As Filed with the Securities and Exchange Commission on April 19, 2006
File No.333-59765
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
POST-EFFECTIVE AMENDMENT NO. 8
TO FORM S-1
ON FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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 St., Lincoln, Nebraska 68506
1-800-865-5237
(Address of registrant's principal executive offices)
WILLIAM F. EMMONS, ESQ.
LINCOLN BENEFIT LIFE COMPANY
2940 South 84th St.
LINCOLN, NE 68506
1-800-865-5237
(Name of agent for service)
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
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Title of Each Class Amount to Proposed Maximum Proposed Maximum Amount of
of Securities to be be Registered Offering Price Aggregate Offering Registration
Registered Per Unit Price Fee
Market Value Adjusted
Interest under Individual
Flexible Premium
Deferred Variable Annuity
Contracts * * * *
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* These Contracts are not issued in predetermined amounts or units. A maximum
aggregate offering price of $25,000,000 was previously registered. No
additional amount of securities is being registered by this post- effective
amendment to the registration statement.
CONSULTANT I VARIABLE ANNUITY PROSPECTUS
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142
MAILING ADDRESS: P.O. BOX 80469, LINCOLN, NE 68501-0469
TELEPHONE NUMBER: 1-800-865-5237
FAX NUMBER: 1-877-525-2689
The Contract is a deferred annuity contract designed to aid you in long-term
financial planning. You may purchase it on either a tax qualified or non-tax
qualified basis. LINCOLN BENEFIT LIFE NO LONGER OFFERS THIS CONTRACT. IF YOU
HAVE ALREADY PURCHASED THE CONTRACT YOU MAY CONTINUE TO MAKE PURCHASE PAYMENTS
ACCORDING TO THE CONTRACT.
Because this is a flexible premium annuity contract, you may pay multiple
premiums. We allocate your premium to the investment options under the Contract
and our Fixed Account in the proportions that you choose. The Contract currently
offers fifty-two investment options, each of which is a Sub-Account of the
Lincoln Benefit Life Variable Annuity Account ("Separate Account"). Each
Sub-Account invests exclusively in shares of Portfolios in one of the following
underlying Funds:
AIM VARIABLE INSURANCE FUNDS (SERIES I)
THE ALGER AMERICAN FUND (CLASS O)
DWS VARIABLE SERIES I (CLASS A)*
FEDERATED INSURANCE SERIES
FIDELITY(R) VARIABLE INSURANCE PRODUCTS (INITIAL CLASS)
JANUS ASPEN SERIES (INSTITUTIONAL SHARES AND SERVICE SHARES)
LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, INC (CLASS I)**
MFS(R) VARIABLE INSURANCE TRUST(SM) (INITIAL CLASS)
OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE SHARES)
PREMIER VIT
PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE SHARES)
PUTNAM VARIABLE TRUST (CLASS IB)
STI CLASSIC VARIABLE TRUST
T. ROWE PRICE EQUITY SERIES, INC. (I)
T. ROWE PRICE INTERNATIONAL SERIES, INC. (I)
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (CLASS I)
VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II)
WELLS FARGO VARIABLE TRUST FUNDS
* Effective 2/6/2006, Scudder Investments has changed its name to DWS Scudder
Investments, accordingly we have made a corresponding change to the names of the
Sub-Accounts.
** Effective 5/1/2006, the Salomon Brothers Variable Series Funds Inc. have been
rebranded Legg Mason Partners Variable Portfolios I, Inc., accordingly we have
made a corresponding change to the names of the Sub-Accounts.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 2006.
Some of the portfolios described in this prospectus may not be available in your
Contract. We may make available other investment options in the future.
You may not purchase a Contract if either you or the Annuitant are older than 90
years before we receive your application.
Your Contract Value will vary daily as a function of the investment performance
of the Sub-Accounts to which you have allocated Purchase Payments and any
interest credited to the Fixed Account. We do not guarantee any minimum Contract
Value for amounts allocated to the Sub-Accounts. Benefits provided by this
Contract, when based on the Fixed Account, are subject to a Market
1 PROSPECTUS
Value Adjustment, which may result in an upwards or downwards adjustment in
withdrawal benefits, death benefits, settlement values, transfers to the
Sub-Accounts.
In certain states the Contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts in
this prospectus applies equally to Certificates under group contracts, unless
the content specifies otherwise.
This prospectus sets forth the information you ought to know about the Contract.
You should read it before investing and keep it for future reference.
We have filed a Statement of Additional Information with the Securities and
Exchange Commission ("SEC"). The current Statement of Additional Information is
dated May 1, 2006. The information in the Statement of Additional Information is
incorporated by reference in this prospectus. You can obtain a free copy by
writing us or calling us at the telephone number given above. The Table of
Contents of the Statement of Additional Information appears on page 45 of this
prospectus.
At least once each year we will send you an annual statement. The annual
statement details values and specific information for your Contract. It does not
contain our financial statements. Our financial statements are set forth in the
Statement of Additional Information. Lincoln Benefit will file annual and
quarterly reports and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
room in Washington, D.C. You can obtain copies of these documents by writing to
the SEC and paying a duplicating fee. Please call the SEC at 1-800-SEC-0330 for
further information as to the operation of the public reference room. Our SEC
filings are also available to the public on the SEC Internet site
(http://www.sec.gov).
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE.
2 PROSPECTUS
TABLE OF CONTENTS
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DEFINITIONS 4
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FEE TABLES 6
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QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT 8
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CONDENSED FINANCIAL INFORMATION 11
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DESCRIPTION OF THE CONTRACTS 11
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Summary 11
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Contract Owner 12
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Annuitant 12
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Modification of the Contract 12
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Assignment 12
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Free Look Period 12
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PURCHASES AND CONTRACT VALUE 12
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Minimum Purchase Payment 12
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Automatic Payment Plan 13
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Allocation of Purchase Payments 13
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Contract Value 13
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Separate Account Accumulation Unit Value 13
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Transfer During Accumulation Period 14
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Market Timing & Excessive Trading 14
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Trading Limitations 15
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Automatic Dollar Cost Averaging Program 15
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Portfolio Rebalancing 16
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THE INVESTMENT AND FIXED ACCOUNT OPTIONS 17
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Separate Account Investments 17
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The Portfolios 17
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Voting Rights 20
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Additions, Deletions, and Substitutions of Securities 21
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The Fixed Account 21
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General 21
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Guaranteed Maturity Fixed Account Option 21
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Market Value Adjustment 23
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Dollar Cost Averaging Fixed Account Option 23
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ANNUITY BENEFITS 23
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Annuity Date 23
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Annuity Options 24
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Other Options 24
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Annuity Payments: General 24
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Variable Annuity Payments 25
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Fixed Annuity Payments 25
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Transfers During the Annuity Period 25
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Death Benefit During Annuity Period 25
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Certain Employee Benefit Plans 26
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OTHER CONTRACT BENEFITS 26
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Death Benefit 26
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Beneficiary 30
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Contract Loans for 403(b) Contracts 30
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Withdrawals (Redemptions) 31
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Systematic Withdrawal Program 32
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ERISA Plans 32
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Minimum Contract Value 32
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CONTRACT CHARGES 32
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Mortality and Expense Risk Charge 33
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Administrative Charges 33
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Contract Maintenance Charge 33
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Administrative Expense Charge 33
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Transfer Fee 33
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Sales Charges 33
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Premium Taxes 35
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Deduction for Separate Account Income Taxes 35
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Other Expenses 35
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TAXES 36
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Taxation of Lincoln Benefit Life Company 36
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Taxation of Variable Annuities in General 36
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Income Tax Withholding 38
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Tax Qualified Contracts 39
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DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT 42
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Lincoln Benefit Life Company 42
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Separate Account 43
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State Regulation of Lincoln Benefit 43
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Financial Statements 43
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ADMINISTRATION 43
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DISTRIBUTION OF CONTRACTS 44
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LEGAL PROCEEDINGS 44
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LEGAL MATTERS 44
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ANNUAL REPORTS AND OTHER DOCUMENTS 44
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REGISTRATION STATEMENT 44
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION 45
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APPENDIX A ACCUMULATION UNIT VALUES 46
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APPENDIX B ILLUSTRATION OF A MARKET VALUE ADJUSTMENT 59
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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.
3 PROSPECTUS
DEFINITIONS
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Please refer to this list for the meaning of the following terms:
ACCUMULATION PERIOD - The period, beginning on the Issue Date, during which
Contract Value builds up under Your Contract.
ACCUMULATION UNIT - A unit of measurement which we use to calculate Contract
Value.
ANNUITANT - The living person on whose life the annuity benefits under a
Contract are based.
ANNUITIZATION - The process to begin annuity payments under the Contract.
ANNUITIZED VALUE - The Contract Value adjusted by any applicable Market Value
Adjustment and less any applicable taxes.
ANNUITY DATE - The date on which annuity payments are scheduled to begin.
ANNUITY PERIOD - The period during which annuity payments are paid. The Annuity
Period begins on the Annuity Date.
ANNUITY UNIT - A unit of measurement which we use to calculate the amount of
Variable Annuity payments.
BENEFICIARY(IES) - The person(s) designated to receive any death benefits under
the Contract.
COMPANY ("WE," "US," "OUR," "LINCOLN BENEFIT") - Lincoln Benefit Life Company.
CONTRACT ANNIVERSARY - Each anniversary of the Issue Date.
CONTRACT OWNER ("YOU," "YOUR") - The person(s) having the privileges of
ownership defined in the Contract. If Your Contract is issued as part of a
retirement plan, Your ownership privileges may be modified by the plan.
CONTRACT VALUE - The sum of the values of Your investment in the Sub-Accounts
of the Separate Account and the Fixed Account.
CONTRACT YEAR - Each twelve-month period beginning on the Issue Date and each
Contract Anniversary.
CONTRIBUTION YEAR - Each twelve-month period beginning on the date a Purchase
Payment is allocated to a Sub-Account, or each anniversary of that date.
FIXED ACCOUNT - The portion of the Contract Value allocated to Our general
account.
FIXED ANNUITY - A series of annuity payments that are fixed in amount.
GUARANTEE PERIODS - A period of years for which we have guaranteed a specific
effective annual interest rate on an amount allocated to the Fixed Account.
ISSUE DATE - The date when the Contract becomes effective.
LATEST ANNUITY DATE - The latest date by which you must begin annuity payments
under the Contract.
LOAN ACCOUNT - An account established for amounts transferred from the
Sub-Accounts or the Fixed Account as security for outstanding Contract loans.
MARKET VALUE ADJUSTMENT - An amount added to or subtracted from certain
transactions involving Your interest in the Fixed Account, to reflect the impact
of changing interest rates.
NET INVESTMENT FACTOR - The factor used to determine the value of an
Accumulation Unit and Annuity Unit in any Valuation Period. We determine the Net
Investment Factor separately for each Sub-Account.
NON-QUALIFIED PLAN - A retirement plan which does not receive special tax
treatment under Sections 401, 403(b), 408, 408A or 457 of the Tax Code.
PORTFOLIO(S) - The underlying funds in which the Sub-Accounts invest. Each
Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.
PURCHASE PAYMENTS - Amounts paid to Us as premium for the Contract by you or on
Your behalf.
QUALIFIED PLAN - A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408 or 408A of the Tax Code or a deferred compensation
plan for a state and local government or another tax exempt organization under
Section 457 of the Tax Code.
SEPARATE ACCOUNT - The Lincoln Benefit Life Variable Annuity Account, which is
a segregated investment account of the Company.
SUB-ACCOUNT - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.
SURRENDER VALUE - The amount paid upon complete surrender of the Contract,
equal to the Contract Value, less any applicable premium taxes, Withdrawal
Charge, and the contract maintenance charge and increased or decreased by any
Market Value Adjustment.
TAX CODE - The Internal Revenue Code of 1986, as amended.
TREASURY RATE - The U.S. Treasury Note Constant Maturity Yield for the preceding
week as reported in Federal Reserve Bulletin Release H.15.
VALUATION DATE - Each day the New York Stock Exchange is open for business.
VALUATION PERIOD - The period of time over which we determine the change in the
value of the Sub-Accounts in order to price Accumulation Units and Annuity
Units.
4 PROSPECTUS
Each Valuation Period begins at the close of normal trading on the New York
Stock Exchange ("NYSE") currently 4:00 p.m. Eastern time on each Valuation Date
and ends at the close of the NYSE on the next Valuation Date.
VARIABLE ANNUITY - A series of annuity payments that vary in amount based on
changes in the value of the Sub-Accounts to which Your Contract Value has been
allocated.
WITHDRAWAL CHARGE - The contingent deferred sales charge that may be required
upon some withdrawals.
5 PROSPECTUS
FEE TABLES
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THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
BUYING, OWNING, AND SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE
FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT,
SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS. STATE
PREMIUM TAXES MAY ALSO BE DEDUCTED.
Maximum Contingent Deferred Sales Charge - Withdrawal Charge (as a percentage of
Purchase Payments)
CONTRIBUTION YEAR APPLICABLE CHARGE
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8 + 0%
- 7%
TRANSFER FEE (Applies solely to the second and subsequent transfers within a
calendar month. We are currently waiving the transfer fee) - $10.00
THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING PORTFOLIO FEES AND
EXPENSES.
ANNUAL CONTRACT MAINTENANCE CHARGE $35.00
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF DAILY NET ASSET
VALUE DEDUCTED FROM EACH OF THE SUB-ACCOUNTS OF THE SEPARATE ACCOUNT)
Base Contract (without optional riders)
Mortality and Expense Risk Charge 1.15%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.25%
Base Contract (with Enhanced Death Benefit Rider)
Mortality and Expense Risk Charge 1.35%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.45%
Base Contract (with Enhanced Income Benefit Rider)
Mortality and Expense Risk Charge 1.50%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.60%
Base Contract (with Enhanced Death and Income Benefit Riders)
Mortality and Expense Risk Charge 1.55%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.65%
Base Contract (with Enhanced Death and Income Benefit Riders II)
Mortality and Expense Risk Charge 1.70%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.80%
THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL OPERATING EXPENSES
CHARGED BY THE PORTFOLIOS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU
OWN THE CONTRACT. ADVISERS AND/OR OTHER SERVICE PROVIDERS OF CERTAIN PORTFOLIOS
MAY HAVE AGREED TO WAIVE THEIR FEES AND/OR REIMBURSE PORTFOLIO EXPENSES IN ORDER
TO KEEP THE PORTFOLIOS' EXPENSES BELOW SPECIFIED LIMITS. THE RANGE OF EXPENSES
SHOWN IN THIS TABLE DOES NOT SHOW THE EFFECT OF ANY SUCH FEE WAIVER OR EXPENSE
REIMBURSMENT. MORE DETAIL CONCERNING EACH PORTFOLIO'S FEES AND EXPENSES IS
CONTAINED IN THE PROSPECTUS FOR EACH PORTFOLIO.
6 PROSPECTUS
Minimum Maximum
Total Annual Portfolio
Operating
Expenses/(1)/
(expenses that are
deducted from
Portfolio assets,
which may include
management fees,
distribution and/or
service (12b-1) fees,
and other
expenses)(without
waivers or
reimbursements) 0.10% 4.97%
(1)Expenses are shown as a percentage of Portfolio average daily net assets
before any waiver or reimbursement as of December 31, 2005.
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Separate
Account annual expenses, and Portfolio fees and expenses and assumes no
transfers or exchanges were made. The Example shows the dollar amount of
expenses that you would bear directly or indirectly if you:
.. Invested $10,000 in the Contract for the time periods indicated,
.. 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, and,
.. elected the Enhanced Death and Income Benefit Riders II (with total Separate
Account expenses of 1.80%).
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum Annual $1,324 $ 2,649 $ 3,828 $6,609
Portfolio Expenses
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Costs Based on Minimum Annual $ 825 $ 1,215 $ 1,543 $2,554
Portfolio Expenses
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EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes 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 time period.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum $729 $ 2,139 $3,488 $6,609
Annual Portfolio Expenses
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Costs Based on Minimum $230 $ 705 $1,203 $2,554
Annual Portfolio Expenses
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EXPLANATION OF EXPENSE EXAMPLES
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
EXAMPLES 1 AND 2 ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT
RIDERS II (TOTAL SEPARATE ACCOUNT EXPENSES OF 1.80%). IF THESE RIDERS WERE NOT
ELECTED, THE EXPENSE FIGURES SHOWN WOULD BE SLIGHTLY LOWER. THE EXAMPLES REFLECT
THE FREE WITHDRAWAL AMOUNTS, IF ANY, AND AN ANNUAL CONTRACT MAINTENANCE CHARGE
OF $35.
7 PROSPECTUS
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the prospectus. Please read the prospectus carefully.
1. WHAT IS THE CONTRACT?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non-qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax-deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine the
amount of your annuity payments during the Annuity Period.
Your premiums are invested in one or more of the Sub-Accounts of the Separate
Account or allocated to the Fixed Account, as you instruct us. You may allocate
your Contract Value to up to twenty-one options under the Contract, counting
each Sub-Account and the Fixed Account as one option. We will treat all of your
Contract Value allocated to the Fixed Account as one option for purposes of this
limit, even if you have chosen more than one Guarantee Period. The value of your
Contract will depend on the investment performance of the Sub-Accounts and the
amount of interest we credit to the Fixed Account.
Each Sub-Account will invest in a single investment portfolio (a "Portfolio") of
an underlying fund. The Portfolios offer a range of investment objectives, from
conservative to aggressive. You bear the entire investment risk on amounts
allocated to the Sub-Accounts. The investment policies and risks of each
Portfolio are described in the accompanying prospectuses for the Portfolios.
In some states, you may also allocate all or part of your Contract Value to the
"Fixed Account", as described in the answer to Question 5.
2. WHAT ANNUITY OPTIONS DOES THE CONTRACT OFFER?
You may receive annuity payments on a fixed or a variable basis or a combination
of the two. We offer a variety of annuity options including:
.. a life annuity with payments guaranteed for zero to thirty years;
.. a joint and full survivorship annuity, with payments guaranteed for zero to
thirty years; and
.. fixed payments for a specified period of five to thirty years.
Call us to inquire about other options.
You may change your annuity option at any time before annuitization. You may
select the date to annuitize the Contract. The date you select, however, may be
no later than the later of the tenth Contract Anniversary or the youngest
Annuitant's 90th birthday. If your Contract was issued in connection with a
qualified plan, different deadlines may apply.
If you select annuity payments on a variable basis, the amount of our payments
to you will be affected by the investment performance of the Sub-Accounts you
have selected. The fixed portion of your annuity payments, on the other hand,
generally will be equal in amount to the initial payment we determine. As
explained in more detail below, however, during the Annuity Period you will have
a limited ability to change the relative weighting of the Sub-Accounts on which
your variable annuity payments are based or to increase the portion of your
annuity payments consisting of Fixed Annuity payments.
3. HOW DO I BUY A CONTRACT?
You can obtain a Contract application from your Lincoln Benefit agent. You must
pay at least $1,200 in Purchase Payments during the first Contract Year.
Purchase Payments must be at least $100, unless you enroll in an automatic
payment plan. Your periodic payments in an automatic payment plan must be at
least $25 per month. We may lower these minimums at our sole discretion. The
maximum age of the oldest Contact Owner and Annuitant cannot exceed age 90 as of
the date we receive the completed application.
4. WHAT ARE MY INVESTMENT CHOICES UNDER THE CONTRACT?
You can allocate and reallocate your investment among the Sub-Accounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the Portfolios described in "The Investment and
Fixed Account Options: Separate Account Investments."
Some of the Portfolios described in this prospectus may not be available in your
Contract.
Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies which
are described in the prospectuses for the Portfolios.
5. WHAT IS THE FIXED ACCOUNT OPTION?
We offer two Fixed Account interest crediting options: the Guaranteed Maturity
Fixed Account Option and the Dollar Cost Averaging Fixed Account Option.
You may allocate Purchase Payments to the Sub-Account(s) and the Fixed
Account(s). Loan payments may
8 PROSPECTUS
not be allocated to the Fixed Account(s). You may not transfer amounts into the
DCA Fixed Account. The minimum amount that may be transferred into any one of
the Guarantee Maturity Fixed Account Options is $500.
We will credit interest to amounts allocated to the Guaranteed Maturity Fixed
Account Option at a specified rate for a specified Guarantee Period. You select
the Guarantee Period for each amount that you allocate to the Guaranteed
Maturity Fixed Account Option. We will tell you what interest rates and
Guarantee Periods we are offering at a particular time. At the end of each
Guarantee Period, you may select a new Guarantee Period from among the choices
we are then making available or transfer or withdraw the relevant amount from
the Fixed Account without any Market Value Adjustment.
We may offer Guarantee Periods ranging from one to ten years in length. We are
currently offering Guarantee Periods of one, three, five, seven, and ten years
in length. In the future we may offer Guarantee Periods of different lengths or
stop offering some Guarantee Periods.
We will not change the interest rate credited to a particular allocation until
the end of the relevant Guarantee Period. From time to time, however, we may
change the interest rate that we offer to credit to new allocations to the
Guaranteed Maturity Fixed Account Option and to amounts rolled over in the Fixed
Account for new Guarantee Periods.
In addition, if you participate in our dollar cost averaging program, you may
designate amounts to be held in the Dollar Cost Averaging Fixed Account Option
until they are transferred monthly to the Sub-Accounts or Guarantee Periods of
your choosing. When you make an allocation to the Fixed Account for this
purpose, we will set an interest rate applicable to that amount. We will then
credit interest at that rate to that amount until it has been entirely
transferred to your chosen Sub-Accounts or Guarantee Periods. We will complete
the transfers within one year of the allocation. In our discretion we may change
the rate that we set for new allocations to the Fixed Account for the dollar
cost averaging program. We will never, however, set a rate less than an
effective annual rate of 3%.
A Market Value Adjustment may increase or decrease the amount of certain
transactions involving the Fixed Account, to reflect changes in interest rates.
As a general rule, we will apply a Market Value Adjustment to the following
transactions:
1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option in
an amount greater than the Free Withdrawal Amount (which is described in the
answer to Question 6);
2) when you transfer funds from the Guaranteed Maturity Fixed Account Option to
the Sub-Accounts;
3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
4) when you annuitize your Contract; and
5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction to the extent that:
1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction;
2) it is necessary to meet IRS minimum withdrawal requirements; or
3) it is a transfer that is part of a Dollar Cost Averaging program.
We determine the amount of a Market Value Adjustment using a formula that takes
into consideration:
1) whether current interest rates differ from interest rates at the beginning of
the applicable Guarantee Period; and
2) how many years are left until the end of the Guarantee Period.
As a general rule, if interest rates have dropped, the Market Value Adjustment
will be an addition; if interest rates have risen, the Market Value Adjustment
will be a deduction. It is therefore possible that if you withdraw an amount
from the Fixed Account during a Guarantee Period, a Market Value Adjustment may
cause you to receive less than you initially allocated to the Fixed Account.
6. WHAT ARE MY EXPENSES UNDER THE CONTRACT?
CONTRACT MAINTENANCE CHARGE. During the Accumulation Period, each year we
subtract an annual contract maintenance charge of $35 from your Contract Value
allocated to the Sub-Accounts. We will waive this charge if you pay $50,000 or
more in Purchase Payments or if you allocate all of your Contract Value to the
Fixed Account.
During the Annuity Period, we will subtract the annual contract maintenance
charge in equal parts from your annuity payments. We waive this charge if on the
Annuity Date your Contract Value is $50,000 or more or if all payments are Fixed
Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE AND MORTALITY AND EXPENSE RISK CHARGE. We impose
a mortality and expense risk charge at an annual rate of 1.15% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. If you select one of our optional enhanced benefit
riders, however, we may charge you a higher mortality and expense risk charge.
These charges are assessed each day during the Accumulation Period and the
Annuity Period. We guarantee that we will not raise these charges.
TRANSFER FEE. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to
9 PROSPECTUS
$10 per transfer for each transfer after the first transfer in each month.
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE). During the Accumulation
Period, you may withdraw all or part of the value of your Contract before your
death or, if the Contract is owned by a company or other legal entity, before
the Annuitant's death. Certain withdrawals may be made without payment of any
Withdrawal Charge, which is a contingent deferred sales charge. Other
withdrawals are subject to the Withdrawal Charge.
The Withdrawal Charge will vary depending on how many complete years have passed
since you paid the Purchase Payment being withdrawn. The Withdrawal Charge
applies to each Purchase Payment for seven complete years from the date of the
Payment (each a "Contribution Year") as follows:
CONTRIBUTION APPLICABLE
YEAR CHARGE
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8 + 0%
In determining Withdrawal Charges, we will deem your Purchase Payments to be
withdrawn on a first-in, first-out basis.
Each year, free of Withdrawal Charges or any otherwise applicable Market Value
Adjustment, you may withdraw the Free Withdrawal Amount, which equals:
(a) the greater of:
. earnings not previously withdrawn; or
. 15% of your total Purchase Payments made in the most recent seven years;
plus
(b) an amount equal to your total Purchase Payments made more than seven years
ago, to the extent not previously withdrawn.
In most states, we also may waive the Withdrawal Charge if you:
1) require long-term medical or custodial care outside the home;
2) become unemployed; or
3) are diagnosed with a terminal illness.
These provisions will apply to the Annuitant, if the Contract is owned by a
company or other legal entity. Additional restrictions and costs may apply to
Contracts issued in connection with qualified plans. Withdrawals of earnings are
taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. You should consult with your tax counselor
to determine what effect a withdrawal might have on your tax liability. As
described in the answer to Question 5, we may increase or decrease certain
withdrawals by a Market Value Adjustment.
PREMIUM TAXES. Certain states impose a premium tax on annuity purchase payments
received by insurance companies. Any premium taxes relating to the Contract may
be deducted from Purchase Payments or the Contract Value when the tax is
incurred or at a later time. State premium taxes generally range from 0% to
3.5%.
OTHER EXPENSES. In addition to our charges under the Contract, each Portfolio
deducts amounts from its assets to pay its investment advisory fees and other
expenses.
7. HOW WILL MY INVESTMENT IN THE CONTRACT BE TAXED?
You should consult a qualified tax adviser for personalized answers. Generally,
earnings under variable annuities are not taxed until amounts are withdrawn or
distributions are made. This deferral of taxes is designed to encourage
long-term personal savings and supplemental retirement plans. Withdrawals of
earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may be
subject to an additional 10% federal tax penalty.
Special rules apply if the Contract is owned by a company or other legal entity.
Generally, such an owner must include in income any increase in the excess of
the Contract Value over the "investment in the contract" during the taxable
year.
8. DO I HAVE ACCESS TO MY MONEY?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some qualified plans, you may
also take a loan against the value of your Contract. Generally, a partial
withdrawal must equal at least $50, and after the withdrawal your remaining
Contract Value must at least equal $500.
Although you have access to your money during the Accumulation Period, certain
charges, such as the contract maintenance charge, the Withdrawal Charge, and
premium tax charges, may be deducted on a surrender or withdrawal. You may also
incur federal income tax liability or tax penalties. In addition, if you have
allocated some of the value of your Contract to the Fixed Account, the amount of
your surrender proceeds or withdrawal may be increased or decreased by a Market
Value Adjustment.
After annuitization, under certain settlement options you may be entitled to
withdraw the commuted value of the remaining payments.
9. WHAT IS THE DEATH BENEFIT?
We will pay a death benefit while the Contract is in force and before the
Annuity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract Owner is not a living person. To obtain payment of the Death Benefit,
the Beneficiary must submit to us a complete request for
10 PROSPECTUS
payment of the death benefit, which includes due proof of death as specified in
the Contract.
The standard death benefit is the greatest of the following:
1) your total Purchase Payments reduced by a withdrawal adjustment;
2) your Contract Value;
3) the amount you would have received by surrendering your Contract; or
4) your Contract Value on each Contract Anniversary evenly divisible by seven
increased by the total Purchase Payments since that anniversary and reduced by
a withdrawal adjustment.
We also offer an optional enhanced death benefit rider, which is described later
in this prospectus.
We will determine the value of the death benefit on the day that we receive all
of the information that we need to process the claim.
10. WHAT ELSE SHOULD I KNOW?
ALLOCATION OF PURCHASE PAYMENTS. You allocate your initial Purchase Payment
among the Sub-Accounts and the Fixed Account in your Contract application. You
may make your allocations in specific dollar amounts or percentages, which must
be whole numbers that add up to 100%. When you make subsequent Purchase
Payments, you may again specify how you want your payments allocated. If you do
not, we will automatically allocate the payment based on your most recent
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
TRANSFERS. During the Accumulation Period, you may transfer Contract Value
among the Sub-Accounts and from the Sub-Accounts to the Fixed Account. You may
not make a transfer, however, that would result in your allocating your Contract
Value to more than twenty-one options under the Contract. While you may also
transfer amounts from the Fixed Account, a Market Value Adjustment may apply.
You may instruct us to transfer Contract Value by writing or calling us.
You may also use our Automatic Dollar Cost Averaging or Portfolio Rebalancing
programs. You may not use both programs at the same time.
Under the Dollar Cost Averaging program, amounts are automatically transferred
at regular intervals from the Fixed Account or a Sub-Account of your choosing,
including other Sub-Accounts or the Fixed Account. Transfers from the Dollar
Cost Averaging Fixed Account may be made monthly only. Transfers from
Sub-Accounts may be made monthly, quarterly, or annually.
Under the Portfolio Rebalancing Program, you can maintain the percentage of your
Contract Value allocated to each Sub-Account at a pre-set level. Investment
results will shift the balance of your Contract Value allocations. If you elect
rebalancing, we will automatically transfer your Contract Value back to the
specified percentages at the frequency (monthly, quarterly, semiannually,
annually) that you specify. We will automatically terminate this program if you
request a transfer outside of the program. You may not include the Fixed Account
in a Portfolio Rebalancing Program. You also may not elect rebalancing after
annuitization.
During the Annuity Period, you may not make any transfers for the first six
months after the Annuity Date. Thereafter, you may make transfers among the
Sub-Accounts or from the Sub-Accounts to increase your Fixed Annuity payments.
Your transfers, however, must be at least six months apart. You may not,
however, convert any portion of your right to receive Fixed Annuity payments
into Variable Annuity payments.
FREE LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or after whatever longer period may be permitted by
state law. You may return it by delivering it or mailing it to us. If you return
the Contract, the Contract terminates and, in most states, we will pay you an
amount equal to the Contract Value on the date we receive the Contract from you.
The Contract Value may be more or less than your Purchase Payments. In some
states, we are required to send you the amount of your Purchase Payments. Since
state laws differ as to the consequences of returning a Contract, you should
refer to your Contract for specific information about your circumstances. 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.
11. WHO CAN I CONTACT FOR MORE INFORMATION?
You can write to us at Lincoln Benefit Life Company, P.O. Box 80469, Lincoln, NE
68501-0469, or call us at (800) 865-5237.
CONDENSED FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Sub-Account for 1994 through 2005.
Accumulation Unit Value is the unit of measure that we use to calculate the
value of your interest in a Sub-Account. Accumulation Unit Value does not
reflect the deduction of certain charges that are subtracted from your
Contract Value, such as the Contract Administration Charge. The Separate
Account's financial statements, which are comprised of the financial
statements of the underlying sub-accounts, as of December 31, 2005, are
included in the Statement of Additional Information. Lincoln Benefit's
financial statements as of December 31, 2005, are included in the Statement of
Additional Information.
DESCRIPTION OF THE CONTRACTS
SUMMARY. The Contract is a deferred annuity contract designed to aid you in
long-term financial planning. You
11 PROSPECTUS
may add to the Contract Value by making additional Purchase Payments. In
addition, the Contract Value will change to reflect the performance of the
Sub-Accounts to which you allocate your Purchase Payments and your Contract
Value, as well as to reflect interest credited to amounts allocated to the Fixed
Account. You may withdraw your Contract Value by making a partial withdrawal or
by surrendering your Contract. Upon Annuitization, we will pay you benefits
under the Contract in the form of an annuity, either for the life of the
Annuitant or for a fixed number of years. All of these features are described in
more detail below.
CONTRACT OWNER. As the Contract Owner, you are the person usually entitled to
exercise all rights of ownership under the Contract. You usually are also the
person entitled to receive benefits under the Contract or to choose someone else
to receive benefits. The Contract can also be purchased as an IRA or TSA (also
known as a 403(b)). The endorsements required to qualify these annuities under
the Code may limit or modify your rights and privileges under the Contract. The
maximum age of the oldest Contract Owner and Annuitant cannot exceed age 90 as
of the date we receive the completed application. The Contract cannot be jointly
owned by both a non-living person and a living person. Changing ownership of
this contract may cause adverse tax consequences and may not be allowed under
qualified plans. Please consult with a competent tax advisor prior to making a
request for a change of Contract Owner. If the Contract Owner is a grantor
trust, the Contract Owner will be considered a non-living person for purposes of
this section and the Death Benefit section.
ANNUITANT. The Annuitant is the living person whose life span is used to
determine annuity payments. You initially designate an Annuitant in your
application. You may change the Annuitant at any time before annuity payments
begin. If your Contract was issued under a plan qualified under Section 403(b),
408 or 408A of the Tax Code, you must be the Annuitant. If the Contract is a
non-qualified Contract, you may also designate a Joint Annuitant, who is a
second person on whose life annuity payments depend. Additional restrictions may
apply in the case of Qualified Plans. If you are not the Annuitant and the
Annuitant dies before annuity payments begin, then either you become the new
Annuitant or you must name another person as the new Annuitant. You must attest
that the Annuitant is alive in order to annuitize your Contract.
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 are permitted to change the terms of the Contract if it is necessary to
comply with changes in the law. If a provision of the Contract is inconsistent
with state law, we will follow state law.
ASSIGNMENT. Before the Annuity Date, if the Annuitant is still alive, you may
assign an interest in the Contract if it is a non-qualified Contract. If a
Contract is issued pursuant to a Qualified Plan, the law prohibits some types of
assignments, pledges and transfers and imposes special conditions on others. An
assignment may also result in taxes or tax penalties.
We will not be bound by any assignment until we receive written notice of it.
Accordingly, until we receive written notice of an assignment, we will continue
to act as though the assignment had not occurred. We are not responsible for the
validity of any assignment.
BECAUSE OF THE POTENTIAL TAX CONSEQUENCES AND ERISA ISSUES ARISING FROM AN
ASSIGNMENT, YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
FREE LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or within whatever longer period may be permitted by
state law. You may return it by delivering it to your agent or mailing it to us.
If you return the Contract, the Contract terminates and, in most states, we will
pay you an amount equal to the Contract Value on the date we receive the
Contract from you. The Contract Value at that time may be more or less than your
Purchase Payments.
In some states, if you exercise your "free look" rights, we are required to
return the amount of your Purchase Payments. Currently, if you live in one of
those states, on the Issue Date we will allocate your Purchase Payment to the
Sub-Accounts and the Fixed Account Options as you specified in your application.
However, we reserve the right in the future to delay allocating your Purchase
Payments to the Sub-Accounts you have selected or to the Fixed Account until 20
days after the Issue Date or, if your state's free look period is longer than
ten days, for ten days plus the period required by state law. During that time,
we will allocate your Purchase Payment to the Fidelity Money Market Sub-Account.
Your Contract will contain specific information about your free-look rights in
your state.
PURCHASES AND CONTRACT VALUE
MINIMUM PURCHASE PAYMENT. The minimum initial Purchase Payment for a Contract
is $1,200. You may pay it in a lump sum or in installments of your choice over
the first Contract Year. You may not pay more than $1 million in Purchase
Payments without our prior approval. As a general rule, subsequent Purchase
Payments may be made in amounts of $100 or more. Subsequent Purchase Payments
made as part of an Automatic Payment Plan, however, may be as small as $25 per
month. However, each purchase payment made to the Dollar Cost Averaging Fixed
Account must be at least $1,200. If we receive purchase payments designated for
the Dollar Cost Averaging Fixed Account that are lower than the required minimum
of $1,200, or purchase payments designated for the Guaranteed Maturity Fixed
Account Option that are
12 PROSPECTUS
lower than $500, such amounts will be allocated to the Fidelity Money Market
Portfolio.We may lower these minimums if we choose. We may refuse any Purchase
Payment at any time.
AUTOMATIC PAYMENT PLAN. You may make scheduled Purchase Payments of $25 or more
per month by automatic payment through your bank account. Call or write us for
an enrollment form.
ALLOCATION OF PURCHASE PAYMENTS. Your Purchase Payments are allocated to the
Sub-Account(s) and the Fixed Account in the proportions that you have selected.
You must specify your allocation in your Contract application, either as
percentages or specific dollar amounts. If you make your allocation in
percentages, the total must equal 100%. We will allocate your subsequent
Purchase Payments in those percentages, until you give us new allocation
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
You initially may allocate your Purchase Payments to up to twenty-one options,
counting each Sub-Account and the Fixed Account as one option. For this purpose,
we will treat all of your allocations to the Fixed Account as one option, even
if you choose more than one Guarantee Period. You may add or delete Sub-Accounts
and/or the Fixed Account from your allocation instructions, but we will not
execute instructions that would cause you to have Contract Value in more than
twenty-one options. In the future, we may waive this limit. Please note that
effective as of September 27, 2002, we will not permit you to allocate new
premiums to the Sub-Account that invests in the STI Classic Variable Trust
International Equity Fund. However, if, as of September 27, 2002, you are
enrolled in one of our automatic transaction programs, such as Dollar Cost
Averaging or Portfolio Rebalancing, we will continue to effect automatic
transactions involving the STI Classic Variable Trust International Equity Fund.
In addition, if you currently have funds allocated to the Sub-Account which
invests in the STI Classic Variable Trust International Equity Fund, you may
keep such investment, but may not invest additional premium payments to it.
If your application is complete, we will issue your Contract within two business
days of its receipt at our P.O. Box shown on the first page of this prospectus.
If your application for a Contract is incomplete, we will notify you and seek to
complete the application within five business days. For example, if you do not
fill in allocation percentages, we will contact you to obtain the missing
percentages. If we cannot complete your application within five business days
after we receive it, we will return your application and your Purchase Payment,
unless you expressly permit us to take a longer time.
Usually, we will allocate your initial Purchase Payment to the Sub-Accounts and
the Fixed Account, as you have instructed us, on the Issue Date. We will
allocate your subsequent Purchase Payments on the date that we receive them at
the next computed Accumulation Unit Value.
In some states, however, we are required to return at least your Purchase
Payment if you cancel your Contract during the "free-look" period. In those
states, we currently will allocate your Purchase Payments on the Issue Date as
you have instructed us, as described above. In the future, however, we reserve
the right, if you live in one of those states, to allocate all Purchase Payments
received during the "free-look period" to the Fidelity Money Market Sub-Account.
If we exercise that right and your state's free look period is ten days, we will
transfer your Purchase Payments to your specified Sub-Accounts or the Fixed
Account 20 days after the Issue Date; if your state's free look period is
longer, we will transfer your Purchase Payment after ten days plus the period
required by state law have passed.
We determine the number of Accumulation Units in each Sub-Account to allocate to
your Contract by dividing that portion of your Purchase Payment allocated to a
Sub-Account by that Sub-Account's Accumulation Unit Value on the Valuation Date
when the allocation occurs.
CONTRACT VALUE. We will establish an account for you and will maintain your
account during the Accumulation Period. The total value of your Contract at any
time is equal to the sum of the value of your Accumulation Units in the
Sub-Accounts you have selected, plus the value of your investment in the Fixed
Account.
SEPARATE ACCOUNT ACCUMULATION UNIT VALUE. As a general matter, the Accumulation
Unit Value for each Sub-Account will rise or fall to reflect changes in the
share price of the Portfolio in which the Sub-Account invests. In addition, we
subtract from Accumulation Unit Value 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, transfer fees and contract maintenance charges
separately for each Contract. They do not affect Accumulation Unit Value.
Instead, we obtain payment of those charges and fees by redeeming Accumulation
Units.
We determine a separate Accumulation Unit Value for each Sub-Account. We also
determine a separate set of Accumulation Unit Values reflecting the cost of the
enhanced benefit riders described beginning on page 28. If we elect or are
required to assess a charge for taxes, we may calculate a separate Accumulation
Unit Value for Contracts issued in connection with Non-Qualified and Qualified
Plans, respectively, within each Sub-Account. We determine the Accumulation Unit
Value for each Sub-Account Monday through Friday on each day that the New York
Stock Exchange is open for business.
You should refer to the prospectuses for the Portfolios for a description of how
the assets of each Portfolio are valued, since that determination has a direct
bearing on
13 PROSPECTUS
the Accumulation Unit Value of the corresponding Sub-Account and, therefore,
your Contract Value.
TRANSFER DURING ACCUMULATION PERIOD. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Sub-Accounts in writing
or by telephone. Currently, there is no minimum transfer amount. The Contract
permits us to set a minimum transfer amount in the future. You may not make a
transfer that would result in your allocating your Contract Value to more than
twenty-one options under the Contract at one time. Please note that effective as
of September 27, 2002, we will not permit you to allocate new premiums to the
Sub-Account that invests in the STI Classic Variable Trust International Equity
Fund. However, if, as of September 27, 2002, you are enrolled in one of our
automatic transaction programs, such as Dollar Cost Averaging or Portfolio
Rebalancing, we will continue to effect automatic transactions involving the STI
Classic Variable Trust International Equity Fund. In addition, if you currently
have funds allocated to the Sub-Account which invests in the STI Classic
Variable Trust International Equity Fund, you may keep such investment, but may
not invest additional premium payments to it.
As a general rule, we only make transfers on days when the NYSE is open for
business. If we receive your request on one of those days, we will make the
transfer that day. Requests received before 4:00 p.m. will be effected on that
day at that day's price. Requests received after 4:00 p.m. will be effected on
the next day on which the NYSE is open for business, at that day's price. If you
transfer an amount from the Fixed Account to a Sub-Account before the end of the
applicable Guarantee Period or you allocate an amount in the Fixed Account to a
new Guarantee Period before the end of the existing Guarantee Period, we usually
will increase or decrease the amount by a Market Value Adjustment. The
calculation of the Market Value Adjustment is described in "Market Value
Adjustment" on page 23.
Transfers within 30 days after the end of the applicable Guarantee Period are
not subject to a Market Value Adjustment.
The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us.
You may not transfer Contract Value into the Dollar Cost Averaging Fixed Account
Option. You may not transfer Contract Value out of the Dollar Cost Averaging
Fixed Account Option except as part of a Dollar Cost Averaging program.
We may charge you the transfer fee described on page 6, although we currently
are waiving it. At any time, without notice, we may suspend, modify or terminate
your privilege to make transfers via the phone, or via other electronic or
automated means previously approved by the Company, including, but not limited
to, automated telephone services, facsimile machine, e-mail and electronic
services via online access. Among other things, we reserve the right to limit
the number of such transfers among the Variable Sub-Accounts in any Contract
year, or to refuse any Variable Sub-Account transfer request. We also reserve
the right to restrict such transfers in any manner reasonably designed to
prevent transfers that we consider disadvantageous to the Contract Owners.
We use procedures that we believe provide reasonable assurance that telephone
authorized 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.
MARKET TIMING & EXCESSIVE TRADING
The Contracts/Policies are intended for long-term investment. Market timing and
excessive trading can potentially dilute the value of Variable Sub-Accounts and
can disrupt management of a Portfolio and raise its expenses, which can impair
Portfolio performance and adversely affect your Contract/Policy Value. Our
policy is not to accept knowingly any money intended for the purpose of market
timing or excessive trading. Accordingly, you should not invest in the
Contract/Policy if your purpose is to engage in market timing or excessive
trading, and you should refrain from such practices if you currently own a
Contract/Policy.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If, in our judgment, we determine that the
transfers are part of a market timing strategy or are otherwise harmful to the
underlying Portfolio, we will impose the trading limitations as described below
under "Trading Limitations." Because there is no universally accepted
definition of what constitutes market timing or excessive trading, we will use
our reasonable judgment based on all of the circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the
Portfolio may experience the adverse effects of market timing and excessive
trading described above.
14 PROSPECTUS
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract/Policy year, require that all future transfer requests be submitted
through U.S. Postal Service First Class Mail thereby refusing to accept transfer
requests via telephone, facsimile, Internet, or overnight delivery, or to refuse
any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract/Policy Owners, or
a specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable Sub-Account
or on the share prices of the corresponding Portfolio or otherwise would be to
the disadvantage of other Contract/Policy Owners; or
.. we are informed by one or more of the Portfolios that they intend to restrict
the purchase, exchange, or redemption of Portfolio shares because of excessive
trading or because they believe that a specific transfer or group of transfers
would have a detrimental effect on the prices of Portfolio shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Portfolios that we have identified as being
susceptible to market timing activities;
.. whether the manager of the underlying Portfolio has indicated that the
transfers interfere with Portfolio management or otherwise adversely impact
the Portfolio; and
.. the investment objectives and/or size of the Variable Sub-Account underlying
Portfolio.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or excessive
trading activity, while others are prohibited, and the Portfolio may experience
the adverse effects of market timing and excessive trading described above.
If we determine that a Contract/Policy Owner has engaged in market timing or
excessive trading activity, we will require that all future transfer requests be
submitted through U.S. Postal Service First Class Mail thereby refusing to
accept transfer requests via telephone, facsimile, Internet, or overnight
delivery. If we determine that a Contract/Policy Owner continues to engage in a
pattern of market timing or excessive trading activity we will restrict that
Contract/Policy Owner from making future additions or transfers into the
impacted Variable Sub-Account(s) or will restrict that Contract/ Policy Owner
from making future additions or transfers into the class of Variable
Sub-Account(s) if the Variable Sub-Accounts(s) involved are vulnerable to
arbitrage market timing trading activity (i.e. International, High Yield, and
Small Cap Variable Sub-Accounts).
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
SHORT TERM TRADING FEES
We reserve the right to assess short-term trading fees in connection with
transfers from Variable Sub-Accounts that occur within a certain number of days
following the date of allocation to the Variable Sub-Accounts. Such fees may
vary by Variable Sub-Account, but will only apply to those Variable Sub-Accounts
corresponding to underlying funds that assess such fees.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM. Under our Automatic Dollar Cost
Averaging program, you may authorize us to transfer a fixed dollar amount at
fixed intervals from the Dollar Cost Averaging Fixed Account Option or a
Sub-Account of your choosing. The interval between transfers from the Dollar
Cost Averaging Fixed Account may be monthly only. The interval between transfers
from Sub-Accounts may be monthly, quarterly, or annually, at your option. The
transfers will be made at the Accumulation Unit Value on the date of the
transfer. The transfers will continue until you instruct us otherwise, or until
your chosen source of transfer payments is exhausted. Currently, the minimum
transfer amount is $100 per transfer. However, if you wish to Dollar Cost
Average to a Guaranteed Maturity Fixed Account Option, the minimum amount that
must be transferred into any one Option is $500. We may change this minimum or
grant exceptions. For each purchase payment allocated to this Option, your first
monthly transfer will occur 25 days after such purchase payment. If we do not
receive an allocation from you within 25 days of the purchase payment, we will
transfer the payment plus associated interest to the Fidelity Money Market
Variable Sub-Account in equal monthly payments. You may not use the Dollar Cost
Averaging program to transfer amounts from the Guaranteed Maturity Fixed Account
Option.
Your request to participate in this program will be effective when we receive
your completed application at the P.O. Box given on the first page of this
prospectus. Call or write us for a copy of the application. You may
15 PROSPECTUS
elect to increase, decrease or change the frequency or amount of transfers under
a Dollar Cost Averaging program. We will not charge a transfer fee for Dollar
Cost Averaging.
The theory of Dollar Cost Averaging is that by spreading your investment over
time, you may be able to reduce the effect of transitory market conditions on
your investment. In addition, because a given dollar amount purchases more units
when the unit prices are relatively low rather than when the prices are higher,
in a fluctuating market, the average cost per unit may be less than the average
of the unit prices on the 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.
Moreover, while we refer to this program of periodic transfers generally as
dollar cost averaging, periodic transfers from a Sub-Account with more volatile
performance experience is unlikely to produce the desired effects of dollar cost
averaging as would transfers from a less volatile Sub-Account. You may not use
Dollar Cost Averaging and Portfolio Rebalancing at the same time.
PORTFOLIO REBALANCING. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Sub-Account at a pre-set
level. Over time, the variations in each Sub-Account's investment results will
shift the balance of your Contract Value allocations. Under the Portfolio
Rebalancing feature, each period, if the allocations change from your desired
percentages, we will automatically transfer your Contract Value, including new
Purchase Payments (unless you specify otherwise), back to the percentages you
specify. 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.
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually. We will not charge a transfer fee for Portfolio Rebalancing. A
one-time request to rebalance the amounts allocated to the Sub-Accounts is not
part of a Portfolio Rebalancing program and is subject to all of the
requirements that are applicable to transfers. We will automatically terminate
this program if you request any transfers outside the Portfolio Rebalancing
program. If you wish to resume Portfolio Rebalancing after it has been canceled,
then you must complete a new Portfolio Rebalancing form and send it to our home
office. You may not include the Fixed Account in a Portfolio Rebalancing
program.
You may request Portfolio Rebalancing at any time by submitting a completed
written request to us at the P.O. Box given on the first page of this
prospectus. Please call or write us for a copy of the request form. If you stop
Portfolio Rebalancing, you must wait 30 days to begin again. In your request,
you may specify a date for your first rebalancing. If you specify a date fewer
than 30 days after your Issue Date, your first rebalance will be delayed one
month. If you request Portfolio Rebalancing in your Contract application and do
not specify a date for your first rebalancing, your first rebalance will occur
one period after the Issue Date. For example, if you specify quarterly
rebalancing, your first rebalance will occur three months after your Issue Date.
Otherwise, your first rebalancing will occur twenty-five days after we receive
your completed request form. All subsequent rebalancing will occur at the
intervals you have specified on the day of the month that coincides with the
same day of the month as your Contract Anniversary Date.
Generally, you may change the allocation percentages, frequency, or choice of
Sub-Accounts at any time. If your total Contract Value subject to rebalancing
falls below any minimum value that we may establish, we may prohibit or limit
your use of Portfolio Rebalancing. You may not use Dollar Cost Averaging and
Portfolio Rebalancing at the same time. We may change, terminate, limit, or
suspend Portfolio Rebalancing at any time.
16 PROSPECTUS
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT INVESTMENTS
THE PORTFOLIOS. Each of the Sub-Accounts of the Separate Account invests in the
shares of one of the Portfolios. Each Portfolio is either an open-end management
investment company registered under the Investment Company Act of 1940 or a
separate investment series of an open-end management investment company. We have
briefly described the Portfolios below. You should consult the current
prospectuses for the Portfolios for more detailed and complete information
concerning the Portfolios. If you do not have a prospectus for a Portfolio,
contact us and we will send you a copy.
We do not promise that the Portfolios will meet their investment objectives.
Amounts you have allocated to Sub-Accounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Sub-Accounts invest. You bear the investment risk that
those Portfolios possibly will not meet their investment objectives. You should
carefully review their prospectuses before allocating amounts to the
Sub-Accounts of the Separate Account.
PORTFOLIO EACH PORTFOLIO SEEKS INVESTMENT ADVISER
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital A I M ADVISORS, INC.(1)
Fund - Series I
- -------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
- -------------------------------------------------------------------------------
Alger American Growth Long-term capital
Portfolio - Class O appreciation
- -------------------------------------------------------
Alger American Income To provide a high level of
& Growth Portfolio - dividend income. Its
Class O secondary goal is to provide
capital appreciation. FRED ALGER MANAGEMENT,
- -------------------------------------------------------INC.
Alger American Long-term capital
Leveraged AllCap appreciation
Portfolio - Class O
- -------------------------------------------------------
Alger American MidCap Long-term capital
Growth Portfolio - appreciation
Class O
- -------------------------------------------------------
Alger American Small Long-term capital
Capitalization appreciation
Portfolio - Class O
- -------------------------------------------------------------------------------
DWS VARIABLE SERIES I(2)
- -------------------------------------------------------------------------------
DWS Bond VIP - Class To provide a high level of
A(2) income consistent with a
high quality portfolio of
debt securities
- -------------------------------------------------------
DWS Global Above-average capital
Opportunities VIP - appreciation over the long DEUTSCHE INVESTMENT
Class A(2) term MANAGEMENT AMERICAS INC.
- -------------------------------------------------------
DWS Growth & Income Long-term growth of capital,
VIP - Class A(2) current income and growth of
income
- -------------------------------------------------------
DWS International VIP Long-term growth of capital
- Class A(2) primarily through
diversified holdings of
marketable foreign equity
investments
- -------------------------------------------------------------------------------
DWS VARIABLE SERIES II(2)
- -------------------------------------------------------------------------------
DWS Balanced VIP - High total return, a DEUTSCHE INVESTMENT
Class A(2) combination of income and MANAGEMENT AMERICAS INC.
capital appreciation
- -------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES
- -------------------------------------------------------------------------------
Federated Capital High current income and FEDERATED EQUITY
Income Fund II moderate capital MANAGEMENT COMPANY OF
appreciation PENNSYLVANIA
- -------------------------------------------------------------------------------
Federated Fund for Current income
U.S. Government FEDERATED INVESTMENT
Securities II MANAGEMENT COMPANY
- -------------------------------------------------------
Federated High Income High current income
Bond Fund II
- -------------------------------------------------------------------------------
17 PROSPECTUS
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
- -------------------------------------------------------------------------------
Fidelity VIP Asset To obtain high total return
Manager(SM) Portfolio with reduced risk over the
- Initial Class long term by allocating its
assets among stocks, bonds,
and short-term instruments.
- -------------------------------------------------------
Fidelity VIP Long-term capital
Contrafund(R) appreciation.
Portfolio - Initial
Class
- -------------------------------------------------------
Fidelity VIP Reasonable income by
Equity-Income investing primarily in
Portfolio - Initial income-producing equity
Class securities. In choosing
these securities, the fund
will also consider the
potential for capital
appreciation. The fund's FIDELITY MANAGEMENT &
goal is to achieve a yield RESEARCH COMPANY
which exceeds the composite
yield on the securities
comprising the S&P 500.
- -------------------------------------------------------
Fidelity VIP Growth To achieve capital
Portfolio - Initial appreciation.
Class
- -------------------------------------------------------
Fidelity VIP Index 500 Investment results that
Portfolio - Initial correspond to the total
Class return of common stocks
publicly traded in the
United States, as
represented by the Standard
& Poor's 500(SM) Index (S&P
500(R)).
- -------------------------------------------------------
Fidelity VIP Money As high a level of current
Market Portfolio - income as is consistent with
Initial Class preservation of capital and
liquidity by investing in
money market instruments.
- -------------------------------------------------------
Fidelity VIP Overseas Long-term growth of capital.
Portfolio - Initial
Class
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES
- -------------------------------------------------------------------------------
Janus Aspen Series Long-term capital growth,
Balanced Portfolio - consistent with preservation
Institutional Shares of capital and balanced by
current income.
- -------------------------------------------------------
Janus Aspen Series To obtain maximum total
Flexible Bond return, consistent with
Portfolio - preservation of capital.
Institutional Shares
- -------------------------------------------------------
Janus Aspen Series Long-term growth of capital. JANUS CAPITAL MANAGEMENT
Foreign Stock LLC
Portfolio - Service
Shares
- -------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Large Cap Growth in a manner consistent with
Portfolio - the preservation of capital.
Institutional Shares
- -------------------------------------------------------
Janus Aspen Series Mid Long-term growth of capital
Cap Growth Portfolio
- Institutional
Shares
- -------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Worldwide Growth in a manner consistent with
Portfolio - the preservation of capital.
Institutional Shares
- -------------------------------------------------------------------------------
LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, INC(3)
- -------------------------------------------------------------------------------
Legg Mason Partners Long-term growth of capital
Variable Investors with current income as a SALOMON BROTHERS ASSET
Portfolio - Class secondary objective MANAGEMENT INC
I(3)
- -------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST(SM)
- -------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital
Series - Initial
Class
- -------------------------------------------------------
MFS Investors Trust To provide long-term growth
Series - Initial of capital and secondarily
Class to provide reasonable
current income
- -------------------------------------------------------
MFS New Discovery Capital appreciation. MFS(TM) INVESTMENT
Series - Initial MANAGEMENT
Class
- -------------------------------------------------------
MFS Research Series - Long-term growth of capital
Initial Class and future income
- -------------------------------------------------------
MFS Total Return To provide above-average
Series - Initial income (compared to a
Class portfolio invested entirely
in equity securities)
consistent with the prudent
employment of capital and
secondarily to provide a
reasonable opportunity for
growth of capital and
income.
- -------------------------------------------------------------------------------
18 PROSPECTUS
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -------------------------------------------------------------------------------
Oppenheimer Main Capital appreciation.
Street Small Cap OPPENHEIMERFUNDS, INC.
Fund(R)/ VA - Service
Shares
- -------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- -------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Maximum total return,
Portfolio (U.S. consistent with preservation
Dollar-Hedged) - of capital and prudent PACIFIC INVESTMENT
Administrative Shares investment management. MANAGEMENT COMPANY LLC
- -------------------------------------------------------
PIMCO VIT Total Return Maximum total return,
Portfolio - consistent with preservation
Administrative Shares of capital and prudent
investment management.
- -------------------------------------------------------------------------------
PREMIER VIT
- -------------------------------------------------------------------------------
Premier VIT OpCap Growth of capital and
Balanced Portfolio investment income
- -------------------------------------------------------
Premier VIT OpCap Capital appreciation through OPCAP ADVISORS LLC
Small Cap Portfolio a diversified portfolio
consisting primarily of
securities of companies with
market capitalizations of
under $2 billion at time of
purchase.
- -------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- -------------------------------------------------------------------------------
Putnam VT Capital growth. Current PUTNAM INVESTMENT
International Growth income is a secondary MANAGEMENT, LLC
and Income Fund - objective.
Class IB
- -------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
- -------------------------------------------------------------------------------
STI Classic Capital Capital appreciation
Appreciation Fund
- -------------------------------------------------------TRUSCO CAPITAL
STI Classic Long-term capital MANAGEMENT, INC.
International Equity appreciation
Fund
- -------------------------------------------------------
STI Classic Large Cap Capital appreciation with the
Value Equity Fund secondary goal of current
income
- -------------------------------------------------------------------------------
T. ROWE PRICE EQUITY SERIES, INC.
- -------------------------------------------------------------------------------
T. Rowe Price Equity Substantial dividend income
Income Portfolio - I as well as long-term growth
of capital. T. ROWE PRICE
- -------------------------------------------------------ASSOCIATES, INC.
T. Rowe Price Mid-Cap Long-term capital
Growth Portfolio - I appreciation
- -------------------------------------------------------
T. Rowe Price New Long-term growth of capital
America Growth
Portfolio - I
- -------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- -------------------------------------------------------------------------------
T. Rowe Price Long-term growth of capital T. ROWE PRICE
International Stock INTERNATIONAL, INC.
Portfolio - I
- -------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
- -------------------------------------------------------------------------------
Van Kampen LIT Capital growth
Aggressive Growth VAN KAMPEN ASSET
Portfolio, Class II MANAGEMENT
- -------------------------------------------------------
Van Kampen LIT Growth Long-term growth of capital
and Income Portfolio, and income.
Class II
- -------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Above-average total return
Mid Cap Value over a market cycle of three VAN KAMPEN (4)
Portfolio, Class I to five years by investing
in common stocks and other
equity securities
- -------------------------------------------------------------------------------
WELLS FARGO VARIABLE TRUST FUNDS
- -------------------------------------------------------------------------------
Wells Fargo Advantage Long-term capital WELLS FARGO FUNDS
Discovery Fund (5) appreciation MANAGEMENT, LLC
- -------------------------------------------------------
Wells Fargo Advantage Long-term capital
Opportunity Fund (5) appreciation
- -------------------------------------------------------------------------------
(1) A Fund's investment objective(s) may be changed by the Fund's Board of
Trustees without shareholder approval.
19 PROSPECTUS
(2) Effective 2/6/2006, Scudder Investments has changed its name to DWS Scudder
Investments, accordingly we have made a corresponding change to the names of
the Sub-Accounts.
(3) Effective 5/1/2006, the Salomon Brothers Variable Series Funds Inc. have
been rebranded Legg Mason Partners Variable Portfolios I, Inc., accordingly
we have made a corresponding change to the names of the Sub-Accounts.
(4) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
(5) Effective May 1, 2006, the Wells Fargo Advantage Discovery Fund changed its
name to the Wells Fargo Advantage Discovery Fund and the Wells Fargo
Advantage Opportunity Fund changed its name to the Wells Fargo Advantage
Opportunity Fund.
Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of the
Portfolio. See the accompanying Prospectuses of the Portfolios for further
information.
We automatically reinvest all dividends and capital gains distributions from the
Portfolios in shares of the distributing Portfolio at their net asset value. The
income and realized and unrealized gains or losses on the assets of each
Sub-Account are separate and are credited to or charged against the particular
Sub-Account without regard to income, gains or losses from any other Sub-Account
or from any other part of our business. We will use the net Purchase Payments
you allocate to a Sub-Account to purchase shares in the corresponding Portfolio
and will redeem shares in the Portfolios to meet Contract obligations or make
adjustments in reserves. The Portfolios are required to redeem their shares at
net asset value and to make payment within seven days.
Some of the Portfolios have been established by investment advisers which manage
publicly traded mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be modeled after
publicly traded mutual funds, you should understand that the Portfolios are not
otherwise directly related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any similarly named
Portfolio may differ substantially.
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.
Although neither we nor any of the Portfolios currently foresees any such
disadvantages either to variable life insurance or variable annuity contract
owners, each Portfolio's Board of Directors intends to monitor events in order
to identify any material conflicts between variable life and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto. If a Board of Directors were to conclude that separate
investment funds should be established for variable life and variable annuity
separate accounts, Lincoln Benefit will bear the attendant expenses.
VOTING RIGHTS. As a general matter, you do not have a direct right to vote the
shares of the Portfolios held by the Sub-Accounts 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. We will notify you
when your instructions are needed. We will also provide proxy materials or other
information to assist you in understanding the matter at issue. We will
determine the number of shares for which you may give voting instructions as of
the record date set by the relevant Portfolio for the shareholder meeting at
which the vote will occur.
As a general rule, before the Annuity Date, you are the person entitled to give
voting instructions. After the Annuity Date, the payee is that person.
Retirement plans, however, may have different rules for voting by plan
participants.
If you send us written voting instructions, we will follow your instructions in
voting the Portfolio shares attributable to your Contract. If you do not send us
written instructions, we will vote the shares attributable to your Contract in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. We will vote shares that we hold in the
same proportions as we vote the shares for which we have received instructions
from other Contract Owners.
We may, when required by state insurance regulatory authorities, disregard
Contract Owner voting instructions if the instructions require that the shares
be voted so as to cause a change in the sub-classification or investment
objective of one or more of the Portfolios or to approve or disapprove an
investment advisory contract for one or more of the Portfolios.
In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment adviser of the
Portfolios if we reasonably disapprove of the proposed change. We would
disapprove a proposed change only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or we reasonably conclude that
the proposed change would not be consistent with the investment objectives of
the Portfolio or would result in the purchase of securities for the Portfolio
which vary from the general quality and nature of investments and investment
techniques utilized by the Portfolio. 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 to you.
This description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decide that we are
permitted to vote the
20 PROSPECTUS
Portfolio shares without obtaining instructions from our Contract Owners, and we
may choose to do so.
ADDITIONS, DELETIONS, AND SUBSTITUTIONS OF SECURITIES. If the shares of any of
the Portfolios are no longer available for investment by the Separate Account or
if, in the judgment of our Board of Directors, further investment in the shares
of a Portfolio is no longer appropriate in view of the purposes of the Contract,
we may add or substitute shares of another Portfolio or underlying fund for
Portfolio shares already purchased or to be purchased in the future by Purchase
Payments under the Contract. Any substitution of securities will comply with the
requirements of the 1940 Act.
We also reserve the right to make the following changes in the operation of the
Separate Account and the Sub-Accounts:
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;
(c) to transfer assets from one Sub-Account to another, or from any
Sub-Account to our general account;
(d) to add, combine, or remove Sub-Accounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total charges
do not exceed the maximum amount that may be charged the Separate Account and
the Portfolios in connection with the Contracts.
If we take any of these actions, we will comply with the then applicable legal
requirements.
THE FIXED ACCOUNT
GENERAL. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Loan payments may not be
allocated to the Fixed Account(s). Allstate Life invests the assets of the
general account in accordance with applicable laws governing the investments of
insurance company general accounts. The Fixed Account may not be available in
all states. Please contact us at 1-800-865-5237 for current information.
GUARANTEED MATURITY FIXED ACCOUNT OPTION. We will credit interest to each
amount allocated to the Guaranteed Maturity Fixed Account Option at a specified
rate for a specified Guarantee Period. You select the Guarantee Period for each
amount that you allocate to this option. We will declare the interest rate that
we will guarantee to credit to that amount for that Guarantee Period. Each
amount allocated to a Guarantee Period under this option must be at least $500.
We reserve the right to limit the number of additional Purchase Payments that
may be allocated to this option.
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may offer Guarantee Periods ranging from one to ten years in
length. We will decide in our discretion which Guarantee Periods to offer.
Currently, we offer Guarantee Periods of one, three, five, seven and ten years.
In the future we may offer Guarantee Periods of different lengths or stop
offering some Guarantee Periods.
We will credit interest daily to each amount allocated to a Guarantee Period
under this option at a rate which compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period. We
will not change the interest rate credited 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.
21 PROSPECTUS
The following example illustrates how a Purchase Payment allocated to this
option would grow, given an assumed Guarantee Period and effective annual
interest rate:
EXAMPLE
Purchase Payment $10,000
Guarantee Period 5 years
Effective Annual Rate 4.50%
END OF CONTACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract
Value $10,000.00
X (1 + Effective
Annual Rate) X 1.045
----------
$10,450.00
Contract Value at end
of Contract Year $10,450.00
X (1 + Effective
Annual Rate) X 1.045
----------
$10,920.25
Contract Value at end
of Contract Year $10,920.25
X (1 + Effective
Annual Rate) X 1.045
----------
$11,411.66
Contract Value at end
of Contract Year $11,411.66
X (1 + Effective
Annual Rate) X 1.045
----------
$11,925.19
Contract Value at end
of Contract Year $11,925.19
X (1 + Effective
Annual Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -
$10,000)
NOTE: This example assumes no withdrawals during the entire five-year Guarantee
Period. If you were to make a partial withdrawal, you might be required to
pay a Withdrawal Charge and the amount withdrawn might be increased or
decreased by a Market Value Adjustment. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest
rates to be declared under the Contract.
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
relevant factors such as then current interest rates, regulatory and tax
requirements, our sales commission and administrative expenses, general economic
trends, and competitive factors. For current interest rate information, please
contact us at 1-800- 865-5237.
WE WILL 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.
At the end of each Guarantee Period, we will mail you a notice asking you what
to do with the relevant amount, including the accrued interest. During the
30-day period after the end of the Guarantee Period, you may:
1) take no action. If so, we will automatically keep the relevant amount in the
Guaranteed Maturity Fixed Account Option. The new Guarantee Period will be the
same length as the expiring Guarantee Period and will begin on the day the
previous Guarantee Period ends. The new interest rate will be our then current
declared rate for Guarantee Periods of that length; or
2) allocate the relevant Contract Value to one or more new Guarantee Periods of
your choice in the Guaranteed Maturity Fixed Account Option. 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 the relevant amount to one or
more Sub-Accounts. 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 the relevant amount through a partial
withdrawal. You may be required to pay a Withdrawal Charge, but we will not
adjust the amount withdrawn to include a Market Value Adjustment. The amount
withdrawn will be deemed to have been withdrawn on the day the Guarantee
Period ends.
Under our Automatic Laddering Program, you may choose, in advance, to use
Guarantee Periods of the same length for all renewals in the Guaranteed Maturity
Fixed Account Option. You can select this program at any time during the
Accumulation Period, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to stop.
We may stop offering this program at any time.
22 PROSPECTUS
MARKET VALUE ADJUSTMENT. We may increase or decrease the amount of some
transactions involving your investment in the Guaranteed Maturity Fixed Account
Option to include a Market Value Adjustment. The formula for determining Market
Value Adjustments reflects changes in interest rates since the beginning of the
relevant Guarantee Period. As a result, you will bear some of the investment
risk on amounts allocated to the Guaranteed Maturity Fixed Account Option.
As a general rule, we will apply a Market Value Adjustment to the following
transactions involving your Fixed Account balance:
1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option in
an amount greater than the Free Withdrawal Amount, as described on page 21;
2) when you transfer funds from the Guaranteed Maturity Fixed Account Option to
the Sub-Accounts;
3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
4) when you annuitize your Contract; and
5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction, to the extent
that:
1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction;
2) you make a withdrawal to satisfy the IRS' required minimum distribution rules
for this Contract; or
3) it is a transfer that is part of a Dollar Cost Averaging program.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment. This formula primarily compares:
1) the Treasury Rate at the time of the relevant transaction for a maturity
equal in length to the relevant Guarantee Period; and
2) the Treasury Rate at the beginning of the Guarantee Period for a maturity
equal in length to the Guarantee Period.
Generally, if the Treasury Rate at the beginning of the Guarantee Period is
higher than the corresponding current Treasury Rate, then the Market Value
Adjustment will increase the amount payable to you or transferred. Similarly, if
the Treasury Rate at the beginning of the Guarantee Period is lower than the
corresponding current Treasury Rate, then the Market Value Adjustment will
reduce the amount payable to you or transferred.
For example, assume that you purchased a Contract and selected an initial
Guarantee Period of five years and the five-year Treasury Rate for that duration
is 4.50%. Assume that at the end of three years, you make a partial withdrawal.
If, at that later time, the current five-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. Similarly, if the current five-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.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may also allocate Purchase
Payments to the Dollar Cost Averaging Fixed Account Option. We will credit
interest to Purchase Payments allocated to this option for up to one year at the
current rate that we declare when you make the allocation. The effective annual
rate will never be less than 3%. You may not transfer funds to this option from
the Sub-Accounts or the Guaranteed Maturity Fixed Account Option. We will follow
your instructions in transferring amounts from this option to the Sub-Accounts
or the Guaranteed Maturity Fixed Account Option on a monthly basis only, as
described in "Automatic Dollar Cost Averaging Program" on page 15 of this
prospectus.
ANNUITY BENEFITS
ANNUITY DATE. You may select the Annuity Date, which is the date on which
annuity payments are to begin, in your application. The Annuity Date must always
be the business day on or immediately following the tenth day of a calendar
month.
The Annuity Date may be no later than the Latest Annuity Date. As a general
rule, the Latest Annuity Date is on or immediately following the later of the
10th Contract Anniversary or the youngest Annuitant's 90th birthday. If your
Contract was issued pursuant to a Qualified Plan, however, the Tax Code
generally requires you to begin to take at least a minimum distribution by the
later of:
.. the year of your separation from service; or
.. April 1 of the calendar year following the calendar year in which you attain
age 70 1/2.
If your Contract is issued pursuant to Section 408 of the Tax Code (traditional
IRAs), you must begin taking minimum distributions by April 1 of the calendar
year following the calendar year in which you reach age 70 1/2. No minimum
distributions are required by the Tax Code for Contracts issued pursuant to
Section 408A (Roth IRAs).
If your Contract was purchased by a Qualified Plan, we may require you to
annuitize by the date required by the Tax Code.
If you do not select an Annuity Date, the Latest Annuity Date will automatically
become the Annuity Date. You
23 PROSPECTUS
may change the Annuity Date by writing to us at the address given on the first
page of the prospectus.
ANNUITY OPTIONS. You may elect an Annuity Option at any time before the Annuity
Date. As part of your election, you may choose the length of the applicable
guaranteed payment period within the limits available for your chosen Option. If
you do not select an Annuity Option, we will pay monthly annuity payments in
accordance with the applicable default Option. The default Options are:
.. Option A with 10 years (120 months) guaranteed, if you have designated only
one Annuitant; and
.. Option B with 10 years (120 months) guaranteed, if you have designated joint
Annuitants.
You may freely change your choice of Annuity Option, as long as you request the
change at least thirty days before the Annuity Date.
Three Annuity Options are generally available under the Contract. Each is
available in the form of:
.. a Fixed Annuity;
.. a Variable Annuity; or
.. a combination of both Fixed and Variable Annuity.
The three Annuity Options are:
OPTION A: 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 income payments to the Beneficiary until the guaranteed
number of payments has been paid. The number of months guaranteed may be 0
months, or range from 60 to 360 months.
OPTION B: 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 income payments to the Beneficiary until the guaranteed number
of payments has been paid. The number of months guaranteed may be 0 months, or
range from 60 to 360 months.
OPTION C, PAYMENTS FOR A SPECIFIED PERIOD CERTAIN OF 5 YEARS TO 30 YEARS. We
make periodic payments for the period you have chosen. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary. If you elect this option, and request
Variable Annuity payments, you may at any time before the period expires request
a lump sum payment. If you elected Variable Annuity payments, the lump sum
payment will depend on:
.. the investment results of the Sub-Accounts you have selected,
.. the Contract Value at the time you elected annuitization, and
.. the length of the remaining period for which the payee would be entitled to
payments.
No lump sum payment is available if you request Fixed Annuity payments. If you
purchased your Contract under a retirement plan, you may have a more limited
selection of Annuity Options to choose from. You should consult your Plan
documents to see what is available.
If you choose Income Plan A or B, 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.
You may not "annuitize" your Contract for a lump sum payment. Instead, before
the Annuity Date you may surrender your Contract for a lump sum. As described on
page 31 below, however, we will subtract any applicable Withdrawal Charge and
increase or decrease your surrender proceeds by any applicable Market Value
Adjustment.
OTHER OPTIONS. We may have other Annuity Options available. You may obtain
information about them by writing or calling us.
If your Contract is issued under Sections 401, 403(b), 408 or 408A of the Tax
Code, we will only make payments to you and/or your spouse.
ANNUITY PAYMENTS: GENERAL. On the Annuity Date, we will apply the Annuitized
Value of your Contract to the Annuity Option you have chosen. Your annuity
payments may consist of Variable Annuity payments or Fixed Annuity payments or a
combination of the two. We will determine the amount of your annuity payments as
described in "Variable Annuity Payments" and "Fixed Annuity Payments" beginning
on page 25.
You must notify us in writing at least 30 days before the Annuity Date how you
wish to allocate your Annuitized Value between Variable Annuity and Fixed
Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Sub-Accounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and Variable Annuity payments, we will apply your Contract Value in the
Separate Account to Variable Annuity
24 PROSPECTUS
payments and your Contract Value in the Fixed Account to Fixed Annuity payments.
Annuity payments begin on the Annuity Date. We make subsequent annuity payments
on the tenth of the month or, if the NYSE is closed on that day, the next day on
which the NYSE is open for business.
Annuity payments will be made in monthly, quarterly, semi-annual or annual
installments as you select. If the amount available to apply under an Annuity
Option is less than $5,000, however, and state law permits, we may pay you a
lump sum instead of the periodic payments you have chosen. In addition, if the
first annuity payment would be less than $50, and state law permits us, we may
reduce the frequency of payments so that the initial payment will be at least
$50.
We may defer for up to 15 days the payment of any amount attributable to a
Purchase Payment made by check to allow the check reasonable time to clear.
YOU MAY NOT WITHDRAW CONTRACT VALUE DURING THE ANNUITY PERIOD, IF WE ARE MAKING
PAYMENTS TO YOU UNDER ANY ANNUITY OPTION, SUCH AS OPTION A OR B ABOVE, INVOLVING
PAYMENT TO THE PAYEE FOR LIFE OR ANY COMBINATION OF PAYMENTS FOR LIFE AND
MINIMUM GUARANTEE PERIOD FOR A PREDETERMINED NUMBER OF YEARS.
VARIABLE ANNUITY PAYMENTS. One basic objective of the Contract is to provide
Variable Annuity Payments which will to some degree respond to changes in the
economic environment. The amount of your Variable Annuity Payments will depend
upon the investment results of the Sub-Accounts you have selected, any premium
taxes, the age and sex of the Annuitant, and the Annuity Option chosen. We
guarantee that the Payments will not be affected by (1) actual mortality
experience and (2) the amount of our administration expenses.
We cannot predict the total amount of your Variable Annuity payments. The
Variable Annuity payments may be more or less than your total Purchase Payments
because (a) Variable Annuity payments vary with the investment results of the
underlying Portfolios; and (b) Annuitants may die before their actuarial life
expectancy is achieved.
The length of any guaranteed payment period under your selected Annuity Option
will affect the dollar amounts of each Variable Annuity payment. As a general
rule, longer guarantee periods result in lower periodic payments, all other
things being equal. For example, if a life Annuity Option with no minimum
guaranteed payment period is chosen, the Variable Annuity payments will be
greater than Variable Annuity payments under an Annuity Option for a minimum
specified period and guaranteed thereafter for life.
The investment results of the Sub-Accounts to which you have allocated your
Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 31/2%. If the actual net
investment return is less than the assumed investment rate, then the dollar
amount of the Variable Annuity payments will decrease. The dollar amount of the
Variable Annuity payments will stay level if the net investment return equals
the assumed investment rate and the dollar amount of the Variable Annuity
payments will increase if the net investment return exceeds the assumed
investment rate. You should consult the Statement of Additional Information for
more detailed information as to how we determine Variable Annuity Payments.
FIXED ANNUITY PAYMENTS. You may choose to apply a portion of your Annuitized
Value to provide Fixed Annuity payments. We determine the Fixed Annuity payment
amount by applying the applicable Annuitized Value to the Annuity Option you
have selected.
As a general rule, subsequent Fixed Annuity payments will be equal in amount to
the initial payment. However, as described in "Transfers During the Annuity
Period" below, after the Annuity Date, you will have a limited ability to
increase the amount of your Fixed Annuity payments by making transfers from the
Sub-Accounts.
We may defer making Fixed Annuity payments for a period of up to six months or
whatever shorter time state law may require. During the deferral period, we
credit any applicable interest at a rate at least as high as state law requires.
TRANSFERS DURING THE ANNUITY PERIOD. During the Annuity Period, you will have a
limited ability to make transfers among the Sub-Accounts so as to change the
relative weighting of the Sub-Accounts on which your Variable Annuity payments
will be based. In addition, you will have a limited ability to make transfers
from the Sub-Accounts to increase the proportion of your annuity payments
consisting of Fixed Annuity payments. You may not, however, convert any portion
of your right to receive Fixed Annuity payments into Variable Annuity payments.
You may not make any transfers for the first six months after the Annuity Date.
Thereafter, you may make transfers among the Sub-Accounts or make transfers from
the Sub-Accounts to increase your Fixed Annuity payments. Your transfers must be
at least six months apart.
DEATH BENEFIT DURING ANNUITY PERIOD. If any Contract Owner dies after the
Annuity Date, the successor Contract Owner will receive any guaranteed annuity
payments scheduled to continue. If the successor Owner dies before all of the
guaranteed payments have been made, we will continue the guaranteed payments to
the Beneficiary(ies). After annuity payments begin, upon the death of the
Annuitant and any Joint Annuitant, we will make any remaining guaranteed
payments to the Beneficiary. The amount and number of these guaranteed payments
will depend on the Annuity Option in effect at
25 PROSPECTUS
the time of the Annuitant's death. After the Annuitant's death, any remaining
guaranteed payments will be distributed at least as rapidly as under the method
of distribution in effect at the Annuitant's death.
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.
OTHER CONTRACT BENEFITS
DEATH BENEFIT: GENERAL. We will pay a distribution on death, if:
1) the Contract is in force;
2) annuity payments have not begun; and
3) either:
(a) any Owner dies; or
(b) any Annuitant dies and the Owner is a non-living person.
DUE PROOF OF DEATH. A complete request for settlement of the Death Proceeds
must be submitted before the Annuity Date. Where there are multiple
Beneficiaries, we will value the Death Benefit at the time the first Beneficiary
submits a complete request for settlement of the Death Proceeds. A complete
request must include "Due Proof of Death". We will accept the following
documentation as Due Proof of Death:
.. a certified original copy of the Death Certificate;
.. a certified copy of a court decree as to the finding of death; or
.. a written statement of a medical doctor who attended the deceased at the time
of death.
In addition, in our discretion we may accept other types of proof.
DEATH PROCEEDS. If we receive a complete request for settlement of the Death
Proceeds within 180 days of the date of your death, the Death Proceeds are equal
to the Death Benefit described below. Otherwise, the Death Proceeds are equal
to the greater of the Contract Value or the Surrender Value. We reserve the
right to waive or extend, on a nondiscriminatory basis, the 180-day period in
which the Death Proceeds will equal the Death Benefit as described below. This
right applies only to the amount payable as Death Proceeds and in no way
restricts when the claim may be filed.
DEATH BENEFIT AMOUNT. The standard Death Benefit under the Contract is the
greatest of the following:
1) the total Purchase Payments, less a withdrawal adjustment for any prior
partial withdrawals;
2) the Contract Value on the date as of which we calculate the Death Benefit.
3) the Surrender Value;
4) the Contract Value on the seventh Contract Anniversary and each subsequent
Contract Anniversary evenly divisible by seven, increased by the total
Purchase Payments since that anniversary and reduced by a withdrawal
adjustment for any partial withdrawals since that anniversary.
The withdrawal adjustment for the Death Benefit will equal (a) divided by (b),
with the result multiplied by (c), where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the value of the applicable Death Benefit immediately before the
withdrawal.
As described on page 28, you may add optional riders that in some circumstances
may increase the Death Benefit under your contract.
DEATH BENEFIT PAYMENTS
1. If your spouse is the sole beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one of
the annuity options, subject to the following conditions:
The Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
(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.
(c) If your spouse chooses to continue the Contract, or does not elect one of
these options, then the Contract will continue in the Accumulation Period as if
the death had not occurred. If the Contract is continued in the Accumulation
Period, the following conditions apply.
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the Sub-Accounts.
This excess will be allocated in proportion to your Contract Value in those
Sub-Accounts as of the end of the Valuation Period during which we receive the
complete request for
26 PROSPECTUS
settlement of the Death Proceeds, except that any portion of this excess
attributable to the fixed account options will be allocated to the Money Market
Sub-Account. Within 30 days of the date the Contract is continued, your
surviving spouse may choose one of the following transfer alternatives without
incurring a transfer fee:
(i) transfer all or a portion of the excess among the Sub-Accounts;
(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
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as the free transfer allowed each calendar
month and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Annuity Date, the death benefit of the continued Contract will be
as defined in the Death Benefit provision.
Only one spousal continuation is allowed under this Contract.
If there is no Annuitant at that time, the new Annuitant will be the surviving
spouse.
2. If the Beneficiary is not your spouse but is a living person:
(a) The Beneficiary may elect to receive the Death Proceeds in a lump sum; or
(b) The Beneficiary may elect to receive the Death Proceeds paid out under one
of the annuity options, subject to the following conditions:
The Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
(i) over the life of the Beneficiary; or
(ii) for a guaranteed number of payments from 5 to 30 years but not to exceed
the life expectancy of the Beneficiary; or
(iii) over the life of the Beneficiary with a guaranteed number of payments
from 5 to 30 years but not to exceed the life expectancy of the Beneficiary.
(c) If the Beneficiary does not elect one of the options above, then the
Beneficiary must receive the Contract Value payable within 5 years of your date
of death. We will determine the Death Proceeds as of the date we receive the
complete request for settlement of the Death Proceeds. Unless otherwise
instructed by the Beneficiary, the excess, if any, of the Death Proceeds over
the Contract Value will be allocated to the Money Market Sub-Account and the
Contract Value will be adjusted accordingly. The Beneficiary may exercise all
rights as set forth in Transfer During the Accumulation Period on page 14 and
Transfer Fees on page 33 during this 5-year period.
The Beneficiary may not pay additional purchase payments into the Contract under
this election. Withdrawal Charges will be waived for any withdrawals made
during this 5-year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the Beneficiary dies before the complete liquidation of the Contract Value,
then the Beneficiary's named Beneficiary(ies) will receive the greater of the
Surrender Value or the remaining Contract Value. This amount must be liquidated
as a lump sum within 5 years of the date of the original Contract Owner's death.
3. If the Beneficiary is a corporation or other type of non-living person:
(a) The Beneficiary may elect to receive the Death Proceeds in a lump sum; or
(b) If the Beneficiary does not elect to receive the option above, then the
Beneficiary must receive the Contract Value payable within 5 years of your date
of death. We will determine the Death Proceeds as of the date we receive the
complete request for settlement of the Death Proceeds. Unless otherwise
instructed by the Beneficiary, the excess, if any, of the Death Proceeds over
the Contract Value will be allocated to the Money Market Sub-Account. The
Beneficiary may exercise all rights as set forth in Transfer During the
Accumulation Period on page 14 and Transfer Fees on page 33 during this 5-year
period.
The Beneficiary may not pay additional purchase payments into the contract under
this election. Withdrawal charges will be waived during this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
If any Beneficiary is a non-living person, all Beneficiaries will be considered
to be non-living persons for the above purposes.
Under any of these options, all contract rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the Beneficiary from
the date of your death to the date on which the Death Proceeds are paid.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
We offer different optional riders under this Contract. If you elect an
optional rider, we will charge you a higher mortality and expense charge. We
may discontinue offering one or more Riders at any time. The benefits under the
Riders are described below. The benefits in the riders discussed below may not
be available in all states.
27 PROSPECTUS
For example, the Enhanced Death Benefit, Enhanced Income Benefit and all
versions of the Enhanced Death and Income Benefit riders issued in Washington
state do not contain the Enhanced Death Benefit B or Enhanced Income Benefit B
provisions that are described below. Further they may be offered in certain
states as a benefit of the base contract rather than as a separate rider. In
those states, the expense charge will remain the same for the benefit.
ENHANCED DEATH BENEFIT RIDER: When you purchase your Contract, you may select
the Enhanced Death Benefit Rider. This Rider is available if the oldest Owner or
Annuitant is age 80 or less at issue. If you are not an individual, the Enhanced
Death Benefit applies only to the Annuitant's death. As described below, we
will charge a higher mortality and expense risk charge if you select this Rider.
If you select this Rider, the Death Benefit will be the greater of the value
provided in your Contract or the Enhanced Death Benefit. The Enhanced Death
Benefit will be the greater of the Enhanced Death Benefit A or Enhanced Death
Benefit B, defined below.
ENHANCED INCOME BENEFIT RIDER: When you purchase your Contract you may select
the Enhanced Income Benefit Rider if available in your state. Lincoln Benefit
Life no longer offers this Rider in most states. This Rider is available if the
oldest Owner or Annuitant is age 75 or less at issue. If you select this Rider,
you may be able to receive higher annuity payments in certain circumstances.
As described below, we will charge a higher mortality and expense risk charge if
you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the greater of Enhanced
Income Benefit A or Enhanced Income Benefit B, defined below, on the Annuity
Date. We will not increase or decrease the Enhanced Income Benefit amount by
any Market Value Adjustment. To be eligible for the Enhanced Income Benefit,
you must select an Annuity Date that is:
(a) on or after the tenth Contract Anniversary;
(b) before the Annuitant's age 90; and
(c) within a 30-day period on or following a Contract Anniversary.
On the Annuity Date, you may apply the Enhanced Income Benefit to an Annuity
Option that provides for fixed payments on the basis guaranteed in the Contract
for either a single life with a period certain, or joint lives with a period
certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) 5 years, if the youngest Annuitant's age is greater than 80 on the Annuity
Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
The Enhanced Income Benefit under this Rider only applies to the determination
of income payments under the income options described above. It is not a
guarantee of Contract Value or performance. The benefit does not enhance the
amounts paid in partial withdrawals, surrenders or death benefits. In
addition, under some circumstances, you will receive higher initial income
payments by applying your Contract Annuitized Value to one of the standard
Annuity Options instead of utilizing this optional benefit. If you surrender
your Contract, you will not receive any benefit under this Rider.
ENHANCED INCOME BENEFIT A. At issue, the Enhanced Income Benefit A is equal to
the initial purchase payment. After issue, Enhanced Income Benefit A is
recalculated as follows:
.. When you make a Purchase Payment, we will increase the Enhanced Income Benefit
A by the amount of your Purchase Payment;
.. When you make a withdrawal, we will decrease Enhanced Income Benefit A by a
withdrawal adjustment as defined below;
.. On each Contract Anniversary, the Enhanced Income Benefit A is equal to the
greater of the Contract Value or the most recently calculated Enhanced Income
Benefit A.
If you do not make any additional Purchase Payments or withdrawals, the Enhanced
Income Benefit A will be the greatest of all Contract Anniversary Contract
Values prior to the date we calculate the Enhanced Income Benefit.
We will continuously adjust Enhanced Income Benefit A; as described above, until
the oldest Contract Owner's 85th birthday, or if the Contract Owner is not a
living individual, the oldest Annuitant's 85th birthday. Thereafter, we will
adjust Enhanced Income Benefit A only for Purchase Payments and withdrawals.
ENHANCED INCOME BENEFIT B. Enhanced Income Benefit B is equal to your total
Purchase Payments reduced by any withdrawal adjustments, accumulated daily at an
effective annual interest rate of 5% per year, until the earlier of:
(a) the date we determine the income benefit;
(b) the first day of the month following the oldest Contract Owner's 85th
birthday, or the first day of the month following the oldest Annuitant's 85th
birthday, if the Contract Owner is not a living individual.
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;
(c) is the most recently calculated Enhanced Income Benefit A or B, as
applicable.
28 PROSPECTUS
ENHANCED DEATH AND INCOME BENEFIT RIDER II: When you purchase your Contract and
if available in your state, you may select the Enhanced Death and Income Benefit
Rider II. Lincoln Benefit Life no longer offers this Rider in most states. This
Rider is available if the oldest Owner or Annuitant is age 75 or less at issue.
This Rider provides the same Enhanced Death Benefit as the Enhanced Death
Benefit Rider. In addition, this Rider may enable you to receive higher annuity
payments in certain circumstances. As described below, we will charge a higher
mortality and expense risk charge if you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the greater of Enhanced
Death Benefit A or Enhanced Death Benefit B, defined below, on the Annuity Date.
We will not increase or decrease the Enhanced Income Benefit amount by any
Market Value Adjustment. To be eligible for the Enhanced Income Benefit, you
must select an Annuity Date that is:
(a) on or after the tenth Contract Anniversary;
(b) before the Annuitant's age 90; and
(c) within a 30-day period on or following a Contract Anniversary.
On the Annuity Date, you may apply the Enhanced Income Benefit to an Annuity
Option that provides for fixed payments on the basis guaranteed in the contract
for either a single life with a period certain, or joint lives with a period
certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) 5 years, if the youngest Annuitant's age is greater than 80 on the Annuity
Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
ENHANCED DEATH AND INCOME BENEFIT RIDER. This Rider was previously available if
the oldest Owner or Annuitant is age 75 or less at issue. This rider is no
longer available. This Rider provides the same Enhanced Death Benefit as the
Enhanced Death Benefit Rider. In addition, this Rider may enable you to receive
higher annuity payments in certain circumstances. As described below, we will
charge a higher mortality and expense risk charge if you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the value of the
Enhanced Death Benefit on the Annuity Date. We will not increase or decrease the
Enhanced Income Benefit amount by any Market Value Adjustment. To be eligible
for the Enhanced Income Benefit, you must select an Annuity Date that is on or
after the tenth Contract Anniversary, but before the Annuitant's age 90. On
the Annuity Date, you may apply the Enhanced Income Benefit to an Annuity Option
that provides for payments guaranteed for either a single life with a period
certain or joint lives with a period certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) at least 5 years, if the youngest Annuitant's age is greater than 80 on
the Annuity Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial Purchase Payment. After issue, Enhanced Death Benefit A is adjusted
whenever you pay a Purchase Payment or make a withdrawal and on each Contract
Anniversary as follows:
.. When you pay a Purchase Payment, we will increase Enhanced Death Benefit A by
the amount of the Purchase Payment;
.. When you make a withdrawal, we will decrease Enhanced Death Benefit A by a
withdrawal adjustment, as described below; and
.. On each Contract Anniversary, we will set Enhanced Death Benefit A equal to
the greater of the Contract Value on that Contract Anniversary or the most
recently calculated Enhanced Death Benefit A.
If you do not pay any additional purchase payments or make any withdrawals,
Enhanced Death Benefit A will equal the greatest of the Contract Value on the
Issue Date and all Contract Anniversaries prior to the date we calculate any
death benefit.
We will continuously adjust Enhanced Death Benefit A as described above until
the oldest Contract Owner's 85th birthday or, if the Contract Owner is not a
living individual, the Annuitant's 85th birthday. Thereafter, we will adjust
Enhanced Death Benefit A only for Purchase Payments and withdrawals.
ENHANCED DEATH BENEFIT B. Enhanced Death Benefit B is equal to your total
Purchase Payments, reduced by any withdrawal adjustments, accumulated daily at
an effective annual rate of 5% per year, until the earlier of:
(a) the date we determine the death benefit,
(b) the first day of the month following the oldest Contract Owner's 85th
birthday; or
(c) the first day of the month following the oldest Annuitant's 85th birthday,
if the Contract Owner is not a living individual.
Thereafter, we will only adjust Enhanced Death Benefit B to reflect additional
Purchase Payments and withdrawals. Enhanced Death Benefit B will never be
greater than the maximum death benefit allowed by any nonforfeiture laws that
govern the Contract.
The withdrawal adjustment for both Enhanced Death Benefit A and Enhanced Death
Benefit B will equal (a) divided by (b), with the result multiplied by (c),
where:
29 PROSPECTUS
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the most recently calculated Enhanced Benefit A or B, as appropriate.
BENEFICIARY. You name the Beneficiary. You may name a Beneficiary in the
application. You may also name one or more contingent Beneficiaries who are
entitled to receive benefits under the contract if all primary Beneficiaries are
deceased at the time a Contract Owner, or Annuitant if the Contract Owner is not
a living person, dies. You may change the Beneficiary or add additional
Beneficiaries at any time before the Annuity Date. We will provide a form to be
signed and filed with us.
Your changes in Beneficiary take effect when we accept them, effective as of the
date you signed the form. Until we accept your change instructions, we are
entitled to rely on your most recent instructions in our files. We are not
liable for making a payment to a Beneficiary shown in our files or treating that
person in any other respect as the Beneficiary prior to accepting a change.
Accordingly, if you wish to change your beneficiary, you should deliver your
instructions to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living, the Beneficiary will be:
.. your spouse if he or she is still alive; or, if he or she is no longer alive,
.. your surviving children equally; or if you have no surviving children,
.. your estate.
Unless you have provided directions to the contrary, the Beneficiaries will take
equal shares. If there is more than one Beneficiary in a class and one of the
Beneficiaries predeceases the Contract Owner or Annuitant, the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original shares of the remaining beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share.
Each Beneficiary will exercise all rights related to his or her share, including
the sole right to select a payout option, subject to any restrictions previously
placed upon the Beneficiary. Each Beneficiary may designate a Beneficiary(ies)
for his or her respective share, but that designated Beneficiary(ies) will be
restricted to the payout option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation or other type of non-living person, all beneficiaries will be
considered to be non-living persons.
You may specify that the Death Benefit be paid under a specific income Plan by
submitting a written request to our Service Center. If you so request, your
Beneficiary may not change to a different Income Plan or lump sum. Once we
accept the written request, the change or restriction will take effect as of the
date you signed the request. Any change is subject to any payment we make or
other action we take before we accept the changes.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
CONTRACT LOANS FOR 403(B) CONTRACTS. Subject to the restrictions described
below, we will make loans to the Owner of a Contract used in connection with a
Tax Sheltered Annuity Plan ("TSA Plan") under Section 403(b) of the Tax Code.
Loans are not available under Non-Qualified Contracts. We will only make loans
after the free look period and before annuitization. All loans are subject to
the terms of the Contract, the relevant 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 Surrender Value of your
Contract on the date of the loan. In addition, we will not make a loan to you if
the total of the requested loan and all of the plan participant's Contract loans
under TSA 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 half of the Surrender Value.
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 Annuity 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. 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 Separate Account and/or the Fixed Account to the Loan Account as collateral
for the loan. We will transfer to the Loan Account amounts from the Separate
Account in proportion to the assets in each Sub-Account. If your loan amount is
greater than your Contract Value in the Sub-Accounts, 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
Sub-Accounts and the Guaranteed Maturity Fixed Account Options, we will transfer
the remaining required collateral from the Dollar Cost Averaging Fixed Account
Option.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Sub-Accounts or the Fixed
30 PROSPECTUS
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 charge a Withdrawal Charge and apply a Market
Value Adjustment, if applicable, on a distribution to repay the loan in full, in
the event of loan default.
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 Sub-Accounts.
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 Proceeds;
2) surrender proceeds;
3) the amount available for partial withdrawal;
4) the amount applied on the Annuity Date to provide annuity payments; and
5) the amount applied on the Annuity Date to provide annuity payments under the
Enhanced Income Benefit Rider, Enhanced Death and Income Benefit Rider, or the
Enhanced Death and Income Benefit Rider II.
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.
Generally, loan payments are allocated to the Sub-Account(s) in the proportion
that you have selected for Purchase Payments. Allocations of loan payments are
not permitted to the Fixed Accounts (Guaranteed Maturity Fixed Account and
Dollar Cost Averaging Fixed Account Option). If your Purchase Payment allocation
includes any of the Fixed Accounts, the percentages allocated to the Fixed
Accounts will be allocated instead to the Fidelity Money Market Sub-Account.
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
and incur the early withdrawal tax penalty. We will capitalize interest on a
loan in default.
If the total loan balance exceeds the Surrender Value, 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.
WITHDRAWALS (REDEMPTIONS). Except as explained below, you may redeem a Contract
for all or a portion of its Contract Value before the Annuity Date. We may
impose a Withdrawal Charge, which would reduce the amount paid to you upon
redemption. The Withdrawal Charges are described on page 34. Withdrawals from
the Fixed Account may be increased or decreased by a Market Value Adjustment, as
described in "Market Value Adjustment" on page 23.
In general, you must withdraw at least $50 at a time. You may also withdraw a
lesser amount if you are withdrawing your entire interest in a Sub-Account. If
your request for a partial withdrawal would reduce the Contract Value to less
than $500, we may treat it as a request for a withdrawal of your entire Contract
Value, as described in "Minimum Contract Value" on page 32. Your Contract will
terminate if you withdraw all of your Contract Value
Withdrawals taken prior to annuitization are generally considered to come from
the earnings in the Contract first. If the Contract is tax-qualified, generally
all withdrawals are treated as distribution of earnings. Withdrawals of earnings
are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject
to an additional 10% federal tax penalty.
We may be required to withhold 20% of withdrawals and distributions from
Contracts issued in connection with certain Qualified Plans, as described on
page 39.
To make a withdrawal, you must send us a written withdrawal request or
systematic withdrawal program enrollment form. You may obtain the required forms
from us at the address and phone number given on the first page of this
prospectus.
For partial withdrawals, you may allocate the amount among the Sub-Accounts and
the Fixed Accounts. If we do not receive allocation instructions from you, we
usually will allocate the partial withdrawal proportionately among the
Sub-Accounts and the Guaranteed Maturity Fixed Account Options based upon
31 PROSPECTUS
the balance of the Sub-Accounts and the Guaranteed Maturity Fixed Account
Options, with any remainder being distributed from the Dollar Cost Averaging
Fixed Account Option. You may not make a partial withdrawal from the Fixed
Account in an amount greater than the total amount of the partial withdrawal
multiplied by the ratio of the value of the Fixed Account to the Contract Value
immediately before the partial withdrawal.
If you request a total withdrawal, you must send us your Contract. The Surrender
Value will equal the Contract Value minus any applicable Withdrawal Charge and
adjusted by any applicable Market Value Adjustment. We also will deduct a
contract maintenance charge of $35, unless we have waived the contract
maintenance charge on your Contract as described on page 33. We determine the
Surrender Value based on the Contract Value next computed after we receive a
properly completed surrender request. We will usually pay the Surrender Value
within seven days after the day we receive a completed request form. However, we
may suspend the right of withdrawal from the Separate Account or delay payment
for withdrawals for more than seven days in the following circumstances:
1) whenever the New York Stock Exchange ("NYSE") is closed (other than customary
weekend and holiday closings);
2) when trading on the NYSE is restricted or an emergency exists, as determined
by the SEC, so that disposal of the Separate Account's investments or
determination of Accumulation Unit Values is not reasonably practicable; or
3) at any other time permitted by the SEC for your protection.
In addition, we may delay payment of the Surrender Value in the Fixed Account
for up to 6 months or a shorter period if required by law. If we delay payment
from the Fixed Account for more than 30 days, we will pay interest as required
by applicable law.
You may withdraw amounts attributable to contributions made pursuant to a salary
reduction agreement (in accordance with Section 403(b)(11) of the Tax Code) only
in the following circumstances:
1) when you attain age 59 1/2;
2) when you terminate your employment with the plan sponsor;
3) upon your death;
4) upon your disability as defined in Section 72(m)(7) of the Tax Code; or
5) in the case of hardship.
If you seek a hardship withdrawal, you may only withdraw amounts attributable to
your Purchase Payments; you may not withdraw any earnings. These limitations on
withdrawals apply to:
1) salary reduction contributions made after December 31, 1988;
2) income attributable to such contributions; and
3) income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between certain Qualified
Plans. Additional restrictions and limitations may apply to distributions from
any Qualified Plan. Tax penalties may also apply. You should seek tax advice
regarding any withdrawals or distributions from Qualified Plans.
SYSTEMATIC WITHDRAWAL PROGRAM. If your Contract is a non-Qualified Contract or
IRA, you may participate in our Systematic Withdrawal Program. You must complete
an enrollment form and send it to us. You must complete the withholding election
section of the enrollment form before the systematic withdrawals will begin. You
may choose withdrawal payments of a flat dollar amount, earnings, or a
percentage of Purchase Payments. You may choose to receive systematic withdrawal
payments on a monthly, quarterly, semi-annual, or annual basis. Systematic
withdrawals will be deducted from your Sub-Account and Fixed Account balances,
excluding the Dollar Cost Averaging Fixed Account, on a pro rata basis.
Depending on fluctuations in the net asset value of the Sub-Accounts and the
value of the Fixed Account, systematic withdrawals may reduce or even exhaust
the Contract Value. The minimum amount of each systematic withdrawal is $50.
We will make systematic withdrawal payments to you or your designated payee. 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.
ERISA PLANS. A married participant may need spousal consent to receive a
distribution from a Contract issued in connection with a Qualified Plan or a
Non-Qualified Plan covered by to Title 1 of ERISA. You should consult an
adviser.
MINIMUM CONTRACT VALUE. If as a result of withdrawals your Contract Value would
be less than $500 and you have not made any Purchase Payments during the
previous three full calendar years, we may terminate your Contract and
distribute its Surrender Value to you. Before we do this, we will give you 60
days notice. We will not terminate your Contract on this ground if the Contract
Value has fallen below $500 due to either a decline in Accumulation Unit Value
or the imposition of fees and charges. In addition, in some states we are not
permitted to terminate Contracts on this ground. Different rules may apply to
Contracts issued in connection with Qualified Plans.
CONTRACT CHARGES
We assess charges under the Contract in three ways:
32 PROSPECTUS
1) as deductions from Contract Value for contract maintenance charges and, if
applicable, for premium taxes;
2) as charges against the assets of the Separate Account for administrative
expenses and for the assumption of mortality and expense risks; and
3) as Withdrawal Charges (contingent deferred sales charges) subtracted from
withdrawal and surrender payments.
In addition, certain deductions are made from the assets of the Portfolios for
investment management fees and expenses. Those fees and expenses are summarized
in the Fee Tables on pages 6, and described more fully in the Prospectuses and
Statements of Additional Information for the Portfolios.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a mortality and expense risk
charge from each Sub-Account during each Valuation Period. The mortality and
expense risk charge is equal, on an annual basis, to 1.15% of the average net
asset value of each Sub-Account. The mortality risks arise from our contractual
obligations:
1) to make annuity payments after the Annuity Date for the life of the
Annuitant(s);
2) to waive the Withdrawal Charge upon your death; and
3) to provide the Death Benefit prior to the Annuity Date. A detailed
explanation of the Death Benefit may be found beginning on page 25.
The expense risk is that it may cost us more to administer the Contracts and the
Separate Account than we receive from the contract maintenance charge and the
administrative expense charge. We guarantee the mortality and expense risk
charge and we cannot increase it. We assess the mortality and expense risk
charge during both the Accumulation Period and the Annuity Period.
If you select the Enhanced Death Benefit Rider, your mortality and expense risk
charge will be 1.35% of average net asset value of each Sub-Account. If you
select the Enhanced Income Rider, your mortality and expense risk charge will be
1.50% of average daily net asset value of each Sub-Account. If you select the
Enhanced Death and Income Benefit Rider, your mortality and expense risk charge
will be 1.55% of average daily net asset value of each Sub-Account. If you
select the Enhanced Death and Income Benefit Rider II, your mortality and
expense risk charge will be 1.70% of average daily net asset value of each
Sub-Account. We charge a higher mortality and expense risk charge for the
Riders to compensate us for the additional risk that we accept by providing the
Riders. We will calculate a separate Accumulation Unit Value for the base
Contract, and for Contracts with each type of Rider, in order to reflect the
difference in the mortality and expense risk charges.
ADMINISTRATIVE CHARGES.
CONTRACT MAINTENANCE CHARGE. We charge an annual contract maintenance charge of
$35 on your Contract. The amount of this charge is guaranteed not to increase.
This charge reimburses us for our expenses incurred in maintaining your
Contract.
Before the Annuity Date, we assess the contract maintenance charge on each
Contract Anniversary. To obtain payment of this charge, on a pro rata basis we
will allocate this charge among the Sub-Accounts to which you have allocated
your Contract Value, and redeem Accumulation Units accordingly. We will waive
this charge if you pay more than $50,000 in Purchase Payments or if you allocate
all of your Contract Value to the Fixed Account. If you surrender your Contract,
we will deduct the full $35 charge as of the date of surrender, unless your
Contract qualifies for a waiver.
After the Annuity Date and if allowed in your state, we will subtract this
charge in equal parts from each of your annuity payments. We will waive this
charge if on the Annuity Date your Contract Value is $50,000 or more or if all
of your annuity payments are Fixed Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE. We deduct an administrative expense charge from
each Sub-Account during each Valuation Period. This charge is equal, on an
annual basis, to 0.10% of the average net asset value of the Sub-Accounts. This
charge is designed to compensate us for the cost of administering the Contracts
and the Separate Account. The administrative expense charge is assessed during
both the Accumulation Period and the Annuity Period.
TRANSFER FEE. We currently are waiving the transfer fee. The Contract, however,
permits us to charge a transfer fee of $10 on the second and each subsequent
transaction in each calendar month in which transfer(s) are effected between
Subaccount(s) and/or the Fixed Account. We will notify you if we begin to charge
this fee. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging or Portfolio Rebalancing program.
The transfer fee will be deducted from Contract Value that remains in the
Subaccount(s) or Fixed Account from which the transfer was made. If that amount
is insufficient to pay the transfer fee, we will deduct the fee from the
transferred amount.
SALES CHARGES.
WITHDRAWAL CHARGE. We may charge a Withdrawal Charge, which is a contingent
deferred sales charge, upon certain withdrawals.
As a general rule, the Withdrawal Charge equals a percentage of Purchase
Payments withdrawn that are: (a) less than seven years old; and (b) not eligible
for a free withdrawal. The applicable percentage depends on how
33 PROSPECTUS
many years ago you made the Purchase Payment being withdrawn, as shown in this
chart:
CONTRIBUTION WITHDRAWAL
YEAR CHARGE
PERCENTAGE
First and Second 7%
Third and Fourth 6%
Fifth 5%
Sixth 4%
Seventh 3%
Eighth and later 0%
When we calculate the Withdrawal Charge, we do not take any applicable Market
Value Adjustment into consideration. Beginning on January 1, 2004, if you make a
withdrawal before the Annuity Date, we will apply the withdrawal charge
percentage in effect on the date of the withdrawal, or the withdrawal charge
percentage in effect on the following day, whichever is lower.
We subtract the Withdrawal Charge from the Contract Value remaining after your
withdrawal. As a result, the decrease in your Contract Value will be greater
than the withdrawal amount requested and paid.
For purposes of determining the Withdrawal Charge, the Contract Value is deemed
to be withdrawn in the following order:
FIRST. Earnings - the current Contract Value minus all Purchase Payments that
have not previously been withdrawn;
SECOND. "Old Purchase Payments" - Purchase Payments received by us more than
seven years before the date of withdrawal that have not been previously
withdrawn;
THIRD. Any additional amounts available as a "Free Withdrawal," as described on
page 34;
FOURTH. "New Purchase Payments" - Purchase Payments received by us less than
seven years before the date of withdrawal. These Payments are deemed to be
withdrawn on a first-in, first-out basis.
No Withdrawal Charge is applied in the following situations:
.. on annuitization;
.. the payment of a Death Benefit;
.. a free withdrawal amount, as described on page 34;
.. certain withdrawals for Contracts issued under 403(b) plans or 401 plan under
our prototype as described on page 41;
.. withdrawals taken to satisfy IRS minimum distribution rules;
.. withdrawals that qualify for one of the waiver benefits described on pages
35-36; and
.. withdrawal under Contracts issued to employees of Lincoln Benefit Life Company
or its affiliates, Surety Life Insurance Company and Allstate Financial
Services, L.L.C., or to their spouses or minor children if those individuals
reside in the State of Nebraska.
We will never waive or eliminate a Withdrawal Charge where such waiver or
elimination would be unfairly discriminatory to any person or where it is
prohibited by state law.
We may waive withdrawal charges if this Contract is surrendered, and the entire
proceeds of the surrender are
directly used to purchase a new Contract also issued by us or any affiliated
company. Such waivers will be
granted on a non-discriminatory basis.
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 of earnings are taxed as ordinary income and, if taken prior to age
59 1/2, may be subject to an additional 10% federal tax penalty. The amount of
your withdrawal may be affected by a Market Value Adjustment. Additional
restrictions may apply to Contracts held in Qualified Plans. We outline the tax
requirements applicable to withdrawals on page 37. You should consult your own
tax counsel or other tax advisers regarding any withdrawals.
FREE WITHDRAWAL. Withdrawals of the following amounts are never subject to the
Withdrawal Charge:
.. In any Contract Year, the greater of: (a) earnings that have not previously
been withdrawn; or (b) 15 percent of New Purchase Payments; and
.. Any Old Purchase Payments that have not been previously withdrawn.
However, even if you do not owe a Withdrawal Charge on a particular withdrawal,
you may still owe taxes or penalty taxes, or be subject to a market Value
Adjustment. The tax treatment of withdrawals is summarized on page 37.
WAIVER BENEFITS
GENERAL. If approved in your state, we will offer the three waiver benefits
described below. In general, if you qualify for one of these benefits, we will
permit you to make one or more partial or full withdrawals without paying any
otherwise applicable Withdrawal Charge or Market Value Adjustment. While we have
summarized those benefits here, you should consult your Contract for the precise
terms of the waiver benefits.
34 PROSPECTUS
Some Qualified Plans may not permit you to utilize these benefits. Also, even if
you do not need to pay our Withdrawal Charge because of these benefits, 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.
CONFINEMENT WAIVER BENEFIT. Under this benefit, we will waive the Withdrawal
Charge and Market Value Adjustment on all withdrawals under your Contract if the
following conditions are satisfied:
1) Any Contract Owner or the Annuitant, if the Contract is owned by a company or
other legal entity, is confined to a long term care facility or a hospital for
at least 90 consecutive days. The Owner or Annuitant must enter the long term
care facility or hospital at least 30 days after the Issue Date;
2) You request the withdrawal no later than 90 days following the end of the
Owner or Annuitant's stay at the long term care facility or hospital. You must
provide written proof of the stay with your withdrawal request; and
3) A physician must have prescribed the stay and the stay must be medically
necessary.
You may not claim this benefit if the physician prescribing the Owner or
Annuitant's stay in a long term care facility is the Owner or Annuitant or a
member of the Owner or Annuitant's immediate family.
TERMINAL ILLNESS WAIVER BENEFIT. Under this benefit, we will waive any
Withdrawal Charge and Market Value Adjustment on all withdrawals under your
Contract if, at least 30 days after the Issue Date, you, or the Annuitant if the
Owner is not a living person, are diagnosed with a terminal illness. We may
require confirmation of the diagnosis as provided in the Contract.
UNEMPLOYMENT WAIVER BENEFIT. Under this benefit, we will waive any Withdrawal
Charge and Market Value Adjustment on one partial or full withdrawal from your
Contract, if you meet the following requirements:
1) you become unemployed at least 1 year after the Issue Date;
2) you receive unemployment compensation for at least 30 consecutive days as a
result of that unemployment; and
3) you claim this benefit within 180 days of your initial receipt of
unemployment compensation.
You may exercise this benefit once before the Annuity Date.
WAIVER OF WITHDRAWAL CHARGE FOR CERTAIN QUALIFIED PLAN WITHDRAWALS. For
Contracts issued under a Section 403(b) plan or a Section 401 plan under our
prototype, we will waive the Withdrawal Charge when:
1) the Annuitant becomes disabled (as defined in Section 72(m)(7)) of the Tax
Code;
2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have passed
since the Contract was issued;
3) at least 15 Contract Years have passed since the Contract was issued.
Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan, or
a paired plan (Money Purchase and Profit Sharing). For more information about
our prototype plan, call us at 1-800- 865-5237.
PREMIUM TAXES. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or other
insurance companies. Some states assess premium taxes when Purchase Payments are
made; others assess premium taxes when annuity payments begin. We will deduct
any applicable premium taxes upon full surrender, death, or annuitization.
Premium taxes generally range from 0% to 3.5%.
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 Separate Account. We will deduct for any taxes we
incur as a result of the operation of the Separate Account, whether or not we
previously made a provision for taxes and whether or not it was sufficient. Our
status under the Tax Code is briefly described in the Statement of Additional
Information.
OTHER EXPENSES. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Sub-Accounts to which you allocate your Contract
value. For a summary of current estimates of those charges and expenses, see
page 6. For more detailed information about those charges and expenses, please
refer to the prospectuses for the appropriate Portfolios. We may receive
compensation from the investment advisers or administrators or the Portfolios in
connection with administrative service and cost savings experienced by the
investment advisers or administrators.
35 PROSPECTUS
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 LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the Separate Account is not an entity separate from Lincoln
Benefit, and its operations form a part of Lincoln Benefit, it will not be taxed
separately. Investment income and realized capital gains of the Separate Account
are automatically applied to increase reserves under the Contract. Under
existing federal income tax law, Lincoln Benefit believes that the Separate
Account investment income and capital gains will not be taxed to the extent that
such income and gains are applied to increase the reserves under the Contract.
Accordingly, Lincoln Benefit does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account, and therefore Lincoln
Benefit does not intend to make provisions for any such taxes. If Lincoln
Benefit is taxed on investment income or capital gains of the Separate Account,
then Lincoln Benefit may impose a charge against the Separate Account in order
to make provision for such taxes.
TAXATION OF VARIABLE 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:
.. the Contract Owner is a natural person,
.. the investments of the Separate Account are "adequately diversified" according
to Treasury Department regulations, and
.. Lincoln Benefit is considered the owner of the Separate Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living
Owners in this prospectus. 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 does not enjoy tax deferral and is taxed as ordinary income received
or accrued by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain Qualified Plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
beneficiary. A trust named beneficiary, including a grantor trust, has two
options for receiving any death benefits: 1) a lump sum payment, or 2) payment
deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Separate Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Separate 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 a contract owner will be
considered the owner of separate account assets if he possesses 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 the separate account
investments may cause a Contract
36 PROSPECTUS
owner 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 sub-account 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
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. 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 owner of the Separate Account. If this
occurs, income and gain from the Separate 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 owner of the assets of the Separate 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 full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
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 any variable payment is less than the excludable
amount you should contact a competent tax advisor to determine how to report any
unrecovered investment. The federal tax treatment of annuity payments is
unclear in some respects. As a result, if the IRS should provide further
guidance, it is possible that the amount we calculate and report to the IRS as
taxable could be different. 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 LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although we will report your levelized payments to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first monthly
payout is received.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Contract Owner's death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire interest
in the Contract will be distributed within 5 years after the date of the
Contract Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or
over a period not extending beyond the life expectancy of the Beneficiary) and
the distributions begin within 1 year of the Contract Owner's death. If the
Contract Owner's designated Beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse as the
new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
37 PROSPECTUS
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
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:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-Qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges
of annuity contracts. Under this ruling, if you take a withdrawal from a
receiving or relinquishing annuity contract within 24 months of the partial
exchange, then special aggregation rules apply for purposes of determining the
taxable amount of a distribution. The IRS has issued limited guidance on how to
aggregate and report these distributions. The IRS is expected to provide
further guidance; as a result, it is possible that the amount we calculate and
report to the IRS as taxable could be different. Your Contract may not permit
partial exchanges.
TAXATION OF OWNERSHIP CHANGES. 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. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Lincoln Benefit (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Lincoln Benefit is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the
38 PROSPECTUS
U.S. and the non-resident alien's country of residence if the payee provides a
U.S. taxpayer identification number on a fully completed Form W-8BEN. A U.S.
taxpayer identification number is a social security number or an individual
taxpayer identification number ("ITIN"). ITINs are issued by the IRS to
non-resident alien individuals who are not eligible to obtain a social security
number. The U.S. does not have a tax treaty with all countries nor do all tax
treaties provide an exclusion or lower withholding rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Code Section 457.
Lincoln Benefit reserves the right to limit the availability of the Contract for
use with any of the retirement plans listed above or to modify the Contract to
conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of 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. Lincoln Benefit no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Lincoln
Benefit can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Lincoln Benefit does
not offer an individual retirement annuity that can accept a transfer of funds
for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
Qualified Plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, 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)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"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.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Effective December 31, 2005, the
IRS requires annuity contracts to include the actuarial present value of other
benefits for purposes of calculating the required minimum distribution amount.
These other benefits may include accumulation, income, or death benefits. Not
all income plans offered under the Contract satisfy the requirements for minimum
distributions. Because these distributions are required under the Code and the
method of calculation is complex, please see a competent tax advisor.
39 PROSPECTUS
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current 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 TSA or employer sponsored qualified retirement plan.
Lincoln Benefit reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax 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:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only for
IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Lincoln Benefit
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. 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 Tax
Qualified Contracts, including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Lincoln Benefit is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states,
if there is federal withholding, then state withholding is also mandatory.
40 PROSPECTUS
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a fully completed Form W-8BEN.
A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all countries nor do
all tax treaties provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
Effective January 1, 2005, the IRS requires conversions of annuity contracts to
include the actuarial present value of other benefits for purposes of valuing
the taxable amount of the conversion.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner of
the annuity and has the right to the death proceeds otherwise payable under
the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) 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
41 PROSPECTUS
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on 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.
Generally, we do not accept funds in 403(b) contracts that are subject to the
Employee Retirement Income Security Act of 1974 (ERISA).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Lincoln Benefit no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under Section
401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is intended
to qualify under Section 401(a) of the Code is the owner. The qualified plan
trust must have its own tax identification number and a named trustee acting
as a fiduciary on behalf of the plan. The annuitant should be the person for
whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner and
annuitant are the same, or the annuity contract is not owned by a qualified
plan trust. The annuitant should be the person for whose benefit the contract
was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which is
consistent with the required IRS language for qualified plans under Section
401(a). A completed Annuitant Owned Qualified Plan Designation of Beneficiary
form is required in order to change the beneficiary of an annuitant owned
Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/ custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. Lincoln Benefit no
longer issues annuity contracts to employer sponsored qualified retirement
plans.
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit 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 S. 84th Street, Lincoln, NE 68506-4142. Lincoln Benefit is a
wholly-owned subsidiary of Allstate Life Insurance Company ("Allstate Life"), 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 ("Allstate"), a stock property-liability insurance company incorporated
under the laws of Illinois. All outstanding capital stock of Allstate is owned
by The Allstate Corporation.
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 will
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
Separate Account and/or the Fixed Account.
Under our reinsurance agreement with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life, and substantially all of
the assets backing our reinsured liabilities are owned by Allstate Life.
Accordingly, the results of operations with respect to applications received
and contracts issued by Lincoln Benefit are not reflected in our financial
42 PROSPECTUS
statements. The amounts reflected in our financial statements relate only to
the investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreement. These assets represent our
general account and are invested and managed by Allstate Life. While the
reinsurance agreement provides 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 Allstate Life, the Company
reinsures all reserve liabilities with Allstate Life except for variable
contracts. The Company's variable Contract assets and liabilities are held in
legally-segregated, unitized Separate Accounts and are retained by the Company.
However, Lincoln Benefit's economic risks and returns related to such variable
contracts are transferred to Allstate Life.
On March 8, 2006, Allstate Life announced that it had entered into an agreement
("the Agreement") with Prudential Financial, Inc. and its subsidiary, The
Prudential Insurance Company of America ("PICA") pursuant to which Allstate Life
will sell, pursuant to a combination of coinsurance and modified coinsurance
reinsurance, substantially all of its variable annuity business, including that
of its subsidiary Lincoln Benefit. The Agreement also provides that Lincoln
Benefit and PICA will enter into an administrative services agreement pursuant
to which PICA or an affiliate will administer the Variable Account and the
Contracts after a transition period that may last up to two years. The benefits
and provisions of the Contracts will not be changed by these transactions and
agreements. None of the transactions or agreements will change the fact that we
are primarily liable to you under your Contract.
The transaction is subject to regulatory approvals, and it is expected that it
will be completed by the end of the second quarter of 2006.
SEPARATE ACCOUNT. Lincoln Benefit Life Variable Annuity Account was originally
established in 1992, as a segregated asset account of Lincoln Benefit. The
Separate Account meets the definition of a "separate account" under the federal
securities laws and is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940. The SEC does not supervise the management of
the Separate Account or Lincoln Benefit.
We own the assets of the Separate Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Contract
Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to our other income, gains, or losses. Our obligations arising
under the Contracts are general corporate obligations of Lincoln Benefit.
The Separate Account is divided into Sub-Accounts. The assets of each
Sub-Account are invested in the shares of one of the Portfolios. We do not
guarantee the investment performance of the Separate Account, its Sub-Accounts
or the Portfolios. Values allocated to the Separate Account and the amount of
Variable Annuity payments will rise and fall with the values of shares of the
Portfolios and are also reduced by Contract charges. We may also use the
Separate Account to fund our other annuity contracts. We will account separately
for each type of annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800- 865-5237. We
have reproduced the Table of Contents of the Statement of Additional
Information on page 45.
STATE REGULATION OF LINCOLN BENEFIT. We are subject to the laws of Nebraska and
regulated by the Nebraska Department of Insurance. Every year we file an annual
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. Our books and records are subject to review by the
Department of Insurance at all times. We are also subject to regulation under
the insurance laws of every jurisdiction in which we operate.
FINANCIAL STATEMENTS. The financial statements of Lincoln Benefit and the
financial statements of the Separate Account, which are comprised of the
financial statements of the underlying Sub-Accounts, are set forth in the
Statement of Additional Information.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and the
Separate Account. Pursuant to the Agreement, we will enter into an
administrative services agreement with PICA whereby, after a transition period
that may last up to two years, PICA or an affiliate will provide administrative
services to the Variable Account and the Contracts on our behalf.
Our mailing address is P.O. Box 80469, Lincoln, NE 68501-0469.
We provide the following administrative services, among others: issuance of the
Contracts; maintenance of Contract Owner records; Contract Owner services;
calculation of unit values; maintenance of the Separate Account; and preparation
of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
quarterly. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and
43 PROSPECTUS
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 will make the adjustment as of the date that we receive notice
of the potential error.
We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
DISTRIBUTION OF CONTRACTS
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 6% of all Purchase Payments (on a present value
basis). From time to time, we may offer additional sales incentives of up to 1%
of Purchase Payments to broker-dealers who maintain certain sales volume levels.
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.
Lincoln Benefit and ALFS have also entered into wholesaling agreements with
certain independent contractors and their broker-dealers. Under these
agreements, compensation based on a percentage of premium payments and/or
Contract values is paid to the wholesaling broker-dealer for the wholesaling
activities of their registered representative.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Lincoln
Benefit is engaged in routine lawsuits which, in our management's judgment, are
not of material importance to their respective total assets or material with
respect to the Separate Account.
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 Michael J. Velotta, Senior Vice President, General Counsel
and Secretary of Lincoln Benefit.
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit's annual report on Form 10-K for the year ended December 31,
2005, is incorporated herein by reference, which means that it is 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 and Form 10-Q 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 100 F Street NE, Room 1580, Washington, DC
20549-2001. 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 S. 84th Street, Lincoln,
NE 68506-4142 or 800-865-5237.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, under the Securities Act of
1933 as amended, with respect to the Contracts offered by this prospectus. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits filed as part of the registration statement. You
should refer to the registration statement and the exhibits for further
information concerning the Separate Account, Lincoln Benefit, and the Contracts.
The descriptions in this prospectus of the Contracts and other legal
instruments are summaries. You should refer to those instruments as filed for
the precise terms of those instruments. You may inspect and obtain
copies of the registration statement as described on the cover page of this
prospectus.
44 PROSPECTUS
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
PAGE
THE CONTRACT
Annuity Payments
Initial Monthly Annuity Payment
Subsequent Monthly Payments
Transfers After Annuity Date
Annuity Unit Value
Illustrative Example of Annuity Unit Value Calculation
Illustrative Example of Variable Annuity Payments
EXPERTS
FINANCIAL STATEMENTS
45 PROSPECTUS
APPENDIX A
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES/(1)/
BASIC POLICY
Year ending December 31,
FUND 1998 1999 2000 2001 2002
- ----------------------------------------------------------------------------------
AIM V.I. BASIC VALUE -
SERIES I SUB-ACCOUNT
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
ALGER AMERICAN GROWTH
- - CLASS O SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.93 $ 15.75 $ 13.26 $ 11.54
Accumulation Unit
Value Ending $ 11.93 $ 15.75 $ 13.26 $ 11.54 $ 7.640
Number of Units
Outstanding at End of 51,133 624,209 1,121,843 996,256 734,340
Year
- ----------------------------------------------------------------------------------
ALGER AMERICAN INCOME
& GROWTH - CLASS O
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.50 $ 16.17 $ 15.77 $ 13.34
Accumulation Unit
Value Ending $ 11.50 $ 16.17 $ 15.77 $ 13.34 $ 9.078
Number of Units
Outstanding at End of 24,310 402.339 853,586 888,850 781,602
Year
- ----------------------------------------------------------------------------------
ALGER AMERICAN
LEVERAGED ALLCAP -
CLASS O SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 12.81 $ 22.52 $ 16.72 $ 13.88
Accumulation Unit
Value Ending $ 12.81 $ 22.52 $ 16.72 $ 13.88 $ 9.061
Number of Units
Outstanding at End of 16,931 276,291 682,579 560,418 474,441
Year
- ----------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP
GROWTH - CLASS O
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.60 $ 15.10 $ 16.28 $ 15.03
Accumulation Unit
Value Ending $ 11.60 $ 15.10 $ 16.28 $ 15.03 $ 10.457
Number of Units
Outstanding at End of 1,813 133,411 613,187 515,103 410,450
Year
- ----------------------------------------------------------------------------------
ALGER AMERICAN SMALL
CAPITALIZATION - CLASS
O SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.31 $ 16.02 $ 11.52 $ 8.02
Accumulation Unit
Value Ending $ 11.31 $ 16.02 $ 11.52 $ 8.02 $ 5.842
Number of Units
Outstanding at End of 5,133 77,078 249,260 328,999 283,731
Year
- ----------------------------------------------------------------------------------
DWS BALANCED - CLASS A
SUB-ACCOUNT(2)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
DWS BOND - CLASS A
SUB-ACCOUNT (2)
Accumulation Unit
Value Beginning $ 10.00 $ 10.19 $ 9.97 $ 10.88 $ 11.36
Accumulation Unit
Value Ending $ 10.19 $ 9.97 $ 10.88 $ 11.36 $ 12.081
Number of Units
Outstanding at End of 24,670 123,093 155,500 507,663 558,679
Year
- ----------------------------------------------------------------------------------
DWS GLOBAL
OPPORTUNITIES - CLASS
A SUB-ACCOUNT (2)
Accumulation Unit
Value Beginning $ 10.00 $ 10.77 $ 17.65 $ 16.51 $ 12.29
Accumulation Unit
Value Ending $ 10.77 $ 17.65 $ 16.51 $ 12.29 $ 9.724
Number of Units
Outstanding at End of 1,630 43,091 114,023 103,294 130,916
Year
- ----------------------------------------------------------------------------------
DWS GROWTH & INCOME -
CLASS A SUB-ACCOUNT
(2)
Accumulation Unit
Value Beginning $ 10.00 $ 10.52 $ 11.02 $ 10.66 $ 9.34
Accumulation Unit
Value Ending $ 10.52 $ 11.02 $ 10.66 $ 9.34 $ 7.087
Number of Units
Outstanding at End of 8,690 138,946 192,522 218,214 201,541
Year
- ----------------------------------------------------------------------------------
DWS INTERNATIONAL -
CLASS A SUB-ACCOUNT
(2)
Accumulation Unit
Value Beginning $ 10.00 $ 10.38 $ 15.84 $ 12.25 $ 8.36
Accumulation Unit
Value Ending $ 10.38 $ 15.84 $ 12.25 $ 8.36 $ 6.743
Number of Units
Outstanding at End of 181 56,287 113,301 100,581 105,081
Year
- ----------------------------------------------------------------------------------
FEDERATED CAPITAL
INCOME II SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.13 $ 11.18 $ 10.06 $ 8.57
Accumulation Unit
Value Ending $ 11.13 $ 11.18 $ 10.06 $ 8.57 $ 8.959
Number of Units
Outstanding at End of 35,130 198,037 401,376 420,723 460,608
Year
- ----------------------------------------------------------------------------------
FEDERATED FUND FOR
U.S. GOVERNMENT
SECURITIES II
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.27 $ 10.08 $ 11.05 $ 11.67
Accumulation Unit
Value Ending $ 10.27 $ 10.08 $ 11.05 $ 11.67 $ 12.572
Number of Units
Outstanding at End of 36,743 175,793 406,015 1,994,814 2,695,911
Year
- ----------------------------------------------------------------------------------
46 PROSPECTUS
FEDERATED HIGH INCOME
BOND II SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 9.85 $ 9.95 $ 8.94 $ 8.95
Accumulation Unit
Value Ending $ 9.85 $ 9.95 $ 8.94 $ 8.95 $ 6.435
Number of Units
Outstanding at End of 47,674 196,572 340,164 785,823 296,496
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP ASSET
MANAGER(SM) - INITIAL
CLASS SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.80 $ 11.85 $ 11.25 $ 10.65
Accumulation Unit
Value Ending $ 10.80 $ 11.85 $ 11.25 $ 10.65 $ 9.601
Number of Units
Outstanding at End of 12,172 154,441 278,326 334,328 371,447
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP
CONTRAFUND(R) -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.46 $ 14.06 $ 12.97 $ 11.24
Accumulation Unit
Value Ending $ 11.46 $ 14.06 $ 12.97 $ 11.24 $ 10.060
Number of Units
Outstanding at End of 28,065 548,967 1,1001,494 1,006,844 1,084,534
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP
EQUITY-INCOME -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.83 $ 11.37 $ 12.18 $ 11.43
Accumulation Unit
Value Ending $ 10.83 $ 11.37 $ 12.18 $ 11.43 $ 9.375
Number of Units
Outstanding at End of 39,303 616,769 1,208,699 1,289,762 1,218,166
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP GROWTH -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.62 $ 15.78 $ 13.87 $ 11.28
Accumulation Unit
Value Ending $ 11.62 $ 15.78 $ 13.87 $ 11.28 $ 7.786
Number of Units
Outstanding at End of 13,317 541,326 1,300,830 1,366,004 1,121,334
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP INDEX 500
- - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.36 $ 13.52 $ 12.11 $ 10.51
Accumulation Unit
Value Ending $ 11.36 $ 13.52 $ 12.11 $ 10.51 $ 8.073
Number of Units
Outstanding at End of 67,638 983,492 1,795,382 2,032,615 1,782,207
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP MONEY
MARKET - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.15 $ 10.54 $ 11.07 $ 11.39
Accumulation Unit
Value Ending $ 10.15 $ 10.54 $ 11.07 $ 11.39 $ 11.436
Number of Units
Outstanding at End of 69,742 1,451,852 2,194,471 2,969,960 3,542,199
Year
- ----------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS
- - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.50 $ 14.79 $ 11.81 $ 9.20
Accumulation Unit
Value Ending $ 10.50 $ 14.79 $ 11.81 $ 9.20 $ 7.240
Number of Units
Outstanding at End of 77,591 26,260 132,253 137,725 200,173
Year
- ----------------------------------------------------------------------------------
JANUS ASPEN SERIES
BALANCED -
INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.69 $ 14.63 $ 14.12 $ 13.29
Accumulation Unit
Value Ending $ 11.69 $ 14.63 $ 14.12 $ 13.29 $ 7.762
Number of Units
Outstanding at End of 39,593 722,058 1,595,397 1,044,409 94,361
Year
- ----------------------------------------------------------------------------------
JANUS ASPEN SERIES
FLEXIBLE BOND -
INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.25 $ 10.29 $ 10.80 $ 11.49
Accumulation Unit
Value Ending $ 10.25 $ 10.29 $ 10.80 $ 11.49 $ 12.280
Number of Units
Outstanding at End of 52,969 197,019 218,753 418,584 1,721,351
Year
- ----------------------------------------------------------------------------------
JANUS ASPEN SERIES
FOREIGN STOCK -
SERVICE SHARES
SUB-ACCOUNT (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 7.675
Number of Units
Outstanding at End of -- -- -- -- 1,378,111
Year
- ----------------------------------------------------------------------------------
JANUS ASPEN SERIES
LARGE CAP GROWTH -
INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.86 $ 16.86 $ 14.23 $ 10.57
Accumulation Unit
Value Ending $ 11.86 $ 16.86 $ 14.23 $ 10.57 $ 12.531
Number of Units
Outstanding at End of 35,519 927,469 1,955,539 1,856,493 623,206
Year
- ----------------------------------------------------------------------------------
JANUS ASPEN SERIES MID
CAP GROWTH -
INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 12.27 $ 27.32 $ 18.39 $ 11.00
Accumulation Unit
Value Ending $ 12.27 $ 27.32 $ 18.39 $ 11.00 $ 7.827
Number of Units
Outstanding at End of 4,895 440,699 1,027,581 926,849 694,192
Year
- ----------------------------------------------------------------------------------
47 PROSPECTUS
JANUS ASPEN SERIES
WORLDWIDE GROWTH -
INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.68 $ 17.35 $ 14.45 $ 11.07
Accumulation Unit
Value Ending $ 10.68 $ 17.35 $ 14.45 $ 11.07 $ 8.143
Number of Units
Outstanding at End of 64,108 931,544 2,485,879 2,316,369 1,719,720
Year
- ----------------------------------------------------------------------------------
LEGG MASON PARTNERS
VARIABLE INVESTORS -
CLASS I SUB-ACCOUNT
(4)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
LSA BALANCED (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 8.678
Number of Units
Outstanding at End of -- -- -- -- 2,230
Year
- ----------------------------------------------------------------------------------
MFS EMERGING GROWTH -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.75 $ 20.50 $ 16.28 $ 10.69
Accumulation Unit
Value Ending $ 11.75 $ 20.50 $ 16.28 $ 10.69 $ 6.994
Number of Units
Outstanding at End of 5,861 114,684 274,444 331,023 247,624
Year
- ----------------------------------------------------------------------------------
MFS INVESTORS TRUST -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.20 $ 11.80 $ 11.63 $ 9.66
Accumulation Unit
Value Ending $ 11.20 $ 11.80 $ 11.63 $ 9.66 $ 7.536
Number of Units
Outstanding at End of 10,591 133,121 217,691 295,343 269,101
Year
- ----------------------------------------------------------------------------------
MFS NEW DISCOVERY -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.35 $ 19.44 $ 18.82 $ 17.65
Accumulation Unit
Value Ending $ 11.35 $ 19.44 $ 18.82 $ 17.65 $ 11.918
Number of Units
Outstanding at End of 842 55,274 219,172 188,675 183,131
Year
- ----------------------------------------------------------------------------------
MFS RESEARCH - INITIAL
CLASS SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.08 $ 13.57 $ 12.75 $ 9.92
Accumulation Unit
Value Ending $ 11.08 $ 13.57 $ 12.75 $ 9.92 $ 7.389
Number of Units
Outstanding at End of 8,940 75,847 240,203 207,793 186,178
Year
- ----------------------------------------------------------------------------------
MFS TOTAL RETURN -
INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.61 $ 10.80 $ 12.38 $ 12.25
Accumulation Unit
Value Ending $ 10.61 $ 10.80 $ 12.38 $ 12.25 $ 11.473
Number of Units
Outstanding at End of 11,410 118,240 207,489 436,363 642,776
Year
- ----------------------------------------------------------------------------------
OPPENHEIMER MAIN
STREET SMALL CAP(R)/VA
- - SERVICE SHARES
SUB-ACCOUNT (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 7.847
Number of Units
Outstanding at End of -- -- -- -- 97,205
Year
- ----------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND
(U.S. DOLLAR-HEDGED) -
ADMINISTRATIVE SHARES
SUB-ACCOUNT (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 10.565
Number of Units
Outstanding at End of -- -- -- -- 75,670
Year
- ----------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN
- - ADMINISTRATIVE
SHARES SUB-ACCOUNT (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 10.557
Number of Units
Outstanding at End of -- -- -- -- 539,429
Year
- ----------------------------------------------------------------------------------
PREMIER VIT OPCAP
BALANCED SUB-ACCOUNT
(3)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
PREMIER VIT OPCAP
SMALL CAP SUB-ACCOUNT
(3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 7.200
Number of Units
Outstanding at End of -- -- -- -- 88,999
Year
- ----------------------------------------------------------------------------------
48 PROSPECTUS
PUTNAM VT
INTERNATIONAL GROWTH
AND INCOME - CLASS IB
SUB-ACCOUNT
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 8.198
Number of Units
Outstanding at End of -- -- -- -- 38,105
Year
- ----------------------------------------------------------------------------------
STI CLASSIC CAPITAL
APPRECIATION
SUB-ACCOUNT
Accumulation Unit
Value Beginning -- $ 10.00 $ 10.08 $ 10.26 $ 9.59
Accumulation Unit
Value Ending -- $ 10.08 $ 10.26 $ 9.59 $ 7.397
Number of Units
Outstanding at End of -- 20,427 23,194 42,077 56,403
Year
- ----------------------------------------------------------------------------------
STI CLASSIC
INTERNATIONAL EQUITY
SUB-ACCOUNT (5)
Accumulation Unit
Value Beginning -- $ 10.00 $ 10.51 $ 10.02 $ 8.18
Accumulation Unit
Value Ending -- $ 10.51 $ 10.02 $ 8.18 $ 6.573
Number of Units
Outstanding at End of -- 21 1,718 88,369 24,111
Year
- ----------------------------------------------------------------------------------
STI CLASSIC LARGE CAP
VALUE EQUITY
SUB-ACCOUNT
Accumulation Unit
Value Beginning -- $ 10.00 $ 8.64 $ 9.42 $ 9.20
Accumulation Unit
Value Ending -- $ 8.64 $ 9.42 $ 9.20 $ 7.540
Number of Units
Outstanding at End of -- 8,610 10,105 196,823 104,266
Year
- ----------------------------------------------------------------------------------
STRONG OPPORTUNITY II
- - INVESTOR CLASS
SUB-ACCOUNT
Accumulation Unit
Value(1) Beginning $ 10.00 $ 10.94 $ 14.57 $ 15.34 $ 14.59
Accumulation Unit
Value Ending $ 10.94 $ 14.57 $ 15.34 $ 14.59 $ 10.541
Number of Units
Outstanding at End of 603 46,155 168,801 322,014 380,519
Year
- ----------------------------------------------------------------------------------
T. ROWE PRICE EQUITY
INCOME - I SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.78 $ 11.05 $ 12.33 $ 12.36
Accumulation Unit
Value Ending $ 10.78 $ 11.05 $ 12.33 $ 12.36 $ 10.602
Number of Units
Outstanding at End of 14,739 128,022 261,772 581,145 608,043
Year
- ----------------------------------------------------------------------------------
T. ROWE PRICE
INTERNATIONAL STOCK -
I SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 10.78 $ 14.57 $ 11.52 $ 8.85
Accumulation Unit
Value Ending $ 10.78 $ 14.57 $ 11.52 $ 8.85 $ 7.137
Number of Units
Outstanding at End of 2,401 22,869 65,454 92,572 99,915
Year
- ----------------------------------------------------------------------------------
T. ROWE PRICE MID-CAP
GROWTH - I SUB-ACCOUNT
(6)
Accumulation Unit
Value Beginning $ 10.00 $ 11.50 $ 14.06 $ 14.91 $ 14.59
Accumulation Unit
Value Ending $ 11.50 $ 14.06 $ 14.91 $ 14.59 $ 11.345
Number of Units
Outstanding at End of 7,608 85,857 344,756 368,137 436,260
Year
- ----------------------------------------------------------------------------------
T. ROWE PRICE NEW
AMERICA GROWTH - I
SUB-ACCOUNT
Accumulation Unit
Value Beginning $ 10.00 $ 11.25 $ 12.52 $ 11.05 $ 9.62
Accumulation Unit
Value Ending $ 11.25 $ 12.52 $ 11.05 $ 9.62 $ 6.813
Number of Units
Outstanding at End of 4,126 57,131 100,767 108,815 165,424
Year
- ----------------------------------------------------------------------------------
VAN KAMPEN LIT
AGGRESSIVE GROWTH,
CLASS II SUB-ACCOUNT
(3)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
VAN KAMPEN LIT GROWTH
AND INCOME, CLASS II
SUB-ACCOUNT (3)
Accumulation Unit
Value Beginning -- -- -- -- $ 10.00
Accumulation Unit
Value Ending -- -- -- -- $ 8.163
Number of Units
Outstanding at End of -- -- -- -- 36,430
Year
- ----------------------------------------------------------------------------------
VAN KAMPEN UIF U.S.
MID CAP VALUE, CLASS I
SUB-ACCOUNT (7)(8)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE
DISCOVERY SUB-ACCOUNT
(9)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE
OPPORTUNITY
SUB-ACCOUNT (9)
Accumulation Unit
Value Beginning -- -- -- -- --
Accumulation Unit
Value Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
- ----------------------------------------------------------------------------------
49 PROSPECTUS
Year ending December 31,
FUND 2003 2004 2005
- -------------------------------------------------------------------------------
AIM V.I. BASIC VALUE - SERIES I
SUB-ACCOUNT
Accumulation Unit Value Beginning -- $ 10.000 $ 10.821
Accumulation Unit Value Ending -- $ 10.821 $ 11.301
Number of Units Outstanding at End of -- 269,780 253,928
Year
- -------------------------------------------------------------------------------
ALGER AMERICAN GROWTH - CLASS O
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.640 $ 10.198 $ 10.625
Accumulation Unit Value Ending $ 10.198 $ 10.625 $ 11.756
Number of Units Outstanding at End of 807,544 719,914 607,853
Year
- -------------------------------------------------------------------------------
ALGER AMERICAN INCOME & GROWTH - CLASS O
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 9.078 $ 11.641 $ 12.398
Accumulation Unit Value Ending $ 11.641 $ 12.398 $ 12.665
Number of Units Outstanding at End of 775,012 686,795 553,769
Year
- -------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP - CLASS O
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 9.061 $ 12.055 $ 12.881
Accumulation Unit Value Ending $ 12.055 $ 12.881 $ 14.559
Number of Units Outstanding at End of 518,914 454,884 380,525
Year
- -------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH - CLASS O
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.457 $ 15.264 $ 17.040
Accumulation Unit Value Ending $ 15.264 $ 17.040 $ 18.482
Number of Units Outstanding at End of 559,837 571,188 583,687
Year
- -------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION -
CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 5.842 $ 8.212 $ 9.454
Accumulation Unit Value Ending $ 8.212 $ 9.454 $ 10.913
Number of Units Outstanding at End of 468,871 355,278 404,918
Year
- -------------------------------------------------------------------------------
DWS BALANCED - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 10.602
Number of Units Outstanding at End of -- -- 449,167
Year
- -------------------------------------------------------------------------------
DWS BOND - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 12.081 $ 12.535 $ 13.046
Accumulation Unit Value Ending $ 12.535 $ 13.046 $ 13.219
Number of Units Outstanding at End of 493,622 507,579 458,975
Year
- -------------------------------------------------------------------------------
DWS GLOBAL OPPORTUNITIES - CLASS A
SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 9.724 $ 14.317 $ 17.440
Accumulation Unit Value Ending $ 14.317 $ 17.440 $ 20.357
Number of Units Outstanding at End of 193,561 176,147 193,166
Year
- -------------------------------------------------------------------------------
DWS GROWTH & INCOME - CLASS A SUB-ACCOUNT
(2)
Accumulation Unit Value Beginning $ 7.087 $ 8.871 $ 9.651
Accumulation Unit Value Ending $ 8.871 $ 9.651 $ 10.109
Number of Units Outstanding at End of 178,003 150,151 139,183
Year
- -------------------------------------------------------------------------------
DWS INTERNATIONAL - CLASS A SUB-ACCOUNT
(2)
Accumulation Unit Value Beginning $ 6.743 $ 8.507 $ 9.790
Accumulation Unit Value Ending $ 8.507 $ 9.790 $ 11.232
Number of Units Outstanding at End of 114,835 121,969 127,476
Year
- -------------------------------------------------------------------------------
FEDERATED CAPITAL INCOME II SUB-ACCOUNT
Accumulation Unit Value Beginning $ 8.959 $ 7.668 $ 8.325
Accumulation Unit Value Ending $ 7.668 $ 8.325 $ 8.738
Number of Units Outstanding at End of 309,555 297,389 271,194
Year
- -------------------------------------------------------------------------------
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II SUB-ACCOUNT
Accumulation Unit Value Beginning $ 12.572 $ 12.710 $ 13.005
Accumulation Unit Value Ending $ 12.710 $ 13.005 $ 13.104
Number of Units Outstanding at End of 1,589,894 1,136,236 879,855
Year
- -------------------------------------------------------------------------------
50 PROSPECTUS
FEDERATED HIGH INCOME BOND II SUB-ACCOUNT
Accumulation Unit Value Beginning $ 6.435 $ 10.814 $ 11.797
Accumulation Unit Value Ending $ 10.814 $ 11.797 $ 11.960
Number of Units Outstanding at End of 707,583 729,703 606,875
Year
- -------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER(SM) - INITIAL
CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 9.601 $ 11.186 $ 11.652
Accumulation Unit Value Ending $ 11.186 $ 11.652 $ 11.973
Number of Units Outstanding at End of 420,226 437,716 433,897
Year
- -------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND(R) - INITIAL
CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.060 $ 12.763 $ 14.555
Accumulation Unit Value Ending $ 12.763 $ 14.555 $ 16.809
Number of Units Outstanding at End of 1,311,861 1,438,118 1,469,954
Year
- -------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME - INITIAL
CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 9.375 $ 12.067 $ 13.291
Accumulation Unit Value Ending $ 12.067 $ 13.291 $ 13.896
Number of Units Outstanding at End of 1,403,132 1,384,897 1,176,532
Year
- -------------------------------------------------------------------------------
FIDELITY VIP GROWTH - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.786 $ 10.215 $ 10.429
Accumulation Unit Value Ending $ 10.215 $ 10.429 $ 10.897
Number of Units Outstanding at End of 1,141,572 1,091,575 953,608
Year
- -------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 8.073 $ 10.237 $ 11.183
Accumulation Unit Value Ending $ 10.237 $ 11.183 $ 11.578
Number of Units Outstanding at End of 1,907,842 1,817,054 1,583,665
Year
- -------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 11.436 $ 11.406 $ 11.401
Accumulation Unit Value Ending $ 11.406 $ 11.401 $ 11.601
Number of Units Outstanding at End of 2,015,425 1,544,840 1,335,848
Year
- -------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.240 $ 10.251 $ 11.504
Accumulation Unit Value Ending $ 10.251 $ 11.504 $ 13.526
Number of Units Outstanding at End of 294,264 402,967 394,476
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED -
INSTITUTIONAL SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.762 $ 13.832 $ 14.825
Accumulation Unit Value Ending $ 13.832 $ 14.825 $ 15.805
Number of Units Outstanding at End of 1,496,830 1,365,759 1,195,782
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES FLEXIBLE BOND -
INSTITUTIONAL SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 12.280 $ 13.166 $ 13.519
Accumulation Unit Value Ending $ 13.166 $ 13.519 $ 13.619
Number of Units Outstanding at End of 584,216 527,949 492,874
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK -
SERVICE SHARES SUB-ACCOUNT (3)
Accumulation Unit Value Beginning $ 7.675 $ 10.226 $ 11.939
Accumulation Unit Value Ending $ 10.226 $ 11.939 $ 12.526
Number of Units Outstanding at End of 58,782 152,105 114,760
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES LARGE CAP GROWTH -
INSTITUTIONAL SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 12.531 $ 9.984 $ 10.306
Accumulation Unit Value Ending $ 9.984 $ 10.306 $ 10.614
Number of Units Outstanding at End of 1,211,583 1,041,507 860,239
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES MID CAP GROWTH -
INSTITUTIONAL SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.827 $ 10.443 $ 12.453
Accumulation Unit Value Ending $ 10.443 $ 12.453 $ 13.812
Number of Units Outstanding at End of 656,913 642,333 539,509
Year
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES WORLDWIDE GROWTH -
INSTITUTIONAL SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 8.143 $ 9.971 $ 10.318
Accumulation Unit Value Ending $ 9.971 $ 10.318 $ 10.788
Number of Units Outstanding at End of 1,479,355 1,193,225 997,853
Year
- -------------------------------------------------------------------------------
51 PROSPECTUS
LEGG MASON PARTNERS VARIABLE INVESTORS -
CLASS I SUB-ACCOUNT (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value Beginning -- $ 10.000 $ 10.954
Accumulation Unit Value Ending -- $ 10.954 $ 11.525
Number of Units Outstanding at End of -- 60,840 49,518
Year
- -------------------------------------------------------------------------------
LSA BALANCED (3)
Accumulation Unit Value Beginning $ 8.678 -- --
Accumulation Unit Value Ending $ 11.074 -- --
Number of Units Outstanding at End of 83,852 -- --
Year
- -------------------------------------------------------------------------------
MFS EMERGING GROWTH - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 6.994 $ 8.995 $ 10.035
Accumulation Unit Value Ending $ 8.995 $ 10.035 $ 10.821
Number of Units Outstanding at End of 248,807 231,814 202,017
Year
- -------------------------------------------------------------------------------
MFS INVESTORS TRUST - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.536 $ 9.091 $ 9.998
Accumulation Unit Value Ending $ 9.091 $ 9.998 $ 10.596
Number of Units Outstanding at End of 270,484 244,156 207,370
Year
- -------------------------------------------------------------------------------
MFS NEW DISCOVERY - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 11.918 $ 15.738 $ 16.556
Accumulation Unit Value Ending $ 15.738 $ 16.556 $ 17.209
Number of Units Outstanding at End of 224,760 232,616 188,078
Year
- -------------------------------------------------------------------------------
MFS RESEARCH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.389 $ 9.100 $ 10.412
Accumulation Unit Value Ending $ 9.100 $ 10.412 $ 11.085
Number of Units Outstanding at End of 190,978 189,969 142,585
Year
- -------------------------------------------------------------------------------
MFS TOTAL RETURN - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 11.473 $ 13.180 $ 14.490
Accumulation Unit Value Ending $ 13.180 $ 14.490 $ 14.714
Number of Units Outstanding at End of 943,486 1,033,566 970,559
Year
- -------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP(R)/VA -
SERVICE SHARES SUB-ACCOUNT (3)
Accumulation Unit Value Beginning $ 7.847 $ 11.178 $ 13.157
Accumulation Unit Value Ending $ 11.178 $ 13.157 $ 14.256
Number of Units Outstanding at End of 214,471 347,171 305,883
Year
- -------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND (U.S.
DOLLAR-HEDGED) - ADMINISTRATIVE SHARES
SUB-ACCOUNT (3)
Accumulation Unit Value Beginning $ 10.565 $ 10.669 $ 11.122
Accumulation Unit Value Ending $ 10.669 $ 11.122 $ 11.550
Number of Units Outstanding at End of 337,271 347,113 338,440
Year
- -------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN - ADMINISTRATIVE
SHARES SUB-ACCOUNT (3)
Accumulation Unit Value Beginning $ 10.557 $ 10.951 $ 11.343
Accumulation Unit Value Ending $ 10.951 $ 11.343 $ 11.476
Number of Units Outstanding at End of 1,001,817 1,060,049 1,156,641
Year
- -------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED SUB-ACCOUNT
(3)
Accumulation Unit Value Beginning -- $ 10.000 $ 10.812
Accumulation Unit Value Ending -- $ 10.812 $ 10.971
Number of Units Outstanding at End of -- 129,223 113,375
Year
- -------------------------------------------------------------------------------
PREMIER VIT OPCAP SMALL CAP SUB-ACCOUNT
(3)
Accumulation Unit Value Beginning $ 7.200 $ 10.143 $ 11.809
Accumulation Unit Value Ending $ 10.143 $ 11.809 $ 11.669
Number of Units Outstanding at End of 236,796 274,798 207,018
Year
- -------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH AND INCOME
- - CLASS IB SUB-ACCOUNT
Accumulation Unit Value Beginning $ 8.198 $ 11.161 $ 13.335
Accumulation Unit Value Ending $ 11.161 $ 13.335 $ 15.027
Number of Units Outstanding at End of 43,231 89,040 123,886
Year
- -------------------------------------------------------------------------------
STI CLASSIC CAPITAL APPRECIATION
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.397 $ 8.653 $ 9.123
Accumulation Unit Value Ending $ 8.653 $ 9.123 $ 8.929
Number of Units Outstanding at End of 63,977 60,421 57,402
Year
- -------------------------------------------------------------------------------
52 PROSPECTUS
STI CLASSIC INTERNATIONAL EQUITY
SUB-ACCOUNT (5)
Accumulation Unit Value Beginning $ 6.573 $ 8.914 $ 10.506
Accumulation Unit Value Ending $ 8.914 $ 10.506 $ 11.720
Number of Units Outstanding at End of 7,301 5,874 5,685
Year
- -------------------------------------------------------------------------------
STI CLASSIC LARGE CAP VALUE EQUITY
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.540 $ 9.168 $ 10.439
Accumulation Unit Value Ending $ 9.168 $ 10.439 $ 10.696
Number of Units Outstanding at End of 53,974 192,125 91,183
Year
- -------------------------------------------------------------------------------
STRONG OPPORTUNITY II - INVESTOR CLASS
SUB-ACCOUNT
Accumulation Unit Value(1) Beginning $ 10.541 $ 14.263 --
Accumulation Unit Value Ending $ 14.263 $ 16.652 --
Number of Units Outstanding at End of 356,248 374,321 --
Year
- -------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME - I
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.602 $ 13.140 $ 14.913
Accumulation Unit Value Ending $ 13.140 $ 14.913 $ 15.306
Number of Units Outstanding at End of 744,659 895,153 874,317
Year
- -------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK - I
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 7.137 $ 9.201 $ 10.338
Accumulation Unit Value Ending $ 9.201 $ 10.338 $ 11.847
Number of Units Outstanding at End of 173,635 264,060 255,863
Year
- -------------------------------------------------------------------------------
T. ROWE PRICE MID-CAP GROWTH - I
SUB-ACCOUNT (6)
Accumulation Unit Value Beginning $ 11.345 $ 15.505 $ 18.121
Accumulation Unit Value Ending $ 15.505 $ 18.121 $ 20.534
Number of Units Outstanding at End of 619,155 586,887 504,417
Year
- -------------------------------------------------------------------------------
T. ROWE PRICE NEW AMERICA GROWTH - I
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 6.813 $ 9.090 $ 9.955
Accumulation Unit Value Ending $ 9.090 $ 9.995 $ 10.271
Number of Units Outstanding at End of 155,957 173,326 157,832
Year
- -------------------------------------------------------------------------------
VAN KAMPEN LIT AGGRESSIVE GROWTH, CLASS
II SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- $ 10.000 $ 11.156
Accumulation Unit Value Ending -- $ 11.156 $ 12.242
Number of Units Outstanding at End of -- 44,940 49,948
Year
- -------------------------------------------------------------------------------
VAN KAMPEN LIT GROWTH AND INCOME, CLASS
II SUB-ACCOUNT (3)
Accumulation Unit Value Beginning $ 8.163 $ 10.293 $ 11.600
Accumulation Unit Value Ending $ 10.293 $ 11.600 $ 12.570
Number of Units Outstanding at End of 152,145 354,336 434,444
Year
- -------------------------------------------------------------------------------
VAN KAMPEN UIF U.S. MID CAP VALUE, CLASS
I SUB-ACCOUNT (7)(8)
Accumulation Unit Value Beginning -- $ 10.000 $ 11.333
Accumulation Unit Value Ending -- $ 11.333 $ 12.570
Number of Units Outstanding at End of -- 309,322 353,741
Year
- -------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE DISCOVERY
SUB-ACCOUNT (9)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 11.481
Number of Units Outstanding at End of -- -- 293,780
Year
- -------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE OPPORTUNITY
SUB-ACCOUNT (9)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 11.040
Number of Units Outstanding at End of -- -- 510,068
Year
- -------------------------------------------------------------------------------
53 PROSPECTUS
ACCUMULATION UNIT VALUES/(1)/
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
Year ending December 31,
FUND 2000 2001 2002 2003 2004 2005
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value Beginning -- -- -- -- $ 10.000 $ 10.781
Accumulation Unit Value Ending -- -- -- -- $ 10.781 $ 11.197
Number of Units Outstanding at End of Year -- -- -- -- 244,914 251,607
- ---------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN GROWTH - CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.16 $ 7.07 $ 4.651 $ 6.175 $ 6.398
Accumulation Unit Value Ending $ 8.16 $ 7.07 $ 4.651 $ 6.175 $ 6.398 $ 7.041
Number of Units Outstanding at End of Year 11,130 97,242 108,296 308,042 439,952 492,261
- ---------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN INCOME & GROWTH - CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.28 $ 7.81 $ 5.284 $ 6.738 $ 7.137
Accumulation Unit Value Ending $ 9.28 $ 7.81 $ 5.284 $ 6.738 $ 7.137 $ 7.252
Number of Units Outstanding at End of Year 32,338 92,660 202,665 354,359 396,418 381,157
- ---------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP - CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 7.68 $ 6.34 $ 4.116 $ 5.447 $ 5.788
Accumulation Unit Value Ending $ 7.68 $ 6.34 $ 4.116 $ 5.447 $ 5.788 $ 6.506
Number of Units Outstanding at End of Year 62,468 136,468 264,242 542,296 727,607 721,253
- ---------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH - CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.44 $ 8.67 $ 5.996 $ 8.703 $ 9.663
Accumulation Unit Value Ending $ 9.44 $ 8.67 $ 5.996 $ 8.703 $ 9.663 $ 10.424
Number of Units Outstanding at End of Year 123,576 107,872 295,309 836,891 999,864 1,007,060
- ---------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION - CLASS O SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 7.22 $ 4.99 $ 3.619 $ 5.060 $ 5.793
Accumulation Unit Value Ending $ 7.22 $ 4.99 $ 3.619 $ 5.060 $ 5.793 $ 6.651
Number of Units Outstanding at End of Year 5,134 116,699 128,015 283,201 359,793 408,709
- ---------------------------------------------------------------------------------------------------------------------------
DWS BALANCED - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning -- -- -- -- -- $ 10.000
Accumulation Unit Value Ending -- -- -- -- -- $ 10.562
Number of Units Outstanding at End of Year -- -- -- -- -- 140,966
- ---------------------------------------------------------------------------------------------------------------------------
DWS BOND - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 10.00 $ 10.61 $ 11.02 $ 11.655 $ 12.026 $ 12.447
Accumulation Unit Value Ending $ 10.19 $ 11.02 $ 11.655 $ 12.026 $ 12.447 $ 12.544
Number of Units Outstanding at End of Year 24,670 60,002 89,305 179,258 242,774 235,908
- ---------------------------------------------------------------------------------------------------------------------------
DWS GLOBAL OPPORTUNITIES - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.12 $ 6.75 $ 5.313 $ 7.780 $ 9.425
Accumulation Unit Value Ending $ 9.12 $ 6.75 $ 5.313 $ 7.780 $ 9.425 $ 10.942
Number of Units Outstanding at End of Year 11,777 24,877 51,809 159,642 254,808 309,298
- ---------------------------------------------------------------------------------------------------------------------------
DWS GROWTH & INCOME - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 8.35 $ 6.305 $ 7.849 $ 8.492
Accumulation Unit Value Ending $ 9.59 $ 8.35 $ 6.305 $ 7.849 $ 8.492 $ 8.847
Number of Units Outstanding at End of Year 3,100 23,428 37,769 76,611 99,749 85,054
- ---------------------------------------------------------------------------------------------------------------------------
DWS INTERNATIONAL - CLASS A SUB-ACCOUNT (2)
Accumulation Unit Value Beginning $ 10.00 $ 8.71 $ 5.91 $ 4.740 $ 5.948 $ 6.808
Accumulation Unit Value Ending $ 8.71 $ 5.91 $ 4.740 $ 5.948 $ 6.808 $ 7.768
Number of Units Outstanding at End of Year 4,151 18,248 36,822 144,072 174,503 190,759
- ---------------------------------------------------------------------------------------------------------------------------
FEDERATED CAPITAL INCOME II SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.14 $ 7.74 $ 9.115 $ 6.855 $ 7.401
Accumulation Unit Value Ending $ 9.14 $ 7.74 $ 9.115 $ 6.855 $ 7.401 $ 7.726
Number of Units Outstanding at End of Year 689 1,970 92,428 51,656 76,744 76,010
- ---------------------------------------------------------------------------------------------------------------------------
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 10.61 $ 11.15 $ 11.942 $ 12.006 $ 12.218
Accumulation Unit Value Ending $ 10.61 $ 11.15 $ 11.942 $ 12.006 $ 12.218 $ 12.243
Number of Units Outstanding at End of Year 230 69,662 408,779 580,553 605,532 530,059
- ---------------------------------------------------------------------------------------------------------------------------
54 PROSPECTUS
FEDERATED HIGH INCOME BOND II SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.19 $ 9.15 $ 5.784 $ 10.941 $ 11.870
Accumulation Unit Value Ending $ 9.19 $ 9.15 $ 5.784 $ 10.941 $ 11.870 $ 11.968
Number of Units Outstanding at End of Year 597 52,109 24,658 246,278 444,657 439,857
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER(SM) - INITIAL CLASS
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 9.03 $ 8.095 $ 9.379 $ 9.716
Accumulation Unit Value Ending $ 9.59 $ 9.03 $ 8.095 $ 9.379 $ 9.716 $ 9.929
Number of Units Outstanding at End of Year 299 33,474 73,114 116,121 181,632 176,415
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND(R) - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.38 $ 8.08 $ 7.195 $ 9.078 $ 10.296
Accumulation Unit Value Ending $ 9.38 $ 8.08 $ 7.195 $ 9.078 $ 10.296 $ 11.826
Number of Units Outstanding at End of Year 19,089 104,405 348,537 888,353 1,158,838 1,260,810
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 11.04 $ 10.30 $ 8.405 $ 10.759 $ 11.786
Accumulation Unit Value Ending $ 11.04 $ 10.30 $ 8.405 $ 10.759 $ 11.786 $ 12.255
Number of Units Outstanding at End of Year 4,932 75,559 174,403 306,020 434,981 395,964
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.39 $ 6.79 $ 4.659 $ 6.080 $ 6.173
Accumulation Unit Value Ending $ 8.39 $ 6.79 $ 4.659 $ 6.080 $ 6.173 $ 6.415
Number of Units Outstanding at End of Year 52,890 98,555 305,305 625,498 939,071 831,880
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.04 $ 7.80 $ 5.960 $ 7.516 $ 8.166
Accumulation Unit Value Ending $ 9.04 $ 7.80 $ 5.960 $ 7.516 $ 8.166 $ 8.407
Number of Units Outstanding at End of Year 102,744 312,663 365,351 978,400 1,444,339 1,362,101
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 10.23 $ 10.47 $ 10.456 $ 10.373 $ 10.311
Accumulation Unit Value Ending $ 10.23 $ 10.47 $ 10.456 $ 10.373 $ 10.311 $ 10.435
Number of Units Outstanding at End of Year 30,553 140,649 310,441 819,516 618,241 694,730
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.44 $ 6.54 $ 5.119 $ 7.208 $ 8.045
Accumulation Unit Value Ending $ 8.44 $ 6.54 $ 5.119 $ 7.208 $ 8.045 $ 9.406
Number of Units Outstanding at End of Year 6,868 58,855 109,892 235,043 382,839 426,944
- ---------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED - INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.62 $ 9.00 $ 8.273 $ 9.267 $ 9.878
Accumulation Unit Value Ending $ 9.62 $ 9.00 $ 8.273 $ 9.267 $ 9.878 $ 10.473
Number of Units Outstanding at End of Year 43,584 199,196 356,912 699,022 705,500 691,502
- ---------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FLEXIBLE BOND - INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 10.40 $ 11.01 $ 11.943 $ 12.480 $ 12.743
Accumulation Unit Value Ending $ 10.40 $ 11.01 $ 11.943 $ 12.480 $ 12.743 $ 12.767
Number of Units Outstanding at End of Year 25 104,700 114,051 254,643 312,969 291,063
- ---------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK - SERVICE SHARES
SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 7.734 $ 10.132 $ 11.765
Accumulation Unit Value Ending -- -- $ 7.734 $ 10.132 $ 11.765 $ 12.276
Number of Units Outstanding at End of Year -- -- 36,688 37,023 71,988 79,929
- ---------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES LARGE CAP GROWTH - INSTITUTIONAL
SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 1000 $ 8.32 $ 6.15 $ 4.441 $ 5.746 $ 5.898
Accumulation Unit Value Ending $ 8.32 $ 6.15 $ 4.441 $ 5.746 $ 5.898 $ 6.042
Number of Units Outstanding at End of Year 98,273 116,481 162,987 251,235 275,805 257,364
- ---------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES MID CAP GROWTH - INSTITUTIONAL SHARES
SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 6.65 $ 3.96 $ 2.799 $ 3.715 $ 4.405
Accumulation Unit Value Ending $ 6.65 $ 3.96 $ 2.799 $ 3.715 $ 4.405 $ 4.860
Number of Units Outstanding at End of Year 272,048 266,218 307,400 412,644 466,868 505,828
- ---------------------------------------------------------------------------------------------------------------------------
55 PROSPECTUS
JANUS ASPEN SERIES WORLDWIDE GROWTH - INSTITUTIONAL
SHARES SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.19 $ 6.24 $ 4.564 $ 5.558 $ 5.719
Accumulation Unit Value Ending $ 8.19 $ 6.24 $ 4.564 $ 5.558 $ 5.719 $ 5.947
Number of Units Outstanding at End of Year 66,346 167,331 245,789 365,025 414,342 364,847
- ---------------------------------------------------------------------------------------------------------------------------
LEGG MASON PARTNERS VARIABLE INVESTORS - CLASS I
SUB-ACCOUNT (4)
Accumulation Unit Value Beginning -- -- -- -- $ 10.000 $ 10.913
Accumulation Unit Value Ending -- -- -- -- $ 10.913 $ 11.419
Number of Units Outstanding at End of Year -- -- -- -- 47,102 45,145
- ---------------------------------------------------------------------------------------------------------------------------
LSA BALANCED (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 8.646 -- --
Accumulation Unit Value Ending -- -- $ 8.646 $ 10.973 -- --
Number of Units Outstanding at End of Year -- -- 2,157 46,166 -- --
- ---------------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.15 $ 5.33 $ 3.465 $ 4.432 $ 4.917
Accumulation Unit Value Ending $ 8.15 $ 5.33 $ 3.465 $ 4.432 $ 4.917 $ 5.273
Number of Units Outstanding at End of Year 66,991 107,324 123,692 227,669 274,686 269,766
- ---------------------------------------------------------------------------------------------------------------------------
MFS INVESTORS TRUST - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.85 $ 8.13 $ 6.308 $ 7.567 $ 8.276
Accumulation Unit Value Ending $ 9.85 $ 8.13 $ 6.308 $ 7.567 $ 8.276 $ 8.724
Number of Units Outstanding at End of Year 3,223 22985 52,812 121,843 136,211 135,382
- ---------------------------------------------------------------------------------------------------------------------------
MFS NEW DISCOVERY - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.97 $ 8.36 $ 5.615 $ 7.374 $ 7.715
Accumulation Unit Value Ending $ 8.97 $ 8.36 $ 5.615 $ 7.374 $ 7.715 $ 7.975
Number of Units Outstanding at End of Year 113,237 118,208 205,837 477,819 623,501 560,525
- ---------------------------------------------------------------------------------------------------------------------------
MFS RESEARCH - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.87 $ 6.86 $ 5.084 $ 6.227 $ 7.085
Accumulation Unit Value Ending $ 8.87 $ 6.86 $ 5.084 $ 6.227 $ 7.085 $ 7.502
Number of Units Outstanding at End of Year 6,208 23,332 32,958 50,336 53,593 52,102
- ---------------------------------------------------------------------------------------------------------------------------
MFS TOTAL RETURN - INITIAL CLASS SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 11.20 $ 11.03 $ 10.273 $ 11.736 $ 12.832
Accumulation Unit Value Ending $ 11.20 $ 11.03 $ 10.273 $ 11.736 $ 12.832 $ 12.959
Number of Units Outstanding at End of Year 8,401 60,889 250,026 454,021 590,723 622,265
- ---------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL CAP(R)/VA - SERVICE SHARES
SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 7.818 $ 11.076 $ 12.965
Accumulation Unit Value Ending -- -- $ 7.818 $ 11.076 $ 12.965 $ 13.972
Number of Units Outstanding at End of Year -- -- 41,593 193,863 323,468 312,606
- ---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND (U.S. DOLLAR-HEDGED) -
ADMINISTRATIVE SHARES SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 10.526 $ 10.571 $ 10.960
Accumulation Unit Value Ending -- -- $ 10.526 $ 10.571 $ 10.960 $ 11.319
Number of Units Outstanding at End of Year -- -- 4,596 79,683 100,873 106,489
- ---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN - ADMINISTRATIVE SHARES
SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 10.518 $ 10.851 $ 11.178
Accumulation Unit Value Ending -- -- $ 10.518 $ 10.851 $ 11.178 $ 11.247
Number of Units Outstanding at End of Year -- -- 85,455 428,033 604,097 614,406
- ---------------------------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- -- -- $ 10.000 $ 10.772
Accumulation Unit Value Ending -- -- -- -- $ 10.772 $ 10.870
Number of Units Outstanding at End of Year -- -- -- -- 91,944 106,673
- ---------------------------------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP SMALL CAP SUB-ACCOUNT (3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 7.173 $ 10.051 $ 11.637
Accumulation Unit Value Ending -- -- $ 7.173 $ 10.051 $ 11.637 $ 11.436
Number of Units Outstanding at End of Year -- -- 8,929 172,641 244,720 236,295
- ---------------------------------------------------------------------------------------------------------------------------
56 PROSPECTUS
PUTNAM VT INTERNATIONAL GROWTH AND INCOME - CLASS IB
SUB-ACCOUNT
Accumulation Unit Value Beginning -- -- $ 10.00 $ 8.168 $ 11.059 $ 13.141
Accumulation Unit Value Ending -- -- $ 8.168 $ 11.059 $ 13.141 $ 14.727
Number of Units Outstanding at End of Year -- -- 6,727 39,731 58,105 61,333
- ---------------------------------------------------------------------------------------------------------------------------
STI CLASSIC CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.63 $ 8.95 $ 6.870 $ 7.992 $ 8.380
Accumulation Unit Value Ending $ 9.63 $ 8.95 $ 6.870 $ 7.992 $ 8.380 $ 8.157
Number of Units Outstanding at End of Year 903 7,596 31,178 54,246 63,858 58,249
- ---------------------------------------------------------------------------------------------------------------------------
STI CLASSIC INTERNATIONAL EQUITY SUB-ACCOUNT (5)
Accumulation Unit Value Beginning $ 10.00 $ 9.25 $ 7.50 $ 6.001 $ 8.093 $ 9.486
Accumulation Unit Value Ending $ 9.25 $ 7.50 $ 6.001 $ 8.093 $ 9.486 $ 10.525
Number of Units Outstanding at End of Year 0 1,363 189 186 182 180
- ---------------------------------------------------------------------------------------------------------------------------
STI CLASSIC LARGE CAP VALUE EQUITY SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 11.70 $ 11.36 $ 9.262 $ 11.201 $ 12.683
Accumulation Unit Value Ending $ 11.70 $ 11.36 $ 9.262 $ 11.201 $ 12.683 $ 12.925
Number of Units Outstanding at End of Year 1,615 18,026 19,587 30,898 100,258 68,271
- ---------------------------------------------------------------------------------------------------------------------------
STRONG OPPORTUNITY II - INVESTOR CLASS SUB-ACCOUNT
Accumulation Unit Value(1) Beginning $ 10.00 $ 10.15 $ 9.60 $ 6.899 $ 9.284 --
Accumulation Unit Value Ending $ 10.15 $ 9.60 $ 6.899 $ 9.284 $ 10.780 --
Number of Units Outstanding at End of Year 4,607 117,620 278,117 409,953 454,476 --
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME - I SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 11.52 $ 11.48 $ 9.895 $ 12.073 $ 13.627
Accumulation Unit Value Ending $ 11.52 $ 11.48 $ 9.895 $ 12.073 $ 13.627 $ 13.909
Number of Units Outstanding at End of Year 113 47,501 228,732 526,597 761,565 796,314
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK - I SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 8.55 $ 6.53 $ 5.239 $ 6.716 $ 7.505
Accumulation Unit Value Ending $ 8.55 $ 6.53 $ 5.239 $ 6.716 $ 7.505 $ 8.554
Number of Units Outstanding at End of Year 5,575 16,460 39,170 110,909 176,753 203,771
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE MID-CAP GROWTH - I SUB-ACCOUNT (6)
Accumulation Unit Value Beginning $ 10.00 $ 10.06 $ 9.79 $ 7.569 $ 10.288 $ 11.957
Accumulation Unit Value Ending $ 10.06 $ 9.79 $ 7.569 $ 10.288 $ 11.957 $ 13.476
Number of Units Outstanding at End of Year 6,092 82,744 231,318 574,018 675,635 621,478
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE NEW AMERICA GROWTH - I SUB-ACCOUNT
Accumulation Unit Value Beginning $ 10.00 $ 9.01 $ 7.80 $ 5.489 $ 7.284 $ 7.933
Accumulation Unit Value Ending $ 9.01 $ 7.80 $ 5.489 $ 7.284 $ 7.933 $ 8.140
Number of Units Outstanding at End of Year 0 14,973 80,509 84,065 120,707 126,892
- ---------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIT AGGRESSIVE GROWTH, CLASS II SUB-ACCOUNT
(3)
Accumulation Unit Value Beginning -- -- -- -- $ 10.000 $ 11.114
Accumulation Unit Value Ending -- -- -- -- $ 11.114 $ 12.130
Number of Units Outstanding at End of Year -- -- -- -- 77,019 52,894
- ---------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIT GROWTH AND INCOME, CLASS II SUB-ACCOUNT
(3)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 8.133 $ 10.199 $ 11.431
Accumulation Unit Value Ending -- -- $ 8.133 $ 10.199 $ 11.431 $ 12.319
Number of Units Outstanding at End of Year -- -- 12,359 106,750 238,529 277,577
- ---------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN UIF U.S. MID CAP VALUE, CLASS I SUB-ACCOUNT
(7)(8)
Accumulation Unit Value Beginning -- -- -- -- $ 10.000 $ 11.290
Accumulation Unit Value Ending -- -- -- -- $ 11.290 $ 12.455
Number of Units Outstanding at End of Year -- -- -- -- 220,091 280,918
- ---------------------------------------------------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE DISCOVERY SUB-ACCOUNT (9)
Accumulation Unit Value Beginning -- -- -- -- -- $ 10.000
Accumulation Unit Value Ending -- -- -- -- -- $ 11.435
Number of Units Outstanding at End of Year -- -- -- -- -- 177,119
- ---------------------------------------------------------------------------------------------------------------------------
57 PROSPECTUS
WELLS FARGO ADVANTAGE OPPORTUNITY SUB-ACCOUNT (9)
Accumulation Unit Value Beginning -- -- -- -- -- $ 10.000
Accumulation Unit Value Ending -- -- -- -- -- $ 10.996
Number of Units Outstanding at End of Year -- -- -- -- -- 449,486
- ---------------------------------------------------------------------------------------------------------------------------
(1) Accumulation unit value: unit of measure used to calculate the value or a
Contract Owner's interest in a Sub-Account for any Valuation Period. An
Accumulation Unit Value does not reflect deduction of certain charges under
the Contract that are deducted from your Contract Value, such as the Contract
Maintenance Charge.
(2) Effective 2/6/2006, Scudder Investments has changed its name to DWS Scudder
Investments, accordingly we have made a corresponding change to the names of
the Sub-Accounts.
(3) First offered 5/1/02.
(4) Effective 5/1/2006, the Salomon Brothers Variable Series Funds Inc. have
been rebranded Legg Mason Partners Variable Portfolios I, Inc., accordingly
we have made a corresponding change to the names of the Sub-Accounts.
(5) Effective September 27, 2002, the STI Classic International Equity Fund is
no longer available for new investments. If you are currently invested in
the Variable Sub-account that invests in this Portfolio you may continue your
investment. If, prior to September 27, 2002, you enrolled in one of our
automatic transaction programs, such as automatic additions, portfolio
rebalancing, or dollar cost averaging, we will continue to effect automatic
transactions into the Variable Sub-Account in accordance with that program.
Outside of these automatic transaction programs, additional allocations will
not be allowed.
(6) Effective May 1, 2004, the T. Rowe Price Mid-Cap Growth Portfolio - I is no
longer available for new investments. If you are currently invested in the
Variable Sub-account that invests in this Portfolio you may continue your
investment. If, prior to May 1, 2004, you enrolled in one of our automatic
transaction programs, such as automatic additions, portfolio rebalancing, or
dollar cost averaging, we will continue to effect automatic transactions into
the Variable Sub-Account in accordance with that program. Outside of these
automatic transaction programs, additional allocations will not be allowed.
(7) First offered 4/30/04.
(8) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
(9) Effective May 1, 2006, the Wells Fargo Advantage Discovery Fund changed its
name to the Wells Fargo Advantage Discovery Fund and the Wells Fargo
Advantage Opportunity Fund changed its name to the Wells Fargo Advantage
Opportunity Fund, accordingly we have made the corresponding changes to the
names of the Sub-Accounts.
(10) A brief explanation of how performance of the Sub-Accounts are calculated
may be found in the Statement of Additional Information.
58 PROSPECTUS
APPENDIX B
- --------------------------------------------------------------------------------
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $ 40,000.00
Guarantee Period: 5 Years
Guaranteed Interest Rate: 5% Annual Effective Rate
5-year Treasury Rate at Time of
Purchase Payment: 6%
The following examples illustrate how the Market Value Adjustment and the
Withdrawal Charge may affect the values of a Contract upon a withdrawal. The 5%
assumed Guaranteed Interest Rate is the rate required to be used in the "Summary
of Expenses." In these examples, the withdrawal occurs one year after the Issue
Date. The Market Value Adjustment operates in a similar manner for transfers,
except that there is no free amount for transfers. No Withdrawal Charge applies
to transfers.
Assuming that the entire $40,000.00 Purchase Payment is allocated to the
Guaranteed Maturity Fixed Account for the Guarantee Period specified above, at
the end of the five-year Guarantee Period the Contract Value would be
$51,051.26. After one year, when the withdrawals occur in these examples, the
Contract Value would be $42,000.00. We have assumed that no prior partial
withdrawals or transfers have occurred.
The Market Value Adjustment and the Withdrawal Charge only apply to the portion
of a withdrawal that is greater than the Free Withdrawal Amount. Accordingly,
the first step is to calculate the Free Withdrawal Amount.
The Free Withdrawal Amount is equal to:
(a) the greater of:
. earnings not previously withdrawn; or
. 15% of your total Purchase Payments in the most recent seven years; plus
(b) an amount equal to your total Purchase Payments made more than seven years
ago, to the extent not previously withdrawn.
Here, (a) equals $6,000.00, because 15% of the total Purchase Payments in the
most recent seven years ($6,000.00 = 15% X $40,000.00) is greater than the
earnings not previously withdrawn ($2,000.00). (b) equals $0, because all of the
Purchase Payments were made less than seven years age. Accordingly, the Free
Withdrawal Amount is $6,000.00.
The formula that we use to determine the amount of the Market Value Adjustment
is:
.9 X (I - J) X N
where: I = the Treasury Rate for a maturity equal to the relevant Guarantee
Period for the week preceding the beginning of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the relevant Guarantee Period for
the week preceding our receipt of your withdrawal request, death benefit
request, transfer request, or annuity option request; and
N = the number of whole and partial years from the date we receive your request
until the end of the relevant Guarantee Period.
We will base the Market Value Adjustment on the current Treasury Rate for a
maturity corresponding in length to the relevant Guarantee Period. These
examples also show the Withdrawal Charge (if any), which would be calculated
separately from the Market Value Adjustment.
EXAMPLE OF A DOWNWARD MARKET VALUE ADJUSTMENT
A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased one year after the Purchase Payment, such that the five-year Treasury
Rate is now 6.5%. Upon a withdrawal, the market value adjustment factor would
be:
.9 X (.06 - .065) X 4 = -.0180
The Market Value Adjustment is a reduction of $648.00 from the amount withdrawn:
$ - 648.00 = -.0180 X ($42,000.00 - $6,000.00)
A Withdrawal Charge of 7% would be assessed against the Purchase Payments
withdrawn that are less than seven years old and are not eligible for free
withdrawal. Under the Contract, earnings are deemed to be withdrawn before
Purchase Payments. Accordingly, in this example, the amount of the Purchase
Payment eligible for free withdrawal would equal the Free Withdrawal Amount less
the interest credited or $4,000.00 ($6,000.00 - $2,000.00).
Therefore, the Withdrawal Charge would be:
$2,520.00 = 7% X (40,000.00 - $4,000.00)
As a result, the net amount payable to you would be:
$38,832.00 = $42,000.00 - $648.00 - $2,520.00
EXAMPLE OF AN UPWARD MARKET VALUE ADJUSTMENT
An upward Market Value Adjustment results from a withdrawal that occurs when
interest rates have decreased. Assume interest rates have decreased one year
after the Purchase Payment, such that the five-year
59 PROSPECTUS
Treasury Rate is now 5.5%. Upon a withdrawal, the market value adjustment factor
would be:
.9 X (.06 - .055) X 4 = .0180
The Market Value Adjustment would increase the amount withdrawn by $648.00, as
follows:
$648.00 = .0180 X ($42,000.00 - $6,000.00)
As above, in this example, the amount of the Purchase Payment eligible for free
withdrawal would equal the Free Withdrawal Amount less the interest credited or
$4,000.00 ($6,000.00 - $2,000.00). Therefore, the Withdrawal Charge would be:
$2,520.00 = 7% X ($40,000.00 - $4,000.00)
As a result, the net amount payable to you would be:
$40,128.00 = $42,000.00 + $648.00 - $2,520.00
EXAMPLE OF A PARTIAL WITHDRAWAL
If you request a partial withdrawal from a Guarantee Period, we can either (1)
withdraw the specified amount of Contract Value and pay you that amount as
adjusted by any applicable Market Value Adjustment or (2) pay you the amount
requested, and subtract an amount from your Contract Value that equals the
requested amount after application of the Market Value Adjustment and Withdrawal
Charge. Unless you instruct us otherwise, when you request a partial withdrawal
we will assume that you wish to receive the amount requested. We will make the
necessary calculations and on your request provide you with a statement showing
our calculations.
For example, if in the first example you wished to receive $20,000.00 as a
partial withdrawal, the Market Value Adjustment and Withdrawal Charge would be
calculated as follows
Let: AW = the total amount to be withdrawn
from your Contract Value
MVA = Market Value Adjustment
WC = Withdrawal Charge
AW' = amount subject to Market Value
Adjustment and Withdrawal Charge
Then AW - $20,000.00 = WC - MVA
:
Since neither the Market Value Adjustment nor the Withdrawal Charge apply to the
free withdrawal amount, we can solve directly for the amount subject to the
Market Value Adjustment and the Withdrawal Charge (i.e., AW'), which equals AW -
$6,000.00. Then, AW = AW' + $6,000, and AW' + $6,000.00 - $20,000.00 = WC - MVA.
MVA = - .018 X AW'
WC = .07 X AW'
WC - MVA = .088AW'
AW' - $14,000.00 = .088AW'
AW' = $14,000.00 / (1 - .088) = $15,350.88
MVA = - .018 X $15,350.88 = - $276.32
WC = .07 X $15,350.88 = $1,074.56
AW = Total amount withdrawn = $15,350.88 + $6,000.00 = $21,350.88
You receive $20,000.00; the total amount subtracted from your contract is
$21,350.88; the Market Value Adjustment is $276.32; and the Withdrawal Charge is
$1,074.56. Your remaining Contract Value is $20,649.12.
If, however, in the same example, you wished to withdraw $20,000.00 from your
Contract Value and receive the adjusted amount, the calculations would be as
follows:
By definition, AW = total amount withdrawn from your Contract Value = $20,000.00
AW' = amount that MVA & WC are applied to
= amount withdrawn in excess of Free
Amount = $20,000.00 - $6,000.00 =
$14,000.00
MVA = - .018 X $14,000.00 = - $252.00
WC = .07 X $14,000.00 = $980.00
You would receive $20,000.00 - $252.00 - $980.00 = $18,768.00; the total amount
subtracted from your Contract Value is $20,000.00. Your remaining Contract Value
would be $22,000.00.
EXAMPLE OF FREE WITHDRAWAL AMOUNT
Assume that in the foregoing example, after four years $8,620.25 in interest had
been credited and that the Contract Value in the Fixed Account equaled
$48,620.25. In this example, if no prior withdrawals have been made, you could
withdraw up to $8,620.25 without incurring a Market Value Adjustment or a
Withdrawal Charge. The Free Withdrawal Amount would be $8,620.25, because the
interest credited ($8,620.25) is greater than 15% of the Total Purchase Payments
in the most recent seven years ($40,000.00 X .15 = $6,000.00).
60 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 April 30, 2006, 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 Principal Underwriting Agreement (1)
3(a) Articles of Incorporation (2)
3(b) Bylaws (2)
4(a) Form of Variable Annuity Contract (3)
4(b) Form of Application (3)
5 Opinion and Consent of Counsel regarding legality (4)
21 Subsidiaries of Registrant - Not Applicable
23 Independent Auditors' Consent (filed herewith)
27 Financial Data Schedule (5)
99 (a) Experts (filed herewith)
99 (b) Powers of Attorney for Lawrence W. Dahl, John C. Lounds,
Samuel H. Pilch, John C. Pintozzi, Kevin R. Slawin,
Casey J. Sylla, Steven C. Verney, Douglas B. Welch (filed herewith)
- -------------------------------------------------
(1) Post-Effective Amendment to Form N-4 for Lincoln Benefit Life Variable
Annuity Account (File No. 333-50545, 811-07924) filed January 22, 1999
(2) Registration Statement on Form S-6 for the Lincoln Benefit Life Variable
Life Account (File No. 333-47717) filed March 11, 1998
(3) Registration Statement on Form N-4 for Lincoln Benefit Life Variable
Annuity Account (File No. 333-50545, 811-07924) filed April 22, 1998
(4) Post-Effective Amendment to Form S-1 on Form S-3 for Lincoln Benefit Life
Company (File No. 333-59765) filed April 21, 2000.
(5) 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 Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Lincoln and State of
Nebraska on April 19th, 2006.
LINCOLN BENEFIT LIFE COMPANY (Registrant)
* By: /s/ Lawrence W. Dahl
------------------------------------------------
Lawrence W. Dahl
President and Chief Operating Officer
LINCOLN BENEFIT LIFE COMPANY
(Depositor)
*By: /s/ Lawrence W. Dahl
------------------------------------------------
Lawrence W. Dahl
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons and in the capacities and on April 19th, 2006.
(Signature) (Title)
*/s/ Lawrence W. Dahl
- ----------------------------------- President, Chief Operating Officer
Lawrence W. Dahl & Director
(Principal Executive Officer)
*/s/ Samuel H. Pilch
- ---------------------------------- Group Vice President & Controller
Samuel H. Pilch (Principal Accounting Officer)
*/s/ Steven C. Verney
- --------------------------------- Treasurer
Steven C. Verney (Principal Financial Officer)
*/s/ John C. Lounds
- -------------------------------- Director, Vice President
John C. Lounds
*/s/ Douglas B. Welch
- -------------------------------- Director, Vice President
Douglas B. Welch
*/s/ John C. Pintozzi
- -------------------------------- Director, Senior Vice President and
John C. Pintozzi Chief Financial Officer
*/s/ Kevin R. Slawin
- -------------------------------- Director, Vice President
Kevin R. Slawin
*/s/ Casey J. Sylla
- -------------------------------- Director, Chairman of the Board
Casey J. Sylla and Chief Executive Officer
/s/ Michael J. Velotta
- --------------------------------- Director, Senior Vice President,
Michael J. Velotta General Counsel and Secretary
*By Michael J. Velotta, pursuant to Power of Attorney.
EXHIBITS
Exhibit No. Description
23 Independent Auditors' Consent
99 (a) Experts
99 (b) Powers of Attorney for Lawrence W. Dahl, John C. Lounds,
Samuel H. Pilch, John C. Pintozzi, Kevin R. Slawin,
Casey J. Sylla, Steven C. Verney, Douglas B. Welch