22,102,000 29,544,271 15,319,638 14,213,674 21,663,152 25,558,736
=========== =========== =========== =========== =========== =========== ===========
Accumulation unit purchases 2,289,226 1,547,210 2,376,936 1,580,078 997,035 1,722,222 1,892,614
Accumulation unit withdrawals (654,316) (91,746) (353,937) (409,650) (138,446) (142,292) (153,310)
--------- -------- --------- --------- --------- --------- ---------
Net increase in units outstanding 1,634,910 1,455,464 2,022,999 1,170,428 858,589 1,579,930 1,739,304
Units outstanding, beginning of year 150,364 199,570 233,679 99,029 58,666 123,287 121,994
-------- -------- -------- ------- ------- -------- --------
Units outstanding, end of year 1,785,274 1,655,034 2,256,678 1,269,457 917,255 1,703,217 1,861,298
========== ========== ========== ========== ======== ========== ==========
LIMITED
TERM
INTERNATIONAL BOND
<C> <C>
148,852 147,574
211,865 (8,394)
998,543 7,327
-------- -----
1,359,260 146,507
---------- -------
20,749,014 6,350,319
(3,224,170) (395,866)
----------- ---------
17,524,844 5,954,453
----------- ---------
18,884,104 6,100,960
1,916,743 580,948
---------- -------
20,800,847 6,681,908
=========== =========
1,853,967 616,757
(298,582) (41,338)
--------- --------
1,555,385 575,419
181,399 56,018
-------- ------
1,736,784 631,437
========== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES V
-----------------------------------------------------------------------------------------------------------
ALGER FEDERATED MFS
--------------------------- --------------------------- -------------------------------------------------
AMERICAN PRIME U.S. HIGH
SMALL AMERICAN MONEY GOVERNMENT WORLD INCOME EMERGING
1996 (CONTINUED) CAPITALIZATION GROWTH FUND II SECURITIES GOVERNMENT FUND RESEARCH GROWT TOTAL
From operations:
Net investment income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(expense) (90,102) 96,661 479,982 306,232 (59,094) 469,197 161,107 55,790 3,631,472
Net realized gains
(losses) 74,642 14,309 - (49,646) (67,457) 152,606 214,289 774,322 3,291,984
Net change in
unrealized gains ( (226,324) 829,801 - 73,418 391,014 75,136 1,023,212 (182,142) 11,956,752
--------- -------- -- ------- -------- ------- ---------- --------- ----------
(241,784) 940,771 479,982 330,004 264,463 696,939 1,398,608 647,970 18,880,208
--------- -------- ------- -------- -------- -------- ---------- -------- ---------
From policyowner
transactions:
Policy purchases 18,653,051 16,379,038 95,951,854 12,639,198 9,995,282 12,970,271 17,476,610 33,768,862 403,158,697
Policy withdrawals (1,858,776) (1,198,863)(76,778,825 (1,983,287)(2,208,387) (4,658,885) (1,822,076) (10,862,876)(133,747,084)
----------- ---------------------- ---------------------- ----------- ----------- ------------------------
16,794,275 15,180,175 19,173,029 10,655,911 7,786,895 8,311,386 15,654,534 22,905,986 269,411,613
----------- ----------- ---------- ----------- ---------- ---------- --------- ----------- -----------
Increase in net assets 16,552,491 16,120,946 19,653,011 10,985,915 8,051,358 9,008,325 17,053,142 23,553,956 288,291,821
Net assets, beginning
of year 1,798,070 1,644,656 3,136,025 1,294,052 577,616 913,288 1,287,154 1,439,514 29,878,821
--------- ---------- --------- ---------- -------- -------- ---------- ---------- ----------
Net assets, end of year 18,350,561 17,765,602 22,789,036 12,279,967 8,628,974 9,921,613 18,340,296 24,993,470 18,170,642
=========== =========== ========== =========== ========== ========== =========== =========== ==========
Accumulation unit
purchases 1,481,302 1,325,942 92,414,020 1,201,567 987,874 1,205,897 1,423,099 2,557,930
Accumulation unit
withdrawals (155,866) (107,957)(73,953,800 (195,468) (224,581) (433,914) (158,948) (827,244)
--------- -------------------- --------- --------- --------- --------- ---------
Net increase in units
outstanding 1,325,436 1,217,985 18,460,220 1,006,099 763,293 771,983 1,264,151 1,730,686
Units outstanding,
beginning of year 148,670 140,897 3,065,603 122,440 56,393 87,378 117,165 123,460
-------- -------- --------- -------- ------- ------- -------- -------
Units outstanding,
end of year 1,474,106 1,358,882 21,525,823 1,128,539 819,686 859,361 1,381,316 1,854,146
========== ========== ========== ========== ======== ======== ========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
United of Omaha Separate Account C (Separate Account) was established by
United of Omaha Life Insurance Company (United of Omaha) 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 assets of the Separate Account are owned by United of Omaha. The net
assets of the Separate Account are restricted from use in the ordinary
business of United of Omaha.
2. SUB-ACCOUNTS
The Separate Account 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
Growth International
Asset Manager New America Growth
Index 500 Equity Income
Limited Term Bond
SCUDDER
Money Market
Bond
SERIES V
FIDELITY ALGER
Contrafund American Small Capitalization
Asset Manager: Growth American Growth
Equity Income
Index 500
SCUDDER FEDERATED
International Prime Money Fund II
Global Discovery U.S. Government Securities
Growth & Income
<PAGE>
T. ROWE PRICE MFS
New America Growth World Government
Personal Strategy Balanced Value Series
Equity Income High Income Fund
International Research
Limited Term Bond Emerging Growth
PIONEER
Real Estate
Capital Growth
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
SECURITY VALUATION AND RELATED INVESTMENT INCOME - The market value of
investments is based on year end closing bid prices. Investment
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income and capital gain distributions are
recorded on the ex-dividend date.
FEDERAL INCOME TAXES - Operations of the Separate Account are part of the
operations of United of Omaha and are not taxed separately; the Separate
Account is not taxed as a regulated investment company. United of Omaha
qualifies for the federal income tax treatment under Subchapter L of the
Internal Revenue Code. Under existing federal income tax law, investment
income and capital gains earned by the Separate Account on contract owner
reserves are not subject to tax.
4. ACCOUNT CHARGES
United of Omaha deducts a daily charge as compensation for the mortality
and expense risks assumed by United of Omaha. The nominal annual rate is a
percentage of the net asset value 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 such taxes.
<PAGE>
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%
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. United of Omaha guarantees that the daily administrative
expense charge and the annual policy fee will 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
pro rata 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%
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 are treated as a single request. No
transfer fee is imposed for any transfer which is not at the policyowner's
request. The transfer fee will not increase.
<PAGE>
5. NET ASSETS
Total net assets (policyowners' cumulative investment accounts) consist of
the following at December 31, 1997:
<PAGE>
<TABLE>
<CAPTION>
SERIES I
------------------------------------------------------------------------------------------------
FIDELITY SCUDDER T. ROWE PRICE
------------------------------------ ------------------------- --------------------------------
NEW LIMITED
ASSET INDEX MONEY AMERICA EQUITY TERM
GROWTH MANAGER 500 MARKET BOND INTERN. GROWTH INCOME BOND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased 1,599,421 774,542 666,049 4,393,900 1,110,082 1,703,744 791,787 1,238,668 343,360
Shares sold (1,041,175) (364,616) (487,639) (4,298,239) (867,815)(1,303,896)(515,426) (959,681) (300,361)
Dividends and capital gain distributions 79,195 93,038 27,494 22,760 68,300 28,667 16,164 63,546 22,090
Net realized gains (losses) 191,803 43,063 102,415 - 2,423 136,337 130,530 139,101 (2,325)
Change in unrealized gains (losses) 116,461 92,928 117,489 11,489 144 130,481 114,906 533
-------- ------- -------- ------- ---- -------- -------- ---
Net assets 945,705 638,955 425,808 118,421 324,479 564,996 553,536 596,540 63,297
======== ======== ======== ======== ======== ======== ======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
SERIES V
--------------------------------------------------------------------------------------------
FIDELITY SCUDDER
--------------------------------------------------------------------------------------------
ASSET
MANAGER: EQUITY INDEX GLOBAL GROWTH &
CONTRAFUND GROWTH INCOME 500 INTERNATIONAL DISCOVERY INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Shares purchased 53,110,921 38,769,377 54,415,818 9,857,232 34,960,562 2,463,504 6,650,954
Shares sold (12,593,178) (3,243,110) (8,758,768) (203,821) (6,519,770) (277,411) (131,860)
Dividends and capital gain distributions 882,870 1,087,378 3,479,179 - 506,595 - 36,878
Net realized gains 1,483,389 385,055 725,854 17,387 408,587 21,330 20,076
Change in unrealized gains 8,752,490 8,353,172 8,602,354 416,554 1,745,105 20,683 270,027
---------- ---------- ---------------------------------------- ------- -------
Net assets 51,636,492 45,351,872 58,464,437 10,087,352 31,101,079 2,228,106 6,846,075
=========== =========== =========== =========== =========== ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SERIES V
---------------------------------------------------------------------------------------------------------
T. ROWE PRICE ALGER FEDERATED
------------------------------------------------------------------- -----------------------------------
NEW PERSONAL LIMITED AMERICAN PRIME
AMERICA STRATEGY EQUITY INTERNATIONAL TERM SMALL AMERICAN MONEY
GROWTH BALANCED INCOME SERIES BOND CAPITALIZATION GROWTH FUND II
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased 27,641,825 36,931,559 56,848,796 43,280,703 15,134,967 32,107,829 29,489,488 177,334,606
Shares sold (3,606,552) (2,550,575) (3,689,172)(10,519,567) (1,481,360) (6,935,725) (4,595,191) (157,787,400)
Dividends and capital gain
distributions 206,030 2,467,329 3,696,286 1,060,604 782,389 871,157 430,831 1,839,077
Net realized gains (losses) 498,361 174,223 529,618 964,078 (28,376) 232,941 576,472 -
Change in unrealized gains
(losses) 4,927,022 4,405,587 9,698,927 69,578 128,656 1,401,488 5,254,565 -
-------------------------------------------------------------------------- ---------- --
Net assets 29,666,686 41,428,123 67,084,455 34,855,396 14,536,276 27,677,690 31,156,165 21,386,283
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SERIES V
-------------------------------------------------------------------------------------------------------
FEDERATED MFS PIONEER
-------------- ----------------------------------------------------------------- --------------------
U.S. HIGH
GOVERNMENT WORLD VALUE INCOME EMERGING REAL CAPITAL
SECURITIES GOVERNMENT SERIES FUND RESEARCH GROWTH ESTATE GROWTH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased 23,425,849 16,196,130 3,434,948 38,717,227 41,532,332 73,499,066 5,315,096 4,483,329
Shares sold (3,992,481) (3,078,200) (26,780) (19,341,433) (7,039,579) (34,783,898) (415,126) (2,363)
Dividends and capital gain
distributions 976,178 278,767 466,662 559,871 275,220 246,233 55,569 (11,597)
Net realized gains (losses) (9,991) (45,626) 4,244 1,397,227 1,288,398 2,623,577 48,987 1,476
Change in unrealized gains (losses)902,292 46,345 (257,490) 1,082,386 5,098,115 5,341,277 236,651 43,126
-------- ------- --------- ---------- ---------- ---------- -------- ------
Net assets 21,301,847 13,397,416 3,621,584 22,415,278 41,154,486 46,926,255 5,241,177 4,513,971
=========== =========== ========== =========== =========== =========== ========== =========
</TABLE>
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits: The following exhibits are filed herewith:
Exhibit No. Description of Exhibit
(1) (a) Resolution of the Board of Directors establishing the Variable Account.*
(2) Not applicable.
(3) (a) Principal Underwriter Agreement by and between United, on its own
behalf and on behalf of the Variable Account, and Mutual of Omaha
Investor Services. *
(b) Form of Broker/Dealer Supervision and Sales Agreement by and between
Mutual of Omaha Investor Services, Inc. and the Broker/Dealer.*
(4) (a) Form of Policy for the Ultra-Access variable annuity Policy.*****
(b) Form of Riders to the Policy (except the Elective Death Benefit Rider is
not available).*.
(c) Systematic Transfer Enrollment Program Endorsement to the Policy. ***
(5) Form of Application to the Policy.*
(6) (a) Articles of Incorporation of United of Omaha Life Insurance Company.*
(b) Bylaws of United of Omaha Life Insurance Company.*
(7) Not applicable.
(8) (a) Participation Agreement with the Alger American Fund*
(b) Participation Agreement with the Insurance Management Series*
(c) Participation Agreement with the Fidelity VIP Fund and Fidelity
VIP Fund II.*
(d)
Participation Agreement with the MFS Variable Insurance Trust.*
(e) Participation Agreement with the Pioneer Variable Contracts Trust.*
(f) Participation Agreement with the Scudder Variable Life Investment Fund.*
(g) Participation Agreement with T. Rowe Price International Series, T.
Rowe Price Fixed Income Series, and T. Rowe Price Equity Series.*
(i)
Participation Agreement with Morgan Stanley Universal Funds, et. al. ***
(9) Opinion and Consent of Counsel.
(10) Consents of Independent Auditors. *****
(11) Not applicable.
(12) Not applicable.
(13) Schedules of Computation of Performance Data.
(14) Powers of Attorney.**
* Incorporated by Reference to the Registration Statement for United of Omaha
Separate Account C filed on April 24, 1997 (File No. 33-89848).
** Incorporated by Reference to the Registration Statement for United of Omaha
Separate Account B filed on June 20, 1997 (File No. 333-18881).
*** Incorporated by Reference to the Registration Statement for United of Omaha
Separate Account B filed on April 16, 1998 (File No. 333-18881).
*****Incorporated by Reference to the Registration Statement for United of Omaha
Separate Account C To be filed on April 27, 1998 (File No. 333-51051).
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Our Directors and senior officers* are:
DIRECTORS*
Foggie, Samuel L. Retired Banking and Finance Industry Executive
Carol B. Hallett Air Transport Industry Executive
Jeffrey M. Heller Electronic's Industry Executive
Thomas W. Osborne Retired University Football Coach
Plunkett III, Hugh V. Attorney (Plunkett, Schwartz & Petersen)
Sampson, Richard J. Retired Group Insurance Executive (United of
Omaha Life Insurance Company)
Straus II, Oscar S. Investments; Foundation Executive
Sturgeon, John A. President, Chief Operating Officer
(United of Omaha Life Insurance Company)
Wayne, Michael A. Foundation and Cancer Institute Executive
Weekly, John W. Chairman of the Board and Chief Executive Officer
(United of Omaha Life Insurance Company)
OFFICERS*
John W. Weekly Chairman of the Board, Chief Executive Officer
John A. Sturgeon President, Chief Operating Officer
G. Ronald Ames Executive Vice President (Information Services)
Robert B. Bogart Executive Vice President (Human Resources)
Stephen R. Booma Executive Vice President (Managed Care)
Cecil D. Bykerk Executive Vice President (Chief Actuary)
James L. Hanson Executive Vice President (Information Services)
Kimberly S. Harm Executive Vice President (Customer Services)
Lawrence F. Harr Executive Vice President (Executive Counsel)
Randall C. Horn Executive Vice President (Group Insurance)
M. Jane Huerter Executive Vice President (Corporate
Secretary; Corporate Administration)
John L. Maginn Executive Vice President (Treasurer; Chief Investment
Officer)
William C. Mattox Executive Vice President (Federal Affairs)
Thomas J. McCusker Executive Vice President (General Counsel)
James N. Plato Executive Vice President (Individual Insurance)
Tommie D.Thompson Executive Vice President (Corporate Comptroller)
*Business address for all directors and officers is Mutual of Omaha
Plaza, Omaha, Nebraska 68175.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Name of Corporation (where organized) Type of Corporation
Mutual of Omaha Insurance Company (NE) Accident & Health Insurance
KFS Corporation (NE) Holding corporation
Kirkpatrick, Pettis, Smith, Polian Inc.(NE) Registered broker-dealer
& investment advisor
KPM Investment Management, Inc. (NE) Investment advisor
Kirkpatrick Pettis Trust Company (NE) Trust company
Mutual of Omaha Health Plans, Inc. (NE) Holding corporation
Exclusive Healthcare, Inc. (NE) HMO
Mutual of Omaha of Colorado, Inc. (CO) (50%) HMO
Mutual of Omaha Health Plans of
Lincoln, Inc.(NE)Staff Model HMO
Preferred Health Alliance, Inc. (NE) (51%) Joint venture w/physician
& hospital organization
Mutual of Omaha Dental Plans of
Nebraska, Inc. (NE) Limited pre-paid DHMO
Mutual of Omaha Health Plans of
Indiana, Inc. (IN) HMO
Mutual of Omaha Health Plans of
Ohio, Inc. (OH) HMO
Mutual of Omaha of South Dakota &
Community Health Plus HMO, Inc. (SD) HMO
Mutual of Omaha Tri-State Health
Plans, Inc. (TN) HMO
Mutual of Omaha Holdings, Inc. (NE) Holding corporation
innowave incorporated (NE) Markets water distillation
products
Mutual Asset Management Co. (NE) Asset management services
Mutual of Omaha Investor Services,
Inc. (NE) Registered
securities Broker-Dealer
Mutual of Omaha Marketing
Corporation (NE) Markets health insurance
Omex Realty, Inc. (NE) Real estate investments
Mutual of Omaha U.K. Limited (U.K.) Insurance in United Kingdom
(inactive)
The Omaha Indemnity Company (WI) Property & casualty
insurance (no new business
since 1986)
Omaha Property and Casualty Insurance
Company (NE) Property & casualty insurance
Adjustment Services, Inc. (NE) Claims adjusting services
Tele-Trip Company, Inc. (DE) Markets travel/flight
insurance in airports
United of Omaha Life Insurance Company (NE) Life, H&A
insurance/annuities
Companion Life Insurance Company (NY) Life insurance/annuities
Mutual of Omaha Structured Settlement
Company, Inc. (CT) Structured settlements
Mutual of Omaha Structure Settlement
Company of New York, Inc. (NY) Structured settlements
United World Life Insurance
Company (NE) Accident & health and life
insurance
United Properties Co. (CA) (50%) Real estate general
partnership
*Subsidiaries of subsidiaries are indicated by indentations.
ITEM 27. NUMBER OF POLICYOWNERS
As of April 27, 1998 there were no Owners of the Policies.
ITEM 28. INDEMNIFICATION
The Nebraska Business Corporation Act (Section 21-2004(15)) provides for
permissive indemnification in certain situations, mandatory indemnification in
other situations, and prohibits indemnification in certain situations. The
Nevada Business Corporation Act also specifies procedures for determining when
indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
United of Omaha pursuant to the foregoing provisions, or otherwise, United of
Omaha has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by United of Omaha of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered), United of Omaha will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue. With respect to indemnification, Section XI of
United of Omaha's Articles of Incorporation provides as follows:
An outside director of the Company shall not be personally liable
in the Company on its Stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for: (i) any act or
omission not in good faith which involves intentional misconduct or a
knowing violation of the law; (ii) any transaction from which the outside
director derived an improper direct or indirect financial benefit; (iii)
paying or approving a dividend which is in violation of Nebraska law; (v)
any act or omission which violates a declaratory or injunctive order
obtained by the Company or its Stockholders; and (v) any act or omission
occurring prior to the effective date of the amendments to the Articles of
Incorporation of the Company incorporating this ARTICLE XI.
For purposes of this ARTICLE XI, an outside director shall mean a
member of the Board of Directors who is not an officer or a person who may
control the conduct of the Company through management agreements, voting
trusts, directorships in related corporations, or any other device or
relationship.
If the Nebraska Business Corporation Act is amended after
approval by the Stockholders of this ARTICLE XI to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the Nebraska
Business Corporation Act as so amended.
Any repeal or modification of the foregoing ARTICLE XI by the
Stockholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such
repeal or modification.
Article VII of United of Omaha's Bylaws provides as follows:
Any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that such
person then is or was a director, officer, employee, or agent of the
Company (or is or was serving at the request of the Company in any such
capacity for an other legal entity or enterprise, shall be indemnified by
the Company against expense, judgements, fines, and amounts paid in
settlement to the full extent that such persons are permitted to be
indemnified by the laws of the State of Nebraska as in effect as of any
date of determination. The provisions of this Article shall not adversely
affect any right to indemnification which any person may have apart from
the provisions of this Article.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to Registrant, Mutual of Omaha Investor Services is
the Principal Underwriter for policies offered by United of Omaha Life Insurance
Company through United of Omaha Separate Account B and offered by Companion Life
Insurance Company through Companion Life Separate Account C and Companion Life
Separate Account B.
(b) The directors and officers of Mutual of Omaha Investor Services,
Inc. (principal address: Mutual of Omaha Plaza, Omaha, Nebraska 68175) are as
follows:
NAME TITLE
John W. Weekly Chairman, Director
Richard A. Witt President, Director
William J. Bluvas Vice President, Finance and Treasurer
M. Jane Huerter Secretary and Director
Kimberly S. Harm Director
Lawrence F. Harr Director
Ronald W. Leach Director
John L. Maginn Director
(c) Mutual of Omaha Investor Services, Inc. ("MOIS") is the
principal underwriter of the Policies. Commissions payable to a broker-dealer
will be up to 7.5% of Purchase Payments.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder,
are maintained by United of Omaha Life Insurance Company at Mutual of Omaha
Plaza, Omaha, Nebraska 68175.
ITEM 31. MANAGEMENT SERVICES.
All management policies are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS
(a)Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for so long as Purchase Payments under the Policy may be
accepted.
(b)Registrant undertakes that it will include either (i) a postcard
or similar written communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional Information or
(ii) a space in the Policy application that an applicant can check to request a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to United of Omaha at the
address or phone number listed in the Prospectus.
(d) Depositor has represented to Registrant that the fees and charges under
the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by United
of Omaha.
SECTION 403(B) REPRESENTATIONS
United of Omaha represents that it is relying on a no-action letter
dated November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88), regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on Section
403(b) Policies, and that paragraphs numbered (1) through (4) of that letter
will be complied with.
STATEMENT PURSUANT TO RULE 6C-7: TEXAS OPTIONAL RETIREMENT PROGRAM
United of Omaha and the Variable Account rely on 17 C.F.R. ss. 270.6c-7,
and represent that the provisions of that Rule have been or will be complied
with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all of the requirements for the
effectiveness of this Registration Statement under the Securities Act of 1993
and has caused this Pre-effective Amendment to the Registration Statement to be
signed on its behalf, in the City of Omaha and State of Nebraska, on this 5th
day of August, 1998.
UNITED OF OMAHA SEPARATE ACCOUNT C
UNITED OF OMAHA LIFE INSURANCE COMPANY
Depositor
/s/ Kenneth W. Reitz
---------------------------------------
By: Kenneth W. Reitz
First Vice President & Counsel
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the duties
indicated.
Signatures Title Date
/s/ John W. Weekly
by__________________________* Chairman of the Board, 8/5/1998
John W. Weekly Chief Executive Officer
/s/ John A. Sturgeon
by__________________________* President, Chief Operation Officer 8/5/1998
John A. Sturgeon
/s/ Tommie D. Thompson
By__________________________* Executive V.P., Corporate Comptroller 8/5/1998
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Samuel L. Foggie
by__________________________* Director 8/5/1998
Samuel L. Foggie
/s/ Hugh V. Plunkett, III
by__________________________ Director 8/5/1998
Hugh V. Plunkett, III
/s/ Richard J. Sampson
by__________________________* Director 8/5/1998
Richard J. Sampson
/s/ Oscar S. Straus
by__________________________* Director 8/5/1998
Oscar S. Straus
/s/Michael A. Wayne
by__________________________* Director 8/5/1998
Michael A. Wayne
*Signed by Kenneth W. Reitz under Powers of Attorney executed on May 20, 1997.
<PAGE>
Reg. 333-51051
811-8910
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
UNITED OF OMAHA SEPARATE ACCOUNT C
OF
UNITED OF OMAHA LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXHIBITS
- --------------------------------------------------------------------------------
TO
THE REGISTRATION STATEMENT ON FORM N-4
under
THE SECURITIES ACT OF 1933, Pre-effective Amendment # 1
and
THE INVESTMENT COMPANY ACT OF 1940, Amendment No. 12
August 5, 1998
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
(9) Opinion and Consent of Counsel.
(10) Consents of Independent Auditors
Exhibit (9): Opinion and Consent of Counsel
UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza, 3-Law Omaha,
Nebraska 68175-1008
August 5, 1998
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175-1008
Re: Registration Statement
Ultra-Access Variable Annuity
1933 Act # 333-51051, Pre-Effective Amendment #1 to the Initial
Registration 1940 Act # 811-8190, Amendment #12
To Whom It May Concern:
With reference to the Registration Statement on Form N-4 as amended, filed by
United of Omaha Life Insurance Company and United of Omaha Separate Account C
with the Securities and Exchange Commission covering individual variable annuity
contracts, I have examined such documents and such laws I considered necessary
and appropriate and on the basis of such examination, it is my opinion that:
1. United of Omaha Life Insurance Company is duly organized and validly
existing under the laws of the State of Nebraska and has been duly
authorized to issue individual variable annuity contracts by the
Insurance Department of the State of Nebraska.
2. United of Omaha Separate Account C is a duly authorized and existing
separate account to establish pursuant to the provision of Nebraska
Revised Statutes ss.ss.44-2221 and 44-402.01(1991).
3. The individual variable annuity contracts, when issued as contemplated
by said Form N-4 Registration Statement, will constitute legal, validly
issued and binding obligations of United of Omaha Life Insurance
Company.
I hereby consent to the filing of this opinion as an Exhibit to said Form N-4
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Registration Statement.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
First V.P. & Counsel
United of Omaha Life Insurance Company
Exhibit (10): Consents of Independent Auditors
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Part B of the Statement of Additional Information
filed as part of the Pre-Effective Amendment No. 1 to the Registration Statement
of the United of Omaha Separate Account C on Form N-4 (File No. 333-51051) of
our report, which includes an explanatory paragraph regarding the change in
opinion as required by Financial Accounting Standards Board Interpretation 40,
APPLICABILITY OF GENERALLY ACCEPTEDACCOUNTING PRINCIPLES TO MUTUAL LIFE
INSURANCE AND OTHER ENTERPRISES, as amended (FIN 40), dated February 23, 1996
(except for the change in our opnion as required by FIN 40, for which the date
is April 9, 1997, on our audit of the financial statements of United of Omaha
Life Insurance Company (United) for the year ended December 31, 1995.
We also consent to the reference to our Firm as independent auditors for United.
/s/ PricewaterhouseCoopers L.L.P.
Omaha, Nebraska
August 5, 1998
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INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-51051 of United of Omaha Separate Account C of our report
dated March 23, 1998 on the financial statements of United of Omaha Separate
Account C and our report dated February 17, 1998 on the financial statements of
United of Omaha Life Insurance Company appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the related
reference to us under the heading ""Financial Statements."
DELOITTE & TOUCHE LLP
Omaha, Nebraska
August 5, 1998
