CONSULTANT I VARIABLE ANNUITY PROSPECTUS
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 5801 SW 6TH AVE., TOPEKA, KS 66606-0001
MAILING ADDRESS: P.O. BOX 758561, TOPEKA, KS 66675-8566
TELEPHONE NUMBER: 1-800-457-7617
FAX NUMBER: 1-785-228-4584
The Contract is a deferred annuity contract designed to aid you in long-term
financial planning. You may purchase it on either a tax qualified or non-tax
qualified basis. LINCOLN BENEFIT LIFE NO LONGER OFFERS THIS CONTRACT. IF YOU
HAVE ALREADY PURCHASED THE CONTRACT YOU MAY CONTINUE TO MAKE PURCHASE PAYMENTS
ACCORDING TO THE CONTRACT.
Because this is a flexible premium annuity contract, you may pay multiple
premiums. We allocate your premium to the investment options under the Contract
and our Fixed Account in the proportions that you choose. The Contract
currently offers 46 investment options, each of which is a Sub-Account of the
Lincoln Benefit Life Variable Annuity Account ("Separate Account"). Each
Sub-Account invests exclusively in shares of Portfolios in one of the following
underlying Funds:
AIM VARIABLE INSURANCE FUNDS (INVESCO MFS(R) VARIABLE INSURANCE TRUST/(SM)
VARIABLE INSURANCE FUNDS) (SERIES I) /(INITIAL CLASS)
THE ALGER PORTFOLIOS (CLASS O) OPPENHEIMER VARIABLE ACCOUNT FUNDS
(SERVICE SHARES)
DWS VARIABLE SERIES I (CLASS A)
PIMCO VARIABLE INSURANCE TRUST
DWS VARIABLE SERIES II (CLASS A) (ADMINISTRATIVE SHARES)
FEDERATED INSURANCE SERIES PUTNAM VARIABLE TRUST (CLASS IB)
FIDELITY(R) VARIABLE INSURANCE T. ROWE PRICE EQUITY SERIES, INC. (I)
PRODUCTS (INITIAL CLASS)
T. ROWE PRICE INTERNATIONAL SERIES,
JANUS ASPEN SERIES (INSTITUTIONAL INC. (I)
SHARES AND SERVICE SHARES)
WELLS FARGO VARIABLE TRUST FUNDS
LEGG MASON PARTNERS VARIABLE EQUITY
TRUST (CLASS I)
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 2012.
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Some of the portfolios described in this prospectus may not be available in
your Contract. We may make available other investment options in the future.
You may not purchase a Contract if either you or the Annuitant are older than
90 years before we receive your application.
Your Contract Value will vary daily as a function of the investment performance
of the Sub-Accounts to which you have allocated Purchase Payments and any
interest credited to the Fixed Account. We do not guarantee any minimum
Contract Value for amounts allocated to the Sub-Accounts. Benefits provided by
this Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, which may result in an upwards or downwards adjustment in
withdrawal benefits, death benefits, settlement values, transfers to the
Sub-Accounts.
In certain states the Contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts
in this prospectus applies equally to Certificates under group contracts,
unless the content specifies otherwise.
This prospectus sets forth the information you ought to know about the
Contract. You should read it before investing and keep it for future reference.
1 PROSPECTUS
We have filed a Statement of Additional Information with the Securities and
Exchange Commission ("SEC"). The current Statement of Additional Information is
dated May 1, 2012. The information in the Statement of Additional Information
is incorporated by reference in this prospectus. You can obtain a free copy by
writing us or calling us at the telephone number given above. The Table of
Contents of the Statement of Additional Information appears on page 47 of this
prospectus.
At least once each year we will send you an annual statement. The annual
statement details values and specific information for your Contract. It does
not contain our financial statements. Our financial statements are set forth in
the Statement of Additional Information. Lincoln Benefit will file annual and
quarterly reports and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
room in Washington, D.C. You can obtain copies of these documents by writing to
the SEC and paying a duplicating fee. Please call the SEC at 1-202-551-8090 for
further information as to the operation of the public reference room. Our SEC
filings are also available to the public on the SEC Internet site
(http://www.sec.gov).
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE.
2 PROSPECTUS
TABLE OF CONTENTS
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DEFINITIONS 4
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FEE TABLES 5
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QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT 7
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CONDENSED FINANCIAL INFORMATION 11
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DESCRIPTION OF THE CONTRACTS 11
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Summary 11
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Contract Owner 11
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Annuitant 11
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Modification of the Contract 11
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Assignment 11
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Free Look Period 11
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PURCHASES AND CONTRACT VALUE 12
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Minimum Purchase Payment 12
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Automatic Payment Plan 12
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Allocation of Purchase Payments 12
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Contract Value 12
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Separate Account Accumulation Unit Value 13
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Transfer During Accumulation Period 13
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Market Timing & Excessive Trading 13
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Trading Limitations 14
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Short Term Trading Fees 14
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Automatic Dollar Cost Averaging Program 15
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Portfolio Rebalancing 15
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THE INVESTMENT AND FIXED ACCOUNT OPTIONS 16
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Separate Account Investments 16
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The Portfolios 16
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Voting Rights 19
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Additions, Deletions, and Substitutions of Securities 19
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The Fixed Account 19
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General 19
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Guaranteed Maturity Fixed Account Option 19
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Market Value Adjustment 21
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Dollar Cost Averaging Fixed Account Option 21
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ANNUITY BENEFITS 21
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Annuity Date 21
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Annuity Options 22
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Other Options 22
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Annuity Payments: General 23
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Variable Annuity Payments 23
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Fixed Annuity Payments 23
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Transfers During the Annuity Period 23
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Death Benefit During Annuity Period 24
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Certain Employee Benefit Plans 24
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OTHER CONTRACT BENEFITS 24
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Death Benefit: General 24
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Due Proof of Death 24
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Death Benefit Payments 25
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Beneficiary 28
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Contract Loans for 403(b) Contracts 28
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Withdrawals (Redemptions) 29
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Written Requests and Forms in Good Order 30
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Systematic Withdrawal Program 31
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ERISA Plans 31
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Minimum Contract Value 31
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CONTRACT CHARGES 31
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Mortality and Expense Risk Charge 31
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Administrative Charges 31
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Contract Maintenance Charge 31
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Administrative Expense Charge 32
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Transfer Fee 32
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Sales Charges 32
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Waiver Benefits 33
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Premium Taxes 34
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Deduction for Separate Account Income Taxes 34
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Other Expenses 34
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TAXES 35
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Taxation of Lincoln Benefit Life Company 35
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Taxation of Variable Annuities in General 35
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Income Tax Withholding 38
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Tax Qualified Contracts 38
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DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE
SEPARATE ACCOUNT 44
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Lincoln Benefit Life Company 44
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Separate Account 44
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State Regulation of Lincoln Benefit 44
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Financial Statements 45
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ADMINISTRATION 45
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DISTRIBUTION OF CONTRACTS 45
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LEGAL PROCEEDINGS 46
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LEGAL MATTERS 46
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REGISTRATION STATEMENT 46
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ABOUT LINCOLN BENEFIT LIFE COMPANY 46
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION 47
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APPENDIX A ACCUMULATION UNIT VALUES 48
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APPENDIX B ILLUSTRATION OF A MARKET VALUE ADJUSTMENT 75
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
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3 PROSPECTUS
DEFINITIONS
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Please refer to this list for the meaning of the following terms:
ACCUMULATION PERIOD - The period, beginning on the Issue Date, during which
Contract Value builds up under Your Contract.
ACCUMULATION UNIT - A unit of measurement which we use to calculate Contract
Value.
ANNUITANT - The living person on whose life the annuity benefits under a
Contract are based.
ANNUITIZATION - The process to begin annuity payments under the Contract.
ANNUITIZED VALUE - The Contract Value adjusted by any applicable Market Value
Adjustment and less any applicable taxes.
ANNUITY DATE - The date on which annuity payments are scheduled to begin.
ANNUITY PERIOD - The period during which annuity payments are paid. The Annuity
Period begins on the Annuity Date.
ANNUITY UNIT - A unit of measurement which we use to calculate the amount of
Variable Annuity payments.
BENEFICIARY(IES) - The person(s) designated to receive any death benefits under
the Contract.
COMPANY ("WE," "US," "OUR," "LINCOLN BENEFIT") - Lincoln Benefit Life Company.
CONTRACT ANNIVERSARY - Each anniversary of the Issue Date.
CONTRACT OWNER ("YOU," "YOUR") - The person(s) having the privileges of
ownership defined in the Contract. If Your Contract is issued as part of a
retirement plan, Your ownership privileges may be modified by the plan.
CONTRACT VALUE - The sum of the values of Your investment in the Sub-Accounts
of the Separate Account and the Fixed Account.
CONTRACT YEAR - Each twelve-month period beginning on the Issue Date and each
Contract Anniversary.
CONTRIBUTION YEAR - Each twelve-month period beginning on the date a Purchase
Payment is allocated to a Sub-Account, or each anniversary of that date.
FIXED ACCOUNT - The portion of the Contract Value allocated to Our general
account.
FIXED ANNUITY - A series of annuity payments that are fixed in amount.
GUARANTEE PERIODS - A period of years for which we have guaranteed a specific
effective annual interest rate on an amount allocated to the Fixed Account.
ISSUE DATE - The date when the Contract becomes effective.
LATEST ANNUITY DATE - The latest date by which you must begin annuity payments
under the Contract.
LOAN ACCOUNT - An account established for amounts transferred from the
Sub-Accounts or the Fixed Account as security for outstanding Contract loans.
MARKET VALUE ADJUSTMENT - An amount added to or subtracted from certain
transactions involving Your interest in the Fixed Account, to reflect the
impact of changing interest rates.
NET INVESTMENT FACTOR - The factor used to determine the value of an
Accumulation Unit and Annuity Unit in any Valuation Period. We determine the
Net Investment Factor separately for each Sub-Account.
NON-QUALIFIED PLAN - A retirement plan which does not receive special tax
treatment under Sections 401, 403(b), 408, 408A or 457 of the Tax Code.
PORTFOLIO(S) - The underlying funds in which the Sub- Accounts invest. Each
Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.
PURCHASE PAYMENTS - Amounts paid to Us as premium for the Contract by you or on
Your behalf.
QUALIFIED PLAN - A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408 or 408A of the Tax Code or a deferred compensation
plan for a state and local government or another tax exempt organization under
Section 457 of the Tax Code.
SEPARATE ACCOUNT - The Lincoln Benefit Life Variable Annuity Account, which is
a segregated investment account of the Company.
SUB-ACCOUNT - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.
SURRENDER VALUE - The amount paid upon complete surrender of the Contract,
equal to the Contract Value, less any applicable premium taxes, Withdrawal
Charge, and the contract maintenance charge and increased or decreased by any
Market Value Adjustment.
TAX CODE - The Internal Revenue Code of 1986, as amended.
TREASURY RATE - The U.S. Treasury Note Constant Maturity Yield for the
preceding week as reported in Federal Reserve Bulletin Release H.15.
VALUATION DATE - Each day the New York Stock Exchange is open for business.
VALUATION PERIOD - The period of time over which we determine the change in the
value of the Sub-Accounts in order to price Accumulation Units and Annuity
Units. Each Valuation Period begins at the close of normal trading on the New
York Stock Exchange ("NYSE") currently 4:00 p.m. Eastern time on each Valuation
Date and ends at the close of the NYSE on the next Valuation Date.
VARIABLE ANNUITY - A series of annuity payments that vary in amount based on
changes in the value of the Sub- Accounts to which Your Contract Value has been
allocated.
WITHDRAWAL CHARGE - The contingent deferred sales charge that may be required
upon some withdrawals.
4 PROSPECTUS
FEE TABLES
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THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
BUYING, OWNING, AND SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE
FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT,
SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS.
STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
Maximum Contingent Deferred Sales Charge - Withdrawal Charge (as a percentage
of Purchase Payments) - 7%
CONTRIBUTION YEAR APPLICABLE CHARGE
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8 + 0%
TRANSFER FEE (Applies solely to the second and subsequent transfers
within a calendar month. We are currently waiving the transfer fee) $ 10.00
THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING PORTFOLIO FEES AND
EXPENSES.
Annual Contract Maintenance Charge $35.00
Separate Account Annual Expenses (as a percentage of daily net asset
value deducted from each of the Sub-Accounts of the Separate Account)
Base Contract (without optional riders)
Mortality and Expense Risk Charge 1.15%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.25%
Base Contract (with Enhanced Death Benefit Rider)
Mortality and Expense Risk Charge 1.35%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.45%
Base Contract (with Enhanced Income Benefit Rider)
Mortality and Expense Risk Charge 1.50%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.60%
Base Contract (with Enhanced Death and Income Benefit Riders)
Mortality and Expense Risk Charge 1.55%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.65%
Base Contract (with Enhanced Death and Income Benefit Riders II)
Mortality and Expense Risk Charge 1.70%
Administrative Expense Charge 0.10%
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Total Separate Account Annual Expenses 1.80%
THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL OPERATING EXPENSES
CHARGED BY THE PORTFOLIOS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT
YOU OWN THE CONTRACT. ADVISERS AND/OR OTHER SERVICE PROVIDERS OF CERTAIN
PORTFOLIOS MAY HAVE AGREED TO WAIVE THEIR FEES AND/OR REIMBURSE PORTFOLIO
EXPENSES IN ORDER TO KEEP THE PORTFOLIOS' EXPENSES BELOW SPECIFIED LIMITS. THE
RANGE OF EXPENSES SHOWN IN THIS TABLE DOES NOT SHOW THE EFFECT OF ANY SUCH FEE
WAIVER OR EXPENSE REIMBURSEMENT. MORE DETAIL CONCERNING EACH PORTFOLIO'S FEES
AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH PORTFOLIO.
Minimum Maximum
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Total Annual Portfolio Operating Expenses(1) (expenses that
are deducted from Portfolio assets, which may include
management fees, distribution and/or service (12b-1) fees,
and other expenses) (without waivers or reimbursements) 0.10% 1.59%
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(1)Expenses are shown as a percentage of Portfolio average daily net assets
before any waiver or reimbursement as of December 31, 2011.
5 PROSPECTUS
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract owner transaction expenses, Contract fees, Separate
Account annual expenses, and Portfolio fees and expenses and assumes no
transfers or exchanges were made. The Example shows the dollar amount of
expenses that you would bear directly or indirectly if you:
.. Invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment,
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period,
and,
.. elected the Enhanced Death and Income Benefit Riders II (with total
Separate Account expenses of 1.80%).
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum Annual Portfolio Expenses $940 $1,560 $2,203 $3,699
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Costs Based on Minimum Annual Portfolio Expenses $794 $1,125 $1,482 $2,285
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EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum Annual Portfolio Expenses $345 $1,050 $1,778 $3,699
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Costs Based on Minimum Annual Portfolio Expenses $199 $ 615 $1,057 $2,285
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EXPLANATION OF EXPENSE EXAMPLES
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
EXAMPLES 1 AND 2 ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT
RIDERS II (TOTAL SEPARATE ACCOUNT EXPENSES OF 1.80%). IF THESE RIDERS WERE NOT
ELECTED, THE EXPENSE FIGURES SHOWN WOULD BE SLIGHTLY LOWER. THE EXAMPLES
REFLECT THE FREE WITHDRAWAL AMOUNTS, IF ANY, AND AN ANNUAL CONTRACT MAINTENANCE
CHARGE OF $35.
6 PROSPECTUS
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the prospectus. Please read the prospectus carefully.
1. WHAT IS THE CONTRACT?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non- qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax- deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine
the amount of your annuity payments during the Annuity Period.
Your premiums are invested in one or more of the Sub- Accounts of the Separate
Account or allocated to the Fixed Account, as you instruct us. You may allocate
your Contract Value to up to twenty-one options under the Contract, counting
each Sub-Account and the Fixed Account as one option. We will treat all of your
Contract Value allocated to the Fixed Account as one option for purposes of
this limit, even if you have chosen more than one Guarantee Period. The value
of your Contract will depend on the investment performance of the Sub- Accounts
and the amount of interest we credit to the Fixed Account.
Each Sub-Account will invest in a single investment portfolio (a "Portfolio")
of an underlying fund. The Portfolios offer a range of investment objectives,
from conservative to aggressive. You bear the entire investment risk on amounts
allocated to the Sub-Accounts. The investment policies and risks of each
Portfolio are described in the accompanying prospectuses for the Portfolios.
In some states, you may also allocate all or part of your Contract Value to the
"Fixed Account", as described in the answer to Question 5.
2. WHAT ANNUITY OPTIONS DOES THE CONTRACT OFFER?
You may receive annuity payments on a fixed or a variable basis or a
combination of the two. We offer a variety of annuity options including:
.. a life annuity with payments guaranteed for zero to thirty years;
.. a joint and full survivorship annuity, with payments guaranteed for zero to
thirty years; and
.. fixed payments for a specified period of five to thirty years.
Call us to inquire about other options.
You may change your annuity option at any time before annuitization. You may
select the date to annuitize the Contract. The date you select, however, may be
no later than the later of the tenth Contract Anniversary or the youngest
Annuitant's 90th birthday. If your Contract was issued in connection with a
qualified plan, different deadlines may apply.
If you select annuity payments on a variable basis, the amount of our payments
to you will be affected by the investment performance of the Sub-Accounts you
have selected. The fixed portion of your annuity payments, on the other hand,
generally will be equal in amount to the initial payment we determine. As
explained in more detail below, however, during the Annuity Period you will
have a limited ability to change the relative weighting of the Sub-Accounts on
which your variable annuity payments are based or to increase the portion of
your annuity payments consisting of Fixed Annuity payments.
3. HOW DO I BUY A CONTRACT?
You can obtain a Contract application from your Lincoln Benefit agent. You must
pay at least $1,200 in Purchase Payments during the first Contract Year.
Purchase Payments must be at least $100, unless you enroll in an automatic
payment plan. Your periodic payments in an automatic payment plan must be at
least $25 per month. We may lower these minimums at our sole discretion. The
maximum age of the oldest Contract Owner and Annuitant cannot exceed age 90 as
of the date we receive the completed application.
4. WHAT ARE MY INVESTMENT CHOICES UNDER THE CONTRACT?
You can allocate and reallocate your investment among the Sub-Accounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the Portfolios described in "The Investment and
Fixed Account Options: Separate Account Investments."
Some of the Portfolios described in this prospectus may not be available in
your Contract.
Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies
which are described in the prospectuses for the Portfolios.
5. WHAT IS THE FIXED ACCOUNT OPTION?
We offer two Fixed Account interest crediting options: the Guaranteed Maturity
Fixed Account Option and the Dollar Cost Averaging Fixed Account Option.
You may allocate Purchase Payments to the Sub- Account(s) and the Fixed
Account(s). Loan payments may not be allocated to the Fixed Account(s). You may
7 PROSPECTUS
not transfer amounts into the DCA Fixed Account. The minimum amount that may be
transferred into any one of the Guarantee Maturity Fixed Account Options is
$500.
We will credit interest to amounts allocated to the Guaranteed Maturity Fixed
Account Option at a specified rate for a specified Guarantee Period. You select
the Guarantee Period for each amount that you allocate to the Guaranteed
Maturity Fixed Account Option. We will tell you what interest rates and
Guarantee Periods we are offering at a particular time. At the end of each
Guarantee Period, you may select a new Guarantee Period from among the choices
we are then making available or transfer or withdraw the relevant amount from
the Fixed Account without any Market Value Adjustment.
We may offer Guarantee Periods ranging from one to ten years in length. We are
currently offering Guarantee Periods of one, three, five, seven, and ten years
in length. In the future we may offer Guarantee Periods of different lengths or
stop offering some Guarantee Periods.
We will not change the interest rate credited to a particular allocation until
the end of the relevant Guarantee Period. From time to time, however, we may
change the interest rate that we offer to credit to new allocations to the
Guaranteed Maturity Fixed Account Option and to amounts rolled over in the
Fixed Account for new Guarantee Periods.
In addition, if you participate in our dollar cost averaging program, you may
designate amounts to be held in the Dollar Cost Averaging Fixed Account Option
until they are transferred monthly to the Sub-Accounts or Guarantee Periods of
your choosing. When you make an allocation to the Fixed Account for this
purpose, we will set an interest rate applicable to that amount. We will then
credit interest at that rate to that amount until it has been entirely
transferred to your chosen Sub-Accounts or Guarantee Periods. We will complete
the transfers within one year of the allocation. In our discretion we may
change the rate that we set for new allocations to the Fixed Account for the
dollar cost averaging program. We will never, however, set a rate less than an
effective annual rate of 3%.
A Market Value Adjustment may increase or decrease the amount of certain
transactions involving the Fixed Account, to reflect changes in interest rates.
As a general rule, we will apply a Market Value Adjustment to the following
transactions:
1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option in
an amount greater than the Free Withdrawal Amount (which is described in the
answer to Question 6);
2) when you transfer funds from the Guaranteed Maturity Fixed Account Option to
the Sub-Accounts;
3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
4) when you annuitize your Contract; and
5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction to the extent that:
1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction;
2) it is necessary to meet IRS minimum withdrawal requirements; or
3) it is a transfer that is part of a Dollar Cost Averaging program.
We determine the amount of a Market Value Adjustment using a formula that takes
into consideration:
1) whether current interest rates differ from interest rates at the beginning
of the applicable Guarantee Period; and
2) how many years are left until the end of the Guarantee Period.
As a general rule, if interest rates have dropped, the Market Value Adjustment
will be an addition; if interest rates have risen, the Market Value Adjustment
will be a deduction. It is therefore possible that if you withdraw an amount
from the Fixed Account during a Guarantee Period, a Market Value Adjustment may
cause you to receive less than you initially allocated to the Fixed Account.
6. WHAT ARE MY EXPENSES UNDER THE CONTRACT?
CONTRACT MAINTENANCE CHARGE. During the Accumulation Period, each year we
subtract an annual contract maintenance charge of $35 from your Contract Value
allocated to the Sub-Accounts. We will waive this charge if you pay $50,000 or
more in Purchase Payments or if you allocate all of your Contract Value to the
Fixed Account.
During the Annuity Period, we will subtract the annual contract maintenance
charge in equal parts from your annuity payments. We waive this charge if on
the Annuity Date your Contract Value is $50,000 or more or if all payments are
Fixed Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE AND MORTALITY AND EXPENSE RISK CHARGE. We impose
a mortality and expense risk charge at an annual rate of 1.15% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. If you select one of our optional enhanced benefit
riders, however, we may charge you a higher mortality and expense risk charge.
These charges are assessed each day during the Accumulation Period and the
Annuity Period. We guarantee that we will not raise these charges.
8 PROSPECTUS
TRANSFER FEE. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to $10 per transfer for each transfer
after the first transfer in each month.
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE). During the Accumulation
Period, you may withdraw all or part of the value of your Contract before your
death or, if the Contract is owned by a company or other legal entity, before
the Annuitant's death. Certain withdrawals may be made without payment of any
Withdrawal Charge, which is a contingent deferred sales charge. Other
withdrawals are subject to the Withdrawal Charge.
The Withdrawal Charge will vary depending on how many complete years have
passed since you paid the Purchase Payment being withdrawn. The Withdrawal
Charge applies to each Purchase Payment for seven complete years from the date
of the Payment (each a "Contribution Year") as follows:
CONTRIBUTION YEAR APPLICABLE CHARGE
----------------- -----------------
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8+ 0%
In determining Withdrawal Charges, we will deem your Purchase Payments to be
withdrawn on a first-in, first- out basis.
Each year, free of Withdrawal Charges or any otherwise applicable Market Value
Adjustment, you may withdraw the Free Withdrawal Amount, which equals:
(a) the greater of:
earnings not previously withdrawn; or
15% of your total Purchase Payments made in the most recent seven years; plus
(b) an amount equal to your total Purchase Payments made more than seven
years ago, to the extent not previously withdrawn.
In most states, we also may waive the Withdrawal Charge if you:
1) require long-term medical or custodial care outside the home;
2) become unemployed; or
3) are diagnosed with a terminal illness.
These provisions will apply to the Annuitant, if the Contract is owned by a
company or other legal entity. Additional restrictions and costs may apply to
Contracts issued in connection with qualified plans. Withdrawals of earnings
are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject
to an additional 10% federal tax penalty. You should consult with your tax
counselor to determine what effect a withdrawal might have on your tax
liability. As described in the answer to Question 5, we may increase or
decrease certain withdrawals by a Market Value Adjustment.
PREMIUM TAXES. Certain states impose a premium tax on annuity purchase payments
received by insurance companies. Any premium taxes relating to the Contract may
be deducted from Purchase Payments or the Contract Value when the tax is
incurred or at a later time. State premium taxes generally range from 0% to
3.5%.
OTHER EXPENSES. In addition to our charges under the Contract, each Portfolio
deducts amounts from its assets to pay its investment advisory fees and other
expenses.
7. HOW WILL MY INVESTMENT IN THE CONTRACT BE TAXED?
You should consult a qualified tax adviser for personalized answers. Generally,
earnings under variable annuities are not taxed until amounts are withdrawn or
distributions are made. This deferral of taxes is designed to encourage
long-term personal savings and supplemental retirement plans. Withdrawals of
earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
Special rules apply if the Contract is owned by a company or other legal
entity. Generally, such an owner must include in income any increase in the
excess of the Contract Value over the "investment in the contract" during the
taxable year.
8. DO I HAVE ACCESS TO MY MONEY?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some qualified plans, you may
also take a loan against the value of your Contract. Generally, a partial
withdrawal must equal at least $50, and after the withdrawal your remaining
Contract Value must at least equal $500.
Although you have access to your money during the Accumulation Period, certain
charges, such as the contract maintenance charge, the Withdrawal Charge, and
premium tax charges, may be deducted on a surrender or withdrawal. You may also
incur federal income tax liability or tax penalties. In addition, if you have
allocated some of the value of your Contract to the Fixed Account, the amount
of your surrender proceeds or withdrawal may be increased or decreased by a
Market Value Adjustment.
After annuitization, under certain settlement options you may be entitled to
withdraw the commuted value of the remaining payments.
9. WHAT IS THE DEATH BENEFIT?
We will pay a death benefit while the Contract is in force and before the
Annuity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract Owner is not a living person. To obtain payment of the Death Benefit,
9 PROSPECTUS
the Beneficiary must submit to us a complete request for payment of the death
benefit, which includes due proof of death as specified in the Contract.
The standard death benefit is the greatest of the following:
1) your total Purchase Payments reduced by a withdrawal adjustment;
2) your Contract Value;
3) the amount you would have received by surrendering your Contract; or
4) your Contract Value on each Contract Anniversary evenly divisible by seven
increased by the total Purchase Payments since that anniversary and reduced
by a withdrawal adjustment.
We also offer an optional enhanced death benefit rider, which is described
later in this prospectus.
We will determine the value of the death benefit on the day that we receive all
of the information that we need to process the claim.
10. WHAT ELSE SHOULD I KNOW?
ALLOCATION OF PURCHASE PAYMENTS. You allocate your initial Purchase Payment
among the Sub-Accounts and the Fixed Account in your Contract application. You
may make your allocations in specific dollar amounts or percentages, which must
be whole numbers that add up to 100%. When you make subsequent Purchase
Payments, you may again specify how you want your payments allocated. If you do
not, we will automatically allocate the payment based on your most recent
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
TRANSFERS. During the Accumulation Period, you may transfer Contract Value
among the Sub-Accounts and from the Sub-Accounts to the Fixed Account. You may
not make a transfer, however, that would result in your allocating your
Contract Value to more than twenty-one options under the Contract. While you
may also transfer amounts from the Fixed Account, a Market Value Adjustment may
apply. You may instruct us to transfer Contract Value by writing or calling us.
You may also use our Automatic Dollar Cost Averaging or Portfolio Rebalancing
programs. You may not use both programs at the same time.
Under the Dollar Cost Averaging program, amounts are automatically transferred
at regular intervals from the Fixed Account or a Sub-Account of your choosing,
including other Sub-Accounts or the Fixed Account. Transfers from the Dollar
Cost Averaging Fixed Account may be made monthly only. Transfers from
Sub-Accounts may be made monthly, quarterly, or annually.
Under the Portfolio Rebalancing Program, you can maintain the percentage of
your Contract Value allocated to each Sub-Account at a pre-set level.
Investment results will shift the balance of your Contract Value allocations.
If you elect rebalancing, we will automatically transfer your Contract Value
back to the specified percentages at the frequency (monthly, quarterly,
semiannually, annually) that you specify. We will automatically terminate this
program if you request a transfer outside of the program. You may not include
the Fixed Account in a Portfolio Rebalancing Program. You also may not elect
rebalancing after annuitization.
During the Annuity Period, you may not make any transfers for the first six
months after the Annuity Date. Thereafter, you may make transfers among the
Sub- Accounts or from the Sub-Accounts to increase your Fixed Annuity payments.
Your transfers, however, must be at least six months apart. You may not,
however, convert any portion of your right to receive Fixed Annuity payments
into Variable Annuity payments.
FREE LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or after whatever longer period may be permitted by
state law. You may return it by delivering it or mailing it to us. If you
return the Contract, the Contract terminates and, in most states, we will pay
you an amount equal to the Contract Value on the date we receive the Contract
from you. The Contract Value may be more or less than your Purchase Payments.
In some states, we are required to send you the amount of your Purchase
Payments. Since state laws differ as to the consequences of returning a
Contract, you should refer to your Contract for specific information about your
circumstances. If your Contract is qualified under Section 408 of the Internal
Revenue Code, we will refund the greater of any purchase payments or the
Contract Value.
11. WHO CAN I CONTACT FOR MORE INFORMATION?
You can write to us at Lincoln Benefit Life Company, P.O. Box 758565, Topeka,
KS 66675-8565, or call us at (800) 457-7617.
10 PROSPECTUS
CONDENSED FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Sub-Account for 2002 through 2011.
Accumulation Unit Value is the unit of measure that we use to calculate the
value of your interest in a Sub-Account. Accumulation Unit Value does not
reflect the deduction of certain charges that are subtracted from your Contract
Value, such as the Contract Administration Charge. The Separate Account's
financial statements, which are comprised of the financial statements of the
underlying sub-accounts, as of December 31, 2011, are included in the Statement
of Additional Information. Lincoln Benefit's financial statements as of
December 31, 2011, are included in the Statement of Additional Information.
DESCRIPTION OF THE CONTRACTS
SUMMARY. The Contract is a deferred annuity contract designed to aid you in
long-term financial planning. You may add to the Contract Value by making
additional Purchase Payments. In addition, the Contract Value will change to
reflect the performance of the Sub-Accounts to which you allocate your Purchase
Payments and your Contract Value, as well as to reflect interest credited to
amounts allocated to the Fixed Account. You may withdraw your Contract Value by
making a partial withdrawal or by surrendering your Contract. Upon
Annuitization, we will pay you benefits under the Contract in the form of an
annuity, either for the life of the Annuitant or for a fixed number of years.
All of these features are described in more detail below.
CONTRACT OWNER. As the Contract Owner, you are the person usually entitled to
exercise all rights of ownership under the Contract. You usually are also the
person entitled to receive benefits under the Contract or to choose someone
else to receive benefits. The Contract can also be purchased as an IRA or TSA
(also known as a 403(b)). The endorsements required to qualify these annuities
under the Code may limit or modify your rights and privileges under the
Contract. The maximum age of the oldest Contract Owner and Annuitant cannot
exceed age 90 as of the date we receive the completed application. The Contract
cannot be jointly owned by both a non-living person and a living person.
Changing ownership of this contract may cause adverse tax consequences and may
not be allowed under qualified plans. Please consult with a competent tax
advisor prior to making a request for a change of Contract Owner. If the
Contract Owner is a grantor trust, the Contract Owner will be considered a
non-living person for purposes of this section and the Death Benefit section.
ANNUITANT. The Annuitant is the living person whose life span is used to
determine annuity payments. You initially designate an Annuitant in your
application. You may change the Annuitant at any time before annuity payments
begin. If a non-Qualified contract is held by a non-living person, any change
in the Annuitant will be treated as the death of the Annuitant and will
activate the distribution requirements outlined in the Death Benefit section.
If your Contract was issued under a plan qualified under Section 403(b), 408 or
408A of the Tax Code, you must be the Annuitant. If the Contract is a
non-qualified Contract, you may also designate a Joint Annuitant, who is a
second person on whose life annuity payments depend. Additional restrictions
may apply in the case of Qualified Plans. If you are not the Annuitant and the
Annuitant dies before annuity payments begin, then either you become the new
Annuitant or you must name another person as the new Annuitant. You must attest
that the Annuitant is alive in order to annuitize your Contract.
MODIFICATION OF THE CONTRACT. Only a Lincoln Benefit officer may approve a
change in or waive any provision of the Contract. Any change or waiver must be
in writing. None of our agents has the authority to change or waive the
provisions of the Contract.
We are permitted to change the terms of the Contract if it is necessary to
comply with changes in the law. If a provision of the Contract is inconsistent
with state law, we will follow state law.
ASSIGNMENT. Before the Annuity Date, if the Annuitant is still alive, you may
assign an interest in the Contract if it is a non-qualified Contract. If a
Contract is issued pursuant to a Qualified Plan, the law prohibits some types
of assignments, pledges and transfers and imposes special conditions on others.
An assignment may also result in taxes or tax penalties.
We will not be bound by any assignment until we receive written notice of it.
Accordingly, until we receive written notice of an assignment, we will continue
to act as though the assignment had not occurred. We are not responsible for
the validity of any assignment.
BECAUSE OF THE POTENTIAL TAX CONSEQUENCES AND ERISA ISSUES ARISING FROM AN
ASSIGNMENT, YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
FREE LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or within whatever longer period may be permitted by
state law. You may return it by delivering it to your agent or mailing it to
us. If you return the Contract, the Contract terminates and, in most states, we
will pay you an amount equal to the Contract Value on the date we receive the
Contract from you. The Contract Value at that time may be more or less than
your Purchase Payments.
In some states, if you exercise your "free look" rights, we are required to
return the amount of your Purchase Payments. Currently, if you live in one of
those states, on the Issue Date we will allocate your Purchase Payment to the
Sub-Accounts and the Fixed Account Options as you specified in your
application. However, we reserve the right in the future to delay allocating
your Purchase
11 PROSPECTUS
Payments to the Sub-Accounts you have selected or to the Fixed Account until 20
days after the Issue Date or, if your state's free look period is longer than
ten days, for ten days plus the period required by state law. During that time,
we will allocate your Purchase Payment to the Fidelity Money Market
Sub-Account. Your Contract will contain specific information about your
free-look rights in your state.
PURCHASES AND CONTRACT VALUE
MINIMUM PURCHASE PAYMENT. The minimum initial Purchase Payment for a Contract
is $1,200. You may pay it in a lump sum or in installments of your choice over
the first Contract Year. You may not pay more than $1 million in Purchase
Payments without our prior approval. As a general rule, subsequent Purchase
Payments may be made in amounts of $100 or more. Subsequent Purchase Payments
made as part of an Automatic Payment Plan, however, may be as small as $25 per
month. However, each purchase payment made to the Dollar Cost Averaging Fixed
Account must be at least $1,200. If we receive purchase payments designated for
the Dollar Cost Averaging Fixed Account that are lower than the required
minimum of $1,200, or purchase payments designated for the Guaranteed Maturity
Fixed Account Option that are lower than $500, such amounts will be allocated
to the Fidelity Money Market Portfolio. We may lower these minimums if we
choose. We may refuse any Purchase Payment at any time. We may apply certain
limitations, restrictions, and/or underwriting standards as a condition of
acceptance of purchase payments.
AUTOMATIC PAYMENT PLAN. You may make scheduled Purchase Payments of $25 or
more per month by automatic payment through your bank account. Call or write us
for an enrollment form.
ALLOCATION OF PURCHASE PAYMENTS. Your Purchase Payments are allocated to the
Sub-Account(s) and the Fixed Account in the proportions that you have selected.
You must specify your allocation in your Contract application, either as
percentages or specific dollar amounts. If you make your allocation in
percentages, the total must equal 100%. We will allocate your subsequent
Purchase Payments in those percentages, until you give us new allocation
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
You initially may allocate your Purchase Payments to up to twenty-one options,
counting each Sub-Account and the Fixed Account as one option. For this
purpose, we will treat all of your allocations to the Fixed Account as one
option, even if you choose more than one Guarantee Period. You may add or
delete Sub-Accounts and/or the Fixed Account from your allocation instructions,
but we will not execute instructions that would cause you to have Contract
Value in more than twenty-one options. In the future, we may waive this limit.
If your application is complete, we will issue your Contract within two
business days of its receipt at our P.O. Box shown on the first page of this
prospectus. If your application for a Contract is incomplete, we will notify
you and seek to complete the application within five business days. For
example, if you do not fill in allocation percentages, we will contact you to
obtain the missing percentages. If we cannot complete your application within
five business days after we receive it, we will return your application and
your Purchase Payment, unless you expressly permit us to take a longer time.
Usually, we will allocate your initial Purchase Payment to the Sub-Accounts and
the Fixed Account, as you have instructed us, on the Issue Date. We will
allocate your subsequent Purchase Payments on the date that we receive them at
the next computed Accumulation Unit Value.
There may be circumstances where the New York Stock Exchange is open, however,
due to inclement weather, natural disaster or other circumstances beyond our
control, our offices may be closed or our business processing capabilities may
be restricted. Under those circumstances, your Contract Value may fluctuate
based on changes in the Accumulation Unit Values, but you may not be able to
transfer Contract Value, or make a purchase or redemption request.
With respect to any purchase payment that is pending investment in our Variable
Account, we may hold the amount temporarily in a suspense account and may earn
interest on amounts held in that suspense account. You will not be credited
with any interest on amounts held in that suspense account.
In some states, however, we are required to return at least your Purchase
Payment if you cancel your Contract during the "free-look" period. In those
states, we currently will allocate your Purchase Payments on the Issue Date as
you have instructed us, as described above. In the future, however, we reserve
the right, if you live in one of those states, to allocate all Purchase
Payments received during the "free-look period" to the Fidelity Money Market
Sub-Account. If we exercise that right and your state's free look period is ten
days, we will transfer your Purchase Payments to your specified Sub-Accounts or
the Fixed Account 20 days after the Issue Date; if your state's free look
period is longer, we will transfer your Purchase Payment after ten days plus
the period required by state law have passed.
We determine the number of Accumulation Units in each Sub-Account to allocate
to your Contract by dividing that portion of your Purchase Payment allocated to
a Sub-Account by that Sub-Account's Accumulation Unit Value on the Valuation
Date when the allocation occurs.
CONTRACT VALUE. We will establish an account for you and will maintain your
account during the Accumulation Period. The total value of your Contract at any
time is equal to the sum of the value of your Accumulation Units
12 PROSPECTUS
in the Sub-Accounts you have selected, plus the value of your investment in the
Fixed Account.
SEPARATE ACCOUNT ACCUMULATION UNIT VALUE. As a general matter, the
Accumulation Unit Value for each Sub-Account will rise or fall to reflect
changes in the share price of the Portfolio in which the Sub-Account invests.
In addition, we subtract from Accumulation Unit Value amounts reflecting the
mortality and expense risk charge, administrative expense charge, and any
provision for taxes that have accrued since we last calculated the Accumulation
Unit Value. We determine Withdrawal Charges, transfer fees and contract
maintenance charges separately for each Contract. They do not affect
Accumulation Unit Value. Instead, we obtain payment of those charges and fees
by redeeming Accumulation Units.
We determine a separate Accumulation Unit Value for each Sub-Account. We also
determine a separate set of Accumulation Unit Values reflecting the cost of the
enhanced benefit riders described beginning on page 26. If we elect or are
required to assess a charge for taxes, we may calculate a separate Accumulation
Unit Value for Contracts issued in connection with Non-Qualified and Qualified
Plans, respectively, within each Sub-Account. We determine the Accumulation
Unit Value for each Sub-Account Monday through Friday on each day that the New
York Stock Exchange is open for business.
You should refer to the prospectuses for the Portfolios for a description of
how the assets of each Portfolio are valued, since that determination has a
direct bearing on the Accumulation Unit Value of the corresponding Sub- Account
and, therefore, your Contract Value.
TRANSFER DURING ACCUMULATION PERIOD. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Sub-Accounts in writing
or by telephone. Currently, there is no minimum transfer amount. The Contract
permits us to set a minimum transfer amount in the future. You may not make a
transfer that would result in your allocating your Contract Value to more than
twenty-one options under the Contract at one time.
As a general rule, we only make transfers on days when the NYSE is open for
business. If we receive your request on one of those days, we will make the
transfer that day. Requests received before 4:00 p.m. will be effected on that
day at that day's price. Requests received after 4:00 p.m. will be effected on
the next day on which the NYSE is open for business, at that day's price. If
you transfer an amount from the Fixed Account to a Sub-Account before the end
of the applicable Guarantee Period or you allocate an amount in the Fixed
Account to a new Guarantee Period before the end of the existing Guarantee
Period, we usually will increase or decrease the amount by a Market Value
Adjustment. The calculation of the Market Value Adjustment is described in
"Market Value Adjustment" on page 21.
Transfers within 30 days after the end of the applicable Guarantee Period are
not subject to a Market Value Adjustment.
The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us.
You may not transfer Contract Value into the Dollar Cost Averaging Fixed
Account Option. You may not transfer Contract Value out of the Dollar Cost
Averaging Fixed Account Option except as part of a Dollar Cost Averaging
program.
We may charge you the transfer fee described on page 5, although we currently
are waiving it. At any time, without notice, we may suspend, modify or
terminate your privilege to make transfers via the phone, or via other
electronic or automated means previously approved by the Company, including,
but not limited to, automated telephone services, facsimile machine, e-mail and
electronic services via online access. Among other things, we reserve the right
to limit the number of such transfers among the Variable Sub-Accounts in any
Contract year, or to refuse any Variable Sub-Account transfer request. We also
reserve the right to restrict such transfers in any manner reasonably designed
to prevent transfers that we consider disadvantageous to the Contract Owners.
We use procedures that we believe provide reasonable assurance that telephone
authorized transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts/Policies are intended for long-term investment. Market timing and
excessive trading can potentially dilute the value of Variable Sub-Accounts and
can disrupt management of a Portfolio and raise its expenses, which can impair
Portfolio performance and adversely affect your Contract/Policy Value. Our
policy is not to accept knowingly any money intended for the purpose of market
timing or excessive trading. Accordingly, you should not invest in the
Contract/Policy if your purpose is to engage in market timing or excessive
trading, and you should refrain from such practices if you currently own a
Contract/Policy.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Portfolios also may report suspected market-timing or
excessive trading activity to us. If, in our judgment, we determine that the
transfers are part of a market timing strategy or are otherwise harmful to the
underlying Portfolio, we will impose the trading limitations as described below
under "Trading Limitations." Because there is no universally accepted
definition of what constitutes market timing or
13 PROSPECTUS
excessive trading, we will use our reasonable judgment based on all of the
circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the
Portfolio may experience the adverse effects of market timing and excessive
trading described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in
any Contract/Policy year, require that all future transfer requests be
submitted through U.S. Postal Service First Class Mail thereby refusing to
accept transfer requests via telephone, facsimile, Internet, or overnight
delivery, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract/Policy Owners,
or a specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable
Sub-Account or on the share prices of the corresponding Portfolio or
otherwise would be to the disadvantage of other Contract/Policy Owners; or
.. we are informed by one or more of the Portfolios that they intend to
restrict the purchase, exchange, or redemption of Portfolio shares because
of excessive trading or because they believe that a specific transfer or
group of transfers would have a detrimental effect on the prices of
Portfolio shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Portfolios that we have identified as being
susceptible to market timing activities (e.g., International, High Yield,
and Small Cap Variable Sub-Accounts);
.. whether the manager of the underlying Portfolio has indicated that the
transfers interfere with Portfolio management or otherwise adversely impact
the Portfolio; and
.. the investment objectives and/or size of the Variable Sub-Account
underlying Portfolio.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or
excessive trading activity, while others are prohibited, and the Portfolio may
experience the adverse effects of market timing and excessive trading described
above.
If we determine that a Contract/Policy Owner has engaged in market timing or
excessive trading activity, we will require that all future transfer requests
be submitted through U.S. Postal Service First Class Mail thereby refusing to
accept transfer requests via telephone, facsimile, Internet, or overnight
delivery. If we determine that a Contract/Policy Owner continues to engage in a
pattern of market timing or excessive trading activity we will restrict that
Contract/Policy Owner from making future additions or transfers into the
impacted Variable Sub-Account(s) or will restrict that Contract/Policy Owner
from making future additions or transfers into the class of Variable
Sub-Account(s) if the Variable Sub-Accounts(s) involved are vulnerable to
arbitrage market timing trading activity (e.g., International, High Yield, and
Small Cap Variable Sub-Accounts).
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
SHORT TERM TRADING FEES
The underlying Portfolios are authorized by SEC regulation to adopt and impose
redemption fees if a Portfolio's Board of Directors determines that such fees
are necessary to minimize or eliminate short-term transfer activity that can
reduce or dilute the value of outstanding shares issued by the Portfolio. The
Portfolio will set the parameters relating to the redemption fee and such
parameters may vary by Portfolio. If a Portfolio elects to adopt and charge
redemption fees, these fees will be passed on to the Contract/Policy Owner(s)
responsible for the short-term transfer activity generating the fee.
We will administer and collect redemption fees in connection with transfers
between the Variable Sub- Accounts and forward these fees to the Portfolio.
Please consult the Portfolio's prospectus for more complete information
regarding the fees and charges associated with each Portfolio.
14 PROSPECTUS
AUTOMATIC DOLLAR COST AVERAGING PROGRAM. Under our Automatic Dollar Cost
Averaging program, you may authorize us to transfer a fixed dollar amount at
fixed intervals from the Dollar Cost Averaging Fixed Account Option or a
Sub-Account of your choosing. The interval between transfers from the Dollar
Cost Averaging Fixed Account may be monthly only. The interval between
transfers from Sub-Accounts may be monthly, quarterly, or annually, at your
option. The transfers will be made at the Accumulation Unit Value on the date
of the transfer. The transfers will continue until you instruct us otherwise,
or until your chosen source of transfer payments is exhausted. Currently, the
minimum transfer amount is $100 per transfer. However, if you wish to Dollar
Cost Average to a Guaranteed Maturity Fixed Account Option, the minimum amount
that must be transferred into any one Option is $500. We may change this
minimum or grant exceptions. For each purchase payment allocated to this
Option, your first monthly transfer will occur 25 days after such purchase
payment. If we do not receive an allocation from you within 25 days of the
purchase payment, we will transfer the payment plus associated interest to the
Fidelity Money Market Variable Sub-Account in equal monthly payments. You may
not use the Dollar Cost Averaging program to transfer amounts from the
Guaranteed Maturity Fixed Account Option.
Your request to participate in this program will be effective when we receive
your completed application at the P.O. Box given on the first page of this
prospectus. Call or write us for a copy of the application. You may elect to
increase, decrease or change the frequency or amount of transfers under a
Dollar Cost Averaging program. We will not charge a transfer fee for Dollar
Cost Averaging.
The theory of Dollar Cost Averaging is that by spreading your investment over
time, you may be able to reduce the effect of transitory market conditions on
your investment. In addition, because a given dollar amount purchases more
units when the unit prices are relatively low rather than when the prices are
higher, in a fluctuating market, the average cost per unit may be less than the
average of the unit prices on the purchase dates. However, participation in
this program does not assure you of a greater profit from your purchases under
the program, nor will it prevent or necessarily reduce losses in a declining
market. Moreover, while we refer to this program of periodic transfers
generally as dollar cost averaging, periodic transfers from a Sub-Account with
more volatile performance experience is unlikely to produce the desired effects
of dollar cost averaging as would transfers from a less volatile Sub-Account.
You may not use Dollar Cost Averaging and Portfolio Rebalancing at the same
time.
PORTFOLIO REBALANCING. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Sub-Account at a pre-set
level. Over time, the variations in each Sub-Account's investment results will
shift the balance of your Contract Value allocations. Under the Portfolio
Rebalancing feature, each period, if the allocations change from your desired
percentages, we will automatically transfer your Contract Value, including new
Purchase Payments (unless you specify otherwise), back to the percentages you
specify. Portfolio Rebalancing is consistent with maintaining your allocation
of investments among market segments, although it is accomplished by reducing
your Contract Value allocated to the better performing segments.
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually. We will not charge a transfer fee for Portfolio Rebalancing. A
one-time request to rebalance the amounts allocated to the Sub- Accounts is not
part of a Portfolio Rebalancing program and is subject to all of the
requirements that are applicable to transfers. We will automatically terminate
this program if you request any transfers outside the Portfolio Rebalancing
program. If you wish to resume Portfolio Rebalancing after it has been
canceled, then you must complete a new Portfolio Rebalancing form and send it
to our home office. You may not include the Fixed Account in a Portfolio
Rebalancing program.
You may request Portfolio Rebalancing at any time by submitting a completed
written request to us at the P.O. Box given on the first page of this
prospectus. Please call or write us for a copy of the request form. If you stop
Portfolio Rebalancing, you must wait 30 days to begin again. In your request,
you may specify a date for your first rebalancing. If you specify a date fewer
than 30 days after your Issue Date, your first rebalance will be delayed one
month. If you request Portfolio Rebalancing in your Contract application and do
not specify a date for your first rebalancing, your first rebalance will occur
one period after the Issue Date. For example, if you specify quarterly
rebalancing, your first rebalance will occur three months after your Issue
Date. Otherwise, your first rebalancing will occur twenty-five days after we
receive your completed request form. All subsequent rebalancing will occur at
the intervals you have specified on the day of the month that coincides with
the same day of the month as your Contract Anniversary Date.
Generally, you may change the allocation percentages, frequency, or choice of
Sub-Accounts at any time. If your total Contract Value subject to rebalancing
falls below any minimum value that we may establish, we may prohibit or limit
your use of Portfolio Rebalancing. You may not use Dollar Cost Averaging and
Portfolio Rebalancing at the same time. We may change, terminate, limit, or
suspend Portfolio Rebalancing at any time.
15 PROSPECTUS
THE INVESTMENT AND FIXED ACCOUNT OPTIONS: SEPARATE ACCOUNT INVESTMENTS
THE PORTFOLIOS. Each of the Sub-Accounts of the Separate Account invests in
the shares of one of the Portfolios. Each Portfolio is either an open-end
management investment company registered under the Investment Company Act of
1940 or a separate investment series of an open-end management investment
company. We have briefly described the Portfolios below. You should consult the
current prospectuses for the Portfolios for more detailed and
complete information concerning the Portfolios. If you do not have a prospectus
for a Portfolio, contact us and we will send you a copy.
We do not promise that the Portfolios will meet their investment objectives.
Amounts you have allocated to Sub-Accounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Sub- Accounts invest. You bear the investment risk
that those Portfolios possibly will not meet their investment objectives. You
should carefully review their prospectuses before allocating amounts to the
Sub-Accounts of the Separate Account.
PORTFOLIO EACH PORTFOLIO SEEKS INVESTMENT ADVISER
----------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS (INVESCO VARIABLE INSURANCE FUNDS)
----------------------------------------------------------------------------------------------------------------------------
Invesco Van Kampen V.I. American Value Above-average total return over a market cycle of
Fund, Series I/(5)/ three to five years by investing in common stocks
and other equity securities.
------------------------------------------------------------------------------------------------
Invesco Van Kampen V.I. Mid Cap Growth Capital growth INVESCO ADVISERS, INC.
Portfolio, Series II
------------------------------------------------------------------------------------------------
Invesco Van Kampen V.I. Growth and Long-term growth of capital and income.
Income Portfolio, Series II
------------------------------------------------------------------------------------------------
Invesco Van Kampen V.I. Value Long-term growth of capital
Opportunities Fund - Series I/(2)/
------------------------------------------------------------------------------------------------
THE ALGER PORTFOLIOS
----------------------------------------------------------------------------------------------------------------------------
Alger LargeCap Growth Portfolio - Class Long-term capital appreciation
I-2
------------------------------------------------------------------------------------------------
Alger Growth and Income Portfolio - Capital appreciation and current income
Class I-2 FRED ALGER MANAGEMENT, INC.
------------------------------------------------------------------------------------------------
Alger Capital Appreciation Portfolio - Long-term capital appreciation
Class I-2
------------------------------------------------------------------------------------------------
Alger MidCap Growth Portfolio - Long-term capital appreciation
Class I-2
------------------------------------------------------------------------------------------------
Alger SmallCap Growth Portfolio - Long-term capital appreciation
Class I-2
------------------------------------------------------------------------------------------------
DWS VARIABLE SERIES I
----------------------------------------------------------------------------------------------------------------------------
DWS Bond VIP - Class A/(3)/ To maximize total return consistent with preservation
of capital and prudent investment management, by
investing for both current income and capital
appreciation DEUTSCHE INVESTMENT
------------------------------------------------------------------------------------------------MANAGEMENT AMERICAS INC.
DWS VSI Global Small Cap Growth - Class Above-average capital appreciation over the long
A term
------------------------------------------------------------------------------------------------
DWS Core Equity VIP - Class A/(4)/ Long-term growth of capital, current income and
growth of income
------------------------------------------------------------------------------------------------
DWS International VIP - Class A Long-term growth of capital
------------------------------------------------------------------------------------------------
DWS VARIABLE SERIES II
----------------------------------------------------------------------------------------------------------------------------
DWS Global Income Builder VIP - Class Maximize income while maintaining prospects for DEUTSCHE INVESTMENT
A/(4)/ capital appreciation MANAGEMENT AMERICAS INC.
----------------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES
----------------------------------------------------------------------------------------------------------------------------
Federated Managed Volatility Fund II High current income and moderate capital FEDERATED EQUITY
(formerly, Federated Capital Income appreciation MANAGEMENT COMPANY OF
Fund II) PENNSYLVANIA
----------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Current income
Securities II FEDERATED INVESTMENT
------------------------------------------------------------------------------------------------MANAGEMENT COMPANY
Federated High Income Bond Fund II High current income
------------------------------------------------------------------------------------------------
16 PROSPECTUS
PORTFOLIO EACH PORTFOLIO SEEKS INVESTMENT ADVISER
---------------------------------------------------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Asset Manager(SM) High total return with reduced risk over the long
Portfolio - Initial Class term by allocating its assets among stocks, bonds,
and short-term instruments.
--------------------------------------------------------------------------------------------------
Fidelity VIP Contrafund(R) Portfolio - Long-term capital appreciation.
Initial Class
--------------------------------------------------------------------------------------------------FIDELITY MANAGEMENT &
Fidelity VIP Equity-Income Portfolio - Reasonable Income. The fund will also consider the RESEARCH COMPANY
Initial Class potential for capital appreciation. The fund's goal
is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard &
Poor's 500(SM) Index (S&P 500(R) ).
--------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio - Initial To achieve capital appreciation.
Class
--------------------------------------------------------------------------------------------------
Fidelity VIP Index 500 Portfolio - Investment results that correspond to the total return
Initial Class of common stocks publicly traded in the United
States, as represented by the Standard & Poor's
500(SM) Index (S&P 500(R) ).
--------------------------------------------------------------------------------------------------
Fidelity VIP Money Market Portfolio - As high a level of current income as is consistent with
Initial Class preservation of capital and liquidity.
--------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio - Long-term growth of capital.
Initial Class
--------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES
---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced Portfolio Long-term capital growth, consistent with
- Institutional Shares preservation of capital and balanced by current
income.
--------------------------------------------------------------------------------------------------
Janus Aspen Series Flexible Bond To obtain maximum total return, consistent with
Portfolio - Institutional Shares preservation of capital. JANUS CAPITAL MANAGEMENT
--------------------------------------------------------------------------------------------------LLC
Janus Aspen Series Overseas Portfolio Long-term growth of capital.
- Service Shares
--------------------------------------------------------------------------------------------------
Janus Aspen Series Janus Portfolio Long-term growth of capital
- Institutional Shares
--------------------------------------------------------------------------------------------------
Janus Aspen Series Enterprise Portfolio Long-term growth of capital
- Institutional Shares
--------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Portfolio Long-term growth of capital
- Institutional Shares
--------------------------------------------------------------------------------------------------
LEGG MASON PARTNERS VARIABLE EQUITY
TRUST
---------------------------------------------------------------------------------------------------------------------------
Legg Mason ClearBridge Variable Large Long-term capital growth with current income as a LEGG MASON PARTNERS FUND
Cap Value Portfolio - Class I secondary objective ADVISOR, LLC
---------------------------------------------------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE TRUST/(SM)/
---------------------------------------------------------------------------------------------------------------------------
MFS Growth Series - Initial Class Capital appreciation
--------------------------------------------------------------------------------------------------
MFS Investors Trust Series - Initial Capital appreciation
Class
--------------------------------------------------------------------------------------------------MFS(TM) INVESTMENT
MFS New Discovery Series - Initial Class Capital appreciation MANAGEMENT
--------------------------------------------------------------------------------------------------
MFS Research Series - Initial Class Capital appreciation
--------------------------------------------------------------------------------------------------
MFS Total Return Series - Initial Class Total return
--------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
---------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Small- & Capital appreciation. OPPENHEIMERFUNDS, INC.
Mid-Cap Fund(R) /VA - Service Shares
---------------------------------------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT Foreign Bond Portfolio (U.S. Maximum total return, consistent with preservation
Dollar- Hedged) - Administrative Shares of capital and prudent investment management. PACIFIC INVESTMENT
--------------------------------------------------------------------------------------------------MANAGEMENT COMPANY LLC
PIMCO VIT Total Return Portfolio Maximum total return, consistent with preservation
- Administrative Shares of capital and prudent investment management.
--------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
---------------------------------------------------------------------------------------------------------------------------
Putnam VT International Value Fund - Capital growth. Current income is a secondary PUTNAM INVESTMENT
Class IB objective. MANAGEMENT, LLC
---------------------------------------------------------------------------------------------------------------------------
17 PROSPECTUS
PORTFOLIO EACH PORTFOLIO SEEKS INVESTMENT ADVISER
---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY SERIES, INC.
---------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Income Portfolio - Substantial dividend income as well as long-term
I growth of capital through investments in the
common stocks of established companies.
------------------------------------------------------------------------------------------------T. ROWE PRICE ASSOCIATES,
T. Rowe Price Mid-Cap Growth Portfolio Long-term capital appreciation by investing in INC.
- I/(1)/ mid-cap stocks with potential for above-average
earnings growth.
------------------------------------------------------------------------------------------------
T. Rowe Price New America Growth Long-term growth of capital by investing primarily in
Portfolio - I the common stocks of growth companies.
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
---------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Long-term growth of capital through investments
Portfolio - I primarily in the common stocks of established T. ROWE PRICE ASSOCIATES,
non-U.S. companies. INC.
---------------------------------------------------------------------------------------------------------------------------
WELLS FARGO VARIABLE TRUST FUNDS
---------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Discovery Fund Long-term capital appreciation.
WELLS FARGO FUNDS
MANAGEMENT, LLC
------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Opportunity Long-term capital appreciation. SUB-ADVISOR: WELLS CAPITAL
Fund(SM) MANAGEMENT INCORPORATED
------------------------------------------------------------------------------------------------
(1) Effective May 1, 2004, the T. Rowe Price Mid-Cap Growth Portfolio - I is no
longer available for new investments. If you are currently invested in the
Variable Sub-account that invests in this Portfolio you may continue your
investment. If, prior to May 1, 2004, you enrolled in one of our automatic
transaction programs, such as automatic additions, portfolio rebalancing, or
dollar cost averaging, we will continue to effect automatic transactions into
the Variable Sub-Account in accordance with that program. Outside of these
automatic transaction programs, additional allocations will not be allowed.
(2) Effective August 19, 2011, the Invesco Van Kampen V.I. Value Opportunities
- Series I Sub-Account (formerly, Invesco V.I. Basic Value - Series I
Sub-Account) closed to all Contract Owners except those Contract Owners who had
contract value invested in the Variable Sub-Account as of the closure date.
Contract Owners who had contract value invested in the Variable Sub-Account as
of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to invest
in the Variable Sub-Account if they withdraw or otherwise transfer their entire
contract value from the Variable Sub-Account following the closure date.
Contract Owners who did not have contract value invested in the Variable
Sub-Account as of the closure date may not invest in the Variable Sub-Account.
(3) Effective as of January 27, 2012, the DWS Bond VIP - Class A Variable
Sub-Account closed to all Contract Owners except those Contract Owners who had
contract value invested in the Variable Sub-Account as of the closure date.
Contract Owners who had contract value invested in this Variable Sub-Account as
of the closure date may continue to submit additional investments into the
Variable Sub-Account thereafter, although they will not be permitted to invest
in the Variable Sub-Account if they withdraw or otherwise transfer their entire
contract value from the Variable Sub-account following the closure
date. Contract Owners who did not have contract value invested in this Variable
Sub-Account as of the specified closure date may not invest in the Variable
Sub-Account.
(4) Effective May 1, 2012, the following Portfolio changed their names:
PREVIOUS NAME NEW NAME
------------------------------------------------------
DWS Growth & Income VIP - DWS Core Equity VIP -
Class A Class A
------------------------------------------------------
DWS Balanced VIP - Class A DWS Global Income Builder
VIP - Class A
------------------------------------------------------
(5) Effective on or about July 1, 2012, the following Portfolio will change its
name:
PREVIOUS NAME NEW NAME
-----------------------------------------------------------
Invesco Van Kampen V.I. Mid Cap Invesco Van Kampen V.I.
Value - Series I American Value - Series I
-----------------------------------------------------------
Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of
the Portfolio. See the accompanying Prospectuses of the Portfolios for further
information.
We automatically reinvest all dividends and capital gains distributions from
the Portfolios in shares of the distributing Portfolio at their net asset
value. The income and realized and unrealized gains or losses on the assets of
each Sub-Account are separate and are credited to or charged against the
particular Sub-Account without regard to income, gains or losses from any other
Sub-Account or from any other part of our business. We will use the net
Purchase Payments you allocate to a Sub-Account to purchase shares in the
corresponding Portfolio and will redeem shares in the Portfolios to meet
Contract obligations or make adjustments in reserves. The Portfolios are
required to redeem their shares at net asset value and to make payment within
seven days.
Some of the Portfolios have been established by investment advisers which
manage publicly traded mutual funds having similar names and investment
objectives. While some of the Portfolios may be similar to, and may in fact be
modeled after publicly traded mutual funds, you should understand that the
Portfolios are not otherwise directly related to any publicly traded mutual
fund. Consequently, the investment performance of publicly traded mutual funds
and any similarly named Portfolio may differ substantially.
Certain of the Portfolios sell their shares to separate accounts underlying
both variable life insurance and variable annuity contracts. It is conceivable
that in the future it may be unfavorable for variable life insurance separate
accounts and variable annuity separate accounts
18 PROSPECTUS
to invest in the same Portfolio. Although neither we nor any of the Portfolios
currently foresees any such disadvantages either to variable life insurance or
variable annuity contract owners, each Portfolio's Board of Directors intends
to monitor events in order to identify any material conflicts between variable
life and variable annuity contract owners and to determine what action, if any,
should be taken in response thereto. If a Board of Directors were to conclude
that separate investment funds should be established for variable life and
variable annuity separate accounts, Lincoln Benefit will bear the attendant
expenses.
VOTING RIGHTS. As a general matter, you do not have a direct right to vote the
shares of the Portfolios held by the Sub-Accounts to which you have allocated
your Contract Value. Under current law, however, you are entitled to give us
instructions on how to vote those shares on certain matters. We will notify you
when your instructions are needed. We will also provide proxy materials or
other information to assist you in understanding the matter at issue. We will
determine the number of shares for which you may give voting
instructions as of the record date set by the relevant Portfolio for the
shareholder meeting at which the vote will occur.
As a general rule, before the Annuity Date, you are the person entitled to give
voting instructions. After the Annuity Date, the payee is that person.
Retirement plans, however, may have different rules for voting by plan
participants.
If you send us written voting instructions, we will follow your instructions in
voting the Portfolio shares attributable to your Contract. If you do not send
us written instructions, we will vote the shares attributable to your Contract
in the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. We will vote shares that we hold in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners.
We may, when required by state insurance regulatory authorities, disregard
Contract Owner voting instructions if the instructions require that the shares
be voted so as to cause a change in the sub-classification or investment
objective of one or more of the Portfolios or to approve or disapprove an
investment advisory contract for one or more of the Portfolios.
In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment adviser of
the Portfolios if we reasonably disapprove of the proposed change. We would
disapprove a proposed change only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or we reasonably conclude
that the proposed change would not be consistent with the investment objectives
of the Portfolio or would result in the purchase of securities for the
Portfolio which vary from the general quality and nature of investments and
investment techniques utilized by the Portfolio. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report to you.
This description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decide that we are
permitted to vote the Portfolio shares without obtaining instructions from our
Contract Owners, and we may choose to do so.
ADDITIONS, DELETIONS, AND SUBSTITUTIONS OF SECURITIES. If the shares of any of
the Portfolios are no longer available for investment by the Separate Account
or if, in the judgment of our Board of Directors, further investment in the
shares of a Portfolio is no longer appropriate in view of the purposes of the
Contract, we may add or substitute shares of another Portfolio or underlying
fund for Portfolio shares already purchased or to be purchased in the future by
Purchase Payments under the Contract. Any substitution of securities will
comply with the requirements of the 1940 Act.
We also reserve the right to make the following changes in the operation of the
Separate Account and the Sub-Accounts:
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;
(c) to transfer assets from one Sub-Account to another, or from any
Sub-Account to our general account;
(d) to add, combine, or remove Sub-Accounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total
charges do not exceed the maximum amount that may be charged the Separate
Account and the Portfolios in connection with the Contracts.
If we take any of these actions, we will comply with the then applicable legal
requirements.
THE FIXED ACCOUNT
GENERAL. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Loan payments may not be
allocated to the Fixed Account(s). Allstate Life invests the assets of the
general account in accordance with applicable laws governing the investments of
insurance company general accounts. The Fixed Account may not be available in
all states. Please contact us at 1-800-457-7617 for current information.
GUARANTEED MATURITY FIXED ACCOUNT OPTION. We will credit interest to each
amount allocated to the Guaranteed Maturity Fixed Account Option at a
19 PROSPECTUS
specified rate for a specified Guarantee Period. You select the Guarantee
Period for each amount that you allocate to this option. We will declare the
interest rate that we will guarantee to credit to that amount for that
Guarantee Period. Each amount allocated to a Guarantee Period under this option
must be at least $500. We reserve the right to limit the number of additional
Purchase Payments that may be allocated to this option.
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may offer Guarantee Periods ranging from one to ten years
in length. We will decide in our discretion which Guarantee Periods to offer.
Currently, we offer Guarantee Periods of one, three, five, seven and ten years.
In the future we may offer Guarantee Periods of different lengths or stop
offering some Guarantee Periods.
We will credit interest daily to each amount allocated to a Guarantee Period
under this option at a rate which compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period. We
will not change the interest rate credited to a particular allocation until the
end of the relevant Guarantee Period. We may declare different interest rates
for Guarantee Periods of the same length that begin at different times.
The following example illustrates how a Purchase Payment allocated to this
option would grow, given an assumed Guarantee Period and effective annual
interest rate:
EXAMPLE
Purchase Payment $ 10,000
Guarantee Period 5 years
Effective Annual Rate 4.50%
End of Contract Year
------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
----------------------------------------------------------------------------------------------
Beginning Contract Value $10,000.00
X (1 + Effective Annual Rate) X 1.045
----------
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Effective Annual Rate) X 1.045
----------
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Effective Annual Rate) X 1.045
----------
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Effective Annual Rate) X 1.045
----------
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Effective Annual Rate) X 1.045
----------
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -
$10,000)
NOTE:This example assumes no withdrawals during the entire five-year Guarantee
Period. If you were to make a partial withdrawal, you might be required to
pay a Withdrawal Charge and the amount withdrawn might be increased or
decreased by a Market Value Adjustment. The hypothetical interest rate is
for illustrative purposes only and is not intended to predict future
interest rates to be declared under the Contract.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
relevant factors such as then current interest rates, regulatory and tax
requirements, our sales commission and administrative expenses, general
economic trends, and competitive factors. For current interest rate
information, please contact us at 1-800-457-7617.
WE WILL DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE
CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE.
At the end of each Guarantee Period, we will mail you a notice asking you what
to do with the relevant amount, including the accrued interest. During the
30-day period after the end of the Guarantee Period, you may:
1) take no action. If so, we will automatically keep the relevant amount in the
Guaranteed Maturity Fixed Account Option. The new Guarantee Period will be
the same length as the expiring Guarantee Period and will begin on the day
the previous Guarantee Period ends. The new interest rate will be our then
current declared rate for Guarantee Periods of that length; or
2) allocate the relevant Contract Value to one or more new Guarantee Periods of
your choice in the Guaranteed Maturity Fixed Account Option. The new
Guarantee Period(s) will begin on the day the previous Guarantee Period
ends. The new interest rate will be our then current declared rate for those
Guarantee Periods; or
20 PROSPECTUS
3) instruct us to transfer all or a portion of the relevant amount to one or
more Sub-Accounts. We will effect the transfer on the day we receive your
instructions. We will not adjust the amount transferred to include a Market
Value Adjustment; or
4) withdraw all or a portion of the relevant amount through a partial
withdrawal. You may be required to pay a Withdrawal Charge, but we will not
adjust the amount withdrawn to include a Market Value Adjustment. The amount
withdrawn will be deemed to have been withdrawn on the day the Guarantee
Period ends.
Under our Automatic Laddering Program, you may choose, in advance, to use
Guarantee Periods of the same length for all renewals in the Guaranteed
Maturity Fixed Account Option. You can select this program at any time during
the Accumulation Period, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to
stop. We may stop offering this program at any time.
MARKET VALUE ADJUSTMENT. We may increase or decrease the amount of some
transactions involving your investment in the Guaranteed Maturity Fixed Account
Option to include a Market Value Adjustment. The formula for determining Market
Value Adjustments reflects changes in interest rates since the beginning of the
relevant Guarantee Period. As a result, you will bear some of the investment
risk on amounts allocated to the Guaranteed Maturity Fixed Account Option.
As a general rule, we will apply a Market Value Adjustment to the following
transactions involving your Fixed Account balance:
1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option in
an amount greater than the Free Withdrawal Amount, as described on page 33;
2) when you transfer funds from the Guaranteed Maturity Fixed Account Option to
the Sub-Accounts;
3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
4) when you annuitize your Contract; and
5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction, to the extent
that:
1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction;
2) you make a withdrawal to satisfy the IRS' required minimum distribution
rules for this Contract; or
3) it is a transfer that is part of a Dollar Cost Averaging program.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment. This formula primarily compares:
1) the Treasury Rate at the time of the relevant transaction for a maturity
equal in length to the relevant Guarantee Period; and
2) the Treasury Rate at the beginning of the Guarantee Period for a maturity
equal in length to the Guarantee Period.
Generally, if the Treasury Rate at the beginning of the Guarantee Period is
higher than the corresponding current Treasury Rate, then the Market Value
Adjustment will increase the amount payable to you or transferred. Similarly,
if the Treasury Rate at the beginning of the Guarantee Period is lower than the
corresponding current Treasury Rate, then the Market Value Adjustment will
reduce the amount payable to you or transferred.
For example, assume that you purchased a Contract and selected an initial
Guarantee Period of five years and the five-year Treasury Rate for that
duration is 4.50%. Assume that at the end of three years, you make a partial
withdrawal. If, at that later time, the current five-year Treasury Rate is
4.20%, then the Market Value Adjustment will be positive, which will result in
an increase in the amount payable to you. Similarly, if the current five-year
Treasury Rate is 4.80%, then the Market Value Adjustment will be negative,
which will result in a decrease in the amount payable to you.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may also allocate Purchase
Payments to the Dollar Cost Averaging Fixed Account Option. We will credit
interest to Purchase Payments allocated to this option for up to one year at
the current rate that we declare when you make the allocation. The effective
annual rate will never be less than 3%. You may not transfer funds to this
option from the Sub-Accounts or the Guaranteed Maturity Fixed Account Option.
We will follow your instructions in transferring amounts from this option to
the Sub-Accounts or the Guaranteed Maturity Fixed Account Option on a monthly
basis only, as described in "Automatic Dollar Cost Averaging Program" on page
15 of this prospectus.
ANNUITY BENEFITS
ANNUITY DATE. You may select the Annuity Date, which is the date on which
annuity payments are to begin, in your application. The Annuity Date must
always be the business day on or immediately following the tenth day of a
calendar month.
The Annuity Date may be no later than the Latest Annuity Date. As a general
rule, the Latest Annuity Date is on or immediately following the later of the
10th Contract Anniversary or the youngest Annuitant's 90th
21 PROSPECTUS
birthday. If your Contract was issued pursuant to a Qualified Plan, however,
the Tax Code generally requires you to begin to take at least a minimum
distribution by the later of:
.. the year of your separation from service; or
.. April 1 of the calendar year following the calendar year in which you
attain age 70 1/2.
If your Contract is issued pursuant to Section 408 of the Tax Code (traditional
IRAs), you must begin taking minimum distributions by April 1 of the calendar
year following the calendar year in which you reach age 70 1/2. No minimum
distributions are required by the Tax Code for Contracts issued pursuant to
Section 408A (Roth IRAs).
If your Contract was purchased by a Qualified Plan, we may require you to
annuitize by the date required by the Tax Code.
If you do not select an Annuity Date, the Latest Annuity Date will
automatically become the Annuity Date. You may change the Annuity Date by
writing to us at the address given on the first page of the prospectus.
ANNUITY OPTIONS. You may elect an Annuity Option at any time before the
Annuity Date. As part of your election, you may choose the length of the
applicable guaranteed payment period within the limits available for your
chosen Option. If you do not select an Annuity Option, we will pay monthly
annuity payments in accordance with the applicable default Option. The default
Options are:
.. Option A with 10 years (120 months) guaranteed, if you have designated only
one Annuitant; and
.. Option B with 10 years (120 months) guaranteed, if you have designated
joint Annuitants.
You may freely change your choice of Annuity Option, as long as you request the
change at least thirty days before the Annuity Date.
Three Annuity Options are generally available under the Contract. Each is
available in the form of:
.. a Fixed Annuity;
.. a Variable Annuity; or
.. a combination of both Fixed and Variable Annuity.
The three Annuity Options are:
OPTION A: LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay income payments to the Beneficiary until the guaranteed
number of payments has been paid. The number of months guaranteed may be 0
months, or range from 60 to 360 months.
OPTION B: JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under this
plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we
will continue to pay income payments to the Beneficiary until the guaranteed
number of payments has been paid. The number of months guaranteed may be 0
months, or range from 60 to 360 months.
OPTION C: PAYMENTS FOR A SPECIFIED PERIOD CERTAIN OF 5 YEARS TO 30 YEARS. We
make periodic payments for the period you have chosen. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary. If you elect this option, and request
Variable Annuity payments, you may at any time before the period expires
request a lump sum payment. If you elected Variable Annuity payments, the lump
sum payment will depend on:
.. the investment results of the Sub-Accounts you have selected,
.. the Contract Value at the time you elected annuitization, and
.. the length of the remaining period for which the payee would be entitled to
payments.
No lump sum payment is available if you request Fixed Annuity payments. If you
purchased your Contract under a retirement plan, you may have a more limited
selection of Annuity Options to choose from. You should consult your Plan
documents to see what is available.
If you choose Income Plan A or B, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before
starting income payments, and proof that the Annuitant or joint Annuitant are
alive before we make each payment. Please note that under such Income Plans, if
you elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they
die before the third income payment, and so on.
You may not "annuitize" your Contract for a lump sum payment. Instead, before
the Annuity Date you may surrender your Contract for a lump sum. As described
on page 30 below, however, we will subtract any applicable Withdrawal Charge
and increase or decrease your surrender proceeds by any applicable Market Value
Adjustment.
OTHER OPTIONS. We may have other Annuity Options available. You may obtain
information about them by writing or calling us.
22 PROSPECTUS
If your Contract is issued under Sections 401, 403(b), 408 or 408A of the Tax
Code, we will only make payments to you and/or your spouse.
ANNUITY PAYMENTS: GENERAL. On the Annuity Date, we will apply the Annuitized
Value of your Contract to the Annuity Option you have chosen. Your annuity
payments may consist of Variable Annuity payments or Fixed Annuity payments or
a combination of the two. We will determine the amount of your annuity payments
as described in "Variable Annuity Payments" and "Fixed Annuity Payments"
beginning on page 23.
You must notify us in writing at least 30 days before the Annuity Date how you
wish to allocate your Annuitized Value between Variable Annuity and Fixed
Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Sub-Accounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and Variable Annuity payments, we will apply your Contract Value in the
Separate Account to Variable Annuity payments and your Contract Value in the
Fixed Account to Fixed Annuity payments.
Annuity payments begin on the Annuity Date. We make subsequent annuity payments
on the tenth of the month or, if the NYSE is closed on that day, the next day
on which the NYSE is open for business.
Annuity payments will be made in monthly, quarterly, semi-annual or annual
installments as you select. If the amount available to apply under an Annuity
Option is less than $5,000, however, and state law permits, we may pay you a
lump sum instead of the periodic payments you have chosen. In addition, if the
first annuity payment would be less than $50, and state law permits us, we may
reduce the frequency of payments so that the initial payment will be at least
$50.
We may defer for up to 15 days the payment of any amount attributable to a
Purchase Payment made by check to allow the check reasonable time to clear.
YOU MAY NOT WITHDRAW CONTRACT VALUE DURING THE ANNUITY PERIOD, IF WE ARE MAKING
PAYMENTS TO YOU UNDER ANY ANNUITY OPTION, SUCH AS OPTION A OR B ABOVE,
INVOLVING PAYMENT TO THE PAYEE FOR LIFE OR ANY COMBINATION OF PAYMENTS FOR LIFE
AND MINIMUM GUARANTEE PERIOD FOR A PREDETERMINED NUMBER OF YEARS.
VARIABLE ANNUITY PAYMENTS. One basic objective of the Contract is to provide
Variable Annuity Payments which will to some degree respond to changes in the
economic environment. The amount of your Variable Annuity Payments will depend
upon the investment results of the Sub-Accounts you have selected, any premium
taxes, the age and sex of the Annuitant, and the Annuity Option chosen. We
guarantee that the Payments will not be affected by (1) actual mortality
experience and (2) the amount of our administration expenses.
We cannot predict the total amount of your Variable Annuity payments. The
Variable Annuity payments may be more or less than your total Purchase Payments
because (a) Variable Annuity payments vary with the investment results of the
underlying Portfolios; and (b) Annuitants may die before their actuarial life
expectancy is achieved.
The length of any guaranteed payment period under your selected Annuity Option
will affect the dollar amounts of each Variable Annuity payment. As a general
rule, longer guarantee periods result in lower periodic payments, all other
things being equal. For example, if a life Annuity Option with no minimum
guaranteed payment period is chosen, the Variable Annuity payments will be
greater than Variable Annuity payments under an Annuity Option for a minimum
specified period and guaranteed thereafter for life.
The investment results of the Sub-Accounts to which you have allocated your
Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3 1/2%. If the actual net
investment return is less than the assumed investment rate, then the dollar
amount of the Variable Annuity payments will decrease. The dollar amount of the
Variable Annuity payments will stay level if the net investment return equals
the assumed investment rate and the dollar amount of the Variable Annuity
payments will increase if the net investment return exceeds the assumed
investment rate. You should consult the Statement of Additional Information for
more detailed information as to how we determine Variable Annuity Payments.
FIXED ANNUITY PAYMENTS. You may choose to apply a portion of your Annuitized
Value to provide Fixed Annuity payments. We determine the Fixed Annuity payment
amount by applying the applicable Annuitized Value to the Annuity Option you
have selected.
As a general rule, subsequent Fixed Annuity payments will be equal in amount to
the initial payment. However, as described in "Transfers During the Annuity
Period" below, after the Annuity Date, you will have a limited ability to
increase the amount of your Fixed Annuity payments by making transfers from the
Sub-Accounts.
We may defer making Fixed Annuity payments for a period of up to six months or
whatever shorter time state law may require. During the deferral period, we
credit any applicable interest at a rate at least as high as state law requires.
TRANSFERS DURING THE ANNUITY PERIOD. During the Annuity Period, you will have
a limited ability to make
23 PROSPECTUS
transfers among the Sub-Accounts so as to change the relative weighting of the
Sub-Accounts on which your Variable Annuity payments will be based. In
addition, you will have a limited ability to make transfers from the
Sub-Accounts to increase the proportion of your annuity payments consisting of
Fixed Annuity payments. You may not, however, convert any portion of your right
to receive Fixed Annuity payments into Variable Annuity payments.
You may not make any transfers for the first six months after the Annuity Date.
Thereafter, you may make transfers among the Sub-Accounts or make transfers
from the Sub-Accounts to increase your Fixed Annuity payments. Your transfers
must be at least six months apart.
DEATH BENEFIT DURING ANNUITY PERIOD. If any Contract Owner dies after the
Annuity Date, the successor Contract Owner will receive any guaranteed annuity
payments scheduled to continue. If the successor Owner dies before all of the
guaranteed payments have been made, we will continue the guaranteed payments to
the Beneficiary(ies). After annuity payments begin, upon
the death of the Annuitant and any Joint Annuitant, we will make any remaining
guaranteed payments to the Beneficiary. The amount and number of these
guaranteed payments will depend on the Annuity Option in effect at the time of
the Annuitant's death. After the Annuitant's death, any remaining guaranteed
payments will be distributed at least as rapidly as under the method of
distribution in effect at the Annuitant's death.
CERTAIN EMPLOYEE BENEFIT PLANS. The Contracts offered by this prospectus
contain income payment tables that provide for different payments to men and
women of the same age, except in states that require unisex tables. We reserve
the right to use income payment tables that do not distinguish on the basis of
sex to the extent permitted by applicable law. In certain employment related
situations, employers are required by law to use the same income payment tables
for men and women. Accordingly, if the Contract is to be used in connection
with an employment-related retirement or benefit plan and we do not offer
unisex annuity tables in your state, you should consult with legal counsel as
to whether the purchase of a Contract is appropriate.
OTHER CONTRACT BENEFITS
DEATH BENEFIT: GENERAL. We will pay a distribution on death, if:
1) the Contract is in force;
2) annuity payments have not begun; and
3) either:
(a)any Owner dies; or
(b)any Annuitant dies and the Owner is a non-living person.
DUE PROOF OF DEATH. A complete request for settlement of the Death Proceeds
must be submitted before the Annuity Date. Where there are multiple
Beneficiaries, we will value the Death Benefit at the time the first
Beneficiary submits a complete request for settlement of the Death Proceeds. A
complete request must include "Due Proof of Death". We will accept the
following documentation as Due Proof of Death:
.. a certified original copy of the Death Certificate;
.. a certified copy of a court decree as to the finding of death; or
.. a written statement of a medical doctor who attended the deceased at the
time of death.
In addition, in our discretion we may accept other types of proof.
DEATH PROCEEDS. If we receive a complete request for settlement of the Death
Proceeds within 180 days of the date of your death, the Death Proceeds are
equal to the Death Benefit described below. Otherwise, the Death Proceeds are
equal to the greater of the Contract Value or the Surrender Value. We reserve
the right to waive or extend, on a nondiscriminatory basis, the 180-day period
in which the Death Proceeds will equal the Death Benefit as described below.
This right applies only to the amount payable as Death Proceeds and in no way
restricts when the claim may be filed.
DEATH BENEFIT AMOUNT. The standard Death Benefit under the Contract is the
greatest of the following:
1) the total Purchase Payments, less a withdrawal adjustment for any prior
partial withdrawals;
2) the Contract Value on the date as of which we calculate the Death Benefit.
3) the Surrender Value;
4) the Contract Value on the seventh Contract Anniversary and each subsequent
Contract Anniversary evenly divisible by seven, increased by the total
Purchase Payments since that anniversary and reduced by a withdrawal
adjustment for any partial withdrawals since that anniversary.
The withdrawal adjustment for the Death Benefit will equal (a) divided by (b),
with the result multiplied by (c), where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the value of the applicable Death Benefit immediately before the
withdrawal.
As described on page 26, you may add optional riders that in some circumstances
may increase the Death Benefit under your contract.
24 PROSPECTUS
DEATH BENEFIT PAYMENTS
1. If your spouse is the sole beneficiary:
(a) Your spouse may elect to receive the Death Proceeds in a lump sum; or
(b) Your spouse may elect to receive the Death Proceeds paid out under one
of the annuity options, subject to the following conditions:
The Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
(i) over the life of your spouse; or
(ii) for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of your spouse; or
(iii) over the life of your spouse with a guaranteed number of payments from
5 to 30 years but not to exceed the life expectancy of your spouse.
(b) If your spouse chooses to continue the Contract, or does not elect one
of these options, then the Contract will continue in the Accumulation Period as
if the death had not occurred. If the Contract is continued in the Accumulation
Period, the following conditions apply.
Unless otherwise instructed by the continuing spouse, the excess, if any, of
the Death Proceeds over the Contract Value will be allocated to the
Sub-Accounts. This excess will be allocated in proportion to your Contract
Value in those Sub-Accounts as of the end of the Valuation Period during which
we receive the
complete request for settlement of the Death Proceeds, except that any portion
of this excess attributable to the fixed account options will be allocated to
the Money Market Sub-Account. Within 30 days of the date the Contract is
continued, your surviving spouse may choose one of the following transfer
alternatives without incurring a transfer fee:
(i) transfer all or a portion of the excess among the Sub-Accounts;
(ii) transfer all or a portion of the excess into the Guaranteed Maturity
Fixed Account and begin a new Guarantee Period; or
(iii) transfer all or a portion of the excess into a combination of
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as the free transfer allowed each calendar
month and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of your death without incurring a Withdrawal Charge or Market Value
Adjustment.
Prior to the Annuity Date, the death benefit of the continued Contract will be
as defined in the Death Benefit provision.
Only one spousal continuation is allowed under this Contract.
If there is no Annuitant at that time, the new Annuitant will be the surviving
spouse.
2. If the Beneficiary is not your spouse but is a living person:
(a) The Beneficiary may elect to receive the Death Proceeds in a lump sum; or
(b) The Beneficiary may elect to receive the Death Proceeds paid out under
one of the annuity options, subject to the following conditions:
The Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
(i) over the life of the Beneficiary; or
(ii) for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of the Beneficiary; or
(iii) over the life of the Beneficiary with a guaranteed number of payments
from 5 to 30 years but not to exceed the life expectancy of the Beneficiary.
(c) If the Beneficiary does not elect one of the options above, then the
Beneficiary must receive the Contract Value payable within 5 years of your date
of death. We will determine the Death Proceeds as of the date we receive the
complete request for settlement of the Death Proceeds. Unless otherwise
instructed by the Beneficiary, the excess, if any, of the Death Proceeds over
the Contract Value will be allocated to the Money Market Sub-Account and the
Contract Value will be adjusted accordingly. The Beneficiary may exercise all
rights as set forth in Transfer During the Accumulation Period on page 13 and
Transfer Fees on page 32 during this 5-year period.
The Beneficiary may not pay additional purchase payments into the Contract
under this election. Withdrawal Charges will be waived for any withdrawals made
during this 5-year period.
We reserve the right to offer additional options upon the death of the Contract
Owner.
If the Beneficiary dies before the complete liquidation of the Contract Value,
then the Beneficiary's named Beneficiary(ies) will receive the greater of the
Surrender Value or the remaining Contract Value. This amount must be liquidated
as a lump sum within 5 years of the date of the original Contract Owner's death.
3. If the Beneficiary is a corporation or other type of non-living person:
(a) The Beneficiary may elect to receive the Death Proceeds in a lump sum; or
(b) If the Beneficiary does not elect to receive the option above, then the
Beneficiary must receive the
25 PROSPECTUS
Contract Value payable within 5 years of your date of death. We will determine
the Death Proceeds as of the date we receive the complete request for
settlement of the Death Proceeds. Unless otherwise instructed by the
Beneficiary, the excess, if any, of the Death Proceeds over the Contract Value
will be allocated to the Money Market Sub-Account. The Beneficiary may exercise
all rights as set forth in Transfer During the Accumulation Period on page 13
and Transfer Fees on page 32 during this 5-year period.
The Beneficiary may not pay additional purchase payments into the contract
under this election. Withdrawal charges will be waived during this 5 year
period.
We reserve the right to offer additional options upon Death of Owner.
If any Beneficiary is a non-living person, all Beneficiaries will be considered
to be non-living persons for the above purposes.
Under any of these options, all contract rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the Beneficiary from
the date of your death to the date on which the Death Proceeds are paid.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
We offer different optional riders under this Contract. If you elect an
optional rider, we will charge you a higher mortality and expense charge. We
may discontinue offering one or more Riders at any time. The benefits under the
Riders are described below. The benefits in the riders discussed below may not
be available in all states. For example, the Enhanced Death Benefit, Enhanced
Income Benefit and all versions of the Enhanced Death and Income Benefit riders
issued in Washington state do not contain the Enhanced Death Benefit B or
Enhanced Income Benefit B provisions that are described below. Further they may
be offered in certain states as a benefit of the base contract rather than as a
separate rider. In those states, the expense charge will remain the same for
the benefit.
ENHANCED DEATH BENEFIT RIDER: When you purchase your Contract, you may select
the Enhanced Death Benefit Rider. This Rider is available if the oldest Owner
or Annuitant is age 80 or less at issue. If you are not an individual, the
Enhanced Death Benefit applies only to the Annuitant's death. As described
below, we will charge a higher mortality and expense risk charge if you select
this Rider. If you select this Rider, the Death Benefit will be the greater of
the value provided in your Contract or the Enhanced Death Benefit. The Enhanced
Death Benefit will be the greater of the Enhanced Death Benefit A or Enhanced
Death Benefit B, defined below.
ENHANCED INCOME BENEFIT RIDER: When you purchase your Contract you may select
the Enhanced Income Benefit Rider if available in your state. Lincoln Benefit
Life no longer offers this Rider in most states. This Rider is available if the
oldest Owner or Annuitant is age 75 or less at issue. If you select this Rider,
you may be able to receive higher annuity payments in certain circumstances. As
described below, we will charge a higher mortality and expense risk charge if
you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the greater of
Enhanced Income Benefit A or Enhanced Income Benefit B, defined below, on the
Annuity Date. We will not increase or decrease the Enhanced Income Benefit
amount by any Market Value Adjustment. To be eligible for the Enhanced Income
Benefit, you must select an Annuity Date that is:
(a) on or after the tenth Contract Anniversary;
(b) before the Annuitant's age 90; and
(c) within a 30-day period on or following a Contract Anniversary.
On the Annuity Date, you may apply the Enhanced Income Benefit to an Annuity
Option that provides for fixed payments on the basis guaranteed in the Contract
for either a single life with a period certain, or joint lives with a period
certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) 5 years, if the youngest Annuitant's age is greater than 80 on the
Annuity Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
The Enhanced Income Benefit under this Rider only applies to the determination
of income payments under the income options described above. It is not a
guarantee of Contract Value or performance. The benefit does not enhance the
amounts paid in partial withdrawals, surrenders or death benefits. In addition,
under some circumstances, you will receive higher initial income payments by
applying your Contract Annuitized Value to one of the standard Annuity Options
instead of utilizing this optional benefit. If you surrender your Contract, you
will not receive any benefit under this Rider.
ENHANCED INCOME BENEFIT A. At issue, the Enhanced Income Benefit A is equal to
the initial purchase payment. After issue, Enhanced Income Benefit A is
recalculated as follows:
.. When you make a Purchase Payment, we will increase the Enhanced Income
Benefit A by the amount of your Purchase Payment;
.. When you make a withdrawal, we will decrease Enhanced Income Benefit A by a
withdrawal adjustment as defined below;
.. On each Contract Anniversary, the Enhanced Income Benefit A is equal to the
greater of the
26 PROSPECTUS
Contract Value or the most recently calculated Enhanced Income Benefit A.
If you do not make any additional Purchase Payments or withdrawals, the
Enhanced Income Benefit A will be the greatest of all Contract Anniversary
Contract Values prior to the date we calculate the Enhanced Income Benefit.
We will continuously adjust Enhanced Income Benefit A; as described above,
until the oldest Contract Owner's 85th birthday, or if the Contract Owner is
not a living individual, the oldest Annuitant's 85th birthday. Thereafter, we
will adjust Enhanced Income Benefit A only for Purchase Payments and
withdrawals.
ENHANCED INCOME BENEFIT B. Enhanced Income Benefit B is equal to your total
Purchase Payments reduced by any withdrawal adjustments, accumulated daily at
an effective annual interest rate of 5% per year, until the earlier of:
(a) the date we determine the income benefit;
(b) the first day of the month following the oldest Contract Owner's 85th
birthday, or the first day of the month following the oldest Annuitant's 85th
birthday, if the Contract Owner is not a living individual.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c) where,
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal;
(c) is the most recently calculated Enhanced Income Benefit A or B, as
applicable.
ENHANCED DEATH AND INCOME BENEFIT RIDER II: When you purchase your Contract
and if available in your state, you may select the Enhanced Death and Income
Benefit Rider II. Lincoln Benefit Life no longer offers this Rider in most
states. This Rider is available if the oldest Owner or Annuitant is age 75 or
less at issue. This Rider provides the same Enhanced Death Benefit as the
Enhanced Death Benefit Rider. In addition, this Rider may enable you to receive
higher annuity payments in certain circumstances. As described below, we will
charge a higher mortality and expense risk charge if you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the greater of
Enhanced Death Benefit A or Enhanced Death Benefit B, defined below, on the
Annuity Date. We will not increase or decrease the Enhanced Income Benefit
amount by any Market Value Adjustment. To be eligible for the Enhanced Income
Benefit, you must select an Annuity Date that is:
(a) on or after the tenth Contract Anniversary;
(b) before the Annuitant's age 90; and
(c) within a 30-day period on or following a Contract Anniversary.
On the Annuity Date, you may apply the Enhanced Income Benefit to an Annuity
Option that provides for fixed payments on the basis guaranteed in the contract
for either a single life with a period certain, or joint lives with a period
certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) 5 years, if the youngest Annuitant's age is greater than 80 on the
Annuity Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
ENHANCED DEATH AND INCOME BENEFIT RIDER. This Rider was previously available
if the oldest Owner or Annuitant is age 75 or less at issue. This rider is no
longer available. This Rider provides the same Enhanced Death Benefit as the
Enhanced Death Benefit Rider. In addition, this Rider may enable you to receive
higher annuity payments in certain circumstances. As described below, we will
charge a higher mortality and expense risk charge if you select this Rider.
The Enhanced Income Benefit under this Rider is equal to the value of the
Enhanced Death Benefit on the Annuity Date. We will not increase or decrease
the Enhanced Income Benefit amount by any Market Value Adjustment. To be
eligible for the Enhanced Income Benefit, you must select an Annuity Date that
is on or after the tenth Contract Anniversary, but before the Annuitant's age
90. On the Annuity Date, you may apply the Enhanced Income Benefit to an
Annuity Option that provides for payments guaranteed for either a single life
with a period certain or joint lives with a period certain of at least:
(a) 10 years, if the youngest Annuitant's age is 80 or less on the Annuity
Date; or
(b) at least 5 years, if the youngest Annuitant's age is greater than 80 on
the Annuity Date.
If you wish to select a different Annuity Option, you must apply the Annuitized
Value and not the Enhanced Income Benefit.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial Purchase Payment. After issue, Enhanced Death Benefit A is adjusted
whenever you pay a Purchase Payment or make a withdrawal and on each Contract
Anniversary as follows:
.. When you pay a Purchase Payment, we will increase Enhanced Death Benefit A
by the amount of the Purchase Payment;
.. When you make a withdrawal, we will decrease Enhanced Death Benefit A by a
withdrawal adjustment, as described below; and
.. On each Contract Anniversary, we will set Enhanced Death Benefit A equal to
the greater of
27 PROSPECTUS
the Contract Value on that Contract Anniversary or the most recently
calculated Enhanced Death Benefit A.
If you do not pay any additional purchase payments or make any withdrawals,
Enhanced Death Benefit A will equal the greatest of the Contract Value on the
Issue Date and all Contract Anniversaries prior to the date we calculate any
death benefit.
We will continuously adjust Enhanced Death Benefit A as described above until
the oldest Contract Owner's 85th birthday or, if the Contract Owner is not a
living individual, the Annuitant's 85th birthday. Thereafter, we will adjust
Enhanced Death Benefit A only for Purchase Payments and withdrawals.
ENHANCED DEATH BENEFIT B. Enhanced Death Benefit B is equal to your total
Purchase Payments, reduced by any withdrawal adjustments, accumulated daily at
an effective annual rate of 5% per year, until the earlier of:
(a) the date we determine the death benefit,
(b) the first day of the month following the oldest Contract Owner's 85th
birthday; or
(c) the first day of the month following the oldest Annuitant's 85th
birthday, if the Contract Owner is not a living individual.
Thereafter, we will only adjust Enhanced Death Benefit B to reflect additional
Purchase Payments and withdrawals. Enhanced Death Benefit B will never be
greater than the maximum death benefit allowed by any nonforfeiture laws that
govern the Contract.
The withdrawal adjustment for both Enhanced Death Benefit A and Enhanced Death
Benefit B will equal (a) divided by (b), with the result multiplied by (c),
where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the most recently calculated Enhanced Benefit A or B, as appropriate.
BENEFICIARY. You name the Beneficiary. You may name a Beneficiary in the
application. You may also name one or more contingent Beneficiaries who are
entitled to receive benefits under the contract if all primary Beneficiaries
are deceased at the time a Contract Owner, or Annuitant if the Contract Owner
is not a living person, dies. You may change the Beneficiary or add additional
Beneficiaries at any time before the Annuity Date. We will provide a form to be
signed and filed with us.
Your changes in Beneficiary take effect when we accept them, effective as of
the date you signed the form. Until we accept your change instructions, we are
entitled to rely on your most recent instructions in our files. We are not
liable for making a payment to a Beneficiary shown in our files or treating
that person in any other respect as the Beneficiary prior to accepting a
change. Accordingly, if you wish to change your beneficiary, you should deliver
your instructions to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living, the Beneficiary will be:
.. your spouse if he or she is still alive; or, if he or she is no longer
alive,
.. your surviving children equally; or if you have no surviving children,
.. your estate.
Unless you have provided directions to the contrary, the Beneficiaries will
take equal shares. If there is more than one Beneficiary in a class and one of
the Beneficiaries predeceases the Contract Owner or Annuitant, the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original shares of the remaining beneficiaries.
If more than one Beneficiary shares in the Death Proceeds, each Beneficiary
will be treated as a separate and independent owner of his or her respective
share. Each Beneficiary will exercise all rights related to his or her share,
including the sole right to select a payout option, subject to any restrictions
previously placed upon the Beneficiary. Each Beneficiary may designate a
Beneficiary(ies) for his or her respective share, but that designated
Beneficiary(ies) will be restricted to the payout option chosen by the original
Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation or other type of non-living person, all beneficiaries will be
considered to be non-living persons.
You may specify that the Death Benefit be paid under a specific income Plan by
submitting a written request to our Service Center. If you so request, your
Beneficiary may not change to a different Income Plan or lump sum. Once we
accept the written request, the change or restriction will take effect as of
the date you signed the request. Any change is subject to any payment we make
or other action we take before we accept the changes.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
CONTRACT LOANS FOR 403(B) CONTRACTS. Subject to the restrictions described
below, we will make loans to the Owner of a Contract used in connection with a
Tax Sheltered Annuity Plan ("TSA Plan") under Section 403(b) of the Tax Code.
Loans are not available under Non-Qualified Contracts. We will only make loans
after the free look period and before annuitization. All loans are subject to
the terms of the Contract, the relevant Plan, and the Tax Code, which impose
restrictions on loans.
We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be
28 PROSPECTUS
greater than the Surrender Value of your Contract on the date of the loan. In
addition, we will not make a loan to you if the total of the requested loan and
all of the plan participant's Contract loans under TSA plans is more than the
lesser of (a) or (b) where:
(a) equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and
(b) equals the greater of $10,000 or half of the Surrender Value.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Some of these requirements are stated
in Section 72 of the Tax Code. Please seek advice from your plan administrator
or tax advisor.
When we make a loan, we will transfer an amount equal to the loan amount from
the Separate Account and/or the Fixed Account to the Loan Account as collateral
for the loan. We will transfer to the Loan Account amounts from the Separate
Account in proportion to the assets in each Sub-Account. If your loan amount is
greater than your Contract Value in the Sub-Accounts, we will transfer the
remaining required collateral from the Guaranteed Maturity Fixed Account
Options. If your loan amount is greater than your contract value in the
Sub-Accounts and the Guaranteed Maturity Fixed Account Options, we will
transfer the remaining required collateral from the Dollar Cost Averaging Fixed
Account Option.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Sub-Accounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount transferred to
the Loan Account will equal the desired loan amount. We will charge a
Withdrawal Charge and apply a Market Value Adjustment, if applicable, on a
distribution to repay the loan in full, in the event of loan default.
We will credit interest to the amounts in the Loan Account. The annual interest
rate credited to the Loan Account will be the greater of: (a) 3%; or (b) the
loan interest rate minus 2.25%. The value of the amounts in the Loan Account
are not affected by the changes in the value of the Sub-Accounts.
When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the
loan interest rate applicable to new loans. We also reserve the right to change
the terms of new loans.
We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:
1) the Death Proceeds;
2) surrender proceeds;
3) the amount available for partial withdrawal;
4) the amount applied on the Annuity Date to provide annuity payments; and
5) the amount applied on the Annuity Date to provide annuity payments under the
Enhanced Income Benefit Rider, Enhanced Death and Income Benefit Rider, or
the Enhanced Death and Income Benefit Rider II.
Usually you must repay a Contract loan within five years of the date the loan
is made. Scheduled payments must be level, amortized over the repayment period,
and made at least quarterly. We may permit a repayment period of 15 or 30 years
if the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
Generally, loan payments are allocated to the Sub-Account(s) in the proportion
that you have selected for Purchase Payments. Allocations of loan payments are
not permitted to the Fixed Accounts (Guaranteed Maturity Fixed Account and
Dollar Cost Averaging Fixed Account Option). If your Purchase Payment
allocation includes any of the Fixed Accounts, the percentages allocated to the
Fixed Accounts will be allocated instead to the Fidelity Money Market
Sub-Account.
If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount
and incur the early withdrawal tax penalty. We will capitalize interest on a
loan in default.
If the total loan balance exceeds the Surrender Value, we will mail written
notice to your last known address. The notice will state the amount needed to
maintain the Contract in force. If we do not receive payment of this amount
within 31 days after we mail this notice, we will terminate your Contract.
We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.
WITHDRAWALS (REDEMPTIONS). Except as explained below, you may redeem a
Contract for all or a portion of its Contract Value before the Annuity Date. We
may
29 PROSPECTUS
impose a Withdrawal Charge, which would reduce the amount paid to you upon
redemption. The Withdrawal Charges are described on page 32. Withdrawals from
the Fixed Account may be increased or decreased by a Market Value Adjustment,
as described in "Market Value Adjustment" on page 21.
In general, you must withdraw at least $50 at a time. You may also withdraw a
lesser amount if you are withdrawing your entire interest in a Sub-Account. If
your request for a partial withdrawal would reduce the Contract Value to less
than $500, we may treat it as a request for a withdrawal of your entire
Contract Value, as described in "Minimum Contract Value" on page 31. Your
Contract will terminate if you withdraw all of your Contract Value.
Withdrawals taken prior to annuitization are generally considered to come from
the earnings in the Contract first. If the Contract is tax-qualified, generally
all withdrawals are treated as distribution of earnings. Withdrawals of
earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may be
subject to an additional 10% federal tax penalty.
We may be required to withhold 20% of withdrawals and distributions from
Contracts issued in connection with certain Qualified Plans, as described on
page 40.
To make a withdrawal, you must send us a written withdrawal request or
systematic withdrawal program enrollment form. You may obtain the required
forms from us at the address and phone number given on the first page of this
prospectus.
WRITTEN REQUESTS AND FORMS IN GOOD ORDER.
Written requests must include sufficient information and/or documentation, and
be sufficiently clear, to enable us to complete your request without the need
to exercise discretion on our part to carry it out. You may contact our
Customer Service Center to learn what information we require for your
particular request to be in "good order." Additionally, we may require that you
submit your request on our form. We reserve the right to determine whether any
particular request is in good order, and to change or waive any good order
requirements at any time.
For partial withdrawals, you may allocate the amount among the Sub-Accounts and
the Fixed Accounts. If we do not receive allocation instructions from you, we
usually will allocate the partial withdrawal proportionately among the
Sub-Accounts and the Guaranteed Maturity Fixed Account Options based upon the
balance of the Sub-Accounts and the Guaranteed Maturity Fixed Account Options,
with any remainder being distributed from the Dollar Cost Averaging Fixed
Account Option. You may not make a partial withdrawal from the Fixed Account in
an amount greater than the total amount of the partial withdrawal multiplied by
the ratio of the value of the Fixed Account to the Contract Value immediately
before the partial withdrawal.
If you request a total withdrawal, you must send us your Contract. The
Surrender Value will equal the Contract Value minus any applicable Withdrawal
Charge and adjusted by any applicable Market Value Adjustment. We also will
deduct a contract maintenance charge of $35, unless we have waived the contract
maintenance charge on your Contract as described on page 31. We determine the
Surrender Value based on the Contract Value next computed after we receive a
properly completed surrender request. We will usually pay the Surrender Value
within seven days after the day we receive a completed request form. However,
we may suspend the right of withdrawal from the Separate Account or delay
payment for withdrawals for more than seven days in the following circumstances:
1) whenever the New York Stock Exchange ("NYSE") is closed (other than
customary weekend and holiday closings);
2) when trading on the NYSE is restricted or an emergency exists, as determined
by the SEC, so that disposal of the Separate Account's investments or
determination of Accumulation Unit Values is not reasonably practicable; or
3) at any other time permitted by the SEC for your protection.
In addition, we may delay payment of the Surrender Value in the Fixed Account
for up to 6 months or a shorter period if required by law. If we delay payment
from the Fixed Account for more than 30 days, we will pay interest as required
by applicable law.
You may withdraw amounts attributable to contributions made pursuant to a
salary reduction agreement (in accordance with Section 403(b)(11) of the Tax
Code) only in the following circumstances:
1) when you attain age 59 1/2;
2) when you terminate your employment with the plan sponsor;
3) upon your death;
4) upon your disability as defined in Section 72(m)(7) of the Tax Code;
5) or in the case of hardship.
If you seek a hardship withdrawal, you may only withdraw amounts attributable
to your Purchase Payments; you may not withdraw any earnings. These limitations
on withdrawals apply to:
1) salary reduction contributions made after December 31, 1988;
2) income attributable to such contributions; and
3) income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between certain
Qualified Plans. Additional restrictions
30 PROSPECTUS
and limitations may apply to distributions from any Qualified Plan. Tax
penalties may also apply. You should seek tax advice regarding any withdrawals
or distributions from Qualified Plans.
SYSTEMATIC WITHDRAWAL PROGRAM. If your Contract is a non-Qualified Contract or
IRA, you may participate in our Systematic Withdrawal Program. You must
complete an enrollment form and send it to us. You must complete the
withholding election section of the enrollment form before the systematic
withdrawals will begin. You may choose withdrawal payments of a flat dollar
amount, earnings, or a percentage of Purchase Payments. You may choose to
receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or
annual basis. Systematic withdrawals will be deducted from your Sub-Account and
Fixed Account balances, excluding the Dollar Cost Averaging Fixed Account, on a
pro rata basis.
Depending on fluctuations in the net asset value of the Sub-Accounts and the
value of the Fixed Account, systematic withdrawals may reduce or even exhaust
the Contract Value. The minimum amount of each systematic withdrawal is $50.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
ERISA PLANS. A married participant may need spousal consent to receive a
distribution from a Contract issued in connection with a Qualified Plan or a
Non-Qualified Plan covered by to Title 1 of ERISA. You should consult an
adviser.
MINIMUM CONTRACT VALUE. If as a result of withdrawals your Contract Value
would be less than $500 and you have not made any Purchase Payments during the
previous three full calendar years, we may terminate your Contract and
distribute its Surrender Value to you. Before we do this, we will give you 60
days notice. We will not terminate your Contract on this ground if the Contract
Value has fallen below $500 due to either a decline in Accumulation Unit Value
or the imposition of fees and charges. In addition, in some states we are not
permitted to terminate Contracts on this ground. Different rules may apply to
Contracts issued in connection with Qualified Plans.
CONTRACT CHARGES
We assess charges under the Contract in three ways:
1) as deductions from Contract Value for contract maintenance charges and, if
applicable, for premium taxes;
2) as charges against the assets of the Separate Account for administrative
expenses and for the assumption of mortality and expense risks; and
3) as Withdrawal Charges (contingent deferred sales charges) subtracted from
withdrawal and surrender payments.
In addition, certain deductions are made from the assets of the Portfolios for
investment management fees and expenses. Those fees and expenses are summarized
in the Fee Tables on page 5, and described more fully in the Prospectuses and
Statements of Additional Information for the Portfolios.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a mortality and expense risk
charge from each Sub-Account during each Valuation Period. The mortality and
expense risk charge is equal, on an annual basis, to 1.15% of the average net
asset value of each Sub-Account. The mortality risks arise from our contractual
obligations:
1) to make annuity payments after the Annuity Date for the life of the
Annuitant(s);
2) to waive the Withdrawal Charge upon your death; and
3) to provide the Death Benefit prior to the Annuity Date. A detailed
explanation of the Death Benefit may be found beginning on page 24.
The expense risk is that it may cost us more to administer the Contracts and
the Separate Account than we receive from the contract maintenance charge and
the administrative expense charge. We guarantee the mortality and expense risk
charge and we cannot increase it. We assess the mortality and expense risk
charge during both the Accumulation Period and the Annuity Period.
If you select the Enhanced Death Benefit Rider, your mortality and expense risk
charge will be 1.35% of average net asset value of each Sub-Account. If you
select the Enhanced Income Rider, your mortality and expense risk charge will
be 1.50% of average daily net asset value of each Sub-Account. If you select
the Enhanced Death and Income Benefit Rider, your mortality and expense risk
charge will be 1.55% of average daily net asset value of each Sub-Account. If
you select the Enhanced Death and Income Benefit Rider II, your mortality and
expense risk charge will be 1.70% of average daily net asset value of each
Sub-Account. We charge a higher mortality and expense risk charge for the
Riders to compensate us for the additional risk that we accept by providing the
Riders. We will calculate a separate Accumulation Unit Value for the base
Contract, and for Contracts with each type of Rider, in order to reflect the
difference in the mortality and expense risk charges.
ADMINISTRATIVE CHARGES.
CONTRACT MAINTENANCE CHARGE. We charge an annual contract maintenance charge
of $35 on your Contract. The amount of this charge is guaranteed not to
increase. This charge reimburses us for our expenses incurred in maintaining
your Contract.
31 PROSPECTUS
Before the Annuity Date, we assess the contract maintenance charge on each
Contract Anniversary. To obtain payment of this charge, on a pro rata basis we
will allocate this charge among the Sub-Accounts to which you have allocated
your Contract Value, and redeem Accumulation Units accordingly. We will waive
this charge if you pay more than $50,000 in Purchase Payments or if you
allocate all of your Contract Value to the Fixed Account. If you surrender your
Contract, we will deduct the full $35 charge as of the date of surrender,
unless your Contract qualifies for a waiver.
After the Annuity Date and if allowed in your state, we will subtract this
charge in equal parts from each of your annuity payments. We will waive this
charge if on the Annuity Date your Contract Value is $50,000 or more or if all
of your annuity payments are Fixed Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE. We deduct an administrative expense charge from
each Sub-Account during each Valuation Period. This charge is equal, on an
annual basis, to 0.10% of the average net asset value of the Sub-Accounts. This
charge is designed to compensate us for the cost of administering the Contracts
and the Separate Account. The administrative expense charge is assessed during
both the Accumulation Period and the Annuity Period.
TRANSFER FEE. We currently are waiving the transfer fee. The Contract,
however, permits us to charge a transfer fee of $10 on the second and each
subsequent transaction in each calendar month in which transfer(s) are effected
between Subaccount(s) and/or the Fixed Account. We will notify you if we begin
to charge this fee. We will not charge a transfer fee on transfers that are
part of a Dollar Cost Averaging or Portfolio Rebalancing program.
The transfer fee will be deducted from Contract Value that remains in the
Subaccount(s) or Fixed Account from which the transfer was made. If that amount
is insufficient to pay the transfer fee, we will deduct the fee from the
transferred amount.
SALES CHARGES.
WITHDRAWAL CHARGE. We may charge a Withdrawal Charge, which is a contingent
deferred sales charge, upon certain withdrawals.
As a general rule, the Withdrawal Charge equals a percentage of Purchase
Payments withdrawn that are: (a) less than seven years old; and (b) not
eligible for a free withdrawal. The applicable percentage depends on how many
years ago you made the Purchase Payment being withdrawn, as shown in this chart:
WITHDRAWAL CHARGE
CONTRIBUTION YEAR PERCENTAGE
First and Second 7%
Third and Fourth 6%
Fifth 5%
Sixth 4%
Seventh 3%
Eighth and later 0%
When we calculate the Withdrawal Charge, we do not take any applicable Market
Value Adjustment into consideration. Beginning on January 1, 2004, if you make
a withdrawal before the Annuity Date, we will apply the withdrawal charge
percentage in effect on the date of the withdrawal, or the withdrawal charge
percentage in effect on the following day, whichever is lower.
We subtract the Withdrawal Charge from the Contract Value remaining after your
withdrawal. As a result, the decrease in your Contract Value will be greater
than the withdrawal amount requested and paid.
For purposes of determining the Withdrawal Charge, the Contract Value is deemed
to be withdrawn in the following order:
FIRST. Earnings - the current Contract Value minus all Purchase Payments that
have not previously been withdrawn;
SECOND. "Old Purchase Payments" - Purchase Payments received by us more than
seven years before the date of withdrawal that have not been previously
withdrawn;
THIRD. Any additional amounts available as a "Free Withdrawal," as described
on page 33;
FOURTH. "New Purchase Payments" - Purchase Payments received by us less than
seven years before the date of withdrawal. These Payments are deemed to be
withdrawn on a first-in, first-out basis.
No Withdrawal Charge is applied in the following situations:
.. on annuitization;
.. the payment of a Death Benefit;
.. a free withdrawal amount, as described on page 33;
.. certain withdrawals for Contracts issued under 403(b) plans or 401 plan
under our prototype as described on page 33;
.. withdrawals taken to satisfy IRS minimum distribution rules;
.. withdrawals that qualify for one of the waiver benefits described on pages
33-34; and
.. withdrawal under Contracts issued to employees of Lincoln Benefit Life
Company or its affiliates, Surety Life Insurance Company and Allstate
Financial Services, L.L.C., or to their spouses or minor children if those
individuals reside in the State of Nebraska.
We will never waive or eliminate a Withdrawal Charge where such waiver or
elimination would be unfairly discriminatory to any person or where it is
prohibited by state law.
We may waive withdrawal charges if this Contract is surrendered, and the entire
proceeds of the surrender are
32 PROSPECTUS
directly used to purchase a new Contract also issued by us or any affiliated
company. Such waivers will be granted on a non-discriminatory basis.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals of earnings are taxed as ordinary income and, if taken prior to age
59 1/2, may be subject to an additional 10% federal tax penalty. The amount of
your withdrawal may be affected by a Market Value Adjustment. Additional
restrictions may apply to Contracts held in Qualified Plans. We outline the tax
requirements applicable to withdrawals on page 36. You should consult your own
tax counsel or other tax advisers regarding any withdrawals.
FREE WITHDRAWAL. Withdrawals of the following amounts are never subject to the
Withdrawal Charge:
.. In any Contract Year, the greater of: (a) earnings that have not previously
been withdrawn; or (b) 15 percent of New Purchase Payments; and
.. Any Old Purchase Payments that have not been previously withdrawn.
However, even if you do not owe a Withdrawal Charge on a particular withdrawal,
you may still owe taxes or penalty taxes, or be subject to a market Value
Adjustment. The tax treatment of withdrawals is summarized on page 36.
WAIVER BENEFITS
GENERAL. If approved in your state, we will offer the three waiver benefits
described below. In general, if you qualify for one of these benefits, we will
permit you to make one or more partial or full withdrawals without paying any
otherwise applicable Withdrawal Charge or Market Value Adjustment. While we
have summarized those benefits here, you should consult your Contract for the
precise terms of the waiver benefits.
Some Qualified Plans may not permit you to utilize these benefits. Also, even
if you do not need to pay our Withdrawal Charge because of these benefits, you
still may be required to pay taxes or tax penalties on the amount withdrawn.
You should consult your tax adviser to determine the effect of a withdrawal on
your taxes.
CONFINEMENT WAIVER BENEFIT. Under this benefit, we will waive the Withdrawal
Charge and Market Value Adjustment on all withdrawals under your Contract if
the following conditions are satisfied:
1) Any Contract Owner or the Annuitant, if the Contract is owned by a company
or other legal entity, is confined to a long term care facility or a
hospital for at least 90 consecutive days. The Owner or Annuitant must enter
the long term care facility or hospital at least 30 days after the Issue
Date;
2) You request the withdrawal no later than 90 days following the end of the
Owner or Annuitant's stay at the long term care facility or hospital. You
must provide written proof of the stay with your withdrawal request; and
3) A physician must have prescribed the stay and the stay must be medically
necessary.
You may not claim this benefit if the physician prescribing the Owner or
Annuitant's stay in a long term care facility is the Owner or Annuitant or a
member of the Owner or Annuitant's immediate family.
TERMINAL ILLNESS WAIVER BENEFIT. Under this benefit, we will waive any
Withdrawal Charge and Market Value Adjustment on all withdrawals under your
Contract if, at least 30 days after the Issue Date, you, or the Annuitant if
the Owner is not a living person, are diagnosed with a terminal illness. We may
require confirmation of the diagnosis as provided in the Contract.
UNEMPLOYMENT WAIVER BENEFIT. Under this benefit, we will waive any Withdrawal
Charge and Market Value Adjustment on one partial or full withdrawal from your
Contract, if you meet the following requirements:
1) you become unemployed at least 1 year after the Issue Date;
2) you receive unemployment compensation for at least 30 consecutive days as a
result of that unemployment; and
3) you claim this benefit within 180 days of your initial receipt of
unemployment compensation.
You may exercise this benefit once before the Annuity Date.
WAIVER OF WITHDRAWAL CHARGE FOR CERTAIN QUALIFIED PLAN WITHDRAWALS. For
Contracts issued under a Section 403(b) plan or a Section 401 plan under our
prototype, we will waive the Withdrawal Charge when:
1) the Annuitant becomes disabled (as defined in Section 72(m)(7)) of the Tax
Code;
2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have passed
since the Contract was issued;
3) at least 15 Contract Years have passed since the Contract was issued.
Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan,
or a paired plan (Money Purchase and Profit Sharing). For
33 PROSPECTUS
more information about our prototype plan, call us at 1-800-457-7617.
PREMIUM TAXES. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or
other insurance companies. Some states assess premium taxes when Purchase
Payments are made; others assess premium taxes when annuity payments begin. We
will deduct any applicable premium taxes upon full surrender, death, or
annuitization. Premium taxes generally range from 0% to 3.5%.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES. We are not currently maintaining
a provision for taxes. In the future, however, we may establish a provision for
taxes if we determine, in our sole discretion, that we will incur a tax as a
result of the operation of the Separate Account. We will deduct for any taxes
we incur as a result of the operation of the Separate Account, whether or not
we previously made a provision for taxes and whether or not it was sufficient.
Our status under the Tax Code is briefly described in the Statement of
Additional Information.
OTHER EXPENSES. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Sub-Accounts to which you allocate your Contract
value. For a summary of current estimates of those charges and expenses, see
page 5. For more detailed information about those charges and expenses, please
refer to the prospectuses for the appropriate Portfolios. We receive
compensation from the investment advisers or administrators or the Portfolios
in connection with administrative service and cost savings experienced by the
investment advisers or administrators. We collect this compensation under
agreements between us and the Portfolio's investment adviser, administrators or
distributors, and is calculated based on a percentage of the average assets
allocated to the Portfolio.
34 PROSPECTUS
TAXES
--------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. LINCOLN
BENEFIT MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual
circumstances. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the Separate Account is not an entity separate from
Lincoln Benefit, and its operations form a part of Lincoln Benefit, it will not
be taxed separately. Investment income and realized capital gains of the
Separate Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Lincoln Benefit believes that
the Separate Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves
under the Contract. Accordingly, Lincoln Benefit does not anticipate that it
will incur any federal income tax liability attributable to the Separate
Account, and therefore Lincoln Benefit does not intend to make provisions for
any such taxes. If Lincoln Benefit is taxed on investment income or capital
gains of the Separate Account, then Lincoln Benefit may impose a charge against
the Separate Account in order to make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Separate Account are "adequately diversified"
according to Treasury Department regulations, and
.. Lincoln Benefit is considered the owner of the Separate Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living
Owners in this prospectus. As a general rule, annuity contracts owned by
non-natural persons such as corporations, trusts, or other entities are not
treated as annuity contracts for federal income tax purposes. The income on
such contracts does not enjoy tax deferral and is taxed as ordinary income
received or accrued by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death
of the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain Qualified Plans; (4) certain
contracts used in connection with structured settlement agreements; and
(5) immediate annuity contracts, purchased with a single premium, when the
annuity starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
beneficiary. A trust named beneficiary, including a grantor trust, has two
options for receiving any death benefits: 1) a lump sum payment, or 2) payment
deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Separate Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Separate Account are not adequately
diversified, the Contract will not be treated as an annuity contract for
federal income tax purposes. As a result, the income on the Contract will be
taxed as ordinary income received or accrued by the Contract owner during the
taxable year. Although Lincoln Benefit does not have control over the
Portfolios or their investments, we expect the Portfolios to meet the
diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be
considered the owner of separate account assets if he possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. At the time the diversification regulations were issued, the
Treasury Department announced that the regulations do not provide guidance
concerning circumstances in which investor control of
35 PROSPECTUS
the separate account investments may cause a Contract owner to be treated as
the owner of the separate account. The Treasury Department also stated that
future guidance would be issued regarding the extent that owners could direct
sub-account investments without being treated as owners of the underlying
assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Separate Account. If this
occurs, income and gain from the Separate Account assets would be includible in
your gross income. Lincoln Benefit does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Separate Account.
However, we make no guarantee that such modification to the Contract will be
successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal
under a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such
amounts were properly excluded from your gross income. If you make a full
withdrawal under a Non-Qualified Contract, the amount received will be taxable
only to the extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
annuity payments received from a Non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the Contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the Contract. If you elect variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
Contract by the total number of expected payments. The annuity payments will be
fully taxable after the total amount of the investment in the Contract is
excluded using these ratios. If any variable payment is less than the
excludable amount you should contact a competent tax advisor to determine how
to report any unrecovered investment. The federal tax treatment of annuity
payments is unclear in some respects. As a result, if the IRS should provide
further guidance, it is possible that the amount we calculate and report to the
IRS as taxable could be different. If you die, and annuity payments cease
before the total amount of the investment in the Contract is recovered, the
unrecovered amount will be allowed as a deduction for your last taxable year.
PARTIAL ANNUITIZATION
Effective January 1, 2011, an individual may partially annuitize their
non-qualified annuity if the contract so permits. The Small Business Jobs Act
of 2010 included a provision which allows for a portion of a non-qualified
annuity, endowment or life insurance contract to be annuitized while the
balance is not annuitized. The annuitized portion must be paid out over 10 or
more years or over the lives of one or more individuals. The annuitized portion
of the contract is treated as a separate contract for purposes of determining
taxability of the payments under IRC section 72. We do not currently permit
partial annuitization.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments
that are recalculated annually. Although we will report your levelized payments
to the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first
monthly payout is received.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion
of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Contract Owner's
death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date
of the Contract Owner's death. These requirements are
36 PROSPECTUS
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.
We administer certain spousal rights under the Contract, and related tax
reporting in accordance with our understanding of the Defense of Marriage Act
(which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). Depending on the state in which your
Contract is issued, we may offer certain spousal benefits to civil union
couples, domestic partners or same-sex marriages. You should be aware, however,
that federal tax law does not recognize civil union couples, domestic partners
or marriage spouses of the same sex. Therefore, we cannot permit a same-sex
civil union partner, domestic partner or spouse to continue the Contract within
the meaning of the tax law upon the death of the first partner under the
Contract's "spousal continuance" provision. Please note there may be federal
tax consequences at the death of the first same-sex civil union partner,
domestic partner or spouse. Civil union couples, domestic partners and spouses
of the same sex should consider that limitation before selecting a spousal
benefit under the Contract.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
MEDICARE TAX ON NET INVESTMENT INCOME. The Patient Protection and Affordable
Care Act, also known as the 2010 Health Care Act, included a new Medicare tax
on investment income. This new tax, which is effective in 2013, assesses a 3.8%
surtax on the lesser of (1) net investment income or (2) the excess of
"modified adjusted gross income" over a threshold amount. The "threshold
amount" is $250,000 for married taxpayers filing jointly, $125,000 for married
taxpayers filing separately, $200,000 for single taxpayers, and approximately
$12,000 for trusts. The taxable portion of payments received as a withdrawal,
surrender, annuity payment, death benefit payment or any other actual or deemed
distribution under the contract will be considered investment income for
purposes of this surtax.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-Qualified Contract. The
penalty tax generally applies to any distribution made prior to the date you
attain age 59 1/2. However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments (as defined by the Code) 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 rulings that permit partial exchanges of
annuity contracts. Effective for exchanges on or after October 24, 2011, where
there is a surrender or distribution from either the initial
37 PROSPECTUS
annuity contract or receiving annuity contract within 180 days of the date on
which the partial exchange was completed, the IRS will apply general tax rules
to determine the substance and treatment of the original transfer. For
exchanges occurring between June 30, 2008 and October 23, 2011, a partial
exchange, of a deferred annuity contract for another deferred annuity contract,
will qualify for tax-deferral only if no amount is withdrawn or surrendered
from either contract for a period of 12 months. The 12 month period begins on
the date when exchange proceeds are treated as premiums paid for the recipient
contract. Withdrawals from, annuitizations, taxable Owner or Annuitant changes,
or surrenders of either contract within the 12 month period will retroactively
negate the partial exchange, unless one of the following applies:
.. the contract owner is at least 591/2 or dies; or becomes totally disabled
or obtains a divorce or suffers a loss of employment after the partial
exchange was completed and prior to the withdrawal, annuitization, Owner or
Annuitant change, or surrender;
.. if the annuity is owned by an entity, the annuitant dies after the partial
exchange was completed and prior to the withdrawal, annuitization, Owner or
Annuitant change or surrender;
.. the withdrawal is allocable to investment in the Contract before August 14,
1982; or,
.. the annuity is a qualified funding asset within the meaning of Code section
130(d).
If a partial exchange is retroactively negated, the amount originally
transferred to the recipient contract is treated as a withdrawal from the
source contract, taxable to the extent of any gain in that contract on the date
of the exchange. An additional 10% tax penalty may also apply if the Contract
Owner is under age 59 1/2. Your Contract may not permit partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract
without full and adequate consideration to a person other than your spouse (or
to a former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Lincoln Benefit (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made or no U.S. taxpayer identification number is provided we will
automatically withhold the required 10% of the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory.
Lincoln Benefit is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if
the payee provides a U.S. taxpayer identification number on a fully completed
Form W-8BEN. A U.S. taxpayer identification number is a social security number
or an individual taxpayer identification number ("ITIN"). ITINs are issued by
the IRS to non-resident alien individuals who are not eligible to obtain a
social security number. The U.S. does not have a tax treaty with all countries
nor do all tax treaties provide an exclusion or lower withholding rate for
annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any
additional tax deferral. You should review the annuity features, including all
benefits and expenses, prior to purchasing an annuity as a TSA or IRA. Tax
Qualified Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code
Section 408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
38 PROSPECTUS
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Code Section 457.
Lincoln Benefit reserves the right to limit the availability of the Contract
for use with any of the retirement plans listed above or to modify the Contract
to conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or
additional conditions or limitations on withdrawals, waiver of charges, death
benefits, Payout Start Dates, income payments, and other Contract features. In
addition, adverse tax consequences may result if Qualified Plan limits on
distributions and other conditions are not met. Please consult your Qualified
Plan administrator for more information. Lincoln Benefit no longer issues
deferred annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do
not conform to specified commencement and minimum distribution rules. Lincoln
Benefit can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan
under which the decedent's surviving spouse is the beneficiary. Lincoln Benefit
does not offer an individual retirement annuity that can accept a transfer of
funds for any other, non-spousal, beneficiary of a decedent's IRA, TSA, or
employer sponsored qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
Qualified Plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of
distributions from Tax Qualified Contracts other than Roth IRAs will indicate
that the distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and
which are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Effective December 31, 2005, the
IRS requires annuity contracts to include the actuarial present value of other
benefits for purposes of calculating the required minimum distribution amount.
These other benefits may include accumulation, income, or death benefits. Not
all income plans offered under the Contract satisfy the requirements for
minimum distributions. Because these distributions are required under the Code
and the method of calculation is complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed
the greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit
were so characterized, this could result in current taxable income to a
Contract Owner. In addition, there are limitations on the amount of incidental
death benefits that may be provided under Qualified Plans, such as in
connection with a TSA or employer sponsored qualified retirement plan.
Lincoln Benefit reserves the right to limit the availability of the Contract
for use with any of the Qualified Plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the
39 PROSPECTUS
taxable amount of any premature distribution from a Tax Qualified Contract. The
penalty tax generally applies to any distribution made prior to the date you
attain age 59 1/2. However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments (as defined by the Code) over
the Contract Owner's life or life expectancy, or over the joint lives or
joint life expectancies of the Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only
for IRAs),
.. made for qualified higher education expenses (applies only for IRAs),
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs), and
.. from an IRA or attributable to elective deferrals under a 401(k) plan,
403(b) annuity, or certain similar arrangements made to individuals who
(because of their being members of a reserve component) are ordered or
called to active duty after Sept. 11, 2001, for a period of more than 179
days or for an indefinite period; and made during the period beginning on
the date of the order or call to duty and ending at the close of the active
duty period.
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions
may apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior
to the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject
to a 10% penalty tax unless another exception to the penalty tax applied. The
tax for the year of the modification is increased by the penalty tax that would
have been imposed without the exception, plus interest for the years in which
the exception was used. A material modification does not include permitted
changes described in published IRS rulings. You should consult a competent tax
advisor prior to creating or modifying a substantially equal periodic payment
stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Lincoln Benefit
is required to withhold federal income tax at a rate of 10% from all
non-annuitized distributions that are not considered "eligible rollover
distributions." The customer may elect out of withholding by completing and
signing a withholding election form. If no election is made, or if no U.S.
taxpayer identification number is provided, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Lincoln Benefit is
required to withhold federal income tax at a rate of 20% on all "eligible
rollover distributions" unless you elect to make a "direct rollover" of such
amounts to an IRA or eligible retirement plan. Eligible rollover distributions
generally include all distributions from Tax Qualified Contracts, including
TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
With respect to any Contract held under a Section 457 plan or by the trustee of
a Section 401 Pension or Profit Sharing Plan, we will not issue payments
directly to a plan participant or beneficiary. Consequently, the obligation to
comply with the withholding requirements described above will be the
responsibility of the plan.
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.
40 PROSPECTUS
Generally, Code Section 1441 provides that Lincoln Benefit as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if
the payee provides a U.S. taxpayer identification number on a fully completed
Form W-8BEN. A U.S. taxpayer identification number is a social security number
or an individual taxpayer identification number ("ITIN"). ITINs are issued by
the IRS to non-resident alien individuals who are not eligible to obtain a
social security number. The U.S. does not have a tax treaty with all countries
nor do all tax treaties provide an exclusion or lower withholding rate for
annuities.
CHARITABLE IRA DISTRIBUTIONS. The Pension Protection Act of 2006 included a
charitable giving incentive permitting tax-free IRA distributions for
charitable purposes. The Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 extended this provision until the end of 2011. As
of 2012, this provision expired and has not been extended. It is possible
Congress will extend this provision retroactively to include some or all of
2012.
For distributions in tax years beginning after 2005 and before 2012, the Act
provides an exclusion from gross income, up to $100,000, for otherwise taxable
IRA distributions from a traditional or Roth IRA that are qualified charitable
distributions. To constitute a qualified charitable distribution, the
distribution must be made (1) directly by the IRA trustee to certain qualified
charitable organizations and (2) on or after the date the IRA owner attains age
70 1/2. Distributions that are excluded from income under this provision are
not taken into account in determining the individual's deduction, if any, for
charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements for
the new income tax exclusion added by the Pension Protection Act. As a result
the general rules for reporting IRA distributions apply.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are
subject to limitations on the amount that can be contributed and on the time
when distributions may commence. Certain distributions from other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into an
Individual Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
A traditional Individual Retirement Account or Annuity may be converted or
"rolled over" to a Roth Individual Retirement Annuity. For distributions after
2007, the Pension Protection Act of 2006 allows distributions from qualified
retirement plans including tax sheltered annuities and governmental Section 457
plans to be rolled over directly into a Roth IRA, subject to the usual rules
that apply to conversions from a traditional IRA into a Roth IRA. The income
portion of a conversion or rollover distribution is taxable currently, but is
exempted from the 10% penalty tax on premature distributions. Prior to January
1, 2010, income and filing status limitations applied to rollovers from
non-Roth accounts to a Roth IRA. Effective January 1, 2005, the IRS requires
conversions of annuity contracts to include the actuarial present value of
other benefits for purposes of valuing the taxable amount of the conversion.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the
beneficial owner of the Individual Retirement Account.
If you have a contract issued as an IRA under Code Section 408(b) and request
to change the ownership to an IRA custodian permitted under Section 408, we
will treat a request to change ownership from an individual to a custodian as
an indirect rollover. We will send a Form 1099R to report the distribution and
the custodian should issue a Form 5498 for the contract value contribution.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the
Annuitant's surviving spouse as the new Annuitant, if the following conditions
are met:
1) The custodian or trustee of the Individual Retirement Account is the owner
of the annuity and has the right to the death proceeds otherwise payable
under the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
41 PROSPECTUS
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. (SEP IRA) Code Section 408(k) allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. These employers may, within specified
limits, make deductible contributions on behalf of the employees to the
individual retirement annuities. Employers intending to use the Contract in
connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers.
Employers intending to purchase the Contract as a SIMPLE IRA should seek
competent tax and legal advice. SIMPLE IRA plans must include the provisions of
the Economic Growth and Tax Relief Reconciliation Act of 2007 (EGTRRA) to avoid
adverse tax consequences. If your current SIMPLE IRA plan uses IRS Model Form
5304-SIMPLE with a revision date of March 2002 or later, then your plan is up
to date. If your plan has a revision date prior to March 2002, please consult
with your tax or legal advisor to determine the action you need to take in
order to comply with this requirement.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the Contract Value to another 403(b) plan.
Generally, we do not accept funds in 403(b) contracts that are subject to the
Employee Retirement Income Security Act of 1974 (ERISA).
CAUTION: Under IRS regulations we can accept contributions, transfers and
rollovers only if we have entered into an information-sharing agreement, or its
functional equivalent, with the applicable employer or its plan administrator.
Unless your contract is grandfathered from certain provisions in these
regulations, we will only process certain transactions (e.g, transfers,
withdrawals, hardship distributions and, if applicable, loans) with employer
approval. This means that if you request one of these transactions we will not
consider your request to be in good order, and will not therefore process the
transaction, until we receive the employer's approval in written or electronic
form.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Lincoln Benefit no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under
Section 401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is
intended to qualify under Section 401(a) of the Code is the owner. The
qualified plan trust must have its own tax identification number and a
named trustee acting as a fiduciary on behalf of the plan. The annuitant
should be the person for whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner
and annuitant are the same, or the annuity contract is not owned by a
qualified plan trust. The annuitant should be the person for whose benefit
the contract was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death
42 PROSPECTUS
benefits from the annuity are distributed in accordance with the terms of the
qualified plan. Annuitant owned contracts require that the beneficiary be the
annuitant's spouse (if applicable), which is consistent with the required IRS
language for qualified plans under Section 401(a). A completed Annuitant Owned
Qualified Plan Designation of Beneficiary form is required in order to change
the beneficiary of an annuitant owned Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible
deferred compensation plan. In eligible governmental plans, all assets and
income must be held in a trust/custodial account/annuity contract for the
exclusive benefit of the participants and their beneficiaries. To the extent
the Contracts are used in connection with a non-governmental eligible plan,
employees are considered general creditors of the employer and the employer as
owner of the Contract has the sole right to the proceeds of the Contract. Under
eligible 457 plans, contributions made for the benefit of the employees will
not be includible in the employees' gross income until distributed from the
plan. Lincoln Benefit no longer issues annuity contracts to 457 plans.
43 PROSPECTUS
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT
--------------------------------------------------------------------------------
LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is a stock life insurance company organized under the laws of
the state of Nebraska in 1938. Our legal domicile and principal business
address is 2940 S. 84th Street , Lincoln, NE 68506-4142. Lincoln Benefit is a
wholly-owned subsidiary of Allstate Life Insurance Company ("Allstate Life"), a
stock life insurance company incorporated under the laws of the State of
Illinois. Allstate Life is a wholly-owned subsidiary of Allstate Insurance
Company ("Allstate"), a stock property-liability insurance company incorporated
under the laws of the State of Illinois. All of the capital stock issued and
outstanding of Allstate Insurance Company is owned by Allstate Insurance
Holdings, LLC, which is wholly owned by The Allstate Corporation.
We are authorized to conduct life insurance and annuity business in the
District of Columbia, Guam, U.S. Virgin Islands and all states except New York.
We will market the Contract everywhere we conduct variable annuity business.
The Contracts offered by this prospectus are issued by us and will be funded in
the Separate Account and/or the Fixed Account.
Under our reinsurance agreement with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life, and substantially all of
the assets backing our reinsured liabilities are owned by Allstate Life.
Accordingly, the results of operations with respect to applications received
and contracts issued by Lincoln Benefit are not reflected in our financial
statements. The amounts reflected in our financial statements relate only to
the investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreement. These assets represent our
general account and are invested and managed by Allstate Life. While the
reinsurance agreement provides us with financial backing from Allstate Life, it
does not create a direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with Allstate Life, the Company
reinsures all reserve liabilities with Allstate Life except for variable
contracts. The Company's variable Contract assets and liabilities are held in
legally-segregated, unitized Separate Accounts and are retained by the Company.
However, Lincoln Benefit's economic risks and returns related to such variable
contracts are transferred to Allstate Life.
Effective June 1, 2006, Allstate Life entered into an agreement ("the
Agreement") with Prudential Financial, Inc. and its subsidiary, The Prudential
Insurance Company of America ("PICA") pursuant to which Allstate Life sold,
through a combination of coinsurance and modified coinsurance reinsurance,
substantially all of its variable annuity business, including that of its
subsidiary Lincoln Benefit. Pursuant to the Agreement Allstate Life and PICA
also entered into an administrative services agreement which provides that PICA
or an affiliate administer the Variable Account and the Contracts. The benefits
and provisions of the Contracts have not been changed by these transactions and
agreements. None of the transactions or agreements have changed the fact that
we are primarily liable to you under your Contract.
SEPARATE ACCOUNT. Lincoln Benefit Life Variable Annuity Account was originally
established in 1992, as a segregated asset account of Lincoln Benefit. The
Separate Account meets the definition of a "separate account" under the federal
securities laws and is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940. The SEC does not supervise the management
of the Separate Account or Lincoln Benefit.
We own the assets of the Separate Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Contract
Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to our other income, gains, or losses. Our obligations arising
under the Contracts are general corporate obligations of Lincoln Benefit.
The Separate Account is divided into Sub-Accounts. The assets of each
Sub-Account are invested in the shares of one of the Portfolios. We do not
guarantee the investment performance of the Separate Account, its Sub-Accounts
or the Portfolios. Values allocated to the Separate Account and the amount of
Variable Annuity payments will rise and fall with the values of shares of the
Portfolios and are also reduced by Contract charges. We may also use the
Separate Account to fund our other annuity contracts. We will account
separately for each type of annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-457-7617. We
have reproduced the Table of Contents of the Statement of Additional
Information on page 47.
STATE REGULATION OF LINCOLN BENEFIT. We are subject to the laws of Nebraska
and regulated by the Nebraska Department of Insurance. Every year we file an
annual
44 PROSPECTUS
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. Our books and records are subject to review by the
Department of Insurance at all times. We are also subject to regulation under
the insurance laws of every jurisdiction in which we operate.
FINANCIAL STATEMENTS. The financial statements of Lincoln Benefit and the
financial statements of the Separate Account, which are comprised of the
financial statements of the underlying Sub-Accounts, are set forth in the
Statement of Additional Information.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and the
Variable Account. We entered into an administrative services agreement with The
Prudential Insurance Company of America ("PICA") whereby, PICA or an affiliate
provides administrative services to the Variable Account and the Contracts on
our behalf. In addition, PICA entered into a master services agreement with
se/2/, inc., of 5801 SW 6th Avenue, Topeka, Kansas 66636, whereby se/2/, inc.
provides certain business process outsourcing services with respect to the
Contracts. se/2/, inc. may engage other service providers to provide certain
administrative functions. These service providers may change over time, and as
of December 31, 2011, consisted of the following: Keane BPO, LLC
(administrative services) located at 100 City Square, Boston, MA 02129; RR
Donnelly Global Investment Markets (compliance printing and mailing) located at
111 South Wacker Drive, Chicago, IL 60606; Jayhawk File Express, LLC (file
storage and document destruction) located at 601 E. 5th Street, Topeka, KS
66601-2596; Co-Sentry.net, LLC (back-up printing and disaster recovery) located
at 9394 West Dodge Rd, Suite 100, Omaha, NE 68114; Convey Compliance Systems,
Inc. (withholding calculations and tax statement mailing) located at 3650
Annapolis Lane, Suite 190, Plymouth, MN 55447; Spangler Graphics, LLC
(compliance mailings) located at 29305 44th Street, Kansas City, KS 66106;
Veritas Document Solutions, LLC (compliance mailings) located at 913 Commerce
Ct, Buffalo Grove, IL 60089; Records Center of Topeka, a division of
Underground Vaults & Storage, Inc. (back-up tapes storage) located at 1540 NW
Gage Blvd. #6, Topeka, KS 66618; EquiSearch Services, Inc. (lost shareholder
search) located at 11 Martime Avenue, Suite 665, White Plains, NY 10606;
ZixCorp Systems, Inc. (email encryption) located at 2711 N. Haskell Ave., Suite
2300, Dallas, TX 75204; DST Systems, Inc. (FAN mail, positions, prices) located
at 333 West 11 Street, 5th Floor, Kansas City, MO 64105.
In administering the Contracts, the following services are provided, among
others:
.. 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 at least annually. We will also send you
transaction confirmations. 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 or a confirmation. We will investigate all
complaints and make any necessary adjustments retroactively, but you must
notify us of a potential error within a reasonable time after the date of the
questioned statement. If you wait too long, we will make the adjustment as of
the date that we receive notice of the potential error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
DISTRIBUTION OF CONTRACTS
The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales will not exceed 6% of all Purchase Payments (on a present value
basis). From time to time, we may offer additional sales incentives of up to 1%
of Purchase Payments to broker-dealers who maintain certain sales volume levels.
ALFS, Inc ("ALFS") merged into Allstate Distributors, LLC ("ADLLC"), effective
September 1, 2011. ALFS assigned its rights and delegated its duties as
principal underwriter to ADLLC. This change had no effect on Lincoln Benefit
Life Company's obligations to you under your Contract.
ADLLC, located at 3100 Sanders Road, Northbrook, IL 60062-7154 serves as
distributor of the Contracts. ADLLC, an affiliate of Lincoln Benefit, is a
wholly owned subsidiary of Allstate Life Insurance Company. ADLLC is a
registered broker dealer under the Securities and Exchange Act of 1934, as
amended, and is a member of the Financial Industry Regulatory Authority.
Lincoln Benefit does not pay ADLLC a commission for distribution of the
Contracts. The underwriting agreement with ADLLC provides that we will
reimburse ADLLC for expenses incurred in distributing the Contracts, including
liability arising out of services we provide on the Contracts.
Lincoln Benefit and ADLLC have also entered into wholesaling agreements with
certain independent contractors and their broker-dealers. Under these
45 PROSPECTUS
agreements, compensation based on a percentage of premium payments and/or
Contract values is paid to the wholesaling broker-dealer for the wholesaling
activities of their registered representative.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Lincoln
Benefit is engaged in routine lawsuits which, in our management's judgment, are
not of material importance to their respective total assets or material with
respect to the Separate Account.
LEGAL MATTERS
All matters of Nebraska law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Nebraska law, have
been passed upon by Susan L. Lees, General Counsel of Lincoln Benefit.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, under the Securities Act
of 1933 as amended, with respect to the Contracts offered by this prospectus.
This
prospectus does not contain all the information set forth in the registration
statement and the exhibits filed as part of the registration statement. You
should refer to the registration statement and the exhibits for further
information concerning the Separate Account, Lincoln Benefit, and the
Contracts. The descriptions in this prospectus of the Contracts and other legal
instruments are summaries. You should refer to those instruments as filed for
the precise terms of those instruments. You may inspect and obtain copies of
the registration statement as described on the cover page of this prospectus.
ABOUT LINCOLN BENEFIT LIFE COMPANY
Rule 12h-7 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") 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. The variable annuities described in this prospectus fall
within the exemption provided under rule 12h-7. We rely on the exemption
provided under rule 12h-7 and do not file reports under the Exchange Act.
46 PROSPECTUS
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
---------------------------------------------------------
THE CONTRACT
---------------------------------------------------------
Annuity Payments
---------------------------------------------------------
Initial Monthly Annuity Payment
---------------------------------------------------------
Subsequent Monthly Payments
---------------------------------------------------------
Transfers After Annuity Date
---------------------------------------------------------
Annuity Unit Value
---------------------------------------------------------
Illustrative Example of Annuity Unit Value Calculation
---------------------------------------------------------
Illustrative Example of Variable Annuity Payments
---------------------------------------------------------
EXPERTS
---------------------------------------------------------
FINANCIAL STATEMENTS
---------------------------------------------------------
47 PROSPECTUS
APPENDIX A
--------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
Appendix A presents the Accumulation Unit Values and number of Accumulation
Units outstanding for each Sub-Account since the Sub-Accounts were first
offered under the Contracts. This Appendix includes Accumulation Unit Values
representing the highest and lowest available combinations of Contract charges
that affect Accumulation Unit Values for each Contract. The Statement of
Additional Information, which is available upon request without charge,
contains the Accumulation Unit Values for all other available combinations of
Contract charges that affect Accumulation Unit Values for each Contract. Please
contact us at 1-800-457-7617 to obtain a copy of the Statement of Additional
Information.
The LBL Consultant Variable Annuity I Contracts and all of the Variable
Sub-Accounts shown below were first offered under the Contracts on September 9,
1998, except for the Janus Aspen Series Foreign Stock - Service Shares
Sub-Account, LSA Balanced, Oppenheimer Main Street Small Cap/VA - Service
Shares Sub-Account, PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) -
Administrative Shares Sub-Account, PIMCO VIT Total Return - Administrative
Shares Sub-Account, Premier VIT OpCap Balanced Sub-Account, Premier VIT NACM
Small Cap Portfolio Class 1 Sub-Account, Putnam VT International Value Fund -
Class IB Sub-Account, Invesco Van Kampen V.I. Growth and Income Fund - Series
II Sub-Account which were first offered under the Contracts on May 1, 2002; the
Invesco V.I. Basic Value Fund - Series I Sub-Account, Legg Mason ClearBridge
Variable Large Cap Value Portfolio - Class I Sub-Account, Invesco Van Kampen
V.I. Mid Cap Value Fund - Series I Sub-Account which were first offered under
the Contracts on April 30, 2004; the Wells Fargo Advantage VT Discovery
Sub-Account, Wells Fargo Advantage VT Opportunity Sub-Account which were first
offered under the Contracts on April 8, 2005; and the DWS Balanced - Class A
Sub-Account which was first offered under the Contracts on April 29, 2005 and
Janus Aspen Overseas Portfolio - Service Share Sub-Account which was first
offered under the Contracts on April 30, 2008. Accumulation unit value: unit of
measure used to calculate the value or a Contract Owner's interest in a
Sub-Account for any Valuation Period. An Accumulation Unit Value does not
reflect deduction of certain charges under the Contract that are deducted from
your Contract Value, such as the Contract Maintenance Charge.
The name of the following Sub-Accounts changed since December 31, 2011. The
name shown in the tables of Accumulation Units correspond to the name of the
Sub-Accounts as of December 31, 2011:
SUB-ACCOUNT NAME AS OF
DECEMBER 31, 2011 (AS
APPEARS IN THE FOLLOWING
TABLES OF ACCUMULATION SUB-ACCOUNT NAME
UNIT VALUES) ON/ABOUT MAY 1, 2012
---------------------------------------------------
DWS Growth & Income VIP DWS Core Equity VIP -
- Class A Class A
---------------------------------------------------
DWS Balanced VIP - Class DWS Global Income
A Builder VIP - Class A
---------------------------------------------------
Invesco V.I. Basic Value Invesco Van Kampen V.I.
- Series I Value Opportunities -
Series I
---------------------------------------------------
SUB-ACCOUNT NAME
ON/ABOUT JULY 1, 2012
---------------------------------------------------
Invesco Van Kampen V.I. Invesco Van Kampen V.I.
Mid Cap Value - Series I American Value - Series I
---------------------------------------------------
48 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS I-2
2002 $13.880 $9.061 474,441
2003 $9.061 $12.055 518,914
2004 $12.055 $12.881 454,884
2005 $12.881 $14.559 380,525
2006 $14.559 $17.148 318,953
2007 $17.148 $22.613 307,354
2008 $22.613 $12.252 182,353
2009 $12.252 $18.283 147,379
2010 $18.283 $20.589 125,277
2011 $20.589 $20.272 102,062
------------------------------------------------------------------------------------------------
ALGER GROWTH & INCOME PORTFOLIO--CLASS I-2
2002 $13.340 $9.078 781,602
2003 $9.078 $11.641 775,012
2004 $11.641 $12.398 686,795
2005 $12.398 $12.665 553,769
2006 $12.665 $13.673 412,877
2007 $13.673 $14.870 289,123
2008 $14.870 $8.889 189,627
2009 $8.889 $11.603 144,735
2010 $11.603 $12.865 102,497
2011 $12.865 $13.533 80,128
------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS I-2
2002 $11.540 $7.640 734,340
2003 $7.640 $10.198 807,544
2004 $10.198 $10.625 719,914
2005 $10.625 $11.756 607,853
2006 $11.756 $12.208 452,187
2007 $12.208 $14.460 340,976
2008 $14.460 $7.689 252,531
2009 $7.689 $11.206 202,899
2010 $11.206 $12.549 159,401
2011 $12.549 $12.350 114,291
------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS I-2
2002 $15.030 $10.457 410,450
2003 $10.457 $15.264 559,837
2004 $15.264 $17.040 571,188
2005 $17.040 $18.482 583,687
2006 $18.482 $20.104 495,198
2007 $20.104 $26.119 395,122
2008 $26.119 $10.741 307,529
2009 $10.741 $16.093 251,589
2010 $16.093 $18.974 201,160
2011 $18.974 $17.188 154,396
49 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
ALGER SMALLCAP GROWTH PORTFOLIO--CLASS I-2
2002 $8.020 $5.842 283,731
2003 $5.842 $8.212 468,871
2004 $8.212 $9.454 355,278
2005 $9.454 $10.913 404,918
2006 $10.913 $12.935 399,147
2007 $12.935 $14.976 268,659
2008 $14.976 $7.898 187,715
2009 $7.898 $11.349 171,410
2010 $11.349 $14.043 140,374
2011 $14.043 $13.427 117,145
------------------------------------------------------------------------------------------------
DWS VSI: BOND VIP--CLASS A
2002 $11.360 $12.081 558,679
2003 $12.081 $12.535 493,622
2004 $12.535 $13.046 507,579
2005 $13.046 $13.219 458,975
2006 $13.219 $13.671 362,090
2007 $13.671 $14.064 339,879
2008 $14.064 $11.560 255,646
2009 $11.560 $12.566 186,602
2010 $12.566 $13.253 155,647
2011 $13.253 $13.833 108,411
------------------------------------------------------------------------------------------------
DWS VSI: GLOBAL SMALL CAP GROWTH--CLASS A FORMERLY, DWS VSI: GLOBAL OPPORTUNITIES VIP--CLASS A
2002 $12.290 $9.724 130,916
2003 $9.724 $14.317 193,561
2004 $14.317 $17.440 176,147
2005 $17.440 $20.357 193,166
2006 $20.357 $24.544 166,415
2007 $24.544 $26.499 131,794
2008 $26.499 $13.094 97,138
2009 $13.094 $19.164 83,558
2010 $19.164 $23.968 72,183
2011 $23.968 $21.328 61,099
------------------------------------------------------------------------------------------------
DWS VSI: GROWTH & INCOME VIP--CLASS A
2002 $9.340 $7.087 201,541
2003 $7.087 $8.871 178,003
2004 $8.871 $9.651 150,151
2005 $9.651 $10.109 139,183
2006 $10.109 $11.345 102,347
2007 $11.345 $11.355 73,259
2008 $11.355 $6.918 49,772
2009 $6.918 $9.164 38,191
2010 $9.164 $10.354 21,260
2011 $10.354 $10.211 20,105
50 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
DWS VSI: INTERNATIONAL VIP--CLASS A
2002 $8.360 $6.743 105,081
2003 $6.743 $8.507 114,835
2004 $8.507 $9.790 121,969
2005 $9.790 $11.232 127,476
2006 $11.232 $13.967 127,598
2007 $13.967 $15.805 113,896
2008 $15.805 $8.083 101,279
2009 $8.083 $10.658 69,353
2010 $10.658 $10.697 54,718
2011 $10.697 $8.803 41,799
------------------------------------------------------------------------------------------------
DWS VSII: BALANCED VIP--CLASS A
2005 $10.000 $10.602 449,167
2006 $10.602 $11.543 346,262
2007 $11.543 $11.950 249,164
2008 $11.950 $8.576 165,654
2009 $8.576 $10.454 114,278
2010 $10.454 $11.483 87,837
2011 $11.483 $11.179 63,813
------------------------------------------------------------------------------------------------
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
2002 $11.670 $12.572 2,695,911
2003 $12.572 $12.710 1,589,894
2004 $12.710 $13.005 1,136,236
2005 $13.005 $13.104 879,855
2006 $13.104 $13.478 722,780
2007 $13.478 $14.146 603,659
2008 $14.146 $14.568 494,396
2009 $14.568 $15.136 374,113
2010 $15.136 $15.721 305,850
2011 $15.721 $16.423 238,391
------------------------------------------------------------------------------------------------
FEDERATED HIGH INCOME BOND FUND II
2002 $8.950 $6.435 296,496
2003 $6.435 $10.814 707,583
2004 $10.814 $11.797 729,703
2005 $11.797 $11.960 606,875
2006 $11.960 $13.088 539,007
2007 $13.088 $13.368 432,506
2008 $13.368 $9.770 344,383
2009 $9.770 $14.748 260,044
2010 $14.748 $16.710 201,597
2011 $16.710 $17.356 164,486
51 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
FEDERATED MANAGED VOLATILITY FUND II FORMERLY, FEDERATED CAPITAL INCOME FUND II
2002 $8.570 $8.959 460,608
2003 $8.959 $7.668 309,555
2004 $7.668 $8.325 297,389
2005 $8.325 $8.738 271,194
2006 $8.738 $9.980 220,546
2007 $9.980 $10.253 154,739
2008 $10.253 $8.062 102,548
2009 $8.062 $10.213 101,513
2010 $10.213 $11.305 68,578
2011 $11.305 $11.698 50,687
------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER? PORTFOLIO--INITIAL CLASS
2002 $10.650 $9.601 371,447
2003 $9.601 $11.186 420,226
2004 $11.186 $11.652 437,716
2005 $11.652 $11.973 433,897
2006 $11.973 $12.690 338,607
2007 $12.690 $14.474 252,896
2008 $14.474 $10.189 202,629
2009 $10.189 $12.992 144,646
2010 $12.992 $14.661 116,581
2011 $14.661 $14.108 93,211
------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND(R) PORTFOLIO--INITIAL CLASS
2002 $11.240 $10.060 1,084,534
2003 $10.060 $12.763 1,311,861
2004 $12.763 $14.555 1,438,118
2005 $14.555 $16.809 1,469,954
2006 $16.809 $18.546 1,308,454
2007 $18.546 $21.536 1,005,803
2008 $21.536 $12.226 742,971
2009 $12.226 $16.386 631,023
2010 $16.386 $18.969 511,344
2011 $18.969 $18.261 383,384
------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--INITIAL CLASS
2002 $11.430 $9.375 1,218,166
2003 $9.375 $12.067 1,403,132
2004 $12.067 $13.291 1,384,897
2005 $13.291 $13.896 1,176,532
2006 $13.896 $16.496 941,565
2007 $16.496 $16.539 684,837
2008 $16.539 $9.366 412,487
2009 $9.366 $12.044 308,304
2010 $12.044 $13.697 252,183
2011 $13.697 $13.658 198,587
52 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--INITIAL CLASS
2002 $11.280 $7.786 1,121,334
2003 $7.786 $10.215 1,141,572
2004 $10.215 $10.429 1,091,575
2005 $10.429 $10.897 953,608
2006 $10.897 $11.500 769,995
2007 $11.500 $14.418 618,823
2008 $14.418 $7.523 492,708
2009 $7.523 $9.531 405,357
2010 $9.531 $11.688 320,051
2011 $11.688 $11.566 270,601
------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--INITIAL CLASS
2002 $10.510 $8.073 1,782,207
2003 $8.073 $10.237 1,907,842
2004 $10.237 $11.183 1,817,054
2005 $11.183 $11.578 1,583,665
2006 $11.578 $13.233 1,319,112
2007 $13.233 $13.778 1,041,479
2008 $13.778 $8.572 756,199
2009 $8.572 $10.718 592,792
2010 $10.718 $12.176 493,294
2011 $12.176 $12.270 410,778
------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--INITIAL CLASS
2002 $11.390 $11.436 3,542,199
2003 $11.436 $11.406 2,015,425
2004 $11.406 $11.401 1,544,840
2005 $11.401 $11.601 1,335,848
2006 $11.601 $12.017 1,166,577
2007 $12.017 $12.487 1,221,039
2008 $12.487 $12.705 1,305,720
2009 $12.705 $12.637 985,343
2010 $12.637 $12.511 775,634
2011 $12.511 $12.369 634,224
------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--INITIAL CLASS
2002 $9.200 $7.240 200,173
2003 $7.240 $10.251 294,264
2004 $10.251 $11.504 402,967
2005 $11.504 $13.526 394,476
2006 $13.526 $15.773 366,639
2007 $15.773 $18.273 327,028
2008 $18.273 $10.141 276,821
2009 $10.141 $12.672 211,336
2010 $12.672 $14.155 161,268
2011 $14.155 $11.580 132,738
53 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES I
2004 $10.000 $10.821 269,780
2005 $10.821 $11.301 253,928
2006 $11.301 $12.634 235,944
2007 $12.634 $12.669 199,610
2008 $12.669 $6.034 176,998
2009 $6.034 $8.820 148,589
2010 $8.820 $9.351 119,425
2011 $9.351 $8.953 77,525
------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
2002 $10.000 $8.163 36,430
2003 $8.163 $10.293 152,145
2004 $10.293 $11.600 354,336
2005 $11.600 $12.570 434,444
2006 $12.570 $14.397 396,566
2007 $14.397 $14.576 306,627
2008 $14.576 $9.758 199,062
2009 $9.758 $11.960 183,308
2010 $11.960 $13.252 150,424
2011 $13.252 $12.792 100,474
------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
2004 $10.000 $11.156 44,940
2005 $11.156 $12.242 49,948
2006 $12.242 $12.686 45,228
2007 $12.686 $14.732 39,490
2008 $14.732 $7.735 29,220
2009 $7.735 $11.945 38,907
2010 $11.945 $15.014 25,399
2011 $15.014 $13.440 18,967
------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP VALUE FUND--SERIES I
2004 $10.000 $11.333 309,322
2005 $11.333 $12.570 353,741
2006 $12.570 $14.984 276,970
2007 $14.984 $15.958 210,481
2008 $15.958 $9.252 158,166
2009 $9.252 $12.720 131,570
2010 $12.720 $15.356 113,395
2011 $15.356 $15.306 92,596
54 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
JANUS ASPEN ENTERPRISE PORTFOLIO--INSTITUTIONAL SHARES
2002 $11.000 $7.827 694,192
2003 $7.827 $10.443 656,913
2004 $10.443 $12.453 642,333
2005 $12.453 $13.812 539,509
2006 $13.812 $15.497 434,028
2007 $15.497 $18.677 344,083
2008 $18.677 $10.380 288,564
2009 $10.380 $14.846 221,943
2010 $14.846 $18.452 186,653
2011 $18.452 $17.965 157,425
------------------------------------------------------------------------------------------------
JANUS ASPEN JANUS PORTFOLIO--INTERNATIONAL SHARES
2002 $10.570 $12.531 623,206
2003 $12.531 $9.984 1,211,583
2004 $9.984 $10.306 1,041,507
2005 $10.306 $10.614 860,239
2006 $10.614 $11.676 645,480
2007 $11.676 $13.270 469,901
2008 $13.270 $7.900 371,128
2009 $7.900 $10.637 290,538
2010 $10.637 $12.031 230,669
2011 $12.031 $11.252 195,033
------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $7.495 62,852
2009 $7.495 $13.254 86,323
2010 $13.254 $16.365 71,833
2011 $16.365 $10.935 59,162
------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--INSTITUTIONAL SHARES
2002 $13.290 $7.762 94,361
2003 $7.762 $13.832 1,496,830
2004 $13.832 $14.825 1,365,759
2005 $14.825 $15.805 1,195,782
2006 $15.805 $17.282 970,410
2007 $17.282 $18.865 747,492
2008 $18.865 $15.679 535,796
2009 $15.679 $19.493 427,444
2010 $19.493 $20.865 348,978
2011 $20.865 $20.945 284,742
55 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FLEXIBLE BOND PORTFOLIO--INSTITUTIONAL SHARES
2002 $11.490 $12.280 1,721,351
2003 $12.280 $13.166 584,216
2004 $13.166 $13.519 527,949
2005 $13.519 $13.619 492,874
2006 $13.619 $14.017 393,774
2007 $14.017 $14.816 327,277
2008 $14.816 $15.514 272,856
2009 $15.514 $17.346 231,270
2010 $17.346 $18.496 202,832
2011 $18.496 $19.499 171,010
------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2002 $10.000 $7.675 1,378,111
2003 $7.675 $10.226 58,782
2004 $10.226 $11.939 152,105
2005 $11.939 $12.526 114,760
2006 $12.526 $14.605 84,464
2007 $14.605 $17.055 73,894
2008 $17.055 $16.058 0
------------------------------------------------------------------------------------------------
JANUS ASPEN WORLDWIDE PORTFOLIO--INSTITUTIONAL SHARES
2002 $11.070 $8.143 1,719,720
2003 $8.143 $9.971 1,479,355
2004 $9.971 $10.318 1,193,225
2005 $10.318 $10.788 997,853
2006 $10.788 $12.594 775,658
2007 $12.594 $13.634 562,020
2008 $13.634 $7.451 410,898
2009 $7.451 $10.132 336,082
2010 $10.132 $11.591 263,086
2011 $11.591 $9.874 207,953
------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO-- CLASS I SHARES
2004 $10.000 $10.954 60,840
2005 $10.954 $11.525 49,518
2006 $11.525 $13.461 49,417
2007 $13.461 $13.811 35,322
2008 $13.811 $8.781 26,875
2009 $8.781 $10.796 20,239
2010 $10.796 $11.671 17,945
2011 $11.671 $12.098 17,154
------------------------------------------------------------------------------------------------
LSA BALANCED
2002 $10.000 $8.678 2,230
2003 $8.678 $11.074 83,852
56 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
MFS(R) GROWTH SERIES--INITIAL CLASS
2002 $10.690 $6.994 247,624
2003 $6.994 $8.995 248,807
2004 $8.995 $10.035 231,814
2005 $10.035 $10.821 202,017
2006 $10.821 $11.531 165,550
2007 $11.531 $13.798 126,996
2008 $13.798 $8.528 102,015
2009 $8.528 $11.594 78,308
2010 $11.594 $13.207 66,211
2011 $13.207 $13.001 60,057
------------------------------------------------------------------------------------------------
MFS(R) INVESTORS TRUST SERIES--INITIAL CLASS
2002 $9.660 $7.536 269,101
2003 $7.536 $9.091 270,484
2004 $9.091 $9.998 244,156
2005 $9.998 $10.596 207,370
2006 $10.596 $11.824 171,767
2007 $11.824 $12.880 126,138
2008 $12.880 $8.512 100,457
2009 $8.512 $10.668 84,052
2010 $10.668 $11.704 56,558
2011 $11.704 $11.307 36,636
------------------------------------------------------------------------------------------------
MFS(R) NEW DISCOVERY SERIES--INITIAL CLASS
2002 $17.650 $11.918 183,131
2003 $11.918 $15.738 224,760
2004 $15.738 $16.556 232,616
2005 $16.556 $17.209 188,078
2006 $17.209 $19.241 161,666
2007 $19.241 $19.479 139,957
2008 $19.479 $11.671 119,273
2009 $11.671 $18.809 94,439
2010 $18.809 $25.325 80,183
2011 $25.325 $22.443 58,617
------------------------------------------------------------------------------------------------
MFS(R) RESEARCH SERIES--INITIAL CLASS
2002 $9.920 $7.389 186,178
2003 $7.389 $9.100 190,978
2004 $9.100 $10.412 189,969
2005 $10.412 $11.085 142,585
2006 $11.085 $12.095 119,287
2007 $12.095 $13.521 86,910
2008 $13.521 $8.534 55,904
2009 $8.534 $11.002 49,781
2010 $11.002 $12.593 38,970
2011 $12.593 $12.381 34,033
57 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
MFS(R) TOTAL RETURN SERIES--INITIAL CLASS
2002 $12.250 $11.473 642,776
2003 $11.473 $13.180 943,486
2004 $13.180 $14.490 1,033,566
2005 $14.490 $14.714 970,559
2006 $14.714 $16.260 802,883
2007 $16.260 $16.734 661,560
2008 $16.734 $12.868 464,793
2009 $12.868 $15.000 347,219
2010 $15.000 $16.285 279,717
2011 $16.285 $16.368 217,821
------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL-- & MID-CAP FUND(R)/VA--SERVICE SHARES FORMERLY, OPPENHEIMER MAIN
STREET SMALL CAP FUND(R)/VA--SERVICE SHARES
2002 $10.000 $7.847 97,205
2003 $7.847 $11.178 214,471
2004 $11.178 $13.157 347,171
2005 $13.157 $14.256 305,883
2006 $14.256 $16.144 279,529
2007 $16.144 $15.720 219,803
2008 $15.720 $9.625 151,992
2009 $9.625 $13.011 120,823
2010 $13.011 $15.812 98,906
2011 $15.812 $15.244 74,721
------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)-- ADMINISTRATIVE SHARES
2002 $10.000 $10.565 75,670
2003 $10.565 $10.669 337,271
2004 $10.669 $11.122 347,113
2005 $11.122 $11.550 338,440
2006 $11.550 $11.657 247,334
2007 $11.657 $11.929 175,543
2008 $11.929 $11.501 185,837
2009 $11.501 $13.133 139,898
2010 $13.133 $14.072 137,307
2011 $14.072 $14.838 121,733
------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2002 $10.000 $10.557 539,429
2003 $10.557 $10.951 1,001,817
2004 $10.951 $11.343 1,060,049
2005 $11.343 $11.476 1,156,641
2006 $11.476 $11.771 944,261
2007 $11.771 $12.643 737,286
2008 $12.643 $13.088 699,373
2009 $13.088 $14.744 709,743
2010 $14.744 $15.743 639,674
2011 $15.743 $16.109 508,815
58 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
PREMIER VIT NACM SMALL CAP PORTFOLIO--CLASS 1
2002 $10.000 $7.200 88,999
2003 $7.200 $10.143 236,796
2004 $10.143 $11.809 274,798
2005 $11.809 $11.669 207,018
2006 $11.669 $14.300 198,198
2007 $14.300 $14.203 142,608
2008 $14.203 $8.186 108,005
2009 $8.186 $9.344 85,491
2010 $9.344 $10.843 0
------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.812 129,223
2005 $10.812 $10.971 113,375
2006 $10.971 $12.005 99,054
2007 $12.005 $11.330 58,167
2008 $11.330 $7.700 43,630
2009 $7.700 $7.432 0
------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL VALUE FUND--CLASS IB
2002 $10.000 $8.198 38,105
2003 $8.198 $11.161 43,231
2004 $11.161 $13.335 89,040
2005 $13.335 $15.027 123,886
2006 $15.027 $18.881 158,576
2007 $18.881 $19.952 125,260
2008 $19.952 $10.636 74,027
2009 $10.636 $13.254 56,664
2010 $13.254 $14.022 39,029
2011 $14.022 $11.940 26,096
------------------------------------------------------------------------------------------------
RIDGEWORTH LARGE CAP GROWTH STOCK FUND
2002 $9.590 $7.397 56,403
2003 $7.397 $8.653 63,977
2004 $8.653 $9.123 60,421
2005 $9.123 $8.929 57,402
2006 $8.929 $9.773 67,263
2007 $9.773 $11.125 88,003
2008 $11.125 $6.517 81,011
2009 $6.517 $6.634 0
------------------------------------------------------------------------------------------------
RIDGEWORTH LARGE CAP VALUE EQUITY FUND
2002 $9.200 $7.540 104,266
2003 $7.540 $9.168 53,974
2004 $9.168 $10.439 192,125
2005 $10.439 $10.696 91,183
2006 $10.696 $12.937 142,829
2007 $12.937 $13.229 83,673
2008 $13.229 $8.781 59,269
2009 $8.781 $8.309 0
59 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--I
2002 $12.360 $10.602 608,043
2003 $10.602 $13.140 744,659
2004 $13.140 $14.913 895,153
2005 $14.913 $15.306 874,317
2006 $15.306 $17.984 762,467
2007 $17.984 $18.339 575,733
2008 $18.339 $11.571 402,473
2009 $11.571 $14.353 288,947
2010 $14.353 $16.304 227,597
2011 $16.304 $15.987 165,957
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO--I
2002 $8.850 $7.137 99,915
2003 $7.137 $9.201 173,635
2004 $9.201 $10.338 264,060
2005 $10.338 $11.847 255,863
2006 $11.847 $13.934 244,192
2007 $13.934 $15.553 191,891
2008 $15.553 $7.879 149,103
2009 $7.879 $11.858 116,835
2010 $11.858 $13.403 95,977
2011 $13.403 $11.538 69,775
------------------------------------------------------------------------------------------------
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO--I
2002 $14.590 $11.345 436,260
2003 $11.345 $15.505 619,155
2004 $15.505 $18.121 586,887
2005 $18.121 $20.534 504,417
2006 $20.534 $21.626 404,390
2007 $21.626 $25.097 295,779
2008 $25.097 $14.931 222,831
2009 $14.931 $21.476 160,985
2010 $21.476 $27.173 125,304
2011 $27.173 $26.495 92,948
------------------------------------------------------------------------------------------------
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO--I
2002 $9.620 $6.813 165,424
2003 $6.813 $9.090 155,957
2004 $9.090 $9.995 173,326
2005 $9.955 $10.271 157,832
2006 $10.271 $10.888 129,696
2007 $10.888 $12.233 117,852
2008 $12.233 $7.461 92,406
2009 $7.461 $11.035 64,870
2010 $11.035 $13.040 49,935
2011 $13.040 $12.740 45,311
60 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY
MORTALITY & EXPENSE = 1.15
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE VT DISCOVERY FUND
2005 $10.000 $11.481 293,780
2006 $11.481 $12.999 225,795
2007 $12.999 $15.702 161,353
2008 $15.702 $8.628 115,632
2009 $8.628 $11.956 82,156
2010 $11.956 $16.004 68,993
2011 $16.004 $15.872 55,858
------------------------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE VT OPPORTUNITY FUND--CLASS 2
2005 $10.000 $11.040 510,068
2006 $11.040 $12.235 431,405
2007 $12.235 $12.884 339,846
2008 $12.884 $7.622 257,232
2009 $7.622 $11.120 196,311
2010 $11.120 $13.591 157,062
2011 $13.591 $12.682 117,739
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.15% and an administrative expense charge of 0.10%.
61 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO--CLASS I-2
2002 $6.340 $4.116 264,242
2003 $4.116 $5.447 542,296
2004 $5.447 $5.788 727,607
2005 $5.788 $6.506 721,253
2006 $6.506 $7.621 732,706
2007 $7.621 $9.995 759,050
2008 $9.995 $5.385 521,910
2009 $5.385 $7.992 457,894
2010 $7.992 $8.951 466,843
2011 $8.951 $8.765 505,465
---------------------------------------------------------------------------------------------------
ALGER GROWTH & INCOME PORTFOLIO--CLASS I-2
2002 $7.810 $5.284 202,665
2003 $5.284 $6.738 354,359
2004 $6.738 $7.137 396,418
2005 $7.137 $7.252 381,157
2006 $7.252 $7.786 339,270
2007 $7.786 $8.421 308,605
2008 $8.421 $5.006 254,925
2009 $5.006 $6.499 249,853
2010 $6.499 $7.166 199,795
2011 $7.166 $7.496 169,075
---------------------------------------------------------------------------------------------------
ALGER LARGE CAP GROWTH PORTFOLIO--CLASS I-2
2002 $7.070 $4.651 108,296
2003 $4.651 $6.175 308,042
2004 $6.175 $6.398 439,952
2005 $6.398 $7.041 492,261
2006 $7.041 $7.271 413,156
2007 $7.271 $8.565 371,317
2008 $8.565 $4.529 324,912
2009 $4.529 $6.565 298,212
2010 $6.565 $7.311 266,498
2011 $7.311 $7.156 160,824
---------------------------------------------------------------------------------------------------
ALGER MID CAP GROWTH PORTFOLIO--CLASS I-2
2002 $8.670 $5.996 295,309
2003 $5.996 $8.703 836,891
2004 $8.703 $9.663 999,864
2005 $9.663 $10.424 1,007,060
2006 $10.424 $11.277 894,467
2007 $11.277 $14.569 822,716
2008 $14.569 $5.959 721,972
2009 $5.959 $8.878 656,392
2010 $8.878 $10.410 560,969
2011 $10.410 $9.379 432,244
62 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------
ALGER SMALLCAP GROWTH PORTFOLIO--CLASS I-2
2002 $4.990 $3.619 128,015
2003 $3.619 $5.060 283,201
2004 $5.060 $5.793 359,793
2005 $5.793 $6.651 408,709
2006 $6.651 $7.840 400,994
2007 $7.840 $9.027 386,201
2008 $9.027 $4.734 324,933
2009 $4.734 $6.765 302,059
2010 $6.765 $8.326 273,464
2011 $8.326 $7.917 210,162
---------------------------------------------------------------------------------------------------------
DWS VSI: BOND VIP--CLASS A
2002 $11.020 $11.655 89,305
2003 $11.655 $12.026 179,258
2004 $12.026 $12.447 242,774
2005 $12.447 $12.544 235,908
2006 $12.544 $12.902 203,670
2007 $12.902 $13.200 192,164
2008 $13.200 $10.790 162,984
2009 $10.790 $11.665 139,150
2010 $11.665 $12.234 131,495
2011 $12.234 $12.700 95,813
---------------------------------------------------------------------------------------------------------
DWS VSI: GLOBAL SMALL CAP GROWTH--CLASS A
FORMERLY, DWS VSI: GLOBAL OPPORTUNITIES VIP--CLASS A
2002 $6.750 $5.313 51,809
2003 $5.313 $7.780 159,642
2004 $7.780 $9.425 254,808
2005 $9.425 $10.942 309,298
2006 $10.942 $13.120 368,488
2007 $13.120 $14.087 319,396
2008 $14.087 $6.922 292,135
2009 $6.922 $10.076 295,598
2010 $10.076 $12.533 247,927
2011 $12.533 $11.091 194,798
---------------------------------------------------------------------------------------------------------
DWS VSI: GROWTH & INCOME VIP--CLASS A
2002 $8.350 $6.305 37,769
2003 $6.305 $7.849 76,611
2004 $7.849 $8.492 99,749
2005 $8.492 $8.847 85,054
2006 $8.847 $9.874 79,081
2007 $9.874 $9.829 76,673
2008 $9.829 $5.955 67,583
2009 $5.955 $7.846 85,215
2010 $7.846 $8.815 73,664
2011 $8.815 $8.646 63,481
63 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
----------------------------------------------------------------------------------------------------
DWS VSI: INTERNATIONAL VIP--CLASS A
2002 $5.910 $4.740 36,822
2003 $4.740 $5.948 144,072
2004 $5.948 $6.808 174,503
2005 $6.808 $7.768 190,759
2006 $7.768 $9.606 229,934
2007 $9.606 $10.810 202,975
2008 $10.810 $5.498 253,788
2009 $5.498 $7.210 164,420
2010 $7.210 $7.197 126,785
2011 $7.197 $5.890 106,508
----------------------------------------------------------------------------------------------------
DWS VSII: BALANCED VIP--CLASS A
2005 $10.000 $10.562 140,966
2006 $10.562 $11.437 117,438
2007 $11.437 $11.776 108,626
2008 $11.776 $8.404 99,008
2009 $8.404 $10.189 96,552
2010 $10.189 $11.130 85,675
2011 $11.130 $10.777 62,067
----------------------------------------------------------------------------------------------------
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
2002 $11.150 $11.942 408,779
2003 $11.942 $12.006 580,553
2004 $12.006 $12.218 605,532
2005 $12.218 $12.243 530,059
2006 $12.243 $12.523 381,051
2007 $12.523 $13.072 721,964
2008 $13.072 $13.388 610,475
2009 $13.388 $13.834 473,221
2010 $13.834 $14.289 324,041
2011 $14.289 $14.846 269,692
----------------------------------------------------------------------------------------------------
FEDERATED HIGH INCOME BOND FUND II
2002 $9.150 $5.784 24,658
2003 $5.784 $10.941 246,278
2004 $10.941 $11.870 444,657
2005 $11.870 $11.968 439,857
2006 $11.968 $13.026 430,206
2007 $13.026 $13.231 379,607
2008 $13.231 $9.617 307,223
2009 $9.617 $14.437 275,990
2010 $14.437 $16.268 242,351
2011 $16.268 $16.804 195,932
64 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
--------------------------------------------------------------------------------------------------------
FEDERATED MANAGED VOLATILITY FUND II
FORMERLY, FEDERATED CAPITAL INCOME FUND II
2002 $7.740 $9.115 92,428
2003 $9.115 $6.855 51,656
2004 $6.855 $7.401 76,744
2005 $7.401 $7.726 76,010
2006 $7.726 $8.776 100,300
2007 $8.776 $8.966 65,968
2008 $8.966 $7.012 98,652
2009 $7.012 $8.834 87,864
2010 $8.834 $9.725 54,559
2011 $9.725 $10.008 30,900
--------------------------------------------------------------------------------------------------------
FIDELITY VIP ASSET MANAGER? PORTFOLIO--INITIAL CLASS
2002 $9.030 $8.095 73,114
2003 $8.095 $9.379 116,121
2004 $9.379 $9.716 181,632
2005 $9.716 $9.929 176,415
2006 $9.929 $10.466 129,882
2007 $10.466 $11.872 125,667
2008 $11.872 $8.311 130,724
2009 $8.311 $10.540 122,598
2010 $10.540 $11.828 129,616
2011 $11.828 $11.320 72,461
--------------------------------------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND(R) PORTFOLIO--INITIAL CLASS
2002 $8.080 $7.195 348,537
2003 $7.195 $9.078 888,353
2004 $9.078 $10.296 1,158,838
2005 $10.296 $11.826 1,260,810
2006 $11.826 $12.977 1,273,768
2007 $12.977 $14.986 1,188,207
2008 $14.986 $8.461 1,080,956
2009 $8.461 $11.277 1,046,007
2010 $11.277 $12.983 998,155
2011 $12.983 $12.430 709,229
--------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO--INITIAL CLASS
2002 $10.300 $8.405 174,403
2003 $8.405 $10.759 306,020
2004 $10.759 $11.786 434,981
2005 $11.786 $12.255 395,964
2006 $12.255 $14.468 396,481
2007 $14.468 $14.426 349,218
2008 $14.426 $8.125 273,985
2009 $8.125 $10.390 270,828
2010 $10.390 $11.751 237,804
2011 $11.751 $11.654 185,670
65 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO--INITIAL CLASS
2002 $6.790 $4.659 305,305
2003 $4.659 $6.080 625,498
2004 $6.080 $6.173 939,071
2005 $6.173 $6.415 831,880
2006 $6.415 $6.732 682,021
2007 $6.732 $8.394 682,803
2008 $8.394 $4.356 663,776
2009 $4.356 $5.488 676,234
2010 $5.488 $6.693 597,279
2011 $6.693 $6.587 435,815
------------------------------------------------------------------------------------------------------
FIDELITY VIP INDEX 500 PORTFOLIO--INITIAL CLASS
2002 $7.800 $5.960 365,351
2003 $5.960 $7.516 978,400
2004 $7.516 $8.166 1,444,339
2005 $8.166 $8.407 1,362,101
2006 $8.407 $9.557 1,346,569
2007 $9.557 $9.896 1,295,792
2008 $9.896 $6.123 1,150,557
2009 $6.123 $7.614 1,043,678
2010 $7.614 $8.602 911,514
2011 $8.602 $8.621 744,841
------------------------------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO--INITIAL CLASS
2002 $10.470 $10.456 310,441
2003 $10.456 $10.373 819,516
2004 $10.373 $10.311 618,241
2005 $10.311 $10.435 694,730
2006 $10.435 $10.750 725,670
2007 $10.750 $11.108 714,035
2008 $11.108 $11.240 1,173,850
2009 $11.240 $11.119 894,758
2010 $11.119 $10.947 697,719
2011 $10.947 $10.764 551,078
------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO--INITIAL CLASS
2002 $6.540 $5.119 109,892
2003 $5.119 $7.208 235,043
2004 $7.208 $8.045 382,839
2005 $8.045 $9.406 426,944
2006 $9.406 $10.909 513,031
2007 $10.909 $12.569 470,601
2008 $12.569 $6.937 476,598
2009 $6.937 $8.620 469,624
2010 $8.620 $9.577 413,895
2011 $9.577 $7.792 323,321
66 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-------------------------------------------------------------------------------------------------------------
INVESCO V.I. BASIC VALUE FUND--SERIES I
2004 $10.000 $10.781 244,914
2005 $10.781 $11.197 251,607
2006 $11.197 $12.450 294,765
2007 $12.450 $12.415 241,174
2008 $12.415 $5.881 236,766
2009 $5.881 $8.549 231,753
2010 $8.549 $9.014 197,346
2011 $9.014 $8.583 140,959
-------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. GROWTH AND INCOME FUND--SERIES II
2002 $10.000 $8.133 12,359
2003 $8.133 $10.199 106,750
2004 $10.199 $11.431 238,529
2005 $11.431 $12.319 277,577
2006 $12.319 $14.033 291,195
2007 $14.033 $14.129 213,247
2008 $14.129 $9.407 187,559
2009 $9.407 $11.466 182,380
2010 $11.466 $12.635 151,891
2011 $12.635 $12.129 114,411
-------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP GROWTH FUND--SERIES II
2004 $10.000 $11.114 77,019
2005 $11.114 $12.130 52,894
2006 $12.130 $12.500 60,010
2007 $12.500 $14.437 59,849
2008 $14.437 $7.538 46,687
2009 $7.538 $11.577 51,595
2010 $11.577 $14.472 53,523
2011 $14.472 $12.884 45,673
-------------------------------------------------------------------------------------------------------------
INVESCO VAN KAMPEN V.I. MID CAP VALUE FUND--SERIES I
2004 $10.000 $11.290 220,091
2005 $11.290 $12.455 280,918
2006 $12.455 $14.765 311,438
2007 $14.765 $15.638 269,763
2008 $15.638 $9.017 244,967
2009 $9.017 $12.329 201,588
2010 $12.329 $14.802 159,248
2011 $14.802 $14.672 123,833
67 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------
JANUS ASPEN ENTERPRISE PORTFOLIO--INSTITUTIONAL SHARES
2002 $3.960 $2.799 307,400
2003 $2.799 $3.715 412,644
2004 $3.715 $4.405 466,868
2005 $4.405 $4.860 505,828
2006 $4.860 $5.423 510,006
2007 $5.423 $6.499 505,513
2008 $6.499 $3.592 433,329
2009 $3.592 $5.110 419,789
2010 $5.110 $6.316 360,339
2011 $6.316 $6.116 287,583
---------------------------------------------------------------------------------------------------------------
JANUS ASPEN JANUS PORTFOLIO--INTERNATIONAL SHARES
2002 $6.150 $4.441 162,987
2003 $4.441 $5.746 251,235
2004 $5.746 $5.898 275,805
2005 $5.898 $6.042 257,364
2006 $6.042 $6.610 266,266
2007 $6.610 $7.471 225,942
2008 $7.471 $4.423 195,932
2009 $4.423 $5.923 193,524
2010 $5.923 $6.662 183,375
2011 $6.662 $6.197 129,587
---------------------------------------------------------------------------------------------------------------
JANUS ASPEN OVERSEAS PORTFOLIO--SERVICE SHARES
2008 $10.000 $7.225 81,678
2009 $7.225 $12.707 127,139
2010 $12.707 $15.603 120,730
2011 $15.603 $10.369 236,411
---------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES BALANCED PORTFOLIO--INSTITUTIONAL SHARES
2002 $9.000 $8.273 356,912
2003 $8.273 $9.267 699,022
2004 $9.267 $9.878 705,500
2005 $9.878 $10.473 691,502
2006 $10.473 $11.389 664,165
2007 $11.389 $12.364 559,884
2008 $12.364 $10.220 522,134
2009 $10.220 $12.636 495,193
2010 $12.636 $13.451 424,233
2011 $13.451 $13.428 402,662
68 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
--------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FLEXIBLE BOND PORTFOLIO--INSTITUTIONAL SHARES
2002 $11.010 $11.943 114,051
2003 $11.943 $12.480 254,643
2004 $12.480 $12.743 312,969
2005 $12.743 $12.767 291,063
2006 $12.767 $13.069 350,195
2007 $13.069 $13.738 380,041
2008 $13.738 $14.306 355,482
2009 $14.306 $15.908 323,948
2010 $15.908 $16.870 295,938
2011 $16.870 $17.687 252,052
--------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES FOREIGN STOCK PORTFOLIO--SERVICE SHARES
2002 $10.000 $7.734 36,688
2003 $7.734 $10.132 37,023
2004 $10.132 $11.765 71,988
2005 $11.765 $12.276 79,929
2006 $12.276 $14.235 72,800
2007 $14.235 $16.532 78,321
2008 $16.532 $15.537 0
--------------------------------------------------------------------------------------------------------------------
JANUS ASPEN WORLDWIDE PORTFOLIO--INSTITUTIONAL SHARES
2002 $6.240 $4.564 245,789
2003 $4.564 $5.558 365,025
2004 $5.558 $5.719 414,342
2005 $5.719 $5.947 364,847
2006 $5.947 $6.905 335,256
2007 $6.905 $7.434 327,739
2008 $7.434 $4.040 279,358
2009 $4.040 $5.464 445,607
2010 $5.464 $6.216 264,635
2011 $6.216 $5.266 213,672
--------------------------------------------------------------------------------------------------------------------
LEGG MASON CLEARBRIDGE VARIABLE LARGE CAP VALUE PORTFOLIO--
CLASS I SHARES
2004 $10.000 $10.913 47,102
2005 $10.913 $11.419 45,145
2006 $11.419 $13.264 47,405
2007 $13.264 $13.534 46,980
2008 $13.534 $8.557 42,904
2009 $8.557 $10.464 43,855
2010 $10.464 $11.250 44,795
2011 $11.250 $11.597 35,396
--------------------------------------------------------------------------------------------------------------------
LSA BALANCED
2002 $10.000 $8.646 2,157
2003 $8.646 $10.973 46,166
69 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------
MFS(R) GROWTH SERIES--INITIAL CLASS
2002 $5.330 $3.465 123,692
2003 $3.465 $4.432 227,669
2004 $4.432 $4.917 274,686
2005 $4.917 $5.273 269,766
2006 $5.273 $5.588 247,942
2007 $5.588 $6.650 220,878
2008 $6.650 $4.087 314,346
2009 $4.087 $5.527 175,017
2010 $5.527 $6.261 155,208
2011 $6.261 $6.130 113,799
------------------------------------------------------------------------------------------------
MFS(R) INVESTORS TRUST SERIES--INITIAL CLASS
2002 $8.130 $6.308 52,812
2003 $6.308 $7.567 121,843
2004 $7.567 $8.276 136,211
2005 $8.276 $8.724 135,382
2006 $8.724 $9.682 134,594
2007 $9.682 $10.488 127,128
2008 $10.488 $6.893 180,349
2009 $6.893 $8.591 197,186
2010 $8.591 $9.375 86,881
2011 $9.375 $9.007 59,938
------------------------------------------------------------------------------------------------
MFS(R) NEW DISCOVERY SERIES--INITIAL CLASS
2002 $8.360 $5.615 205,837
2003 $5.615 $7.374 477,819
2004 $7.374 $7.715 623,501
2005 $7.715 $7.975 560,525
2006 $7.975 $8.868 514,110
2007 $8.868 $8.928 480,804
2008 $8.928 $5.320 407,025
2009 $5.320 $8.527 412,667
2010 $8.527 $11.418 350,753
2011 $11.418 $10.063 280,613
------------------------------------------------------------------------------------------------
MFS(R) RESEARCH SERIES--INITIAL CLASS
2002 $6.860 $5.084 32,958
2003 $5.084 $6.227 50,336
2004 $6.227 $7.085 53,593
2005 $7.085 $7.502 52,102
2006 $7.502 $8.141 49,634
2007 $8.141 $9.050 50,049
2008 $9.050 $5.681 46,891
2009 $5.681 $7.284 43,067
2010 $7.284 $8.291 38,811
2011 $8.291 $8.107 26,137
70 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
---------------------------------------------------------------------------------------------------------------------------
MFS(R) TOTAL RETURN SERIES--INITIAL CLASS
2002 $11.030 $10.273 250,026
2003 $10.273 $11.736 454,021
2004 $11.736 $12.832 590,723
2005 $12.832 $12.959 622,265
2006 $12.959 $14.243 569,919
2007 $14.243 $14.577 589,170
2008 $14.577 $11.148 454,138
2009 $11.148 $12.923 417,681
2010 $12.923 $13.953 393,032
2011 $13.953 $13.947 283,231
---------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET SMALL-- & MID-CAP FUND(R)/VA--SERVICE SHARES
FORMERLY, OPPENHEIMER MAIN STREET SMALL CAP FUND(R)/VA--SERVICE SHARES
2002 $10.000 $7.818 41,593
2003 $7.818 $11.076 193,863
2004 $11.076 $12.965 323,468
2005 $12.965 $13.972 312,606
2006 $13.972 $15.735 325,308
2007 $15.735 $15.238 316,074
2008 $15.238 $9.278 291,787
2009 $9.278 $12.473 266,203
2010 $12.473 $15.075 255,321
2011 $15.075 $14.454 208,709
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT FOREIGN BOND PORTFOLIO (U.S. DOLLAR-HEDGED)--
ADMINISTRATIVE SHARES
2002 $10.000 $10.526 4,596
2003 $10.526 $10.571 79,683
2004 $10.571 $10.960 100,873
2005 $10.960 $11.319 106,489
2006 $11.319 $11.362 99,214
2007 $11.362 $11.563 106,231
2008 $11.563 $11.086 122,885
2009 $11.086 $12.591 135,635
2010 $12.591 $13.417 119,213
2011 $13.417 $14.070 85,468
---------------------------------------------------------------------------------------------------------------------------
PIMCO VIT TOTAL RETURN PORTFOLIO--ADMINISTRATIVE SHARES
2002 $10.000 $10.518 85,455
2003 $10.518 $10.851 428,033
2004 $10.851 $11.178 604,097
2005 $11.178 $11.247 614,406
2006 $11.247 $11.473 512,461
2007 $11.473 $12.255 483,376
2008 $12.255 $12.616 572,089
2009 $12.616 $14.135 536,002
2010 $14.135 $15.010 502,876
2011 $15.010 $15.275 328,409
71 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
-------------------------------------------------------------------------------------------------
PREMIER VIT NACM SMALL CAP PORTFOLIO--CLASS 1
2002 $10.000 $7.173 8,929
2003 $7.173 $10.051 172,641
2004 $10.051 $11.637 244,720
2005 $11.637 $11.436 236,295
2006 $11.436 $13.938 205,170
2007 $13.938 $13.767 172,785
2008 $13.767 $7.892 167,008
2009 $7.892 $8.958 160,896
2010 $8.958 $10.376 0
-------------------------------------------------------------------------------------------------
PREMIER VIT OPCAP BALANCED PORTFOLIO
2004 $10.000 $10.772 91,944
2005 $10.772 $10.870 106,673
2006 $10.870 $11.829 97,834
2007 $11.829 $11.102 94,157
2008 $11.102 $7.504 80,619
2009 $7.504 $7.230 0
-------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL VALUE FUND--CLASS IB
2002 $10.000 $8.168 6,727
2003 $8.168 $11.059 39,731
2004 $11.059 $13.141 58,105
2005 $13.141 $14.727 61,333
2006 $14.727 $18.403 109,461
2007 $18.403 $19.339 175,336
2008 $19.339 $10.253 80,251
2009 $10.253 $12.707 72,272
2010 $12.707 $13.369 62,701
2011 $13.369 $11.322 51,749
-------------------------------------------------------------------------------------------------
RIDGEWORTH LARGE CAP GROWTH STOCK FUND
2002 $8.950 $6.870 31,178
2003 $6.870 $7.992 54,246
2004 $7.992 $8.380 63,858
2005 $8.380 $8.157 58,249
2006 $8.157 $8.879 51,761
2007 $8.879 $10.052 47,830
2008 $10.052 $5.856 43,139
2009 $5.856 $5.951 0
-------------------------------------------------------------------------------------------------
RIDGEWORTH LARGE CAP VALUE EQUITY FUND
2002 $11.360 $9.262 19,587
2003 $9.262 $11.201 30,898
2004 $11.201 $12.683 100,258
2005 $12.683 $12.925 68,271
2006 $12.925 $15.546 93,618
2007 $15.546 $15.810 49,278
2008 $15.810 $10.437 30,278
2009 $10.437 $9.859 0
72 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
--------------------------------------------------------------------------------------------------
T. ROWE PRICE EQUITY INCOME PORTFOLIO--I
2002 $11.480 $9.895 228,732
2003 $9.895 $12.073 526,597
2004 $12.073 $13.627 761,565
2005 $13.627 $13.909 796,314
2006 $13.909 $16.254 661,730
2007 $16.254 $16.483 601,481
2008 $16.483 $10.343 537,201
2009 $10.343 $12.759 523,378
2010 $12.759 $14.414 428,716
2011 $14.414 $14.056 307,413
--------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO--I
2002 $6.530 $5.239 39,170
2003 $5.239 $6.716 110,909
2004 $6.716 $7.505 176,753
2005 $7.505 $8.554 203,771
2006 $8.554 $10.006 257,698
2007 $10.006 $11.107 256,965
2008 $11.107 $5.596 188,929
2009 $5.596 $8.375 202,112
2010 $8.375 $9.415 262,241
2011 $9.415 $8.060 158,565
--------------------------------------------------------------------------------------------------
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO--I
2002 $9.790 $7.569 231,318
2003 $7.569 $10.288 574,018
2004 $10.288 $11.957 675,635
2005 $11.957 $13.476 621,478
2006 $13.476 $14.114 575,076
2007 $14.114 $16.289 538,625
2008 $16.289 $9.638 472,274
2009 $9.638 $13.787 438,741
2010 $13.787 $17.348 371,524
2011 $17.348 $16.823 257,098
--------------------------------------------------------------------------------------------------
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO--I
2002 $7.800 $5.489 80,509
2003 $5.489 $7.284 84,065
2004 $7.284 $7.933 120,707
2005 $7.933 $8.140 126,892
2006 $8.140 $8.581 132,467
2007 $8.581 $9.589 126,622
2008 $9.589 $5.816 125,436
2009 $5.816 $8.555 120,111
2010 $8.555 $10.054 108,637
2011 $10.054 $9.769 81,021
73 PROSPECTUS
LBL CONSULTANT I VARIABLE ANNUITY--PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT*
BASIC POLICY PLUS DEATH BENEFIT AND INCOME BENEFIT RIDER II
MORTALITY & EXPENSE = 1.7
Number of
Accumulation Accumulation Units
For the Year Unit Value Unit Value Outstanding
Ending at Beginning at End at End
Sub-Accounts December 31 of Period of Period of Period
------------------------------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE VT DISCOVERY FUND
2005 $10.000 $11.435 177,119
2006 $11.435 $12.876 174,427
2007 $12.876 $15.468 167,923
2008 $15.468 $8.453 150,363
2009 $8.453 $11.648 130,113
2010 $11.648 $15.507 125,559
2011 $15.507 $15.296 90,356
------------------------------------------------------------------------------------------------------
WELLS FARGO ADVANTAGE VT OPPORTUNITY FUND--CLASS 2
2005 $10.000 $10.996 449,486
2006 $10.996 $12.120 420,788
2007 $12.120 $12.692 391,679
2008 $12.692 $7.467 344,261
2009 $7.467 $10.835 303,876
2010 $10.835 $13.169 278,789
2011 $13.169 $12.221 163,451
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.70% and an administrative expense charge of 0.10%.
74 PROSPECTUS
APPENDIX B
--------------------------------------------------------------------------------
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $40,000.00
---------------------------------------------------------
Guarantee Period: 5 Years
---------------------------------------------------------
Guaranteed Interest Rate: 5% Annual Effective Rate
---------------------------------------------------------
5-year Treasury Rate at Time of
Purchase Payment: 6%
---------------------------------------------------------
The following examples illustrate how the Market Value Adjustment and the
Withdrawal Charge may affect the values of a Contract upon a withdrawal. The 5%
assumed Guaranteed Interest Rate is the rate required to be used in the
"Summary of Expenses." In these examples, the withdrawal occurs one year after
the Issue Date. The Market Value Adjustment operates in a similar manner for
transfers, except that there is no free amount for transfers. No Withdrawal
Charge applies to transfers.
Assuming that the entire $40,000.00 Purchase Payment is allocated to the
Guaranteed Maturity Fixed Account for the Guarantee Period specified above, at
the end of the five-year Guarantee Period the Contract Value would be
$51,051.26. After one year, when the withdrawals occur in these examples, the
Contract Value would be $42,000.00. We have assumed that no prior partial
withdrawals or transfers have occurred.
The Market Value Adjustment and the Withdrawal Charge only apply to the portion
of a withdrawal that is greater than the Free Withdrawal Amount. Accordingly,
the first step is to calculate the Free Withdrawal Amount.
The Free Withdrawal Amount is equal to:
(a) the greater of:
. earnings not previously withdrawn; or
. 15% of your total Purchase Payments in the most recent seven years; plus
(b) an amount equal to your total Purchase Payments made more than seven
years ago, to the extent not previously withdrawn.
Here, (a) equals $6,000.00, because 15% of the total Purchase Payments in the
most recent seven years ($6,000.00 = 15% X $40,000.00) is greater than the
earnings not previously withdrawn ($2,000.00). (b) equals $0, because all of
the Purchase Payments were made less than seven years age. Accordingly, the
Free Withdrawal Amount is $6,000.00.
The formula that we use to determine the amount of the Market Value Adjustment
is:
.9 X (I - J) X N
where: I = the Treasury Rate for a maturity equal to the relevant Guarantee
Period for the week preceding the beginning of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the relevant Guarantee Period for
the week preceding our receipt of your withdrawal request, death benefit
request, transfer request, or annuity option request; and
N = the number of whole and partial years from the date we receive your request
until the end of the relevant Guarantee Period.
We will base the Market Value Adjustment on the current Treasury Rate for a
maturity corresponding in length to the relevant Guarantee Period. These
examples also show the Withdrawal Charge (if any), which would be calculated
separately from the Market Value Adjustment.
EXAMPLE OF A DOWNWARD MARKET VALUE ADJUSTMENT
A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased one year after the Purchase Payment, such that the five-year Treasury
Rate is now 6.5%. Upon a withdrawal, the market value adjustment factor would
be:
.9 X (.06 - .065) X 4 = -.0180
The Market Value Adjustment is a reduction of $648.00 from the amount withdrawn:
$ - 648.00 = -.0180 X ($42,000.00 - $6,000.00)
A Withdrawal Charge of 7% would be assessed against the Purchase Payments
withdrawn that are less than seven years old and are not eligible for free
withdrawal. Under the Contract, earnings are deemed to be withdrawn before
Purchase Payments. Accordingly, in this example, the amount of the Purchase
Payment eligible for free withdrawal would equal the Free Withdrawal Amount
less the interest credited or $4,000.00 ($6,000.00 - $2,000.00).
Therefore, the Withdrawal Charge would be:
$2,520.00 = 7% X (40,000.00 - $4,000.00)
As a result, the net amount payable to you would be:
$38,832.00 = $42,000.00-$648.00 - $2,520.00
75 PROSPECTUS
EXAMPLE OF AN UPWARD MARKET VALUE ADJUSTMENT
An upward Market Value Adjustment results from a withdrawal that occurs when
interest rates have decreased. Assume interest rates have decreased one year
after the Purchase Payment, such that the five-year
Treasury Rate is now 5.5%. Upon a withdrawal, the market value adjustment
factor would be:
.9 X (.06 - .055) X 4 = .0180
The Market Value Adjustment would increase the amount withdrawn by $648.00, as
follows:
$648.00 = .0180 X ($42,000.00 - $6,000.00)
As above, in this example, the amount of the Purchase Payment eligible for free
withdrawal would equal the Free Withdrawal Amount less the interest credited or
$4,000.00 ($6,000.00 - $2,000.00). Therefore, the Withdrawal Charge would be:
$2,520.00 = 7% X ($40,000.00 - $4,000.00)
As a result, the net amount payable to you would be:
$40,128.00 = $42,000.00 + $648.00 - $2,520.00
EXAMPLE OF A PARTIAL WITHDRAWAL
If you request a partial withdrawal from a Guarantee Period, we can either
(1) withdraw the specified amount of Contract Value and pay you that amount as
adjusted by any applicable Market Value Adjustment or (2) pay you the amount
requested, and subtract an amount from your Contract Value that equals the
requested amount after application of the Market Value Adjustment and
Withdrawal Charge. Unless you instruct us otherwise, when you request a partial
withdrawal we will assume that you wish to receive the amount requested. We
will make the necessary calculations and on your request provide you with a
statement showing our calculations.
For example, if in the first example you wished to receive $20,000.00 as a
partial withdrawal, the Market Value Adjustment and Withdrawal Charge would be
calculated as follows:
Let: AW = the total amount to be withdrawn
from your Contract Value
MVA = Market Value Adjustment
WC = Withdrawal Charge
AW' = amount subject to Market Value
Adjustment and Withdrawal
Charge
Then AW - $20,000.00 = WC - MVA
Since neither the Market Value Adjustment nor the Withdrawal Charge apply to
the free withdrawal amount, we can solve directly for the amount subject to the
Market Value Adjustment and the Withdrawal Charge (i.e., AW'), which equals AW
- $6,000.00. Then, AW = AW' + $6,000, and AW' + $6,000.00 - $20,000.00 = WC -
MVA.
MVA. = - .018 X AW'
WC.. = .07 X AW'
WC.. - MVA = .088AW'
AW'. - $14,000.00 = .088AW'
AW'. = $14,000.00 / (1 - .088) = $15,350.88
MVA. = - .018 X $15,350.88 = - $276.32
WC.. = .07 X $15,350.88 = $1,074.56
AW = Total amount withdrawn = $15,350.88 + $6,000.00 = $21,350.88
You receive $20,000.00; the total amount subtracted from your contract is
$21,350.88; the Market Value Adjustment is $276.32; and the Withdrawal Charge
is $1,074.56. Your remaining Contract Value is $20,649.12.
If, however, in the same example, you wished to withdraw $20,000.00 from your
Contract Value and receive the adjusted amount, the calculations would be as
follows:
By definition, AW = total amount withdrawn from your Contract Value = $20,000.00
AW' = amount that MVA & WC are applied to
= amount withdrawn in excess of Free
Amount = $20,000.00 - $6,000.00 =
$14,000.00
MVA = - .018 X $14,000.00 = - $252.00
WC = .07 X $14,000.00 = $980.00
You would receive $20,000.00 - $252.00 - $980.00 = $18,768.00; the total amount
subtracted from your Contract Value is $20,000.00. Your remaining Contract
Value would be $22,000.00.
EXAMPLE OF FREE WITHDRAWAL AMOUNT
Assume that in the foregoing example, after four years $8,620.25 in interest
had been credited and that the Contract Value in the Fixed Account equaled
$48,620.25. In this example, if no prior withdrawals have been made, you could
withdraw up to $8,620.25 without incurring a Market Value Adjustment or a
Withdrawal Charge. The Free Withdrawal Amount would be $8,620.25, because the
interest credited ($8,620.25) is greater than 15% of the Total Purchase
Payments in the most recent seven years ($40,000.00 X .15 = $6,000.00).
76 PROSPECTUS
LBL3055-7
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