AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996
REGISTRATION NO. 33-98062
811-8814
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 |_|
Amendment No. 3 |X|
---
COMPANION LIFE SEPARATE ACCOUNT C
(EXACT NAME OF REGISTRANT)
COMPANION LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
401 THEODORE FREMD AVENUE, RYE, NEW YORK 10580-1493
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(914) 921-0350
NAME AND ADDRESS OF
AGENT FOR SERVICE: COPY TO:
Kenneth W. Reitz, Esquire Frederick R. Bellamy, Esquire
Mutual of Omaha Companies Sutherland, Asbill & Brennan
Mutual of Omaha Plaza, 3-Law 1275 Pennsylvania Avenue, N.W.
Omaha, Nebraska 68175-1008 Washington, D.C. 20004-2404
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite amount of Ultrannuity Series V Variable
Annuity Policies are being registered under the Securities Act of 1933.
The Securities Act registration fee of $500 was paid with the initial filing.
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.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
<TABLE>
<CAPTION>
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
- ----------------- -----------------------
<S> <C>
1. Cover Page.................................... Cover Page
2. Definitions................................... Definitions
3. Synopsis...................................... Summary; Historical Performance Data
4. Condensed Financial Information............... Financial Statements
5. General
(a) Depositor................................. Companion 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 %.............................. Withdrawal Charge
(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
- 2 -
<PAGE>
9. Death Benefit................................. Death of Annuitant or Owner Prior to Annuity Starting
Date
10. Purchase and Policy Values
(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) Check Delay............................... Payment not Honored by Bank
(c) Lapse..................................... N/A
(d) 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) Companion 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
- 3 -
<PAGE>
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
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 Persons Controlled By or Under Common
with the Depositor or Registrant ............. Control with the Depositor or Registrant
27. Number of Policyowners........................ Number of Policyowners
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
- 4 -
</TABLE>
<PAGE>
Prospectus November 15, 1996
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
=========================================
Issued Through
COMPANION LIFE SEPARATE ACCOUNT C
by
COMPANION LIFE INSURANCE COMPANY
This Prospectus describes the Ultrannuity Series V Variable Annuity Policy
(the "Policy"), a Flexible Payment Variable Deferred Annuity offered by
Companion Life Insurance Company. The Policy is designed to aid in long-term
financial planning and provides for the accumulation of capital by individuals
on a tax-deferred basis for retirement or other long-term purposes.
The Owner may allocate Purchase Payments to one or more of the eighteen
Eligible investments, which are the seventeen Subaccounts of the Companion Life
Separate Account C (the "Variable Account") and the Fixed Account. Assets of
each Subaccount of the Variable Account are invested in a corresponding mutual
fund Portfolio. The Portfolios are described in separate prospectuses that
accompany this Prospectus. The Policy's available investment options are:
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FEDERATED PRIME MONEY FUND II ("MONEY MARKET")PORTFOLIO
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II PORTFOLIO
FIDELITY VIP II ASSET MANAGER: GROWTH PORTFOLIO
FIDELITY VIP EQUITY-INCOME PORTFOLIO
FIDELITY CONTRAFUND PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
MFS HIGH INCOME FUND PORTFOLIO
MFS RESEARCH PORTFOLIO
MFS WORLD GOVERNMENT PORTFOLIO
SCUDDER INTERNATIONAL PORTFOLIO
T. ROWE PRICE EQUITY INCOME PORTFOLIO
T. ROWE PRICE INTERNATIONAL PORTFOLIO
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
FIXED ACCOUNT
The Accumulation Value in the Variable Account will vary in accordance with
the investment performance of the Subaccounts selected by the Owner. Therefore,
the Owner bears the entire investment risk under this Policy for all amounts
allocated to the Variable Account. Amounts allocated to the Fixed Account are
guaranteed by Companion Life Insurance Company ("Companion") and will earn a
specified rate of interest declared periodically.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth the information that a prospective investor
should consider before investing in a Policy. A Statement of Additional
Information about the Policy and the Variable Account, which has the same date
as this Prospectus, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available at no cost to any person requesting a copy by writing Companion at
its Service Office (Companion Annuity Service Division, P.O. Box 419241, Kansas
City, Missouri 64141-6821) or by calling 1-800-494-0067. 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, and an Owner generally may pay additional Purchase Payments of at least
$500 each (but no additional Purchase Payments are required).
The Policy provides for periodic annuity payments to be made by Companion
to the Owner, if living, for the life of the Annuitant or for some other period,
beginning on the Annuity Starting Date selected by the Owner. Prior to the
Annuity Starting Date, the Owner can transfer Accumulation Value among the
Eligible Investments, that is, among the Fixed Account and the seventeen
Subaccounts of the Variable Account (some prohibitions and restrictions apply,
especially on transfers out of the Fixed Account). The Owner can also elect to
withdraw all or a portion of the Cash Surrender Value; however, withdrawals may
be taxable, subject to a Withdrawal Charge and/or a tax penalty, and withdrawals
from the Fixed Account may be delayed.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION GENERALLY
DESCRIBE ONLY THE POLICIES AND THE VARIABLE ACCOUNT, EXCEPT WHEN THE FIXED
ACCOUNT IS SPECIFICALLY MENTIONED.
PLEASE READ THIS PROSPECTUS CAREFULLY
AND RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENT PROSPECTUS FOR EACH PORTFOLIO
-2-
<PAGE>
TABLE OF CONTENTS
-------------------
Page
-----
DEFINITIONS ........................................................... 4
SUMMARY................................................................ 6
FINANCIAL STATEMENTS................................................... 11
COMPANION LIFE INSURANCE COMPANY....................................... 11
THE ELIGIBLE INVESTMENTS............................................... 12
The Variable Account.......................................... 12
Historical Performance Data................................... 15
Standardized Performance Data............................. 15
Non-Standardized Performance Data......................... 16
The Fixed Account............................................. 18
Transfers..................................................... 19
Dollar Cost Averaging......................................... 20
Asset Allocation Program...................................... 20
THE POLICY............................................................. 20
Policy Application and Issuance of Policies................... 21
Purchase Payments............................................. 21
Accumulation Value............................................ 22
DISTRIBUTIONS UNDER THE POLICY......................................... 22
Withdrawals................................................... 22
Systematic Withdrawal Plan.................................... 23
Annuity Payments.............................................. 23
Annuity Starting Date..................................... 23
Election of Payout Option................................. 23
Payout Options............................................ 24
Death Benefit................................................. 25
Death of Owner Prior to Annuity Starting Date............. 25
Death of Owner On or After Annuity Starting Date.......... 25
Beneficiary............................................... 26
IRS Required Distributions.................................... 26
CHARGES AND DEDUCTIONS................................................. 26
Withdrawal Charge............................................. 26
Mortality and Expense Risk Charge ............................ 27
Administrative Charges........................................ 27
Transfer Fee.................................................. 27
Federal, State and Local Taxes......................................... 27
Other Expenses Including Investment Advisory Fees...................... 27
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................ 28
Tax Status of the Policy...................................... 28
Taxation of Annuities......................................... 28
DISTRIBUTOR OF THE POLICIES............................................ 31
VOTING RIGHTS.......................................................... 31
LEGAL PROCEEDINGS...................................................... 31
STATEMENT OF ADDITIONAL INFORMATION.................................... 32
-3-
<PAGE>
DEFINITIONS
-----------
ACCUMULATION UNIT -- An accounting unit of measure used in calculating the
Accumulation Value in the Variable Account prior to the Annuity Starting Date.
ACCUMULATION VALUE -- The dollar value as of any Valuation Date prior to the
Annuity Starting Date of all amounts in the Variable Account, plus the value in
the Fixed Account.
ANNIVERSARY VALUE -- An amount equal to the Accumulation Value on a Policy
Anniversary.
ANNUITANT -- The person on whose life Annuity Payments involving life
contingencies are based. If the Annuitant is other than the Owner, the Annuitant
has no rights under the Policy.
ANNUITY PAYMENT -- A payment made by Companion under an annuity Payout Option.
ANNUITY STARTING DATE -- The date upon which Annuity Payments are to begin. The
latest Annuity Starting Date permitted is when the Annuitant attains age 90.
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 and any applicable Policy Fee.
COMPANION -- Companion Life Insurance Company, the issuer of the Policies.
CURRENT INTEREST RATE GUARANTEE -- Companion's guarantee to pay a declared
current interest rate on amounts under a Policy allocated to the Fixed Account.
A particular Current Interest Rate Guarantee will be in effect for at least one
year.
DATE OF ISSUE -- The date the Policy is issued, as shown on the Policy Data
Page.
DUE PROOF OF DEATH -- A certified copy of a death certificate, a certified copy
of a decree of a court of competent jurisdiction as to the finding of death, a
written statement by the attending physician, or any other proof satisfactory to
Companion will constitute Due Proof of Death.
ELIGIBLE INVESTMENTS -- The Fixed Account and any of the Subaccounts of the
Variable Account.
FIXED ACCOUNT -- The account which consists of general account assets of
Companion Life Insurance Company.
NONQUALIFIED POLICY -- A Policy other than a Qualified Policy.
PAYEE -- The person who receives Annuity Payments under the Policy.
PAYOUT OPTION -- Any method of payment of Policy Proceeds under the Policy.
POLICY -- The variable annuity policy offered by this Prospectus.
POLICY ANNIVERSARY -- The same month and day as the Date of Issue in each
calendar year after the calendar year in which the Date of Issue occurs.
POLICY OWNER OR OWNER(S) -- 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.
-4-
PORTFOLIO -- A Series Fund's separate investment series that is available under
the Policy.
PURCHASE PAYMENT -- An amount paid to Companion 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 Accumulation Value reduced by any
Withdrawal Charge.
QUALIFIED POLICY -- A Policy that receives favorable tax treatment under Section
401, 403, 408, or 457 of the Internal Revenue Code of 1986, as amended.
SERIES FUNDS -- Alger American Fund, Insurance Management Series, Variable
Insurance Products Fund, Variable Insurance Products Fund II, MFS Variable
Insurance Trust, Scudder Variable Life Investment Fund, T. Rowe Price
International Series, Inc., T. Rowe Price Fixed Income Series, Inc., and T. Rowe
Price Equity Series, Inc., each of which is a diversified, open-end management
company in which the Variable Account invests.
SERVICE OFFICE - Companion Annuity Service Division, P.O. Box 419241, Kansas
City, Missouri 64141-6281. Telephone: 1-800-494-0067.
SUBACCOUNT -- A segregated account within the Variable Account which invests in
a specified Portfolio of one of the Series Funds.
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 -- Companion Life Separate Account C, a separate account
maintained by Companion in which a portion of Companion's assets has been
allocated for the Policy and certain other policies.
WRITTEN NOTICE OR REQUEST -- Written notice, signed by the Policy Owner, that
gives Companion the information it requires and is received at the Service
Office.
-5-
<PAGE>
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
-----------------------------------------
SUMMARY
-------
THE POLICY
The Ultrannuity Series V Variable Annuity is a Flexible Payment Variable
Deferred Annuity Policy. The Policy can be purchased on a non-tax qualified
basis ("Nonqualified Policy") or in connection with certain plans qualifying for
favorable federal income tax treatment ("Qualified Policy"). The Owner allocates
the Purchase Payments among the Eligible Investments offered under the Policy by
Companion Life Insurance Company ("Companion"). These Eligible Investments are
the seventeen Subaccounts of Companion Life Separate Account C (the "Variable
Account") and the Fixed Account.
THE ELIGIBLE INVESTMENTS
THE VARIABLE ACCOUNT. The Variable Account is a segregated investment
account of Companion. It is divided into Subaccounts, each of which invests
exclusively in shares of a corresponding mutual fund Portfolio. The available
Portfolios are: the Alger American Growth Portfolio and the Alger American Small
Capitalization Portfolio of the Alger American Fund ("Alger Fund"); the
Federated Prime Money Fund II Portfolio and the Federated Fund for U.S.
Government Securities II Portfolio of the Insurance Management Series Trust
("Insurance Management Series"); the Fidelity VIP Equity-Income Portfolio of the
Variable Insurance Products Fund ("Fidelity VIP Fund"); the Fidelity VIP II
Asset Manager: Growth Portfolio and the Fidelity Contrafund Portfolio of the
Variable Insurance Products Fund II ("Fidelity VIP Fund II"); the MFS Emerging
Growth Portfolio, the MFS High Income Fund Portfolio, the MFS Research
Portfolio, and the MFS World Government Portfolio of the MFS Variable Insurance
Trust ("MFS Trust"); the Scudder International Portfolio of the Scudder Variable
Life Investment Fund ("Scudder Fund"); the T. Rowe Price International Stock
Portfolio of T. Rowe Price International Series, Inc. ("T. Rowe Price
International Series"); the T. Rowe Price Limited-Term Bond Portfolio of T. Rowe
Price Fixed Income Series, Inc. ("T. Rowe Price Fixed Income Series"); the T.
Rowe Price Personal Strategy Balanced Portfolio, the T. Rowe Price New America
Growth Portfolio and T. Rowe Price Equity Income Portfolio of T. Rowe Price
Equity Series, Inc. ("T. Rowe Price Equity Series") (each of the Alger Fund,
Insurance Management Series, Fidelity VIP Fund, Fidelity VIP Fund II, MFS Trust,
Scudder Fund, T. Rowe Price International Series, T. Rowe Price Fixed Income
Series, and T. Rowe Price Equity Series are referred to as the "Series Funds").
Because the Accumulation Value will increase or decrease in accordance with the
investment experience of the selected Subaccounts, the Owner bears the entire
investment risk with respect to Purchase Payments allocated to, and amounts
transferred to, the Variable Account. (See "The Variable Account," p.12.)
THE FIXED ACCOUNT. The Fixed Account guarantees safety of principal and a
minimum 3% effective annual return on Purchase Payments allocated to, and
amounts transferred to, the Fixed Account. Companion may, IN ITS SOLE
DISCRETION, declare a higher current interest rate. A current interest rate is
guaranteed for at least one year. (See "The Fixed Account," p.19.)
PURCHASE PAYMENTS
A Policy may be purchased with an Initial Purchase Payment of at least
$5,000 either on a non-tax qualified basis ("Nonqualified Policy") or in
connection with retirement plans or individual retirement accounts that qualify
for favorable federal income tax treatment ("Qualified Policy"). An Owner may
pay additional Purchase Payments of at least $500 each at any time prior to the
Annuity Starting Date and up to the Policy Anniversary next following such
Owner's 83rd birthday. There is no deduction from Purchase Payments for sales or
administrative expenses, although there is a Withdrawal Charge.
(See "Withdrawal Charge," p. 26.)
Purchase Payments will be allocated among the Eligible Investments (that
is, among the Fixed Account and/or the Subaccounts of the Variable Account) in
accordance with the allocation percentages specified by the Owner in the Policy
application. Any allocation must be in whole percentages, and the total
allocation must equal 100%. (The Policy provides for a "Free Look Period" during
which the Owner can return the Policy for a full refund of the Accumulation
Value.) Allocations for additional Purchase Payments may be changed by sending
Written Notice to Companion's Service Office.
TRANSFERS
An Owner can transfer Accumulation Value from one Subaccount to another
Subaccount or to the Fixed Account with certain limitations. The minimum amount
which may be transferred is the lesser of $500 or the entire Subaccount Value.
HOWEVER, following a transfer out of a particular Subaccount, at least $500 must
remain in that Subaccount. Transfers out of the Variable Account currently may
be made as often as the Owner wishes by sending Written Notice to the Service
Office.
- 6 -
There is no charge for the first 12 transfers during any Policy Year.
However, a charge of $10 may be imposed for any transfers from Subaccounts in
excess of 12 per Policy Year. No such charge will be imposed on transfers out of
the Fixed Account.
Transfers from the Fixed Account to one or more Subaccounts of the Variable
Account may be made only once each Policy Year. The maximum amount that can be
transferred out of the Fixed Account during any Policy Year will be determined
periodically by Companion. Such amount will not be less than 10% of the Fixed
Account Value on the date of the transfer. (See "Transfers," p. 19.) Transfers
from the Fixed Account may be delayed up to 6 months.
WITHDRAWALS
The Owner may elect to surrender the Policy for its Cash Surrender Value,
or to withdraw a portion of the Cash Surrender Value ($500 minimum) at any time
prior to the earlier of the Owner's death or the Annuity Starting Date and after
the Annuity Starting Date if Payment Option 2 is elected as a variable annuity
payment option. The Cash Surrender Value equals the Accumulation Value less any
applicable Withdrawal Charge and any applicable Policy Fee. A surrender or
withdrawal request must be made by Written Request, and a request for a partial
withdrawal may specify the Eligible Investment(s) from which the withdrawal is
to be made, but no more than a pro-rata amount can be deducted from the Fixed
Account. If the Owner does not provide specific withdrawal instructions, the
withdrawal will be made pro-rata from each Eligible Investment. There is
currently no limit on the frequency or timing of withdrawals from the Variable
Account, but surrenders and partial withdrawals from the Fixed Account may be
delayed for up to six months. Withdrawals may be taxable, and subject to a
Withdrawal Charge and/or a tax penalty.(See "Federal, State and Local Taxes," p.
27.) If the Contract is issued pursuant to a Qualified Plan, withdrawals may be
restricted by applicable law or the terms of the Qualified Plan.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE. In order to permit maximum investment of Purchase
Payments, Companion does not deduct sales or other charges at the time of
investment. However, Purchase Payments surrendered or withdrawn within seven
years after they were made will be subject to a Withdrawal Charge to partially
cover sales expenses, but each Policy Year up to 15% of the Accumulation Value
may be withdrawn as of the date of the first withdrawal that Policy Year without
imposition of the Withdrawal Charge. In addition, amounts applied to provide a
death benefit or applied after the second Policy Year to the Payout Option that
provides a Lifetime Income (Option 4) will not be subject to a Withdrawal
Charge. The applicable Withdrawal Charge is calculated separately as to each
Purchase Payment based on the period of time elapsed since the Purchase Payment
was made. There will be no Charge imposed on any Purchase Payments in connection
with a withdrawal or surrender that occurs more than seven years after the
Purchase Payment was made. The Withdrawal Charge is 7% of any Purchase Payment
withdrawn within one year after the Purchase Payment is made, and the percentage
declines by 1% each year to zero after the seventh year following the date of
the Purchase Payment. For purposes of calculating the Withdrawal Charge, the
oldest Purchase Payment is deemed to be withdrawn first (a first-in, first-out
arrangement), and all Purchase Payments are deemed to be withdrawn before any
earnings. (See "Withdrawal Charge," p. 26.)
ACCOUNT CHARGES. Companion deducts a daily charge equal to a percentage of
the net assets in the Variable Account for the mortality and expense risks
assumed by Companion. The annual rate of this charge is 1.00% of the value of
each Subaccount's net assets. (See "Mortality and Expense Risk Charge," p. 27.)
Companion also deducts a daily Administrative Expense Charge from the net
assets of the Variable Account to partially cover expenses incurred by Companion
in connection with the administration of the Variable Account and the Policies.
The annual rate of this charge is .20% of the value of each Subaccount's net
assets. (See "Administrative Charges," p. 27.)
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
"Administrative Charges," p. 27.)
TRANSFER FEE. No fee is imposed for transfers from the Fixed Account or for
the first 12 transfers from Subaccounts of the Variable Account in each Policy
Year. However, a $10 Transfer Fee may be imposed for the thirteenth and each
subsequent request to transfer Accumulation Value from a Subaccount during a
single Policy Year. This fee will not be increased in the future. (See "Transfer
Fee," p. 27.)
TAXES. No deductions are currently made for federal, state, or local income
taxes. Should Companion determine that charges for any such taxes should be
imposed with respect to any of the Accounts, Companion may deduct such taxes or
the economic burden thereof from Purchase Payments or from amounts held in the
relevant Account. (See "Federal, State and Local Taxes," p. 27.)
- 7 -
CHARGES AGAINST THE SERIES FUNDS. The value of the net assets of the
Subaccounts of the Variable Account will reflect the investment advisory fee and
other expenses incurred by the Portfolios of the Series Funds. (See "Other
Expenses Including Investment Advisory Fees," p. 27.)
EXPENSE DATA. The charges and deductions are summarized in the following
table. The purpose of this table is to help the Owner understand the costs and
expenses that the Owner will bear directly and indirectly. This table and the
examples that follow should be considered only in conjunction with the detailed
descriptions under the heading "Charges and Deductions" of this prospectus. This
tabular information regarding expenses assumes that the entire Accumulation
Value is in the Variable Account and reflects expenses of the Variable Account
as well as of the Portfolios.
POLICY OWNER TRANSACTION EXPENSES
================================================================================
- --------------------------------------------------------------------------------
Maximum Withdrawal Charge (as a % of each 7%
Purchase Payment Surrendered)1/
- --------------------------------------------------------------------------------
Transfer Fee First 12 Transfers Per Year: NO FEE
More Than 12 in One Year: $10 each
================================================================================
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of account value)
================================================================================
Mortality and Expense Risk Fees 1.00%
- --------------------------------------------------------------------------------
Administrative Expense Charge 0.20%
- --------------------------------------------------------------------------------
Total Variable Account Annual Expenses 1.20%
================================================================================
OTHER ANNUAL EXPENSES
================================================================================
Annual Policy Fee $30 Per Year
================================================================================
- --------
1/Each Policy Year up to fifteen percent (15%) of the Accumulation Value as of
the date of the first withdrawal that year can be withdrawn without a Withdrawal
Charge. Thereafter, the Withdrawal Charge is calculated separately for each
Purchase Payment withdrawn based on the number of years elapsed since the
Purchase Payment was made; it is 7% in the first year after a Purchase Payment
is made and then decreases by 1% in each successive year to 0% after the seventh
year.
- 8 -
==================================
SERIES FUND ANNUAL EXPENSES 2/ Management Other Total Series
(as a percentage of average net assets) Fees Expenses Fund Annual
Expenses
================================================================================
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Capitalization Portfolio 0.85% 0.07% 0.92%
Federated Prime Money Fund II Portfolio 0.50% 0.30% 0.80%
Federated Fund for U.S. Government Securities II 0.00% 0.80% 0.80%
Portfolio
Fidelity VIP II Asset Manager: Growth Portfolio 0.71% 0.29% 1.00%
Fidelity VIP Equity Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP II Contrafund Portfolio 0.61% 0.11% 0.72%
MFS Emerging Growth Portfolio 0.75% 0.25% 1.00%
MFS High Income Fund Portfolio 0.75% 0.25% 1.00%
MFS Research Portfolio 0.75% 0.25% 1.00%
MFS World Government 0.75% 0.25% 1.00%
Scudder International Portfolio 0.88% 0.21% 1.09%
T. Rowe Price Equity-Income Portfolio* 0.00% 0.85% 0.85%
T. Rowe Price International Portfolio* 0.00% 1.05% 1.05%
T. Rowe Price Limited-Term Bond Portfolio* 0.00% 0.70% 0.70%
T. Rowe Price New America Growth Portfolio* 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced Portfolio* 0.00% 0.90% 0.90%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* T. Rowe Price Funds do not itemize management fees and other expenses.
================================================================================
- --------
2/The fee and expense data regarding each Series Fund, which are fees and
expenses for 1995, was provided to United of Omaha by the Series Fund. The
Series Funds are not affiliated with United of Omaha.
- 9 -
<PAGE>
<TABLE>
<CAPTION>
==================================================================================
EXAMPLES. 3/ 1. If the Policy is 2. If the Policy is 3. If the Policy is
An Owner would pay the following surrendered at the end of annuitized at the end not surrendered and
expenses on a $1,000 investment, the applicable time of the applicable time is not annuitized
assuming a 5% annual return on assets:period or is annuitized period and Annuity
and Annuity Option 4 Option 4 (Lifetime
(Lifetime Income) Income)
is not chosen: is chosen
- ----------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio $ 84. $117. $84. $68. $22. $68.
Alger American Small Capitalization
Portfolio 85. 119. 85. 70. 22. 70.
Federated Prime Money Fund II
Portfolio 83. 115. 83. 66. 21. 66.
Federated Fund for U.S. Government
Securities II Portfolio 83. 115. 83. 66. 21. 66.
Fidelity VIP II Asset Manager:
Growth Portfolio 85. 119. 85. 70. 23. 72.
Fidelity VIP Equity-Income
Portfolio 82. 109. 82. 60. 19. 60.
Fidelity VIP II Contrafund Portfolio 83. 113. 83. 64. 20. 64.
MFS Emerging Growth Portfolio 85. 122. 85. 72. 23. 72.
MFS High Income Fund Portfolio 85. 122. 85. 72. 23. 72.
MFS Research Portfolio 84. 118. 84. 69. 22. 69.
MFS World Government 85. 122. 85. 72. 23. 72.
Scudder International Portfolio 86. 122. 86. 72. 24. 75.
T. Rowe Price Equity Income
Portfolio 84. 117. 84. 68. 22. 68.
T. Rowe Price International Portfolio 86. 123. 86. 74. 24. 74.
T. Rowe Price Limited-Term Bond
Portfolio 82. 112. 82. 63. 20. 63.
T. Rowe Price New America Growth
Portfolio 84. 117. 84. 68. 22. 68.
T. Rowe Price Personal Strategy
Balanced Portfolio 84. 118. 84. 69. 22. 69.
======================================================================================================================
</TABLE>
The assumed 5% annual return is hypothetical and should not be considered a
representation or indication of past or future expenses (in either the Variable
or Fixed Account), which could be greater or lesser than the 5% rate assumed
solely for purposes of these examples.
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 Companion's receipt of Due Proof of Death of any
Owner, as well as an election of the method of settlement. If any Owner dies,
the death benefit will equal the greater of (a) the Accumulation Value (without
deduction of the Withdrawal Charge) on the later of the date on which Due Proof
of Death or an election of Payout Option is received by Companion's Service
Office; or (b) the sum of Purchase Payments less partial withdrawals. No
Withdrawal Charge is imposed upon amounts paid as a death benefit. Subject to
any limitations of state or federal law, the death benefit may be paid as either
a lump sum cash benefit or as an Annuity. (See "Death Benefit," p. 25.)
FREE LOOK RIGHT
- --------
3/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.
- 10 -
The Policy Owner may, within 10 days after receipt, examine the Policy and
return it to Companion's Service Office or the agent from whom it was purchased
for a refund. Return of the Policy is effective upon being postmarked, properly
addressed, and postage pre-paid. Companion will pay the refund within seven (7)
days after it receives written notice of cancellation and the returned Policy.
Companion will promptly refund the Accumulation Value calculated on the
date Companion receives the Policy and refund request. This amount may be more
or less than the Purchase Payments made.
FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN THE POLICY
With respect to Owners who are natural persons under existing tax law,
there should be no federal income tax on increases (if any) in the Accumulation
Value until a distribution under the Policy occurs (E.G., a withdrawal or
Annuity Payment) or is deemed to occur (E.G., a pledge or assignment of a
Policy). Generally, a portion of any distribution or deemed distribution will be
taxable as ordinary income. The taxable portion of certain distributions will be
subject to withholding unless the recipient (if permitted) elects otherwise. In
addition, a penalty tax of 10% of the amount withdrawn may apply to certain
distributions or deemed distributions under the Policy made prior to the Owner's
attaining age 59 1/2. (See "Certain Federal Income Tax Consequences," p. 28.)
INQUIRIES AND WRITTEN NOTICES AND REQUESTS
Any questions about procedures or the Policy, or any Written Notice or
Written Request required to be sent to Companion, should be sent to Companion's
Service Office: Companion Annuity Service Division, P.O. Box 419241, Kansas
City, MO 64141-6281. Telephone requests and inquiries may be made by calling
1-800-494-0067. All inquiries, Notices and Requests should include the Policy
number, the Owner's name and the Annuitant's name.
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE STATEMENT OF
ADDITIONAL INFORMATION AND IN THE PROSPECTUSES FOR THE SERIES FUNDS AND IN THE
POLICY, ALL OF WHICH SHOULD BE REFERRED TO FOR MORE DETAILED INFORMATION. THIS
PROSPECTUS GENERALLY DESCRIBES ONLY THE POLICY AND THE VARIABLE ACCOUNT.
SEPARATE PROSPECTUSES DESCRIBE THE SERIES FUNDS. (THERE IS NO PROSPECTUS FOR THE
FIXED ACCOUNT SINCE INTERESTS IN THE FIXED ACCOUNT ARE NOT SECURITIES. SEE "THE
FIXED ACCOUNT," P. 18.)
FINANCIAL STATEMENTS
--------------------
The Financial Statements for Companion and the related independent
auditor's report are contained in the Statement of Additional Information, which
is available free upon request.
As of the effective date of this prospectus, the Variable Account had not
commenced sales of the Ultrannuity Series V Variable Annuity. Accordingly, no
condensed financial information is presented for such Contracts.
COMPANION LIFE INSURANCE COMPANY
--------------------------------
Companion Life Insurance Company, 401 Theodore Fremd Avenue, Rye, New York
10580, is a stock life insurance company. It was incorporated under the laws of
the State of New York on June 3, 1949. It is principally engaged in the sale of
life insurance and annuity policies in the State of New York. As of December 31,
1995, Companion had assets of over $345 million. Companion is a wholly-owned
subsidiary of United of Omaha Life Insurance Company. Both Companion and United
of Omaha are Mutual of Omaha Companies.
Companion may from time to time publish (in advertisements, sales
literature and reports to Owners) the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
and Duff & Phelps. The purpose of the ratings is to reflect the financial
strength and/or claims-paying ability of Companion, and the ratings should not
be considered as bearing on the investment performance of assets held in the
Variable Account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A.M. Best Company's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, the claims-paying
ability of Companion, as measured by Duff & Phelps may be referred to in such
advertisements, sales literature, or reports. These ratings are opinions
regarding an operating insurance company's financial capacity to meet the
obligations of its insurance and annuity policies in accordance with their
terms. Such ratings do not reflect the investment performance of the Variable
Account or the degree of risk associated with an investment in the Variable
Account.
- 11 -
THE ELIGIBLE INVESTMENTS
------------------------
Purchase Payments made under a Policy may be allocated to one of the
seventeen Subaccounts of the Variable Account, to the Fixed Account, or to a
combination of these Eligible Investment(s).
THE VARIABLE ACCOUNT
The Companion Life Separate Account C of Companion Life Insurance Company
(the "Variable Account") was established as a separate investment account under
the laws of the State of New York on February 18, 1994. The Variable Account
will receive and invest the Purchase Payments under the Policies that are
allocated to it for investment in shares of a Series Fund.
The Variable Account currently is divided into seventeen Subaccounts. Each
Subaccount invests exclusively in shares of a Portfolio of one of the Series
Funds. Under New York law, the assets of the Variable Account are owned by
Companion, but they are held separately from the other assets of Companion and
are not chargeable with any liabilities arising out of any other separate
investment account or any other business of Companion which has no specific and
determinable relation to or dependence upon the Variable Account. The income,
gains and losses, realized or unrealized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account, without regard
to other income, gains, or losses of Companion. The investment performance of
any Subaccount should be entirely independent of the investment performance of
Companion's general account assets or any other accounts maintained by
Companion.
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 Companion.
THE SERIES FUNDS. Each Subaccount of the Variable Account will invest
exclusively in shares of a specific Portfolio of one of the Series Funds, each
of which is a mutual fund registered with the SEC under the Investment Company
Act of 1940 (the "1940 Act") as an open-end, diversified management investment
company. 4/ The assets of each Portfolio of each Series Fund are held separate
from the assets of that Series Fund's other Portfolios, and each Portfolio has
its own distinct investment objectives and policies. Each Portfolio operates as
a separate investment fund, and the income or losses of one Portfolio generally
have no effect on the investment performance of any other Portfolio.
Each of the Series Funds is managed by an investment adviser registered
with the SEC under the Investment Advisers Act of 1940, as amended. Each
investment manager is responsible for selecting Portfolio investments consistent
with the investment objectives and policies of the Portfolio, and conducts
securities trading for the Portfolio. Alger Management is responsible for the
overall administration of the Alger American Fund, subject to the supervision of
the Alger Fund Board of Trustees; Federated Advisers is responsible for the
portfolio investment decisions of the Insurance Management Series, subject to
direction by the Insurance Management Series Trustees; Fidelity Management &
Research Company ("FMR") is the manager of the Fidelity VIP Fund and Fidelity
VIP Fund II. On behalf of the Asset Manager: Growth Portfolio of the Fidelity
VIP Fund II, FMR has entered into sub-advisory agreements with Fidelity
Investment Management and Research (U.K.) Inc. ("FMR (U.K.)") and Fidelity
Management and Research (Far East) Inc. ("FMR Far East") pursuant to which those
entities provide research and investment recommendations with respect to
companies based outside of the United States. FMR (U.K.) primarily focuses on
companies based in Europe, and FMR Far East focuses primarily on companies based
in Asia and the Pacific Basin. Massachusetts Financial Services Company is
responsible for the management of the assets of the MFS Variable Insurance
Trust. Scudder, Stevens & Clark, Inc. manages the daily business and affairs of
the Scudder Fund, subject to policies established by the Trustees of Scudder
Fund. T. Rowe Price Associates, Inc. is responsible for selection and management
of the portfolio investments of T. Rowe Price Equity Series and T. Rowe Price
Fixed Income Series. Rowe Price-Fleming International, Inc., incorporated in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited, is responsible for selection and management of the
portfolio investments of T. Rowe Price International Series.
The investment objectives of each Portfolio are summarized as follows:
ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term capital appreciation by
investing in a diversified portfolio of equity securities, primarily of
companies with total market capitalization of $1 billion or greater.
- --------
4/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.
- 12 -
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 in such companies may have limited
marketability and may be subject to more abrupt or erratic market movements
than securities of larger, more established companies or the market
averages in general.(*)
INSURANCE MANAGEMENT SERIES
FEDERATED PRIME MONEY FUND II PORTFOLIO -- invests in money market
instruments maturing in thirteen months or less to achieve current income
consistent with stability of principal and liquidity. The Portfolio
attempts to maintain a stable net asset value of $1.00 per share, but there
can be no assurance the Portfolio will be able to do so.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II PORTFOLIO -- seeks current
income by investing in a diversified portfolio limited to U.S. government
securities.
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 yield that beats that of the
S&P 500. The Portfolio does not expect to invest in debt securities of
companies that do not have proven earnings or credit.(*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY 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.(*)
FIDELITY CONTRAFUND PORTFOLIO -- seeks to increase the value of the
Portfolio's return over the long term by investing in securities of
companies that are undervalued or out-of-favor. This strategy can lead to
investments in domestic or foreign companies, many of which may not be well
known. The stocks of small companies often involve more risk than those of
larger companies. The Portfolio may use various investment techniques to
hedge the Portfolio's risk, but there is no guarantee that these strategies
will work as intended.(*)
MFS VARIABLE INSURANCE TRUST
MFS EMERGING GROWTH PORTFOLIO -- seeks to provide long-term growth of
capital through investing primarily in common stocks of emerging growth
companies, which involves greater risk than is customarily associated with
investments in more established companies. The Portfolio may invest in a
limited extent in lower rated fixed income securities or comparable unrated
securities.(*)
MFS HIGH INCOME PORTFOLIO -- seeks high current income by investing
primarily in a diversified portfolio of fixed income securities, some of
which may involve equity features. The Portfolio may invest in lower rated
fixed income securities or comparable unrated securities.(*)
MFS RESEARCH PORTFOLIO -- seeks to provide long-term growth of capital and
future income by investing a substantial proportion of its assets in the
common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. No
more than 5% of the Portfolio's convertible securities, if any, will
consist of securities in lower rated categories or securities believed to
be of similar quality to lower rated securities. The Portfolio may invest
in a limited extent in lower rated fixed income securities or comparable
unrated securities.(*)
MFS WORLD GOVERNMENT PORTFOLIO -- seeks preservation and growth of capital,
together with moderate current income by investing its assets in an
internationally diversified portfolio consisting primarily of debt
securities and to a lesser extent equity securities. The Portfolio
investments are expected to consist primarily of securities which are of
relatively
- 13 -
high quality and minimal credit risk. However, an error of judgment in
selecting a currency or an interest rate environment could result in a loss
of capital, and a held security whose quality deteriorates significantly
will be sold only if the Portfolio investment adviser believes it is
advantageous to do so.
SCUDDER VARIABLE LIFE INVESTMENT FUND
SCUDDER INTERNATIONAL PORTFOLIO -- seeks long-term growth of capital
primarily through diversified holdings of marketable foreign equity
investments. The Portfolio invests in companies, wherever organized, which
do business primarily outside the United States. The Portfolio intends to
diversify investments among several countries, and does not intend to
concentrate investments in any particular industry.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO -- seeks a total return on its
assets from long-term growth of capital and income, by investing
substantially all of its assets in common stocks of established non-U.S.
companies. The Portfolio will not purchase any debt security which at the
time of purchase is rated below investment grade. This would not prevent
the Portfolio from retaining a security downgraded to below investment
grade after purchase.
T. ROWE PRICE EQUITY SERIES, INC.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO -- seeks long-term growth of
capital through investments primarily in common stocks of U.S. growth
companies which operate in service industries believed to be above-average
performers in their fields. Total return will consist primarily of capital
appreciation or depreciation.
T. ROWE PRICE EQUITY-INCOME PORTFOLIO -- Seeks to provide substantial
dividend income and also capital appreciation by investing primarily in
dividend-paying common stocks of established companies.(*)
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO -- seeks the highest
total return over time consistent with an emphasis on both capital
appreciation and income. There are no limitations on market capitalization
or types of stock the Portfolio can hold. While bond holdings are primarily
investment grade, the Portfolio can also invest in more volatile
below-investment grade bonds.(*)
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO -- seeks a high level of income
consistent with modest price fluctuation by investing primarily in
investment grade debt securities.
(*) THE PORTFOLIOS' INVESTMENT STRATEGIES MAY PROVIDE THE OPPORTUNITY OF HIGHER
THAN AVERAGE YIELDS BY INVESTING IN SECURITIES WITH HIGHER THAN AVERAGE
RISK, SUCH AS LOWER AND UNRATED DEBT AND COMPARABLE EQUITY INSTRUMENTS.
PLEASE CONSULT EACH PORTFOLIO'S SERIES FUND PROSPECTUS ACCOMPANYING THIS
PROSPECTUS FOR MORE INFORMATION ABOUT THE RISK ASSOCIATED WITH SUCH
INVESTMENTS.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES,
IS CONTAINED IN THE PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE SERIES FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT OF THE
VARIABLE ACCOUNT.
An investment in the Variable Account, or in any Portfolio, including the
Money Market Portfolio, is not insured or guaranteed by the U.S. Government and
there can be no assurance that the Money Market Portfolio will be able to
maintain a stable net asset value per share.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS. Companion does not
control the Series Funds and cannot and does not guarantee that any of the
Portfolios will always be available for Purchase Payments, allocations, or
transfers. Companion retains the right, subject to any applicable law, to make
certain changes in the Variable Account and its investments. Companion reserves
the right to eliminate the shares of any Portfolio held by a Subaccount and to
substitute shares of another
- 14 -
Portfolio of a Series Fund, or of another registered open-end management
investment company for the shares of any Portfolio, if the shares of the
Portfolio are no longer available for investment or if, in Companion's judgment,
investment in any Portfolio would be inappropriate in view of the purposes of
the Variable Account. To the extent required by the 1940 Act, substitutions of
shares attributable to an Owner's interest in a Subaccount will not be made
without prior notice to the Owner and the prior approval of the SEC. If
required, approval of or change of any investment policy will be filed with the
Insurance Department of any state in which the Policy is sold. Nothing contained
herein shall prevent the Variable Account from purchasing other securities for
other series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable annuity policies on the basis of
requests made by Owners.
New Subaccounts may be established when, in the sole discretion of
Companion, marketing, tax, investment or other conditions warrant. Any new
Subaccounts may be made available to existing Owners on a basis to be determined
by Companion. Each additional Subaccount will purchase shares in a Portfolio of
a Series Fund or in another mutual fund or investment vehicle. Companion may
also eliminate one or more Subaccounts if, in its sole discretion, marketing,
tax, investment or other conditions warrant such change. In the event any
Subaccount is eliminated, Companion will notify Owners and request a
reallocation of the amounts invested in the eliminated Subaccount. If no such
reallocation is provided by the Owner, Companion 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, Companion 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, Companion 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, Companion may advertise or include in sales
literature yields, effective yields, and total returns for the Subaccounts of
the Variable Account. THESE FIGURES ARE BASED ON HISTORICAL PERFORMANCE AND DO
NOT INDICATE OR PROJECT FUTURE PERFORMANCE. Performance relative to certain
performance rankings and indices compiled by independent organizations may also
be advertised or included in sales literature. More detailed information as to
the calculation of performance information, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.
STANDARDIZED PERFORMANCE DATA. Effective yields and total returns for the
Subaccounts are based on the investment performance of the corresponding
Portfolios of the Series Funds. The Series Funds' performance in part reflects
the Series Funds' expenses. See the Prospectuses for the Series Funds.
The yield of the Money Market Subaccount refers to the annualized
income generated by an investment in the Subaccount over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in the
Subaccount is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Subaccount (except the Money Market Subaccount) refers
to the annualized income generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each period over a 12-month period and is shown as a percentage of the
investment.
Yield quotations do not reflect the Withdrawal Charge.
The total return of a Subaccount refers to return quotations assuming
Accumulation Value has been held in the Subaccount for various periods of time
including, but not limited to, a period measured from the date the Subaccount
commenced operations. When a Subaccount has been in operation for one, five, and
ten years, respectively, the total return for these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Subaccount from the beginning date of the measuring
period to the end of that period. This standardized version of average annual
total return reflects all historical investment results, less all charges and
deductions applied against the Subaccount (including any Withdrawal Charge that
would apply if an Owner terminated the Policy at the end of each period
indicated.
- 15 -
NON-STANDARDIZED PERFORMANCE DATA. In addition to the standard version
described above, total return performance information computed on different
non-standard bases may be used in advertisements. Average annual total return
information may be presented, computed on the same basis as described above,
except deductions will not include the Withdrawal Charge. In addition, Companion
may from time to time disclose average annual total return in non-standard
formats and cumulative total return for Policies funded by the Subaccounts.
Companion may, from time to time, also disclose yield, standard total
returns, and non-standard total returns for the Portfolios of the Series Funds,
including such disclosure for periods prior to the dates the Subaccounts
commenced operations. For periods prior to the date the Subaccount commenced
operations, performance information for Policies will be calculated based on the
performance of the Series Fund Portfolios and the assumption that the
Subaccounts were in existence for the same periods as those indicated for the
Series Fund Portfolios, with the level of Policy charges that were in effect at
the inception of the Subaccounts (this is referred to as "hypothetical"
performance data). Such standardized but "hypothetical" average annual total
return information for the Subaccounts of Policies is as follows:
<TABLE>
<CAPTION>
=======================================================================================================
SUBACCOUNT STANDARDIZED "HYPOTHETICAL" For 1 Yr For 5 Yr For period from
AVERAGE ANNUAL TOTAL RETURN TABLE period ended period ended inception to
12/31/95 12/31/95 12/31/95
Subaccount (date of inception of corresponding Portfolio) % % %
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 28.35 19.92 17.87
Alger American Small Capitalization (9/21/88) 36.19 18.78 21.03
Federated Prime Money Fund II (11/18/94) -2.46 N/A -1.95
Federated Fund for U.S. Government Securities (3/29/94) 1.07 N/A 1.54
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 15.26
Fidelity VIP Equity-Income(10/9/86) 27.09 19.52 11.89
Fidelity VIP II Contrafund (1/3/95) N/A N/A 31.56
MFS Emerging Growth (6/1/95) N/A N/A 18.59
MFS High Income (6/1/95) N/A N/A 9.87
MFS Research (6/1/95) N/A N/A 13.49
MFS World Government (6/1/94) 6.62 N/A 4.25
Scudder International (5/1/87) 3.39 8.60 7.99
T. Rowe Price International (3/194) 3.45 N/A 2.46
T. Rowe Price New America Growth (3/1/94) 42.90 N/A 22.59
T. Rowe Price Equity Income (3/1/94) 26.76 N/A 18.61
T. Rowe Price Limited-Term Bond (5/17/94) 2.17 N/A 2.46
T. Rowe Price Personal Strategy Balanced (12/31/94) 20.73 N/A 20.73
===============================================================================================
</TABLE>
- 16 -
<PAGE>
<TABLE>
<CAPTION>
SUCH NON-STANDARDIZED (I.E., ASSUMING NO WITHDRAWAL CHARGE) BUT HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN INFORMATION FOR THE SUBACCOUNTS IS AS FOLLOWS:
======================================================================================================
SUBACCOUNT NON-STANDARDIZED For 1 Yr For 5 Yr For period from
"HYPOTHETICAL" period ended period ended inception to
AVERAGE ANNUAL TOTAL RETURN TABLE 12/31/95 12/31/95 12/31/95
% % %
Subaccount (date of inception of corresponding Portfolio)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Alger American Growth (1/9/87) 34.65 20.18 17.92
Alger American Small Capitalization (9/21/88) 42.49 19.05 21.03
Federated Prime Money Fund II (11/18/94) 3.84 N/A 3.72
Federated Fund for U.S. Government Securities (3/29/94) 7.37 N/A 5.07
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 21.56
Fidelity VIP Equity-Income(10/9/86) 33.39 19.78 11.89
Fidelity VIP II Contrafund (1/3/95) N/A N/A 37.86
MFS Emerging Growth (6/1/95) N/A N/A 18.59
MFS High Income (6/1/95) N/A N/A 9.87
MFS Research (6/1/95) N/A N/A 13.49
MFS World Government (6/1/94) 12.92 N/A 8.18
Scudder International (5/1/87) 9.69 8.98 7.99
T. Rowe Price International (3/1/94) 9.75 N/A 5.94
T. Rowe Price New America Growth (3/1/94) 49.20 N/A 25.65
T. Rowe Price Equity Income (3/1/94) 33.06 N/A 21.74
T. Rowe Price Limited-Term Bond (5/17/94) 8.46 N/A 6.21
T. Rowe Price Personal Strategy Balanced (12/31/94) 27.03 N/A 27.03
================================================================================================
</TABLE>
THE FIGURES ABOVE ARE NOT AN INDICATION OF PRESENT, PAST, OR FUTURE PERFORMANCE
OF THE APPLICABLE SUBACCOUNTS OR OF THE ACTUAL PORTFOLIOS AVAILABLE UNDER THE
POLICY.
Companion may also disclose average annual total returns for Series Fund
Portfolios since their inception, including such disclosure for periods prior to
the date the Variable Account commenced operations. These figures do not reflect
the Variable Account or Policy expenses. Such average annual total return
information is as follows:
- 17 -
<TABLE>
<CAPTION>
=======================================================================================================
SERIES FUND PORTFOLIOS For the For the period
AVERAGE ANNUAL TOTAL RETURN TABLE 1-year For the 5-year from inception
period period ended to
Series Fund ended 12/31/95 12/31/95
(date of inception of Series Fund Portfolio) 12/31/95
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alger American Growth (1/9/87) 36.37% 21.73% 19.44%
Alger American Small Capitalization (9/21/88) 44.31% 20.59% 22.60%
Federated Prime Money Fund II (11/18/94) 5.20% N/A 5.13%
Federated Fund for U.S. Government Securities (3/29/94) 8.77% N/A 6.44%
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A 23.13%
Fidelity VIP Equity-Income (10/9/86) 35.09% 21.32% 13.33%
Fidelity VIP II Contrafund (1/3/95) N/A N/A 39.62%
MFS Emerging Growth (6/1/95) N/A N/A 20.30%
MFS High Income (6/1/95) N/A N/A 11.30%
MFS Research (6/1/95) N/A N/A 12.08%
MFS World Government (6/1/95) N/A N/A 9.60%
Scudder International (5/1/87) 11.11% 10.40% 9.39%
T. Rowe Price International (3/1/94) 11.18% N/A 7.31%
T. Rowe Price New America Growth (3/1/94) 51.08% N/A 27.24%
T. Rowe Price Equity Income (3/1/94) 34.76% N/A 23.30%
T. Rowe Price Limited-Term Bond (5/17/94) 9.88% N/A 7.61%
T. Rowe Price Personal Strategy Balanced (12/31/94 ) 28.66% N/A 28.66%
=======================================================================================================
</TABLE>
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or mutual fund portfolios with investment objectives similar to
each of the Subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research Data Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree of
risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of
each Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely
used measure of stock performance. This unmanaged index assumes the 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.
Companion may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the underlying
portfolio's investment experience is positive.
THE FIXED ACCOUNT
This Prospectus is generally intended to serve as a disclosure document
only for the Policy and the Variable Account. For complete details regarding the
Fixed Account, see the Policy itself.
PURCHASE PAYMENTS ALLOCATED AND AMOUNTS TRANSFERRED TO THE FIXED ACCOUNT
BECOME PART OF THE GENERAL ACCOUNT ASSETS OF COMPANION. 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 COMPANION HAS
BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED ACCOUNT.
- 18 -
The Fixed Account includes all the assets of Companion except those
segregated in the Variable Account or in any other separate investment account.
The Policy Owner may allocate Purchase Payments to the Fixed Account at the time
of a Purchase Payment or transfer amounts from the Variable Account to the Fixed
Account. Instead of the Policy Owner bearing the investment risk, as is the case
for Accumulation Value in the Variable Account, Companion bears the full
investment risk for all Accumulation Value in the Fixed Account. Companion has
sole discretion to invest the assets of its general account, including the Fixed
Account, subject to applicable law.
Companion guarantees that it will credit interest to amounts in the Fixed
Account at an effective rate of at least 3% per year. Companion may, IN ITS SOLE
DISCRETION, credit amounts in the Fixed Account with interest at a current
interest rate in excess of 3%. Once declared, a current interest rate will be
guaranteed for at least one year. ONE TRANSFER OUT OF THE FIXED ACCOUNT IS
ALLOWED EACH POLICY YEAR. Moreover, the maximum amount that can be transferred
out of the Fixed Account during any Policy Year will be determined by Companion
in its sole discretion, but will not be less than 10% of Fixed Account Value on
the date of the transfer. No charge is imposed on such transfers. Companion
reserves the right to modify transfer privileges at any time. (SEE "Transfers,"
p. 19.) Partial withdrawals from the Fixed Account are limited to a pro rata
amount (with withdrawals from the Variable Account). Withdrawals and transfers
from the Fixed Account may be delayed for up to six months, and withdrawals may
be subject to a Withdrawal Charge. (See "Withdrawals," p. 22.) 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).
Companion guarantees that, at any time prior to the Annuity Starting Date,
the amount in the Fixed Account allocable to a particular Policy will be not be
less than the amount of the Purchase Payments allocated or transferred to the
Fixed Account, plus interest at an effective rate of 3% per year, plus any
excess interest credited to amounts in the Fixed Account, less any amounts
deducted from the Fixed Account in connection with partial withdrawals
(including any Withdrawal Charges) or transfers to the Variable Account.
The current interest rates will be determined by Companion in its sole
discretion.
COMPANION'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE
CURRENT INTEREST RATES. COMPANION CANNOT PREDICT OR GUARANTEE THE LEVEL OF
FUTURE CURRENT INTEREST RATES, EXCEPT THAT COMPANION GUARANTEES THAT FUTURE
CURRENT INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE RATE OF 3% PER YEAR
COMPOUNDED ANNUALLY. THE POLICY OWNER BEARS THE RISK THAT CURRENT INTEREST RATES
WILL NOT EXCEED AN EFFECTIVE RATE OF 3% PER YEAR.
TRANSFERS
SUBJECT TO the limitations and restrictions described below, transfers out
of a Subaccount of the Variable Account may be made any time prior to the
Annuity Starting Date, by sending Written Notice, signed by the Policy Owner, to
the Service Office. Companion reserves the right, at any time and without notice
to any party, to modify the transfer privileges under the Policy.
An Owner can transfer Accumulation Value from one Subaccount of the
Variable Account to another, or from the Variable Account to the Fixed Account
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, Companion will include that amount as part of the
transfer. Transfers out of a Subaccount currently may be made as often as the
Owner wishes, subject to the minimum amount specified above (Companion reserves
the right to otherwise limit or restrict transfers in the future or to eliminate
the transfer privilege). Companion 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 Companion.
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. (See
"Charges and Deductions," p. 26.)
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free transfer
limit described above, and no transfer charge will be imposed on transfers from
the Fixed Account. Moreover, the maximum amount that can be transferred out of
the Fixed Account during any Policy Year will be determined by Companion, at its
sole discretion, but will not be less than 10% of the Fixed Account Value on the
date of the transfer.
The Policy is designed as a long-term investment, for retirement or other
financial planning. The Policy is not intended for active trading or "market
timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management (which could occur, for example, if
it caused excessive commission expense or caused the manager to keep higher cash
reserves than otherwise). Therefore, Companion reserves the right to limit the
number of Transfers from
- 19 -
the Subaccounts of the Variable Account and the Fixed Account if Companion
believes that: (a) excessive trading by the Policy Owner or a specific Transfer
request would have a detrimental effect on Accumulation Unit values or the share
prices of the Portfolios; or (b) Companion is informed by one or more of the
Series Funds or the Variable Account that the purchase or redemption of shares
is to be restricted because of excessive trading or a Transfer or group of
Transfers is deemed to have a detrimental effect on share prices of one or more
Portfolios or the Variable Account.
Where permitted by law, Companion may accept a Policy Owner's authorization
of third party reallocation on such Owner's behalf, subject to Companion's
rules. Companion 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. Companion will notify the Policy Owner of any such
suspension or cancellation. Companion may restrict the availability of
Subaccounts and the Fixed Account for Transfers during any period in which the
Policy Owner authorizes such third party to act on his behalf. Companion will
give Owners prior notification of any such restrictions. However, Companion will
not enforce such restrictions if it is provided with satisfactory evidence that:
(a) such third party has been appointed by a court of competent jurisdiction to
act on the Policy Owner's behalf; or (b) such third party has been appointed by
the Policy Owner to act on his behalf for all his financial affairs.
DOLLAR COST AVERAGING
Under the Dollar Cost Averaging program, the Policy Owner can instruct
Companion to automatically transfer, on a periodic basis, a predetermined amount
or percentage specified by the Policy Owner from any one Subaccount or the Fixed
Account to any Subaccount(s) of the Variable Account. The automatic transfers
can occur monthly, quarterly, semi-annually, or annually, and the amount
transferred each time must be at least $100 and must be $50 per Subaccount. At
the time the program begins, there must be at least $5,000 of Accumulation Value
in the applicable Subaccount or the Fixed Account. If transfers are made from
the Fixed Account, the maximum periodic transfer amount is 10% of that account's
value at the time of election, or a sufficient amount to provide transfers for
10 months. There is no maximum transfer amount requirement out of the
Subaccounts of the Variable Account.
Dollar Cost Averaging results in the purchase of more Accumulation Units
when the Accumulation Unit value is low, and fewer units when the Accumulation
Unit value is high. However, there is no guarantee that the Dollar Cost
Averaging program will result in higher Accumulation Value or otherwise be
successful.
The Policy Owner can request participation in the Dollar Cost Averaging
program when purchasing the Policy or at a later date. Transfers will begin on
the first or 15th day (or, if not a Valuation Date, the next following Valuation
Date) of the month, as specified by the Owner, during which the request is
processed. The Owner can specify that only a certain number of transfers will be
made, in which case the program will terminate when that number of transfers has
been made. Otherwise, the program will terminate when the amount remaining in
the applicable Subaccount or, if applicable, the Fixed Account is less than
$500.
The Owner can increase or decrease the amount or percentage of the
transfers or discontinue the program by sending Written Notice to the Service
Office or by telephone, if telephone transactions are authorized. There is no
charge for participation in this program.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, the Policy Owner can instruct Companion
to allocate purchase payments and Accumulation Value among the Subaccounts of
the Variable Account and the Fixed Account in accordance with allocation
instructions specified by the Policy Owner or allocation instructions
recommended by Companion and approved by the Policy Owner. Companion will
rebalance a Policy Owner's investment by allocating purchase payments and
transferring Accumulation Value among the Subaccounts and the Fixed Account to
ensure conformity with current allocation instructions. Rebalancing will be
performed on a quarterly, semi-annual or annual basis as specified by the Policy
Owner. Transfers of Accumulation Value made pursuant this program will not be
counted in determining whether the Transfer Fee applies. At the time the program
begins, there must be at least $10,000 of Accumulation Value under the Policy.
The Policy Owner can request participation in the Asset Allocation Program
when purchasing the Policy or at a later date. The Owner can change his
allocation percentage or discontinue the program by sending Written Notice to
the Service Office. There is no charge for participation in this program.
THE POLICY
----------
The Ultrannuity Series V Variable Annuity Policy is a Flexible Payment
Variable Deferred Annuity Policy. The rights and benefits under the Policy are
summarized below; however, the description of the Policy contained in this
Prospectus is qualified in its entirety by the Policy itself, a copy of which is
available upon request from Companion. The Policy may be purchased on a non-tax
qualified basis ("Nonqualified Policy") or in connection with retirement plans
or individual retirement
- 20 -
accounts that qualify for favorable income tax treatment ("Qualified Policy").
The Policy will remain in force until surrendered for its Cash Surrender Value,
or all Proceeds have been paid under a Payout Option or as a death benefit or
upon termination.
POLICY APPLICATION AND ISSUANCE OF POLICIES
Before it will issue a Policy, Companion 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 Owners Age 0 through 80, and
a Qualified Policy ordinarily will be issued only in respect of Owners Age 0
through 70 1/2. Companion reserves the right to reject any application or
Purchase Payment.
Under Companion's Electronic Funds Transfer program, the Owner can select a
monthly payment schedule pursuant to which purchase payments will be
automatically deducted from a bank or credit union account or other sources. The
minimum size of an initial Purchase Payment must be at least $2,000. Each
subsequent monthly payment must be at least $100.
If the application can be accepted in the form received, the initial
Purchase Payment will be credited to the Accumulation Value within two business
days after the later of receipt of the application or receipt of the initial
Purchase Payment. If the initial Purchase Payment cannot be credited because the
application or other issuing requirements are incomplete, the applicant will be
contacted within five business days of receipt and given an explanation for the
delay, and the initial Purchase Payment will be returned at that time unless the
applicant consents to Companion's retaining the initial Purchase Payment and
crediting it as soon as the necessary requirements are completed.
The date on which the initial Purchase Payment is credited to the
Accumulation Value is the Date of Issue. The Date of Issue is the date used to
determine Policy Years and Policy anniversaries.
PURCHASE PAYMENTS
All initial Purchase Payment checks or drafts should be made payable to
Companion Life Insurance Company and sent to the Service Office. Additional
Purchase Payments should be sent to the Service Office. The death benefit will
not take effect until the check or draft for the Purchase Payment is honored.
INITIAL PURCHASE PAYMENT. The minimum initial Purchase Payment that
Companion currently will accept under both a Nonqualified Policy and a Qualified
Policy is $5,000 except under the Electronic Funds Transfer Program where the
minimum initial Purchase Payment is $2,000. Companion reserves the right to
increase or decrease this amount. The initial Purchase Payment is the only
Purchase Payment required to be paid under a Policy.
ADDITIONAL PURCHASE PAYMENTS. The Owner may pay additional Purchase
Payments. The minimum additional Purchase Payment under both a Nonqualified
Policy and a Qualified Policy is $500 except under the Electronic Funds Transfer
Program where the minimum additional Purchase Payment is $100. Additional
Purchase Payments will be credited to the Policy and added to the Accumulation
Value as of the Valuation Date when they are received at the Service Office.
Companion will not accept any additional Purchase Payments beginning on the
Policy Anniversary following the Owner's 83rd birthday.
ALLOCATION OF PURCHASE PAYMENTS. An Owner must allocate Purchase Payments
to one or more of the Eligible Investments. The Owner must specify the initial
allocation in the Policy application. This allocation will be used for
additional Purchase Payments unless the Owner requests a change of allocation.
All allocations must be made in whole percentages and must total 100%. The
minimum allocation amount is $500. If the Owner fails to specify how Purchase
Payments are to be allocated, the Purchase Payment(s) cannot be accepted. The
initial Purchase Payment will be allocated to the Owner's selected Subaccounts
on the Date of Issue. All additional Purchase Payments received after the end of
the free look period will be allocated and credited to the Owner's Policy as of
the Valuation Period during which they are received.
The Owner may change the allocation instructions for future additional
Purchase Payments by sending Written Notice, signed by the Owner, to Companion's
Service Office. The allocation change will apply to payments received on or
after the date the Written Notice 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 Companion by check or draft may
be postponed until such time as Companion determines that such instrument has
been honored.
- 21 -
ACCUMULATION VALUE
On the Date of Issue, the Accumulation Value equals the initial Purchase
Payment. On any Valuation Date thereafter, the Accumulation Value equals the sum
of the values in the Variable Account and the Fixed Account.
The Accumulation Value is expected to change from Valuation Period to
Valuation Period, reflecting the expenses and investment experience of the
selected Eligible Investments as well as the Variable Account deductions for
charges.
THE VARIABLE ACCOUNT VALUE. The Accumulation Value for each Subaccount is
equal to:
(a) the current number of Accumulation Units in the Subaccount for the
Policy; multiplied by
(b) the current Accumulation Unit value.
A 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 Purchase Payment or transfer is allocated to
the Variable Account. The initial Accumulation Unit value for each Subaccount
was set at $10 when the Subaccount was established. The Accumulation Unit value
may increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) The net asset value per share of the Portfolio multiplied by the
number of shares held in the Subaccount, before the purchase or
redemption of any shares on that date; minus
(b) the cumulative unpaid charge for the Mortality and Expense Risk
Charge and Administrative Expense Charge; minus
(c) any applicable charge for federal and state income taxes, if any;
the result divided by
(d) the total number of Accumulation Units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any
Accumulation Units on that day.
Positive investment experience of the applicable Portfolio will increase the
Accumulation Unit values and negative investment experience will decrease the
Unit values. Expenses and deductions will have a negative effect on Unit values.
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 Purchase Payments credited since the end of the previous Policy
Month; plus
(c) any transfers from the Subaccounts credited to the Fixed Account
since the end of the previous Policy Month; minus
(d) any transfers from the Fixed Account to the Subaccounts since the
end of the previous Policy Month; minus
(e) any partial withdrawal and Withdrawal Charge taken from the Fixed
Account since the end of the previous Policy Month; plus
(f) interest credited on the Fixed Account balance.
Companion guarantees that the Accumulation Value in the Fixed Account will be
credited with an effective annual interest rate of at least 3%.
NON-PARTICIPATING POLICY
The Policy does not participate or share in the profits or surplus earnings
of Companion. No dividends are payable on the Policy.
TERMINATION
If the Accumulation Value is less than $500, Companion may cancel the
Policy upon 60 days' notice to the Owner. This cancellation will be considered a
full surrender of the Policy. If the Accumulation Value in any Subaccount falls
below $500, Companion reserves the right to transfer the remaining balance,
without charge, to the Money Market Subaccount.
DISTRIBUTIONS UNDER THE POLICY
------------------------------
WITHDRAWALS
The Owner may withdraw all or a portion of the Cash Surrender Value in
exchange for a cash payment from Companion. The Cash Surrender Value is the
Accumulation Value less any applicable Withdrawal Charge and any applicable
Policy Fee. (See "Charges and Deductions," p. 26).
The Owner may withdraw Cash Surrender Value from the Variable Account at
any time prior to the Annuity Starting Date and after the Annuity Starting Date
if Payment Option 2 is elected as a variable annuity payment option, by sending
a Written Request to Companion's Service Office. The minimum amount that can be
withdrawn from any Eligible Investment is $500. After a partial withdrawal, the
remaining Accumulation Value must be at least $500. In the absence of written
instructions from the Owner, withdrawals will result in cancellation of
Accumulation Units from each applicable Subaccount and the deduction of
Accumulation Value from the Fixed Account in the ratio that the value of each
such Eligible Investment bears to the total Accumulation Value of the Policy
(I.E., pro rata from each Eligible Investment).
- 22 -
No more than a pro-rata amount may be withdrawn from the Fixed Account for any
partial withdrawal. If the Owner requests a surrender, the Policy must be
returned to the Service Office.
Withdrawals from the Fixed Account may be delayed for up to six months.
Each Policy Year the Owner may withdraw up to 15% of Accumulation Value
without deduction of a Withdrawal Charge. Amounts withdrawn in excess of this
free withdrawal amount may be subject to the Withdrawal Charge of up to 7%. For
a discussion of the Withdrawal Charge, see "Withdrawal Charge," p. 26.
Withdrawals may be taxable and subject to a penalty tax. (See "Certain
Federal Income Tax Consequences," p. 28.)
Since the Owner assumes the investment risk with respect to Purchase
Payments allocated to the Variable Account, and because surrenders and
withdrawals are subject to a Withdrawal Charge, and possibly a charge for
premium taxes, the total amount paid upon total surrender of the Policy (taking
any prior partial withdrawals into account) may be more or less than the total
Purchase Payments made. Following a surrender of the Policy, or at any time the
Accumulation Value is zero, all rights of the Owner will terminate.
SYSTEMATIC WITHDRAWAL PLAN
Under the Systematic Withdrawal Plan, the Policy Owner can instruct
Companion to make automatic payments of a predetermined dollar amount or fixed
percentage of Accumulation Value to them monthly, quarterly, semi-annually or
annually from a specified Eligible Investment. The minimum systematic withdrawal
payment is $100. The "Request for Systematic Withdrawal" form must specify a
date for the first payment, which must be at least 30 but not more than 90 days
after the form is submitted. The Owner may specify the Eligible Investments from
which Systematic Withdrawals will be made, but no more than a pro-rata amount
can be withdrawn from the Fixed Account. If the Owner does not specify the
Eligible Investments from which Systematic Withdrawals are to be taken,
Systematic Withdrawals will be taken from each Eligible Investment in the
proportion that the Accumulation Value in each Eligible Investment bears to the
total Accumulation Value of the Policy.
The Withdrawal Charge will apply in accordance with its terms.
A qualified tax adviser should be consulted before a Systematic Withdrawal
Plan is requested since distributions under such a Plan may be taxable and
subject to a penalty tax. (See "Certain Federal Income Tax Consequences," p.
28.)
ANNUITY PAYMENTS
Payees receiving Annuity Payments under the Policy must be individuals who
receive payments in their own behalf unless otherwise agreed to by Companion.
Any Payout Option chosen will be effective when Companion acknowledges it.
Companion may require proof of the Owner's or the Annuitant's age or survival.
The level of Annuity Payments is determined by the Accumulation Value, the age
and sex of the Annuitant, and the Payout Option elected.
ANNUITY STARTING DATE. Unless the Annuity Starting Date is changed, Annuity
Payments under a Policy will begin on the Annuity Starting Date which is
selected by the Policy Owner at the time the Policy is applied for. The latest
Annuity Starting Date permitted is when the Annuitant attains age 90. An earlier
Annuity Starting Date is required for Qualified Contracts. The Annuity Starting
Date may be changed from time to time by the Policy Owner by Written Notice to
Companion, provided that notice of each change is received by Companion at its
Service Office at least thirty (30) days prior to the then current Annuity
Starting Date.
ELECTION OF PAYOUT OPTION. The Policy Owner will choose a Payout Option,
under which the Policy Proceeds will be paid to the Payee(s), in the Policy
application. However, during the lifetime of the Owner and prior to the Annuity
Starting Date, the Policy Owner may change the election, but Written Notice of
any election or change of election must be received by Companion at its Service
Office at least thirty (30) days prior to the Annuity Starting Date. If no
election is made prior to the Annuity Starting Date, Annuity Payments will be
made under Option 4 providing lifetime income with guaranteed payments for 10
years. Companion reserves the right to pay the Proceeds in one sum when the
Proceeds are less than $2,000, or when the Payout Option chosen would result in
periodic payments of less than $20.
If the Owner dies prior to the Annuity Starting Date (and the Policy is in
force), the Beneficiary may elect to receive the death benefit under one of the
Payout Options, to the extent allowed by law and subject to the terms of any
settlement agreement. (See "Death Benefit," p. 25.)
The longer the guaranteed or projected Payout Option period, the lower the
amount of each payment. Unless the Policy Owner specifies otherwise, the
Payee shall be the Annuitant.
FIXED ANNUITY PAYMENTS. Fixed annuity payments are available under all six
Payout Options below. Under each fixed Payout Option the amount of each payment
will be set on the Annuity Starting Date and will not change. Annuity Payments
will begin on that date. The Accumulation Value reduced by any Withdrawal Charge
will be transferred to the general account of Companion, and the Annuity
Payments will be fixed in amount by the fixed annuity provisions selected and
the
- 23 -
age and sex (if consideration of sex is allowed) of the Annuitant. The
guaranteed effective annual interest rate used in the Payout Options is 3%.
Using a procedure approved by its Board of Directors, Companion 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 Companion. For further
information, contact Companion at its Service Office.
VARIABLE ANNUITY PAYMENTS. Only Payout Options 2, 4, and 6 are available
for variable annuity payments. The dollar amount of the first monthly annuity
payment will be determined by applying the Accumulation Value reduced by any
Withdrawal Charge 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 Accumulation Value reduced by any
Withdrawal Charge 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
Commencement Date the annuitant may exchange the value of a designated number of
Variable Annuity Units of a particular subaccount into other Variable Annuity
Units, the value of which would be such that the dollar amount of an annuity
payment made on the date of the exchange would be unaffected by the fact of the
exchange. No more than four (4) exchanges may be made within each account year.
Transfers may be made between subaccounts and from a subaccount to the
fixed account. No exchanges may be made from the fixed account to the variable
subaccounts. Transfers will be made using the Variable Annuity Unit values for
the Valuation Period during which any request is received by Companion.
Payout Options. The Policy provides six Payout Options which are described
below.
The guaranteed effective annual interest rate used in the Payout Options is
3%. Using a procedure approved by its Board of Directors, Companion may, AT ITS
SOLE DISCRETION, declare additional interest to be paid or credited annually for
Payout Options 1, 2, 3, or 6.
Under each Payout Option the amount of each payment will be set on the
Annuity Starting Date and will not change. Annuity Payments will begin on that
date. The Accumulation Value will be transferred to the general account of
Companion, and the Annuity Payments will be fixed in amount by the fixed annuity
provisions selected and the age and sex (if consideration of sex is allowed) of
the Annuitant. For further information, contact Companion at its Service Office.
There are six Payout Options. All Payout Options or earnings thereon
are available for fixed annuity payments. Only Payout Options 2, 4 and 6 are
available for variable annuity payments.
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the Proceeds
are held by Companion, Companion 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 or earnings thereon, 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.
Companion will provide the income amounts for payments other than monthly upon
request.
- 24 -
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.
If a fixed annuity Payment Option is chosen, 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,
Companion'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 "Variable Annuity
Payments," p. 24).
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, Companion 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,
Companion will provide payments for other options, including joint and survivor
periods. Certain options may not be available in some states.
Additional information about any Payout Option may be obtained by
contacting the Service Office.
* * *
A portion or the entire amount of the Annuity Payments may be taxable as
ordinary income. If, at the time the Annuity Payments begin, the Policy Owner
has not provided Companion with a written election not to have federal income
taxes withheld, Companion must by law withhold such taxes from the taxable
portion of such annuity payments and remit that amount to the federal
government. Withholding is mandatory for certain Qualified Policies. (See
"Certain Federal Income Tax Consequences," p. 28.)
DEATH BENEFIT
DEATH OF OWNER PRIOR TO ANNUITY STARTING DATE. If any Owner or joint Owner
dies prior to the Annuity Starting Date (and the Policy is in force), the Policy
will terminate, and a death benefit will be paid to the Beneficiary. The death
benefit will equal the largest of (i) the Accumulation Value (without deduction
of the Withdrawal Charge), on the later of the date on which Due Proof of Death
or an election of Payout Option is received by Companion's Service Office; or
(ii) the sum of 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 Companion has sufficient
information about the Beneficiary to make the payment. The Beneficiary may
receive the amount payable in a lump sum cash benefit, or, subject to any
limitation under any state or federal law, rule, or regulation, under one of the
Payout Options described above, unless a settlement agreement is effective at
the death of the Owner that prevents such election. The Beneficiary must make
such election within sixty days of the date Companion receives Due Proof of
Death; otherwise a lump sum payment will be made.
If an Owner of the Policy is a corporation or other nonindividual, the
primary Annuitant will be treated as an Owner of the Policy for purposes of the
death benefit. The "primary Annuitant" is that individual whose life affects the
timing or the amount of the payout under the Policy. A change in the primary
Annuitant will be treated as the death of an Owner.
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of 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. If the Owner does not name a new Annuitant,
the Owner will become the Annuitant.)
DEATH OF OWNER ON OR AFTER ANNUITY STARTING DATE. If any Owner or joint
Owner dies on or after the Annuity Starting Date and before all the Proceeds
have been paid, any remaining Proceeds will be paid at least as rapidly as under
the Payout Option in effect at the time of the death.
- 25 -
BENEFICIARY. The Owner may change the named Beneficiary by sending Written
Notice to the Service Office unless the named Beneficiary is irrevocable. When
recorded and acknowledged by Companion, the change will be effective as of the
date the Owner signed the request. The change will not apply to any payments
made or other action taken by Companion before recording. If the named
Beneficiary is irrevocable, the Owner may change the named Beneficiary only by
joint written request from the Owner and the Beneficiary. If more than one named
Beneficiary is designated, and the Policy Owner fails to specify their
interests, they will share equally.
If there are joint Owners, the surviving joint Owner will be deemed the
Beneficiary, and the Beneficiary named in the Policy application or as
subsequently changed will be deemed the contingent Beneficiary. If both joint
Owners die simultaneously, the death benefit will be paid to the contingent
Beneficiary.
If the Beneficiary is the deceased Owner's surviving spouse, the spouse may
elect either to receive the death benefit, in which case the Policy will
terminate, or to continue the Policy in force with the spouse as Owner.
If the named Beneficiary does not survive the Owner, then the estate of the
Owner is the Beneficiary.
IRS REQUIRED DISTRIBUTION
Federal tax law requires that if a Policy Owner of a nonqualified Policy
dies before the Annuity Starting Date, then the entire value of the Policy must
generally be distributed within five years of the date of death of such Policy
Owner. Therefore, generally, any death benefit must be paid within five years
after the date of death. The five-year rule does not apply to that portion of
the Proceeds which (a) is payable to or for the benefit of an individual
Beneficiary; and (b) will be paid over the lifetime or the life expectancy of
that Beneficiary as long as payments begin not later than one year after the
date of the Owner's death. Special rules may apply to the spouse of the deceased
Owner. See "Federal Tax Matters" in the Statement of Additional Information for
a detailed description of these rules. Other required distribution rules apply
to Qualified Contracts. (See "Certain Federal Income Tax Consequences," p. 28.)
The Policy contains provisions designed to comply with these requirements.
CHARGES AND DEDUCTIONS
----------------------
Companion 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 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
Companion will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses.
Companion will apply a Withdrawal Charge, expressed as a percentage of any
Purchase Payment surrendered or withdrawn, in connection with a full surrender
or partial withdrawal, in order to partially cover distribution expenses. The
Withdrawal Charge Percentage will vary depending upon the number of years that
have elapsed since the date the Purchase Payment was made. The amount of the
Withdrawal Charge is determined by multiplying the amount of each Purchase
Payment withdrawn by the applicable Withdrawal Charge Percentages. For purposes
of determining the Withdrawal Charge, the oldest Purchase Payment is considered
to be withdrawn first; the next oldest Purchase Payment is considered to be
withdrawn next, and so on (this is a "first-in, first-out" procedure), and all
Purchase Payments are deemed to be withdrawn before any earnings. The amount of
the partial withdrawal requested plus any Withdrawal Charge will be deducted
from the Accumulation Value on the date an Owner's Written Request is received
at the Service Office. In the absence of other instructions, partial withdrawals
(including any charge) will be deducted from the Subaccounts and the Fixed
Account on a pro-rata basis. No more than a pro-rata amount can be withdrawn
from the Fixed Account. The following is the table of Withdrawal Charge
Percentages:
================================================================================
Years Since Receipt of Purchase Payment 1 2 3 4 5 6 7 8+
- --------------------------------------------------------------------------------
Applicable Withdrawal Charge Percentage 7% 6% 5% 4% 3% 2% 1% 0%
================================================================================
Companion anticipates that the Withdrawal Charge will not generate
sufficient funds to pay the cost of distributing the Policies. If this charge is
insufficient to cover the distribution expenses, the deficiency will be met from
Companion's general funds, which will include amounts derived from the charge
for mortality and expense risks (described below).
Each Policy year, the Owner can withdraw up to 15% of Accumulation Value,
without imposition of the Withdrawal Charge. A Withdrawal Charge will also not
be applied on the Annuity Starting Date if the Accumulation Value is applied
after the second Policy Anniversary to provide lifetime Annuity Payments under
Payout Option 4. (The Withdrawal Charge will apply to Proceeds placed under
Payout Options 1, 2, 3, 5, and 6.) No Withdrawal Charge will be imposed as a
result
- 26 -
of any death benefit payment or, under Qualified Plans, any refund of
contributions paid in excess of the Owner's deductible amounts. Companion will
not increase the withdrawal charge.
MORTALITY AND EXPENSE RISK CHARGE
Companion imposes a daily charge as compensation for bearing certain
mortality and expense risks in connection with the Policies. This charge is
equal to an annual rate of 1.00% (.0027535% daily) of the value of the net
assets in the Variable Account and it will not increase. On an annual basis,
approximately three-fourths of this charge is for mortality risks and
approximately one-fourth is for expense risks. The Mortality and Expense Risk
Charge is reflected in the accumulation unit values for each Subaccount.
Accumulation Values and Annuity Payments are not affected by changes in
actual mortality experience or by actual expenses incurred by Companion. The
mortality risks assumed by Companion arise from its contractual obligations to
make Annuity Payments (determined in accordance with the Annuity tables and
other provisions contained in the Policy) and to pay death benefits prior to the
Annuity Starting Date. Thus, Owners are assured that neither an Annuitant's own
longevity nor an unanticipated improvement in general life expectancy will
adversely affect the periodic Annuity Payments that the Payee will receive under
the Policy.
The expense risk assumed by Companion is the risk that Companion's actual
expenses in administering the Policy will exceed the amount recovered through
the Administrative Charges.
If the Mortality and Expense Risk Charge is insufficient to cover
Companion's actual costs, Companion will bear the loss; conversely, if the
charge is more than sufficient to cover costs, the excess will be profit to
Companion. Companion expects a profit from this charge. To the extent that the
proceeds of the Withdrawal Charge are insufficient to cover the actual cost of
Policy distribution, the deficiency will be met from Companion's general
corporate assets, which may include amounts, if any, derived from the Mortality
and Expense Risk Charge.
ADMINISTRATIVE CHARGES
In order to cover the costs of administering the Policies, Companion
deducts an annual Policy Fee from the Accumulation Value of the Variable Account
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 the
Variable Account 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 in the same proportion that the Variable Account
Subaccount Accumulation Value in each such Eligible Investment bears to the
total Variable Account Accumulation Value of the Policy. The portion of the
annual Policy Fee deducted from the Variable Account Subaccounts will be
deducted by cancelling Accumulation Units. This fee is waived if the
Accumulation Value exceeds $50,000 on the last Valuation Date of the applicable
Policy Year and if the Variable Account Accumulation Value is insufficient to
pay the Policy Fee. Companion does not anticipate realizing any profit from this
fee.
Companion also deducts a daily Administrative Expense Charge from the
assets of each Subaccount of the Variable Account. This charge is equal to an
annual rate of .20% (.0005485% daily) of the net assets of each Subaccount of
the Variable Account. The Administrative Expense Charge will not be increased in
the future. Companion does not anticipate realizing any profit from this charge.
TRANSFER FEE
There is no charge for transfers from the Fixed Account or for the first 12
transfers from Subaccounts of the Variable Account in each Policy Year. However,
there is a $10 fee for the thirteenth and each subsequent request made by the
Owner to transfer Accumulation Value from a Subaccount during a single Policy
Year. Any applicable Transfer Fee is deducted from the amount transferred. All
transfer requests made simultaneously will be treated as a single request. No
transfer fee will be imposed for any transfer which is not at the Owner's
request. The Transfer Fee will not increase.
FEDERAL, STATE AND LOCAL TAXES
No charges are currently made for federal, state, or local taxes. However,
Companion reserves the right to deduct amounts from the Subaccounts for such
taxes or any other economic burden resulting from imposition of the tax laws
that Companion determines to be properly attributable to the Variable Account in
the future.
OTHER EXPENSES INCLUDING INVESTMENT ADVISORY FEES
Each Portfolio of the Series Funds is responsible for all of its expenses.
The net assets of each Portfolio of the Series Funds will reflect deductions in
connection with the investment advisory fee and other expenses.
For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Series Funds,
current copies of which accompany this Prospectus.
- 27 -
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 COMPANION'S UNDERSTANDING OF THE PRESENT FEDERAL INCOME
TAX LAWS AS THEY ARE CURRENTLY INTERPRETED BY THE INTERNAL REVENUE SERVICE. NO
REPRESENTATION IS MADE AS TO THE LIKELIHOOD OF THE CONTINUATION OF THE PRESENT
FEDERAL INCOME TAX LAWS OR OF THE CURRENT INTERPRETATION BY THE INTERNAL REVENUE
SERVICE. MOREOVER, THIS SUMMARY DISCUSSES ONLY CERTAIN FEDERAL INCOME TAX
CONSEQUENCES TO "UNITED STATES PERSONS," AND NO ATTEMPT HAS BEEN MADE TO
CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS. UNITED STATES PERSONS MEANS
CITIZENS OR RESIDENTS OF THE UNITED STATES, DOMESTIC CORPORATIONS, DOMESTIC
PARTNERSHIPS AND TRUSTS OR ESTATES THAT ARE SUBJECT TO UNITED STATES FEDERAL
INCOME TAX REGARDLESS OF THE SOURCE OF THEIR INCOME.
The Policy may be purchased on a non-tax qualified basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for favorable
tax treatment ("Qualified Policy"). Qualified Policies are designed for use by
individuals whose Purchase Payments are comprised solely of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 403(b), 408, or
457 of the Internal Revenue Code of 1986, as amended (the "Code"). The ultimate
effect of Federal income taxes on the amounts held under a Policy, on Annuity
Payments, and on the economic benefit to the Policy Owner, the Annuitant, or the
Beneficiary depends, 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. Companion believes that the Policy Owner who is a natural person
generally is not taxed on increases (if any) in the value of a Policy until
distribution occurs by withdrawing all or part of the Accumulation Value (E.G.,
partial withdrawals, full surrenders or Annuity Payments under the Payout Option
elected). For this purpose, the assignment, pledge, or agreement to assign or
pledge any portion of the Accumulation Value (and in the case of a Qualified
Policy, any portion of an interest in the qualified plan) generally will be
treated as a distribution. The taxable portion of a distribution (in the form of
a single sum payment or an annuity) is taxable as ordinary income.
The owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Policy's Accumulation
Value over the "investment in the contract" (discussed below) during the taxable
year. There are some exceptions to this rule, and a prospective Policy Owner
that is not a natural person may wish to discuss these with a competent tax
adviser.
THE FOLLOWING DISCUSSION GENERALLY APPLIES TO A POLICY OWNED BY A NATURAL
PERSON.
SURRENDERS AND PARTIAL WITHDRAWALS. In the case of a surrender or partial
withdrawal (including systematic withdrawals) under a QUALIFIED POLICY, under
Section 72(e) of the Code a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
individual's total accrued benefit for balance under the retirement plan. The
"investment in the contract" generally equals the amount of any purchase
payments paid by or on behalf of any individual. For a Policy issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from a Qualified
Policy.
With respect to NONQUALIFIED POLICIES, partial withdrawals (including
systematic withdrawals) are generally treated as taxable income to the extent
that the Accumulation Value immediately before the partial withdrawal exceeds
the "investment in the contract" at that time.
- 28 -
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.
For Variable Annuity Payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract." For Fixed Annuity Payments, in
general there is no tax on the portion of each Annuity Payment which represents
the same ratio that the "investment in the contract" bears to the total expected
value of the Annuity Payments for the term of the payments; however, the
remainder of each Annuity Payment is taxable. Once the "investment in the
contract" has been fully recovered, the full amount of any additional Annuity
Payments is taxable. If Annuity Payments cease by reason of the death of the
Annuitant, the excess (if any) of the "investment in the contract" as of the
Annuity Starting Date over the aggregate amount of Annuity Payments received on
or after the Annuity Starting Date that was excluded from gross income is
allowable as a deduction for the last taxable year of the Annuitant.
PENALTY TAX. In the case of a distribution pursuant to a Nonqualified
Policy, there may be imposed a Federal penalty tax equal to 10% of the amount
treated as taxable income. In general, however, there is no penalty tax on
distributions: (a) made on or after the date on which the Policy Owner attains
age 59 1/2; (b) made as a result of death or disability of a Policy Owner; (c)
received in substantially equal periodic payments as a life annuity or a joint
and survivor annuity for the lives or life expectancies of the Policy Owner and
a "designated beneficiary"; (d) from a qualified plan; (e) allocable to
investment in the Policy before August 14, 1982; (f) under a qualified funding
asset (as defined in Code section 130(d)); (g) under an immediate annuity (as
defined in Code Section 72(u)(4)); or (h) which are purchased by an employer on
termination of certain types of qualified plans and which are held by the
employer until the employee separates from service. Other tax penalties may
apply to certain distributions under a Qualified Policy.
DEATH BENEFIT PROCEEDS. Amounts may be distributed from the Account because
of the death of a Policy Owner. Generally, such amounts are includible 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 Companion (or its affiliates) to the same Policy Owner during any
calendar year are treated as one annuity contract for purposes of determining
the amount includible in gross income under section 72(e) of the Code. In
addition, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of section 72(e) through the serial purchase of
annuity contracts or otherwise. Congress has also indicated that the Treasury
Department may have authority to treat the combination purchase of an immediate
annuity contract and separate deferred annuity contract as a single annuity
contract under its general authority to prescribe rules as may be necessary to
enforce the income tax laws. Any Policy Owner or prospective Policy Owner
contemplating the purchase of more than one annuity in a calendar year should
consult a tax advisor.
WITHHOLDING. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Recipients, however, generally are provided the opportunity to elect not to have
tax withheld from distributions. Effective January 1, 1994, distributions from
certain qualified plans are generally subject to mandatory withholding. Certain
states also require withholding of state income taxes whenever federal income
taxes are withheld.
POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
nonqualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although as of the date of this
prospectus Congress is not actively considering any legislation regarding the
taxation of annuities, there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover, it is also possible that
any change could be retroactive (that is, effective prior to the date of the
change).
OTHER TAX CONSEQUENCES. As noted above, the foregoing discussion of the
Federal income tax consequences under the Policy is not exhaustive and special
rules are provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal income tax consequences discussed herein
reflect Companion'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.
- 29 -
QUALIFIED PLANS
The Policy may be used with certain qualified plans as described in the
following paragraphs. The tax rules applicable to Policy Owners in qualified
plans, including restrictions on contributions and benefits, taxation of
distributions and any tax penalties, vary according to the type of plan and the
terms and condition of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, aggregate distributions in excess
of $155,000 annually, distribution that do not satisfy specified requirements
and certain other transactions with respect to qualified plans. Therefore, no
attempt is made to provide more than general information about the use of the
Policy with qualified plans. Policy Owners, Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under qualified plans
may be subject 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.
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). Purchasers of a Policy for use
with such plans should seek competent advice regarding the suitability of the
Policy to their specific needs. The Policy may not be assigned except to a
successor plan trustee.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (each hereinafter referred to as "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA. Subject to the Policy's purchase payment
limits, the Policy may be issued as an IRA. Purchasers of a Policy for use with
IRAs will be provided with supplemental information required by the Internal
Revenue Service. Such purchasers will have the right to revoke their purchase
within seven days of the earlier of the establishment of the IRA or their
purchase. Purchasers should seek competent advice as to the suitability of the
Policy to their specific needs. An IRA cannot be assigned. Subject to the
Policy's purchase payment limits, the Policy (with unisex settlement option
rates) may be issued as an IRA in connection with a simplified employee pension
under Section 408(k) of the Code, but Companion is not responsible for providing
a plan document or administrative services for the simplified employee pension.
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 tax purposes.
These annuity contracts are commonly referred to as "Tax-Sheltered Annuities."
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 or rollover
from another Tax-Sheltered Annuity that is either offered through a government
employer such as a public school or funded only with salary reduction
contributions. Unlike some other Tax-Sheltered Annuities, the Policy does not
accept salary reduction contributions directly from an employer's payroll office
and it does not offer loans or hardship withdrawals. Except in the case of a
direct transfer to another Tax-Sheltered Annuity, withdrawals under the Policy
are prohibited unless made after the Policy Owner attains age 59 1/2, upon the
Policy Owner's separation from service or upon the Policy Owner's death or
disability. Purchasers should seek competent advice as to the suitability of the
Policy for their specific needs.
DISTRIBUTOR OF THE POLICIES
---------------------------
Mutual of Omaha Investor Services ("MOIS"), Mutual of Omaha Plaza, Omaha
Nebraska 68175, is the principal underwriter of the Policies. MOIS is a 100%
owned subsidiary of Mutual of Omaha Insurance Company, which is the ultimate
parent company of Registrant, Companion Life 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. Commission paid to a broker-dealer will
be up to 7% of Purchase Payments.
- 30 -
VOTING RIGHTS
-------------
To the extent required by law, Companion 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
Companion determines that it is permitted to vote Series Fund shares in its own
right, it may elect to do so. The Series Funds may not hold routine annual
Shareholder meetings.
The Policy Owner holds the voting interest in the selected Portfolios. The
number of votes that an Owner has the right to instruct will be calculated
separately for each Subaccount. The number of votes that an Owner has the right
to instruct for a particular Subaccount will be determined by dividing his or
her Accumulation Value in the Subaccount by the net asset value per share of the
corresponding Portfolio in which the Subaccount invests. Fractional shares will
be counted. Each Owner having a voting interest in a Subaccount will receive
proxy material, reports, and other materials relating to the appropriate
Portfolio.
LEGAL PROCEEDINGS
-----------------
There are no legal proceedings to which the Variable Account is a party or
to which the assets of the Variable Account are subject. Companion is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Variable Account.
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..................................................... 2
Assignment ....................................................... 3
Evidence of Age or Survival.......................................... 3
Federal Tax Matters . . . . .............................................. 3
Tax Status of the Policy............................................. 3
Taxation of Companion................................................ 4
State Regulation of Companion ............................................ 4
Administration . . . . . . . . ........................................... 4
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
Average Annual Total Returns . . . . . . ........................... 5
Legal Matters . . . . ................................................... 7
Other Information . . . . . . ............................................ 7
Financial Statements . . . . . .......................................... 7
- 31 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
Issued through: COMPANION LIFE SEPARATE ACCOUNT C
Offered by: COMPANION LIFE INSURANCE COMPANY
401 Theodore Fremd Avenue
Rye, New York 10580-1493
This Statement of Additional information expands upon subjects discussed in
the current Prospectus for the Ultrannuity Series V Variable Annuity Policy (the
"Policy") offered by Companion Life Insurance Company. You may obtain a copy of
the Prospectus dated November 15, 1996 by calling 1-800-494-0067 or by writing
to the Service Office: Companion Annuity Service Division, P.O. Box 419241,
Kansas City, MO 64141-6281. 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: November 15, 1996
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 (33)............................................ 3
Tax Status of the Policy.................................... 3
Taxation of Companion....................................... 4
State Regulation of Companion....................................... 4
Administration ..................................................... 4
Records and Reports................................................. 4
Distribution of the Policies (26)................................... 4
Custody of Assets................................................... 5
Historical Performance Data (17).................................... 5
Money Market Yields......................................... 5
Other Subaccount Yields..................................... 5
Average Annual Total Returns................................ 6
Legal Matters....................................................... 7
Other Information................................................... 7
Financial Statements (13)........................................... 7
(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 Companion and the Policy which may be of
interest to an Owner.
THE POLICY - GENERAL PROVISIONS
-------------------------------
OWNER AND JOINT OWNER
While the Owner is alive, only the Owner may exercise the rights under
the Policy. Ownership may be changed as described below under "Assignment." If
there are joint Owners, the signatures of both Owners are needed to exercise
rights under the Policy. If the Annuitant is other than the Owner, the Annuitant
has no rights under the Policy.
DEATH OF ANNUITANT
If the Annuitant is an Owner or joint Owner, the death of the Annuitant
will be treated as the death of the Owner rather than of the Annuitant.
If the Annuitant is not an Owner and the Annuitant dies before the
Annuity Starting Date, the Owner may name a new Annuitant if such Owner(s) is
not a corporation or other non-individual. If the Owner does not name a new
Annuitant, the Owner will become the Annuitant.
ENTIRE CONTRACT
The entire contract is the Policy, data page, any riders and the signed
application, a copy of which will be attached to the Policy. All statements made
in the application will be deemed representations and not warranties. No
statement, unless it is in the application, will be used by Companion 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 Companion. No agent or Registered Representative has authority to
change or waive any provision of the Policy.
Companion reserves the right to amend the Policies to meet the
requirements of, or take advantage of, the Internal Revenue Code, regulations or
published rulings. A Policy Owner can refuse such a change by giving Written
Notice, but a refusal may result in adverse tax consequences.
DEFERMENT OF PAYMENT AND TRANSFERS
Companion 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
Companion. Companion 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.
Companion may defer payment of partial withdrawals or a surrender from the
Fixed Account for up to six months from the date written request is received at
the Service Office.
INCONTESTABILITY
Companion will not contest the validity of the Policy after the Date of
Issue.
MISSTATEMENT OF AGE OR SEX
Companion 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 Companion has made payments that are too small, the underpayments
will be added to the next payment. Adjustments for overpayments or underpayments
will include 6% interest.
NONPARTICIPATING
No dividends will be paid. Neither the Owner nor the Beneficiary will
have the right to share in Companion's surplus earnings or profits.
- 2 -
ASSIGNMENT
The Owner may change the ownership of the Policy or pledge it as
collateral by assigning it. No assignment will be binding on Companion until
Companion records and acknowledges it. The rights of any Payee will be subject
to a collateral assignment.
If the named Beneficiary is irrevocable, a change of ownership or a
collateral assignment may be made only by joint written request from the Owner
and the named Beneficiary. On the Annuity Starting Date, the Owner may select
another Payee, but the Owner retains all rights of ownership unless the Owner
signs an absolute assignment.
EVIDENCE OF AGE OR SURVIVAL
Companion reserves the right to require proof of the age or survival of
any Owner, Annuitant or Payee. No payment will be made until Companion 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 Companion during the Valuation Period which is
determined by Companion 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 Companion 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. Companion and the Series Funds have entered into agreements
regarding participation in the Series Funds that requires the Series Funds and
their Portfolios to be operated in compliance with the Treasury regulations.
OWNER CONTROL. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the contract owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over
- 3 -
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."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the Owner has additional flexibility in allocating premium payments and
policy values. These differences could result in an Owner being treated as the
owner of a pro-rata portion of the assets of the Separate Account. In addition,
Companion does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Companion therefore reserves the right to modify the Policy as necessary
to attempt to prevent an Owner from being considered the owner of a pro-rata
share of the assets of the Variable Account or to otherwise qualify the Policy
for favorable tax treatment.
DISTRIBUTION REQUIREMENTS. The Code also requires that Nonqualified
Policies contain specific provisions for distribution of Policy Proceeds upon
the death of an Owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such Policies provide that if an
Owner dies on or after the Annuity Starting Date and before the entire interest
in the Policy has been distributed, the remaining portion must be distributed at
least as rapidly as under the method in effect on the Owner's death. If an Owner
dies before the Annuity Starting Date, the entire interest in the Policy must
generally be distributed within five years after the Owner's date of death,
these requirements are considered to be satisfied if the entire interest in the
Policy is used to purchase an immediate annuity under which payments will begin
within one year of the Owner's death and will be made for the life of the
Beneficiary or for a period not extending beyond the life expectancy of the
Beneficiary. If the Beneficiary is the deceased Owner's surviving spouse, the
Policy may be continued with the Owner's surviving spouse as the new Owner. The
Policy contains provisions intended to comply with these requirements of the
Code. No regulations interpreting these requirements of the Code have yet been
issued and thus no assurance can be given that the provisions contained in the
Policies satisfy all such Code requirements. The provisions contained in the
Policies will be reviewed and modified if necessary to assure that they comply
with the Code requirements when clarified by regulation or otherwise.
TAXATION OF COMPANION
Companion 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
Companion and, accordingly, will not be taxed separately as a "regulated
investment company" under Subchapter M of the Code. Companion does not expect to
incur any federal income tax liability with respect to investment income and net
capital gains arising from the activities of the Variable Account retained as
part of the reserves under the Policy. Based on this expectation, it is
anticipated that no charges will be made against the Variable Account for
federal income taxes. If, in future years, any federal income taxes or related
economic burdens are incurred by Companion with respect to the Variable Account,
Companion may make a charge to the Variable Account.
STATE REGULATION OF COMPANION
-----------------------------
Companion is subject to the laws of New York governing insurance
companies and to regulation by the New York Division of Insurance. An annual
statement in a prescribed form is filed with the Department of Insurance each
year covering the operation of Companion 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 Companion's contract
liabilities and reserves so that the Department may certify the items are
correct. Companion's books and accounts are subject to review by the Department
of Insurance at all times and a full examination of its operations is conducted
periodically by the National Association of Insurance Commissioners. In
addition, Companion is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
ADMINISTRATION
--------------
Companion has an administrative services agreement with
Continuum/Vantage Computer Systems, (the "Administrator"), P.O. Box 419241,
Kansas City, Missouri 64141-6281. The services provided by the Administrator
under the agreement include issuance and redemption of the Policies, maintenance
of records concerning the Policies, and certain valuation services.
If the Administrator does not continue to provide these services because
the administrative services agreement is not renewed or for any other reason,
Companion will attempt to secure similar services from such sources as may then
be available. Services will be purchased on a basis which, in Companion's sole
discretion, affords the best service at the lowest
- 4 -
cost. Companion, however, reserves the right to select a provider of services
which Companion its sole discretion, considers best able to perform such
services in a satisfactory manner even though the costs for the service may be
higher than would prevail elsewhere. If Companion does not secure these services
on a basis which it deems satisfactory, it may elect to perform all or any part
of the services itself or through a subsidiary or affiliate.
RECORDS AND REPORTS
-------------------
All records and accounts relating to the Variable Account will be
maintained by Companion or by its Administrator. As presently required by the
Investment Company Act of 1940 and regulations promulgated thereunder, Companion
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 Companion does not anticipate discontinuing the
offering of the Policies.
However, Companion reserves the right to discontinue the offering of the
Policies.
Mutual of Omaha Investor Services, Inc. ("MOIS") will be the principal
underwriter of the Policies. The Policies will be distributed by MOIS through
retail broker-dealers. Commissions payable to a broker-dealer will be up to 7.0%
of Purchase Payments.
CUSTODY OF ASSETS
-----------------
The assets of each of the Subaccounts of the Variable Account are held
by Companion. The assets of the Variable Account are segregated and held
separate and apart from Companion's general account assets. Companion or the
Administrator maintains records of all purchases and redemptions of shares of
the Series Funds held by each of the Subaccounts. Additional protection for the
assets of the Variable Account is afforded by Companion's fidelity bond,
presently in the amount of $10 million, covering the acts of officers and
employees of Companion.
HISTORICAL PERFORMANCE DATA
---------------------------
From time to time, Companion may disclose yields, total returns, and
other performance data pertaining to the Policies for a Subaccount. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the Securities and Exchange
Commission.
The yields and total returns of the Subaccounts of the Variable Account
normally will fluctuate over time. THEREFORE, THE DISCLOSED YIELDS AND TOTAL
RETURNS FOR ANY GIVEN PAST PERIOD ARE NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. A Subaccount's actual yield and total return
is affected by the types and quality of portfolio securities held by the
Portfolio and its operating expenses.
Because of the charges and deductions imposed under a Policy, the yields
and total returns for the Subaccounts will be lower than the yields and total
returns for their respective Portfolios. The yield figures will not reflect the
Withdrawal Charge.
MONEY MARKET YIELDS
From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the Money Market Portfolio or on its portfolio
securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Policy having a balance of one Accumulation
Unit of the Money Market Subaccount at the beginning of the period to determine
the base period return, and annualizing this quotient on a 365-day basis. The
net change in account value reflects: (1) net income from the Portfolio
attributable to the hypothetical account; and (2) charges and deductions imposed
under the Policy which are attributable to the hypothetical account. The charges
and deductions include the per Unit charges for the hypothetical account for:
(1) the annual Policy Fee; (2) the Administrative Expense Charge; and (3) the
Mortality and Expense Risk Charge. The $30 annual Policy Fee is reflected as an
annual 0.10% charged daily, based on an anticipated average Accumulation Value
of $30,000. Yield figures will not reflect the Withdrawal Charge.
Because of the charges and deductions imposed under the Policy, the
yield for the Money Market Subaccount will be lower than the yield for the Money
Market Portfolio.
- 5 -
The Securities and Exchange Commission also permits Companion to
disclose the effective yield of the Money Market Subaccount for the same
seven-day period, determined on a compounded basis. The effective yield is
calculated by compounding the unannualized base period return by adding one to
the base period return, raising the sum to a power equal to 365 divided by 7,
and subtracting one from the result.
The current and effective yields on amounts held in the Money Market
Subaccount normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Portfolio, the types of quality of
portfolio securities held by the Money Market Portfolio and the Money Market
Portfolio's operating expenses. Yields figures do not reflect the effect of any
Withdrawal Charge that may be applicable to a Policy.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the
current annualized yield of one or more of the Subaccounts (except the Money
Market Subaccount) for a Policy for 30-day or one-month periods. The annualized
yield of a Subaccount refers to income generated by the Subaccount over a
specific 30-day or one-month period. Because the yield is annualized, the yield
generated by a Subaccount during a 30-day or one-month period is assumed to be
generated each period over a 12-month period.
The yield is computed by: (a) dividing the net investment income of the
Portfolio attributable to the Subaccount Accumulation Units less Subaccount
expenses for the period by the maximum offering price per Accumulation Unit on
the last day of the period times the daily average number of units outstanding
for the period; (b) compounding that yield for a six-month period; and (c)
multiplying that result by 2. Expenses attributable to the Subaccount include:
(a) the annual Policy Fee; (b) the Administrative Expense Charge; and (c) the
Mortality and Expense Risk Charge. The $30 annual Policy Fee is reflected as an
annual 0.10% charged daily in the yield calculation, based on an anticipated
average Accumulation Value of $30,000. The 30-day or one-month yield is
calculated according to the following formula:
Yield = [2 {A-B + 1} 6 - 1]
[ cd ]
Where:
a =-- net income of the Portfolio for the 30-day or one-month
period attributable to the Subaccount's Accumulation Units.
b =-- expenses of the Subaccount for the 30-day or one-month period.
c =-- the average number of Accumulation Units outstanding.
d =-- the Accumulation Unit value at the close of the last day in
the 30-day or one-month period.
Because of the charges and deductions imposed under the Policies, the
yield for a Subaccount will be lower than the yield for the corresponding Series
Fund Portfolio.
Yield calculations do not take into account the Withdrawal Charge under
the Policy (a maximum of 7% of the Purchase Payments surrendered or withdrawn).
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Subaccounts for various
periods of time.
When a Subaccount has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Until a Subaccount has been in operation for 10 years, Companion 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 Companion calculates at the end of each Valuation
Period based on the performance of the Subaccount's underlying Portfolio, the
deductions for (a) the annual Policy Fee; (b) the Administrative Expense Charge;
and (c) the Mortality and Expense Risk Charge. The $30 annual Policy Fee is
reflected as an annual 0.10% charged daily in the calculation of average annual
total returns, based on an anticipated average Accumulation Value of $30,000.
The calculation also assumes surrender of the Policy at the end of the period
for the return quotation. Standard total returns will therefore reflect a
deduction of any applicable Withdrawal Charge. The total return will then be
calculated according to the following formula:
- 6 -
P(1+TR) n = ERV
Where:
P = -- a hypothetical initial Purchase Payment of $1,000.
TR = -- the average annual total return.
ERV = -- the ending redeemable value (net of any applicable
Withdrawal Charge) of the hypothetical account at the end
of the period.
n =-- the number of years in the period.
Companion 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
-------------
Legal advice relating to certain matters under the federal securities
laws applicable to the issue and sale of the Policies has been provided to
Companion by Sutherland, Asbill & Brennan, of Washington D.C. All matters of
state law, including the validity of the Policy and Companion's authority to
issue the Policy, have been passed upon by Daniel R.
Varona, General Counsel of Companion.
OTHER INFORMATION
-----------------
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the terms
of these documents, reference should be made to the instruments filed with the
Securities and Exchange Commission.
FINANCIAL STATEMENTS
--------------------
This Statement of Additional Information contains financial statements for
the Variable Account as of December 31, 1995. Coopers & Lybrand LLP, Omaha,
Nebraska, served as independent auditors for the Variable Account, and in that
capacity audited the Accounts Financial Statements.
The Financial Statements of Companion as of December 31, 1995, 1994, and
1993 included in this Registration Statement have also been audited by Coopers &
Lybrand LLP, New York, New York. The financial statements of Companion should be
considered only as bearing on the ability of Companion 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>
===============================================================================
COMPANION LIFE
SEPARATE ACCOUNT C
REPORT ON AUDIT OF
FINANCIAL STATEMENTS
for the year ended
December 31, 1995
===============================================================================
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Companion Life Insurance Company
We have audited the accompanying statement of net assets of Companion Life
Separate Account C as of December 31, 1995, and the related statement of
operations and changes in net assets for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Companion Life Separate Account
C as of December 31, 1995, and the results of its operations and changes in its
net assets for the year then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 20, 1996
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE SEPARATE ACCOUNT C
STATEMENT OF NET ASSETS
Series I
-------------------------------------------------------------------------------------------------
Fidelity T. Rowe Price Scudder
-------------------------------- ------------------------------------------ ---------------------
Asset International America Equity Term Money
Growth Manager Index 500 Stock Growth Income Bond Market Bond
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1995
ASSETS
Investments in portfolio
shares, at cost $ 55,995 118,963 4,969 47,976 76,062 153,920 33,082 2,371 78,115
========== ========== ========== ========== ========== ========= ========== ========== ==========
Investments in portfolio
shares, at market value $ 57,821 125,985 5,422 49,531 78,018 162,211 33,290 2,371 80,270
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Net assets $ 57,821 125,985 5,422 49,531 78,018 162,211 33,290 2,371 80,270
========== ========== ========== ========== ========== ========= ========== ========== ==========
Accumulation units outstanding 4,158 11,268 395 4,573 5,231 11,887 3,022 2,260 6,902
========== ========== ========== ========== ========== ========= ========== ========== ==========
Net asset value per unit $ 13.91 11.18 13.73 10.83 14.91 13.65 11.02 1.05 11.63
========== ========== ========== ========== ========== ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE SEPARATE ACCOUNT C
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Series I
-------------------------------------------------------------------------------------------------
Fidelity T. Rowe Price Scudder
-------------------------------- ------------------------------------------ ---------------------
Asset International America Equity Term Money
Growth Manager Index 500 Stock Growth Income Bond Market Bond
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1995
Reinvested dividends and
capital gain distributions - - - - - 1,646 224 1,838 779
Mortality risk charges and
expenses (169) (483) (24) (202) (202) (423) (48) (485) (268)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net investment income
(expense) (169) (483) (24) (202) (202) 1,223 176 1,353 511
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net realized gains (losses) 36 249 5 612 3,781 150 1 317
Net unrealized gains (losses) 1,826 7,022 453 1,555 1,956 8,291 208 2,155
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net gains (losses) on
investments 1,862 7,271 458 2,167 5,737 8,441 209 2,472
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase (decrease)
in net assets 1,693 6,788 434 1,965 5,535 9,664 385 1,353 2,983
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Policy purchases 56,128 128,308 4,988 78,188 125,644 156,068 32,905 102,360 120,902
Policy withdrawals - (9,111) - (30,622) (53,161) (3,521) - (101,342) (43,615)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in net
assets from policyholder
transactions 56,128 119,197 4,988 47,566 72,483 152,547 32,905 1,018 77,287
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in net assets
Net assets, beginning of year 57,821 125,985 5,422 49,531 78,018 162,211 33,290 2,371 80,270
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net assets, end of year $ 57,821 125,985 5,422 49,531 78,018 162,211 33,290 2,371 80,270
========== ========== ========== ========== ========= ========= ========== ========== ==========
Accumulation unit purchases 4,158 12,146 395 7,493 8,880 12,180 3,022 98,650 10,788
Accumulation unit withdrawals - (878) - (2,920) (3,649) (293) - (96,390) (3,886)
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Net increase in units
outstanding 4,158 11,268 395 4,573 5,231 11,887 3,022 2,260 6,902
Units outstanding, beginning
of year - - - - - - - - -
---------- ---------- ---------- ---------- --------- --------- ---------- ---------- ----------
Units outstanding, end of year 4,158 11,268 395 4,573 5,231 11,887 3,022 2,260 6,902
========== ========== ========== ========== ========= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMPANION LIFE SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Companion Life Separate Account C (Separate Account) was established by
Companion Life Insurance Company on February 18, 1994, under the laws of
the State of New York, and is registered as a unit investment trust
under the Investment Company Act of 1940, as amended. The Separate
Account is a segregated investment account of Companion Life Insurance
Company (Companion). It is divided into subaccounts, each of which
invests exclusively in shares of a corresponding mutual fund portfolio.
The available portfolios are the Fidelity VIP Growth, Fidelity VIP Asset
Manager and Fidelity VIP II Index 500, T. Rowe Price International
Stock, T. Rowe Price New America Growth, T. Rowe Price Equity Income, T.
Rowe Price Limited Term Bond, Scudder Money Market and Scudder Bond.
(a) Security Valuation and Related Investment Income:
The market value of investments is based on the closing bid
prices as of the respective year end. Investment transactions
are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the
ex-dividend date.
(b) Federal Income Taxes:
Operations of the Separate Account are part of, and are taxed
with, the operations of Companion, which is taxed as a "life
insurance company" under the Internal Revenue Code.
2. Account Charges:
Companion deducts a daily charge as compensation for the mortality and
expense risks assumed by Companion. The charge is equal on an annual
basis to 1.25% of the average daily net assets of each subaccount.
Companion guarantees that the mortality and expense charge shall not
increase.
Companion may incur premium taxes relating to the policies. Companion
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, Companion may make deductions from the
Separate Account to pay the taxes.
Companion deducts a daily administrative expense charge from the net
assets of the Separate Account. The nominal annual rate is .15% of the
net asset value of each subaccount. 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. Neither
expense charge shall increase.
<PAGE>
COMPANION LIFE SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Account Charges, Continued:
A withdrawal charge will be assessed on withdrawals in excess of 10% of
the participant's accumulation value as of the last contract anniversary
preceding the request for the withdrawal. 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 will be treated as a single
request. No transfer fee will be imposed for any transfer which is not
at the policyowner's request. The transfer fee will not increase.
<PAGE>
COMPANION LIFE SEPARATE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Net Assets:
<TABLE>
<CAPTION>
Total net assets (policyowners' cumulative investment accounts) consist
of the following at December 31, 1995:
Fidelity T. Rowe Price Scudder
------------------------------- ------------------------------------------- --------------------
Asset International America Equity Term Money
Growth Manager Index 500 Stock Growth Income Bond Market Bond
--------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased $56,128 128,308 4,988 78,188 125,644 156,068 32,905 102,360 120,902
Shares sold (169) (9,594) (24) (30,824) (53,363) (3,944) (48) (101,827) (43,883)
Reinvested
dividends and capital gain
distributions - - - - - 1,646 224 1,838 779
Net realized gains
(losses) 36 249 5 612 3,781 150 1 - 317
Unrealized gains
(losses) 1,826 7,022 453 1,555 1,956 8,291 208 - 2,155
--------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net assets $57,821 125,985 5,422 49,531 78,018 162,211 33,290 2,371 80,270
========= ========== ========== ========== ========== ========== ========== ========= =========
</TABLE>
Gross unrealized gain on investments aggregated $23,466 at December 31, 1995.
<PAGE>
===============================================================================
COMPANION LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
For the years ended
December 31, 1995, 1994 and 1993
===============================================================================
<PAGE>
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Companion Life Insurance Company:
We have audited the accompanying balance sheets of COMPANION LIFE INSURANCE
COMPANY (a New York corporation and a wholly owned subsidiary of United of Omaha
Life Insurance Company) as of December 31, 1995 and 1994, and the related
statements of operations, capital and surplus, and cash flow for the three years
in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Companion Life Insurance
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flow for each of the three years in the period ended December 31, 1995
in conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of New York, which are considered generally accepted
accounting principles for wholly owned subsidiaries of mutual life and health
and accident insurance companies.
Our audit was conducted for the purpose of expressing an opinion on the
statutory financial statements taken as a whole. The Supplemental Schedule of
Assets and Liabilities is presented to comply with the NAIC's Annual Statement
Instructions and is not a required part of the basic statutory financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic statutory financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
statutory financial statements taken as a whole.
COOPERS & LYBRAND L.L.P.
New York, New York
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31, 1995 and 1994
ADMITTED ASSETS: 1995 1994
------------------- -------------------
<S> <C> <C>
Bonds $ 299,274,340 $ 237,304,318
Mortgage loans 21,596,144 27,815,248
Policy loans 12,096,063 11,659,319
Cash (338,823) 563,888
Short-term investments 4,000,000 3,650,000
------------------- -------------------
Total cash and invested assets 336,627,724 280,992,773
------------------- -------------------
Premiums deferred and uncollected 3,758,690 2,974,171
Investment income due and accrued 3,435,558 3,254,781
Separate account assets 597,883
Other assets 777,328 915,567
------------------- -------------------
Total admitted assets $ 345,197,183 $ 288,137,292
=================== ===================
LIABILITIES:
Policy reserves:
Aggregate reserve for policies and contracts $ 274,395,967 $ 220,190,108
Policy and contract claims 2,818,717 2,459,716
Interest maintenance reserve 453,991 447,842
Other reserves 357,769 382,040
------------------- -------------------
278,026,444 223,479,706
Asset valuation reserve 2,827,596 2,694,071
General expenses due or accrued 570,704 433,693
Funds held under reinsurance treaties 8,348,218 7,269,575
Reinsurance in unauthorized companies 47,177 46,956
Amounts due reinsurers 52,552 67,450
Separate account liabilities 584,527
Other liabilities 3,873,167 3,436,245
------------------- -------------------
Total liabilities 294,330,385 237,427,696
------------------- -------------------
CAPITAL and SURPLUS:
Capital stock, $400 par value; 5,000 shares
authorized and outstanding 2,000,000 2,000,000
Surplus:
Gross paid-in and contributed 45,650,000 45,650,000
Special surplus and contingency reserve 359,960 298,105
Unassigned surplus 2,856,838 2,761,491
------------------- -------------------
48,866,798 48,709,596
------------------- -------------------
Total capital and surplus 50,866,798 50,709,596
------------------- -------------------
Total liabilities, capital and surplus $ 345,197,183 $ 288,137,292
=================== ===================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
STATEMENTS of OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---------------- ---------------- -----------------
<S> <C> <C> <C>
Income:
Premiums, annuity considerations and fund deposits $ 72,765,877 $ 48,176,597 $ 25,813,474
Net investment income 23,605,272 19,640,976 17,704,979
Other income 380,099 488,529 201,323
---------------- ---------------- -----------------
Total income 96,751,248 68,306,102 43,719,776
---------------- ---------------- -----------------
Benefits and expenses:
Policyholder benefits 22,458,731 19,514,839 17,070,403
Increase in reserves for policyholder benefits 54,205,859 31,906,878 13,172,943
Commissions and operating expenses 17,356,764 14,033,820 10,620,722
Net transfers to separate accounts 545,430
---------------- ---------------- -----------------
Total benefits and expenses 94,566,784 65,455,537 40,864,068
---------------- ---------------- -----------------
Net gain from operations before federal
income taxes and net realized capital gains 2,184,464 2,850,565 2,855,708
Federal income taxes 1,445,927 2,052,319 2,119,861
---------------- ---------------- -----------------
Net gain from operations before
net realized capital gains 738,537 798,246 735,847
Net realized capital losses (691) (117,518)
---------------- ---------------- -----------------
Net income $ 737,846 $ 798,246 $ 618,329
================ ================ =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
STATEMENTS of CAPITAL and SURPLUS
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
--------------- ---------------- ----------------
<S> <C> <C> <C>
Capital stock:
Balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
--------------- ---------------- ----------------
Surplus:
Gross paid-in and contributed:
Balance at beginning of year 45,650,000 25,650,000 25,650,000
Paid-in surplus by United of Omaha 20,000,000
--------------- ---------------- ----------------
Balance at end of year 45,650,000 45,650,000 25,650,000
--------------- ---------------- ----------------
Special surplus and contingency reserve:
Balance at beginning of year 298,105 222,560 1,975,449
Increase in group contingency life reserve 61,855 75,545 50,479
Transfer of federal income tax credit to
unassigned surplus (1,803,368)
--------------- ---------------- ----------------
Balance at end of year 359,960 298,105 222,560
--------------- ---------------- ----------------
Unassigned surplus:
Balance at beginning of year 2,761,491 2,338,424 (753,647)
Net income 737,846 798,246 618,329
Change in separate accounts surplus 13,356
Change in net unrealized capital gains (losses) (382,026)
(Increase) decrease in:
Non-admitted assets (78,228) 56,754 (101,114)
Liability for reinsurance in unauthorized companies (221) (1,724) 877,026
Asset valuation reserve (133,525) (354,664) (533,562)
Contingency reserve (61,855) (75,545) (50,479)
Investment reserve 478,503
Transfer of federal income tax credit from
special surplus reserve 1,803,368
--------------- ---------------- ----------------
Balance at end of year 2,856,838 2,761,491 2,338,424
--------------- ---------------- ----------------
Total capital and surplus $ 50,866,798 $ 50,709,596 $ 30,210,984
=============== ================ ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
STATEMENTS of CASH FLOW
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---------------- ---------------- -----------------
<S> <C> <C> <C>
Cash from operations:
Premiums, annuity considerations and fund deposits $ 71,904,608 $ 47,200,645 $ 25,064,722
Net investment income 23,188,680 18,742,752 17,791,161
Other income 426,796 309,949 376,737
---------------- ---------------- -----------------
95,520,084 66,253,346 43,232,620
---------------- ---------------- -----------------
Benefits 21,974,648 20,017,495 17,506,139
Commissions and general expenses 17,477,981 12,807,114 10,120,122
Increase in policy loans 436,744 (519,633) (340,073)
Federal income taxes paid
(excluding tax on capital gains) 1,665,994 2,122,134 1,709,631
Other operating expenses 786,187 217,918 179,606
---------------- ---------------- -----------------
42,341,554 34,645,028 29,175,425
---------------- ---------------- -----------------
Net cash from operations 53,178,530 31,608,318 14,057,195
---------------- ---------------- -----------------
Proceeds from investments sold, redeemed or matured:
Bonds 16,456,527 15,047,578 37,877,453
Mortgage loans 6,273,360 7,946,922 10,116,684
Real estate 400,000
Federal income taxes on capital gains 3,153 (67,353) (253,454)
---------------- ---------------- -----------------
22,733,040 22,927,147 48,140,683
---------------- ---------------- -----------------
Paid-in surplus from United of Omaha 20,000,000
----------------
Other sources 2,204,401 1,453,722 1,553,066
---------------- ---------------- -----------------
Total cash provided 78,115,971 75,989,187 63,750,944
---------------- ---------------- -----------------
Cost of investments acquired:
Bonds 78,529,680 75,613,066 73,134,176
Mortgage loans 2,769
Other uses 139,002 205,276 579,658
---------------- ---------------- -----------------
Total cash applied 78,668,682 75,821,111 73,713,834
---------------- ---------------- -----------------
Net change in cash and (552,711) 168,076 (9,962,890)
short-term investments
Cash and short-term investments at beginning of year 4,213,888 4,045,812 14,008,702
---------------- ---------------- -----------------
Cash and short-term
investments at end of year $ 3,661,177 $ 4,213,888 $ 4,045,812
================ ================ =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES to FINANCIAL STATEMENTS
1. . Summary of Significant Accounting Practices:
Companion Life Insurance Company (the Company), domiciled in the State of
New York, is a wholly owned subsidiary of United of Omaha Life Insurance
Company (United of Omaha), which is a wholly owned subsidiary of Mutual
of Omaha Insurance Company (Mutual of Omaha), a mutual life and health
and accident insurance company, domiciled in the State of Nebraska. The
Company has insurance licenses to operate in three states, New York, New
Jersey and Connecticut. Individual annuity and life insurance products
are sold primarily through a network of Mutual of Omaha career agents,
direct mail, stockbrokers, financial planners, and banks. The group
business is produced through representatives located in Mutual of Omaha
group offices.
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the Department of
Insurance, State of New York, which practices are considered to be
generally accepted accounting principles for mutual life and health and
accident insurance companies and their wholly-owned stock life insurance
company subsidiaries (see Note 11). Management is required to make
estimates and assumptions that affect the reported amounts of admitted
assets and liabilities as of the dates of the financial statements and
income, expenses and benefits for the years then ended. Actual results
could differ significantly from those estimates. The principal accounting
practices followed by the Company are:
(a.) Investments:Bonds are generally stated at amortized cost using
the scientific method, except for those not in good standing as
defined by the National Association of Insurance Commissioners
("NAIC"), which are carried at values determined by the NAIC.
Unrealized capital gains and losses are reported as a component of
surplus without recognizing the effect of related 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.
Short-term investments include all investments whose maturities, at
the time of acquisition, are one year or less, and are stated at
cost, which approximates market.Investment income is recorded when
earned. Realized gains and losses on sale or maturity of
investments are determined on the specific identification basis.
Any portion of invested assets designated as "non-admitted" are
excluded from the balance sheets and recorded as a change in
unrealized capital gains and losses.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES to FINANCIAL STATEMENTS, Continued
(b) Asset Valuation and Interest Maintenance Reserves: The Company
establishes certain reserves as promulgated by the NAIC. The Asset
Valuation Reserve (AVR) is established for the specific risk
characteristics of invested assets of the Company. The Interest
Maintenance Reserve (IMR) is established for the realized gains and
losses on the redemption of fixed income securities resulting from
changes in interest rates net of tax. Gains and losses pertaining
to the IMR are subsequently amortized into investment income over
the expected remaining period to maturity of the investments sold.
(c) Policy Reserves: Policy reserves provide amounts adequate to discharge
estimated future obligations on policies in force. Reserves for life
policies are computed principally by the Commissioners' Reserve
Valuation Method basis using the 1980 CSO mortality table with
interest rates ranging from 4% to 6%. Other life reserves are computed
on the net level premium basis or the Commissioners' Reserve Valuation
Method basis using various mortality tables, including 1941 CSO, 1958
CSO, and 1980 CSO tables, with interest rates ranging from 2.5% to 6%.
Annuity reserves are based primarily upon the 1937 Standardized
Annuity Table with interest rates ranging from 2.5% to 3.5%, the 1971
Individual Annuity Mortality Table with interest rates ranging from 4%
to 7.5%, or the 1983a Individual Annuity Mortality Table with interest
rates ranging from 5.25% to 9.25%.
Policy and contract claim liabilities include provisions for
reported claims and estimates for claims incurred but not reported.
(d) Premiums and Related Commissions: Premiums are recognized as
income over the premium-paying period. Commissions and other
expenses related to the acquisition of policies are charged to
operations as incurred.
(e) Federal Income Taxes:The Company files a consolidated federal income
tax return with its parent and other eligible affiliated companies.The
method of allocating taxes among the companies is subject to a written
agreement approved by the Board of Directors. Each company's provision
for federal income tax expense is based on a separate return
calculation with each company recognizing tax benefits of net
operating loss carry- forwards and tax credits on a separate return
basis. The provision for federal income taxes is based on income which
is currently taxable. Deferred federal income taxes are not provided
for temporary differences between income tax and financial reporting.
The Company recognizes the benefits of investment tax carry-forwards
when realized.
<PAGE>
(f) Non-admitted Assets:Certain assets designated as "non-admitted"
assets, principally receivables and office furniture and equipment,
are excluded from the balance sheets. The net change in such assets is
charged or credited directly to unassigned surplus.
(g) Retirement Benefits:Annual provisions,based on actuarial calculations,
are made for contributions to the retirement annuity plan.
(h) Fair Values of Financial Instruments:The following methods and
assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:
Cash,Short-term Investments and Other Invested Assets:The carrying
amounts reported in the balance sheets for these instruments
approximate their fair values.
Bonds: The fair values for bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values are
estimated using values obtained from independent pricing services
or based on expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the
investments.
Mortgage Loans: The fair values for mortgage loans are estimated
using discounted cash flow analyses, using interest rates currently
being offered for similar loans to borrowers with similar credit
ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
Policy Loans: The Company does not believe an estimate of the fair
value of policy loans can be made without incurring excessive cost.
Policy loans have no stated maturities and are usually repaid by
reductions to benefits and surrenders. Because of the numerous
assumptions which would have to be made to estimate fair value, the
Company further believes that such information would not be
meaningful.
i) Separate Accounts: The assets of the separate accounts shown in
the balance sheets primarily consist of mutual funds held by the
Company for the benefit of policyholders under specific individual
annuity contracts. Benefits paid to separate account policyholders
are reflected in the statements of operations, but are offset by
transfers from the separate accounts. The payment of such benefits
and the earning of investment income constitute the only
significant activities in the separate accounts.
<PAGE>
2. Investments:
The amortized cost, and gross unrealized gains and losses and estimated
fair value of bonds and short-term investments held at December 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Gains Unrealized
Amortized Losses Estimated
Cost Fair Value
------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
At December 31, 1995:
Bonds:
Governments $ 1,050,289 $ 78,434 $ $ 1,128,723
States 137,775 2,225 140,000
Special revenue 72,353,983 1,268,317 144,958 73,477,342
Subdivisions 994,205 25,795 1,020,000
Utilities 25,947,182 1,484,545 33,525 27,398,202
Industrials and
miscellaneous 200,911,451 10,920,076 324,828 211,506,699
Credit-tenant loans 1,879,455 139,904 2,019,359
------------------ ----------------- ----------------- ------------------
$ 303,274,340 $ 13,919,296 $ 503,311 $ 316,690,325
================== ================= ================= ==================
At December 31, 1994:
Bonds:
Governments $ 1,201,582 $ 22,183 $ 7,560 $ 1,216,205
States 199,924 13,495 186,429
Special revenue 72,619,710 211,303 6,241,751 66,589,262
Subdivisions 992,053 13,591 978,462
Utilities 27,435,534 181,121 1,003,249 26,613,406
Industrials and
Miscellaneous 137,531,564 1,258,216 4,402,349 134,387,431
Credit-tenant loans 973,951 37,302 936,649
------------------ ----------------- ----------------- ------------------
$ 240,954,318 $ 1,672,823 $ 11,719,297 $ 230,907,844
================== ================= ================= ==================
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The amortized cost and estimated fair value of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Cost Estimated Fair
Value
------------------ ------------------
<S> <C> <C>
Due in one year or less $ 6,788,468 $ 6,836,711
Due after one year through five years 86,848,960 91,529,517
Due after five years through ten years 122,293,290 129,063,688
Due after ten years 87,343,622 89,260,409
------------------ ------------------
$ 303,274,340 $ 316,690,325
================== ==================
Mortgage-backed securities included above $ 86,706,727
==================
</TABLE>
<TABLE>
<CAPTION>
The components of net investment income for the years ended December 31,
1995, 1994 and 1993 are as follows:
1995 1994 1993
----------------- ------------------ -----------------
<S> <C> <C> <C>
Bonds $ 20,708,759 $ 15,963,937 $ 13,255,658
Mortgage loans 2,264,264 3,017,737 3,816,993
Policy loans 583,981 585,934 614,274
Short-term investments 406,836 316,928 287,655
Other 42,117 24,517 27,168
----------------- ------------------ -----------------
24,005,957 19,909,053 18,001,748
Less investment expense (484,211) (341,989) (356,293)
Add amortization of interest maintenance reserve 83,526 73,912 59,524
----------------- ------------------ -----------------
$ 23,605,272 $ 19,640,976 $ 17,704,979
================= ================== =================
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
Realized gains and losses on invested assets for the years ended December 31, 1995, 1994 and 1993 include the
following:
Gross Realized Gross Realized Net
Gains Losses Realized
Gains (Losses)
---------------- --------------- -------------------
<S> <C> <C> <C>
Year ended December 31, 1995:
Bonds $ 83,705 $ 1,063 $ 82,642
Mortgage loans 54,256 54,256
---------------- --------------- ----------------
137,961 1,063 136,898
Less:
Capital gains tax (47,914)
Transfer to IMR (89,675)
----------------
Net realized capital gains (losses) (691)
Year ended December 31, 1994:
Bonds 96,149 48,306 47,843
Mortgage loans 9,781 9,781
---------------- --------------- ----------------
105,930 48,306 57,624
Less:
Capital gains tax (20,168)
Transfer to IMR (37,456)
----------------
Net realized capital gains (losses) -
Year ended December 31, 1993:
Bonds 377,268 1,543 375,725
Mortgage loans 166,134 (166,134)
Real estate 14,664 (14,664)
---------------- --------------- ------------------
377,268 182,341 194,927
Less:
Capital gains tax (68,224)
Transfer to IMR (244,221)
----------------
Net realized capital gains (losses) (117,518)
</TABLE>
At December 31, 1995, 1994 and 1993, securities with a par value
aggregating $275,000 were on deposit with the New York State Insurance
Department.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum percentage of any one loan to the
value of the security at the time of the loan was 75%. The Company did
not invest in any new mortgage loans during 1995, 1994 or 1993. The
estimated fair value of the mortgage loan portfolio totaled $22,745,530,
$27,432,258 and $36,360,931 at December 31, 1995, 1994 and 1993,
respectively.
3 . 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 temporary differences
between financial and income tax reporting. The major differences include
capitalization and amortization of certain acquisition amounts for tax
purposes, different methods for determining statutory and tax insurance
reserves, timing of the recognition of market discount on bonds and the
acceleration of depreciation for tax purposes. Included in "Other
Liabilities" is federal income taxes payable to an affiliate for
$389,000, $558,000 and $675,000, at December 31, 1995, 1994 and 1993,
respectively.
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1989. The returns for 1990 through 1992 are
currently under examination. Management believes these examinations will
have no material impact on the Company's financial statements.
Under Federal income tax law prior to 1984, the Company accumulated
approximately $2,623,000 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.
4 . 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 its affiliates (the Companies)
generally make annual contributions to the plan in an amount between the
minimum ERISA-required contribution and the maximum tax-deductible
contribution. Companion was not required to make a contribution in 1995,
1994 or 1993. Funds for the plan are held by United of Omaha under a
group annuity contract.
Information regarding accumulated plan benefits and net assets has not
been determined on an individual-company basis. The Company's employees
comprise less than 1% of the total employee group in 1995, 1994 and 1993.
The Companies expensed contributions of
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
$9,114,637, $8,745,945 and $8,597,302 in 1995, 1994 and 1993, respectively. A
comparison of accumulated plan benefits and net assets for the entire plan as of
January 1, 1995, 1994 and 1993 follows:
1995 1994
----------------- -----------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested $ 280,516,363 $ 262,456,863
Nonvested 1,263,379 1,314,632
----------------- -----------------
$ 281,779,742 $ 263,771,495
================= =================
Net assets available for benefits $ 301,773,000 $ 290,914,090
================= =================
Assumptions:
Annual investment return 8.0% 10.0%
Mortality table 1971 GAM 1971 GAM
Discount rate 7.93% 8.71%
</TABLE>
The Companies also have the Mutual of Omaha 401(k) Long-Term Savings Plan
covering all United States employees who have completed one year of
service and have reached their 21st birthday. Participants may elect to
contribute 1% to 16% of their salary annually subject to plan and IRS
limitations. The Companies match at least 25% of the first 6% of the
contributions made by each participant. Contributions by the Companies
were $5,774,963 in 1995, $5,476,901 in 1994, and $5,113,658 in 1993.
The Companies provide certain postretirement medical and life benefits to
full time employees who have worked 10 years and attained age 55 while in
service with the Companies. The medical plan is contributory with retiree
contributions adjusted annually. The benefits are subject to cost-sharing
features such as deductibles and coinsurance. The cost of these
postretirement benefits is allocated in accordance with an intercompany
cost-sharing arrangement. The Companies use the accrual method of
accounting for postretirement benefits and elected to amortize the
original transition obligation over 20 years.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
The following table set forth the Plan's funded status at December 31, 1995 and
1994:
1995 1994
----------------- -------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible actives $ 9,071,511 $ 9,898,773
Retirees 72,687,982 72,976,766
----------------- ------------------
81,759,493 82,875,539
Unrecognized transition obligation (69,716,631) (73,817,610)
Unrecognized gain 9,951,187 6,469,385
----------------- ------------------
Total accrued expense $ 21,994,049 $ 15,527,314
================= ==================
Assumptions:
Discount rate 7.25% 7.50%
Health care trend rate:
First year 8.50% 8.50 - 10.00%
Ultimate 5.00% 5.00%
Grading period 10 years 10 years
</TABLE>
<TABLE>
<CAPTION>
The Companies net periodic reimbursement benefit costs include the
following components at December 31, 1995, 1994 and 1993:
1995 1994 1993
----------------- ----------------- -----------------
<S> <C> <C> <C>
Service and eligibility costs $ 1,654,470 $ 1,839,420 $ 1,528,640
Interest costs 5,567,144 5,760,689 6,361,487
Net amortization and deferral (683,259) -
Amortization of transition obligation 4,100,979 4,100,979 4,100,978
----------------- ----------------- -----------------
Total benefit costs $ 10,639,334 $ 11,701,088 $ 11,991,105
================= ================= =================
</TABLE>
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' postretirement benefit obligation as of December 31, 1995 by
approximately $5,995,000 and the estimated eligibility cost and interest
components of the net periodic postretirement benefit cost for 1995 by
approximately $805,000.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5 . Related Party Transactions:
At December 31, 1995, 1994 and 1993, approximately $15,299,000,
$21,159,000 and $22,619,000 of the Company's investments in mortgage
loans were held through joint participations with United of Omaha. In
1995 and 1993, United of Omaha purchased approximately $3,287,000 and
$4,511,500 of participating mortgage loans from the Company.
United of Omaha provides actuarial, data processing, consulting and
various other services to the Company. Charges for these services
amounted to approximately $6,320,000, $5,640,000 and $4,617,000 for 1995,
1994 and 1993, respectively. Included in other liabilities are unsettled
balances related to these services of approximately $885,000, $407,000
and $121,000 as of December 31, 1995, 1994 and 1993, respectively.
The Company also leases its principal office space from an affiliated
company under an operating lease. The lease, whose original term ran from
January 1, 1993 to December 1, 1995 has an option to renew for an
identical term. The 1995, 1994 and 1993 rental expense under this lease
was approximately $380,900. The Company is in the process of renewing its
lease.
In 1994, the Company received a $20,000,000 contribution to its capital
and surplus from United of Omaha.
The Company has also entered into various reinsurance agreements with
Mutual of Omaha and United of Omaha. A summary of these agreements is
included in Note 6.
6 . Reinsurance:
The Company participates in various reinsurance agreements under which it
cedes the risks for certain of its life insurance and accident and health
business to unrelated and affiliated insurance companies. These risks are
primarily reinsured on a yearly renewable term basis, coinsurance or a
modified coinsurance basis whereby the Company continues to underwrite
new contracts, administer existing contracts and retain the policy
reserves. Under the modified coinsurance agreements, the Company pays
reinsurance premiums and a portion of its investment income, and receives
reimbursement for commissions, expense allowances, current benefits and
reserve increases from the reinsurer.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
Amounts deducted from policy reserves and premiums for reinsurance ceded by the
Company are as follows:
Policy Reserves Premiums
------------------ ------------------
<S> <C> <C>
1995:
Life insurance:
Ceded to affiliates $ 5,998,629 $ 4,369,203
Ceded to nonaffiliate 5,521,092 520,131
------------------ ------------------
11,519,721 4,889,334
------------------ ------------------
Accident and health business:
Ceded to affiliates 136,955 25,034
Ceded to nonaffiliates 41,124 14,981
------------------ ------------------
178,079 40,015
------------------ ------------------
Total amount ceded $ 11,697,800 $ 4,929,349
================== ==================
1994:
Life insurance:
Ceded to affiliates $ 4,982,785 $ 5,072,349
Ceded to nonaffiliate 5,433,048 764,444
------------------ ------------------
10,415,833 5,836,793
------------------ ------------------
Accident and health business:
Ceded to affiliates 200,312 33,657
Ceded to nonaffiliates 50,438 17,646
------------------ ------------------
250,750 51,303
------------------ ------------------
Total amount ceded $ 10,666,583 $ 5,888,096
================== ==================
1993:
Life insurance:
Ceded to affiliates $ 4,162,552 $ 3,665,061
Ceded to nonaffiliate 5,409,820 1,192,022
------------------ ------------------
9,572,372 4,857,083
------------------ ------------------
Accident and health business:
Ceded to affiliates 205,540 42,424
Ceded to nonaffiliates 53,182 20,912
------------------ ------------------
258,722 63,336
------------------ ------------------
Total amount ceded $ 9,831,094 $ 4,920,419
================== ==================
</TABLE>
United of Omaha has established a funds-withheld reinsurance treaty in
compliance with regulations of the State of New York Insurance
Department. Amounts withheld by the Company under this reinsurance
agreement were approximately $7,938,000, $7,270,000 and $6,304,000 at
December 31, 1995, 1994 and 1993.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
United World Life Insurance Company (United World), an affiliate
domiciled in the State of Nebraska, has also deposited funds withheld
with the Company in anticipation of a reinsurance treaty to become
effective in 1996. Amounts withheld by the Company from United World
totaled $500,000 at December 31, 1995.
There is a contingent liability with respect to reinsurance which would
become an ultimate liability of the Company in the event that such
reinsuring companies are unable, at some later date, to meet their
obligations under the reinsurance agreements.
7 . Policy Reserves:
<TABLE>
<CAPTION>
Withdrawal characteristics of annuity actuarial reserves and deposit fund
liabilities at December 31, 1995 are as follows:
Amount % of Total
------------------ --------------
<S> <C> <C>
Subject to discretionary withdrawal - with adjustment:
- At book value, less surrender charge $ 83,899,936 44.5
- At market value 584,527 0.3
Subject to discretionary withdrawal - without adjustment:
- At book value (minimal or no charge or adjustment) 93,259,277 49.5
Not subject to discretionary withdrawal provisions 10,778,720 5.7
------------------ ---------
Total annuity actuarial reserves and deposit
fund liabilities $ 188,522,460 100
================== =========
</TABLE>
Fair value for the Company's insurance liabilities other than those for
investment-type insurance contracts are not required to be disclosed.
However, the fair values of liabilities under all insurance contracts are
taken into consideration in the Company's overall management of interest
rate risk, which minimizes exposure to changing interest rates through
the matching of investment maturities with amounts due under insurance
contracts.
8 . Contingent Liability:
The Company is a defendant in various legal actions arising primarily
from its investment and insurance operations. In addition, insurance
companies are subject to assessments, up to statutory limits, by state
guaranty funds for losses to policyholders of insolvent insurance
companies. In the opinion of management, the outcome of such legal
proceedings and assessments will not have a material adverse effect on
the financial position of the Company.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9 . Capital and Surplus:
Dividends to the Company's stockholder are subject to prior approval by
the State of New York Insurance Department.
10 . Business Risks:
The Company is subject to regulation by state insurance departments and
it 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 mitigates 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
diversifying its line of 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, by
maintaining sound reinsurance, credit and collection policies, and
by providing for any amounts deemed uncollectible.
Interest-Rate Risk is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. The
Company mitigates this risk by attempting to match the maturity
schedule of its assets with the expected payouts of its liabilities.
To the extent that liabilities come due more quickly than assets
mature, an insurer would have to sell assets prior to maturity and
recognize a gain or loss.
11. Accounting Pronouncement:
The Company's financial statements are prepared on the basis of statutory
accounting principles which, for wholly-owned subsidiaries of mutual life
and health and accident insurance companies, are currently considered to
be generally accepted accounting principles (GAAP).
The Financial Accounting Standards Board (FASB) issued an interpretation
in 1993 indicating that financial statements of mutual life and health
and accident insurance companies prepared on a statutory basis will no
longer be considered in conformity with GAAP for fiscal years beginning
after December 15, 1994. In 1995, the FASB issued a Statement which
amended the Interpretation to defer the effective date of the general
provisions of the Interpretation to fiscal years beginning after December
15, 1995 and extended the requirements of other FASB Statements to mutual
life and health and accident insurance companies. The American Institute
of Certified Public Accountants (AICPA) issued a Statement of Position
that provided accounting guidance for certain participating insurance
contracts of mutual life and health and accident insurance companies in
1995. The FASB Statement and AICPA Statement of Position are effective
for financial statements issued for fiscal years beginning after December
31, 1995.
<PAGE>
COMPANION LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Should the Company decide to issue comparative GAAP financial statements, the
effect of applying the pronouncements is to be reported retroactively by
restatement of prior year GAAP financial statements for all years presented. The
effects of these changes which are required for GAAP have not been quantified.
Management has not yet determined how it will choose to comply with the
provisions of the pronouncements.
Supplemental Schedule
<TABLE>
<CAPTION>
Appendix A - Supplemental Schedule of Assets and Liabilities
COMPANION LIFE INSURANCE COMPANY
Annual Statement for the Year Ended December 31, 1995
Schedule I - Selected Financial Data
The following is a summary of certain financial data included in annual
statement exhibits and schedules subjected to audit procedures by independent
auditors and utilized by actuaries in the determination of reserves.
<S> <C>
Investment income earned:
Government bonds $ 104,935
Other bonds (unaffiliated) 20,603,824
Bonds of affiliates
Preferred stocks (unaffiliated) Preferred stocks of affiliates Common stocks
(unaffiliated) Common stocks of affiliates
Mortgage loans 2,264,264
Real estate
Premium notes, policy loans and liens 583,981
Collateral loans
Cash on hand and on deposit 27,191
Short-term investments 406,836
Other invested assets
Derivative instruments
Aggregate write-ins for investment income 14,926
--------------------
Gross investment income $ 24,005,957
====================
Real estate owned - book value less encumbrances
Mortgage loans - book value:
Farm mortgages
Residential mortgages
Commercial mortgages $ 21,596,144
--------------------
Total mortgage loans $ 21,596,144
====================
<PAGE>
Mortgage loans by standing -book value:
Good standing $ 21,596,144
Good standing with restructured terms
Interest overdue more than three months, not in foreclosure
Foreclosure in process
Other long term assets - statement value
Collateral loans
Bonds and stocks of parents, subsidiaries and affiliates - book value Bonds
Preferred stocks Common stocks
Bonds and short-term investment by class and maturity:
Bonds by expected maturity - statement value
Due within one year or less 10,380,769
Over 1 years through 5 years 124,126,626
Over 5 years through 10 years 139,800,583
Over 10 years through 20 years 19,328,148
Over 20 years 9,638,214
--------------------
Total by maturity 303,274,340
--------------------
Bonds by class - statement value
Class 1 197,957,952
Class 2 100,852,080
Class 3 1,895,690
Class 4 800,000
Class 5 1,195,578
Class 6 573,039
--------------------
Total by class 303,274,339
--------------------
Total bonds publicly traded 200,089,396
Total bonds privately placed 103,184,945
Preferred stocks - statement value
Common stocks - market value
Short-term investments - book value 4,000,000
Financial options owned - statement value
Financial options written and in force - statement value
Financial futures contracts open - current price
Cash on deposit (338,823)
<PAGE>
Life insurance in force:
Industrial
Ordinary $ 2,785,114,449
Credit life
Group life 1,495,951,119
Amount of accidental death insurance in force under ordinary policies 51,033,902
Life insurance policies with disability provision in force:
Industrial
Ordinary 612,828,383
Credit life
Group life 7,531,000
Supplementary contracts in force:
Ordinary - not involving life contingencies
Amount on deposit 1,046
Income payable 55,864
Ordinary - involving life contingencies
Income payable 33,685
Group - no involving life contingencies
Amount of deposit
Income payable
Annuities:
Ordinary
Immediate - amount of income payable 1,328,955
Deferred - fully paid account balance 56,016,122
Deferred - not fully paid - account balance 125,553,577
Group
Amount of income payable 6,998
Fully paid account balance
Not fully paid - account balance 308,606
Accident and health insurance - premiums in force
Ordinary 64,138
Group 5,088
Credit
Deposit funds and dividend accumulations:
Deposit funds - account balance 177,680
Dividend accumulations - account balance 81,760
Claim payments 1995:
Group accident and health year - ended December 31, 1995
1995
1994
1993 (1,276)
Group accident and health
1995 24,531
1994 32,975
1993
Other coverages that use developmental methods to calculate claims reserves
1995
1994
1993
</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:
(1) (a) Resolution of the Board of Directors of Companion Life
Insurance Company establishing the Variable Account.
Note 1.
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement by and between
Companion Life Insurance Company, on its own behalf and
on behalf of the Variable Account, and Mutual of Omaha
Investor Services, Inc. Note 2.
(b) Form of Broker/Dealer Supervision and Sales Agreement by
and between Mutual of Omaha Investor Services, Inc. and
the Broker/Dealer. Note 3.
(4) (a) Form of Policy for the Ultrannuity Series V Variable
Annuity.
(b) Form of Rider.
(5) Form of Application for the Ultrannuity Series V Variable Annuity.
(6) (a) Articles of Incorporation of Companion Life Insurance
Company. Note 1.
(b) Bylaws of Companion Life Insurance Company. Note 1.
(7) Not Applicable.
(8) (a) Participation Agreement by and between Companion Life
Insurance Company and the Alger American Fund. Note 3.
(b) Participation Agreement by and between Companion Life
Insurance Company and the Insurance Management Series.
Note 3.
(c) Participation Agreement by and between Companion Life
Insurance Company and the Fidelity VIP Fund and Fidelity
VIP Fund II. Note 2.
(d) Participation Agreement by and between Companion Life
Insurance Company and MFS Variable Insurance Trust.
Note 3.
(e) Participation Agreement by and between Companion Life
Insurance Company and the Scudder Variable Life
Investment Fund. Note 2.
(f) Participation Agreement by and between Companion Life
Insurance Company and T. Rowe Price International
Series, T. Rowe Price Fixed Income Series, and T. Rowe
Price Equity Series. Note 2.
(g) Administrative Services Agreement by and between
Companion Life Insurance Company and Vantage Computer
Systems. Note 2.
(9) (a) Opinion and Consent of Counsel.
(b) Consent of Counsel.
(10) Consent of Independent Auditors.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedules for Computation of Performance Data. Note 3.
(14) Powers of Attorney. Note 3.
Note 1. Incorporated by Reference to the Initial Registration Statement
for Companion Separate Account C filed on October 13, 1994
(File No. 33-85090).
Note 2. Incorporated by reference to the Pre-effective Amendment #1 to
the Registration Statement for Companion Separate Account C filed
on February 13, 1995 (File No. 33-85090).
Note 3. Incorporated by reference to the Initial Registration Statement
for Companion Separate Account C filed on October 12, 1995
(File No. 33-98062).
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
PRINCIPAL POSITIONS
NAME AND AND OFFICES WITH
BUSINESS ADDRESS 5/ DEPOSITOR
Thomas J. Skutt 6/ Chairman
Ernest B. Johnston 9/ Vice-Chairman, President & Chief Executive Officer
John W. Weekly 9/ Vice-Chairman
William G. Campbell 9/ Director
Samuel L. Foggie 9/ Director
M. Jane Huerter 9/ Director, Vice President & Assistant Secretary
Charles T. Locke Director
John L. Maginn9/ Director, Vice President & Assistant Treasurer
Jocile S. Stockman 9/ Director
Oscar S. Straus 9/ Director
John A. Sturgeon 9/ Director
Fred C. Boddy Vice President & Treasurer
Daniel R. Varona General Counsel, Secretary & Chief Administrative Officer
Burton D. Jay 9/ Vice President & Actuary
Robert J. Quinn, II 9/ Vice President & Medical Director
Raymond J. Vendetti Regional Vice President
- --------
5/ Business Address for each person listed is Companion Life Insurance
Company, 401 Theodore Fremd Avenue, Rye, New York 10580- 1493, unless otherwise
indicated.
6/ Business Address is Mutual of Omaha Insurance Company, Mutual of Omaha Plaza,
Omaha, Nebraska 68175
C - 2
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
<TABLE>
<CAPTION>
Percentage Principal
NAME OF CORPORATION (WHERE ORGANIZED) OWNERSHIP BUSINESS
- ------------------------------------- --------- --------
<S> <C> <C>
Mutual of Omaha Insurance Company (NE) NA Health Insurer
ARD-RICH Realty Corp. (NY) 100% Real Estate Investments
Kirkpatrick, Pettis, Smith, Polian Inc. (NE) 100% Investment Banking Securities
Brokerage and Money Management
KPM Investment Management, Inc. (NE) 100% Investment Advisor
Kirkpatrick Pettis Trust Company (NE) 100% Trust Company
Mutual Asset Management Co. (NE) 100% Asset Management Services
Mutual of Omaha Health Plans, Inc. (NE) 100% Managed Health Care Company
Exclusive Healthcare, Inc. (NE) 100% Health Maintenance Organization
Mutual of Omaha of Colorado
and Primera, Inc. (CO) 50% Health Maintenance Organization
Mutual of Omaha Health Plans of
Lincoln, Inc. (NE) 100% Health Maintenance Organization
Preferred HealthAlliance, Inc. (NE) 51% Managed Health Care Company
Mutual of Omaha Dental Plans of
Nebraska, Inc. (NE) 100% Prepaid Dental Service Organization
Mutual of Omaha Dental Plans of Nevada, Inc.(NV) 100% Prepaid Dental Service Organization
Mutual of Omaha of South Dakota &
Community Health Plus HMO, Inc. (SD) 100% Health Maintenance Organization
Mutual of Omaha Investor Services, Inc. (NE) 100% Securities Broker/Dealer
Mutual of Omaha Marketing Corporation (NE) 100% Insurance Marketing Organization
Mutual of Omaha U.K. Limited (England) 100% (Inactive)
The Omaha Indemnity Company (WI) 100% Auto & Homeowner Insurer
(No new business since 1986)
Omaha Property and Casualty Insurance Company (A/) 100% Personal Property & Casualty Insurer
Adjustment Services, Inc. (NE) 100% Claims Adjusting Company
Omex Realty, Inc. (NE) 100% Real Estate Investments
Tele-Trip Company, Inc. (DE) 100% Travel Services & Insurance
Marketing Organization
UB Realty, Inc. (NE) 100% Real Estate Investments
United Life Insurance Company (NE) 100% Life Health & Accident Insurer
(all states except NY)
Companion Life Insurance Company (NY) 100% Life Insurer (NY only)
Mutual of Omaha Structured Settlement Company (NE) 100% Structured Settlement Assignment
Company
Mutual of Omaha Structured Settlement Company (CT) 100% Structured Settlement Assignment
Company
Mutual of Omaha Structured Settlement Company
of New York (NY) 100% Structured Settlement Assignment
Company
United World Life Insurance Company (B/) 100% Life Health & Accident Insurer
United Properties Co. 50% Real Estate General Partnership
</TABLE>
A/ Incorporated in Delaware. Redomesticated to Nebraska.
B/ Incorporated in Illinois. Redomesticated to Nebraska.
* Subsidiaries are indicated by indentations. All companies file
independent financial statements, except Kirkpatrick Pettis Smith Polian Inc.
and KPM Investment Management Inc. file consolidated financial statements.
ITEM 27. NUMBER OF POLICYOWNERS
As of October 30, 1996, there were no Owners of the Policies.
C - 3
ITEM 28. INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Companion pursuant to the foregoing provisions, or otherwise,
Companion 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 Companion of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered), Companion 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, Article V, Section
8 of Companion's Bylaws provides as follows:
The Corporation shall indemnify any person, made, or threatened
to be made, a party to any action or proceeding other than one by or in the
right of the Corporation to procure a judgment in its favor, whether civil or
criminal, which any officer of the Corporation served in any capacity at the
request of the Corporation, by reason of the fact that he, his testator or
intestate, was an officer of the Corporation, against judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys' fees actually
and necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such officer acted, in good faith, for a purpose which he is
reasonably believed to be in the best interests of the Corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.. The termination of any such civil or criminal
action proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such officer did not act, in good faith, for a purpose which he is reasonably
believed to be in the best interests of the Corporation or that he had
reasonable cause to believe that his conduct was unlawful.
ITEM 29. PRINCIPAL UNDERWRITER
In addition to Registrant, Mutual of Omaha Investor Services, Inc. is the
Principal Underwriter for policies offered by Companion Life Insurance Company
through Companion Life Separate Account C. The directors and officers of Mutual
of Omaha Investor Services, Inc. are as follows:
NAME7 TITLE
Richard A. Witt Director & President
William J. Bluvas Vice President & Treasurer
M. Jane Huerter Director & Secretary
Amy J. Owens Assistant Treasurer & Assistant Secretary
Michael F. Gentile Vice President
Linda K. Augustyn Vice President
John L. Maginn Director
Lawrence F. Harr Director
Thomas T. Sawicz Director
John W. Weekly Director
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 Companion Life Insurance Company at 401 Theodore Fremd Avenue,
Rye, New York 10580-1493.
- --------
7/ Business address is Mutual of Omaha Plaza, Omaha, Nebraska 68175
C - 4
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 Companion at the address or
phone number listed in the Prospectus.
(d) Companion Life Insurance Company hereby represents that the fees
and charges deducted 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 Companion Life Insurance Company.
C - 5
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has caused this Pre-effective Amendment #1 to the
Registration Statement to be signed on its behalf, in the City of Omaha and
State of Nebraska, on this ______ day of ____________________, 1996.
COMPANION SEPARATE ACCOUNT C
COMPANION LIFE INSURANCE COMPANY
Depositor
/s/Kenneth W. Reitz
---------------------------------------
By: Kenneth W. Reitz
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 on this ______ day of __________, 1996.
SIGNATURES TITLE
/s/ Ernest B. Johnston by Kenneth W. Reitz*
- -----------------------
Ernest B. Johnston Vice-Chairman, President and Chief Executive Officer
/s/ Fred C. Boddy by Kenneth W. Reitz*
- ------------------------
Fred C. Boddy Vice President and Treasurer (Principal Financial Officer)
/s/ John C. Gribbon by Kenneth W. Reitz*
- ------------------------
John C. Gribbon Assistant Vice President (Principal Accounting Officer)
/s/ Kenneth W. Reitz
by __________________________________, for and on behalf of:
Kenneth W. Reitz
Thomas J. Skutt* Chairman
John W. Weekly* Vice-Chairman
William G. Campbell* Director
Samuel L. Foggie* Director
M. Jane Huerter* Director
Charles T. Locke* Director
John L. Maginn* Director
Oscar S. Straus* Director
John A. Sturgeon* Director
* All individuals have granted Powers of Attorney executed on and between July
13 and August 1, 1995 whereby Kenneth W. Reitz is authorized to execute this
Registration Statement on their behalf.
C - 6
<PAGE>
EXHIBIT INDEX
Exhibit Description of Page
NO. EXHIBIT NO.
(4) (a) Form of Policy for the Ultrannuity Series V Variable Annuity
(4) (b) Form of Rider for the Ultrannuity Series V Variable Annuity
(5) Form of Rider Application for the Ultrannuity Series V Variable
Annuity
(9) (a) Opinion and Consent of Counsel
(9) (b) Consent of Outside Counsel
(10) Consent of Independent Auditors
(14) Powers of Attorney
EXHIBIT (4)(A): FORM OF POLICY FOR THE ULTRANNUITY SERIES V VARIABLE ANNUITY
COMPANION
LIFE INSURANCE
COMPANY
A Stock Company
ANNUITY POLICY
- --------------------------------------------------------------------------------
Companion Life Insurance Company will pay you, if living, the annuity payments
as set forth in this policy beginning on the annuity starting date. If you die
before the annuity starting date and while this policy is in force, we will pay
the death benefit according to the policy provisions.
READ YOUR POLICY CAREFULLY.
IT INCLUDES THE PROVISIONS ON THE FOLLOWING PAGES.
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND
COMPANION LIFE INSURANCE COMPANY.
IF YOU ARE NOT SATISFIED WITH YOUR POLICY, RETURN IT TO US OR OUR AGENT WITHIN
10 DAYS AFTER YOU RECEIVE IT. RETURN OF THE POLICY BY MAIL IS EFFECTIVE ON BEING
POSTMARKED, PROPERLY ADDRESSED, AND POSTAGE PRE-PAID. THE RETURNED POLICY WILL
BE TREATED AS IF WE HAD NEVER ISSUED IT. WE WILL PROMPTLY REFUND THE
ACCUMULATION VALUE AS OF THE DATE WE RECEIVE YOUR REQUEST TO CANCEL THE POLICY.
THIS IS A FLEXIBLE PAYMENT SEPARATE ACCOUNT DEFERRED ANNUITY POLICY. THE
POLICY'S ACCUMULATION VALUE IN THE SEPARATE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE IN THAT ACCOUNT AND WILL INCREASE OR DECREASE DAILY. THE DOLLAR
AMOUNT IS NOT GUARANTEED. NO DIVIDENDS ARE PAYABLE.
THIS POLICY OFFERS BOTH FIXED AND VARIABLE ANNUITY PAYOUT OPTIONS. FOR THE
VARIABLE ANNUITY PAYOUT OPTIONS, THE SMALLEST ANNUAL RATE OF INVESTMENT RETURN
THAT MUST BE EARNED ON THE ASSETS OF THE SEPARATE ACCOUNT SO THAT THE DOLLAR
AMOUNT OF VARIABLE ANNUITY PAYMENTS WILL NOT DECREASE IS 4%. A CHARGE EQUAL ON
AN ANNUAL BASIS TO 1.20% OF THE DAILY NET ASSET VALUE OF THE SEPARATE ACCOUNT IS
APPLIED IN CALCULATING VARIABLE ANNUITY PAYMENTS.
For inquiries regarding coverage or customer service, please call Companion
Annuity Service Division at 800/494-0067.
/S/Ernest B. Johnston------------------
President and Chief Executive Officer
/S/Daniel R. Varone--------------------
Secretary
COMPANION
OF NEW YORK
A Mutual of Omaha Company
HOME OFFICE: 401 THEODORE FREMD AVENUE
RYE, NEW YORK 10580-1493
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE PAGE
POLICY DATA............................3 THE SEPARATE ACCOUNT
General Description.........................8
POLICY CHARGES.........................4 Investment Allocations to the Separate
Account..............................8
DEFINITIONS............................5 Valuation of Assets.........................8
Transfers Between Subaccounts...............8
GENERAL PROVISIONS Dollar Cost Averaging.......................8
The Contract.......................6 Asset Allocation............................9
Delay of Payments..................6
Incontestability...................6 THE FIXED ACCOUNT
Misstatement of Age or Sex.........6 General Description.........................9
Nonparticipating...................6 Transfers from the Fixed Account............9
Periodic Reports...................6
Policy Dates.......................6 VALUES
Termination........................6 Accumulation Value..........................9
Accumulation Unit...........................9
OWNER, JOINT OWNER, ANNUITANT AND The Fixed Account..........................10
BENEFICIARY Policy Charges.............................10
Owner and Joint Owner..............7 Partial Withdrawals or Cash Surrender......11
Death of Owner, Joint Owner........7 Death Benefit..............................11
Annuitant..........................7 Computations...............................11
Death of Annuitant.................7
Beneficiary Change.................7 PAYOUT OPTIONS FOR PAYMENT OF
Assignments........................7 POLICY PROCEEDS
General Conditions.........................11
PURCHASE PAYMENTS Payout Options.............................12
Consideration ....................8 Variable Annuity Payout Options............13
Purchase Payments.................8 First Variable Annuity Payment.............13
Allocation of Purchase Payments...8 Second and Later Variable Annuity Payments.14
Annuity Unit Value.........................14
Number of Annuity Units....................14
Exchange of Annuity Units..................14
</TABLE>
Page 2
<PAGE>
POLICY DATA
POLICY NUMBER: 1234567
POLICY OWNER: JOHN J. DOE
ANNUITANT: JOHN J. DOE
DATE OF ISSUE: FEBRUARY 1, 1995
ANNUITY STARTING DATE: FEBRUARY 1, 2040
INITIAL PURCHASE PAYMENT: $5,000
SUBSEQUENT MINIMUM PURCHASE PAYMENT: $500
ELIGIBLE INVESTMENTS: INITIAL ALLOCATION (%)
COMPANION LIFE FIXED ACCOUNT 10
(ALGER AMERICAN GROWTH PORTFOLIO) 0
(ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO) 0
(FEDERATED PRIME MONEY MARKET) 30
(FEDERATED US GOVERNMENT PORTFOLIO) 30
(FIDELITY VIP II ASSET MANAGER: GROWTH PORTFOLIO) 0
(FIDELITY VIP EQUITY INCOME PORTFOLIO) 0
(FIDELITY VIP II CONTRAFUND PORTFOLIO) 0
(MFS EMERGING GROWTH PORTFOLIO) 30
(MFS HIGH INCOME FUND PORTFOLIO) 0
(MFS RESEARCH PORTFOLIO) 0
(MFS WORLD GOVERNMENT PORTFOLIO) 0
(SCUDDER INTERNATIONAL PORTFOLIO) 0
(T ROWE PRICE EQUITY INCOME PORTFOLIO) 0
(T ROWE PRICE INTERNATIONAL PORTFOLIO) 0
(T ROWE PRICE LIMITED TERM BOND PORTFOLIO) 0
(T ROWE PRICE NEW AMERICAN GROWTH PORTFOLIO) 0
(T ROW PRICE PERSONAL STRATEGY BALANCED PORTFOLIO) 0
SEPARATE ACCOUNT: COMPANION LIFE SEPARATE ACCOUNT C
ANNUITY SERVICE OFFICE:
COMPANION ANNUITY SERVICE DIVISION
301 WEST 11TH STREET
P. O. BOX 419241
KANSAS CITY, MO 64141-6281
800/494-0067
Page 3
<PAGE>
POLICY CHARGES
POLICY FEE: $30.00 EACH POLICY YEAR
MORTALITY AND EXPENSE CHARGE: EQUAL ON AN ANNUAL BASIS TO 1.00% OF THE
AVERAGE DAILY NET ASSETS OF THE SEPARATE
ACCOUNT
ADMINISTRATIVE EXPENSE CHARGE: EQUAL ON AN ANNUAL BASIS TO 0.20% OF THE
AVERAGE DAILY NET ASSETS OF THE SEPARATE
ACCOUNT
SCHEDULE OF WITHDRAWAL CHARGES
YEARS SINCE PERCENTAGE OF
PURCHASE PAYMENT EACH PURCHASE PAYMENT
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 AND LATER 0%
Page 4
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ACCUMULATION UNIT - An accounting unit of measure used to calculate the
accumulation value of the Separate Account prior to the annuity starting date.
ACCUMULATION VALUE - The dollar value as of any valuation date of all amounts
accumulated under this policy prior to the annuity starting date.
AGE - Age last birthday.
ANNUITANT - The person upon whose life annuity payments are based.
ANNUITY STARTING DATE - The date on which annuity payments are to begin. You may
change the annuity starting date by written request, provided that it is not
deferred past your 90th birthday.
BENEFICIARY - The person(s) or other legal entity listed by the owner in the
application and referred to in this 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.
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.
ELIGIBLE INVESTMENT(S) - Those investments available under the policy. Current
Eligible Investments are shown on page 3.
EXECUTIVE OFFICER - The president, vice president, assistant vice president, the
secretary or assistant secretary of Companion Life Insurance Company.
FIXED ACCOUNT - The account which consists of general account assets of
Companion Life Insurance Company.
FUND - A segment of an Eligible Investment which constitutes a separate and
distinct class of interests under an Eligible Investment.
NET ASSET VALUE PER SHARE - The net assets of a Fund divided by the number of
shares in the Fund.
OUR, US, WE - Refers to Companion Life Insurance Company, 401 Theodore Fremd
Avenue, Rye, New York 10580-1493.
OWNER - (a) The annuitant; or
(b) the person named on the application as owner; or
(c) the persons named on the application as joint owners. Any
reference to owner in the policy will include both owners if
joint owners are named in the application.
PAYEE - The person who receives the annuity payments under this policy.
PAYOUT OPTION - Any option of payment of policy proceeds available under this
policy.
PROCEEDS - (a) The death benefit; or
(b) the Accumulation Value, less any applicable withdrawal charges,
applied to a payout option.
PURCHASE PAYMENT - An amount paid to Companion Life Insurance Company in
accordance with the provisions of this policy.
SUBACCOUNTS - That portion of the Separate Account which invests in shares of
mutual funds or any other investment portfolios that we determine to be suitable
for this policy's purposes.
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.
SEPARATE ACCOUNT - A separate account maintained by us in which a portion of our
assets has been allocated for this and certain other policies. It has been
designated on page 3.
YOU, YOUR - Refers to the owner.
Page 5
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire contract is this policy, any riders and amendments, and the signed
application, a copy of which is attached. 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 this policy or deny a claim.
Any change of this policy and any riders requires the written consent of an
executive officer.
DELAY OF PAYMENTS
We will usually pay any amounts payable from the Separate Account as a result of
a partial withdrawal or cash surrender within seven days after we receive your
written request at our 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 Separate Account;
(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 payment of partial withdrawals or a cash surrender from the Fixed
Account for up to six months from the date your written request is received at
our Service Office.
INCONTESTABILITY
We will not contest the validity of this policy after its date of issue.
MISSTATEMENT OF AGE OR SEX
We may require proof of the age of the annuitant before making any life annuity
payment provided for by this policy. If the age or sex of the annuitant has been
misstated, the annuity starting date and monthly income will be determined using
the correct age and sex.
If a misstatement of age or sex results in monthly income payments that are too
large, the overpayments will be deducted from future 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.
NONPARTICIPATING
No dividends will be paid. Neither you nor the beneficiary of this policy will
have the right to share in our surplus earnings or profits.
PERIODIC REPORTS
At least quarterly each calendar year we will send you a statement showing your
Accumulation Value as of a date not more than two months prior to the date of
mailing. We will also send such statements as may be required by applicable
state and federal laws, rules and regulations.
POLICY DATES
Policy years and policy anniversaries are measured from the date of issue shown
on page 3.
TERMINATION
This policy will remain in force until surrendered for its full value, or all
annuity payments have been made, or the death benefit has been paid.
If the Accumulation Value is less than $500, we may cancel this policy upon 60
days' notice to you. This cancellation would be considered a full surrender of
this policy.
If your account value in any Fund falls below $500, we reserve the right to
transfer the remaining balance, without charge, to the Money Market Fund.
Page 6
- --------------------------------------------------------------------------------
OWNER, JOINT OWNER, ANNUITANT AND BENEFICIARY
- --------------------------------------------------------------------------------
OWNER AND JOINT OWNER
While you are alive, only you may exercise the rights under this policy.
Ownership may be changed as described in the ASSIGNMENTS provision. If there are
joint owners, the signatures of both owners are needed to exercise rights under
the policy.
DEATH OF OWNER, JOINT OWNER
If any owner or joint owner dies before the annuity starting date, the policy
will end and the death benefit will be paid to the beneficiary.
If there are joint owners, the beneficiary is the surviving joint owner. If both
joint owners die simultaneously, the death benefit will be paid to the named
beneficiary.
If an owner of this policy is a corporation or other nonindividual, the primary
annuitant will be treated as an owner of this policy. The "primary annuitant" is
that individual whose life affects the timing or the amount of the payout under
this policy. A change in the primary annuitant will be treated as the death of
an owner.
If the beneficiary is the surviving spouse, the spouse may either receive the
death benefit and the policy will end, or the spouse may continue the policy in
force.
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 payment option in effect at the time of such
owner's death.
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 named beneficiary; and
(b) will be paid over the lifetime or the life expectancy of that named
beneficiary
as long as payments begin not later than one year after the date of your death.
ANNUITANT
If the owner is different from the annuitant, the annuitant does not have any
rights under this 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 an owner.
If the annuitant is not an owner and the annuitant dies before the annuity
starting date, you may name a new annuitant. If you do not name a new annuitant,
you will become the annuitant.
BENEFICIARY CHANGE
You may change the named beneficiary by sending a written request to our Service
Office unless the beneficiary is irrevocable. When recorded and acknowledged by
us, the change 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 named beneficiary.
ASSIGNMENTS
You may change the ownership of this policy or pledge it as collateral by
assigning it. No assignment will be binding on us until we record and
acknowledge it. The right of any payee will be subject to a collateral
assignment.
If the named beneficiary of this policy is irrevocable, a change of ownership or
a collateral assignment may be made only by joint written request from you and
the named beneficiary. On the annuity starting date, you may select another
payee, but you retain all rights of ownership unless you sign an absolute
assignment.
Page 7
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
CONSIDERATION
The consideration for this policy is the application and the payment of the
initial purchase payment.
PURCHASE PAYMENTS
Purchase payments after the first may be made at any time but are not required.
Purchase payments are payable at our Service Office. Upon request a receipt
signed by our Secretary or an Assistant Secretary will be given for any purchase
payment. The minimum purchase payment allowed is shown on page 3.
We will not accept any additional purchase payments beginning on the policy
anniversary next following your 83rd birthday.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments are allocated to one or more Eligible Investments according to
your instructions. Changes in the allocation will be effective on the date your
written request is received at our Service Office. The change will apply to
future purchase payments.
- --------------------------------------------------------------------------------
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
The name of the Separate Account is shown on page 3. The assets of the Separate
Account are our property but are not chargeable with the liabilities arising out
of any other business we may conduct, except to the extent that the assets of
the Separate Account exceed the liabilities of the Separate Account arising
under the contracts supported by the Separate Account.
INVESTMENT ALLOCATIONS TO THE SEPARATE ACCOUNT
The assets of the Separate Account are segregated by Eligible Investments or
Funds and, where appropriate, by Funds within the Eligible Investment. This
establishes a series of subaccounts within the Separate Account.
We may, from time to time, add other Eligible Investments or Funds. In such
event you may be permitted to select from these other Eligible Investments or
Funds, limited by the terms and conditions we may impose on such transactions.
We may also substitute other Eligible Investments or Funds. If required,
approval of or change of any investment policy will be filed with the Insurance
Department of the state in which this policy was delivered.
VALUATION OF ASSETS
Assets of Eligible Investments within each subaccount will be valued at their
net asset value on each valuation date.
TRANSFERS BETWEEN SUBACCOUNTS
Prior to the Annuity Starting Date you may transfer all or part of your interest
in a subaccount to another subaccount or to the Fixed Account. You may make 12
transfers each policy year without charge. We reserve the right to charge a $10
fee for additional transfers, to be deducted from the amount transferred.
The minimum transfer amount is $500 or the entire amount in the subaccount if it
is less than $500. The minimum amount that can remain in a subaccount after a
transfer is $500.
We reserve the right at any time and without prior notice to any party to modify
the transfer privileges described above.
DOLLAR COST AVERAGING
Under the Dollar Cost Averaging program you may instruct us to automatically
transfer between Eligible Investments, on a periodic basis, a predetermined
dollar amount or percentage of accumulation value. The automatic transfers will
be made from any one subaccount or the Fixed Account to any other subaccount.
Page 8
Automatic transfers can occur monthly, quarterly, semi-annually or annually. The
amount transferred each time must be at least $100 and at least $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, or enough
to cover one year's transfers.
If transfers are made from the Fixed Account, the maximum periodic transfer
amount is 10% of that account's value at the time of election, or enough to
provided transfers for 10 months. There is no maximum transfer amount applicable
to the subaccounts.
You may request Dollar Cost Averaging at the time of application or at a later
date. Transfers will begin on the first or 15th day of the month, as you
specify. If the first or 15th day of the month is not a valuation date, then the
transfer will be processed on the next following valuation date. The program
will terminate when the number of transfers you have specified have been made,
or when the value in the applicable subaccount or the Fixed Account is less than
$500, whichever occurs first.
You may increase or decrease the amount or percentage of the transfers or
discontinue the program by sending written notice to our Service Office. There
is no charge for participation in this program.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program you may instruct us to allocate purchase
payments and the Accumulation Value among the subaccounts and the Fixed Account
according to your instructions, or according to instructions recommended by us
and approved by you. We will allocate your purchase payments and transfer
accumulation value among the Eligible Investments to maintain conformity with
current instructions, thereby "rebalancing" your investments.
At the time the program begins, there must be at least $10,000 of Accumulation
Value in the policy. Rebalancing will be performed on a quarterly, semi-annual
or annual basis as you specify. Transfers made in accordance with this program
will not be counted toward the 12 free transfers allowed each policy year.
You may request participation in the Asset Allocation Program at the time of
application or at a later date. You may change your allocation percentages or
discontinue the program by sending written notice to our Service Office. There
is no charge for participation in this program.
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
Any portion of the purchase payments allocated to the Fixed Account and
transfers to the Fixed Account under the policy become part of the general
account assets of Companion Life Insurance Company. The Fixed Account does not
include those assets segregated in separate accounts. We maintain sole
discretion to invest the assets of the Fixed Account, subject to applicable law.
TRANSFERS FROM THE FIXED ACCOUNT
Prior to the Annuity Starting Date you may transfer part of the accumulation
value in the Fixed Account to the subaccounts once each policy year.
The maximum percentage that may be transferred is 10% of the value in the Fixed
Account on the date of the transfer. These transfers do not count toward the 12
free transfers allowed each policy year.
We reserve the right to defer transfers from the Fixed Account to the
subaccounts for up to six months from the date your written request is received
at our Service Office.
You may transfer amounts from the subaccounts to the Fixed Account at any time
prior to the Annuity Starting Date. However, we reserve the right to restrict
transfers back to the Fixed Account for 90 days immediately following a transfer
to the subaccounts.
Page 9
- --------------------------------------------------------------------------------
VALUES
- --------------------------------------------------------------------------------
ACCUMULATION VALUE
On the date of issue the Accumulation Value is equal to the initial purchase
payment. On any valuation date after the date of issue the Accumulation Value is
equal to the total of your values in each subaccount plus the accumulation value
of the Fixed Account.
The value for each subaccount is equal to:
(a) your current number of Accumulation Units; multiplied by
(b) the current unit value.
ACCUMULATION UNIT
Each purchase payment is converted into Accumulation Units by dividing it by the
Accumulation Unit value for the valuation period during which the purchase
payment is allocated to the Separate Account. The initial Accumulation Unit
value for each subaccount was set when the subaccount was established. The 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 Fund multiplied by the number of
shares held in the subaccount, before the purchase or redemption of
any shares on that date; less
(b) the cumulative unpaid charge for the Mortality and Expense Risk Charge
and Administrative Expense Charge, which are shown on page 4; less
(c) any applicable charge for federal and state income tax; the result
divided by
(d) the total number of Accumulation Units held in the subaccount on the
valuation date, before the purchase or redemption of any shares on that
date.
THE FIXED ACCOUNT
The accumulation value of the Fixed Account on any valuation date is equal to:
(a) the value at the end of the preceding policy month; plus
(b) any purchase payments credited since the end of the previous policy
month; plus
(c) any transfers from the subaccounts to the Fixed Account since the end of
the previous policy month; less
(d) any transfers from the Fixed Account to the subaccounts since the end
of the previous policy month; less
(e) any partial withdrawal and withdrawal charge taken from the Fixed
Account since the end of the previous policy month; plus
(f) interest credited on the balance.
We guarantee that the accumulation value in the Fixed Account will be credited
with an effective annual interest rate of at least 3%. Using a procedure
approved by our Board of Directors, we may credit interest to the Fixed Account
at a current rate in excess of the guaranteed minimum interest rate. Any such
current interest rate will be guaranteed for one year.
POLICY CHARGES
The following charges are deducted under the policy:
(a) ANNUAL POLICY FEE - An annual charge, shown on page 4, is deducted from
the Accumulation Value on the last valuation date of each policy year or
on a full surrender, if between policy anniversaries. The annual policy
fee is deducted from the subaccounts on a pro rata basis by canceling
Accumulation Units. If the accumulation value in the subaccounts is less
than the policy fee, the policy fee will not be charged.
(b) ADMINISTRATIVE EXPENSE CHARGE - A charge equal, on an annual basis, to
the amount shown on page 4. The administrative expense charge
compensates us for some of the costs associated with the administration
of this policy and the Separate Account.
(c) MORTALITY AND EXPENSE RISK CHARGE - A charge equal, on an annual basis,
to the amount shown on page 4. The mortality and expense risk charge
compensates us for assuming the mortality and expense risks under this
policy.
(d) OTHER - Depending on Fund choices, other charges may apply, such as
management fees or other expenses.
Page 10
PARTIAL WITHDRAWALS OR CASH SURRENDER
You may withdraw part of the Accumulation Value prior to the annuity starting
date. The minimum withdrawal amount is $500.
Partial withdrawals may be subject to a withdrawal charge. The withdrawal charge
is calculated by:
(a) allocating purchase payments to the amount withdrawn on a first-in,
first-out basis; and
(b) multiplying each such allocated purchase payment by the applicable
percentage according to the length of time since the purchase payments
were made.
The percentages are shown on page 4.
The withdrawal charge will not apply to the following:
(a) in each policy year, up to 15% of the Accumulation Value as of the
first withdrawal that policy year;
(b) amounts placed under Payout Option 4 (Lifetime Income) after the first
two policy years; or
(c) amounts you paid in excess of the allowable tax deduction that we
refund to you.
The amount of the cash withdrawal requested and any withdrawal charge will be
deducted from the Accumulation Value on the date your written request is
received at our Service Office. Partial withdrawals will result in cancellation
of Accumulation Units from each applicable subaccount. In the absence of
instructions from you, amounts will be deducted from the subaccounts and the
Fixed Account on a pro rata basis. No more than a pro rata amount may be
withdrawn from the Fixed Account for any partial withdrawal. We reserve the
right to defer withdrawals from the Fixed Account for up to six months from the
date your written request is received at our Service Office.
If you request a cash surrender, the policy must be returned to us to receive
the cash surrender value. The cash surrender value equals:
(a) the Accumulation Value at the end of the valuation period in which
your written request is received at our Service Office; less
(b) any applicable withdrawal charge; and
(c) any applicable pro rata policy fee based on the number of policy months
from the last policy anniversary to the date of surrender.
DEATH BENEFIT
The death benefit is the amount payable to the beneficiary if any owner dies
before the annuity starting date. The death benefit equals the greater of:
(a) the Accumulation Value as of the end of the valuation period during
which due proof of death and an election of a payout option are received
by our Service Office; or
(b) the sum of the purchase payments less any partial withdrawals.
COMPUTATIONS
We have filed a detailed statement of the method used to compute the policy
values and benefits with the state in which this policy was delivered. With
regard to amounts allocated to the Fixed Account, the accumulation value, cash
surrender value, death benefit and paid-up annuity benefit are not less than
those required by the state in which this policy was delivered.
- --------------------------------------------------------------------------------
PAYOUT OPTIONS FOR PAYMENT OF POLICY PROCEEDS
- --------------------------------------------------------------------------------
GENERAL CONDITIONS
You may choose to have the Accumulation Value less any applicable withdrawal
charges applied under any combination of the fixed annuity and variable annuity
payout options available in this policy. If no option is chosen, a fixed annuity
Option 4 with a guaranteed period of 10 years will be the automatic option.
A beneficiary may also have the death benefit applied to a payout option. If the
beneficiary does not choose an option within 60 days of the date due proof of
death is received at our Service Office, we will make payment in a lump sum.
If the option chosen provides for monthly income payments, the payments will
begin as of the annuity starting date. We will pay the proceeds in one sum when
the proceeds are less than $2,000, or when the option of payment chosen would
result in periodic payments of less than $20. Payees must be individuals who
receive payments in their own behalf unless otherwise agreed to by us. Any
option chosen will be effective when we acknowledge it.
Page 11
Proof of your age or survival or the age or survival of the annuitant may be
required by us.
The guaranteed minimum interest rate used in the fixed annuity payout options is
3%.
PAYOUT OPTIONS
OPTION 1 - PROCEEDS HELD ON DEPOSIT AT INTEREST - This option is available on a
fixed basis. While the proceeds are held by us, we will annually:
(a) pay interest to any payee; or
(b) add interest to the proceeds.
OPTION 2 - INCOME OF A SPECIFIED AMOUNT - This option is available on either a
fixed or variable basis. The proceeds will be paid in installments of a
specified amount until the proceeds, with interest, have been fully paid.
OPTION 3 - INCOME FOR A SPECIFIED PERIOD - This option is available on a fixed
basis. 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 following table,
include interest. We will provide the income amounts for payments other than
monthly upon request.
- --------=========-------========----------------
Years Monthly Years Monthly Years Monthly
Chosen Income Chosen Income Chosen Income
- --------=========-------========----------------
1 $84.47 8 $11.68 15 $6.87
2 42.86 9 10.53 16 6.53
3 28.99 10 9.61 17 6.23
4 22.06 11 8.86 18 5.96
5 17.91 12 8.24 19 5.73
6 15.14 13 7.71 20 5.51
7 13.16 14 7.26
- --------=========-------========----------------
OPTION 4 - LIFETIME INCOME - This option is available on either a fixed or
variable basis. The proceeds will be paid as a 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 as a fixed annuity will be the amount computed using one of
the following bases: (i) the Lifetime Monthly Income Table for Fixed Annuity
Option 4 shown in this policy, or, if more favorable to the payee, (ii) our then
current lifetime monthly income rates for payment of proceeds. Payments will not
be less than payments made if the proceeds were used to purchase a single
premium immediate annuity available from us at that time to the same class of
annuitants.
The Lifetime Monthly Income Table for Fixed Annuity Option 4 is based on the
1983a Mortality Table and interest at 3%.
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.
Additional information about any of the options may be obtained by contacting
us.
Page 12
<PAGE>
<TABLE>
<CAPTION>
LIFETIME MONTHLY INCOME TABLE FOR FIXED ANNUITY OPTION 4
MONTHLY INCOME FOR EACH $1,000 OF PROCEEDS
- ------------------------------------------------------------------------------------------------------
Age Last Guaranteed Guaranteed Age Last Guaranteed Guaranteed Age Last Guaranteed Guaranteed
Birthday Period Amount Birthday Period Amount Birthday Period Amount
------------------------ ------------------------ ------------------------
of Payee Male Female Male Female of Payee Male Female Male Female of Payee Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
7 and
under $2.84 $2.77 $2.83 $2.76
8 2.85 2.78 2.84 2.77 34 $3.40 $3.23 $3.36$3.20 60 $5.14 $4.66 $4.86 $4.48
9 2.86 2.79 2.85 2.78 35 3.44 3.26 3.39 3.23 61 5.27 4.76 4.96 4.56
10 2.87 2.80 2.86 2.79 36 3.48 3.29 3.42 3.26 62 5.39 4.87 5.07 4.66
11 2.89 2.81 2.88 2.80 37 3.52 3.32 3.46 3.29 63 5.53 4.98 5.19 4.75
12 2.90 2.82 2.89 2.82 38 3.56 3.35 3.49 3.32 64 5.66 5.10 5.30 4.86
13 2.91 2.83 2.90 2.83 39 3.60 3.38 3.53 3.35 65 5.81 5.22 5.43 4.96
14 2.93 2.85 2.92 2.84 40 3.65 3.42 3.57 3.38 66 5.96 5.36 5.56 5.08
15 2.95 2.86 2.93 2.85 41 3.69 3.46 3.61 3.42 67 6.12 5.50 5.70 5.20
16 2.96 2.87 2.95 2.86 42 3.74 3.50 3.66 3.45 68 6.28 5.65 5.85 5.33
17 2.98 2.89 2.96 2.88 43 3.79 3.54 3.70 3.49 69 6.44 5.80 6.00 5.47
18 3.00 2.90 2.98 2.89 44 3.85 3.58 3.75 3.53 70 6.61 5.97 6.16 5.61
19 3.01 2.92 3.00 2.91 45 3.90 3.63 3.80 3.57 71 6.79 6.14 6.33 5.76
20 3.03 2.93 3.02 2.92 46 3.96 3.67 3.85 3.61 72 6.96 6.32 6.51 5.93
21 3.05 2.95 3.04 2.94 47 4.02 3.72 3.90 3.66 73 7.14 6.50 6.69 6.10
22 3.07 2.96 3.06 2.95 48 4.09 3.78 3.96 3.70 74 7.32 6.69 6.90 6.28
23 3.09 2.98 3.08 2.97 49 4.15 3.83 4.01 3.75 75 7.50 6.89 7.10 6.47
24 3.12 3.00 3.10 2.99 50 4.22 3.89 4.07 3.80 76 7.67 7.09 7.32 6.68
25 3.14 3.02 3.12 3.01 51 4.30 3.95 4.14 3.86 77 7.84 7.29 7.54 6.90
26 3.16 3.04 3.14 3.02 52 4.37 4.01 4.20 3.91 78 8.01 7.49 7.78 7.12
27 3.19 3.06 3.16 3.04 53 4.45 4.08 4.27 3.97 79 8.18 7.69 8.03 7.37
28 3.22 3.08 3.19 3.06 54 4.54 4.15 4.34 4.03 80 8.33 7.89 8.30 7.64
29 3.24 3.10 3.21 3.09 55 4.62 4.22 4.42 4.10 81 8.48 8.08 8.58 7.90
30 3.27 3.12 3.24 3.11 56 4.72 4.30 4.50 4.17 82 8.61 8.26 8.88 8.20
31 3.30 3.15 3.27 3.13 57 4.82 4.38 4.58 4.24 83 8.74 8.43 9.19 8.50
32 3.33 3.17 3.30 3.15 58 4.92 4.47 4.67 4.31 84 8.86 8.59 9.53 8.81
33 3.37 3.20 3.33 3.18 59 5.03 4.56 4.77 4.39 85 8.97 8.74 9.83 9.18
and over
- ------------------------------------------------------------------------------------------------------
</TABLE>
VARIABLE ANNUITY PAYOUT OPTIONS
You may choose payout options 2, 4 or 6 to be paid as a variable annuity.
Variable annuity payments will vary according to the net investment return of
the subaccounts chosen.
FIRST VARIABLE ANNUITY PAYMENT
We will compute the dollar amount of the first monthly variable annuity payment
by applying all or part of the Accumulation Value to the Variable Annuity Payout
Options table shown in this policy for the payout option you choose. The table
shows the dollar amount of monthly payment that you can buy with each $1,000 of
Accumulation Value.
If you have chosen more than one subaccount, we will apply the accumulation
value of each subaccount separately to the Variable Annuity Payout Options
table. The total amount of the first variable annuity payment equals the sum of
the payment amounts payable for each subaccount.
Page 13
SECOND AND LATER VARIABLE ANNUITY PAYMENTS
The dollar amount of the second and later variable annuity payments is not set.
It may change from month to month. We will compute the payment on the 10th
valuation date before the payment is due.
The amount of each variable annuity payment after the first equals the sum of:
(a) the number of annuity units under each subaccount; multiplied by
(b) the current annuity unit value for each subaccount as of the date we
compute the payment.
An annuity unit is a measuring unit used in computing the amount of the variable
annuity payments. The value of an annuity unit for each subaccount will vary
with the net investment return of the subaccount.
ANNUITY UNIT VALUE
The current value of an annuity unit for each subaccount is:
(a) the value as of the date we computed the last payment; multiplied by
(b) the Net Investment Factor for the subaccount as of the date on which we
are computing the current payment.
The Net Investment Factor is figured by dividing (a) by (b), then subtracting
(c) from the result, then multiplying by the offset factor described below. The
values of (a), (b) and (c) are defined as follows:
(a) is the net result of
(1)the net asset value of a Fund share held in a subaccount as of the
end of the currentpayment period; plus or minus
(2)a per share credit or charge for any taxes we incurred since the last
computation date that were charged to the operation of the
subaccount.
(b) is the net asset value of a Fund share held in the subaccount as of the
beginning of the current payment period.
(c) is the asset charge factor that reflects the mortality and expense risk
charge and administrative expense charge deducted from the Separate
Account. This factor is equal, on an annual basis, to 1.20% of the daily
net asset value of the Separate Account.
The result of the calculation described above is then multiplied by a factor
that offsets the assumed investment rate upon which the Variable Annuity Payout
Options table is based. This 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.
NUMBER OF ANNUITY UNITS
The number of annuity units payable for each subaccount equals:
(a) the amount of the first monthly variable annuity payment payable for
that subaccount; divided by
(b) the annuity unit value for that subaccount as of the 10th valuation date
before the annuity starting date.
The number of annuity units payable for each subaccount is fixed when we compute
the first variable annuity payment. The number remains fixed unless you exchange
annuity units between subaccounts. The number of annuity units will not change
as a result of investment experience.
We guarantee that the dollar amount of each variable annuity payment after the
first will not be affected by actual expenses or changes in mortality
experience.
EXCHANGE OF ANNUITY UNITS
After the Annuity Starting Date you may exchange the value of a specified number
of Annuity Units of one subaccount for Annuity Units of another subaccount or
the Fixed Account. You may not exchange Annuity Units of the Fixed Account for
Annuity Units of the subaccounts.
The value of the Annuity Units being exchanged will be the value for the
Valuation Period during which we receive your request for the exchange. The
value of the new Annuity Units will be such that the dollar amount of an annuity
payment made on the date of the exchange would not change as a result of the
exchange.
No more than four exchanges may be made each policy year.
Page 14
<PAGE>
<TABLE>
<CAPTION>
VARIABLE ANNUITY PAYOUT OPTIONS
MONTHLY PAYOUTS PER $1,000 BASED ON 4.00% INTEREST AND
1983A MORTALITY TABLE ALB PROJECTED 20 YEARS WITH
PROJECTION SCALE 'G'
- -------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- --------------------------------------------------
FEMALE RATES MALE RATES
- ---------------------------------------------------- --------------------------------------------------
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
Age 20 Year 10 Year Life Only Installment 20 Year 10 Year Life Only Installment Age
Certain Certain Refund Certain Certain Refund
& Life & Life & Life & Life
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 0
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
1 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 1
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
2 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 2
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
3 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 3
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
4 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 4
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
5 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 5
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
6 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 6
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
7 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 7
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
8 3.44 3.45 3.45 3.44 3.50 3.50 3.51 3.50 8
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
9 3.45 3.45 3.45 3.45 3.51 3.51 3.51 3.50 9
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
10 3.46 3.46 3.46 3.46 3.52 3.52 3.53 3.51 10
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
11 3.47 3.47 3.47 3.47 3.53 3.53 3.53 3.52 11
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
12 3.48 3.48 3.48 3.47 3.54 3.54 3.54 3.53 12
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
13 3.48 3.49 3.49 3.48 3.55 3.55 3.56 3.54 13
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
14 3.49 3.50 3.50 3.49 3.56 3.57 3.57 3.56 14
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
15 3.50 3.51 3.51 3.50 3.57 3.58 3.58 3.57 15
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
16 3.51 3.51 3.52 3.51 3.58 3.59 3.59 3.58 16
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
17 3.52 3.53 3.53 3.52 3.60 3.60 3.60 3.59 17
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
18 3.53 3.54 3.54 3.53 3.61 3.62 3.62 3.60 18
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
19 3.54 3.55 3.55 3.54 3.62 3.63 3.63 3.62 19
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
20 3.55 3.56 3.56 3.55 3.64 3.64 3.65 3.63 20
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
21 3.57 357 3.57 3.56 3.65 3.66 3.66 3.65 21
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
22 3.58 3.58 3.58 3.58 3.67 3.67 3.68 3.66 22
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
23 3.59 3.60 3.60 3.59 3.68 3.69 3.70 3.68 23
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
24 3.61 3.61 3.61 3.60 3.70 3.71 3.71 3.70 24
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
25 3.62 3.62 3.63 3.62 3.72 3.73 3.73 3.71 25
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
26 3.63 3.64 3.64 3.63 3.74 3.75 3.75 3.73 26
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
27 3.65 3.65 3.66 3.65 3.76 3.77 3.77 3.75 27
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
28 3.67 3.67 3.67 3.66 3.78 3.79 3.79 3.77 28
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
29 3.68 3.69 3.69 3.68 3.80 3.81 3.81 3.79 29
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
30 3.70 3.71 3.71 3.70 3.82 3.83 3.84 3.81 30
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
31 3.72 3.73 3.73 3.72 3.84 3.86 3.86 3.84 31
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
32 3.74 3.75 3.75 3.74 3.87 3.88 3.89 3.86 32
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
33 3.76 3.77 3.77 3.76 3.89 3.91 3.91 3.89 33
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
34 3.78 3.79 3.79 3.78 3.92 3.94 3.94 3.92 34
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
35 3.80 3.81 3.81 3.80 3.95 3.97 3.97 3.94 35
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
36 3.82 3.84 3.84 3.82 3.97 4.00 4.00 3.97 36
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
37 3.85 3.86 3.86 3.85 4.00 4.03 4.04 4.00 37
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
38 3.87 3.89 3.89 3.87 4.04 4.07 4.07 4.03 38
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
39 3.90 3.92 3.92 3.90 4.07 4.10 4.11 4.06 39
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
40 3.93 3.95 3.95 3.93 4.10 4.14 4.15 4.10 40
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
41 3.96 3.98 3.98 3.96 4.14 4.18 4.19 4.14 41
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
42 3.99 4.01 4.01 3.99 4.18 4.22 4.24 4.18 42
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
43 4.02 4.04 4.05 4.02 4.22 4.27 4.28 4.21 43
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
44 4.05 4.08 4.09 4.05 4.25 4.32 4.33 4.25 44
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
45 4.09 4.12 4.13 4.09 4.30 4.36 4.38 4.30 45
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
46 4.13 4.16 4.17 4.13 4.34 4.41 4.43 4.35 46
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
47 4.16 4.20 4.21 4.16 4.38 4.47 4.49 4.39 47
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
48 4.20 4.24 4.25 4.20 4.43 4.52 4.55 4.44 48
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
49 4.24 4.29 4.30 4.24 4.48 4.58 4.61 4.49 49
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
50 4.29 4.34 4.35 4.29 4.53 4.64 4.68 4.55 50
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
51 4.33 4.39 4.40 4.34 4.58 4.70 4.74 4.61 51
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
52 4.38 4.44 4.46 4.39 4.63 4.77 4.81 4.67 52
- ----------- --------- --------- ---------- --------- --------- ---------- --------- ---------
53 4.43 4.50 4.52 4.44 4.69 4.84 4.89 4.73 53
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
54 4.48 4.56 4.58 4.49 4.74 4.91 4.97 4.80 54
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
55 4.53 4.62 4.65 4.56 4.80 4.99 5.06 4.87 55
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
56 4.59 4.69 4.72 4.62 4.86 5.08 5.14 4.94 56
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
57 4.65 4.76 4.79 4.68 4.92 5.16 5.24 5.02 57
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
58 4.71 4.83 4.87 4.74 4.98 5.25 5.34 5.10 58
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
59 4.77 4.91 4.96 4.82 5.04 5.35 5.45 5.19 59
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
60 4.83 5.00 5.05 4.89 5.01 5.45 5.57 5.28 60
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
61 4.89 5.08 5.14 4.97 5.17 5.56 5.69 5.37 61
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
62 4.96 5.18 5.24 5.06 5.23 5.67 5.82 5.47 62
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
63 5.03 5.28 5.35 5.14 5.29 5.79 5.97 5.58 63
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
64 5.09 5.38 5.47 5.24 5.35 5.92 6.11 5.69 64
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
65 5.16 5.49 5.59 5.34 5.41 6.05 6.28 5.81 65
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
66 5.23 5.61 5.72 5.45 5.47 6.19 6.45 5.93 66
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
67 5.30 5.74 5.86 5.56 5.52 6.32 6.63 6.06 67
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
68 5.37 5.86 6.02 5.68 5.58 6.47 6.84 6.20 68
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
69 5.43 6.00 6.18 5.80 5.63 6.62 7.05 6.35 69
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
70 5.50 6.15 6.36 5.93 5.67 6.78 7.28 6.50 70
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
71 5.56 6.30 6.55 6.07 5.72 6.94 7.51 6.64 71
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
72 5.61 6.46 6.76 6.22 5.76 7.10 7.77 6.82 72
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
73 5.67 6.63 6.99 6.37 5.80 7.27 8.04 6.99 73
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
74 5.72 6.80 7.23 6.55 5.83 7.43 8.33 7.17 74
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
75 5.76 6.99 7.49 6.72 5.86 7.60 8.64 7.37 75
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
76 5.80 7.17 7.77 6.91 5.89 7.77 8.97 7.57 76
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
77 5.83 7.36 8.07 7.11 5.91 7.94 9.32 7.78 77
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
78 5.86 7.55 8.40 7.33 5.93 8.11 9.70 8.01 78
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
79 5.89 7.74 8.75 7.55 5.94 8.28 10.10 8.25 79
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
80 5.91 7.93 9.14 7.78 5.96 8.44 10.54 8.50 80
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
81 5.93 8.12 9.55 8.03 5.97 8.60 10.99 8.76 81
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
82 5.95 8.31 9.99 8.30 5.98 8.75 11.49 9.03 82
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
83 5.96 8.49 10.47 8.57 5.98 8.89 12.01 9.33 83
- ----------- --------- --------- ---------- --------- --------- ---------- --------- ---------
84 5.97 8.66 10.99 8.86 5.99 9.03 12.57 9.62 84
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
85 5.98 8.82 11.56 9.18 6.00 9.16 13.14 9.94 85
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
86 5.99 8.97 12.17 9.49 6.00 9.28 13.77 10.28 86
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
87 5.99 9.11 12.80 9.82 6.00 9.38 14.44 10.62 87
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
88 6.00 9.24 13.51 10.17 6.00 9.48 15.18 11.00 88
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
89 6.00 9.35 14.25 10.53 6.00 9.58 16.96 11.38 89
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
90 6.00 9.46 15.04 10.90 6.00 9.66 15.80 11.81 90
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
91 6.00 9.56 15.81 11.29 6.00 9.74 17.62 12.22 91
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
92 6.00 9.63 16.60 11.69 6.00 9.79 18.52 12.65 92
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
93 6.00 9.71 17.43 12.10 6.00 9.85 19.47 13.15 93
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
94 6.00 9.78 18.32 12.53 6.00 9.90 20.48 13.66 94
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
95 6.00 9.84 19.20 12.99 6.00 9.94 21.59 14.21 95
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
</TABLE>
THIS IS A FLEXIBLE PAYMENT SEPARATE ACCOUNT DEFERRED ANNUITY. THE POLICY'S
ACCUMULATION VALUE IN THE SEPARATE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE
IN THAT ACCOUNT AND WILL INCREASE OR DECREASE DAILY. THE DOLLAR AMOUNT IS NOT
GUARANTEED. NO DIVIDENDS ARE PAYABLE.
EXHIBIT (4)(B): FORM OF RIDER FOR THE ULTRANUUITY SERIES V VARIABLE ANNUITY
INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is attached to and made a part of the policy to qualify the policy as
an Individual Retirement Annuity under the Internal Revenue Code of 1986, as
amended, (the Code). Where the provisions of this rider and those of the policy
disagree, the provisions of the rider will apply. This rider replaces any rider
Individual Annuity Retirement rider previously issued.
AMENDMENTS
OWNERSHIP
- ---------
The policy is established for the exclusive benefit of the Owner and his or her
beneficiaries. The Owner is the Annuitant of the policy and may exercise all
rights under the policy during his or her lifetime. The Owner's rights to
benefits under the policy are nonforfeitable.
ASSIGNMENTS
- -----------
The policy may not be sold, assigned, discounted or pledged as collateral for a
loan or as security for the performance of an obligation. To the extent
permitted by law, benefits payable under this policy will be exempt from the
claims of creditors.
PREMIUMS (Also called purchase payments or contributions in the policy)
- --------
Premiums under the policy must be paid in cash. Premiums may not exceed $2,000
for any taxable year except for:
(a) rollover contributions (as permitted by section 402(c), 403(a)(4),
403(b)(8) or 408(d) of the Code); or
(b) a contribution made in accordance with a Simplified Employee Pension
(SEP) as described in section 408(k) of the Code.
MATURITY DATE
- -------------
In no event may the maturity date, either as stated on page 3 of the policy or
as later changed, be a date:
(a) prior to the date the Owner attains age 59 1/2; or
(b) after the first day of the Owner's taxable year in which the Owner
attains age 70 1/2.
REQUIRED DISTRIBUTION
- ---------------------
Not withstanding any provision of the policy to the contrary, the Owner's entire
interest in the policy will be distributed or begin to be distributed by the
April 1 following the calendar year in which the Owner reaches age 70 1/2 (the
required beginning date). For each succeeding year, a distribution must be made
on or before December 31. Distribution of the entire interest in the policy
shall be made in a single sum payment or over:
(a) the life of the owner; or
(b) the lives of the Owner and his or her named beneficiary; or
(c) a period certain not extending beyond the life expectancy of the
Owner; or
(d) the joint life and last survivor expectancy of the Owner and his or
her named beneficiary.
Periodic payments must be made at intervals of no longer than one year. Payments
must be either non-increasing or may increase only as provided in Q&A F-3 of
section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
Distributions under this Required Distribution provision shall be made in
accordance with the minimum distribution requirements of section 408(b)(3) of
the Code and regulations thereunder. This includes the incidental death benefit
requirement of section 401(a)(9)(G) of the Code and the incidental death benefit
requirement of section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. All
of these Code sections and regulations are herein incorporated by reference.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Income Tax Regulations. Unless otherwise elected
by the Owner by the time distributions are required to begin, life expectancies
will be recalculated annually. This election will be irrevocable by the Owner
and will apply to all later years. The life expectancy of a non-spouse
beneficiary may not be recalculated. Instead, life expectancy will be calculated
using the attained age of the beneficiary during the calendar year in which the
Owner reaches age 70 1/2. Payments for later years will be calculated based on
that life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
The Owner will elect prior to the required beginning date a form of distribution
that satisfies this Required Distribution provision.
DISTRIBUTION UPON OWNER'S DEATH
- -------------------------------
If the Owner dies after distributions have begun, the remaining portion of the
Owner's interest, if any, will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Owner's death.
If the Owner dies before distribution of this or her interest begins,
distribution of the entire remaining interest in the policy shall be completed
by December 31 of the year containing the fifth anniversary of the Owner's
death. However, to the extent that the Owner elects or, if the Owner has not so
elected, his or her named beneficiary elects, distribution will be made in
accordance with one of the following methods:
1. If the Owner's interest is payable to a named beneficiary, the entire
remaining interest in the policy may be distributed:
(a) over the life of the named beneficiary; or
(b) over a period certain not greater than the life expectancy of the named
beneficiary. Payment must begin on or before December 31 of the calendar
year immediately following the calendar year in which the Owner died.
2. If the named beneficiary is the Owner's surviving spouse, the entire
remaining interest in the policy may be distributed:
(a) over the life of the surviving spouse; or
(b) over a period certain not greater than the life expectancy of the
surviving spouse. Payment must begin on or before the later of:
(1) December 31 of the calendar year immediately following the calendar
year in which the Owner died; or
(2) December 31 of the year in which the Owner would have reached
age 70 1/2.
3. If the named beneficiary is the Owner's surviving spouse, the spouse may
elect to treat the policy as his or her own IRA. This election is made if
the surviving spouse makes:
(a) a regular IRA contribution to the policy; or
(b) makes a rollover to or from the policy; or
(c) fails to elect a distribution under this provision.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Income Tax Regulations. Unless otherwise elected
by the surviving spouse by the time distributions are required to begin, life
expectancies will be recalculated annually. This election will be irrevocable by
the surviving spouse and will apply to all later years. In the case of any other
named beneficiary, life expectancies will be calculated using the attained age
of the beneficiary during the calendar year in which distributions are required
to begin under this provision. Payments for later years will be calculated based
on that life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
Distributions under this provision are considered to have begun:
(a) if distributions are made on account of the Owner reaching his or her
required beginning date; or
(b) if, prior to the required beginning date, distributions irrevocably
begin to an individual over a period permitted and in an annuity form
acceptable under section 1.401(a)(9) of the Proposed Income Tax
Regulations.
ALTERNATIVE METHOD OF DISTRIBUTION
- ----------------------------------
An individual may satisfy the minimum distribution requirements under sections
408(a)(6) and 408(b)(3) of the Code by receiving a distribution from one IRA
that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the Owner of two or more
IRAs may use the 'alternative method' described in Notice 88-38, 1988-1 C.B.
524. This method satisfies the minimum distribution requirements described
above.
NOTICE TO COMPANY
- -----------------
The Owner shall notify us of the reason for any partial or total withdrawal. The
Owner or beneficiary is solely responsible for determining that premiums and
distributions under this policy satisfy applicable tax requirements.
ANNUAL REPORT
- -------------
We will furnish annual calendar reports concerning the status of the policy.
AMENDMENT RIGHT
- ---------------
This rider may be amended by the Company to qualify the policy as an Individual
Retirement Annuity under the Internal Revenue Code of 1986, as amended, and
applicable rules and regulations. Any such amendment may be made effective the
date of issue of the policy.
GENERAL
- -------
This rider is part of the policy to which it is attached. It is subject to all
of the policy provisions which are not inconsistent with the rider provisions.
Companion Life Insurance Company
/S/--------------------------
Daniel R. Varone
Secretary
EXHIBIT (5): FORM OF APPLICATION FOR THE ULTRANNUITY SERIES V VARIABLE ANNUITY
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------- --------------------------
MAIL TO: SEPARATE ACCOUNT ANNUITY APPLICATION REGISTERED
COMPANION LIFE INSURANCE COMPANY [ ] NONQUALIFIED [ ] 1035 EXCHANGE REPRESENTATIVE
ANNUITY SERVICE CENTER [ ] IRA TRANSFER [ ] IRA CONTRIBUTION USE ONLY:
P. O. BOX 419241 [ ] IRA ROLLOVER FOR YEAR ________ (CHECK ONLY ONE)
KANSAS CITY, MO 64141-6281 [ ] OTHER __________ [ ] A [ ] B
[ ] C [ ] D
- ------------------------------------------------------------------- ---------------------------------------------------------------
1. OWNER 2. JOINT OWNER
Name___________________________________________________________ Name_____________________________________________________________
Address________________________________________________________ Address__________________________________________________________
City___________________ State________________ ZIP ___________ City___________________ State________________ ZIP _____________
Social Security Number __ __ __-__ __ -___ ___ ___ ___ Social Security Number __ __ __-__ __ -___ ___ ___ ___
Telephone ( )_______________________ Sex [ ] Male [ ] Female Telephone ( )_________________________ Sex [ ] Male [ ] Female
Age __________ Date of Birth ________/________/_______ Age __________ Date of Birth ________/________/_______
- ------------------------------------------------------------------- ---------------------------------------------------------------
3. ANNUITANT 4. JOINT ANNUITANT
Name___________________________________________________________ Name_____________________________________________________________
Address________________________________________________________ Address__________________________________________________________
City___________________ State________________ ZIP ___________ City___________________ State________________ ZIP _____________
Social Security Number __ __ __-__ __ -___ ___ ___ ___ Social Security Number __ __ __-__ __ -___ ___ ___ ___
Telephone ( )_______________________ Sex [ ] Male [ ] Female Telephone ( )_________________________ Sex [ ] Male [ ] Female
Age __________ Date of Birth ________/________/_______ Age __________ Date of Birth ________/________/_______
- ------------------------------------------------------------------- ---------------------------------------------------------------
5. BENEFICIARIES: (IF MULTIPLE BENEFICIARIES, ATTACH SEPARATE SHEET.)
Primary Beneficiary _______________________________ Contingent Beneficiary _______________________________
Relationship to Owner _____________________________ Relationship to Owner _______________________________
Social Security or Tax I.D. No. ______________________ Social Security or Tax I.D. No. ________________________
- ------------------------------------------------------------------------------------------------------------------------------------
6. ANNUITY STARTING DATE:_____/_____/_____ If you do not choose an annuity
starting date, the annuity starting date will be the policy anniversary date
following your 90th birthday.
- ------------------------------------------------------------------------------------------------------------------------------------
7. PURCHASE PAYMENT ALLOCATION: MAKE CHECKS PAYABLE TO COMPANION LIFE INSURANCE COMPANY.
INITIAL PURCHASE PAYMENT $_______________________
Choose your investment portfolio EITHER by allocating your purchase payment
among the funds in section 7A (total must equal 100%) OR by choosing a Model
Portfolio in section 7B. Unless you direct us otherwise, we will allocate
purchase payments according to this election.
7A. [ ] Allocate my purchase payment as follows:
001 Fixed Account ____% 011 Fidelity VIP II Contrafund Portfolio ____%
002 MFS Emerging Growth Series ____% 012 Fidelity VIP II Asset Mngr-Growth Portfolio ____%
003 MFS Research Series ____% 013 Fidelity VIP Equity Income Portfolio ____%
004 MFS High Income Series ____% 014 Federated U.S. Government Bond Fund ____%
005 MFS World Government Series ____% 015 Federated Prime Money Fund ____%
006 T.Rowe Price New America Growth Portfolio ____% 016 Alger American Small Capitalization Portfolio ____%
007 T.Rowe Price Personal Str. Balanced Portfolio ____% 017 Alger American Growth Portfolio ____%
008 T.Rowe Price Equity Income Portfolio ____% 018 Scudder International Portfolio ____%
009 T.Rowe Price International Stock Portfolio ____% Total ____%
010 T.Rowe Price Limited Term Bond Portfolio ____%
-----------------------------------------------------------------------------------------------------------------------------
7B. [ ] Allocate my purchase payment according to one of the following Model Portfolios:
_____Aggressive _____Moderate _____Conservative
7C. Rebalance my portfolio as indicated in 7A or 7B: [ ] Yes [ ] No If yes, check how often you would like your
portfolio rebalanced:
[ ] Quarterly [ ] Semi-Annually [ ] Annually
- ------------------------------------------------------------------------------------------------------------------------------------
8. DOLLAR COST AVERAGING: (A minimum value of $5,000 is required in the subaccount from which transfers will be made at the time
of election. No more than 10% can be transferred from the Fixed Account at the time of election.)
Please transfer the amounts shown below:
FROM: ________________________________________________ $___________________
Subaccount
TO: ________________________________________________ __________% or $___________________
Subaccount
________________________________________________ __________% or $___________________
Subaccount
________________________________________________ __________% or $___________________
Subaccount
________________________________________________ __________% or $___________________
Subaccount
FREQUENCY: [ ] Monthly [ ] Semiannually [ ] Quarterly [ ] Annually
DATE OF TRANSFER [ ] 1st of month [ ] 15th of month
MINIMUM TRANSFER: $100 minimum; $50 per Subaccount
- ------------------------------------------------------------------------------------------------------------------------------------
9. OPTIONAL DEATH BENEFIT -- I elect to take the Enhanced Death Benefit [ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
10. Will this annuity replace or change any existing life insurance or annuity? [ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
11. I represent that my answers above are true and complete to the best of my knowledge and belief. I UNDERSTAND THAT ANNUITY
PAYMENTS AND SURRENDER VALUES, WHEN BASED UPON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO A FIXED DOLLAR AMOUNT. RECEIPT OF A CURRENT SEPARATE ACCOUNT ANNUITY PROSPECTUS IS HEREBY ACKNOWLEDGED
[ ] IF YOU WANT A STATEMENT OF ADDITIONAL INFORMATION, PLEASE CHECK HERE. [ ]
OWNER'S SIGNATURE X______________________________________________________ DATE __________________
Signed at _______________________________________________________________________________________________
City State
JOINT OWNER'S SIGNATURE X________________________________________________ DATE __________________
Signed at _______________________________________________________________________________________________
City State
- ------------------------------------------------------------------------------------------------------------------------------------
MUST BE COMPLETED BY REGISTERED REPRESENTATIVE
Do you have reason to believe the policy applied for will replace existing annuities or insurance owned by the applicant?
[ ] Yes [ ] No (If yes, fulfill all state requirements.)
AGENT SIGNATURE X________________________________________________AGENT NUMBER___________________
AGENCY NAME______________________________________________________PHONE NUMBER___________________
AGENCY ADDRESS___________________________________________________________________________________________
CITY____________________________________________________________STATE______________ZIP____________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT (9)(A)(II): CONSENT OF COUNSEL
November 1, 1996
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Re: Companion Life Insurance Company
Companion Life Separate Account C
Form N-4, File No. 33-98062
Commissioners:
I hereby consent to the reference of my name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of
Pre-Effective Amendment No. 1 to the registration statement on Form N-4 filed by
Companion Life Insurance Company on behalf of Companion Life Separate Account C
(File No. 33-98062) with the Securities and Exchange Commission.
Sincerely,
/s/ Daniel R. Varona
Daniel R. Varona
General Counsel, Secretary & Chief Administrative Officer
Companion Life Insurance Company
401 Theodore Fremd Avenue
Rye, New York 10580-1493
EXHIBIT (9)(B): CONSENT OF OUTSIDE COUNSEL.
Sutherland, Asbill & Brennan
1275 Pennsylvanie Ave., N.W.
Washington, D.C. 20004-2404
October 31, 1996
Board of Directors
Companion Life Insurance Company
401 Theodore Fremd Avenue
Rye, New York 10580-1493
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters in the Statement of Additional Information filed as part of
Pre-Effective Amendment No. 1 to the registration statement on Form N-4 for the
Companion Life Separate Account C (File No. 33-98062). In giving this consent,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Frederick R. Bellamy
Frederick R. Bellamy
EXHIBIT 10: CONSENT OF INDEPENDENT AUDITOR
Coopers & Lybrand L.L.P.
1200 Landmark Center
1299 Farnam, Suite 1000
Omaha, Nebraska 68102-1842
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Companion Life Insurance Company
We consent to the inclusion in Part B of the Statement of Additional
Information filed as part of Pre-Effective Amendment No. 1 to this registration
statement of the Companion Life Separate Account C (the "Variable Account") on
Form N-4 (File No. 33-98062) of our report dated March 20, 1996, on our audits
of the financial statements of the Companion Life Separate Account C. We also
consent to the reference to our firm as the independent accountants for the
Variable Account.
/s/ Coopers & Lybrand L.L.P.
Omaha, Nebraska
November 1, 1996
<PAGE>
Coopers & Lybrand L.L.P.
New York, New York
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Companion Life Insurance Company
We consent to the inclusion in Part B of the Statement of Additional
Information filed as part of Pre-Effective Amendment No. 1 to this registration
statement of the Companion Life Separate Account C (the "Variable Account") on
Form N-4 (File No. 33-98062) of our report dated February 23, 1996, on our
audits of the financial statements of Companion Life Insurance Company
(Companion).
/s/ Coopers & Lybrand L.L.P.
New York, New York
November 1, 1996
EXHIBIT 14: POWERS OF ATTORNEY
MEMORANDUM
To: Dan Varona
General Counsel, Secretary,
and Chief Administrative Officer
COMPANION LIFE INSURANCE COMPANY
FROM: Tom McCusker
Larry Harr
DATE: September 20, 1995
RE: POWER OF ATTORNEY DESIGNATION
Between July 13 and August 1, 1995, Messrs. Skutt, Weekly and Johnston, together
with members of Companion's Board of Directors each executed limited Powers of
Attorney in favor of Tom McCusker or Larry Harr or "such person(s) as they may
designate in writing directed to the Corporate Secretary . . .". The Power is
limited to signing registration statements and amendments thereto and similar
documents for variable products.
We hereby designate the following person to have and exercise on our behalf all
power granted us under these limited Powers of Attorney.
Kenneth W. Reitz
A copy of each Power of Attorney and this memo will accompany each SEC
registration filing signed by our designee.
/s/ Thomas J. McCusker /s/Lawrence F. Harr
- ----------------------- -----------------------
Thomas J. McCusker Lawrence F. Harr
Senior Executive Vice President Executive Vice President
and General Counsel and Executive Counsel
United of Omaha Insurance United of Omaha Insurance
Company Company
