As Filed with the Securities and Exchange Commission on June 18, 2009
File No. 333-158180
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LINCOLN BENEFIT LIFE COMPANY
(Exact name of Registrant as Specified in its Charter)
Nebraska 6300 470221457
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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)
Approximate date of commencement of proposed sale to the Public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]
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 [ ]
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.
Explanatory Note
This post-effective amendment is being filed to change the registration
statement from Form S-3 to Form S-1 and to include supplemental disclosure
complying with Form S-1.
Lincoln Benefit Life Company
Supplement dated August 14, 2009
To the following Prospectuses, as supplemented:
Consultant Solutions, Prospectus Dated May 1, 2009
Consultant I, Prospectus Dated May 1, 2009
LBL Advantage, Prospectus Dated May 1, 2004
Consultant II, Prospectus Dated May 1, 2004
Premier Planner, Prospectus Dated May 1, 2004
This prospectus supplement amends certain disclosure contained in the
prospectuses referenced above for your variable annuity contract issued by
Lincoln Benefit Life Company ("Lincoln Benefit").
The "Annual Reports and Other Documents" section is deleted and replaced with
the following:
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission ("SEC") recently adopted rule 12h-7 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Rule 12h-
7 exempts an insurance company from filing reports under the Exchange Act when
the insurance company issues certain types of insurance products that are
registered under the Securities Act of 1933 and such products are regulated
under state law. Each of the variable annuities described in the prospectuses
referenced above fall within the exemption provided under rule 12h-7. Lincoln
Benefit is hereby providing notice that it is electing to rely on the exemption
provided under rule 12h-7 effective as of the date of this prospectus supplement
or as soon as possible thereafter, and will be suspending filing reports under
the Exchange Act.
The SEC allows us to "incorporate by reference" information that we file with
the SEC into this prospectus supplement which means that incorporated documents
are considered part of this prospectus supplement. We can disclose important
information to you by referring you to those documents. This prospectus
supplement incorporates by reference our Annual Report on Form 10-K for the year
ended December 31, 2008, filed with the SEC on March 18, 2009, and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC on
May 12, 2009.
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 758565, Topeka, KS
66675-8565 or by calling 1-800- 457- 7617. 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
LBL Advantage
Consultant II
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 Benefit 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 758565, Topeka, KS 66675-8565 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 LBL Advantage 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 LBL Advantage 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.
AIM V.I. Dent Demographics Trends Fund - Series I Seeks long-term growth of
capital.
Alger American Growth Portfolio - Class S Seeks long-term capital appreciation.
Fidelity VIP Equity-Income Portfolio - Service Class 2 Seeks reasonable income.
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.
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
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.
Oppenheimer International Growth Fund/VA - Service Shares Seeks capital
appreciation.
PAVIT OpCap Balanced Portfolio Seeks growth of capital and investment income.
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 Real Return Portfolio - Administrative Shares Seeks maximum real
return, consistent with preservation of real capital and prudent investment
management.
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.)
Putnam VT International Growth and Income Fund - Class IB Seeks capital growth.
Current income is a secondary objective.
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.
Rydex VT Sector Rotation Fund Seeks long-term capital appreciation.
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.
Scudder VIT EAFE Equity Index Fund - Class B Seeks to replicate as closely as
possible before deduction of expenses, performance of the MSCI EAFE Index which
emphasizes stocks of companies in major markets in Europe, Australia, and the
Far East.
Scudder VIT Equity 500 Index Fund - Class B Seeks to replicate as closely as
possible before deduction of expenses, performance of the S&P 500 Index which
emphasizes stocks of large U.S. companies.
Scudder VIT Small Cap Index Fund - Class B Seeks to replicate as closely as
possible before deduction of expenses, the performance of the Russell 2000 Index
which emphasizes stocks of small U.S. companies.
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 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 UIF U.S. Real Estate Portfolio, Class II Seeks to provide
above-average current income and long-term capital appreciation by investing
primarily in equity securities of companies in the U.S. real estate industry,
including real estate investment trusts.
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
THE LBL ADVANTAGE VARIABLE ANNUITY
Prospectus dated May 1, 2004
Lincoln Benefit Life Company ("LINCOLN BENEFIT" "WE", OR "US") is offering the
LBL Advantage Variable Annuity, a group and individual flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 40 "INVESTMENT ALTERNATIVES" The investment
alternatives include 3 fixed account options ("FIXED ACCOUNT OPTIONS") and 37
variable subaccounts ("VARIABLE SUBACCOUNTS") of the Lincoln Benefit Life
Variable Annuity Account ("VARIABLE ACCOUNT"). Each Variable Subaccount invests
exclusively in shares of the portfolios ("PORTFOLIOS") of the following
underlying funds ("FUNDS"):
AIM VARIABLE INSURANCE FUNDS PIMCO ADVISERS VIT
THE ALGER AMERICAN FUND PIMCO VARIABLE INSURANCE TRUST
FIDELITY(R) VARIABLE INSURANCE PUTNAM VARIABLE TRUST
PRODUCTS THE RYDEX VARIABLE TRUST
JANUS ASPEN SERIES SALOMON BROTHERS VARIABLE SERIES FUNDS
LAZARD RETIREMENT SERIES, INC. INC
MFS(R) VARIABLE INSURANCE TRUST(SM) SCUDDER INVESTMENTS VIT FUNDS
OPPENHEIMER VARIABLE ACCOUNT FUNDS THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
PANORAMA SERIES FUND, INC. VAN KAMPEN LIFE INVESTMENT TRUST
Each Fund has multiple Portfolios. Not all of the Funds and/or Portfolios,
however, may be available with your Contract. You should check with your
representative for further information on the availability of Funds and/or
Portfolios. Your annuity application will list all available Portfolios.
Lincoln Benefit has filed a Statement of Additional Information, dated May 1,
2004, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 58 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
EFFECTIVE MAY 1, 2004, THIS CONTRACT IS NO LONGER BEING OFFERED FOR SALE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS IT
PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANYONE
IMPORTANT WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
NOTICES THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY
EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL
REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1 PROSPECTUS
TABLE OF CONTENTS
PAGE
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OVERVIEW
Important Terms 3
The Contract At A Glance 4
How the Contract Works 5
Expense Table 6
Financial Information 9
CONTRACT FEATURES
The Contract 10
Purchases 11
Contract Value 12
Investment Alternatives
The Variable Subaccounts 14
The Fixed Account Options 15
Transfers 18
Expenses 20
Access To Your Money 22
Contract Loans for 403(b) Contracts 23
Income Payments 24
PAGE
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Death Benefits 27
Other Information
More Information: 31
Lincoln Benefit Life Company 31
The Variable Account 31
The Portfolios 32
The Contract 32
Non-Qualified Annuities Held Within A Qualified Plan 33
Legal Matters 33
Taxes 34
Annual Reports and Other Documents 40
APPENDIX A - ACCUMULATION UNIT VALUES 41
APPENDIX B - MARKET VALUE ADJUSTMENT EXAMPLE 49
APPENDIX C - CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT 51
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 53
2 PROSPECTUS
IMPORTANT TERMS
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
----
Accumulation Phase 7
Accumulation Unit 14
Accumulation Unit Value 14
Anniversary Values 33
Annuitant 12
Automatic Additions Program 13
Automatic Portfolio Rebalancing Program 23
Beneficiary 12
Cancellation Period 14
Contingent Beneficiary 12
*Contract 12
Contract Anniversary 6
Contract Owner ("You") 12
Contract Value 6
Contract Year 4
Death Benefit Anniversary 31
Dollar Cost Averaging Program 23
Due Proof of Death 31
Enhanced Earnings Death Benefit Rider 32
Enhanced Death Benefit Rider 32
Fixed Account Options 19
Free Withdrawal Amount 24
Funds 1
Guarantee Periods 20
Guaranteed Income Benefit 29
PAGE
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Guaranteed Maturity Fixed Account 19
Income Base 30
Income Benefit Rider 29
Income Plan 28
In-Force Premium 33
Investment Alternatives 16
Issue Date 7
Lincoln Benefit ("We" or "Us") 1
Loan Account 27
Market Value Adjustment 21
Payout Phase 7
Payout Start Date 28
Portfolios 36
Primary Beneficiary 12
Rider Date 32
SEC 1
Settlement Value 31
Systematic Withdrawal Program 26
Tax Qualified Contracts 41
Valuation Date 14
Variable Account 35
Variable Subaccount 16
* In certain states the Contract is available only as a group Contract. If
you purchase a group Contract, we will issue you a certificate that
represents your ownership and that summarizes the provisions of the group
Contract. References to "Contract" in this prospectus include certificates,
unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
The following is a snapshot of the Contracts. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract with as little as
$10,000. You can add to your Contract as often
and as much as you like, but each payment must
be at least $100 unless you enroll in an
automatic payment plan, in which case each
payment must be at least $50.
- --------------------------------------------------------------------------------
RIGHT TO CANCEL You may cancel your Contract within 20 days of
receipt or any longer period as your state may
require ("CANCELLATION PERIOD"). Upon
cancellation, we will return your purchase
payments adjusted, to the extent federal or
state law permits, to reflect the investment
experience of any amounts allocated to the
Variable Account. 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.
- --------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
. Total Variable Account annual fees equal to
1.35% of average daily net assets (1.60% if
you select the ENHANCED DEATH BENEFIT
RIDER, 1.55% if you elect the INCOME
BENEFIT RIDER, and 1.80% if you select both
the Enhanced Death Benefit and the Income
Benefit Riders).
. If you select the ENHANCED EARNINGS DEATH
BENEFIT RIDER, you would pay an additional
annual fee of up to 0.35% of average daily
net assets (depending on the oldest
Contract owner's age on the date we issue
the Rider). For more information about
Variable Account expenses, see "EXPENSES"
below.
. Withdrawal charges ranging from 0% to 8% of
purchase payment withdrawn (with certain
exceptions)
. Transfer fee of up to 0.50% of the transfer
amount, but not less than $25, after 12th
transfer in any CONTRACT YEAR (fee
currently waived)
. State premium tax (if your state imposes
one). In addition, each Portfolio pays
expenses that you will bear indirectly if
you invest in a Variable Subaccount.
- --------------------------------------------------------------------------------
INVESTMENT The Contract offers 40 Investment Alternatives
ALTERNATIVES including:
. 3 Fixed Account Options (which credit
interest at rates we guarantee)
. 37 Variable Subaccounts investing in
Portfolios offering professional money
management by these investment advisers:
. A I M Advisors, Inc.
. Deutsche Asset Management Inc.
. Fred Alger Management, Inc.
. Fidelity Management & Research Company
. Janus Capital Management LLC
. Lazard Asset Management LLC
. MFS(TM) Investment Management
. OpCap Advisors LLC
. OppenheimerFunds, Inc.
. Pacific Investment Management Company
LLC
. Putnam Investment Management, LLC
. Rydex Investments
. Salomon Brothers Asset Management Inc
. Van Kampen*
. Van Kampen Asset Management
To find out current rates being paid on the
fixed account options or how the Variable
Subaccounts have performed, call us at
1-800-865-5237.
* Morgan Stanley Invesement Management Inc.,
the adviser to the UIF Portfolios, does
business in certain instances as Van
Kampen.
- --------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special
services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
- --------------------------------------------------------------------------------
INCOME PAYMENTS You can choose fixed income payments, variable
income payments, or a combination of the two.
You can receive your income payments in one of
the following ways:
. life income with guaranteed payments
. a "joint and survivor" life income with
guaranteed payments
. guaranteed payments for a specified period
(5 to 30 years)
We offer an optional Income Benefit Rider.
- --------------------------------------------------------------------------------
DEATH BENEFITS If you or the ANNUITANT (if the Contract Owner
is a non-living person) die before the PAYOUT
START DATE, we will pay the death benefit
described in the Contract. We offer an Enhanced
Death Benefit Rider and Enhanced Earnings Death
Benefit Rider. The Enhanced Earnings Death
Benefit Rider is not available for purchase
with any IRA at this time.
- --------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer
your Contract value ("CONTRACT VALUE") among
the investment alternatives, with certain
restrictions. We do not currently impose a fee
upon transfers. However, we reserve the right
to charge up to 0.50% of the transfer amount,
but not less than $25 per transfer after the
12th transfer in each "Contract Year", which we
measure from the date we issue your Contract or
a Contract anniversary ("CONTRACT
ANNIVERSARY"), which is the anniversary of your
Contract's Issue Date.
- --------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract
Value at any time prior to the Payout Start
Date. In general, you must withdraw at least
$50 at a time. Full or partial withdrawals are
available under limited circumstances on or
after the Payout Start Date. 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. A
withdrawal charge and a MARKET VALUE ADJUSTMENT
also may apply.
4 PROSPECTUS
HOW THE CONTRACT WORKS
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the CONTRACT OWNER) save for
retirement because you can invest in up to 40 investment alternatives and
generally pay no federal income taxes on any earnings until you withdraw them.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. See
"TAX QUALIFIED CONTRACTS" on page 41. You do this during what we call the
"ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date
we issue your Contract (we call that date the "ISSUE DATE") and continues until
the Payout Start Date, which is the date we apply your money to provide income
payments. During the Accumulation Phase, you may allocate your purchase payments
to any combination of the Variable Subaccounts and/or Fixed Account Options. If
you invest in any of the three Fixed Account Options, you will earn a fixed rate
of interest that we declare periodically. If you invest in any of the Variable
Subaccounts, your investment return will vary up or down depending on the
performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 28. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Subaccounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
- -------------------------------------------------------------------------------------------------->
You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
SEE"The Contract." In addition, if you die before the Payout Start Date, we will
pay a death benefit to any surviving Contract Owner, or if there is none, to
your Beneficiary. SEE "Death Benefits."
Please call us at 1-800-865-5237 if you have any questions about how the
Contract works.
5 PROSPECTUS
EXPENSE TABLE
THE FOLLOWING TABLES LIST THE EXPENSES AND FEES THAT YOU WILL BEAR DIRECTLY OR
INDIRECTLY WHEN YOU BUY, OWN, OR SURRENDER A CONTRACT. THE FIRST TABLE DESCRIBES
THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT,
SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN PORTFOLIOS. THE TABLES
AND THE EXAMPLES THAT FOLLOW DO NOT REFLECT PREMIUM TAXES THAT MAY BE IMPOSED BY
THE STATE WHERE YOU RESIDE. FOR MORE INFORMATION ABOUT VARIABLE ACCOUNT
EXPENSES, SEE "EXPENSES," BELOW. FOR MORE INFORMATION ABOUT PORTFOLIO EXPENSES,
PLEASE REFER TO THE ACCOMPANYING PROSPECTUSES FOR THE FUNDS.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn:
- --------------------------------------------------------------------------------------------------------
Contract: 0 1 2 3 4 5 6 7 8+
Applicable Charge: 8% 7% 7% 6% 6% 5% 4% 3% 0%
All Contracts:
- --------------------------------------------------------------------------------------------------------
Transfer Fee up to 0.50% of the amount transferred**
* Each Contract Year, you may withdraw the greater of earnings not previously
withdrawn or 15% of your New Purchase Payments (as defined in "Withdrawal
Charge" below) without incurring a withdrawal charge. You may withdraw any
Purchase Payment made more than 8 years before the withdrawal, which have
not been previously withdrawn, without paying the charge.
** Applies solely to the thirteenth and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
portfolio rebalancing. We are currently waiving the transfer fee.
THE TABLE BELOW DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING PORTFOLIO FEES AND
EXPENSES.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUBACCOUNT)
Mortality and Expense Risk Administrative Total Variable Account
Charge Expense Charge* Annual Expense
- -----------------------------------------------------------------------------------------------
Without the Enhanced
Death Benefit or Income 1.25% 0.10% 1.35%
Benefit Riders
- -----------------------------------------------------------------------------------------------
With the Enhanced Death 1.50% 0.10% 1.60%
Benefit Rider
- -----------------------------------------------------------------------------------------------
With the Income Benefit 1.45% 0.10% 1.55%
Rider
- -----------------------------------------------------------------------------------------------
With the Income Benefit
and Enhanced Death 1.70% 0.10% 1.80%
Benefit Riders
- -----------------------------------------------------------------------------------------------
If you elect the Enhanced Earnings Death Benefit Rider, your Total Variable
Account Annual Expenses will be increased, based on the oldest Contract Owner's
age on the date we issue the Rider, as follows:
Age Annual Charge
- ---------------------
0-55 0.15%
- ---------------------
56-65 0.25%
- ---------------------
66-75 0.35%
- ---------------------
THE TABLE BELOW 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 SPECIFIED LIMITS. THE RANGE OF EXPENSES SHOWN IN
THIS TABLE DOES NOT SHOW THE EFFECT
6 PROSPECTUS
OF ANY SUCH FEE WAIVER OR EXPENSE REIMBURSEMENT. MORE DETAIL CONCERNING EACH
PORTFOLIO'S FEES AND EXPENSES APPEARS IN THE PROSPECTUS FOR EACH PORTFOLIO.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES
- ----------------------------------------------------------------------------
Minimum Maximum
- ----------------------------------------------------------------------------
Total Annual Portfolio Operating Expenses/(1)/ (expenses
that are deducted from Portfolio assets, including any
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.
EXAMPLES
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, Variable
Account annual expenses, and Portfolio fees and expenses and assume no transfers
or exchanges were made. The Example shows the dollar amount of expenses that you
would bear directly or indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period,
and
.. elected the Income Benefit, Enhanced Death Benefit, and Enhanced Earnings
Death Benefit Riders (assuming Contract Owner is age 66-75 on rider issue
date and with total Variable Account expenses of 2.15%.)
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
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.
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------
Costs Based on Maximum Annual Portfolio Expenses $1,257 $2,464 $3,629 $6,157
- ----------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio Expenses $ 867 $1,343 $1,846 $3,012
- ----------------------------------------------------------------------------------------
7 PROSPECTUS
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 $662 $1,954 $3,204 $6,157
- ----------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio Expenses $272 $ 833 $1,421 $3,012
- ----------------------------------------------------------------------------------------
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 INCOME BENEFIT AND ENHANCED DEATH
BENEFIT RIDERS (TOTAL VARIABLE ACCOUNT EXPENSES OF 2.15%).IF THESE RIDERS WERE
NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
The Examples reflect the Free Withdrawal Amounts, if applicable.
8 PROSPECTUS
FINANCIAL INFORMATION
To measure the value of your investment in the Variable Subaccounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT".
Each Variable Subaccount has a separate value for its Accumulation Units which
we call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but
not the same as, the share price of a mutual fund.
Because we deduct Rider charges directly from the Variable Subaccounts, we
calculate separate Accumulation Unit Values for the base Contract and for
Contracts issued with various combinations of optional Riders.
Accumulation Unit Values for the lowest and highest charges available are shown
in Appendix A to this prospectus. The Statement of Additional Information
contains the Accumulation Unit Values for all other available combinations of
charges. Please contact us to obtain a copy of the Statement of Additional
Information.
To obtain a fuller picture of each Variable Subaccount's finances, please refer
to the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Lincoln Benefit also appear
in the Statement of Additional Information.
9 PROSPECTUS
THE CONTRACT
CONTRACT OWNER
The LBL Advantage Variable Annuity is a contract between you, the Contract
Owner, and Lincoln Benefit, a life insurance company. As the Contract Owner, you
may exercise all of the rights and privileges provided to you by the Contract.
That means it is up to you to select or change (to the extent permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your purchase payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner, or, if none, the Beneficiary, may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Contract Owner is a grantor trust, the Contract Owner will be
considered a non-living person for purposes of this section and the Death
Benefits section. The maximum age of the oldest Contract Owner and Annuitant
cannot exceed 90 as of the date we receive the completed application.
You may change the Contract Owner at any time. We will provide a change of
ownership form to be signed by you and filed with us. After we accept the form,
the change of ownership will be effective as of the date you signed the form.
Until we receive your written notice to change the Contract Owner, we are
entitled to rely on the most recent ownership information in our files. We will
not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change the Contract Owner, you
should deliver your written notice to us promptly. Each change is subject to any
payment made by us or any other action we take before we accept the change.
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. The Income
Benefit Rider terminates upon changes of the Annuitant. The Enhanced Earnings
Death Benefit Rider terminates upon changes of the Owner or, if the Owner is a
non-living person, the Annuitant.
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. Qualified plans may limit
or modify your rights and privileges under the Contract. Variable Annuities held
by Qualified Plans do not receive any additional tax deferral.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant at any time prior to the Payout Start Date (only if the
Contract Owner is a living person). Once we accept a change, it takes effect as
of the date you signed the request. Each change is subject to any payment we
make or other action we take before we accept it.
If the Contract is a non-qualified Contract, you may designate a joint
Annuitant, who is a second person on whose life income payments depend. We
permit joint Annuitants only during the Payout Phase. If the sole surviving
Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
(i) the youngest Contract Owner; otherwise,
(ii) the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner subject to the Death of Owner provision if the
sole surviving Contract owner dies before the Payout Start Date. If the sole
surviving Contract Owner dies after the Payout Start Date, the PRIMARY
BENEFICIARY, or if none surviving, the CONTINGENT BENEFICIARY, will receive any
guaranteed income payments scheduled to continue.
You may name one or more primary Beneficiaries when you apply for a Contract.
The primary Beneficiary is the person who may elect to receive the death benefit
or become the new Contract Owner if the sole surviving Contract Owner dies
before the Payout Start Date. You may also name one or more Contingent
Beneficiaries who will receive any Death Benefit or Guaranteed Income Benefit if
no Beneficiary survives the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
receive your written notice to change a Beneficiary, we are entitled to rely on
the most recent Beneficiary information in our files. We will not be liable
10 PROSPECTUS
as to any payment or settlement made prior to receiving the written notice.
Accordingly, if you wish to change your Beneficiary, you should deliver your
written notice to us promptly. Each change is subject to any payment made by us
or any other action we take before we accept the change.
Unless you have provided directions to the contrary, the Beneficiaries will take
equal shares. If there is more than one Beneficiary in a class and one of the
Beneficiaries predeceases the Contract Owner or Annuitant, the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original shares of the remaining Beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary will
be treated as a separate and independent owner of his or her respective share.
Each Beneficiary will exercise all rights related to his or her share, including
the sole right to select a payout option, subject to any restrictions previously
placed upon the Beneficiary. Each Beneficiary may designate a Beneficiary(ies)
for his or her respective share, but that designated Beneficiary(ies) will be
restricted to the payout option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation or other type of non-living person, all beneficiaires will be
considered to be non-living persons.
You may specify that the Death Benefit be paid under a specific Income Plan by
submitting a written request to our Service Center. If you so request, your
Beneficiary may not change to a different Income Plan or lump sum. Once we
accept the written requst, the change or restriction wll take effect as of the
date you signed the request. Any change is subject to any payment we make or
other action we take before we accept the changes.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries or Contingent Beneficiaries, the new
Beneficiary will be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If one or more Beneficiaries survive you (or survives the Annuitant, if the
Contract Owner is not a living person), we will divide the death benefit among
the surviving Beneficiaries according to your most recent written instructions.
If you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Lincoln Benefit officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
We will honor an assignment of an interest in a Contract as collateral or
security for a loan. No Beneficiary may assign benefits under the Contract until
they are payable to the Beneficiary. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of Qualified Plans and other types of retirement plans
and the terms of such plans may themselves contain restrictions on assignments.
An assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $10,000. All subsequent purchase
payments must be $100 or more unless part of an automatic additions program.
Each purchase payment made to the Dollar Cost Averaging Fixed Account must be at
least $1,200. If we receive purchase payments designated for the Dollar Cost
Averaging Fixed Account that are lower than the required minimum of $1,200, or
purchase payments designated for a Guarantee Period that are lower than $500,
such amounts will be allocated to the PIMCO Money Market Portfolio. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments we will accept. The most
we will accept without our prior approval is $1,000,000. We also reserve the
right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more by automatically
transferring money from your bank account. Consult your representative for more
detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on
11 PROSPECTUS
your application will be effective immediately. All allocations must be in whole
percents that total 100% or in whole dollars. You can change your allocations by
notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business, except for certain days immediately preceding or
following certain national holidays when the New York Stock Exchange is open for
business. Each day that the New York Stock Exchange is open for business is
referred to as a VALUATION DATE. We determine the number of Accumulation Units
for each Variable Subaccount to allocate to your contract by dividing that
portion of your Purchase Payment allocated to a Variable Subaccount by that
Variable Subaccount's Accumulation Unit Value on the Valuation Date when the
allocation occurs. Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or a longer
period should your state require it. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. Some states may require us to
return a greater amount to you. If your Contract is qualified under Section 408
of the Internal Revenue Code, we will refund the greater of any purchase
payments or the Contract Value.
In states where we are required to refund purchase payments, we reserve the
right during the Cancellation Period to invest any purchase payments you
allocated to a Variable Subaccount to the Money Market Variable Subaccount
available under the Contract. We will notify you if we do so. At the end of the
Cancellation Period, we will allocate the amount in the Money Market Variable
Subaccount to the Variable Subaccount as you originally designated.
CONTRACT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Subaccounts you have
selected, plus the value of your investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Subaccount to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Subaccount by (ii) the Accumulation
Unit Value of that Variable Subaccount next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Subaccount when the Accumulation Unit Value for the
Subaccount is $10, we would credit 1,000 Accumulation Units of that Variable
Subaccount to your Contract. Withdrawals and transfers from a Variable
Subaccount would, of course, reduce the number of Accumulation Units of that
Subaccount allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Subaccount
will rise or fall to reflect:
.. changes in the share price of the Portfolio in which the Variable
Subaccount invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine withdrawal charges, and transfer fees (currently waived) separately
for each Contract. They do not affect Accumulation Unit Value. Instead, we
obtain payment of those charges and fees by redeeming Accumulation Units. For
details on how we calculate
12 PROSPECTUS
Accumulation Unit Value, please refer to the Statement of Additional
Information.
We determine a separate Accumulation Unit Value for each Variable Subaccount on
each Valuation Date. We also determine a separate set of Accumulation Unit
Values reflecting the cost of the Enhanced Death Benefit Rider, the Income
Benefit Rider, the Enhanced Death Benefit Rider with the Income Benefit Rider,
and the Enhanced Earnings Death Benefit Rider.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUBACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
13 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUBACCOUNTS
You may allocate your purchase payments to up to 37 Variable Subaccounts. Each
Variable Subaccount invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Subaccounts.
PORTFOLIO PORTFOLIO OBJECTIVE INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS (8)
- --------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital A I M ADVISORS, INC.
Fund - Series I (1)
- --------------------------------------------------------
AIM V.I. Dent Long-term growth of capital
Demographic Trends
Fund - Series I
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
Alger American Growth Long-term capital FRED ALGER
Portfolio - Class S appreciation MANAGEMENT, INC.
- --------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
- --------------------------------------------------------------------------------
Fidelity VIP Reasonable income FIDELITY MANAGEMENT &
Equity-Income RESEARCH COMPANY
Portfolio - Service
Class 2
- --------------------------------------------------------
Fidelity VIP Growth Capital appreciation
Portfolio - Service
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
- --------------------------------------------------------------------------------
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------
Janus Aspen Series Long-term growth of capital JANUS CAPITAL
Capital Appreciation MANAGEMENT LLC
Portfolio:
Institutional Shares
(2)
- --------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Foreign Stock
Portfolio: Service
Shares (3)
- --------------------------------------------------------
Janus Aspen Series Long-term growth of capital
Worldwide Growth in a manner consistent with
Portfolio: Service the preservation of
Shares capital.
- --------------------------------------------------------------------------------
LAZARD RETIREMENT SERIES, INC.
- --------------------------------------------------------------------------------
Lazard Emerging Markets Long-term capital LAZARD ASSET
Portfolio appreciation MANAGEMENT LLC
- --------------------------------------------------------------------------------
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,
Small Cap Fund/VA - INC.
Service Shares
- --------------------------------------------------------------------------------
PANORAMA SERIES FUND, INC.
- --------------------------------------------------------------------------------
Oppenheimer Capital appreciation OPPENHEIMERFUNDS,
International Growth INC.
Fund/VA - Service
Shares
- --------------------------------------------------------------------------------
PIMCO ADVISERS VIT
- --------------------------------------------------------------------------------
PAVIT OpCap Balanced Growth of capital and OPCAP ADVISORS LLC
Portfolio (1) investment income
- --------------------------------------------------------
PAVIT PEA Science and Capital appreciation
Technology Portfolio
- --------------------------------------------------------
PAVIT OpCap Small Cap Capital appreciation
Portfolio
- --------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- --------------------------------------------------------------------------------
PIMCO Foreign Bond To maximize total return, PACIFIC INVESTMENT
Portfolio (U.S. consistent with MANAGEMENT COMPANY
Dollar-Hedged) - preservation of capital and LLC
Administrative Shares prudent investment
management
- --------------------------------------------------------
PIMCO Money Market To obtain maximum current
Portfolio - income consistent with
Administrative Shares preservation of capital and
daily liquidity.
- --------------------------------------------------------
PIMCO Real Return Seeks maximum real return,
Portfolio - consistent with
Administrative Shares preservation of real
capital and prudent
investment management.
- --------------------------------------------------------
PIMCO 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 rated
below investment grade
(junk bonds) and that have
intermediate to long-term
maturities (three years or
longer.)
- --------------------------------------------------------
Putnam VT International Capital growth. Current
Growth and Income Fund income is a secondary
- Class IB objective.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------
Rydex VT Sector Long-term capital
Rotation Fund appraciation.
- --------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
- --------------------------------------------------------------------------------
Salomon Brothers Capital appreciation SALOMON BROTHERS
Variable All Cap Fund ASSET MANAGEMENT INC
- Class I (formerly
Capital Fund) Class I
- --------------------------------------------------------
Salomon Brothers Long-term growth of capital
Variable Investors with current income as a
Fund - Class I (1) secondary objective
- --------------------------------------------------------------------------------
SCUDDER INVESTMENTS VIT FUNDS
- --------------------------------------------------------------------------------
Scudder VIT EAFE Equity To replicate as closely as DEUTSCHE ASSET
Index Fund - Class B possible before deduction MANAGEMENT, INC.
of expenses, performance of
the MSCI EAFE Index which
emphasizes stocks of companies
in major markets in Europe,
Australia, and the Far East.
- --------------------------------------------------------
Scudder VIT Equity 500 To replicate as closely as
Index Fund - Class B possible before deduction of
expenses, performance of
the S&P 500 Index which
emphasizes stocks of large
U.S. companies.
- --------------------------------------------------------
Scudder VIT Small Cap To replicate as closely as
Index Fund - Class B possible before deduction
of expenses, the
performance of the Russell
2000 Index which emphasizes
stocks of small U.S.
companies.
- --------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- --------------------------------------------------------------------------------
Van Kampen UIF Seeks long-term capital VAN KAMPEN (6)
Equity Growth appreciation by investing
Portfolio, Class I (4) primarily in
growth-oriented equity
securities of large
capitalization companies.
- --------------------------------------------------------
Van Kampen UIF Above-average total return
High Yield Portfolio, over a market cycle of
Class I three to five years by
investing primarily in high
yield securities (commonly
referred to as "junk
bonds").
- --------------------------------------------------------
Van Kampen UIF Seeks above-average total
U.S. Mid Cap Value return over a market cycle
Portfolio, Class I (5) of three to five years by
investing in common stocks
and other equity
securities.
- --------------------------------------------------------
Van Kampen UIF Seeks to provide
U.S. Real Estate above-average current
Portfolio, Class II income and long-term
capital appreciation by
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 (7)
- --------------------------------------------------------
Van Kampen LIT Long-term growth of capital
Growth & Income and income
Portfolio, Class II
- --------------------------------------------------------------------------------
(1) 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.
(2) Effective 4/30/04, the LSA Capital Appreciation Fund was merged into the
Janus Aspen Series Capital Appreciation Portfolio - Institutional Shares.
(3) Effective 5/1/04 the Janus Aspen Series International Portfolio - Service
Shares changed its name to the Janus Aspen Foreign Stock Portfolio -
Service Shares.
(4) 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.
(5) 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.
(6) Morgan Stanley Investment Management Inc., the investment adviser to the
UIF Portfolios, does business in certain instances as Van Kampen.
(7) 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.
(8) A Fund's objective may be changed by the Fund's Board of Trustees without
shareholder approval.
SOME OF THE PORTFOLIOS HAVE NAMES SIMILAR TO RETAIL MUTUAL FUNDS. HOWEVER, THE
PORTFOLIOS MAY BE MANAGED BY A DIFFERENT PORTFOLIO MANAGER. MOREOVER, THE
PORTFOLIOS ARE LIKELY TO DIFFER FROM RETAIL MUTUAL FUNDS IN ASSETS, CASH FLOW,
AND TAX MATTERS. ACCORDINGLY, A PORTFOLIO'S SECURITY HOLDINGS MAY DIFFER FROM
THOSE OF A SIMILARLY NAMED RETAIL MUTUAL FUND, AND INVESTMENT RESULTS OF A
PORTFOLIO CAN BE EXPECTED TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF
SIMILARLY NAMED RETAIL MUTUAL FUNDS.
14 PROSPECTUS
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options, including 2 dollar
cost averaging options and the option to invest in one or more GUARANTEE PERIODS
included in the GUARANTEED MATURITY FIXED ACCOUNT. We may offer additional Fixed
Account options in the future. We will credit a minimum annual interest rate of
3% to money you allocate to any of the Dollar Cost Averaging Fixed Account
Options. The Fixed Account Options may not be available in all states. Please
consult with your representative for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general account assets other than those in segregated asset accounts. We
have sole discretion to invest the assets of the Fixed Account, subject to
applicable law. Any money you allocate to a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account. Loan
Payments may not be allocated to the Fixed Account(s).
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may establish a Short
Term Dollar Cost Averaging Program by allocating purchase payments to THE SHORT
TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION ("SHORT TERM DCA FIXED ACCOUNT
OPTION"). Each purchase payment allocated to the Short Term DCA Fixed Account
Option must be at least $1,200. We will credit interest to purchase payments you
allocate to this Option for up to six months at the current rate in effect at
the time of allocation. We will credit interest daily at a rate that will
compound at the annual interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the Short
Term DCA Fixed Account Option. However, you may not choose less than 3 or more
than 6 equal monthly installments. Further, you must transfer each purchase
payment and all its earnings out of this Option by means of dollar cost
averaging within 6 months. If you discontinue the Dollar Cost Averaging Program
before the end of the transfer period, we will transfer the remaining balance in
this Option to the Money Market Variable Subaccount unless you request a
different investment alternative. At the end of the transfer period, any
residual amount will be transferred to the Money Market Variable Subaccount. No
transfers are permitted into the Short Term DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur 25 days after such purchase payment. If we do not receive an
allocation from you within 25 days of the date of payment, we will transfer the
payment plus associated interest to the Money Market Variable Subaccount in
equal monthly installments.
EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may
establish an Extended Short Term Dollar Cost Averaging Program by allocating
purchase payments to THE EXTENDED SHORT TERM DOLLAR COST AVERAGING FIXED ACCOUNT
OPTION ("EXTENDED SHORT TERM DCA FIXED ACCOUNT OPTION"). Each purchase payment
allocated to the Extended Short Term DCA Fixed Account Option must be at least
$1,200. We will credit interest to purchase payments you allocate to this Option
for up to twelve months at the current rate in effect at the time of allocation.
We will credit interest daily at a rate that will compound at the annual
interest rate we guaranteed at the time of allocation.
We will follow your instructions in transferring amounts monthly from the
Extended Short Term DCA Fixed Account Option. However, you may not choose less
than 7 or more than 12 equal monthly installments. Further, you must transfer
each purchase payment and all its earnings out of this Option by means of dollar
cost averaging within 12 months. If you discontinue the Dollar Cost Averaging
Program before the end of the transfer period, we will transfer the remaining
balance in this Option to the Money Market Variable Subaccount unless you
request a different investment alternative. At the end of the transfer period,
any residual amount will be transferred to the Money Market Variable Subaccount.
No transfers are permitted into the Extended Short Term DCA Fixed Account.
For each purchase payment allocated to this Option, your first monthly transfer
will occur 25 days after such purchase payment. If we do not receive an
allocation from you within 25 days of the date of payment, we will transfer the
payment plus associated interest to the Money Market Variable Subaccount in
equal monthly installments.
INVESTMENT RISK
We bear the investment risk for all amounts allocated to the Short Term DCA
Fixed Account Option and the Extended Short Term DCA Fixed Account Option. That
is because we guarantee the current rates we credit to the amounts you allocate
to either of these Options, which will never be less than the minimum guaranteed
rate in the Contract. We determine, in our sole discretion, the amount of
interest credited in excess of the guaranteed rate.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Short Term DCA Fixed Account Option and the Extended
Short Term DCA Fixed Account Option. For current interest rate information,
please contact your representative or our customer support unit at
1-800-865-5237.
15 PROSPECTUS
GUARANTEE PERIODS
Each payment or transfer allocated to a Guarantee Period earns interest at a
specified rate that we guarantee for a period of years. Guarantee Periods may
range from 1 to 10 years. We are currently offering Guarantee Periods of 1, 3,
5, 7, and 10 years in length. In the future we may offer Guarantee Periods of
different lengths or stop offering some Guarantee Periods.
You select the Guarantee Period for each payment or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment(s).
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to this Option.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your representative or Lincoln Benefit at
1-800-865-5237.
HOW WE CREDIT INTEREST. We will credit interest daily to each amount allocated
to a Guarantee Period at a rate that compounds to the annual interest rate that
we declared at the beginning of the applicable Guarantee Period. The following
example illustrates how a purchase payment allocated to a Guaranteed Period
would grow, given an assumed Guarantee Period and annual interest rate:
Purchase Payment......................... $10,000
Guarantee Period......................... 5 years
Annual Interest Rate..................... 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
Beginning Contract
Value................ $10,000.00
x (1 + Annual Interest Rate) 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
x (1 + Annual Interest Rate) 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
x (1 + Annual Interest Rate) 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
x (1 + Annual Interest Rate) 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
x (1 + Annual Interest Rate) 1.045
----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82 -
$10,000.00)
This example assumes no withdrawals during the entire 5-year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
16 PROSPECTUS
1. Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expiring Guarantee Period. The new
Guarantee Period will begin on the day the previous Guarantee Period ends.
The new interest rate will be our current declared rate for a Guarantee
Period of that length; or
2. Instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
3. Instruct us to transfer all or a portion of your money to one or more
Variable Subaccounts of the Variable Account. We will effect the transfer
on the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4. Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay premium taxes and
income tax withholding, if applicable. We will pay interest from the day
the Guarantee Period expired until the date of withdrawal. The interest
will be the rate for the shortest Guarantee Period then being offered.
Amounts not withdrawn will be applied to a new Guarantee Period of the same
length as the previous Guarantee Period. The new Guarantee Period will
begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals and transfers from a Guarantee Period,
other than those taken during the 30-day period after such Guarantee Period
expires, are subject to a Market Value Adjustment. A Market Value Adjustment
also may apply upon payment of a death benefit and when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30-day period after such Guarantee Period expires). We also
will not apply a Market Value Adjustment to a withdrawal you make:
.. that qualifies for one of the waivers as described on pages 25,
.. to satisfy the IRS minimum distribution rules for the Contract, or
.. a single withdrawal made by a surviving spouse made within one year after
continuing the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a maturity equal to the Guarantee Period at its
inception to the Treasury Rate for a maturity equal to the Guarantee Period when
you remove your money. "Treasury Rate" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal from a
Guaranteed Period to an amount that is less than the purchase payment applied to
that period plus interest earned under the Contract.
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate for a
period equal to the Guarantee Period, then the Market Value Adjustment will
result in a higher amount payable to you, transferred or applied to an Income
Plan. Conversely, if the Treasury Rate at the time you allocate money to a
Guarantee Period is lower than the applicable Treasury Rate for a period equal
to the Guarantee Period, then the Market Value Adjustment will result in a lower
amount payable to you, transferred or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5-year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5-year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5-year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
17 PROSPECTUS
INVESTMENT ALTERNATIVES: TRANSFERS
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to either the Short
Term Dollar Cost Averaging Fixed Account or the Extended Short Term Dollar Cost
Averaging Fixed Account Options. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below. The
minimum amount that you may transfer into a Guarantee Period is $500. We
currently do not assess, but reserve the right to assess, a charge of.50% of the
transfer amount but not less than $25, on each transfer in excess of 12 per
Contract Year. All transfers to or from more than one Portfolio on any given day
counts as one transfer.
As a general rule, we only make transfers on days when the NYSE is open for
business. If we receive your request on one of those days, we will make the
transfer that day. The Contract permits us to defer transfers from the Fixed
Account for up to six months from the date we receive your request. If we decide
to postpone transfers for 30 days or more, we will pay interest as required by
applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
If you transfer an amount from a Guarantee Period other than during the 30-day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Subaccounts
so as to change the relative weighting of the Variable Subaccounts on which your
variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. After 6 months from the Payout Start Date, you
may make transfers from the Variable Subaccounts to increase the proportion of
your income payments consisting of fixed income payments.
TELEPHONE TRANSFERS
You may make transfers by telephone. To give a third party authorization, you
must first send us a completed authorization form. The cut off time for
telephone transfer requests is 3:00 p.m. Central Time. Calls completed before
3:00 p.m. will be effected on that day at that day's price. Calls completed
after 3:00 p.m. will be effected on the next day on which the NYSE is open for
business, at that day's price.
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 Variable Subaccounts in any Contract year, or to refuse any
Variable 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 the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING. The Contracts are intended for long-term
investment. Market timing and excessive trading can potentially dilute the value
of Variable Subaccounts and can disrupt management of a Portfolio and raise its
expenses, which can impair Portfolio performance. Our policy is not to accept
knowingly any money intended for the purpose of market timing or excessive
trading. Accordingly, you should not invest in the Contract if your purpose is
to engage in market timing or excessive trading, and you should refrain from
such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If we identify a pattern of market-timing or
excessive trading activity, we will make further inquiry and may, depending on
the circumstances, impose trading limitations as described below under "Trading
Limitations" consistent with applicable law and the Contract. Because there is
no universally accepted definition of what constitutes market timing or
excessive trading, we will use our reasonable judgment based on all of the
circumstances.
While we seek to deter market timing and excessive trading in Variable
Subaccounts, not all market timing or excessive trading is identifiable or
preventable. Therefore, we cannot guarantee that we can prevent such trading
activity in all cases or before it occurs.
TRADING LIMITATIONS. We reserve the right to limit transfers among the
investment alternatives in any Contract Year, or to refuse any transfer request,
if:
18 PROSPECTUS
.. 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.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount every month from any Variable Subaccount, the Short Term
Dollar Cost Averaging Fixed Account, or the Extended Short Term Dollar Cost
Averaging Fixed Account, to any of the other Variable Subaccounts or the
Guarantee Periods. You may not use the Dollar Cost Averaging Program to transfer
amounts from the Guarantee Periods. This program is available only during the
Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of Dollar Cost Averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market. You may not use Dollar Cost Averaging and Portfolio
Rebalancing at the same time. Call or write us for instructions on how to
enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Subaccounts, the
performance of each Subaccount may cause a shift in the percentage you allocated
to each Subaccount. If you select our Automatic Portfolio Rebalancing Program,
we will automatically rebalance the Contract Value in each Variable Subaccount
and return it to the desired percentage allocations. We will not include money
you allocate to the Fixed Account Options in the Automatic Portfolio Rebalancing
Program.
We will rebalance your account monthly, quarterly, semi-annually, or annually,
depending on your instructions. We will transfer amounts among the Variable
Subaccounts to achieve the percentage allocations you specify. You can change
your allocations at any time by contacting us in writing or by telephone. The
new allocation will be effective with the first rebalancing that occurs after we
receive your request. We are not responsible for rebalancing that occurs prior
to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Subaccounts. You want 40% to be in the Fidelity Growth Portfolio Variable
Subaccount and 60% to be in the OpCap Balanced portfolio Variable Subaccount.
Over the next 2 months the bond market does very well while the stock market
performs poorly. At the end of the first quarter, the Fidelity Growth Portfolio
Variable Subaccount now represents 50% of your holdings because of its increase
in value. If you choose to have your holdings rebalanced quarterly, on the first
day of the next quarter, we would sell some of your units in the Fidelity Growth
Portfolio Variable Subaccount and use the money to buy more units in the OpCap
Balanced portfolio Variable Subaccount so that the percentage allocations would
again be 40% and 60% respectively.
The Automatic Portfolio Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the Program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. 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 Phase. We will automatically terminate this program if you request
any transfer outside the Automatic Portfolio Rebalancing Program. Portfolio
rebalancing is consistent with maintaining your allocation of investments among
market segments, although it is accomplished by reducing your Contract Value
allocated to the better performing segments. You may not use Dollar Cost
Averaging and Portfolio Rebalancing at the same time.
19 PROSPECTUS
EXPENSES
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Subaccounts
(1.50% if you select the Enhanced Death Benefit Rider; 1.45% if you select the
Income Benefit Rider; and 1.70% if you select both the Enhanced Death Benefit
Rider and the Income Benefit Rider), and an additional charge ranging from 0.15%
to 0.35% for the Enhanced Earnings Death Benefit described below.
The mortality and expense risk charge is for the insurance benefits available
with your Contract (including our guarantee of annuity rates and the death
benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss. We charge an additional amount
for the Enhanced Death Benefit Rider, the Income Benefit Rider and the Enhanced
Earnings Death Benefit Rider compensate us for the additional risk that we
accept by providing these Riders.
We guarantee that we will not raise the mortality and expense risk charge. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase. After the Payout Start Date, mortality and expense risk
charges for the Enhanced Death Benefit, the Income Benefit, and the Enhanced
Earnings Death Benefit will cease.
ENHANCED EARNINGS DEATH BENEFIT RIDER CHARGE
If you elect the Enhanced Earnings Death Benefit Rider, we will increase the
Mortality and Expense charge during the Accumulation Phase by the annual rates
shown below based on the oldest Contract Owner's age on the Rider Date.
AGE ANNUAL CHARGE
- ----- ------------
0-55 0.15%
56-65 0.25%
66-75
0.35%
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Subaccounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge up to 0.50% of the
transfer amount, but not less than $25, per transfer after the 12th transfer in
each Contract Year. We will not charge a transfer fee on transfers that are part
of a Dollar Cost Averaging or Automatic Portfolio Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 8% of the purchase payment(s) you
withdraw. The charge declines to 0% over an 8 year period that begins on the day
we receive your payment. A schedule showing how the charge declines is shown on
page 8. Beginning on January 1, 2004, if you make a withdrawal before the Payout
Start Date, we will apply the withdrawal charge percentage in effect on the date
of the withdrawal, or the withdrawal charge penalty in effect on the following
day, whichever is lower. Any Purchase Payments older than 8 years old, which
have not been previously withdrawn, may be withdrawn without paying the
withdrawal charge. During each Contract year, you can also withdraw the greater
of earnings not previously withdrawn or 15% of your New Purchase Payments
without paying the charge. New Purchase Payments are Purchase Payments received
by us less than 8 years prior to withdrawal. Unused portions of this "FREE
WITHDRAWAL AMOUNT" are not carried forward to future Contract Years. We will
deduct withdrawal charges, if applicable, from the amount paid.
For purposes of calculating the withdrawal charge, the Contract Value is deemed
to be withdrawn in the following order:
FIRST. Earnings - The amount of Contract Value in excess of all purchase
payments that have not previously been withdrawn;
SECOND. Old Purchase Payments - Purchase payments received by us more than eight
years prior to the date of withdrawal which have not been previously withdrawn;
THIRD. New Purchase Payments that are not subject to a withdrawal charge; and
FOURTH. New Purchase Payments that are subject to a withdrawal charge.
For federal income tax purposes, withdrawals are considered to have come first
from earnings, which means you pay taxes on the earnings portion of your
withdrawal. Free withdrawal amounts are not cumulative.
20 PROSPECTUS
We do not apply a withdrawal charge in the following situations:
.. on the Payout Start Date (a withdrawal charge may apply if you terminate
income payments to be received for a specified period);
.. withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
.. withdrawals that qualify for one of the waivers as described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax and a Market
Value Adjustment. 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 your own tax counsel or other tax advisers regarding
any withdrawals.
CONFINEMENT WAIVER.We will waive the withdrawal charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. You or the Annuitant, if the Contract Owner is not a living person, are
confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care
facility or hospital at least 30 days after the Issue Date;
2. You request the withdrawal and provide written proof of the stay no later
than 90 days following the end of your or the Annuitant's stay at the long
term care facility or hospital; and
3. A physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, the Annuitant, or a member of your or the
Annuitant's immediate family, is the physician prescribing your or the
Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you or the Annuitant (if the Contract Owner is not a living person) are
first diagnosed with a terminal illness at least 30 days after the Issue
Date; and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date;
2. you or the Annuitant, if the Contract Owner is not a living person, receive
unemployment compensation as defined in the Contract for at least 30 days
as a result of that unemployment; and
3. you or the Annuitant, if the Contract Owner is not a living person, claim
this benefit within 180 days of your or the Annuitant's initial receipt of
unemployment compensation.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge or a Market Value Adjustment because of
these waivers, you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax adviser to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
At our discretion, we may discontinue this practice and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, if applicable, we deduct the charge for premium taxes
from each investment alternative in the proportion that the Contract Owner's
value in the investment alternative bears to the total Contract Value.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not
21 PROSPECTUS
it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Subaccounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 9. We may receive compensation from the
investment advisers or administrators of the Portfolios in connection with the
administrative services we provide to the Portfolios.
ACCESS TO YOUR MONEY
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any Market Value Adjustment less any withdrawal charges, income tax
withholding, and any premium taxes. We will pay withdrawals from the Variable
Account within 7 days of receipt of the request, subject to postponement in
certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is specified, we will deduct your withdrawal pro-rata from
the Variable Subaccounts according to the value of your investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire investment in a Variable
Subaccount.
If you request a total withdrawal, we may require you to return your Contract to
us. 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.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months (or shorter period if required by law). If we delay payment
for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
If your Contract is a non-qualified contract or IRA, you may choose to receive
systematic withdrawal payments on a monthly, quarterly, semi-annual, or annual
basis at any time prior to the Payout Start Date. The minimum amount of each
systematic withdrawal is $50. Systematic withdrawals will be deducted from the
Variable Subaccounts and Fixed Account balances, excluding the Dollar Cost
Averaging Fixed Account Options, on a pro rata basis. At our discretion,
systematic withdrawals may not be offered in conjunction with the Dollar Cost
Averaging Program or Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the value of the Variable Subaccounts and the value
of the Fixed Account Options, systematic withdrawals may reduce or even exhaust
the Contract Value. For income tax purposes, withdrawals are generally made from
earnings first. 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. Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, we may modify or suspend the Systematic Withdrawal Program and
charge a processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $2,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been reduced by
withdrawals to less than $2,000, we will inform you in writing of our intention
to terminate your Contract and give you at least 30 days in which to make an
additional Purchase Payment to restore your Contract Value to the contractual
minimum of $2,000. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
22 PROSPECTUS
CONTRACT LOANS FOR 403(B) CONTRACTS
Subject to the restrictions described below, we will make loans to the Contract
Owner of a Contract used in connection with a Tax Sheltered Annuity Plan ("TSA
Plan") under Section 403(b) of the Internal Revenue Code. Such loans are not
available in Vermont. Loans are not available under non-qualified Contracts. We
will only make loans after the right to cancel period and before the Payout
Start Date. All loans are subject to the terms of the Contract, the relevant
qualified plan, and the Internal Revenue Code, which impose restrictions on
loans.
We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be greater than the amount available for full
withdrawal under your Contract on the date of the loan. In addition, you may not
borrow a loan if the total of the requested loan and all of your loans under TSA
plans is more than the lesser of (a) or (b) where:
(a) equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and
(b) equals the greater of $10,000 or half of the amount available for full
withdrawal.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Loans made before the Payout Start Date
are generally treated as distributions under the Contract, and may be subject to
withholding and tax penalties for early distributions. Some of these
requirements are stated in Section 72 of the Internal Revenue 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 Variable Account and/or the Fixed Account Options to the LOAN ACCOUNT as
collateral for the loan. The Loan Account is an account established for amounts
transferred from the Variable Subaccounts or Fixed Account as security for an
outstanding Contract loan. We will transfer to the Loan Account amounts from the
Variable Account in proportion to the assets in each Subaccount. If your loan
amount is greater than your Contract Value in the Subaccounts, we will transfer
the remaining required collateral from the Guaranteed Maturity Fixed Account
Options. If your loan amount is greater than your contract value in the
Subaccounts and the Guaranteed Maturity Fixed Account Options, we will transfer
the remaining required collateral from the Dollar Cost Averaging Fixed Account
Options.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Subaccounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount transferred to the
Loan Account will equal the desired loan amount. We will 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) full withdrawal proceeds;
(3) the amount available for partial withdrawal;
(4) the amount applied on the Payout Start Date to provide income payments.
Usually you must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
Generally, loan payments are allocated to the Subaccount(s) in the proportion
that you have selected for your most recent Purchase Payment. 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
23 PROSPECTUS
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. Until we are permitted by law to extinguish a defaulted loan, we will
continue to charge interest and add unpaid interest to your outstanding loan
balance.
If the total loan balance exceeds the amount available for full withdrawal, we
will mail written notice to your last known address. The notice will state the
amount needed to maintain the Contract in force. If we do not receive payment of
this amount within 31 days after we mail this notice, we will terminate your
Contract.
We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.
INCOME PAYMENTS
PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
.. at least 30 days after the Issue Date; and
.. no later than the day the Annuitant reaches age 90, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
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 Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. You may elect
to receive guaranteed payments for periods ranging from 5 to 30 years. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Subaccount assets
that support variable income payments even though we may not bear any mortality
risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving income payments that do not
depend on the life of the Annuitant (such as under Income Plan 3).
24 PROSPECTUS
In that case you may terminate all or part of the income payments at any time
and withdraw their value, subject to withdrawal charges. For Variable Amount
Income Payments, the value you may withdraw is equal to the present value of the
Variable Amount Income Payments being terminated, calculated using a discount
rate equal to the assumed investment rate that was used in determining the
initial variable payment. For Fixed Amount Income Payments, the value you may
withdraw is equal to the present value of the Fixed Amount Income Payments being
terminated, calculated using a discount rate equal to the applicable current
interest rate. The applicable current interest rate is the rate we are using on
the date we receive your withdrawal request to determine income payments for a
new Income Plan with a payment period equal to the remaining payment period of
the income payments being terminated. The value you may withdraw may be higher
or lower than it would have been using the interest rate that was initially used
to calculate your Fixed Account Income Payments and your total payments
(withdrawal amount plus income payments already received) may be more or less
than the amount applied to your Income Plan. We deduct applicable premium taxes
from the Contract Value at the Payout Start Date.
We may make other Income Plans available.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Subaccounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan on the Payout Start Date.
If the amount available to apply under an Income Plan is less than $2,000, or
not enough to provide an initial payment of at least $50, and state law permits,
we may:
.. pay you the Contract Value, adjusted by any applicable Market Value
Adjustment and less any applicable taxes, in a lump sum instead of the
periodic payments you have chosen; or
.. reduce the frequency of your payments so that each payment will be at least
$50.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Subaccounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Subaccounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
INCOME BENEFIT RIDER
The Income Benefit Rider is no longer available. For Contract Owners and
Annuitants up to and including age 75. This Rider guarantees that the amount of
income payments you receive will not be less than those determined by applying
the Income Base, less any applicable taxes, to the minimum guaranteed rate
(rather than to any current rates we may be offering) for the Income Plan you
select ("Guaranteed Income Benefit"). This Rider does not affect the amounts
paid as a death benefit, partial withdrawal or surrender. The Rider is optional,
has additional charges and may not be available in all states.
25 PROSPECTUS
QUALIFICATIONS. To qualify for the income benefit payments under this Rider, you
must meet the following requirements as of the Payout Start Date:
.. You must elect a Payout Start Date that is on or after the 10th anniversary
of the Rider Date;
.. The Payout Start Date must be prior to the oldest Annuitant's 90th
birthday;
.. The Payout Start Date must occur during the 30 day period following a
Contract Anniversary;
.. You must elect to receive fixed income payments, which will be calculated
using the guaranteed payout rates listed in your Contract; and
.. The Income Plan you selected must provide for payments guaranteed for
either a single life or joint lives with a specified period of at least:
.. 10 years, if the youngest Annuitant's age is 80 or less on the Payout Start
Date, or
.. 5 years, if the youngest Annuitant's age is greater than 80 on the Payout
Start Date.
.. Of course, if your Contract Value, applied to the then current payout rates
offered by Lincoln Benefit, generates higher income payments than those
provided under the Income Benefit Rider, you will receive the higher
payment amount. You may also elect to apply your Contract Value to any
other income plan that we offer at that time.
The Income Benefit Rider will no longer be in effect and the mortality and
expense charge for the Rider will end upon the change of the named Annuitant for
reasons other than death. We may discontinue offering these options at any time.
INCOME BASE
The Income Base is used solely for the purpose of calculating the GUARANTEED
INCOME BENEFIT under this Rider ("Guaranteed Income Benefit") and does not
provide a Contract Value or guarantee performance of any investment option.
On the date we issue the Rider ("Rider Date"), the Income Base is equal to the
Contract Value. After the Rider Date, the Income Base plus any subsequent
purchase payments and less a withdrawal adjustment (described below) for any
subsequent withdrawal will accumulate daily at a rate equivalent to 5% per year
until the earlier of the Payout Start Date, or the first day of the month after
the oldest Contract Owner's (or Annuitant's, if the Contract Owner is not a
living person) 85th birthday. The maximum Income Base is 200% of:
.. the Contract Value on the Rider Date; plus
.. any subsequent purchase payments; less
.. any subsequent withdrawal adjustments.
WITHDRAWAL ADJUSTMENT
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c) where:
(a) = the withdrawal amount
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated Income Base
The Guaranteed Income Benefit amount is determined by applying the Income Base
less any applicable taxes to the guaranteed rates for the Income Plan you elect.
The Income Plan you elect must satisfy the conditions described above.
On the Payout Start Date, the income payment will be the greater of the
guaranteed Income Benefit or the Income Payment provided in the Payout Phase
section.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
26 PROSPECTUS
DEATH BENEFITS
WE WILL PAY A DEATH BENEFIT PRIOR TO THE PAYOUT START DATE ON:
1. the death of any Contract Owner or,
2. the death of the Annuitant, if the Contract Owner is not a living person.
We will pay the death benefit to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiaries. If the Contract Owner is not a
living person, in the case of the death of the Annuitant, we will pay the death
benefit to the current Contract Owner.
A claim for a distribution on death must include DUE PROOF OF DEATH. Where there
are multiple Beneficiaries, we will value the Death Benefit at the time the
first Beneficiary submits a complete claim for payment of the Death Benefit. We
will accept the following documentation as "Due Proof of Death":
.. a certified copy of a death certificate,
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
.. any other proof acceptable to us.
Your beneficiary should submit a complete claim for payment of the Death Benefit
within 180 days of the relevant death in order to claim the standard or enhanced
Death Benefit. If your beneficiary does not submit a complete claim for payment
of the Death Benefit within 180 days of the relevant death, the beneficiary will
be paid the Contract Value which may be adjusted as described in "Death Benefit
Payments" on page 34. 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.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, if we receive a complete request for payment of
the Death Benefit within 180 days of the date of death, the standard Death
Benefit is equal to the greatest of:
.. the sum of all Purchase Payments reduced by withdrawal adjustments. The
withdrawal adjustment for Purchase Payments is equal to (a) divided by (b),
with the result multiplied by (c) where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the sum of all prior purchase payments adjusted by any prior
withdrawals; or
.. the Contract Value on the date we determine the Death Benefit, or
.. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value, i.e., the Contract Value adjusted by any market value
adjustment, less any applicable withdrawal charge or premium tax) on the
date we determine the Death Benefit, or
.. the Contract Value on each DEATH BENEFIT ANNIVERSARY prior to the date we
determine the Death Benefit, increased by any purchase payment made since
that Death Benefit Anniversary and reduced by an adjustment for any
withdrawals since that Death Benefit Anniversary.
In other words, for each Death Benefit Anniversary that occurs prior to the date
we determine the Death Benefit, we will calculate an amount equal to the
Contract Value on that Death Benefit Anniversary, plus any purchase payments
made since that Death Benefit Anniversary, and minus an adjustment for any
withdrawals made since that Death Benefit Anniversary. (The calculation of the
withdrawal adjustment is described on page 33.) If there are multiple Death
Benefit Anniversaries, we will make multiple calculations. The highest result
will be compared to the other three values listed above in order to determine
the Death Benefit.
"Death Benefit Anniversaries" occur every 7th Contract anniversary until the
oldest Contract Owner's 80th birthday, or the Annuitant's 80th birthday if the
Contract Owner is not a living person. The Contract Anniversary immediately
following the oldest Contract Owner's 80th birthday, or the Annuitant's 80th
birthday if the Contract Owner is not a living person, will also be a Death
Benefit Anniversary and is the final Death Benefit Anniversary.
The Death Benefit Anniversary withdrawal adjustment is equal to (a) divided by
(b), with the result multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the Contract Value on the Death Benefit Anniversary adjusted by any
prior purchase payments or withdrawals made since that Anniversary.
We will determine the value of the Death Benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3:00 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
27 PROSPECTUS
ENHANCED DEATH BENEFIT RIDER
The Enhanced Death Benefit Rider is an optional benefit that you may elect if
the Contract Owners and Annuitants are not older than age 80 on the date we
receive the application, or the date we receive the written request to add this
Rider, whichever is later. If the Contract Owner is a living individual, the
Enhanced Death Benefit applies only upon the death of the Contract Owner. If the
Contract Owner is not a living individual, the Enhanced Death Benefit applies
only upon the death of the Annuitant. For Contracts with the Enhanced Death
Benefit Rider, the death benefit will be the greatest of the standard death
benefit above, or the Enhanced Death Benefit. The Enhanced Death Benefit is
equal to the greater of Enhanced Death Benefit A or Enhanced Death Benefit B.
Enhanced Death Benefit A or B may not be available in all states. This rider
will automatically terminate on the Payout Start Date.
The Enhanced Death Benefit will never be greater than the maximum death benefit
allowed by any state nonforfeiture laws that govern the Contract. The Enhanced
Death Benefit Rider and the mortality and expense charge for the Rider will
terminate upon the change of Contract Owner (or the Annuitant if the Contract
Owner is not a living person) for reasons other than death.
ENHANCED DEATH BENEFIT A. On the date we issue the Rider ("RIDER DATE"),
Enhanced Death Benefit A is equal to the Contract Value on that date. After the
Rider Date, Enhanced Death Benefit A is the greatest of the ANNIVERSARY VALUES
as of the date we determine the death benefit. The "Anniversary Value" is equal
to the Contract Value on a Contract Anniversary, increased by purchase payments
made since that Anniversary and reduced by a withdrawal adjustment, as described
below, for any partial withdrawals since that Anniversary.
We will calculate Anniversary Values for each Contract Anniversary up until the
earlier of:
.. the date we determine the death benefit; or
.. the first Contract Anniversary following the oldest Contract Owner's or, if
the Contract Owner is not a living person, the Annuitant's 80th birthday,
or the first day of the 61st month following the Rider Date, whichever is
later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit A only for
purchase payments and withdrawals.
The withdrawal adjustment is equal to (a) divided by (b), and the result
multiplied by (c) where:
(a) = is the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = the most recently calculated Enhanced Death Benefit A.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B on the Rider Date is
equal to the Contract Value on that date. After the Rider Date, the Enhanced
Death Benefit B, plus any subsequent purchase payments and less a withdrawal
adjustment, as described below, will accumulate daily at a rate equivalent to 5%
per year until the earlier of:
.. the date we determine the death benefit; or
.. the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a living person, the Annuitant's 80th birthday, or
the first day of the 61st month following the Rider Date, whichever is
later.
After age 80, or the first day of the 61st month following the Rider Date,
whichever is later, we will recalculate the Enhanced Death Benefit B only for
purchase payments and withdrawals. The maximum amount of Enhanced Death Benefit
B is 200% of:
.. the Contract Value on the Rider Date; plus
.. any subsequent purchase payments; less
.. any subsequent withdrawal adjustments.
The withdrawal adjustment is equal to (a) divided by (b), and the result
multiplied by (c) where:
(a) = the withdrawal amount,
(b) = is the Contract Value immediately prior to the withdrawal, and
(c) = is the most recently calculated Enhanced Death Benefit B.
ENHANCED EARNINGS DEATH BENEFIT RIDER
For Contract Owners and Annuitants up to and including age 75, the Enhanced
Earnings Death Benefit Rider is an optional benefit that you may elect.
If the Contract Owner is a living person, the Enhanced Earnings Death Benefit
Rider applies only upon the death of the Contract Owner. If the Contract Owner
is not a living person, the Enhanced Earnings Death Benefit Rider applies only
upon the death of the Annuitant. The Enhanced Earnings Death Benefit Rider and
the annual charge for the Rider will terminate upon the change of Contract Owner
(or the Annuitant if the Contract Owner is not a living person) for reasons
other than death. The Rider may not be available in all states. We may
discontinue the offering of the Rider at any time. This rider will automatically
terminate on the Payout Start Date.
Under the Enhanced Earnings Death Benefit Rider, the Enhanced Earnings Death
Benefit is determined as follows:
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is age 55 or younger on the date we receive the completed
application, or we receive written request to add this
28 PROSPECTUS
rider, whichever is later, the Enhanced Earnings Death Benefit will be:
.. the lesser of 100% of IN-FORCE PREMIUM (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 50% of In-Force Earnings, calculated as of the date
we receive due proof of death.
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is between the ages of 56 and 65 on the date we receive the
completed application or the date we receive the written request to add this
rider, whichever is later, the Enhanced Earnings Death Benefit will be:
.. the lesser of 80% of the In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 40% of In-Force Earning, calculated as of the date
we receive due proof of death.
If the oldest Contract Owner, or the Annuitant if the Contract Owner is not a
living person, is between the ages of 66 and 75 on the date we receive the
completed application or the date we receive the written request to add this
rider, whichever is later, the Enhanced Earnings Death Benefit will be:
.. the lesser of 50% of In-Force Premium (excluding purchase payments made
after the Rider Date and in the twelve month period immediately preceding
the death of the Contract Owner, or the Annuitant if the Contract Owner is
not a living person) or 25% of In-Force Earnings, calculated as of the date
we receive due proof of death.
For purpose of calculating the Enhanced Earnings Death Benefit, the following
definitions apply:
.. In-Force Earnings is the greater of (a) the current Contract Value less the
In-Force Premium; or (b) zero.
.. In-Force Premiums are defined as follows:
.. If the Rider Date is the same as the Issue Date of the Contract:
.. The sum of all the purchase payments less the sum of all the
Excess-of-Earnings Withdrawals.
.. If the Rider Date is later than the Contract issue date:
.. The Contract Value as of Rider Date plus all the purchase payments made
after the Rider Date less the sum of all the Excess-of-Earnings Withdrawals
after the Rider Date Excess-of-Earnings Withdrawals are defined as follows:
.. For each withdrawal, this amount is equal to the amount, if any, by which
the withdrawal exceeds the In-Force Earnings immediately prior to the
withdrawal.
We will calculate the Enhanced Earnings Death Benefit Rider as of the date we
receive Due Proof of Death. We will pay the Enhanced Earnings Death Benefit with
the death benefit as described under "Death Benefit Payments" below.
The value of the Enhanced Earnings Death Benefit largely depends on the amount
of earnings that accumulate under your Contract. If you expect to withdraw the
earnings from your Contract Value, electing the Enhanced Earnings Death Benefit
Rider may not be appropriate. For purposes of calculating the Enhanced Earnings
Death Benefit, earnings are considered to be withdrawn first before purchase
payments. Your financial advisor can help you decide if the Enhanced Earnings
Death Benefit Rider is right for you.
For examples of how the death benefit is calculated under the Enhanced Earnings
Death Benefit Rider, see Appendix C.
DEATH BENEFIT PAYMENTS
1. If the sole new Contract Owner is your spouse:
(a) Your spouse may elect, within 180 days of the date of your death, to
receive the Death Benefit described above in a lump sum.
(b) Your spouse may elect, within 180 days of the date of your death, to
receive an amount equal to the Death Benefit paid out through an Income
Plan. Payments from the Income Plan must begin within one year of your date
of death. The payments must be:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 30 years but not to exceed
the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of your spouse.
If your spouse chooses to continue the Contract or, does not elect one of the
options above within 180 days of your death, the Contract will continue in the
Accumulation Phase as if no death has occurred. If the Contract continues in the
Accumulation Phase, the following conditions apply:
(a) On the date the Contract is continued, the Contract Value will be the Death
Benefit as determined as of the Valuation Date on which we received due
proof of death (the next Valuation Date, if we receive due proof of death
after 3 p.m. Central Time). Unless otherwise instructed by the continuing
spouse, the excess, if any, of the Death Benefit amount over the Contract
Value will be allocated to the Subaccounts. This excess will be allocated
in proportion to your Contract Value in those Subaccounts as of the end of
the Valuation Period during which we receive the complete request for
payment of the
29 PROSPECTUS
Death Benefit, except that any portion of this excess attributable to the Fixed
Account Options will be allocated to the Money Market Subaccount. Within 30 days
of the date the Contract is continued, your surviving spouse may choose one of
the following transfers without incurring a transfer fee:
(i) transfer all or a portion of the excess among the Subaccounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of Subaccounts,
or the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract. The surviving spouse may make a single withdrawal of any amount within
one year of the date of death without incurring a Withdrawal Charge or Market
Value Adjustment.
After the Contract is continued, prior to the Payout Start Date, the Death
Benefit of the continued Contract will be the greatest of:
(a) the sum of all purchase payments reduced by any withdrawal adjustments; or
(b) the Contract Value on the date we determine the Death Benefit; or
(c) the Settlement Value on the date we determine the Death Benefit; or
(d) the Contract Value on each Death Benefit Anniversary prior to the date we
determine the Death Benefit, increased by any Purchase Payments made since
that Death Benefit Anniversary and reduced by an adjustment for any
withdrawals, as defined in the Death Benefit provision.
Please see DEATH BENEFIT AMOUNT on page 32 for a detailed explanation of how
these amounts are calculated.
Only one spousal continuation is allowed under the Contract.
2. If the new Contract Owner is not your spouse but is a living person, the
new Contract Owner has the following options:
(a) The new Contract Owner may elect, within 180 days of the date of your
death, to receive the Death Benefit in a lump sum.
(b) The new Contract Owner may elect, within 180 days of the date of your
death, to receive an amount equal to the Death Benefit paid out through an
Income Plan. Payments from the annuity option must begin within one year of
your date of death. The Payments must be:
(i) over the life of the new Contract Owner, or for a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner; or
(ii) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of the new
Contract Owner.
(c) If the New Owner does not elect one of the options above within 180 days of
death, then the New Owner must receive the Contract Value payable within 5
years of your date of death. Under this option, if the Settlement Value is
greater than the Contract Value as determined as of the Valuation Date on
which we received a complete request for settlement, which includes Due
Proof of Death (the next Valuation Date, if we receive Due Proof of Death
after 3:00 p.m. Central Time), we will allocate the excess to the Variable
Subaccount selected by the New Owner. In the absence of instructions, we
will allocate that amount to the Money Market Variable Subaccount. Until
the Contract Value is withdrawn, it will vary in accordance with the
investment options selected by the New Owner, and the New Owner may
exercise all rights as set forth in the TRANSFERS section during this
5-year period.
No additional purchase payments may be added to the Contract under this
election. Withdrawal Charges will be waived for any withdrawals made during this
5-year period.
If the New Owner dies prior to receiving all of the Contract Value, then the New
Owner's named beneficiary(ies) will receive the greater of the Settlement Value
or the remaining Contract Value. This amount must be received as a lump sum
within 5 years of the date of the original Owner's death.
3. If the new Contract Owner is a non-Living Person, the new Contract Owner
has the following options:
(a) The non-living Contract Owner may elect, within 180 days of your death, to
receive the Death Benefit in a lump sum.
(b) If the New Owner does not elect the option above, then the New Owner must
receive the Contract Value payable within 5 years of your date of death.
Under this option, if the Settlement Value is greater than the Contract
Value as determined as of the Valuation Date on which we received Due Proof
of Death (the next Valuation Date, if we receive Due Proof of Death after
3:00 pm Central Time), we will allocate the excess to the Variable
Subaccount selected by the New Owner. In the absence of instructions, we
will allocate that amount to the Money Market Variable Subaccount. Until
the Contract Value is withdrawn, it will vary in accordance with the
investment options selected by the New Owner, and the New Owner may
exercise all rights as set forth in the Transfers provision 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.
30 PROSPECTUS
We reserve the right to offer additional options upon Death of Owner. Under any
of these options, all ownership rights, subject to any restrictions previously
placed upon the Beneficiary, are available to the New Owner.
If any new Contract Owner is not a Living Person, all new Contract Owners will
be considered to be non-Living Persons for the above purposes.
We reserve the right to waive or extend the 180-day limit on a
non-discriminatory basis.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date, the Contract Owner must elect one of the following options:
1. If the Contract Owner is a Living Person, the Contract will continue with a
new Annuitant as described on page 12.
2. If the Contract Owner is not a Living Person:
(a) The non-living Contract Owner may elect, within 180 days of the Annuitant's
date of death, to receive the Death Benefit in a lump sum; or
(b) If the Contract Owner does not elect the above option, then the Owner must
receive the Contract Value payable within 5 years of the Annuitant's date
of death. Under this option, if the Settlement Value is greater than the
Contract Value as determined as of the Valuation Date on which we received
Due Proof of Death (the next Valuation Date, if we receive Due Proof of
Death after 3:00 pm Central Time), we will allocate the excess to the
Variable Subaccount selected by the New Owner. In the absence of
instructions, we will allocate that amount to the Money Market Variable
Subaccount. Until the Contract Value is withdrawn, it will vary in
accordance with the investment options selected by the New Owner, and the
Contract Owner may then exercise all rights as set forth in the TRANSFERS
section 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.
If the non-living Contract Owner does not make one of the above described
elections, the Settlement Value must be withdrawn by a non-living Contract Owner
on or before the mandatory distribution date 5 years after the Annuitant's
death.
We reserve the right to waive or extend the 180-day limit on a
non-discriminatory basis.
MORE INFORMATION
LINCOLN BENEFIT LIFE COMPANY.
Lincoln Benefit Life Company is a stock life insurance company organized under
the laws of the state of Nebraska in 1938. Our legal domicile and principal
business address is 2940 South 84th Street, Lincoln, Nebraska, 68506-4142.
Lincoln Benefit is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life" or "ALIC"), a stock life insurance company incorporated under
the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company ("AIC"), a stock property-liability insurance company
incorporated under the laws of Illinois. All outstanding capital stock of
Allstate is owned by The Allstate Corporation ("Allstate").
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam, U.S. Virgin Islands and all states except New York. We intend
to market the Contract everywhere we conduct variable annuity business. The
Contracts offered by this prospectus are issued by us and will be funded in the
Variable Account and/or the Fixed Account.
Under our reinsurance agreements with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life 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 ALIC, the Company reinsures all
reserve liabilities with ALIC except for variable contracts. The Company's
variable contract assets and liabilities are held in legally-segregated,
unitized Variable Accounts and are retained by the Company. However, the
transactions related to such variable contracts such as premiums, expenses and
benefits are transferred to ALIC.
THE VARIABLE ACCOUNT
Lincoln Benefit established the Lincoln Benefit Life Variable Annuity Account in
1992. We have registered the Variable Account with the SEC as a unit investment
trust. The SEC does not supervise the management of the Variable Account or
Lincoln Benefit.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Nebraska law. That means we account for the Variable
Account's income, gains and losses separately from the results of our
31 PROSPECTUS
other operations. It also means that only the assets of the Variable Account
that are in excess of the reserves and other Contract liabilities with respect
to the Variable Account are subject to liabilities relating to our other
operations. Our obligations arising under the Contracts are general corporate
obligations of Lincoln Benefit.
The Variable Account consists of Variable Subaccounts. Each Variable Subaccount
invests in a corresponding Portfolio. We may add new Variable Subaccounts or
eliminate one or more of them, if we believe marketing, tax, or investment
conditions so warrant. We may also add other Variable Subaccounts that may be
available under other variable annuity contracts. We do not guarantee the
investment performance of the Variable Account, its Subaccounts or the
Portfolios. We may use the Variable Account to fund our other annuity contracts.
We will account separately for each type of annuity contract funded by the
Variable Account.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Subaccounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Subaccount by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserve for such Contract allocated to the applicable Variable
Subaccount by the net asset value per share of the corresponding Portfolio. The
votes decrease as income payments are made and as the reserves for the Contract
decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Subaccounts that invest in additional underlying funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a separate account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a separate
account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales will not exceed 7.5% of all Purchase Payments (on a present value
basis). From time to time, we may offer additional sales incentives of up to
1.5% of Purchase Payments and other cash bonuses to broker-dealers who maintain
certain sales volume levels.
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
32 PROSPECTUS
underwriting agreement with ALFS provides that we will reimburse ALFS for
expenses incurred in distributing the Contracts, including liability arising out
of services we provide on the Contracts.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. maintenance of the Variable Account; and
.. preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within a employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. Lincoln Benefit no longer issues deferred annuities to
employer sponsored qualified retirement plans.
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.
33 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 Variable
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 Variable Account are automatically applied to
increase reserves under the Contract. Under existing federal income tax law,
Lincoln Benefit believes that the Variable 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 Variable 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 Variable Account, then Lincoln Benefit may impose a
charge against the Variable
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 Variable Account are "adequately diversified"
according to Treasury Department regulations, and
.. Lincoln Benefit is considered the owner of the Variable 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
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, 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 Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Lincoln Benefit does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
OWNERSHIP TREATMENT. The IRS has stated that 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
34 PROSPECTUS
announced that the regulations do not provide guidance concerning circumstances
in which investor control of the separate account investments may cause a
Contract owner to be treated as the owner of the separate account. The Treasury
Department also stated that future guidance would be issued regarding the extent
that owners could direct sub-account investments without being treated as owners
of the underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Lincoln
Benefit does not know what standards will be set forth in any regulations or
rulings which the Treasury Department may issue. It is possible that future
standards announced by the Treasury Department could adversely affect the tax
treatment of your Contract. We reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the federal tax owner
of the assets of the Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal under
a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a 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.
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.
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
35 PROSPECTUS
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
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
36 PROSPECTUS
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.
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
37 PROSPECTUS
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 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.
38 PROSPECTUS
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.
39 PROSPECTUS
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
statements in other documents that are legally part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000910739. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. the
address of the site is http:// www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Lincoln Benefit Life Company, P.O. Box 80469, Lincoln,
Nebraska, 68501-0469 or 800-865-5237.
40 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUES
The Accumulation Unit Value is a unit of measure used to calculate the value of
a Contract Owner's interest in a Variable 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 for 2001 reflects the
Accumulation Unit Value as of August 10, 2001, the effective date of the
Registration Statement for this Contract. We maintain different Accumulation
Unit Values for Base Contracts with different combinations of optional riders
because the charges deducted from the Subaccounts are different. This Appendix
includes Accumulation Unit Values reflecting the highest and lowest available
Contract charge combinations. The Statement of Additional Information, which is
available upon request without charge, contains the Accumulation Unit Values for
all the other available combinations of optional riders. A brief explanation of
how performance of the Subaccounts is calculated may also be found in the
Statement of Additional Information. Please contact us at 1-800-865-5237 to
obtain a copy of the Statement of Additional Information.
BASE POLICY WITH NO OPTIONAL RIDERS
Year ending December 31,
-----------------------------
2001 2002 2003
FUND
- --------------------------------------------------------------------------
AIM Basic Value Fund (2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
AIM Dent Demographics Trends Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.77 $ 6.537
Accumulation Unit Value Ending $ 9.77 $ 6.537 $ 8.865
Number of Units Outstanding at End of 6,717 37,747 49,569
Year
- --------------------------------------------------------------------------
Alger American Growth
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 12.361
Number of Units Outstanding at End of -- -- 16,344
Year
- --------------------------------------------------------------------------
Fidelity Equity-Income
Accumulation Unit Value Beginning $ 10.00 $ 9.63 $ 7.873
Accumulation Unit Value Ending $ 9.63 $ 7.873 $ 10.099
Number of Units Outstanding at End of 7,233 176,376 291,454
Year
- --------------------------------------------------------------------------
Fidelity VIP Growth P
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 12.461
Number of Units Outstanding at End of -- -- 42,866
Year
- --------------------------------------------------------------------------
Fidelity Investment Grade Bond
Accumulation Unit Value Beginning $ 10.00 $ 10.15 $ 11.021
Accumulation Unit Value Ending $ 10.15 $ 11.021 $ 11.409
Number of Units Outstanding at End of 10,192 204,156 340,857
Year
- --------------------------------------------------------------------------
Fidelity Overseas
Accumulation Unit Value Beginning $ 10.00 $ 9.35 $ 7.339
Accumulation Unit Value Ending $ 9.35 $ 7.339 $ 10.356
Number of Units Outstanding at End of 110 2,203 46,826
Year
- --------------------------------------------------------------------------
Janus Aspen Series Capital Appreciation P
(3)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
Janus Aspen Series Foreign Stock (4)
Accumulation Unit Value Beginning $ 10.00 $ 10.69 $ 9.136
Accumulation Unit Value Ending $ 10.69 $ 9.136 $ 12.021
Number of Units Outstanding at End of 391 14,107 26,635
Year
- --------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth
Accumulation Unit Value Beginning $ 10.00 $ 9.63 $ 7.060
Accumulation Unit Value Ending $ 9.63 $ 7.060 $ 8.614
Number of Units Outstanding at End of 3,165 97,061 77,756
Year
- --------------------------------------------------------------------------
Lazard Retirement Emerging Markets
Accumulation Unit Value Beginning $ 10.00 $ 9.92 $ 9.639
Accumulation Unit Value Ending $ 9.92 $ 9.639 $ 14.544
Number of Units Outstanding at End of 0 4,579 9,947
Year
- --------------------------------------------------------------------------
LSA Aggressive Growth Fund (7)
AAccumulation Unit Value Beginning $ 10.00 $ 9.41 $ 6.348
Accumulation Unit Value Ending $ 9.41 $ 6.348 $ 8.686
Number of Units Outstanding at End of 649 22,935 45,902
Year
- --------------------------------------------------------------------------
41 PROSPECTUS
LSA Balanced Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.64 $ 7.768
Accumulation Unit Value Ending $ 9.64 $ 7.768 $ 9.902
Number of Units Outstanding at End of 18,088 152,064 238,048
Year
- --------------------------------------------------------------------------
LSA Basic Value Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.60 $ 7.416
Accumulation Unit Value Ending $ 9.60 $ 7.416 $ 9.761
Number of Units Outstanding at End of 13,440 193,154 241,742
Year
- --------------------------------------------------------------------------
LSA Blue Chip Fund (5)
Accumulation Unit Value Beginning $ 10.00 $ 9.76 $ 7.103
Accumulation Unit Value Ending $ 9.76 $ 7.103 $ 8.776
Number of Units Outstanding at End of 3,387 91,543 224,286
Year
- --------------------------------------------------------------------------
LSA Capital Appreciation Fund (3)
Accumulation Unit Value Beginning $ 10.00 $ 10.03 $ 7.059
Accumulation Unit Value Ending $ 10.03 $ 7.059 $ 9.077
Number of Units Outstanding at End of 2,459 53,255 107,302
Year
- --------------------------------------------------------------------------
LSA Disciplined Equity Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.59 --
Accumulation Unit Value Ending $ 9.59 $ 7.073 --
Number of Units Outstanding at End of 1,065 64,810 --
Year
- --------------------------------------------------------------------------
LSA Diversified Mid Cap Fund (6)
Accumulation Unit Value Beginning $ 10.00 $ 10.00 $ 7.962
Accumulation Unit Value Ending $ 10.00 $ 7.962 $ 10.432
Number of Units Outstanding at End of 9,409 97,423 130,830
Year
- --------------------------------------------------------------------------
LSA Emerging Growth Equity Fund (7)
Accumulation Unit Value Beginning $ 10.00 $ 10.06 $ 5.768
Accumulation Unit Value Ending $ 10.06 $ 5.768 $ 8.361
Number of Units Outstanding at End of 352 17,828 26,548
Year
- --------------------------------------------------------------------------
LSA Equity Growth Fund (2) (3)
Accumulation Unit Value Beginning $ 10.00 $ 9.97 $ 6.901
Accumulation Unit Value Ending $ 9.97 $ 6.901 $ 8.405
Number of Units Outstanding at End of 1,703 27,593 109,311
Year
- --------------------------------------------------------------------------
LSA Capital Growth Fund (3)
Accumulation Unit Value Beginning $ 10.00 $ 9.68 $ 7.225
Accumulation Unit Value Ending $ 9.68 $ 7.225 $ 8.806
Number of Units Outstanding at End of 856 31,959 53,695
Year
- --------------------------------------------------------------------------
LSA Mid Cap Value Fund (6)
Accumulation Unit Value Beginning $ 10.00 $ 10.66 $ 9.731
Accumulation Unit Value Ending $ 10.66 $ 9.731 $ 13.418
Number of Units Outstanding at End of 7,420 82,491 122,723
Year
- --------------------------------------------------------------------------
LSA Value Equity Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.62 $ 7.389
Accumulation Unit Value Ending $ 9.62 $ 7.389 $ 9.508
Number of Units Outstanding at End of 2,032 38,421 98,093
Year
- --------------------------------------------------------------------------
MFS New Discovery Series
Accumulation Unit Value Beginning $ 10.00 $ 10.35 $ 6.963
Accumulation Unit Value Ending $ 10.35 $ 6.963 $ 9.166
Number of Units Outstanding at End of 1,040 63,132 81,084
Year
- --------------------------------------------------------------------------
MFS Utilities Series
Accumulation Unit Value Beginning $ 10.00 $ 8.96 $ 6.813
Accumulation Unit Value Ending $ 8.96 $ 6.813 $ 9.112
Number of Units Outstanding at End of 12,557 38,681 50,267
Year
- --------------------------------------------------------------------------
PAVIT OpCap Balanced (2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
PAVIT PEA Science and Technology
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 4.768
Accumulation Unit Value Ending $ 9.59 $ 4.768 $ 7.683
Number of Units Outstanding at End of 906 18,884 56,004
Year
- --------------------------------------------------------------------------
PAVIT OpCap SmallCap
Accumulation Unit Value Beginning $ 10.00 $ 10.09 $ 7.802
Accumulation Unit Value Ending $ 10.09 $ 7.802 $ 10.980
Number of Units Outstanding at End of 536 34,675 59,114
Year
- --------------------------------------------------------------------------
Oppenheimer International Growth
Accumulation Unit Value Beginning $ 10.00 $ 9.11 $ 6.781
Accumulation Unit Value Ending $ 9.11 $ 6.781 $ 9.735
Number of Units Outstanding at End of 1,054 23,843 23,597
Year
- --------------------------------------------------------------------------
42 PROSPECTUS
Oppenheimer Main Street Small Cap Fund/VA
Accumulation Unit Value Beginning $ 10.00 $ 10.30 $ 8.545
Accumulation Unit Value Ending $ 10.30 $ 8.545 $ 12.160
Number of Units Outstanding at End of 2,185 52,157 87,171
Year
- --------------------------------------------------------------------------
PIMCO Foreign Bond (U.S. Dollar-Hedged)
Accumulation Unit Value Beginning $ 10.00 $ 10.12 $ 10.806
Accumulation Unit Value Ending $ 10.12 $ 10.806 $ 10.901
Number of Units Outstanding at End of 575 49,021 71,226
Year
- --------------------------------------------------------------------------
PIMCO Money Market
Accumulation Unit Value Beginning $ 10.00 $ 10.04 $ 10.048
Accumulation Unit Value Ending $ 10.04 $ 10.048 $ 9.983
Number of Units Outstanding at End of 23,597 289,545 388,312
Year
- --------------------------------------------------------------------------
PIMCO Real Return (1)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 10.482
Number of Units Outstanding at End of -- -- 22,724
Year
- --------------------------------------------------------------------------
PIMCO Total Return
Accumulation Unit Value Beginning $ 10.00 $ 10.15 $ 10.919
Accumulation Unit Value Ending $ 10.15 $ 10.919 $ 11.314
Number of Units Outstanding at End of 22,113 370,770 504,244
Year
- --------------------------------------------------------------------------
Putnam High Yield Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.89 $ 9.683
Accumulation Unit Value Ending $ 9.89 $ 9.683 $ 12.088
Number of Units Outstanding at End of 4,328 49,831 121,267
Year
- --------------------------------------------------------------------------
Putnam International Growth and Income
Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.44 $ 8.034
Accumulation Unit Value Ending $ 9.44 $ 8.034 $ 10.925
Number of Units Outstanding at End of 935 19,992 36,251
Year
- --------------------------------------------------------------------------
Rydex VT OTC Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.80 $ 5.913
Accumulation Unit Value Ending $ 9.80 $ 5.913 $ 8.483
Number of Units Outstanding at End of 577 23,308 31,257
Year
- --------------------------------------------------------------------------
Rydex VT Sector Rotation Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 12.471
Number of Units Outstanding at End of -- -- 1,384
Year
- --------------------------------------------------------------------------
Salomon Brothers Variable All Cap Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.68 $ 7.159
Accumulation Unit Value Ending $ 9.68 $ 7.159 $ 9.819
Number of Units Outstanding at End of 1,864 101,018 82,721
Year
- --------------------------------------------------------------------------
Salomon Brothers Variable Investors Fund
(2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
Scudder VIT EAFE Equity Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 13.170
Number of Units Outstanding at End of -- -- 1,561
Year
- --------------------------------------------------------------------------
Scudder VIT Equity 500 Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 12.119
Number of Units Outstanding at End of -- -- 27,529
Year
- --------------------------------------------------------------------------
Scudder VIT Small Cap Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 13.867
Number of Units Outstanding at End of -- -- 10,762
Year
- --------------------------------------------------------------------------
Van Kampen UIF Equity Growth (5) (9)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
Van Kampen UIF High Yield (9)
Accumulation Unit Value Beginning $ 10.00 $ 9.49 $ 8.683
Accumulation Unit Value Ending $ 9.49 $ 8.683 $ 10.768
Number of Units Outstanding at End of 7,458 45,587 70,594
Year
- --------------------------------------------------------------------------
43 PROSPECTUS
Van Kampen UIF U.S. Mid Cap Value (6) (9)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of -- -- --
Year
- --------------------------------------------------------------------------
Van Kampen LIT Growth & Income (7)
Accumulation Unit Value Beginning $ 10.00 $ 9.64 $ 8.108
Accumulation Unit Value Ending $ 9.64 $ 8.108 $ 10.212
Number of Units Outstanding at End of 8,115 139,022 223,485
Year
- --------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate (1) (9)
Accumulation Unit Value Beginning -- -- $ 10.000
Accumulation Unit Value Ending -- -- $ 12.780
Number of Units Outstanding at End of -- -- 9,773
Year
- --------------------------------------------------------------------------
(1) First offered May 1, 2003.
(2) 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.
44 PROSPECTUS
(3) 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 Series Capital
Appreciation Variable Sub-Account.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) Effective 5/1/04, the PIMCO VIT Foreign Bond Portfolio - Administrative
Shares changed its name to PIMCO VIT Foreign Bond Portfolio (U.S.
Dollar-Hedged) - Administrative Shares
(9) Morgan Stanley Investment Management, Inc., the adviser to the UIF
Portfolios, does business in certain instances usingthe name Van Kampen.
BASE POLICY WITH ENHANCED DEATH BENEFIT RIDER, INCOME BENEFIT RIDER AND ENHANCED
EARNINGS DEATH BENEFIT RIDER (66-75)
Year ending December 31,
-----------------------------
2001 2002 2003
FUND
- --------------------------------------------------------------------------
AIM Basic Value Fund (2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
AIM Dent Demographics Trends Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.74 $ 6.464
Accumulation Unit Value Ending $ 9.74 $ 6.464 $ 8.695
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Alger American Growth (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 12.294
Number of Units Outstanding at End of Year -- -- 2,501
- --------------------------------------------------------------------------
Fidelity VIP Equity-Income
Accumulation Unit Value Beginning $ 10.00 $ 9.60 $ 7.786
Accumulation Unit Value Ending $ 9.60 $ 7.786 $ 9.906
Number of Units Outstanding at End of Year 0 4,628 5,624
- --------------------------------------------------------------------------
Fidelity VIP Growth (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 12.394
Number of Units Outstanding at End of Year -- -- 1,046
- --------------------------------------------------------------------------
Fidelity VIP Investment Grade Bond
Accumulation Unit Value Beginning $ 10.00 $ 10.12 $ 10.898
Accumulation Unit Value Ending $ 10.12 $ 10.898 $ 11.191
Number of Units Outstanding at End of Year 0 2,777 3,709
- --------------------------------------------------------------------------
Fidelity VIP Overseas
Accumulation Unit Value Beginning $ 10.00 $ 9.32 $ 7.257
Accumulation Unit Value Ending $ 9.32 $ 7.257 $ 10.158
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Janus Aspen Series Capital Appreciation (3)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
Janus Aspen Series Foreign Stock (4)
Accumulation Unit Value Beginning $ 10.00 $ 10.66 $ 9.034
Accumulation Unit Value Ending $ 10.66 $ 9.034 $ 11.791
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth
Accumulation Unit Value Beginning $ 10.00 $ 9.60 $ 6.982
Accumulation Unit Value Ending $ 9.60 $ 6.982 $ 8.449
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
45 PROSPECTUS
Lazard Emerging Markets
Accumulation Unit Value Beginning $ 10.00 $ 9.89 $ 9.532
Accumulation Unit Value Ending $ 9.89 $ 9.532 $ 14.265
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Aggressive Growth Fund (7)
Accumulation Unit Value Beginning $ 10.00 $ 9.38 $ 6.277
Accumulation Unit Value Ending $ 9.38 $ 6.277 $ 8.519
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Balanced Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.61 $ 7.681
Accumulation Unit Value Ending $ 9.61 $ 7.681 $ 9.712
Number of Units Outstanding at End of Year 0 790 1,466
- --------------------------------------------------------------------------
LSA Basic Value Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.57 $ 7.333
Accumulation Unit Value Ending $ 9.57 $ 7.333 $ 9.574
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Blue Chip Fund (5)
Accumulation Unit Value Beginning $ 10.00 $ 9.73 $ 7.024
Accumulation Unit Value Ending $ 9.73 $ 7.024 $ 8.608
Number of Units Outstanding at End of Year 0 0 756
- --------------------------------------------------------------------------
LSA Capital Appreciation Fund (3)
Accumulation Unit Value Beginning $ 10.00 $ 10.00 $ 6.980
Accumulation Unit Value Ending $ 10.00 $ 6.980 $ 8.903
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Disciplined Equity Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.56 --
Accumulation Unit Value Ending $ 9.56 $ 6.961 --
Number of Units Outstanding at End of Year 0 0 --
- --------------------------------------------------------------------------
LSA Diversified Mid Cap Fund (6)
Accumulation Unit Value Beginning $ 10.00 $ 9.96 $ 7.866
Accumulation Unit Value Ending $ 9.96 $ 7.866 $ 10.232
Number of Units Outstanding at End of Year 0 0 630
- --------------------------------------------------------------------------
LSA Emerging Growth Equity Fund (7)
Accumulation Unit Value Beginning $ 10.00 $ 10.03 $ 5.704
Accumulation Unit Value Ending $ 10.03 $ 5.704 $ 8.201
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Equity Growth Fund (2) (3)
Accumulation Unit Value Beginning $ 10.00 $ 9.94 $ 6.824
Accumulation Unit Value Ending $ 9.94 $ 6.824 $ 8.244
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Capital Growth Fund (3)
Accumulation Unit Value Beginning $ 10.00 $ 9.66 $ 7.142
Accumulation Unit Value Ending $ 9.66 $ 7.142 $ 8.637
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Mid Cap Value Fund (6)
Accumulation Unit Value Beginning $ 10.00 $ 10.63 $ 9.602
Accumulation Unit Value Ending $ 10.63 $ 9.602 $ 13.162
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
LSA Value Equity Fund (2)
Accumulation Unit Value Beginning $ 10.00 $ 9.59 $ 7.306
Accumulation Unit Value Ending $ 9.59 $ 7.306 $ 9.326
Number of Units Outstanding at End of Year 0 0 1,401
- --------------------------------------------------------------------------
MFS New Discovery Series
Accumulation Unit Value Beginning $ 10.00 $ 10.32 $ 6.886
Accumulation Unit Value Ending $ 10.32 $ 6.886 $ 8.990
Number of Units Outstanding at End of Year 0 0 370
- --------------------------------------------------------------------------
MFS Utilities Series
Accumulation Unit Value Beginning $ 10.00 $ 8.93 $ 6.737
Accumulation Unit Value Ending $ 8.93 $ 6.737 $ 8.937
Number of Units Outstanding at End of Year 0 0 399
- --------------------------------------------------------------------------
PAVIT OpCap Balanced (2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
PAVIT PEA Science and Technology
Accumulation Unit Value Beginning $ 10.00 $ 9.56 $ 4.715
Accumulation Unit Value Ending $ 9.56 $ 4.715 $ 7.536
Number of Units Outstanding at End of Year 0 0 4,942
- --------------------------------------------------------------------------
PAVIT OpCap SmallCap
Accumulation Unit Value Beginning $ 10.00 $ 10.06 $ 7.715
Accumulation Unit Value Ending $ 10.06 $ 7.715 $ 10.770
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Oppenheimer International Growth
Accumulation Unit Value Beginning $ 10.00 $ 9.08 $ 6.705
Accumulation Unit Value Ending $ 9.08 $ 6.705 $ 9.549
Number of Units Outstanding at End of Year 0 0 387
- --------------------------------------------------------------------------
Oppenheimer Main Street Small Cap Fund/VA
Accumulation Unit Value Beginning $ 10.00 $ 10.27 $ 8.450
Accumulation Unit Value Ending $ 10.27 $ 8.450 $ 11.927
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
46 PROSPECTUS
PIMCO Foreign Bond (U.S. Dollar-Hedged) (8)
Accumulation Unit Value Beginning $ 10.00 $ 10.09 $ 10.686
Accumulation Unit Value Ending $ 10.09 $ 10.686 $ 10.692
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
PIMCO Money Market
Accumulation Unit Value Beginning $ 10.00 $ 10.01 $ 9.936
Accumulation Unit Value Ending $ 10.01 $ 9.936 $ 9.792
Number of Units Outstanding at End of Year 0 0 1,275
- --------------------------------------------------------------------------
PIMCO Real Return (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 10.425
Number of Units Outstanding at End of Year -- -- 1,193
- --------------------------------------------------------------------------
PIMCO Total Return
Accumulation Unit Value Beginning $ 10.00 $ 10.12 $ 10.797
Accumulation Unit Value Ending $ 10.12 $ 10.797 $ 11.098
Number of Units Outstanding at End of Year 0 2,792 7,241
- --------------------------------------------------------------------------
Putnam High Yield Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.86 $ 9.576
Accumulation Unit Value Ending $ 9.86 $ 9.576 $ 11.857
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Putnam International Growth and Income Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.42 $ 7.944
Accumulation Unit Value Ending $ 9.42 $ 7.944 $ 10.716
Number of Units Outstanding at End of Year 0 0 0
- --------------------------------------------------------------------------
Rydex OTC Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.77 $ 5.847
Accumulation Unit Value Ending $ 9.77 $ 5.847 $ 8.321
Number of Units Outstanding at End of Year 0 0 1,833
- --------------------------------------------------------------------------
Rydex Sector Rotation Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 12.403
Number of Units Outstanding at End of Year -- -- 0
- --------------------------------------------------------------------------
Salomon Brothers Variable All Cap Fund
Accumulation Unit Value Beginning $ 10.00 $ 9.65 $ 7.079
Accumulation Unit Value Ending $ 9.65 $ 7.079 $ 9.631
Number of Units Outstanding at End of Year 0 0 678
- --------------------------------------------------------------------------
Salomon Brothers Variable Investors Fund (2)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
Scudder VIT EAFE Equity Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 13.099
Number of Units Outstanding at End of Year -- -- 0
- --------------------------------------------------------------------------
Scudder VIT Equity 500 Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 12.053
Number of Units Outstanding at End of Year -- -- 0
- --------------------------------------------------------------------------
Scudder VIT Small Cap Index Fund (1)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 13.792
Number of Units Outstanding at End of Year -- -- 0
- --------------------------------------------------------------------------
Van Kampen LIT Aggressive Growth (7)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
Van Kampen LIT Growth & Income
Accumulation Unit Value Beginning $ 10.00 $ 9.61 $ 8.017
Accumulation Unit Value Ending $ 9.61 $ 8.017 $ 10.016
Number of Units Outstanding at End of Year 0 0 357
- --------------------------------------------------------------------------
Van Kampen UIF Equity Growth (5) (9)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
Van Kampen UIF High Yield (9)
Accumulation Unit Value Beginning $ 10.00 $ 9.46 $ 8.556
Accumulation Unit Value Ending $ 9.46 $ 8.556 $ 10.562
Number of Units Outstanding at End of Year 0 0 3,961
- --------------------------------------------------------------------------
Van Kampen UIF U.S. Mid Cap Value (6) (9)
Accumulation Unit Value Beginning -- -- --
Accumulation Unit Value Ending -- -- --
Number of Units Outstanding at End of Year -- -- --
- --------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate (1) (9)
Accumulation Unit Value Beginning -- -- $ 10.00
Accumulation Unit Value Ending -- -- $ 12.711
Number of Units Outstanding at End of Year -- -- 0
- --------------------------------------------------------------------------
(1) First offered May 1, 2003.
(2) 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,
47 PROSPECTUS
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.
(3) 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 Series Capital
Appreciation Variable Sub-Account.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) Effective 5/1/04, the PIMCO VIT Foreign Bond Portfolio - Administrative
Shares changed its name to PIMCO VIT Foreign Bond Portfolio (U.S.
Dollar-Hedged) - Administrative Shares
(9) Morgan Stanley Investment Management, Inc., the adviser to the UIF
Portfolios, does business in certain instances usingthe name Van Kampen.
48 PROSPECTUS
APPENDIX B
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for the
week preceding the establishment of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the term length of the
Guarantee Period Account for the week preceding the date amounts are
transferred or withdrawn from the Guarantee Period Account, the date we
determine the Death Proceeds, or the Payout Start Date, as the case may be
("Market Value Adjustment Date").
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout State
Date to the end of the Guarantee Period.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
..9 X [I-(J +.0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as a death benefit,
or applied to an Income Plan from a Guarantee Period at any time other than
during the 30-day period after such Guarantee Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
I (5-Year Treasury Rate): 4.50%
NOTE: These examples assume that premium taxes are not applicable and that
previous withdrawals have not been taken.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract
Value at End of Contract
Year 3: = $10,000.00 X (1.045)/3/ = 11,411.66
Step 2: Calculate the Free
Withdrawal Amount: = .15 X ($10,000.00) = $1,500.00
(GREATER THAN $1,411.66 EARNINGS IN
THE CONTRACT)
Step 3: Calculate the
Withdrawal Charge:
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
88.34 ( 1,500.00 - 1,411.66)
Therefore, the Withdrawal
Charge would be = .07 X ($10,000 - $88.34) = $693.82
Step 4: Calculate the Market
Value Adjustment: I = 4.50%
J = 4.20% (5-Year Treasury Rate at
time of withdrawal)
730 DAYS
N = --------- = 2
365 DAYS
Market Value Adjustment Factor:
.9 X [I - (J + .0025)] X N
=.9 X [.045 - (.042 +.0025)] X 2 =.0009
Market Value Adjustment = Market Value
Adjustment Factor X Amount Subject To
Market Value Adjustment:
= .0009 X $11,411.66 = $10.27
Step 5: Calculate the amount
received by Contract Owner as
a result of full withdrawal at
the end of Contract Year 3: = $11,411.66 - $693.82 + $10.27 = $10,728.11
49 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract
Value at End of Contract
Year 3: = $10,000.00 X (1.045)/3/ = $11,411.66
Step 2: Calculate The Free
Withdrawal Amount: = .15 X ($10,000.00) = $1,500.00
(GREATER THAN $1,411.66 IN EARNINGS)
Step 3: Calculate the
Withdrawal Charge:
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 88.34
(1,500 - 1,411.66). Therefore,
the Withdrawal Charge would be = .07 X ($10,000.00 - $88.34) = $693.82
Step 4: Calculate the Market
Value Adjustment:
(5-Year Treasury Rate at time
of withdrawal) J = 4.80%
730 DAYS
N = ---------- = 2
365 DAYS
MARKET VALUE ADJUSTMENT FACTOR:
.9 X [I - (J +.0025)] X N
=.9 X [(.045 - (.048 +.0025)] X (2) = -.0099
MARKET VALUE ADJUSTMENT = MARKET VALUE
ADJUSTMENT FACTOR X AMOUNT SUBJECT TO MARKET
VALUE ADJUSTMENT:
= -.0099 X $11,411.66 = -( $112.98)
Step 5: Calculate the amount
received by Contract Owner as
a result of full withdrawal at
the end of Contract Year 3: = $11,411.66 - $693.82 - $112.98 = $10,604.86
50 PROSPECTUS
APPENDIX C
CALCULATION OF ENHANCED EARNINGS DEATH BENEFIT AMOUNT
EXAMPLE 1: In this example, assume that the oldest Contract Owner is age 55 at
the time the Contract is issued and elects the Enhanced Earnings Death Benefit
Rider when the Contract is issued. The Contract Owner makes an initial purchase
payment of $100,000. After four years, the Contract Owner dies. On the date
Lincoln Benefit receives Due Proof Of Death, the Contract Value is $125,000.
Prior to his death, the Contract Owner did not make any additional purchase
payments or take any withdrawals.
Excess of Earnings Withdrawals = 0
Purchase Payments in the 12 months after the = 0
Rider Date and prior to Death
In-Force Premium = $100,000 ($100,000 + 0 - 0)
In-Force Earnings = $25,000 ($125,000 - $100,000)
ENHANCED EARNINGS PROTECTION DEATH BENEFIT = 50% * $25,000 = $12,500
Since 50% of In-Force Earnings is less than 100% of the In-Force Premium
(excluding purchase payments in the 12 months prior to death), the In-Force
Earnings are used to compute the Enhanced Earnings Death Benefit amount.
EXAMPLE 2: ELECTED WHEN CONTRACT WAS ISSUED WITH SUBSEQUENT WITHDRAWALS
In the second example, assume the same facts as above, except that the Contract
Owner has taken a withdrawal of $10,000 during the second year of the Contract.
At the time the withdrawal is taken, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Lincoln Benefit receives Due
Proof of Death will be assumed to be $114,000.
Excess-of-Earnings Withdrawals = $5,000 ($10,000 - $5,000)
Purchase payments in the 12 months after the = 0
Rider Date and prior to Death
In-Force Premium = $95,000 ($100,000 + 0 -$5,000)
In-Force Earnings = $19,000 ($114,000 - $95,000)
Enhanced Earnings Death Benefit = 50% x $19,000 = $9,500
Since 50% of In-Force Earnings is less than 100% of the In-Force Premium
(excluding purchase payments in the 12 months after the Rider Date and prior to
death), the In-Force Earnings are used to compute the Enhanced Earnings Death
Benefit amount.
EXAMPLE 3.
This third example is intended to illustrate the effect of adding the Enhanced
Earnings Death Benefit Rider after the Contract has been issued and the effect
of later purchase payments. In this example, assume that the oldest Contract
Owner is age 65 on the Rider Date. At the time the Contract is issued, the
Contract Owner makes a purchase payment of $100,000. After two years pass, the
Contract Owner elects to add the Enhanced Earnings Death Benefit Rider. On the
date this Rider is added, the Contract Value is $110,000. Two years later, the
Contract Owner withdraws $50,000. Immediately prior to the withdrawal, the
Contract Value is $130,000. Another two years later, the Contract Owner makes an
additional purchase payment of $40,000. Two years later, the Contract Owner dies
with a Contract Value of $140,000 on the date Lincoln Benefit receives Due Proof
of Death.
Excess-of-Earnings Withdrawals = $30,000 ($50,000 - $20,000)
Purchase payments in the 12 months
after the Rider Date and prior to
Death = 0
In-Force Premium = $120,000 ($110,000 + $40,000 - $30,000)
In-Force Earnings = $20,000 ($140,000 - $120,000)
Enhanced Earnings Death Benefit = 40% of $20,000 = $8,000
In this example, In-Force Premium is equal to the Contract Value on the date the
Rider was issued plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
51 PROSPECTUS
Since 40% of In-Force Earnings is less than 80% of the In-Force Premium
(excluding purchase payments in the 12 months after the Rider Date and prior to
death), the In-Force Earnings are used to compute the Enhanced Earnings Death
Benefit amount.
52 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
DESCRIPTION
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
THE CONTRACT
Purchases of Contract
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
Calculation of Accumulation Unit Values
Net Investment Factor
Calculation of Variable Income Payments
Calculation of Annuity Unit Values
GENERAL MATTERS
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
EXPERTS
FINANCIAL STATEMENTS
APPENDIX A ACCUMULATION UNIT VALUES
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.
53 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. 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 $ 0.00
Cost of printing and engraving $ 100.00
Legal fees $ 0
Accounting fees $3,000.00
Mailing fees $2,100.00
Item 14. 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 15. RECENT SALES OF UNREGISTERED SECURITIES
During the period beginning on December 1, 2008 and ending on March 26, 2009,
the Registrant inadvertently sold participating interests in existing deferred
annuity contracts pursuant to registration statements on Form S-3 that were not
in compliance with Rule 415(a)(5) under the Securities Act of 1933. The
aggregate amount of securities sold was $13,933,172. Purchasers, however, did
receive all material information relating to the security prior to sale,
including the prospectus from the existing registration statement. When the
technical violation was discovered, the Registrant filed new registration
statements on Form S-3 with the Commission to comply with the requirements of
Rule 415(a)(5) for continuous offering. These registration statements were
declared effective on March 27, 2009 (SEC File Nos. 333-158172, 333-158176,
333-158180, 333-158181, 333-158192). Although the legal effect of a violation of
Rule 415(a)(5) is not entirely clear, the Registrant may have been deemed to
have inadvertently sold unregistered securities during the time period noted
above. New procedures have been implemented to ensure timely submission of
future registration statement filings.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
16(a)
Exh. No. Description
1 Form of Principal Underwriting Agreement. Incorporated herein by reference
to Post-Effective Amendment No. 1 to the Registration Statement on Form
N-4 for Lincoln Benefit Life Variable Annuity Account (File No. 333-50545,
811-07924) filed January 28, 1999
3(i) Amended and Restated Articles of Incorporation of Lincoln Benefit Life
Company dated September 26, 2000. Incorporated herein by reference to
Exhibit 3(i) to Lincoln Benefit Life Company's Quarterly Report on
Form 10-Q for quarter ended March 31, 2002. (SEC File No. 333-111553)
3(ii) Amended and Restated By-Laws of Lincoln Benefit Life Company effective
March 10, 2006. Incorporated herein by reference to Exhibit 3.2 to
Lincoln Benefit Life Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006. (SEC File No. 333-111553)
4(a) Form of Variable Annuity Contract. Incorporated herein by reference to the
Registration Statement on Form N-4 for Lincoln Benefit Life Variable
Annuity Account (File No. 333-61146, 811-07924) filed May 17, 2001
4(b) Form of Application. Incorporated herein by reference to the Registration
Statement on Form N-4 for Lincoln Benefit Life Variable Annuity Account
(File No. 333-61146, 811-07924) filed May 17, 2001
5(a) Opinion and Consent of Counsel regarding legality. Incorporated herein by
reference to the Registration Statement on Form S-3 for Lincoln Benefit
Life Company (File No. 333-66452) filed August 1, 2001.
5(b) Opinion and Consent of Counsel regarding legality. Opinion of General
Counsel Re: Legality (Incorporated herein by reference to Registrant's
Form S-3 Registration Statement (File No. 333-158180) dated March 24,
2009)
8 None
9 None
10
10.1 Form of Investment Management Agreement among Allstate Investments,
LLC, Allstate Insurance Company, The Allstate Corporation and certain
affiliates effective January 1, 2007. Incorporated herein by reference
to Exhibit 10.12 to Allstate Life Insurance Company's Annual Report on
Form 10-K for 2007. (SEC File No. 000-31248)
10.2 Form of Tax Sharing Agreement among The Allstate Corporation and
certain affiliates dated as of November 12, 1996. Incorporated herein
by reference to Exhibit 10.24 to Allstate Life Insurance Company's
Annual Report on Form 10-K for 2007. (SEC File No. 000-31248)
10.3 Supplemental Intercompany Tax Sharing Agreement between Allstate Life
Insurance Company and Lincoln Benefit Life Company effective December
21, 2000. Incorporated herein by reference to Exhibit 10.3 to Lincoln
Benefit Life Company's Annual Report on Form 10-K for the year ended
December 31, 2009. (SEC File No. 333-111553)
10.4 Cash Management Services Master Agreement between Allstate Insurance
Company and Allstate Bank (aka Allstate Federal Savings Bank) dated
March 16, 1999. Incorporated herein by reference to Exhibit 10.4 to
Lincoln Benefit Life Company's Quarterly Report on Form 10-Q for
quarter ended March 31, 2002. (SEC File No. 333-111553)
10.5 Amendment No.1 to Cash Management Services Master Agreement effective
January 5, 2001. Incorporated herein by reference to Exhibit 10.5 to
Lincoln Benefit Life Company's Quarterly Report on Form 10-Q for
quarter ended March 31, 2002. (SEC File No. 333-111553)
10.6 Amendment No. 2 entered into November 8, 2002 to the Cash Management
Services Master Agreement between Allstate Insurance Company, Allstate
Bank and Allstate Motor Club, Inc. dated March 16, 1999. Incorporated
herein by reference to Exhibit 10.19 to Allstate Life Insurance
Company's Annual Report on Form 10-K filed for 2007. (SEC File No.
000-31248)
10.7 Premium Depository Service Supplement dated as of September 30, 2005
to Cash Management Services Master Agreement between Allstate
Insurance Company, Allstate Bank, Allstate Motor Club, Inc. and
certain other parties. Incorporated herein by reference to Exhibit
10.20 to Allstate Life Insurance Company's Annual Report on Form 10-K
filed for 2007. (SEC File No. 000-31248)
10.8 Variable Annuity Service Supplement dated November 10, 2005 to Cash
Management Services Agreement between Allstate Bank, Allstate Life
Insurance Company of New York and certain other parties. Incorporated
herein by reference to Exhibit 10.21 to Allstate Life Insurance
Company's Annual Report on Form 10-K filed for 2007. (SEC File No.
000-31248)
10.9 Sweep Agreement Service Supplement dated as of October 11, 2006 to
Cash Management Services Master Agreement between Allstate Life
Insurance Company, Allstate Bank, Allstate Motor Club, Inc. and
certain other companies. Incorporated herein by reference to Exhibit
10.22 to Allstate Life Insurance Company's Annual Report on Form 10-K
filed for 2007. (SEC File No. 000-31248)
10.10 Form of Amended and Restated Service and Expense Agreement between
Allstate Insurance Company, The Allstate Corporation and certain
affiliates effective January 1, 2004. Incorporated herein by reference
to Exhibit 10.1 to Allstate Life Insurance Company's Annual Report on
Form 10-K for 2007. (SEC File No. 000-31248)
10.11 Administrative Services Agreement between Lincoln Benefit Life Company
and Allstate Life Insurance Company effective June 1, 2006.
Incorporated herein by reference to Exhibit 10.1 to Lincoln Benefit
Life Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006. (SEC File No. 333-111553)
10.12 Principal Underwriting Agreement between Lincoln Benefit Life Company
and ALFS, Inc., effective November 25, 1998. (Variable Universal Life
Account). Incorporated herein by reference to Exhibit 10.6 to Lincoln
Benefit Life Company's Quarterly Report on Form 10-Q for quarter ended
June 30, 2002. (SEC File No. 333-111553)
10.13 Amended and Restated Principal Underwriting Agreement between Lincoln
Benefit Life Company and ALFS, Inc. effective June 1, 2006.
Incorporated herein by reference to Exhibit 10.1 to Lincoln Benefit
Life Company's Current Report on Form 8-K filed December 20, 2007.
(SEC File No. 333-111553)
10.14 Selling Agreement between Lincoln Benefit Life Company, ALFS, Inc.
(f/k/a Allstate Financial Services, Inc.) and Allstate Financial
Services, LLC (f/k/a LSA Securities, Inc.) effective August 2, 1999.
Incorporated herein by reference to Exhibit 10.8 to Allstate Life
Insurance Company's Annual Report on Form 10-K for 2003. (SEC File No.
000-31248)
10.15 Coinsurance Agreement between Allstate Life Insurance Company and
Lincoln Benefit Life Company, effective December 31, 2001.
Incorporated herein by reference to Exhibit 10.11 to Lincoln Benefit
Life Company's Quarterly Report on Form 10-Q for quarter ended June
30, 2002. (SEC File No. 333-111553)
10.16 Modified Coinsurance Agreement between Allstate Life Insurance Company
and Lincoln Benefit Life Company, effective December 31, 2001.
Incorporated herein by reference to Exhibit 10.12 to Lincoln Benefit
Life Company's Quarterly Report on Form 10-Q for quarter ended June
30, 2002. (SEC File No. 333-111553)
10.17 Modified Coinsurance Agreement between Allstate Life Insurance Company
and Lincoln Benefit Life Company, effective December 31, 2001.
Incorporated herein by reference to Exhibit 10.13 to Lincoln Benefit
Life Company's Quarterly Report on Form 10-Q for quarter ended June
30, 2002. (SEC File No. 333-111553)
10.18 Intercompany Loan Agreement among The Allstate Corporation, Allstate
Life Insurance Company, Lincoln Benefit Life Company and other certain
subsidiaries of The Allstate Corporation dated February 1, 1996.
Incorporated herein by reference to Exhibit 10.24 of Allstate Life
Insurance Company's Annual Report on Form 10-K for 2006. (SEC File No.
000-31248)
10.19 Form of Service Agreement between Lincoln Benefit Life Company and
Allstate Assignment Company effective June 25, 2001. Incorporated
herein by reference to Exhibit 10.22 of Lincoln Benefit Life Company's
Annual Report on Form 10-K for 2007. (SEC File No. 333-111553)
10.20 First Amendment to Service Agreement between Lincoln Benefit Life
Company and Allstate Assignment Company effective December 1, 2007.
Incorporated herein by reference to Exhibit 10.23 of Lincoln Benefit
Life Company's Annual Report on Form 10-K for 2007.
(SEC File No. 333-111553)
10.21 Agreement for the Settlement of State and Local Tax Credits among
Allstate Insurance Company and certain affiliates effective January 1,
2007. Incorporated herein by reference to Exhibit 10.1 to Lincoln
Benefit Life Company's Current Report on Form 8-K filed February 21,
2008. (SEC File No. 333-111553)
10.22 Administrative Services Agreement between ALFS, Inc., Allstate Life
Insurance Company, Lincoln Benefit Life Company and Charter National
Life Insurance Company effective January 1, 2000. Incorporated herein by
reference to Exhibit 10.3 to Lincoln Benefit Life Company's Annual Report
on Form 10-K for the year ended December 31, 2009.
(SEC File No. 333-111553)
11 None
12 None
15 Letter RE: Unaudited interim financial information from Registered Public
Accounting Firm. Filed herewith.
16 Letter re change in certifying accountant. Not applicable.
21 Subsidiaries of the registrant. Not applicable.
23 Consent of Independent Registered Public Accounting Firm. Filed herewith.
24 Powers of Attorney for Frederick F. Cripe, Lawrence W. Dahl, Matthew S.
Easley, Susan L. Lees, John C. Lounds, Samuel H. Pilch, and John Pintozzi.
Incorporated herein by reference to the Registration Statement on Form S-3
File No. 333-158180 dated March 24, 2009.
99 Experts. Filed herewith.
16(b)
Financial statement schedules required by Regulation S-X (17 CFR Part 210) and
Item 11(e) of Form S-1 are incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on
March 18, 2009, and the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009, filed with the SEC on May 12, 2009, File No. 333-
111553.
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.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective 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.
(4) That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of
a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
(5) That, for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424 ((S)230.424
of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
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-1 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 18th day of June, 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 18th
day of June 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
*/ 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
- ------------------------------------
Samuel H. Pilch
*/ John C. Pintozzi Director, Senior Vice President and
- ------------------------------------ Chief Financial Officer
John C. Pintozzi
* By Susan L. Lees, pursuant to Power of Attorney.
EXHIBITS
Exhibit No. Description
- ----------- -----------
15 Letter Re: Unaudited Interim Financial Information from Registered
Public Accounting Firm.
23 Consent of Independent Registered Public Accounting Firm
99 Experts