LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT, 485APOS, 1999-01-28

LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
485APOS, 1999-01-28

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999

File No. 333-50545
File No. 811-7924
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 1
AND
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940

POST-EFFECTIVE AMENDMENT NO. 17

LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)

LINCOLN BENEFIT LIFE COMPANY
(Name of Depositor)
206 South 13th Street
Lincoln, Nebraska 68508
(Complete Address of Depositor's Principal Office)

JOHN MORRIS
Lincoln Benefit Life Company
206 South 13th Street
Lincoln, Nebraska 68508
1-800-865-5237
(Name and Complete Address of Agent for Service)

Copy to:

JOAN E. BOROS, ESQ.
Jorden Burt Boros Cicchetti
Berenson & Johnson LLP
1025 Thomas Jefferson Street N.W.
Suite 400 East
Washington, D.C. 20007-0805
------------------------
SECURITIES BEING OFFERED: FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY
CONTRACTS

Approximate Date of Proposed Public Offering: As soon as practicable after
effective date.

It is proposed that this filing will become effective:
________ immediately upon filing pursuant to paragraph (b) of Rule 485
________ on pursuant to paragraph (b) of Rule 485 60 days after filing
________ pursuant to paragraph (a) of rule 485
___X____ on April 10, 1999 pursuant to paragraph (a) of rule 485

The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933, pursuant to Section 24 of the Investment Company Act of
1940.
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<PAGE>

CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus) and Part B of Registration Statement of
Additional Information Required by Form N-4

ITEM OF FORM N-4
PART A: INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page..................................... Cover Page
2. Definitions.................................... Definitions
3. Synopsis....................................... Questions and Answers
About your Contract; Fee
Tables; Examples;
Explanation of Fee
Tables and Examples
4. Condensed Financial Information
(a) Accumulation Unit Values................... Not Applicable
(b) Explanation of Calculation of
Performance............................... Appendix A: Portfolios
and Performance Data
(c) Location of Other Financial Statements..... Condensed Financial Data
5. General Description of Registrant, Depositor,
and Portfolio Companies
(a) Depositor.................................. Lincoln Benefit Life
Company
(b) Registrant................................. Separate Account
(c) Portfolio Companies........................ The Portfolios
(d) Portfolio Company Prospectuses............. The Portfolios
(e) Voting Rights.............................. Voting Rights
(f) Administrators............................. Administration
6. Deductions
(a) General.................................... Contract Charges
(b) Sales Load Percent......................... Sales Charges
(c) Special Purchase Plans..................... Sales Charges
(d) Commissions................................ Distribution of the
Contracts
(e) Portfolio Expenses......................... Other Expenses
(f) Operating Expenses......................... Fee Tables; Contract
Charges
7. General Description of Contracts
(a) Persons with Rights........................ Description of the
Contracts; Annuity
Benefits; Other Contract
Benefits; Voting Rights;
Beneficiary
(b) (i) Allocation of Purchase Payments....... Allocation of Purchase
Payments
(ii) Transfers.............................. Purchases and Contract
Value; Transfers During
Annuity Period
(iii) Exchanges............................. Not Applicable
(c) Changes.................................... Modification of the
Contract
(d) Inquiries.................................. Questions and Answers
about Your Contract: Who
Should I Contact for
More Information
8. Annuity Period................................. Annuity Benefits;
Enhanced Death Benefit
and Income Benefit Rider
9. Death Benefit.................................. Death Benefit; Enhanced
Death Benefit Rider;
Enhanced Death Benefit
and Income Benefit Rider
10. Purchases and Contract Value................... Purchases and Contract
Value; Distribution of
the Contracts
11. Redemptions
(a) By Owners.................................. Withdrawals
(Redemptions);
Substantially Equal
Periodic Payments;
Systematic Withdrawal
Program
(b) By Annuitant............................... Annuity Options
(c) Texas ORP.................................. Not Applicable
(d) Lapse...................................... Minimum Contract Value
(e) Free Look.................................. Free Look Period
12. Taxes.......................................... Taxes
13. Legal Proceedings.............................. Legal Proceedings
14. Table of Contents of SAI....................... Table of Contents of SAI

PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

15. Cover Page..................................... Cover Page

16. Table of Contents.............................. Table of Contents

17. General Information and History
(a) Depositor's Name........................... Not Applicable
(b) Assets of Subaccount....................... Not Applicable
(c) Control of Depositor....................... Prospectus: Lincoln
Benefit Life Company

18. Services
(a) Fees and Expenses of Registrant............ Not Applicable
(b) Management Contracts....................... Not Applicable
(c) Custodian.................................. Prospectus: Separate
Account
Independent Public Accountant.................. Prospectus: Experts
(d) Assets of Registrant....................... Prospectus: Separate
Account
(e) Affiliated Persons......................... Not Applicable
(f) Principal Underwriter...................... Prospectus: Distribution
of the Contracts

19. Purchase of Securities Being Offered........... Prospectus: Distribution
of the Contracts

20. Underwriters................................... Prospectus: Distribution
of the Contracts

21. Calculation of Performance Data................ Prospectus: Appendix A:
Portfolios and
Performance Data;
Separate Account
Performance

22. Annuity Payments............................... SAI: The Contract

23. Financial Statements
(a) Financial Statements of Registrant......... SAI: Financial
Statements
(b) Financial Statements of Depositor.......... Prospectus: Financial
Statements

PART C: OTHER INFORMATION
The information required to be provided in Part C is separately identified by
Item number.

<PAGE>

FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 206 SOUTH 13TH ST., LINCOLN, NE 68508-1993
MAILING ADDRESS: P. O. BOX 82532, LINCOLN, NE 68501-2532
TELEPHONE NUMBER: 1-800-865-5237

This prospectus describes a Flexible Premium Individual Deferred Variable
Annuity Contract ("Contract") offered by Lincoln Benefit Life Company ("we" or
"Lincoln Benefit"). Lincoln Benefit is owned by Allstate Life Insurance Company.
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.

Because this is a flexible premium annuity contract, you may pay multiple
premiums. We allocate your premium to the investment options under the Contract
and our Fixed Account in the proportions that you choose. The Contract currently
offers thirty-seven investment options, each of which is a subaccount of the
Lincoln Benefit Life Variable Annuity Account ("Separate Account"). Each
Subaccount invests exclusively in shares of one of the following Portfolios:

JANUS ASPEN SERIES: Flexible Income Portfolio, Balanced Portfolio, Growth
Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio

FEDERATED INSURANCE MANAGEMENT SERIES: Utility Fund II, Fund for U.S. Government
Securities II, High Income Bond Fund II

FIDELITY VARIABLE INSURANCE PRODUCTS FUND: Money Market Portfolio, Equity-Income
Portfolio, Growth Portfolio, Overseas Portfolio

FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: Asset Manager Portfolio,
Contrafund Portfolio, Index 500 Portfolio

THE ALGER AMERICAN FUND: Income and Growth Portfolio, Small Capitalization
Portfolio, Growth Portfolio, MidCap Growth Portfolio, Leveraged AllCap Portfolio

SCUDDER VARIABLE LIFE INVESTMENT FUND: Bond Portfolio, Balanced Portfolio,
Growth and Income Portfolio, Global Discovery Portfolio, International Portfolio

STRONG VARIABLE INSURANCE FUNDS, INC.: Discovery Fund II, Growth Fund II

STRONG OPPORTUNITY FUND II, INC.: Opportunity Fund II

T. ROWE PRICE INTERNATIONAL SERIES, INC.: International Stock Portfolio

T. ROWE PRICE EQUITY SERIES, INC.: New America Growth Portfolio, Mid-Cap Growth
Portfolio, Equity Income Portfolio

MFS VARIABLE INSURANCE TRUST: Growth with Income Series, Research Series,
Emerging Growth Series, Total Return Series, New Discovery Series

We may make available other investment options in the future.

You may not purchase a Contract if either you or the Annuitant are 90 years old
or older before we receive your application.

Your Contract Value will vary daily as a function of the investment performance
of the Subaccounts to which you have allocated Purchase Payments and any
interest credited to the Fixed Account. We do not guarantee any minimum Contract
Value for amounts allocated to the Subaccounts. Benefits provided by this
Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, which may result in an upwards or downwards adjustment in withdrawal
benefits, death benefits, settlement values, transfers to the Subaccounts.

In certain states the Contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts in
this prospectus applies equally to Certificates under group contracts, unless
the content specifies otherwise.

This prospectus sets forth the information you ought to know about the Contract.
You should read it before investing and keep it for future reference.

We have filed a Statement of Additional Information with the Securities and
Exchange Commission ("SEC"). The current Statement of Additional Information is
dated May 1, 1999. The information in the Statement of Additional Information is
incorporated by reference in this

(continued on next page)
1
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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, 1999.

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 70 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 begin on page F-1 of
this prospectus. Lincoln Benefit will file annual and quarterly reports and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference room in Washington, D.C.
You can obtain copies of these documents by writing to the SEC and paying a
duplicating fee. Please call the SEC at 1-800-SEC-0330 for further information
as to the operation of the public reference room. Our SEC filings are also
available to the public on the SEC Internet site (http://www.sec.gov).

THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES
FOR THE PORTFOLIOS LISTED ABOVE. IF ANY OF THESE PROSPECTUSES IS MISSING OR
OUTDATED, PLEASE CONTACT US AND WE WILL SEND YOU THE PROSPECTUS YOU NEED.

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE.

<PAGE>

TABLE OF CONTENTS

DEFINITIONS...................................................... 6

QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT........................ 8

FEE TABLES....................................................... 14

EXAMPLES......................................................... 17

EXPLANATION OF FEE TABLES AND EXAMPLES........................... 18

CONDENSED FINANCIAL INFORMATION.................................. 18

DESCRIPTION OF THE CONTRACTS..................................... 20
Summary.......................................................... 20
Contract Owner................................................... 20
Annuitant........................................................ 20
Modification of the Contract..................................... 20
Assignment....................................................... 20
Free Look Period................................................. 20

PURCHASES AND CONTRACT VALUE..................................... 21
Minimum Purchase Payment......................................... 21
Automatic Payment Plan........................................... 21
Allocation of Purchase Payments.................................. 21
Contract Value................................................... 22
Separate Account Accumulation Unit Value......................... 22
Transfer During Accumulation Period.............................. 22
Transfers Authorized by Telephone................................ 23
Automatic Dollar Cost Averaging Program.......................... 23
Portfolio Rebalancing............................................ 24

THE INVESTMENT AND FIXED ACCOUNT OPTIONS......................... 24
Separate Account Investments..................................... 24
The Portfolios................................................... 24
Voting Rights.................................................... 30
Additions, Deletions, and Substitutions of Securities............ 31
The Fixed Account................................................ 31
General.......................................................... 31
Guaranteed Maturity Fixed Account Option......................... 31
Market Value Adjustment.......................................... 33
Dollar Cost Averaging Fixed Account Option....................... 34

ANNUITY BENEFITS................................................. 34
Annuity Date..................................................... 34
Annuity Options.................................................. 35
Other Options.................................................... 35
Annuity Payments: General........................................ 36
Variable Annuity Payments........................................ 36
Fixed Annuity Payments........................................... 37
Transfers During Annuity Period.................................. 37
Death Benefit During Annuity Period.............................. 37
Certain Employee Benefit Plans................................... 37

OTHER CONTRACT BENEFITS.......................................... 37
3
Death Benefit.................................................... 37
Enhanced Death Benefit Rider..................................... 40
Enhanced Death and Income Benefit Rider.......................... 40
Beneficiary...................................................... 41
Contract Loans for 401(a), 401(k), and 403(b) Contracts.......... 41
Withdrawals (Redemptions)........................................ 43
Substantially Equal Periodic Payments............................ 44
Systematic Withdrawal Program.................................... 45
ERISA Plans...................................................... 45
Minimum Contract Value........................................... 45

CONTRACT CHARGES................................................. 46
Mortality and Expense Risk Charge................................ 46
Administrative Charges........................................... 46
Contract Maintenance Charge...................................... 46
Administrative Expense Charge.................................... 47
Transfer Fee..................................................... 47
Sales Charges.................................................... 47
Withdrawal Charge................................................ 47
Free Withdrawal.................................................. 48
Waiver Benefits.................................................. 49
General.......................................................... 49
Confinement Waiver Benefit....................................... 49
Terminal Illness Waiver Benefit.................................. 49
Unemployment Waiver Benefit...................................... 49
Waiver of Withdrawal Charge for Certain Qualified Plan
Withdrawals..................................................... 49
Premium Taxes.................................................... 50
Deduction for Separate Account Income Taxes...................... 50
Other Expenses................................................... 50

TAX MATTERS...................................................... 50
Introduction..................................................... 50
Taxation of Annuities in General................................. 50
Tax Qualified Contracts.......................................... 53
Income Tax Withholding........................................... 53

DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE
ACCOUNT.......................................................... 54
Lincoln Benefit Life Company..................................... 54
Financial Statements of Lincoln Benefit.......................... 54
Selected Financial Data.......................................... 55
Investments by Lincoln Benefit................................... 55
Management's Discussion and Analysis of Financial Condition and
Results of Operation............................................ 56
Management's Discussion and Analysis of Financial Condition and
Results of Operation--First Quarter 1998........................ 61
Competition...................................................... 64
Employees........................................................ 64
Properties....................................................... 64
Executive Officers and Directors of Lincoln Benefit.............. 64
Executive Compensation........................................... 66
State Regulation of Lincoln Benefit.............................. 67
Separate Account................................................. 67

ADMINISTRATION................................................... 68

4
MARKET TIMING AND ASSET ALLOCATION SERVICES...................... 68

DISTRIBUTION OF CONTRACTS........................................ 68

LEGAL PROCEEDINGS................................................ 69

LEGAL MATTERS.................................................... 69

EXPERTS.......................................................... 69

REGISTRATION STATEMENT........................................... 69

TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION......... 70

FINANCIAL STATEMENTS............................................. S-15

APPENDIX A--ACCUMULATION UNIT VALUES............................. A-1
APPENDIX B--PORTFOLIOS AND PERFORMANCE DATA...................... B-1
APPENDIX C--EXAMPLES OF MARKET VALUE ADJUSTMENTS................. C-1

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.

<PAGE>

DEFINITIONS

Please refer to this list for the meaning of the following terms:

ACCUMULATION PERIOD - The period, beginning on the Issue Date, during which
Contract Value builds up under your Contract.

ACCUMULATION UNIT - A unit of measurement which we use to calculate Contract
Value.

ANNUITANT - The natural 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") - 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 interests in the Subaccounts of
the Separate Account and the Fixed Account.

CONTRACT YEAR - Each twelve-month period beginning on the Issue Date and each
Contract Anniversary.

CONTRIBUTION YEAR - Each twelve-month period beginning on the date a Purchase
Payment is allocated to a Subaccount, or each anniversary of that date.

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.
6
LOAN ACCOUNT - An account established for amounts transferred from the
Subaccounts or the Fixed Account as security for outstanding Contract loans.

MARKET VALUE ADJUSTMENT - An amount added to or subtracted from certain
transactions involving your interest in the Fixed Account, to reflect the impact
of changing interest rates.

NET INVESTMENT FACTOR - The factor used to determine the value of an
Accumulation Unit and Annuity Unit in any Valuation Period. We determine the Net
Investment Factor separately for each Subaccount.

NON-QUALIFIED PLAN - A retirement plan which does not receive special tax
treatment under Sections 401, 403(b), 408, 408A or 457 of the Tax Code.

PORTFOLIO(S) - The underlying mutual funds in which the Subaccounts invest. Each
Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.

PURCHASE PAYMENTS - Amounts paid to us as premium for the Contract by you or on
your behalf.

QUALIFIED PLAN - A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408 or 408A of the Tax Code or a deferred compensation
plan for a state and local government or another tax exempt organization under
Section 457 of the Tax Code.

SEPARATE ACCOUNT - The Lincoln Benefit Life Variable Annuity Account, which is a
segregated investment account of the Company.

SUBACCOUNT - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.

SURRENDER VALUE - The amount paid upon complete surrender of the Contract, equal
to the Contract Value, less any applicable premium taxes, Withdrawal Charge, and
the contract maintenance charge and increased or decreased by any Market Value
Adjustment.

TAX CODE - The Internal Revenue Code of 1986, as amended.

TREASURY RATE - The U.S. Treasury Note Constant Maturity Yield for the preceding
week as reported in Federal Reserve Bulletin Release H.15.

VALUATION DATE - Each day the New York Stock Exchange is open for business.

VALUATION PERIOD - The period of time over which we determine the change in the
value of the Subaccounts in order to price Accumulation Units and Annuity Units.
Each Valuation Period begins at the close of normal trading on the New York
Stock Exchange ("NYSE") currently 4:00 p.m. Eastern time on each Valuation Date
and ends at the close of the NYSE on the next Valuation Date.

VARIABLE ANNUITY - A series of annuity payments that vary in amount based on
changes in the value of the Subaccounts to which your Contract Value has been
allocated.

WITHDRAWAL CHARGE - The contingent deferred sales charge that may be required
upon some withdrawals.

<PAGE>

QUESTIONS AND ANSWERS
ABOUT YOUR CONTRACT

The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the Prospectus. Please read the Prospectus carefully.

1. WHAT IS THE CONTRACT?

The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non-qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax-deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine the
amount of your annuity payments during the Annuity Period.

Your premiums are invested in one or more of the Subaccounts of the Separate
Account or allocated to the Fixed Account, as you instruct us. You may allocate
your Contract Value to up to twenty-one options under the Contract, counting
each Subaccount and the Fixed Account as one option. We will treat all of your
Contract Value allocated to the Fixed Account as one option for purposes of this
limit, even if you have chosen more than one Guarantee Period. The value of your
Contract will depend on the investment performance of the Subaccounts and the
amount of interest we credit to the Fixed Account.

Each Subaccount will invest in a single investment portfolio (a "Portfolio") of
a mutual fund. The Portfolios offer a range of investment objectives, from
conservative to aggressive. You bear the entire investment risk on amounts
allocated to the Subaccounts. The investment policies and risks of each
Portfolio are described in the accompanying prospectuses for the Portfolios.

In some states, you may also allocate all or part of your Contract Value to the
"Fixed Account", as described in the answer to Question 5.

2. WHAT ANNUITY OPTIONS DOES THE CONTRACT OFFER?

You may receive annuity payments on a fixed or a variable basis or a combination
of the two. We offer a variety of annuity options including:
- - a life annuity with payments guaranteed for five to twenty years;

- - a joint and full survivorship annuity, with payments guaranteed for five to
twenty years; and

- - fixed payments for a specified period of five to thirty years.

Call us to inquire about other options.

You may change your annuity option at any time before annuitization. You may
select the date to annuitize the Contract. The date you select, however, may be
no later than the later of the tenth Contract Anniversary or the Annuitant's
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 Subaccounts you
have selected. The fixed
8
portion of your annuity payments, on the other hand, generally will be equal in
amount to the initial payment we determine. As explained in more detail below,
however, during the Annuity Period you will have a limited ability to change the
relative weighting of the Subaccounts on which your variable annuity payments
are based or to increase the portion of your annuity payments consisting of
Fixed Annuity payments.

3. HOW DO I BUY A CONTRACT?

You can obtain a Contract application from your Lincoln Benefit agent. You must
pay at least $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. We will
not issue a Contract to you if either you or the Annuitant is age 90 or older
before we receive your application.

4. WHAT ARE MY INVESTMENT CHOICES UNDER THE CONTRACT?

You can allocate and reallocate your investment among the Subaccounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the following Portfolios:

Fund Portfolio(s)
- ----------------------------- -----------------------------
- ------------------------------------------------------------

Janus Aspen Series Flexible Income Portfolio
Balanced Portfolio
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
- ------------------------------------------------------------
Federated Insurance Utility Fund II
Management Series Fund for U.S. Government
Securities II
High Income Bond Fund II
- ------------------------------------------------------------
Fidelity Variable Insurance Money Market Portfolio
Products Fund Equity-Income Portfolio
Growth Portfolio
Overseas Portfolio
- ------------------------------------------------------------
Fidelity Variable Insurance Asset Manager Portfolio
Products Fund II Contrafund Portfolio
Index 500 Portfolio
- ------------------------------------------------------------
The Alger American Fund Income and Growth Portfolio
Small Capitalization
Portfolio
Growth Portfolio
MidCap Growth Portfolio
Leveraged AllCap Portfolio
- ------------------------------------------------------------
Scudder Variable Life Bond Portfolio
Investment Fund Balanced Portfolio
Growth and Income Portfolio
Global Discovery Portfolio
International Portfolio
9
- ------------------------------------------------------------
Strong Variable Insurance Discovery Fund II
Funds, Inc. Growth Fund II
- ------------------------------------------------------------
Strong Opportunity Fund II, Opportunity Fund II
Inc.
- ------------------------------------------------------------
T. Rowe Price International International Stock Portfolio
Series, Inc.
- ------------------------------------------------------------
T. Rowe Price Equity Series, New America Growth Portfolio
Inc. Mid-Cap Growth Portfolio
Equity Income Portfolio
- ------------------------------------------------------------
MFS Variable Insurance Trust Growth with Income Series
Research Series
Emerging Growth Series
Total Return Series
New Discovery Series
- ------------------------------------------------------------

Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies which
are described in the accompanying prospectuses for the Portfolios.

5. WHAT IS THE FIXED ACCOUNT OPTION?

We offer two Fixed Account interest crediting options: the Guaranteed Maturity
Fixed Account Option and the Dollar Cost Averaging Fixed Account Option.

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 Subaccounts or Guarantee Periods of
your choosing. When you make an allocation to the Fixed Account for this
purpose, we will set an interest rate applicable to that amount. We will then
credit interest at that rate to that amount until it has been entirely
transferred to your chosen Subaccounts or Guarantee Periods. We will complete
the transfers within one year of the allocation. In our discretion we may change
the rate that we set for new allocations to the Fixed Account for the dollar
cost averaging program. We will never, however, set a rate less than an
effective annual rate
10
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 Subaccounts; (3) when you
allocate part of your interest in the Guaranteed Maturity Fixed Account Option
to a new Guarantee Period before the end of the existing Guarantee Period; (4)
when you annuitize your Contract; and (5) when we pay a death benefit. We will
not apply a Market Value Adjustment to a transaction to the extent that: (1) it
occurs within 30 days after the end of a Guarantee Period applicable to the
funds involved in the transaction; or (2) it is necessary to meet IRS minimum
withdrawal requirements. We determine the amount of a Market Value Adjustment
using a formula that takes into consideration: (1) whether current interest
rates differ from interest rates at the beginning of the applicable Guarantee
Period; and (2) how many years are left until the end of the Guarantee Period.
As a general rule, if interest rates have dropped, the Market Value Adjustment
will be an addition; if interest rates have risen, the Market Value Adjustment
will be a deduction. It is therefore possible that if you withdraw an amount
from the Fixed Account during a Guarantee Period, a Market Value Adjustment may
cause you to receive less than you initially allocated to the Fixed Account.

6. WHAT ARE MY EXPENSES UNDER THE CONTRACT?

CONTRACT MAINTENANCE CHARGE. During the Accumulation Period, each year we
subtract an annual contract maintenance charge of $35 from your Contract Value
allocated to the Subaccounts. We will waive this charge if you pay $50,000 or
more in Purchase Payments or if you allocate all of your Contract Value to the
Fixed Account.

During the Annuity Period, we will subtract the annual contract maintenance
charge in equal parts from your annuity payments. We waive this charge if on the
Annuity Date your Contract Value is $50,000 or more or if all payments are Fixed
Annuity payments.

ADMINISTRATIVE EXPENSE CHARGE AND MORTALITY AND EXPENSE RISK CHARGE. We impose a
mortality and expense risk charge at an annual rate of 1.15% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. If you select one of our optional enhanced benefit
riders, however, we may charge you a higher mortality and expense risk charge.
These charges are assessed each day during the Accumulation Period and the
Annuity Period. We guarantee that we will not raise these charges.

TRANSFER FEE. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to $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. 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. In addition,
withdrawals may trigger
11
tax liabilities and penalties. 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 3, we may increase or decrease certain
withdrawals by a Market Value Adjustment.

Each year, free of Withdrawal Charge or any otherwise applicable Market Value
Adjustment, you may withdraw the Free Withdrawal Amount, which equals:

(a) the greater of:

- earnings not previously withdrawn; or

- 15% of your total Purchase Payments made in the most recent seven
years; plus

(b) an amount equal to your total Purchase Payments made more than seven
years ago, to the extent not previously withdrawn.

The Withdrawal Charge will vary depending on the year the Purchase Payment(s)
and withdrawals are made.
<TABLE>
<CAPTION>

CONTRIBUTION APPLICABLE
YEAR CHARGE
- ------------ ----------
<S> <C> <C>
1-2 7%
3-4 6%
5 5%
6 4%
7 3%
8+ 0%
</TABLE>

In determining Withdrawal Charges, we will deem your Purchase Payments to be
withdrawn on a first-in first-out basis.

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. The taxable
portion of a withdrawal or distribution is taxed as ordinary income.

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
12
partial withdrawal. Under some 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 natural person. To obtain payment of the Death Benefit,
the Beneficiary must submit to us written proof of death as specified in the
Contract.

The standard death benefit is the greatest of the following:

(1) your total Purchase Payments reduced proportionately for any prior partial
withdrawals;

(2) your Contract Value;

(3) the amount you would have received by surrendering your Contract; or

(4) your Contract Value on each Contract Anniversary evenly divisible by
seven, increased by the total Purchase Payments since that anniversary
and reduced proportionately by any partial withdrawals since that
anniversary.

We also offer two optional enhanced death benefit riders, which are described
later in this prospectus.

We will determine the value of the death benefit on the day that we receive all
of the information that we need to process the claim.

10. WHAT ELSE SHOULD I KNOW?

ALLOCATION OF PURCHASE PAYMENTS. You allocate your initial Purchase Payment
among the Subaccounts and the Fixed Account in your Contract application. You
may make your allocations in specific dollar amounts or percentages, which must
be whole numbers that add up to 100%. When you make subsequent Purchase
Payments, you may again specify how you want your payments allocated. If you do
not, we will automatically allocate the payment based on your most recent
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.

TRANSFERS. During the Accumulation Period, you may transfer Contract Value among
the Subaccounts and from the Subaccounts 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.
13
You may also use our automatic dollar cost averaging or portfolio rebalancing
programs. You may not use both programs at the same time.

Under the dollar cost averaging program, amounts are automatically transferred
at regular intervals from the Fixed Account or a Subaccount of your choosing to
up to eight options, including other Subaccounts or the Fixed Account. Transfers
may be made monthly, quarterly, or annually.

Under the portfolio rebalancing program, you can maintain the percentage of your
Contract Value allocated to each Subaccount at a pre-set level. Investment
results will shift the balance of your Contract Value allocations. If you elect
rebalancing, we will automatically transfer your Contract Value back to the
specified percentages at the frequency (monthly, quarterly, semiannually,
annually) that you specify. You may not include the Fixed Account in a portfolio
rebalancing program. You also may not elect rebalancing after annuitization.

During the Annuity Period, you may not make any transfers for the first six
months after the Annuity Date. Thereafter, you may make transfers among the
Subaccounts or from the Subaccounts to increase your Fixed Annuity payments.
Your transfers, however, must be at least six months apart. You may not,
however, convert any portion of your right to receive Fixed Annuity payments
into Variable Annuity payments.

FREE-LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or after whatever longer period may be permitted by
state law. You may return it by delivering it or mailing it to us. If you return
the Contract, the Contract terminates 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.

11. WHO CAN I CONTACT FOR MORE INFORMATION?

You can write to us at Lincoln Benefit Life Company, P.O. Box 82532, Lincoln,
Nebraska 68501-2532, or call us at (800) 865-5237.

FEE TABLES

CONTRACT OWNER TRANSACTION EXPENSES

Contingent Deferred Sales Charge -- Withdrawal Charge
(as a percentage of Purchase Payments)
<TABLE>
<CAPTION>

CONTRIBUTION APPLICABLE CONTRIBUTION APPLICABLE
YEAR CHARGE YEAR CHARGE
- ------------ ---------- ------------ ----------
<S> <C> <C> <C>
1-2 7% 6 4%
3-4 6% 7 3%
5 5% 8+ 0
</TABLE>

ANNUAL CONTRACT MAINTENANCE CHARGE................................... $ 35.00
TRANSFER FEE (Applies solely to the second and
subsequent transfers within a calendar month.
We are currently waiving the transfer fee).......................... $ 10.00
SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF
DAILY NET ASSET VALUE DEDUCTED FROM EACH OF THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT)
14
Mortality and Expense Risk Charge*........................... 1.15%
Administrative Expense Charge................................ 0.10%
---------
Total Separate Account Annual Expenses....................... 1.25%

- ------------------------
* If you select the Enhanced Death Benefit Rider, the Mortality and Expense
Risk Charge will be equal to 1.35% of your Contract's average daily net
assets in the Separate Account. If you select the Enhanced Death and Income
Benefit Rider, the Mortality and Expense Risk Charge will be equal to 1.55%
of your Contract's average daily net assets in the Separate Account.
<TABLE>
<CAPTION>

PORTFOLIO COMPANY ANNUAL EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
AGGRESSIVE WORLDWIDE
JANUS ASPEN SERIES FLEXIBLE INCOME BALANCED(1) GROWTH(1) GROWTH(1) GROWTH(1)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Management (after fee waivers or
reductions):
Other (after fee waivers or reductions):
Total (after fee waivers or reductions):
</TABLE>

U.S. GOVERNMENT
SECURITIES HIGH INCOME
FEDERATED INSURANCE MANAGEMENT SERIES UTILITY II(2) II(2) BOND II(2)
--------------- --------------- ---------------
<S> <C> <C> <C>
Management (after fee waiver or expense
reimbursement):
Other (after fee waiver or expense
reimbursement):
Total (after fee waiver or expense
reimbursement):
</TABLE>

FIDELITY VARIABLE INSURANCE PRODUCTS MONEY EQUITY-
FUND MARKET INCOME(3) GROWTH(3) OVERSEAS(3)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Management:
Other:
Total:
</TABLE>

FIDELITY VARIABLE INSURANCE PRODUCTS ASSET
FUND II MANAGER(3) CONTRAFUND(3) INDEX 500
--------------- --------------- ---------------
<S> <C> <C> <C>

Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

INCOME AND SMALL LEVERAGED
THE ALGER AMERICAN FUND GROWTH CAPITALIZATION GROWTH MIDCAP GROWTH ALLCAP(4)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

GROWTH AND GLOBAL
SCUDDER VARIABLE LIFE INVESTMENT FUND BOND BALANCED INCOME DISCOVERY INTERNATIONAL
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

STRONG VARIABLE INSURANCE FUNDS, INC. DISCOVERY II GROWTH II
--------------- ---------------
<S> <C> <C>
Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

STRONG OPPORTUNITY FUND II, INC. OPPORTUNITY II
---------------
<S> <C>
Management:
Other:
Total:
</TABLE>

15
<TABLE>
<CAPTION>
INTERNATIONAL
T. ROWE PRICE INTERNATIONAL SERIES, INC. STOCK
---------------
<S> <C>
Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

NEW AMERICA
T. ROWE PRICE EQUITY SERIES, INC. GROWTH MID-CAP GROWTH EQUITY INCOME
--------------- --------------- ---------------
<S> <C> <C> <C>

Management:
Other:
Total:
</TABLE>
<TABLE>
<CAPTION>

GROWTH WITH NEW
MFS VARIABLE INSURANCE TRUST(5) INCOME(6) RESEARCH EMERGING GROWTH TOTAL RETURN(6) DISCOVERY(6)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Management:
Other (after expense limitation):
Total (after expense limitation):
</TABLE>

- --------------------------
(1) Other expenses are based on the gross expenses of the Portfolios before
expense offset arrangements for the fiscal year ended December 31, 1998.
The information for Growth, Aggressive Growth, Worldwide Growth and
Balanced Portfolios is net of fee reductions from Janus Capital. Without
such reductions, the Management Fee, Other Expenses and Total Operating
Expenses for the Portfolios would have been [ ], [ ] and [ ] for Growth
Portfolio; [ ], [ ], and [ ]for Aggressive Growth Portfolio; [ ], [ ], and
[ ] for Worldwide Growth Portfolio, and [ ], [ ], and [ ] for Balanced
Portfolio, respectively. Janus Capital may modify or terminate the fee
reductions at any time upon at least 90 days' notice to the Portfolios'
Trustees.

(2) The expense figures shown reflect the voluntary waiver of all or a portion
of the Management Fee. The maximum Management Fees for the indicated
Portfolios and the Total Portfolio Expenses absent the voluntary waiver
are as follows: [ ] and [ ], respectively, for the Utility Fund II; [ ]
and [ ], respectively, for the U.S. Government Securities II; and [ ] and
[ ], respectively, for the High Income Bond Fund II. The expense figures
for U.S. Government Securities II are also net of expense reimbursements
from the investment adviser.

(3) A portion of the brokerage commissions the Portfolio paid was used to
reduce its expenses. Including this reduction, total operating expenses
would have been for Equity Income -- [ ], for Growth -- [ ], for Overseas
-- [ ], for Asset Manager -- [ ], and for Contrafund -- [ ].

(4) Included in the Other Expenses of this Portfolio is 0.04% of interest
expense.

(5) Each Portfolio has an expense offset arrangement which reduces the
Portfolio's custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent, and may enter
into other such arrangements and directed brokerage arrangements (which
would also have the effect of reducing the Portfolio's expenses). Any such
fee reductions are not reflected under "Other Expenses".

(6) The Adviser has agreed to bear expenses for these Portfolios, subject to
reimbursement by these Portfolios, such that each such Portfolio's "Other
Expenses" shall not exceed 0.25% of the average daily net assets of the
Portfolio during the current fiscal year. Otherwise, "Other Expenses" and
"Total Expenses" for each such Portfolio would be:

16
<TABLE>
<CAPTION>

"OTHER EXPENSES" "TOTAL EXPENSES"
WITHOUT EXPENSE WITHOUT EXPENSE
PORTFOLIO LIMITATIONS LIMITATIONS
- ---------------------------------------- ------------------- -----------------
<S> <C> <C>
Growth With Income......................
Total Return............................
New Discovery (estimate)................
</TABLE>

EXAMPLES

IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD, YOU
WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING 5% ANNUAL
RETURN ON ASSETS.
<TABLE>
<CAPTION>

JANUS JANUS JANUS FEDERATED FIDELITY
FLEXIBLE JANUS JANUS AGGRESSIVE WORLDWIDE FEDERATED U.S. GOV'T. FEDERATED HIGH MONEY
INCOME BALANCED GROWTH GROWTH GROWTH UTILITY II SECURITIES II INCOME BOND II MARKET
----------- ---------- -------- ---------- ---------- ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $
3 years $
</TABLE>
<TABLE>
<CAPTION>

ALGER
FIDELITY AMERICAN ALGER AMERICAN ALGER
FIDELITY FIDELITY FIDELITY FIDELITY ASSET FIDELITY INCOME AND SMALL AMERICAN
EQUITY-INCOME GROWTH OVERSEAS CONTRAFUND MANAGER INDEX 500 GROWTH CAPITALIZATION GROWTH
------------- ------------- -------- ---------- ---------- ---------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $
3 years $
</TABLE>
<TABLE>
<CAPTION>

ALGER
ALGER AMERICAN SCUDDER SCUDDER
AMERICAN LEVERAGED SCUDDER SCUDDER GROWTH AND GLOBAL SCUDDER STRONG STRONG
MIDCAP GROWTH ALLCAP BOND BALANCED INCOME DISCOVERY INTERNATIONAL DISCOVERY II GROWTH II
---------- ------------- -------- ---------- ---------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1 year $
3 years $
</TABLE>
<TABLE>
<CAPTION>

T. ROWE
PRICE T. ROWE T. ROWE
STRONG T. ROWE PRICE NEW PRICE PRICE MFS GROWTH
OPPORTUNITY INTERNATIONAL AMERICA MID-CAP EQUITY WITH MFS EMERGING MFS TOTAL
II STOCK GROWTH GROWTH INCOME INCOME MFS RESEARCH GROWTH RETURN
------------ ------------- -------- ---------- ---------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1 year $
3 years $
</TABLE>
<TABLE>
<CAPTION>

MFS NEW DISCOVERY
-----------------
<S> <C>

1 year $
3 years $
</TABLE>

IF YOU ANNUITIZE OR IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD, YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING 5% ANNUAL RETURN ON ASSETS.
<TABLE>
<CAPTION>

JANUS JANUS JANUS FEDERATED FIDELITY
FLEXIBLE JANUS JANUS AGGRESSIVE WORLDWIDE FEDERATED U.S. GOV'T. FEDERATED HIGH MONEY
INCOME BALANCED GROWTH GROWTH GROWTH UTILITY II SECURITIES II INCOME BOND II MARKET
------------ ------------- -------- ---------- ---------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1 year $
3 years $
</TABLE>

<TABLE>
<CAPTION>
ALGER
FIDELITY AMERICAN ALGER AMERICAN ALGER
FIDELITY FIDELITY FIDELITY FIDELITY ASSET FIDELITY INCOME AND SMALL AMERICAN
EQUITY-INCOME GROWTH OVERSEAS CONTRAFUND MANAGER INDEX 500 GROWTH CAPITALIZATION GROWTH
------------ ------------- -------- ---------- ---------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1 year $
3 years $

</TABLE>
<TABLE>
<CAPTION>

17
ALGER
ALGER AMERICAN SCUDDER SCUDDER
AMERICAN LEVERAGED SCUDDER SCUDDER GROWTH AND GLOBAL SCUDDER STRONG STRONG
MIDCAP GROWTH ALLCAP BOND BALANCED INCOME DISCOVERY INTERNATIONAL DISCOVERY II GROWTH II
------------ ------------- -------- ---------- ---------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1 year $
3 years $
</TABLE>
<TABLE>
<CAPTION>

MFS NEW DISCOVERY
-----------------
<S> <C>

1 year $
3 years $
</TABLE>

* We will not charge a Withdrawal Charge on Annuitization if you select a
Payment Option that provides payments over at least five years or over the
Annuitant's lifetime.

EXPLANATION OF FEE TABLES AND EXAMPLES

1. We have included the table and examples shown above to assist you in
understanding the costs and expenses that you will bear directly or indirectly
by investing in the Separate Account. The table reflects expenses of the
Separate Account as well as the Portfolios. For additional information, you
should read "Contract Charges," which begins on page 29 below; you should also
read the sections relating to expenses of the Portfolios in their prospectuses.
The examples do not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.

2. The examples assume that you did not make any transfers. We are currently
waiving the transfer fee, but in the future, we may decide to charge $10 for the
second and each subsequent transfer within a calendar month. Premium taxes are
not reflected. Currently, we deduct premium taxes (which range from 0% to 3.5%)
from Contract Value upon full surrender, death or annuitization.

3. To reflect the contract maintenance charge in the examples, we estimated an
equivalent percentage charge, which we calculated by dividing the total amount
of contract maintenance charges expected to be collected during a year by the
total estimated average net assets of the Subaccounts and the Fixed Account
attributable to the Contracts.

4. The examples reflect any Free Withdrawal Amounts.

NEITHER THE FEE TABLES NOR THE EXAMPLES SHOULD BE CONSIDERED REPRESENTATIONS OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. SIMILARLY, THE ANNUAL RATE OF RETURN OF 5% ASSUMED IN THE EXAMPLE IS NOT
AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE.

CONDENSED FINANCIAL INFORMATION

Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Subaccount for 1998. Accumulation Unit Value
is the unit of measure that we use to calculate the value of your interest in a
Subaccount. Accumulation Unit Value does not reflect the deduction of certain
charges that are subtracted from your Contract Value, such as the Contract
Administration Charge. The information in the table is included in the Separate
Account's financial statements, which have been audited by Deloitte & Touche
LLP, independent auditors. To obtain a fuller picture of each Subaccount's
finances and performance, you should also review the Separate Account's
18
financial statements, which are in the Separate Account's Annual Report dated as
of December 31, 1998, contained in the Statement of Additional Information. The
Statement of Additional Information also includes a brief explanation of how
performance of the Subaccounts is calculated.

<PAGE>

DESCRIPTION OF THE CONTRACTS

SUMMARY. The Contract is a deferred annuity contract designed to aid you in
long-term financial planning. You may add to the Contract Value by making
additional Purchase Payments. In addition, the Contract Value will change to
reflect the performance of the Subaccounts to which you allocate your Purchase
Payments and your Contract Value, as well as to reflect 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. If your Contract was issued under a Qualified Plan,
however, the Plan may limit or modify your rights and privileges under the
Contract and may limit your right to choose someone else to receive benefits. We
will not issue a Contract to a purchaser who has attained age 90, or where the
Annuitant has attained age 90.

ANNUITANT. The Annuitant is the living person whose life span is used to
determine annuity payments. You initially designate an Annuitant in your
application. You may change the Annuitant at any time before annuity payments
begin. If your Contract was issued under a plan qualified under Section 403(b),
408 or 408A of the Tax Code, you must be the Annuitant. 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 a Contract issued under a Non-Qualified Plan that is not subject to Title
1 of the Employee Retirement Income Security Act of 1974 ("ERISA"). If a
Contract is issued pursuant to a Qualified Plan or a Non-Qualified Plan that is
subject to Title 1 of ERISA, 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,
20
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
Subaccounts and the Fixed Account Options as you specified in your application.
However, we reserve the right in the future to delay allocating your Purchase
Payments to the Subaccounts you have selected or to the Fixed Account until 20
days after the Issue Date or, if 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 Subaccount.
Your Contract will contain specific information about your free-look rights in
your state.

PURCHASES AND CONTRACT VALUE

MINIMUM PURCHASE PAYMENT. The minimum initial Purchase Payment for a Contract is
$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. We may
lower these minimums if we choose. We may refuse any Purchase Payment at any
time.

AUTOMATIC PAYMENT PLAN. You may make scheduled Purchase Payments of $25 or more
per month by automatic payment through your bank account. Call or write us for
an enrollment form.

ALLOCATION OF PURCHASE PAYMENTS. Your Purchase Payments are allocated to the
Subaccount(s) and the Fixed Account in the proportions that you have selected.
You must specify your allocation in your Contract application, either as
percentages or specific dollar amounts. If you make your allocation in
percentages, the total must equal 100%. We will allocate your subsequent
Purchase Payments in those percentages, until you give us new allocation
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.

You initially may allocate your Purchase Payments to up to twenty-one options,
counting each Subaccount and the Fixed Account as one option. For this purpose,
we will treat all of your allocations to the Fixed Account as one option, even
if you choose more than one Guarantee Period. You may add or delete Subaccounts
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 Subaccounts and
the Fixed Account, as you have instructed us, on the Issue Date. We will
allocate your subsequent Purchase Payments on the date that we receive them at
the next computed Accumulation Unit Value.

In some states, however, we are required to return at least your Purchase
Payment if you
21
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 Subaccount. If we
exercise that right and your state's free look period is ten days, we will
transfer your Purchase Payments to your specified Subaccounts or the Fixed
Account 20 days after the Issue Date; if your state's free look period is
longer, we will transfer your Purchase Payment after ten days plus the period
required by state law have passed.

We determine the number of Accumulation Units in each Subaccount to allocate to
your Contract by dividing that portion of your Purchase Payment allocated to a
Subaccount by that Subaccount's Accumulation Unit Value on the Valuation Date
when the allocation occurs.

CONTRACT VALUE. We will establish an account for you and will maintain your
account during the Accumulation Period. The total value of your Contract at any
time is equal to the sum of the value of your Accumulation Units in the
Subaccounts you have selected, plus the value of your interest in the Fixed
Account.

SEPARATE ACCOUNT ACCUMULATION UNIT VALUE. As a general matter, the Accumulation
Unit Value for each Subaccount will rise or fall to reflect changes in the share
price of the Portfolio in which the Subaccount invests. In addition, we subtract
from Accumulation Unit Value amounts reflecting the mortality and expense risk
charge, administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value. We determine
Withdrawal Charges, transfer fees and contract maintenance charges separately
for each Contract. They do not affect Accumulation Unit Value. Instead, we
obtain payment of those charges and fees by redeeming Accumulation Units.

We determine a separate Accumulation Unit Value for each Subaccount. We also
determine a separate set of Accumulation Unit Values reflecting the cost of the
enhanced benefit riders described on page A-1 below. If we elect or are required
to assess a charge for taxes, we may calculate a separate Accumulation Unit
Value for Contracts issued in connection with Non-Qualified and Qualified Plans,
respectively, within each Subaccount. We determine the Accumulation Unit Value
for each Subaccount Monday through Friday on each day that the New York Stock
Exchange is open for business.

You should refer to the prospectuses for the Portfolios which accompany this
prospectus for a description of how the assets of each Portfolio are valued,
since that determination has a direct bearing on the Accumulation Unit Value of
the corresponding Subaccount and, therefore, your Contract Value.

TRANSFER DURING ACCUMULATION PERIOD. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Subaccounts in writing
or by telephone. Currently, there is no minimum transfer amount. The Contract
permits us to set a minimum transfer amount in the future. You may not make a
transfer that would result in your allocating your Contract Value to more than
twenty-one options under the Contract at one time.

As a general rule, we only make transfers on days when we and the NYSE are open
for business. If we receive your request on one of those days, we will make the
transfer that day. Otherwise, we will make the transfer on the first subsequent
day on which we and the NYSE are open.

If you transfer an amount from the Fixed Account to a Subaccount before the end
of the applicable Guarantee Period or you allocate an amount in the Fixed
Account to a new
22
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 33 below.

Transfers within 30 days after the end of the applicable Guarantee Period are
not subject to a Market Value Adjustment.

The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us.

You may not transfer Contract Value into the Dollar Cost Averaging Fixed Account
Option. You may not transfer Contract Value out of the Dollar Cost Averaging
Fixed Account Option except as part of a Dollar Cost Averaging program.

TRANSFERS AUTHORIZED BY TELEPHONE. You may make transfers by telephone, if you
first send us a completed authorization form. The cut off time for telephone
transfer requests is 4:00 p.m. Eastern time. Calls completed before 4:00 p.m.
will be effected on that day at that day's price. Calls completed after 4:00
p.m. will be effected on the next day on which we and the NYSE are open for
business, at that day's price.

We may charge you the transfer fee described on page 47 below, although we
currently are waiving it. In addition, we may suspend, modify or terminate the
telephone transfer privilege at any time without notice.

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.

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
Subaccount of your choosing to up to eight options, including other Subaccounts
or the Guaranteed Maturity Fixed Account Option. The interval between transfers
from the Dollar Cost Averaging Fixed Account may be monthly only. The interval
between transfers from Subaccounts may be monthly, quarterly, or annually, at
your option. The transfers will be made at the Accumulation Unit Value on the
date of the transfer. The transfers will continue until you instruct us
otherwise, or until your chosen source of transfer payments is exhausted.
Currently, the minimum transfer amount is $100 per transfer. However, if you
wish to Dollar Cost Average to a Guaranteed Maturity Fixed Account Option, the
minimum amount that must be transferred into any one Option is $500. We may
change this minimum or grant exceptions. If you elect this program, the first
transfer will occur one interval after your Issue Date. 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 you will purchase greater numbers of
units when the unit prices are relatively low rather than when the prices are
higher. As a result, when purchases are made at fluctuating prices, the average
cost per unit is less than the average of the unit prices on the purchase dates.
However, participation in this
23
program does not assure you of a greater profit from your purchases under the
program; nor will it prevent or necessarily reduce losses in a declining market.
You may not use Dollar Cost Averaging and Portfolio Rebalancing at the same
time.

PORTFOLIO REBALANCING. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Subaccount at a pre-set
level. For example, you could specify that 30% of your Contract Value should be
in the Balanced Portfolio, 40% in the Growth Portfolio-Janus Aspen Series and
30% in Federated High Income Bond Fund II. Over time, the variations in each
Subaccount's investment results will shift the balance of your Contract Value
allocations. Under the Portfolio Rebalancing feature, each period, if the
allocations change from your desired percentages, we will automatically transfer
your Contract Value, including new Purchase Payments (unless you specify
otherwise), back to the percentages you specify. Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Contract Value allocated
to the better performing segments.

You may choose to have rebalance made monthly, quarterly, semi-annually, or
annually until your Annuity Date. Portfolio Rebalancing is not available after
you annuitize. We will not charge a transfer fee for Portfolio Rebalancing. No
more than eight Subaccounts can be included in a Portfolio Rebalancing program
at one time. You may not include the Fixed Account in a Portfolio Rebalancing
program.

You may request Portfolio Rebalancing at any time before your Annuity Date by
submitting a completed written request to us at the P.O. Box given on the first
page of this prospectus. Please call or write us for a copy of the request form.
If you stop Portfolio Rebalancing, you must wait 30 days to begin again. In your
request, you may specify a date for your first rebalancing. If you specify a
date fewer than 30 days after your Issue Date, your first rebalance will be
delayed one month. If you request Portfolio Rebalancing in your Contract
application and do not specify a date for your first rebalancing, your first
rebalance will occur one period after the Issue Date. For example, if you
specify quarterly rebalancing, your first rebalance will occur three months
after your Issue Date. Otherwise, your first rebalancing will occur one period
after we receive your completed request form. All subsequent rebalancing will
occur at the intervals you have specified on the day of the month that coincides
with the same day of the month as your Contract Anniversary Date.

Generally, you may change the allocation percentages, frequency, or choice of
Subaccounts at any time. If your total Contract Value subject to rebalancing
falls below any minimum value that we may establish, we may prohibit or limit
your use of Portfolio Rebalancing. You may not use Dollar Cost Averaging and
Portfolio Rebalancing at the same time. We may change, terminate, limit, or
suspend Portfolio Rebalancing at any time.

THE INVESTMENT AND FIXED ACCOUNT OPTIONS

SEPARATE ACCOUNT INVESTMENTS

THE PORTFOLIOS. Each of the Subaccounts of the Separate Account invests in the
shares of one of the Portfolios. Each Portfolio is either an open-end management
investment company registered under the Investment Company Act of 1940 or a
separate investment series of an open-end management investment company. We have
briefly described the Portfolios below. You should consult the current
prospectuses for the Portfolios for more detailed and complete information
concerning the Portfolios. If you do not have a prospectus for a Portfolio,
contact us and we will send you a copy. Appendix B contains a description of how
advertised performance data for the Subaccounts are computed.

We do not promise that the Portfolios will meet their investment objectives.
Amounts you have allocated to Subaccounts may grow in value, decline in value,
or grow less than you
24
expect, depending on the investment performance of the Portfolios in which those
Subaccounts invest. You bear the investment risk that those Portfolios possibly
will not meet their investment objectives. You should carefully review their
prospectuses before allocating amounts to the Subaccounts of the Separate
Account.

JANUS ASPEN SERIES (investment adviser: Janus Capital Corporation)

FLEXIBLE INCOME PORTFOLIO seeks to maximize total return from a combination of
current income and capital appreciation, with an emphasis on current income.
This Portfolio invests in all types of income-producing securities. This
Portfolio may have substantial holdings of debt securities rated below
investment grade. Investments in such securities present special risks; you are
urged to carefully read the risk disclosure in the accompanying Prospectus for
the Portfolio before allocating amounts to the Janus Flexible Income Subaccount.

BALANCED PORTFOLIO seeks long term growth of capital balanced by current income.
This Portfolio normally invests 40-60% of its assets in securities selected
primarily for their growth potential and 40-60% of its assets in securities
selected primarily for their income potential.

GROWTH PORTFOLIO seeks long-term growth of capital by investing primarily in a
diversified portfolio of common stocks of a large number of issuers of any size.
Generally, this Portfolio emphasizes issuers with larger market capitalizations.

AGGRESSIVE GROWTH PORTFOLIO seeks long-term growth of capital. It is a
non-diversified fund. It normally invests at least 50% of its equity assets in
securities issued by medium-sized companies, which are companies whose market
capitalizations at the time of purchase by the Portfolio fall within the same
range as companies in the S&P MidCap 400 Index. This range is expected to change
on a regular basis. This Portfolio may invest its remaining assets in smaller or
larger issuers.

WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of capital by investing in a
diversified portfolio of common stocks of foreign and domestic issuers of any
size. This Portfolio normally invests in issuers from at least five different
countries including the United States.

FEDERATED INSURANCE MANAGEMENT SERIES (investment adviser: Federated Advisers)

FEDERATED UTILITY FUND II'S investment objective is to achieve high current
income and moderate capital appreciation. The Portfolio invests primarily in
equity and debt securities of utility companies that produce, transmit, or
distribute gas and electric energy, as well as those companies that provide
communications facilities, such as telephone and telegraph companies.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II'S investment objective is to
provide current income. The Portfolio invests in direct obligations of the U.S.
Government or its agencies or instrumentalities, and securities guaranteed by
the U.S. Government, its agencies, or instrumentalities. This Portfolio may also
invest in certain collateralized mortgage obligations and repurchase agreements.

FEDERATED HIGH INCOME BOND FUND II'S investment objective is to seek high
current income. This Portfolio invests at least 65% of its assets in lower rated
corporate debt obligations, such as preferred stocks, bonds, debentures, notes,
equipment lease certificates and equipment trust certificates. Some of these
fixed income securities may involve equity features. Under normal circumstances,
this Portfolio will not invest more than 10% of the value of its total assets in
equity securities.
25
FIDELITY VARIABLE INSURANCE PRODUCTS FUND (investment adviser: Fidelity
Management & Research Company)

MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. This Portfolio will
invest in high quality U.S. dollar-denominated money market securities of
domestic and foreign insurers, including U.S. government securities and
repurchase agreements.

EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. The goal is to achieve a higher yield than
the composite yield of the S&P 500 Composite Stock Price Index. At least 65% of
this Portfolio's assets will be invested in income-producing common or preferred
stock. The Portfolio, however, has the flexibility to invest the balance in all
types of domestic and foreign securities, including bonds.

GROWTH PORTFOLIO seeks to achieve capital appreciation. This Portfolio usually
purchases common stocks, although its investments are not restricted to any one
type of security.

OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. At least 65% of this Portfolio's assets will
be invested in securities of issuers outside of the United States. The Portfolio
normally diversifies its investments across countries and regions.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND II (investment adviser: Fidelity
Management & Research Company)

ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced risk over
the long term by allocating its assets among domestic and foreign stocks, bonds,
and short-term money market securities. Usually, this Portfolio's assets will be
allocated within the following guidelines: 30-70% in stocks (equities); 20-60%
in bonds (intermediate to long-term); and 0-50% in short-term instruments.

CONTRAFUND PORTFOLIO seeks capital appreciation by investing mainly in equity
securities of companies whose value the Portfolio's adviser believes is not
fully recognized by the public. This Portfolio usually invests primarily in
common stock and securities convertible into common stock, but it may invest in
other types of securities.

INDEX 500 PORTFOLIO seeks long-term capital growth through the purchase of a
portfolio of securities that broadly represents the U.S. stock market, as
measured by the S&P 500. By investing to match the return of the S&P 500, the
Portfolio seeks to keep expenses low.

THE ALGER AMERICAN FUND (investment adviser: Fred Alger Management, Inc.)

INCOME AND GROWTH PORTFOLIO seeks primarily to provide a high level of dividend
income. Capital appreciation is a secondary objective of the Portfolio. Except
during temporary defensive periods, the Portfolio attempts to invest 100%, and
it is a fundamental policy of the Portfolio to invest at least 65%, of its total
assets in dividend paying equity securities.

SMALL CAPITALIZATION PORTFOLIO seeks long-term capital appreciation. Except
during temporary defensive periods, the Portfolio invests at least 65% of its
total assets in equity securities of companies that at the time of purchase have
total market capitalization within the range of companies included in the
Russell 2000 Growth Index or the S&P SmallCap 600 Index. The Portfolio may
invest its remaining assets in larger or smaller issuers.

GROWTH PORTFOLIO seeks long-term capital appreciation. Under normal
circumstances, the
26
Portfolio invests at least 65% of its total assets in equity securities of
companies that have total market capitalization of $1 billion or greater. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that have total market capitalization of less than $1 billion.

MIDCAP GROWTH PORTFOLIO seeks long-term capital appreciation. Under normal
circumstances, the Portfolio invests at least 65% of its total assets in equity
securities of companies that have total market capitalization within the range
of companies included in the S&P MidCap 400 Index.

LEVERAGED ALLCAP PORTFOLIO seeks long-term capital appreciation. Except during
temporary defensive periods, the Portfolio invests at least 85% of its net
assets in equity securities of companies of any size. The Portfolio may purchase
put and call options and sell (write) covered call and put options on securities
and securities indexes to increase gain and to hedge against the risk of
unfavorable price movements, and may enter into futures contracts on securities
indexes and purchase and sell call and put options on these futures contracts.
The Portfolio may also borrow money for the purchase of additional securities.

SCUDDER VARIABLE LIFE INVESTMENT FUND (investment adviser: Scudder, Kemper
Investments, Inc.) The Scudder Variable Life Investment Fund has two classes of
shares. The Subaccounts invest in Class A shares, which do not impose
distribution fees.

BOND PORTFOLIO seeks high income from a high quality portfolio of debt
securities. Under normal circumstances, this Portfolio invests at least 65% of
its assets in bonds including those of the U.S. Government and its agencies and
those of corporations and other notes and bonds paying high current income. This
Portfolio can invest in a broad range of short, intermediate and long-term
securities.

BALANCED PORTFOLIO seeks a balance of growth and income from a diversified
portfolio of equity and fixed income securities. The Portfolio also seeks
long-term preservation of capital through a quality-oriented investment approach
that is designed to reduce risk. The Portfolio will invest its assets in equity
securities, debt securities with maturities generally exceeding one year, and
money market instruments and other debt securities with maturities generally not
exceeding thirteen months. Not more than 75% of this Portfolio's net assets may
be invested in stocks or other equity investments. Generally, 25%-50% of the
Portfolio's net assets are invested in bonds.

GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital, current income
and growth of income. In pursuing these three objectives, the Portfolio invests
primarily in common stocks, preferred stocks, and securities convertible into
common stocks of companies which offer the prospect for growth of earnings while
paying higher than average current dividends. The Portfolio allocates its
investments among different industries and companies, and changes its portfolio
securities for investments considerations and not for trading purposes.

GLOBAL DISCOVERY PORTFOLIO seeks above-average capital appreciation over the
long term by investing primarily in the equity securities of small companies
located throughout the world. The Portfolio is designed for investors looking
for above-average appreciation potential (when compared with the overall
domestic stock market as reflected by the S&P 500 Stock Composite Price Index)
and the benefits of investing globally, but who are willing to accept
above-average stock market risk, the impact of currency fluctuation, and little
or no current income. The Portfolio generally invests in small, rapidly growing
companies that offer the potential for above-average returns relative to larger
companies, yet are frequently overlooked and thus undervalued by the market.

INTERNATIONAL PORTFOLIO seeks long-term growth of capital primarily through
diversified
27
holdings of marketable foreign equity investments. The Portfolio invests in
companies, wherever organized, which do business primarily outside the United
States. The Portfolio intends to diversify investments among several countries
and to have represented in its holdings business activities in not less than
three different countries, excluding the United States. The Portfolio invests
primarily in equity securities of established companies, listed on foreign
exchanges, which the adviser believes have favorable characteristics. It may
also invest in fixed income securities of foreign governments and companies.

STRONG VARIABLE INSURANCE FUNDS, INC. (investment adviser: Strong Capital
Management, Inc.)

DISCOVERY FUND II seeks capital growth. The Portfolio usually emphasizes equity
investments, although it has the flexibility to invest in any security the
adviser believes has the potential for capital appreciation. The Portfolio's
strategy is to invest in a blend of small, mid- and large-cap companies that are
in good businesses, are headed by capable and driven management, and trade at
attractive valuations.

GROWTH FUND II seeks capital growth. The Portfolio invests primarily in equity
securities that the adviser believes have above-average growth prospects and are
selling at reasonable valuations. The Portfolio generally has over half of its
assets in small- and mid-cap issues as these companies tend to have the highest
growth rates.

STRONG OPPORTUNITY FUND II, INC. (investment adviser: Strong Capital Management,
Inc.)

OPPORTUNITY FUND II seeks capital growth. The Portfolio currently emphasizes
medium-sized companies that the adviser believes are under-researched and
attractively valued. To achieve its investment goals, the Portfolio seeks to
find well-managed companies that have sustainable growth prospects but that are
selling at prices below their private market values.

T. ROWE PRICE INTERNATIONAL SERIES, INC. (investment adviser: Rowe Price-Fleming
International, Inc., a joint venture between T. Rowe Price Associates, Inc. and
Robert Fleming Holdings, Ltd.)

INTERNATIONAL STOCK PORTFOLIO seeks long-term growth of capital through
investments primarily in common stocks of established, non-U.S. companies. The
Portfolio invests substantially all of its assets outside the United States and
broadly diversifies its investments among countries throughout the
world--developed and emerging.

T. ROWE PRICE EQUITY SERIES, INC. (investment adviser: T. Rowe Price Associates,
Inc.)

NEW AMERICA GROWTH PORTFOLIO seeks long-term growth of capital through
investment primarily in the common stocks of U.S. growth companies which operate
in service industries. The Portfolio will invest most of its assets in service
companies, regardless of size, that the adviser believes to be above average
performers in their fields. The Portfolio may invest up to 25% of its assets in
growth companies outside the service sector.

MID-CAP GROWTH PORTFOLIO seeks long-term growth of capital by investing
primarily in the common stocks of companies with medium-sized (Mid-Cap) market
capitalizations and the potential for above-average earnings growth. Most of the
assets will be invested in U.S. common stocks, but the Portfolio also may invest
in other types of securities, such as foreign securities, convertible stocks and
bonds, and warrants when consistent with the Portfolio's investment objective.

EQUITY INCOME PORTFOLIO seeks to provide substantial dividend income as well as
long-term
28
capital appreciation by investing primarily in common stocks of established
companies. Under normal circumstances, the Portfolio usually will invest at
least 65% of its total assets in common stocks of established companies paying
above-average dividends which are expected to have favorable prospects for
dividend growth and capital appreciation. The Portfolio may also invest in other
securities such as foreign securities and convertible stocks and bonds, and
warrants, when consistent with the Portfolio's investment objective.

MFS VARIABLE INSURANCE TRUST (investment adviser: Massachusetts Financial
Services)

GROWTH WITH INCOME SERIES seeks reasonable current income, as well as long-term
growth of capital and income. The Portfolio invests in stocks of companies that
the adviser considers to be of high or improving investment quality. The
Portfolio has the flexibility to invest in derivative securities when its
managers believe such securities can provide better value relative to direct
investments in stocks and bonds.

RESEARCH SERIES seeks to provide long-term growth of capital and future income.
The Portfolio invests in the common stocks of companies the adviser believes
possess better-than-average prospects for long-term growth. The Portfolio may
invest up to 20% of its net assets in foreign and emerging market securities.
Investing in foreign and emerging market securities involves special risks and
may increase share price volatility. The Portfolio has the flexibility to invest
in derivative securities when its adviser believes such securities can provide
better value relative to direct investments in stocks and bonds.

EMERGING GROWTH SERIES seeks to provide long-term growth of capital. The
Portfolio invests primarily in common stocks of companies that are early in
their life cycles but which have the potential to become major enterprises. The
Portfolio may also invest in more established companies whose earnings growth
the adviser expects to accelerate because of special factors. Investing in
emerging growth companies involves greater risk than is customarily associated
with more established companies. The Portfolio also may invest up to 25% of its
net assets in foreign and emerging market securities. The Portfolio has the
flexibility to invest in derivative securities when its adviser believes such
securities can provide better value relative to direct investments in stocks or
bonds.

TOTAL RETURN SERIES seeks to provide above-average current income (compared to a
portfolio invested entirely in equity securities) consistent with the prudent
employment of capital. The Portfolio also seeks to provide reasonable
opportunity for growth of capital and income. The Portfolio invests in both
equities and fixed income securities. The equity segment is actively managed
with a value-oriented style of investing. The fixed income segment is actively
managed through shifts in maturity, duration, and sector components. The
Portfolio may invest up to 20% of its assets in foreign and emerging market
securities. The Portfolio has the flexibility to invest in derivative securities
when its adviser believes such securities can provide better value relative to
direct investments in stocks or bonds.

NEW DISCOVERY SERIES seeks capital appreciation. This Portfolio seeks to achieve
its objective by investing under normal market conditions at least 65% of its
total assets in companies that its adviser believes offer superior prospects for
growth. Those securities may either be listed on securities exchanges or traded
in the over-the-counter markets and may be U.S. or foreign companies.

Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of the
Portfolio. See the accompanying Prospectuses of the Portfolios for further
information.

We automatically reinvest all dividends and capital gains distributions from the
Portfolios in shares of the distributing Portfolio at their net asset value. The
income and realized and unrealized gains or losses on the assets of each
Subaccount are separate
29
and are credited to or charged against the particular Subaccount without regard
to income, gains or losses from any other Subaccount or from any other part of
our business. We will use the net Purchase Payments you allocate to a Subaccount
to purchase shares in the corresponding Portfolio and will redeem shares in the
Portfolios to meet Contract obligations or make adjustments in reserves. The
Portfolios are required to redeem their shares at net asset value and to make
payment within seven days.

Some of the Portfolios have been established by investment advisers which manage
publicly traded mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be modeled after
publicly traded mutual funds, you should understand that the Portfolios are not
otherwise directly related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any similarly named
Portfolio may differ substantially.

Certain of the Portfolios sell their shares to separate accounts underlying both
variable life insurance and variable annuity contracts. It is conceivable that
in the future it may be unfavorable for variable life insurance separate
accounts and variable annuity separate accounts to invest in the same Portfolio.
Although neither we nor any of the Portfolios currently foresees any such
disadvantages either to variable life insurance or variable annuity contract
owners, each Portfolio's Board of Directors intends to monitor events in order
to identify any material conflicts between variable life and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto. If a Board of Directors were to conclude that separate
investment funds should be established for variable life and variable annuity
separate accounts, Lincoln Benefit will bear the attendant expenses.

VOTING RIGHTS. As a general matter, you do not have a direct right to vote the
shares of the Portfolios held by the Subaccounts to which you have allocated
your Contract Value. Under current law, however, you are entitled to give us
instructions on how to vote those shares on certain matters. We will notify you
when your instructions are needed. We will also provide proxy materials or other
information to assist you in understanding the matter at issue. We will
determine the number of shares for which you may give voting instructions as of
the record date set by the relevant Portfolio for the shareholder meeting at
which the vote will occur.

As a general rule, before the Annuity Date, you are the person entitled to give
voting instructions. After the Annuity Date, the payee is that person.
Retirement plans, however, may have different rules for voting by plan
participants.

If you send us written voting instructions, we will follow your instructions in
voting the Portfolio shares attributable to your Contract. If you do not send us
written instructions, we will vote the shares attributable to your Contract in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. We will vote shares that we hold in the
same proportions as we vote the shares for which we have received instructions
from other Contract Owners.

We may, when required by state insurance regulatory authorities, disregard
Contract Owner voting instructions if the instructions require that the shares
be voted so as to cause a change in the sub-classification or investment
objective of one or more of the Portfolios or to approve or disapprove an
investment advisory contract for one or more of the Portfolios.

In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment 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
30
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 mutual 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 Subaccounts:

(a) to operate the Separate Account in any form permitted by law;

(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;

(d) to add, combine, or remove Subaccounts in the Separate Account; and

(e) to change the way in which we assess charges, as long as the total
charges do not exceed the maximum amount that may be charged the
Separate Account and the Portfolios in connection with the Contracts.

If we take any of these actions, we will comply with the then applicable legal
requirements.

THE FIXED ACCOUNT

GENERAL. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Allstate Life invests the
assets of the general account in accordance with applicable laws governing the
investments of insurance company general accounts. The Fixed Account may not be
available in all states. Please contact us at 1-800-865-5237 for current
information.

GUARANTEED MATURITY FIXED ACCOUNT OPTION. We will credit interest to each amount
allocated to the Guaranteed Maturity Fixed Account Option at a specified rate
for a specified Guarantee Period. You select the Guarantee Period for each
amount that you allocate to this option. We will declare the interest rate that
we will guarantee to credit to that amount for that Guarantee Period. Each
amount allocated to a Guarantee Period under this option must be at least $500.
We reserve the right to limit the number of additional Purchase Payments that
may be allocated to this option.

We will tell you what interest rates and Guarantee Periods we are offering at a
particular
31
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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>

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
</TABLE>

Total Interest Credited During Guarantee Period = $2,461.82
($12,461.82 -$10,000)

NOTE: This example assumes no withdrawals during the entire five year Guarantee
Period. If you were to make a partial withdrawal, you might be required to pay a
Withdrawal Charge and the amount withdrawn might be increased or decreased by a
Market Value Adjustment. The hypothetical interest rate is for illustrative
purposes only and is not intended to predict future interest rates to be
declared under the Contract.

We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
relevant factors such as then current interest rates, regulatory and tax
requirements, our sales commission and administrative expenses, general economic
trends, and competitive factors. For current interest rate information, please
contact us at 1-800-865-5237.
32
WE WILL DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE
CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE.

At the end of each Guarantee Period, we will mail you a notice asking you what
to do with the relevant amount, including the accrued interest. During the
30-day period after the end of the Guarantee Period, you may:

(1) take no action. If so, we will automatically keep the relevant amount in the
Guaranteed Maturity Fixed Account Option. The new Guarantee Period will be the
same length as the expiring Guarantee Period and will begin on the day the
previous Guarantee Period ends. The new interest rate will be our then current
declared rate for Guarantee Periods of that length; or

(2) allocate the relevant Contract Value to one or more new Guarantee Periods of
your choice in the Guaranteed Maturity Fixed Account Option. The new Guarantee
Period(s) will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for those Guarantee
Periods; or

(3) instruct us to transfer all or a portion of the relevant amount to one or
more Subaccounts. We will effect the transfer on the day we receive your
instructions. We will not adjust the amount transferred to include a Market
Value Adjustment; or

(4) withdraw all or a portion of the relevant amount through a partial
withdrawal. You may be required to pay a Withdrawal Charge, but we will not
adjust the amount withdrawn to include a Market Value Adjustment. The amount
withdrawn will be deemed to have been withdrawn on the day the Guarantee Period
ends.

Under our Automatic Laddering Program, you may choose, in advance, to use
Guarantee Periods of the same length for all renewals in the Guaranteed Maturity
Fixed Account Option. You can select this program at any time during the
Accumulation Period, including on the Issue Date. We will apply renewals to
Guarantee Periods of the 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 interest 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 32
below;

(2) when you transfer funds from the Guaranteed Maturity Fixed Account Option to
the Subaccounts;

(3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;

(4) when you annuitize your Contract; and

(5) when we pay a death benefit.

We will not apply a Market Value Adjustment to a transaction, to the extent
that: (1) it occurs within 30 days after the end of a Guarantee Period
33
applicable to the funds involved in the transaction; or (2) you make a
withdrawal to satisfy the IRS' required minimum distribution rules for this
Contract.

The formula for calculating Market Value Adjustments is set forth in Appendix C
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 Subaccounts or the Guaranteed Maturity Fixed Account Option. We will follow
your instructions in transferring amounts from this option to the Subaccounts or
the Guaranteed Maturity Fixed Account Option on a monthly basis only, as
described in "Automatic Dollar Cost Averaging Program" on page 23 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 immediately following the tenth day of a calendar month.

The Annuity Date may be no later than the Latest Annuity Date. As a general
rule, the Latest Annuity Date is the later of the 10th Contract Anniversary or
the Annuitant's 90th birthday. If your Contract was issued pursuant to a
Qualified Plan, however, the Tax Code generally requires you to begin to take at
least a minimum distribution by the later of:

- - the year of your separation from service; or

- - April 1 of the calendar year following the calendar year in which you attain
age 70 1/2.

If your Contract is issued pursuant to Section 408 of the Tax Code (traditional
IRAs), you must begin taking minimum distributions by April 1 of the calendar
year following the calendar year in which you reach age 70 1/2. No minimum
distributions are required by the Tax Code for Contracts issued pursuant to
Section 408A (Roth IRAs).

If you are in a Qualified Plan, we may require you to annuitize by the date
required by the Tax Code, unless you show us that you are meeting the minimum
distribution requirements in some other way.
34
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 ANNUITY WITH PAYMENTS GUARANTEED FOR 5 TO 20 YEARS. We make
periodic payments at least as long as the Annuitant lives. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.

OPTION B, JOINT AND SURVIVOR ANNUITY, WITH PAYMENTS GUARANTEED FOR 5 TO 20
YEARS. We make periodic payments at least as long as either the Annuitant or the
joint Annuitant is alive. If both the Annuitant and the Joint Annuitant die
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.

OPTION C, PAYMENTS FOR A SPECIFIED PERIOD CERTAIN OF 5 YEARS TO 30 YEARS. We
make periodic payments for the period you have chosen. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.

If you purchased your Contract under a retirement plan, you may have a more
limited selection of Annuity Options to choose from. You should consult your
Plan documents to see what is available.

You may not "annuitize" your Contract for a lump sum payment. Instead, before
the Annuity Date you may surrender your Contract for a lump sum. As described in
page 22 above, 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.
35
If your Contract is issued under Sections 401, 403(b), 408 or 408A of the Tax
Code, we will only make payments to you and/or your spouse.

ANNUITY PAYMENTS: GENERAL. On the Annuity Date, we will apply the Annuitized
Value of your Contract to the Annuity Option you have chosen. Your annuity
payments may consist of Variable Annuity payments or Fixed Annuity payments or a
combination of the two. We will determine the amount of your annuity payments as
described in "Variable Annuity Payments" and "Fixed Annuity Payments" on pages
37 below.

You must notify us in writing at least 30 days before the Annuity Date how you
wish to allocate your Annuitized Value between Variable Annuity and Fixed
Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Subaccounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and 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 INVOLVING LIFE CONTINGENCIES.

VARIABLE ANNUITY PAYMENTS. One basic objective of the Contract is to provide
Variable Annuity Payments which will to some degree respond to changes in the
economic environment. The amount of your Variable Annuity Payments will depend
upon the investment results of the Subaccounts you have selected, any premium
taxes, the age and sex of the Annuitant, and the Annuity Option chosen. We
guarantee that the Payments will not be affected by (1) actual mortality
experience and (2) the amount of our administration expenses.

We cannot predict the total amount of your Variable Annuity payments. The
Variable Annuity payments may be more or less than your total Purchase Payments
because (a) Variable Annuity payments vary with the investment results of the
underlying Portfolios; and (b) Annuitants may die before their actuarial life
expectancy is achieved.

The length of any guaranteed payment period under your selected Annuity Option
will affect the dollar amounts of each Variable Annuity payment. As a general
rule, longer guarantee periods result in lower periodic payments, all other
things being equal. For example, if a life Annuity Option with no minimum
guaranteed payment period is chosen, the Variable Annuity payments will be
greater than Variable Annuity payments under an Annuity Option for a minimum
specified period and guaranteed thereafter for life.

The investment results of the Subaccounts to which you have allocated your
Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the
36
periodic payments in the annuity tables in the Contract, we assumed an annual
investment rate of 3 1/2%. If the actual net investment return is less than the
assumed investment rate, then the dollar amount of the Variable Annuity payments
will decrease. The dollar amount of the Variable Annuity payments will stay
level if the net investment return equals the assumed investment rate and the
dollar amount of the Variable Annuity payments will increase if the net
investment return exceeds the assumed investment rate. You should consult the
Statement of Additional Information for more detailed information as to how we
determine Variable Annuity Payments.

FIXED ANNUITY PAYMENTS. You may choose to apply a portion of your Annuitized
Value to provide Fixed Annuity payments. We determine the Fixed Annuity payment
amount by applying the applicable Annuitized Value to the Annuity Option you
have selected.

As a general rule, subsequent Fixed Annuity payments will be equal in amount to
the initial payment. However, as described in "Transfers During the Annuity
Period" below, after the Annuity Date, you will have a limited ability to
increase the amount of your Fixed Annuity payments by making transfers from the
Subaccounts.

We may defer making Fixed Annuity payments for a period of up to six months or
whatever shorter time state law may require. During the deferral period, we
credit interest at a rate at least as high as state law requires.

TRANSFERS DURING THE ANNUITY PERIOD. During the Annuity Period, you will have a
limited ability to make transfers among the Subaccounts so as to change the
relative weighting of the Subaccounts on which your Variable Annuity payments
will be based. In addition, you will have a limited ability to make transfers
from the Subaccounts to increase the proportion of your annuity payments
consisting of Fixed Annuity payments. You may not, however, convert any portion
of your right to receive Fixed Annuity payments into Variable Annuity payments.

You may not make any transfers for the first six months after the Annuity Date.
Thereafter, you may make transfers among the Subaccounts or make transfers from
the Subaccounts to increase your Fixed Annuity payments. Your transfers must be
at least six months apart.

DEATH BENEFIT DURING ANNUITY PERIOD. After annuity payments begin, upon the
death of the Annuitant and any Joint Annuitant, we will make any remaining
annuity payments to the Beneficiary. The amount and number of these annuity
payments will depend on the Annuity Option in effect at the time of the
Annuitant's death. After the Annuitant's death, any remaining interest will be
distributed at least as rapidly as under the method of distribution in effect at
the Annuitant's death.

CERTAIN EMPLOYEE BENEFIT PLANS. In some states, the Contracts offered by this
prospectus contain life annuity tables that provide for different benefit
payments to men and women of the same age. In certain employment-related
situations, however, the U.S. Supreme Court's decision in ARIZONA GOVERNING
COMMITTEE V. NORRIS requires employers to use the same annuity 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 under NORRIS.

OTHER CONTRACT BENEFITS

DEATH BENEFIT. We will pay a distribution on death, if:

(1) the Contract is in force;

37
(2) annuity payments have not begun; and

(3) either:

(a) you die; or

(b) if the Contract is owned by a company or other legal entity, the
Annuitant dies.

Currently, we will pay a distribution on death equal in amount to the Death
Benefit or Enhanced Death Benefit, as appropriate. Under the Contract, however,
we have the right to pay a distribution equal in amount to the Surrender Value
unless:

(1) the Beneficiary chooses to receive the Death Benefit in a lump sum within
180 days of the date of death; and

(2) the Beneficiary requests that the Death Benefit be paid as of the date we
receive the completed claim for a distribution on death.

We currently are waiving this 180 day limitation, but we may enforce it in the
future. If we do, we will calculate the distribution as of the earlier of the
requested distribution date or the fifth anniversary of the date of death.

We determine the Death Benefit as of the date we receive all of the information
we need to process the Death Benefit claim. 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

A claim for a distribution on death must be submitted before the Annuity Date.
As part of the claim, the Beneficiary must provide "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.

38
In addition, in our discretion we may accept other types of proof.

We will pay the Death Benefit in a lump sum within seven days of receiving a
completed claim for a distribution on death, unless the Beneficiary selects one
of the other alternatives described below.

If the Beneficiary is a natural person, the Beneficiary may choose from the
following alternative ways of receiving the distribution:

- - the Beneficiary may receive the distribution as a lump sum payment;

- - the Beneficiary may apply the distribution to receive a series of equal
periodic payments over the life of the Beneficiary, over a fixed period no
longer than the Beneficiary's life expectancy, or over the life of the
Beneficiary with payments guaranteed for a period not to exceed the life
expectancy of the Beneficiary (the payments must begin within one year of
the date of death); or

- - if there is only one Beneficiary, he or she may defer payment for up to
five years from the date of death. Any remaining funds must be distributed
at the end of the five-year period. An Annuitant is necessary for this
option. If prior to your death you were the Annuitant, the Beneficiary will
become the new Annuitant.

If your spouse is the Beneficiary, he or she may choose to continue the Contract
as the new Contract Owner. If your spouse chooses to continue the Contract, the
following conditions apply:

(1) On the day the Contract is continued, we will set the Contract Value equal
to the Death Benefit or Enhanced Death Benefit, as appropriate, calculated
as of the date on which we receive all of the information we need to
process your spouse's request to continue the Contract after your death.
Because the Death Benefit and Enhanced Death Benefit can never be less
than the then current Contract Value, our resetting the Contract will not
cause the Contract Value to decrease. During the continuation period,
however, the Contract Value will continue to increase or decrease to
reflect the investment performance of the Subaccounts, interest credited
to the Fixed Account, and charges and expenses under the Contract, as
described in this prospectus.

(2) Within one year of the date of death, your spouse may withdraw one lump
sum without paying any Withdrawal Charge or incurring any Market Value
Adjustment;

(3) During the continuation period, currently we will pay a distribution on
death equal to the Death Benefit or the Enhanced Death Benefit, as
appropriate, determined as of the date on which we receive due proof of
your spouse's death. As described above, we also reserve the right to pay
a distribution equal in amount to the Surrender Value as of the date on
which we receive due proof of death. The standard Death Benefit payable
upon your spouse's death will be calculated using the formula described
above. Thus, the amount of the distribution on death may increase or
decrease during the continuation period, depending on changes in the
Contract Value and other Contract transactions during the continuation
period.

(4) If before your death you were the Annuitant, your surviving spouse
becomes the Annuitant.

(5) If you selected the Enhanced Death Benefit Rider or the Enhanced Death and
Income Benefit Rider, that rider will continue during the continuation
period. Your spouse will be treated as the Contract Owner under the
applicable Rider.

Your surviving spouse may also select one of the options listed above.
39
If the Beneficiary is a company or other legal entity, then the Beneficiary must
receive the Death Benefit in a lump sum, and the options listed above are not
available.

Different rules may apply to Contracts issued in connection with Qualified
Plans.

ENHANCED DEATH BENEFIT RIDER: When you purchase your Contract, you may select
the Enhanced Death Benefit Rider. If you are not an individual, the Enhanced
Death Benefit applies only to the Annuitant's death. If you select this rider,
the Death Benefit will be the greater of the value provided in your Contract or
the Enhanced Death Benefit. The Enhanced Death Benefit will be the greater of
the Enhanced Death Benefit A and Enhanced Death Benefit B. As described below,
we will charge a higher mortality and expense risk charge if you select this
Rider.

ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial Purchase Payment. After issue, Enhanced Death Benefit A is adjusted
whenever you pay a Purchase Payment or make a withdrawal and on each Contract
Anniversary as follows:

- - When you pay a Purchase Payment, we will increase Enhanced Death Benefit A by
the amount of the Purchase Payment;

- - When you make a withdrawal, we will decrease Enhanced Death Benefit A by a
withdrawal adjustment, as described below; and

- - On each Contract Anniversary, we will set Enhanced Death Benefit A equal to
the greater of the Contract Value on that Contract Anniversary or the
most recently calculated Death Benefit A.

If you do not pay any additional purchase payments or make any withdrawals,
Enhanced Death Benefit A will equal the highest of the Contract Value on the
Issue Date and all Contract Anniversaries prior to the date we calculate the
Death Benefit.

We will continuously adjust Enhanced Death Benefit A as described above until
the oldest Contract Owner's 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 (a) your total
Purchase Payments, (b) reduced by any withdrawal adjustments and (c) accumulated
daily at an effective annual rate of 5% per year, until: (1) the first day of
the month following the oldest Contract owner's 85th birthday or (2) if the
Contract Owner is a company or other legal entity, the Annuitant's 85th
birthday. Thereafter, we will only adjust Enhanced Death Benefit B to reflect
additional Purchase Payments and withdrawals. Enhanced Death Benefit B will
never be greater than the maximum death benefit allowed by any nonforfeiture
laws which govern the Contract.

The withdrawal adjustment for both Enhanced Death Benefit A and Enhanced Death
Benefit B will equal (a) divided by (b), with the result multiplied by (c),
where:

(a) = the withdrawal amount;

(b) = the Contract Value immediately before the withdrawal; and

ENHANCED DEATH AND INCOME BENEFIT RIDER. You may choose the Enhanced Death and
Income Benefit Rider. This rider provides the same Enhanced Death Benefit as the
Enhanced Death
40
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 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. If the Enhanced Income
Benefit is greater than the Annuitized Value on the Annuity Date, you may apply
the Enhanced Income Benefit to an Annuity Option that provides for payments
guaranteed for either a single or joint lives with a period certain of (a) at
least 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.

BENEFICIARY. You name the Beneficiary. You may name a Beneficiary in the
application. 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 receive them, effective as of
the date you signed the form. Until we receive 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. 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.

If you name more than one Beneficiary, we will divide the Death Benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the Death Benefit in equal
shares to the Beneficiaries. If one of the Beneficiaries dies before you, we
will divide the Death Benefit among the surviving Beneficiaries.

Different rules may apply to Contracts issued in connection with Qualified
Plans.

CONTRACT LOANS FOR 401(a), 401(k), AND 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, or an Owner of a Contract purchased by a pension,
profit-sharing, or other similar plan qualified under Section 401(a) of the Tax
Code (a "401 Plan"), including a Section 401(k) plan, where a plan trustee is
the Owner. Loans are not available under Non-Qualified Contracts. We will only
make loans after the free look period and before annuitization. All loans are
subject to the terms of the Contract, the relevant Plan, and the Tax Code, which
impose restrictions on loans.

We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be greater than the Surrender Value of your
Contract on the date of
41
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
and 401 plans is more than the lesser of (a) or (b) where:

(a) equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and

(b) equals the greater of $10,000 or 1/2 of the Surrender Value.

The minimum loan amount is $1,000.

To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Loans made before the Annuity Date are
generally treated as distributions under the Contract, and may be subject to
withholding and tax penalties for early distributions. Some of these
requirements are stated in Section 72 of the Tax Code and Title 1 of ERISA.
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. You may select from which account(s) to transfer the loan value.
However, we will not transfer amounts from the Fixed Account in an amount
greater than the total amount of the loan multiplied by the ratio of the value
of the Fixed Account to the Contract Value immediately before the loan. If you
do not give us instructions, we will first transfer to the Loan Account amounts
from the Separate Account in proportion to the assets in each Subaccount. If
your loan amount is greater than your Contract Value in the Subaccounts, we will
transfer the remaining required collateral from the Fixed Account.

We will not charge a Withdrawal Charge on the loan or on the transfer from the
Subaccounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount transferred to the
Loan Account will equal the desired loan amount.

We will credit interest to the amounts in the Loan Account. The annual interest
rate credited to the Loan Account will be the greater of: (a) 3%; or (b) the
loan interest rate minus 2.25%. The value of the amounts in the Loan Account are
not affected by the changes in the value of the Subaccounts.

When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the loan
interest rate applicable to new loans. We also reserve the right to change the
terms of new loans.

We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:

(1) the Death Benefit;

(2) surrender proceeds;

(3) the amount available for partial withdrawal; and

(4) the amount applied on the Annuity Date to provide annuity payments.

Usually you must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are
42
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.

If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount,
incur the early withdrawal tax penalty, and be subject to mandatory 20% federal
withholding.

If the total loan balance exceeds the Surrender Value, we will mail written
notice to your last known address. The notice will state the amount needed to
maintain the Contract in force. If we do not receive payment of this amount
within 31 days after we mail this notice, we will terminate your Contract.

We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.

WITHDRAWALS (REDEMPTIONS). Except as explained below, you may redeem a Contract
for all or a portion of its Contract Value before the Annuity Date. We may
impose a Withdrawal Charge, which would reduce the amount paid to you upon
redemption. The Withdrawal Charges are described on page 47 below. Withdrawals
from the Fixed Account may be increased or decreased by a Market Value
Adjustment, as described in "Market Value Adjustment" on page 33 above.

In general, you must withdraw at least $50 at a time. You may also withdraw a
lesser amount if you are withdrawing your entire interest in a Subaccount. If
your request for a partial withdrawal would reduce the Contract Value to less
than $500, we may treat it as a request for a withdrawal of your entire Contract
Value, as described in "Minimum Contract Value" on page 45. Your Contract will
terminate if you withdraw all of your Contract Value.

We may be required to withhold 20% of withdrawals and distributions from
Contracts issued in connection with certain Qualified Plans, as described on
page 53 below. Withdrawals also may be subject to a 10% penalty tax, as
described on page 51 below.

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. We will not honor your request unless the required form includes
your Tax I.D. Number (E.G., Social Security Number) and provides instructions
regarding withholding of income taxes.

For partial withdrawals, you may allocate the amount among the Subaccounts and
the Fixed Account. If we do not receive allocation instructions from you, we
usually will allocate the partial withdrawal proportionately among the
Subaccounts and the Fixed Account in the same proportions as you have instructed
us to allocate your Purchase Payments. If you have Contract Value in the
Guaranteed Maturity Fixed Account Option that is allocated entirely to Guarantee
Periods of the same length, we will subtract the partial withdrawal first from
the most recently created Guarantee Period. If your Contract Value in the
Guaranteed Maturity Fixed Account Option is allocated to Guarantee Periods of
different lengths, you must provide us with allocation instructions, and we will
not process your withdrawal request until we receive your instructions. 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
43
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 46 below. We determine
the Surrender Value based on the Contract Value next computed after we receive a
properly completed surrender request. We will usually pay the Surrender Value
within seven days after the day we receive a completed request form. However, we
may suspend the right of withdrawal from the Separate Account or delay payment
for withdrawals for more than seven days in the following circumstances:

(1) whenever the New York Stock Exchange ("NYSE") is closed (other than
customary weekend and holiday closings);

(2) when trading on the NYSE is restricted or an emergency exists, as determined
by the SEC, so that disposal of the Separate Account's investments or
determination of Accumulation Unit Values is not reasonably practicable; or

(3) at any other time permitted by the SEC for your protection.

In addition, we may delay payment of the Surrender Value in the Fixed Account
for up to 6 months or a shorter period if required by law. If we delay payment
from the Fixed Account for more than 30 days, we will pay interest as required
by applicable law.

You may withdraw amounts attributable to contributions made pursuant to a salary
reduction agreement (in accordance with Section 403(b)(11) of the Tax Code) only
in the following circumstances:

(1) when you attain age 59 1/2;

(2) when you terminate your employment with the plan sponsor;

(3) upon your death;

(4) upon your disability as defined in Section 72(m)(7) of the Tax Code; or

(5) in the case of hardship.

If you seek a hardship withdrawal, you may only withdraw amounts attributable to
your Purchase Payments; you may not withdraw any earnings. These limitations on
withdrawals apply to:

(1) salary reduction contributions made after December 31, 1988;

(2) income attributable to such contributions; and

(3) income attributable to amounts held as of December 31, 1988.

The limitations on withdrawals do not affect transfers between certain Qualified
Plans. Additional restrictions and limitations may apply to distributions from
any Qualified Plan. Tax penalties may also apply. You should seek tax advice
regarding any withdrawals or distributions from Qualified Plans.

SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. In general, earnings on annuities are
taxable as ordinary income upon withdrawal. As described on page 35 below, a 10%
tax penalty is imposed on certain "premature" payments under annuity contracts.
The tax penalty applies
44
to any payment received before age 59 1/2, to the extent it is includable in
income and is not subject to an exception. The Tax Reform Act of 1986 clarified
an exception to this tax penalty. This exception is known as "substantially
equal periodic payments."

Generally, under this exception you may take "substantially equal periodic
payments" before age 59 1/2 without incurring the tax penalty. These "payments"
are withdrawals, as opposed to an annuitization of the Contract. Accordingly,
you may need to pay a Withdrawal Charge, and withdrawals from the Fixed Account
may be subject to a Market Value Adjustment.

To qualify for this exception, the payments must meet the following
requirements:

1) The payments must continue to the later of age 59 1/2 or for five years.

2) Payments must be established under one of the approved methods detailed by
the IRS in IRS Notice 89-25.

3) You must have separated from service, if you purchased your Contract under a
qualified retirement plan or tax sheltered annuity.

If you modify the payment stream in any way, except for reason of death or
disability, you will loose the exception. Modification includes changing the
amount or timing of the payments, or making additional Purchase Payments. Any
subsequent periodic payment will be subject to the penalty tax, unless it
qualifies for a different exception. In addition, in the year of the
modification, you will be required to pay the penalty tax (plus interest) that
you would have been required to pay on the earlier payments if this exception
had not applied.

SYSTEMATIC WITHDRAWAL PROGRAM. If your Contract was issued in connection with a
Non-Qualified Plan or IRA, you may participate in our Systematic Withdrawal
Program. You must complete an enrollment form and send it to us. You must
complete the withholding election section of the enrollment form before the
systematic withdrawals will begin. You may choose withdrawal payments of a flat
dollar amount, earnings, or a percentage of Purchase Payments. You may choose to
receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or
annual basis. Systematic withdrawals will be deducted from your Subaccount and
Fixed Account balances, excluding the Dollar Cost Averaging Fixed Account, on a
pro rata basis.

Depending on fluctuations in the net asset value of the Subaccounts and the
value of the Fixed Account, systematic withdrawals may reduce or even exhaust
the Contract Value. The minimum amount of each systematic withdrawal is $50.

We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.

ERISA PLANS. A married participant may need spousal consent to receive a
distribution from a Contract issued in connection with a Qualified Plan or a
Non-Qualified Plan covered by to Title 1 of ERISA. You should consult an
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
45
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 or for the assumption of mortality and expense risks; and

(3) as Withdrawal Charges (contingent deferred sales charges) subtracted from
withdrawal and surrender payments.

In addition, certain deductions are made from the assets of the Portfolios for
investment management fees and expenses. Those fees and expenses are summarized
in the Fee Tables on pages 14-16, and described more fully in the Prospectuses
and Statements of Additional Information for the Portfolios.

MORTALITY AND EXPENSE RISK CHARGE. We deduct a mortality and expense risk charge
from each Subaccount during each Valuation Period. The mortality and expense
risk charge is equal, on an annual basis, to 1.15% of the average net asset
value of each Subaccount. The mortality risks arise from our contractual
obligations:

(1) to make annuity payments after the Annuity Date for the life of the
Annuitant(s);

(2) to waive the Withdrawal Charge upon your death; and

(3) to provide the Death Benefit prior to the Annuity Date. A detailed
explanation of the Death Benefit may be found beginning on page 37 above.

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 Subaccount. 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 Subaccount.
We charge a higher mortality and expense risk charge for the Riders to
compensate us for the additional risk that we accept by providing the Riders. We
will calculate a separate Accumulation Unit Value for the base Contract, and for
Contracts with each type of Rider, in order to reflect the difference in the
mortality and expense risk charges.

ADMINISTRATIVE CHARGES.

CONTRACT MAINTENANCE CHARGE. We charge an annual contract maintenance charge of
$35 on your Contract. The amount of this charge is guaranteed not to increase.
This charge reimburses us for our expenses incurred in maintaining your
Contract.

Before the Annuity Date, we assess the contract maintenance charge on each
Contract Anniversary. To obtain payment of this charge, on a pro rata basis we
will allocate this
46
charge among the Subaccounts and the Fixed Account to which you have allocated
your Contract Value, and redeem Accumulation Units and reduce your interest in
the Fixed Account 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, we will subtract this charge in equal parts from each of
your annuity payments. We will waive this charge if on the Annuity Date your
Contract Value is $50,000 or more or if all of your annuity payments are Fixed
Annuity payments.

ADMINISTRATIVE EXPENSE CHARGE. We deduct an administrative expense charge from
each Subaccount during each Valuation Period. This charge is equal, on an annual
basis, to 0.10% of the average net asset value of the Subaccounts. This charge
is designed to compensate us for the cost of administering the Contracts and the
Separate Account. The administrative expense charge is assessed during both the
Accumulation Period and the Annuity Period.

TRANSFER FEE. We currently are waiving the transfer fee. The Contract, however,
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. 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 48 below;

- - certain withdrawals for Contracts issued under 403(b) plans or 401 plans
under our prototype as described on page 49 below;

- - withdrawals taken to satisfy IRS minimum distribution rules;

- - withdrawals that qualify for one of the waiver benefits described at page 49
below; and

- - withdrawal under Contracts issued to employees of Lincoln Benefit Life Company
or its affiliates to their spouses or minor children.

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.

As a general rule, the Withdrawal Charge equals a percentage of Purchase
Payments
47
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:
<TABLE>
<CAPTION>

CONTRIBUTION WITHDRAWAL CHARGE
YEAR PERCENTAGE
- --------------------------------------- ------------------
<S> <C>

First and Second....................... 7%
Third and Fourth....................... 6%
Fifth.................................. 5%
Sixth.................................. 4%
Seventh................................ 3%
Eighth and later....................... 0%
</TABLE>

When we calculate the Withdrawal Charge, we do not take any applicable Market
Value Adjustment into consideration.

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
below;

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.

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 may also be subject to tax penalties or income tax. 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 pages 51-52 below. 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.
48

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 pages 51-52 below.

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 insured 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
Insured'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 insured's stay
in a long term care facility is the insured or a member of the insured's
immediate family.

TERMINAL ILLNESS WAIVER BENEFIT. Under this benefit, we will waive any
Withdrawal Charge and Market Value Adjustment on all withdrawals under your
Contract if, at least 30 days after the Issue Date, you or the Annuitant are
diagnosed with a terminal illness. 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 10 days after the Issue Date;

(2) you receive unemployment compensation for at least 30 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:
49
(1) the Annuitant becomes disabled (as defined in Section 72(m)(7)) of the Tax
Code;

(2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have passed
since the Contract was issued;

(3) at least 15 Contract Years have passed since the Contract was issued.

Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan, or
a paired plan (Money Purchase and Profit Sharing). For more information about
our prototype plan, call us at 1-800-865-5237.

PREMIUM TAXES. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or other
insurance companies. Some states assess premium taxes when Purchase Payments are
made; others assess premium taxes when annuity payments begin. We will deduct
any applicable premium taxes upon full surrender, death, or annuitization.
Premium taxes generally range from 0% to 3.5%.

DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES. We are not currently maintaining a
provision for taxes. In the future, however, we may establish a provision for
taxes if we determine, in our sole discretion, that we will incur a tax as a
result of the operation of the Separate Account. We will deduct for any taxes we
incur as a result of the operation of the Separate Account, whether or not we
previously made a provision for taxes and whether or not it was sufficient. Our
status under the Tax Code is briefly described in the Statement of Additional
Information.

OTHER EXPENSES. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Subaccounts to which you allocate your Contract
Value. For a summary of current estimates of those charges and expenses, see
pages 14-17 above. For more detailed information about those charges and
expenses, please refer to the prospectuses for the appropriate Portfolios. We
may receive compensation from the investment advisers or administrators of the
Portfolios in connection with administrative service and cost savings
experienced by the investment advisers or administrators.

TAX MATTERS

INTRODUCTION

THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ONLY
FEDERAL INCOME TAX ISSUES ARE ADDRESSED. 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 of your individual
circumstances, you should consult a competent tax adviser.

TAXATION OF 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:

(1) the owner is a natural person,
(2) the investments of the Separate Account are "adequately diversified"
according to Treasury Department regulations, and (3) Lincoln Benefit is
considered the owner of the Separate Account assets for federal income tax
purposes.
50
Non-natural Owners. 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. Any increase in the value of
such contracts is taxed as ordinary income received or accrued by the owner
during the taxable year. Please see the Statement of Additional Information for
a discussion of several exceptions to the general rule for contracts owned by
non-natural persons.

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 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 you will be considered the owner of
Separate Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of the Separate Account investments may cause an investor 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 this contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of Separate
Account assets. For example, you have the choice to allocate premiums and
contract values among more investment options. Also, you may be able to transfer
among investment options 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 partial withdrawal
under a qualified Contract, 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, after tax contributions to qualified plans) bears to the
contract value, is excluded from your income. You should contact a competent tax
advisor with respect to the potential tax consequences of a Market Value
Adjustment, as no definitive guidance exists on the proper tax treatment of
Market Value Adjustments. If you make a full withdrawal under a non-qualified
Contract or a qualified Contract, the amount received will be taxable only to
the extent it exceeds the investment in the contract.
51

"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. "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:

o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the owner's death,
o attributable to the owner being disabled, or
o for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).

If you transfer a nonqualified 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. Except for certain qualified
contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.

Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a nonqualified 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 you die, and annuity payments cease before the total amount of the
investment in the contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.

Taxation of Annuity Death Benefits. Death of an owner, or death of the annuitant
if the Contract is owned by a non-natural person, will cause a distribution of
Death Benefits from a Contract. Generally, such amounts are included in income
as follows:

(1) if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
(2) if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Unlike some other assets, a holder's basis
for an annuity is not increased or decreased to the fair market value of
the Contract on the date of death. Please see the Statement of Additional
Information for more detail on distribution at death requirements.

Penalty Tax on Premature Distributions. A 10% penalty tax applies to the
taxable amount of any premature distribution from a nonqualified 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:

(1) made on or after the date the owner attains age 59 1/2;
(2) made as a result of the owner's death or disability;
(3) made in substantially equal periodic payments over the owner's life or life
expectancy,
(4) made under an immediate annuity; or
(5) attributable to investment in the contract before August 14, 1982.
52

You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from qualified Contracts.

Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Lincoln Benefit (or its affiliates) to the same owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.

Tax Qualified Contracts

Contracts may be used as investments with certain Qualified Plans such as:

o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.

In the case of certain Qualified Plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.

Restrictions Under Section 403(b) Plans. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only on or after the date the employee:

o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
o on account of hardship (earnings on salary reduction contributions may not be
distributed on the 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.

Income Tax Withholding

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 another qualified plan or IRA. Eligible rollover
distributions generally include all distributions from qualified Contracts,
excluding IRAs, with the exception of:

(1) required minimum distributions, or
(2) a series of substantially equal periodic payments made over a period of at
least 10 years, or,
(3) over the life (joint lives) of the participant (and beneficiary).

Lincoln Benefit may be required to withhold federal and state income taxes on
any
53
distributions from either non-qualified or qualified Contracts that are not
eligible rollover distributions unless you notify us of your election to not
have taxes withheld.

DESCRIPTION OF LINCOLN BENEFIT LIFE
COMPANY AND THE SEPARATE ACCOUNT

LINCOLN BENEFIT LIFE COMPANY. Lincoln Benefit Life Company is a stock life
insurance company organized under the laws of the state of Nebraska in 1938. Our
legal domicile and principal business address is 206 South 13th Street, Lincoln,
Nebraska. Lincoln Benefit is a wholly owned subsidiary of Allstate Life
Insurance Company ("Allstate Life" or "ALIC"), a stock life insurance company
incorporated under the laws of the State of Illinois. Allstate Life is a wholly
owned subsidiary of Allstate Insurance Company ("AIC"), a stock
property-liability insurance company incorporated under the laws of Illinois.
All outstanding capital stock of Allstate is owned by The Allstate Corporation
("Allstate").

We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam and all states except New York. We intend to market the
Contract everywhere we conduct variable annuity business. The Contracts offered
by this prospectus are issued by us and will be funded in the Separate Account
and/or the Fixed Account.

Under our reinsurance agreement with Allstate Life, all contract related
transactions are transferred to Allstate Life. Through our reinsurance agreement
with Allstate Life, all of the assets backing our reinsured liabilities are
owned by Allstate Life. These assets represent our general account and are
invested and managed by Allstate Life. Accordingly, the results of operations
with respect to applications received and contracts issued by Lincoln Benefit
are not reflected in our financial statements. The amounts reflected in our
financial statements relate only to the investment of those assets of Lincoln
Benefit that are not transferred to Allstate Life under the reinsurance
agreement. 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.

Lincoln Benefit is highly rated by independent agencies, including A.M. Best,
Moody's, and Standard & Poor's. These ratings are based on our reinsurance
agreement with Allstate Life, and reflect financial soundness and strong
operating performance. The ratings are not intended to reflect the financial
strength or investment experience of the Separate Account. We may from time to
time advertise these ratings in our sales literature.

FINANCIAL STATEMENTS OF LINCOLN BENEFIT. The Company's consolidated financial
statements and notes thereto are included in this Prospectus beginning on page
F-1.* You should consider those financial statements only as bearing on Lincoln
Benefit's ability to meet its obligations under the Policy. They do not relate
to the investment performance of the assets held in the Separate Account. The
financial statements for the Separate Account are set forth in the Statement of
Additional Information.

*To be filed by Post-Effective Amendment.

SELECTED FINANCIAL DATA. The following selected financial data for the Company
should be read in conjunction with the consolidated financial statements and
notes thereto included in the prospectus beginning on page F-1.

<PAGE>

LINCOLN BENEFIT LIFE COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>

YEAR-END FINANCIAL DATA 1998 1997 1996 1995 1994
- ----------------------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>

For the Years Ended
December 31:
Income Before
Income Tax Expense... $ 10,587 $ 8,603 $ 7,838 $ 4,641
Net Income............. 6,852 5,583 5,093 3,036
As of December 31:
Total Assets........... $7,507,203 $7,108,502 $6,347,097 $5,319,707
</TABLE>

INVESTMENTS BY LINCOLN BENEFIT. Our general account assets, like the general
account assets of other insurance companies, including Allstate Life, must be
invested in accordance with applicable state laws. These laws govern the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit us, within specified limits and
subject to certain qualifications, to invest in federal, state, and municipal
obligations, corporate bonds, preferred stocks, real estate mortgages, real
estate and certain other investments. All of our general account assets are
available to meet our obligations.

We will primarily invest our general account assets in investment-grade fixed
income securities including the following:

Securities issued by the United States Government or its agencies or
instrumentalities, which may or may not be guaranteed by the United States
Government;

Debt instruments, including issues of or guaranteed by banks or bank holding
companies, and of corporations, which our management deems to have qualities
appropriate for inclusion in our general account;

Commercial mortgages, mortgage-backed securities collateralized by real estate
mortgage loans, or securities collateralized by other assets, that are insured
or guaranteed by the Federal Home Loan Mortgage Association, the Federal
National Mortgage Association or the Government National Mortgage Association,
or that have an investment grade at time of purchase within the four highest
grades assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or Baa),
Standard & Poor's Corporation (AAA, AA, A or BBB) or any other nationally
recognized rating service;

Commercial paper, cash or cash equivalents, and other short-term investments
having a maturity of less than one year that our management considers to have
investment quality comparable to securities having the ratings stated above. In
addition, interest rate swaps, futures, options, rate caps, and other hedging
instruments may be used solely for non-speculative hedging purposes. Anticipated
use of these financial instruments shall be limited to protecting the value of
portfolio sales or purchases, or to enhance yield through the creation of a
synthetic security.

In addition, Lincoln Benefit maintains certain unitized separate accounts which
invest in shares of open-end investment companies registered under the
Investment company Act of 1940, as amended. The Subaccounts under this Contract
are subdivisions of one of those Separate Accounts. These separate account
assets do not support our obligations under the Fixed Account provisions of the
Contracts.
55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion highlights significant factors influencing consolidated
results of operations and changes in financial position of Lincoln Benefit Life
Company (the "Company") and its wholly owned subsidiary, Lincoln Benefit
Financial Services, Inc. It should be read in conjunction with the consolidated
financial statements and related notes.

The Company, a wholly owned subsidiary of Allstate Life, which is wholly owned
by Allstate Insurance Company, a wholly owned subsidiary of The Allstate
Corporation, markets life insurance and annuity products through independent
agents.

The Company issues flexible premium deferred variable annuity contracts and
variable life policies, the assets and liabilities of which are legally
segregated and reflected as Separate Account assets and liabilities. Separate
Account assets and liabilities are carried at fair value in the statements of
financial position. Investment income and realized gains and losses of the
Separate Accounts accrue directly to the contractholders (net of fees) and,
therefore, are not included in the Company's consolidated statements of
operations.
<TABLE>
<CAPTION>

RESULTS OF OPERATIONS ($ IN THOUSANDS).

1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>

Net investment income $ 10,789 $ 9,951 $ 8,796
--------- --------- ---------
--------- --------- ---------
Realized capital gains and
losses, after-tax $ 17 $ 6 $ 258
--------- --------- ---------
--------- --------- ---------
Operating costs and expenses $ 219 $ 889 $ 754
--------- --------- ---------
--------- --------- ---------
Net Income $ 6,852 $ 5,583 $ 5,093
--------- --------- ---------
--------- --------- ---------
Investments $ 151,505 $ 142,296 $ 143,116
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company and ALIC have reinsurance agreements under which all contract and
policy related transactions are transferred to ALIC. The Company's consolidated
results of operations include only investment income and realized capital gains
and losses earned on the assets of the Company that are not transferred to ALIC
under the reinsurance agreements, and underwriting expense allowances for
services provided by the Company's broker dealer, Lincoln Benefit Financial
Services, Inc. Prior to December 31, 1996, the Company retained a small block of
paid up life insurance, which was ceded to ALIC on that date.

Net income for 1997 and 1996 increased $1,269,000 and $490,000, respectively. In
1997, the increase was attributable to the underwriting expense allowance and
increased net investment income. In 1996, increased investment income was
partially offset by lower realized capital gains.

Pretax net investment income increased by $838,000, or 8.4% in 1997 and
$1,155,000, or
56
13.1% in 1996. The additional investment income was earned on a higher base of
investments arising from positive cash flows from operating activities,
partially offset by increased investment expenses.

In 1997, operating costs and expenses decreased as a result of the cession of
the small block of paid up life insurance and the expenses on that block of
business that were incurred in 1996.

Realized capital gains were $17,000 and $6,000 after tax in 1997 and 1996,
respectively, and arose principally from prepayments on fixed income securities.
No securities were sold in 1997 or 1996. Realized capital gains in 1995 of
$258,000 after tax were primarily the result of a sale of a fixed income
security, the remainder was due to prepayments on fixed income securities.
<TABLE>
<CAPTION>

FINANCIAL POSITION ($ IN THOUSANDS).

1997 1996
----------- -----------
<S> <C> <C>
Fixed income securities(1) $ 147,911 $ 137,638
Real Estate 2,574 2,797
Short-term investments 1,020 1,861
----------- -----------
Total investments $ 151,505 $ 142,296
----------- -----------
----------- -----------
Reinsurance recoverable from Allstate
Life $ 6,732,755 $ 6,544,750
----------- -----------
----------- -----------
Separate Account assets and liabilities $ 447,658 $ 255,881
----------- -----------
----------- -----------
Contractholder funds $ 6,607,130 $ 6,422,126
----------- -----------
----------- -----------
</TABLE>

(1) Fixed income securities are carried at fair value. Amortized cost for these
securities was $141,553 and $134,866 at December 31, 1997 and 1996,
respectively.

The Company's fixed income securities portfolio consists of mortgage-backed
securities, publicly traded corporate bonds, and U.S. government bonds. The
Company generally holds its fixed income securities until maturity, but has
classified all of these securities as available for sale to allow maximum
flexibility in portfolio management.

Investments grew $9.2 million, or 6.5%, during 1997 primarily due to the
investment of positive operating cash flows and an increase in the unrealized
capital gain position on fixed income securities. At December 31, 1997, net
unrealized capital gains on fixed income securities were $4.1 million compared
to $1.8 million as of December 31, 1996. The increase in the net unrealized
capital gain position is primarily attributable to lower interest rates.

At the end of 1997, all of the Company's fixed income securities portfolio is
rated investment grade; 99.7% of the portfolio has a National Association of
Insurance Commissioners ("NAIC") rating of 1 or a Moody's rating of Aaa, Aa or
A. The remaining .3% has an NAIC rating of 2.

At December 31, 1997 and 1996, $55.1 million and $61.0 million, respectively, of
the fixed 57 income portfolio were invested in mortgage-backed securities
("MBS"). At December 31, 1997, all of the MBS had underlying collateral that is
guaranteed by U.S. government entities, thus credit risk was minimal.

MBS, however, are subject to interest rate risk as the duration and ultimate
realized yield are affected by the rate of repayment of the underlying
mortgages. The Company attempts to limit interest rate risk by purchasing MBS
whose cost does not significantly exceed par value, and with repayment
protection to provide a more certain cash flow to the Company. At December
31,1997, the amortized cost of the MBS portfolio was below par value by $2.8
million and 15% of the MBS portfolio was invested in planned amortization class
bonds. This type of MBS is purchased to provide additional protection against
rising interest rates.

The Company closely monitors its fixed income portfolio for declines in value
that are other than temporary. Securities are placed on non-accrual status when
they are in default or when the receipt of interest payments is in doubt.

The Company's short-term investment portfolio was $1.0 million and $1.9 million
at December 31, 1997 and 1996, respectively. The Company invests available cash
balances, primarily in taxable short-term securities having a final maturity
date or redemption date of one year or less.

During 1997, contractholder funds increased by $185 million and reinsurance
recoverable from ALIC under reinsurance agreements increased by $188.0 million.
Interest credited to contractholders and sales of fixed annuity contracts
exceeded the fixed annuity surrenders, withdrawals, policyholder transfers from
fixed annuity contracts to flexible premium deferred variable annuity contracts,
and benefits paid. Reinsurance recoverable from Allstate Life relates to
contract benefit obligations ceded to Allstate Life.

Separate Account assets and liabilities increased by $191.8 million, primarily
attributable to sales of flexible premium deferred variable annuity contracts,
the favorable investment performance of the Separate Account investment
portfolios and transfers from fixed annuity contracts, partially offset by
variable annuity surrenders and withdrawals.

MARKET RISK. Market risk is the risk that the Company will incur losses due to
adverse changes in market rates and prices. The Company's primary market risk
exposure is to changes in interest rates. Interest rate risk is the risk that
the Company will incur economic losses due to adverse changes in interest rates,
as the Company invests substantial funds in interest-sensitive assets.

One way to quantify this exposure is duration. Duration measures the sensitivity
of the fair value of assets to changes in interest rates. For example, if
interest rates increase 1%, the fair value of an asset with a duration of 5
years is expected to decrease in value by approximately 5%. At December 31,
1997, the Company's asset duration was approximately 4.6 years.

To calculate duration, the Company projects asset cash flows and discounts them
to a net present value basis using a risk-free market rate adjusted for credit
quality, sector attributes, liquidity and other specific risks. The projections
include assumptions (based upon historical market and Company specific
experience) reflecting the impact of changing interest rates on the prepayment
and/or option features of instruments, where applicable. Such assumptions relate
primarily to mortgage-backed securities, collateralized mortgage obligations,
and municipal and corporate obligations.

Based upon the information and assumptions the Company uses in its duration
calculation and in effect at December 31, 1997, management estimates that a 100
basis point immediate,
58
parallel increase in interest rates ("rate shock") would decrease the net fair
value of its assets identified above by approximately $6.9 million. The
selection of a 100 basis point immediate rate shock should not be construed as a
prediction by the Company's management of future market events; but rather, to
illustrate the potential impact of such an event.

To the extent that actual results differ from the assumptions utilized, the
Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.

In formulating and implementing policies for investing new and existing funds,
AIC, as parent company of ALIC, administers and oversees investment risk
management processes primarily through three oversight bodies: the Boards of
Directors and Investment Committees of its operating subsidiaries, and the
Credit and Risk Management Committee ("CRMC"). The Boards of Directors and
Investment Committees provide executive oversight of investment activities. The
CRMC is a senior management committee consisting of the Chief Investment
Officer, the Investment Risk Manager, and other investment officers who are
responsible for the day-to-day management of market risk. The CRMC meets at
least monthly to provide detailed oversight of investment risk, including market
risk.

AIC has investment guidelines that define the overall framework for managing
market and other investment risks, including the accountabilities and controls
over these activities. In addition, AIC has specific investment policies for
each of its affiliates, including the Company, that delineate the investment
limits and strategies that are appropriate for the Company's liquidity, surplus
and regulatory requirements.

LIQUIDITY AND CAPITAL RESOURCES. Under the terms of reinsurance agreements,
premiums and deposits, excluding those relating to Separate Accounts, are
transferred to ALIC, which maintains the investment portfolios supporting the
Company's products. Payments of policyholder claims, benefits, contract
maturities, contract surrenders and withdrawals and operating costs are
reimbursed by ALIC, also under the terms of the reinsurance agreements. The
primary sources for the remainder of the Company's funds are collection of
principal and interest from the investment portfolio and capital contributions
from ALIC. The primary uses for the remainder of the Company's funds are to
purchase investments and pay costs associated with the maintenance of the
Company's investment portfolio. The Company continues to have primary liability
as a direct insurer for risks reinsured.

The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset, and interest rate risks. At December 31, 1997, RBC for the
Company was significantly above levels that would require regulatory action.

YEAR 2000. The Company is heavily dependent upon complex computer systems for
all phases of its operations, including customer service, and policy and
contract administration. Since many of the Company's older computer software
programs recognize only the last two digits of the year in any date, some
software may fail to operate properly in or after the year 1999, if the software
is not reprogrammed or replaced ("Year 2000 Issue"). The Company believes that
many of its suppliers and counterparties also have Year 2000 Issues which could
affect the Company. In 1995, AIC commenced a plan intended to mitigate and/or
prevent the adverse effects of Year 2000 Issues. These strategies include normal
development and enhancement of new and existing systems, upgrades to operating
systems
59
already covered by maintenance agreements and modifications to existing systems
to make them Year 2000 compliant. The plan also includes the Company actively
working with its major external counterparties and suppliers to assess their
compliance efforts and the Company's exposure to them. The Company presently
believes that it will resolve the Year 2000 Issue in a timely manner, and the
financial impact will not materially affect its results of operations,
liquidity, or financial position. Year 2000 costs are and will be expensed as
incurred.

PENDING ACCOUNTING STANDARDS. In December 1996, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125." SFAS No. 127 delayed the implementation of certain
provisions of SFAS No. 125. "Accounting for Transfers of Financial Assets and
Extinguishments of Liabilities" until January 1, 1998. The deferred provisions
of SFAS No. 125 will be adopted effective January 1, 1998 and are not expected
to have a material impact on the financial position of the Company.

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" and
SFAS No. 131 "Disclosures About Segments of an Enterprise and Related
Information".

SFAS No. 130 requires the presentation of comprehensive income in the financial
statements. Comprehensive income is a measurement of all changes in equity that
result from transactions and other economic events other than transactions with
shareholders. The requirements of this statement will be adopted effective
January 1, 1998.

SFAS No. 131 redefines how segments are determined and requires additional
segment disclosures for both annual and quarterly reporting. Under this
statement, segments are determined using the "management approach" for financial
statement reporting. The management approach is based on the way an enterprise
makes operating decisions and assesses performance of its businesses. The
Company is currently reviewing the requirements of this SFAS and has yet to
determine its impact on its current reporting segments. The requirements of this
statement will be adopted effective December 31, 1998.

In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
97-3, "Accounting by Insurance and Other Enterprises for Insurance-related
Assessments". The SOP provides guidance concerning when to recognize a liability
for insurance-related assessments and how those liabilities should be measured.
Specifically, insurance-related assessments should be recognized as liabilities
when all of the following criteria have been met: a) an assessment has been
imposed or it is probable that an assessment will be imposed, b) the event
obligating an entity to pay an assessment has occurred and c) the amount of the
assessment can be reasonably estimated. The requirements of this standard will
be adopted in 1999 and are not expected to have a material impact on the results
of operations, cash flows or financial position of the Company.

In March 1998, the Accounting Standards Executive Committee of the AICPA issued
SOP 98-1 "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." The SOP provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Specifically, certain
external, payroll and payroll related costs should be capitalized during the
application development state of a project and depreciated over the computer
software's useful life. The Company currently expenses these costs as incurred
and is evaluating the effects of this SOP on its accounting for internally
developed software. The SOP is expected to be adopted in 1998.

FORWARD-LOOKING STATEMENTS. The statements contained in this Management's
Discussion and Analysis that are not historical information are forward-looking
statements that are based on management's estimates, assumptions and
projections. The Private Securities Litigation Reform Act of 1995 provides a
safe harbor under the Securities Act of 1933 and the
60
Securities Exchange Act of 1934 for forward-looking statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--THE QUARTER ENDED MARCH 31, 1998

The following discussion highlights significant factors influencing results of
operations and changes in financial position of Lincoln Benefit Life Company
(the "Company") and its wholly owned subsidiary, Lincoln Benefit Financial
Services, Inc. ("LBFS"), a registered broker-dealer. It should be read in
conjunction with the Company's audited consolidated financial statements for the
year ended December 31, 1997.

The Company, a wholly owned subsidiary of Allstate Life Insurance Company
("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly
owned subsidiary of The Allstate Corporation, markets life insurance and annuity
products through independent agents and brokers.

The Company issues flexible premium deferred variable annuity contracts and
flexible premium variable life policies, the assets and liabilities of which are
legally segregated and reflected as Separate Account assets and liabilities.
Separate Account assets and liabilities are carried at fair value in the
consolidated statements of financial position. Investment income and realized
gains and losses of the Separate Accounts accrue directly to the contractholders
(net of fees) and, therefore, are not included in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>

RESULTS OF OPERATIONS

($ in thousands)

THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net investment income $ 2,566 $ 2,462
---------- ----------
---------- ----------
Realized capital gains and losses,
after-tax $ -- $ 1
---------- ----------
---------- ----------
Net income $ 1,667 $ 1,548
---------- ----------
---------- ----------
Investments $ 156,268 $ 139,261
---------- ----------
---------- ----------
</TABLE>

The Company and ALIC amended their reinsurance agreement effective December 31,
1996. All business issued subsequent to that date is primarily ceded to ALIC.
The Company's results of operations include only investment income and realized
capital gains and losses earned on the assets of the Company that are not
transferred to ALIC under the reinsurance agreement.

Net income for the first quarter of 1998 was $1.7 million compared to $1.5
million for the first quarter of 1997. The increase was due to increased
investment income.

Pretax net investment income for the three-month period ended March 31, 1998 was
$2.6
61
million compared to $2.5 million for the same period last year. Additional
investment income was earned on higher investment balances arising from positive
cash flows from operating activities.
<TABLE>
<CAPTION>

FINANCIAL POSITION

($ in thousands)

MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Fixed income securities(1) $ 149,287 $ 147,911
Investment in home office real estate 2,488 2,574
Short-term investments 4,493 1,020
------------ ------------
Total investments $ 156,268 $ 151,505
------------ ------------
------------ ------------
Reinsurance recoverable from ALIC $ 6,746,392 $6,732,755
------------ ------------
------------ ------------
Separate Account assets and
liabilities $ 543,452 $ 447,658
------------ ------------
------------ ------------
Contractholder funds $ 6,617,167 $6,607,130
------------ ------------
------------ ------------
</TABLE>

(1) Fixed income securities are carried at fair value. Amortized cost for these
securities was $142,906 and $141,553 at March 31, 1998 and December 31, 1997,
respectively.

The Company's fixed income securities portfolio consists of mortgage-backed
securities, U.S. government bonds, publicly traded corporate bonds and foreign
government bonds. The Company generally holds its fixed income securities for
the long term, but has classified all of these securities as available for sale
to allow maximum flexibility in portfolio management.

Total investments increased to $156.3 million at March 31, 1998 from $151.5
million at December 31, 1997. The increase in investments is primarily due to
amounts invested from positive cash flows generated from operations and a slight
increase in unrealized net capital gains on the fixed income securities
portfolio. At March 31, 1998, unrealized net capital gains on the fixed income
securities were $6.4 million compared to $6.3 million at December 31, 1997.

At March 31, 1998, all of the Company's fixed income securities portfolio is
rated investment grade, with a National Association of Insurance Commissioners
("NAIC") rating of 1 or 2 or a Moody's rating of Aaa, Aa or A.

The Company's short-term investment portfolio was $4.5 million and $1.0 million
at March 31, 1998 and December 31, 1997, respectively. The Company invests
available cash balances primarily in taxable short-term securities having a
final maturity date or redemption date of one year or less.

During 1998, contractholder funds increased by $10.0 million and amounts
recoverable from ALIC under the reinsurance agreement increased by $13.6
million. The increases resulted
62
from sales of the Company's single and flexible premium deferred annuities, and
interest credited to contractholders, partially offset by surrenders,
withdrawals and benefits paid. Reinsurance recoverable from ALIC relates to
contract benefit obligations ceded to ALIC.

Separate Account assets and liabilities increased by $95.8 million as compared
with December 31, 1997. The increases were primarily attributable to increased
sales of flexible premium deferred variable annuity contracts and the favorable
investment performance of the Separate Account investment portfolios, partially
offset by variable annuity surrenders and withdrawals.

LIQUIDITY AND CAPITAL RESOURCES

Under the terms of reinsurance agreements, premiums and deposits on life
policies and investment contracts, excluding those relating to Separate
Accounts, are transferred to ALIC, which maintains the investment portfolios
supporting the Company's products. The Company continues to have primary
liability as a direct insurer for risks reinsured.

YEAR 2000

The Company is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of the Company's older computer software programs
recognize only the last two digits of the year in any date, some software may
fail to operate properly in or after the year 1999, if the software is not
reprogrammed, remediated or replaced, ("Year 2000 Issue"). The Company believes
that many of its counterparties and suppliers also have Year 2000 Issues which
could affect the Company. In 1995, AIC commenced a plan intended to mitigate
and/or prevent the adverse effects of Year 2000 Issues. These strategies include
normal development and enhancement of new and existing systems, upgrades to
operating systems already covered by maintenance agreements and modifications to
existing systems to make them Year 2000 compliant. The plan also includes the
Company actively working with its major external counterparties and suppliers to
assess their compliance efforts and the Company's exposure to them. The Company
presently believes that it will resolve the Year 2000 Issue in a timely manner,
and the financial impact will not materially affect its results of operations,
liquidity or financial position. Year 2000 costs are and will continue to be
expensed as incurred.

PENDING ACCOUNTING STANDARDS

Statement of Financial Accounting Standards ("SFAS") No. 131 redefines how
segments are determined and requires additional segment disclosures for both
annual and quarterly reporting. Under this statement, segments are determined
using the "management approach" for financial statement reporting. The
management approach is based on the way an enterprise makes operating decisions
and assesses performance of its businesses. The Company is currently reviewing
the requirements of the SFAS and has yet to determine its impact on its current
reporting segments. The requirements of this statement will be adopted effective
December 31, 1998.

In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA") issued Statement of Position
("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-related Assessments." The SOP provides guidance concerning when to
recognize a liability for insurance-related assessments and how those
liabilities should be measured. Specifically, insurance-related assessments
should be recognized as liabilities when all of the following criteria have been
met: 1) an assessment has been imposed or it is probable that an assessment will
be imposed, 2) the event obligating an entity to pay an assessment has occurred
and 3) the
63
amount of the assessment can be reasonably estimated. The requirements of this
statement are expected to be adopted in 1999 and are not expected to have a
material impact on the results of operations, cash flows or financial position
of the Company.

FORWARD-LOOKING STATEMENTS

The statements contained in this Management's Discussion and Analysis that are
not historical information are forward-looking statements that are based on
management's estimates, assumptions and projections. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of
1933 and The Securities Exchange Act of 1934 for forward-looking statements.

COMPETITION. Lincoln Benefit is engaged in a business that is highly
competitive. Many other life insurance companies and other entities sell
insurance and annuities. There are approximately 1,700 insurers in business in
the United States. As of April 1, 1998, A.M. Best Company assigns a rating of A+
(Superior) to Allstate Life, which automatically reinsures all net general
account business of Lincoln Benefit. A.M. Best Company also assigns Lincoln
Benefit a rating of A+(r), because Lincoln Benefit automatically reinsures all
general account business with Allstate Life. Standard & Poor's Insurance Rating
Services assigns an AA+ (Very Strong) to Lincoln Benefit's financial strength
rating. Moody's assigns an Aa2 (Excellent) financial stability rating to Lincoln
Benefit. Lincoln Benefit shares the same ratings as its parent, Allstate Life.

EMPLOYEES. As of December 31, 1998, Lincoln Benefit had approximately 571
employees at its home office in Lincoln, Nebraska.

PROPERTIES. Lincoln Benefit owns and leases office space in Lincoln, Nebraska.
The combined owned and leased spaces are used for home office administrative
operations.

EXECUTIVE OFFICERS AND DIRECTORS OF LINCOLN BENEFIT. Our directors and executive
officers are listed below, together with information as to their ages, dates of
election and principal business occupations during the last five years (if other
than their present occupation).

JANET P. ANDERBERY, VICE PRESIDENT AND CONTROLLER 1994; Associate Vice President
and Controller 5/84-4/94, Lincoln Benefit Life Company; Vice President and
Controller 1/94-present, Surety Life Insurance Company; Vice President &
Controller 1/99-present, Allstate Financial Distributors; Vice President and
Controller 5/93-1/99, Lincoln Benefit Financial Services, Inc.

THOMAS R. ASHLEY, SENIOR VICE PRESIDENT & MEDICAL DIRECTOR 1998, Vice President
and Medical Director 10/96-5/98 Lincoln Benefit Life Company; Senior Vice
President & Medical Director 5/98-present, Vice President and Medical Director
1/97-5/98, Surety Life Insurance Company.

THOMAS J. BERNEY, SENIOR VICE PRESIDENT 1998, Vice President 1982-1998 Lincoln
Benefit Life Company.

JOHN H. COLEMAN, III, SENIOR VICE PRESIDENT, DIRECTOR 1998-present, Vice
President 4/94-5/98, Lincoln Benefit Life Company; Senior Vice President,
Director 5/98-present, Vice President, 9/96-5/98, Surety Life Insurance Company;
President 2/93-4/94, Acordia.

MARVIN P. EHLY, SENIOR VICE PRESIDENT AND TREASURER, DIRECTOR 1999; Vice
President 6/93-12/98, Lincoln Benefit Life Company; Senior Vice President and
Treasurer, Director 1/99-present, Surety Life Insurance Company.

DOUGLAS F. GAER, EXECUTIVE VICE PRESIDENT 1997, DIRECTOR 1981, Senior Vice
President,
64
4/95-2/97, Senior Vice President and Treasurer 4/94-3/95, Vice President
3/81-4/94, Lincoln Benefit Life Company; Executive Vice President 1/97-present,
Senior Vice President and Treasurer, 1/94-12/96, Director 1/94-present, Surety
Life Insurance Company; Director 5/93-1/99, Lincoln Benefit Financial Services,
Inc.

PETER H. HECKMAN, CHAIRMAN OF THE BOARD 1999, DIRECTOR 1990, Vice Chairman of
the Board 8/96-12/98, Lincoln Benefit Life Company; Vice President, Director
4/92-present, Glenbrook Life & Annuity Company; Vice President 11/90-present,
Director 9/90-present, Glenbrook Life Insurance Company; Vice President
6/89-present, Director 7/90-present, Allstate Life Insurance Company of New
York; Vice President 4/89-present, Director 12/88-present, Allstate Life
Insurance Company; Vice President, Director 12/88-present, Northbrook Life
Insurance Company; Director 5/90-present, Surety Life Insurance Company;
Director 5/91-9/93, Allstate Life Financial Services.

LOUIS G. LOWER, II, DIRECTOR, 1989, Chairman of the Board 5/89-12/98, Lincoln
Benefit Life Company; Chairman of the Board and Chief Executive Officer
6/95-present, Chairman of the Board & President, 4/92-6/95, Glenbrook Life &
Annuity Company; Chairman of the Board and Chief Executive Officer
12/95-present, Chairman of the Board & President 1/91-12/95, Director
9/90-present, Glenbrook Life Insurance Company; President 1/90-present,
Executive Vice President 1/89-1/90, Senior Vice President & Treasurer
10/86-12/88, Director 10/86-present, Allstate Life Insurance Company; Chairman
of the Board and Chief Executive Officer 6/95-present, Chairman of the Board and
President 4/90-6/95, Chairman of the Board 4/90-7/90, Executive Vice President
1/89-4/90, Senior Vice President and Treasurer 10/86-4/89, Director
4/86-present, Northbrook Life Insurance Company; Chairman of the Board &
President 6/90-present, Vice President & Treasurer 12/86-6/90, Director
12/83-present, Allstate Life Insurance Company of New York; Chairman of the
Board & Chief Executive Officer 3/90-present, Director 5/89-present, Surety Life
Insurance Company; Group Vice President 76-89, Director 10/86-present Allstate
Insurance Company; Director 4/90-present, Allstate Settlement Company; Director
5/91-present, Allstate Life Financial Services.

JOHN J. MORRIS, SENIOR VICE PRESIDENT/SECRETARY 1994, DIRECTOR 1987, Vice
President & Secretary 8/85-4/94, Lincoln Benefit Life Company; Senior Vice
President 9/96-present, Director 6/95-present, Surety Life Insurance Company;
Vice President & Secretary, Director 5/93-1/99, Lincoln Benefit Financial
Services Inc.

ROBERT E. RICH, EXECUTIVE VICE PRESIDENT 1996, DIRECTOR 1987, Senior Vice
President/Chief Actuary and Treasurer, 4/95-5/96; Senior Vice President,
Assistant Secretary 4/94-3/95, Vice President/Assistant Secretary 1/84-5/96,
Lincoln Benefit Life Company; Executive Vice President 5/96-present, Senior Vice
President and Chief Actuary 1/94-5/96, Director 9/93-present, Surety Life
Insurance Company; Director 5/93-1/99, Lincoln Benefit Financial Services, Inc.

KEVIN R. SLAWIN, DIRECTOR 1996, Lincoln Benefit Life Company; Director and Vice
President-Finance and Planning 1996-present, Allstate Life Insurance Company;
Director 8/96-present, Allstate Life Insurance Company of New York; Director
8/96-present, Laughlin Group Holdings, Inc.; Director 8/96-present, Northbrook
Life Insurance Company; Director 8/96-present, Surety Life Insurance Company;
Director 8/96-present, Glenbrook Life Insurance Company; Assistant Vice
President, Assistant Treasurer 1/95-8/96, Allstate Insurance Company; Assistant
Treasurer and Director 2/94-1/95, Sears Roebuck & Co.; First Vice President and
Treasurer 6/86-2/94, Sears Mortgage Corp.

MICHAEL J. VELOTTA, DIRECTOR 1992, Lincoln Benefit Life Company; Vice President,
Secretary & General Counsel 1/93-present, Director 12/92-present, Allstate Life
Insurance Company; Vice President, Secretary & General Counsel 1/93-present,
Director 12/92-present, Glenbrook Life Insurance Company; Vice President,
Secretary & General Counsel 1/93-present, Director 12/92-present, Glenbrook Life
& Annuity Company; Vice President, Secretary & General Counsel 1/93-present,
Director 12/92-present, Allstate Life Insurance
65
Company of New York; Vice President, Secretary & General Counsel 1/93-present,
Director 12/92-present, Northbrook Life Insurance Company; Assistant Secretary,
Director 6/95-present, Surety Life Insurance Company; Assistant Vice President &
Assistant General Counsel 1989, Allstate Insurance Company.

CAROL S. WATSON, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND ASSISTANT SECRETARY
1994, DIRECTOR, 1992, Vice President & General Counsel 7/91-4/94, Lincoln
Benefit Life Company; Senior Vice President, General Counsel & Corporate
Secretary 1/98-present, Senior Vice President, General Counsel and Assistant
Secretary, 1/94-12/97, Director 6/95-present, Surety Life Insurance Company;
President, 1996-1/99, Director 5/93-1/99, Vice President and General Counsel
1993-1995, Lincoln Benefit Financial Services, Inc.

DEAN M. WAY, SENIOR VICE PRESIDENT AND ACTUARY, DIRECTOR 1998, Vice President
and Actuary 5/92-5/98, Lincoln Benefit Life Company; Senior Vice President and
Actuary, Director, 5/98-present, Vice President and Actuary 9/96-5/98, Surety
Life Insurance Company.

THOMAS J. WILSON, II, DIRECTOR 1999, Lincoln Benefit Life Company; Director
1/99-present, Surety Life Insurance Company; Senior Vice President, Director
6/95-present, Vice President 1/95-6/95, Allstate Insurance Company; Senior Vice
President, Director 7/96-present, Allstate Holdings, Inc.; President
1/99-present, Director 9/95-present, Allstate Life Insurance Company; President
12/98-present, Director 1/99-present, Allstate Life Insurance Company of New
York; Senior Vice President 6/95-present, Director 7/95-present, Allstate
Property and Casualty Insurance Company; Vice President 1/95-1/99, The Allstate
Corporation; Vice President 1993-1995, Sears, Roebuck & Company.

PATRICIA W. WILSON, DIRECTOR 1997, Lincoln Benefit Life Company; Assistant Vice
President/Assistant Secretary/Assistant Treasurer, 7/97-present, Assistant Vice
President 1/93-7/97, Allstate Life Insurance Company; Assistant Vice President
6/91-present, Director 6/97-present, Allstate Life Insurance Company of New
York; Assistant Treasurer 7/97-present, Glenbrook Life Insurance Company;
Assistant Treasurer 7/97-present, Glenbrook Life Annuity Company; Assistant Vice
President/Assistant Secretary/Assistant Treasurer 7/97-present, Northbrook Life
Insurance Company; Director 7/97-present, Surety Life Insurance Company.

B. EUGENE WRAITH, PRESIDENT, CHIEF OPERATING OFFICER 1996, DIRECTOR 1984,
President and Chief Operating Officer 3/96-present, Senior Vice President
4/94-3/96, Vice President 12/81-4/94, Lincoln Benefit Life Company; President
and Chief Operating Officer 3/96-present, Executive Vice President 1/94-3/96,
Director 9/93-present, Surety Life Insurance Company; Chairman of the Board,
Director 1993-1/99, President 5/93-11/96, Lincoln Benefit Financial Services,
Inc.; Vice President 3/96-present, Allstate Life Insurance Company.

EXECUTIVE COMPENSATION

Certain executive officers of Lincoln Benefit also serve as officers of Allstate
Life and receive no compensation directly from Lincoln Benefit. Some officers
also serve as executive officers of other companies affiliated with Lincoln
Benefit. Allocations have been made as to each individual's time devoted to his
or her duties as an executive officer of Lincoln Benefit. Those allocations are
reflected in the Summary Compensation Table set forth below, except that the
figures for Mr. Lower reflect his total compensation from Lincoln Benefit, its
affiliates, and parent company Allstate Life Insurance Company. Lincoln
Benefit's directors receive no compensation for serving as directors, in
addition to their compensation as employees at Lincoln Benefit, Allstate Life,
or their affiliates.

66
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>

LONG TERM COMPENSATION
-----------------------------
PAYOUTS
AWARDS ------------
ANNUAL COMPENSATION --------------
----------------------------- (f) (g)
(a) (e) ------------ --------- (h) (i)
- -------------------------- (b) (c) (d) -------------- SECURITIES UNDERLYING --------- --------------
NAME AND PRINCIPAL ----- --------- --------- OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS SARS(#) PAYOUTS($) COMPENSATION
- -------------------------- ----- --------- --------- -------------- ------------ --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Louis G. Lower II 1998
Chief Executive Officer 1997 $ 453,225 $ 500,000 $ 27,768 $280,589 25,914 $570,068 $
8,000(1)
Chairman of the Board 1996 $ 436,800 $ 246,781 $ 10,246 0 18,258 0 $
5,250(1)
----- --------- --------- ------- ------------ --------- --------- ------
Bernard Eugene Wraith 1998
President 1997 99,500 24,733 4,887 0 1,002 0 0
1996 90,750 26,500 10,435 0 14,275 0 0
----- --------- --------- ------- ------------ --------- --------- ------
Robert Edwin Rich 1998
Executive Vice President 1997 77,772 20,206 18,461 0 456 0 0
and Chief Actuary 1996 71,824 23,500 19,611 0 132 0 0
----- --------- --------- ------- ------------ --------- --------- ------
Douglas Ford Gaer 1998
Executive Vice President 1997 73,750 17,888 15,978 0 434 0 0
1996 57,875 18,550 12,996 0 100 0 0
----- --------- --------- ------- ------------ --------- --------- ------
John H. Coleman, III 1998
Vice President 1997 109,776 28,620 12,709 0 0 0 0
1996 101,088 25,500 3,047 0 0 0 0
</TABLE>

- ------------------------

(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing Fund of
Allstate Employees and prior to 1996 to The Profit Sharing Fund and to its
predecessor, The Savings and Profit Sharing Fund of Sears employees.

Shares of the Company and Allstate Life are not directly owned by any of our
directors or executive officers. The percentage of shares of The Allstate
Corporation beneficially owned by any director, and by all of our directors and
executive officers as a group does not exceed one percent of the class
outstanding.

STATE REGULATION OF LINCOLN BENEFIT. We are subject to the laws of Nebraska and
regulated by the Nebraska Department of Insurance. Every year we file an annual
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. We also are examined periodically by the NAIC. 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.

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.
67
The Separate Account is divided into Subaccounts. The assets of each Subaccount
are invested in the shares of one of the Portfolios. We do not guarantee the
investment performance of the Separate Account, its Subaccounts or the
Portfolios. Values allocated to the Separate Account and the amount of Variable
Annuity payments will rise and fall with the values of shares of the Portfolios
and are also reduced by Contract charges. We may also use the Separate Account
to fund our other annuity contracts. We will account separately for each type of
annuity contract funded by the Separate Account.

We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-865-5237. We have
reproduced the Table of Contents of the Statement of Additional Information on
page 70 below.

ADMINISTRATION

We have primary responsibility for all administration of the Contracts and the
Separate Account. Our mailing address is P.O. Box 82532, Lincoln, Nebraska
68501-2532.

We provide the following administrative services, among others: issuance of the
Contracts; maintenance of Contract Owner records; Contract Owner services;
calculation of unit values; maintenance of the Separate Account; and preparation
of Contract Owner reports.

We will send you Contract statements and transaction confirmations at least
quarterly. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we will
make the adjustment as of the date that we receive notice of the potential
error.

We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.

MARKET TIMING AND ASSET
ALLOCATION SERVICES

Certain third parties offer market timing and asset allocation services in
connection with the Contracts. In certain situations, we will honor transfer
instructions from third party market timing and asset allocation services if
they comply with our administrative systems, rules and procedures, which we may
modify at any time. PLEASE NOTE that fees and charges assessed for third party
market timing and asset allocation services are separate and distinct from the
Contract fees and charges set forth herein. We neither recommend nor discourage
the use of market timing and asset allocation services.

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.
We do not pay commission on Contract sales to our employees, our affiliate's
employees or their spouses or minor children.

Allstate Life Financial Services ("ALFS") located at 3100 Sanders Road,
Northbrook, IL
68
60062-7154 serves as distributor of the Contracts. ALFS, an affiliate of Lincoln
Benefit, is a wholly owned subsidiary of Allstate Life Insurance Company. ALFS
is a registered broker dealer under the Securities and Exchange Act of 1934, as
amended, and is a member of the National Association of Securities Dealers, Inc.

Sale of the Contracts commenced in August of 1998. During 1998, Lincoln Benefit
paid to a former distributor of the Contracts, Lincoln Benefit Financial
Services ("LBFS"), gross commissions for the Sale of the Contracts of
approximately $ . LBFS, as principal underwriter, retained . The amounts that
were not retained were paid to other independent broker/dealers and registered
representatives of LBFS for distribution of the Contracts.

Lincoln Benefit does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for expenses incurred in distributing the Contracts, including liability
arising out of services we provide on the Contracts.

LEGAL PROCEEDINGS

There are no pending legal proceedings affecting the Separate Account. Lincoln
Benefit and its subsidiaries are engaged in routine law suits 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 Carol S. Watson, Senior Vice President and General Counsel
of Lincoln Benefit. Legal matters relating to the federal securities laws in
connection with the Contracts described in this prospectus are being passed upon
by the law firm of Jorden Burt Boros Cicchetti Berenson & Johnson, 1025 Thomas
Jefferson St., East Lobby-Suite 400, Washington, D.C. 20007-0805.

EXPERTS

The consolidated financial statements of Lincoln Benefit Life Company and
subsidiary as of December 31, 1998 and 1997, and for each of the three years in
the period ended December 31, 1998, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.

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.

69
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION

The Contract.................................................... S-2
Annuity Payments............................................ S-2
Initial Monthly Annuity Payment............................. S-2
Subsequent Monthly Payments................................. S-2
Transfers After Annuity Date................................ S-3
Annuity Unit Value.......................................... S-3
Illustrative Example of Variable Annuity Payments........... S-4
Additional Federal Income Tax Information....................... S-5
Introduction................................................ S-5
Taxation of Lincoln Benefit Life Insurance Company.......... S-5
Exceptions to the Non-natural Owner Rule.................... S-6
IRS Required Distribution at Death Rules.................... S-6
Qualified Plans............................................. S-6
Types of Qualified Plans.................................... S-6

Separate Account Performance.................................... S-8

Experts......................................................... S-15

Financial Statements............................................ S-15

<PAGE>

APPENDIX A
Accumulation Unit Values
Basic Policy
<TABLE>
<CAPTION>

Accumulation Accumulation Number of Units
Fund Unit Value1 Unit Value Outstanding at
Beginning Ending End of Year2 Year
<S> <C> <C> <C> <C>
Janus Flexible Income 10 10.25 52,969 1998
Janus Balanced 10 11.69 39,593 1998
Janus Growth 10 11.86 35,519 1998
Janus Aggressive Growth 10 12.27 4,895 1998
Janus Worldwide Growth 10 10.68 64,108 1998

Federated Utility II 10 11.13 35,130 1998
Federated U.S. Gov't. Securities II 10 10.27 36,743 1998
Federated High Income Bond II 10 9.85 47,674 1998

Fidelity Money Market 10 10.15 69,742 1998
Fidelity Equity-Income 10 10.83 39,303 1998
Fidelity Growth 10 11.62 13,317 1998
Fidelity Overseas 10 10.50 77,591 1998
Fidelity Contrafund 10 11.46 28,065 1998
Fidelity Asset Manager 10 10.80 12,172 1998
Fidelity Index 500 10 11.36 67,638 1998

Alger American Income and Growth 10 11.50 24,310 1998
Alger American Small Capitalization 10 11.31 5,133 1998
Alger American Growth 10 11.93 51,133 1998
Alger American MidCap Growth 10 11.60 1,813 1998
Alger American Leveraged AllCap 10 12.81 16,931 1998

Scudder Bond 10 10.19 24,670 1998
Scudder Balanced 10 11.04 9,569 1998
Scudder Growth and Income 10 10.52 8,690 1998
Scudder Global Discovery 10 10.77 1,630 1998
Scudder International 10 10.38 181 1998

Strong Discovery II 10 11.04 226 1998
Strong Growth II 10 11.41 8,510 1998
Strong Opportunity II 10 10.94 603 1998
A-1
T. Rowe Price International Stock 10 10.78 2,401 1998
T. Rowe Price New America Growth 10 11.25 4,126 1998
T. Rowe Price Mid-Cap Growth 10 11.50 7,608 1998
T. Rowe Price Equity Income 10 10.78 14,739 1998

MFS Growth with Income 10 11.20 10,591 1998
MFS Research 10 11.08 8,940 1998
MFS Emerging Growth 10 11.75 5,861 1998
MFS Total Return 10 10.61 11,410 1998
MFS New Discovery 10 11.35 842 1998
</TABLE>

- ----------------------
1 Accumulation Unit Value: unit of measure used to calculate the value of a
Contract Owner's interest in a Subaccount for any Valuation Period. An
Accumulation Unit Value does not reflect deduction of certain charges under the
Contract that are deducted from your Contract Value, such as the Contract
Administration Charge, and Administrative Expense Charge. The beginning value
reflects the Accumulation Unit Value as of August 17, 1998, the effective date
of the Registration statement for this contract.

A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.

A-2

<PAGE>

Accumulation Unit Values
Basic Policy plus Death Benefit Rider

Accumulation Accumulation Number of Units
Fund Unit Value1 Unit Value Outstanding at
Beginning Ending End of Year2 Year
<S> <C> <C> <C> <C>
Janus Flexible Income 10 10.24 7,491 1998
Janus Balanced 10 11.68 18,636 1998
Janus Growth 10 11.85 14,182 1998
Janus Aggressive Growth 10 12.26 4,799 1998
Janus Worldwide Growth 10 10.68 60,930 1998

Federated Utility II 10 11.13 23,112 1998
Federated U.S. Gov't. Securities II 10 10.26 10,599 1998
Federated High Income Bond II 10 9.84 7,379 1998

Fidelity Money Market 10 10.14 53,103 1998
Fidelity Equity-Income 10 10.82 19,830 1998
Fidelity Growth 10 11.62 11,279 1998
Fidelity Overseas 10 10.49 2,466 1998
Fidelity Contrafund 10 11.45 22,847 1998
Fidelity Asset Manager 10 10.80 7,062 1998
Fidelity Index 500 10 11.35 136,540 1998

Alger American Income and Growth 10 11.49 20,131 1998
Alger American Small Capitalization 10 11.30 2,569 1998
Alger American Growth 10 11.92 15,244 1998
Alger American MidCap Growth 10 11.59 8,615 1998
Alger American Leveraged AllCap 10 12.80 4,249 1998

Scudder Bond 10 10.18 2,343 1998
Scudder Balanced 10 11.03 4,128 1998
Scudder Growth and Income 10 10.51 1,708 1998
Scudder Global Discovery 10 10.76 0 1998
Scudder International 10 10.37 5,932 1998

Strong Discovery II 10 11.03 1,200 1998
Strong Growth II 10 11.41 3,091 1998
Strong Opportunity II 10 10.93 1,370 1998
A-3
T. Rowe Price International Stock 10 10.77 5,160 1998
T. Rowe Price New America Growth 10 11.24 4,213 1998
T. Rowe Price Mid-Cap Growth 10 11.49 43,441 1998
T. Rowe Price Equity Income 10 10.78 13,978 1998

MFS Growth with Income 10 11.19 8,633 1998
MFS Research 10 11.07 2,305 1998
MFS Emerging Growth 10 11.74 91 1998
MFS Total Return 10 10.60 8,539 1998
MFS New Discovery 10 11.34 2,858 1998
</TABLE>

A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.

A-4

<PAGE>

Accumulation Unit Values
Basic Policy plus Death Benefit and Income Benefit Rider

<TABLE>
<CAPTION>
Accumulation Accumulation Number of Units
Fund Unit Value1 Unit Value Outstanding at
Beginning Ending End of Year2 Year
<S> <C> <C> <C> <C>
Janus Flexible Income 10 10.24 9,165 1998
Janus Balanced 10 11.67 11,145 1998
Janus Growth 10 11.84 7,220 1998
Janus Aggressive Growth 10 12.25 788 1998
Janus Worldwide Growth 10 10.67 10,553 1998

Federated Utility II 10 11.12 7,862 1998
Federated U.S. Gov't. Securities II 10 10.25 9,297 1998
Federated High Income Bond II 10 9.83 10,770 1998

Fidelity Money Market 10 10.13 27,065 1998
Fidelity Equity-Income 10 10.82 4,535 1998
Fidelity Growth 10 11.61 2,503 1998
Fidelity Overseas 10 10.48 0 1998
Fidelity Contrafund 10 11.44 5,053 1998
Fidelity Asset Manager 10 10.79 292 1998
Fidelity Index 500 10 11.35 18,374 1998

Alger American Income and Growth 10 11.48 287 1998
Alger American Small Capitalization 10 11.30 2,840 1998
Alger American Growth 10 11.91 4,543 1998
Alger American MidCap Growth 10 11.58 266 1998
Alger American Leveraged AllCap 10 12.79 273 1998

Scudder Bond 10 10.17 2,883 1998
Scudder Balanced 10 11.02 4,684 1998
Scudder Growth and Income 10 10.51 702 1998
Scudder Global Discovery 10 10.75 203 1998
Scudder International 10 10.37 2,877 1998

Strong Discovery II 10 11.02 0 1998
Strong Growth II 10 11.40 0 1998
Strong Opportunity II 10 10.92 191 1998
A-5
T. Rowe Price International Stock 10 10.76 0 1998
T. Rowe Price New America Growth 10 11.23 0 1998
T. Rowe Price Mid-Cap Growth 10 11.49 0 1998
T. Rowe Price Equity Income 10 10.77 687 1998

MFS Growth with Income 10 11.18 3,420 1998
MFS Research 10 11.06 1,499 1998
MFS Emerging Growth 10 11.73 733 1998
MFS Total Return 10 10.59 3,925 1998
MFS New Discovery 10 11.34 0 1998

</TABLE>

1 Accumulation Unit Value: unit of measure used to calculate the value of a
Contract Owner's interest in a Subaccount for any Valuation Period. An
Accumulation Unit Value does not reflect deduction of certain charges under the
Contract that are deducted from your Contract Value, such as the Contract
Administration Charge, and Administrative Expense Charge. The beginning value
reflects the Accumulation Unit Value as of August 17, 1998, the effective date
of the Registration statement for this contract.

A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.

A-6

<PAGE>

APPENDIX B
PORTFOLIOS AND PERFORMANCE DATA
PERFORMANCE DATA

From time to time the Separate Account may advertise the Fidelity Money Market
Subaccount's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Fidelity Money Market Subaccount refers to the net income earned
by the Subaccount over the seven-day period stated in the advertisement. This
income is then "annualized." That is, the amount of income earned during that
week is assumed to be generated each week over a 52-week period and is shown as
a percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by the investment is assumed to be
reinvested at the end of each seven-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital gains or losses that might have occurred
during the seven day period, nor do they reflect the impact of any premium tax
charge or Withdrawal Charges. The impact of other, recurring charges on both
yield figures is, however, reflected in them to the same extent it would affect
the yield (or effective yield) for a Contract of average size.

In addition, the Separate Account may advertise an annualized 30-day (or one
month) yield figure for Subaccounts other than the Fidelity Money Market
Subaccount. These yield figures are based upon the actual performance of the
Subaccount over a 30-day (or one month) period ending on a date specified in the
advertisement. Like the money market yield data described above, the 30-day (or
one month) yield data will reflect the effect of all recurring Contract charges,
but will not reflect any Withdrawal Charges or premium tax charge. The yield
figure is derived from net investment gain (or loss) over the period expressed
as a fraction of the investment's value at the end of the period.

The Separate Account may also advertise standardized and non-standardized "total
return" data for its Subaccounts. Like the yield figures described above, total
return figures are based on historical data and are not intended to indicate
future performance. The standardized "total return" compares the value of a
hypothetical investment made at the beginning of the period to the value of the
same hypothetical investment at the end of the period. Standardized total return
figures reflect the deduction of any Withdrawal Charge that would be imposed
upon a complete redemption of the Contract at the end of the period. Recurring
Contract charges are reflected in the standardized total return figures in the
same manner as they are reflected in the yield data for Contracts funded through
the Money Market Subaccount.

In addition to the standardized "total return," the Separate Account may
advertise non-standardized "total return." Non-standardized total return is
calculated in a similar manner and for the same time periods as the standardized
total return except that the Withdrawal Charge is not deducted. Further, we
assumed an initial hypothetical investment of $30,000, because $30,000 is closer
to the average Purchase Payment of a Contract which we expect to write.
Standardized total return, on the other hand, assumes an initial hypothetical
investment of $1,000.

The Separate Account may also disclose yield and non-standardized total return
for time periods before the date the Separate Account commenced operations. In
this case, performance data for the Subaccounts is calculated based on the
performance of the Portfolios and assumes that the Subaccounts existed during
the same time period as the Portfolios, with recurring Contract charges equal to
those currently assessed against the Subaccounts.

B-1
Our advertisements may also compare the performance of our Subaccounts with: (a)
certain unmanaged market indices, including but the Dow Jones Industrial
Average, the Standard & Poor's 500, and the Shearson Lehman Bond Index; and/or
(b) other management investment companies with investment objectives similar to
the underlying funds being compared. Our advertisements also may include the
performance ranking assigned by various publications, including the Wall Street
Journal, Forbes, Fortune, Money, Barron's, Business Week, USA Today, and
statistical services, including Lipper Analytical Services Mutual Fund Survey,
Lipper Annuity and Closed End Survey, the Variable Annuity Research Data Survey,
and SEI.

The Contract charges are described in more detail on pages 46-50. We have
described the computation of advertised performance data for the Separate
Account in more detail beginning on page S-8 of the Statement of Additional
Information.

B-2

<PAGE>

APPENDIX C
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
C-1
N = the number of whole and partial years from the date
we receive your request until the end of the relevant
Guarantee Period.

We will base the Market Value Adjustment on the current Treasury Rate for a
maturity corresponding in length to the relevant Guarantee Period. These
examples also show the Withdrawal Charge (if any), which would be calculated
separately from the Market Value Adjustment.

EXAMPLE OF A DOWNWARD MARKET VALUE ADJUSTMENT

A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased one year after the Purchase Payment, such that the five-year Treasury
Rate is now 6.5%. Upon a withdrawal, the market value adjustment factor would
be:

.9 X (.06 - .065) X 4 = -.0180

The Market Value Adjustment is a reduction of $648.00 from the amount withdrawn:

$648.00 = -.0180 X ($42,000.00 - $6,000.00)

A Withdrawal Charge of 7% would be assessed against the Purchase Payments
withdrawn that are less than seven years old and are not eligible for free
withdrawal. Under the Contract, earnings are deemed to be withdrawn before
Purchase Payments. Accordingly, in this example, the amount of the Purchase
Payment eligible for free withdrawal would equal the Free Withdrawal Amount less
the interest credited or $4,000.00 ($6,000.00 - $2,000.00).

Therefore, the Withdrawal Charge would be:

$2,520.00 = 7% X (40,000.00 - $4,000.00)

As a result, the net amount payable to you would be:

$38,832.00 = $42,000.00 - $648.00 - $2,520.00

EXAMPLE OF AN UPWARD MARKET VALUE ADJUSTMENT

An upward Market Value Adjustment results from a withdrawal that occurs when
interest rates have decreased. Assume interest rates have decreased one year
after the Purchase Payment, such that the five-year 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:
C-2
$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 = MVA + WC

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 = MVA +
WC.

MVA = .018 X AW'
WC = .07 X AW'

(since the Market Value Adjustment is a reduction from amount withdrawn, it
operates in the same direction as the Withdrawal Charge)

MVA + WC = .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
C-3
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).

C-4

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS

LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT

DEPOSITOR: LINCOLN BENEFIT LIFE COMPANY

This Statement of Additional Information is not a prospectus. You should also
read the prospectus relating to the annuity contracts described above. You may
obtain a copy of the prospectus without charge by calling us at 1-800-865-5237
or writing to us at the following address:

Lincoln Benefit Life Company
P.O. Box 82532
Lincoln, Nebraska 68501-2532

The date of this Statement of Additional Information
and of the related Prospectus is: May 1, 1999.

TABLE OF CONTENTS

PAGE
----
THE CONTRACT...................................... S-2
ANNUITY PAYMENTS................................ S-2
INITIAL MONTHLY ANNUITY PAYMENTS................ S-2
SUBSEQUENT MONTHLY PAYMENTS..................... S-2
TRANSFERS AFTER ANNUITY DATE.................... S-3
ANNUITY UNIT VALUE.............................. S-3
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY
PAYMENTS...................................... S-4

ADDITIONAL FEDERAL INCOME TAX INFORMATION......... S-5
INTRODUCTION.................................... S-5
TAXATION OF LINCOLN BENEFIT LIFE
INSURANCE COMPANY............................. S-5
EXCEPTIONS TO THE NON-NATURAL OWNER RULE........ S-6
IRS REQUIRED DISTRIBUTION AT DEATH RULES........ S-6
QUALIFIED PLANS................................. S-6
TYPES OF QUALIFIED PLANS........................ S-6

SEPARATE ACCOUNT PERFORMANCE...................... S-8

EXPERTS........................................... S-15

FINANCIAL STATEMENTS.............................. S-15

S-1

<PAGE>

THE CONTRACT

ANNUITY PAYMENTS

The amount of your annuity payments will depend on the following factors:

(a) the amount of your Contract Value on the Valuation Date next preceding
the Annuity Date, minus any applicable premium tax charge and adjusted by any
applicable Market Value Adjustment;

(b) the Payment Option you have selected;

(d) the age and, in some cases, the sex of the Annuitant and any Joint
Annuitant; and

(e) for Variable Annuity Payments only, the investment performance after the
Annuity Date of the Subaccounts you have selected.

INITIAL MONTHLY ANNUITY PAYMENT

For both Fixed and Variable Annuity payments, we determine the amount of your
initial annuity payment as follows. First, we subtract any applicable premium
tax charge from your Contract Value on the Valuation Date next preceding the
Annuity Date. We will also increase or decrease your Fixed Account balance by
any applicable Market Value Adjustment. Next, we apply that amount to the
Payment Option you have selected. For Fixed Annuity payments, we will use either
the Payment Option Tables in the Contract or our annuity tables in effect for
single premium immediate annuities at the time of the calculation, whichever
table is more favorable to the payee. For Variable Annuity payments, we will use
the Payment Options tables in the Contract (which reflect the assumed investment
rate of 3.5% which is used in calculating subsequent Variable Annuity payments,
as described below). The tables show the amount of the periodic payment a payee
could receive based on $1,000 of Contract Value. To determine the initial
payment amount, we divide your Contract Value, adjusted as described above, by
$1,000 and multiply the result by the relevant annuity factor for the
Annuitant's age and sex (if we are permitted to consider that factor) and the
frequency of the payments you have selected.

In some states and under certain Qualified Plans and other employer-sponsored
employee benefit plans, we are not permitted to take the Annuitant's sex into
consideration in determining the amount of periodic annuity payments. In those
states, we use the same annuity table for men and women.

SUBSEQUENT MONTHLY PAYMENTS

For a Fixed Annuity, the amount of the second and each subsequent monthly
annuity payment is usually the same as the first monthly payment. However, after
the Annuity Date you will have a limited ability to increase your Fixed Annuity
payments by making transfers from the Subaccounts, as described in "Transferred
after the Annuity Date" on page S-3 below. After each such transfer, however,
your subsequent annuity payments will remain at the new level until and unless
you make an additional transfer to your Fixed Annuity payments.

For a Variable Annuity, the amount of the second and each subsequent monthly
payment will vary depending on the investment performance of the Subaccounts to
which you allocated your Contract Value. We calculate separately the portion of
the monthly annuity payment attributable to each Subaccount you have selected as
follows. When we calculate your initial annuity payment, we also will determine
the number of Annuity Units in each Subaccount to allocate to your Contract for
the remainder of the Annuity Period. For each
S-2
Subaccount, we divide the portion of the initial annuity payment attributable to
that Subaccount by the Annuity Unit Value for that Subaccount on the Valuation
Date next preceding the Annuity Date. The number of Annuity Units so determined
for your Contract is fixed for the duration of the Annuity Period. We will
determine the amount of each subsequent monthly payment attributable to each
Subaccount by multiplying the number of Annuity Units allocated to your Contract
by the Annuity Unit Value for that Subaccount as of the Valuation Period next
preceding the date on which the annuity payment is due. Since the number of
Annuity Units is fixed, the amount of each subsequent Variable Annuity payment
will reflect the investment performance of the Subaccounts elected by you.

TRANSFERS AFTER THE ANNUITY DATE

The Contract provides that during the Annuity Period, you may make transfers
among the Subaccounts or increase the proportion of your annuity payments
consisting of Fixed Annuity payments. We will effect a transfer among the
Subaccounts at their Annuity Unit Value next determined after we receive your
instructions. After the transfer, your subsequent Variable Annuity payments will
be based on your new Annuity Unit balances. If you wish to transfer value from
the Subaccounts to increase your Fixed Annuity payments, we will determine the
amount of your additional Fixed Annuity payments as follows. First, we will
determine the Annuitized Value represented by the Annuity Units that you wish to
apply to a Fixed Annuity payment. Then, we will apply that amount to the
appropriate factor for the Payment Option you have selected, using either the
Payment Option Tables in the Contract or our annuity tables for single premium
immediate annuities at the time of the calculation, whichever table is more
favorable to the payee.

ANNUITY UNIT VALUE

We determine the value of an Annuity Unit independently for each Subaccount.
Initially, the Annuity Unit Value for each Subaccount was set at $100.00.

The Annuity Unit Value for each Subaccount will vary depending on how much the
actual net investment return of the Subaccount differs from the assumed
investment rate that was used to prepare the annuity tables in the Contract.
Those annuity tables are based on a 3.5% per year assumed investment rate. If
the actual net investment rate of a Subaccount exceeds 3.5%, the Annuity Unit
Value will increase and Variable Annuity payments derived from allocations to
that Subaccount will increase over time. Conversely, if the actual rate is less
than 3.5%, the Annuity Unit Value will decrease and the Variable Annuity
payments will decrease over time. If the net investment rate equals 3.5%, the
Annuity Unit Value will stay the same, as will the Variable Annuity payments. If
we had used a higher assumed investment rate, the initial monthly payment would
be higher, but the actual net investment rate would also have to be higher in
order for annuity payments to increase (or not to decrease).

For each Subaccount, we determine the Annuity Unit Value for any Valuation
Period by multiplying the Annuity Unit Value for the immediately preceding
Valuation Period by the Net Investment Factor for the current Valuation Period.
The result is then divided by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per year.

The Net Investment Factor measures the net investment performance of a
Subaccount from one Valuation Date to the next. The Net Investment Factor may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.

To determine the Net Investment Factor for a Subaccount for a Valuation Period,
we divide (a) by (b), and then subtract (c) from the result, where:

(a) is the total of:
S-3
(1) the net asset value of a Portfolio share held in the Subaccount
determined as of the Valuation Date at the end of the Valuation Period; plus

(2) the per share amount of any dividend or other distribution
declared by the Portfolio for which the "ex-dividend" date occurs during the
Valuation Period; plus or minus

(3) a per share credit or charge for any taxes which we paid or for
which we reserved during the Valuation Period and which we determine to be
attributable to the operation of the Subaccount. As described in the prospectus,
currently we do not pay or reserve for federal income taxes;

(b) is the net asset value of the Portfolio share determined as of the
Valuation Date at the end of the preceding Valuation Period; and

ILLUSTRATIVE EXAMPLE OF ANNUITY UNIT VALUE CALCULATION

Assume that one share of a given Subaccount's underlying Portfolio had a net
asset value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on
a Tuesday; that its net asset value had been $11.44 at the close of the NYSE on
Monday, the day before; and that no dividends or other distributions on that
share had been made during the intervening Valuation Period. The Net Investment
Factor for the Valuation Period ending on Tuesday's close of the NYSE is
calculated as follows:

Net Investment Factor = ($11.46/$11.44) - 0.0000384 = 1.0017140

The amount subtracted from the ratio of the two net asset values (0.0000343) is
the daily equivalent of the annual asset-based expense charges against the
Subaccount of 1.25%.

In the example given above, if the Annuity Unit value for the Subaccount was
$101.03523 on Monday, the Annuity Unit Value on Tuesday would have been:

$101.03523 X 1.0017140 = $101.19886
- ---------------------
1.0000943

ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY PAYMENTS

Assume that a male Contract owner, P, owns a Contract in connection with which P
has allocated all of his Contract Value to a single Subaccount. P is also the
sole Annuitant. At age 60, P chooses to annuitize his Contract under Option B,
Life and 10 Years Certain. As of the last Valuation Date preceding the Annuity
Date, P's Account was credited with 7543.2456 Accumulation Units each having a
value of $15.432655. Accordingly, P's Account Value at that Date is equal to
7543.2456 X $15.432655 = $116,412.31. There are no premium tax charges payable
upon annuitization. Assume also that the Annuity Unit Value for the Subaccount
at that same Date is $132.56932, and that the Annuity Unit Value on the
Valuation Date immediately prior to the second annuity payment date is
$133.27695.

P's first Variable Annuity payment is determined from the annuity rate tables in
P's Contract, using the information assumed above. The tables supply monthly
annuity payments for each $1,000 of applied Contract Value. Accordingly, P's
first Variable Annuity payment is determined by multiplying the monthly
installment of $5.44 by the result of dividing P's Account Value by $1,000:

S-4
First Payment = $5.44 X ($116,412.31/$1,000) = $633.28

The number of P's Annuity Units is also determined at this time. It is equal to
the amount of the first Variable Annuity payment divided by the value of an
Annuity Unit at the Valuation Date immediately prior to annuitization:

Annuity Units = $633.28 DIVIDED BY $132.56932 = 4.77697

P's second Variable Annuity payment is determined by multiplying the number of
Annuity Units by the Annuity Unit value as of the Valuation Date immediately
prior to the second payment due date:

Second Payment = 4.77697 X $133.27695 = $636.66

P's third and subsequent Variable Annuity payments are computed in the same
manner.

The amount of the first Variable Annuity payment depends on the Contract Value
in the relevant Subaccount on the Annuity Date. Thus, it reflects the investment
performance of the Subaccount net of fees and charges during the Accumulation
Period. The amount of the first Variable Annuity payment determines the number
of Annuity Units allocated to P's Contract for the Annuity Period. That number
will remain constant throughout the Annuity Period, unless the Contract owner
makes a transfer. The amount of the second and subsequent Variable Annuity
payments depends on changes in the Annuity Unit Value, which will continuously
reflect changes in the net investment performance of the Subaccount during the
Annuity Period.

ADDITIONAL FEDERAL INCOME TAX INFORMATION

Introduction

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 the individual circumstances of each person. 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 Insurance Company

Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. The Separate Account is not an entity separate
from Lincoln Benefit, and its operations form a part of the Company. As a
consequence, the Separate Account will not be taxed separately as a "Regulated
Investment Company" under Subchapter M of the Code. Investment income and
realized capital gains of the Separate Account are automatically applied to
increase reserves under the contract. Under current federal 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. Generally, reserves are amounts that
Lincoln Benefit is legally required to accumulate and maintain in order to meet
future obligations under the Contracts. Lincoln Benefit does not anticipate that
it will incur any federal income tax liability attributable to the Separate
Account. Therefore, we do not intend to make provisions for any such taxes. If
we are taxed on investment income or capital gains of the Separate Account, then
we may impose a charge against the Separate Account in order to make provision
for such taxes.

S-5
Exceptions to the Non-natural Owner Rule

Generally, Contracts held by a non-natural owner are not treated as annuity
contracts for federal income tax purposes, unless one of several exceptions
applies. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity that holds the Contract for the benefit
of a natural person. However, this special exception will not apply in the case
of an employer who is the nominal owner of a Contract under a non-qualified
deferred compensation arrangement for 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) Contracts purchased with a single premium when the annuity starting date is
no later than a year from date of purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during
the annuity period.

IRS Required Distribution at Death Rules

To qualify as an annuity contract for federal income tax purposes, a
nonqualified Contract must provide:

(1) if any owner dies on or after the annuity 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 owner's death;
(2) if any owner dies prior to the annuity start date, the entire interest in
the Contract must be distributed within five years after the date of the
owner's death.

The five year requirement is satisfied if:

(1) any portion of the owner's interest which is payable to 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
(2) the distributions begin within one year of the owner's death.

If the owner's designated beneficiary is a surviving spouse, the Contract may be
continued with the surviving spouse as the new owner. If the owner of the
Contract is a non-natural person, the annuitant is treated as the 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 is treated as the
death of the owner.

Qualified Plans

This Contract may be used with several types of Qualified Plans. The tax rules
applicable to participants in Qualified Plans vary according to the type of Plan
and the terms and conditions of the Plan. Qualified Plan participants, and
owners, annuitants and beneficiaries under the Contract may be subject to the
terms and conditions of the Qualified Plan regardless of the terms of the
Contract.

Types of Qualified Plans

IRAs. Section 408 of the Code permits eligible individuals to contribute to an
individual retirement plan known as an IRA. IRAs are subject to limitations on
the amount that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified plans may be
"rolled over" on a tax-deferred basis into an
S-6
IRA. An IRA generally may not provide life insurance, but it may provide a Death
Benefit that equals the greater of the premiums paid or the Contract value. The
Contract provides a Death Benefit that in certain situations, may exceed the
greater of the payments or the contract value. If the IRS treats the Death
Benefit as violating the prohibition on investment in life insurance contracts,
the Contract would not qualify as an IRA.

Roth IRAs. Section 408A of the Code permits eligible individuals to make
nondeductible contributions to an individual retirement plan known as a Roth
IRA. Roth IRAs are subject to limitations on the amount that can be contributed.
In certain instances, distributions from Roth IRAs are excluded from gross
income. Subject to certain limits, a traditional Individual Retirement Account
or Annuity may be converted or "rolled over" to a Roth IRA. The taxable portion
of a conversion or rollover distribution is included in gross income, but is
exempt from the 10% penalty tax on premature distributions

Simplified Employee Pension Plans. Section 408(k) of the Code allows employers
to establish simplified employee pension plans for their employees using the
employees' IRAs if certain criteria are met. Under these plans the employer may,
within limits, make deductible contributions on behalf of the employees to their
individual retirement annuities. Employers intending to use the contract in
connection with such plans should seek competent advice

Savings Incentive Match Plans for Employees (SIMPLE Plans). Sections 408(p) and
401(k) of the Tax Code allow employers with 100 or fewer employees to establish
SIMPLE retirement plans for their employees. SIMPLE plans may be structured as a
SIMPLE retirement account using an employee's IRA to hold the assets, or as a
Section 401(k) qualified cash or deferred arrangement. In general, a SIMPLE plan
consists of a salary deferral program for eligible employees and matching or
nonelective contributions made by employers. Employers intending to use the
Contract in conjunction with SIMPLE plans should seek competent tax and legal
advice.

Tax Sheltered Annuities. Section 403(b) of the Tax Code permits public school
employees and employees of certain types of tax-exempt organizations (specified
in Section 501(c)(3) of the Code) to have their employers purchase Contracts for
them. Subject to certain limitations, a Section 403(b) plan allows an employer
to exclude the purchase payments from the employees' gross income. A Contract
used for a Section 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:

o the date the employee attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
o on the account of hardship (earnings on salary reduction contributions may
not be distributed for 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.

Corporate and Self-Employed Pension and Profit Sharing Plans. Sections 401(a)
and 403(a) of the Tax Code permit corporate employers to establish various types
of tax favored retirement plans for employees. The Tax Code permits
self-employed individuals to establish tax favored retirement plans for
themselves and their employees. Such retirement plans may permit the purchase of
Contracts to provide benefits under the plans.

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
S-7
organizations to defer a portion of their compensation without paying current
income taxes. The employees must be participants in an eligible deferred
compensation plan. Employees with Contracts under the plan are considered
general creditors of the employer. The employer, as owner of the Contract, has
the sole right to the proceeds of the Contract. Generally, under the non-natural
owner rules, Contracts are not treated as annuity contracts for federal income
tax purposes. Under these plans, contributions made for the benefit of the
employees will not be included in the employees' gross income until distributed
from the plan. However, all compensation deferred under a 457 plan must remain
the sole property of the employer. As property of the employer, the assets of
the plan are subject only to the claims of the employer's general creditors,
until such time as the assets become available to the employee or a beneficiary.

SEPARATE ACCOUNT PERFORMANCE

Performance data for the various Subaccounts are computed in the manner
described below.

FIDELITY MONEY MARKET SUBACCOUNT

The current yield is the annual yield on the Fidelity Money Market Subaccount
assuming no reinvestment of dividends and excluding all realized or unrealized
capital gains. We compute current yield by first determining the Base Period
Return on a hypothetical Contract having a balance of one Accumulation Unit at
the beginning of a 7 day period using the formula:

Base Period Return = (EV-SV)/(SV)

where:

SV = value of one Accumulation Unit at the start of a 7 day period EV = value
of one Accumulation Unit at the end of the 7 day period

We determine the value of the Accumulation Unit at the end of the period (EV)
by:

(1) adding, to the value of the Unit at the beginning of the period (SV),
the investment income from the underlying Variable Insurance Products Fund Money
Market Portfolio attributed to the Unit over the period; and

(2) subtracting, from the result, the sum of:

(a) the portion of the annual Mortality and Expense Risk and
Administrative Expense Charges allocable to the 7 day period (obtained by
multiplying the annually-based charges by the fraction 7/365); and

(b) a prorated portion of the annual contract maintenance charge of $35
per Contract. The contract maintenance charge is allocated among the Subaccounts
in proportion to the total Contract Values similarly allocated. The charge is
further reduced, for purposes of the yield computation, by multiplying it by the
ratio that the value of the hypothetical Contract bears to the value of an
account of average size for Contracts funded by the Fidelity Money Market
Subaccount. The Charge is then multiplied by the fraction 7/365 to arrive at the
portion attributable to the 7 day period.

The current yield is then obtained by annualizing the Base Period Return:

Current Yield = (Base Period Return) X (365/7)

The Fidelity Money Market Subaccount also quotes an "effective yield". Effective
yield
S-8
differs from current yield in that effective yield takes into account the effect
of dividend reinvestment. The effective yield, like the current yield, is
derived from the Base Period Return over a 7 day period. However, the effective
yield accounts for the reinvestment of dividends in the Variable Insurance
Products Fund Money Market Portfolio by compounding the current yield according
to the formula:

Effective Yield = [(Base Period Return + 1)to the power of 365/7 - 1].

Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not. The yield quotations also do not reflect any impact
of premium tax charges, transfer fees, or Withdrawal Charges.

The yields quoted do not represent the yield of the Fidelity Money Market
Subaccount in the future, because the yield is not fixed. Actual yields will
differ depending on the type, quality and maturities of the investments held by
the Variable Insurance Products Fund Money Market Portfolio and changes in
interest rates on those investments. In addition, your yield also will be
affected by factors specific to your Contract. For example, if your account is
smaller than average, your yield will be lower, because the fixed dollar expense
charges will affect the yield on small accounts more than they will affect the
yield on larger accounts.

Yield information may be useful in reviewing the performance of the Fidelity
Money Market Subaccount and for providing a basis for comparison with other
investment alternatives. However, the Fidelity Money Market Subaccount's yield
may vary on a daily basis, unlike bank deposits or other investments that
typically pay a fixed yield for a stated period of time.

The Fidelity Money Market Portfolio's yield for the seven-day period ended
December 31, 1997 was 4.05% and the effective yield for the same seven day
period was 4.13%.

OTHER SUBACCOUNTS

We compute the performance of the other Subaccounts in terms of an annualized
"yield" and/or as "total return".

YIELD

Yield will be expressed as an annualized percentage based on the Subaccount's
performance over a stated 30-day (or one month) period. The annualized yield
figures will reflect all recurring Contract charges and will not reflect
Withdrawal Charges, transfer fees or premium tax charges. To arrive at the yield
percentage over the 30-day (or one month) period, the net income per
Accumulation Unit of the Subaccount during the period is divided by the value of
an Accumulation Unit as of the end of the period. The yield figure is then
annualized by assuming monthly compounding of the 30-day (or one month) figure
over a six-month period and then doubling the result.

The formula used in computing the yield figure is:

Yield = 2 X ( ((a-b) + 1)to the power of 6 - 1)
---
cd

where:

a = net investment income earned during the period by the underlying
Portfolio attributable to its shares held in the Subaccount;
S-9
b = expenses accrued for the period (net of reimbursements);

c = average daily number of Accumulation Units outstanding during the
period; and

d = the net asset value of an Accumulation Unit on the last day of the
period.

These yield figures reflect all recurring Contract charges, as described in the
explanation of the yield computation for the Fidelity Money Market Subaccount.
Like the Fidelity Money Market Subaccount's yield figures, the yield figures for
the other Subaccounts are based on past performance and should not be taken as
predictive of future results.

STANDARDIZED TOTAL RETURN

Standardized total return for a Subaccount represents a single computed annual
rate of return that, when compounded annually over a specified time period (one,
five, and ten years, or since inception) and applied to a hypothetical initial
investment in a Contract funded by that Subaccount made at the beginning of the
period, will produce the same Contract Value at the end of the period that the
hypothetical investment would have produced over the same period. The
standardized total rate of return (T) is computed so that it satisfies the
following formula:

P(1+T)to the power of n = ERV

where:

P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten year period as of the end of
the period (or fractional portion thereof).

The standardized total return figures reflect the effect of both non-recurring
and recurring charges, as discussed herein. Recurring charges are taken into
account in a manner similar to that used for the yield computations for the
Fidelity Money Market Subaccount, described above. The applicable Withdrawal
Charge (if any) is deducted as of the end of the period, to reflect the effect
of the assumed complete redemption. The effect of the contract maintenance
charge on your account usually will differ from that assumed in the computation,
due to differences between most actual allocations and the assumed one, as well
as differences due to varying account sizes. Accordingly, your total return on
an investment in the Subaccount over the same time periods usually would have
differed from those produced by the computation. As with the Fidelity Money
Market and other Subaccount yield figures, standardized total return figures are
based on historical data and are not intended to be a projection of future
performance.

NON-STANDARDIZED TOTAL RETURN

Non-standardized total return for a Subaccount represents a single computed
annual rate of return that, when compounded annually over a specified time
period (one, five, and ten years, or since inception) and applied to a
hypothetical initial investment in a Contract funded by that Subaccount made at
the beginning of the period, will produce the same
S-10
Contract Value at the end of the period that the hypothetical investment would
have produced over the same period. The total rate of return (T) is computed so
that it satisfies the formula:

P(1+T)to the power of n = ERV

where:

P = a hypothetical initial payment of $30,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $30,000 payment made at
the beginning of the one, five, or ten year period as of the end of
the period (or fractional portion thereof).

Our non-standardized total return differs standardized total return in that in
calculating non-standardized total return, we assumed an initial hypothetical
investment of $30,000. We chose $30,000, because it is closer to the average
Purchase Payment of a Contract that we expect to write. For standardized total
return, we used an initial hypothetical investment of $1,000, as required by SEC
regulations. The non-standardized total return figures reflect the effect of
recurring charges, as discussed herein. Because the impact of the contract
maintenance charge on your account will usually differ from that assumed in the
computation, due to differences between most actual allocations and the assumed
one, as well as differences due to varying account sizes, your total return on
an investment in the Subaccount over the same time periods usually would have
differed from those produced by the computation. As with the standardized total
return figures, non-standardized total return figures are based on historical
data and are not intended to be a projection of future performance.

TIME PERIODS BEFORE THE DATE THE SEPARATE ACCOUNT COMMENCED OPERATIONS

The Separate Account may also disclose yield and non-standardized total return
for time periods before the Separate Account commenced operations. This
performance data is based on the actual performance of the Portfolios since
their inception, adjusted to reflect the effect of the recurring Contract
charges at the rates currently charged against the Subaccounts.

TABLES OF TOTAL RETURN QUOTATIONS

The following tables include average annual total return and non-standardized
total return for various periods as of December 31, 1997.

STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1997
ASSUMING CONTRACT SURRENDERED
<TABLE>
<CAPTION>

AVERAGE ANNUAL TOTAL RETURN (3)
---------------------------------------------
SINCE
INCEPTION 5 YEAR 10 YEAR INCEPTION
DATE (2) 1 YEAR (%) (%) (%) (%)
----------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
JANUS
Flexible Income................................. 1/2/94 4.80% N/A N/A 7.99%
Balanced (4).................................... 1/2/94 15.44% N/A N/A 12.99%
Growth (4)...................................... 1/2/94 16.47% N/A N/A 15.58%
Aggressive Growth (4)........................... 1/2/94 6.58% N/A N/A 13.77%
Worldwide Growth (4)............................ 1/2/94 16.11% N/A N/A 16.86%
FEDERATED
Utility II (4).................................. 2/11/94 19.33% N/A N/A 11.91%
S-11
U.S. Gov't II (4)............................... 3/28/94 0.85% N/A N/A 3.53%
High Income Bond (4)............................ 3/1/94 6.81% N/A N/A 8.61%
FIDELITY VIP
Money Market (1)................................ 1/2/94 N/A N/A N/A N/A
Equity Income (4)............................... 1/2/94 21.94% N/A N/A 18.24%
Growth (4)...................................... 1/2/94 17.10% N/A N/A 15.38%
Overseas (4).................................... 1/2/94 4.24% N/A N/A 6.15%
FIDELITY VIP II
Asset Manager (4)............................... 1/2/94 13.21% N/A N/A 8.41%
Contrafund (4).................................. 1/3/95 18.21% N/A N/A 16.78%
Index 500....................................... 2/17/98 N/A N/A N/A N/A
ALGER AMERICAN
Income and Growth............................... 2/17/98 N/A N/A N/A N/A
Small Capitalization............................ 2/17/98 N/A N/A N/A N/A
Growth.......................................... 2/17/98 N/A N/A N/A N/A
MidCap.......................................... 2/17/98 N/A N/A N/A N/A
Leveraged AllCap (4)............................ 2/17/98 N/A N/A N/A N/A
SCUDDER
Bond............................................ 1/2/94 1.31% N/A N/A 3.30%
Balanced........................................ 1/2/94 17.26% N/A N/A 12.17%
Growth and Income............................... N/A N/A N/A N/A N/A
Global Discovery................................ N/A N/A N/A N/A N/A
International................................... N/A N/A N/A N/A N/A
STRONG
Discovery II.................................... N/A N/A N/A N/A N/A
Opportunity II.................................. N/A N/A N/A N/A N/A
Growth II....................................... N/A N/A N/A N/A N/A
T. ROWE PRICE INTERNATIONAL
International Stock............................. N/A N/A N/A N/A N/A
T. ROWE PRICE
New America..................................... N/A N/A N/A N/A N/A
Mid-Cap Growth.................................. N/A N/A N/A N/A N/A
Equity Income................................... N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>

MFS
Growth with Income (4).......................... N/A N/A N/A N/A N/A
Research........................................ N/A N/A N/A N/A N/A
Emerging Growth................................. N/A N/A N/A N/A N/A
Total Return (4)................................ N/A N/A N/A N/A N/A
New Discovery (4)............................... N/A N/A N/A N/A N/A
</TABLE>

- ------------------------
(1) An investment in Fidelity Money Market is neither insured nor guaranteed by
the U.S. Government and there can be no assurance that Fidelity Money Market
will maintain a stable $1.00 share price. The Fidelity Money Market Fund does
not advertise total return.

(2) The Separate Account was established on approximately January 2, 1994.
Lincoln Benefit did not start offering the Contracts until on or about August
15, 1998, although it has offered other annuity contracts that are not offered
by the prospectus to which this Statement of Additional Information relates.
Accordingly, this table reflects hypothetical performance for the periods
covered, applying the contract charges under the Contract to the investment
performance of the underlying Portfolios. Standardized performance data for
periods after the inception of Contract sales will reflect the actual
performance of the Contracts.

(3) Total return includes changes in share price, reinvestment of dividends, and
capital gains. The performance figures: (1) represent past performance and
neither guarantee nor predict future investment results; (2) assume an initial
hypothetical investment of $1,000, as required by the SEC; and (3) reflect the
deduction of 1.25% annual asset charges, a $35 annual contract maintenance
charge, and a maximum 7% contingent deferred sales charge (declining after two
years). The investment return and value of a Contract will fluctuate so that a
Contract, when surrendered, may be worth more or less than the amount of the
Purchase Payments.
S-12
(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise, total
returns would have been lower.

N/A Certain recently established subaccounts do not yet have meaningful
standardized return data. In the future, as such data becomes available,
standardized total return will be calculated as described above.

NON-STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1997
ASSUMING CONTRACT NOT SURRENDERED
<TABLE>
<CAPTION>

AVERAGE ANNUAL TOTAL RETURN (3)
---------------------------------------------
PORTFOLIO MONTHLY TOTAL SINCE
INCEPTION RETURN RETURN 1 YEAR 5 YEAR 10 YEAR INCEPTION
DATE (2) (%) YTD (%) (%) (%) (%) (%)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUS
Flexible Income................... 9/13/93 1.23% 10.24% 10.24% N/A N/A 8.42%
Balanced (4)...................... 9/13/93 1.44% 20.44% 20.44% N/A N/A 13.42%
Growth (4)........................ 9/13/93 0.81% 21.08% 21.08% N/A N/A 15.43%
Aggressive Growth ................ 9/13/93 3.56% 11.14% 11.14% N/A N/A 14.46%
Worldwide Growth (4).............. 9/13/93 1.44% 20.49% 20.49% N/A N/A 17.84%
FEDERATED
Utility II (4).................... 2/11/94 5.26% 24.91% 24.91% N/A N/A 12.21%
U.S. Gov't II (4)................. 3/28/94 0.74% 7.10% 7.10% N/A N/A 4.92%
High Income Bond (4).............. 3/1/94 1.18% 12.29% 12.29% N/A N/A 9.86%
FIDELITY VIP
Money Market (1).................. 4/1/82 N/A N/A N/A N/A N/A N/A
Equity Income (4)................. 10/9/86 2.03% 26.37% 26.37% 18.52% 15.13% 13.07%
Growth (4)........................ 10/9/86 0.10% 21.80% 21.80% 16.41% 15.59% 14.06%
Overseas (4)...................... 1/28/87 0.72% 10.04% 10.04% 12.57% 7.22% 8.01%
FIDELITY VIP II
Asset Manager (4)................. 9/6/89 1.40% 19.01% 19.01% 11.45% N/A 11.38%
Contrafund (4).................... 1/3/95 1.72% 22.46% 22.46% N/A N/A 26.50%
Index 500......................... 8/27/92 1.57% 31.02% 31.02% 18.29% N/A 18.26%
ALGER AMERICAN
Income and Growth................. 11/15/88 2.11% 34.44% 34.44% 15.81% N/A 12.26%
Small Capitalization.............. 9/21/88 0.60% 9.88% 9.88% 11.12% N/A 17.44%
Growth............................ 1/9/89 (0.49)% 24.04% 24.04% 17.66% N/A 17.17%
MidCap............................ 5/3/93 (2.65)% 13.44% 13.44% N/A N/A 19.35%
Leveraged AllCap (4).............. 1/25/95 (1.85)% 18.06% 18.06% N/A N/A 33.01%
SCUDDER
Bond.............................. 7/16/85 0.76% 7.62% 7.62% 5.79% 7.08% 6.73%
Balanced.......................... 7/16/85 1.49% 22.52% 22.52% 11.59% 11.37% 10.42%
Growth and Income................. 5/2/94 1.12% 28.70% 28.70% N/A N/A 21.06%
Global Discovery.................. 5/1/96 2.64% 10.86% 10.86% N/A N/A 7.75%
International..................... 5/1/87 0.81% 7.59% 7.59% 12.16% 10.28% 9.04%
STRONG
Discovery II...................... 5/8/92 (3.41)% 9.88% 9.88% 10.37% N/A 9.64%
Opportunity II.................... 5/8/92 1.39% 23.75% 23.75% 17.70% N/A 18.10%
Growth II......................... 12/31/96 2.20% 27.98% 27.98% N/A N/A 28.01%
T.ROWE PRICE INTERNATIONAL
International Stock............... 3/31/94 0.43% 1.69% 1.69% N/A N/A 6.61%
T. ROWE PRICE
New America....................... 3/31/94 2.67% 19.47% 19.47% N/A N/A 21.99%
Mid-Cap Growth.................... 12/31/96 4.27% 17.19% 17.19% N/A N/A 17.20%
Equity Income..................... 3/31/94 2.86% 27.10% 27.10% N/A N/A 22.04%
MFS
Growth with Income (4)............ 10/9/95 1.61% 28.02% 28.02% N/A N/A 28.74%
Research.......................... 7/26/95 0.07% 18.63% 18.63% N/A N/A 20.57%
Emerging Growth................... 7/24/95 (1.10)% 20.25% 20.25% N/A N/A 21.84%
Total Return (4).................. 1/3/95 1.53% 19.65% 19.65% N/A N/A 20.36%
New Discovery (4)................. 5/1/98 N/A N/A N/A N/A N/A N/A
</TABLE>

Statement of Additional Information relates. Accordingly, this table reflects
hypothetical performance for the periods covered, applying the contract
charges under the Contract to the investment performance of the underlying
Portfolios since their inception. Nonstandardized performance data for periods
after the inception of Contract sales will reflect the actual performance of the
Contracts.

(3) Total return includes changes in share price, reinvestment of dividends, and
capital gains. The performance figures: (1) represent past performance and
neither guarantee nor predict future investment results; (2) assume an initial
hypothetical investment of $30,000, since this is closer to the average Purchase
Payment of a contract expected to be written, rather than the $1,000 required by
the SEC for the standardized returns shown in the table on pages S-11-12; and
(3) reflect the deduction of 1.25% annual asset charges and a $35 annual
contract maintenance charge, but do not reflect the applicable contingent
deferred sales charge. The impact of the contract maintenance charge on
investment returns will vary depending on the size of the Contract. The
investment return and value of a Contract will fluctuate so that a Contract,
when surrendered, may be worth more or less than the amount of the Purchase
Payments.

(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise, total
returns would have been lower.

N/A Certain Portfolios do not have meaningful performance for the periods
indicated. In the future, as such data becomes available, total return will be
calculated as described above.

NON-STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1997
ASSUMING CONTRACT NOT SURRENDERED
<TABLE>
<CAPTION>

CUMULATIVE
TOTAL
RETURN
PORTFOLIO SINCE CALENDAR YEAR RETURN (3)
INCEPTION INCEPTION ------------------------------------
DATE (2) (%) (3) 1995 (%) 1996 (%) 1997 (%)
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
JANUS
Flexible Income....................... 9/13/93 41.55% 22.18% 7.71% 10.24%
Balanced (4).......................... 9/13/93 71.85% 23.10% 14.61% 20.44%
Growth (4)............................ 9/13/93 85.27% 28.38% 16.85% 21.08%
Aggressive Growth (4)................. 9/13/93 78.70% 25.75% 6.49% 11.14%
Worldwide Growth (4).................. 9/13/93 102.49% 25.64% 27.29% 20.49%
FEDERATED
Utility II (4)........................ 2/11/94 56.45% 22.47% 10.05% 24.91%
U.S. Gov't II (4)..................... 3/28/94 19.82% 7.28% 2.79% 7.10%
High Income Bond (4).................. 3/1/94 43.44% 18.72% 12.76% 12.29%
FIDELITY VIP
Money Market (1)...................... 4/1/82 N/A N/A N/A N/A
Equity Income (4)..................... 10/9/86 296.98% 33.23% 12.73% 26.37%
Growth (4)............................ 10/9/86 337.83% 33.53% 13.15% 21.80%
Overseas (4).......................... 1/28/87 131.95% 8.19% 11.68% 10.04%
FIDELITY VIP II
Asset Manager (4)..................... 9/6/89 145.08% 15.36% 13.05% 19.01%
Contrafund (4)........................ 1/3/95 102.09% N/A 19.66% 22.46%
Index 500............................. 8/27/92 145.05% 35.33% 21.05% 37.02%
ALGER AMERICAN
Income and Growth..................... 11/15/88 187.31% 33.30% 18.05% 34.44%
Small Capitalization.................. 9/4/88 344.18% 42.35% 2.77% 9.88%
Growth................................ 1/9/89 314.67% 34.52% 11.81% 24.04%
MidCap................................ 5/3/93 128.13% 42.49% 10.38% 13.44%
Leveraged AllCap (4).................. 1/25/95 130.80% N/A 10.52% 18.06%
SCUDDER
Bond.................................. 7/16/85 125.13% 16.57% 1.42% 7.62%
Balanced.............................. 7/16/85 243.92% 24.95% 10.37% 22.52%
Growth and Income..................... 5/2/94 101.52% 29.95% 20.51% 28.70%
Global Discovery...................... 5/1/96 13.25% N/A N/A 10.86%
International......................... 5/1/87 151.76% 9.61% 13.23% 7.59%
STRONG
Discovery II.......................... 5/8/92 68.17% 33.42% (0.56)% 9.88%
Opportunity II........................ 5/8/92 155.94% 24.11% 16.55% 23.75%
S-14
Growth II............................. 12/31/96 27.98% N/A N/A 27.98%
T. ROWE PRICE INTERNATIONAL
International Stock................... 3/31/94 27.14% 9.67% 13.14% 1.69%
T. ROWE PRICE
New America........................... 3/31/94 110.86% 49.03% 18.46% 19.47%
Mid-Cap Growth........................ 12/31/96 17.19% N/A N/A 17.19%
Equity Income......................... 3/31/94 111.17% 32.93% 17.85% 27.10%
MFS
Growth with Income (4)................ 10/9/95 75.60% N/A 22.77% 28.02%
Research.............................. 7/26/95 57.68% N/A 20.67% 18.63%
Emerging Growth....................... 7/24/95 61.90% N/A 15.40% 20.25%
Total Return (4)...................... 1/3/95 74.11% N/A 12.82% 19.65%
New Discovery (4)..................... 5/1/98 N/A N/A N/A N/A
</TABLE>

(2) The Separate Account was established on approximately January 2, 1994.
Lincoln Benefit did not start offering the Contracts until on or about August
15, 1998, although it has offered other annuity contracts that are not offered
by the prospectus to which this Statement of Additional Information relates.
Accordingly, this table reflects hypothetical performance for the periods
covered, applying the contract charges under the Contract to the investment
performance of the underlying Portfolios since their inception. Nonstandardized
performance data for periods after the inception of Contract sales will reflect
the actual performance of the Contracts.

(3) Total return includes changes in share price, reinvestment of dividends, and
capital gains. The performance figures: (1) represent past performance and
neither guarantee nor predict future investment results; (2) assume an initial
hypothetical investment of $30,000, since this is closer to the average Purchase
Payment of a contract expected to be written, rather than the $1,000 required by
the SEC for the standardized returns shown in the table on pages S-10 and S-11;
and (3) reflect the deduction of 1.25% annual asset charges and a $35 annual
contract maintenance charge, but do not reflect the applicable contingent
deferred sales charge. The impact of the contract maintenance charge on
investment returns will vary depending on the size of the Contract. The
investment return and value of a Contract will fluctuate so that a Contract,
when surrendered, may be worth more or less than the amount of the Purchase
Payments.

(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise, total
returns would have been lower.

N/A Certain Portfolios do not have meaningful performance for the periods
indicated. In the future, as such data becomes available, total return will be
calculated as described above.

EXPERTS

The financial statements of Lincoln Benefit Life Variable Annuity Account as of
December 31, 1998, and for each of the two years ended December 31, 1998,
included in this statement of additional information have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

FINANCIAL STATEMENTS*

This Statement of Additional Information contains financial statements for the
Separate
S-15
Account which reflect assets attributable to other variable annuity contracts
offered by Lincoln Benefit through the Separate Account. In addition, the
financial statements for the Separate Account reflect Subaccounts that are not
available under the Contract.

*To be filed by Post-Effective Amendment

S-16

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

The following financial statements are included in Part A of the Registration
Statement:

To be filed by Post-Effective Amendment.

The following financial statements are included in Part B of the Registration
Statement:

To be filed by Post-Effective Amendment.

The following financial statements are included in Part C of the Registration
Statement:

None

(b) Exhibits

(1) Resolution of the Board of Directors of Lincoln Benefit Life Company
authorizing the establishment of the Lincoln Benefit Life
Variable Annuity Account**

(2) Custody Agreements (not applicable)

(3) (a) Form of Principal Underwriting Agreement(filed herewith)

(b) Form of Selling Agreement*

(4) Variable Annuity Contract**

(5) Application for Contract**

(6) Depositor--Corporate Documents

(a) Articles of Incorporation of Lincoln Benefit Life Company, as amended*

(b) By-Laws of Lincoln Benefit Life Company*

(7) Reinsurance Contract**

(8) Participation Agreements:

(a) Fund Participation Agreement between Janus Aspen Series and Lincoln
Benefit Life Company*

(b) Participation Agreement among Lincoln Benefit Life Company, Variable
Insurance Products Fund and Fidelity Distributors Corporation*

(c) Participation Agreement among Lincoln Benefit Life Company, Variable
Insurance Products Fund II and Fidelity Distributors Corporation*

(d) (1) Participation Agreement among The Alger American Fund, Lincoln
Benefit Life Company and Fred Alger and Company, Incorporated*
C-1
(2) Service Agreement between Fred Alger Management, Inc. And Lincoln
Benefit Life Company*

(e)(1) Participation Agreement between Scudder Variable Life Investment
Fund and Lincoln Benefit Life Company*

(2) Reimbursement Agreement by and between Scudder, Stevens & Clark,
Inc. And Lincoln Benefit Life Company*

(3) Participating Contract and Policy Agreement between Scudder
Investor Services, Inc. and Lincoln Benefit Financial Services*

(f) Form of Participation Agreement among Lincoln Benefit Life Company,
Strong Variable Insurance Funds, Inc., Strong Opportunity Fund II,
Inc., Strong Capital Management, Inc., and Strong Funds Distributors,
Inc.*

(g) Form of Participation Agreement among T. Rowe Price Equity Series,
Inc., T. Rowe Price International Series, Inc., T. Rowe Price Investment
Services, Inc., and Lincoln Benefit Life Company*

(h) Form of Participation Agreement among MFS Variable Insurance Trust,
Lincoln Benefit Life Company, and Massachusetts Financial Services
Company*

(i) Fund Participation Agreement between Lincoln Benefit Life Company,
Insurance Management Series and Federated Securities Corp.*

(9) Opinion and Consent of Counsel***

(10) (a) Consent of Independent Auditors-to be filed by Post-Effective
Amendment.

(b) Consent of Attorneys (filed herewith)

(11) Financial Statements Omitted from Item 23 (not applicable)

(12) Initial Capitalization Agreement (not applicable)

(13) Performance Computations***

(27) Financial Data Schedules (not applicable)
- ------------------------
* Registration Statement on Form S-6 for Lincoln Benefit Life Variable Life
Account, File No. 333-47717, filed March 11, 1998
** Registration Statement on Form N-4 for Lincoln Benefit Life Variable Annuity
Account, File No. 333-50545, 811-7924, filed April 21, 1998.
*** Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Life Account, File No.333-50545 filed July 24,
1998.

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

The directors and principal officers of Lincoln Benefit Life Company are
listed below. Their principal business address is 206 South 13th Street,
Lincoln, Nebraska 68508.

NAME POSITION/OFFICE WITH DEPOSITOR
- -------------------------- --------------------------------------------
Louis G. Lower, II Chairman of the Board of Directors and Chief
Executive Officer
Peter H. Heckman Vice Chairman of the Board of Directors
C-2
B. Eugene Wraith Director, President and Chief Operating
Officer
Douglas F. Gaer Director, Executive Vice President
Janet P. Anderbery Vice President and Controller
John H. Coleman III Director, Senior Vice President
Marvin P. Ehly Director, Senior Vice President and
Treasurer
John J. Morris Director, Senior Vice President and
Secretary
Robert E. Rich Director, Executive Vice President and
Assistant Secretary
Kevin R. Slawin Director
Michael J. Velotta Director and Assistant Secretary
Carol S. Watson Director, Senior Vice President, General
Counsel, and Assistant Secretary
Dean M. Way Director, Senior Vice President
Patricia W. Wilson Director
Tom Wilson Director
Thomas J. Berney Senior Vice President
Kenny L. Gettman Vice President
Rodger A. Hergenrader Vice President
Thomas S. Holt Vice President
Sharyn L. Jensen Vice President
Gregory C. Sernett Vice President
Stanley G. Shelley Vice President
Randy E. Tillis Vice President

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT

See Annual Report on Form 10-K of The Allstate Corporation, File No. 1-11840,
filed March 27, 1998.

ITEM 27. NUMBER OF CONTRACT OWNERS

As of December 31, 1998, the Registrant has 161 qualified contract owners and
168 non-qualified contract owners.

ITEM 28. INDEMNIFICATION

The Articles of Incorporation of Lincoln Benefit Life Company (Depositor)
provide for the indemnification of its directors and officers against expenses,
judgments, fines and amounts paid in settlement as incurred by such person, so
long as such person shall not have been adjudged to be liable for negligence or
misconduct in the performance of a duty to the Company. This right of indemnity
is not exclusive of other rights to which a director or officer may otherwise be
entitled.

The By-Laws of Lincoln Benefit Financial Services, Inc. (Distributor) provide
that the corporation will indemnify a director, officer, employee or agent of
the corporation to the full extent of Delaware law. In general, Delaware law
provides that a corporation may indemnify a director, officer, employee or agent
against expenses, judgments, fines and amounts paid in settlement if that
individual acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. No indemnification shall be made for expenses,
including attorney's fees, if the person shall have been judged to be liable to
the corporation unless a court determines such person is entitled to such
indemnity. Expenses incurred by such individual in defending any action or
proceeding may be advanced by the corporation so long as the individual agrees
to repay the corporation if it is later determined that he or she is not
entitled to such indemnification.

Under the terms of the form of Underwriting Agreement, the Depositor agrees to
indemnify
C-3
the Distributor for any liability that the latter may incur to a Contract owner
or party-in-interest under a Contract, (a) arising out of any act or omission in
the course of or in connection with rendering services under such Agreement, or
(b) arising out of the purchase, retention or surrender of a Contract; provided,
that the Depositor will not indemnify the Distributor for any such liability
that results from the latter's willful misfeasance, bad faith or gross
negligence, or from the reckless disregard by the latter of its duties and
obligations under the Underwriting Agreement.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the forgoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 29. PRINCIPAL UNDERWRITER

(a) Allstate Life Financial Services ("ALFS") serves as distributor for the
Registrant. LBFS also serves as distributor for the Lincoln Benefit Life
Variable Life Account, which is another separate account of Lincoln Benefit. The
following are the directors and officers of Allstate Life Financial Services,
Inc. Their principal business address is 206 South 13th Street, Lincoln,
Nebraska 68508.

NAME AND PRINCIPAL BUSINESS
ADDRESS OF EACH SUCH PERSON ALLSTATE LIFE FINANCIAL SERVICES
- --------------------------- --------------------------------------------
Louis G. Lower, II Director
Kevin R. Slawin Director
Michael J. Velotta Director and Secretary
John Hunter President and Chief Executive Officer
Diane Bellas Vice President and Controller
Brent H. Hamann Vice President
Karen Gardner Vice President
Andrea J. Schur Vice President
James P. Zils Treasurer
Terry Young General Counsel and Assistant Secretary
Lisa A. Burnell Assistant Vice President and Compliance
Officer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Brenda D. Sneed Assistant Secretary
Nancy M. Bufalino Assistant Treasurer

(b) The following commissions and other compensation were received by each
principal underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
<TABLE>
<CAPTION>
(2)
(1) NET UNDERWRITING (3) (4)
NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION BROKERAGE (5)
UNDERWRITER COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Lincoln Benefit Financial Services, Inc. 0 0 0 0
Allstate Life Financial Services, Inc. 0 0 0 0
</TABLE>
C-4
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The Depositor, Lincoln Benefit Life Company, is located at 206 South 13th
Street, Lincoln, Nebraska 68508.

The Principal Underwriter, Allstate Life Financial Services, Inc., is located at
3100 Sanders Road, Northbrook, Illinois 60062.

Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.

ITEM 31. MANAGEMENT SERVICES
None.

ITEM 32. UNDERTAKINGS

Registrant undertakes (1) to file post-effective amendments to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted; (2) to
include either (A) as part of any application to purchase a Contract offered by
the prospectus forming part of this Registration Statement, a space that an
applicant can check to request a Statement of Additional Information, or (B) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information, and (3) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form N-4 promptly
upon written or oral request.

REPRESENTATIONS

The Company hereby represents that it is relying upon a No Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:

1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;

2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;

3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;

4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (a) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.

SECTION 26(e) REPRESENTATIONS

The Company further represents that fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Company.
C-5

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Post-Effective Amendment to be signed
on its behalf, in the City of Lincoln, and the State of Nebraska, on this 22nd
day of January, 1999.

LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
(Registrant)

By: LINCOLN BENEFIT LIFE COMPANY
------------------------------------------
(DEPOSITOR)

By: /s/ B. EUGENE WRAITH
------------------------------------------
B. Eugene Wraith
PRESIDENT AND CHIEF OPERATING OFFICER

As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities and on the dates
indicated:

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ B. EUGENE WRAITH
- ------------------------------ President, Chief Operating
B. Eugene Wraith Officer and Director January 22, 1999
(PRINCIPAL EXECUTIVE OFFICER)

/s/ ROBERT E. RICH
- ------------------------------ Executive Vice President January 22, 1999
Robert E. Rich and Director

/s/ MARVIN P. EHLY
- ------------------------------ Senior Vice President
MARVIN P. EHLY Treasurer and Director January 22, 1999
(PRINCIPAL FINANCIAL OFFICER)

/s/ JANET P. ANDERBERY
- ------------------------------ Vice President and
Janet P. Anderbery Controller January 22, 1999
(PRINCIPAL ACCOUNTING OFFICER)

- ------------------------------ Vice Chairman of the Board January 22, 1999
Peter H. Heckman of Directors

Chairman of the Board of
- ------------------------------ Directors and Chief January 22, 1999
Louis G. Lower, II Executive Officer

/s/ JOHN H. COLEMAN III
- ------------------------------ Director January 22, 1999
John H. Coleman III

/s/ JOHN J. MORRIS
- ------------------------------ Director January 22, 1999
John J. Morris

/s/ DOUGLAS F. GAER
- ------------------------------ Director January 22, 1999
Douglas F. Gaer

- ------------------------------ Director January 22, 1999
Kevin Slawin

- ------------------------------ Director January 22, 1999
Michael J. Velotta

/s/ CAROL S. WATSON
- ------------------------------ Director January 22, 1999
Carol S. Watson

/s/ DEAN M. WAY
- ------------------------------ Director January 22, 1999
Dean M. Way

- ------------------------------ Director January 22, 1999
Patricia W. Wilson

- ------------------------------
Thomas J. Wilson, II Director January 22, 1999

INDEX TO EXHIBITS
FOR
REGISTRATION STATEMENT ON FORM N-4
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT

EXHIBIT NO. SEQUENTIAL PAGE NO.
- ----------- -----------------------------------------
3(a) Underwriting Agreement
10(b) Consent of Attorneys

<PAGE>

EXHIBIT 3(a)
PRINCIPAL UNDERWRITING AGREEMENT

THIS AGREEMENT, is entered into on this 25th day of November, 1998, by
and among LINCOLN BENEFIT LIFE COMPANY, ("LBL" or "Company") a life insurance
company organized under the laws of the State of Nebraska, on its own and on
behalf of the VARIABLE ANNUITY ACCOUNT (A) ("Separate Account"), a separate
account established pursuant to the insurance laws of the State of Nebraska, and
ALLSTATE LIFE FINANCIAL SERVICES, INC., ("Principal Underwriter"), a corporation
organized under the laws of the state of Delaware.

WITNESSETH:

WHEREAS, Company proposes to issue to the public certain flexible
premium deferred variable annuity contracts identified in the Attachment A
("Contracts"); and

WHEREAS, Company, by resolution adopted on August 3, 1992, established
the Separate Account for the purpose of issuing the Contracts; and

WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940, as amended, ("Investment Company Act") (File No.
811-7924); and

WHEREAS, the Contracts to be issued by Company are registered with the
Commission under the Securities Act of 1933, as amended, ("Securities Act")
(File No. 33-66786, 333-50545, 333-59765, 333-50736, 333-59765) for offer and
sale to the public and otherwise are in compliance with all applicable laws; and

WHEREAS, Principal Underwriter, a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, ("Exchange Act") and a member of
the National Association of Securities Dealers, Inc. ("NASD"), proposes to act
as principal underwriter on an agency (best efforts) basis in the marketing and
distribution of said Contracts; and

WHEREAS, Company desires to obtain the services of Principal
Underwriter as an underwriter and distributor of said Contracts issued by
Company through the Separate Account;

NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, the Company, the Separate Account, and the Principal Underwriter
hereby agree as follows:

1. AUTHORITY AND DUTIES

(a) Principal Underwriter will serve as an underwriter and distributor
on an agency basis for the Contracts which will be issued by the Company through
the Separate Account.

(b) Principal Underwriter will use its best efforts to provide
information and marketing assistance to licensed insurance agents and
broker-dealers on a continuing basis. However, Principal Underwriter shall be
responsible for compliance with the requirements of state broker-dealer
regulations and the Exchange Act as each applies to Principal Underwriter in
connection with its duties as distributor of said Contracts. Moreover, Principal
Underwriter shall conduct its affairs in accordance and compliance with the NASD
Conduct Rules.

(c) Subject to agreement with the Company, Principal Underwriter may
enter into selling agreements with broker-dealers which are registered under the
Exchange Act and/or authorized by applicable law or exemptions to sell variable
annuity contracts issued by Company through the Separate Account. Any such
contractual arrangement is expressly made subject to this Agreement, and
Principal Underwriter will at all times be responsible to Company for
supervision of compliance with the federal securities laws regarding
distribution of Contracts.

2. WARRANTIES

(a) The Company represents and warrants to Principal Underwriter that:

(i) Registration Statements on Form N-4 and S-1 of the
Contracts identified in Attachment A have been filed with the Commission in the
form previously delivered to Principal Underwriter and that copies of any and
all amendments thereto will be forwarded to Principal Underwriter at the time
that they are filed with Commission;

(ii) The Registration Statement and any further amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act and the Investment Company
Act, and the rules and regulations of the Commission under such Acts, and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that this representation and warranty shall
not apply to any statement or omission made in reliance upon and in conformity
with information furnished in writing to Company by Principal Underwriter
expressly for use therein;

(iii) The Company is validly existing as a stock life
insurance company in good standing under the laws of the State of Nebraska, with
power to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business;

(iv) The Contracts to be issued by the Company through the
Separate Account and offered for sale by Principal Underwriter on behalf of the
Company hereunder have been duly and validly authorized and, when issued and
delivered with payment therefore as provided herein, will be duly and validly
issued and will conform to the description of such Contracts contained in the
Prospectuses relating thereto;

(v) Those persons who offer and sell the Contracts are to be
appropriately licensed and/or appointed to comply with the state insurance laws;

(vi) The performance of this Agreement and the consummation of
the transactions contemplated by this Agreement will not result in a violation
of any of the provisions of or default under any statute, indenture, mortgage,
deed of trust, note agreement or other agreement or instrument to which Company
is a party or by which Company is bound (including Company's Charter or By-laws
as a stock life insurance company, or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over Company or any of its
properties);

(vii) There is no consent, approval, authorization or order of
any court or governmental agency or body required for the consummation by
Company of the transactions contemplated by this Agreement, except such as may
be required under the Exchange Act or state insurance or securities laws in
connection with the distribution of the Contracts; and

(viii) There are no material legal or governmental proceedings
pending to which Company or the Separate Account is a party or of which any
property of Company or the Separate Account is the subject (other than as set
forth in the Prospectus relating to the Contracts, or litigation incidental to
the kind of business conducted by the Company) which, if determined adversely to
Company, would individually or in the aggregate have a material adverse effect
on the financial position, surplus or operations of Company.

(b) Principal Underwriter represents and warrants to Company that:

(i) It is a broker-dealer duly registered with the Commission
pursuant to the Exchange Act, is a member in good standing of the NASD, and is
in compliance with the securities laws in those states in which it conducts
business as a broker-dealer;

(ii) As a principal underwriter, it shall permit the offer and
sale of Contracts to the public only by and through persons who are
appropriately licensed under the securities laws and who are appointed in
writing by the Company to be authorized insurance agents, unless such persons
are exempt from licensing and appointment requirements;

(iii) The performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or violation
of any of the terms or provisions of or constitute a default under any statute,
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which Principal Underwriter is a party or by which Principal
Underwriter is bound (including the Certificate of Incorporation or By-laws of
Principal Underwriter or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over either Principal
Underwriter or its property); and

(iv) To the extent that any statements made in the
Registration Statement, or any amendments or supplements thereto, are made in
reliance upon and in conformity with written information furnished to Company by
Principal Underwriter expressly for use therein, such statements will, when they
become effective or are filed with the Commission, as the case may be, conform
in all material respects to the requirements of the Securities Act and the rules
and regulations of the Commission thereunder, and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

3. BOOKS AND RECORDS

(a) Principal Underwriter shall keep, in a manner and form approved by
Company and in accordance with Rules 17a-3 and 17a-4 under the Exchange Act,
correct records and books of account as required to be maintained by a
registered broker-dealer, acting as principal underwriter, of all transactions
entered into on behalf of Company with respect to its activities under this
Agreement. Principal Underwriter shall make such records and books of account
available for inspection by the Commission, the NASD, and all other regulatory
bodies having jurisdiction, and Company shall have the right to inspect, make
copies of or take possession of such records and books of account at any time
upon demand.

(b) Subject to applicable Commission or NASD restrictions, Company will
send confirmations of Contract transactions to Contract Owners. Company will
make such confirmations and records of transactions available to Principal
Underwriter upon request. Company will also maintain Contract Owner records on
behalf of Principal Underwriter to the extent permitted by applicable securities
laws.

4. SALES MATERIALS

(a) After authorization to commence the activities contemplated herein,
Principal Underwriter will utilize the currently effective prospectus relating
to the subject Contracts in connection with its underwriting, marketing and
distribution efforts. As to other types of sales material, Principal Underwriter
hereby agrees and will require any participating or selling broker-dealers to
agree that they will use only sales materials which have been authorized for use
by Company, which conform to the requirements of federal and state securities
laws and regulations and state insurance laws and regulations, and which have
been filed where necessary with the appropriate regulatory authorities,
including the NASD.

(b) Principal Underwriter will not distribute any prospectus, sales
literature or any other printed matter or material in the underwriting and
distribution of any Contract if, to the knowledge of Principal Underwriter, any
of the foregoing misstates the duties, obligation or liabilities of Company or
Principal Underwriter.

5. COMPENSATION

(a) Company agrees to pay Principal Underwriter for direct expenses
incurred on behalf of Company. Such direct expenses shall include, but not be
limited to, the costs of goods and services purchased from outside vendors,
travel expenses and state and federal regulatory fees incurred on behalf of
Company.

(b) Principal Underwriter shall present to Company a statement after
the end of the quarter showing the apportionment of services rendered and the
direct expenses incurred. Settlements are due and payable within thirty days.

6. PURCHASE PAYMENTS

Principal Underwriter shall arrange that all purchase payments collected on the
sale of the Contracts are promptly and properly transmitted to Company for
immediate allocation to the Separate Account in accordance with the Investment
Company Act and rules and regulations thereunder, the procedures of Company and
the directions furnished by the purchasers of such Contracts at the time of
purchase.

7. UNDERWRITING TERMS

(a) Principal Underwriter makes no representations or warranties
regarding the number of Contracts to be sold by licensed broker-dealers and
registered representatives of broker-dealers or the amount to be paid
thereunder. Principal Underwriter does, however, represent that it will actively
engage in its duties under this Agreement on a continuous basis while there is
an effective registration statement with the Commission.

(b) Principal Underwriter will use its best efforts to ensure that the
Contracts shall be offered for sale by registered broker-dealers and registered
representatives (who also are duly licensed as insurance agents) on the terms
described in the currently effective prospectus describing such Contracts.

(c) It is understood and agreed that Principal Underwriter may render
similar services to other companies in the distribution of other variable
contracts.

(d) The Company will use its best efforts to assure that the Contracts
are continuously registered under the Securities Act (and under any applicable
state "blue sky" laws) and to file for approval under state insurance laws when
necessary.

(e) The Company reserves the right at any time to suspend or limit the
public offering of the subject Contracts upon one day's written notice to
Principal Underwriter.

8. LEGAL AND REGULATORY ACTIONS

(a) The Company agrees to advise Principal Underwriter immediately of:

(i) any request by the Commission for amendment of the
Registration Statement or for additional information relating to the Contracts;

(ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that purpose; and

(iii) the happening of any known material event which makes
untrue any statement made in the Registration Statement relating to the
Contracts or which requires the making of a change therein in order to make any
statement made therein not misleading.

(b) Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding, investigation
or hearing involving the offer or sale of the subject Contracts.

(c) During any legal action or inquiry, Company will furnish to
Principal Underwriter such information with respect to the Separate Account and
Contracts in such form and signed by such of its officers as Principal
Underwriter may reasonably request and will warrant that the statements therein
contained when so signed are true and correct.

9. TERMINATION

(a) This Agreement will terminate automatically upon its assignment.

(b) This Agreement shall terminate without the payment of any penalty
by either party upon sixty (60) days' advance written notice.

(c) This Agreement shall terminate at the option of the Company upon
institution of formal proceedings against Principal Underwriter by the NASD or
by the Commission, or if Principal Underwriter or any representative thereof at
any time:

(i) employs any device, scheme, artifice, statement or
omission to defraud any person;

(ii) fails to account and pay over promptly to the Company
money due it according to the Company's records; or

(iii)violates the conditions of this Agreement.

10. INDEMNIFICATION

The Company agrees to indemnify Principal Underwriter for any liability that it
may incur to a Contract owner or party-in-interest under a Contract:

(a) arising out of any act or omission in the course of or in
connection with rendering services under this Agreement; or

(b) arising out of the purchase, retention or surrender of a contract;
provided, however, that the Company will not indemnify Principal Underwriter for
any such liability that results from the willful misfeasance, bad faith or gross
negligence of Principal Underwriter or from the reckless disregard by such
Principal Underwriter of its duties and obligations arising under this
Agreement.

11. GENERAL PROVISIONS

(a) This Agreement shall be subject to the laws of the State of
Nebraska.

(b) This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties.

(c) In case any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in way be affected or impaired thereby.

IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed, to be effective as of November 25, 1998.

LINCOLN BENEFIT LIFE COMPANY
(and LINCOLN BENEFIT LIFE COMPANY VARIABLE ANNUITY ACCOUNT)

BY: ______________________________
President & Chief Operating Officer

ALLSTATE LIFE FINANCIAL SERVICES, INC.

BY: ______________________________
President

<PAGE>

UNDERWRITING AGREEMENT

Attachment A

"Contracts" Form #

Investor's Select VAP 9330
Consultant I VAP 9830
Consultant II VAP 9840

- --------

Exhibit 10(b)

[Jorden Burt]
[1025 Thomas Jefferson Street, N.W.]
[Suite 400 East]
[Washington, D.C. 20007-0805]
[(202)-965-8100]
[Telecopier: (202) 965-8104]
[HTTP://WWW.JORDENUSA.COM]

Joan E. Boros 202-965-8150

January 28, 1999

Lincoln Benefit Life Company
Lincoln Benefit Life Variable Annuity Account
Lincoln Benefit Life Centre
Lincoln, Nebraska 68501-0469

Ladies and Gentlemen:

We hereby consent to the reference to our name under the caption "Legal
Matters" in this Post-Effective Amendment No. 1 to Registration Statement No.
333-50545 (811-7924) of Lincoln Benefit Life Variable Annuity Account on Form
N-4. In giving this consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.

Very truly yours,

Jorden Burt Boros Cicchetti Berenson
& Johnson LLP

By:__/s/Joan E. Boros______________
Joan E. Boros