As filed with the Securities and Exchange Commission on January 13, 1999
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. [ ]
Post-Effective Amendment No. 3 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 7
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
(402) 351-5087
Name and Address of Agent for Service:
Kenneth W. Reitz, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska, 68175-1008
Internet: [email protected]
It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[x] on the 80th day after filing pursuant to paragraph (a)(i)
If appropriate, check the following box:
[ ] This Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
- ----------------- -----------------------
1. Cover Page................................ Cover Page
2. Definitions............................... Definitions
3. Synopsis.................................. Summary
4. Condensed Financial Information........... Financial Statements
5. General
(a) Depositor................................. About Us
(b) Registrant................................ Variable Investment Options
(c) Portfolio Company......................... Variable Investment Options
(d) Fund Prospectus........................... Variable Investment Options
(e) Voting Rights............................. Voting Rights
6. Deductions and Expenses
(a) General................................... Expenses
(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............................. Other Expenses: Investment
Advisory Fees
(g) Organizational Expenses................... N/A
7. Policies
(a) Persons with Rights....................... Basic Policy Provisions;
Policy Distributions;
Voting Rights
(b) (i) Allocation of Premium
Payments............................ Summary: Purchase Payment
Flow Chart; Investment
Options; Dollar Cost
Averaging; Systematic
Transfer Enrollment Program
(ii) Transfers........................... Transfers
(iii) Exchanges........................... N/A
(c) Changes................................... Adding, Deleting or
Substituting Variable
Investments; Selecting an
Annuity Payout Option;
Annuity Starting Date
(d) Inquiries................................. Miscellaneous: Do You Have
Questions?
8. Annuity Period............................ Annuity Payout Options
9. Death Benefit............................. Death Benefits
10. Purchase and Policy Values
(a) Purchases................................. Policy Application and
Issuance
(b) Valuation................................. Accumulation Value
(c) Daily Calculation......................... Accumulation Value
(d) Underwriter............................... Distributor of the Policies
11. Redemptions
(a) By Owners................................. Withdrawals
By Annuitant.............................. N/A
(b) Check Delay............................... Policy Application and
Issuance
(c) Lapse..................................... N/A
(d) Free Look................................. Summary
12. Taxes..................................... Federal Tax Matters
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) About Us
18. Services
(a) Fees and Expenses
of Registrant............................. N/A
(b) Management Policies....................... N/A
(c) Custodian................................. Custody of Assets
Independent
Auditors ................................ Financial Statements
(d) Assets of Registrant...................... Custody of Assets
(e) Affiliated Person......................... N/A
(f) Principal Underwriter..................... Distribution of the Policies
19. Purchase of Securities
Being Offered............................. Distribution of the Policies
Offering Sales Load....................... N/A
20. Underwriters.............................. Distribution of the Policies;
(Prospectus) Distributor of
the Policies
21. Calculation of Performance
Data Calculation of Yields and Total Returns;
Other Performance Data
22. Annuity Payments.......................... (Prospectus) 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 Persons Controlled By or
Control with the Depositor or Registrant .. Under Common Control with
the Depositor or Registrant
27. Number of Policy Owners................... Number of Policy Owners
28. Indemnification........................... Indemnification
29. Principal Underwriters.................... Principal Underwriters
30. Location of Accounts
and Records............................... Location of Accounts and
Records
31. Management Services....................... Management Services
32. Undertakings.............................. Undertakings
Signature Page............................ Signatures
<PAGE>
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED] PROSPECTUS: Dated _______, 1999
Companion of New York
A Mutual of Omaha Company SERIES V ULTRANNUITY
Flexible Payment
Variable Deferred Annuity Policy
- -------------------------------------------------------------------------------
The SERIES V ULTRANNUITY (the "Policy") is offered by Companion Life
Insurance Company ("we, us, our, Companion"). The Policy is designed to aid you
(the Owner, investor) in your long-term financial planning by providing for the
accumulation of capital on a tax-deferred basis.
To purchase a Policy, you must invest at least $5,000. Further investment is
optional, but must be at least $500 each time.
<TABLE>
<CAPTION>
<S> <C>
Investment options offered
through the Policy include
25 variable options (where
you have the investment
risk) from:
The investment portfolios offered through the Alger American Fund
Policy, while they may have the same or similar Federated's Insurance Management Series
names of retail mutual funds, are not the same Fidelity's VIP Fund and VIP Fund II
as those funds. By law, the Policy may not offer MFS Variable Insurance Trust
those retail mutual funds, so it offers funds Morgan Stanley Universal Funds
whose names and characteristics may be similar Pioneer Variable Contracts Trust
to them but whose performance is not necessarily Scudder Variable Life Investment Fund
related to the retail funds. The portfolios T.Rowe Price Equity Series, Fixed Income Series
are described in separate prospectuses that and International Series
accompany this Prospectus. and 2 fixed options (where we have the investment
risk) from:
Companion Life
</TABLE>
The variable investment options are not direct investments in mutual fund
shares, but are purchases of Subaccount shares of Companion Life Separate
Account C (the "Variable Account"), which in turn invests your Purchase Payments
in the investment options pursuant to your directions. You must be given copies
of the prospectus for each variable investment option when or before you receive
this Prospectus.
The Policy is an annuity, so unlike other kinds of investments (retail mutual
funds, certificates of deposit, stocks, etc.) you may have the Policy pay your
investment back to you in installments for your entire life or for some other
period. Prior to the Annuity Starting Date, you may transfer Policy value among
the investment options. Restrictions may apply, especially on transfers out of
fixed options. You may also withdraw all or part of the Policy's value at any
time; however, withdrawals may be taxable, subject to a Withdrawal Charge and/or
a tax penalty, and withdrawals from any fixed options may be delayed.
<TABLE>
<CAPTION>
<S> <C>
PLEASE READ THIS PROSPECTUS CAREFULLY. A Statement of Additional Information about
IT PROVIDES INFORMATION YOU SHOULD us and the Policy, with the same date as
CONSIDER BEFORE INVESTING IN A POLICY. the Prospectus, is on file with the Securities
KEEP THIS PROSPECTUS FOR FUTURE and Exchange Commission ("SEC") and is
REFERENCE. IT, AND THE STATEMENT OF incorporated into this Prospectus by reference.
ADDITIONAL INFORMATION, GENERALLY DESCRIBE You may obtain a copy by writing or calling us,
ONLY THE POLICY AND VARIABLE INVESTMENT or you may access it in our registration on the
OPTIONS, EXCEPT WHEN THE FIXED OPTIONS SEC's Web site (http://www.sec.gov). The Table
ARE SPECIFICALLY MENTIONED. of Contents for the Statement of Additional
Information is at the end of this Prospectus.
</TABLE>
The Policy is a security. Although we register this Prospectus with the SEC, the
SEC does not pass upon its accuracy or adequacy, nor does the SEC approve or
disapprove the Policy. This Prospectus may only be used to offer the Policy
where the Policy may lawfully be sold. No one is authorized to give information
or make representations about the Policy that isn't in the Prospectus; if anyone
does so, you should not rely upon it as being accurate or adequate.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE POLICY IS NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE POLICY INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
CONTENTS
Page(s)
--------
DEFINITIONS 3
------------------------------------------------ --------
SUMMARY 4-9
Comparison to Other Policies and
Investments
How the Policy Operates
Summary of Expense Charges
Examples of Expenses Effect on a Policy
------------------------------------------------ --------
FINANCIAL STATEMENTS 9-10
------------------------------------------------ --------
ABOUT US 10
------------------------------------------------ --------
INVESTMENT OPTIONS 11-17
Variable Investment Options
Fixed Investment Options
Fixed Account
Transfers
Dollar Cost Averaging
Asset Allocation Program
Rebalancing
------------------------------------------------ --------
BASIC POLICY PROVISIONS 17-20
Policy Application and Issuance
Accumulation Value
Telephone Transactions
Death of Annuitant
Minor Owner or Beneficiary
Policy Termination
------------------------------------------------ --------
EXPENSES 20-21
Withdrawal Charge and Waivers
Mortality and Expense Risk Charge
Administrative Charges
Transfer Fee
Premium Tax Charge
Other Expenses
------------------------------------------------ --------
POLICY DISTRIBUTIONS 21-25
Withdrawals
Annuity Payments
Death Benefits (Standard, IRS required)
------------------------------------------------ --------
FEDERAL TAX MATTERS 25-28
Taxation of Annuities
Qualified Plan Uses of the Policy
------------------------------------------------ --------
MISCELLANEOUS 28
Distributor of the Policies
Voting Rights
Year 2000 Issues
Legal Proceedings
Do You Have Questions?
------------------------------------------------ --------
Statement of Additional Information Table of 29
Contents
2
<PAGE>
- -----------------------------------------------------------
DEFINITIONS
<PAGE>
Accumulation Units are an accounting unit of measure used to calculate the
Accumulation Value of the Variable Account.
Accumulation Value is the dollar value as of any Valuation Date of all amounts
accumulated under the Policy.
Anniversary Value is the Accumulation Value on a Policy anniversary.
Annuitant is the person on whose life annuity payments involving life
contingencies are based. The Annuitant only has rights under the Policy if the
Annuitant is also the Owner, and then has Ownership rights only.
Annuity Starting Date is the date when annuity payments are to begin. The latest
Annuity Starting Date permitted is the Annuitant's 90th birthday. Beneficiary is
the person(s) or other legal entity who receives Policy benefits, if any, upon
your death.
Cash Surrender Value is the Accumulation Value less any Withdrawal Charge and
any Policy Fee.
Date of Issue is the date the Policy is issued, as shown on the Policy Data
Page.
Due Proof of Death is a certified copy of a death certificate, a certified copy
of a decree of a court of competent jurisdiction as to the finding of death, a
written statement by the attending physician, or any other proof satisfactory to
us will constitute Due Proof of Death.
Fixed Account is an account consisting of general account assets of ours.
Payee is the person who receives annuity payments under the Policy.
Owner is 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 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.
SEC is the Security Exchange Commission, the federal governmental agency
regulating securities.
Series Funds are diversified, open-end investment management companies in which
the Variable Account invests.
Subaccount is a segregated account within the Variable Account investing in a
specified portfolio of one of the Series Funds.
Telephone Transaction are transactions you may make by telephone based upon
prior Written Notice authorization.
Us, We, Our is Companion Life Insurance Company. All communication to us
regarding your Policy should be sent to Companion Life, Variable Product
Service, P.O. Box 3664, Omaha, Nebraska 68108-0664. Telephone: 1-800-494-0067.
Valuation Date is each day that the New York Stock Exchange is open for trading.
Valuation Period is 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 us in which a portion of our assets has been allocated for the
Policy and certain other policies.
Written Notice or Request -- Written notice, signed by you, that gives us the
information we require and is received at Companion Life: Variable Product
Service, P.O. Box 3664, Omaha, Nebraska 68108-0664.
3
<PAGE>
- -----------------------------------------------------------
SUMMARY
o COMPARISON TO OTHER POLICIES AND INVESTMENTS
Compared to fixed annuities. Like fixed-interest annuities, the Policy
offers the ability to accumulate capital on a tax-deferred basis, offers the
ability to have a guaranteed minimum return on your investment (if you choose a
fixed option), allows you to make partial or full withdrawals from your Policy,
and can provide annuity payments for the rest of your life or for some other
period. The Policy is different from fixed-interest annuities in that, to the
extent your capital is invested in variable investment options, the Accumulation
Value will reflect the investment experience of the selected variable investment
options, so you have the investment risk and opportunity, not us.
Compared to mutual funds. The Policy is designed to provide insurance and
annuity protection. Although the underlying investment portfolios to which
Accumulation Value may be allocated invest in securities similar to those in
which mutual funds available directly to the public invest, in many ways the
Policy differs from mutual fund investments. The main differences are:
o The Policy provides a death benefit, based on our assumption of an
actuarially calculated risk.
o We, not you, own the investment portfolio's underlying series fund shares.
You own interests in our Subaccounts that invest in series fund portfolios
as directed by you.
o Insurance-related charges not associated with mutual fund investments are
deducted from values of the Policy.
o Federal income tax liability on any earnings is deferred until you receive a
distribution from the Policy. Transfers from one underlying series fund
portfolio to another are accomplished without tax liability under current
law.
o Dividends and capital gains distributed by the investment portfolio's
underlying series funds are automatically reinvested.
o Premature withdrawals are subject to a 10% federal tax penalty. Also, Policy
earnings that would be treated as capital gains in a mutual fund are treated
as ordinary income, although such earnings are exempt from taxation if
received as a death benefit or taxation is deferred until such earnings are
distributed.
o New York insurance law grants you 10 days to review your policy and cancel
it. The terms of this "right to examine" period is stated on the cover of
your Policy.
o HOW THE POLICY OPERATES
The following chart shows how the Policy operates. For more information,
refer to specific sections of this Prospectus.
--------------------------------------------------
PURCHASE PAYMENTS
o Minimum initial Purchase Payment is $5,000
($2,000 if you elect to make electronic funds
transfer payments of at least $100 per month, or
quarterly, semi-annual or annual payment
equivalents).
o Minimum additional Purchase Payment is $500.
o No Purchase Payments after earlier of the
Annuity Starting Date or your 83th birthday.
--------------------------------------------------
------------------------------------------------------------------
DEDUCTIONS BEFORE ALLOCATING PURCHASE PAYMENTS
None
------------------------------------------------------------------
-------------------------------------------------------------------------------
INVESTMENT OF PURCHASE PAYMENTS
o You direct the allocation of the initial Purchase Payment and any
additional Purchase Payments among 25 Subaccounts of the Variable
Account and the Fixed Account. The Subaccounts invest in corresponding
series funds.
-------------------------------------------------------------------------------
4
<PAGE>
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DEDUCTIONS FROM ASSETS
o Daily charges deducted from the net assets in the Variable Account equal
to an annual rate of:
- 1% for our mortality and expense risk;
- 0.2% for our administrative expenses.
o Annual Policy Fee of $30 Per Year. (Waived if Accumulation Value is more
than $50,000 on the Policy anniversary.)
o $10 transfer fee (first 12 transfers per Year are free).
o Investment advisory fees and fund expenses are deducted from the assets
of each Subaccount.
-----------------------------------------------------------------------------
------------------------------------------------------------------------
ACCUMULATION VALUE
o Accumulation Value is equal to the initial Purchase Payment and any
additional Purchase Payments, as adjusted each day the New York Stock
Exchange is open to reflect Subaccounts' investment experience,
charges deducted and other Policy transactions (such as transfers and
partial withdrawals).
o Accumulation Value may vary daily. There is no minimum guaranteed
Accumulation Value.
o Accumulation Value can be transferred among the Subaccounts and the
Fixed Account.
o Dollar cost averaging and asset rebalancing programs are available.
o Accumulation Value is the starting point for calculating certain
values under a Policy, such as the Cash Surrender Value and the Death
Benefit.
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCUMULATION VALUE BENEFITS
o All or part of the Accumulation Value may be withdrawn.
Each Policy Year, up to 15% of the Accumulation Value
as of the date of the first withdrawal that year DEATH BENEFITS
may be withdrawn without a Withdrawal Charge. o Available as a lump
Thereafter, the Withdrawal Charge is calculated sum or under a
separately for each Purchase Payment withdrawn variety of payment
based on the number of years elapsed since options.
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.
o Fixed and variable annuity Payout Options are available.
- --------------------------------------------------------------------------------
5
<PAGE>
o SUMMARY OF EXPENSE CHARGES
Policy Owner Transaction Expenses
o Maximum Withdrawal Charge 7%
(% of each Purchase Payment Surrendered)/1
o Transfer Fee - First 12 Transfers Per Year: NO FEE
- Over 12 Transfers in One Year: $10 each
Variable Account Annual Expenses
(deducted daily to equal this annual % of account value)
o Mortality and Expense Risk Fees 1.00%
o Administrative Expense Charge 0.20%
Total Variable Account Annual Expenses 1.20%
Other Annual Expenses
o Annual Policy Fee $30 Per Year
(waived if Accumulation Value is greater than
$50,000 on Policy Anniversary)
FOR MORE DETAILED INFORMATION ABOUT THE POLICY,
PLEASE READ THE REST OF THIS PROSPECTUS AND THE POLICY.
/ 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.
6
<PAGE>
Series Fund Annual Expenses(2) Management Other Total Series
(as a percentage of average net assets) Fees Expenses Fund Annual
Expenses
- ------------------------------------------------------------ ------- ----------
Portfolio:
Alger American Growth 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.04% 0.89%
Federated Prime Money Fund II * 0.30% 0.50% 0.80%
Federated Fund for U.S. Government Securities II * 0.15% 0.65% 0.80%
Fidelity VIP II Asset Manager: Growth *** 0.65% 0.22% 0.87%
Fidelity VIP II Contrafund *** 0.61% 0.13% 0.74%
Fidelity VIP Equity Income *** 0.51% 0.07% 0.58%
Fidelity VIP II Index 500 ** 0.13% 0.15% 0.28%
MFS Emerging Growth 0.75% 0.25% 1.00%
MFS High Income Fund 0.75% 0.25% 1.00%
MFS Research 0.75% 0.25% 1.00%
MFS Value Series 0.75% 0.25% 1.00%
MFS World Government 0.75% 0.25% 1.00%
Morgan Stanley Emerging Markets Equity ** 0% 1.75% 1.75%
Morgan Stanley Fixed Income ** 0% 0.70% 0.70%
Pioneer Capital Growth 0.65% 0.14% 1.79%
Pioneer Real Estate ** .88% 0.37% 1.25%
Scudder Global Discovery **, ***** 0.67% 1.08% 1.75%
Scudder Growth & Income ***, ***** 0.48% 0.22% 0.80%
Scudder International 0.86% 0.17% 1.00%
T. Rowe Price Equity Income **** 0% 0.85% 0.85%
T. Rowe Price International **** 0% 1.05% 1.05%
T. Rowe Price Limited-Term Bond **** 0% 0.70% 0.70%
T. Rowe Price New America Growth **** 0% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced **** 0% 0.90% 0.90%
==============================================================================
* Both Federated Prime Money Fund II and Federated Fund for U.S. Government
Securities II currently bundle their fees and expenses and limit the total
charge. Absent any fee waiver or expense reimbursement, the total fees and
expenses for each fund would have been 1.00% and 1.25% respectively.
** Without fee waiver or expense reimbursement limits the following funds would
have had the charges set forth below:
Management Other Total
Fees Expenses Expenses
----------- ----------- --------
Fidelity VIP II Index 500 0.28% 0.15% 0.43%
Morgan Stanley Emerging
Markets Equity 1.25% 2.87% 4.12%
Morgan Stanley Fixed Income 0.40% 1.31% 1.71%
Pioneer Real Estate 0.88% 0.48% 1.36%
Scudder Global Discovery 0.98% 2.00%***** 2.98%
*** These funds have voluntarily agreed to limit their total annual expenses to
the limits shown below:
Fidelity VIP II Asset Manager: Growth and Fidelity VIP II Contrafund - 1.00%
Fidelity VIP Equity Income and Scudder Growth & Income - 1.50%
**** T. Rowe Price Funds do not itemize management fees and other expenses.
***** Includes .25% 12b-1 fee assessed for payment of distribution
administration expenses.
================================================================================
(2)The fee and expense data regarding each Series Fund, which are fees and
expenses for 1997, was provided to us by the Series Fund. The Series Funds are
not affiliated with us.
7
<PAGE>
<TABLE>
<CAPTION>
Examples(3) 1. Surrender Policy at 2. Annuitize Policy at 3. Policy is not
An Owner would pay the following end of the time period or the end of the time surrendered and is not
expenses on a $1,000 investment, annuitize an Annuity period and Annuity annuitized
assuming a 5% annual return on Option 4 (Lifetime Option 4 (Lifetime
assets if: Income) is NOT chosen Income) IS chosen
Portfolio 1Yr 3Yr 5Yr 10Yr 1Yr 3Yr 5Yr 10Yr 1Yr 3Yr 5Yr 10Yr
- ------------------------------------- ------ ---- ---- ----- ----- ---- ----- ----- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alger American Growth $83 115 148 260 $83 66 115 260 $21 66 115 260
Alger American Small Capitalization 84 118 153 273 84 69 120 273 22 69 120 273
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
Federated Prime Money Fund II 83 115 148 262 83 66 116 262 21 66 116 262
Federated Fund for U.S. Government
Securities II 83 115 148 262 83 66 116 262 21 66 116 262
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
Fidelity VIP II Asset Manager 84 115 152 270 84 66 119 270 21 66 119 270
Growth 83 113 148 254 83 64 115 254 20 64 115 254
Fidelity VIP II Contrafund 82 109 138 234 82 60 105 234 19 60 105 234
Fidelity VIP Equity Income 78 99 120 197 78 50 87 197 16 50 87 197
Fidelity VIP II Index 500
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
MFS Emerging Growth 85 122 159 287 85 72 127 287 23 72 127 287
MFS High Income Fund 85 122 159 287 85 72 127 287 23 72 127 287
MFS Research 85 122 159 287 85 72 127 287 23 72 127 287
MFS Value Series 85 122 159 287 85 72 127 287 23 72 127 287
MFS World Government 85 122 159 287 85 72 127 287 23 72 127 287
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
Morgan Stanley Emerging Markets
Equity 93 145 210 381 93 96 168 381 30 96 168 381
Morgan Stanley Fixed Income 82 112 142 249 82 63 110 249 20 63 110 249
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
Pioneer Capital Growth 83 115 148 260 83 66 115 260 21 66 115 260
Pioneer Real Estate 88 129 173 318 88 80 141 318 26 80 141 318
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
Scudder Global Discovery 93 145 201 381 93 93 168 381 31 93 168 381
Scudder Growth & Income 83 115 148 262 83 83 116 262 21 83 116 262
Scudder International 85 121 159 286 85 85 127 286 23 85 127 286
- ------------------------------------ ----- ----- ----- ------ ---- ----- ----- ----- ----- ---- ----- ------
T. Rowe Price Equity Income 84 117 151 268 84 68 118 268 22 68 118 268
T. Rowe Price International 86 123 162 293 86 74 129 293 24 74 129 293
T. Rowe Price Limited-Term Bond 82 112 143 249 82 63 110 249 20 63 110 249
T. Rowe Price New America Growth 84 117 151 268 84 68 118 268 22 68 118 268
T. Rowe Price Personal Strategy
Balanced 84 118 154 274 84 69 121 274 22 69 121 274
==================================== ===== ===== ===== ====== ==== ===== ===== ===== ===== ==== ===== ======
</TABLE>
These examples should not be considered representations of past or future
expenses. Actual expenses paid may be greater than or less than those shown,
subject to the guarantees in the Policy. The assumed 5% annual rate of return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than this assumed rate.
- -----------------------------------------------------------
FINANCIAL STATEMENTS
The Financial Statements for Companion Life, the Subaccounts and the related
independent auditor's report are contained in the Statement of Additional
Information. (See the cover page on how to get a copy.) At December 31, 1998,
net assets of the Subaccounts were represented by the following Accumulation
Unit Values and Accumulation Units. This information should be read in
conjunction with the Variable Account's financial statements and related notes
included in the Statement of Additional Information.
(3) The $30 annual Policy Fee is reflected as a daily 0.10% charge in these
Examples, based on an average Accumulation Value of $30,000.
8
<PAGE>
<TABLE>
<CAPTION>
Accumulation Unit Accumulation Unit Number of
Subaccount Value on Value at End of Year Accumulation Units at
(Date of Inception Commencement Date (December 31) End of Year
($) ($) December 31)
- ------------------------------------------- ------------- ---------------- -----------------
<S> <C> <C> <C>
Alger American Growth (12/13/96) 10.
1996..................................... 13.071 0.
1997..................................... 16.240 26,254
1998.....................................
Alger American Small Capitalization 10.
(12/13/96)
1996..................................... 12.448 0.
1997..................................... 13.690 16,717
1998.....................................
Federated Prime Money Fund II (12/13/96) 1.
1996..................................... 1.059 0.
1997..................................... 1.098 410,506
1998.....................................
Federated Fund for U.S. Government 10.
Securities II (12/13/96)
1996..................................... 10.882 0.
1997..................................... 11.674 31,521
1998.....................................
Fidelity VIP II Asset Manager: Growth 10.
(12/13/96)
1996..................................... 13.353 0
1997..................................... 16.500 58,425
1998.....................................
Fidelity VIP II Contrafund (12/13/96) 10.
1996..................................... 14.070 0
1997..................................... 17.257 27,082
1998.....................................
Fidelity VIP Equity Income (12/13/96) 10.
1996..................................... 13.090 0
1997..................................... 16.571 48,536
1998.....................................
Fidelity VIP II Index 500 (5/1/98) 10.
1998.....................................
MFS Emerging Growth (12/13/96) 10.
1996..................................... 13.480 0
1997..................................... 16.230 21,242
1998.....................................
MFS High Income Fund (12/13/96) 10.
1996..................................... 11.548 0
1997..................................... 12.960 17,267
1998.....................................
MFS Research (12/13/96) 10.
1996..................................... 13.277 0.
1997..................................... 15.775 30,779
1998.....................................
MFS Value Series (5/1/98) 10.
1998.....................................
MFS World Government (12/13/96) 10.
1996..................................... 10.527 0.
1997..................................... 10.283 14,907
1998.....................................
Morgan Stanley Emerging Markets Equity 10.
(5/1/99)
9
<PAGE>
Accumulation Unit Accumulation Unit Number of
Subaccount Value on Value at End of Year Accumulation Units at
(Date of Inception Commencement Date (December 31) End of Year
($) ($) December 31)
- ------------------------------------------- ------------------ --------------- ---------------------
1998..................................... NA NA
Morgan Stanley Fixed Income (5/1/99) 10.
1998..................................... NA NA
Pioneer Capital Growth (5/1/98) 10.
1998.....................................
Pioneer Real Estate (5/1/98) 10.
1998.....................................
Scudder Global Discovery (5/1/98) 10.
1998.....................................
Scudder Growth & Income (5/1/98) 10.
1998.....................................
Scudder International (12/13/96) 10.
1996..................................... 12.067 0.
1997..................................... 13.004 15,759
1998.....................................
T.Rowe Price Equity Income (12/13/96) 10.
1996..................................... 13.731 0.
1997..................................... 17.481 52,630
1998.....................................
T.Rowe Price International (12/13/96) 10.
1996..................................... 11.976 0.
1997..................................... 12.200 23,539.
1998.....................................
T.Rowe Price Limited-Term Bond (12/13/96) 10.
1996..................................... 10.582 0.
1997..................................... 11.160 31,032
1998.....................................
T.Rowe Price New America Growth (12/13/96) 10.
1996..................................... 15.496 0.
1997..................................... 18.543 19,742
1998.....................................
T.Rowe Price Personal Strategy (12/13/96) 10.
1996..................................... 12.719 0.
1997..................................... 14.833 50,339
1998.....................................
* Accumulation Unit Values are rounded to the nearest hundredth of a cent.
** Accumulation Units are rounded to the nearest unit.
</TABLE>
- -----------------------------------------------------------
ABOUT US
We are Companion Life Insurance Company, a stock life insurance company
organized under the laws of the State of New York in 1949. We are a wholly owned
subsidiary of United of Omaha Life Insurance Company, which is a subsidiary of
Mutual of Omaha Insurance Company. The Mutual of Omaha family of companies
provide life, health, disability, home and auto insurance, mutual funds, trust
services, and investment sales and brokerage services. The Mutual of Omaha
Companies have a proud tradition of supporting environmental education, made
popular through its long-running Mutual of Omaha's Wild Kingdom television
program, and continued through its Wildlife Heritage Trust. Companion Life is
principally engaged in the business of issuing group and individual life
insurance and annuity policies, and group accident and health insurance in New
York State. As of December 31, 1997, United of Omaha had assets of over $465
million.
10
<PAGE>
We may from time to time publish (in advertisements, sales literature and
reports to Owners) the ratings and other information assigned to us by one or
more independent rating organizations such as A.M. Best Company, Moody's,
Standard & Poor's, and Duff & Phelps. The purpose of the ratings is to reflect
our financial strength and/or claims-paying ability, and the ratings should not
be considered as bearing on the investment performance of assets held in the
Variable Account or the degree of risk associated with an investment in the
Variable Account.
- -----------------------------------------------------------
INVESTMENT OPTIONS
THE INVESTMENT RESULTS OF EACH INVESTMENT OPTION, WHOSE
INVESTMENT OBJECTIVES ARE DESCRIBED BELOW, ARE LIKELY TO
DIFFER SIGNIFICANTLY. YOU SHOULD CONSIDER CAREFULLY, AND ON
A CONTINUING BASIS, WHICH PORTFOLIO OR COMBINATION OF
INVESTMENT OPTIONS BEST SUITS YOU LONG-TERM INVESTMENT
OBJECTIVES.
We recognize you have very personal goals and investment strategies. The
Policy allows you to choose from a wide array of investment options - each
chosen for its potential to meet specific investment objectives. You may
allocate all or a part of your Policy Purchase Payments to one or a combination
of the variable investment options or the fixed investment options. Allocations
must be in whole percentages and total 100%.
THE SERIES FUND PORTFOLIO, WHILE THEY MAY HAVE THE SAME OR
SIMILAR NAMES OF RETAIL MUTUAL FUNDS, ARE NOT THE SAME AS
THOSE FUNDS. bY LAW, THE pOLICY CANNOT OFFER THOSE RETAIL
MUTUAL FUNDS, SO IT OFFERS INVESTMENT PORTFOLIOS WHOSE NAMES
AND CHARACTERISTICS MAY BE SIMILAR TO THEM BUT WHOSE
PERFORMANCE IS NOT NECESSARILY RELATED TO THE RETAIL FUNDS.
FOR DETAILED INFORMATION ABOUT ANY PORTFOLIO, INCLUDING ITS
PERFORMANCE HISTORY, REFER TO THE SERIES fUND PROSPECTUS FOR
THAT PORTFOLIO.
VARIABLE INVESTMENT OPTIONS
With the Policy's variable investment options, you bear the investment
risk, not us. This means you, not we, control the amount of money you invest in
each of the variable investment portfolios, and you, not we, bear the risk those
portfolios will perform better or worse than you expect.
The Variable Account, Companion Life Separate Account C, provides you
with variable investment options in the form of Series Fund portfolios to fund
the benefits provided by your Policy. Each Series Fund is an open-end investment
management company. When you allocate Policy funds to a Series Fund portfolio,
those funds are placed in a Variable Account Subaccount corresponding to that
portfolio, and the Subaccount in turn in invests in the Series Fund portfolio in
the amount of your allocation. 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. Complete descriptions of each
portfolio's investment objectives and restrictions and other material
information related to an investment in the portfolio are contained in the
prospectuses for each of the Series Funds which accompany this Prospectus.
The Variable Account is registered with the SEC 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 Life. The Variable Account was
established as a separate investment account of Companion Life under New York
law on February 14, 1994. Under New York law, we own Variable Account assets,
but they are held separately from our other assets and are not charged with any
liability or credited with any gain of other separate investment accounts or
other business unrelated to the Variable Account. These assets are held by us
for our variable annuity insurance policies. Any and all distributions made by
the Series Funds with respect to the shares held by the Variable Account will be
reinvested in additional shares at net asset value. Because we do not manage the
investments of the portfolios, we do not guarantee the Variable Account's
performance. We are, however, responsible for meeting the obligations of the
Policy to you.
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------- ---------------------------------------------------------------- --------------------------------------------
Variable Investment Options
Asset under Companion Life Separate Account C Objective
Category* (Series Fund-Portfolio)
Investments
<S> <C> <C>
- ------------------- ---------------------------------------------------------------- --------------------------------------------
MFS Variable Insurance Trust -
MFS Emerging Growth Portfolio (5) Long-term capital appreciation.
Aggressive
Growth
Common stocks of small and medium-sized
companies with growth potential. May make
limited investments in lower rated bonds or
comparable unrated securities.
Alger American Fund -
Alger American Small Capitalization Portfolio (1) Long-term capital appreciation
Common stocks of companies with total market
capitalization of less than $1 billion.
Such securities may have limited marketability
and be subject to more abrupt or erratic
market movements than the general equity
market.
- ------------------- -------------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Long-term capital appreciation
Real Estate Pioneer Real Estate Growth Portfolio (8) with current income.
Real estate investment trusts (REITs) and
other real estate industry companies.
- ------------------- -------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc. -
T. Rowe Price International Stock Portfolio (10) Long-term capital appreciation.
International
Common stock of foreign companies.
Scudder Variable Life Investment Fund -
Scudder VLIF International Portfolio (9) Long-term capital appreciation.
Common stock of foreign companies, diversified
among several countries and industries.
Scudder Variable Life Investment Fund - Long-term capital
appreciation Scudder VLIF Global Discovery Portfolio (9)
with current income.
Common stocks of small foreign and domestic
companies, including to a limited extent in
lower rated bonds or comparable unrated
securities.
Morgan Stanley Universal Funds, Inc. -
Morgan Stanley Emerging Markets Equity Portfolio (6) Long-term capital appreciation.
Securities of "emerging" foreign countries
(countries whose economies are developing
strongly and where equity markets are becoming
sophisticated). Such investments may not be
feasible or may involve unacceptable political
risks in some countries, and may involve
greater risk than securities in more developed
countries and markets.
- ------------------- -------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - High current income
Bond - MFS High Income Portfolio (5) and capital appreciation.
High Yield
Diversified bond portfolio, some of which may
involve equity features, including lower-rated
bonds or comparable unrated securities.
- ------------------- -------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. -
T. Rowe Price New American Growth Portfolio (11) Long-term capital appreciation.
Common stocks of companies in the service
sector of the economy.
MFS Variable Insurance Trust -
- ------------------- ---------------------------------------------------------------- --------------------------------------------
12
<PAGE>
Long-term capital appreciation.
Common stocks or securities convertible into
common stocks of companies expected to possess
better than average prospects for long-term
growth. May invest to a limited extent in
lower-rated securities or comparable unrated
securities.
Fidelity Variable Insurance Products Fund II -
Fidelity VIP II Contrafund Portfolio (3) Long-term capital appreciation.
Securities of companies, foreign and domestic,
that are currently undervalued, unpopular or
overlooked, but analysts believe show
potential for growth. May use techniques to
hedge risk.
Alger American Fund -
Alger American Growth Portfolio (1) Long-term capital appreciation.
Common stocks of companies with total market
capitalization of $1 billion or more.
Pioneer Variable Contracts Trust -
Pioneer Capital Growth Portfolio (8) Long-term capital appreciation.
Securities of companies, foreign and domestic,
that are currently undervalued, unpopular or
overlooked, but analysts believe show
potential for growth.
MFS Variable Insurance Trust -
MFS Value Series Portfolio (5) Long-term capital appreciation.
Common stocks of foreign and domestic
companies. May make limited investments in
lower rated bonds or comparable unrated
securities.
- ------------------- -------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II - Long-term
capital appreciation Fidelity VIP II Index 500 Portfolio (3)
with current income.
Growth &
Income
Common stocks of companies that comprise the
Standard & Poor's 500 index.
Scudder Variable Life Investment Fund - Long-term capital
appreciation Scudder VLIF Growth & Income Portfolio (9) with
current income.
Common and preferred stocks, and securities
convertible into common stocks, of large
established companies.
- ------------------- -------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. -
T. Rowe Price Equity Income Portfolio (11) Dividend income and capital appreciation.
Equity
Income
Common stocks of established companies that
pay dividends.
Fidelity Variable Insurance Products Fund - Dividend income
and capital appreciation Fidelity VIP Equity Income
Portfolio (3) surpassing the S&P 500 average.
Securities of established companies that
produce income and capital appreciation.
- ------------------- ---------------------------------------------------------------- --------------------------------------------
T. Rowe Price Equity Series, Inc. - (11)
T. Rowe Price Personal Strategy Balanced Portfolio Dividend income and capital appreciation.
Balanced
Diversified portfolio of stocks, bond and
money market securities. Bond holdings are
primarily investment grade, but can include
more volatile unrated bonds.
Fidelity Variable Insurance Products Fund II -
Fideltiy VIP II Asset Manager Growth Portfolio (3,4) Long
term capital appreciation.
Diversified portfolio of domestic and foreign
stocks, bonds, money market securities, and
derivative transactions.
- ------------------- -------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Capital appreciation and growth with
Bond - MFS World Government Portfolio (5) moderate current income.
International
Foreign and U.S. government bonds.
Insurance Management Series -
Federated Fund for U.S. Government Securities II Portfolio (2) Current income.
- ------------------- ---------------------------------------------------------------- --------------------------------------------
Bond -
Domestic
U.S. Government bonds.
T. Rowe Price Fixed Income Series, Inc. - High level of current income consistent
T. Rowe Price Limited Term Bond Portfolio (11) with modest price fluctuations.
Short- and intermediate-term investment grade
debt securities.
- ------------------- -------------------------------------------------------------------------------------------------------------
Above average return from a diversified
Morgan Stanley Universal Funds, Inc. - portfolio of fixed income securities and
Morgan Stanley Fixed Income Portfolio (7) derivatives.
Medium to high quality fixed income
investments of intermediate maturity.
- ------------------- -------------------------------------------------------------------------------------------------------------
Insurance Management Series - Current income consistent with the
Money Market Federated Prime Money Fund II Portfolio (2) stability of principal.
Money market instruments maturing in 13 months or less. This portfolio is not insured by the
U.S. government, and there is no guarantee it will be able to maintain a stable net asset
value per share.
- ------------------- -------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Investment Advisers and Subadvisers of the Series Funds:
(1) Fred Alger Management, Inc.
(2) Federated Advisors.
(3) Fidelity Management & Research Company.
(4) Fidelity Investment Management and Research (U.K.) Inc., and Fidelity
Management and Research Far East Inc., regarding research and investment
recommendations with respect to companies based outside the United States.
(5) Massachusetts Financial Services Company.
(6) Morgan Stanley Asset Management, Inc.
(7) Miller Anderson & Sherrerd, LLP.
(8) Pioneer Investment Management.
(9) Scudder Kemper Investments, Inc.
(10)Rowe Price-Fleming International, Inc., a joint venture
between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
(11)T. Rowe Price Associates, Inc.
(*) Asset Category designations are our own to help you gain insight into each
portfolio's intended objectives, but do not assure any portfolio will perform
consistent with the categorization. INFORMATION CONTAINED IN THE SERIES FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN ANY PORTFOLIO OF THE
VARIABLE ACCOUNT.
WE DO NOT ASSURE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE. DETAILED
INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S INVESTMENT OBJECTIVE
AND POLICIES, A DESCRIPTION OF RISKS INVOLVED IN INFESTING IN EACH OF THE
PORTFOLIOS, AND EACH PORTFOLIO'S FEES AND EXPENSES, IS CONTAINED IN THE
PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH ACCOMPANY THIS
PROSPECTUS. NONE OF THESE PORTFOLIOS IS INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT.
The performance history of each Variable Account Subaccount, which gives you
an indication of how each Series Fund portfolio has performed and the effect of
Policy expenses on that performance, is discussed in the Statement of Additional
Information. You may obtain a copy from us. The performance history of each
portfolio is more fully described in the Series Fund prospectus for each
portfolio.
o Adding, Deleting, or Substituting Variable Investments
We do not control the Series Funds, so cannot guarantee that any of the
portfolios will always be available. We retain the right to change the Variable
Account and its investments. This means we may eliminate the shares of any
portfolio held in our Variable Account and to substitute shares of another
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 our
judgment, investment in any portfolio would be inappropriate in view of the
purposes of the Variable Account. We will first notify you and receive the SEC's
and necessary State approval before making such a change.
New portfolios may be added, or existing portfolios eliminated, when, in our
sole discretion, conditions warrant such a change. If a portfolio is eliminated,
we will ask you to reallocate any amount allocated to the eliminated portfolio.
If you do not reallocate these amounts, we will automatically reinvest them in
the Money Market Portfolio.
If we make a portfolio substitution or change, we may change the Policy to
reflect the substitution or change. Our Variable Account may be (i) operated as
an investment management company or any other form permitted by law, (ii)
deregistered with the SEC if registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
law, we also may transfer Policy assets of the Variable Account to other
accounts.
o FIXED INVESTMENT OPTIONS
With fixed investment options, we bear the investment risk, unlike variable
investment options where you bear that risk. This means that we will guarantee
you will earn a minimum interest rate of at least 3%, and each year may declare
a higher current interest rate that we guarantee for at least one year. We have
full control over how assets allocated to fixed investment options are invested,
and we bear the risk those assets will perform better or worse than the amount
of interest we guarantee to pay you. The focus of this Prospectus is to disclose
the Variable Account aspects of the Policy. For details regarding the fixed
investment options, see the Policy.
PURCHASE PAYMENTS ALLOCATED AND AMOUNTS TRANSFERRED TO THE
FIXED ACCOUNT BECAME PART OF THE GENERAL ACCOUNT ASSETS OF
COMPANION LIFE. INTEREST IN THE GENERAL ACCOUNT HAVE NOT
BEEN REGISTERED WITH THE SEC AND ARE NOT SUBJECT TO THE
SEC'S REGULATION, NOR IS THE GENERAL ACCOUNT REGISTERED AS
AN INVESTMENT COMPANY WITH THE SEC. THEREFOR, SEC STAFF HAVE
NOT REVIEWED THE FIXED ACCOUNT DISCLOSURES IN THIS
PROSPECTUS.
14
<PAGE>
o Fixed Account
The Fixed Account includes all our assets except those segregated in the
Variable Account or in any other separate investment account. You may allocate
Purchase Payments to the Fixed Account or transfer amounts from the Variable
Account to the Fixed Account. Instead of you bearing the investment risk, as you
do with investments allocated to the Variable Account, we bear the full
investment risk for investments in the Fixed Account. We have sole discretion to
invest the assets of our general account, including the Fixed Account, subject
to applicable law.
We guarantee that money invested in the Fixed Account will earn an effective
rate of at least 3% per year, and may earn more than that. Once declared, we
guarantee a current interest rate for at least one year. ONE TRANSFER OUT OF THE
FIXED ACCOUNT IS ALLOWED EACH POLICY YEAR. (This limit does not apply under the
Dollar Cost Averaging or Asset Allocation programs). The maximum amount that can
be transferred out of the Fixed Account during any Policy Year is 10% of Fixed
Account value on the date of the transfer. No charge is imposed on such
transfers. We reserve the right to modify transfer privileges at any time.
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. For purposes of crediting interest, the most
recent 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 (a "first-in, first-out" procedure).
WE HAVE SOLE DISCRETION TO SET CURRENT INTEREST RATES OF
FIXED INVESTMENT OPTIONS. WE DO NOT GUARANTEE THE LEVEL OF
FUTURE CURRENT INTEREST RATES OF FIXED INVESTMENT OPTIONS,
EXCEPT THAT THEY WILL NOT BE LESS THAN AN EFFECTIVE RATE OF
3% PER YEAR COMPOUNDED ANNUALLY.
We guarantee that, at any time prior to the Annuity Starting Date, the
amount in your Fixed Account will be not be less than the amount of Purchase
Payment allocated or Accumulation Value transferred to the Fixed Account, plus
interest at an effective rate of 3% per year, plus excess interest credited to
amounts in the Fixed Account, less premium or other taxes allocable to the Fixed
Account, less that part of the Monthly Deduction allocable to the Fixed Account
and less any amounts deducted from the Fixed Account in connection with partial
withdrawals (including any Withdrawal Charges) or transfers to the Variable
Account.
o TRANSFERS
The Policy is designed for long-term investment, not for active trading or
"market timing." Excessive transfers could harm other Owners by having a
detrimental effect on portfolio management. Prior to the Annuity Starting Date,
you may transfer Policy value from one Subaccount to another, from the Variable
Account to the Fixed Account, or from the Fixed Account to any Subaccount, as
often as you like, subject to these rules:
Our Rules:
o We must receive notice of the transfer - either Written Notice or an
authorized Telephone Transaction.
o The transferred amount must be at least $500, or the entire Subaccount
value if it is less. (If the Subaccount value remaining after a transfer
will be less than $500, we will include that amount as part of the
transfer.)
o We reserve the right to limit transfers from the Variable Account to the
Fixed Account of amounts previously transferred from the Fixed Account.
o The first 12 transfers from Variable Account Subaccounts are free. The rest
cost $10 each. This fee is deducted from the amount transferred.
o A transfer from the Fixed Account:
- currently may be made only once each Policy Year;
- is free;
- does not count toward the 12 free transfer limit; and
- is limited during any Policy Year to 10% of the Fixed Account value on
the date of the transfer.
o We reserve the right to limit transfers, or to modify transfer privileges,
for any permissible reason.
o If the Accumulation Value in any Subaccount falls below $500, we may
transfer the remaining balance, without charge, to the Money Market
Subaccount.
o Transfers made pursuant to participation in the Dollar Cost Averaging,
Asset Allocation or Rebalancing programs are not subject to the amount or
timing limitations of these rules, nor are they subject to a Transfer fee.
See sections describing those programs for the rules of each program.
Third-party Transfers. Where permitted and subject to our rules, we may
accept your authorization to have a third party exercise transfers on your
behalf. We can suspend or cancel our acceptance any time upon notice to you. An
example of a reason might be if the third party is practicing "market timing."
We can also limit the availability of Subaccounts and the Fixed Account for
transfers by the third party, upon notice to you. We would not impose such
restrictions where we have Written Notice that the third party has been duly
appointed by a court or by you to act on your behalf for all your financial
affairs.
o DOLLAR COST AVERAGING
Our Dollar Cost Averaging program allows you to automatically transfer, on a
periodic basis, a set amount or percentage from one Subaccount or the Fixed
Account to any Subaccount(s). You can begin Dollar Cost Averaging when you
purchase the Policy or later. You can increase or decrease the amount or
percentage of transfers or discontinue the program at any time. Rules of the
Dollar Cost Averaging program are:
Our Rules:
o The Dollar Cost Averaging program is free.
o We must receive notice of your election and any changed instruction -
either Written Notice or an authorized Telephone Transaction.
o Automatic transfers can occur monthly, quarterly, semi-annually, or
annually.
o There must be at least $5,000 of Accumulation Value in the applicable
Subaccount or Fixed Account.
o Amount of each transfer must be at least $100, and must be $50 per
Subaccount.
o If transfers are made from the Fixed Account, the maximum periodic transfer
amount is 10% of that account's value at the time of the first Dollar Cost
Averaging transfer. There is no maximum transfer amount requirement out of
the Subaccounts of the Variable Account.
o Dollar Cost Averaging program transfers cannot begin before the end of a
Policy's free look (a/k/a "right to examine") period.
o You may specify that transfers will begin on the 1st through the 28th day
(or, if not a Valuation Date, the next following Valuation Date) following
the Policy's free look period. If you do not select a date, the program
will begin on the next Policy monthly anniversary following the date the
Policy's free look period ends.
o You can limit the number of transfers to be made, in which case the program
will end when that number has been made. Otherwise, the program will
terminate when the amount remaining in the applicable Subaccount or the
Fixed Account is less than $500.
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,
REDUCING THE AVERAGE COST PER UNIT AND HOPEFULLY THEREBY
ACCUMULATING MORE UNITS. HOWEVER, THERE IS NO GUARANTEE THAT
THE PROGRAM WILL RESULT IN HIGHER POLICY VALUE OR OTHERWISE
BE SUCCESSFUL.
ASSET ALLOCATION PROGRAM
The Asset Allocation program allows you to allocate Purchase Payments and
policy value among the variable investment options and the Fixed Account. We
will periodically rebalance your Policy investments consistent with your
allocation instructions. You can specify your own desired allocation
instructions, or you can choose to use one of the five Asset Allocation Models
outlined below.
Our Rules:
o The Asset Allocation program is free.
o You must request the Asset Allocation program and give us your rebalancing
instructions by Written Notice. Changed instructions, or a request to end
this program must also be by Written Notice.
o You must have at least $10,000 of Policy Accumulation Value to begin the
Asset Allocation program.
o You may have rebalancing occur quarterly, semi-annually or annually.
o Transfers made pursuant to this program do not count in determining whether
a Transfer Fee applies.
16
<PAGE>
<TABLE>
<CAPTION>
ASSET ALLOCATION MODES
ALLOCATIONS
Portfolio Principal Portfolio Income Capital Equity
(listed aggressive Conserver Protector Builder Accumulator Maximizer
to conservative) (conservative) (moderately (moderate) (moderately (aggressive)
conservative) aggressive)
% % % % %
- --------------------------------- ------------- ------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Alger American Small Capitalization 5 4 10 12
Pioneer Real Estate Growth 4 5 6
T.Rowe Price International 6 13 22 25
Scudder International 16
MFS High Income 4 5 5
T.Rowe Price New America Growth 10
MFS Value Series 5 10 15 10
Fidelity VIP II Index 500 5 10 15 12 16
T.Rowe Price Equity Income 10 20
Fidelity VIP Equity Income 8 16 16
MFS World Government 3 5 5
Federated Fund for U.S. Government
Securities 5
T.Rowe Price Limited-Term Bond 50 37 20 16
Morgan Stanley Fixed Income Bond 5
Federated Prime Money Fund II 19 10 5
- ------------------------------------ ------------- ------------- ----------- -------------- ------------
We use Ibbotson Associates to develop the Asset Allocation Model
allocations. They are an investment consulting firm specializing in applying
investment theories and empirical findings (such as historical return data
collected on the Subaccount portfolios) to quantify the benefits of
diversification for particular investment profiles.
</TABLE>
o REBALANCING PROGRAM
The Rebalancing program allows you to rebalance your Policy Accumulation Value
amount the variable investment options and the Fixed Account pursuant to your
initial allocation percentage instructions on a quarterly, semi-annual, or
annual basis. You may change your rebalancing allocation instructions at any
time. Any change will not be effective until the next rebalancing occurs.
Our Rules:
o The Rebalancing program is free.
o You must request the Rebalancing program and give us your rebalancing
instructions by Written Notice. Changed instructions, or a request to end
this program must also be by Written Notice.
o You must have at least $10,000 of Policy Accumulation Value to begin the
Rebalancing program.
o You may have rebalancing occur quarterly, semi-annually or annually.
o Transfers made pursuant to this program do not count in determining whether
a Transfer Fee applies.
- -----------------------------------------------------------
BASIC POLICY PROVISIONS
The Ultrannuity Series V Policy is a Flexible Payment Variable Deferred Annuity
Policy. The Policy allows you to save and invest your assets on a tax-deferred
basis. A feature of the Policy distinguishing it from other similar non-annuity
investments is its ability to make annuity payments to you or, upon your death,
to pay a death benefit to your Beneficiary. Some key rights and benefits under
the Policy are summarized in this Prospectus; however, you must refer to the
Policy for the actual terms of the Policy. You may obtain a copy of the Policy
from us. The Policy can be purchased as a tax qualified or nonqualified annuity.
The Policy remains 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.
17
<PAGE>
o POLICY APPLICATION AND ISSUANCE
To purchase a Policy, you must submit an application and a minimum initial
Purchase Payment. A tax-nonqualified Policy usually will be issued only if you
are age 0 through 83, and a tax-qualified Policy if you are age 0 through 70
1/2. We may reject any applicant or Purchase Payment.
If your application is in good order upon receipt, we will credit your
initial net Purchase Payment to the Accumulation Value within 2 business days
after the later of the date we receive your application or your payment. If the
application is incomplete or there are other reasons we cannot meet this two day
objective, we will contact you within 5 business days to explain the delay; at
that time we will refund your initial Purchase Payment unless you consent to our
retaining it to apply it to your Policy once all Policy issuance requirements
are met. The date we credit your initial net Purchase Payment to your Policy's
Accumulation Value is the Date of Issue.
o Application in Good Order. All questions must be answered, but particularly
note these requirements:
- Your full name, social security number, and date of birth must be
included.
- Your Purchase Payment allocations must be completed, be in whole
percentages, and total 100%.
- Initial Purchase Payment must meet minimum Purchase Payment requirements.
- Your signature and your agent's signature must be on the application.
- Identify the type of plan, whether it is nonqualified or qualified.
- City, state, and date application was signed must be completed.
o Purchase Payment Requirements
Your Purchase Payment checks should be made payable to "Companion Life
Insurance Company" and sent to us. We may postpone crediting any payment made by
check to your Policy's Accumulation Value until it has been honored by our and
your bank. Payment by certified check, banker's draft, or cashier's check will
be promptly applied. Under our Electronic Fund Transfer program, you may select
a monthly payment schedule for us to automatically deduct Purchase Payments from
your bank account or other sources.
Initial Purchase Payment:
- - The only Purchase Payment required. All others are optional.
- - Must be at least $5,000; $2,000 if payment is made via our Electronic Fund
Transfer program. We have the right to change these payment requirements.
Additional Purchase Payments:
Must be at least $500; $100 if payments are made via our Electronic Fund
Transfer program. We have the right to change these payment requirements.
- - A separate Withdrawal Charge period applies to each Purchase Payment.
- - Will not be accepted beginning on the Policy anniversary following your
83rd birthday.
o Allocating Your Purchase Payments
You must allocate your Purchase Payments to one or more of the variable or
fixed investment options. Initial allocations in your Policy application will be
used for additional Purchase Payments until you change your allocation. If you
do not specify any allocation, we will not accept your Purchase Payment.
- - Allocations must be in whole percentages, and total 100%.
- - The minimum allocation amount is $500 ($100 under the Electronic Fund
Transfer program).
- - Change your allocation by sending us Written Notice or through an
authorized Telephone Transaction. The change will apply to payments
received on or after the date we receive your Notice or authorization.
- - All Purchase Payments will be allocated pursuant to your instructions on
record with us, except your initial Purchase Payment and any additional
Purchase Payments received during your Policy's Free Look Period may be
subject to special requirements.
- - We will allocate your initial Purchase Payment to your selected Subaccounts
on the Date of Issue.
o ACCUMULATION VALUE
On your Policy's 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 (or interest
credited to) the selected Policy investment options as well as the Policy's
deductions for charges.
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o Variable Account Value.
The Accumulation Value for each Subaccount equals:
(a) the current number of Accumulation Units in the Subaccount for the
Policy; multiplied by
(b) the current Accumulation Unit value.
A net Purchase Payment or transfer allocated to a Subaccount is converted
into Accumulation Units by dividing it by the Accumulation Unit value for the
Valuation Period during which the net Purchase Payment or transfer is allocated
to the Variable Account. The initial Accumulation Unit value for each Subaccount
was set at $10 when the Subaccount was established. The Accumulation Unit value
may increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) The net asset value per share of the Portfolio multiplied by the
number of shares held in the Subaccount, before the purchase or
redemption of any shares on that date; minus
(b) the cumulative unpaid charge for the Mortality and Expense Risk
Charge and Administrative Expense Charge; minus
(c) any applicable charge for federal and state income taxes, if any;
the result divided by
(d) the total number of Accumulation Units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any
Accumulation Units on that day.
Positive investment experience of the applicable Portfolio will increase the
Accumulation Unit values and negative investment experience will decrease the
Unit values. Expenses and deductions will have a negative effect on Unit values.
o Fixed Account Value.
The Accumulation Value of the Fixed Account on any Valuation Date equals:
(a) the Accumulation
Value at the end of the preceding Policy Month; plus
(b) any net Purchase Payments credited since the end of the previous
Policy Month; plus
(c) any transfers from the Subaccounts credited to the Fixed Account
since the end of the previous Policy Month; minus
(d) any transfers from the Fixed Account to the Subaccounts since the
end of the previous Policy Month; minus
(e) any partial withdrawal and Withdrawal Charge taken from the Fixed
Account since the end of the previous Policy Month; plus
(f) interest credited on the Fixed Account balance.
<TABLE>
<CAPTION>
o TELEPHONE TRANSACTIONS
<S> <C>
Transactions Permitted Our Rules:
o Transfers. o Prior Written Notice authorization to us.
o Partial Withdrawals of $10,000 or o Must be received by close of the New York Stock Exchange
less by the Owner ("NYSE")(usually 3 p.m. Central Time); if later, the
o Purchase Payment Allocations. transaction will be processed the next day the NYSE is
open.
o Will be recorded for your protection.
o For security, you must provide
your social security number and/or
other identification information.
o May be discontinued at any time as to some or all Owners.
We are not liable for following authorized Telephone Transaction
instructions we reasonably believe to be genuine.
</TABLE>
o DEATH OF ANNUITANT
Upon the Annuitant's death, you may name a new Annuitant. If the Owner is
the Annuitant, upon the Owner's death, the Policy's applicable death benefit
becomes payable to the named Beneficiary(ies). If the Beneficiary is the Owner's
spouse, upon the Owner's death the spouse may be permitted under federal tax law
to become the Owner of the Policy and to name an Annuitant and different
Beneficiaries.
o MINOR OWNER OR BENEFICIARY
A minor may not own the Policy solely in the minor's name and cannot receive
payments directly as a Policy Beneficiary. Contrary to common belief, in most
states parental status does NOT automatically give parents the power to provide
an adequate release to us to make Beneficiary payments to the parent for the
minor's benefit. A minor can "own" a Policy through the Trustee of a Trust
established for the minor's benefit, or through the minor's named and court
appointed guardian who own the Policy in their capacity as Trustee or Guardian.
Where a minor is a named Beneficiary, we are able to pay the minor's beneficiary
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share to a minor's Trustee or Guardian. Some states allow us to make such
payments up to a limited amount directly to parents. Parents seeking to have a
minor's interest made payable to them for the minor's benefit are encouraged to
check with their local court to determine the process to be appointed as the
minor's guardian; it is often a very simple process that can be accomplished
without the benefit of an attorney. If there is no adult representative able to
give us an adequate release for payment of the minor's Beneficiary interest, we
retain the minor's interest on deposit until the minor attains the age of
majority.
o POLICY TERMINATION
We may cancel your Policy upon 60 days' notice to you if the Accumulation
Value falls below $500. This cancellation would be a full surrender of the
Policy.
- -----------------------------------------------------------
EXPENSES
The charges and fees described below compensate us for our expenses in
distributing the Policy, bearing mortality and expense risks under the Policy,
and administering the investment options and the Policy. Except where stated
otherwise, charges and fees shown are the maximum we will charge, and some
actual expenses may be less. Each Series Fund also deducts expenses from each
Portfolio; those expenses are described in each Series Fund prospectus.
o WITHDRAWAL CHARGE
---------------------------------------------------------------------------
Years Since Receipt of Purchase 1 2 3 4 5 6 7 8+
Payment
---------------------------------------------------------------------------
Applicable Withdrawal Charge 7% 6% 5% 4% 3% 2% 1% 0%
Percentage
---------------------------------------------------------------------------
We will apply a Withdrawal Charge, expressed as a percentage of any Purchase
Payment surrendered or withdrawn, upon a full surrender or partial withdrawal.
This charge partially covers our distribution expenses, including commissions
and other promotional expenses. A Withdrawal Charge may also be deducted from
amounts applied to provide annuity payments. The Withdrawal Charge Percentage
varies depending upon the number of years elapsed since the date the Purchase
Payment was made. The amount of a partial withdrawal plus the Withdrawal Charge
is deducted from the Accumulation Value on the date we receive your withdrawal
request. Partial withdrawals (including any charge) are deducted from the
Subaccounts and the Fixed Account on a pro-rata basis, unless you instruct us
otherwise.
DETERMINE THE AMOUNT OF THE WITHDRAWAL CHARGE BY MULTIPLYING
THE AMOUNT OF EACH PURCHASE PAYMENT WITHDRAWN BY THE
APPLICABLE WITHDRAWAL CHARGE PERCENTAGES. 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).
ALL PURCHASE PAYMENTS ARE DEEMED TO BE WITHDRAWN BEFORE ANY
EARNINGS.
The Withdrawal Charge will not cover our cost of distributing the Policies.
Any deficiency is met from our general funds, including amounts derived from the
Mortality and Expense Risk Charge (described below).
o Free Withdrawals
Each Policy Year, subject to limits on transfers from the Fixed Account,
you can withdraw up to 15% of Accumulation Value at the time of the first
withdrawal each year without incurring a Withdrawal Charge. A Withdrawal Charge
is not applied on the Annuity Starting Date if you apply the Accumulation Value
after the second Policy anniversary to provide lifetime annuity payments under
Payout Option 4 (but does apply to Proceeds placed under other Payout Options.)
No Withdrawal Charge is charged upon death benefit payments or, under
tax-qualified Plans, any refund of contributions paid in excess of your
deductible amounts.
o Withdrawal Charge Waivers
We will waive the Withdrawal Charge upon partial withdrawals and surrenders
in the following situation:
Disability Waiver. Any withdrawal where you are physically disabled. We may
require proof of such disability. Proof of continued disability may be required
through the date of any partial withdrawal or surrender. We reserve the right to
have any Owner claiming such disability examined by a licensed physician.
The Disability Waiver is not available if any Owner is age 65 or older.
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<PAGE>
o MORTALITY and EXPENSE RISK CHARGE
1% ANNUAL RATE, DEDUCTED DAILY FROM NET ASSETS IN THE
VARIABLE ACCOUNT.
We impose a daily charge to compensate us for the mortality and expense
risks we have under the Policy. This charge is equal to an annual rate of 1%
(.0027535% daily) of the value of the net assets in the Variable Account, and
will not increase. This charge is reflected in the accumulation unit values for
each Subaccount.
Our mortality risk arises from our obligation to make annuity payments and
to pay death benefits prior to the Annuity Starting Date. The mortality risk we
assume is that annuitants will live longer than we project, so our cost in
making annuity payments will be higher than projected. However, an Annuitant's
own longevity, or improvement in general life expectancy, will not affect the
periodic annuity payments the Payee receives under your Policy.
Our expense risk is that our costs to administer your Policy will exceed the
amount we collect through Administrative Charges.
If the Mortality and Expense Risk Charge does not cover our costs, we bear
the loss, not you. If the charge exceeds our costs, the excess is profit to us.
We expect a profit from this charge, but the amount of our charge is sensitive
to competitive market pressures. If the Withdrawal Charge does not cover our
Policy distribution costs, the deficiency is met from our general corporate
assets, which may include amounts, if any, derived from this Mortality and
Expense Risk Charge.
o ADMINISTRATIVE CHARGES
POLICY FEE $30 ANNUALLY
------------- -------------------------------
ADMINISTRATIVE 0.20% ANNUAL RATE (0.0005485%
EXPENSE CHARGE DAILY), DEDUCTED DAILY FROM NET
ASSETS OF EACH SUBACCOUNT
These charges help cover our cost to administer your Policy and will not
increase. The Administrative Expense Charge is deducted from each Subaccount in
the same proportion that the value in each Subaccount bears to the total value
in the Variable Account.
We deduct the Policy Fee from the your Policy's Accumulation Value on the
last Valuation Date of each Policy Year prior to the Annuity Starting Date (and
upon a complete surrender). This fee is levied by canceling Accumulation Units.
This fee is waived if your Policy's Accumulation Value exceeds $50,000 on the
last Valuation Date of the applicable Policy Year, and is waived for employees
of ours or our affiliated Mutual of Omaha Companies.
o TRANSFER FEE
0.35% ANNUAL RATE, OR LESS,
OF THE AVERAGE DEATH BENEFIT AMOUNT.
The first 12 transfers from Subaccounts, and all transfers from the Fixed
Account are free. The Transfer Fee is deducted from the amount transferred.
Simultaneous requests are treated as a single request. We will not impose the
fee for transfers that are not the result of your request. Dollar Cost
Averaging, Asset Allocation and Rebalancing program transfers do not count
toward the 12 free transfers.
o OTHER TAXES
No charges are currently made for taxes. We reserve the right to levy
charges in the future for taxes or other economic burdens resulting from taxes
that we determine are properly attributable to the Variable Account.
o OTHER EXPENSES;
INVESTMENT ADVISORY FEES SEE EACH SERIES FUND's
PROSPECTUS.
Each Series Fund Portfolio is responsible for its own expenses. The net
assets of each Portfolio reflects deductions for investment advisory fees and
other expenses. These charges are disclosed in each Series Fund's prospectus
which accompany this Prospectus.
- -----------------------------------------------------------
POLICY DISTRIBUTIONS
There are several ways to take all or part of your investment out of your
Policy, both before and after the Annuity Starting Date. Tax penalties and
Withdrawal Charges may apply to amounts taken out of your Policy before the
Annuity Starting Date. Your Policy also provides several kinds of death benefits
to be paid upon your death prior to the Annuity Starting Date.
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o WITHDRAWALS
You may withdraw all or part of your Policy's Cash Surrender Value prior to
the Annuity Starting Date. Amounts withdrawn, except for "Free" Withdrawals
described below, are subject to a Withdrawal Charge. Following a full surrender
of the Policy, or at any time the Accumulation Value is zero, all your rights in
the Policy end.
"Free" Withdrawals
Each Policy Year, subject to limits on transfers from the Fixed Account, you
may withdraw up to 15% of your Policy's Accumulation Value, AS OF THE DATE OF
THE FIRST WITHDRAWAL THAT YEAR, without deduction of a Withdrawal Charge. The
15% amount is determined when the first withdrawal is made; additional Purchase
Payments contributed later in that Policy Year or on the date of your request
are not included in determining that 15% amount.
Systematic Withdrawal Plan
The Systematic Withdrawal Plan allows you to automatically withdraw payments
of a predetermined dollar amount or fixed percentage of Accumulation Value from
a specified investment option monthly, quarterly, semi-annually or annually.
Although this Plan mimics annuity payments, each distribution is a withdrawal
that may be taxable and subject to Charges; you may wish to consult a tax
adviser before requesting this Plan.
Our Rules
o Withdrawals must be by Written Notice. Total surrender requires you to
also return your Policy to us. The request for "Systematic Withdrawal
Plan" 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 received by us.
o Minimum withdrawal is $500 from any investment option. ($100 for the
Systematic Withdrawal Plan.)
o Any partial withdrawal must leave Accumulation Value of at least $500.
If less than $500 remains in an investment option, we will treat your
withdrawal request as a full surrender of that investment option.
o No more than a pro rata amount (or 10% of the Fixed Account, whichever
is less) may be withdrawn from the Fixed Account for any partial
withdrawal. Only one withdrawal per year is allowed out of the Fixed
Account.
WITHDRAWALS MAY BE SUBJECT TO:
- INCOME TAX
- PENALTY TAX
- WITHDRAWAL CHARGE
o Withdrawals result in cancellation of Accumulation Units from each
applicable Subaccount and deduction of Accumulation Value from the
Fixed Account in the ratio that the value of each such investment
option bears to the Policy's total Accumulation Value (i.e., pro rata
from each applicable investment option). If you do not specify which
investment option(s) to take the withdrawal from, it will be taken from
each investment option in the proportion that the Accumulation Value in
each investment option bears to the Policy's total Accumulation Value.
o Because a Withdrawal Charge and a Premium Tax Charge may apply to
withdrawals, the total amount paid to you upon total surrender of the
Policy (taking any prior partial withdrawals into account) may be less
than the total Purchase Payments made.
o ANNUITY PAYMENTS
A primary function of an annuity contract, like this Policy, is to provide
annuity payments to the Payee(s). The level of annuity payments is determined by
your Policy Accumulation Value, the Annuitant's sex (except where prohibited by
law) and age, and the annuity Payout Option selected.
ANNUITY PAYMENTS:
- MAY BE FIXED OR VARIABLE:
- MAY BE SUBJECT TO WITHDRAWAL
CHARGE IF MADE BEFORE THE 2ND
YEAR OF THE LAST PURCHASE PAYMENT.
- MAY BE TAXABLE, AND IF
PREMATURE, SUBJECT TO A TAX
PENALTY.
Annuity payments may be subject to a Withdrawal Charge. A Withdrawal Charge
is not applied on the Annuity Starting Date if you apply the Accumulation Value
after the second Policy anniversary to provide lifetime annuity payments under
Payout Option 4 (but does apply to Proceeds placed under other Payout Options.)
Annuity payment Payees must be individuals receiving payments in their own
behalf, unless otherwise agreed to by us. Any annuity Payout Option is only
effective once we acknowledge it. We may require initial and ongoing proof of
the Owner's or Annuitant's age or survival. Unless you specify otherwise, the
Payee is the Annuitant.
Fixed Annuity Payments. Fixed annuity payments pay a fixed rate of
interest at or higher than a guaranteed effective annual rate of 3%.
Accumulation Value reduced by any Withdrawal Charge is transferred to our
general account to fund fixed annuity payments. We have sole discretion
whether or not to pay a higher rate for Payout Options 1,2,3, or 6. Current
immediate annuity rates for the same class of annuities are used if higher
22
<PAGE>
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% guaranteed interest rate. Current amounts, and
further information, may be obtained from us.
Fixed annuity payments are available under all six annuity Payout
Options. The amount of each fixed annuity payment is set and begins on the
Annuity Starting Date, and does not change.
Variable Annuity Payments. To obtain variable annuity payments, you
allocate Accumulation Value reduced by any Withdrawal Charge to variable
investment options. Variable annuity payments, other than the first, vary in
amount depending upon the investment performance of the applicable
Subaccounts.
The first annuity payment amount is 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.
Subsequent annuity payment amounts (after the first) 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.
Only Payout Options 2,4 and 6 are available for variable annuity
payments.
o Annuity Starting Date 4 TRANSFERS ARE ALLOWED
EACH POLICY YEAR.
You select the Annuity Starting Date on the Policy application. This is the
date annuity payments begin. This date may be as late as the Annuitant's 90th
birthday. Tax qualified Policies may require an earlier Annuity Starting Date.
You may change this date be sending Written Notice for our receipt at least 30
days before the then current Annuity Starting Date.
o Transfers between fixed and variable investment options
THE LONGER THE GUARANTEED OR PROJECTED
ANNUITY PAYOUT OPTION PERIOD, THE
LOWER THE AMOUNT OF EACH ANNUITY PAYMENT.
After the Annuity Starting Date, you may transfer amounts applied to
variable annuity payments from one Subaccount to another or to the Fixed
Account. Transfers use the Variable Annuity Unit values for the Valuation Period
during which we receive your transfer request. A designated number of Variable
Annuity Units of the designated Subaccount(s) is exchanged for another
Subaccount(s) Variable Annuity Units, the value of which is such that the dollar
amount of an annuity payment made on the date of the exchange would be
unaffected by the exchange.
o Selecting an annuity Payout Option
You choose the annuity Payout Option on your Policy application. You may
change your selection during your life by sending Written Notice for our receipt
at least 30 days before the Annuity Starting Date. If no selection is made by
then, we will apply Accumulation Value in the Variable Account to provide
variable annuity payments, and Accumulation Value in the Fixed Account to
provide fixed annuity payments, and annuity payments will be made under Option 4
providing lifetime income with payments guaranteed for 10 years. We may pay your
Policy proceeds in one sum if they are less than $2,000, or when the Payout
Option chosen would result in periodic payments of less than $20.
If you die before the Annuity Starting Date (and the Policy is in force),
your Beneficiary may elect to receive the death benefit under one of the Payout
Options (unless applicable law or a settlement agreement dictate otherwise).
o Annuity Payout Options
If variable annuity payments are being made under Option 2 or 6 and do not
involve life contingencies, you may surrender your Policy and receive the
commuted value of any unpaid annuity payments.
When the Owner dies, we will pay any unpaid guaranteed payments to your
Beneficiary. Upon the last Payee's death, we will pay any unpaid guaranteed
payments to that Payee's estate.
NOTE: UNLESS YOU ELECT A PAYOUT OPTION WITH A GUARANTEED PERIOD OR OPTION 1,
IT IS POSSIBLE ONLY ONE ANNUITY PAYMENT WOULD BE MADE UNDER THIS ANNUITY PAYMENT
OPTION IF THE ANNUITANT DIED BEFORE THE DUE DATE OF THE SECOND ANNUITY PAYMENT,
ONLY TWO ANNUITY PAYMENTS WOULD BE MADE IF THE ANNUITANT DIED BEFORE THE DUE
DATE OF THE THIRD ANNUITY PAYMENT, ETC.
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Part or all of an annuity payment may be taxable as ordinary income. If, at
the time annuity payments begin, you have not given us Written Notice to not
withhold federal income taxes, we must be law withhold such taxes from the
taxable portion of each annuity payment and remit it to the Internal Revenue
Service.
(Withholding is mandatory for tax qualified Policies.)
1)
<PAGE>
1) Proceeds Held on Deposit at Interest. While Proceeds remain on deposit, we
annually credit interest to the Proceeds. The interest may be paid to the
Payee or added to the amount on deposit.
2) Income of a Specified Amount. Proceeds are paid in monthly installments of a
specified amount over at least a 5 year period until Proceeds, with
interest, have been fully paid.
3) Income for a Specified Period. Periodic payments of Proceeds are paid for
the number of years chosen. If no other frequency is selected, payments will
be made monthly. Monthly incomes for each $1,000 of Proceeds, which include
interest, are shown in a table in the Policy.
4) Lifetime Income. Proceeds are paid as monthly income during the Annuitant's
life. The amount of the monthly income annuity payment will be the amount
computed using either the Lifetime Monthly Income Table set forth in the
Policy (based on the 1983 Table "a" mortality table and interest at 3%,
adjusted to age last birthday) or, if more favorable to the Annuitant, our
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 variable investment options.
Guarantees available:
Guaranteed Period - An amount of monthly income annuity payments is
determined that we guarantee to pay for at least 10 years, and
thereafter during the Annuitant's life. Guaranteed Amount - An amount of
monthly income annuity payment is determined that we guarantee to pay
for the rest of the Annuitant's life.
5) Lump Sum. Proceeds are paid in one sum.
6) Alternative Schedule. We may be able to accommodate making annuity payments
under other options, including joint and survivor periods. Contact us for
more information.
o DEATH BENEFITS
We will pay the death benefit within 7 days after we receive necessary
documentation of your death, or as soon thereafter as we have sufficient
information about the Beneficiary to make the payment. Death Benefits may be
paid pursuant to an annuity Payout Option (including a lump sum payment) to the
extent allowed by applicable law and any settlement agreement in effect at your
death. If the Beneficiary does not make an annuity Payout Option election within
60 days of our receipt of Due Proof of your death, we will issue a lump sum
payment to the Beneficiary.
A DEATH BENEFIT IS PAYABLE UPON:
- PURCHASE PAYMENT CHECK OR
DRAFT BEING HONORED (I.E.,
YOUR POLICY IS IN FORCE)
- RECEIPT OF DUE PROOF OF DEATH
OF THE FIRST OWNER TO DIE;
- ELECTION OF AN ANNUITY PAYOUT
OPTION; AND
- PROOF THAT SUCH OWNER DIED BEFORE
ANNUITY PAYMENTS BEGIN.
If an Owner of the Policy is a corporation, trust or other nonindividual,
we treat the primary Annuitant as an Owner for purposes of the death benefit.
The "primary Annuitant" is that individual whose life affects the timing or the
amount of the death benefit 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 Annuitant's death is
treated as the Owner's death.
(If the Annuitant is not an Owner and the Annuitant dies before the Annuity
Starting Date, the Owner may name a new Annuitant if such Owner(s) is not a
corporation or other non-individual or if such Owner is the trustee of an
Internal Revenue Code Section 401(a) retirement plan. If the Owner does not name
a new Annuitant, the Owner will become the Annuitant.)
o Standard Death Benefit
If you or a joint Owner dies before the Annuity Starting Date (and the
Policy is in force), the Policy will terminate, and we will pay a death benefit
to your Beneficiary. The death benefit equals the largest of:
1) your Policy's Accumulation Value (without deduction of the Withdrawal
Charge) on the later of the date we receive Due Proof of Death and an
annuity Payout Option election; or
2) the sum of net Purchase Payments, less partial withdrawals.
(If you or a joint Owner dies on or after the Annuity Starting Date and
before all Proceeds have been paid, no death benefit is payable, but any
remaining Proceeds will be paid at least as rapidly as under the annuity Payout
Option then in effect.)
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o Beneficiary
You may change your Beneficiary by sending Written Notice to us, unless the
named Beneficiary is irrevocable. Once we record and acknowledge the change, it
is effective as of the date you signed the Written Notice. 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
Written Notice signed by both you and the Beneficiary. If more than one named
Beneficiary is designated, and you fail to specify their interests, they will
share equally.
If there are joint Owners, the surviving joint Owner will be deemed the
Beneficiary, and the Beneficiary named in the Policy application or as
subsequently changed will be deemed the contingent Beneficiary. If both joint
Owners die simultaneously, the death benefit will be paid to the contingent
Beneficiary.
If the Beneficiary is the your surviving spouse, the spouse may elect
either to receive the death benefit, in which case the Policy will terminate, or
to continue the Policy in force with the spouse as Owner.
If the named Beneficiary dies before you, then your estate is the
Beneficiary until you name a new Beneficiary.
o IRS Required Distribution
Federal law requires that if your Policy is tax non-qualified and you die
before the Annuity Starting Date, then the entire value of your Policy must be
distributed within 5 years of your death. Therefore, any death benefit must be
paid within 5 years after your death. The 5-year rule does not apply to that
portion of the Proceeds which (a) is 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 your death. Special rules may apply to your surviving spouse. The
Statement of Additional Information has a more detailed description of these
rules. Other required distribution rules apply to tax qualified Policies.
- -----------------------------------------------------------
FEDERAL TAX MATTERS
- - We only provide general information about certain current federal tax
issues affecting Policies owned by United States natural persons (except
where otherwise stated) and tax-qualified plans. Tax laws and their
application may change. ("Code" refers to the Internal Revenue Code.)
- - This discussion assumes the Policy qualifies as an annuity under federal
tax law, and assumes any tax-qualified Policy is purchased with proceeds
from and/or contributions under retirement plans that qualify for the
intended Federal income tax treatment.
- - The Statement of Additional Information discusses in greater detail the
requirements for the Policy qualifying as an annuity. Neither this
Prospectus nor the Statement of Additional Information is exhaustive on
the tax laws and regulations that may affect the Policy.
PLEASE CONSULT YOUR OWN LEGAL AND TAX ADVISER FOR ADVICE REGARDING THE
SUITABILITY OF A POLICY FOR YOUR SITUATION, THE APPLICABLE REQUIREMENTS FOR
TAX-QUALIFIED PLANS, ANY TAX LAW CHANGES, AND THE TAX TREATMENT OF THE RIGHTS
AND BENEFITS OF THE POLICY.
A Policy may be purchased on a non-tax qualified basis
("Nonqualified Policy") or in connection with plans qualifying
for favorable tax treatment ("Qualified Policy"). The ultimate
effect of Federal income taxes on the amounts held under a
Policy, on annuity payments, and on the economic benefit to
you, 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.
o TAXATION OF ANNUITIES
We believe that an Owner who is a natural person is generally not taxed on
increases in Policy value until distribution occurs by withdrawing all or part
of the Accumulation Value. 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 is treated as a
distribution. The taxable portion of a distribution is taxed as ordinary income.
An Owner 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" during the taxable year.
"INVESTMENT IN THE CONTRACT" GENERALLY EQUALS
THE AMOUNT OF ANY PURCHASE PAYMENTS PAID BY
OR ON YOUR BEHALF. FOR A TAX-QUALIFIED POLICY,
THIS CAN BE ZERO.
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o Surrenders and Partial Withdrawals
With surrenders or partial withdrawals (including systematic withdrawals)
under a Qualified Policy, a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to your total
accrued benefit for balance under the retirement plan. Special tax rules may be
available for certain distributions from a Qualified Policy.
For Nonqualified Policies, partial withdrawals are generally treated as
taxable income to the extent that the Accumulation Value immediately before the
partial withdrawal exceeds the "investment in the contract" at that time. Full
surrenders are treated as taxable income to the extent that the amount received
exceeds the "investment in the contract."
o Annuity Payments
Although tax consequences may vary depending on the Payout Option elected
under the Policy, in general, only the portion of the payout representing the
amount by which the Accumulation Value exceeds the "investment in the contract"
will be taxed; after the "investment in the contract" is recovered, the full
amount of any additional payments is taxable. In general there is no tax on the
portion of each annuity payment representing 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" is fully recovered, the full
amount of any additional annuity payments is taxable. If annuity payments cease
by reason of the Annuitant's death, any excess 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.
o Penalty Tax
Nonqualified Policy distributions may incur 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 you attain age 59
1/2; (b) made as a result of your death or disability; (c) received in
substantially equal periodic payments as a life annuity or a joint and survivor
annuity for the lives or life expectancies of you 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 Internal Revenue 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.
o Death Benefits
Generally, Death Benefits are included 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.
o Transfers, Assignments and Exchanges of the Policy
A transfer of ownership of the Policy, the designation of an Annuitant or
Beneficiary other than you, the selection of certain Annuity Starting Dates, or
the exchange of the Policy may result in certain tax consequences to you that
are not discussed here.
o Multiple Policies
All nonqualified deferred annuity contracts we or our affiliates issue you
during any calendar year are treated as one annuity contract for purposes of
determining the amount included in gross income under section 72(e) of the Code.
In addition, the Treasury Department has authority to issue regulations
preventing 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.
o Tax 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. However, recipients
generally may elect to 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.
o Tax Law Changes
The likelihood of there being any changes in tax law affecting the Policy is
uncertain. Moreover, any change could be retroactive (that is, effective prior
to the date of the change).
o QUALIFIED PLAN USES OF THE POLICY
This Policy may be used with certain qualified plans, as described below.
The rights of any person to qualified plan benefits may be subject to plan terms
26
<PAGE>
and conditions themselves, regardless of the provisions of the Policy. For
instance, some retirement plans are subject to distribution and other
requirements that are not incorporated in the Policy provisions or our
administrative procedures. Determining what those requirements are is your
responsibility, not ours. When issued in connection with the following qualified
plans, we amend the Policy to conform with Internal Revenue Code and State
Insurance Department requirements. The Policy may not be available in all States
for all types of qualified plans.
o Required Distributions
Section 401(a) and 403(b) Distributions generally must begin no later
plans than April 1 of the calendar year following
the calendar year you (the plan
participant) (a) attain age 70 1/2 or (b) retire.
Distributions must be made in a specified form or
manner. If you are a "5 percent owner"(as defined
in the Code), distributions generally must begin
no later than (a) above.
- ------------------------------ -------------------------------------------------
Standard IRAs (Section 408) Distributions generally must
begin no later than April 1 of the calendar year
following the calendar year you (the plan
participant) attain age 70 1/2.
- ------------------------------ -------------------------------------------------
Roth IRAs (Section 408a) Do not require distributions prior to your death.
o Qualified Pension or Profit Sharing Plans
Code Section 401(a) permits employers to establish retirement plans for
employees and also permits self-employed individuals to establish retirement
plans for themselves and their employees.
- Plan Trustee must be the Policy Owner and Beneficiary
- We generally do not provide Plan administration; those must be obtained
from another party.
- If each Plan participant directs investments under the Plan,
individual Policies must be issued for each participant.
- Assignments and transfers of the Policy to any individual are usually
limited and would cause adverse tax consequences to the Plan and/or
participant.
o Individual Retirement Annuities
Code Section 408 permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity ("IRA").
Distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis to an IRA. The Taxpayer Relief Act of 1997 added several
features to the IRA permitting withdrawals prior to age 59 1/2 without federal
tax penalty for such uses as purchase of a first residence and education. This
Act also created a new kind of IRA, known as a "Roth IRA." Unlike the
traditional IRA, deposits in a Roth IRA are not deductible, but if certain
specified conditions are met, distributions from Roth IRA's can be tax free.
Assets in a Roth IRA accumulate on a tax-deferred, and potentially tax-free,
basis.
- We will provide you with supplemental information required by the
Internal Revenue Service.
- You may revoke your purchase within 7 days of the earlier of the date you
established your IRA/Roth IRA or the date you purchase the Policy.
- An IRA or Roth IRA cannot be assigned.
o Tax Sheltered Annuities
Code Section 403(b) permits public school employees and employees of
certain types of religious, charitable, educational and scientific organizations
specified in Code Section 501(c)(3) to direct the purchase of annuity contracts
and, subject to certain limitations, exclude the amount of purchase payments
from gross income for income tax purposes. This Section 403(b) annuity contract
is commonly referred to as a "Tax Sheltered Annuity" or "TSA".
- We only issue the Policy as a TSA if each purchase payment is a direct
transfer from another Tax Sheltered Annuity Policy. We don't issue the
Policy as a TSA to accept direct purchase payments from an employer's
payroll office.
- The Policy as a TSA prohibits withdrawals or distributions except upon
the Annuitant's death, attainment of age 59 1/2, separation from service
or disability; and the Policy does not provide for hardship withdrawals.
- A Tax Sheltered Annuity cannot be assigned.
27
<PAGE>
- -----------------------------------------------------------
MISCELLANEOUS
o DISTRIBUTOR OF THE POLICIES
Mutual of Omaha Investor Services, Inc. ("MOIS"), Mutual of Omaha Plaza,
Omaha Nebraska 68175, is the principal underwriter of the Policies. Like us,
MOIS is an affiliate of Mutual of Omaha Insurance Company. MOIS enters into
contracts with various broker-dealers to distribute Policies. MOIS is registered
with the Securities and Exchange Commission as a broker-dealer and is a member
of the National Association of Securities Dealers, Inc. Commissions paid to a
broker-dealer are up to 7 1/2% of Purchase Payments.
o VOTING RIGHTS
As required by law, we will vote Series Fund shares held by the Variable
Account at regular and special shareholder meetings of the Series Funds pursuant
to instructions received from persons having voting interests in the portfolios.
If, however, applicable law or regulation or interpretation of them is amended,
and as a result we may vote Series Fund shares in its own right, we may do so.
The Series Funds may not hold routine annual Shareholder meetings.
As a Policy Owner, you have a voting interest in the Portfolios you are
invested in. The number of votes that you may instruct for a particular
Subaccount is determined by dividing your Accumulation Value in the Subaccount
by the net asset value per share of the corresponding Series Fund Portfolio.
Fractional shares are counted. You will receive proxy material, reports, and
other materials relating to the appropriate Portfolio in which you have voting
interests.
o YEAR 2000 ISSUES
Like all financial services providers, we use systems affected by Year 2000
transition issues and rely upon service providers, including investment
managers, whose own systems may also be affected. We are implementing a Year
2000 transition plan, and are confirming that our service providers are also
doing so. The resources that are being devoted to this effort are substantial.
It is difficult to predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have any negative
impact on us. However, as of the date of this prospectus, we do not believe Year
2000 transition implementation will harm purchaser of Policies, or our Policy
administration efforts.
o LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no legal proceedings affecting
the Variable Account, or that is material in relation to our total assets.
---------------------------------------------------
If you have questions about your Policy or this prospectus,
you may contact your agent or broker who gave this
prospectus to you, or you may contact us at: Companion Life,
Variable Product Service, P.O. Box 8430, Omaha, Nebraska
68108-3664. Telephone 1-800-494-0067.
---------------------------------------------------
<PAGE>
o STATEMENT OF ADDITIONAL INFORMATION
You may obtain, at no cost, a Statement of Additional Information which
contains more details concerning the disclosures in this Prospectus by
contacting us. Here is the Statement's Table of Contents:
Contents Page(s)
-------------------------------------- ---------
The Policy - general provisions 2
Owner and Joint Owner
Death of Annuitant
Entire Contract
Deferment of Payment and
Transfers
Incontestability
Misstatement of Age or Sex
Nonparticipating
Assignment
Evidence of Age or Survival
-------------------------------------- ---------
Federal Tax Matters 3-4
Tax Status of the Policy
Taxation of Companion Life
-------------------------------------- ---------
State Regulation of Companion Life 4-5
Administration
Records and Reports
Distribution of the Policies
-------------------------------------- ---------
Custody of Assets 5-11
Historical Performance Data
Money Market Yields
Other Subaccount Yields
Total Returns
Other Performance Data
-------------------------------------- ---------
Legal Matters 11
Other Information
Financial Statements
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ULTRANNUITY SERIES V VARIABLE ANNUITY
Issued through: COMPANION LIFE SEPARATE ACCOUNT C
Offered by: COMPANION LIFE INSURANCE COMPANY ("We, us, our")
401 Theodore Fremd Ave., Rye, New York 10590-1493
Service Office: P.O.Box 3664., Omaha, Nebraska 68108-0664
This Statement of Additional information expands upon subjects discussed in
the current Prospectus for the Ultrannuity Series V Variable Annuity Policy (the
"Policy"). You may obtain a copy of the Prospectus dated _______, 1999 by
calling 1-800-238-9354 or by writing to us at: Companion Life, Variable Product
Service, P.O. Box 3664, Omaha, Nebraska 68108-0664. Terms used in the current
Prospectus for the Policy have the same meaning in this Statement.
This Statement of Additional Information is not a
prospectus. You should read it only in conjunction with the prospectuses for
the Policy and the Series Funds.
Dated: __________, 1999
Contents Page(s)
-------------------------------------- ---------
The Policy - general provisions 2
Owner and Joint Owner
Death of Annuitant
Entire Contract
Deferment of Payment and
Transfers
Incontestability
Misstatement of Age or Sex
Nonparticipating
Assignment
Evidence of Age or Survival
-------------------------------------- ---------
Federal Tax Matters 3-4
Tax Status of the Policy
Taxation of Companion Life
-------------------------------------- ---------
State Regulation of Companion Life 4-5
Administration
Records and Reports
Distribution of the Policies
-------------------------------------- ---------
Custody of Assets 5-11
Historical Performance Data
Money Market Yields
Other Subaccount Yields
Total Returns
Other Performance Data
-------------------------------------- ---------
Legal Matters 11
Other Information
Financial Statements
1
<PAGE>
The following provides additional information about us and the Policy which
may be of interest to you and is not addressed in the Prospectus.
THE POLICY - GENERAL PROVISIONS
Owner and Joint Owner
While you are alive, only you may exercise the rights under the Policy. You
may change the Owner of the Policy 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.
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 are deemed representations and not warranties. No statement,
unless it is in the application, will be used by us to contest the Policy or
deny a claim.
Any change of the Policy and any riders requires the consent of our
authorized officer. No agent or Registered Representative has authority to
change or waive any provision of the Policy.
We reserve the right to amend the Policy to meet the requirements of, or
take advantage of, the Internal Revenue Code, regulations or published rulings.
You can refuse such a change by giving Written Notice, but a refusal may result
in adverse tax consequences.
Deferment of Payment and Transfers
We will usually pay any amounts payable from the Variable Account as a
result of a partial withdrawal or cash surrender within seven days after
receiving Written Notice. We can postpone such payments or any transfers of
amounts between Subaccounts or into the Fixed Account if:
(a) the New York Stock Exchange is closed for other than customary
weekend and holiday closings;
(b) trading on the New York Stock Exchange is restricted;
(c) an emergency exists as determined by the Securities Exchange
Commission, as a result of which it is not reasonably practical to
dispose of securities, or not reasonably practical to determine the
value of the net assets of the Variable Account; or
(d) the Securities Exchange Commission permits delay for the protection
of security holders.
The applicable rules of the Securities Exchange Commission
will govern as to whether the conditions in (c) or (d) exist.
We may defer transfers, payment of partial withdrawals or a surrender
from the Fixed Account for up to six months from the date we receive Written
Notice.
Incontestability
We will not contest the validity of the Policy after its Date of Issue.
Misstatement of Age or Sex
We may require proof of the Annuitant's age before making any life
annuity payment. If the Annuitant's age or sex has been misstated, the Annuity
Starting Date and Annuity Payments will be determined using the correct age and
sex. If misstatement of age or sex results in Annuity Payments that are too
large, the overpayments will be deducted from future Annuity Payments. If We
have made payments that are too small, the underpayments will be added to the
next payment. Adjustments for overpayments or underpayments will include 6%
interest.
Nonparticipating
No dividends will be paid. Neither you nor the Beneficiary shares in our
surplus earnings or profits.
Assignment
You may change the Owner of the Policy or pledge it as collateral by
assigning it. No assignment is binding on us until we record and acknowledge it.
The rights of any Payee will be subject to a collateral assignment.
If the Beneficiary designation is irrevocable, the Owner may be changed
or the Policy assigned only upon Written Notice signed by both you and the
Beneficiary. On the Annuity Starting Date, you may select another Payee, but you
retain all rights of ownership unless you sign an absolute assignment of the
Policy.
Evidence of Age or Survival
We may require proof of the age or survival of any Owner, Annuitant or
Payee. No payment will be made until we receive such proof.
2
<PAGE>
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 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 Life during the Valuation Period which
is determined by Companion Life to be attributable to the
operations of the subaccount;
(b) is the net asset value per share of the Fund held in the subaccount
determined as of the end of the preceding Valuation Period plus or
minus the per share credit or charge with respect to any taxes paid
or reserved for the preceding Valuation Period; and
(c) is the asset charge factor determined by us for the Valuation Period
to reflect the Mortality and Expense Risk Charge and the
Administrative Expense Charge deducted from the Variable Account.
This factor is equal, on an annual basis, to 1.20% of the net asset
value of the Variable Account.
The result is then multiplied by a factor that offsets the Assumed Investment
Rate used to establish the Annuity Payment Rates found in the applicable
Contract, which allows the actual investment rate to be credited. For a one day
Valuation Period the factor is 0.99989255 using an Assumed Investment Rate of 4%
per year.
FEDERAL TAX MATTERS
Tax Status of the Policy
Diversification Requirements. Section 817(h) of the Internal Revenue
Code provides that in order for a variable contract 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." The Treasury regulations
issued under Section 817(h) (Treas. Reg. 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. We and the Series Funds have entered into
agreements regarding participation in the Series Funds that requires the Series
Funds and their Portfolios to comply with the Treasury regulations.
Owner Control. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the contract owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. The Treasury Department also announced, in connection with the issuance
of regulations concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
Owner), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets." As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, you have additional flexibility in allocating premium payments and
policy values. These differences could result in you being treated as the owner
3
<PAGE>
of a pro-rata portion of the assets of the Separate Account. In addition, we do
not know what standards will be set forth, if any, in future regulations or
rulings issued by the Treasury Department. We therefore reserve the right to
modify the Policy as necessary to attempt to prevent you from being considered
the owner of a pro-rata share of the assets of the Variable Account or to
otherwise qualify the Policy for favorable tax treatment.
Distribution Requirements. The Code also requires that Nonqualified
Policies contain specific provisions for distribution of Policy Proceeds upon
your death. In order to be treated as an annuity contract for federal income tax
purposes, the Code requires that such Policies provide that if you die on or
after the Annuity Starting Date and before the entire interest in the Policy has
been distributed, the remaining portion must be distributed at least as rapidly
as under the method in effect on your death. If you die before the Annuity
Starting Date, the entire interest in your Policy must generally be distributed
within five years after your death. This requirement can be satisfied if the
entire interest in your Policy is used to purchase an immediate annuity under
which payments will begin within one year of your death and will be made for the
life of the Beneficiary or for a period not extending beyond the life expectancy
of the Beneficiary. If the Beneficiary is your surviving spouse, the Policy may
be continued with your surviving spouse as the new Owner. The Policy contains
provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued and
thus no assurance can be given that the provisions contained in the Policy
satisfies all such Code requirements. The provisions contained in the Policy
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 Life
We at present are taxed as a life insurance company under part I of
Subchapter L of the Code. The Variable Account is treated as part of us and,
accordingly, is not taxed separately as a "regulated investment company" under
Subchapter M of the Code. We do not expect to incur any federal income tax
liability with respect to investment income and net capital gains arising from
the activities of the Variable Account retained as part of the reserves under
the Policy. Based on this expectation, it is anticipated that no charges will be
made against the Variable Account for federal income taxes. If, in future years,
any federal income taxes or related economic burdens are incurred by us with
respect to the Variable Account, we may make a charge to the Variable Account.
STATE REGULATION OF COMPANION LIFE
We are subject to New York law and to regulation by the New York
Division of Insurance. We file an annual statement with the New York Department
of Insurance covering our operation for the preceding year and our financial
condition as of the end of such year. Regulation by the Department of Insurance
includes periodic examination to determine our contract liabilities and reserves
so that the Department may certify the items are correct. Our books and accounts
are subject to review by the Department of Insurance at all times and a full
examination of our operations is conducted periodically by the National
Association of Insurance Commissioners. In addition, we are subject to
regulation under the insurance laws of other jurisdictions in which we operate.
ADMINISTRATION
Effective on or about March 3, 1997, we perform all administration for
your Policy. Before then, we had an administrative services agreement with The
Continuum Company, Inc. (a/k/a Vantage Computer Systems), ("Vantage"), P.O. Box
419472, Kansas City, Missouri 64141-6472. The services provided by Vantage under
the agreement included issuance and redemption of the Policies, maintenance of
records concerning the Policies, and certain valuation services. We have not
paid any fees to Vantage in 1998. For the fiscal year ended December 31, 1997,
Companion Life paid $11,132 total compensation to Vantage, and in fiscal year
ended December 31, 1996 the amount was $64,445.
RECORDS AND REPORTS
All our records and accounts relating to the Variable Account are
maintained by us. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, we will mail to all Policy Owners at
their last known address of record, at least annually, financial statements of
the Variable Account and such other information as may be required under that
Act or by any other applicable law or regulation. Policy Owners will also
receive confirmation of each financial transaction and any other reports
required by applicable state and federal laws, rules, and regulations.
4
<PAGE>
DISTRIBUTION OF THE POLICIES
The Policies are offered to the public through brokers licensed under
the federal securities laws and state insurance laws. The offering of the
Policies is continuous and we do not anticipate discontinuing the offering of
the Policies. However, we reserve the right to discontinue the offering of the
Policies.
Mutual of Omaha Investor Services, Inc. ("MOIS") will be the principal
underwriter of the Policies. The Policies will be distributed by MOIS through
retail broker-dealers. Commissions payable to a broker-dealer will be up to 7.5%
of Purchase Payments. For the fiscal year ended December 31, 1998, we paid
$______ in total compensation to MOIS; of this amount MOIS retained $ ____ as
concessions for its services as Principal Underwriter and for distribution
concessions, with the remaining amount paid to other broker-dealers. In 1997,
these amounts were $261,234 and $?? respectively.
CUSTODY OF ASSETS
We hold the assets of each of the Subaccounts of the Variable Account.
The assets of the Variable Account are segregated and held separate and apart
from our general account assets. We maintain records of all purchases and
redemptions of shares of the Series Funds held by each of the Subaccounts.
Additional protection for the assets of the Variable Account is afforded by our
fidelity bond, presently in the amount of $10 million, covering the acts of our
officers and employees.
HISTORICAL PERFORMANCE DATA
From time to time, we may disclose yields, total returns, and other
performance data pertaining to the Policies for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the Securities and Exchange Commission.
The yields and total returns of the Subaccounts of the Variable Account
normally will fluctuate over time. Therefore, the disclosed yields and total
returns for any given past period are not an indication or representation of
future yields or rates of return. A Subaccount's actual yield and total return
is affected by the types and quality of portfolio securities held by the
Portfolio and its operating expenses.
Because of the charges and deductions imposed under a Policy, the yields
and total returns for the Subaccounts will be lower than the yields and total
returns for their respective Portfolios. The 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. As of 12/31/98, this current annualized yield is _____%.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities, unrealized
appreciation and depreciation, and excluding income other than investment
income) at the end of the seven-day period in the value of a hypothetical
account under a Policy having a balance of one Accumulation Unit of the Money
Market Subaccount at the beginning of the period to determine the base period
return, and annualizing this quotient on a 365-day basis. The net change in
account value reflects: (1) net income from the Portfolio attributable to the
hypothetical account; and (2) charges and deductions imposed under the Policy
which are attributable to the hypothetical account. The charges and deductions
include the per Unit charges for the hypothetical account for: (1) the annual
Policy Fee; (2) the Administrative Expense Charge; and (3) the Mortality and
Expense Risk Charge. The $30 annual Policy Fee is reflected as an annual 0.10%
charged daily, based on an average Accumulation Value of $30,000.
Yield figures will not reflect the Withdrawal Charge.
Because of the charges and deductions imposed under the Policy, the
yield for the Money Market Subaccount will be lower than the yield for the Money
Market Portfolio.
The Securities and Exchange Commission also permits us to disclose the
effective yield of the Money Market Subaccount for the same seven-day period,
determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return by adding one to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result.
5
<PAGE>
The current and effective yields on amounts held in the Money Market
Subaccount normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Portfolio, the types of quality of
portfolio securities held by the Money Market Portfolio and the Money Market
Portfolio's operating expenses. 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 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, we will always
include quotes of average annual total return for the period measured from the
date the Policies were first offered for sale. Average annual total returns for
other periods of time may, from time to time, also be disclosed.
Average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a Policy
to the redemption value of that investment as of the last day of each of the
periods. Average annual total returns will be calculated using Subaccount
Accumulation Unit values which we calculate at the end of each Valuation Period
based on the performance of the Subaccount's underlying Portfolio, the
deductions for (a) the annual Policy Fee; (b) the Administrative Expense Charge;
and (c) the Mortality and Expense Risk Charge. The $30 annual Policy Fee is
reflected as an annual 0.10% charged daily in the calculation of average annual
total returns, based on an anticipated average Accumulation Value of $30,000.
The calculation also assumes surrender of the Policy at the end of the period
for the return quotation. 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:
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.
6
<PAGE>
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 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.
Such average annual total return information for the Subaccounts of
Policies is as follows:
7
<PAGE>
- ---------------------------------------------- ------------ --------------
SUBACCOUNT 1 Year From
AVERAGE ANNUAL TOTAL RETURN (reflects Ended Inception
Withdrawal Charges) 12/31/98 to
Subaccount (date of inception) % 12/31/98
%
- ---------------------------------------------- ------------ -------------
Alger American Growth (12/13/96)
Alger American Small Capitalization (12/13/96)
Federated Prime Money Fund II (12/13/96)
Federated Fund for U.S. Government Securities (12/13/96)
Fidelity VIP II Asset Manager: Growth (12/13/96)
Fidelity VIP II Contrafund (12/13/96)
Fidelity VIP Equity Income (12/13/96)
Fidelity VIP II Index 500 (5/1/98)
MFS Emerging Growth (12/13/96)
MFS High Income (12/13/96)
MFS Research (12/13/96)
MFS Value Series (5/1/98)
MFS World Government (12/13/96)
Morgan Stanley Emerging Markets Equity (5/1/99)
Morgan Stanley Fixed Income (5/1/99)
Pioneer Capital Growth (5/1/98)
Pioneer Real Estate (5/1/98)
Scudder Global Discovery (5/1/98)
Scudder Growth & Income (5/1/98)
Scudder International (12/13/96)
T. Rowe Price International (12/13/96)
T. Rowe Price New America Growth (12/13/96)
T. Rowe Price Equity Income (12/13/96)
T. Rowe Price Limited-Term Bond (12/13/96)
T. Rowe Price Personal Strategy Balanced (12/13/96)
Non-Standardized Performance Data. In addition to the version described above,
total return performance information computed on different non-standard bases
may be used in advertisements. Average annual total return information may be
presented, computed on the same basis as described above, except deductions will
not include the Withdrawal Charge. Such non-standardized average annual total
return information for the Subaccounts of Policies is as follows:
8
<PAGE>
- ---------------------------------------------- ------------ -------------
SUBACCOUNT NON-STANDARDIZED 1 Year From
AVERAGE ANNUAL TOTAL RETURN Ended Inception
(does not reflect Withdrawal Charges) 12/31/98 to
Subaccount (date of inception) % 12/31/98
%
- ---------------------------------------------- ------------ ------------
Alger American Growth (12/13/96)
Alger American Small Capitalization (12/13/96)
Federated Prime Money Fund II (12/13/96)
Federated Fund for U.S. Government Securities (12/13/96)
Fidelity VIP II Asset Manager: Growth (12/13/96)
Fidelity VIP II Contrafund (12/13/96)
Fidelity VIP Equity Income (12/13/96)
Fidelity VIP II Index 500 (5/1/98)
MFS Emerging Growth (12/13/96)
MFS High Income (12/13/96)
MFS Research (12/13/96)
MFS Value Series (5/1/98)
MFS World Government (12/13/96)
Morgan Stanley Emerging Markets Equity (5/1/99)
Morgan Stanley Fixed Income (5/1/99)
Pioneer Capital Growth (5/1/98)
Pioneer Real Estate (5/1/98)
Scudder Global Discovery (5/1/98)
Scudder Growth & Income (5/1/98)
Scudder International (12/13/96)
T. Rowe Price International (12/13/96)
T. Rowe Price New America Growth (12/13/96)
T. Rowe Price Equity Income (12/13/96)
T. Rowe Price Limited-Term Bond (12/13/96)
T. Rowe Price Personal Strategy Balanced (12/13/96)
In addition, we may from time to time disclose average annual total return in
non-standard formats and cumulative total return for Policies funded by the
Subaccounts.
THE FIGURES ABOVE ARE AN INDICATION OF PAST, BUT NOT FUTURE, PERFORMANCE OF THE
APPLICABLE SUBACCOUNTS AVAILABLE UNDER THE POLICY.
Adjusted Historical Performance Data. We 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
"adjusted historical" performance data). Such standardized but "adjusted
historical" average annual total return information for the Subaccounts of
Policies is as follows:
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------- --------- ------------ -------------
SUBACCOUNT 1 Year 5 Years 10 Years Since
"ADJUSTED HISTORICAL" Ended Ended Ended Inception
AVERAGE ANNUAL TOTAL RETURN TABLE 12/31/98 12/31/98 12/31/98 to 12/31/98
(Reflects Withdrawal Charges) % % % %
Subaccount (date of inception of corresponding
Portfolio)
- ------------------------------------------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Alger American Growth (1/9/89) N/A
Alger American Small Capitalization (9/21/88)
Federated Prime Money Fund II (11/21/94) N/A N/A
Federated Fund for U.S. Government Securities (3/28/94) N/A N/A
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A
Fidelity VIP II Contrafund (1/3/95) N/A N/A
Fidelity VIP Equity Income (10/9/86)
Fidelity VIP II Index 500 (8/27/92) N/A
MFS Emerging Growth (7/24/95) N/A N/A
MFS High Income (7/26/95) N/A N/A
MFS Research (7/26/95) N/A N/A
MFS Value Series (8/14/96) N/A N/A
MFS World Government (6/14/94) N/A N/A
Morgan Stanley Emerging Markets Equity (10/1/96) N/A N/A
Morgan Stanley Fixed Income (1/2/97) N/A N/A
Pioneer Capital Growth (3/1/95) N/A N/A
Pioneer Real Estate (3/1/95) N/A N/A
Scudder Global Discovery (5/2/97) N/A N/A
Scudder Growth & Income (5/1/97) N/A N/A
Scudder International (5/1/87)
T. Rowe Price International (3/31/94) N/A N/A
T. Rowe Price New America Growth (3/31/94) N/A N/A
T. Rowe Price Equity Income (3/31/94) N/A N/A
T. Rowe Price Limited-Term Bond (5/13/94) N/A N/A
T. Rowe Price Personal Strategy Balanced (12/31/94) N/A N/A
10
<PAGE>
Such non-standardized (i.e., assuming no Withdrawal Charge) but adjusted
historical average annual total return information for the Subaccounts is as
follows:
- ------------------------------------------------- --------- --------- ------------ ------------
SUBACCOUNT NON-STANDARDIZED 1 Year 5 Years 10 Years Since
"ADJUSTED HISTORICAL" Ended Ended Ended Inception
AVERAGE ANNUAL TOTAL RETURN TABLE 12/31/98 12/31/98 12/31/98 to 12/31/98
(Does not reflect Surrender Charges) % % % %
Subaccount (date of inception of corresponding
Portfolio)
- ------------------------------------------------- --------- --------- ------------ ------------
Alger American Growth (1/9/89) N/A
Alger American Small Capitalization (9/21/88)
Federated Prime Money Fund II (11/21/94) N/A N/A
Federated Fund for U.S. Government Securities (3/28/94) N/A N/A
Fidelity VIP II Asset Manager: Growth (1/3/95) N/A N/A
Fidelity VIP II Contrafund (1/3/95) N/A N/A
Fidelity VIP Equity Income (10/9/86)
Fidelity VIP II Index 500 (8/27/92) N/A
MFS Emerging Growth (7/24/95) N/A N/A
MFS High Income (7/26/95) N/A N/A
MFS Research (7/26/95) N/A N/A
MFS Value Series (8/14/96) N/A N/A
MFS World Government (6/14/94) N/A N/A
Morgan Stanley Emerging Markets Equity (10/1/96) N/A N/A
Morgan Stanley Fixed Income (1/2/97) N/A N/A
Pioneer Capital Growth (3/1/95) N/A N/A
Pioneer Real Estate (3/1/95) N/A N/A
Scudder Global Discovery (5/2/97) N/A N/A
Scudder Growth & Income (5/1/97) N/A N/A
Scudder International (5/1/87)
T. Rowe Price International (3/31/94) N/A N/A
T. Rowe Price New America Growth (3/31/94) N/A N/A
T. Rowe Price Equity Income (3/31/94) N/A N/A
T. Rowe Price Limited-Term Bond (5/13/94) N/A N/A
T. Rowe Price Personal Strategy Balanced (12/31/94) N/A N/A
</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.
We may disclose Cumulative Total Returns in conjunction with the
standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = -- The Cumulative Total Return net of Subaccount recurring
charges for the period.
ERV = -- The ending redeemable value of the hypothetical investmen
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.
11
<PAGE>
Across the Board
Advertising Age
American Banker
Barron's
Best's Review
Broker World
Business Insurance
Business Month
Business Week
Changing Times
Consumer Reports
Economist
Financial Planning
Financial World
Forbes
Fortune
Inc.
Institutional Investor
Insurance Forum
Insurance Sales
Insurance Week
Journal of Accountancy
Journal of the American Society
of CLU & ChFC
Journal of Commerce
Life Association News
Life Insurance Selling
Manager's Magazine
Market Facts
Money
LEGAL MATTERS
We know of no material legal proceedings pending to which the Variable
Account is a party or which would materially affect the Variable Account. We are
not involved in any litigation of material importance to our total assets or to
the Variable Account. Legal matters in connection with the Policy have been
passed upon by our Law Staff.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission ("SEC"), 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, refer to the instruments filed with the SEC. They may be
accessed on the SEC's Web site:
http://www.sec.gov.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements
for the Variable Account as of December 31, 1998 and for the years ended
December 31, 1997 and 1996 which have been audited by Deloitte & Touche, LLP,
independent auditors, New York, New York, as stated in their report appearing
herein.
The Financial Statements of Companion Life Insurance Company as of and
for the years ended December 31, 1998, 1997 and 1996 included in this Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, New York, New York, as stated in their report appearing
herein. The financial statements of Companion Life Insurance Company should be
considered only as bearing on our ability 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.
12
<PAGE>
[AUDITED FINANCIAL STATEMENTS OF COMPANION LIFE and COMPANION LIFE SEPARATE
ACCOUNT C WILL BE INSERTED HERE BY SUBSEQUENT POST-EFFECTIVE AMENDMENT BEFORE
THIS AMENDED REGISTRATION BECOMES EFFECTIVE.]
13
<PAGE>
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits: The following exhibits are filed herewith:
Exhibit No. Description of Exhibit
- --------- -----------------------
(1) (a) Resolution of the Board of Directors establishing the Variable Account.*
(2) Not applicable.
(3) (a) Principal Underwriter Agreement by and between United, on its own
behalf and on behalf of the Variable Account, and Mutual of Omaha
Investor Services. *
(b) Form of Broker/Dealer Supervision and Sales Agreement by and between
Mutual of Omaha Investor Services, Inc. and the Broker/Dealer. *
(4) (a) Form of Policy for the SERIES V variable annuity Policy. *
(b) Form of Riders to the Policy. *
(5) Form of Application to the Policy. *
(6) (a) Articles of Incorporation of United of Omaha Life Insurance Company. *
(b) Bylaws of United of Omaha Life Insurance Company. *
(7) Not applicable.
(8) (a) Participation Agreement with the Alger American Fund. *
(b) Participation Agreement with the Insurance Management Series. *
(c) Participation Agreement with the Fidelity VIP Fund and Fidelity
VIP Fund II. *
(d) Participation Agreement with the MFS Variable Insurance Trust. *
(e) Participation Agreement with the Pioneer Variable Contracts Trust. *
(f) Participation Agreement with the Scudder Variable Life Investment Fund.*
(g) Participation Agreement with T. Rowe Price International Series, T.
Rowe Price Fixed Income Series, and T. Rowe Price Equity Series. *
(h) Administrative Services Agreement with Vantage Computer Systems. *
(9) Opinion and Consent of Counsel. ##
(10) Consents of Independent Auditors. ##
(11) Not applicable.
(12) Not applicable.
(13) Schedules of Computation of Performance Data.##
(14) Powers of Attorney. *
o Incorporated by Reference to the Registration Statement for Companion Life
Separate Account C filed on April 24, 1997 (File No. 33-98062).
## To be filed by Pre-Effective Amendment to this Registration Statement.
C-14
<PAGE>
Item 25. Directors and Officers of the Depositor
Principal Positions
Name and and Offices with
Business Address/1 Depositor
- --------------------- -----------------------
John W. Weekly Chairman
Kimberley S. Harm President, Director
William G. Campbell Director
Samuel L. Foggie Director
M. Jane Huerter Director, Vice President & Secretary
Charles T. Locke III Director
John L. Maginn Director, Vice President & Assistant Treasurer
James U. O'Neill Director
Oscar S. Straus Director
John A. Sturgeon Director
Fred C. Boddy Vice President, Treasurer and Assistant Secretary
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
<TABLE>
<CAPTION>
Name of Corporation (where organized) Type of Corporation
<S> <C>
Mutual of Omaha Insurance Company (NE) Accident & Health Insurance
KFS Corporation (NE) Holding corporation
Kirkpatrick, Pettis, Smith, Polian Inc. (NE) Registered broker-dealer & investment advisor
KPM Investment Management, Inc. (NE) Investment advisor
Kirkpatrick Pettis Trust Company (NE) Trust company
Mutual of Omaha Health Plans, Inc. (NE) Holding corporation
Exclusive Healthcare, Inc. (NE) HMO
Mutual of Omaha of Colorado, Inc. (CO) (50%) HMO
Mutual of Omaha Health Plans of Lincoln, Inc. (NE) Staff Model HMO
Preferred Health Alliance, Inc. (NE) (51%) Joint venture w/physician & hospital organization
Mutual of Omaha Dental Plans of Nebraska, Inc. (NE) Limited pre-paid DHMO
Mutual of Omaha Health Plans of Indiana, Inc. (IN) HMO
Mutual of Omaha Health Plans of Ohio, Inc. (OH) HMO
Mutual of Omaha of South Dakota & Community Health
Plus HMO, Inc. (SD) HMO
Mutual of Omaha Tri-State Health Plans, Inc. (TN) HMO
Mutual of Omaha Holdings, Inc. (NE) Holding corporation
innowave incorporated (NE) Markets water distillation products
Mutual Asset Management Co. (NE) Asset management services
Mutual of Omaha Investor Services, Inc. (NE) Registered securities Broker-Dealer
Mutual of Omaha Marketing Corporation (NE) Markets health insurance
Omex Realty, Inc. (NE) Real estate investments
Mutual of Omaha U.K. Limited (U.K.) Insurance in United Kingdom (inactive)
The Omaha Indemnity Company (WI) Property & casualty insurance (no new business since 1986)
Omah`1a Property and Casualty Insurance Company (NE) Property & casualty insurance
Adjustment Services, Inc. (NE) Claims adjusting services
Tele-Trip Company, Inc. (DE) Markets travel/flight insurance in airports
United of Omaha Life Insurance Company (NE) Life, H&A insurance/annuities
Companion Life Insurance Company (NY) Life insurance/annuities
Mutual of Omaha Structured Settlement Company, Inc. (CT) Structured settlements
Mutual of Omaha Structure Settlement Company of
New York, Inc. (NY) Structured settlements
United World Life Insurance Company (NE) Accident & health and life insurance
United Properties Co. (CA) (50%) Real estate general partnership
</TABLE>
*Subsidiaries of subsidiaries are indicated by indentations.
/1 Business address is Mutual of Omaha Insurance Company, Mutual of Omaha Plaza,
Omaha, Nebraska 68175.
C-15
<PAGE>
Item 27. Number of Policyowners
As of December 31, 1998, there were _____ Owners of the Policies.
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
(a) 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.
(b) The directors and officers of Mutual of Omaha Investor
Services, Inc. (principal address: Mutual of Omaha Plaza, Omaha, Nebraska 68175)
are as follows:
NAME TITLE
-------------- ----------------------
John W. Weekly Chairman
Richard A. Witt President, Director
William J. Bluvas Vice President, Finance and Treasurer
M. Jane Huerter Secretary and Director
Lawrence F. Harr Director
John L. Maginn Director
(c) Mutual of Omaha Investor Services, Inc. ("MOIS") is the
principal underwriter of the Policies. Commissions payable to a broker-dealer
will be up to 7% of Purchase Payments. For the fiscal year ended December 31,
1997, Companion paid $329,337 in total compensation to MOIS; of this amount MOIS
retained $ 36,342 as concessions for its services as Principal Underwriter and
for distribution concessions, with the remaining amount paid to other
broker-dealers.
C-16
<PAGE>
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 Mutual of Omaha Plaza,
Omaha, Nebraska 68175.
Item 31. Management Services.
All management policies are discussed in Part A or Part B of this
registration statement.
Item 32. Undertakings
(a)Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for so long as Purchase Payments under the Policy may be
accepted.
(b)Registrant undertakes that it will include either (i) a postcard
or similar written communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional Information or
(ii) a space in the Policy application that an applicant can check to request a
Statement of Additional Information.
(c)Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to 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-17
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets all of the requirements for the
effectiveness of this Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1993 and has caused this Post-effective Amendment No. 3 to the
Registration Statement to be signed on its behalf, in the City of Omaha and
State of Nebraska, on this 13th day of January, 1999.
COMPANION SEPARATE ACCOUNT C
COMPANION LIFE INSURANCE COMPANY
Depositor
/s/Kenneth W. Reitz
---------------------------------------
By: Kenneth W. Reitz
Assistant Secretary
As required by the Securities Act of 1933, this Post-effective amendment
No. 3 Registration Statement has been signed by the following persons on January
13, 1999 in the capacities and on the duties indicated.
Signatures Title
- -------------- ---------------
/s/ John W. Weekly by Kenneth W. Reitz*
- -----------------------
John W. Weekly Chairman
/s/ Fred C. Boddy by Kenneth W. Reitz*
- ------------------------
Fred C. Boddy Vice President and Treasurer (Principal
Financial and Accounting Officer)
/s/ Kenneth W. Reitz
by __________________________________, for and on behalf of:
Kenneth W. Reitz
John W. Weekly* Chairman
William G. Campbell* Director
Samuel L. Foggie* Director
Kimberley S. Harm Director
M. Jane Huerter* Director
Charles T. Locke* Director
John L. Maginn* Director
James J. O'Neill Director
Oscar S. Straus* Director
John A. Sturgeon* Director
* These 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-18
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