As Filed with the Securities and Exchange Commission on March 24, 2008
File No.333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LINCOLN BENEFIT LIFE COMPANY
(Exact name of Registrant as Specified in its Charter)
Nebraska 6300 470221457
(State or other (Primary Standard (I.R.S.Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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2940 South 84th St., Lincoln, Nebraska 68506
1-800-865-5237
(Address of registrant's principal executive offices)
JOCELYN LIU, ESQ.
LINCOLN BENEFIT LIFE COMPANY
2940 South 84th St.
LINCOLN, NE 68506
1-800-865-5237
(Name of agent for service)
If any of the 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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box: [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [x] Smaller reporting company [ ]
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
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Proposed maximum
Title of securities Amount to be Proposed maximum aggregate offering Amount of
to be registered registered (1) offering price per unit price (1) registration fee
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Deferred annuity interests
and participating interests
therein $25,000,000 (1) $25,000,000 $1,395
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(1) The maximum aggregate offering price is estimated solely for the purpose of
determining the registration fee. The amount being registered and the
proposed maximum offering price per unit are not applicable in that the
Contract does not provide for a predetermined amount or number of units.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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Lincoln Benefit Life Company
Consultant I Variable Annuity
Supplement, dated May 1, 2009
This supplement amends certain disclosure contained in the prospectus for
certain annuity contracts issued by Lincoln Benefit Life Company.
Under the "More Information" section, the subsection entitled "Legal Matters" is
deleted and replaced with the following:
LEGAL MATTERS
Certain matters of state law pertaining to the Contracts, including the validity
of the Contracts and Lincoln Benefit Life's right to issue such Contracts under
applicable state insurance law, have been passed upon by Susan L. Lees, General
Counsel of Lincoln Benefit Life.
The "Annual Reports and other Documents" section is deleted and replaced with
the following:
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit Life Company ("LBL") incorporates by reference into the
prospectus its latest annual report on Form 10-K filed pursuant to Section 13(a)
or Section 15(d) of the Exchange Act and all other reports filed with the SEC
under the Exchange Act since the end of the fiscal year covered by its latest
annual report, including filings made on Form 10-Q and Form 8-K. In addition,
all documents subsequently filed by LBL pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act also are incorporated into the prospectus by
reference. LBL will provide to each person, including any beneficial owner, to
whom a prospectus is delivered, a copy of any or all of the information that has
been incorporated by reference into the prospectus but not delivered with the
prospectus. Such information will be provided upon written or oral request at no
cost to the requester by writing to LBL, P.O. Box 758561, Topeka, KS 66675-8566
or by calling 1-800-457-7617. LBL files periodic reports as required under the
Securities Exchange Act of 1934. The public may read and copy any materials that
LBL files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy, and information
statements, and other information regarding issuers that file electronically
with the SEC (see http://www.sec.gov).
LINCOLN BENEFIT LIFE COMPANY
Supplement, dated February 17, 2009, to the
Prospectus Dated May 1, 2008
Consultant I Variable Annuity
RidgeWorth Variable Trust Liquidation
The purpose of this notice is to advise you of certain changes to your variable
annuity contract issued by Lincoln Benefit Life Company.
The Board of Trustees of the RidgeWorth Variable Trust (the "Trust"), which is
an investment within your variable annuity, has approved the liquidation and
closing of the Trust. The Trust expects to complete the liquidation on or around
April 30, 2009 (the "Liquidation Date"). After the Liquidation Date, the
following Sub-Accounts, as applicable, will no longer be available for
investment within your variable annuity (each Sub-Account we refer to here as a
"Liquidating Sub-Account"):
Liquidating Sub-Accounts:
RidgeWorth Classic Large Cap Growth Stock Fund RidgeWorth Classic Large Cap
Value Equity Fund
As a result, unless you take further action, on the Liquidation Date any
Contract Value you have allocated to a Liquidating Sub-Account will be
transferred to the Fidelity VIP Money Market Portfolio - Initial Class
Sub-Account (the "Money Market Sub-Account") within your variable annuity:
If you wish to transfer your Contract Value out of a Liquidating Sub-Account and
into any other available investment option within your annuity before the
Liquidation Date, you may do so without charge and without the transfer being
applied against your annual free transfers. If you take no action before the
Liquidation Date, during the 60-day period after the Liquidation Date you may
transfer your Contract Value corresponding to a Liquidating Sub-Account out of
the Money Market Sub-Account and into any other available investment option
within your annuity without charge and without the transfer being applied
against your annual free transfers.
For your convenience, we have enclosed a transfer form that you may use to
transfer your Contract Value to another investment option(s). Please refer to
your prospectus or accessallstate.com for detailed information about available
investment options. If you need assistance in choosing investment options,
please contact your financial representative. You may request a transfer via the
internet at accessallstate.com. If you have elected the telephone transfer
privilege, you may transfer your Contract Value by calling the Annuity Service
Center.
If you have any questions, or would like a copy of any fund prospectuses, please
contact your financial representative or the Annuity Service Center at
1-800-457-7617.
Lincoln Benefit Life Company
Lincoln Benefit Life Variable Annuity Account
Supplement, dated February 17, 2009, to the
Prospectus Dated May 1, 2008 for
Consultant I Variable Annuity
Premier VIT OpCap Balanced Portfolio
The purpose of this prospectus supplement is to advise you of changes to certain
investment options within your variable annuity contract issued by Lincoln
Benefit Life Company.
The Board of Trustees of Premier VIT (the "Trust") has approved the liquidation
and closing of Premier VIT OpCap Balanced Portfolio (the "Liquidating Fund") to
occur on or about April 24, 2009 ("Liquidation Date"). After the Liquidation
Date, the Premier VIT OpCap Balanced Portfolio Sub-Account within your variable
annuity will no longer be available for investment. As a result, on the
Liquidation Date any Contract Value allocated to the Premier VIT OpCap Balanced
Portfolio Sub-Account will be transferred to the Fidelity VIP Money Market
Portfolio Initial Class Sub-Account ("Money Market Sub-Account").
If you wish to transfer your Contract Value out of the Liquidating Fund and into
any other available investment option within your annuity before the Liquidation
Date, you may do so without charge and without the transfer being applied
against your annual free transfers. If you take no action before the Liquidation
Date, during the 60-day period after the Liquidation Date you may transfer your
Contract Value corresponding to the Liquidating Fund out of the Money Market
Sub-Account and into any other available investment option within your annuity
without charge and without the transfer being applied against your annual free
transfers.
For your convenience, we have enclosed a transfer form that you may use to
transfer your Contract Value to another investment option(s). Please refer to
accessallstate.com for detailed information about available investment options.
If you need assistance in choosing investment options, please contact your
financial representative. You may request a transfer via the internet at
accessallstate.com. If you have elected the telephone transfer privilege, you
may transfer your Contract Value by calling the Annuity Service Center.
If you have any questions, or would like a copy of any fund prospectuses, please
contact your financial representative or the Annuity Service Center at
1-800-457-7617.
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: 5801 SW 6th Ave., Topeka, KS 66606-0001
MAILING ADDRESS: P.O. Box 758561, Topeka, KS 66675-8566
Telephone Number: 1-800-457-7617
Fax Number: 1-785-228-4584
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 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 Oppenheimer Variable Account Funds
I) (Service Shares)
The Alger American Fund (Class O) Premier VIT
DWS Variable Series I (Class A) PIMCO Variable Insurance Trust
(Administrative Shares)
DWS Variable Series II (Class A)
Putnam Variable Trust (Class IB)
Federated Insurance Series
RidgeWorth Variable Trust
Fidelity(R) Variable Insurance
Products (Initial Class) T. Rowe Price Equity Series, Inc. (I)
Janus Aspen Series (Institutional T. Rowe Price International Series,
Shares and Service Shares) Inc. (I)
Legg Mason Partners Variable Equity The Universal Institutional Funds,
Trust (Class I) Inc. (Class I)
MFS(R) Variable Insurance Trust(SM) Van Kampen Life Investment Trust
(Initial Class) (Class II)
Wells Fargo Variable Trust Funds
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, 2008.
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 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.
1 PROSPECTUS
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, 2008. 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 46 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
Definitions 4
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Fee Tables 5
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Questions and Answers About Your Contract 7
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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 11
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Annuitant 11
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Modification of the Contract 11
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Assignment 11
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Free Look Period 11
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Purchases and Contract Value 12
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Minimum Purchase Payment 12
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Automatic Payment Plan 12
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Allocation of Purchase Payments 12
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Contract Value 12
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Separate Account Accumulation Unit Value 12
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Transfer During Accumulation Period 13
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Market Timing & Excessive Trading 13
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Trading Limitations 13
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Automatic Dollar Cost Averaging Program 14
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Portfolio Rebalancing 15
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The Investment and Fixed Account Options 16
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Separate Account Investments 16
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The Portfolios 16
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Voting Rights 19
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Additions, Deletions, and Substitutions of Securities 19
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The Fixed Account 20
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General 20
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Guaranteed Maturity Fixed Account Option 20
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Market Value Adjustment 21
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Dollar Cost Averaging Fixed Account Option 21
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Annuity Benefits 22
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Annuity Date 22
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Annuity Options 22
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Other Options 23
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Annuity Payments: General 23
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Variable Annuity Payments 23
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Fixed Annuity Payments 24
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Transfers During the Annuity Period 24
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Death Benefit During Annuity Period 24
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Certain Employee Benefit Plans 24
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Other Contract Benefits 24
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Death Benefit 24
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Beneficiary 28
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Contract Loans for 403(b) Contracts 29
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Withdrawals (Redemptions) 30
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Systematic Withdrawal Program 31
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ERISA Plans 31
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Minimum Contract Value 31
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Contract Charges 31
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Mortality and Expense Risk Charge 31
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Administrative Charges 32
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Contract Maintenance Charge 32
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Administrative Expense Charge 32
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Transfer Fee 32
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Sales Charges 32
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Premium Taxes 34
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Deduction for Separate Account Income Taxes 34
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Other Expenses 34
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Taxes 35
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Taxation of Lincoln Benefit Life Company 35
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Taxation of Variable Annuities in General 35
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Income Tax Withholding 37
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Tax Qualified Contracts 38
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Description of Lincoln Benefit Life Company and the
Separate Account 43
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Lincoln Benefit Life Company 43
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Separate Account 43
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State Regulation of Lincoln Benefit 43
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Financial Statements 44
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Administration 44
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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 45
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Table of Contents of Statement of Additional Information 46
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Appendix A Accumulation Unit Values 47
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Appendix B Illustration of a Market Value Adjustment 63
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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
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. 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.
4 PROSPECTUS
Fee Tables
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) - 7%
CONTRIBUTION YEAR APPLICABLE CHARGE
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8 + 0%
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
reimbursement. More detail concerning each Portfolio's fees and expenses is
contained in the prospectus for each Portfolio.
Minimum Maximum
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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% 1.39%
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(1) Expenses are shown as a percentage of Portfolio average daily net assets
before any waiver or reimbursement as of December 31, 2007.
5 PROSPECTUS
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 Portfolio Expenses $957 $1,609 $2,195 $3,832
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Costs Based on Minimum Annual Portfolio Expenses $825 $1,215 $1,543 $2,554
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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 Annual Portfolio Expenses $362 $1,099 $1,855 $3,832
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Costs Based on Minimum Annual Portfolio Expenses $230 $ 705 $1,203 $2,554
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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.
6 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 not be allocated to the Fixed Account(s). You may
7 PROSPECTUS
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.
8 PROSPECTUS
Transfer Fee. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to $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 Year Applicable 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,
9 PROSPECTUS
the Beneficiary must submit to us a complete request for 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 758565, Topeka, KS
66675-8565, or call us at (800) 457-7617.
10 PROSPECTUS
CONDENSED FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Sub-Account for 1998 through 2007.
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, 2007, are included in the Statement
of Additional Information. Lincoln Benefit's financial statements as of December
31, 2007, 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 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
11 PROSPECTUS
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 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.
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 27. 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
12 PROSPECTUS
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 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.
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 21.
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 5, 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.
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,
13 PROSPECTUS
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 (e.g., International, High Yield,
and Small Cap Variable Sub-Accounts);
.. 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 (e.g., 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
The underlying Portfolios are authorized by SEC regulation to adopt and impose
redemption fees if a Portfolio's Board of Directors determines that such fees
are necessary to minimize or eliminate short-term transfer activity that can
reduce or dilute the value of outstanding shares issued by the Portfolio. The
Portfolio will set the parameters relating to the redemption fee and such
parameters may vary by Portfolio. If a Portfolio elects to adopt and charge
redemption fees, these fees will be passed on to the Contract/Policy Owner(s)
responsible for the short-term transfer activity generating the fee.
We will administer and collect redemption fees in connection with transfers
between the Variable Sub- Accounts and forward these fees to the Portfolio.
Please consult the Portfolio's prospectus for more complete information
regarding the fees and charges associated with each Portfolio.
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
14 PROSPECTUS
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 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.
15 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 Fund - Series I Long-term growth of capital Invesco A I M Advisors,
Inc. (1)
- --------------------------------------------------------------------------------------------------------------------------
The Alger American Fund
- --------------------------------------------------------------------------------------------------------------------------
Alger American LargeCap Growth Long-term capital appreciation
Portfolio - Class O
- -----------------------------------------------------------------------------------------------
Alger American Income & Growth To provide a high level of dividend income. Its
Portfolio - Class O secondary goal is to provide capital appreciation. Fred Alger Management, Inc.
- -----------------------------------------------------------------------------------------------
Alger American Capital Appreciation Long-term capital appreciation
Portfolio - Class O
- -----------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio Long-term capital appreciation
- Class O
- -----------------------------------------------------------------------------------------------
Alger American SmallCap Growth Long-term capital appreciation
Portfolio - Class O
- -----------------------------------------------------------------------------------------------
DWS Variable Series I
- --------------------------------------------------------------------------------------------------------------------------
DWS Bond VIP - Class A To maximize total return consistent with preservation
of capital and prudent investment management, by
investing for both current income and capital
appreciation Deutsche Investment
- -----------------------------------------------------------------------------------------------Management Americas Inc.
DWS Global Opportunities VIP - Class A Above-average capital appreciation over the long
term
- -----------------------------------------------------------------------------------------------
DWS Growth & Income VIP - Class A Long-term growth of capital, current income and
growth of income
- -----------------------------------------------------------------------------------------------
DWS International VIP - Class A Long-term growth of capital primarily through
diversified holdings of marketable foreign equity
investments
- -----------------------------------------------------------------------------------------------
DWS Variable Series II
- --------------------------------------------------------------------------------------------------------------------------
DWS Balanced VIP - Class A High total return, a combination of income and Deutsche Investment
capital appreciation Management Americas Inc.
- --------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series
- --------------------------------------------------------------------------------------------------------------------------
Federated Capital Income Fund II High current income and moderate capital Federated Equity
appreciation Management Company of
Pennsylvania
- --------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Current income
Securities II Federated Investment
- -----------------------------------------------------------------------------------------------Management Company
Federated High Income Bond Fund II High current income
- -----------------------------------------------------------------------------------------------
16 PROSPECTUS
Portfolio Each Portfolio Seeks Investment Adviser
- -------------------------------------------------------------------------------------------------------------------------
Fidelity(R) Variable Insurance Products
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager(SM) To obtain high total return with reduced risk over the
Portfolio - Initial Class long term by allocating its assets among stocks,
bonds, and short-term instruments.
- -------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(R) Portfolio - Long-term capital appreciation.
Initial Class
- -------------------------------------------------------------------------------------------------Fidelity Management &
Fidelity VIP Equity-Income Portfolio - Reasonable Income. The fund will also consider the Research Company
Initial Class potential for capital appreciation. The funds
goal is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard & Poors
500(SM) Index (S&P 500(R) ).
- -------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial To achieve capital appreciation.
Class
- -------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Investment results that correspond to the total return
Initial Class of common stocks publicly traded in the United
States, as represented by the Standard & Poors
500(SM) Index (S&P 500(R) ).
- -------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - As high a level of current income as is consistent with
Initial Class preservation of capital and liquidity.
- -------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Long-term growth of capital.
Initial Class
- -------------------------------------------------------------------------------------------------
Janus Aspen Series
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Long-term capital growth, consistent with
Institutional Shares preservation of capital and balanced by current
income.
- -------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond To obtain maximum total return, consistent with
Portfolio - Institutional Shares preservation of capital. Janus Capital Management
- -------------------------------------------------------------------------------------------------LLC
Janus Aspen Series International Growth Long-term growth of capital.
Portfolio - Service Shares
- -------------------------------------------------------------------------------------------------
Janus Aspen Series Large Cap Growth Long-term growth of capital in a manner consistent
Portfolio - Institutional Shares with the preservation of capital.
- -------------------------------------------------------------------------------------------------
Janus Aspen Series Mid Cap Growth Long-term growth of capital.
Portfolio - Institutional Shares
- -------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Long-term growth of capital in a manner consistent
Portfolio - Institutional Shares with the preservation of capital.
- -------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Equity
Trust
- -------------------------------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Investors Long-term growth of capital with current income as a Legg Mason Partners Fund
Portfolio - Class I secondary objective Advisor, LLC
- -------------------------------------------------------------------------------------------------------------------------
MFS(R) Variable Insurance Trust(SM)
- -------------------------------------------------------------------------------------------------------------------------
MFS Growth Series - Initial Class Capital appreciation
- -------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Capital appreciation
Class
- -------------------------------------------------------------------------------------------------MFS(TM) Investment
MFS New Discovery Series - Initial Class Capital appreciation Management
- -------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class Capital appreciation
- -------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class Total return
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Capital appreciation. OppenheimerFunds, Inc.
Fund(R) /VA - Service Shares
- -------------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
- -------------------------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Maximum total return, consistent with preservation
Dollar- Hedged) - Administrative Shares of capital and prudent investment management. Pacific Investment
- -------------------------------------------------------------------------------------------------Management Company LLC
PIMCO VIT Total Return Portfolio - Maximum total return, consistent with preservation
Administrative Shares of capital and prudent investment management.
- -------------------------------------------------------------------------------------------------
17 PROSPECTUS
Portfolio Each Portfolio Seeks Investment Adviser
- ---------------------------------------------------------------------------------------------------------------------------
Premier VIT
- ---------------------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Balanced Portfolio Growth of capital and investment income
- -----------------------------------------------------------------------------------------------OpCap Advisors LLC
Premier VIT OpCap Small Cap Portfolio Capital appreciation through a diversified portfolio
consisting primarily of securities of companies with
market capitalizations of under $2.2 billion at time
of purchase.
- -----------------------------------------------------------------------------------------------
Putnam Variable Trust
- ---------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Capital growth. Current income is a secondary Putnam Investment
Income Fund - Class IB objective. Management, LLC
- ---------------------------------------------------------------------------------------------------------------------------
RidgeWorth Variable Trust
- ---------------------------------------------------------------------------------------------------------------------------
RidgeWorth Large Cap Growth Stock Fund Capital appreciation
- -----------------------------------------------------------------------------------------------Trusco Capital
RidgeWorth Large Cap Value Equity Fund Capital appreciation with the secondary goal of Management, Inc.
current income
- -----------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - Substantial dividend income as well as long-term
I growth of capital.
- -----------------------------------------------------------------------------------------------T. Rowe Price Associates,
T. Rowe Price Mid-Cap Growth Portfolio Long-term capital appreciation Inc.
- I (2)
- -----------------------------------------------------------------------------------------------
T. Rowe Price New America Growth Long-term growth of capital
Portfolio - I
- -----------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Long-term growth of capital T. Rowe Price International,
Portfolio - I Inc.
- ---------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
UIF U.S. Mid Cap Value Portfolio, Above-average total return over a market cycle of Van Kampen (3)
Class I (4) three to five years by investing in common stocks
and other equity securities.
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Mid Cap Growth Capital growth
Portfolio, Class II Van Kampen Asset
- -----------------------------------------------------------------------------------------------Management
Van Kampen LIT Growth and Income Long-term growth of capital and income.
Portfolio, Class II
- -----------------------------------------------------------------------------------------------
Wells Fargo Variable Trust Funds
- ---------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund Long-term capital appreciation.
- -----------------------------------------------------------------------------------------------Wells Fargo Funds
Wells Fargo Advantage VT Opportunity Long-term capital appreciation. Management, LLC
Fund(SM)
- -----------------------------------------------------------------------------------------------
(1) A Fund's investment objective(s) may be changed by the Fund's Board of
Trustees without shareholder approval.
(2) 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.
(3) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
(4) Effective May 1, 2008, the Van Kampen UIF U.S. Mid Cap Value Portfolio
changed its name to the UIF U.S. Mid Cap Value Portfolio.
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
18 PROSPECTUS
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 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.
19 PROSPECTUS
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 1-800-457-7617 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.
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- 457-7617.
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.
20 PROSPECTUS
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.
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 20;
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
21 PROSPECTUS
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 14 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 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
22 PROSPECTUS
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 30 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 24.
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 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 3 1/2%. 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.
23 PROSPECTUS
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 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
24 PROSPECTUS
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 27, 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.
(b) 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 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 13 and
Transfer Fees on page 32 during this 5-year period.
The Beneficiary may not pay additional purchase payments into the Contract under
this election.
25 PROSPECTUS
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 13 and Transfer Fees on page 32 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. 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,
26 PROSPECTUS
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.
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
27 PROSPECTUS
(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:
(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
28 PROSPECTUS
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 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.
29 PROSPECTUS
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 32. Withdrawals from
the Fixed Account may be increased or decreased by a Market Value Adjustment, as
described in "Market Value Adjustment" on page 21.
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 31. 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 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 32. 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;
5) or in the case of hardship.
30 PROSPECTUS
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:
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 5, 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 24.
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
31 PROSPECTUS
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 many years ago
you made the Purchase Payment being withdrawn, as shown in this chart:
WITHDRAWAL CHARGE
CONTRIBUTION YEAR 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 33;
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 33;
.. certain withdrawals for Contracts issued under 403(b) plans or 401 plan
under our prototype as described on page 41;
32 PROSPECTUS
.. withdrawals taken to satisfy IRS minimum distribution rules;
.. withdrawals that qualify for one of the waiver benefits described on pages
33-34; 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 35. 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 35.
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.
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.
33 PROSPECTUS
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 1-800-457-7617.
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.
34 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
35 PROSPECTUS
the separate account investments may cause a Contract 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
36 PROSPECTUS
Contract owned by a non-natural person will be treated as the death of the
Contract Owner.
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. If no election is made or no U.S. taxpayer identification number is
provided 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.
37 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. We
require an original IRS Form W- 8BEN at issue to certify the owners' foreign
status. 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.
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.
38 PROSPECTUS
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.
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)
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs), and
.. from an IRA or attributable to elective deferrals under a 401(k) plan,
403(b) annuity, or certain similar arrangements made to individuals who
(because of their being members of a reserve component) are ordered or
called to active duty after Sept. 11, 2001, and before Dec. 31, 2007, for a
period of more than 179 days or for an indefinite period; and made during
the period beginning on the date of the order or call to duty and ending at
the close of the active duty period.
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.
39 PROSPECTUS
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 the required 10% of the taxable amount. 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. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. 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.
Charitable IRA Distributions. The Pension Protection Act of 2006 Included a
charitable giving incentive permitting tax-free IRA distributions for charitable
purposes.
For distributions in tax years beginning after 2005 and before 2008, the Act
provides an exclusion from gross income, up to $100,000, for otherwise taxable
IRA distributions from a traditional or Roth IRA that are qualified charitable
distributions. To constitute a qualified charitable distribution, the
distribution must be made (1) directly by the IRA trustee to a certain qualified
charitable organizations and (2) on or after the date the IRA owner attains age
70 1/2. Distributions that are excluded from income under this provision are not
taken into account in determining the individual's deduction, if any, for
charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements for
the new income tax exclusion added by the Pension Protection Act. As a result
the general rules for reporting IRA distributions apply.
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. For distributions after 2007, the Pension Protection Act of 2006 allows
distributions from qualified retirement plans including tax sheltered annuities
and governmental Section 457 plans to be rolled over directly into a Roth IRA,
subject to the usual rules that apply to conversions from a traditional IRA into
a Roth IRA. The income portion of a conversion or rollover distribution is
taxable currently, but is exempted from the 10% penalty tax on premature
distributions. An individual with adjusted gross income (AGI) of $100,000 or
more won't be able to rollover amounts from an eligible retirement plan into a
Roth IRA. Please note, however, that the $100,000 AGI limit will be eliminated
for tax years beginning after December 31, 2009. 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
40 PROSPECTUS
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.
If you have a contract issued as an IRA under Code Section 408(b) and request to
change the ownership to an IRA custodian permitted under Section 408, we will
treat a request to change ownership from an individual to a custodian as an
indirect rollover. We will send a Form 1099R to report the distribution and the
custodian should issue a Form 5498 for the contract value contribution.
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. SIMPLE IRA plans must include the provisions of the Economic
Growth and Tax Relief Reconciliation Act of 2007 (EGTRRA) to avoid adverse tax
consequences. If your current SIMPLE IRA plan uses IRS Model Form 5304-SIMPLE
with a revision date of March 2002 or later, then your plan is up to date. If
your plan has a revision date prior to March 2002, please consult with your tax
or legal advisor to determine the action you need to take in order to comply
with this requirement.
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
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.
41 PROSPECTUS
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.
42 PROSPECTUS
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
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.
Effective June 1, 2006, Allstate Life 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 sold,
through a combination of coinsurance and modified coinsurance reinsurance,
substantially all of its variable annuity business, including that of its
subsidiary Lincoln Benefit. Pursuant to the Agreement Allstate Life and PICA
also have entered into an administrative services agreement which provides that
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 have not been changed by these transactions and
agreements. None of the transactions or agreements have changed the fact that we
are primarily liable to you under your Contract.
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 1-800-457-7617. We have
reproduced the Table of Contents of the Statement of Additional Information on
page 46.
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
43 PROSPECTUS
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 758561, Topeka, KS 66675-8561.
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 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 Financial Industry Regulatory Authority.
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,
2007, 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
44 PROSPECTUS
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, P.O. Box 758565, Topeka, KS
66675-8565 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.
45 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
- -----------------------------------------------------------
46 PROSPECTUS
APPENDIX A
Accumulation Unit Values/(1)/ Basic Policy
*The LBL Consultant Variable Annuity I Contracts and all of the Variable
Sub-Accounts shown below were first offered under the Contracts on September 9,
1998, except for the Janus Aspen Series Foreign Stock - Service Shares
Sub-Accounts, LSA Balanced, Oppenheimer Main Street Small Cap(R)/VA - Service
Shares Sub-Account, PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) - Administrative
Shares Sub-Account, PIMCO VIT Total Return - Administrative Shares Sub-Account,
Premier VIT OpCap Balanced Sub-Account, Premier VIT OpCap Small Cap Sub-Account,
Putnam VT International Growth and Income - Class IB Sub-Account, Van Kampen LIT
Aggressive Growth, Class II Sub-Account, Van Kampen LIT Growth and Income, Class
II Sub-Account which were first offered under the Contracts on May 1, 2002; the
AIM V.I. Basic Value - Series I Sub-Account, Legg Mason Partners Variable
Investors - Class I Sub-Account, UIF U.S. Mid Cap Value, Class I Sub-Account
which were first offered under the Contracts on April 30, 2004; the Wells Fargo
Advantage VT Discovery Sub-Account, Wells Fargo Advantage VT Opportunity(SM)
Sub-Account which were first offered under the Contracts on April 8, 2005; and
the DWS Balanced - Class A Sub-Account which was first offered under the
Contracts on April 29, 2005.
The names of the following Sub-Accounts changed since December 31, 2007. The
names shown in the tables of Accumulation Units correspond to the name of the
Sub-Account as of December 31, 2007:
Sub-Account Name as of December 31, 2007
(as appears in the following tables
of Accumulation Unit Values) Sub-Account Name as of May 1, 2008
- --------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio - Class O Alger American LargeCap Growth Portfolio - Class O
- --------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio - Class O Alger American Capital Appreciation Portfolio - Class O
- --------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Capitalization Portfolio - Class O Alger American Small Cap Growth Portfolio
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series - Initial Class MFS Growth Series - Initial Class
- --------------------------------------------------------------------------------------------------------------------
STI Classic Large Cap Growth Stock Fund RidgeWorth Large Cap Growth Stock Fund
- --------------------------------------------------------------------------------------------------------------------
STI Classic Large Cap Value Equity Fund RidgeWorth Large Cap Value Equity Fund
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio - Service Shares Janus Aspen Series International Growth Portfolio -
Service Shares
- --------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth Portfolio, Class II Van Kampen LIT Mid Cap Growth Portfolio, Class II
- --------------------------------------------------------------------------------------------------------------------
47 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY - PROSPECTUS
ACCUMULATION UNIT VALUES (1)
Basic Policy
Mortality & Expense = 1.15
For the Year Ending December 31
Sub-Accounts 1998 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------
AIM V.I. Basic Value Fund - Series I
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- -----------------------------------------------------------------------------------------------------
Alger American Growth Portfolio - Class O
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 Year 51,133 624,209 1,121,843 996,256 734,340
- -----------------------------------------------------------------------------------------------------
Alger American Income & Growth Portfolio - Class O
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 Year 24,310 402,339 853,586 888,850 781,602
- -----------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio - Class O
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 Year 16,931 276,291 682,579 560,418 474,441
- -----------------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio - Class O
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 Year 1,813 133,411 613,187 515,103 410,450
- -----------------------------------------------------------------------------------------------------
Alger American Small Capitalization - Class O
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 Year 5,133 77,078 249,260 328,999 283,731
- -----------------------------------------------------------------------------------------------------
DWS Balanced VIP - Class A
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- -----------------------------------------------------------------------------------------------------
DWS Bond VIP - Class A
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 Year 24,670 123,093 155,500 507,663 558,679
- -----------------------------------------------------------------------------------------------------
DWS Global Opportunities VIP - Class A
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 Year 1,630 43,091 114,023 103,294 130,916
- -----------------------------------------------------------------------------------------------------
DWS Growth & Income VIP - Class A
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 Year 8,690 138,946 192,522 218,214 201,541
- -----------------------------------------------------------------------------------------------------
DWS International VIP - Class A
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 Year 181 56,287 113,301 100,581 105,081
- -----------------------------------------------------------------------------------------------------
Federated Capital Income Fund II
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 Year 35,130 198,037 401,376 420,723 460,608
- -----------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II
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 Year 36,743 175,793 406,015 1,994,814 2,695,911
- -----------------------------------------------------------------------------------------------------
48 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II
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 Year 47,674 196,572 340,164 785,823 296,496
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager Portfolio - Initial Class
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 Year 12,172 154,441 278,326 334,328 371,447
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio - Initial Class
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 Year 28,065 548,967 1,001,494 1,006,844 1,084,534
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Initial Class
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 Year 39,303 616,769 1,208,699 1,289,762 1,218,166
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial Class
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 Year 13,317 541,326 1,300,830 1,366,004 1,121,334
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Initial Class
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 Year 67,638 983,492 1,795,382 2,032,615 1,782,207
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - Initial Class
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 Year 69,742 1,451,852 2,194,471 2,969,960 3,542,199
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Initial Class
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 Year 77,591 26,260 132,253 137,725 200,173
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Institutional Shares
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 Year 39,593 722,058 1,595,397 1,044,409 94,361
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond Portfolio - Institutional Shares
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 Year 52,969 197,019 218,753 418,584 1,721,351
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio - Service Shares
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 7.675
Number of Units Outstanding at End of Year - - - - 1,378,111
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Large Cap Growth Portfolio - Institutional Shares
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 Year 35,519 927,469 1,955,539 1,856,493 623,206
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Mid Cap Growth Portfolio - Institutional Shares
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 Year 4,895 440,699 1,027,581 926,849 694,192
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio - Institutional Shares
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 Year 64,108 931,544 2,485,879 2,316,369 1,719,720
- ------------------------------------------------------------------------------------------------------------------------
49 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Investors Portfolio - Class I
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ------------------------------------------------------------------------------------------------------------------
LSA Balanced
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 8.678
Number of Units Outstanding at End of Year - - - - 2,230
- ------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series - Initial Class
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 Year 5,861 114,684 274,444 331,023 247,624
- ------------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class
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 Year 10,591 133,121 217,691 295,343 269,101
- ------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series - Initial Class
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 Year 842 55,274 219,172 188,675 183,131
- ------------------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class
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 Year 8,940 75,847 240,203 207,793 186,178
- ------------------------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class
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 Year 11,410 118,240 207,489 436,363 642,776
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund/VA - Service Shares
Accumulation Unit Value Beginning - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 7.847
Number of Units Outstanding at End of Year - - - - 97,205
- ------------------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) - Administrative
Shares
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 10.565
Number of Units Outstanding at End of Year - - - - 75,670
- ------------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Administrative Shares
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 10.557
Number of Units Outstanding at End of Year - - - - 539,429
- ------------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Balanced Portfolio
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ------------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Small Cap Portfolio
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 7.200
Number of Units Outstanding at End of Year - - - - 88,999
- ------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund - Class IB
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 8.198
Number of Units Outstanding at End of Year - - - - 38,105
- ------------------------------------------------------------------------------------------------------------------
STI Classic Large Cap Growth Stock Fund (2)
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 Year - 20,427 23,194 42,077 56,403
- ------------------------------------------------------------------------------------------------------------------
50 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 1998 1999 2000 2001 2002
- ----------------------------------------------------------------------------------------------------
STI Classic Large Cap Value Equity Fund
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 Year - 8,610 10,105 196,823 104,266
- ----------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - I
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 Year 14,739 128,022 261,772 581,145 608,043
- ----------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio - I
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 Year 2,401 22,869 65,454 92,572 99,915
- ----------------------------------------------------------------------------------------------------
T. Rowe Price Mid-Cap Growth Portfolio - I (3)
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 Year 7,608 85,857 344,756 368,137 436,260
- ----------------------------------------------------------------------------------------------------
T. Rowe Price New America Growth Portfolio - I
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 Year 4,126 57,131 100,767 108,815 165,424
- ----------------------------------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth Portfolio, Class II
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ----------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income Portfolio, Class II
Accumulation Unit Value Beginning - - - - $ 10.00
Accumulation Unit Value Ending - - - - $ 8.163
Number of Units Outstanding at End of Year - - - - 36,430
- ----------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value Portfolio, Class I (4)
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ----------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ----------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Opportunity Fund
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ----------------------------------------------------------------------------------------------------
51 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY - PROSPECTUS
ACCUMULATION UNIT VALUES (1)
Basic Policy
Mortality & Expense = 1.15
For the Year Ending December 31
Sub-Accounts 2003 2004 2005 2006 2007
- ----------------------------------------------------------------------------------------------------
AIM V.I. Basic Value Fund - Series I
Accumulation Unit Value Beginning - $ 10.000 $ 10.821 $ 11.301 $ 12.634
Accumulation Unit Value Ending - $ 10.821 $ 11.301 $ 12.634 $ 12.669
Number of Units Outstanding at End of Year - 269,780 253,928 235,944 199,610
- ----------------------------------------------------------------------------------------------------
Alger American Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 7.640 $ 10.198 $ 10.625 $ 11.756 $ 12.208
Accumulation Unit Value Ending $ 10.198 $ 10.625 $ 11.756 $ 12.208 $ 14.460
Number of Units Outstanding at End of Year 807,544 719,914 607,853 452,187 340,976
- ----------------------------------------------------------------------------------------------------
Alger American Income & Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 9.078 $ 11.641 $ 12.398 $ 12.665 $ 13.673
Accumulation Unit Value Ending $ 11.641 $ 12.398 $ 12.665 $ 13.673 $ 14.870
Number of Units Outstanding at End of Year 775,012 686,795 553,769 412,877 289,123
- ----------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio - Class O
Accumulation Unit Value Beginning $ 9.061 $ 12.055 $ 12.881 $ 14.559 $ 17.148
Accumulation Unit Value Ending $ 12.055 $ 12.881 $ 14.559 $ 17.148 $ 22.613
Number of Units Outstanding at End of Year 518,914 454,884 380,525 318,953 307,354
- ----------------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 10.457 $ 15.264 $ 17.040 $ 18.482 $ 20.104
Accumulation Unit Value Ending $ 15.264 $ 17.040 $ 18.482 $ 20.104 $ 26.119
Number of Units Outstanding at End of Year 559,837 571,188 583,687 495,198 395,122
- ----------------------------------------------------------------------------------------------------
Alger American Small Capitalization - Class O
Accumulation Unit Value Beginning $ 5.842 $ 8.212 $ 9.454 $ 10.913 $ 12.935
Accumulation Unit Value Ending $ 8.212 $ 9.454 $ 10.913 $ 12.935 $ 14.976
Number of Units Outstanding at End of Year 468,871 355,278 404,918 399,147 268,659
- ----------------------------------------------------------------------------------------------------
DWS Balanced VIP - Class A
Accumulation Unit Value Beginning - - $ 10.000 $ 10.602 $ 11.543
Accumulation Unit Value Ending - - $ 10.602 $ 11.543 $ 11.950
Number of Units Outstanding at End of Year - - 449,167 346,262 249,164
- ----------------------------------------------------------------------------------------------------
DWS Bond VIP - Class A
Accumulation Unit Value Beginning $ 12.081 $ 12.535 $ 13.046 $ 13.219 $ 13.671
Accumulation Unit Value Ending $ 12.535 $ 13.046 $ 13.219 $ 13.671 $ 14.064
Number of Units Outstanding at End of Year 493,622 507,579 458,975 362,090 339,879
- ----------------------------------------------------------------------------------------------------
DWS Global Opportunities VIP - Class A
Accumulation Unit Value Beginning $ 9.724 $ 14.317 $ 17.440 $ 20.357 $ 24.544
Accumulation Unit Value Ending $ 14.317 $ 17.440 $ 20.357 $ 24.544 $ 26.499
Number of Units Outstanding at End of Year 193,561 176,147 193,166 166,415 131,794
- ----------------------------------------------------------------------------------------------------
DWS Growth & Income VIP - Class A
Accumulation Unit Value Beginning $ 7.087 $ 8.871 $ 9.651 $ 10.109 $ 11.345
Accumulation Unit Value Ending $ 8.871 $ 9.651 $ 10.109 $ 11.345 $ 11.355
Number of Units Outstanding at End of Year 178,003 150,151 139,183 102,347 73,259
- ----------------------------------------------------------------------------------------------------
DWS International VIP - Class A
Accumulation Unit Value Beginning $ 6.743 $ 8.507 $ 9.790 $ 11.232 $ 13.967
Accumulation Unit Value Ending $ 8.507 $ 9.790 $ 11.232 $ 13.967 $ 15.805
Number of Units Outstanding at End of Year 114,835 121,969 127,476 127,598 113,896
- ----------------------------------------------------------------------------------------------------
Federated Capital Income Fund II
Accumulation Unit Value Beginning $ 8.959 $ 7.668 $ 8.325 $ 8.738 $ 9.980
Accumulation Unit Value Ending $ 7.668 $ 8.325 $ 8.738 $ 9.980 $ 10.253
Number of Units Outstanding at End of Year 309,555 297,389 271,194 220,546 154,739
- ----------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II
Accumulation Unit Value Beginning $ 12.572 $ 12.710 $ 13.005 $ 13.104 $ 13.478
Accumulation Unit Value Ending $ 12.710 $ 13.005 $ 13.104 $ 13.478 $ 14.146
Number of Units Outstanding at End of Year 1,589,894 1,136,236 879,855 722,780 603,659
- ----------------------------------------------------------------------------------------------------
52 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2003 2004 2005 2006 2007
- -------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II
Accumulation Unit Value Beginning $ 6.435 $ 10.814 $ 11.797 $ 11.960 $ 13.088
Accumulation Unit Value Ending $ 10.814 $ 11.797 $ 11.960 $ 13.088 $ 13.368
Number of Units Outstanding at End of Year 707,583 729,703 606,875 539,007 432,506
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager Portfolio - Initial Class
Accumulation Unit Value Beginning $ 9.601 $ 11.186 $ 11.652 $ 11.973 $ 12.690
Accumulation Unit Value Ending $ 11.186 $ 11.652 $ 11.973 $ 12.690 $ 14.474
Number of Units Outstanding at End of Year 420,226 437,716 433,897 338,607 252,896
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.060 $ 12.763 $ 14.555 $ 16.809 $ 18.546
Accumulation Unit Value Ending $ 12.763 $ 14.555 $ 16.809 $ 18.546 $ 21.536
Number of Units Outstanding at End of Year 1,311,861 1,438,118 1,469,954 1,308,454 1,005,803
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Initial Class
Accumulation Unit Value Beginning $ 9.375 $ 12.067 $ 13.291 $ 13.896 $ 16.496
Accumulation Unit Value Ending $ 12.067 $ 13.291 $ 13.896 $ 16.496 $ 16.539
Number of Units Outstanding at End of Year 1,403,132 1,384,897 1,176,532 941,565 684,837
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial Class
Accumulation Unit Value Beginning $ 7.786 $ 10.2 15 $ 10.429 $ 10.897 $ 11.500
Accumulation Unit Value Ending $ 10.215 $ 10.429 $ 10.897 $ 11.500 $ 14.418
Number of Units Outstanding at End of Year 1,141,572 1,091,575 953,608 769,995 618,823
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Initial Class
Accumulation Unit Value Beginning $ 8.073 $ 10.237 $ 11.183 $ 11.578 $ 13.233
Accumulation Unit Value Ending $ 10.237 $ 11.183 $ 11.578 $ 13.233 $ 13.778
Number of Units Outstanding at End of Year 1,907,842 1,817,054 1,583,665 1,319,112 1,041,479
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - Initial Class
Accumulation Unit Value Beginning $ 11.436 $ 11.406 $ 11.401 $ 11.601 $ 12.017
Accumulation Unit Value Ending $ 11.406 $ 11.401 $ 11.601 $ 12.017 $ 12.487
Number of Units Outstanding at End of Year 2,015,425 1,544,840 1,335,848 1,166,577 1,221,039
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Initial Class
Accumulation Unit Value Beginning $ 7.240 $ 10.251 $ 11.504 $ 13.526 $ 15.773
Accumulation Unit Value Ending $ 10.251 $ 11.504 $ 13.526 $ 15.773 $ 18.273
Number of Units Outstanding at End of Year 294,264 402,967 394,476 366,639 327,028
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 7.762 $ 13.832 $ 14.825 $ 15.805 $ 17.282
Accumulation Unit Value Ending $ 13.832 $ 14.825 $ 15.805 $ 17.282 $ 18.865
Number of Units Outstanding at End of Year 1,496,830 1,365,759 1,195,782 970,410 747,492
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 12.280 $ 13.166 $ 13.519 $ 13.619 $ 14.017
Accumulation Unit Value Ending $ 13.166 $ 13.519 $ 13.619 $ 14.017 $ 14.816
Number of Units Outstanding at End of Year 584,216 527,949 492,874 393,774 327,277
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio - Service Shares
Accumulation Unit Value Beginning $ 7.675 $ 10.226 $ 11.939 $ 12.526 $ 14.605
Accumulation Unit Value Ending $ 10.226 $ 11.939 $ 12.526 $ 14.605 $ 17.055
Number of Units Outstanding at End of Year 58,782 152,105 114,760 84,464 73,894
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Large Cap Growth Portfolio -
Institutional Shares
Accumulation Unit Value Beginning $ 12.531 $ 9.984 $ 10.306 $ 10.614 $ 11.676
Accumulation Unit Value Ending $ 9.984 $ 10.306 $ 10.614 $ 11.676 $ 13.270
Number of Units Outstanding at End of Year 1,211,583 1,041,507 860,239 645,480 469,901
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Mid Cap Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 7.827 $ 10.443 $ 12.453 $ 13.812 $ 15.497
Accumulation Unit Value Ending $ 10.443 $ 12.453 $ 13.812 $ 15.497 $ 18.677
Number of Units Outstanding at End of Year 656,913 642,333 539,509 434,028 344,083
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio -
Institutional Shares
Accumulation Unit Value Beginning $ 8.143 $ 9.971 $ 10.318 $ 10.788 $ 12.594
Accumulation Unit Value Ending $ 9.971 $ 10.318 $ 10.788 $ 12.594 $ 13.634
Number of Units Outstanding at End of Year 1,479,355 1,193,225 997,853 775,658 562,020
- -------------------------------------------------------------------------------------------------------------------------
53 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2003 2004 2005 2006 2007
- -------------------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Investors Portfolio - Class I
Accumulation Unit Value Beginning - $ 10.000 $ 10.954 $ 11.525 $ 13.461
Accumulation Unit Value Ending - $ 10.954 $ 11.525 $ 13.461 $ 13.811
Number of Units Outstanding at End of Year - 60,840 49,518 49,417 35,322
- -------------------------------------------------------------------------------------------------------------
LSA Balanced
Accumulation Unit Value Beginning $ 8.678 - - - -
Accumulation Unit Value Ending $ 11.074 - - - -
Number of Units Outstanding at End of Year 83,852 - - - -
- -------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series - Initial Class
Accumulation Unit Value Beginning $ 6.994 $ 8.995 $ 10.035 $ 10.821 $ 11.531
Accumulation Unit Value Ending $ 8.995 $ 10.035 $ 10.821 $ 11.531 $ 13.798
Number of Units Outstanding at End of Year 248,807 231,814 202,017 165,550 126,996
- -------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class
Accumulation Unit Value Beginning $ 7.536 $ 9.091 $ 9.998 $ 10.596 $ 11.824
Accumulation Unit Value Ending $ 9.091 $ 9.998 $ 10.596 $ 11.824 $ 12.880
Number of Units Outstanding at End of Year 270,484 244,156 207,370 171,767 126,138
- -------------------------------------------------------------------------------------------------------------
MFS New Discovery Series - Initial Class
Accumulation Unit Value Beginning $ 11.918 $ 15.738 $ 16.556 $ 17.209 $ 19.241
Accumulation Unit Value Ending $ 15.738 $ 16.556 $ 17.209 $ 19.241 $ 19.479
Number of Units Outstanding at End of Year 224,760 232,616 188,078 161,666 139,957
- -------------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class
Accumulation Unit Value Beginning $ 7.389 $ 9.100 $ 10.412 $ 11.085 $ 12.095
Accumulation Unit Value Ending $ 9.100 $ 10.412 $ 11.085 $ 12.095 $ 13.521
Number of Units Outstanding at End of Year 190,978 189,969 142,585 119,287 86,910
- -------------------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class
Accumulation Unit Value Beginning $ 11.473 $ 13.180 $ 14.490 $ 14.714 $ 16.260
Accumulation Unit Value Ending $ 13.180 $ 14.490 $ 14.714 $ 16.260 $ 16.734
Number of Units Outstanding at End of Year 943,486 1,033,566 970,559 802,883 661,560
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund/VA - Service Shares
Accumulation Unit Value Beginning $ 7.847 $ 11.178 $ 13.157 $ 14.256 $ 16.144
Accumulation Unit Value Ending $ 11.178 $ 13.157 $ 14.256 $ 16.144 $ 15.720
Number of Units Outstanding at End of Year 214,471 347,171 305,883 279,529 219,803
- -------------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) -
Administrative Shares
Accumulation Unit Value Beginning $ 10.565 $ 10.669 $ 11.122 $ 11.550 $ 11.657
Accumulation Unit Value Ending $ 10.669 $ 11.122 $ 11.550 $ 11.657 $ 11.929
Number of Units Outstanding at End of Year 337,271 347,113 338,440 247,334 175,543
- -------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Administrative Shares
Accumulation Unit Value Beginning $ 10.557 $ 10.951 $ 11.343 $ 11.476 $ 11.771
Accumulation Unit Value Ending $ 10.951 $ 11.343 $ 11.476 $ 11.771 $ 12.643
Number of Units Outstanding at End of Year 1,001,817 1,060,049 1,156,641 944,261 737,286
- -------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Balanced Portfolio
Accumulation Unit Value Beginning - $ 10.000 $ 10.812 $ 10.971 $ 12.005
Accumulation Unit Value Ending - $ 10.812 $ 10.971 $ 12.005 $ 11.330
Number of Units Outstanding at End of Year - 129,223 113,375 99,054 58,167
- -------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Small Cap Portfolio
Accumulation Unit Value Beginning $ 7.200 $ 10.143 $ 11.809 $ 11.669 $ 14.300
Accumulation Unit Value Ending $ 10.143 $ 11.809 $ 11.669 $ 14.300 $ 14.203
Number of Units Outstanding at End of Year 236,796 274,798 207,018 198,198 142,608
- -------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund - Class IB
Accumulation Unit Value Beginning $ 8.198 $ 11.161 $ 13.335 $ 15.027 $ 18.881
Accumulation Unit Value Ending $ 11.161 $ 13.335 $ 15.027 $ 18.881 $ 19.952
Number of Units Outstanding at End of Year 43,231 89,040 123,886 158,576 125,260
- -------------------------------------------------------------------------------------------------------------
STI Classic Large Cap Growth Stock Fund (2)
Accumulation Unit Value Beginning $ 7.397 $ 8.653 $ 9.123 $ 8.929 $ 9.773
Accumulation Unit Value Ending $ 8.653 $ 9.123 $ 8.929 $ 9.773 $ 11.125
Number of Units Outstanding at End of Year 63,977 60,421 57,402 67,263 88,003
- -------------------------------------------------------------------------------------------------------------
54 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2003 2004 2005 2006 2007
- -----------------------------------------------------------------------------------------------------
STI Classic Large Cap Value Equity Fund
Accumulation Unit Value Beginning $ 7.540 $ 9.168 $ 10.439 $ 10.696 $ 12.937
Accumulation Unit Value Ending $ 9.168 $ 10.439 $ 10.696 $ 12.937 $ 13.229
Number of Units Outstanding at End of Year 53,974 192,125 91,183 142,829 83,673
- -----------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - I
Accumulation Unit Value Beginning $ 10.602 $ 13.140 $ 14.913 $ 15.306 $ 17.984
Accumulation Unit Value Ending $ 13.140 $ 14.913 $ 15.306 $ 17.984 $ 18.339
Number of Units Outstanding at End of Year 744,659 895,153 874,317 762,467 575,733
- -----------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio - I
Accumulation Unit Value Beginning $ 7.137 $ 9.201 $ 10.338 $ 11.847 $ 13.934
Accumulation Unit Value Ending $ 9.201 $ 10.338 $ 11.847 $ 13.934 $ 15.553
Number of Units Outstanding at End of Year 173,635 264,060 255,863 244,192 191,891
- -----------------------------------------------------------------------------------------------------
T. Rowe Price Mid-Cap Growth Portfolio - I (3)
Accumulation Unit Value Beginning $ 11.345 $ 15.505 $ 18.121 $ 20.534 $ 21.626
Accumulation Unit Value Ending $ 15.505 $ 18.121 $ 20.534 $ 21.626 $ 25.097
Number of Units Outstanding at End of Year 619,155 586,887 504,417 404,390 295,779
- -----------------------------------------------------------------------------------------------------
T. Rowe Price New America Growth Portfolio - I
Accumulation Unit Value Beginning $ 6.813 $ 9.090 $ 9.955 $ 10.271 $ 10.888
Accumulation Unit Value Ending $ 9.090 $ 9.995 $ 10.271 $ 10.888 $ 12.233
Number of Units Outstanding at End of Year 155,957 173,326 157,832 129,696 117,852
- -----------------------------------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth Portfolio, Class II
Accumulation Unit Value Beginning - $ 10.000 $ 11.156 $ 12.242 $ 12.686
Accumulation Unit Value Ending - $ 11.156 $ 12.242 $ 12.686 $ 14.732
Number of Units Outstanding at End of Year - 44,940 49,948 45,228 39,490
- -----------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income Portfolio, Class II
Accumulation Unit Value Beginning $ 8.163 $ 10.293 $ 11.600 $ 12.570 $ 14.397
Accumulation Unit Value Ending $ 10.293 $ 11.600 $ 12.570 $ 14.397 $ 14.576
Number of Units Outstanding at End of Year 152,145 354,336 434,444 396,566 306,627
- -----------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value Portfolio, Class I (4)
Accumulation Unit Value Beginning - $ 10.000 $ 11.333 $ 12.570 $ 14.984
Accumulation Unit Value Ending - $ 11.333 $ 12.570 $ 14.984 $ 15.958
Number of Units Outstanding at End of Year - 309,322 353,741 276,970 210,481
- -----------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund
Accumulation Unit Value Beginning - - $ 10.000 $ 11.481 $ 12.999
Accumulation Unit Value Ending - - $ 11.481 $ 12.999 $ 15.702
Number of Units Outstanding at End of Year - - 293,780 225,795 161,353
- -----------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Opportunity Fund
Accumulation Unit Value Beginning - - $ 10.000 $ 11.040 $ 12.235
Accumulation Unit Value Ending - - $ 11.040 $ 12.235 $ 12.884
Number of Units Outstanding at End of Year - - 510,068 431,405 339,846
- -----------------------------------------------------------------------------------------------------
* The LBL Consultant Variable Annuity I Contracts and all of the Variable
Sub-Accounts shown below were first offered under the Contracts on
September 9, 1998, except for the Janus Aspen Series Foreign Stock -
Service Shares Sub-Account, LSA Balanced, Oppenheimer Main Street Small
Cap/VA - Service Shares Sub-Account, PIMCO VIT Foreign Bond (U.S.
Dollar-Hedged) - Administrative Shares Sub-Account, PIMCO VIT Total Return
- Administrative Shares Sub-Account, Premier VIT OpCap Balanced
Sub-Account, Premier VIT OpCap Small Cap Sub-Account, Putnam VT
International Growth and Income - Class IB Sub-Account, Van Kampen LIT
Aggressive Growth, Class II Sub-Account, Van Kampen LIT Growth and Income,
Class II Sub-Account which were first offered under the Contracts on May 1,
2002; the AIM V.I. Basic Value - Series I Sub-Account, Legg Mason Partners
Variable Investors - Class I Sub-Account, Van Kampen UIF U.S. Mid Cap
Value, Class I Sub-Account which were first offered under the Contracts on
April 30, 2004; the Wells Fargo Advantage VT Discovery Sub-Account, Wells
Fargo Advantage VT Opportunity Sub-Account which were first offered under
the Contracts on April 8, 2005; and the DWS Balanced
- - Class A Sub-Account which was first offered under the Contracts on April
29, 2005.
(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 May 31, 2007, the STI Classic Capital Appreciation Fund will
change its name to STI Classic Large Cap Growth Stock Fund. We will make
the corresponding change to the name of the Variable Sub-account that
invests in that Portfolio.
(3) 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.
(4) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
(5) A brief explanation of how performance of the Sub-Accounts are calculated
may be found in the Statement of Additional Information.
55 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY - PROSPECTUS
ACCUMULATION UNIT VALUES (1)
Basic Policy plus Death Benefit and Income Benefit Rider II Mortality & Expense
= 1.7
For the Year Ending December 31
Sub-Accounts 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------
AIM V.I. Basic Value Fund - Series I
Accumulation Unit Value Beginning - - - - $ 10.000
Accumulation Unit Value Ending - - - - $ 10.781
Number of Units Outstanding at End of Year - - - - 244,914
- ------------------------------------------------------------------------------------------------
Alger American Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 10.00 $ 8.16 $ 7.07 $ 4.651 $ 6.175
Accumulation Unit Value Ending $ 8.16 $ 7.07 $ 4.651 $ 6.175 $ 6.398
Number of Units Outstanding at End of Year 11,130 97,242 108,296 308,042 439,952
- ------------------------------------------------------------------------------------------------
Alger American Income & Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 10.00 $ 9.28 $ 7.81 $ 5.284 $ 6.738
Accumulation Unit Value Ending $ 9.28 $ 7.81 $ 5.284 $ 6.738 $ 7.137
Number of Units Outstanding at End of Year 32,338 92,660 202,665 354,359 396,418
- ------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio - Class O
Accumulation Unit Value Beginning $ 10.00 $ 7.68 $ 6.34 $ 4.116 $ 5.447
Accumulation Unit Value Ending $ 7.68 $ 6.34 $ 4.116 $ 5.447 $ 5.788
Number of Units Outstanding at End of Year 62,468 136,468 264,242 542,296 727,607
- ------------------------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 10.00 $ 9.44 $ 8.67 $ 5.996 $ 8.703
Accumulation Unit Value Ending $ 9.44 $ 8.67 $ 5.996 $ 8.703 $ 9.663
Number of Units Outstanding at End of Year 123,576 107,872 295,309 836,891 999,864
- ------------------------------------------------------------------------------------------------
Alger American Small Capitalization - Class O
Accumulation Unit Value Beginning $ 10.00 $ 7.22 $ 4.99 $ 3.619 $ 5.060
Accumulation Unit Value Ending $ 7.22 $ 4.99 $ 3.619 $ 5.060 $ 5.793
Number of Units Outstanding at End of Year 5,134 116,699 128,015 283,201 359,793
- ------------------------------------------------------------------------------------------------
DWS Balanced VIP - Class A
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- ------------------------------------------------------------------------------------------------
DWS Bond VIP - Class A
Accumulation Unit Value Beginning $ 10.00 $ 10.61 $ 11.02 $ 11.655 $ 12.026
Accumulation Unit Value Ending $ 10.19 $ 11.02 $ 11.655 $ 12.026 $ 12.447
Number of Units Outstanding at End of Year 24,670 60,002 89,305 179,258 242,774
- ------------------------------------------------------------------------------------------------
DWS Global Opportunities VIP - Class A
Accumulation Unit Value Beginning $ 10.00 $ 9.12 $ 6.75 $ 5.313 $ 7.780
Accumulation Unit Value Ending $ 9.12 $ 6.75 $ 5.313 $ 7.780 $ 9.425
Number of Units Outstanding at End of Year 11,777 24,877 51,809 159,642 254,808
- ------------------------------------------------------------------------------------------------
DWS Growth & Income VIP - Class A
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 8.35 $ 6.305 $ 7.849
Accumulation Unit Value Ending $ 9.59 $ 8.35 $ 6.305 $ 7.849 $ 8.492
Number of Units Outstanding at End of Year 3,100 23,428 37,769 76,611 99,749
- ------------------------------------------------------------------------------------------------
DWS International VIP - Class A
Accumulation Unit Value Beginning $ 10.00 $ 8.71 $ 5.91 $ 4.740 $ 5.948
Accumulation Unit Value Ending $ 8.71 $ 5.91 $ 4.740 $ 5.948 $ 6.808
Number of Units Outstanding at End of Year 4,151 18,248 36,822 144,072 174,503
- ------------------------------------------------------------------------------------------------
Federated Capital Income Fund II
Accumulation Unit Value Beginning $ 10.00 $ 9.14 $ 7.74 $ 9.115 $ 6.855
Accumulation Unit Value Ending $ 9.14 $ 7.74 $ 9.115 $ 6.855 $ 7.401
Number of Units Outstanding at End of Year 689 1,970 92,428 51,656 76,744
- ------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II
Accumulation Unit Value Beginning $ 10.00 $ 10.61 $ 11.15 $ 11.942 $ 12.006
Accumulation Unit Value Ending $ 10.61 $ 11.15 $ 11.942 $ 12.006 $ 12.218
Number of Units Outstanding at End of Year 230 69,662 408,779 580,553 605,532
- ------------------------------------------------------------------------------------------------
56 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II
Accumulation Unit Value Beginning $ 10.00 $ 9.19 $ 9.15 $ 5.784 $ 10.941
Accumulation Unit Value Ending $ 9.19 $ 9.15 $ 5.784 $ 10.941 $ 11.870
Number of Units Outstanding at End of Year 597 52,109 24,658 246,278 444,657
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 9.03 $ 8.095 $ 9.379
Accumulation Unit Value Ending $ 9.59 $ 9.03 $ 8.095 $ 9.379 $ 9.716
Number of Units Outstanding at End of Year 299 33,474 73,114 116,121 181,632
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 9.38 $ 8.08 $ 7.195 $ 9.078
Accumulation Unit Value Ending $ 9.38 $ 8.08 $ 7.195 $ 9.078 $ 10.296
Number of Units Outstanding at End of Year 19,089 104,405 348,537 888,353 1,158,838
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 11.04 $ 10.30 $ 8.405 $ 10.759
Accumulation Unit Value Ending $ 11.04 $ 10.30 $ 8.405 $ 10.759 $ 11.786
Number of Units Outstanding at End of Year 4,932 75,559 174,403 306,020 434,981
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 8.39 $ 6.79 $ 4.659 $ 6.080
Accumulation Unit Value Ending $ 8.39 $ 6.79 $ 4.659 $ 6.080 $ 6.173
Number of Units Outstanding at End of Year 52,890 98,555 305,305 625,498 939,071
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 9.04 $ 7.80 $ 5.960 $ 7.516
Accumulation Unit Value Ending $ 9.04 $ 7.80 $ 5.960 $ 7.516 $ 8.166
Number of Units Outstanding at End of Year 102,744 312,663 365,351 978,400 1,444,339
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 10.23 $ 10.47 $ 10.456 $ 10.373
Accumulation Unit Value Ending $ 10.23 $ 10.47 $ 10.456 $ 10.373 $ 10.311
Number of Units Outstanding at End of Year 30,553 140,649 310,441 819,516 618,241
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 8.44 $ 6.54 $ 5.119 $ 7.208
Accumulation Unit Value Ending $ 8.44 $ 6.54 $ 5.119 $ 7.208 $ 8.045
Number of Units Outstanding at End of Year 6,868 58,855 109,892 235,043 382,839
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 10.00 $ 9.62 $ 9.00 $ 8.273 $ 9.267
Accumulation Unit Value Ending $ 9.62 $ 9.00 $ 8.273 $ 9.267 $ 9.878
Number of Units Outstanding at End of Year 43,584 199,196 356,912 699,022 705,500
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 10.00 $ 10.40 $ 11.01 $ 11.943 $ 12.480
Accumulation Unit Value Ending $ 10.40 $ 11.01 $ 11.943 $ 12.480 $ 12.743
Number of Units Outstanding at End of Year 25 104,700 114,051 254,643 312,969
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio - Service Shares
Accumulation Unit Value Beginning - - $ 10.00 $ 7.734 $ 10.132
Accumulation Unit Value Ending - - $ 7.734 $ 10.132 $ 11.765
Number of Units Outstanding at End of Year - - 36,688 37,023 71,988
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Large Cap Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 10.00 $ 8.32 $ 6.15 $ 4.441 $ 5.746
Accumulation Unit Value Ending $ 8.32 $ 6.15 $ 4.441 $ 5.746 $ 5.898
Number of Units Outstanding at End of Year 98,273 116,481 162,987 251,235 275,805
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Mid Cap Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 10.00 $ 6.65 $ 3.96 $ 2.799 $ 3.715
Accumulation Unit Value Ending $ 6.65 $ 3.96 $ 2.799 $ 3.715 $ 4.405
Number of Units Outstanding at End of Year 272,048 266,218 307,400 412,644 466,868
- -------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 10.00 $ 8.19 $ 6.24 $ 4.564 $ 5.558
Accumulation Unit Value Ending $ 8.19 $ 6.24 $ 4.564 $ 5.558 $ 5.719
Number of Units Outstanding at End of Year 66,346 167,331 245,789 365,025 414,342
- -------------------------------------------------------------------------------------------------------------------
57 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Investors Portfolio - Class I
Accumulation Unit Value Beginning - - - - $ 10.000
Accumulation Unit Value Ending - - - - $ 10.913
Number of Units Outstanding at End of Year - - - - 47,102
- -------------------------------------------------------------------------------------------------------
LSA Balanced
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 Series - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 8.15 $ 5.33 $ 3.465 $ 4.432
Accumulation Unit Value Ending $ 8.15 $ 5.33 $ 3.465 $ 4.432 $ 4.917
Number of Units Outstanding at End of Year 66,991 107,324 123,692 227,669 274,686
- -------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 9.85 $ 8.13 $ 6.308 $ 7.567
Accumulation Unit Value Ending $ 9.85 $ 8.13 $ 6.308 $ 7.567 $ 8.276
Number of Units Outstanding at End of Year 3,223 22,985 52,812 121,843 136,211
- -------------------------------------------------------------------------------------------------------
MFS New Discovery Series - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 8.97 $ 8.36 $ 5.615 $ 7.374
Accumulation Unit Value Ending $ 8.97 $ 8.36 $ 5.615 $ 7.374 $ 7.715
Number of Units Outstanding at End of Year 113,237 118,208 205,837 477,819 623,501
- -------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 8.87 $ 6.86 $ 5.084 $ 6.227
Accumulation Unit Value Ending $ 8.87 $ 6.86 $ 5.084 $ 6.227 $ 7.085
Number of Units Outstanding at End of Year 6,208 23,332 32,958 50,336 53,593
- -------------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class
Accumulation Unit Value Beginning $ 10.00 $ 11.20 $ 11.03 $ 10.273 $ 11.736
Accumulation Unit Value Ending $ 11.20 $ 11.03 $ 10.273 $ 11.736 $ 12.832
Number of Units Outstanding at End of Year 8,401 60,889 250,026 454,021 590,723
- -------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund/VA - Service Shares
Accumulation Unit Value Beginning - - $ 10.00 $ 7.818 $ 11.076
Accumulation Unit Value Ending - - $ 7.818 $ 11.076 $ 12.965
Number of Units Outstanding at End of Year - - 41,593 193,863 323,468
- -------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) -
Administrative Shares
Accumulation Unit Value Beginning - - $ 10.00 $ 10.526 $ 10.571
Accumulation Unit Value Ending - - $ 10.526 $ 10.571 $ 10.960
Number of Units Outstanding at End of Year - - 4,596 79,683 100,873
- -------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Administrative Shares
Accumulation Unit Value Beginning - - $ 10.00 $ 10.518 $ 10.851
Accumulation Unit Value Ending - - $ 10.518 $ 10.851 $ 11.178
Number of Units Outstanding at End of Year - - 85,455 428,033 604,097
- -------------------------------------------------------------------------------------------------------
Premier VIT OpCap Balanced Portfolio
Accumulation Unit Value Beginning - - - - $ 10.000
Accumulation Unit Value Ending - - - - $ 10.772
Number of Units Outstanding at End of Year - - - - 91,944
- -------------------------------------------------------------------------------------------------------
Premier VIT OpCap Small Cap Portfolio
Accumulation Unit Value Beginning - - $ 10.00 $ 7.173 $ 10.051
Accumulation Unit Value Ending - - $ 7.173 $ 10.051 $ 11.637
Number of Units Outstanding at End of Year - - 8,929 172,641 244,720
- -------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund - Class IB
Accumulation Unit Value Beginning - - $ 10.00 $ 8.168 $ 11.059
Accumulation Unit Value Ending - - $ 8.168 $ 11.059 $ 13.141
Number of Units Outstanding at End of Year - - 6,727 39,731 58,105
- -------------------------------------------------------------------------------------------------------
STI Classic Large Cap Growth Stock Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.63 $ 8.95 $ 6.870 $ 7.992
Accumulation Unit Value Ending $ 9.63 $ 8.95 $ 6.870 $ 7.992 $ 8.380
Number of Units Outstanding at End of Year 903 7,596 31,178 54,246 63,858
- -------------------------------------------------------------------------------------------------------
58 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------
STI Classic Large Cap Value Equity Fund
Accumulation Unit Value Beginning $10.00 $ 11.70 $ 11.36 $ 9.262 $ 11.201
Accumulation Unit Value Ending $11.70 $ 11.36 $ 9.262 $ 11.201 $ 12.683
Number of Units Outstanding at End of Year 1,615 18,026 19,587 30,898 100,258
- --------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - I
Accumulation Unit Value Beginning $10.00 $ 11.52 $ 11.48 $ 9.895 $ 12.073
Accumulation Unit Value Ending $11.52 $ 11.48 $ 9.895 $ 12.073 $ 13.627
Number of Units Outstanding at End of Year 113 47,501 228,732 526,597 761,565
- --------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio - I
Accumulation Unit Value Beginning $10.00 $ 8.55 $ 6.53 $ 5.239 $ 6.716
Accumulation Unit Value Ending $ 8.55 $ 6.53 $ 5.239 $ 6.716 $ 7.505
Number of Units Outstanding at End of Year 5,575 16,460 39,170 110,909 176,753
- --------------------------------------------------------------------------------------------------
T. Rowe Price Mid-Cap Growth Portfolio - I (3)
Accumulation Unit Value Beginning $10.00 $ 10.06 $ 9.79 $ 7.569 $ 10.288
Accumulation Unit Value Ending $10.06 $ 9.79 $ 7.569 $ 10.288 $ 11.957
Number of Units Outstanding at End of Year 6,092 82,744 231,318 574,018 675,635
- --------------------------------------------------------------------------------------------------
T. Rowe Price New America Growth Portfolio - I
Accumulation Unit Value Beginning $10.00 $ 9.01 $ 7.80 $ 5.489 $ 7.284
Accumulation Unit Value Ending $ 9.01 $ 7.80 $ 5.489 $ 7.284 $ 7.933
Number of Units Outstanding at End of Year 0 14,973 80,509 84,065 120,707
- --------------------------------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth Portfolio, Class II
Accumulation Unit Value Beginning - - - - $ 10.000
Accumulation Unit Value Ending - - - - $ 11.114
Number of Units Outstanding at End of Year - - - - 77,019
- --------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income Portfolio, Class II
Accumulation Unit Value Beginning - - $ 10.00 $ 8.133 $ 10.199
Accumulation Unit Value Ending - - $ 8.133 $ 10.199 $ 11.431
Number of Units Outstanding at End of Year - - 12,359 106,750 238,529
- --------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value Portfolio, Class I (4)
Accumulation Unit Value Beginning - - - - $ 10.000
Accumulation Unit Value Ending - - - - $ 11.290
Number of Units Outstanding at End of Year - - - - 220,091
- --------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- --------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Opportunity Fund
Accumulation Unit Value Beginning - - - - -
Accumulation Unit Value Ending - - - - -
Number of Units Outstanding at End of Year - - - - -
- --------------------------------------------------------------------------------------------------
59 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY - PROSPECTUS
ACCUMULATION UNIT VALUES (1)
Basic Policy plus Death Benefit and Income Benefit Rider II Mortality & Expense
= 1.7
For the Year Ending December 31
Sub-Accounts 2005 2006 2007
- -----------------------------------------------------------------------------------
AIM V.I. Basic Value Fund - Series I
Accumulation Unit Value Beginning $ 10.781 $ 11.197 $ 12.450
Accumulation Unit Value Ending $ 11.197 $ 12.450 $ 12.415
Number of Units Outstanding at End of Year 251,607 294,765 241,174
- -----------------------------------------------------------------------------------
Alger American Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 6.398 $ 7.041 $ 7.271
Accumulation Unit Value Ending $ 7.041 $ 7.271 $ 8.565
Number of Units Outstanding at End of Year 492,261 413,156 371,317
- -----------------------------------------------------------------------------------
Alger American Income & Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 7.137 $ 7.252 $ 7.786
Accumulation Unit Value Ending $ 7.252 $ 7.786 $ 8.421
Number of Units Outstanding at End of Year 381,157 339,270 308,605
- -----------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio - Class O
Accumulation Unit Value Beginning $ 5.788 $ 6.506 $ 7.621
Accumulation Unit Value Ending $ 6.506 $ 7.621 $ 9.995
Number of Units Outstanding at End of Year 721,253 732,706 759,050
- -----------------------------------------------------------------------------------
Alger American MidCap Growth Portfolio - Class O
Accumulation Unit Value Beginning $ 9.663 $ 10.424 $ 11.277
Accumulation Unit Value Ending $ 10.424 $ 11.277 $ 14.569
Number of Units Outstanding at End of Year 1,007,060 894,467 822,716
- -----------------------------------------------------------------------------------
Alger American Small Capitalization - Class O
Accumulation Unit Value Beginning $ 5.793 $ 6.651 $ 7.840
Accumulation Unit Value Ending $ 6.651 $ 7.840 $ 9.027
Number of Units Outstanding at End of Year 408,709 400,994 386,201
- -----------------------------------------------------------------------------------
DWS Balanced VIP - Class A
Accumulation Unit Value Beginning $ 10.000 $ 10.562 $ 11.437
Accumulation Unit Value Ending $ 10.562 $ 11.437 $ 11.776
Number of Units Outstanding at End of Year 140,966 117,438 108,626
- -----------------------------------------------------------------------------------
DWS Bond VIP - Class A
Accumulation Unit Value Beginning $ 12.447 $ 12.544 $ 12.902
Accumulation Unit Value Ending $ 12.544 $ 12.902 $ 13.200
Number of Units Outstanding at End of Year 235,908 203,670 192,164
- -----------------------------------------------------------------------------------
DWS Global Opportunities VIP - Class A
Accumulation Unit Value Beginning $ 9.425 $ 10.942 $ 13.120
Accumulation Unit Value Ending $ 10.942 $ 13.120 $ 14.087
Number of Units Outstanding at End of Year 309,298 368,488 319,396
- -----------------------------------------------------------------------------------
DWS Growth & Income VIP - Class A
Accumulation Unit Value Beginning $ 8.492 $ 8.847 $ 9.874
Accumulation Unit Value Ending $ 8.847 $ 9.874 $ 9.829
Number of Units Outstanding at End of Year 85,054 79,081 76,673
- -----------------------------------------------------------------------------------
DWS International VIP - Class A
Accumulation Unit Value Beginning $ 6.808 $ 7.768 $ 9.606
Accumulation Unit Value Ending $ 7.768 $ 9.606 $ 10.810
Number of Units Outstanding at End of Year 190,759 229,934 202,975
- -----------------------------------------------------------------------------------
Federated Capital Income Fund II
Accumulation Unit Value Beginning $ 7.401 $ 7.726 $ 8.776
Accumulation Unit Value Ending $ 7.726 $ 8.776 $ 8.966
Number of Units Outstanding at End of Year 76,010 100,300 65,968
- -----------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II
Accumulation Unit Value Beginning $ 12.218 $ 12.243 $ 12.523
Accumulation Unit Value Ending $ 12.243 $ 12.523 $ 13.072
Number of Units Outstanding at End of Year 530,059 381,051 721,964
- -----------------------------------------------------------------------------------
60 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2005 2006 2007
- -----------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II
Accumulation Unit Value Beginning $ 11.870 $ 11.968 $ 13.026
Accumulation Unit Value Ending $ 11.968 $ 13.026 $ 13.231
Number of Units Outstanding at End of Year 439,857 430,206 379,607
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager Portfolio - Initial Class
Accumulation Unit Value Beginning $ 9.716 $ 9.929 $ 10.466
Accumulation Unit Value Ending $ 9.929 $ 10.466 $ 11.872
Number of Units Outstanding at End of Year 176,415 129,882 125,667
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.296 $ 11.826 $ 12.977
Accumulation Unit Value Ending $ 11.826 $ 12.977 $ 14.986
Number of Units Outstanding at End of Year 1,260,810 1,273,768 1,188,207
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio - Initial Class
Accumulation Unit Value Beginning $ 11.786 $ 12.255 $ 14.468
Accumulation Unit Value Ending $ 12.255 $ 14.468 $ 14.426
Number of Units Outstanding at End of Year 395,964 396,481 349,218
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial Class
Accumulation Unit Value Beginning $ 6.173 $ 6.415 $ 6.732
Accumulation Unit Value Ending $ 6.415 $ 6.732 $ 8.394
Number of Units Outstanding at End of Year 831,880 682,021 682,803
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Initial Class
Accumulation Unit Value Beginning $ 8.166 $ 8.407 $ 9.557
Accumulation Unit Value Ending $ 8.407 $ 9.557 $ 9.896
Number of Units Outstanding at End of Year 1,362,101 1,346,569 1,295,792
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - Initial Class
Accumulation Unit Value Beginning $ 10.311 $ 10.435 $ 10.750
Accumulation Unit Value Ending $ 10.435 $ 10.750 $ 11.108
Number of Units Outstanding at End of Year 694,730 725,670 714,035
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Initial Class
Accumulation Unit Value Beginning $ 8.045 $ 9.406 $ 10.909
Accumulation Unit Value Ending $ 9.406 $ 10.909 $ 12.569
Number of Units Outstanding at End of Year 426,944 513,031 470,601
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 9.878 $ 10.473 $ 11.389
Accumulation Unit Value Ending $ 10.473 $ 11.389 $ 12.364
Number of Units Outstanding at End of Year 691,502 664,165 559,884
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 12.743 $ 12.767 $ 13.069
Accumulation Unit Value Ending $ 12.767 $ 13.069 $ 13.738
Number of Units Outstanding at End of Year 291,063 350,195 380,041
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio - Service Shares
Accumulation Unit Value Beginning $ 11.765 $ 12.276 $ 14.235
Accumulation Unit Value Ending $ 12.276 $ 14.235 $ 16.532
Number of Units Outstanding at End of Year 79,929 72,800 78,321
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Large Cap Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 5.898 $ 6.042 $ 6.610
Accumulation Unit Value Ending $ 6.042 $ 6.610 $ 7.471
Number of Units Outstanding at End of Year 257,364 266,266 225,942
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Mid Cap Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 4.405 $ 4.860 $ 5.423
Accumulation Unit Value Ending $ 4.860 $ 5.423 $ 6.499
Number of Units Outstanding at End of Year 505,828 510,006 505,513
- -----------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio - Institutional Shares
Accumulation Unit Value Beginning $ 5.719 $ 5.947 $ 6.905
Accumulation Unit Value Ending $ 5.947 $ 6.905 $ 7.434
Number of Units Outstanding at End of Year 364,847 335,256 327,739
- -----------------------------------------------------------------------------------------------------
61 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2005 2006 2007
- -------------------------------------------------------------------------------------------------------------
Legg Mason Partners Variable Investors Portfolio - Class I
Accumulation Unit Value Beginning $ 10.913 $ 11.419 $ 13.264
Accumulation Unit Value Ending $ 11.419 $ 13.264 $ 13.534
Number of Units Outstanding at End of Year 45,145 47,405 46,980
- -------------------------------------------------------------------------------------------------------------
LSA Balanced
Accumulation Unit Value Beginning - - -
Accumulation Unit Value Ending - - -
Number of Units Outstanding at End of Year - - -
- -------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series - Initial Class
Accumulation Unit Value Beginning $ 4.917 $ 5.273 $ 5.588
Accumulation Unit Value Ending $ 5.273 $ 5.588 $ 6.650
Number of Units Outstanding at End of Year 269,766 247,942 220,878
- -------------------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Class
Accumulation Unit Value Beginning $ 8.276 $ 8.724 $ 9.682
Accumulation Unit Value Ending $ 8.724 $ 9.682 $ 10.488
Number of Units Outstanding at End of Year 135,382 134,594 127,128
- -------------------------------------------------------------------------------------------------------------
MFS New Discovery Series - Initial Class
Accumulation Unit Value Beginning $ 7.715 $ 7.975 $ 8.868
Accumulation Unit Value Ending $ 7.975 $ 8.868 $ 8.928
Number of Units Outstanding at End of Year 560,525 514,110 480,804
- -------------------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class
Accumulation Unit Value Beginning $ 7.085 $ 7.502 $ 8.141
Accumulation Unit Value Ending $ 7.502 $ 8.141 $ 9.050
Number of Units Outstanding at End of Year 52,102 49,634 50,049
- -------------------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class
Accumulation Unit Value Beginning $ 12.832 $ 12.959 $ 14.243
Accumulation Unit Value Ending $ 12.959 $ 14.243 $ 14.577
Number of Units Outstanding at End of Year 622,265 569,919 589,170
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund/VA - Service Shares
Accumulation Unit Value Beginning $ 12.965 $ 13.972 $ 15.735
Accumulation Unit Value Ending $ 13.972 $ 15.735 $ 15.238
Number of Units Outstanding at End of Year 312,606 325,308 316,074
- -------------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) - Administrative Shares
Accumulation Unit Value Beginning $ 10.960 $ 11.319 $ 11.362
Accumulation Unit Value Ending $ 11.319 $ 11.362 $ 11.563
Number of Units Outstanding at End of Year 106,489 99,214 106,231
- -------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Administrative Shares
Accumulation Unit Value Beginning $ 11.178 $ 11.247 $ 11.473
Accumulation Unit Value Ending $ 11.247 $ 11.473 $ 12.255
Number of Units Outstanding at End of Year 614,406 512,461 483,376
- -------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Balanced Portfolio
Accumulation Unit Value Beginning $ 10.772 $ 10.870 $ 11.829
Accumulation Unit Value Ending $ 10.870 $ 11.829 $ 11.102
Number of Units Outstanding at End of Year 106,673 97,834 94,157
- -------------------------------------------------------------------------------------------------------------
Premier VIT OpCap Small Cap Portfolio
Accumulation Unit Value Beginning $ 11.637 $ 11.436 $ 13.938
Accumulation Unit Value Ending $ 11.436 $ 13.938 $ 13.767
Number of Units Outstanding at End of Year 236,295 205,170 172,785
- -------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund - Class IB
Accumulation Unit Value Beginning $ 13.141 $ 14.727 $ 18.403
Accumulation Unit Value Ending $ 14.727 $ 18.403 $ 19.339
Number of Units Outstanding at End of Year 61,333 109,461 175,336
- -------------------------------------------------------------------------------------------------------------
STI Classic Large Cap Growth Stock Fund (2)
Accumulation Unit Value Beginning $ 8.380 $ 8.157 $ 8.879
Accumulation Unit Value Ending $ 8.157 $ 8.879 $ 10.052
Number of Units Outstanding at End of Year 58,249 51,761 47,830
- -------------------------------------------------------------------------------------------------------------
62 PROSPECTUS
For the Year Ending December 31
Sub-Accounts 2005 2006 2007
- ----------------------------------------------------------------------------------------
STI Classic Large Cap Value Equity Fund
Accumulation Unit Value Beginning $ 12.683 $ 12.925 $ 15.546
Accumulation Unit Value Ending $ 12.925 $ 15.546 $ 15.810
Number of Units Outstanding at End of Year 68,271 93,618 49,278
- ----------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - I
Accumulation Unit Value Beginning $ 13.627 $ 13.909 $ 16.254
Accumulation Unit Value Ending $ 13.909 $ 16.254 $ 16.483
Number of Units Outstanding at End of Year 796,314 661,730 601,481
- ----------------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio - I
Accumulation Unit Value Beginning $ 7.505 $ 8.554 $ 10.006
Accumulation Unit Value Ending $ 8.554 $ 10.006 $ 11.107
Number of Units Outstanding at End of Year 203,771 257,698 256,965
- ----------------------------------------------------------------------------------------
T. Rowe Price Mid-Cap Growth Portfolio - I (3)
Accumulation Unit Value Beginning $ 11.957 $ 13.476 $ 14.114
Accumulation Unit Value Ending $ 13.476 $ 14.114 $ 16.289
Number of Units Outstanding at End of Year 621,478 575,076 538,625
- ----------------------------------------------------------------------------------------
T. Rowe Price New America Growth Portfolio - I
Accumulation Unit Value Beginning $ 7.933 $ 8.140 $ 8.581
Accumulation Unit Value Ending $ 8.140 $ 8.581 $ 9.589
Number of Units Outstanding at End of Year 126,892 132,467 126,622
- ----------------------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth Portfolio, Class II
Accumulation Unit Value Beginning $ 11.114 $ 12.130 $ 12.500
Accumulation Unit Value Ending $ 12.130 $ 12.500 $ 14.437
Number of Units Outstanding at End of Year 52,894 60,010 59,849
- ----------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income Portfolio, Class II
Accumulation Unit Value Beginning $ 11.431 $ 12.319 $ 14.033
Accumulation Unit Value Ending $ 12.319 $ 14.033 $ 14.129
Number of Units Outstanding at End of Year 277,577 291,195 213,247
- ----------------------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value Portfolio, Class I (4)
Accumulation Unit Value Beginning $ 11.290 $ 12.455 $ 14.765
Accumulation Unit Value Ending $ 12.455 $ 14.765 $ 15.638
Number of Units Outstanding at End of Year 280,918 311,438 269,763
- ----------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund
Accumulation Unit Value Beginning $ 10.000 $ 11.435 $ 12.876
Accumulation Unit Value Ending $ 11.435 $ 12.876 $ 15.468
Number of Units Outstanding at End of Year 177,119 174,427 167,923
- ----------------------------------------------------------------------------------------
Wells Fargo Advantage VT Opportunity Fund
Accumulation Unit Value Beginning $ 10.000 $ 10.996 $ 12.120
Accumulation Unit Value Ending $ 10.996 $ 12.120 $ 12.692
Number of Units Outstanding at End of Year 449,486 420,788 391,679
- ----------------------------------------------------------------------------------------
* The LBL Consultant Variable Annuity I Contracts and all of the Variable
Sub-Accounts shown below were first offered under the Contracts on
September 9, 1998, except for the Janus Aspen Series Foreign Stock -
Service Shares Sub-Account, LSA Balanced, Oppenheimer Main Street Small
Cap/VA - Service Shares Sub-Account, PIMCO VIT Foreign Bond (U.S.
Dollar-Hedged) - Administrative Shares Sub-Account, PIMCO VIT Total Return
- Administrative Shares Sub-Account, Premier VIT OpCap Balanced
Sub-Account, Premier VIT OpCap Small Cap Sub-Account, Putnam VT
International Growth and Income - Class IB Sub-Account, Van Kampen LIT
Aggressive Growth, Class II Sub-Account, Van Kampen LIT Growth and Income,
Class II Sub-Account which were first offered under the Contracts on May 1,
2002; the AIM V.I. Basic Value - Series I Sub-Account, Legg Mason Partners
Variable Investors - Class I Sub-Account, Van Kampen UIF U.S. Mid Cap
Value, Class I Sub-Account which were first offered under the Contracts on
April 30, 2004; the Wells Fargo Advantage VT Discovery Sub-Account, Wells
Fargo Advantage VT Opportunity Sub-Account which were first offered under
the Contracts on April 8, 2005; and the DWS Balanced - Class A Sub-Account
which was first offered under the Contracts on April 29, 2005.
(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 May 31, 2007, the STI Classic Capital Appreciation Fund will
change its name to STI Classic Large Cap Growth Stock Fund. We will make
the corresponding change to the name of the Variable Sub-account that
invests in that Portfolio.
(3) 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.
(4) Morgan Stanley Investment Management Inc., the adviser to the UIF
Portfolios, does business in certain instances using the name Van Kampen.
(5) A brief explanation of how performance of the Sub-Accounts are calculated
may be found in the Statement of Additional Information.
63 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
64 PROSPECTUS
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
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).
65 PROSPECTUS
LBL3055-7
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of issuance and Distribution.
Registrant anticipates that it will incur the following approximate expenses in
connection with the issuance and distribution of the securities to be
registered:
Registration fees.................. $1,395
Cost of printing and engraving..... $ 100
Legal fees......................... $ 0
Accounting fees.................... $3,000
Mailing fees....................... $2,100
Item 15. Indemnification of Directors and Officers
The Articles of Incorporation of Lincoln Benefit Life Company (Registrant)
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 Registrant 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 Registrant 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)
4(a) Form of Variable Annuity Contract (2)
4(b) Form of Application (2)
5(a) Opinion and Consent of Counsel regarding legality (3)
5(b) Opinion and Consent of Counsel regarding legality. Filed
herewith.
15 Not applicable
23 Consent of Independent Registered Public Accounting Firm.
Filed herewith.
24 Powers of Attorney for Frederick F. Cripe, Lawrence W. Dahl,
Matthew S. Easley, Susan L. Lees, John C. Lounds, Samuel H. Pilch, and
John Pintozzi. Filed herewith.
99 Experts. Filed herewith.
- --------
(1) Incorporated herein by reference to Post-Effective Amendment to Form N-4
for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-
07924) filed January 28, 1999
(2) Incorporated herein by reference to Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account (File No. 333-50545, 811-07924)
filed April 21, 1998
(3) Incorporated herein by reference to Post-Effective Amendment to Form S-1 on
Form S-3 for Lincoln Benefit Life Company (File No. 333-59765) filed April 28,
2000.
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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lincoln and State of
Nebraska on March 24, 2009.
LINCOLN BENEFIT LIFE COMPANY (Registrant)
* By: /s/ Susan L. Lees
-------------------------------------
Susan L. Lees
Director, Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities
indicated on March 24, 2009.
(Signature) (Title)
*/ Frederick F. Cripe Director, Chairman and
- ----------------------------- Chief Executive Officer
Frederick F. Cripe
*/ Lawrence W. Dahl Director, President, and Chief Operating Officer
- ----------------------------- (Principal Executive Officer)
Lawrence W. Dahl
*/ Matthew S. Easley Director
- -----------------------------
Matthew S. Easley
/s/ Susan L. Lees Director, Senior Vice President,
- ----------------------------- General Counsel and Secretary
Susan L. Lees
*/ John C. Lounds Director and Vice President
- -----------------------------
John C. Lounds
*/ Samuel H. Pilch Group Vice President and Controller
- ----------------------------- (Principal Accounting Officer)
Samuel H. Pilch
*/ John C. Pintozzi Director, Senior Vice President and
- ----------------------------- Chief Financial Officer (Principal Financial
John C. Pintozzi Officer)
* By Susan L. Lees, pursuant to Power of Attorney, filed herewith.
EXHIBITS
Exhibit No. Description
5(b) Opinion and Consent of Counsel regarding legality
23 Consent of Independent Registered Public Accounting Firm
24 Powers of Attorney for Frederick F. Cripe, Lawrence W. Dahl,
Matthew S. Easley, Susan L. Lees, John C. Lounds, Samuel H. Pilch,
and John Pintozzi
99 Experts