As Filed with the Securities and Exchange Commission on August 1, 2001
File No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LINCOLN BENEFIT LIFE COMPANY
(Exact name of Registrant as Specified in its Charter)
Nebraska 6300 470221457
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
2940 South 84th Street Lincoln, Nebraska 68506
1-800-525-9287
(Address of registrant's principal executive offices)
WILLIAM F. EMMONS, ESQ.
LINCOLN BENEFIT LIFE COMPANY
2940 SOUTH 84th STREET
LINCOLN, NEBRASKA 68508
1/800-525-9287
(Name of agent for service)
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Copy to:
JOAN E. BOROS, ESQ.
CHRISTOPHER S. PETITO, ESQ.
Jorden Burt, LLP
1025 Thomas Jefferson Street N.W.
Suite 400 East
Washington, D. C. 20007-0805
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / X /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / Calculation of Registration Fee
- ---------------------------------------- -------------- ------------------------- ------------------------- ----------------
Title of Each Class of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price Per Unit Aggregate Offering Price Registration
Fee
Market Value Adjusted Interest under
Individual Flexible Premium
Deferred Variable Annuity Contracts. . * * $25,000,000.00 $6,250.00
..
- ---------------------------------------- -------------- ------------------------- ------------------------- ----------------
* The maximum aggregate offering price is estimated solely for the purpose of
determining the registration fee. The amount being registered and the proposed
maximum offering price per unit is not applicable in that these contracts are
not issued in predetermined amounts or units.
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CROSS REFERENCE SHEET
(Pursuant to Regulation S-K, Item 501(b)
Caption in Prospectus
- ----------------------------------------- -----------------------------------------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus. . . . . . . . Facing Page and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . . . . . . . . . . Table of Contents
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges. . . . . . . . . . . . . . Questions and Answers about
Your Contract; Not Applicable as to Ratio of Earnings to Fixed
Charges
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . Allocation of Purchase
Payments; The Investment and Fixed Account Options; Lincoln
Benefit Life Company; Investments by Lincoln Benefit
5. Determination of Offering Price. . . . . . . . . . . . Not Applicable
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . . . . . . . . . . Not Applicable
8. Plan of Distribution. . . . . . . . . . . . . . . . . . Distribution of Contracts
9. Description of Securities to be Registered. . . . . . . Questions and Answers about
your Contract; Description of the Contracts; Annuity Benefits;
Other Contract Benefits; Contract Charges
10. Interests of Named Experts and Counsel . . . . . . . . Experts; Legal Matters
11. Information with respect to Registrant. . . . . . . . . Taxes; Description of Lincoln
Benefit Life Company and the Separate Account; Legal Proceedings;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liability. . . . . . Part II, Item 17.
The Lincoln Benefit Life Variable Annuity
Prospectus dated August 3, 2001
Lincoln Benefit Life Company "Lincoln Benefit" "we", or "us") is offering the
Lincoln Benefit Variable Annuity, a group and individual flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 22 "INVESTMENT ALTERNATIVES". The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 19
variable Subaccounts ("VARIABLE SUBACCOUNTS") of the Lincoln Benefit Life
Variable Annuity Account ("VARIABLE ACCOUNT"). Each Variable Subaccount invests
exclusively in shares of the portfolios ("Portfolios") of the following mutual
funds ("FUNDS"):
Fidelity Variable Insurance Products Fund
Janus Aspen Series
LSA Variable Series Trust
MFS Variable Series Trust
The Universal Institutional Funds, Inc.
OCC Accumulation Trust
PIMCO Variable Insurance Trust
Salomon Brothers Variable Series Funds
Each Fund has multiple Portfolios. Not all of the Funds and/or Portfolios,
however, may be available with your Contract. You should check with your
representative for further information on the availability of Funds and/or
Portfolios. Your annuity application will list all available Portfolios.
Lincoln Benefit has filed a Statement of Additional Information, dated August 3,
2001 with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page C-1 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR
THE ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT NOTICES: THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF
SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR
GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN
THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
TABLE OF CONTENTS
Page
Overview...............................................................
Important Terms...................................................
The Contract At A Glance..........................................
How the Contract Works............................................
Expense Table.....................................................
Financial Information.............................................
Contract Features......................................................
The Contract......................................................
Purchases.........................................................
Contract Value....................................................
Investment Alternatives...........................................
The Variable Subaccounts......................................
The Fixed Account Options.....................................
Transfers.....................................................
Expenses..........................................................
Access To Your Money..............................................
Contract Loans....................................................
Income Payments...................................................
Death Benefits....................................................
Other Information......................................................
More Information:.................................................
Lincoln Benefit Life..........................................
The Variable Account..........................................
The Portfolios................................................
The Contract..................................................
Qualified Plans...............................................
Legal Matters.................................................
Taxes.............................................................
Annual Reports and Other Documents................................
Experts...........................................................
Performance Information...........................................
Appendix A - Market Value Adjustment Example A-1
Appendix B - Calculation of Enhanced Earnings Death Benefit Amount B-1
Statement of Additional Information Table of Contents C-1
IMPORTANT TERMS
THIS PROSPECTUS USES A NUMBER OF IMPORTANT TERMS THAT YOU MAY NOT BE FAMILIAR
WITH. THE INDEX BELOW IDENTIFIES THE PAGE THAT DESCRIBES EACH TERM. THE FIRST
USE OF EACH TERM IN THIS PROSPECTUS APPEARS IN HIGHLIGHTS.
Page
Accumulation Phase................................................
Accumulation Unit.................................................
Accumulation Unit Value...........................................
Anniversary Values................................................
Annuitant.........................................................
Automatic Additions Plan..........................................
Automatic Portfolio Rebalancing Program...........................
Beneficiary.......................................................
Cancellation Period...............................................
Contingent Beneficiary............................................
*Contract.........................................................
Contract Anniversary..............................................
Contract Owner ("You")............................................
Contract Value....................................................
Contract Year.....................................................
Death Benefit Anniversary.........................................
Death Benefit Earnings............................................
Dollar Cost Averaging Program.....................................
Due Proof of Death................................................
Enhanced Earnings Death Benefit Rider.............................
Enhanced Death Benefit Rider......................................
Excess-of-Earnings Withdrawal.....................................
Fixed Account Options.............................................
Free Withdrawal Amount............................................
Funds.............................................................
Guarantee Periods.................................................
Guaranteed Income Benefit.........................................
Guaranteed Maturity Fixed Account.................................
Income Base.......................................................
Income Benefit Rider..............................................
Income Plan.......................................................
In-Force Premium..................................................
Investment Alternatives...........................................
Issue Date........................................................
Lincoln Benefit ("We" or "Us")....................................
Loan Account......................................................
Market Value Adjustment...........................................
Payout Phase......................................................
Payout Start Date.................................................
Portfolios........................................................
Primary Beneficiary...............................................
Qualified Contracts...............................................
Rider Date........................................................
SEC
Settlement Value..................................................
Systematic Withdrawal Program.....................................
Valuation Date....................................................
Variable Account..................................................
Variable Subaccount...............................................
*In certain states the Contract is available only as a group Contract. If you
purchase a group Contract, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract. References
to "Contract" in this prospectus include certificates, unless the context
requires otherwise.
THE CONTRACT AT A GLANCE
THE FOLLOWING IS A SNAPSHOT OF THE CONTRACT. PLEASE READ THE REMAINDER OF THIS
PROSPECTUS FOR MORE INFORMATION.
FLEXIBLE PAYMENTS
You can purchase a Contract with as little as $10,000. You can add to your
Contract as often and as much as you like, but each payment must be at least
$100 unless you enroll in an automatic payment plan, in which case each payment
must be at least $50.
RIGHT TO CANCEL
You may cancel your Contract within 20 days of receipt or any longer period as
your state may require ("CANCELLATION PERIOD"). Upon cancellation, we will
return your purchase payments adjusted, to the extent federal or state law
permits, to reflect the investment experience of any amounts allocated to the
Variable Account.
EXPENSES
You will bear the following expenses:
o Total Variable Account annual fees equal to 1.35% of average daily net
assets (1.60% if you select the ENHANCED DEATH BENEFIT RIDER, 1.55% if you
elect the INCOME BENEFIT RIDER, and 1.80% if you select both the Enhanced
Death Benefit and the Income Benefit Riders).
o If you select the ENHANCED EARNINGS DEATH BENEFIT RIDER, you would pay an
additional annual fee of up to 0.35% of average daily net assets (depending
on the oldest Contract owner's age on the date we issue the Rider). For
more information about Variable Account expenses, see "EXPENSES" below.
o Withdrawal charges ranging from 0% to 8% of purchase payment withdrawn
(with certain exceptions)
o Transfer fee of up to .50% of the transfer amount, but not less than $25,
after 12th transfer in any Contract Year (fee currently waived)
o State premium tax (if your state imposes one). In addition, each Portfolio
pays expenses that you will bear indirectly if you invest in a Variable
Subaccount.
INVESTMENT ALTERNATIVES
The Contract offers 22 investment alternatives including:
o 3 Fixed Account Options (which credit interest at rates we guarantee)
o 19 Variable Subaccounts investing in Portfolios offering professional money
management by these investment advisers:
Fidelity Management & Research Company
Janus Capital Corporation
LSA Asset Management LLC
Massachusetts Financial Services Company
Miller Anderson & Sherrerd, LLP
OpCap Advisors
Pacific Investment Management Company
Salomon Brothers Asset Management
TO FIND OUT CURRENT RATES BEING PAID ON THE FIXED ACCOUNT OPTIONS OR HOW THE
VARIABLE SUBACCOUNTS HAVE PERFORMED, CALL US AT 1-800-525-9287.
SPECIAL SERVICES
For your convenience, we offer these special services:
o AUTOMATIC PORTFOLIO REBALANCING PROGRAM
o AUTOMATIC ADDITIONS PROGRAM
o DOLLAR COST AVERAGING PROGRAM
o SYSTEMATIC WITHDRAWAL PROGRAM
INCOME PAYMENTS
You can choose fixed income payments, variable income payments, or a combination
of the two. You can receive your income payments in one of the following ways:
o life income with guaranteed payments
o a "joint and survivor" life income with guaranteed payments
o guaranteed payments for a specified period (5 to 30years)
We offer an optional Income Benefit Rider.
DEATH BENEFITS
If you or the ANNUITANT (if the Contract Owner is a non-living person) die
before the PAYOUT START DATE, we will pay the death benefit described in the
Contract. We offer an Enhanced Death Benefit Rider and Enhanced Earnings Death
Benefit Rider.
TRANSFERS
Before the Payout Start Date, you may transfer your Contract value ("CONTRACT
VALUE") among the investment alternatives, with certain restrictions. We do not
currently impose a fee upon transfers. However, we reserve the right to charge
up to .50% of the transfer amount, but not less than $25 per transfer after the
12th transfer in each "Contract Year", which we measure from the date we issue
your Contract or a Contract anniversary "CONTRACT ANNIVERSARY"), which is the
anniversary of your Contract's Issue Date.
WITHDRAWALS
You may withdraw some or all of your Contract Value at anytime prior to the
Payout Start Date. In general, you must withdraw at least $50 at a time. Full or
partial withdrawals are available under limited circumstances on or after the
Payout Start Date. A 10% federal tax penalty may apply if you withdraw before
you are 59 1/2 years old. A withdrawal charge and a MARKET VALUE ADJUSTMENT also
may apply.
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 22 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. The income on
qualified plan and IRA investments is tax deferred and variable annuities held
by such plans do not receive any additional tax deferral. See "Tax Qualified
Contracts" on page [ ]. You do this during what we call the "ACCUMULATION PHASE"
of the Contract. The Accumulation Phase begins on the date we issue your
Contract (we call that date the "ISSUE DATE") and continues until the Payout
Start Date, which is the date we apply your money to provide income payments.
During the Accumulation Phase, you may allocate your purchase payments to any
combination of the Variable Subaccounts and/or Fixed Account Options. If you
invest in any of the three Fixed Account Options, you will earn a fixed rate of
interest that we declare periodically. If you invest in any of the Variable
Subaccounts, your investment return will vary up or down depending on the
performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page ___. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Subaccounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
You buy You save for You elect to receive You can receive Or you can
a Contract retirement income payments or income payments receive
receive a lump for a set period income
sum payment payments
for life
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
SEE "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. SEE "Death Benefits."
Please call us at 1-800-525-9287 if you have any questions about how the
Contract works.
EXPENSE TABLE
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn:
0 1 2 3 4 5 6 7 8+
Applicable Charge: 8% 7% 7% 6% 6% 5% 4% 3% 0%
Transfer Fee- up to .50% of the transfer amount, but not less than $25**
*Each Contract Year, you may withdraw the greater of earnings not previously
withdrawn or 15% of your New Purchase Payments (as defined in "Withdrawal
Charge" below) without incurring a withdrawal charge. You may withdraw any
Purchase Payment made more than 8 years before the withdrawal, which have not
been previously withdrawn, without paying the charge.
**Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic portfolio
rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSET
VALUE DEDUCTED FROM EACH VARIABLE SUBACCOUNT)
Variable Account Annual Expenses (as a percentage of average daily net asset
value deducted from each Variable Subaccount)
Without the Enhanced Death Benefit or Income Benefit Riders
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.35%
With the Enhanced Death Benefit Rider
Mortality and Expense Risk Charge 1.50%
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.60%
With the Income Benefit Rider
Mortality and Expense Risk Charge 1.45%
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.55%
With the Income Benefit and Enhanced Death Benefit Riders
Mortality and Expense Risk Charge 1.70%
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.80%
If you elect the Enhanced Earnings Death Benefit Rider, your Total Variable
Account Annual Expenses will be increased, based on the oldest Contract Owner's
age on the date we issue the Rider, as follows:
Age Annual Charge
0-55 0.15%
56-65 0.25%
66-75 0.35%
PORTFOLIO ANNUAL EXPENSES
(AFTER VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
(AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS)(1)
Total
Portfolio
Rule 12b-1 Annual
Portfolio Management Fees Fees Other Expenses Expenses
- ------------------------------------------------------------------------ ---------------- ------------ --------------- -------------
Fidelity Variable Insurance Products
Equity-Income-Service Class 2 (2) 0.48% 0.25% 0.10% 0.83%
Investment Grade Bond-Service Class 2 (3) 0.43% 0.25% 0.37% 1.05%
Overseas-Service Class 2 (2) 0.72% 0.25% 0.18% 1.15%
Janus Aspen Series
Worldwide Growth-Service Class (4) 0.65% 0.25% 0.05% 0.95%
LSA
Balanced Fund (5) 0.80% N/A 0.30% 1.10%
Disciplined Equity Fund (5) 0.75% N/A 0.30% 1.05%
Emerging Growth Equity Fund (5) 1.05% N/A 0.30% 1.35%
Focused Equity Fund (5) 0.95% N/A 0.30% 1.25%
Growth Equity Fund (5) 0.85% N/A 0.30% 1.15%
Value Equity Fund (5) 0.80% N/A 0.30% 1.10%
MFS
New Discovery Series-Service Class (6,7,8) 0.90% 0.20% 0.16% 1.26%
Utilities Series-Service Class (6,7) 0.75% 0.20% 0.16% 1.11%
The Universal Institutional Funds
High Yield Portfolio 0.26% N/A 0.54% 0.80%
OCC
Science and Technology Portfolio (9,10) 0.00% N/A 1.04% 1.04%
Small Cap Portfolio (9) 0.80% N/A 0.10% 0.90%
PIMCO
Foreign Bond Portfolio-Administrative Class 0.25% N/A 0.66% 0.91%
Money Market Portfolio-Administrative Class 0.15% N/A 0.35% 0.50%
Total Return Bond Portfolio-Administrative Class(11) 0.25% N/A 0.40% 0.65%
Salomon Brothers
Variable Capital Fund 0.70% N/A 0.21% 0.91%
1. Figures shown in the table are for the year ended December 31, 2000 (except
as otherwise noted).
2. Actual annual class operating expenses were lower because a portion of the
brokerage commissions that the fund paid was used to reduce the fund's
expenses, and/or because through arrangements with the fund's custodian,
credits realized as a result of uninvested cash balances were used to
reduce a portion of the fund's custodian expenses. Had these reductions
been taken into account, "Total Portfolio Annual Expenses" would have been
as follows: 0.82% for Equity Income-Service Class 2 and 1.13% for
Overseas-Service Class 2.
3. The fund's manager has voluntarily agreed to reimburse the class's expenses
if they exceed a certain level. Without this reduction, "Other Expenses"
and "Total Portfolio Annual Expenses" were 1.07% and 1.75% respectively.
This arrangement may be discontinued by the fund's manager at any time.
4. Expenses are based upon expenses for the fiscal year ended December 31,
2000, restated to reflect a reduction in the management fee.
5. The Manager has agreed to reduce "Other Expenses" or reimburse the Funds so
that no Fund will incur expenses that exceed 0.30% of its assets. Without
these fee reductions or expense reimbursements, "Other Expenses" and "Total
Portfolio Annual Expenses" for the period ending December 31, 2000 were
3.07% and 3.87 for LSA Balanced Fund, 1.87% and 2.62% for LSA Disciplined
Equity Fund, 2.24% and 3.29% for Emerging Growth Equity Fund, 2.73% and
3.68% for LSA Focused Equity Fund, 2.65% and 3.50% for LSA Growth Equity
Fund, and 2.89% and 3.69% for LSA Value Equity Fund respectively. There is
no guarantee that such reimbursement will continue beyond April 30, 2002.
6. Each series has adopted a distribution plan under Rule 12b-1 that permits
it to pay marketing and other fees to support the sale and distribution of
service class shares (these fees are referred to as distribution fees).
7. Each series has an expense offset arrangement that reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series may enter into
other similar arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses do
not take into account these expense reductions, and are therefore higher
than the actual expenses of the series. Had these fee reductions been taken
into account, "Total Portfolio Annual Expenses" would be lower, and for
service class shares would be: 1.25% for New Discovery Series and 1.10% for
Utilities Series.
8. MFS has contractually agreed, subject to reimbursement, to bear the series'
expenses such that "Other Expenses" (after taking into account the expense
offset arrangement described above) do not exceed 0.15% annually. These
contractual fee arrangements will continue until at least May 1, 2002,
unless changed with the consent of the board of trustees which oversees the
series.
9. Each Portfolio had expenses offset by earnings credits from the custodian
bank. Had the expense offsets been taken into account, "Total Portfolio
Annual Expenses" would have been 1.00% for Science and Technology and 0.90%
for Small Cap.
10. During the fiscal period ended December 31, 2000 the Adviser waived a
portion of its fee. If such waiver had not been in effect, "Other Expenses"
and "Total Portfolio Annual Expenses" would have been 0.80% and 1.84%
respectively.
11. PIMCO has contractually agreed to reimburse organizational expenses and
Trustees' fees to the extent that payment of those expenses and fees cause
"Total Portfolio Annual Expenses" to exceed 0.65% of average daily net
assets for the Total Return Bond Portfolio. Without such reductions, "Total
Portfolio Annual Expenses" for the fiscal year ended December 31, 2000
would have been 0.66%. Under the Expense Limitation Agreement, PIMCO may
recoup these waivers and reimbursements in future periods, not exceeding
three years, provided "Total Portfolio Annual Expenses," including such
recoupment, do not exceed the annual expense limit.
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- - - invested $1,000 in a Variable Subaccount,
- - - earned a 5% annual return on your investment,
- - - surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period,
- - - elected the Enhanced Death Benefit and Income Benefit Riders, and
- - - elected the Enhanced Earnings Death Benefit Rider (assuming Contract Owner
is age 66-75 on the Rider Date).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
Fund 1 Year 3 Years 5 Years 10 Years
- ---- ------ ------- ------- --------
Fidelity VIP Equity Income Portfolio-Service Class 2 $94 $156 $220 $374
Fidelity VIP Investment Grade Bond Portfolio-Service Class 2 $103 $183 $265 $457
Fidelity VIP Overseas Portfolio - Service Class 2 $97 $165 $236 $403
Janus Aspen Series Worldwide Growth Portfolio: Service Class $95 $159 $226 $385
LSA Balanced Fund $96 $164 $234 $399
LSA Disciplined Equity Fund $96 $162 $231 $394
LSA Emerging Growth Fund $99 $171 $246 $422
LSA Focused Equity Fund $98 $168 $241 $413
LSA Growth Equity Fund $97 $165 $236 $403
LSA Value Equity Fund $96 $164 $234 $399
MFS New Discovery Series - Service Class $98 $169 $241 $413
MFS Utilities Series - Service Class $97 $164 $234 $400
The Universal Institutional Funds, Inc. High Yield Portfolio $93 $155 $219 $371
OCC Science and Technology Portfolio $96 $162 $231 $393
OCC Small Cap Portfolio $85 $130 $178 $292
PIMCO Foreign Bond Portfolio-Administrative Class $95 $158 $224 $381
PIMCO Money Market Portfolio-Administrative Class $90 $146 $204 $342
PIMCO Total Return Bond Portfolio-Administrative Class $92 $150 $211 $357
Salomon Brothers Variable Capital Fund $95 $158 $224 $381
Example 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months, at the end of each period.
Fund 1 Year 3 Years 5 Years 10 Years
- ---- ------ ------- ------- --------
Fidelity VIP Equity Income Portfolio - Service Class 2 $34 $105 $178 $374
Fidelity VIP Investment Grade Bond Portfolio - Service Class 2 $44 $132 $223 $457
Fidelity VIP Overseas Portfolio - Service Class 2 $37 $114 $194 $403
Janus Aspen Series Worldwide Growth Portfolio: Service Class $35 $108 $184 $385
LSA Balanced Fund $37 $113 $191 $399
LSA Disciplined Equity Fund $36 $111 $189 $394
LSA Emerging Growth Fund $40 $120 $203 $422
LSA Focused Equity Fund $39 $117 $199 $413
LSA Growth Equity Fund $37 $114 $194 $403
LSA Value Equity Fund $37 $113 $191 $399
MFS New Discovery Series - Service Class $39 $118 $199 $413
MFS Utilities Series - Service Class $37 $113 $192 $400
The Universal Institutional Funds, Inc. High Yield Portfolio $34 $104 $176 $371
OCC Science and Technology Portfolio $36 $111 $188 $393
OCC Small Cap Portfolio $26 $79 $136 $292
PIMCO Foreign Bond Portfolio-Administrative Class $35 $107 $182 $381
PIMCO Money Market Portfolio-Administrative Class $31 $95 $161 $342
PIMCO Total Return Bond Portfolio-Administrative Class $32 $99 $169 $357
Salomon Brothers Variable Capital Fund $35 $107 $182 $381
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EARNINGS. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES TO THE PORTFOLIO ANNUAL
EXPENSE TABLE ARE IN EFFECT FOR THE PERIODS PRESENTED. THE ABOVE EXAMPLES ASSUME
THE ELECTION OF THE ENHANCED DEATH BENEFIT, INCOME BENEFIT RIDERS AND ENHANCED
EARNINGS DEATH BENEFIT WITH A TOTAL MORTALITY AND EXPENSE RISK CHARGE OF 2.05%
AND AN ADMINISTRATIVE CHARGE OF 0.10%. IF THOSE RIDERS WERE NOT ELECTED, THE
EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Subaccounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT".
Each Variable Subaccount has a separate value for its Accumulation Units which
we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but
not the same as, the share price of a mutual fund.
There are no Accumulation Unit Values to report because the Contracts were first
offered as of the date of this prospectus.
To obtain a fuller picture of each Variable Subaccount's finances, please refer
to the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Lincoln Benefit also appear
in the Statement of Additional Information.
THE CONTRACT
CONTRACT OWNER
The Lincoln Benefit Life Variable Annuity is a contract between you, the
Contract Owner, and Lincoln Benefit, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
- - the investment alternatives during the Accumulation and Payout Phases,
- - the amount and timing of your purchase payments and withdrawals,
- - the programs you want to use to invest or withdraw money,
- - the income payment plan you want to use to receive retirement income,
- - the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- - the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
- - any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary, may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-living person and a living
person. The maximum age of the oldest Contract Owner and Annuitant cannot exceed
90 as of the date we receive the completed application.
You may change the Contract Owner at any time. We will provide a change of
ownership form to be signed by you and filed with us. After we accept the form,
the change of ownership will be effective as of the date you signed the form.
Until we receive your written notice to change the Contract Owner, we are
entitled to rely on the most recent ownership information in our files. We will
not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change the Contract Owner, you
should deliver your written notice to us promptly. Each change is subject to any
payment made by us or any other action we take before we accept the change.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. Variable Annuities held
by Qualified Plans do not receive any additional tax deferral. We use the term
"Qualified Contract" to refer to a Contract issued within a qualified plan. See
"Qualified Plans" on page ___.
ANNUITANT The Annuitant is the individual whose life determines the amount and
duration of income payments (other than under Income Plans with guaranteed
payments for a specified period). You initially designate an Annuitant in your
application. You may change the Annuitant at any time prior to the Payout Start
Date (only if the Contract Owner is a living person). Once we accept a change,
it takes effect as of the date you signed the request. Each change is subject to
any payment we make or other action we take before we accept it.
You may designate a joint Annuitant, who is a second person on whose life income
payments depend. We permit joint Annuitants only during the Payout Phase. If the
Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY The Beneficiary is the person selected by the Contract Owner to
receive the death benefits or become the new Contract Owner if the sole
surviving Contract Owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the primary
Beneficiary, or if none surviving, the contingent Beneficiary, will receive any
guaranteed income payments scheduled to continue.
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who may elect to receive the
death benefit or become the new Contract Owner if the sole surviving Contract
Owner dies before the Payout Start Date. A contingent Beneficiary is the person
selected by the Contract Owner who will become the Beneficiary if all named
primary Beneficiaries die before the death of the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable as
to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change your Beneficiary, you should deliver your
written notice to us promptly. Each change is subject to any payment made by us
or any other action we take before we accept the change.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries or Contingent Beneficiaries, the new
Beneficiary will be:
- - - your spouse or, if he or she is no longer alive,
- - - your surviving children equally, or if you have no surviving children,
- - - your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a living person), we will divide the death benefit among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Lincoln Benefit officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
We will honor an assignment of an interest in a Contract as collateral or
security for a loan. No Beneficiary may assign benefits under the Contract until
they are payable to the Beneficiary. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of Qualified Plans and other types of retirement plans
and the terms of such plans may themselves contain restrictions on assignments.
An assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS Your initial purchase payment must be at least
$10,000. All subsequent purchase payments must be $100 or more unless part of an
automatic additions program. You may make purchase payments at any time prior to
the Payout Start Date. We reserve the right to limit the maximum amount of
purchase payments we will accept. The most we will accept without our prior
approval is $1,000,000. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more by automatically
transferring money from your bank account. Consult your representative for more
detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business, except for certain days immediately preceding or
following certain national holidays when the New York Stock Exchange is open for
business. For calendar year 2001, our office will be closed on November 23rd,
December 24th and December 31st. Each day that the New York Stock Exchange is
open for business is referred to as a Valuation Date. We determine the number of
Accumulation Units for each Variable Subaccount to allocate to your contract by
dividing that portion of your Purchase Payment allocated to a Variable
Subaccount by that Variable Subaccount's Accumulation Unit Value on the
Valuation Date when the allocation occurs. Our business day closes when the New
York Stock Exchange closes, usually 4 p.m. Eastern Time (3 p.m. Central Time).
If we receive your purchase payment after 3 p.m. Central Time on any Valuation
Date, we will credit your purchase payment using the Accumulation Unit Values
computed on the next Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you. If your Contract is qualified under Section 408
of the Internal Revenue Code, we will refund the greater of any purchase
payments or the Contract Value.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Subaccount to the Money Market Variable Subaccount
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, we will allocate the amount in the Money Market Variable
Subaccount to the Variable Subaccount as you originally designated.
CONTRACT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Subaccounts you have
selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Subaccount to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Subaccount by (ii) the Accumulation
Unit Value of that Variable Subaccount next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Subaccount when the Accumulation Unit Value for the
Subaccount is $10, we would credit 1,000 Accumulation Units of that Variable
Subaccount to your Contract. Withdrawals and transfers from a Variable
Subaccount would, of course, reduce the number of Accumulation Units of that
Subaccount allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Subaccount
will rise or fall to reflect:
o changes in the share price of the Portfolio in which the Variable
Subaccount invests, and
o the deduction of amounts reflecting the mortality and expense risk charge
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine withdrawal charges, and transfer fees (currently waived) separately
for each Contract. They do not affect Accumulation Unit Value. Instead, we
obtain payment of those charges and fees by redeeming Accumulation Units. For
details on how we calculate Accumulation Unit Value, please refer to the
Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Subaccount on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider, the Income
Benefit Rider, the Enhanced Death Benefit Rider with the Income Benefit Rider,
and the Enhanced Earnings Death Benefit Rider.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUBACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
INVESTMENT ALTERNATIVES: THE VARIABLE SUBACCOUNTS
You may allocate your purchase payments to up to 19 Variable Subaccounts. Each
Variable Subaccount invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Subaccounts.
Portfolio: Each Portfolio Seeks: Investment Advisor:
Fidelity Variable Insurance Products Fund Fidelity Management
Equity-Income Portfolio-Service Class II Reasonable Income & Research Company
Investment Grade Bond Portfolio-Service As high a level of current income as is
Class II consistent with the preservation of capital
Overseas Portfolio-Service Class II Long-term growth of capital
Janus Aspen Series Janus Capital Corporation
Worldwide Growth Portfolio-Service Class Long-term growth of capital
LSA Variable Series Trust LSA Asset Management LLC
Balanced Fund to provide a combination of growth of
capital and investment income (growth of
capital is the primary objective) by
investing in a mix of equity and debt
Disciplined Equity Fund to provide a consistently high
total return from a broadly
diversified portfolio of
equity securities with risk
characteristics similar to
the Standard & Poor's 500
Composite Stock Index
Emerging Growth Equity Fund to provide capital appreciation through
investing in smaller, rapidly growing
emerging companies
Focused Equity Fund to provide capital appreciation by investing
primarily in equity securities
Growth Equity Fund to provide long-term growth of capital
Value Equity Fund to provide long-term growth of capital with
current income as a secondary objective
MFS Variable Insurance Trust Massachusetts Financial Services
Company
New Discovery Series-Service Class Capital appreciation
Utilities Series-Service Class Capital growth and current income
OCC Accumulation Trust OpCap Advisors
Science and Technology Portfolio Capital appreciation
SmallCap Portfolio Capital appreciation
PIMCO Variable Insurance Trust Pacific Investment Management
Foreign Bond Portfolio-Administrative Class To maximize total return, consistent with Company
preservation of capital and prudent
investment management
Total Return Bond Portfolio-Administrative To maximize total return, consistent with
Class preservation of capital and prudent
investment management
Money Market Portfolio-Administrative Class Capital appreciation
Salomon Brothers Variable Series Fund Salomon Brothers Asset Management
Variable Capital Fund Capital appreciation
The Universal Institutional Fund, Inc. Miller Anderson & Sherrerd, LLP
High Yield Portfolio Above-average total return over a market
cycle of three to five years by investing
primarily in high yield securities (commonly
referred to as "junk bonds")
SOME OF THE PORTFOLIOS HAVE NAMES SIMILAR TO RETAIL MUTUAL FUNDS. HOWEVER, THE
PORTFOLIOS MAY BE MANAGED BY A DIFFERENT PORTFOLIO MANAGER. MOREOVER, THE
PORTFOLIOS ARE LIKELY TO DIFFER FROM RETAIL MUTUAL FUNDS IN ASSETS, CASH FLOW,
AND TAX MATTERS. ACCORDINGLY, A PORTFOLIO'S SECURITY HOLDINGS MAY DIFFER FROM
THOSE OF A SIMILARLY NAMED RETAIL MUTUAL FUND, AND INVESTMENT RESULTS OF A
PORTFOLIO CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF
SIMILARLY NAMED RETAIL MUTUAL FUNDS.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options, including 2 dollar
cost averaging options and the option to invest in one or more Guarantee Periods
included in the Guaranteed Maturity Fixed Account. We may offer additional Fixed
Account options in the future. We will credit a minimum annual interest rate of
3% to money you allocate to any of the Dollar Cost Averaging Fixed Account
Options. The Fixed Account Options may not be available in all states. Please
consult with your representative for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general account assets other than those in segregated asset accounts. We
have sole discretion to invest the assets of the Fixed Account, subject to
applicable law. Any money you allocate to a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
Short Term Dollar Cost Averaging Fixed Account Option. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to THE SHORT
TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT
OPTION"). Each purchase payment allocated to the Short Term DCA Fixed Account
Option must be at least $1,000. We will credit interest to purchase payments you
allocate to this Option for up to six months at the current rate in effect at
the time of allocation. We will credit interest daily at a rate that will
compound at the annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 6 equal monthly installments. Further, you must transfer each purchase
payment and all its earnings out of this Option by means of dollar cost
averaging within 6 months. If you discontinue the Dollar Cost Averaging Program
before the end of the transfer period, we will transfer the remaining balance in
this Option to the Money Market Variable Subaccount unless you request a
different investment alternative. At the end of the transfer period, any
residual amount will be transferred to the Money Market Variable Subaccount. No
transfers are permitted into the Short Term DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur 30 days following such purchase payment. If we do not receive an
allocation from you within 30 days of the date of payment, we will transfer the
payment plus associated interest to the Money Market Variable Subaccount in
equal monthly installments.
Extended Short Term Dollar Cost Averaging Fixed Account Option. You may
establish an Extended Short Term Dollar Cost Averaging Program by allocating
purchase payments to THE EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT
OPTION ("EXTENDED SHORT TERM DCA FIXED ACCOUNT OPTION"). Each purchase payment
allocated to the Extended Short Term DCA Fixed Account Option must be at least
$1,000. We will credit interest to purchase payments you allocate to this Option
for up to twelve months at the current rate in effect at the time of allocation.
We will credit interest daily at a rate that will compound at the annual
interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the
Extended Short Term DCA Fixed Account Option. However, you may not choose less
than 7 or more than 12 equal monthly installments. Further, you must transfer
each purchase payment and all its earnings out of this Option by means of dollar
cost averaging within 12 months. If you discontinue the Dollar Cost Averaging
Program before the end of the transfer period, we will transfer the remaining
balance in this Option to the Money Market Variable Subaccount unless you
request a different investment alternative. At the end of the transfer period,
any residual amount will be transferred to the Money Market Variable Subaccount.
No transfers are permitted into the Extended Short Term DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur 30 days after such purchase payment. If we do not receive an
allocation from you within 30 days of the date of payment, we will transfer the
payment plus associated interest to the Money Market Variable Subaccount in
equal monthly installments.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the Short Term DCA
Fixed Account Option and the Extended Short Term DCA Fixed Account Option. That
is because we guarantee the current rates we credit to the amounts you allocate
to either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. We determine, in our sole discretion, the amount of
interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Short Term DCA Fixed Account Option and the Extended
Short Term DCA Fixed Account Option. For current interest rate information,
please contact your representative or our customer support unit at
1-800-525-9287.
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
Interest Rates. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your representative or Lincoln Benefit at
1-800-525-9287.
How We Credit Interest. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
Purchase Payment......................... $10,000
Guarantee Period......................... 5 years
Annual Interest Rate..................... 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -
$10,000.00)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
Renewals. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1. Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new
Guarantee Period will begin on the day the previous Guarantee Period ends.
The new interest rate will be our current declared rate for a Guarantee
Period of that length; or
2. Instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
3. Instruct us to transfer all or a portion of your money to one or more
Variable Subaccounts of the Variable Account. We will effect the transfer
on the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4. Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day
the Guarantee Period expired until the date of withdrawal. The interest
will be the rate for the shortest Guarantee Period then being offered.
Amounts not withdrawn will be applied to a new Guarantee Period of the same
length as the previous Guarantee Period. The new Guarantee Period will
begin on the day the previous Guarantee Period ends.
Market Value Adjustment. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30 day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make:
o that qualifies for one of the waivers as described on page ___,
o to satisfy the IRS minimum distribution rules for the Contract, or
o a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a maturity equal to the Guarantee Period at its
inception to the Treasury Rate for a maturity equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the Short
Term Dollar Cost Averaging Fixed Account or the Extended Short Term Dollar Cost
Averaging Fixed Account Options. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below. The
minimum amount that you may transfer into a Guarantee Period is $500. We
currently do not assess, but reserve the right to assess, a charge of .50% of
the transfer amount but not less than $25, on each transfer in excess of 12 per
Contract Year. All transfers to or from more than one Portfolio on any given day
counts as one transfer.
As a general rule, we only make transfers on days when we and the NYSE are open
for business. If we receive your request on one of those days, we will make the
transfer that day. We close our offices for business on certain days immediately
preceding or following certain national holidays when the NYSE is open for
business. For calendar year 2001, our office will be closed on November 23rd,
December 24th, and December 31st. For transfers requested on these days, we will
make the transfer on the first subsequent day on which we and the NYSE are open.
The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date we receive your request. If we decide to postpone transfers
for 30 days or more, we will pay interest as required by applicable law. Any
interest would be payable from the date we receive the transfer request to the
date we make the transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Subaccounts
so as to change the relative weighting of the Variable Subaccounts on which your
variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. After 6 months from the Payout Start Date, you
may make transfers from the Variable Subaccounts to increase the proportion of
your income payments consisting of fixed income payments.
TELEPHONE TRANSFERS
You may make transfers by telephone, if you first send us a completed
authorization form. The cut off time for telephone transfer requests is 3:00
p.m. Central Time. Calls completed before 3:00 p.m. will be effected on that day
at that day's price. Calls completed after 3:00 p.m. will be effected on the
next day on which we and the NYSE are open for business, at that day's price. We
may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers among the Variable Subaccounts in any
Contract Year, or to refuse any Variable Subaccount transfer request, if:
o we believe, in our sole discretion, that excessive trading by such
Contract Owner or Owners, or a specific transfer request or group of
transfer requests, may have a detrimental effect on the Accumulation
Unit Values of any Variable Subaccount or the share prices of the
corresponding Funds or would be to the disadvantage of other Contract
Owners; or
o we are informed by one or more of the corresponding Funds that they
intend to restrict the purchase of Fund shares because of excessive
trading or because they believe that a specific transfer or groups of
transfers would have a detrimental effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month from any Variable Subaccount, the Short Term
Dollar Cost Averaging Fixed Account, or the Extended Short Term Dollar Cost
Averaging Fixed Account, to any of the other Variable Subaccounts. You may not
use the Dollar Cost Averaging Program to transfer amounts to the Guarantee
Periods. This program is available only during the Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Subaccounts, the
performance of each Subaccount may cause a shift in the percentage you allocated
to each Subaccount. If you select our Automatic Portfolio Rebalancing Program,
we will automatically rebalance the Contract Value in each Variable Subaccount
and return it to the desired percentage allocations. We will not include money
you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing
Program.
We will rebalance your account monthly, quarterly, semi-annually, or annually,
depending on your instructions. We will transfer amounts among the Variable
Subaccounts to achieve the percentage allocations you specify. You can change
your allocations at any time by contacting us in writing or by telephone. The
new allocation will be effective with the first rebalancing that occurs after we
receive your request. We are not responsible for rebalancing that occurs prior
to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2
Variable Subaccounts. You want 40% to be in the LSA Growth Equity
Variable Subaccount and 60% to be in the LSA Balanced Variable
Subaccount. Over the next 2 months the bond market does very well while
the stock market performs poorly. At the end of the first quarter, the
LSA Growth Equity Variable Subaccount now represents 50% of your
holdings because of its increase in value. If you choose to have your
holdings rebalanced quarterly, on the first day of the next quarter, we
would sell some of your units in the LSA Growth Equity Variable
Subaccount and use the money to buy more units in the LSA Balanced
Variable Subaccount so that the percentage allocations would again be
40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. Portfolio rebalancing is consistent with maintaining your
allocation of investments among market segments, although it is accomplished by
reducing your Contract Value allocated to the better performing segments.
EXPENSES
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Subaccounts
(1.50% if you select the Enhanced Death Benefit Rider; 1.45% if you select the
Income Benefit Rider; and 1.70% if you select both the Enhanced Death Benefit
Rider and the Income Benefit Rider), and an additional charge ranging from 0.15%
to 0.35% for the Enhanced Earnings Death Benefit described below.
The mortality and expense risk charge is for the insurance benefits available
with your Contract (including our guarantee of annuity rates and the death
benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss. We charge an additional amount
for the Enhanced Death Benefit Rider, the Income Benefit Rider and the Enhanced
Earnings Death Benefit Rider compensate us for the additional risk that we
accept by providing these Riders.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase. After the Payout Start Date, mortality and expense risk
charges for the Enhanced Death Benefit, the Income Benefit, and the Enhanced
Earnings Death Benefit will cease.
ENHANCED EARNINGS DEATH BENEFIT RIDER CHARGE
If you elect the Enhanced Earnings Death Benefit Rider, we will increase the
Mortality and Expense charge during the Accumulation Phase by the annual rates
shown below based on the oldest Contract Owner's age on the Rider Date.
Age Annual Charge
0-55 0.15%
56-65 0.25%
66-75 0.35%
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Subaccounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge up to .50% of the transfer
amount, but not less than $25, per transfer after the 12th transfer in each
Contract Year. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging or Automatic Portfolio Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 8% of the purchase payment(s) you
withdraw. The charge declines to 0% over a 8 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page __.Any Purchase Payments older than 8 years old, which have not been
previously withdrawn, may be withdrawn without paying the charge. During each
Contract year, you can also withdraw the greater of earnings not previously
withdrawn or 15% of your New Purchase Payments without paying the charge. New
Purchase Payments are Purchase Payments received by us less than 8 years prior
to withdrawal. Unused portions of this "Free Withdrawal Amount" are not carried
forward to future Contract Years. We will deduct withdrawal charges, if
applicable, from the amount paid.
For purposes of calculating the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first. However, for federal income tax
purposes, please note that withdrawals are considered to have come first from
earnings, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period);
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
o withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract Owner is not a living person, are
confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care
facility or hospital at least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long
term care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract Owner is not a living person) are
first diagnosed with a terminal illness at least 30 days after the Issue
Date; and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract Owner is not a living person, receive
unemployment compensation as defined in the Contract for at least 30 days
as a result of that unemployment; and
3. you or the Annuitant, if the Contract Owner is not a living person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Subaccounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page ___. We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any Market Value Adjustment less any withdrawal charges, income tax
withholding, and any premium taxes. We will pay withdrawals from the Variable
Account within 7 days of receipt of the request, subject to postponement in
certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is specified, we will deduct your withdrawal pro-rata from
the Variable Subaccounts according to the value of your investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Subaccount.
If you request a total withdrawal, we may require you to return your Contract to
us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. Systematic
withdrawals will be deducted from the Variable Subaccounts and Fixed Account
balances, excluding the Dollar Cost Averaging Fixed Account Options, on a pro
rata basis. At our discretion, systematic withdrawals may not be offered in
conjunction with the Dollar Cost Averaging Program or Automatic Portfolio
Rebalancing Program.
Depending on fluctuations in the value of the Variable Subaccounts and the value
of the Fixed Account Options, systematic withdrawals may reduce or even exhaust
the Contract Value. Income taxes may apply to systematic withdrawals. Please
consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
CONTRACT LOANS FOR 401(a), 401(k), AND 403(b) CONTRACTS
Subject to the restrictions described below, we will make loans to the Contract
Owner of a Contract used in connection with a Tax Sheltered Annuity Plan ("TSA
Plan") under Section 403(b) of the Tax Code, or a Contract Owner of a Contract
purchased by a pension, profit-sharing, or other similar plan qualified under
Section 401(a) of the Tax Code (a "401 Plan"), including a Section 401(k) plan,
where a plan trustee is the Contract Owner. Loans are not available under
non-qualified Contracts. We will only make loans after the right to cancel
period and before the Payout Start Date. All loans are subject to the terms of
the Contract, the relevant qualified plan, and the Tax Code, which impose
restrictions on loans.
We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be greater than the amount available for full
withdrawal under your Contract on the date of the loan. In addition, you may not
borrow a loan if the total of the requested loan and all of your loans under TSA
plans and 401 plans is more than the lesser of (a) or (b) where:
(a) equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and
(b) equals the greater of $10,000 or 1/2 of the amount available for full
withdrawal.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Loans made before the Payout Start Date
are generally treated as distributions under the Contract, and may be subject to
withholding and tax penalties for early distributions. Some of these
requirements are stated in Section 72 of the Tax Code and Title 1 of ERISA.
Please seek advice from your plan administrator or tax advisor.
When we make a loan, we will transfer an amount equal to the loan amount from
the Variable Account and/or the Fixed Account Options to the Loan Account as
collateral for the loan. The Loan Account is an account established for amounts
transferred from the Variable Subaccounts or Fixed Account as security for an
outstanding Contract loan. We will transfer to the Loan Account amounts from the
Variable Account in proportion to the assets in each Subaccount. If your loan
amount is greater than your Contract Value in the Subaccounts, we will transfer
the remaining required collateral from the Guaranteed Maturity Fixed Account
Options. If your loan amount is greater than your contract value in the
Subaccounts and the Guaranteed Maturity Fixed Account Options, we will transfer
the remaining required collateral from the Dollar Cost Averaging Fixed Account
Options.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Subaccounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount transferred to the
Loan Account will equal the desired loan amount.
We will credit interest to the amounts in the Loan Account. The annual interest
rate credited to the Loan Account will be the greater of: (a) 3%; or (b) the
loan interest rate minus 2.25%. The value of the amounts in the Loan Account are
not affected by the changes in the value of the Subaccounts.
When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the loan
interest rate applicable to new loans. We also reserve the right to change the
terms of new loans.
We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:
(1) the Death Benefit;
(2) full withdrawal proceeds;
(3) the amount available for partial withdrawal; and
(4) the amount applied on the Payout Start Date to provide income
payments.
Usually you must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount,
incur the early withdrawal tax penalty, and be subject to mandatory 20% federal
withholding. Until we are permitted by law to foreclose on a defaulted loan, we
will continue to charge interest and add unpaid interest to your outstanding
loan balance.
If the total loan balance exceeds the amount available for full withdrawal, we
will mail written notice to your last known address. The notice will state the
amount needed to maintain the Contract in force. If we do not receive payment of
this amount within 31 days after we mail this notice, we will terminate your
Contract.
We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.
INCOME PAYMENTS
PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
o at least 30 days after the Issue Date; and
o no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 -- GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Subaccount assets
that support variable income payments even though we may not bear any mortality
risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving income payments that do not
depend on the life of the Annuitant (such as under Income Plan 3). In that case
you may terminate all or part of the income payments at any time and withdraw
their value, subject to withdrawal charges. For Variable Amount income Payments,
the value you may withdraw is equal to the present value of the Variable Amount
Income Payments being terminated, calculated using a discount rate equal to the
assumed investment rate that was used in determining the initial variable
payment. For Fixed Amount Income Payments, the value you may withdraw is equal
to the present value of the Fixed Amount Income Payments being terminated,
calculated using a discount rate equal to the applicable current interest rate.
The applicable current interest rate is the rate we are using on the date we
receive your withdrawal request to determine income payments for a new Income
Plan with a payment period equal to the remaining payment period of the income
payments being terminated. The value you may withdraw may be higher or lower
than it would have been using the interest rate that was initially used to
calculate your Fixed Account Income Payments and your total payments (withdrawal
amount plus income payments already received) may be more or less than the
amount applied to your Income Plan. We deduct applicable premium taxes from the
Contract Value at the Payout Start Date.
We may make other Income Plans available.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Subaccounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount available to apply under an Income Plan is less than $2,000, or
not enough to provide an initial payment of at least $50, and state law permits,
we may:
o pay you the Contract Value, adjusted by any applicable Market Value
Adjustment and less any applicable taxes, in a lump sum instead of the
periodic payments you have chosen; or
o reduce the frequency of your payments so that each payment will be at least
$50.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Subaccounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Subaccounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
INCOME BENEFIT RIDER
For Contract Owners and Annuitants up to and including age 75. The Rider is
optional, has additional charges and may not be available in all states.
Qualifications. To qualify for the income benefit payments under this Rider, you
must meet the following requirements as of the Payout Start Date:
o You must elect a Payout Start Date that is on or after the 10th anniversary
of the Rider Date;
o The Payout Start Date must be prior to the oldest Annuitant's 90th
birthday;
o The payout Start Date must occur during the 30 day period following a
Contract Anniversary;
o You must elect to receive fixed income payments, which will be calculated
using the guaranteed payout rates listed in your Contract; and
o The Income Plan you selected must provide for payments guaranteed for
either a single life or joint lives with a specified period of at least:
o 10 years, if the youngest Annuitant's age is 80 or less on the Payout Start
Date, or
o 5 years, if the youngest Annuitant's age is greater than 80 on the Payout
Start Date.
o Of course, if your Contract Value, applied to the then current payout rates
offered by Lincoln Benefit, generates higher income payments than those
provided under the Income Benefit Rider, you will receive the higher
payment amount. You may also elect to apply your Contract Value to any
other income plan that we offer at that time.
The Income Benefit Rider will no longer be in effect and the mortality and
expense charge for the Rider will end upon the change of the named Annuitant for
reasons other than death.
Income Base
The Income Base is used solely for the purpose of calculating the guaranteed
income benefit under this Rider ("Guaranteed Income Benefit") and does not
provide a Contract Value or guarantee performance of any investment option.
On the date we issue the Rider ("Rider Date"), the Income Base is equal to the
Contract Value. After the Rider Date, the Income Base plus any subsequent
purchase payments and less a withdrawal adjustment (described below) for any
subsequent withdrawal will accumulate daily at a rate equivalent to 5% per year
until the earlier of the Payout Start Date, or the first day of the month after
the oldest Contract Owner's (or Annuitant's, if the Contract Owner is not a
living person) 85th birthday. The maximum Income Base is 200% of:
o the Contract Value on the Rider Date; plus
o any subsequent purchase payments; less
o any subsequent withdrawal adjustments.
Withdrawal Adjustment
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c) where:
(a) = the withdrawal amount
(b) = the Contract Value immediately prior to the
withdrawal, and
(c) = the most recently calculated Income Base
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan you elect.
The Income Plan you elect must satisfy the conditions described above.
On the Payout Start Date, the income payment will be the greater of the
guaranteed Income Benefit or the Income Payment provided in the Payout Phase
section.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract Owner or,
2. the death of the Annuitant, if the Contract Owner is not a living person.
We will pay the death benefit to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies). If the Contract Owner is not a
living person, in the case of the death of the Annuitant, we will pay the death
benefit to the current Contract Owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. We will
accept the following documentation as "Due Proof of Death":
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
o any other proof acceptable to us.
Your beneficiary should submit a complete claim for payment of the Death Benefit
within 180 days of the relevant death in order to claim the standard or enhanced
Death Benefit. If your beneficiary does not submit a complete claim for payment
of the Death Benefit within 180 days of the relevant death, the beneficiary will
be paid the Settlement Value.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the standard Death Benefit is equal to the
greatest of:
o the sum of all Purchase Payments reduced by the sum of all withdrawal
adjustments; or
o the Contract Value on the date we determine the Death Benefit, or
o the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value, i.e., the Contract Value adjusted by any market value
adjustment, less any applicable withdrawal charge or premium tax) on the
date we determine the Death Benefit, or
o the Contract Value on each Death Benefit Anniversary prior to the date we
determine the Death Benefit, increased by any purchase payment made since
that Death Benefit Anniversary and reduced by an adjustment for any
withdrawals since that Death Benefit Anniversary.
In other words, for each Death Benefit Anniversary that occurs prior to the date
we determine the Death Benefit, we will calculate an amount equal to the
Contract Value on that Death Benefit Anniversary, plus any purchase payments
made since that Death Benefit Anniversary, and minus an adjustment for any
withdrawals made since that Death Benefit Anniversary. (The calculation of the
withdrawal adjustment is described in the next paragraph.) If there are multiple
Death Benefit Anniversaries, we will make multiple calculations. The highest
result will be compared to the other three values listed above in order to
determine the Death Benefit.
"Death Benefit Anniversaries" occur every 7th Contract anniversary until the
oldest Contract Owner's 80th birthday, or the Annuitant's 80th birthday if the
Contract Owner is not a living person. The Contract Anniversary immediately
following the oldest Contract Owner's 80th birthday, or the Annuitant's 80th
birthday if the Contract Owner is not a living person, will also be a Death
Benefit Anniversary and is the final Death Benefit Anniversary.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the Contract Value on the Death Benefit Anniversary adjusted by any
prior purchase payments or withdrawals made since that Anniversary.
We will determine the value of the Death Benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3:00 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
ENHANCED DEATH BENEFIT RIDER
The Enhanced Death Benefit Rider is an optional benefit that you may elect if
the Contract Owners and Annuitants are not older than age 80 on the date we
receive the application, or the date we receive the written request to add this
Rider, whichever is later. If the Contract Owner is a living individual, the
Enhanced Death Benefit applies only upon the death of the Contract Owner. If the
Contract Owner is not a living individual, the Enhanced Death Benefit applies
only upon the death of the Annuitant. For Contracts with the Enhanced Death
Benefit Rider, the death benefit will be the greatest of the standard death
benefit above, or the Enhanced Death Benefit. The Enhanced Death Benefit is
equal to the greater of Enhanced Death Benefit A or Enhanced Death Benefit B.
Enhanced Death Benefit A or B may not be available in all states.
The Enhanced Death Benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract. The Enhanced
Death Benefit Rider and the mortality and expense charge for the Rider will
terminate upon the change of Contract Owner (or the Annuitant if the Contract
Owner is not a living person) for reasons other than death.
ENHANCED DEATH BENEFIT A. On the date we issue the Rider ("Rider Date"),
Enhanced Death Benefit A is equal to the Contract Value on that date. After the
Rider Date, Enhanced Death Benefit A is the greatest of the ANNIVERSARY VALUES
as of the date we determine the death benefit. The "Anniversary Value" is equal
to the Contract Value on a Contract Anniversary, increased by purchase payments
made since that Anniversary and reduced by a withdrawal adjustment, as described
below, for any partial withdrawals since that Anniversary.
We will calculate Anniversary Values for each Contract Anniversary up until the
earlier of:
o the date we determine the death benefit; or
o the first Contract Anniversary following the oldest Contract Owner's
or, if the Contract Owner is not a living person, the Annuitant's 80th
birthday, or the first day of the 61st month following the Rider Date,
whichever is later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit A only for
purchase payments and withdrawals.
The withdrawal adjustment is equal to (a) divided by (b), and the result
multiplied by (c) where:
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated Enhanced Death Benefit A.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B on the Rider Date is
equal to the Contract Value on that date. After the Rider Date, the Enhanced
Death Benefit B, plus any subsequent purchase payments and less a withdrawal
adjustment, as described below, will accumulate daily at a rate equivalent to 5%
per year until the earlier of:
o the date we determine the death benefit; or
o the first day of the month following the oldest Contract Owner's or, if
the Contract Owner is not a living person, the Annuitant's 80th
birthday, or the first day of the 61st month following the Rider Date,
whichever is later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit B only for
purchase payments and withdrawals. The maximum amount of Enhanced Death Benefit
B is 200% of:
o the Contract Value on the Rider Date; plus
o any subsequent purchase payments; less
o any subsequent withdrawal adjustments.
The withdrawal adjustment is equal to (a) divided by (b), and the result
multiplied by (c) where:
(a) = the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = is the most recently calculated Enhanced Death Benefit B.
ENHANCED EARNINGS DEATH BENEFIT RIDER
For Contract Owners and Annuitants up to and including age 75, the Enhanced
Earnings Death Benefit Rider is an optional benefit that you may elect.
If the Contract Owner is a living person, the Enhanced Earnings Death Benefit
Rider applies only upon the death of the Contract Owner. If the Contract Owner
is not a living person, the Enhanced Earnings Death Benefit Rider applies only
upon the death of the annuitant. The Enhanced Earnings Death Benefit Rider and
the annual charge for the Rider will terminate upon the change of Contract Owner
(or the Annuitant if the Contract Owner is not a living person) for reasons
other than death. The Rider may not be available in all states. We may
discontinue the offering of the Rider at any time.
Under the Enhanced Earnings Death Benefit Rider, the Enhanced Earnings Death
Benefit is determined as follows:
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is age 55 or younger on the date we receive the completed
application, or we receive written request to add this rider, whichever is
later, the Enhanced Earnings Death Benefit will be:
o the lesser of 100% of In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 50% of In-Force Earnings, calculated as of the date
we receive due proof of death.
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is between the ages of 56 and 65 on the date we receive the
completed application or the date we receive the written request to add this
rider, whichever is later, the Enhanced Earnings Death Benefit will be:
o the lesser of 80% of the In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 40% of In-Force Earning, calculated as of the date
we receive due proof of death.
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is between the ages of 66 and 75 on the date we receive the
completed application or the date we receive the written request to add this
rider, whichever is later, the Enhanced Earnings Death Benefit will be :
o the lesser of 50% of In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 25% of In-Force Earnings, calculated as of the date
we receive due proof of death.
For purpose of calculating the Enhanced Earnings Death Benefit, the following
definitions apply:
o In-Force Earnings is the greater of (a) the current Contract Value less the
In-Force Premium; or (b) zero.
o In-Force Premiums are defined as follows:
o If the Rider Date is the same as the Issue Date of the Contract:
o The sum of all the purchase payments less the sum of all the
Excess-of-Earnings Withdrawals.
o If the Rider Date is later than the Contract issue date:
o The Contract Value as of Rider Date plus all the purchase payments
made after the Rider Date less the sum of all the Excess-of-Earnings
Withdrawals after the Rider Date
Excess-of-Earnings Withdrawals are defined as follows: For each withdrawal, this
amount is equal to the amount, if any, by which the withdrawal exceeds the
In-Force Earnings immediately prior to the withdrawal.
We will calculate the Enhanced Earnings Death Benefit Rider as of the date we
receive Due Proof of Death. We will pay the Enhanced Earnings Death Benefit with
the death benefit as described under "Death Benefit Payments" below.
The value of the Enhanced Earnings Death Benefit largely depends on the amount
of earnings that accumulate under your Contract. If you expect to withdraw the
earnings from your Contract Value, electing the Enhanced Earnings Death Benefit
Rider may not be appropriate. For purposes of calculating the Enhanced Earnings
Death Benefit, earnings are considered to be withdrawn first before purchase
payments. Your financial advisor can help you decide if the Enhanced Earnings
Death Benefit Rider is right for you.
For examples of how the death benefit is calculated under the Enhanced Earnings
Death Benefit Rider, see Appendix B.
DEATH BENEFIT PAYMENTS
1. If the sole new Contract Owner is your spouse:
a) Your spouse may elect, within 180 days of the date of your death, to
receive the Death Benefit described above in a lump sum.
b) Your spouse may elect, within 180 days of the date of your death, to
receive an amount equal to the Death Benefit paid out through an
Income Plan. Payments from the Income Plan must begin within one year
of your date of death. The payments must be:
i. over the life of your spouse; or
ii. for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of your spouse; or
iii. over the life of your spouse with a guaranteed number of payments
from 5 to 30 years but not to exceed the life expectancy of your
spouse.
If your spouse does not elect one of the options above, then your spouse may
continue the Contract prior to the Payout Start Date as if no death has
occurred. If your spouse elects to continue the Contract within 180 days of the
date of your death and prior to the Payout Start Date, the following conditions
apply:
a) On the date the Contract is continued, the Contract Value will be the Death
Benefit as determined at the end of the Valuation Period during which we
received due proof of death. Unless otherwise instructed by the continuing
spouse, the excess, if any, of the Death Benefit amount over the Contract
Value will be allocated to the Subaccounts. This excess will be allocated
in proportion to your Contract Value in the investment alternatives on the
Valuation Date that we receive due proof of death, except that any portion
of this excess attributable to the Fixed Account Options will be allocated
to the Money Market Subaccount. Within 30 days of the date the Contract is
continued, your surviving spouse may choose one of the following transfers
without incurring a transfer fee:
i. transfer all or a portion of the excess among the Subaccounts;
ii. transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
iii. transfer all or a portion of the excess into a combination of
Subaccounts, or the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract. If your spouse elects to continue the Contract after 180 days of the
date of your death, the Contract Value will not be adjusted to the Death
Benefit. The surviving spouse may make a single withdrawal of any amount within
one year of the date of death without incurring a Withdrawal Charge or Market
Value Adjustment.
Prior to the Payout Start Date, the Death Benefit of the continued Contract will
be the greatest of:
a) the sum of all purchase payments reduced by an adjustment for any
withdrawals; or
b) the Contract Value on the date we determine the Death Benefit; or
c) the Settlement Value on the date we determine the Death Benefit; or
d) the Contract Value on each Death Benefit Anniversary prior to the date we
determine the Death Benefit, increased by any Purchase Payments made since that
Death Benefit Anniversary and reduced by an adjustment for any withdrawals, as
defined in the Death Benefit provision. Please see DEATH BENEFIT AMOUNT on page
[ ] for a detailed explanation of how these amounts are calculated.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person, the
new Contract Owner has the following options:
a) The new Contract Owner may elect, within 180 days of the date of your
death, to receive the Death Benefit in a lump sum.
b) The new Contract Owner may elect, within 180 days of the date of your
death, to receive an amount equal to the Death Benefit paid out
through an Income Plan. Payments from the annuity option must begin
within one year of your date of death. The Payments must be:
i. over the life of the new Contract Owner, or for a guaranteed
number of payments from 5 to 30 years but not to exceed the life
expectancy of the new Contract Owner; or
ii. Over the life of the new Contract Owner with a guaranteed number
of payments from 5 to 30 years but not to exceed the life
expectancy of the new Contract Owner.
c) The new Contract Owner may elect to receive the Settlement Value
payable in a lump sum within 5 years of your date of death.
3. If the new Contract Owner is a non-Living Person, the new Contract Owner
has the following options:
a) The non-living Contract Owner may elect, within 180 days of your
death, to receive the Death Benefit in a lump sum.
b) The non-living Contract Owner may elect to receive the Settlement
Value payable in a lump sum within 5 years of your date of death.
c) If the new Contract Owner does not make one of the above described
elections, the Settlement Value must be withdrawn by the new Contract
Owner on or before the mandatory distribution date 5 years after your
date of death.
If any new Contract Owner is not a Living Person, all new Contract Owners will
be considered to be non-Living Persons for the above purposes.
If a new Contract Owner does not make one of the elections described above, the
Settlement Value must be withdrawn by the new Contract Owner on or before the
mandatory distribution date 5 years after your date of death.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the Contract Owner must elect one of the following options:
1. If the Contract Owner is a Living Person, the Contract will continue with a
new Annuitant as described on page [ ].
2. If the Contract Owner is not a Living Person:
a. The non-living Contract Owner may elect, within 180 days of the
Annuitant's date of death, to receive the Death Benefit in a lump sum;
or
b. The non-living Contract Owner may elect to receive the Settlement
Value payable in a lump sum within 5 years of the Annuitant's date of
death.
If the non-living Contract Owner does not make one of the above described
elections, the Settlement Value must be withdrawn by a non-living Contract Owner
on or before the mandatory distribution date 5 years after the Annuitant's
death.
We reserve the right to waive the 180 day limit on a non-discriminatory basis.
MORE INFORMATION
Lincoln Benefit Life Company. Lincoln Benefit Life Company is a stock life
insurance company organized under the laws of the state of Nebraska in 1938. Our
legal domicile and principal business address is 2940 South 84th Street,
Lincoln, Nebraska, 68506-4142. Lincoln Benefit is a wholly owned subsidiary of
Allstate Life Insurance Company ("Allstate Life" or "ALIC"), a stock life
insurance company incorporated under the laws of the State of Illinois. Allstate
Life is a wholly owned subsidiary of Allstate Insurance Company ("AIC"), a stock
property-liability insurance company incorporated under the laws of Illinois.
All outstanding capital stock of Allstate is owned by The Allstate Corporation
("Allstate").
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam, U.S. Virgin Islands and all states except New York. We intend
to market the Contract everywhere we conduct variable annuity business. The
Contracts offered by this prospectus are issued by us and will be funded in the
Variable Account and/or the Fixed Account.
Under our reinsurance agreements with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life. Through our reinsurance
agreements with Allstate Life, substantially all of the assets backing our
reinsured liabilities are owned by Allstate Life. These assets represent our
general account and are invested and managed by Allstate Life. Accordingly, the
results of operations with respect to applications received and contracts issued
by Lincoln Benefit are not reflected in our consolidated financial statements.
The amounts reflected in our consolidated financial statements relate only to
the investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreements. While the reinsurance agreements
provide us with financial backing from Allstate Life, it does not create a
direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with ALIC, the Company reinsures all
reserve liabilities with ALIC except for variable contracts. The Company's
variable contract assets and liabilities are held in legally-segregated,
unitized Variable Accounts and are retained by the Company. However, the
transactions related to such variable contracts such as premiums, expenses and
benefits are transferred to ALIC.
Lincoln Benefit is highly rated by independent agencies, including A.M. Best,
Moody's, and Standard & Poor's. These ratings are based on our reinsurance
agreement with Allstate Life, and reflect financial strength. The ratings are
not intended to reflect the financial strength or investment experience of the
Variable Account. We may from time to time advertise these ratings in our sales
literature.
THE VARIABLE ACCOUNT
Lincoln Benefit established the Lincoln Benefit Life Variable Annuity Account in
1992. We have registered the Variable Account with the SEC as a unit investment
trust. The SEC does not supervise the management of the Variable Account or
Lincoln Benefit.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Nebraska law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Lincoln Benefit.
The Variable Account consists of Variable Subaccounts. Each Variable Subaccount
invests in a corresponding Portfolio. We may add new Variable Subaccounts or
eliminate one or more of them, if we believe marketing, tax, or investment
conditions so warrant. We may also add other Variable Subaccounts that may be
available under other variable annuity contracts. We do not guarantee the
investment performance of the Variable Account, its Subaccounts or the
Portfolios. We may use the Variable Account to fund our other annuity contracts.
We will account separately for each type of annuity contract funded by the
Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Subaccounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Subaccount by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Subaccount by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Subaccounts that invest in additional mutual funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales will not exceed 7.5% of all Purchase Payments (on a present value
basis). From time to time, we may offer additional sales incentives of up to
1.5% of Purchase Payments and other cash bonuses to broker-dealers who maintain
certain sales volume levels. We do not pay commission on Contract sales to our
employees, employees of Surety Life Insurance Company, and Allstate Financial
Services L.L.C. or their spouses or minor children, if these individuals reside
in the State of Nebraska.
ALFS, Inc. ("ALFS") located at 3100 Sanders Road, Northbrook, IL 60062-7154
serves as distributor of the Contracts. ALFS, an affiliate of Lincoln Benefit,
is a wholly owned subsidiary of Allstate Life Insurance Company. ALFS is a
registered broker dealer under the Securities and Exchange Act of 1934, as
amended, and is a member of the National Association of Securities Dealers, Inc.
Lincoln Benefit does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for expenses incurred in distributing the Contracts, including liability
arising out of services we provide on the Contracts.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
o issuance of the Contracts;
o maintenance of Contract Owner records;
o Contract Owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract within a qualified plan, the plan may impose different
or additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
All matters of Nebraska law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Nebraska law, have
been passed upon by Carol S. Watson, Senior Vice President, General Counsel and
Secretary of Lincoln Benefit. Legal matters relating to the federal securities
laws in connection with the Contracts described in this prospectus are being
passed upon by the law firm of Jorden Burt LLP, 1025 Thomas Jefferson St. N.W.,
East Lobby-Suite 400, Washington, D.C. 20007-0805.
TAXES
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. LINCOLN
BENEFIT MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Lincoln Benefit is considered the Owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although Lincoln Benefit does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that you will be considered the Owner of
Variable Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct Subaccount investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that Contract Owners were not Contract Owners of
separate account assets. For example, you have the choice to allocate premiums
and Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the Contract Owner of the
Variable Account. If this occurs, income and gain from the Variable Account
assets would be includible in your gross income. Lincoln Benefit does not know
what standards will be set forth in any regulations or rulings which the
Treasury Department may issue. It is possible that future standards announced by
the Treasury Department could adversely affect the tax treatment of your
Contract. We reserve the right to modify the Contract as necessary to attempt to
prevent you from being considered the federal tax Contract Owner of the assets
of the Variable Account. However, we make no guarantee that such modification to
the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract Owner's death,
o attributable to the Contract Owner being disabled, or
o for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS. Death of a Contract Owner, or death of the
Annuitant if the Contract Owner is not a natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2. if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2;
2. made as a result of the Contract Owner's death or disability;
3. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified deferred annuity contracts
issued by Lincoln Benefit (or its affiliates) to the same Contract Owner during
any calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Lincoln Benefit
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed below.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
The Death Benefit and Qualified Contracts. Pursuant to IRS regulations, IRAs may
not invest in life insurance contracts. We do not believe that these regulations
prohibit the Death Benefit, including that provided by the optional Death
Benefit, from being provided under the Contracts when we issue the Contracts as
Traditional IRAs, Roth IRAs or SIMPLE IRAs. However, the law is unclear and it
is possible that the presence of the Death Benefit under a Contract issued as a
Traditional IRA, Roth IRA or SIMPLE IRAs could result in increased taxes to the
Contract Owner.
It is also possible that the Death Benefit could be characterized as an
incidental Death Benefit. If the Death Benefit were so characterized, this could
result in currently taxable income to a Contract Owner. In addition, there are
limitations on the amount of incidental Death Benefits that may be provided
under qualified plans, such as in connection with a 403(b) plan. Even if the
Death Benefit under the Contract were characterized as an incidental Death
Benefit, it is unlikely to violate those limits unless the Contract Owner also
purchases a life insurance contract in connection with such plan.
RESTRICTIONS UNDER SECTION 403(B) PLANS. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1998, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date the employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may not
be distributed on the account of hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Lincoln Benefit is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless you elect to make a "direct
rollover" of such amounts to an IRA or eligible retirement plan. Eligible
rollover distributions generally include all distributions from Qualified
Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or over the life (joint lives) of the participant (and
beneficiary).
Lincoln Benefit may be required to withhold federal and state income taxes on
any distributions from non-Qualified Contracts or Qualified Contracts that are
not eligible rollover distributions, unless you notify us of your election to
not have taxes withheld.
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit's annual report on Form 10-K for the year ended December 31,
2000, and quarterly report on Form 10-Q for the period ended March 31, 2001 are
incorporated herein by reference, which means that they are legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act of 1934 are also incorporated herein by reference, which
means that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K electronically on the SEC's "EDGAR" system using
the identifying number CIK No. 0000910739. The SEC maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. the address of the
site is http://www.sec.gov. You also can view these materials at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For
more information on the operations of SEC's Public Reference Room, call
1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Lincoln Benefit Life Company, 2940 South 84th Street,
Lincoln, Nebraska, 68516 or 800-525-9287.
EXPERTS
The financial statements of Lincoln Benefit as of December 31, 2000 and 1999 and
for each of the three years in the period ended December 31, 2000 and the
related financial statement schedule incorporated herein by reference from the
Annual Report on Form 10-K of Lincoln Benefit Life Company and from the
Statement of Additional Information, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 2000 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report incorporated herein
by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PERFORMANCE INFORMATION
We may advertise the performance of the Variable Subaccounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable Subaccount
after reinvesting all income distributions. Yield refers to the income generated
by an investment in a Variable Subaccount over a specified period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Subaccounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Subaccounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date to
the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the week
preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a Note with a maturity of the original Guarantee Period is
not available, we will use a weighted average.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as a death benefit,
or applied to an Income Plan from a Guarantee Period at any time other than
during the 30 day period after such Guarantee Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
I (5-Year Treasury Rate): 4.50%
NOTE: These examples assume that premium taxes are not applicable and that
previous withdrawals have not been taken.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3:
= $10,000.00 X (1.045) TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X ($10,000.00) = $1,500.00
(greater than $1,411.66 earnings in the Contract)
Step 3: Calculate the Withdrawal Charge:
= .07 X ($10,000 - $1,500) = $595.00
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20% (5-Year Treasury Rate at time of withdrawal)
730 DAYS
N = -------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X [I - (J + .0025)] X N
= .9 X [.045 - (.042 + .0025)] X 2 = .0009
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X
AMOUNT SUBJECT TO MARKET VALUE ADJUSTMENT:
= .0009 X $11,411.66 = $10.27
Step 5: Calculate the amount received by Contract Owner as a result
of full withdrawal at the end of Contract Year 3:
= $11,411.66 - $595.00 + $10.27 = $10,826.93
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3:
= $10,000.00 X (1.045) TO THE POWER OF 3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
= .15 X ($10,000.00) = $1,500.00 (greater than $1,411.66 in
earnings)
Step 3: Calculate the Withdrawal Charge:
= .07 X ($10,000.00 - $1,500.00) = $595.00
Step 4: Calculate the Market Value Adjustment:
J = 4.80% (5-Year Treasury Rate at time of withdrawal)
N = 730 DAYS = 2
--------
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR: .9 X [I - (J + .0025)] X N
= .9 X [(.045 - (.048 + .0025)] X (2) = -.0099
MARKET VALUE ADJUSTMENT = MARKET VALUE ADJUSTMENT FACTOR X
AMOUNT SUBJECT TO MARKET VALUE ADJUSTMENT:
= -.0099 X $11,411.66 = -$112.98
Step 5: Calculate the amount received by Contract Owner as a
result of full withdrawal at the end of Contract Year 3:
= $11,411.66 - $595.00 - $112.98 = $10,703.63
APPENDIX B
CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
EXAMPLE 1. In this example, assume that the oldest Contract Owner is age 55 at
the time the Contract is issued and elects the Enhanced Earnings Death Benefit
Rider when the Contract is issued. The Contract Owner makes an initial purchase
payment of $100,000. After four years, the Contract Owner dies. On the date
Lincoln Benefit receives Due Proof of Death, the Contract Value is $125,000.
Prior to his death, the Contract Owner did not make any additional purchase
payments or take any withdrawals.
Excess-of-Earnings Withdrawals = $0
Purchase payments in the 12 months after the Rider Date and prior to Death = $0
In-Force Premium = $100,000 ($100,000 + $0 - $0) In-Force Earnings = $25,000
($125,000 - $100,000) Enhanced Earnings Death Benefit = 50% x $25,000 = $12,500.
Since 50% of In-Force Earnings is less than 100% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the In-Force
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2. In the second example, assume the same facts as above, except that
the Contract Owner has taken a withdrawal of $10,000 during the second year of
the Contract. At the time the withdrawal is taken, the Contract Value is
$105,000. Here, $5,000 of the withdrawal is in excess of the In-Force Earnings
at the time of the withdrawal. The Contract Value on the date Lincoln Benefit
receives Due Proof of Death will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000 ($10,000 - $5,000) Purchase payments in
the 12 months after the Rider Date and prior to Death = $0 In-Force Premium =
$95,000 ($100,000 + $0 - $5,000) In-Force Earnings = $19,000 ($114,000 -
$95,000) Enhanced Earnings Death Benefit = 50% x $19,000 = $9,500.
Since In-Force Earnings are less than 100% of the In-Force Premium (excluding
purchase payments in the 12 months after the Rider Date and prior to death), the
In-Force Earnings are used to compute the Enhanced Earnings Death Benefit
amount.
EXAMPLE 3. This third example is intended to illustrate the effect of adding the
Enhanced Earnings Death Benefit Rider after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest
Contract Owner is age 65 on the Rider Date. At the time the Contract is issued,
the Contract Owner makes a purchase payment of $100,000. After two years pass,
the Contract Owner elects to add the Enhanced Earnings Death Benefit Rider. On
the date this Rider is added, the Contract Value is $110,000. Two years later,
the Contract Owner withdraws $50,000. Immediately prior to the withdrawal, the
Contract Value is $130,000. Another two years later, the Contract Owner makes an
additional purchase payment of $40,000. Two years later, the Contract Owner dies
with a Contract Value of $140,000 on the date Lincoln Benefit receives Due Proof
of Death.
Excess of Earnings Withdrawals = $30,000 ($50,000 - $20,000) Purchase payments
in the 12 months after the Rider Date and prior to Death = $0 In-Force Premium =
$120,000 ($110,000 + $40,000 - $30,000) In-Force Earnings = $20,000 ($140,000 -
$120,000) Enhanced Earnings Death Benefit = 40% of $20,000 = $8,000.
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since 40% of In-Force Earnings is less than 80% of the In-Force Premium
(excluding purchase payments in the 12 months after the Rider Date and prior to
death), the In-Force Earnings are used to compute the Enhanced Earnings Death
Benefit amount.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Pursuant to Item 511 of Regulation S-K, the Registrant hereby represents that
the following expenses totaling approximately $31,000.00 will be incurred or are
anticipated to be incurred in connection with the issuance and distribution of
the securities to be registered: registration fees - $0.00; cost of printing and
engraving - $25,000.00 (approximate); legal fees - $5,000.00 (approximate) and
accounting fees - $1,000.00 (approximate). All amounts are estimated, for the
period ending May 1, 2002 for the continuous offering of shares, but are not
deducted from proceeds.
Item 15. Indemnification of Directors and Officers
The Articles of Incorporation of Lincoln Benefit Life Company (Depositor)
provide for the indemnification of its directors and officers against expenses,
judgments, fines and amounts paid in settlement as incurred by such person, so
long as such person shall not have been adjudged to be liable for negligence or
misconduct in the performance of a duty to the Company. This right of indemnity
is not exclusive of other rights to which a director or officer may otherwise be
entitled.
The By-Laws of ALFS, Inc. (Distributor) provide that the corporation will
indemnify a director, officer, employee or agent of the corporation to the full
extent of Delaware law. In general, Delaware law provides that a corporation may
indemnify a director, officer, employee or agent against expenses, judgments,
fines and amounts paid in settlement if that individual acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
No indemnification shall be made for expenses, including attorney's fees, if the
person shall have been judged to be liable to the corporation unless a court
determines such person is entitled to such indemnity. Expenses incurred by such
individual in defending any action or proceeding may be advanced by the
corporation so long as the individual agrees to repay the corporation if it is
later determined that he or she is not entitled to such indemnification.
Under the terms of the form of Underwriting Agreement, the Depositor agrees to
indemnify the Distributor for any liability that the latter may incur to a
Contract owner or party-in-interest under a Contract, (a) arising out of any act
or omission in the course of or in connection with rendering services under such
Agreement, or (b) arising out of the purchase, retention or surrender of a
Contract; provided that the Depositor will not indemnify the Distributor for any
such liability that results from the latter's willful misfeasance, bad faith or
grow negligence, or from the reckless disregard by the latter of its duties and
obligations under the Underwriting Agreement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the forgoing provisions, or otherwise, the registrant 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 the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has 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.
Item 16. Exhibits
Exh. No. Description
1 Form of Principal Underwriting Agreement*
4(a) Form of Variable Annuity Contract***
4(b) Form of Application***
5 Opinion and Consent of Counsel regarding legality
21 Subsidiaries of Registrant - N/A
23(a) Consent of Deloitte & Touche LLP, Independent Auditors
23(b) Consent of Attorneys
- -------------------------------------------------
* Incorporated herein by reference to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 for Lincoln Benefit Life Variable
Annuity Account (File No. 333-50545, 811-07924) filed January 28, 1999
** Incorporated herein by reference to the Registration Statement on Form
S-6 for the Lincoln Benefit Life Variable Life Account (File No.
333-47717) filed March 11, 1998
*** Incorporated herein by reference to the Registration Statement on Form
N-4 for Lincoln Benefit Life Variable Annuity Account (File No.
333-61146, 811-07924) filed May 17, 2001
**** Incorporated herein by reference to the Registrant's Form 10-K filed
March 29, 2001.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the determining of any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liabilities under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted in directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant 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 the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant 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.
SIGNATURES
As required by the Securities Act of 1933, the Registrant has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Lincoln and State of
Nebraska on the 31st day of July, 2001
LINCOLN BENEFIT LIFE COMPANY (Registrant)
By: /s/ B. Eugene Wraith
---------------------------------
B. Eugene Wraith
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following directors and
principal officers of Lincoln Benefit Life Company in the capacities indicated
on the 31st day of July, 2001.
Name Title Date
- --------------------- ------------- --------
/s/ B. Eugene Wraith
- ------------------------------- President, Chief Operating Officer & Director August 1, 2001
B. Eugene Wraith
(Principal Executive Officer)
/s/ James P. Zils
- ------------------------------ Treasurer August 1, 2001
James P. Zils
(Principal Financial Officer)
/s/ Samuel H. Pilch
- ----------------------------- Vice President & Controller August 1, 2001
Samuel H. Pilch
(Principal Accounting Officer)
/s/ Lawrence W. Dahl
- ----------------------------- Executive Vice President & Director August 1, 2001
Lawrence W. Dahl
/s/ Douglas F. Gaer
- ---------------------------- Executive Vice President & Director August 1, 2001
Douglas F. Gaer
- ---------------------------- Director August 1, 2001
J. Kevin McCarthy
- ---------------------------- Director August 1, 2001
Kevin R. Slawin
- ---------------------------- Director, General Counsel August 1, 2001
Michael J. Velotta & Secretary
/s/ Carol S. Watson
- ---------------------------- Director & Senior Vice President August 1, 2001
Carol S. Watson
/s/ Dean M. Way
- ---------------------------- Director, Senior Vice President and Actuary August 1, 2001
Dean M. Way
- ---------------------------- Director August 1, 2001
Patricia W. Wilson
- ------------------------------- Chairman of the Board, Chief Executive August 1, 2001
Thomas J. Wilson, II Officer & Director
EXHIBITS
Exhibit No. Description
5 Opinion and Consent of Counsel regarding legality
23(a) Consent of Independent Auditors
23(b) Consent of Attorneys