As Filed with the Securities and Exchange Commission on March 24, 2009
File No. 333-
-------
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 jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or
organization) Classification Code Number) Identification No.)
2940 South 84th St., Lincoln, Nebraska 68506
1-800-525-9287
(Address of registrant's principal executive offices)
Jocelyn Liu, ESQ.
LINCOLN BENEFIT LIFE COMPANY
2940 South 84th St.
LINCOLN, NE 68506
1-800-525-9287
(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] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
CALCULATION OF REGISTRATION FEE
Title of securities Amount to be Proposed maximum Proposed maximum Amount of registration
to be registered registered (1) offering price per unit aggregate offering price (1) fee
- ------------------- --------------- ----------------------- ---------------------------- ----------------------
Deferred annuity $17,000,000 (1) $17,000,000 $948.60
interests and
participating interests
therein
(1) 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.
Lincoln Benefit Life Company
Premier Planner
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 Benefits Life Company'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 Company.
The "Annual Reports and Other Documents" section is deleted and replaced with
the following:
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit Life Company ("Lincoln Benefit") 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 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 Lincoln Benefit
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act also are
incorporated into the prospectus by reference. Lincoln Benefit 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 Lincoln Benefit, P.O. Box 758561, Topeka, KS 66675-8561 or by calling 1-800-
457- 7617. Lincoln Benefit files periodic reports as required under the
Securities Exchange Act of 1934. The public may read and copy any materials that
Lincoln Benefit 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
Lincoln Benefit Life Variable Annuity Account
Supplement, dated March 31, 2008, to
the LBL Advantage Variable Annuity Prospectus
and the LBL Premier Planner Variable Annuity Prospectus
This supplement amends certain disclosure contained in the above-referenced
prospectus for certain variable annuity contracts issued by Lincoln Benefit Life
Company.
We have received notice that the Board of Trustees of the Rydex Variable Trust
has approved the following fund name change:
Effective April 1, 2008, the name of the Rydex VT OTC Fund will be changed
to the Rydex VT NASDAQ-100 (R) Fund.
Due to this name change, the corresponding Rydex VT OTC Sub-Account available
for your product will change its name to the Rydex VT NASDAQ-100 (R) Sub-Account
effective April 1, 2008.
The name change does not in any way affect the investment objective of the Fund,
which remains unchanged, or the manner in which the investment advisor manages
the fund.
Please keep this supplement for future reference together with your prospectus.
Lincoln Benefit Life Company
Lincoln Benefit Life Variable Annuity Account
Supplement, dated February 26, 2007 to
The LBL Advantage Variable Annuity Prospectus dated May 1, 2004
The Premier Planner Variable Annuity Prospectus dated May 1, 2004
This supplement amends certain disclosures contained in the above-referenced
prospectuses for certain variable annuity contracts issued by Lincoln Benefit
Life Company.
We have received notice that the Board of Trustees ("Board") of the Legg Mason
Variable Portfolios has approved the reorganization, on or about April 27, 2007
("Conversion Date"), of the Legg Mason Partners Variable All Cap Portfolio -
Class II into the Legg Mason Partners Variable Fundamental Value Portfolio -
Class I, which will be added as an investment choice to your contract as of
April 27, 2007.
To reflect the change in the underlying Portfolio, we will transfer any Contract
Value you have in the Legg Mason Partners Variable All Cap Portfolio - Class II
Sub-Account ("All Cap Sub-Account) into the Legg Mason Partners Variable
Fundamental Value Portfolio - Class I Sub-Account ("Fundamental Value
Sub-Account"). Contract owners will receive a confirmation of the transaction
reflecting this change.
Salomon Brothers Asset Management Inc. is the investment advisor for the Legg
Mason Partners Variable Fundamental Value Portfolio - Class I. The investment
objective for this Portfolio is: Long-term capital growth with current income as
a secondary consideration.
If you currently have allocations made to the All Cap Sub-Account through
automatic additions, automatic portfolio rebalancing, dollar cost averaging or
systematic withdrawal programs, any future allocations will be made to the
Fundamental Value Sub-Account as of the Conversion Date.
For additional information on how to transfer to another investment alternative,
or how to make a change to your current allocation(s), please contact your
financial representative or call our Customer Service Center at 1-800-865-5237.
Please keep this supplement for future reference together with your
prospectuses.
Lincoln Benefit Life Company
Lincoln Benefit Life Variable Annuity Account
Supplement, dated January 14, 2005,
to
The Premier Planner Variable Annuity Prospectus
dated May 1, 2004
This supplement amends certain disclosure contained in the above-referenced
prospectus for certain variable annuity contracts issued by Lincoln Benefit Life
Company.
We have received notice that the Board of Trustees ("Board") of PIMCO Advisors
VIT has approved the liquidation, on or about April 29, 2005 (the "Closing
Date"), of the PEA Science and Technology Portfolio (the "PEA Portfolio").
The Board based its decision, in part, upon the fact that the PEA Portfolio is
relatively small in asset size and has failed to garner significant exposure in
the variable contract market. In addition, the Board believes the outlook for
future growth of the PEA Portfolio is not encouraging.
Due to the liquidation of the PEA Portfolio, we will no longer accept new
premiums for investment in, nor will we permit transfers to, the PEA Science and
Technology Portfolio Sub-Account ("PEA Sub-Account") on or after April 29, 2005.
Because the PEA Sub-Account will no longer be offered as an investment
alternative as of the Closing Date, you may wish to transfer, prior to April 29,
2005, some or all of your interest in the PEA Sub-Account to the other
investment alternatives currently offered by your Contract. Any value remaining
in the PEA Sub-Account will be transferred automatically, as of the Closing
Date, to the PIMCO VIT Money Market Sub-Account, an investment alternative
already available under your Contract. These transfers are not subject to a
transfer fee.
If you currently have allocations made to the PEA Sub-Account through automatic
additions, automatic portfolio rebalancing, dollar cost averaging or systematic
withdrawal programs, your allocation in the PEA Sub-Account will also need to be
changed in these programs. If you do not change this allocation to other
investment alternatives currently available under your Policy, any allocation to
the PEA Sub-Account will be automatically allocated, as of the Closing Date, to
the PIMCO VIT Money Market Sub-Account.
If your interest in the PEA Sub-Account is transferred automatically on the
Closing Date to the PIMCO VIT Money Market Sub-Account, for 60 days following
the Closing Date, you may transfer your interest in the PIMCO VIT Money Market
Sub-Account to any other investment alternative(s) available under your
Contract. This transfer is not subject to a transfer fee.
We will send you a confirmation that shows the amount that we credited to the
PIMCO VIT Money Market Sub-Account or to the investment alternative that you
chose and the date of the transaction. For additional information on how to
transfer to another investment alternative, or how to make a change to your
current allocation(s), please contact your financial representative or call our
Customer Service Center at the number listed below.
Attached, as Appendix A, is a list of the Portfolios and Fixed Account
Investment Alternatives currently available under your Contract.
Please keep this supplement for future reference together with your
prospectuses.
Number for Customer Service Center: 1-800-865-5237
Appendix A
The Premier Planner Variable Annuity contract offers a variety of Investment
Alternatives that encompass investment choices ranging from aggressive to
conservative. Below is a listing of the Portfolios and Fixed Account Investment
Alternatives currently available. Also included is the investment objective for
each Portfolio.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the relevant prospectus for the
Portfolio.
PORTFOLIOS
AIM V.I. Basic Value Fund - Series I Seeks long-term growth of capital.
Alger American Growth Portfolio - Class S Seeks long-term capital appreciation.
Fidelity VIP Growth Portfolio - Service Class 2 Seeks capital appreciation.
Fidelity VIP Investment Grade Bond Portfolio - Service Class 2 Seeks as high a
level of current income as is consistent with the preservation of capital.
Fidelity VIP Overseas Portfolio - Service Class 2 Seeks long-term growth of
capital.
Goldman Sachs VIT CORESM Small Cap Equity Fund Seeks long-term growth of
capital.
Goldman Sachs VIT International Equity Fund Seeks long-term capital
appreciation.
Janus Aspen Series Capital Appreciation Portfolio: Institutional Shares Seeks
long-term growth of capital.
Janus Aspen Series Foreign Stock Portfolio: Service Shares Seeks long-term
growth of capital.
Janus Aspen Series Worldwide Growth Portfolio: Service Shares Seeks long-term
growth of capital in a manner consistent with the preservation of capital.
Lazard Emerging Markets Portfolio Seeks long-term capital appreciation
Lazard International Equity Portfolio Seeks long-term capital appreciation
MFS New Discovery Series - Service Class Seeks capital appreciation.
MFS Utilities Series - Service Class Seeks capital growth and current income.
Oppenheimer Main Street Small Cap Fund/VA - Service Shares Seeks capital
appreciation.
PAVIT OpCap Balanced Portfolio Seeks growth of capital and investment income.
PAVIT OpCap Equity Portfolio Seeks long-term capital appreciation.
PAVIT OpCap Small Cap Portfolio Seeks capital appreciation.
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) - Administrative Shares
Seeks to maximize total return, consistent with preservation of capital and
prudent investment management.
PIMCO VIT Money Market Portfolio - Administrative Shares Seeks to obtain maximum
current income consistent with preservation of capital and daily liquidity.
PIMCO VIT Total Return Portfolio - Administrative Shares Seeks to maximize total
return, consistent with preservation of capital and prudent investment
management.
Putnam VT High Yield Fund - Class IB
Seeks high current income. Capital growth is a secondary goal when consistent
with achieving high current income. The fund seeks its goal by investing at
least 80% in U.S. corporate rated below investment grade (junk bonds) and that
have intermediate to long-term maturities (three years or longer.)
Rydex VT OTC Fund
Seeks investment results that correspond to a benchmark for over-the-counter
securities. The Portfolio's current benchmark is the NASDAQ 100 Index.
Salomon Brothers Variable All Cap Fund - Class I Seeks capital appreciation.
Salomon Brothers Variable Investors Fund - Class I Seeks long-term growth of
capital with current income as a secondary objective.
Van Kampen UIF Equity Growth Portfolio, Class I Seeks long-term capital
appreciation by investing primarily in growth-oriented equity securities of
large capitalization companies.
Van Kampen UIF High Yield Portfolio, Class I Seeks above-average total return
over a market cycle of three to five years by investing primarily in high yield
securities (commonly referred to as "junk bonds").
Van Kampen UIF Mid Cap Growth Portfolio, Class I Seeks above-average total
return over a market cycle of three to five years by investing in common stocks
and other equity securities.
Van Kampen UIF U.S. Mid Cap Value Portfolio, Class I Seeks above-average total
return over a market cycle of three to five years by investing in common stocks
and other equity securities.
Van Kampen LIT Aggressive Growth Portfolio, Class II Seeks capital growth.
Van Kampen LIT Growth and Income Portfolio, Class II Seeks long-term growth of
capital and income.
Fixed Account Options
Standard Fixed Account
Guaranteed Maturity Fixed Account Option
PREMIER PLANNER VARIABLE ANNUITY PROSPECTUS
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 2940 SOUTH 84TH ST., LINCOLN, NE 68506
MAILING ADDRESS: P. O. BOX 80469, LINCOLN, NE 68501-0469
TELEPHONE NUMBER: 1-800-865-5237
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 in most
states. 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 thirty-four investment options, each of which is a Subaccount of the
Lincoln Benefit Life Variable Annuity Account ("Separate Account"). Each
Subaccount invests exclusively in shares of one of the following Portfolios:
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Basic Value Fund - Series I
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio - Class S
FIDELITY(R) VARIABLE INSURANCE PRODUCTS:
Fidelity VIP Growth Portfolio - Service Class 2 Fidelity VIP Investment Grade
Bond Portfolio - Service Class 2 Fidelity VIP Overseas Portfolio - Service
Class 2
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs VIT CORE(SM) Small Cap Equity Fund Goldman Sachs VIT International
Equity Fund
JANUS ASPEN SERIES:
Janus Aspen Series Capital Appreciation Portfolio -Institutional Shares Janus
Aspen Series Foreign Stock Portfolio - Service Shares (formerly International
Value Portfolio)
Janus Aspen Series Worldwide Growth Portfolio - Service Shares
J.P. MORGAN SERIES TRUST II:
JPMorgan Small Company Portfolio
LAZARD RETIREMENT SERIES, INC.:
Lazard Emerging Markets Portfolio
Lazard International Equity Portfolio
MFS(R) VARIABLE INSURANCE TRUST(SM):
MFS New Discovery Series - Service Class MFS Utilities Series - Service Class
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Main Street Small Cap Fund/VA - Service Shares
PIMCO ADVISORS VIT:
PAVIT OpCap Balanced Portfolio
PAVIT OpCap Equity Portfolio
PAVIT OpCap Small Cap Portfolio
PAVIT PEA Science and Technology Portfolio
PIMCO VARIABLE INSURANCE TRUST:
PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) - Administrative Shares
PIMCO VIT Money Market Portfolio - Administrative Shares PIMCO VIT StocksPLUS
Growth and Income Portfolio - Administrative Shares PIMCO VIT Total Return
Portfolio - Administrative Shares
PUTNAM VARIABLE TRUST:
Putnam VT High Yield Fund - Class 1B
THE RYDEX VARIABLE TRUST:
Rydex VT OTC Fund
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Salomon Brothers Variable All Cap Fund - Class I Salomon Brothers Variable
Investors Fund - Class I
VAN KAMPEN LIFE INVESTMENT TRUST:
Van Kampen LIT Aggressive Growth Portfolio, Class II Van Kampen LIT Growth and
Income Portfolio, Class II
1 PROSPECTUS
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
Van Kampen UIF Equity Growth Portfolio, Class I* Van Kampen UIF High Yield
Portfolio, Class I* Van Kampen UIF Mid Cap Growth Portfolio, Class I* Van Kampen
UIF U.S. Mid Cap Value Portfolio, Class I**
* Morgan Stanley Investment Management, Inc., the advisor for the UIF
Portfolios, does business in certain instances using the name Van Kampen.
** Effective 9/20/2003, the Van Kampen UIF Mid Cap Core Portfolio, Class I
changed its name to Van Kampen UIF Mid Cap Value Portfolio, Class I.
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.
Your Contract Value will vary daily as a function of the investment performance
of the Subaccounts 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 Subaccounts. Benefits provided by this
Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, which may result in an upward or downward adjustment in withdrawal
benefits, death benefits, settlement values, and transfers to the Subaccounts.
The maximum age of the oldest Contract Owner and Annuitant is age 85 as of the
date we receive the completed application. The maximum age of the oldest
Contract Owner and Annuitant for purchasing the Contract with the Enhanced Death
Benefit Rider is age 80.
Each time you pay a Premium, we will credit your Contract Value with a Credit
Enhancement. In addition to this Contract, we also offer other annuity contracts
that do not provide for Credit Enhancements. The expenses for this Contract may
be higher than the expenses for an annuity contract that does not provide for
Credit Enhancements. Over time, the amount of the Credit Enhancements may be
more than offset by the higher expenses. You and your agent should decide if
this Contract is right for you.
In certain states the Contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts in
this prospectus applies equally to Certificates under group contracts, unless
the content specifies otherwise.
This prospectus sets forth the information you ought to know about the Contract.
You should read it before investing and keep it for future reference.
We have filed a Statement of Additional Information with the Securities and
Exchange Commission ("SEC"). The current Statement of Additional Information is
dated May 1, 2004. 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 44 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 Life Company ("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).
The Date of this Prospectus is May 1, 2004.
EFFECTIVE MAY 1, 2004, THIS PRODUCT IS NO LONGER BEING OFFERED FOR SALE.
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.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES
FOR THE PORTFOLIOS LISTED ABOVE. IF ANY OF THESE PROSPECTUSES IS MISSING OR
OUTDATED, PLEASE CONTACT US AND WE WILL SEND YOU THE PROSPECTUS YOU NEED.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE.
2 PROSPECTUS
TABLE OF CONTENTS
PAGE
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DEFINITIONS 5
FEE TABLES 6
Examples 7
Explanation of the Expense Examples 7
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT 8
FINANCIAL INFORMATION 12
DESCRIPTION OF THE CONTRACTS 13
Summary 13
Contract Owner 13
Annuitant 13
Modification of the Contract 13
Assignment 13
Free Look Period 13
PURCHASES AND CONTRACT VALUE 14
Minimum Purchase Payment 14
Automatic Payment Plan 14
Credit Enhancement 14
Allocation of Purchase Payments 14
Contract Value 15
Separate Account Accumulation Unit Value 15
Transfer During Accumulation Period 15
Transfers Authorized by Telephone 15
Market Timing & Excessive Trading 16
Trading Limitations 16
Automatic Dollar Cost Averaging Program 16
Portfolio Rebalancing 16
THE INVESTMENT AND FIXED ACCOUNT OPTIONS 17
Separate Account Investments 17
The Portfolios 17
Voting Rights 20
Additions, Deletions, and Substitutions of Securities 20
The Fixed Account 21
General 21
Guaranteed Maturity Fixed Account Option 21
Market Value Adjustment 23
Dollar Cost Averaging Fixed Account Option 23
ANNUITY BENEFITS 23
Annuity Date 23
Annuity Options 24
Other Options 24
Annuity Payments: General 24
Variable Annuity Payments 25
Fixed Annuity Payments 25
PAGE
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Transfers During Annuity Period 25
Death Benefit During Annuity Period 25
Certain Employee Benefit Plans 26
OTHER CONTRACT BENEFITS 26
Death Benefit 26
General 26
Due Proof of Death 26
Death Proceeds 26
Death Benefit Amount 26
Death Benefit Payments 26
Enhanced Death Benefit Rider 28
Beneficiary 29
Contract Loans for 403(b) Contracts 29
Withdrawals (Redemptions) 30
Systematic Withdrawal Program 31
ERISA Plans 31
Minimum Contract Value 31
CONTRACT CHARGES 31
Mortality and Expense Risk Charge 32
Administrative Charges 32
Contract Maintenance Charge 32
Administrative Expense Charge 32
Transfer Fee 32
Sales Charges 32
Withdrawal Charge 32
Free Withdrawal 33
Waiver Benefits 33
General 33
Confinement Waiver Benefit 33
Terminal Illness Waiver Benefit 34
Waiver of Withdrawal Charge for Certain Qualified Plan Withdrawals 34
Premium Taxes 33
Deduction for Separate Account Income Taxes 34
Other Expenses 34
TAXES 35
Taxation of Lincoln Benefit Life Company 35
Taxation of Variable Annuities in General 35
Income Tax Withholding 37
Tax Qualified Contracts 38
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT 41
Lincoln Benefit Life Company 41
Separate Account 41
State Regulation of Lincoln Benefit 41
3 PROSPECTUS
PAGE
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ADMINISTRATION 41
DISTRIBUTION OF CONTRACTS 42
LEGAL PROCEEDINGS 42
LEGAL MATTERS 42
ANNUAL REPORTS AND OTHER DOCUMENTS 42
REGISTRATION STATEMENT 43
PAGE
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION 44
APPENDIX A ACCUMULATION UNIT VALUES 45
APPENDIX B ILLUSTRATION OF A MARKET VALUE ADJUSTMENT 53
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.
4 PROSPECTUS
DEFINITIONS
Please refer to this list for the meaning of the following terms:
ACCUMULATION PERIOD - The period of time beginning on the day money is put into
an annuity contract and ending when the contract is annuitized or surrendered.
ACCUMULATION UNIT - A unit of measurement which we use to calculate Contract
Value.
ANNUITANT - The living person named on an annuity contact whose life expectancy
is used to calculate the annuity payments when the contract is annuitized.
ANNUITIZATION - The process by which the accumulation phase of the contract is
terminated and the conteract is converted to the payoout phase. This is
accomplished by paying the entire contract value over a period of time.
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 designated to receive the death benefit in the
event of all of the owners' deaths.
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) or entity 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 Subaccounts 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 Subaccount, or each anniversary of that date.
CREDIT ENHANCEMENT - An amount we add to your Contract Value when a Purchase
Payment is received. Each Credit Enhancement will be counted as earnings under
your Contract.
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
Subaccounts 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 Subaccount.
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 Subaccounts 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.
SUBACCOUNT - 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.
5 PROSPECTUS
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 Subaccounts 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 Subaccounts to which your Contract Value has been
allocated.
WITHDRAWAL CHARGE - The contingent deferred sales charge that may be required
upon some withdrawals.
FEE TABLES
The following tables describe the fees and expenses that you will pay when
buying, owning and surrendering the Contract. The first table decribes 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.
Contingent Deferred Sales Charge Withdrawal Charge (as a percentage of Purchase
Payments)
CONTRIBUTION YEAR APPLICABLE CHARGE
- ----------------- -----------------
1 8%
2-3 7%
4-5 6%
6 5%
7 4%
8 3%
9 + 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 you own the Contract, not including Portfolio fees and expenses.
Annual Contract Maintenance Charge (waived if total Purchase Payments are
$50,000 or more) $35.00
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF DAILY NET ASSET VALUE
DEDUCTED FROM EACH OF THE SUBACCOUNTS OF THE SEPARATE ACCOUNT)
BASE CONTRACT (WITHOUT OPTIONAL RIDERS)
Mortality and Expense Risk Charge 1.30%
Administrative Expense Charge 0.10%
------
Total Separate Account Annual Expenses 1.40%
BASE CONTRACT (WITH ENHANCED DEATH BENEFIT RIDER)
Mortality and Expense Risk Charge 1.50%
Administrative Expense Charge 0.10%
------
Total Separate Account Annual Expenses 1.60%
The next table shows the minimum and maximum total 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
6 PROSPECTUS
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 appears in the prospectus for each Portfolio.
Minimum Maximum
- ------------------------------------------------------------------
Total Portfolio Annual 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) 0.50% 4.31%
- ------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
before any waiver or reimbursement as of December 31, 2003.
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 expense
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 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 Benefit Rider (with total Separate Account
expenses of 1.60%)
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
- ----------------------------------------------------------------------------------------
Costs Based on Maximum Annual Portfolio Expenses $1,236 $2,406 $3,544 $6,033
- ----------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio Expenses $ 845 $1,277 $1,731 $2,763
- ----------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------
Costs Based on Maximum Annual Portfolio Expenses $641 $1,896 $3,119 $6,033
- ----------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio Expenses $250 $ 767 $1,306 $2,763
- ----------------------------------------------------------------------------------------
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 BENEFIT RIDER (TOTAL
SEPARATE ACCOUNT EXPENSES OF 1.60%). IF THIS RIDER WAS NOT ELECTED, THE EXPENSE
FIGURES SHOWN WOULD BE SLIGHTLY LOWER.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE AND AN ANNUAL
CONTRACT ADMINISTRATIVE CHARGE OF $35.
7 PROSPECTUS
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the Prospectus. Please read the Prospectus carefully.
1. WHAT IS THE CONTRACT?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non-qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax-deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine the
amount of your annuity payments during the Annuity Period.
Your premiums are invested in one or more of the Subaccounts of the Separate
Account or allocated to the Fixed Account, as you instruct us. If we offer
additional Subaccounts in the future, we may limit your right to allocate your
Contract Value to up to twenty-three options under the Contract, counting each
Subaccount 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 Subaccounts and the
amount of interest we credit to the Fixed Account.
Each Subaccount 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 Subaccounts. 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 five to twenty years;
.. a joint and full survivorship annuity, with payments guaranteed for five to
twenty 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 Annuitant's
90/TH/ 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 Subaccounts 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 Subaccounts 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 $10,000 in Purchase Payments during the first Contract Year.
Purchase Payments must be at least $500, unless you enroll in an automatic
payment plan. Your periodic payments in an automatic payment plan must be at
least $100 per month. We may lower these minimums at our sole discretion. The
maximum age of the oldest Contract Owner and Annuitant is age 85 as of the date
we receive the completed application. The maximum age of the oldest Contract
Owner and Annuitant for purchasing the Contract with the Enhanced Death Benefit
Rider is age 80.
4. WHAT ARE MY INVESTMENT CHOICES UNDER THE CONTRACT?
You can allocate and reallocate your investment among the Subaccounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the following Portfolios:
PORTFOLIO(S)
- --------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds AIM V.I. Basic Value Fund - Series I
- --------------------------------------------------------------------------------------------------------------------
The Alger American Fund Alger American Growth Portfolio - Class S
- --------------------------------------------------------------------------------------------------------------------
Fidelity(R) Variable Insurance Products Fund Fidelity VIP Growth Portfolio - Service Class 2
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Investment Grade Bond Portfolio - Service Class 2
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Service Class 2
- --------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust Goldman Sachs VIT CORE(SM) Small Cap Equity
- --------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Fund
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Janus Aspen Series Capital Appreciation Portfolio: Institutional
Shares
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Foreign Stock Portfolio: Service Shares
- --------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio: Service Shares
- --------------------------------------------------------------------------------------------------------------------
J.P. Morgan Series Trust II JPMorgan Small Company Portfolio
- --------------------------------------------------------------------------------------------------------------------
Lazard Retirement Series, Inc. Lazard Emerging Markets Portfolio
- --------------------------------------------------------------------------------------------------------------------
Lazard International Equity Portfolio
- --------------------------------------------------------------------------------------------------------------------
MFS(R) Variable Insurance Trust(SM) MFS New Discovery Series - Service Class
- --------------------------------------------------------------------------------------------------------------------
MFS Utilities Series - Service Class
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds Oppenheimer Main Street Small Cap Fund/VA - Service Shares
- --------------------------------------------------------------------------------------------------------------------
PIMCO Advisors VIT PAVIT OpCap Balanced Portfolio
- --------------------------------------------------------------------------------------------------------------------
PAVIT OpCap Equity Portfolio
- --------------------------------------------------------------------------------------------------------------------
PAVIT OpCap Small Cap Portfolio
- --------------------------------------------------------------------------------------------------------------------
PAVIT PEA Science and Technology Portfolio
- --------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust PIMCO VIT Foreign Bond Portfolio (U.S. Dollar-Hedged) -
Administrative Shares
- --------------------------------------------------------------------------------------------------------------------
PIMCO VIT Money Market Portfolio - Administrative Shares
- --------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth and Income Portfolio - Administrative
Shares
- --------------------------------------------------------------------------------------------------------------------
PIMCO VIT Total Return Portfolio - Administrative Shares
- --------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust Putnam VT High Yield Fund - Class 1B
- --------------------------------------------------------------------------------------------------------------------
The Rydex Variable Trust Rydex VT OTC Fund
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Series Funds Inc Salomon Brothers Variable All Cap Fund - Class I
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Investors Fund - Class I
- --------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc.* Van Kampen UIF Equity Growth Portfolio - Class I
- --------------------------------------------------------------------------------------------------------------------
Van Kampen UIF High Yield Portfolio - Class I
- --------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Mid Cap Growth Portfolio - Class I
- --------------------------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value Portfolio - Class I
- --------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust Van Kampen LIT Aggressive Growth Portfolio - Class II
- --------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income Portfolio - Class II
- --------------------------------------------------------------------------------------------------------------------
* Morgan Stanley Investment Management, Inc., the advisor for the UIF
Portfolios, does business in certain instances using the name Van Kampen.
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 accompanying 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 Subaccount(s) and the Fixed
Account(s). Loan payments may not be allocated to the Fixed Account(s). You may
not transfer amounts into the DCA Fixed Account. The minimum amount that may be
transferred into any one of the Guaranteed 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.
9 PROSPECTUS
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 Subaccounts 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 Subaccounts 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 Guaranteed Maturity 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 Subaccounts;
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; or
2) it is necessary to meet IRS minimum withdrawal requirements.
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 Subaccounts. 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, if allowed in your state, 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 1.30% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. If you select our optional enhanced death benefit
rider, however, we may charge you a higher mortality and expense risk charge.
These charges are assessed each day during the Accumulation Period and the
Annuity Period. We guarantee that we will not raise these charges.
Transfer Fee. Although we currently are not charging a transfer fee, depending
on your state, the Contract permits us to charge you up to $10 per transfer for
each transfer after the first transfer in each month, or for each transfer in
excess of twelve within a calendar year. The Contract also permits us to impose
a minimum size on transfer amounts although the minimum size may be limited to
$25 in some states.
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
10 PROSPECTUS
Charge applies to each Purchase Payment for eight complete years from the date
of the Payment (each a "Contribution Year") as follows:
Contribution Applicable
Year Charge
- ------------ ----------
1 8%
2-3 7%
4-5 6%
6 5%
7 4%
8 3%
9+ 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 Charge 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 eight years;
plus
(b) an amount equal to your total Purchase Payments made more than eight 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; or (2) 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 advisor 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 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 distributions of earnings. Withdrawal of earnings
are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject
to an additional 10% federal tax penalty.
Special rules apply if the Contract is owned by a company or other legal entity.
Generally, such an owner must include in income any increase in the excess of
the Contract Value over the "investment in the contract" during the taxable
year.
8. DO I HAVE ACCESS TO MY MONEY?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some qualified plans, you may
also take a loan against the value of your Contract. Generally, a partial
withdrawal must equal at least $50, and after the withdrawal your remaining
Contract Value must at least equal $500.
Although you have access to your money during the Accumulation Period, certain
charges, such as the contract maintenance charge, the Withdrawal Charge, and
premium tax charges, may be deducted on a surrender or withdrawal. You may also
incur federal income tax liability or tax penalties. In addition, if you have
allocated some of the value of your Contract to the Fixed Account, the amount of
your surrender proceeds or withdrawal may be increased or decreased by a Market
Value Adjustment.
After annuitization, under certain settlement options you may be entitled to
withdraw the commuted value of the remaining payments.
9. WHAT IS THE DEATH BENEFIT?
We will pay a death benefit while the Contract is in force and before the
Annuity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract Owner is not a living person. To obtain payment of the Death Benefit,
the Beneficiary must submit to us a complete request for 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 proportionately for any prior partial
withdrawals;
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 eight,
increased by the total
11 PROSPECTUS
Purchase Payments since that anniversary and reduced proportionately by any
partial withdrawals since that anniversary.
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 Subaccounts 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.
Credit Enhancements. We will credit your Contract Value with a Credit
Enhancement of 4% of each Purchase Payment before we allocate that Purchase
Payment among the Subaccounts or to the Fixed Account. The Credit Enhancements
will be allocated in the same proportions as the corresponding Purchase Payment.
As described in "Free Look Period" on page 13, if you cancel your Contract
during the free look period we may deduct any Credit Enhancement from the amount
paid you.
Transfers. During the Accumulation Period, you may transfer Contract Value among
the Subaccounts and from the Subaccounts to the Fixed Account. If we offer
additional Subaccounts in the future, we may limit your right to allocate your
Contract Value to no 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 Subaccount of your choosing,
including other Subaccounts or the Fixed Account. Transfers from the Dollar Cost
Averaging Fixed Account may be made monthly only. Transfers from Subaccounts may
be made monthly, quarterly, or annually.
Under the Portfolio Rebalancing program, you can maintain the percentage of your
Contract Value allocated to each Subaccount 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
Subaccounts or from the Subaccounts 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. In most states, we will pay you an amount
equal to the Contract Value minus the Credit Enhancement. The Owner will also
bear any expenses charged with respect to the Credit Enhancement amount incurred
prior to the return of the Contract such as any mortality and expense charge.
The Contract Value may be more or less than your Purchase Payments. In some
states, we are required to send you the amount of your Purchase Payments. Since
state laws differ as to the consequences of returning a Contract, you should
refer to your Contract for specific information about your circumstances. If
your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any purchase payments or the Contract Value.
11. WHO CAN I CONTACT FOR MORE INFORMATION?
You can write to us at Lincoln Benefit Life Company, P.O. Box 80469, Lincoln,
Nebraska 68501-0469, or call us at (800) 865-5237.
FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Subaccount for each year since we started
offering the Contracts. Accumulation Unit Value is the unit of measure that we
use to calculate the value of your interest in a Subaccount. Accumulation Unit
Value does not reflect the deduction of certain charges that are subtracted from
your Contract Value, such as the Annual Contract Maintenance Charge. The
information in the table is included in the Separate Account's financial
statements. To obtain a fuller picture of each Subaccount's finances and
performance, you should review the Separate Account's financial statements,
which are in the Separate Account's Annual Statement dated as
12 PROSPECTUS
of December 31, 2003, contained in the Statement of Additional Information. The
Statement of Additional Information also includes a brief explanation of how
performance of the Subaccounts is calculated.
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 Subaccounts to which you allocate your Purchase
Payments and your Contract Value, as well as to reflect Credit Enhancements and
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 is age 85 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 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 a living person and 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.
If you are a non-living person and the Annuitant dies before annuity payments
begin, the Beneficiary may elect to receive a death benefit as discussed in
"Death of Annuitant" on page 28. 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. In most states, we will pay
you an amount equal to the Contract Value minus the Credit Enhancement. The
Contract Value at that time may be more or less than your Purchase Payments. The
Owner will also bear any expense charged with respect to the Credit Enhancement
amount incurred prior to the return of the Contract, such as any Mortality and
Expense Charge.
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
Subaccounts 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 Subaccounts you have selected or to the Fixed Account until 20
days after the Issue Date or, if
13 PROSPECTUS
your state's free look period is longer than ten days, for ten days plus the
period required by state law. During that time, we will allocate your Purchase
Payment to the PIMCO Money Market Subaccount. 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
$10,000. 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 $500 or more. Subsequent Purchase Payments made as part of
an Automatic Payment Plan, however, may be as small as $100 per month. However,
each Purchase Payment made to the Dollar Cost Averaging Fixed Account must be at
least $1200. If we receive Purchase Payments designated for the Dollar Cost
Averaging Fixed Account that are lower than the required minimum of $1200, or
purchase payments designated for the Guaranteed Maturity Fixed Account Option
that are lower than $500, such amounts will be allocated to the PIMCO 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 $100 or more
per month by automatic payment through your bank account. Call or write us for
an enrollment form.
CREDIT ENHANCEMENT. We will add a Credit Enhancement to your Contract Value when
each Purchase Payment is received. The Credit Enhancement is payable from our
general account. The amount of a Credit Enhancement is 4% of each Purchase
Payment. The Credit Enhancement will be allocated among the Subaccounts and
Fixed Account in the same proportion that the applicable Purchase Payment is
allocated. The amount returned if the Contract Owner exercises his or her right
to return the Contract during your Free Look period will be reduced by any
Credit Enhancements applied.
The expense charges for this Contract may be higher than the expense charges for
annuity contracts that do not offer Credit Enhancements. We expect to recoup the
cost of paying Credit Enhancements through collections of the Withdrawal Charges
on the Contract (which are contingent), as well as our legitimate profits on
this and other contracts we offer. In some circumstances - for example, if you
surrender your Contract while the Withdrawal Charge still applies to a
substantial proportion of your Premiums - your net proceeds may be lower than if
you had purchased one of our other annuity contracts that does not offer Credit
Enhancements. Likewise, over time the amount of the Credit Enhancements may be
offset by higher expenses.
Credit Enhancements are treated as "earnings" for purposes of determining
Withdrawal Charges and free withdrawal amounts on surrenders and partial
withdrawals. Similarly, Credit Enhancements are not treated as an "investment in
the contract" for tax purposes.
ALLOCATION OF PURCHASE PAYMENTS. Your Purchase Payments are allocated to the
Subaccount(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.
If we offer additional Subaccounts in the future, we may limit your right to
allocate your Purchase Payments to up to twenty-three options, counting each
Subaccount 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.
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 Subaccounts 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 PIMCO
14 PROSPECTUS
Money Market Subaccount. If we exercise that right and your state's free look
period is ten days, we will transfer your Purchase Payments to your specified
Subaccounts 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 Subaccount to allocate to
your Contract by dividing that portion of your Purchase Payment allocated to a
Subaccount by that Subaccount'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
Subaccounts 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 Subaccount will rise or fall to reflect changes in the share
price of the Portfolio in which the Subaccount 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 Subaccount. We also
determine a separate set of Accumulation Unit Values reflecting the cost of the
enhanced death benefit rider. If we elect or are required to assess a charge for
taxes, we may calculate a separate Accumulation Unit Value for Contracts issued
in connection with Non-Qualified and Qualified Plans, respectively, within each
Subaccount. We determine the Accumulation Unit Value for each Subaccount 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 which accompany this
prospectus 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 Subaccount and, therefore, your Contract Value.
TRANSFER DURING ACCUMULATION PERIOD. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Subaccounts 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-three 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. If you transfer an amount from the Fixed Account to a
Subaccount before the end of the applicable Guarantee Period or you allocate an
amount in the Fixed Account to a new Guarantee Period before the end of the
existing Guarantee Period, we usually will increase or decrease the amount by a
Market Value Adjustment. The calculation of the Market Value Adjustment is
described in "Market Value Adjustment" on page 23.
Transfers within 30 days after the end of the applicable Guarantee Period are
not subject to a Market Value Adjustment.
The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us.
You may not transfer Contract Value into the Dollar Cost Averaging Fixed Account
Option. You may not transfer Contract Value out of the Dollar Cost Averaging
Fixed Account Option except as part of a Dollar Cost Averaging program.
TRANSFERS AUTHORIZED BY TELEPHONE. You may make transfers by telephone. The cut
off time for telephone transfer requests is 4:00 p.m. Eastern time. Calls
completed before 4:00 p.m. will be effected on that day at that day's price.
Calls completed 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.
We may charge you the transfer fee or impose a minimum transfer amount as
described on page 32, although we currently are waiving it. At any time, without
notice, we may suspend, modify or terminate your privilege to make transfers via
the telephone, 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
Separate Subaccounts in any Contract year, or to refuse any Separate Subaccount
transfer request. We also reserve the right to restrict such transfers in any
manner reasonably designed to prevent transfers that we consider disadvantageous
to other 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.
15 PROSPECTUS
MARKET TIMING & EXCESSIVE TRADING. The Contracts are intended for long-term
investment. Frequent trading in response to short-term fluctuations in the
market can disrupt management of a Portfolio and raise its expenses, which can
impair Portfolio performance. Lincoln Benefit's policy is not to knowingly
accept any money intended for the purpose of market timing. Lincoln Benefit does
not market the Contracts to persons for the purpose of their engaging in market
timing activity.
Lincoln Benefit defines market timing activity to be the movement in and out of
a Subaccount in a short period of time designed to take advantage of short-term
market fluctuations based upon expected increases in Subaccount unit values.
Lincoln Benefit defines excessive trading activity as purchase and sale
transactions of a Contract Owner that occur with such frequency and/or such size
as to affect the Portfolio's ability to meet its investment objective, in the
judgment of Lincoln Benefit or the Portfolio.
Service center personnel seek to detect and report market timing or excessive
trading transfer activity through monitoring and review of trading activities.
Portfolios may also report suspected market timing or excessive trading transfer
activity. However, not all market timing or excessive trading transfer activity
can be prevented, as it may not be possible to identify it unless and until a
trading pattern is established. If we identify suspected market timing or
excessive trading activity, we will make further inquiry and take corrective
action as appropriate. Corrective action may include, but is not limited to,
refusing transfer requests, or suspending, modifying or terminating any
telephone, automated or electronic transfer privileges.
TRADING LIMITATIONS. We reserve the right to limit transfers among the
investment alternatives in any Contract Year, or to refuse any transfer request,
if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading or market timing ("Prohibited Trading Practices"), by, or
on behalf of, one or more Contract Owners, or a specific transfer request
or group of transfer requests, may have a detrimental effect on the
Accumulation Unit Values of any Variable Subaccount or on the share prices
of the corresponding Portfolio or otherwise would be to the disadvantage of
other Contract 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 Prohibited Trading Practices or because they believe that a specific
transfer or group of transfers would have a detrimental effect on the
prices of Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
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
Variable Subaccount of your choosing. You may not use the Dollar Cost Averaging
program to transfer amounts from the Guaranteed Maturity Fixed Account Option.
The interval between transfers from the Dollar Cost Averaging Fixed Account may
be monthly only. The interval between transfers from Subaccounts 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. 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 Money Market Subaccount in
equal monthly installments.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 subaccount with more volatile
performance experience is unlikely to produce the desired effects of Dollar Cost
Averaging as would transfers from a less volatile subaccount.
PORTFOLIO REBALANCING. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Subaccount at a pre-set
level. Over time, the variations in each Subaccount'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.
16 PROSPECTUS
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually until your Annuity Date. Portfolio Rebalancing is not available after
you annuitize. We will not charge a transfer fee for Portfolio Rebalancing. A
one-time request to rebalance the amounts allocated to the Subaccounts is not
part of a Portfolio Rebalancing program and is subject to all of the
requirements that are applicable to transfers made during the Accumulation
Period. We will automatically terminate this option if you request any transfers
outside the Portfolio Rebalancing program. If you wish to resume the 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 before your Annuity Date 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 one period
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
Subaccounts 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.
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
SEPARATE ACCOUNT INVESTMENTS
THE PORTFOLIOS. Each of the Subaccounts 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 Subaccounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Subaccounts 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 Subaccounts
of the Separate Account.
PORTFOLIO PORTFOLIO OBJECTIVE INVESTMENT ADVISER
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital A I M ADVISORS, INC.
Fund - Series I (4)
- -------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
- -------------------------------------------------------------------------------
Alger American Growth Long-term capital FRED ALGER MANAGEMENT,
Portfolio - Class S appreciation INC.
- -------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
- -------------------------------------------------------------------------------
Fidelity VIP Growth Capital appreciation FIDELITY MANAGEMENT &
Portfolio - Service RESEARCH COMPANY
Class 2
- -------------------------------------------------------
Fidelity VIP Investment As high a level of current
Grade Bond Portfolio - income as is consistent
Service Class 2 with the preservation of
capital.
- -------------------------------------------------------
Fidelity VIP Overseas Long-term growth of capital
Portfolio - Service
Class 2
- -------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE INSURANCE TRUST
- -------------------------------------------------------------------------------
Goldman Sachs VIT Long-term growth of capital GOLDMAN SACHS ASSET
CORE(SM) Small Cap MANAGEMENT, L.P.
Equity Fund
- -------------------------------------------------------------------------------
Goldman Sachs VIT Long-term capital GOLDMAN SACHS ASSET
International Equity appreciation MANAGEMENT INTERNATIONAL
Fund
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES
- -------------------------------------------------------------------------------
Janus Aspen Series Long-term growth of capital JANUS CAPITAL MANAGEMENT
Capital Appreciation LLC
Portfolio:
Institutional Shares
(5)
- -------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Foreign Stock
Portfolio: Service
Shares (6)
- -------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Worldwide Growth in a manner consistent with
Portfolio: Service the preservation of capital.
Shares
- -------------------------------------------------------------------------------
J.P. MORGAN SERIES TRUST II
- -------------------------------------------------------------------------------
JP Morgan Small Company High total return from a J.P. MORGAN INVESTMENT
Portfolio portfolio of small company MANAGEMENT, INC.
stocks.
- -------------------------------------------------------------------------------
LAZARD RETIREMENT SERIES INC.
- -------------------------------------------------------------------------------
Lazard Emerging Markets Long-term capital LAZARD ASSET MANAGEMENT
Portfolio appreciation LLC
- -------------------------------------------------------------------------------
Lazard International Long-term capital
Equity Portfolio appreciation
- -------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST(SM)
- -------------------------------------------------------------------------------
MFS New Discovery Capital appreciation MFS(TM) INVESTMENT
Series - Service Class MANAGEMENT
- -------------------------------------------------------
MFS Utilities Series - Capital growth and current
Service Class income
- -------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- -------------------------------------------------------------------------------
Oppenheimer Main Street Capital appreciation OPPENHEIMERFUNDS, INC.
Small Cap Fund/VA -
Service Shares
- -------------------------------------------------------------------------------
PIMCO ADVISORS VIT
- -------------------------------------------------------------------------------
PAVIT OpCap Balanced Growth of capital and OPCAP ADVISORS LLC
Portfolio (4) investment income
- -------------------------------------------------------
PAVIT OpCap Equity Long-term capital
Portfolio appreciation
- -------------------------------------------------------
PAVIT PEA Science and Capital appreciation
Technology Portfolio
(3)
- -------------------------------------------------------
PAVIT OpCap Small Cap Capital appreciation
Portfolio
- -------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- -------------------------------------------------------------------------------
PIMCO VIT Foreign Bond To maximize total return, PACIFIC INVESTMENT
Portfolio (U.S. consistent with MANAGEMENT COMPANY LLC
Dollar-Hedged) - preservation of capital and
Administrative Shares prudent investment
management.
- -------------------------------------------------------
PIMCO VIT Money Market To obtain maximum current
Portfolio - income consistent with
Administrative Shares preservation of capital and
daily liquidity.
- -------------------------------------------------------
StocksPLUS Growth and A total return which exceeds
Income Portfolio - the total return
Administrative Shares performance of the S&P 500.
- -------------------------------------------------------
PIMCO VIT Total Return To maximize total return,
Portfolio - consistent with
Administrative Shares preservation of
capital and prudent
investment management.
- -------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
- -------------------------------------------------------------------------------
Putnam VT High Yield High current income. Capital PUTNAM INVESTMENT
Fund - Class IB growth is a secondary goal MANAGEMENT LLC
when consistent with
achieving high current
income. The fund seeks its
goal by investing at least
80% in U.S. corporate
bonds rated below investment
grade (junkbonds) and that
have intermediate to
long-term maturities (three
years or longer.)
- -------------------------------------------------------------------------------
THE RYDEX VARIABLE TRUST
- -------------------------------------------------------------------------------
Rydex VT OTC Fund Investment results that RYDEX INVESTMENTS
correspond to a benchmark for
over-the-counter
securities. The Portfolio's
current benchmark is the
NASDAQ 100 Index.
- -------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
- -------------------------------------------------------------------------------
Salomon Brothers Capital appreciation through SALOMON BROTHERS ASSET
Variable All Cap Fund investment in securities MANAGEMENT INC
(formerly Capital that the investment manager
Fund) - Class I believes have above-average
capital appreciation
potential.
- -------------------------------------------------------
Salomon Brothers Long-term growth of capital
Variable Investors with current income as a
Fund - Class I (4) secondary objective
- -------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- -------------------------------------------------------------------------------
Van Kampen UIF Equity Seeks long-term capital VAN KAMPEN(1)
Growth Portfolio, appreciation by investing
Class I (7) primarily in
growth-oriented equity
securities of large
capitalization companies.
- -------------------------------------------------------
Van Kampen UIF High Above-average total return
Yield Portfolio, over a market cycle of
Class I three to five years by
investing primarily in high
yield securities.
- -------------------------------------------------------
Van Kampen UIF Mid Cap Seeks above-average total
Growth Portfolio, return over a market cycle
Class I of three to five years by
investing in common stocks
and other equity
securities.
- -------------------------------------------------------
Van Kampen UIF U.S. Mid Seeks to provide
Cap Value Portfolio, above-average current
Class I (formerly Mid income and long-term
Cap Core Portfolio) capital appreciation by
(2) (8) investing primarily in
equity securities of
com[panies in the U.S. real
estate industry, including
real estate investment
trusts.
- -------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
- -------------------------------------------------------------------------------
Van Kampen LIT Capital Growth VAN KAMPEN ASSET
Aggressive Growth MANAGEMENT
Portfolio, Class II
(9)
- -------------------------------------------------------
Van Kampen LIT Growth Long-term growth of capital
and Income Portfolio, and income
Class II
- -------------------------------------------------------------------------------
(1) Morgan Stanley Investment Management Inc., the investment adviser to the
Van Kampen UIF Portfolios, does business in certain instances as Van
Kampen.
(2) Effective September 30, 2003, The Universal Institutional Funds, Inc. U.S.
Mid Cap Core Portfolio, Class I changed its name to The Universal
Institutional Funds, Inc. U.S. Mid Cap Value Portfolio, Class I. The
investment objective for this Portfolio has not changed.
(3) Sub-advised by PIMCO Equity Advisers LLC.
(4) Effective 4/30/04, the LSA Balance Fund, LSA Basic Value Fund and LSA Value
Equity Fund were merged into the PAVIT OpCap Balanced Portfolio, AIM V.I.
Basic Value Fund - Series I and Salomon Brothers Variable Investors Fund -
Class I, respectively.
(5) Effective 4/30/04, the LSA Capital Appreciation Fund was merged into the
Janus Aspen Series Capital Appreciation Portfolio - Institutional Shares.
(6) Effective 5/1/04 the Janus Aspen Series International Portfolio - Service
Shares changed its name to the Janus Aspen Foreign Stock Portfolio -
Service Shares.
(7) Effective 4/30/04, the LSA Blue Chip Fund, LSA Equity Grown Fund and LSA
Capital Growth Fund were merged into the Van Kampen UIF Equity Growth
Portfolio, Class I.
(8) Effective 4/30/04, the LSA Diversified Mid-Cap Growth Fund and LSA MidCap
Value Fund were merged into the Van Kampen UIF U.S. Mid Cap Value
Portfolio, Class I.
19 PROSPECTUS
(9) Effective 4/30/04, the LSA Aggressive Growth Fund and LSA Emerging Growth
Fund were merged into the Van Kampen LIT Aggressive Growth Portfolio, Class
II.
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
Subaccount are separate and are credited to or charged against the particular
Subaccount without regard to income, gains or losses from any other Subaccount
or from any other part of our business. We will use the net Purchase Payments
you allocate to a Subaccount 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 advisors which manage
publicly traded mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be modeled after
publicly traded mutual funds, you should understand that the Portfolios are not
otherwise directly related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any similarly named
Portfolio may differ substantially.
Some 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 Subaccounts to which you have allocated
your Contract Value. Under current law, however, you are entitled to give us
instructions on how to vote those shares on certain matters. 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 advisor 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
20 PROSPECTUS
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 Subaccounts:
(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 Subaccount to another, or from any subaccount
to our general account;
(d) to add, combine, or remove Subaccounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total charges
do not exceed the maximum amount that may be charged the Separate Account
and the Portfolios in connection with the Contracts.
If we take any of these actions, we will comply with the then applicable legal
requirements.
THE FIXED ACCOUNT
GENERAL. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Loan Payments may not be
allocated to the Fixed Account(s). Allstate Life invests the assets of the
general account in accordance with applicable laws governing the investments of
insurance company general accounts. The Fixed Account may not be available in
all states. Please contact us at 1-800-865-5237 for current information.
GUARANTEED MATURITY FIXED ACCOUNT OPTION. We will credit interest to each amount
allocated to the Guaranteed Maturity Fixed Account Option at a specified rate
for a specified Guarantee Period. You select the Guarantee Period for each
amount that you allocate to this option. We will declare the interest rate that
we will guarantee to credit to that amount for that Guarantee Period. Each
amount allocated to a Guarantee Period under this option must be at least $500.
We reserve the right to limit the number of additional Purchase Payments that
may be allocated to this option.
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may offer Guarantee Periods ranging from one to ten years in
length. We will decide in our discretion which Guarantee Periods to offer.
Currently, we offer Guarantee Periods of one, three, five, seven and ten years.
In the future we may offer Guarantee Periods of different lengths or stop
offering some Guarantee Periods.
We will credit interest daily to each amount allocated to a Guarantee Period
under this option at a rate which compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period. We
will not change the interest rate credited to a particular allocation until the
end of the relevant Guarantee Period. We may declare different interest rates
for Guarantee Periods of the same length that begin at different times.
The following example illustrates how a Purchase Payment allocated to this
option would grow, given an assumed Guarantee Period and effective annual
interest rate:
21 PROSPECTUS
EXAMPLE
Purchase Payment $10,000
Guarantee Period 5 years
Effective Annual Rate 4.50%
Credit Enhancement $ 400
END OF CONTACT YEAR
-----------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ----------- ---------- ---------- ----------
Beginning Contract
Value $10,400.00
x (1 + Effective
Annual Rate) x 1.045
----------
$10,868.00
Contract Value at end
of Contract Year $$10,868.00
x (1 + Effective
Annual Rate) x 1.045
-----------
$ 11,357.06
Contract Value at end
of Contract Year $11,357.06
x (1 + Effective
Annual Rate) x 1.045
----------
$11,868.13
Contract Value at end
of Contract Year $11,868.13
x (1 + Effective
Annual Rate) x 1.045
----------
$12,402.19
Contract Value at end
of Contract Year $12,402.19
x (1 + Effective
Annual Rate) x 1.045
----------
$12,960.29
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,560.29 ($12,960.29 -
$10,400)
NOTE: This example assumes no withdrawals during the entire five-year Guarantee
Period. If you were to make a partial withdrawal, you might be required to pay a
Withdrawal Charge and the amount withdrawn might be increased or decreased by a
Market Value Adjustment. The hypothetical interest rate is for illustrative
purposes only and is not intended to predict future interest rates to be
declared under the Contract.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
relevant factors such as then current interest rates, regulatory and tax
requirements, our sales commission and administrative expenses, general economic
trends, and competitive factors. For current interest rate information, please
contact us at 1-800-865-5237.
WE WILL DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE
CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE.
At the end of each Guarantee Period, we will mail you a notice asking you what
to do with the relevant amount, including the accrued interest. During the
30-day period after the end of the Guarantee Period, you may:
1) take no action. If so, we will automatically keep the relevant amount in
the Guaranteed Maturity Fixed Account Option. The new Guarantee Period will
be the same length as the expiring Guarantee Period and will begin on the
day the previous Guarantee Period ends. The new interest rate will be our
then current declared rate for Guarantee Periods of that length; or
2) allocate the relevant Contract Value to one or more new Guarantee Periods
of your choice in the Guaranteed Maturity Fixed Account Option. The new
Guarantee Period(s) will begin on the day the previous Guarantee Period
ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
3) instruct us to transfer all or a portion of the relevant amount to one or
more Subaccounts. 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
22 PROSPECTUS
selected length until you direct us in writing to stop. We may stop offering
this program at any time.
MARKET VALUE ADJUSTMENT. If permitted by your state, 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
33;
2) when you transfer funds from the Guaranteed Maturity Fixed Account Option
to the Subaccounts;
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; or
2) you make a withdrawal to satisfy the IRS' required minimum distribution
rules for this Contract.
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. If permitted by your state, you may
also allocate Purchase Payments to the Dollar Cost Averaging Fixed Account
Option. We will credit interest to Purchase Payments allocated to this option
for up to one year at the current rate that we declare when you make the
allocation. The effective annual rate will never be less than 3%. You may not
transfer funds to this option from the Subaccounts or the Guaranteed Maturity
Fixed Account Option. We will follow your instructions in transferring amounts
from this option to the Subaccounts or the Guaranteed Maturity Fixed Account
Option on a monthly basis only, as described in "Automatic Dollar Cost Averaging
Program" on page 16 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 the later of the 10th Contract Anniversary or
the youngest Annuitant's 90/TH/ 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).
23 PROSPECTUS
If your Contract was purchased by a Qualified Plan, we may require you to
annuitize by the date required by the Tax Code, unless you show us that you are
meeting the minimum distribution requirements in some other way.
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.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis." Once the investment in the Contract is depleted, all
remaining payments will be fully taxable. If the Contract is tax-qualified,
generally, all payments will be fully taxable. Taxable payments taken prior to
age 59 1/2 may be subject to an additional 10% federal tax penalty.
The three Annuity Options are:
OPTION A, LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5 TO 20 YEARS. We make
periodic payments at least as long as the Annuitant lives. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
OPTION B, JOINT AND SURVIVOR ANNUITY, WITH PAYMENTS GUARANTEED FOR 5 TO 20
YEARS. We make periodic payments at least as long as either the Annuitant or the
Joint Annuitant is alive. If both the Annuitant and the Joint Annuitant die
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
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, subject to a Withdrawal Charge. We will charge a Withdrawal
Charge on any portion of your lump sum payment attributable to Purchase Payments
made within the prior eight years. The amount of the Withdrawal Charge will be
determined as described in "Withdrawal Charge" on page 32 below. If you elected
Variable Annuity payments, the lump sum payment after Withdrawal Charge will
depend on:
.. the investment results of the Subaccounts 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.
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 32 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" on page
25.
You must notify us in writing at least 30 days before the Annuity Date how you
wish to allocate your Annuitized Value between Variable Annuity and Fixed
Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Subaccounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and
24 PROSPECTUS
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 Subaccounts 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 Subaccounts 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.
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
Subaccounts.
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 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 Subaccounts so as to change the
relative weighting of the Subaccounts on which your Variable Annuity payments
will be based. In addition, you will have a limited ability to make transfers
from the Subaccounts 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 Subaccounts or make transfers from
the Subaccounts 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
25 PROSPECTUS
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 as 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 eighth Contract Anniversary and each subsequent
Contract Anniversary evenly divisible by eight, 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 in Enhanced Death Benefit Rider on page 28, you may add an optional
rider that in some circumstances may increase the Death Benefit under your
Contract.
DEATH BENEFIT PAYMENTS.
Death of Owner:
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
26 PROSPECTUS
iii. over the life of your spouse with a guaranteed number of payments from 5 to
30 years but not to exceed the life expectancy of your spouse.
c. If your spouse chooses to continue the Contract or does not elect one of
these options, then the Contract will continue in the Accumulation Period
as if the death had not occurred. If the Contract is continued in the
Accumulation Period, the following conditions apply:
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the Subaccounts.
This excess will be allocated in proportion to your Contract Value in those
Subaccounts 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 Subaccount. 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 Subaccounts;
ii. transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
iii. transfer all or a portion of the excess into a combination of subaccounts
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
Subaccount 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 15 and "Transfer Fee" 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 for any withdrawals made during
this 5 year period.
We reserve the right to offer additional options upon Death of 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
Subaccount and the Contract Value will be adjusted accordingly. The
Beneficiary may exercise all rights as set forth in "Transfers During the
Accumulation Period" on page 15 and "Transfer Fee" 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.
27 PROSPECTUS
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.
Death of Annuitant:
If the Annuitant who is not also the Owner dies prior to the Annuity Date, the
following apply:
1. If the Owner is a living person, then the contract will continue with a new
Annuitant as described in "Annuitant" on page 13.
2. If the Owner is a 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 the option above, then the Beneficiary
must receive the Contract Value payable within 5 years of the Annuitant's
date of death. On the date we receive the complete request for settlement
of the Death Proceeds, the Contract Value under this option will be 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 Subaccount. Henceforth, the Beneficiary may exercise all
rights as set forth in the "Transfers During Accumulation Period" on page
15 and "Transfer Fee" on page 32 during this 5 year period.
No additional Purchase Payments may be added to the contract under this
election. Withdrawal charges will be waived during this 5 year period.
We reserve the right to offer additional options under Death of Annuitant.
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 the Annuitant's death to the date on which the Death Proceeds are
paid.
ENHANCED DEATH BENEFIT RIDER: When you purchase your Contract, you may select
the Enhanced Death Benefit Rider. In certain states, this benefit may be offered
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. If you are not
an individual, the Enhanced Death Benefit applies only to the Annuitant's death.
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. As described below, we will charge a higher mortality and expense
risk charge if you select this Rider. We may discontinue offering the Rider at
any time.
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 highest Contract Value on all Contract
Anniversaries prior to the date we calculate the Death Benefit.
We will continuously adjust Enhanced Death Benefit A as described above until
the oldest Contract Owner's 85/TH/ birthday or, if the Contract Owner is not a
living individual, the Annuitant's 85/TH/ 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:
(a) your total Purchase Payments,
(b) reduced by any withdrawal adjustments and
(c) accumulated daily at an effective annual rate of 5% per year, until the
earlier of:
1) the date we determine the death benefit;
2) the first day of the month following the oldest Contract owner's 85/TH
/birthday; or
3) if the Contract Owner is a company or other legal entity, the first day of
the month following the Annuitant's 85/TH/ birthday. 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 which
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
28 PROSPECTUS
(c) = the most recently calculated Enhanced Death 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 Beneficiary(ies)
are deceased at the time a Contract Owner or any 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, as defined above, the
remaining Beneficiaries in that class will divide the deceased Beneficiary's
share in proportion to the original share 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 for the above purposes.
You may specify that the Death Benefit be paid under a specific Income Plan by
submitting a written request to our Service Center. If you so request, your
Beneficiary may not change to a different Income Plan or lump sum. Once we
accept the written request, the change or restriction will take effect as of the
date you signed the request.
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 1/2 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 Subaccount. If your loan amount is
greater than your Contract Value in the Subaccounts, we will transfer the
remaining required collateral from the Guaranteed Maturity Fixed Account
Options. If your loan amount is greater than your contract value in the
Subaccounts and the Guaranteed Maturity Fixed Account Options, we will transfer
the remaining required collateral from the Dollar Cost Averaging Fixed Account
Option.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Subaccounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount
29 PROSPECTUS
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 Subaccounts.
When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the loan
interest rate applicable to new loans. We also reserve the right to change the
terms of new loans.
We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:
1) the Death Proceeds;
2) surrender proceeds;
3) the amount available for partial withdrawal; and
4) the amount applied on the Annuity Date to provide annuity payments.
Usually you must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
Generally, loan payments are allocated to the Subaccount(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 PIMCO Money Market Subaccount.
If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount,
incur the early withdrawal tax penalty. 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 23.
In general, you must withdraw at least $50 at a time. You may also withdraw a
lesser amount if you are withdrawing your entire interest in a Subaccount. 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 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 Subaccounts and
the Fixed Accounts. If we do not receive allocation instructions from you, we
usually will allocate the partial withdrawal proportionately among the
Subaccounts and the Guaranteed Maturity Fixed Account Options based upon the
balance of the Subaccounts 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
30 PROSPECTUS
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; or
5) in the case of hardship.
If you seek a hardship withdrawal, you may only withdraw amounts attributable to
your Purchase Payments; you may not withdraw any earnings. These limitations on
withdrawals apply to:
1) salary reduction contributions made after December 31, 1988;
2) income attributable to such contributions; and
3) income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between certain Qualified
Plans. Additional restrictions and limitations may apply to distributions from
any Qualified Plan. Tax penalties may also apply. You should seek tax advice
regarding any withdrawals or distributions from Qualified Plans.
SYSTEMATIC WITHDRAWAL PROGRAM. If your Contract is a non-Qualified Contract or
IRA, you may participate in our Systematic Withdrawal Program. You must complete
an enrollment form and send it to us. You must complete the withholding election
section of the enrollment form before the systematic withdrawals will begin. You
may choose withdrawal payments of a flat dollar amount, earnings, or a
percentage of Purchase Payments. You may choose to receive systematic withdrawal
payments on a monthly, quarterly, semi-annual, or annual basis. Systematic
withdrawals will be deducted from your Subaccount 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 Subaccounts 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
advisor.
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 for
premium taxes, if applicable;
2) as charges against the assets of the Separate Account for administrative
expenses and for the assumption of mortality and expense risks; and
31 PROSPECTUS
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 page 6 and described more fully in the Prospectuses and
Statements of Additional Information for the Portfolios.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a mortality and expense risk charge
from each Subaccount during each Valuation Period. The mortality and expense
risk charge is equal, on an annual basis, to 1.30% of the average net asset
value of each Subaccount. 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 26.
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 1.50% of average net asset value of each Subaccount. We charge a
higher mortality and expense risk charge for the Rider to compensate us for the
additional risk that we accept by providing the Rider. We will calculate a
separate Accumulation Unit Value for the base Contract, and for Contracts with
the 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 Subaccounts to which you have allocated your
Contract Value, and redeem Accumulation Units accordingly. 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. 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, 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 Subaccount during each Valuation Period. This charge is equal, on an annual
basis, to 0.10% of the average net asset value of the Subaccounts. 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,
depending on your state, either permits us to charge you up to $10 per transfer
for each transfer effected between Subaccount(s) and/or the Fixed Account after
the first transfer in each month, or for each transfer in excess of twelve
within a calendar year. The Contract also permits us to impose a minimum size on
transfer amounts although the minimum size may be limited to $25 in some states.
We will notify you if we begin to charge this fee or impose a minimum size on
transfer amounts. 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 eight 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 8%
Second and Third 7%
Fourth and Fifth 6%
Sixth 5%
Seventh 4%
Eighth 3%
Ninth and later 0%
When we calculate the Withdrawal Charge, we do not take any applicable Market
Value Adjustment into
32 PROSPECTUS
consideration. 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; Credit Enhancements are treated as
"earnings" for this purpose;
Second. "Old Purchase Payments" - Purchase Payments received by us more than
eight years before the date of withdrawal that have not been previously
withdrawn;
Third. Any additional amounts available as a "Free Withdrawal," as described
below;
Fourth. "New Purchase Payments - Purchase Payments received by us less than
eight 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 plans
under our prototype as described on page 33;
.. withdrawals taken to satisfy IRS minimum distribution rules;
.. withdrawals that qualify for one of the waiver benefits described on page
33 below; and
.. withdrawals under Contracts issued to employees of Lincoln Benefit Life
Company, Surety Life Insurance Company, and Allstate Financial Services,
L.L.C. or to their spouses or minor children, if these 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 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 36. You should consult your own
tax counsel or other tax advisors 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.
Credit Enhancements are treated as earnings for purposes of determining the free
withdrawal amount. 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 36.
WAIVER BENEFITS
GENERAL. If approved in your state, we will offer the two 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 advisor 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
33 PROSPECTUS
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 are
diagnosed with a terminal illness. Due proof of the diagnosis, as provided in
the Contract, must be given to us prior to, or at the time of, any withdrawal
request.
WAIVER OF WITHDRAWAL CHARGE FOR CERTAIN QUALIFIED PLAN WITHDRAWALS. For
Contracts issued under a Section 403(b) plan or a Section 401 plan under our
prototype, we will waive the Withdrawal Charge when:
1) the Annuitant becomes disabled (as defined in Section 72(m)(7) of the Tax
Code);
2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have passed
since the Contract was issued;
3) at least 15 Contract Years have passed since the Contract was issued.
Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan, or
a paired plan (Money Purchase and Profit Sharing). For more information about
our prototype plan, call us at 1-800-865-5237.
PREMIUM TAXES. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or other
insurance companies. Some states assess premium taxes when Purchase Payments are
made; others assess premium taxes when annuity payments begin. We will deduct
any applicable premium taxes upon full surrender, death, or annuitization.
Premium taxes generally range from 0% to 3.5%.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES. We are not currently maintaining a
provision for taxes. In the future, however, we may establish a provision for
taxes if we determine, in our sole discretion, that we will incur a tax as a
result of the operation of the Separate Account. We will deduct for any taxes we
incur as a result of the operation of the Separate Account, whether or not we
previously made a provision for taxes and whether or not it was sufficient. Our
status under the Tax Code is briefly described in the Statement of Additional
Information.
OTHER EXPENSES. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Subaccounts 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 advisors or administrators of the Portfolios in
connection with administrative service and cost savings experienced by the
investment advisors 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 the separate account investments may
cause a Contract
35 PROSPECTUS
owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Separate Account. If this
occurs, income and gain from the Separate Account assets would be includible in
your gross income. Lincoln
Benefit does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Separate Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of annuity
payments received from a Non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If any variable payment is less than the excludable amount you should
contact a competent tax advisor to determine how to report any unrecovered
investment. The federal tax treatment of annuity payments is unclear in some
respects. As a result, if the IRS should provide further guidance, it is
possible that the amount we calculate and report to the IRS as taxable could be
different. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although we will report your levelized payments to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first monthly
payout is received.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are satisfied if any
portion of the Contract Owner's interest that is payable to (or for the
benefit of) a designated Beneficiary is distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
the Beneficiary) and the distributions begin within 1 year of the Contract
Owner's death. If the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner.
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by
a non-natural person will be treated as the death of the Contract Owner.
36 PROSPECTUS
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in income
as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
full 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.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Lincoln Benefit (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Lincoln Benefit is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Section 1441 of the Code provides that Lincoln Benefit as a
withholding agent must withhold 30% of the taxable amounts paid to a
non-resident alien. A non-resident alien is someone other than a U.S. citizen or
resident alien. Withholding may be reduced or eliminated if covered by an income
tax treaty between the U.S. and the non-resident alien's country of residence if
37 PROSPECTUS
the payee provides a U.S. taxpayer identification number on a 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 on variable 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 a variable annuity as a TSA or IRA.
Tax Qualified Contracts are contracts purchased as investments as:
.. Individual Retirement Annuities (IRAs) under Section 408(b) of the Code;
.. Roth IRAs under Section 408A of the Code;
.. Simplified Employee Pension (SEP IRA) under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Section
408(p) of the Code; and
.. Tax Sheltered Annuities under Section 403(b) of the Code.
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.
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 retirement plan.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
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 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. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, IRAs (excluding Roth IRAs) and TSAs
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. 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 403(b) plan.
Lincoln Benefit reserves the right to limit the availability of the Contract for
use with any of the qualified plans listed above.
38 PROSPECTUS
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 (applies only for IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Lincoln Benefit is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "eligible rollover distributions." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Lincoln Benefit is
required to withhold federal income tax at a rate of 20% on all "eligible
rollover distributions" unless you elect to make a "direct rollover" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions from employer sponsored retirement plans,
including TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Lincoln Benefit is required to withhold federal income tax using
the wage withholding rates. The customer may elect out of withholding by
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states, if
there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Section 1441 of the Code provides that Lincoln Benefit as a
withholding agent must withhold 30% of the taxable amounts paid to a
non-resident alien. A non-resident alien is someone other than a U.S. citizen or
resident alien. Withholding may be reduced or eliminated if covered by an income
tax treaty between the U.S. and the non-resident alien's country of residence if
the payee provides a U.S. taxpayer identification number on a completed Form
W-8BEN. A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all countries nor do
all tax treaties provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code 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
39 PROSPECTUS
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue Code Section 408 permits a custodian or trustee of an
Individual Retirement Account to purchase an annuity as an investment of the
Individual Retirement Account. If an annuity is purchased inside of an
Individual Retirement Account, then the Annuitant must be the same person as the
beneficial owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the annuity 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. Section 408(k) of the Code 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). Section 408(p) of the
Code allow eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 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 Employee Retirement Income Security Act of 1974 (ERISA) funds
in 403(b) contracts.
40 PROSPECTUS
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT
LINCOLN BENEFIT LIFE COMPANY. Lincoln Benefit Life Company is a stock life
insurance company organized under the laws of the state of Nebraska in 1938. Our
legal domicile and principal business address is 2940 South 84th Street,
Lincoln, Nebraska, 68506-4142. Lincoln Benefit is a wholly owned subsidiary of
Allstate Life Insurance Company ("Allstate Life"), a stock life insurance
company incorporated under the laws of the State of Illinois. Allstate Life is a
wholly owned subsidiary of Allstate Insurance Company ("AIC"), a stock
property-liability insurance company incorporated under the laws of Illinois.
All outstanding capital stock of AIC is owned by The Allstate Corporation
("Allstate").
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam, U.S. Virgin Islands and all states except New York. We intend
to market the Contract everywhere we conduct variable annuity business. The
Contracts offered by this prospectus are issued by us and will be funded in the
Separate Account and/or the Fixed Account.
Under our reinsurance agreements 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. These
assets represent our general account and are invested and managed by Allstate
Life. Accordingly, the results of operations with respect to applications
received and contracts issued by Lincoln Benefit are not reflected in our
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 agreements. While the
reinsurance agreements provide us with financial backing from Allstate Life, it
does not create a direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with 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.
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 Subaccounts. The assets of each Subaccount
are invested in the shares of one of the Portfolios. We do not guarantee the
investment performance of the Separate Account, its Subaccounts or the
Portfolios. Values allocated to the Separate Account and the amount of Variable
Annuity payments will rise and fall with the values of shares of the Portfolios
and are also reduced by Contract charges. We may also use the Separate Account
to fund our other annuity contracts. We will account separately for each type of
annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-865-5237. We have
reproduced the Table of Contents of the Statement of Additional Information on
44.
STATE REGULATION OF LINCOLN BENEFIT. We are subject to the laws of Nebraska and
regulated by the Nebraska Department of Insurance. Every year we file an annual
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. Our books and records are subject to review by the
Department of Insurance at all times. We are also subject to regulation under
the insurance laws of every jurisdiction in which we operate.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and the
Separate Account. Our mailing address is P.O. Box 80469, Lincoln, Nebraska
68501-0469.
41 PROSPECTUS
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 5.5% 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 and other cash bonuses to broker-dealers who maintain
certain sales volume levels. ALFS, Inc. ("ALFS") located at 3100 Sanders Road,
Northbrook, IL 60062-7154 serves as distributor of the Contracts. ALFS, an
affiliate of Lincoln Benefit, is a wholly owned subsidiary of Allstate Life
Insurance Company. ALFS is a registered broker dealer under the Securities and
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc. Lincoln Benefit does not pay ALFS a commission for
distribution of the Contracts. The underwriting agreement with ALFS provides
that we will reimburse ALFS for expenses incurred in distributing the Contracts,
including liability arising out of services we provide on the Contracts.
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 William F. Emmons, Vice President, Assistant General
Counsel, and Assistant Secretary of Lincoln Benefit.
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit's annual report on Form 10-K for the year ended December 31,
2003, 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
statement in other documents that are legally part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000910739. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by
42 PROSPECTUS
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 80469, Lincoln, Nebraska 68501-0469 or 1-800-865-5237.
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.
43 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
THE CONTRACT
Annuity Payments
Initial Monthly Annuity Payment
Subsequent Monthly Payments
Transfers After Annuity Date
Annuity Unit Value
PAGE
Illustrative Example of Annuity Unit Value Calculation
Illustrative Example of Variable Annuity Payments
EXPERTS
FINANCIAL STATEMENTS
44 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUES /(1)/
BASIC POLICY
Year ending December 31,
---------------------------------------------------
FUND 1999 2000 2001 2002 2003
- -----------------------------------------------------------------------------
AIM V.I. Basic Value
Fund (6)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
Alger American Growth
Portfolio (5)
Accumulation Unit Value
Beginning -- -- -- -- $ 10.00
Accumulation Unit Value
Ending -- -- -- -- $ 12.358
Number of Units
Outstanding at End of -- -- -- -- 54,381
Year
Fidelity VIP Growth
Portfolio (5)
Accumulation Unit Value
Beginning -- -- -- -- $ 10.00
Accumulation Unit Value
Ending -- -- -- -- $ 12.458
Number of Units
Outstanding at End of -- -- -- -- 111,685
Year
Fidelity VIP Investment
Grade Bond (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 10.721
Accumulation Unit Value
Ending -- -- -- $ 10.721 $ 11.094
Number of Units
Outstanding at End of -- -- -- 178,620 645,218
Year
Fidelity VIP Overseas
(4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.724
Accumulation Unit Value
Ending -- -- -- $ 7.724 $ 10.895
Number of Units
Outstanding at End of -- -- -- 3,650 40,658
Year
Goldman Sachs VIT
International Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 12.29 $ 10.52 $ 8.07 $ 6.495
Accumulation Unit Value
Ending $ 12.29 $ 10.52 $ 8.07 $ 6.495 $ 8.678
Number of Units
Outstanding at End of 22,152 159,917 114,948 254,616 287,318
Year
Goldman Sachs VIT CORE
Small Cap Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 12.19 $ 12.23 $ 12.61 $ 10.573
Accumulation Unit Value
Ending $ 12.19 $ 12.23 $ 12.61 $ 10.573 $ 15.223
Number of Units
Outstanding at End of 32,499 94,926 230,893 127,061 199,375
Year
Janus Aspen Series
Capital Appreciation (7)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
Janus Aspen Series
Foreign Stock (4) (8)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.755
Accumulation Unit Value
Ending -- -- -- $ 7.755 $ 10.200
Number of Units
Outstanding at End of -- -- -- 10,251 32,987
Year
Janus Aspen Series
Worldwide Growth (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.806
Accumulation Unit Value
Ending -- -- -- $ 7.806 $ 9.520
Number of Units
Outstanding at End of -- -- -- 13,094 51,204
Year
JPMorgan Small Company
(2)
Accumulation Unit Value
Beginning $ 10.00 $ 14.01 $ 12.25 $ 11.11 $ 8.582
Accumulation Unit Value
Ending $ 14.01 $ 12.25 $ 11.11 $ 8.582 $ 11.508
Number of Units
Outstanding at End of 42,567 135,018 148,118 229,162 235,165
Year
Lazard Emerging Markets
(2)
Accumulation Unit Value
Beginning $ 10.00 $ 13.27 $ 9.41 $ 8.81 $ 8.555
Accumulation Unit Value
Ending $ 13.27 $ 9.41 $ 8.81 $ 8.555 $ 12.903
Number of Units
Outstanding at End of 11,803 34,832 51,868 78,720 112,391
Year
Lazard International
Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 11.25 $ 10.02 $ 7.50 $ 6.607
Accumulation Unit Value
Ending $ 11.25 $ 10.02 $ 7.50 $ 6.607 $ 8.374
Number of Units
Outstanding at End of 27,207 79,805 118,331 162,113 148,319
Year
LSA Aggressive Growth
(4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.299
Accumulation Unit Value
Ending -- -- -- $ 7.299 $ 9.982
Number of Units
Outstanding at End of -- -- -- 10,154 73,878
Year
LSA Balanced (2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.40 $ 11.17 $ 11.26 $ 9.073
Accumulation Unit Value
Ending $ 10.40 $ 11.17 $ 11.26 $ 9.073 $ 11.561
Number of Units
Outstanding at End of 386 124,389 266,745 514,929 685,220
Year
LSA Basic Value (6)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.638
Accumulation Unit Value
Ending -- -- -- $ 7.638 $ 10.049
Number of Units
Outstanding at End of -- -- -- 63,427 353,241
Year
LSA Blue Chip (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.975
Accumulation Unit Value
Ending -- -- -- $ 7.975 $ 9.848
Number of Units
Outstanding at End of -- -- -- 24,337 260,606
Year
LSA Capital Appreciation
(4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 8.163
Accumulation Unit Value
Ending -- -- -- $ 8.163 $ 10.491
Number of Units
Outstanding at End of -- -- -- 14,015 73,575
Year
LSA Capital Growth (2)
Accumulation Unit Value
Beginning $ 10.00 $ 12.22 $ 11.03 $ 9.33 $ 6.910
Accumulation Unit Value
Ending $ 12.22 $ 11.03 $ 9.33 $ 6.910 $ 8.472
Number of Units
Outstanding at End of 3,394 142,502 226,920 226,041 330,980
Year
LSA Diversified Mid Cap
(4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.783
Accumulation Unit Value
Ending -- -- -- $ 7.783 $ 10.192
Number of Units
Outstanding at End of -- -- -- 26,268 172,288
Year
LSA Emerging Growth
Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 17.48 $ 12.04 $ 9.75 $ 5.589
Accumulation Unit Value
Ending $ 17.48 $ 12.04 $ 9.75 $ 5.589 $ 8.098
Number of Units
Outstanding at End of 16,191 131,445 150,128 161,610 207,970
Year
LSA Equity Growth (2)
Accumulation Unit Value
Beginning $ 10.00 $ 12.49 $ 10.86 $ 9.05 $ 6.224
Accumulation Unit Value
Ending $ 12.49 $ 10.86 $ 9.05 $ 6.224 $ 7.627
Number of Units
Outstanding at End of 34,228 160,257 240,525 85,390 619,195
Year
LSA Mid Cap Value (10)
Accumulation Unit Value
Beginning $ 8.437
Accumulation Unit Value
Ending $ 11.629
Number of Units
Outstanding at End of 165,206
Year
LSA Value Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 11.03 $ 12.55 $ 11.77 $ 9.035
Accumulation Unit Value
Ending $ 11.03 $ 12.55 $ 11.77 $ 9.035 $ 11.622
Number of Units
Outstanding at End of 32 122,654 235,535 428,181 484,234
Year
MFS New Discovery (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.473
Accumulation Unit Value
Ending -- -- -- $ 7.473 $ 9.833
Number of Units
Outstanding at End of -- -- -- 20,998 103,156
Year
MFS Utilities (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 8.370
Accumulation Unit Value
Ending -- -- -- $ 8.370 $ 11.189
Number of Units
Outstanding at End of -- -- -- 13,969 71,175
Year
Oppenheimer Main Street
Small Cap (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 7.839
Accumulation Unit Value
Ending -- -- -- $ 7.839 $ 11.151
Number of Units
Outstanding at End of -- -- -- 28,379 251,859
Year
PAVIT OpCap Balanced (6)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
PAVIT OpCap Equity (2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.62 $ 11.51 $ 10.56 $ 8.180
Accumulation Unit Value
Ending $ 10.62 $ 11.51 $ 10.56 $ 8.180 $ 10.371
Number of Units
Outstanding at End of 0 58,987 110,288 195,029 295,226
Year
PAVIT OpCap Small Cap
(2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.65 $ 15.15 $ 16.18 $ 12.502
Accumulation Unit Value
Ending $ 10.65 $ 15.15 $ 16.18 $ 12.502 $ 17.586
Number of Units
Outstanding at End of 0 49,685 75,521 140,778 232,549
Year
PAVIT PEA Science and
Technology (3)
Accumulation Unit Value
Beginning -- -- $ 10.00 $ 3.36 $ 1.803
Accumulation Unit Value
Ending -- -- $ 3.36 $ 1.803 $ 2.903
Number of Units
Outstanding at End of -- -- 59,395 160,966 1,167,164
Year
PIMCO VIT Foreign Bond
(U.S. Dollar-Hedged) (2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.29 $ 10.99 $ 11.66 $ 12.443
Accumulation Unit Value
Ending $ 10.29 $ 10.99 $ 11.66 $ 12.443 $ 12.547
Number of Units
Outstanding at End of 17,747 30,068 49,293 93,732 218,507
Year
PIMCO VIT Money Market
(2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.07 $ 10.54 $ 10.79 $ 10.786
Accumulation Unit Value
Ending $ 10.07 $ 10.54 $ 10.79 $ 10.786 $ 10.713
Number of Units
Outstanding at End of 45,777 307,495 918,122 1,311,411 1,069,740
Year
PIMCO VIT StocksPLUS
Growth and Income (4)
Accumulation Unit Value
Beginning $ 10.00 $ 11.64 $ 10.39 $ 9.07 $ 7.139
Accumulation Unit Value
Ending $ 11.64 $ 10.39 $ 9.07 $ 7.139 $ 9.179
Number of Units
Outstanding at End of 21 97,992 171,296 335,810 444,281
Year
PIMCO VIT Total Return
Bond (2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.13 $ 11.01 $ 11.77 $ 12.656
Accumulation Unit Value
Ending $ 10.13 $ 11.01 $ 11.77 $ 12.656 $ 13.109
Number of Units
Outstanding at End of 54,509 181,857 356,786 916,788 1,387,841
Year
Putnam VT High Yield (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 9.568
Accumulation Unit Value
Ending -- -- -- $ 9.568 $ 11.939
Number of Units
Outstanding at End of -- -- -- 14,843 151,285
Year
Rydex VT OTC (3)
Accumulation Unit Value
Beginning -- -- $ 10.00 $ 5.75 $ 3.470
Accumulation Unit Value
Ending -- -- $ 5.75 $ 3.470 $ 4.976
Number of Units
Outstanding at End of -- -- 7,617 73,139 169,077
Year
Salomon Brothers
Variable All Cap (2)
Accumulation Unit Value
Beginning $ 10.00 $ 11.54 $ 13.45 $ 13.51 $ 9.987
Accumulation Unit Value
Ending $ 11.54 $ 13.45 $ 13.51 $ 9.987 $ 13.693
Number of Units
Outstanding at End of 49,256 141,167 260,699 321,536 374,930
Year
Salomon Brothers
Variable Investors (6)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
Van Kampen UIF Equity
Growth (2) (9)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
Van Kampen UIF High
Yield (2)
Accumulation Unit Value
Beginning $ 10.00 $ 10.37 $ 9.14 $ 8.61 $ 7.872
Accumulation Unit Value
Ending $ 10.37 $ 9.14 $ 8.61 $ 7.872 $ 9.759
Number of Units
Outstanding at End of 17,868 68,958 94,964 148,434 259,819
Year
Van Kampen UIF. Mid Cap
Growth (2)
Accumulation Unit Value
Beginning $ 10.00 $ 13.80 $ 12.61 $ 8.79 $ 5.967
Accumulation Unit Value
Ending $ 13.80 $ 12.61 $ 8.79 $ 5.967 $ 8.341
Number of Units
Outstanding at End of 409 170,775 213,956 302,409 426,417
Year
Van Kampen UIF U.S. Mid
Cap Value (10)
Accumulation Unit Value
Beginning $ 10.00 $ 12.06 $ 13.17 $ 12.57 $ 8.924
Accumulation Unit Value
Ending $ 12.06 $ 13.17 $ 12.57 $ 8.924 $ 12.453
Number of Units
Outstanding at End of 0 85,226 189,874 301,924 324,553
Year
Van Kampen LIT
Aggressive Growth (11)
Accumulation Unit Value
Beginning -- -- -- -- --
Accumulation Unit Value
Ending -- -- -- -- --
Number of Units
Outstanding at End of -- -- -- -- --
Year
Van Kampen LIT Growth
and Income (4)
Accumulation Unit Value
Beginning -- -- -- $ 10.00 $ 8.155
Accumulation Unit Value
Ending -- -- -- $ 8.155 $ 10.267
Number of Units
Outstanding at End of -- -- -- 58,636 266,307
Year
(1) Accumulation Unit Value: unit of measure used to calculate the value of a
Contract Owner's interest in a Subaccount 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
Administrative Expense Charge. The beginning value reflects the
Accumulation Unit Value as of October 18, 1999, the date Lincoln Benefit
started to offer the Contract.
(2) First offered 10/18/1999.
(3) First offered 1/17/2001.
(4) First offered 5/1/2002.
(5) First offered 5/1/03.(6) Effective 4/30/04, the LSA Balance Fund, LSA Basic
Value Fund and LSA Value Equity Fund were merged into the PAVIT OpCap
Balanced Portfolio, AIM V.I. Basic Value Fund - Series I and Salomon
Brothers Variable Investors Fund - Class I, respectively. Accordingly, on
4/30/04, we transferred the value of the LSA Balanced Variable Sub-Account
and the LSA Value Equity Variable Sub-Account to the PAVIT OpCap Balanced
Variable Sub-Account, AIM V.I. Basic Value Variable Sub-Account and the
Salomon Brothers Variable Investors Variable Sub-Account, respectively.
(6) Effective 4/30/04, the LSA Balance Fund, LSA Basic Value Fund and LSA Value
Equity Fund were merged into the PAVIT OpCap Balanced Portfolio, AIM V.I.
Basic Value Fund - Series I and Salomon Brothers Variable Investors Fund -
Class I, respectively. Accordingly, on 4/30/04, we transferred the value of
the LSA Balanced Variable Sub-Account and the LSA Value Equity Variable
Sub-Account to the PAVIT OpCap Balanced Variable Sub-Account, AIM V.I.
Basic Value Variable Sub-Account and the Salomon Brothers Variable
Investors Variable Sub-Account, respectively.
(7) Effective 4/30/04, the LSA Capital Appreciation Fund was merged into the
Janus Aspen Series Capital Appreciation Portfolio - Institutional Shares.
Accordingly, on 4/30/04, we transferred the value of the LSA Capital
Appreciation Variable Sub-Account to the Janus Aspen Serioed Capital
Appreciation Variable Sub-Account.
(8) Effective 5/1/04 the Janus Aspen Series International Portfolio - Service
Shares changed its name to the Janus Aspen Foreign Stock Portfolio -
Service Shares. We have made a corresponding change in the name of the
Variable Sub-Account that invests in this Portfolio.
(9) Effective 4/30/04, the LSA Blue Chip Fund, LSA Equity Growth Fund and LSA
Capital Growth Fund were merged into the Van Kampen UIF Equity Growth
Portfolio, Class I. Accordingly, on 4/30/04, we transferred the value of
the LSA Blue Chip Variable Sub-Account, LSA Equity Growth Variable
Sub-Account and LSA Capital Growth Variable Sub-Account to the Van Kampen
UIF Equity Growth Variable Sub-Account.
(10) Effective 4/30/04, the LSA Diversified Mid-Cap Growth Fund and LSA MidCap
Value Fund were merged into the Van Kampen UIF U.S. Mid Cap Value
Portfolio, Class I. Accordingly, on 4/30/04, we transferred the value of
the LSA Diversified Mid-Cap Growth Variable Sub-Account and the LSA MidCap
Value Variable Sub-Account to the Van Kampen UIF U.S. Mid Cap Value
Variable Sub-Account.
(11) Effective 4/30/04, the LSA Aggressive Growth Fund and LSA Emerging Growth
Fund were merged into the Van Kampen LIT Aggressive Growth Portfolio, Class
II. Accordingly, on 4/30/04, we transferred the value of the LSA Aggressive
Growth Variable Sub-Account and the LSA Emerging Growth Variable
Sub-Account to the Van Kampen LIT Aggressive Growth Variable Sub-Account.
A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.
48 PROSPECTUS
ACCUMULATION UNIT VALUES
BASIC POLICY PLUS ENHANCED DEATH BENEFIT RIDER
Year ending December 31,
---------------------------------------------------
FUND 1999 2000 2001 2002 2003
- ------------------------------------------------------ ------------------------------------------
AIM Basic Value (6)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
Alger American Growth (5)
Accumulation Unit Value Beginning -- -- -- -- $ 10.00
Accumulation Unit Value Ending -- -- -- -- $ 12.341
Number of Units Outstanding at End of Year -- -- -- -- 30,627
Fidelity VIP Growth Portfolio (5)
Accumulation Unit Value Beginning -- -- -- -- $ 10.00
Accumulation Unit Value Ending -- -- -- -- $ 12.441
Number of Units Outstanding at End of Year -- -- -- -- 71,284
Fidelity VIP Investment Grade Bond (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 10.706
Accumulation Unit Value Ending -- -- -- $ 10.706 $ 11.057
Number of Units Outstanding at End of Year -- -- -- 84,421 275,877
Fidelity VIP Overseas (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.714
Accumulation Unit Value Ending -- -- -- $ 7.714 $ 10.858
Number of Units Outstanding at End of Year -- -- -- 8,812 22,038
Goldman Sachs VIT International Equity (2)
Accumulation Unit Value Beginning $ 10.00 $ 12.29 $ 10.50 $ 8.03 $ 6.453
Accumulation Unit Value Ending $ 12.29 $ 10.50 $ 8.03 $ 6.453 $ 8.605
Number of Units Outstanding at End of Year 5,621 78,931 112,245 114,893 135,685
Goldman Sachs VIT CORE Small Cap Equity (2)
Accumulation Unit Value Beginning $ 10.00 $ 12.19 $ 12.20 $ 12.55 $ 10.505
Accumulation Unit Value Ending $ 12.19 $ 12.20 $ 12.55 $ 10.505 $ 15.095
Number of Units Outstanding at End of Year 3,604 24,178 35,125 59,592 108,325
Janus Aspen Series Capital Appreciation (7)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
Janus Aspen Series Foreign Stock (4) (8)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.744
Accumulation Unit Value Ending -- -- -- $ 7.744 $ 10.166
Number of Units Outstanding at End of Year -- -- -- 6,035 20,593
Janus Aspen Series Worldwide Growth (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.795
Accumulation Unit Value Ending -- -- -- $ 7.795 $ 9.488
Number of Units Outstanding at End of Year -- -- -- 13,160 39,364
JPMorgan Small Company (2)
Accumulation Unit Value Beginning $ 10.00 $ 14.00 $ 12.22 $ 11.06 $ 8.527
Accumulation Unit Value Ending $ 14.00 $ 12.22 $ 11.06 $ 8.527 $ 11.412
Number of Units Outstanding at End of Year 0 53,597 58,437 83,459 115,268
Lazard Emerging Markets (2)
Accumulation Unit Value Beginning $ 10.00 $ 13.26 $ 9.39 $ 8.77 $ 8.501
Accumulation Unit Value Ending $ 13.26 $ 9.39 $ 8.77 $ 8.501 $ 12.795
Number of Units Outstanding at End of Year 2,809 25,988 32,552 51,013 81,410
Lazard International Equity (2)
Accumulation Unit Value Beginning $ 10.00 $ 11.24 $ 10.00 $ 7.47 $ 6.565
Accumulation Unit Value Ending $ 11.24 $ 10.00 $ 7.47 $ 6.565 $ 8.304
Number of Units Outstanding at End of Year 4,064 50,850 71,754 73,992 82,929
LSA Aggressive Growth (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.289
Accumulation Unit Value Ending -- -- -- $ 7.289 $ 9.949
Number of Units Outstanding at End of Year -- -- -- 5,753 41,947
LSA Balanced (2)
Accumulation Unit Value Beginning $ 10.00 $ 10.40 $ 11.14 $ 11.21 $ 9.015
Accumulation Unit Value Ending $ 10.40 $ 11.14 $ 11.21 $ 9.015 $ 11.464
Number of Units Outstanding at End of Year 7,126 69,393 144,623 221,913 419,279
LSA Basic Value (6)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.627
Accumulation Unit Value Ending -- -- -- $ 7.627 $ 10.015
Number of Units Outstanding at End of Year -- -- -- 30,010 144,113
LSA Blue Chip (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.964
Accumulation Unit Value Ending -- -- -- $ 7.964 $ 9.816
Number of Units Outstanding at End of Year -- -- -- 9,727 122,223
LSA Capital Appreciation (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 8.152
Accumulation Unit Value Ending -- -- -- $ 8.152 $ 10.456
Number of Units Outstanding at End of Year -- -- -- 4,462 52,459
LSA Diversified Mid Cap (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.772
Accumulation Unit Value Ending -- -- -- $ 7.772 $ 10.158
Number of Units Outstanding at End of Year -- -- -- 7,362 76,253
LSA Emerging Growth Equity (2)
Accumulation Unit Value Beginning $ 10.00 $ 17.47 $ 12.01 $ 9.71 $ 5.553
Accumulation Unit Value Ending $ 17.47 $ 12.01 $ 9.71 $ 5.553 $ 8.030
Number of Units Outstanding at End of Year 5,259 86,819 94,558 98,810 110,592
LSA Equity Growth (2)
Accumulation Unit Value Beginning $ 10.00 $ 12.48 $ 10.83 $ 9.01 $ 6.224
Accumulation Unit Value Ending $ 12.48 $ 10.83 $ 9.01 $ 6.224 $ 7.563
Number of Units Outstanding at End of Year 8,359 54,291 90,631 85,390 $243,908
LSA Capital Growth(2)
Accumulation Unit Value Beginning $ 10.00 $ 12.21 $ 11.00 $ 9.28 $ 6.910
Accumulation Unit Value Ending $ 12.21 $ 11.00 $ 9.28 $ 6.910 $ 8.401
Number of Units Outstanding at End of Year 24,902 123,406 172,729 226,041 268,165
LSA Mid Cap Value (10)
Accumulation Unit Value Beginning $ 8.246
Accumulation Unit Value Ending $ 11.591
Number of Units Outstanding at End of Year 107,129
LSA Value Equity (2)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 8.978
Accumulation Unit Value Ending -- -- -- $ 8.426 $ 11.525
Number of Units Outstanding at End of Year -- -- -- 25,180 234,745
MFS New Discovery (4)
Accumulation Unit Value Beginning $ 10.00 $ 11.03 $ 12.52 $ 11.72 $ 8.978
Accumulation Unit Value Ending $ 11.03 $ 12.52 $ 11.72 $ 8.978 $ 9.800
Number of Units Outstanding at End of Year 17,183 62,043 130,669 179,820 46,541
MFS Utilities (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.463
Accumulation Unit Value Ending -- -- -- $ 7.463 $ 11.152
Number of Units Outstanding at End of Year -- -- -- 10,193 37,809
PAVIT OpCap Balanced (2) (6)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
PAVIT OpCap Equity (2)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 8.359
Accumulation Unit Value Ending -- -- -- $ 8.359 $ 10.284
Number of Units Outstanding at End of Year -- -- -- 6,880 158,681
PAVIT PEA Science and Technology (3)
Accumulation Unit Value Beginning $ 10.00 $ 10.62 $ 11.49 $ 10.51 $ 8.128
Accumulation Unit Value Ending $ 10.62 $ 11.49 $ 10.51 $ 8.128 $ 10.284
Number of Units Outstanding at End of Year 5,784 61,655 97,863 115,950 158,681
PAVIT OpCap Small Cap (2)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 3.62 $ 1.796
Accumulation Unit Value Ending -- -- $ 3.62 $ 1.796 $ 17.439
Number of Units Outstanding at End of Year -- -- 14,533 63,153 137,092
Oppenheimer Main Street Small Cap (4)
Accumulation Unit Value Beginning $ 10.00 $ 10.65 $ 15.11 $ 16.11 $ 12.422
Accumulation Unit Value Ending $ 10.65 $ 15.11 $ 16.11 $ 12.422 $ 11.113
Number of Units Outstanding at End of Year 0 16,703 43,783 74,972 108,430
PIMCO VIT Foreign Bond (U.S. Dollar-Hedged)
(2)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 7.829
Accumulation Unit Value Ending -- -- -- $ 7.829
Number of Units Outstanding at End of Year -- -- -- 27,890
PIMCO VIT Money Market (2)
Accumulation Unit Value Beginning $ 10.00 $ 10.28 $ 10.97 $ 11.61 $ 12.364
Accumulation Unit Value Ending $ 10.28 $ 10.97 $ 11.61 $ 12.364
Number of Units Outstanding at End of Year 0 1,231 3,605 27,152
PIMCO VIT StocksPLUS Growth and Income (2)
Accumulation Unit Value Beginning $ 10.00 $ 10.07 $ 10.51 $ 10.74 $ 10.717
Accumulation Unit Value Ending $ 10.07 $ 10.51 $ 10.74 $ 10.717
Number of Units Outstanding at End of Year 10,350 104,093 239,107 467,548
PIMCO VIT Total Return Bond (2)
Accumulation Unit Value Beginning $ 10.00 $ 11.64 $ 10.37 $ 9.03 $ 7.094
Accumulation Unit Value Ending $ 11.64 $ 10.37 $ 9.03 $ 7.094
Number of Units Outstanding at End of Year 12,776 82,128 112,333 161,698
Putnam VT High Yield (4)
Accumulation Unit Value Beginning $ 10.00 $ 10.13 $ 10.98 $ 11.71 $ 12.575
Accumulation Unit Value Ending $ 10.13 $ 10.98 $ 11.71 $ 12.575
Number of Units Outstanding at End of Year 224 57,774 148,500 491,013
Rydex VT OTC (3)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 9.555
Accumulation Unit Value Ending -- -- -- $ 9.555
Number of Units Outstanding at End of Year -- -- -- 6,438
Salomon Brothers Variable All Cap (2)
Accumulation Unit Value Beginning -- -- $ 10.00 $ 5.74 3.457
Accumulation Unit Value Ending -- -- $ 5.74 3.457
Number of Units Outstanding at End of Year -- -- 14,044 83,805
Salomon Brothers Variable Investors (6)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
Van Kampen UIF Equity Growth (2) (9)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
Van Kampen UIF High Yield (2)
Accumulation Unit Value Beginning $ 10.00 $ 11.53 $ 13.42 $ 13.46 $ 7.822
Accumulation Unit Value Ending $ 11.53 $ 13.42 $ 13.46 $ 7.822
Number of Units Outstanding at End of Year 0 64,958 121,931 60,785
Van Kampen UIF Mid Cap Growth (2)
Accumulation Unit Value Beginning $ 10.00 $ 13.80 $ 12.58 $ 8.75 $ 5.929
Accumulation Unit Value Ending $ 13.80 $ 12.58 $ 8.75 $ 5.929
Number of Units Outstanding at End of Year 6,216 87,781 123,258 135,098
Van Kampen UIF U.S. Mid Cap Value (2) (10)
Accumulation Unit Value Beginning $ 10.00 $ 12.05 $ 13.14 $ 12.52 $ 8.867
Accumulation Unit Value Ending $ 12.05 $ 13.14 $ 12.52 $ 8.867
Number of Units Outstanding at End of Year 6,021 44,148 95,312 151,383
Van Kampen LIT Aggressive Growth (11)
Accumulation Unit Value Beginning -- -- -- -- --
Accumulation Unit Value Ending -- -- -- -- --
Number of Units Outstanding at End of Year -- -- -- -- --
Van Kampen LIT Growth and Income (4)
Accumulation Unit Value Beginning -- -- -- $ 10.00 $ 8.144
Accumulation Unit Value Ending -- -- -- $ 8.144
Number of Units Outstanding at End of Year -- -- -- 26,840
(1) Accumulation Unit Value: unit of measure used to calculate the value of a
Contract Owner's interest in a Subaccount 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
Administrative Expense Charge.
(2) First offered 10/18/1999.
(3) First offered 1/17/2001.
(4) First offered 5/1/2002.
(5) First offered 5/1/03.(6) Effective 4/30/04, the LSA Balance Fund, LSA Basic
Value Fund and LSA Value Equity Fund were merged into the PAVIT OpCap
Balanced Portfolio, AIM V.I. Basic Value Fund - Series I and Salomon
Brothers Variable Investors Fund - Class I, respectively. Accordingly, on
4/30/04, we transferred the value of the LSA Balanced Variable Sub-Account
and the LSA Value Equity Variable Sub-Account to the PAVIT OpCap Balanced
Variable Sub-Account, AIM V.I. Basic Value Variable Sub-Account and the
Salomon Brothers Variable Investors Variable Sub-Account, respectively.
(6) Effective 4/30/04, the LSA Balance Fund, LSA Basic Value Fund and LSA Value
Equity Fund were merged into the PAVIT OpCap Balanced Portfolio, AIM V.I.
Basic Value Fund - Series I and Salomon Brothers Variable Investors Fund -
Class I, respectively. Accordingly, on 4/30/04, we transferred the value of
the LSA Balanced Variable Sub-Account and the LSA Value Equity Variable
Sub-Account to the PAVIT OpCap Balanced Variable Sub-Account, AIM V.I.
Basic Value Variable Sub-Account and the Salomon Brothers Variable
Investors Variable Sub-Account, respectively.
(7) Effective 4/30/04, the LSA Capital Appreciation Fund was merged into the
Janus Aspen Series Capital Appreciation Portfolio - Institutional Shares.
Accordingly, on 4/30/04, we transferred the value of the LSA Capital
Appreciation Variable Sub-Account to the Janus Aspen Serioed Capital
Appreciation Variable Sub-Account.
(8) Effective 5/1/04 the Janus Aspen Series International Portfolio - Service
Shares changed its name to the Janus Aspen Foreign Stock Portfolio -
Service Shares. We have made a corresponding change in the name of the
Variable Sub-Account that invests in this Portfolio.
(9) Effective 4/30/04, the LSA Blue Chip Fund, LSA Equity Growth Fund and LSA
Capital Growth Fund were merged into the Van Kampen UIF Equity Growth
Portfolio, Class I. Accordingly, on 4/30/04, we transferred the value of
the LSA Blue Chip Variable Sub-Account, LSA Equity Growth Variable
Sub-Account and LSA Capital Growth Variable Sub-Account to the Van Kampen
UIF Equity Growth Variable Sub-Account.
(10) Effective 4/30/04, the LSA Diversified Mid-Cap Growth Fund and LSA MidCap
Value Fund were merged into the Van Kampen UIF U.S. Mid Cap Value
Portfolio, Class I. Accordingly, on 4/30/04, we transferred the value of
the LSA Diversified Mid-Cap Growth Variable Sub-Account and the LSA MidCap
Value Variable Sub-Account to the Van Kampen UIF U.S. Mid Cap Value
Variable Sub-Account.
(11) Effective 4/30/04, the LSA Aggressive Growth Fund and LSA Emerging Growth
Fund were merged into the Van Kampen LIT Aggressive Growth Portfolio, Class
II. Accordingly, on 4/30/04, we transferred the value of the LSA Aggressive
Growth Variable Sub-Account and the LSA Emerging Growth Variable
Sub-Account to the Van Kampen LIT Aggressive Growth Variable Sub-Account.
A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.
52 PROSPECTUS
APPENDIX B
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $ 40,000.00
Credit Enhancement: 1,600.00
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 (in the
second Contract Year) 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 and $1,600.00 Credit
Enhancement are 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 $53,093.31. After one year, when the withdrawals
occur in these examples, the Contract Value would be $43,680.00. 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 eight years; plus
(b) an amount equal to your total Purchase Payments made more than eight 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 eight years ($6,000.00 = 15% x $40,000.00) is greater than the
earnings not previously withdrawn ($3,680.00). (B) equals $0, because all of the
Purchase Payments were made less than eight 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 $678.24 from the amount withdrawn:
$-678.24 = -.0180 x ($43,680 - $6,000.00)
A Withdrawal Charge of 7% (assuming the Withdrawal occurs at the start of the
second Contract year) would be assessed against the Purchase Payments withdrawn
that are less than eight 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 $2,320.00 ($6,000.00 - $3,680.00).
Therefore, the Withdrawal Charge would be:
$2,637.60 = 7% x (40,000.00 - $2,320.00)
As a result, the net amount payable to you would be:
$40,364.16 = $43,680.00 - $678.24 - $2,637.60
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
53 PROSPECTUS
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:
$678.24 = .0180 x ($43,680 - $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
$2,320.00 ($6,000.00 - $3,680.00). Therefore, the Withdrawal Charge would be:
$2,637.60 = 7% x ($40,000.00 - $2,320.00)
As a result, the net amount payable to you would be:
$41,720.64 = $43,680.00 + $678.24 - $2,637.60
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 $10,565.06 in earnings;
including the Credit Enhancement had been credited and that the Contract Value
in the Fixed Account equaled $50,565.06. In this example, if no prior
withdrawals have been made, you could withdraw up to $10,565.06 without
incurring a Market Value Adjustment or a Withdrawal Charge. The Free Withdrawal
Amount would be $10,565.06, because the interest credited ($10,565.06) is
greater than 15% of the Total Purchase Payments in the most recent eight years
($40,000.00 x .15 = $6,000.00).
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
54 PROSPECTUS
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................. $ 948.60
Cost of printing and engraving.... $ 100.00
Legal fees........................ $ 0.00
Accounting fees................... $3,000.00
Mailing fees...................... $2,100.00
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 Form of 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 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. 333-82427, 811-07924)
filed July 8, 1999
(3) Incorporated herein by reference to Post-Effective Amendment to Form S-3 on
Form S-1 for Lincoln Benefit Life Variable Annuity Account (File No. 333-88045)
filed April 6, 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 the 24th day of March, 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 below by the following directors and principal
officers of Lincoln Benefit Life Company in the capacities indicated on the 24th
day of March, 2009.
(Signature) (Title)
- ------------------------------------ -----------------------------------
*/ Frederick F. Cripe Director, Chairman and Chief Executive
- ------------------------------------ Officer
Frederick F. Cripe
*/ Lawrence W. Dahl Director, President, and Chief Operating
- ------------------------------------ Officer
Lawrence W. Dahl (Principal Executive Officer)
*/ 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
John C. Pintozzi (Principal Financial Officer)
* By Susan L. Lees, pursuant to Power of Attorney, filed herewith.
EXHIBITS
Exhibit No. Description
- ----------- -------------------------------------------------------------
5(b) Opinion and Consent of General Counsel re: 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