FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
issued by
LINCOLN BENEFIT LIFE COMPANY
in connection with
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
Street Address: 2940 South 84th St., Lincoln, NE 68506
Mailing Address: P. O. Box 82532, Lincoln, NE 68501-2532
Telephone Number: 1-800-525-9287
The Contract is a deferred annuity 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 twenty-five 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
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
IAI Retirement Funds, Inc.:
IAI Regional Portfolio
IAI Balanced Portfolio
IAI Reserve Portfolio
Federated Insurance Management Series:
Federated Utility Fund II
Federated Fund for U.S. Government Securities II
Federated High Income Bond Fund II
Scudder Variable Life Investment Fund:
Bond Portfolio
Balanced Portfolio
Alger American Fund:
Small Capitalization Portfolio
MidCap Portfolio
Growth Portfolio
Leveraged AllCap Portfolio
Income and Growth Portfolio
Some of the Portfolios described in this Prospectus may not be available in your
Contract. We may make available other investment options in the future.
You may not purchase a Contract if either you or the Annuitant are 86 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.
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 context specifies otherwise.
This prospectus sets forth the information you ought to know about the variable
portion of 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, 2000. The information in the Statement of Additional Information is
incorporated by reference in this prospectus. You can obtain a free copy by
writing us or calling us at the telephone number given above. The Table of
Contents of the Statement of Additional Information appears on page 29 of this
prospectus. 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.
The date of this prospectus is May 1, 2000.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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1
<PAGE>
TABLE OF CONTENTS
Definitions.........................................................3
Fee Tables..........................................................4
Examples............................................................6
Explanation of Fee Tables and Examples..............................7
Questions and Answers About Your Contract...........................8
Condensed Financial Information.....................................11
Description of the Contracts........................................11
Summary.........................................................11
Contract Owner..................................................11
Annuitant.......................................................11
Modification of the Contract....................................11
Assignment......................................................11
Free Look Period................................................11
Purchases and Contract Value........................................11
Minimum Purchase Payment........................................11
Automatic Payment Plan..........................................11
Allocation of Purchase Payments.................................12
Contract Value..................................................12
Separate Account Accumulation Unit Value........................12
Transfer During Accumulation Period.............................12
Transfers Authorized by Telephone...............................13
Automatic Dollar Cost Averaging Program.........................13
Portfolio Rebalancing...........................................13
The Investment and Fixed Account Options............................14
Separate Account Investments....................................14
The Portfolios.............................................14
Voting Rights..............................................16
Substitution of Securities.................................17
The Fixed Account...............................................17
Annuity Benefits....................................................17
Annuity Date....................................................17
Deferment of Payments...........................................17
Annuity Options.................................................18
Substantially Equal Periodic Payments...........................
Other Options...................................................18
Death Benefit During Annuity Period.............................19
Variable Annuity Payments.......................................19
Certain Employee Benefit Plans..................................19
Other Contract Benefits.............................................19
Death Benefit ..................................................19
Beneficiary ..................................................20
Contract Loans for 401(a), 401(k), and 403(b) Contracts.........20
Withdrawals (Redemptions).......................................21
Systematic Withdrawal Program...................................22
ERISA Plans.....................................................22
Minimum Contract Value..........................................22
Contract Charges....................................................22
Mortality and Expense Risk Charge...............................23
Administrative Charges..........................................23
Contract Administration Charge.............................23
Administrative Expense Charge..............................23
Transfer Fee...............................................23
Sales Charges...................................................23
Withdrawal Charge..........................................23
Free Withdrawal............................................24
Confinement Waiver Benefit.................................24
Waiver of Withdrawal Charge for
Certain Qualified Plan Withdrawals.......................25
Premium Taxes...................................................25
Deduction for Separate Account Income Taxes.....................25
Other Expenses..................................................25
Tax Matters.........................................................25
Taxation of Annuities in General................................25
Tax Qualified Contracts.........................................27
Income Tax Withholding..............................................27
Description of Lincoln Benefit Life Company and
the Separate Account .........................................27
Lincoln Benefit Life Company....................................27
Separate Account................................................28
State Regulation of Lincoln Benefit.............................28
Financial Statements............................................28
Administration......................................................28
Distribution of Contracts...........................................28
Legal Proceedings...................................................29
Legal Matters.......................................................29
Registration Statement..............................................29
Table of Contents of Statement of Additional Information............29
Appendix A -- Accumulation Unit Values ...... ......................30
Appendix B -- Portfolios and Performance Data.......................33
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
- --------------------------------------------------------------------------------
2
<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.
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 Life") - 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.
Issue Date - The date when the Contract becomes effective.
Latest Annuity Date - The latest date by which you must begin annuity payments
under the Contract.
Loan Account - An account established for amounts transferred from the
Subaccounts or the Fixed Account as security for outstanding Contract loans.
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.
Tax Code - The Internal Revenue Code of 1986, as amended.
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.
3
<PAGE>
Fee Tables
Contract Owner Transaction Expenses
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge - Withdrawal Charge
(as a percentage of Purchase Payments)
<S> <C> <C> <C>
Contribution Applicable Contribution Applicable
Year Charge Year Charge
---- ------ ---- ------
1-2 7% 6 3%
3 6% 7 2%
4 5% 8+ 0%
5 4%
</TABLE>
Annual Contract Administration Charge......................$25.00
Transfer Fee (Applies solely to the second and subsequent transfers within a
calendar month.
We are currently waiving the Transfer Fee).................$25.00
Separate Account Expenses (As a percentage of daily net asset value deducted
from each of the Subaccounts of the Separate Account)
Mortality Risk Charge 0.85%
Expense Risk Charge 0.40%
Administrative Expense Charge 0.15%
--------------
Total Separate Account Annual Expenses 1.40%
<TABLE>
<CAPTION>
PORTFOLIO COMPANY ANNUAL EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
MANAGEMENT FEE OTHER EXPENSES TOTAL
<S> <C> <C> <C>
JANUS ASPEN SERIES ------------------------------------------------------------
Flexible Income (1) 0.65% 0.07% 0.72%
Balanced(1) 0.65% 0.02% 0.67%
Growth (1 0.65% 0.02% 0.67%
Aggressive Growth (1) 0.65% 0.02% 0.67%
Worldwide Growth (1) 0.65% 0.05% 0.70%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Money Market 0.18% 0.09% 0.27%
Equity-Income (2a) 0.48% 0.08% 0.56%
Growth (2a) 0.58% 0.07% 0.65%
Overseas (2a) 0.73% 0.14% 0.87%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager (2a) 0.53% 0.09% 0.62%
Contrafund (2a) 0.58% 0.07% 0.65%
Index 500 (2b)(after expense reimbursement) 0.24% 0.04% 0.28%
FEDERATED INSURANCE MANAGEMENT SERIES
Utility II (3) (after fee waiver or expense reimbursement) 0.75% 0.19% 0.94%
U.S. Government Securities II (3) (after fee waiver or 0.60% 0.18% 0.78%
expense reimbursement)
High Income Bond II 0.60% 0.19% 0.79%
IAI Retirements Funds, Inc.
IAI Regional 0.65% 0.23% 0.88%
IAI Balanced (4) (net of expense reimbursements) 0.65% 0.32% 0.97%
IAI Reserve (4) (net of expense reimbursements) 0.45% 0.56% 1.01%
SCUDDER VARIABLE LIFE INVESTMENT FUND
Bond 0.475% 0.095% 0.57%
Balanced 0.475% 0.075% 0.55%
THE ALGER AMERICAN FUND
Income and Growth 0.625% 0.075% 0.70%
Small Capitalization 0.85% 0.05% 0.90%
Growth 0.75% 0.04% 0.79%
Midcap Growth 0.80% 0.05% 0.85%
Leveraged Allcap (5) 0.85% 0.08% 0.93%
</TABLE>
4
<PAGE>
- --------------------------
(1) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Growth,
Aggressive Growth, Worldwide Growth, and Balanced Portfolios. All expenses
are shown without the effect of expense offset arrangements.
(2) (a) A portion of the brokerage commissions the Portfolio paid was used
to reduce its expenses. Additionally, a portion of certain of these
fund's expenses was reduced as a result of credits earned on
uninvested cash balances through arrangements with or on behalf of the
Fund's custodian. Without these reductions, total operating expenses
for the following portfolios would have been: Equity Income -- 0.57%,
Growth -- 0.66%, Overseas -- 0.91%, Asset Manager -- 0.63%, and
Contrafund -- 0.67%.
(b) The Fund's Investment Adviser agreed to reimburse a portion of the
Index 500 Portfolio's expenses during the period. Without this
reimbursement, the total operating expenses for the Index 500 Portfolio
would have been 0.34%.
(3) 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: 0.75% and 1.19%, respectively, for the Utility Fund II; and
0.60% and 1.03%, respectively, for the U.S. Government Securities II, and
0.60% and 1.04% respectively for the High Income Bond Fund II.
(4) The expense figures shown are net of expenses reimbursements from Investment
Advisers, Inc. Without such reimbursements, Management Fees and Total
Portfolio Expenses for the Portfolios are estimated as follows: 0.65% and
0.99% for Balanced Portfolio, and 0.45% and 1.66% for Reserve Portfolio.
(5) Included in the Other Expenses of this Portfolio is 0.01% of interest
expense.
5
<PAGE>
<TABLE>
<CAPTION>
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.
Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
Janus Flexible Income $84 $126 $159 $255
Janus Balanced $84 $124 $156 $250
Janus Growth $84 $124 $156 $250
Janus Aggressive Growth $84 $124 $156 $250
Janus Worldwide Growth $84 $125 $158 $253
Fidelity VIP Money Market $80 $113 $136 $208
Fidelity VIP Equity-Income $83 $121 $151 $239
Fidelity VIP Growth $83 $124 $155 $248
Fidelity VIP Overseas $85 $130 $166 $271
Fidelity VIP II Contrafund $83 $124 $155 $248
Fidelity VIP II Asset Manager $83 $123 $154 $245
Fidelity VIP II Index 500 $80 $113 $136 $209
IAI Regional $86 $130 $167 $272
IAI Balanced $86 $133 $171 $281
IAI Reserve $87 $134 $173 $285
Federated Utility II $86 $132 $170 $278
Federated U.S. Government Securities II $85 $127 $162 $261
Federated High Income Bond II $85 $128 $162 $262
Scudder Bond $83 $121 $151 $240
Scudder Balanced $82 $121 $150 $237
Alger American Income and Growth $84 $125 $158 $253
Alger American Small Capitalization $86 $131 $168 $274
Alger American Growth $85 $128 $162 $262
Alger American Midcap Growth $85 $129 $165 $268
Alger American Leveraged AllCap $86 $132 $169 $277
</TABLE>
If you annuitize or if you do not surrender your contact 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>
Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
Janus Flexible Income $23 $69 $119 $255
Janus Balanced $22 $68 $116 $250
Janus Growth $22 $68 $116 $250
Janus Aggressive Growth $22 $68 $116 $250
Janus Worldwide Growth $22 $69 $118 $253
Fidelity VIP Money Market $18 $56 $96 $208
Fidelity VIP Equity-Income $21 $65 $111 $239
Fidelity VIP Growth $22 $67 $115 $248
Fidelity VIP Overseas $24 $74 $127 $271
Fidelity VIP II Contrafund $22 $67 $115 $248
Fidelity VIP II Asset Manager $22 $66 $114 $245
Fidelity VIP II Index 500 $18 $56 $96 $209
IAI Regional $24 $74 $127 $272
IAI Balanced $25 $77 $132 $281
IAI Reserve $25 $78 $134 $285
Federated Utility II $25 $76 $130 $278
Federated U.S. Government Securities II $23 $71 $122 $261
Federated High Income Bond II $23 $72 $122 $262
Scudder Bond $21 $65 $111 $240
Scudder Balanced $21 $64 $110 $237
6
<PAGE>
Sub-Account 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------- --------------------------------------------
Alger American Income and Growth $22 $69 $118 $253
Alger American Small Capitalization $24 $75 $128 $274
Alger American Growth $23 $72 $122 $262
Alger American Midcap Growth $24 $73 $125 $268
Alger American Leveraged AllCap $25 $76 $130 $277
</TABLE>
*We will waive the Withdrawal Charge if you select a settlement option that
provides for payments over at least 5 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 22 below; you should also
read the sections relating to management 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. The examples assume that the fee
waivers and expense reimbursements discussed above will continue for the periods
shown.
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 $25 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 Administration Charge in the Examples, we applied an
equivalent percentage charge, which we calculated by dividing the total amount
of Contract Administration 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.
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7
<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 ready 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 Answers to Questions. The Contract Value 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. 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.
In some states, you may allocate all or part of the value of your Contract to
what we call the "Fixed Account". We guarantee that we will credit interest on
amounts allocated the Fixed Account at an effective annual rate of at least 3%.
We may credit a higher rate of interest. The Fixed Account offers you an
opportunity to protect your principal and earn at least a guaranteed rate of
interest.
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) a life annuity;
(b) a life annuity with payments guaranteed for five to twenty years; (c) a
joint and full Survivorship annuity; and (d) fixed payments for a specified
period of five to twenty-five years.
Call us to inquire about other options.
You may change your annuity option at any time prior to 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 tenth day of
the month following the Annuitant's 90th birthday. If your Contract was issued
in connection with a qualified plan, different deadlines may apply. In addition,
we can refuse to permit you to select a date within two years of our issuing
your Contract, unless the law requires us to permit it.
If you select annuity payments on a variable basis, the amount of our payments
to you will be affected by the investment performance of the Subaccounts you
have selected. The fixed portion of your annuity payments, on the other hand,
generally will equal in amount to the initial payment we determine. Contract
Value that is allocated to the Fixed Account at the end of the Accumulation
Period cannot be applied to a variable annuity payment option. Accordingly, if
you wish to apply any portion of your Fixed Account balance to a variable
annuity payment option, you should plan ahead and transfer that amount from the
Fixed Account to the Separate Account before you annuitize the Contract.
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 premiums during the first Contract Year. Premium 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 are age 86 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
- ----- ----------
Janus Aspen Series Flexible Income Portfolio
Balanced Portfolio
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
- --------------------------------------------------------------------------------
Fidelity Variable Money Market Portfolio
Insurance Equity-Income Portfolio
Products Fund Growth Portfolio
Overseas Portfolio
- --------------------------------------------------------------------------------
Fidelity Variable Asset Manager Portfolio
Insurance Contrafund Portfolio
Products Fund II Index 500
- --------------------------------------------------------------------------------
IAI Retirement IAI Regional Portfolio
Funds, Inc IAI Balanced Portfolio
IAI Reserve Portfolio
- --------------------------------------------------------------------------------
8
<PAGE>
Fund Portfolio
- ----- ----------
Federated Insurance Federated Utility Fund II
Management Series Federated U.S. Government Securities II
Federated High Income Bond Fund II
- --------------------------------------------------------------------------------
Scudder Variable Bond Portfolio Class A
Life Investment Balanced Portfolio Class A
Fund
- --------------------------------------------------------------------------------
Alger American Small Capitalization Portfolio
Fund MidCap Growth Portfolio
Growth Portfolio
Leveraged AllCap Portfolio
Income and Growth Portfolio
- --------------------------------------------------------------------------------
Some of the Portfolios described in this Prospectus may not be available in your
Contract. Each Portfolio holds its assets separately from the assets of the
other Portfolios. Each Portfolio has distinct investment objectives and policies
which are described in the accompanying prospectuses for the Portfolios.
In addition, the Fixed Account is available in some states.
5. What are my expenses under the Contract?
Contract Administration Charge. During the Accumulation Period only, each year
we subtract $25 from your Contract Value as an annual contract administration
charge. We cannot increase the amount of this charge.
Administrative Expense Charge and Mortality and Expense Risk Charge. We impose a
mortality and expense risk charge at an annual rate of 1.25% of average daily
net assets and an administrative expense charge at an annual rate of .15% of
average daily net assets. 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. We currently do not charge a transfer fee. The Contract permits
us to charge you up to $25 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. The Withdrawal Charge, which is a contingent deferred
sales charge, will vary depending on how many complete years have passed since
you paid the Purchase Payment being withdrawn. The Withdrawal Charge applies to
each Purchase Payment for seven complete years from the date of the Payment
(each a "Contribution Year")
Contribution Applicable
Year Charge
---- ------
1-2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8+ 0%
In determining Withdrawal Charges, we will deem your Purchase Payments to be
withdrawn on a first-in first-out basis.
Certain withdrawals may be made without payment of any Withdrawal Charge. We may
impose a Withdrawal Charge upon annuitization only if you select an annuity
option under which we will make payments for a fixed period of less than five
years. In some states, we also may waive the Withdrawal Charge under our
confinement waiver benefit. Additional restrictions and costs may apply to
Contracts issued in connection with qualified plans. In addition, withdrawals
may trigger tax liabilities and penalties. You should consult with your tax
counselor to determine what effect a withdrawal might have on your tax
liability.
In most states, each year, free of Withdrawal Charge, you may withdraw:
(a) the greater of:
15% of your total Purchase Payments made in the most recent seven
years, if permitted under state law; or
earnings not previously withdrawn; plus
(b) an amount equal to your total Purchase Payments made more than seven years
ago, to the extent not previously withdrawn.
Because of differences in state law, in some states we substitute 10% in this
formula.
Premium Taxes. Certain states impose a premium tax on annuity purchase payments
received by insurance companies. Any applicable premium taxes are deducted from
the value of your Contract upon surrender, death, or annuitization. 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.
6. 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.
7. Do I have access to my money?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some plans, you may also take a
loan against the value of your Contract. Generally, a partial withdrawal must
equal at least $250. Under our
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Systematic Withdrawal Program, however, the minimum amount of each withdrawal
payment is $50.
While you have access to your money during the Accumulation Period, certain
charges, such as the contract administration charge, the Withdrawal Charge, and
premium tax charges may be deducted on a surrender or withdrawal. In addition,
you may incur federal income tax liability or tax penalties.
After annuitization, under certain settlement options you may be entitled to
withdraw the commuted value of the remaining payments.
8. 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 death benefit is the greater of 1) the "floor value" or 2) the Contract
Value less any premium tax. During the first seven years of the Contract, the
floor value is equal to your total Purchase Payments less prior withdrawals, all
accumulated at 4% per year until the Contract Anniversary next following your
75th birthday and at 0% per year thereafter. If the Contract Value exceeds the
floor value on the seventh Contract Anniversary, the floor value will be raised
to the level of the Contract Value and, in subsequent years, the floor value
will be calculated using the "stepped up" value in place of the actual Purchase
Payments and withdrawals during the first seven Contract years.
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.
9. 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.
Percentages must be in whole numbers and the total allocation must equal 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 freely transfer Contract
Value among the Subaccounts and from the Subaccounts to the Fixed Account. You
may instruct us to transfer Contract Value by writing or calling us. While you
may also transfer amounts from the Fixed Account, certain restrictions may
apply. No transfers are permitted after the Annuity Date.
You may also use our automatic dollar cost averaging or portfolio rebalancing
programs. You may not use both programs at the same time.
Under the dollar cost averaging program, amounts are automatically transferred
at regular intervals from the Fixed Account or a Subaccount of your choosing,
including other Subaccounts or the Fixed Account. Transfers may be made monthly,
quarterly, or annually.
Under the portfolio rebalancing program, you can maintain the percentage of your
Contract Value allocated to each Subaccount at a pre-set level. Investment
results will shift the balance of your Contract Value allocations. If you elect
rebalancing, we will automatically transfer your Contract Value back to the
specified percentages at the frequency (monthly, quarterly, semiannually,
annually) that you specify. We will automatically terminate this program if you
request a transfer outside of the program. You may not elect rebalancing after
annuitization.
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.
10. 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) 525-9287.
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CONDENSED FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information concerning
Accumulation Unit Values for each Subaccount for 1994, 1995, 1996, 1997, 1998
and 1999. 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 Separate
Account's financial statements dated as of December 31, 1999, are contained in
the Statement of Additional Information. Lincoln Benefit's consolidated
financial statements as of December 31, 1999, are included in the Statement of
Additional Information. The Statement of Additional Information also includes a
brief explanation of how performance of the Subaccounts is calculated.
DESCRIPTION OF THE CONTRACT
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 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 86, or where the Annuitant
has attained age 86.
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 Life 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, 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. 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.
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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 percentages in your Contract application.
Percentages must be in whole numbers and the total allocation must equal 100%.
We will allocate your subsequent Purchase Payments in those percentages, until
you give us new allocation instructions. You may not allocate Purchase Payments
to the Fixed Account if it is not available in your state.
If your application is complete, we will issue your Contract within two business
days of its receipt at our P.O. Box shown on the first page of this prospectus.
If your application for a Contract is incomplete, we will notify you and seek to
complete the application within five business days. For example, if you do not
fill in allocation percentages, we will contact you to obtain the missing
percentages. If we cannot complete your application within five business days
after we receive it, we will return your application and your Purchase Payment,
unless you expressly permit us to take a longer time.
Usually, we will allocate your initial Purchase Payment to the Subaccounts and
the Fixed Account, as you have instructed us, on the Issue Date. We will
allocate your subsequent Purchase Payments on the date that we receive them at
the next computed Accumulation Unit Value.
In some states, however, we are required to return at least your Purchase
Payment if you cancel your Contract during the "free-look" period. In those
states, we currently will allocate your Purchase Payments on the Issue Date as
you have instructed us, as described above. In the future, however, we reserve
the right, if you live in one of those states, to allocate all Purchase Payments
received during the "free-look period" to the 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 equal to 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 Administration 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. If we elect
or are required to assess a charge for taxes, a separate Accumulation Unit Value
may be calculated for Contracts issued in connection with Non-Qualified and
Qualified Plans, respectively, within each Subaccount. We will determine the
Accumulation Unit Value 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 the 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 Subaccounts in writing or by
telephone. YOU MAY NOT MAKE A TRANSFER AFTER THE ANNUITY DATE. Currently, there
is no minimum transfer amount. The Contract permits us to set a minimum transfer
amount in the future.
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. We close our offices for business on certain days immediately
preceding or following certain national holidays when the NYSE is open for
business. For calendar year 2000, our offices will be closed on November 24th.
For transfers requested on this day, we will make the transfer on the first
subsequent day on which we and the NYSE are open.
We have established special requirements for transfers from the Fixed Account.
You may make a lump sum transfer from the Fixed Account to the Subaccounts only
during the 60 day period beginning on the Issue Date and each Contract
Anniversary. Transfers pursuant to a Dollar Cost Averaging or Portfolio
Rebalancing Program may occur at any time at the intervals you have selected.
The maximum amount which may be transferred as a lump sum from the Fixed Account
during a Contract Year usually is the greater of:
o 30% of the Fixed Account balance on the most recent Contract Anniversary;
or
o the largest amount transferred from the Fixed Account in any prior
Contract Year.
This limit also applies to transfers under a Dollar Cost Averaging program,
unless you choose to transfer your entire Fixed Account balance to Subaccounts.
In that case,
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the maximum monthly transfer amount may not be more than 1/36th of your Fixed
Account balance on the day of the first transfer. We may waive or modify these
restrictions on transfers from the Fixed Account. You may not transfer Account
Value or allocate new Purchase Payments into the Fixed Account, if transfers are
being made out under the Dollar Cost Averaging program.
In addition, you may transfer 100% of the Fixed Account balance in a lump sum to
the Subaccount(s), if on any Contract Anniversary either (a) or (b) is true:
(a) The interest rate on the Fixed Account is lower than it was on the
Contract Anniversary one year previously or if on the First Contract
Anniversary that interest rate is lower than it was on the Issue Date;
or
(b) The credited interest rate is less than 4%.
We will notify you by mail if (a) or (b) occurs. You may request a transfer for
60 days following the date we mail notification to you.
The Contract permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us. Also, we may restrict transfers from the
Subaccounts to the Fixed Account in each Contract Year to no more than 30% of
the total Subaccount balances as of the most recent Contract Anniversary. We
currently are not imposing this restriction on transfers from the Subaccounts.
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 23 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 Fixed Account or a Subaccount (the "Source Subaccount")
of your choosing, including other Subaccounts or the Fixed Account. The interval
between transfers 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 from the Source Subaccount is $100. We may change this minimum
or grant exceptions. If you elect this program, the first transfer will occur
twenty five days after your Issue Date.
Your request to participate in this program will be effective when we receive
your completed application or service request form 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 increase, decrease or change the frequency or amount of Purchase
Payments under a Dollar Cost Averaging Program. Special restrictions apply to
transfers from the Fixed Account. They are explained on pages 12-13 above.
The theory of Dollar Cost Averaging is that by spreading your investment over
time, you may be able to reduce the effect of transitory market conditions on
your investment. In addition, because a given dollar amount purchases more units
when the unit prices are relatively low rather than when the prices are higher,
in a fluctuating market, the average cost per unit may be less than the average
of the unit prices on the purchase dates. However, participation in this program
does not assure you of a greater profit from your purchases under the program,
nor will it prevent or necessarily reduce losses in a declining market.
Moreover, while we refer to this program of periodic transfers generally as
Dollar Cost Averaging, periodic transfers from a subaccount with more volatile
performance experience is unlikely to produce the desired effects of Dollar Cost
Averaging as would transfers from a less volatile subaccount. 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 and/or the Fixed Account 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, if the changes from your
desired percentages pass a threshold we establish, we will automatically
transfer your Contract Value, including new premium (unless you specify
otherwise), back to the percentages you specify. Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Contract Value allocated
to the better performing segments.
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually until your Annuity Date; Portfolio Rebalancing is not available after
you annuitize. No Transfer Fees will be charged for portfolio rebalancing. We
will automatically terminate this program if you request any transfers outside
the Portfolio Rebalancing program. If you wish to resume Portfolio Rebalancing
after it has been cancelled, then you must complete a new Portfolio Rebalancing
form and send it to our home office.
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In any Contract Year, transfers from the Fixed Account under a Portfolio
Rebalancing program are subject to the overall limit on transfers from the Fixed
Account. Accordingly, if the total amount transferred from the Fixed Account
reaches that limit before the end of a Contract Year, we will not transfer
additional amounts from the Fixed Account for portfolio rebalancing purposes
until the next Contract Year.
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 do not specify a date for your first rebalancing, your
first rebalance will occur one period after the Issue Date, if you request
portfolio rebalancing in your Contract application. 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 you include the Fixed Account in a Portfolio
Rebalancing program, however, in any given twelve-month period you may not
change the allocation percentages more than twice and the total change to the
Fixed Amount allocation may not exceed 20%. We may waive this restriction.
If the 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.
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.
Amounts you have allocated to Subaccounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Subaccounts invest. You bear the investment risk that
those Portfolios possibly will not meet their investment objectives. You should
carefully review their prospectuses before allocating amounts to the Subaccounts
of the Separate Account.
Alger American Fund (Investment advisor: Fred Alger Management, Inc.)
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Alger American Income and Growth Portfolio primarily seeks to provide a high
level of dividend income; its secondary goal is to provide capital appreciation.
The Portfolio invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. It focuses on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests primarily in the equity securities
of small capitalization companies. A small capitalization company is one that
has a market capitalization within the range of the Russell 2000 Growth Index or
the S&P SmallCap 600 Index.
Alger American Growth Portfolio seeks long-term capital appreciation. It focuses
on growing companies that generally have broad product lines, markets, financial
resources and depth of management. Under normal circumstances, the portfolio
invests primarily in the equity securities of large companies. The portfolio
considers a large company to have a market capitalization of $1 billion or
greater.
Alger American MidCap Growth seeks long-term capital appreciation. It focuses on
midsize companies with promising growth potential. Under normal circumstances,
the portfolio invests primarily in the equity securities of companies having a
market capitalization within the range of companies in the S&P MidCap 400 Index.
Alger American Leveraged AllCap Portfolio seeks long-term capital appreciation.
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential. The
portfolio can leverage, that is, borrow money, up to one-third of its total
assets to buy additional securities. By borrowing money, the portfolio has the
potential to increase its returns if the increase in the value of the securities
purchased exceeds the cost of borrowing, including interest paid on the money
borrowed.
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Janus Aspen Series (investment adviser: Janus Capital Corporation)
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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 usually 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 usually 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 usually invests in issuers from at least five different
countries including the United States.
Fidelity Variable Insurance Products Fund (investment adviser: Fidelity
Management & Research Company)
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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 U.S. dollar-denominated money market securities of domestic and
foreign issuers, including U.S. government securities and repurchase
agreements.
EQUITY-INCOME PORTFOLIO seeks reasonable income normally by investing in
income-producing equity securities. The goal is to achieve a yield which exceeds
the composite yield on the securities comprising the S&P 500 Composite Stock
Price Index. At least 65% of this Portfolio's assets is normally invested in
income-producing common or preferred stock. The Portfolio, however, has the
flexibility to invest the balance in other types of domestic and foreign
securities, including bonds.
GROWTH PORTFOLIO seeks to achieve capital appreciation. This Portfolio normally
invests primarily in common stocks which are believed to have above average
growth potential.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. At least 65% of this Portfolio's assets is
normally 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)
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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: 50% in stocks (can range from
30-70%); 40% in bonds (can range from 20-60%); and 10% in short-term/money
market instruments (can range from 0-50%).
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 of domestic and foreign issuers.
INDEX 500 PORTFOLIO seeks investment results that correspond to the total return
of common stocks publicly traded in the U.S. as represented by the S&P 500 while
keeping transaction costs and other expenses low.
IAI Retirement Funds, Inc. (investment adviser: Investment Advisers, Inc.)
- --------------------------
IAI Regional Portfolio seeks capital appreciation by investing at least 65% of
its equity investments in companies that have their headquarters in Minnesota,
Wisconsin, Iowa, Illinois, Nebraska, Montana, North Dakota or South Dakota.
IAI Balanced Portfolio's investment objective is to maximize total return to
investors. This Portfolio pursues its objective by investing in a broadly
diversified portfolio of stocks, bonds and short-term instruments. Under normal
market conditions, the Portfolio will hold between 25% and 75% of its assets in
stocks and other equity securities, between 25% and 75% of its assets in bonds
and other fixed income securities, and up to 50% of its assets in short-term
instruments.
IAI Reserve Portfolio's investment objectives are to provide its shareholders
with high levels of capital stability and liquidity and, to the extent
consistent with these primary objectives, a high level of current income. This
Portfolio pursues its investment objectives by investing primarily in a
diversified portfolio of investment grade bonds and other debt securities of
similar quality. This Portfolio's dollar weighted average maturity will not
exceed twenty-five (25) months.
Federated Insurance Management Series (investment adviser: Federated Advisers)
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Federated Utility Fund II's investment objective is to achieve high current
income and moderate capital appreciation. The Fund pursues its investment
objective by invest-
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ing, under normal market conditions, at least 65% of its assets in equity
securities (including convertible securities) of companies that derive at least
50% of their revenues from the provision of electricity, gas and
telecommunications related services.
Federated Fund for U.S. Government Securities II's investment objective is to
provide current income. The fund pursues its objective by investing primarily in
U.S. government securities which include agency mortgage (FHLMC, FNMA, GNMA),
U.S. Treasury and agency debenture securities.
Federated High Income Bond Fund II's investment objective is to seek high
current income by investing primarily in a professionally managed, diversified
portfolio of fixed income securities. The Fund provides exposure to the
high-yield, lower-rated corporate bond market. At least 65 percent of the Fund's
assets are invested in corporate bonds rated BBB or lower. The adviser actively
manages the Fund's portfolio seeking to realize the potentially higher returns
of high-yield bonds compared to returns of high-grade securities by seeking to
minimize default risk and other risks through careful security selection and
diversification.
Scudder Variable Life Investment Fund (investment adviser: Scudder, Kemper
Investments Inc., Stevens & Clark, 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.
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BOND PORTFOLIO seeks high level of income consistent with 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. Generally, 25%-50% of the Portfolio's net assets are
invested in bonds.
We automatically reinvest all dividends and capital gains distributions from the
Portfolios in shares of the distributing Portfolio at their net asset value. The
income and realized and unrealized gains or losses on the assets of each
Subaccount are separate and are credited to or charged against the particular
Subaccount without regard to income, gains or losses from any other Subaccount
or from any other part of our business. We will use the net Purchase Payments
you allocate to a Subaccount to purchase shares in the corresponding Portfolio
and will redeem shares in the Portfolios to meet Contract obligations or make
adjustments in reserves. The Portfolios are required to redeem their shares at
net asset value and to make payment within seven days.
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
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authorities or we reasonably conclude that the proposed change would not be
consistent with the investment objectives of the Portfolio or would result in
the purchase of securities for the Portfolio which vary from the general quality
and nature of investments and investment techniques utilized by the Portfolio.
If we disregard voting instructions, we will include a summary of that action
and our reasons for that action in the next semi-annual financial report to you.
This description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decide that we are
permitted to vote the Portfolio shares without obtaining instructions from our
Contract Owners, and we may choose to do so.
Substitution 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 Accounts in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;
(c) to transfer assets from one Subaccount to another, or from any Subaccount
to our general account;
(d) to add, combine, or remove Subaccounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total charges
do not exceed the amount currently 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. The portion of the Contract relating to the Fixed Account is
not registered under the Securities Act of 1933 and the Fixed Account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly, neither the Fixed Account nor any interests in the Fixed Account
are subject to the provisions or restrictions of the 1933 Act or the 1940 Act,
and the disclosure regarding the Fixed Account has not been reviewed by the
staff of the SEC. The statements about the Fixed Account in this prospectus may
be subject to generally applicable provisions of the federal securities laws
regarding accuracy and completeness.
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.
We will credit interest to amounts allocated to the Fixed Account. We guarantee
that the interest rate credited to the Fixed Account will be at least an annual
effective rate of 3%. We may credit interest at a higher rate, but we are not
obligated to do so. You assume the risk that interest credited to the Fixed
Account may be no higher than 3%.
Transfers from the Fixed Account are subject to the limitations described on
pages 12-13 above. Also, as described on page 13 above, we may delay payment of
partial withdrawals or Surrender Value from the Fixed Account for up to 6
months.
ANNUITY BENEFITS
Annuity Date. On your application you may select the Annuity Date, which is the
date on which annuity payments are to begin. The Annuity Date must always be the
business day on or immediately following the tenth day of a calendar month. We
may require you to pick an Annuity Date at least two years after the Issue Date,
unless the law requires us to permit you to pick an earlier date.
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 10th day of the month following 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:
o the year of your separation from service; or
o 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.
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.
Deferment of Payments. 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. We may defer making Fixed Annuity payments for a period of up to
six months or whatever shorter time state
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law may require. During the deferral period, we credit interest at a rate at
least as high as state law requires.
Annuity Options. You may elect an Annuity Option at any time before the Annuity
Date. 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:
o Option B with 10 years (120 months) guaranteed, if you have
designated only one Annuitant; and
o Option C, if you have designated joint Annuitants.
You may freely change your choice of Annuity Option, as long as you request the
change at least seven days before the Annuity Date. 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.
You may not withdraw Contract Value during the annuity period, if we are making
payments to you under any Annuity Option involving payment to the Payee for life
or any combination of payments for life and minimum guaranteed payment period
for a predetermined number of years.
The following four Annuity Options are generally available under the Contract.
Each is available in the form of:
o a Fixed Annuity;
o a Variable Annuity; or
o a combination of both Fixed and Variable Annuity.
Option A, Life Annuity. Periodic payments are made during the Annuitant's life,
starting with the Annuity Date. No payments will be made after the Annuitant
dies. It is possible for the payee to receive only one payment under this
option, if the Annuitant dies before the second payment is due.
Option B, Life Annuity with Payments Guaranteed for 5 to 20 Years. Periodic
payments are made starting on the Annuity Date. Payments will continue at least
as long as the Annuitant lives. Under this option, before the Annuity Date you
select a guaranteed payment period or, if you do not select a guarantee period,
payments are guaranteed for 120 months. If the Annuitant dies before all of the
guaranteed payments have been made, we will pay the remaining guaranteed
payments to the Beneficiary.
Option C, Joint and Full Survivor Annuity. Periodic payments are made starting
with the Annuity Date. Payments will continue as long as either the Annuitant or
the joint Annuitant is alive. Payments will stop when both the Annuitant and the
joint Annuitant have died. It is possible for the payee or payees under this
option to receive only one payment, if both Annuitants die before the second
payment is due.
Option D, Payments for a Specified Period Certain, 5 Years to 25 Years. Periodic
payments are made starting on the Annuity Date, and continue for the period you
have chosen. If the Annuitant dies before all of the guaranteed payments have
been made, we will pay the remaining guaranteed payments to the Beneficiary. If
you elect this option and request Variable Annuity payments, at any time before
the period expires you may request a lump sum payment, subject to a Withdrawal
Charge. We will charge a Withdrawal Charge on any portion of your lump sum
payment attributable to Purchase Payments made within the prior seven years. The
amount of the Withdrawal Charge will be determined as described in "Withdrawal
Charges" on page 23 below. If you elected Variable Annuity Payments, the lump
sum payment after Withdrawal Charge will depend on:
o the investment results of the Subaccounts you have selected,
o the Contract Value at the time you elected annuitization,
o and the cumulative value of the annuity payments you have received.
No lump sum payment is available if you request Fixed Annuity payments.
Fixed Account Contract Value will be applied to provide a Fixed Annuity. You may
want to plan ahead and transfer amounts to the Subaccounts, if you do not wish
to apply that Contract Value to a Fixed Annuity. 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.
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.
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
pages 23-24 below, however, we will subtract any applicable Withdrawal Charge
from your surrender proceeds.
Other Options. We may have other Annuity Options available. You may obtain
information about them by writing or calling us.
If your Contract is issued under Sections 401, 403(b), 408, or 408A of the Tax
Code, we will only make payments to you and/or your spouse.
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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. For example, Options B and D require us to make payments for
a guaranteed period, even if the Annuitant dies before the end of that period.
On the other hand, under Options A and C, we are not obligated to make any
additional annuity payments once all of the Annuitants have died. 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.
In our discretion, we may permit the Beneficiary to accelerate the remaining
payments at a discounted rate reflecting the time value of money.
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 Payments. The Variable
Payments may be more or less than your total Purchase Payments because (a)
Variable Payments vary with the investment results of the underlying Portfolios;
(b) you bear the investment risk with respect to all amounts allocated to the
Separate Account; and (c) 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 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 Payments will be greater than Variable
Payments under an Annuity Option for a minimum specified period and guaranteed
thereafter for life.
The investment results of the Subaccounts to which you have allocated your
Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3 1/2%. If the actual net
investment return is less than the assumed investment rate, then the dollar
amount of the Variable Payments will decrease. The dollar amount of the Variable
Payments will stay level if the net investment return equals the assumed
investment rate and the dollar amount of the Variable Payments will increase if
the net investment return exceeds the assumed investment rate.
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. 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.
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 annuity tables that do not vary on
the basis of sex. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan we 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 the Death Benefit, if:
(1) the Contract is in force;
(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.
A claim for a Death Benefit must be submitted before the Annuity Date. To claim
the Death Benefit, the Beneficiary must provide us with "Due Proof of Death." We
will accept the following documentation as Due Proof of Death:
o a certified original copy of the Death Certificate;
o a certified copy of a court decree as to the finding of death; or
o a written statement of a medical doctor who attended the deceased at
the time of death.
In addition, in our discretion we may accept other types of proof.
If the Beneficiary is a natural person, the Beneficiary may choose from the
following alternative ways of receiving the Death Benefit:
o the Beneficiary may receive the Death Benefit as a lump sum payment;
o the Beneficiary may apply the Death Benefit to receive a series of
equal periodic payments over the life of the Beneficiary or a fixed
period no longer than the Beneficiary's life expectancy.The payments
must begin within one year of your death.
o If there is only one Beneficiary, he or she may defer
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payment of the Contract Value 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.
In addition, if your spouse is the Beneficiary, he or she may choose to continue
the Contract as the new Contract Owner. If prior to your death you were the
Annuitant, your surviving spouse becomes the new Annuitant. The surviving spouse
may also select one of the options listed above.
If the Beneficiary is a company, trust, 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.
We determine the Death Benefit as of the date of settlement. The date of
settlement is the date on which we receive all necessary forms and proof of
claim. The Death Benefit is the greater of 1) the "floor value" or 2) the
Contract Value less any premium tax. During the first seven years of the
Contract, the floor value is equal to your total Purchase Payments less prior
withdrawals, all accumulated at 4% per year before the Contract Anniversary next
following your 75th birthday and at 0% per year thereafter. If the Contract
Value exceeds the floor value on the seventh Contract Anniversary, the floor
value will be raised to the level of the Contract Value and, in subsequent
years, the floor value will be calculated using the "stepped up" value in place
of the actual Purchase Payments and withdrawals during the first seven Contract
years.
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. Accordingly, 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, even if
instructions that we subsequently receive from you seek to change your
Beneficiary effective as of a date before we made the payment or took the action
in question.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living, the Beneficiary will be:
o your spouse if he or she is still alive; or, if he or she is no
longer alive,
o your surviving children equally; or if you have no surviving
children, or
o 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 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.
You may request a Contract loan in writing. 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. We will transfer to the Loan Account amounts from the Separate
Account in proportion to the assets in each Subaccount. If your loan amount is
greater than your interest 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 Separate Account or the Fixed
Account.
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
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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.
You usually must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
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 pages 23-24 below. In
general, you must withdraw at least $250 at a time, unless you make withdrawals
through our systematic withdrawal program. You may also withdraw a lesser amount
if you are withdrawing your entire interest in a Subaccount.
We may be required to withhold 20% of withdrawals and distributions from
Contracts issued in connection with certain Qualified Plans, as described on
page 27 below. Withdrawals also may be subject to a 10% penalty tax, as
described in page 26 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. For partial withdrawals, you may allocate the amount among the
Subaccounts and the Fixed Account. Otherwise, we will allocate the amount of the
partial withdrawal proportionately among the Subaccounts and the Fixed Account.
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.
If you request a total withdrawal, you must send us your Contract. 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.
In addition, we may delay payment of the Surrender Value in the Fixed Account
for up to six 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.
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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 in pages 26-27 below, a
10% tax penalty is imposed on certain "premature" payments under annuity
contracts. The tax penalty applies 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 on the amounts withdrawn. The
circumstances in which Withdrawal Charges are due are described in pages 23-24
below.
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 (5) 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 lose 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 may incur additional tax penalties (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. Systematic
withdrawals are treated the same as partial withdrawals for purposes of
determining if a Withdrawal Charge applies. You may choose to receive systematic
withdrawal payments on a monthly, quarterly, semi-annual, or annual 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 is
less than $250 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 $250 due to either a decline in Accumulation Unit Value or the imposition
of fees and charges. In addition, in some states we are not permitted to
terminate Contracts on this ground. Different rules may apply to Contracts
issued in connection with Qualified Plans.
CONTRACT CHARGES
We assess charges under the Contract in three ways:
(1) as deductions from Contract Value for contract administrative 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
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Tables on page 4, 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 1.25% of the average net asset value of each Subaccount. Approximately
0.85% is for mortality risks and approximately 0.40% is for expense risks. 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 on page 19.
The expense risk is that it may cost us more to administer the Contracts and the
Separate Account than we receive from the Contract Administration Charge and the
Administrative Expense Charge. We guarantee the Expense Risk Charges and we
cannot increase it. We assess the Mortality and Expense Risk Charge during both
the Accumulation Period and the Annuity Period.
Administrative Charges
Contract Administration Charge
We charge an annual Contract Administration Charge of $25 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. We assess the Contract
Administration Charge on each Contract Anniversary on or before the Annuity
Date. If you surrender your Contract, we will deduct the full $25 charge as of
the date of surrender. We will stop charging this charge after annuitization.
To obtain payment of this charge, on a pro rata basis we will allocate this
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 the Contract Administration Charge if on any Contract Anniversary
your Contract Value is at least $75,000.
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 0.15% of the
average net asset value of the Subaccount. 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 not charging the Transfer Fee. The Contract, however, permits
us to charge a Transfer Fee of $25 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.
The Transfer Fee will be deducted from Contract Value that remain in the
Subaccount(s) or Fixed Account from which the transfer was made. If that amount
is insufficient to pay the Transfer Fee, we will deduct the fee from the
transferred amount.
Sales Charges
Withdrawal Charge
We may charge a Withdrawal Charge, which is a contingent deferred sales charge,
upon certain withdrawals.
As a general rule, the Withdrawal Charge equals a percentage of Purchase
Payments withdrawn that are: (a) less than seven years old; and (b) not eligible
for a free withdrawal. The applicable percentage depends on how many years ago
you made the Purchase Payment being withdrawn, as shown in this chart:
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE TABLE
Contribution Withdrawal Charge
Year Percentage
----- ----------
<S> <C>
First and Second 7%
Third 6%
Fourth 5%
Fifth 4%
Sixth 3%
Seventh 2%
Eighth and later 0%
</TABLE>
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.
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No Withdrawal Charge is applied in the following situations:
(1) on annuitization, unless you choose payment over a fixed period of less
than 5 years;
(2) the payment of a death benefit;
(3) a free withdrawal amount, as described on page 24 below;
(4) certain withdrawals for Contracts issued under 403(b) plans or 401
plans under our prototype as described on page 25 below; and
(5) withdrawals taken to satisfy IRS minimum distribution rules that apply
to this Contract, exclusive of any other Contracts held by you
(6) withdrawal under Contracts issued to employees of Lincoln Benefit Life
Company, Surety Life Insurance Company and Allstate Financial Services,
L.L.C., or to their spouses or minor children if these individuals
reside in the State of Nebraska.
We will never waive or eliminate a Withdrawal Charge where such waiver or
elimination would be unfairly discriminatory to any person or where it is
prohibited by state law.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
Mortality and Expense Risk Charge or any other charges of fee described above,
to make up any difference.
Withdrawals may also be subject to tax penalties or income tax. Additional
restrictions may apply to Contracts held in Qualified Plans. We outline the tax
requirements applicable to withdrawals on page 26 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:
(1) In any Contract Year, the greater of: (a) earnings that have not
previously been withdrawn; or (b) 15 percent of New Purchase Payments;
and
(2) Any Old Purchase Payments that have not been previously withdrawn.
However, even if you do not owe a Withdrawal Charge on a particular withdrawal,
you may still owe taxes or penalty taxes. Free withdrawals may be subject to tax
and tax penalties.
In some states, free withdrawals of 15% of the New Purchase Payments are not
permitted by law. In those states, the free withdrawal percentage will be 10% of
New Purchase Payments.
Confinement Waiver Benefit
In some states we offer a Confinement Waiver Benefit. Under this benefit, we
will waive the Withdrawal Charge on all withdrawals under your Contract if the
following conditions are satisfied:
(1) The Annuitant is confined to a Long Term Care Facility or a Hospital
for at least 60 consecutive days. The Annuitant must enter the Long
Term Care Facility or Hospital after the Issue Date;
(2) You request the withdrawal no later than 90 days following the end of
the Annuitant's stay at the Long Term Care Facility or Hospital. You
must provide written proof of the stay with your withdrawal request;
and
(3) If the waiver request is based on a stay in a Long Term Care Facility,
a physician must have prescribed the stay and the stay must be
medically necessary.
You may not claim the Confinement Waiver Benefit if:
(1) The Long Term Care Facility where the Annuitant stayed is owned or
operated by you or a member of your immediate family; or
(2) The Physician prescribing the Annuitant's stay in a Long Term Care
Facility is you or a member of your immediate family.
Long Term Care Facility means a facility located in the United States of America
which is licensed by the jurisdiction where it is located and operated as a
Custodial Care Facility or other facility which provides an equivalent level of
care and services.
Custodial Care Facility means a facility which:
(1) Provides custodial care under the supervision of a Registered Nurse; and
(2) Can accommodate three or more persons at their expense.
Hospital means a facility which:
(1) Is licensed and operated as a hospital;
(2) Is supervised by a staff of licensed physicians;
(3) Provides continuous nursing service 24 hours a day by or under the
supervision of a Registered Nurse;
(4) Operates primarily for the care and treatment of sick or injured persons
as inpatients for a charge; and
(5) Has medical, diagnostic and major surgical facilities or has access to
such facilities.
Medically Necessary means confinement, care or treatment which is appropriate
and consistent with the diagnosis in accordance with accepted standards of
practice, and which could not have been omitted without adversely affecting the
Annuitant's condition.
Physician means a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) operating within the scope of his or her license.
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<PAGE>
Registered Nurse means a registered graduate professional nurse (R.N.).
Immediate Family means the insured's spouse, children, parents, grandparents,
grandchildren, siblings, or corresponding in-laws.
Some Qualified Plans may not permit you to utilize this benefit. Also, even if
you do not need to pay our Withdrawal Charge because of this benefit, 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.
Waiver of Withdrawal Charge for Certain Qualified Plan Withdrawals
For Contracts issued under a Section 403(b) plan or a Section 40l plan under
our prototype, we will waive the Withdrawal Charge when:
(1) the Annuitant becomes disabled (as defined in Section 72(m)(7)) of the
Tax Code;
(2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have
passed since the Contract was issued;
(3) at least 15 Contract Years have passed since the Contract was issued.
Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan, or
a paired plan (Money Purchase and Profit Sharing).
Premium Taxes
We will charge premium taxes or other state or local taxes against the Contract
Value, including Contract Value that consists of 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 4-7 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
ax 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.
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
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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 includable 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. 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.
"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 591/2,
o made to a beneficiary after the owner's death,
o attributable to the owner being disabled,
o or 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.
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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 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 is a stock life insurance company organized under the laws of
the state of Nebraska in 1938. Our legal domicile and principal business address
is 2940 South 84th Street, Lincoln, Nebraska. Lincoln Benefit is a wholly-owned
subsidiary of Allstate Life Insurance Company ("Allstate Life"), a stock life
insurance company incorporated under the laws of the State of Illinois. Allstate
Life is a wholly-owned subsidiary of Allstate Insurance Company ("Allstate"), a
stock property-liability insurance company incorporated under the laws of
Illinois. All outstanding capital stock of Allstate is owned by The Allstate
Corporation.
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam, U.S. Virgin Islands and all states except New York. We will
market the Contract everywhere we conduct variable annuity business. The
Contracts offered by this prospectus are issued by us and will be funded in the
Separate Account and/or the Fixed Account.
Under our reinsurance agreement with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life. Through our reinsurance
agreement with Allstate Life, substantially all of the assets backing our
reinsured liabilities are owned by Allstate Life. Accordingly, the results of
operations with respect to applications received and contracts issued by Lincoln
Benefit are not reflected in our consolidated financial statements. The amounts
reflected in our consolidated financial statements relate only to the investment
of those assets of Lincoln Benefit that are not transferred to Allstate Life
under the reinsurance agreement. These assets represent our general account and
are invested and managed by Allstate Life. While the reinsurance agreement
provides us with financial backing from Allstate Life, it does not create a
direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with Allstate Life, the Company
reinsures all reserve liabilities with Allstate Life except for variable
contracts. The Company's
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variable Contract assets and liabilities are held in legally-segregated,
unitized Separate Accounts and are retained by the Company. However, the
transactions related to such variable contracts such as premiums, expenses and
benefits are transferred to Allstate Life.
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.
Separate Account
Lincoln Benefit Life Variable Annuity Account was originally established in
1992, as a segregated asset account of Lincoln Benefit. The Separate Account
meets the definition of a "separate account" under the federal securities laws
and is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940. The SEC does not supervise the management of the Separate
Account or Lincoln Benefit.
We own the assets of the Separate Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Contract
Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to the
Separate Account are credited to or charged against the Separate Account without
regard to our other income, gains, or losses. Our obligations arising under the
Contracts are general corporate obligations of Lincoln Benefit.
The Separate Account is divided into Subaccounts. The assets of each Subaccount
are invested in the shares of one of the Portfolios. We do not guarantee the
investment performance of the Separate Account, its Subaccounts or the
Portfolios. Values allocated to the Separate Account and the amount of Variable
Annuity payments will rise and fall with the values of shares of the Portfolios
and are also reduced by Contract charges. We may also use the Separate Account
to fund our other annuity contracts. We will account separately for each type of
annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-865-5237. We have
reproduced the Table of Contents of the Statement of Additional Information on
page 29 below.
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 National Association of Insurance
Commissioners. Our books and records are subject to review by the Department of
Insurance at all times. We are also subject to regulation under the insurance
laws of every jurisdiction in which we operate.
Financial Statements
The financial statements of the Variable Annuity Account as of December 31, 1999
and for the periods in the two years then ended, the consolidated financial
statements and related financial statement schedule of Lincoln Benefit Life
Company as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 and the accompanying Independent Auditors' Report
appear in the Statement of Additional Incormation. The financial statements of
the Lincoln Benefit included in the Statement of Additional Information should
be considered only as bearing upon the ability of Lincoln Benefit to meet its
obligations under the Contracts.
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.
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
28
<PAGE>
on Contract sales to our employees, our affiliate's employees or their spouses
or minor children.
ALFS, Inc. ("ALFS") located at 3100 Sanders Road, Northbrook, IL 60062-7154
serves as distributor of the Contracts. ALFS, an affiliate of Lincoln Benefit,
is a wholly owned subsidiary of Allstate Life Insurance Company. It is
registered as a broker-dealer under the Securities and Exchange Act of 1934, as
amended, and is a member of the National Association of Securities Dealers, Inc.
During 1998 and 1997, Lincoln Benefit paid to its former distributor of the
Contracts, Lincoln Benefit Financial Services ("LBFS"), gross commissions for
the sale of Contracts of approximately $11,428,184.95 and $7,553,487
respectively. Of the gross commissions received, LBFS (as principal underwriter)
retained $242,501.90 and $243,193 respectively. The amounts not retained by LBFS
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.
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 such third parties provided such market timing and asset
allocation services comply with our administrative systems, rules and
procedures, which we may modify at any time. PLEASE NOTE that fees and charges
assessed for such market timing and asset allocation services are separate and
distinct from the Contract fees and charges set forth herein. Lincoln Benefit
neither recommends nor discourages such market timing and asset allocation
services.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. The
Company 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, General Counsel and
Secretary 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 Street,
East Lobby - Suite 400, Washington, D.C. 20007-0805.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, Washington, D.C., 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, the Company and the
Contracts. The descriptions in the 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 read the registration statement
and other reports that we file at the SEC's public reference room in Washington,
D.C. You can request copies of these documents upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its public reference room. Our SEC filings are
also available to the public on the SEC Internet site (http:\\www.sec.gov).
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
The Contract........................................................3
Annuity Payments...........................................3
Annuity Unit Value.........................................3
Illustrative Example of Variable Annuity Payments.........4
Additional Federal Income Tax Information...........................4
Introduction...............................................5
Taxation of Lincoln Benefit Life Company...................5
Exceptions to the Non-Natural Owner Rule...................5
IRS Required Distribution at Death Rules...................5
Qualified Plans............................................6
Types of Qualified Plans...................................6
Separate Account Performance........................................7
Experts.............................................................13
Financial Statements................................................13
29
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
Accumulation Unit Values 1
Accumulation Accumulation Number of Units
Unit Value 1 Unit Value Outstanding at
Beginning Ending End of Year Year
Fund ($) ($)
<S> <C> <C> <C> <C>
Fidelity VIP Money Market 12.05 12.50 3,210,449 1999
11.59 12.05 2,320,956 1998
11.14 11.59 2,166,046 1997
10.72 11.14 1,493,297 1996
10.27 10.72 1,063,044 1995
10.00 10.27 249,473 1994
Fidelity VIP Growth 24.59 33.33 2,466,985 1999
17.88 24.59 2,486,678 1998
14.68 17.88 2,119,475 1997
12.98 14.68 1,822,777 1996
9.73 12.98 1,028,768 1995
10.00 9.73 247,556 1994
Fidelity VIP Equity-Income 21.46 22.51 3,422,044 1999
19.50 21.46 3,906,757 1998
15.44 19.50 3,093,518 1997
13.70 15.44 2,157,454 1996
10.28 13.70 1,025,219 1995
10.00 10.28 145,290 1994
Fidelity VIP Overseas 14.32 20.14 1,335,981 1999
12.88 14.32 1,489,209 1998
11.71 12.88 1,104,305 1997
10.49 11.71 944,146 1996
9.70 10.49 599,989 1995
10.00 9.70 166,871 1994
VIP II Fidelity Asset Manager 16.00 17.52 1,153,565 1999
14.10 16.00 1,315,223 1998
11.85 14.10 1,110,906 1997
10.49 11.85 921,269 1996
9.09 10.49 593,918 1995
10.00 9.09 226,936 1994
Fidelity VIP II Contrafund* 17.49 21.43 2,294,148 1999
13.64 17.49 2,198,114 1998
11.15 13.64 1,395,072 1997
10.00 11.15 497,571 1996
Fidelity VIP II Index 500** 12.02 14.28 1,732,194 1999
10.00 12.02 1,052,148 1998
Scudder Bond 12.39 12.10 502,991 1999
11.79 12.39 461,863 1998
10.96 11.79 345,499 1997
10.81 10.96 203,879 1996
9.27 10.81 134,527 1995
10.00 9.27 4,615 1994
Scudder Balanced 19.44 22.11 883,754 1999
16.01 19.44 895,255 1998
13.07 16.01 625,526 1997
11.85 13.07 460,749 1996
9.48 11.85 209,087 1995
10.00 9.48 55,482 1994
30
<PAGE>
Accumulation Accumulation Number of Units
Unit Value 1 Unit Value Outstanding at
Beginning Ending End of Year Year
Fund ($) ($)
Janus Flexible Income 15.03 15.06 748,162 1999
13.97 15.03 708,089 1998
12.67 13.97 406,324 1997
11.77 12.67 280,447 1996
9.64 11.77 145,173 1995
10.00 9.64 9,271 1994
Janus Balanced 21.69 27.11 1,725,833 1999
16.43 21.69 1,570,637 1998
13.65 16.43 983,350 1997
11.91 13.65 608,590 1996
9.68 11.91 204,556 1995
10.00 9.68 54,218 1994
Janus Growth 23.91 33.95 2,478,426 1999
17.87 23.91 2,335,027 1998
14.77 17.87 1,816,216 1997
12.64 14.77 1,200,179 1996
9.85 12.64 529,026 1995
10.00 9.85 91,020 1994
Janus Aggressive Growth 22.83 50.75 1,531,639 1999
17.25 22.83 1,444,800 1998
15.52 17.25 1,279,192 1997
14.58 15.52 1,010,157 1996
11.60 14.58 545,594 1995
10.000 11.60 78,193 1994
Janus Worldwide Growth 23.67 38.39 3,222,820 1999
18.62 23.67 3,269,577 1998
15.46 18.62 2,680,262 1997
12.15 15.46 1,649,612 1996
9.67 12.15 520,639 1995
10.00 9.67 109,298 1994
Federated High Income Bond II 14.45 14.58 1,087,087 1999
14.27 14.45 1,245,268 1998
12.72 14.27 809,791 1997
11.28 12.72 407,045 1996
9.50 11.28 210,460 1995
10.00 9.50 28,352 1994
Federated Utility Fund II 17.96 18.01 639,124 1999
15.98 17.96 687,133 1998
12.80 15.98 437,287 1997
11.64 12.80 315,710 1996
9.50 11.64 197,013 1995
10.00 9.50 44,207 1994
Federated U.S. Gov't. Securities II 12.61 12.36 638,219 1999
11.88 12.61 582,790 1998
11.13 11.88 239,114 1997
10.83 11.13 208,602 1996
10.10 10.83 106,437 1995
10.00 10.10 36,563 1994
31
<PAGE>
Accumulation Accumulation Number of Units
Unit Value 1 Unit Value Outstanding at
Beginning Ending End of Year Year
Fund ($) ($)
IAI Regional 17.06 19.90 533,632 1999
17.03 17.06 760,302 1998
15.23 17.03 843,183 1997
13.80 15.23 646,379 1996
10.48 13.80 325,443 1995
10.00 10.48 71,368 1994
IAI Reserve 11.61 11.66 38,476 1999
11.17 11.61 42,468 1998
10.82 11.17 73,556 1997
10.46 10.82 39,968 1996
10.09 10.46 67,843 1995
10.00 10.09 51,928 1994
IAI Balanced 15.91 16.25 180,094 1999
14.39 15.91 177,759 1998
12.52 14.39 143,880 1997
11.56 12.52 103,719 1996
10.09 11.56 60,190 1995
10.00 10.09 18,173 1994
Alger Small Capitalization** 11.01 15.58 333,325 1999
10.00 11.01 217,169 1998
Alger MidCap Growth** 12.17 15.83 257,838 1999
10.00 12.17 196,031 1998
Alger Growth** 13.66 18.02 676,378 1999
10.00 13.66 392,390 1998
Alger Leveraged AllCap** 14.56 25.57 330,069 1999
10.00 14.56 106,760 1998
Alger Income and Growth** 12.55 17.63 581,544 1999
10.00 12.55 333,125 1998
</TABLE>
- ------------------------------
* First offered 5/1/96
** First offered 3/1/98
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
Accuulation Unit Value does not reflect a deduction of certain charges under
the Contract that are deducted from your Contract Value, such as the Contract
Administration Charge, and Administrative Expense Charge.
2. The Alger American Fund (Small Capitalization; MidCap Growth; Growth;
Leveraged AllCap; Income & Growth) and the Fidelity Index 500 Portfolio were not
offered as of December 31, 1997.
A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.
32
<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 premium taxes or
any 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 taxes. 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 $20,000, because $20,000 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, standardized total return 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 Underlying Funds and assumes that
the Subaccounts existed during the same time period as those of the Underlying
Funds, with recurring Contract charges equal to those currently assessed against
the Subaccounts.
Our advertisements may also compare the performance of our Subaccounts with:
(a)certain unmanaged market indices, including 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, Variable Annuity Research Data Survey, and
SEI.
The Contract Charges are described in more detail on page 22. We have described
the computation of advertised performance data for the Separate Account in more
detail on page 7 of the Statement of Additional Information.
33
<PAGE>
(This page has been left blank intentionally)
<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 contacting us in writing 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, 2000.
TABLE OF CONTENTS
PAGE
----
The Contract........................................................3
Annuity Payments...........................................3
Annuity Unit Value.........................................3
Illustrative Example of Variable Annuity Payments.........4
Additional Federal Income Tax Information...........................4
Introduction...............................................5
Taxation of Lincoln Benefit Life Company...................5
Exceptions to the Non-Natural Owner Rule...................5
IRS Required Distribution at Death Rules...................5
Qualified Plans............................................6
Types of Qualified Plans...................................6
Separate Account Performance........................................7
Experts.............................................................13
Financial Statements................................................13
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 state premium taxes or
applicable Withdrawal Charges;
(b) the Payment Option you have selected;
(c) the payment frequency 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 state premium tax and
applicable Withdrawal Charges from your Contract Value on the Valuation Date
next preceding the Annuity Date. Next, we apply that amount to the Payment
Option you have selected. 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.
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 adjusted Contract Value 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 the same as the first monthly payment.
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 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.
S-2
<PAGE>
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:
(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 determine as of
the Valuation Date at the end of the preceding Valuation
Period; and
(c) is the mortality and expense risk charge and the
administrative expense risk charge.
S-3
<PAGE>
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 = 1.0017099
The amount subtracted from the ratio of the two net asset values (0.0000384) is
the daily equivalent of the annual asset-based expense charges against the
Subaccount of 1.40%.
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 1.0017099 = $101.19845
----------------------
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 taxes payable upon
annuitization and no Withdrawal Charges are applicable. 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:
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 / $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. 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 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-4
<PAGE>
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.
<PAGE>
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 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.
S-5
<PAGE>
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 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
S-6
<PAGE>
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 Administration
Charge of $25 per contract. The Contract Administration 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 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 in the Variable
Insurance Products Fund Money Market Portfolio by compounding the current yield
according to the formula:
Effective Yield = [(Base Period Return + 1)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 taxes, 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, 1999 was 5.72% and the compound effective yield for the same
seven-day period was 5.88%.
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 taxes. 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.
S-7
<PAGE>
The formula used in computing the yield figure is:
Yield = 2 x ( ((a-b) + 1) 6 - 1)
-----
cd
where:
a = net investment income earned during the period by the
underlying Portfolio attributable to its shares held in the
Subaccount;
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)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 Administration
Charges 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 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)n = ERV
where:
P = a hypothetical initial payment of $20,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $20,000 payment
made at the beginning of the one, five, or ten year period as
of the end of the period (or fractional portion thereof).
S-8
<PAGE>
Our non-standardized total return differs standardized total return in that in
calculating non-standardized total return, we assumed an initial hypothetical
investment of $20,000. We choose $20,000, 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 Contract
Administration Charges 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, standardized total return 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.
<PAGE>
Tables of Total Return Calculations
The following tables include average annual total return and non-standardized
total return for various periods as of December 31, 1999.
<TABLE>
<CAPTION>
TOTAL RETURN -- AS OF DECEMBER 31, 1999
ASSUMING CONTRACT SURRENDERED
AVERAGE ANNUAL TOTAL RETURN (4)
----------------------------------------------------------
SINCE
INCEPTION 5 YEAR 10 YEAR INCEPTION
DATE (3) 1 YEAR (%) (%) (%) (%)
----------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
JANUS
Flexible Income..........................9/13/93 -4.65% 8.09% N/A 6.38%
Balanced ................................9/13/93 21.75% 22.34% N/A 18.21%
Growth (2)...............................9/13/93 39.10% 27.85% N/A 23.00%
Aggressive ..............................9/13/93 118.83% 34.22% N/A 30.82%
Worldwide Growth (2).....................9/13/93 59.18% 31.39% N/A 25.57%
FEDERATED
Utility II (2)...........................2/11/94 -3.77% 13.08% N/A 9.72%
U.S. Gov't II (2)........................3/28/94 -7.59% 3.39% N/A 3.32%
High Income Bond ........................3/1/94 -4.07% 8.25% N/A 6.28%
FIDELITY VIP
Money Market (1).........................4/1/82 N/A N/A N/A N/A
Equity Income (2)........................10/9/86 2.04% 16.69% N/A 14.78%
Growth (2)...............................10/9/86 35.49% 28.26% N/A 22.79%
Overseas (2).............................1/28/87 38.57% 15.77% N/A 13.05%
FIDELITY VIP II
Asset Manager (2)........................9/6/89 6.17% 13.68% N/A 9.92%
Contrafund (2)...........................1/3/95 20.96% N/A N/A 23.08%
Index 500................................8/27/92 14.60% N/A N/A 19.14%
ALGER AMERICAN
Income and Growth........................11/15/88 34.89% N/A N/A 34.09%
Small Capitalization.....................9/21/88 35.29% N/A N/A 25.13%
Growth...................................1/9/89 26.69% N/A N/A 35.10%
MidCap...................................5/3/93 24.28% N/A N/A 25.74%
Leveraged AllCap (2).....................1/25/95 70.72% N/A N/A 64.79%
SCUDDER
Bond.....................................7/16/85 -8.03% 4.66% N/A 2.89%
Balanced.................................7/16/85 9.94% 17.95% N/A 14.14%
S-9
<PAGE>
INVESTMENT ADVISERS, INC. (IAI)
Regional.................................1/31/94 12.40% 13.23% N/A 11.57%
Reserve (2)..............................4/7/94 -6.20% 2.02% N/A 2.13%
Balanced (2).............................2/3/94 -3.00% 9.26% N/A 7.11%
</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) Total returns reflect the investment adviser waived all or part of its fee
or reimbursed the investment options for a portion of its expenses.
Otherwise, total returns would have been lower.
(3) Some of the underlying investment options were active before January 2,
1994, the effective date of the Investor's Select Separate Account. Where
applicable, performance includes hypothetical performance for periods
before the investment option was available in Investor's Select, applying
contract charges assessed at the Separate Account
(4) 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 Securities
and Exchange Commission (SEC); and (3) reflect the deduction of 1.4% annual
asset charges, a $25 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.
N/A - Performance data is not been available for all or part of the period
indicated (see Inception Date). Investment options with a 9/13/93 inception date
or later will not have meaningful performance to report for the periods
indicated.
<TABLE>
<CAPTION>
TOTAL RETURN -- AS OF DECEMBER 31, 1999
ASSUMING CONTRACT NOT SURRENDERED
AVERAGE ANNUAL TOTAL RETURN (4)
-------------------------------------------
MONTHLY TOTAL SINCE
INCEPTION RETURN RETURN 1 YEAR 5 YEAR 10 YEAR INCEPTION
DATE (3) (4) % YTD (4) % (%) (%) (%) (%)
---------- ---------- ---------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUS
Flexible Income.....................9/13/93 -0.64% 0.07% 0.07% 8.66% N/A 6.37%
Balanced ...........................9/13/93 7.62% 24.84% 24.84% 22.52% N/A 17.68%
Growth (2)..........................9/13/93 10.57% 41.80% 41.80% 27.91% N/A 21.93%
Aggressive Growth ..................9/13/93 24.09% 121.99% 121.99% 34.17% N/A 29.97%
Worldwide Growth (2)................9/13/93 15.41% 61.96% 61.96% 31.54% N/A 25.26%
FEDERATED
Utility II (2)......................2/11/94 -0.27% 0.15% 0.15% 13.50% N/A 9.95%
U.S. Gov't II (2)...................3/28/94 -0.60% -2.10% -2.10% 4.06% N/A 3.75%
High Income Bond ...................3/1/94 0.86% 0.76% 0.76% 8.80% N/A 6.61%
S-10
<PAGE>
FIDELITY VIP
Money Market (1)....................4/1/82 N/A N/A N/A N/A N/A N/A
Equity Income (2)...................10/9/86 0.89% 5.25% 5.25% 16.93% 12.81% 12.07%
Growth (2)..........................10/9/86 9.96% 38.41% 38.41% 28.34% 18.39% 17.22%
Overseas (2)........................1/28/87 11.54% 43.31% 43.31% 16.06% 9.96% 10.50%
FIDELITY VIP II
Asset Manager (2)...................9/6/89 4.05% 10.52% 10.52% 14.11% 11.55% 11.34%
Contrafund (2)......................1/3/95 8.75% 24.84% 24.84% N/A N/A 26.36%
Index 500...........................8/27/92 5.74% 20.48% 20.48% 26.60% N/A 19.50%
ALGER AMERICAN
Income and Growth...................11/15/88 17.20% 40.29% 40.29% 30.96% 17.13% 15.94%
Small Capitalization................9/21/88 14.34% 41.25% 41.25% 20.79% 16.43% 18.89%
Growth..............................1/9/89 8.33% 31.72% 31.72% 28.96% 21.04% 20.66%
MidCap..............................5/3/93 12.12% 29.85% 29.85% 24.23% N/A 22.07%
Leveraged AllCap (2)................1/25/95 18.49% 75.37% 75.37% N/A N/A 45.07%
SCUDDER
Bond................................7/16/85 -0.28% -2.45% -2.45% 5.33% 5.75% 5.80%
Balanced............................7/16/85 4.14% 13.57% 13.57% 18.30% 11.65% 11.21%
INVESTMENT ADVISERS, INC. (IAI)
Regional............................1/31/94 7.73% 16.59% 16.59% 13.52% N/A 11.71%
Reserve (2).........................4/7/94 -0.13% -0.18% -0.18% 2.74% N/A 2.60%
Balanced (2)........................2/3/94 2.64% 1.66% 1.66% 9.79% N/A 7.42%
</TABLE>
- ------------------------
S-11
<PAGE>
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1999
CALENDAR YEAR RETURN (4)
---------------------------
CUMULATIVE (4)
INCEPTION TOTAL RETURN 1996 1997 1998
DATE (3) SINCE INCEPTION % (%) (%) (%)
------------ ----------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
JANUS
Flexible Income.........................9/13/93 47.51% 7.54% 10.07% 4.84%
Balanced ...............................9/13/93 178.70% 14.43% 20.25% 30.79%
Growth (2)..............................9/13/93 248.50% 16.66% 20.89% 33.55%
Aggressive Growth ......................9/13/93 421.01% 6.32% 10.96% 32.23%
Worldwide Growth (2)....................9/13/93 313.04% 27.09% 20.30% 26.80%
FEDERATED
Utility II (2)..........................2/11/94 74.78% 9.88% 24.72% 12.22%
U.S. Gov't II (2).......................3/28/94 23.64% 2.63% 6.94% 6.03%
High Income Bond .......................3/1/94 45.31% 12.58% 12.11% 1.14%
FIDELITY VIP
Money Market (1)........................4/1/82 N/A N/A N/A N/A
Equity Income ..........................10/9/86 351.45% 12.55% 26.17% 9.94%
Growth .................................10/9/86 718.20% 12.97% 21.61% 37.38%
Overseas ...............................1/28/87 263.35% 11.50% 9.87% 11.04%
FIDELITY VIP II
Asset Manager ..........................9/6/89 202.94% 12.87% 18.82% 13.31%
Contrafund (2)..........................1/3/95 221.48% 19.47% 22.26% 28.01%
Index 500...............................8/27/92 270.00% 20.86% 30.82% 26.37%
ALGER AMERICAN
Income and Growth.......................11/15/88 418.11% 17.87% 34.22% 30.39%
Small Capitalization....................9/21/88 603.56% 2.61% 9.71% 13.78%
Growth..................................1/9/89 685.43% 11.63% 23.84% 45.83%
MidCap..................................5/3/93 277.44% 10.20% 13.27% 28.33%
Leveraged AllCap .......................1/25/95 526.31% 10.34% 17.87% 55.44%
SCUDDER
Bond....................................7/16/85 126.03% 1.26% 7.45% 4.96%
Balanced................................7/16/85 364.65% 10.20% 22.33% 21.32%
INVESTMENT ADVISERS, INC. (IAI)
Regional................................1/31/94 92.48% 10.19% 11.73% 0.02%
Reserve (2).............................4/7/94 15.86% 3.35% 3.04% 3.87%
Balanced (2)............................2/3/94 52.60% 8.14% 14.83% 10.41%
</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. The Fidelity Investments Money Market
Fund experienced an SEC 7-day effective yield of 4.11% and a 7 day current
yield of 4.03% as of November 30, 1999.
S-12
<PAGE>
(2) Total returns reflect the investment adviser waived all or part of its fee
or reimbursed the investment options for a portion of its expenses.
Otherwise, total returns would have been lower.
(3) Some of the underlying investment options were active before January 2,
1994, the effective date of the Investor's Select Separate Account. Where
applicable, performance includes hypothetical performance for periods
before the investment option was available in Investor's Select, applying
contract charges assessed at the Separate Account
(4) Total returns include change in share price, reinvestment of dividends, and
capital gains. An initial hypothetical investment of $20,000 is assumed
since this is closer to the average purchase payment of a contract expected
to be written than the $1,000 assumed for SEC required returns shown on
page [ ]. Returns reflect deductions of 1.4% annual asset charges and a
$25.00 annual contract administration charge, but do not include the
applicable contingent deferred sales charge. The impact of the annual
contract administration charge on vestment returns will vary depending on
the size of the contract.
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 consolidated financial statements and related financial statement schedule
of Lincoln Benefit Life Company as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 that appear 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.
The financial statements of Lincoln Benefit Life Variable Annuity Account as of
December 31, 1999, and for the periods in the two years then ended that appear
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
The financial statements of the Variable Annuity Account as of December 31, 1999
and for the periods in the two years then ended, the consolidated financial
statements and related financial statement schedule of Lincoln Benefit Life
Company as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 and the accompanying Independent Auditors' Report
appear in the pages that follow. The financial statements of the Lincoln Benefit
included herein should be considered only as bearing upon the ability of Lincoln
Benefit to meet its obligations under the Contacts.
S-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER
OF LINCOLN BENEFIT LIFE COMPANY:
We have audited the accompanying Consolidated Statements of Financial Position
of Lincoln Benefit Life Company and subsidiary (the "Company", an affiliate of
The Allstate Corporation) as of December 31, 1999 and 1998, and the related
Consolidated Statements of Operations and Comprehensive Income, Shareholder's
Equity and Cash Flows for each of the three years in the period ended December
31, 1999. Our audits also included Schedule IV - Reinsurance. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
($ in thousands, except par value)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $158,747 and $149,898) $ 157,218 $ 158,984
Short-term 1,919 3,675
----------- -----------
Total investments 159,137 162,659
Cash 1,110 1,735
Reinsurance recoverable from
Allstate Life Insurance Company 7,539,995 6,938,717
Reinsurance recoverables from non-affiliates 260,324 199,997
Other assets 4,447 12,286
Separate Accounts 1,411,996 763,416
----------- -----------
TOTAL ASSETS $ 9,377,009 $ 8,078,810
=========== ===========
LIABILITIES
Reserve for life-contingent contract benefits $ 419,117 $ 346,974
Contractholder funds 7,369,664 6,785,070
Current income taxes payable 3,401 3,659
Deferred income taxes 745 5,546
Payable to affiliates, net 12,723 10,536
Other liabilities and accrued expenses 1,528 3,831
Separate Accounts 1,411,996 763,416
----------- -----------
TOTAL LIABILITIES 9,219,174 7,919,032
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 12)
SHAREHOLDER'S EQUITY
Common stock, $100 par value, 30,000 shares
authorized, 25,000 issued and outstanding 2,500 2,500
Additional capital paid-in 116,750 116,750
Retained income 39,579 34,622
Accumulated other comprehensive (loss) income:
Unrealized net capital (losses) gains (994) 5,906
----------- -----------
TOTAL ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (994) 5,906
----------- -----------
TOTAL SHAREHOLDER'S EQUITY 157,835 159,778
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 9,377,009 $ 8,078,810
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Net investment income $ 10,740 $ 10,078 $ 10,067
Realized capital gains and losses (913) 134 17
Other (expense) income (2,311) 162 503
-------- -------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 7,516 10,374 10,587
Income tax expense 2,559 3,704 3,735
-------- -------- --------
NET INCOME 4,957 6,670 6,852
-------- -------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (6,900) 1,774 2,331
-------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (1,943) $ 8,444 $ 9,183
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
($ in thousands) 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK $ 2,500 $ 2,500 $ 2,500
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN $ 116,750 $ 116,750 $ 116,750
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year $ 34,622 $ 27,952 $ 21,110
Net income 4,957 6,670 6,852
Dividend-in-kind - - (10)
--------- --------- ---------
Balance, end of year 39,579 34,622 27,952
--------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 5,906 $ 4,132 $ 1,801
Change in unrealized net capital gains
and losses (6,900) 1,774 2,331
--------- --------- ---------
Balance, end of year (994) 5,906 4,132
--------- --------- ---------
TOTAL SHAREHOLDER'S EQUITY $ 157,835 $ 159,778 $ 151,334
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,957 $ 6,670 $ 6,852
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash items (5,313) 2 20
Realized capital gains and losses 913 (134) (17)
Changes in:
Life-contingent contract benefits and
contractholder funds (4,868) 1,394 427
Income taxes payable (1,343) 2,973 (381)
Other operating assets and liabilities 11,344 (2,867) (4,606)
-------- -------- --------
Net cash provided by operating activities 5,690 8,038 2,295
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 17,760 - -
Investment collections 13,580 10,710 11,980
Investments purchases (39,723) (18,587) (18,307)
Change in short-term investments, net 2,068 (2,646) 840
-------- -------- --------
Net cash used in investing activities (6,315) (10,523) (5,487)
-------- -------- --------
NET DECREASE IN CASH (625) (2,485) (3,192)
CASH AT THE BEGINNING OF YEAR 1,735 4,220 7,412
-------- -------- --------
CASH AT END OF YEAR $ 1,110 $ 1,735 $ 4,220
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash financing activity
Dividend-in-kind to Allstate Life Insurance Company $ - $ - $ (10)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Lincoln Benefit Life Company ("LBL") and its wholly owned subsidiary, AFD, Inc.
(formerly Allstate Financial Distributors, Inc), a registered broker-dealer,
(collectively, the "Company"). LBL is 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 (the
"Corporation"). These consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. All significant
intercompany accounts and transactions have been eliminated.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products
primarily through independent insurance agents and brokers. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life, immediate annuities with life contingencies, variable
life and indexed life insurance. Savings products include deferred annuities and
immediate annuities without life contingencies. Deferred annuities include fixed
rate, market value adjusted, indexed and variable annuities. In 1999, annuity
premiums and deposits represented 80.9% of the Company's total statutory
premiums and deposits.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia, Guam and the U.S. Virgin
Islands. The top geographic locations for statutory premiums and deposits for
the Company were California, Florida, Wisconsin, Pennsylvania and Illinois for
the year ended December 31, 1999. No other jurisdiction accounted for more than
5% of statutory premiums and deposits. All premiums and deposits are ceded under
reinsurance agreements.
6
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost which approximates fair value.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgaged-backed securities is
determined on the effective yield method, based on the estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt. Realized
capital gains and losses are determined on a specific identification basis.
REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby all premiums, contract charges,
credited interest, policy benefits and certain expenses are ceded. Such amounts
are reflected net of such reinsurance in the consolidated statements of
operations and comprehensive income. Investment income earned on the assets
which support contractholder funds and the reserve for life-contingent contract
benefits is not included in the Company's consolidated financial statements as
those assets are owned and managed under terms of the reinsurance agreements.
Reinsurance recoverable and the related reserve for life-contingent contract
benefits and contractholder funds are reported separately in the consolidated
statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of related contractholder account balance.
Limited payment contracts, a type of immediate annuity with life contingencies
and single premium life contract, are contracts that provide insurance
protection over a contract period that extends beyond the period in which
premiums are collected. Gross premiums in excess of the net premium on limited
payment contracts are deferred and recognized over the contract period. Contract
benefits are recognized in relation to such revenues so as to result in the
recognition of profits over the life of the policy.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities, indexed
7
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
annuities and immediate annuities without life contingencies are considered
investment contracts. Deposits received for such contracts are reported as
deposits to contractholder funds. Contract charge revenue for investment
contracts consists of charges assessed against the contractholder account
balance for contract administration and surrenders. Contract benefits include
interest credited and claims incurred in excess of the related contractholder
account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Crediting rates for indexed annuities and indexed life products are based on an
interest rate index, such as LIBOR or an equity index, such as the S&P 500.
Investment contracts also include variable annuity and variable life contracts
which are sold as Separate Accounts products. The assets supporting these
products are legally segregated and available only to settle Separate Accounts
contract obligations. Deposits received are reported as Separate Accounts
liabilities. The Company's contract charge revenue for these contracts consists
of charges assessed against the Separate Accounts fund balances for contract
maintenance, administration, mortality, expense and surrenders.
All premiums, contract charges, contract benefits and interest credited are
reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. Deferred income taxes arise primarily from
unrealized capital gains or losses on fixed income securities carried at fair
value and differences in the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provisions wherein
the Company contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claim to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's consolidated statements of operations and comprehensive income.
Revenues to the Company from Separate Accounts consist of contract maintenance
and administration fees, and mortality, surrender and expense charges.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, immediate annuities with life contingencies and certain variable
annuity contract guarantees, is computed on the basis of assumptions as to
mortality, future investment yields, terminations and expenses at the time the
policy is issued. These assumptions, which for traditional life insurance are
applied using the net level premium method, include provisions for adverse
deviation and generally vary by such characteristics as type of coverage, year
of issue and policy duration. Detailed reserve assumptions and reserve interest
rates are outlined in Note 6.
8
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 6.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted 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 amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby certain premiums, contract
charges, credited interest, policy benefits and expenses are ceded to ALIC, and
reflected net of such reinsurance in the consolidated statements of operations
and comprehensive income. Reinsurance recoverable and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the consolidated statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits are not included in the
Company's consolidated financial statements as those assets are owned and
managed under terms of the reinsurance agreements. The following amounts were
ceded to ALIC under reinsurance agreements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
($ in thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Premiums $ 60,451 $ 30,811 $ 34,834
Contract charges 127,403 106,158 87,061
Credited interest, policy benefits, and other
expenses 684,704 624,620 533,369
</TABLE>
BUSINESS OPERATIONS
The Company utilizes services provided by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $26,418,
9
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
$45,940 and $34,947 in 1999, 1998 and 1997, respectively. Of these costs, the
Company retains investment related expenses. All other costs are ceded to ALIC
under reinsurance agreements.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ------- -------- --------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 11,849 $ 606 $ (30) $ 12,425
Corporate 95,036 439 (3,282) 92,193
Municipal 10,625 78 (108) 10,595
Mortgage-backed securities 41,237 1,372 (604) 42,005
--------- ------- -------- --------
Total fixed income securities $ 158,747 $ 2,495 $ (4,024) $ 157,218
========= ======= ======== ========
AT DECEMBER 31, 1998
U.S. government and agencies $ 14,105 $ 2,498 $ - $ 16,603
Corporate 84,547 3,548 (151) 87,944
Foreign government 3,031 239 - 3,270
Mortgage-backed securities 48,215 2,972 (20) 51,167
--------- ------- -------- --------
Total fixed income securities $ 149,898 $ 9,257 $ (171) $158,984
========= ======= ======== ========
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due in one year or less $ 2,000 $ 1,999
Due after one year through five years 38,778 38,374
Due after five years through ten years 56,887 54,579
Due after ten years 19,845 20,261
--------- --------
117,510 115,213
Mortgage-backed securities 41,237 42,005
--------- --------
Total $ 158,747 $157,218
========= ========
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
10
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 10,380 $ 10,375 $ 10,032
Short-term investments 577 286 195
------ ------ ------
Investment income, before expense 10,957 10,661 10,227
Investment expense 217 583 160
------ ------ ------
Net investment income $ 10,740 $ 10,078 $ 10,067
========= ======== ========
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
Fixed income securities $ (913) $ 134 $ 17
Income taxes (320) 47 6
-------- ------- --------
Realized capital gains and losses,
after tax $ (593) $ 87 $ 11
======== ======= ========
</TABLE>
Excluding calls and prepayments, gross gains of $1 and gross losses of $914 were
realized on sales of fixed income securities during 1999. There were no gross
gains or losses realized on sales of fixed income securities during 1998 and
1997.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET LOSSES
-------------- ---------- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 158,747 $ 157,218 $2,495 $ (4,024) $ (1,529)
========== ========= ====== ========
Deferred income taxes 535
---------
Unrealized net capital losses $ (994)
=========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (10,615) $ 2,729 $ 3,585
Deferred income taxes 3,715 (955) (1,254)
---------- -------- --------
(Decrease) increase in unrealized net
capital gains $ (6,900) $ 1,774 $ 2,331
========== ======== ========
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value
of $7,628 were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented on the following page are not necessarily
indicative of the amounts the Company might pay or receive in actual market
transactions. Potential taxes and other transaction costs have not been
considered in estimating fair value. The disclosures that follow do not
reflect the fair value of the Company as a whole since a number of the
Company's significant assets (including reinsurance recoverables) and
liabilities (including traditional life
11
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
and interest-sensitive life insurance reserves and deferred income taxes) are
not considered financial instruments and are not carried at fair value.
Other assets and liabilities considered financial instruments, such as
accrued investment income and cash, are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 157,218 $ 157,218 $ 158,984 $ 158,984
Short-term investments 1,919 1,919 3,675 3,675
Separate Accounts 1,411,996 1,411,996 763,416 763,416
</TABLE>
Fair values for fixed income securities are based on quoted market prices
where available. Non-quoted securities are valued based on discounted cash
flows using current interest rates for similar securities. Short-term
investments are highly liquid investments with maturities of less than one
year whose carrying value are deemed to approximate fair value. Separate
Accounts assets are carried in the consolidated statements of financial
position at fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 5,716,583 $ 5,424,725 $ 5,220,485 $ 5,006,124
Separate Accounts 1,411,996 1,411,996 763,416 763,416
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with
no stated maturities (single premium and flexible premium deferred annuities)
are valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms
is estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
12
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities $ 79,269 $ 56,683
Traditional life 312,130 228,734
Other 27,718 61,557
-------- ---------
Total life-contingent contract benefits $419,117 $ 346,974
======== =========
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the 1983 group annuity mortality table for immediate annuities; and
actual Company experience plus loading for traditional life. Interest rate
assumptions vary from 4.4% to 9.3% for immediate annuities and 4.0% to 8.0% for
traditional life. Other estimation methods used include the present value of
contractually fixed future benefits for immediate annuities and the net level
premium reserve method using the Company's withdrawal experience rates for
traditional life.
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $ 1,656,087 $ 1,572,478
Fixed annuities:
Immediate annuities 123,637 105,692
Deferred annuities 5,589,940 5,106,900
----------- ------------
Total contractholder funds $ 7,369,664 $ 6,785,070
=========== ============
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.2% to 7.4% for interest-sensitive life contracts; 4.4% to 9.3% for
immediate annuities and 1.6% to 26.2% for deferred annuities. Withdrawal and
surrender charge protection includes: i) for interest-sensitive life, either a
percentage of account balance or dollar amount grading off generally over 20
years; and, ii) for deferred annuities not subject to a market value adjustment,
either a declining or a level percentage charge generally over nine years or
less. Approximately 10% of deferred annuities are subject to a market value
adjustment.
7. REINSURANCE
The Company purchases reinsurance to limit aggregate and single losses on large
risks. The Company continues to have primary liability as the direct insurer for
risks reinsured. Estimating amounts of reinsurance recoverable is impacted by
the uncertainties involved in the establishment of loss reserves. Failure of
reinsurers to honor their obligations could result in losses to the Company.
The Company cedes a portion of the mortality risk on certain term life policies
with a pool of reinsurers.
Amounts recoverable from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Except for ALIC, no single
13
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
reinsurer had a material obligation to the Company nor is the Company's
business substantially dependent upon any reinsurance contract.
The following amounts were ceded to third parties under reinsurance
agreements:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 201,889 $ 154,320 $173,855
Policy benefits and other expenses 182,389 202,676 182,799
</TABLE>
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic
initiatives to aggressively expand its selling and servicing capabilities.
The Corporation also announced that it is implementing a program to reduce
expenses by approximately $600 million. The reduction will result in the
elimination of approximately 4,000 current non-agent positions, across all
employment grades and categories by the end of 2000, or approximately 10% of
the Corporation's non-agent work force. The impact of the reduction in
employee positions is not expected to materially impact the results of
operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and
enhanced marketing and advertising. As a result of the cost reduction
program, the Corporation recorded restructuring and related charges of $81
million pretax during the fourth quarter of 1999. The Corporation anticipates
that additional pretax restructuring related charges of approximately $100
million will be expensed as incurred throughout 2000. The Company's allocable
share of these expenses were immaterial in 1999 and are expected to be
immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement
(the "Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing
Agreement, the Company pays to or receives from the Corporation the amount,
if any, by which the Allstate Group's federal income tax liability is
affected by virtue of inclusion of the Company in the consolidated federal
income tax return. Effectively, this results in the Company's annual income
tax provision being computed, with adjustments, as if the Company filed a
separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck &
Co. ("Sears") and, with its eligible domestic subsidiaries, was included in
the Sears consolidated federal income tax return and federal income tax
allocation agreement. Effective June 30, 1995, the Corporation and Sears
entered into a new tax sharing agreement, which governs their respective
rights and obligations with respect to federal income taxes for all periods
during which the Corporation was a subsidiary of Sears, including the
treatment of audits of tax returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns
14
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
are not expected to have a material impact on the financial position,
liquidity or result of operations of the Company.
The components of the deferred income tax assets and liabilities at
December 31, are as follow:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Unrealized net capital losses $ 535 $ -
Other assets 897 -
--------- --------
Total deferred assets 1,432 -
DEFERRED LIABILITIES
Difference in tax bases of investments (2,177) (2,244)
Unrealized net capital gains - (3,180)
Other liabilities - (122)
--------- --------
Total deferred liabilities (2,177) (5,546)
--------- --------
Net deferred liability $ (745) $ (5,546)
========= ========
</TABLE>
The components of the income tax expense for the year
ended at December 31, are as follow:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 3,645 $ 3,262 $ 4,321
Deferred (1,086) 442 (586)
-------- ------- -------
Total income tax expense $ 2,559 $ 3,704 $ 3,735
======== ======= =======
</TABLE>
The Company paid income taxes of $3,902, $731 and $4,116 in 1999, 1998 and
1997, respectively
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other (1.0) .7 .3
---- ---- ----
Effective income tax rate 34.0% 35.7% 35.3%
==== ==== ====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately
$340, will result in federal income taxes payable of $119 if distributed by
the Company. No provision for taxes has been made as the Company has no plan
to distribute amounts from this account. No further additions to the account
have been permitted since the Tax Reform Act of 1984.
15
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $153,632 and $146,842 at
December 31, 1999 and 1998, respectively. The Company's statutory net income
was $6,091, $7,201 and $6,665 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Nebraska Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Nebraska, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 2000 without prior approval of the Nebraska Department of Insurance is
$15,113.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December 31, 1999, RBC for the
Company was significantly above a level that would require regulatory action.
16
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
11. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- -------------------------- ---------------------------------
After- After- After-
Pretax Tax Tax Pretax Tax Tax Pretax Tax Tax
------ --- ------ ------ --- ------ ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
- -------------------------
Unrealized holding
(losses) gains arising
during the period $ (11,528) $ 4,035 $ (7,493) $ 2,863 $(1,002) $ 1,861 $ 3,602 $ (1,260) $ 2,342
Less: reclassification
adjustments (913) 320 (593) 134 (47) 87 17 (6) 11
--------- ------- -------- ------- ------- ------- ------- -------- -------
Unrealized net capital
(losses) gains (10,615) 3,715 (6,900) 2,729 (955) 1,774 3,585 (1,254) 2,331
--------- ------- -------- ------- -------- ------- ------- -------- -------
Other comprehensive
(loss) income $ (10,615) $ 3,715 $ (6,900) $ 2,729 $ (955) $ 1,774 $ 3,585 $ (1,254) $ 2,331
========= ======= ======== ======= ======= ======= ======= ======== =======
</TABLE>
12. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Company leases certain office facilities and computer equipment.
Total rent expense for all leases was $2,042, $1,743 and $1,596 in 1999, 1998
and 1997, respectively. Minimum rental commitments under noncancelable
operating leases with initial or remaining term of more than one year as of
December 31, are as follows:
<TABLE>
<CAPTION>
1999
----
<S> <C>
2000 $ 1,815
2001 296
2002 12
2003 12
2004 12
Thereafter 264
-------
$ 2,411
=======
</TABLE>
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, removal of barriers preventing banks
from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, and tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate
17
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS)
liability, if any, arising from such pending or threatened litigation is not
expected to have a material effect on the results of operations, liquidity or
financial position of the Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds have been immaterial. These expenses are ceded to ALIC
under reinsurance agreements.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
13. SALE OF BUILDING
Included within other income and expenses in the Company's consolidated
statements of operations and comprehensive income for 1999, is a write-down of
$798 associated with the sale of the Company's building in Lincoln, Nebraska
which occurred in the first quarter of 2000. Also included in other income and
expenses is the write-down of $1,200 related to unamortized building
improvements recognized in the third quarter of 1999 when the building was
vacated by the Company.
14. SUBSEQUENT EVENT
On January 13, 2000, the Company declared a dividend of all the common shares of
AFD, Inc stock to ALIC. AFD, Inc income (loss) after taxes, included within
other income and expenses and income tax expense was ($9), $136, and $580 in
1999, 1998 and 1997, respectively. Total assets for AFD, Inc were immaterial to
the Company in total at December 31, 1999 and 1998.
18
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
SCHEDULE IV - REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 109,520,029 $ 109,520,029 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 369,540 $ 369,540 $ -
Accident and health 20,203 20,203 -
------------- ------------- ---------
$ 389,743 $ 389,743 $ -
============= ============= =========
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- -------- ------- ------
Life insurance in force $ 97,690,299 $ 97,690,299 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 287,839 $ 287,839 $ -
Accident and health 3,450 3,450 -
------------- ------------- ---------
$ 291,289 $ 291,289 $ -
============= ============= =========
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 72,754,000 $ 72,754,000 $ -
============= ============= =========
Premiums and contract charges:
Life and annuities $ 277,825 $ 277,825 $ -
Accident and health 35,217 $ 35,217 -
------------- ------------- ---------
$ 313,042 $ 313,042 $ -
============= ============= =========
</TABLE>
19
<PAGE>
-----------------------------------------------
LINCOLN BENEFIT LIFE
VARIABLE ANNUITY
ACCOUNT
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998, AND INDEPENDENT AUDITORS'
REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Lincoln Benefit Life Company:
We have audited the accompanying statement of net assets of Lincoln Benefit
Life Variable Annuity Account as of December 31, 1999 (including the assets
of each of the individual sub-accounts which comprise the Account as
disclosed in Note 1), and the related statements of operations for the period
then ended and the statements of changes in net assets for each of the
periods in the two year period then ended for each of the individual
sub-accounts which comprise the Account. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December 31, 1999
by correspondence with the account custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Lincoln Benefit Life Variable Annuity
Account as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts for the period then ended
and the changes in their net assets for each of the periods in the two year
period then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
($ and shares in thousands)
NET ASSETS
Allocation to Sub-Accounts investing in Alger American Fund:
Growth, 465 shares (cost $25,423) $ 29,948
Income and Growth, 1,293 shares (cost $16,957) 22,730
Leveraged AllCap, 368 shares (cost $15,615) 21,354
MidCap Growth, 240 shares (cost $6,495) 7,735
Small Capitalization, 140 shares (cost $6,067) 7,717
Allocation to Sub-Accounts investing in Janus Aspen Series:
Flexible Income, 1,280 shares (cost $15,085) 14,619
Balanced, 2,451 shares (cost $51,923) 68,437
Growth, 3,378 shares (cost $78,230) 113,658
Aggressive Growth, 1,652 shares (cost $49,822) 98,626
Worldwide Growth, 3,234 shares (cost $87,958) 154,433
Allocation to Sub-Accounts investing in IAI Retirement Funds, Inc.:
Regional, 583 shares (cost $8,585) 10,620
Reserve, 45 shares (cost $451) 449
Balanced, 192 shares (cost $2,646) 2,927
Allocation to Sub-Accounts investing in Fidelity Variable Insurance Products Fund II:
Asset Manager, 1,244 shares (cost $20,297) 23,233
Contrafund, 2,184 shares (cost $50,524) 63,666
Index 500, 354 shares (cost $51,343) 59,249
Allocation to Sub-Accounts investing in Fidelity Variable Insurance Products Fund:
Money Market, 66,146 shares (cost $66,146) 66,146
Equity-Income, 3,541 shares (cost $81,682) 91,036
Growth, 1,782 shares (cost $69,050) 97,878
Overseas, 1,046 shares (cost $21,378) 28,711
Allocation to Sub-Accounts investing in Federated Insurance Management Series:
High Income Bond Fund II, 1,872 shares (cost $19,864) 19,172
Utility Fund II, 1,146 shares (cost $15,593) 16,444
U.S. Government Securities Fund II, 1,150 shares (cost $12,315) 12,147
Allocation to Sub-Accounts investing in Scudder Variable Life Investment Fund:
Bond, 1,215 shares (cost $8,159) 7,884
Balanced, 1,523 shares (cost $20,292) 24,533
Growth and Income, 205 shares (cost $2,238) 2,247
Global Discovery, 116 shares (cost $1,350) 1,528
International, 77 shares (cost $1,233) 1,561
See notes to financial statements.
2
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1999
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
($ and shares in thousands)
NET ASSETS
Allocation to Sub-Accounts investing in Strong Variable Insurance Funds, Inc.:
Discovery Fund II, 18 shares (cost $180) $ 205
Growth Fund II, 180 shares (cost $4,012) 5,453
Allocation to Sub-Accounts investing in Strong Opportunity Fund II, Inc.:
Opportunity Fund II, 49 shares (cost $1,119) 1,264
Allocation to Sub-Accounts investing in T. Rowe Price International Series, Inc.:
International Stock, 52 shares (cost $811) 992
Allocation to Sub-Accounts investing in T. Rowe Price Equity Series, Inc.:
New America Growth, 47 shares (cost $1,195) 1,230
Mid-Cap Growth, 170 shares (cost $2,457) 2,973
Equity Income, 159 shares (cost $3,165) 2,978
Allocation to Sub-Accounts investing in MFS Variable Insurance Trust:
Growth with Income Series, 183 shares (cost $3,707) 3,892
Research Series, 94 shares (cost $1,886) 2,199
Emerging Growth Series, 119 shares (cost $2,975) 4,527
Total Return Series, 130 shares (cost $2,317) 2,311
New Discovery Series, 123 shares (cost $1,599) 2,117
Allocation to Sub-Accounts investing in STI Classic Variable Trust:
Capital Appreciation, 16 shares (cost $331) 327
International Equity, 0 shares (cost $0) -
Value Income Stock, 7 shares (cost $98) 90
Allocation to Sub-Accounts investing in Goldman Sachs Variable Insurance Trust:
CORE Small Cap Equity, 42 shares (cost $417) 440
International Equity, 24 shares (cost $337) 341
Allocation to Sub-Accounts investing in J.P. Morgan Series Trust II:
Small Company, 36 shares (cost $572) 596
Allocation to Sub-Accounts investing in Lazard Retirement Series Trust:
Emerging Markets, 18 shares (cost $190) 194
International Equity, 26 shares (cost $344) 352
Allocation to Sub-Accounts investing in LSA Variable Series Trust:
Focused Equity, 44 shares (cost $521) 532
Balanced, 8 shares (cost $77) 78
Growth Equity, 29 shares (cost $334) 346
Disciplined Equity, 13 shares (cost $143) 145
Value Equity, 18 shares (cost $185) 190
Emerging Growth Equity, 21 shares (cost $364) 375
See notes to financial statements.
3
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1999
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
($ and shares in thousands)
NET ASSETS
Allocation to Sub-Accounts investing in Morgan Stanley Dean Witter Universal Funds, Inc.:
Mid Cap Growth, 7 shares (cost $87) $ 91
Mid Cap Value, 5 shares (cost $70) 73
High Yield, 18 shares (cost $185) 185
Allocation to Sub- Accounts investing in OCC Accumulation Trust:
Equity, 2 shares (cost $61) 61
Small Cap, 0 shares (cost $0) -
Allocation to Sub-Accounts investing in PIMCO Variable Insurance Trust:
StocksPLUS Growth and Income, 11 shares (cost $149) 149
Foreign Bond, 19 shares (cost $182) 182
Total Return Bond, 58 shares (cost $551) 552
Money Market, 566 shares (cost $566) 566
Allocation to Sub-Accounts investing in Salomon Brothers Variable Series Funds:
Capital, 42 shares (cost $576) 568
--------------
Net Assets $ 1,105,262
==============
</TABLE>
See notes to financial statements.
4
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Alger American Fund Sub-Accounts
----------------------------------------------------------------------------
For the Period Ended December 31, 1999
----------------------------------------------------------------------------
Income and Leveraged MidCap Small
Growth Growth AllCap Growth Capitalization
------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,218 $ 580 $ 376 $ 525 $ 414
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (218) (152) (111) (56) (55)
Administrative expense (22) (16) (11) (6) (6)
------------ ------------ ------------ ------------ ----------------
Net investment income (loss) 978 412 254 463 353
------------ ------------ ------------ ------------ ----------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 18,560 5,180 9,093 4,636 10,425
Cost of investments sold 17,643 5,205 8,403 4,319 10,303
------------ ------------ ------------ ------------ ----------------
Net realized gains (losses) 917 (25) 690 317 122
------------ ------------ ------------ ------------ ----------------
Change in unrealized gains (losses) 3,613 5,172 5,433 973 1,460
------------ ------------ ------------ ------------ ----------------
Net gains (losses) on investments 4,530 5,147 6,123 1,290 1,582
------------ ------------ ------------ ------------ ----------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,508 $ 5,559 $ 6,377 $ 1,753 $ 1,935
============ ============ ============ ============ ================
</TABLE>
See notes to financial statements.
5
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Janus Aspen Series Sub-Accounts
------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Flexible Aggressive Worldwide
Income Balanced Growth Growth Growth
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 999 $ 1,218 $ 589 $ 1,796 $ 181
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (173) (610) (981) (651) (1,290)
Administrative expense (20) (69) (112) (75) (149)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) 806 539 (504) 1,070 (1,258)
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 6,474 13,650 45,030 36,298 41,864
Cost of investments sold 6,507 10,967 37,024 28,202 31,610
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) (33) 2,683 8,006 8,096 10,254
------------ ------------ ------------ ------------ ------------
Change in unrealized gains (losses) (730) 8,490 21,736 38,961 48,843
------------ ------------ ------------ ------------ ------------
Net gains (losses) on investments (763) 11,173 29,742 47,057 59,097
------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 43 $ 11,712 $ 29,238 $ 48,127 $ 57,839
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
6
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Fidelity Variable Insurance
IAI Retirement Funds, Inc. Sub-Accounts Products Fund II Sub-Accounts
------------------------------------------ -----------------------------
For the Period Ended December 31, 1999
--------------------------------------------------------------------------
Asset
Regional Reserve Balanced Manager Contrafund
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 196 $ 19 $ 169 $ 1,571 $ 1,591
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (140) (6) (32) (268) (605)
Administrative expense (17) (1) (4) (32) (70)
------------ ------------ ------------ ------------ --------------
Net investment income (loss) 39 12 133 1,271 916
------------ ------------ ------------ ------------ --------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 4,744 192 818 5,075 33,589
Cost of investments sold 4,402 193 739 4,717 30,117
------------ ------------ ------------ ------------ --------------
Net realized gains (losses) 342 (1) 79 358 3,472
------------ ------------ ------------ ------------ --------------
Change in unrealized gains (losses) 1,194 (8) (149) 398 5,798
------------ ------------ ------------ ------------ --------------
Net gains (losses) on investments 1,536 (9) (70) 756 9,270
------------ ------------ ------------ ------------ --------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,575 $ 3 $ 63 $ 2,027 $ 10,186
============ ============ ============ ============ ==============
</TABLE>
See notes to financial statements.
7
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Fidelity
Variable
Insurance
Products
Fund II
Sub-Accounts Fidelity Variable Insurance Products Fund Sub-Accounts
------------ ---------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Money Equity-
Index 500 Market Income Growth Overseas
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 295 $ 2,345 $ 4,087 $ 7,029 $ 875
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (461) (576) (1,145) (940) (291)
Administrative expense (46) (63) (134) (110) (34)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (212) 1,706 2,808 5,979 550
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 10,332 304,969 33,593 35,171 70,759
Cost of investments sold 9,568 304,969 30,104 30,352 69,501
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 764 - 3,489 4,819 1,258
------------ ------------ ------------ ------------ ------------
Change in unrealized gains (losses) 6,222 - (2,491) 13,445 6,304
------------ ------------ ------------ ------------ ------------
Net gains (losses) on investments 6,986 - 998 18,264 7,562
------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,774 $ 1,706 $ 3,806 $ 24,243 $ 8,112
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
8
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Federated Insurance Management Scudder Variable Life
Series Sub-Accounts Investment Fund Sub-Accounts
------------------------------------------ ------------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------------------------
High U.S.
Income Government
Bond Utility Securities
Fund II Fund II Fund II Bond Balanced
------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,687 $ 1,055 $ 417 $ 334 $ 1,603
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (246) (193) (132) (90) (258)
Administrative expense (28) (22) (14) (10) (30)
------------ ------------ ------------ ------------ ---------------
Net investment income (loss) 1,413 840 271 234 1,315
------------ ------------ ------------ ------------ ---------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 30,079 5,149 7,046 3,760 4,192
Cost of investments sold 30,345 4,878 7,082 3,834 3,670
------------ ------------ ------------ ------------ ---------------
Net realized gains (losses) (266) 271 (36) (74) 522
------------ ------------ ------------ ------------ ---------------
Change in unrealized gains (losses) (928) (1,021) (410) (320) 1,006
------------ ------------ ------------ ------------ ---------------
Net gains (losses) on investments (1,194) (750) (446) (394) 1,528
------------ ------------ ------------ ------------ ---------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 219 $ 90 $ (175) $ (160) $ 2,843
============ ============ ============ ============ ===============
</TABLE>
See notes to financial statements
9
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Scudder Variable Life Strong Variable Insurance
Investment Fund Sub-Accounts Funds, Inc. Sub-Accounts
------------------------------------------ ---------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Growth and Global Discovery Growth
Income Discovery International Fund II Fund II
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 58 $ - $ 22 $ 5 $ -
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (13) (2) (8) (1) (16)
Administrative expense (1) - (1) - (1)
------------ ------------ ------------- ------------ ------------
Net investment income (loss) 44 (2) 13 4 (17)
------------ ------------ ------------- ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1,175 137 12,162 110 743
Cost of investments sold 1,166 127 11,978 111 667
------------ ------------ ------------- ------------ ------------
Net realized gains (losses) 9 10 184 (1) 76
------------ ------------ ------------- ------------ ------------
Change in unrealized gains (losses) - 176 323 24 1,421
------------ ------------ ------------- ------------ ------------
Net gains (losses) on investments 9 186 507 23 1,497
------------ ------------ ------------- ------------ ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 53 $ 184 $ 520 $ 27 $ 1,480
============ ============ ============= ============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Strong T. Rowe Price
Opportunity International
Fund II, Inc. Series, Inc.
Sub-Account Sub-Account T. Rowe Price Equity Series, Inc. Sub-Accounts
------------ ------------ ----------------------------------------------
For the Period Ended December 31, 1999
----------------------------------------------------------------------------
New
Opportunity International America Mid-Cap Equity
Fund II Stock Growth Growth Income
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 7 $ 15 $ 68 $ 29 $ 151
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (6) (6) (6) (21) (19)
Administrative expense - - (1) (2) (2)
------------ ------------- ------------ ------------ ------------
Net investment income (loss) 1 9 61 6 130
------------ ------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 110 1,087 281 241 658
Cost of investments sold 104 1,056 277 222 652
------------ ------------- ------------ ------------ ------------
Net realized gains (losses) 6 31 4 19 6
------------ ------------- ------------ ------------ ------------
Change in unrealized gains (losses) 143 176 23 431 (193)
------------ ------------- ------------ ------------ ------------
Net gains (losses) on investments 149 207 27 450 (187)
------------ ------------- ------------ ------------ ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 150 $ 216 $ 88 $ 456 $ (57)
============ ============= ============ ============ ============
</TABLE>
See notes to financial statements.
11
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
MFS Variable Insurance Trust Sub-Accounts
------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Growth Emerging Total New
with Income Research Growth Return Discovery
Series Series Series Series Series
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 7 $ 6 $ - $ 38 $ 35
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (24) (13) (20) (16) (7)
Administrative expense (2) (1) (2) (1) -
------------ ------------ ------------ ------------ ------------
Net investment income (loss) (19) (8) (22) 21 28
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 568 554 1,260 428 699
Cost of investments sold 562 537 1,143 434 624
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) 6 17 117 (6) 75
------------ ------------ ------------ ------------ ------------
Change in unrealized gains (losses) 161 297 1,542 (15) 504
------------ ------------ ------------ ------------ ------------
Net gains (losses) on investments 167 314 1,659 (21) 579
------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 148 $ 306 $ 1,637 $ - $ 607
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Goldman Sachs Variable
STI Classic Variable Trust Sub-Accounts Insurance Trust Sub-Accounts
------------------------------------------- -----------------------------
For the Period Ended December 31, 1999
--------------------------------------------------------------------------
CORE
Capital International Value Income Small Cap International
Appreciation(a) Equity (a) Stock (a) Equity (b) Equity (b)
--------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 18 $ - $ 5 $ - $ 5
Charges from Lincoln Benefit Life Company:
Mortality and expense risk (2) - - - -
Administrative expense - - - - -
------------- ------------ ------------ ----------- ------------
Net investment income (loss) 16 - 5 - 5
------------- ------------ ------------ ----------- ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 72 - 35 1 1
Cost of investments sold 78 - 39 1 1
------------- ------------ ------------ ----------- ------------
Net realized gains (losses) (6) - (4) - -
------------- ------------ ------------ ----------- ------------
Change in unrealized gains (losses) (4) - (8) 23 4
------------- ------------ ------------ ----------- ------------
Net gains (losses) on investments (10) - (12) 23 4
------------- ------------ ------------ ----------- ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6 $ - $ (7) $ 23 $ 9
============= ============ ============ =========== ============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
(b) For the Period Beginning October 18, 1999 and Ended December 31, 1999
See notes to financial statements.
13
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
J.P. Morgan
Series Trust II Lazard Retirement Series LSA Variable Series
Sub-Account Trust Sub-Accounts Trust Sub-Accounts
--------------- --------------------------- ---------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------------
Small Emerging International Focused
Company (b) Markets (b) Equity (b) Equity (b) Balanced (b)
-------------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ - $ - $ -
Charges from Lincoln Benefit Life Company:
Mortality and expense risk - - - - -
Administrative expense - - - - -
--------------- ------------ -------------- ------------ ---------------
Net investment income (loss) - - - - -
--------------- ------------ -------------- ------------ ---------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales - - - - -
Cost of investments sold - - - - -
--------------- ------------ -------------- ------------ ---------------
Net realized gains (losses) - - - - -
--------------- ------------ -------------- ------------ ---------------
Change in unrealized gains (losses) 24 4 8 11 1
--------------- ------------ -------------- ------------ ---------------
Net gains (losses) on investments 24 4 8 11 1
--------------- ------------ -------------- ------------ ---------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 24 $ 4 $ 8 $ 11 $ 1
=============== ============ ============== ============ ===============
</TABLE>
(b) For the Period Beginning October 18, 1999 and Ended December 31, 1999
See notes to financial statements.
14
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
($ in thousands) Dean Witter
Universal
Funds Inc.
LSA Variable Series Trust Sub-Accounts Sub-Accounts
---------------------------------------------------------- ---------------
For the Period Ended December 31, 1999
---------------------------------------------------------------------------
Growth Disciplined Value Emerging Mid Cap
Equity (b) Equity (b) Equity (b) Growth Equity (b) Growth (b)
------------ ------------ ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 1 $ - $ - $ -
Charges from Lincoln Benefit Life Company:
Mortality and expense risk - - - - -
Administrative expense - - - - -
------------ ------------ ------------ --------------- ---------------
Net investment income (loss) - 1 - - -
------------ ------------ ------------ --------------- ---------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 22 - - - -
Cost of investments sold 21 - - - -
------------ ------------ ------------ --------------- ---------------
Net realized gains (losses) 1 - - - -
------------ ------------ ------------ --------------- ---------------
Change in unrealized gains (losses) 12 2 5 11 4
------------ ------------ ------------ --------------- ---------------
Net gains (losses) on investments 13 2 5 11 4
------------ ------------ ------------ --------------- ---------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 13 $ 3 $ 5 $ 11 $ 4
============ ============ ============ =============== ===============
</TABLE>
(b) For the Period Beginning October 18, 1999 and Ended December 31, 1999
See notes to financial statements.
15
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands) PIMCO Variable
Insurance
Morgan Stanley Dean Witter OCC Accumulation Trust
Universal Funds, Inc. Sub-Accounts Trust Sub-Accounts Sub-Accounts
----------------------------------- --------------------------- --------------
For the Period Ended December 31, 1999
--------------------------------------------------------------------------------
StocksPLUS
Mid Cap High Growth and
Value (b) Yield (b) Equity (b) Small Cap (b) Income (b)
---------------- --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 3 $ - $ - $ - $ 3
Charges from Lincoln Benefit Life Company:
Mortality and expense risk - - - - -
Administrative expense - - - - -
----------------- --------------- ------------ ------------ ------------
Net investment income (loss) 3 - - - 3
----------------- --------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1 - - - -
Cost of investments sold 1 - - - -
----------------- --------------- ------------ ------------ ------------
Net realized gains (losses) - - - - -
----------------- --------------- ------------ ------------ ------------
Change in unrealized gains (losses) 3 - - - -
----------------- --------------- ------------ ------------ ------------
Net gains (losses) on investments 3 - - - -
---------------- --------------- ------------ ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6 $ - $ - $ - $ 3
================= =============== ============ ============ ============
</TABLE>
(b) For the Period Beginning October 18, 1999 and Ended December 31, 1999
See notes to financial statements.
16
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
($ in thousands) Salomon Brothers
Variable
Series Funds
PIMCO Variable Insurance Trust Sub-Accounts Sub-Account
------------------------------------------- ----------------
For the Period Ended December 31, 1999
------------------------------------------------------------
Foreign Total Return Money
Bond (b) Bond (b) Market (b) Capital (b)
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 1 $ 2 $ 18
Charges from Lincoln Benefit Life Company:
Mortality and expense risk - - - -
Administrative expense - - - -
------------ ------------ ------------- ------------
Net investment income (loss) - 1 2 18
------------ ------------ ------------- ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales - - 182 -
Cost of investments sold - - 182 -
------------ ------------ ------------- ------------
Net realized gains (losses) - - - -
------------ ------------ ------------- ------------
Change in unrealized gains (losses) - 1 - (8)
------------ ------------ ------------- ------------
Net gains (losses) on investments - 1 - (8)
------------ ------------ ------------- ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ - $ 2 $ 2 $ 10
============ ============ ============= ============
</TABLE>
(b) For the Period Beginning October 18, 1999 and Ended December 31, 1999
See notes to financial statements.
17
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Alger American Fund Sub-Accounts
-----------------------------------------------------------------------------------
Growth Income and Growth Leveraged AllCap
-------------------------- ------------------------- --------------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 978 $ 73 $ 412 $ 55 $ 254 $ (2)
Net realized gains (losses) 917 33 (25) (14) 690 (35)
Change in unrealized gains (losses) 3,613 912 5,172 601 5,433 306
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 5,508 1,018 5,559 642 6,377 269
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 14,785 1,844 9,663 2,018 8,960 436
Benefit payments (40) - (62) - (18) -
Payments on termination (1,027) (169) (1,032) (49) (382) (8)
Loans - net (3) - (2) - - -
Contract administration charges (3) - (2) - (1) -
Transfers among the sub-accounts
and with the Fixed Account - net 4,347 3,688 3,666 2,329 4,496 1,225
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 18,059 5,363 12,231 4,298 13,055 1,653
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 23,567 6,381 17,790 4,940 19,432 1,922
NET ASSETS AT BEGINNING OF PERIOD 6,381 - 4,940 - 1,922 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 29,948 $ 6,381 $ 22,730 $ 4,940 $ 21,354 $ 1,922
============ ============ ============ ============ ============ ============
</TABLE>
(a) For the Period Beginning February 17, 1998 and Ending December 31, 1998
See notes to financial statements.
18
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Janus Aspen Series
Alger American Fund Sub-Accounts Sub-Accounts
------------------------------------------------------ --------------------------
MidCap Growth Small Capitalization Flexible Income
-------------------------- ------------------------- --------------------------
1999 1998 (a) 1999 1998 (a) 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 463 $ 79 $ 353 $ 50 $ 806 $ 463
Net realized gains (losses) 317 (125) 122 (73) (33) 111
Change in unrealized gains (losses) 973 267 1,460 190 (730) (4)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 1,753 221 1,935 167 43 570
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 3,330 1,117 2,426 1,121 4,731 4,308
Benefit payments (12) - (11) - (106) (170)
Payments on termination (219) (32) (168) (38) (1,049) (303)
Loans - net (1) - (14) - (3) (6)
Contract administration charges (1) - (1) - (2) (2)
Transfers among the sub-accounts
and with the Fixed Account - net 332 1,247 977 1,323 (558) 1,491
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 3,429 2,332 3,209 2,406 3,013 5,318
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 5,182 2,553 5,144 2,573 3,056 5,888
NET ASSETS AT BEGINNING OF PERIOD 2,553 - 2,573 - 11,563 5,675
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 7,735 $ 2,553 $ 7,717 $ 2,573 $ 14,619 $ 11,563
============ ============ ============ ============ ============ ============
</TABLE>
(a) For the Period Beginning February 17, 1998 and Ending December 31, 1998
See notes to financial statements.
19
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Janus Aspen Series Sub-Accounts
-----------------------------------------------------------------------------------
Balanced Growth Aggressive Growth
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 539 $ 695 $ (504) $ 2,248 $ 1,070 $ (361)
Net realized gains (losses) 2,683 827 8,006 1,895 8,096 1,613
Change in unrealized gains (losses) 8,490 5,778 21,736 8,921 38,961 6,673
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 11,712 7,300 29,238 13,064 48,127 7,925
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 20,759 7,827 25,102 8,319 12,398 2,926
Benefit payments (354) (279) (419) (512) (102) (59)
Payments on termination (3,703) (1,246) (5,242) (2,089) (2,505) (1,130)
Loans - net (8) 1 (14) 11 (10) (13)
Contract administration charges (14) (8) (25) (18) (20) (16)
Transfers among the sub-accounts
and with the Fixed Account - net 4,922 5,368 8,348 5,435 7,598 1,496
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 21,602 11,663 27,750 11,146 17,359 3,204
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 33,314 18,963 56,988 24,210 65,486 11,129
NET ASSETS AT BEGINNING OF PERIOD 35,123 16,160 56,670 32,460 33,140 22,011
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 68,437 $ 35,123 $ 113,658 $ 56,670 $ 98,626 $ 33,140
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
20
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Janus Aspen Series
Sub-Accounts IAI Retirement Funds, Inc. Sub-Accounts
-------------------------- ------------------------------------------------------
Worldwide Growth Regional Reserve
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,258) $ 1,608 $ 39 $ 604 $ 12 $ 19
Net realized gains (losses) 10,254 3,047 342 132 (1) (1)
Change in unrealized gains (losses) 48,843 9,929 1,194 (872) (8) 5
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 57,839 14,584 1,575 (136) 3 23
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 23,533 12,550 302 1,052 82 53
Benefit payments (481) (418) (27) (327) - (1)
Payments on termination (6,760) (2,981) (1,122) (602) (104) (39)
Loans - net (52) (5) 2 (13) - -
Contract administration charges (37) (31) (5) (6) - -
Transfers among the sub-accounts
and with the Fixed Account - net 1,148 5,636 (3,075) (1,361) (25) (364)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 17,351 14,751 (3,925) (1,257) (47) (351)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 75,190 29,335 (2,350) (1,393) (44) (328)
NET ASSETS AT BEGINNING OF PERIOD 79,243 49,908 12,970 14,363 493 821
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 154,433 $ 79,243 $ 10,620 $ 12,970 $ 449 $ 493
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
21
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
IAI Retirement Funds, Inc.
Sub-Accounts Fidelity Variable Insurance Products Fund II Sub-Accounts
-------------------------- ---------------------------------------------------------
Balanced Asset Manager Contrafund
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 133 $ 34 $ 1,271 $ 1,759 $ 916 $ 865
Net realized gains (losses) 79 56 358 183 3,472 939
Change in unrealized gains (losses) (149) 151 398 399 5,798 5,713
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 63 241 2,027 2,341 10,186 7,517
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 416 432 2,824 3,092 15,075 8,056
Benefit payments (43) (82) (252) (123) (152) (157)
Payments on termination (164) (104) (1,358) (769) (2,228) (1,176)
Loans - net - - (4) (14) (7) (3)
Contract administration charge (1) (1) (8) (8) (18) (11)
Transfers among the sub-accounts
and with the Fixed Account - net (172) 271 (1,278) 1,099 1,622 5,928
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 36 516 (76) 3,277 14,292 12,637
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 99 757 1,951 5,618 24,478 20,154
NET ASSETS AT BEGINNING OF PERIOD 2,828 2,071 21,282 15,664 39,188 19,034
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 2,927 $ 2,828 $ 23,233 $ 21,282 $ 63,666 $ 39,188
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
22
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Fidelity Variable Insurance
Products Fund II Sub-Accounts Fidelity Variable Insurance Products Fund Sub-Accounts
----------------------------- ------------------------------------------------------
Index 500 Money Market Equity-Income
-------------------------- ------------------------- --------------------------
1999 1998 (a) 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (212) $ (74) $ 1,706 $ 1,154 $ 2,808 $ 2,962
Net realized gains (losses) 764 (33) - - 3,489 2,185
Change in unrealized gains (losses) 6,222 1,684 - - (2,491) 1,609
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 6,774 1,577 1,706 1,154 3,806 6,756
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 31,559 6,877 59,959 71,632 16,805 14,703
Benefit payments (133) (40) (423) (129) (741) (524)
Payments on termination (2,681) (129) (5,955) (2,044) (9,566) (4,163)
Loans - net (7) 8 (55) (1) (28) 15
Contract administration charges (7) - (9) (6) (36) (33)
Transfers among the sub-accounts
and with the Fixed Account - net 8,197 7,254 (19,081) (65,701) (4,142) 7,859
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 36,928 13,970 34,436 3,751 2,292 17,857
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 43,702 15,547 36,142 4,905 6,098 24,613
NET ASSETS AT BEGINNING OF PERIOD 15,547 - 30,004 25,099 84,938 60,325
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 59,249 $ 15,547 $ 66,146 $ 30,004 $ 91,036 $ 84,938
============ ============ ============ ============ ============ ============
</TABLE>
(a) For the Period Beginning February 17, 1998 and Ending December 31, 1998
See notes to financial statements.
23
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Federated Insurance
Management Series
Fidelity Variable Insurance Products Fund Sub-Accounts Sub-Accounts
------------------------------------------------------ --------------------------
Growth Overseas High Income Bond Fund II
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,979 $ 4,656 $ 550 $ 990 $ 1,413 $ 226
Net realized gains (losses) 4,819 2,005 1,258 897 (266) 332
Change in unrealized gains (losses) 13,445 9,064 6,304 288 (928) (361)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 24,243 15,725 8,112 2,175 219 197
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 17,004 6,775 1,507 1,993 3,791 6,720
Benefit payments (233) (326) (215) (131) (162) (128)
Payments on termination (4,710) (2,356) (1,226) (980) (1,582) (965)
Loans - net (6) (10) 4 (9) (1) 23
Contract administration charges (31) (27) (7) (8) (5) (4)
Transfers among the sub-accounts
and with the Fixed Account - net 37 3,895 (1,648) 4,921 (1,803) 1,313
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 12,061 7,951 (1,585) 5,786 238 6,959
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 36,304 23,676 6,527 7,961 457 7,156
NET ASSETS AT BEGINNING OF PERIOD 61,574 37,898 22,184 14,223 18,715 11,559
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 97,878 $ 61,574 $ 28,711 $ 22,184 $ 19,172 $ 18,715
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
24
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Scudder Variable Life
Federated Insurance Management Series Sub-Accounts Investment Fund Sub-Accounts
------------------------------------------------------ ----------------------------
U.S. Government
Utility Fund II Securities Fund II Bond
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 840 $ 368 $ 271 $ (13) $ 234 $ 235
Net realized gains (losses) 271 338 (36) 143 (74) 30
Change in unrealized gains (losses) (1,021) 547 (410) 154 (320) (19)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 90 1,253 (175) 284 (160) 246
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 4,796 4,727 4,141 3,121 1,909 1,568
Benefit payments (83) (163) (42) (16) (27) (83)
Payments on termination (1,513) (296) (620) (262) (666) (230)
Loans - net (1) - - (1) (1) 6
Contract administration charges (5) (3) (2) (1) (2) (2)
Transfers among the sub-accounts
and with the Fixed Account - net (121) 773 775 2,097 787 467
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 3,073 5,038 4,252 4,938 2,000 1,726
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 3,163 6,291 4,077 5,222 1,840 1,972
NET ASSETS AT BEGINNING OF PERIOD 13,281 6,990 8,070 2,848 6,044 4,072
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 16,444 $ 13,281 $ 12,147 $ 8,070 $ 7,884 $ 6,044
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
25
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Scudder Variable Life Investment Fund Sub-Accounts
-----------------------------------------------------------------------------------
Balanced Growth and Income Global Discover
-------------------------- ------------------------- --------------------------
1999 1998 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,315 $ 694 $ 44 $ - $ (2) $ -
Net realized gains (losses) 522 213 9 - 10 1
Change in unrealized gains (losses) 1,006 1,843 - 9 176 2
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 2,843 2,750 53 9 184 3
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 5,716 3,966 1,913 182 256 21
Benefit payments (151) (77) (12) - - -
Payments on termination (1,587) (703) (67) - (5) -
Loans - net (1) (7) - - - -
Contract administration charges (7) (5) - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 72 1,711 166 3 1,070 (1)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 4,042 4,885 2,000 185 1,321 20
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 6,885 7,635 2,053 194 1,505 23
-
NET ASSETS AT BEGINNING OF PERIOD 17,648 10,013 194 - 23 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 24,533 $ 17,648 $ 2,247 $ 194 $ 1,528 $ 23
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
See notes to financial statements.
26
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Scudder Variable Life
Investment Fund Sub-Accounts Strong Variable Insurance Funds, Inc.
---------------------------- ------------------------------------------------------
International Discovery Fund II Growth Fund II
-------------------------- ------------------------- --------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13 $ - $ 4 $ - $ (17) $ -
Net realized gains (losses) 184 - (1) - 76 -
Change in unrealized gains (losses) 323 5 24 1 1,421 20
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 520 5 27 1 1,480 20
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 972 73 123 12 1,971 106
Benefit payments - - - - - -
Payments on termination (4) - (5) - (57) (1)
Loans - net - - - - - -
Contract administration charges - - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net (35) 30 44 3 1,927 7
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 933 103 162 15 3,841 112
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 1,453 108 189 16 5,321 132
NET ASSETS AT BEGINNING OF PERIOD 108 - 16 - 132 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 1,561 $ 108 $ 205 $ 16 $ 5,453 $ 132
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
See notes to financial statements.
27
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
T. Rowe Price T. Rowe Price
Strong Opportunity International Series, Inc. Equity Series, Inc.
Fund II Sub-Account Sub-Account Sub-Accounts
-------------------------- ------------------------- --------------------------
Opportunity Fund II International Stock New America Growth
-------------------------- ------------------------- --------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1 $ - $ 9 $ 1 $ 61 $ 2
Net realized gains (losses) 6 - 31 - 4 2
Change in unrealized gains (losses) 143 2 176 5 23 12
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 150 2 216 6 88 16
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 872 26 661 92 987 92
Benefit payments - - - - - -
Payments on termination (9) - (13) - (11) (1)
Loans - net - - - - - -
Contract administration charges - - - - - -
Transfers among the sub-accounts -
and with the Fixed Account - net 221 2 24 6 55 4
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 1,084 28 672 98 1,031 95
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 1,234 30 888 104 1,119 111
NET ASSETS AT BEGINNING OF PERIOD 30 - 104 - 111 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 1,264 $ 30 $ 992 $ 104 $ 1,230 $ 111
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
See notes to financial statements.
28
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
MFS Variable Insurance
T. Rowe Price Equity Series, Inc. Sub-Accounts Trust Sub-Accounts
------------------------------------------------------ --------------------------
Mid-Cap Growth Equity Income Growth with Income Series
-------------------------- ------------------------- --------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 6 $ 8 $ 130 $ 11 $ (19) $ -
Net realized gains (losses) 19 7 6 - 6 2
Change in unrealized gains (losses) 431 85 (193) 6 161 24
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 456 100 (57) 17 148 26
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,708 551 1,764 346 3,127 283
Benefit payments - - - - - -
Payments on termination (21) - (21) - (43) (1)
Loans - net - - - - - -
Contract administration charges - - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 176 3 903 26 329 23
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 1,863 554 2,646 372 3,413 305
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 2,319 654 2,589 389 3,561 331
NET ASSETS AT BEGINNING OF PERIOD 654 - 389 - 331 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 2,973 $ 654 $ 2,978 $ 389 $ 3,892 $ 331
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
See notes to financial statements.
29
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
MFS Variable Insurance Trust Sub-Accounts
-----------------------------------------------------------------------------------
Research Series Emerging Growth Series Total Return Series
-------------------------- ------------------------- --------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (8) $ - $ (22) $ - $ 21 $ -
Net realized gains (losses) 17 - 117 - (6) -
Change in unrealized gains (losses) 297 16 1,542 10 (15) 9
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 306 16 1,637 10 - 9
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,636 125 3,136 100 1,813 252
Benefit payments - - - - (32) -
Payments on termination (26) - (32) - (51) -
Loans - net - - - - - -
Contract administration charges - - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 142 - (320) (4) 312 8
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 1,752 125 2,784 96 2,042 260
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 2,058 141 4,421 106 2,042 269
NET ASSETS AT BEGINNING OF PERIOD 141 - 106 - 269 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 2,199 $ 141 $ 4,527 $ 106 $ 2,311 $ 269
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
See notes to financial statements.
30
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
($ in thousands)
MFS Variable Insurance
Trust Sub-Accounts STI Classic Variable Trust Sub-Accounts
-------------------------- ------------------------------------------
Capital International Value Income
New Discovery Series Appreciation Equity Stock
-------------------------- --------------------------- ------------
1999 1998 (b) 1999 ( c) 1999 ( c) 1999 ( c)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 28 $ - $ 16 $ - $ 5
Net realized gains (losses) 75 - (6) - (4)
Change in unrealized gains (losses) 504 14 (4) - (8)
------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 607 14 6 - (7)
------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 648 65 386 - 117
Benefit payments - - - - -
Payments on termination (12) - (4) - -
Loans - net - - - - -
Contract administration charges - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 795 - (61) - (20)
------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 1,431 65 321 - 97
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 2,038 79 327 - 90
NET ASSETS AT BEGINNING OF PERIOD 79 - - - -
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 2,117 $ 79 $ 327 $ - $ 90
============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning August 17, 1998 and Ending December 31, 1998
(c) For the Period Beginning May 3, 1999 and Ending December 31, 1999
See notes to financial statements.
31
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
($ in thousands)
J.P. Morgan
Goldman Sachs Variable Series Trust II Lazard Retirement Series Trust
Insurance Trust Sub-Accounts Sub- Account Sub-Accounts
---------------------------- -------------- -----------------------------
CORE Small International Small Emerging International
Cap Equity Equity Company Markets Equity
------------ ------------ ------------ ------------ ------------
1999 (d) 1999 (d) 1999 (d) 1999 (d) 1999 (d)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ - $ 5 $ - $ - $ -
Net realized gains (losses) - - - - -
Change in unrealized gains (losses) 23 4 24 4 8
------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 23 9 24 4 8
------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 379 294 572 148 344
Benefit payments - - - - -
Payments on termination - - - - -
Loans - net - - - - -
Contract administration charges - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 38 38 - 42 -
------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 417 332 572 190 344
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 440 341 596 194 352
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 440 $ 341 $ 596 $ 194 $ 352
============ ============ ============ ============ ============
</TABLE>
(d) For the Period Beginning October 18, 1999 and Ending December 31, 1999
See notes to financial statements.
32
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
LSA Variable Series Trust Sub-Accounts
----------------------------------------------------------------------------------
Emerging
Focused Growth Disciplined Value Growth
Equity Balanced Equity Equity Equity Equity
------------ ------------ ------------ ------------ ------------ ------------
1999 (d) 1999 (d) 1999 (d) 1999 (d) 1999 (d) 1999 (d)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ - $ - $ - $ 1 $ - $ -
Net realized gains (losses) - - 1 - - -
Change in unrealized gains (losses) 11 1 12 2 5 11
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 11 1 13 3 5 11
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 479 77 280 142 146 322
Benefit payments - - - - - -
Payments on termination - - - - - -
Loans - net - - - - - -
Contract administration charges - - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 42 - 53 - 39 42
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 521 77 333 142 185 364
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 532 78 346 145 190 375
NET ASSETS AT BEGINNING OF PERIOD - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 532 $ 78 $ 346 $ 145 $ 190 $ 375
============ ============ ============ ============ ============ ============
</TABLE>
(d) For the Period Beginning October 18, 1999 and Ending December 31, 1999
See notes to financial statements.
33
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
($ in thousands)
Morgan Stanley Dean Witter OCC Accumulation Trust
Universal Funds, Inc. Sub-Accounts Sub-Accounts
------------------------------------------ ---------------------------
Mid Cap Mid Cap High Small
Growth Value Yield Equity Cap
------------ ------------ ------------ ------------ ------------
1999 (d) 1999 (d) 1999 (d) 1999 (d) 1999 (d)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ - $ 3 $ - $ - $ -
Net realized gains (losses) - - - - -
Change in unrealized gains (losses) 4 3 - - -
------------ ------------ ------------ ------------ ------------
Change in net assets resulting from
operations 4 6 - - -
------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 45 29 185 61 -
Benefit payments - - - - -
Payments on termination - - - - -
Loans - net - - - - -
Contract administration charges - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net 42 38 - - -
------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 87 67 185 61 -
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 91 73 185 61 -
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 91 $ 73 $ 185 $ 61 $ -
============ ============ ============ ============ ============
</TABLE>
(d) For the Period Beginning October 18, 1999 and Ending December 31, 1999
See notes to financial statements.
34
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Salomon
Brothers
Variable Series
PIMCO Variable Insurance Trust Sub-Accounts Funds Sub-Account
--------------------------------------------------------- -----------------
StocksPLUS
Growth Foreign Total Return Money
and Income Bond Bond Market Capital
------------ ------------ ------------ ------------ -----------------
1999 (d) 1999 (d) 1999 (d) 1999 (d) 1999 (d)
------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 3 $ - $ 1 $ 2 $ 18
Net realized gains (losses) - - - - -
Change in unrealized gains (losses) - - 1 - (8)
------------ ------------ ------------ ------------ -----------------
Change in net assets resulting from
operations 3 - 2 2 10
------------ ------------ ------------ ------------ -----------------
FROM CAPITAL TRANSACTIONS
Deposits 146 182 550 938 558
Benefit payments - - - - -
Payments on termination - - - - -
Loans - net - - - - -
Contract administration charges - - - - -
Transfers among the sub-accounts
and with the Fixed Account - net - - - (374) -
------------ ------------ ------------ ------------ -----------------
Change in net assets resulting
from capital transactions 146 182 550 564 558
------------ ------------ ------------ ------------ -----------------
INCREASE (DECREASE) IN NET ASSETS 149 182 552 566 568
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------ ------------ ------------ ------------ -----------------
NET ASSETS AT END OF PERIOD $ 149 $ 182 $ 552 $ 566 $ 568
============ ============ ============ ============ =================
</TABLE>
(d) For the Period Beginning October 18, 1999 and Ending December 31, 1999
See notes to financial statements.
35
<PAGE>
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Lincoln Benefit Life Variable Annuity Account (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of Lincoln
Benefit Life Company ("Lincoln Benefit"). The assets of the Account are
legally segregated from those of Lincoln Benefit. Lincoln Benefit is wholly
owned by Allstate Life Insurance Company ("Allstate"), a wholly owned
subsidiary of Allstate Insurance Company, which is wholly owned by The
Allstate Corporation.
Lincoln Benefit sells four variable annuity contracts, Investor's Select,
Consultant I, Consultant II and Premier Planner, the deposits of which
are invested at the direction of the contractholders in the sub-accounts
that comprise the Account. Absent any contract provisions wherein Lincoln
Benefit contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the sub-accounts may not meet
their stated objectives. The sub-accounts invest in the following underlying
mutual fund portfolios (collectively the "Funds"):
<TABLE>
<S> <C>
ALGER AMERICAN FUND SCUDDER VARIABLE LIFE INVESTMENT FUND
Growth Bond
Income and Growth Balanced
Leveraged AllCap Growth and Income
MidCap Growth Global Discovery
Small Capitalization International
JANUS ASPEN SERIES STRONG VARIABLE INSURANCE FUNDS, INC.
Flexible Income Discovery Fund II
Balanced Growth Fund II
Growth STRONG OPPORTUNITY FUND II, INC.
Agressive Growth Opportunity Fund, II
Worldwide Growth T. ROWE PRICE EQUITY SERIES, INC.
IAI RETIREMENT FUNDS, INC. New America Growth
Regional Mid-Cap Growth
Reserve Equity Income
Balanced MFS VARIABLE INSURANCE TRUST
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II Growth with Income Series
Asset Manager Research Series
Contrafund Emerging Growth Series
Index 500 Total Return Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND New Discovery Series
Money Market STI CLASSIC VARIABLE TRUST
Equity-Income Capital Appreciation
Growth International Equity
Overseas Value Income Stock
FEDERATED INSURANCE MANAGEMENT SERIES GOLDMAN SACHS VARIABLE INSURANCE TRUST
High Income Bond Fund II CORE Small Cap Equity
Utility Fund II International Equity
U.S. Government Securities Fund II
36
<PAGE>
J.P. MORGAN SERIES TRUST II MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Small Company Mid Cap Growth
LAZARD RETIREMENT SERIES TRUST Mid Cap Value
Emerging Markets High Yield
International Equity OCC ACCUMULATION TRUST
LSA VARIABLE SERIES TRUST Equity
Focused Equity Small Cap
Balanced PIMCO VARIABLE INSURANCE TRUST
Growth Equity StocksPLUS Growth and Income
Disciplined Equity Foreign Bond
Value Equity Total Return Bond
Emerging Growth Equity Money Market
SALOMON BROTHERS VARIABLE SERIES FUNDS
Capital
</TABLE>
Lincoln Benefit provides insurance and administrative services to the
contractholders for a fee. Lincoln Benefit also maintains a fixed account
("Fixed Account"), to which contractholders may direct their deposits and
receive a fixed rate of return. Lincoln Benefit has sole discretion to
invest the assets of the Fixed Account, subject to applicable law.
The LSA Variable Series Trust ("Trust") is managed by LSA Asset Management,
LLC (the "Manager"), wholly-owned subsidiary of Allstate pursuant to an
investment management agreement with the Trust. The Manager is entitled to
receive a management fee from each sub-account investing in the Trust. Fees
are payable monthly at an annual rate as a percentage of average daily net
assets ranging from 0.75% to 1.05%.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31, 1999.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Lincoln Benefit.
Lincoln Benefit is taxed as a life insurance company under the Code. No
federal income taxes were allocable to the Account as the Account did not
generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
37
<PAGE>
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Lincoln Benefit deducts administrative
expense charges daily at a rate equal to .15% per annum of the average daily
net assets of the Account for Investor's Select. The rate is .10% for
Consultant I, Consultant II and Premier Planner.
CONTRACT MAINTENANCE CHARGE - Lincoln Benefit deducts an annual maintenance
charge on each contract anniversary and guarantees that this charge will not
increase over the life of the contract. For Investor's Select, the charge is
$25 and will be waived if total deposits are $75,000 or more. For Consultant
I, Consultant II and Premier Planner, the charge is $35 and will be waived
if total deposits are $50,000 or more or if all of the deposits are
allocated to the Fixed Account on a contract anniversary.
MORTALITY AND EXPENSE RISK CHARGE - Lincoln Benefit assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily based on the daily net assets of the Account. The mortality and
expense risk charge covers insurance benefits available with the contracts
and certain expenses of the contracts. It also covers the risk that the
current charges will not be sufficient in the future to cover the cost of
administering the contract, Lincoln Benefit guarantees that the amount of
this charge will not increase over the lives of the contracts. At the
contractholder's discretion, additional options, primarily death benefits,
may be purchased for an additional charge.
38
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
INVESTOR'S SELECT CONTRACTS
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Alger American Fund
Sub-Accounts:
Growth 392,390 6,002,550 (5,718,562) 676,378 $ 18.02
Income and Growth 333,125 550,512 (302,093) 581,544 17.63
Leveraged AllCap 106,760 555,942 (332,633) 330,069 25.57
MidCap Growth 196,031 370,716 (308,909) 257,838 15.83
Small Capitalization 217,169 518,752 (402,596) 333,325 15.58
Investments in Janus Aspen Series
Sub-Accounts:
Flexible Income 708,089 326,464 (286,391) 748,162 15.06
Balanced 1,570,637 663,588 (508,392) 1,725,833 27.11
Growth 2,335,027 1,742,931 (1,599,532) 2,478,426 33.95
Aggressive Growth 1,444,800 1,227,253 (1,140,414) 1,531,639 50.75
Worldwide Growth 3,269,577 920,886 (967,643) 3,222,820 38.39
Investments in IAI Retirement Funds,
Inc. Sub-Accounts:
Regional 760,302 47,259 (273,929) 533,632 19.90
Reserve 42,468 12,487 (16,479) 38,476 11.66
Balanced 177,759 54,290 (51,955) 180,094 16.25
Investments in Fidelity Variable
Insurance Products Fund II Sub-Accounts:
Asset Manager 1,315,223 129,475 (291,133) 1,153,565 17.52
Contrafund 2,198,114 1,870,098 (1,774,064) 2,294,148 21.43
Index 500 1,052,148 1,225,553 (545,507) 1,732,194 14.28
Investments in Fidelity Variable Insurance
Products Fund Sub-Accounts:
Money Market 2,320,956 18,002,716 (17,113,223) 3,210,449 12.50
Equity-Income 3,906,757 900,209 (1,384,922) 3,422,044 22.51
Growth 2,486,678 931,649 (951,342) 2,466,985 33.33
Overseas 1,489,209 2,328,934 (2,482,162) 1,335,981 20.14
Investments in Federated Insurance
Management Series Sub-Accounts:
High Income Bond Fund II 1,245,268 983,715 (1,141,896) 1,087,087 14.58
Utility Fund II 687,133 154,219 (202,228) 639,124 18.01
U.S. Government Securities Fund II 582,790 483,173 (427,744) 638,219 12.36
Investments in Scudder Variable Life
Investment Fund Sub-Accounts:
Bond 461,863 293,631 (252,503) 502,991 12.10
Balanced 895,255 170,887 (182,388) 883,754 22.11
</TABLE>
39
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
CONSULTANT I CONTRACTS
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Alger American Fund
Sub-Accounts:
Growth 51,133 1,059,132 (486,056) 624,209 $ 15.75
Income and Growth 24,310 423,298 (45,269) 402,339 16.17
Leveraged AllCap 16,931 303,752 (44,392) 276,291 22.52
MidCap Growth 1,813 143,233 (11,635) 133,411 15.10
Small Capitalization 5,133 205,005 (133,060) 77,078 16.02
Investments in Janus Aspen Series
Sub-Accounts:
Flexible Income 52,969 273,188 (129,138) 197,019 10.29
Balanced 39,593 735,330 (52,865) 722,058 14.63
Growth 35,519 1,009,911 (117,961) 927,469 16.86
Aggressive Growth 4,895 541,162 (105,358) 440,699 27.32
Worldwide Growth 64,108 1,541,466 (674,030) 931,544 17.35
Investments in Fidelity Variable Insurance
Products Fund II Sub-Accounts:
Asset Manager 12,172 158,904 (16,635) 154,441 11.85
Contrafund 28,065 565,361 (44,459) 548,967 14.06
Index 500 67,638 1,031,615 (115,761) 983,492 13.52
Investments in Fidelity Variable Insurance
Products Fund Sub-Accounts:
Money Market 69,742 7,175,630 (5,793,520) 1,451,852 10.54
Equity-Income 39,303 674,691 (97,225) 616,769 11.37
Growth 13,317 1,192,603 (664,594) 541,326 15.78
Overseas 77,591 2,536,251 (2,587,582) 26,260 14.79
Investments in Federated Insurance
Management Series Sub-Accounts:
High Income Bond Fund II 47,674 1,448,443 (1,299,545) 196,572 9.95
Utility Fund II 35,130 278,621 (115,714) 198,037 11.18
U.S. Government Securities Fund II 36,743 210,721 (71,671) 175,793 10.08
Investments in Scudder Variable Life
Investment Fund Sub-Accounts:
Bond 24,670 133,736 (35,313) 123,093 9.97
Balanced 9,569 221,138 (10,437) 220,270 12.57
Growth and Income 8,690 146,794 (16,538) 138,946 11.02
Global Discovery 1,630 52,406 (7,945) 46,091 17.65
International 181 59,807 (3,701) 56,287 15.84
Investments in Strong Variable Insurance
Funds, Inc. Sub-Accounts:
Discovery Fund II 226 4,991 (106) 5,111 11.46
Growth Fund II 8,510 183,532 (27,835) 164,207 21.40
Investment in Strong Opportunity Fund II,
Inc. Sub-Accounts:
Opportunity Fund II 603 47,441 (1,889) 46,155 14.57
Investment in T. Rowe Price International
Series, Inc. Sub-Account:
International Stock 2,401 94,148 (73,680) 22,869 14.19
Investments in T. Rowe Price Equity Series,
Inc. Sub-Accounts:
New America Growth 4,126 60,755 (7,750) 57,131 12.52
Mid-Cap Growth 7,608 96,327 (18,078) 85,857 14.06
Equity Income 14,739 145,909 (32,626) 128,022 11.05
Investments in MFS Variable Insurance Trust
Sub-Accounts:
Growth with Income Series 10,591 139,326 (16,796) 133,121 11.80
Research Series 8,940 75,965 (9,058) 75,847 13.57
Emerging Growth Series 5,861 175,923 (67,100) 114,684 20.50
Total Return Series 11,410 128,554 (21,724) 118,240 10.80
New Discovery Series 842 81,612 (27,180) 55,274 19.44
Investments in STI Classic Variable Trust
Sub-Accounts:
Capital Appreciation - 28,361 (7,934) 20,427 10.08
International Equity - 21 - 21 10.51
Value Income Stock - 8,623 (13) 8,610 8.64
</TABLE>
40
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
CONSULTANT I CONTRACTS WITH ENHANCED DEATH BENEFIT RIDER
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Alger American Fund
Sub-Accounts:
Growth 15,244 245,482 (29,466) 231,260 $ 15.71
Income and Growth 20,131 268,049 (39,993) 248,187 16.13
Leveraged AllCap 4,249 102,071 (9,129) 97,191 22.46
MidCap Growth 8,615 72,892 (41,812) 39,695 15.06
Small Capitalization 2,569 44,376 (13,831) 33,114 15.98
Investments in Janus Aspen Series
Sub-Accounts:
Flexible Income 7,491 98,234 (54,843) 50,882 10.26
Balanced 18,636 451,377 (48,802) 421,211 14.59
Growth 14,182 348,822 (24,833) 338,171 16.81
Aggressive Growth 4,799 113,650 (13,174) 105,275 27.24
Worldwide Growth 60,930 413,563 (63,356) 411,137 17.30
Investments in Fidelity Variable Insurance
Products Fund II Sub-Accounts:
Asset Manager 7,062 62,668 (3,564) 66,166 11.82
Contrafund 22,847 255,791 (16,522) 262,116 14.02
Index 500 136,539 623,048 (73,439) 686,148 13.49
Investments in Fidelity Variable Insurance
Products Fund Sub-Accounts:
Money Market 53,103 883,613 (501,594) 435,122 10.51
Equity-Income 19,830 398,938 (43,422) 375,346 11.34
Growth 11,279 212,272 (14,652) 208,899 15.73
Overseas 2,466 41,502 (25,970) 17,998 14.75
Investments in Federated Insurance
Management Series Sub-Accounts:
High Income Bond Fund II 7,379 70,206 (13,231) 64,354 9.92
Utility Fund II 23,112 143,038 (16,583) 149,567 11.15
U.S. Government Securities Fund II 10,599 128,229 (48,573) 90,255 10.05
Investments in Scudder Variable Life
Investment Fund Sub-Accounts:
Bond 2,343 39,717 (14,122) 27,938 9.94
Balanced 4,128 126,862 (19,781) 111,209 12.54
Growth and Income 1,708 49,450 (13,294) 37,864 10.99
Global Discovery - 10,602 (300) 10,302 17.60
International 5,932 18,393 (2,810) 21,515 15.80
Investments in Strong Variable Insurance
Funds, Inc. Sub-Accounts:
Discovery Fund II 1,200 17,940 (10,008) 9,132 11.42
Growth Fund II 3,091 35,809 (2,633) 36,267 21.35
Investment in Strong Opportunity Fund II,
Inc. Sub-Account:
Opportunity Fund II 1,370 25,444 (1,969) 24,845 14.53
Investment in T. Rowe Price International
Series, Inc. Sub-Account:
International Stock 5,160 38,503 (16,000) 27,663 14.15
Investments in T. Rowe Price Equity Series,
Inc. Sub-Accounts:
New America Growth 4,213 26,337 (9,045) 21,505 12.49
Mid-Cap Growth 43,441 59,264 (6,383) 96,322 14.02
Equity Income 13,978 82,443 (19,683) 76,738 11.02
Investments in MFS Variable Insurance Trust
Sub-Accounts:
Growth with Income Series 8,633 120,593 (17,632) 111,594 11.76
Research Series 2,305 66,807 (30,091) 39,021 13.53
Emerging Growth Series 91 33,464 (2,675) 30,880 20.45
Total Return Series 8,539 38,611 (4,112) 43,038 10.77
New Discovery Series 2,858 26,179 (7,423) 21,614 19.39
Investments in STI Classic Variable Trust
Sub-Accounts:
Capital Appreciation - 4,701 (35) 4,666 10.06
International Equity - - - - 10.50
Value Income Stock - 1,411 (746) 665 8.63
</TABLE>
41
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
CONSULTANT I CONTRACTS WITH ENHANCED DEATH AND INCOME BENEFIT RIDER
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Alger American Fund
Sub-Accounts:
Growth 4,543 161,862 (3,056) 163,349 $ 15.67
Income and Growth 287 68,815 (8,959) 60,143 16.08
Leveraged AllCap 273 131,675 (11,992) 119,956 22.40
MidCap Growth 266 33,434 (4,491) 29,209 15.02
Small Capitalization 2,840 35,280 (9,640) 28,480 15.93
Investments in Janus Aspen Series
Sub-Accounts:
Flexible Income 9,165 23,329 (5,277) 27,217 10.23
Balanced 11,145 122,308 (5,397) 128,056 14.55
Growth 7,219 256,598 (5,762) 258,055 16.77
Aggressive Growth 788 106,619 (9,082) 98,325 27.17
Worldwide Growth 10,553 191,354 (8,849) 193,058 17.26
Investments in Fidelity Variable Insurance
Products Fund II Sub-Accounts:
Asset Manager 292 23,385 (5,957) 17,720 11.79
Contrafund 5,053 107,628 (4,944) 107,737 13.98
Index 500 18,374 622,900 (17,445) 623,829 13.45
Investments in Fidelity Variable Insurance
Products Fund Sub-Accounts:
Money Market 27,065 464,579 (215,322) 276,322 10.48
Equity-Income 4,535 135,006 (34,245) 105,296 11.31
Growth 2,503 139,853 (5,055) 137,301 15.69
Overseas - 9,774 (196) 9,578 14.71
Investments in Federated Insurance Management
Series Sub-Accounts:
High Income Bond Fund II 10,770 33,784 (10,910) 33,644 9.89
Utility Fund II 7,862 20,326 (3,257) 24,931 11.12
U.S. Government Securities Fund II 9,297 76,039 (20,525) 64,811 10.02
Investments in Scudder Variable Life
Investment Fund Sub-Accounts:
Bond 2,883 10,736 (2,827) 10,792 9.91
Balanced 4,684 31,940 (8,646) 27,978 12.50
Growth and Income 702 76,672 (61,484) 15,890 10.96
Global Discovery 203 13,527 (44) 13,686 17.55
International 2,877 10,052 (3,312) 9,617 15.75
Investments in Strong Variable Insurance
Funds, Inc. Sub-Accounts:
Discovery Fund II - 600 (2) 598 11.39
Growth Fund II - 17,201 (4,543) 12,658 21.29
Investment in Strong Opportunity Fund II,
Inc. Sub-Account:
Opportunity Fund II 191 7,833 (178) 7,846 14.49
Investment in T. Rowe Price International
Series, Inc. Sub-Account:
International Stock - 8,861 (3,849) 5,012 14.11
Investments in T. Rowe Price Equity Series,
Inc. Sub-Accounts:
New America Growth - 8,315 (1,731) 6,584 12.46
Mid-Cap Growth - 13,483 (708) 12,775 13.98
Equity Income 687 33,597 (2,590) 31,694 10.99
Investments in MFS Variable Insurance Trust
Sub-Accounts:
Growth with Income Series 3,420 58,505 (9,529) 52,396 11.73
Research Series 1,499 35,833 (7,737) 29,595 13.49
Emerging Growth Series 733 68,253 (6,339) 62,647 20.39
Total Return Series 3,925 36,067 (12,527) 27,465 10.74
New Discovery Series - 11,657 (6,823) 4,834 19.34
Investments in STI Classic Variable Trust
Sub-Accounts:
Capital Appreciation - 354 (1) 353 10.05
International Equity - - - - 10.48
Value Income Stock - - - - 8.61
</TABLE>
42
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
CONSULTANT II CONTRACTS
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Alger American Fund
Sub-Accounts:
Growth 14,614 131,274 (35,561) 110,327 $ 15.72
Income and Growth 21,210 65,484 (24,879) 61,815 16.14
Leveraged AllCap 7,257 167,697 (93,992) 80,962 22.48
MidCap Growth 3,707 44,662 (8,303) 40,066 15.07
Small Capitalization 5,492 327,285 (313,575) 19,202 15.99
Investments in Janus Aspen Series
Sub-Accounts:
Flexible Income 20,382 64,048 (33,178) 51,252 10.27
Balanced 20,840 209,820 (20,076) 210,584 14.60
Growth 14,330 248,178 (32,190) 230,318 16.83
Aggressive Growth 1,708 140,780 (20,936) 121,552 27.26
Worldwide Growth 37,205 430,854 (231,118) 236,941 17.32
Investments in Fidelity Variable Insurance
Products Fund II Sub-Accounts:
Asset Manager 2,962 14,974 (1,296) 16,640 11.83
Contrafund 9,371 127,836 (22,626) 114,581 14.03
Index 500 33,281 301,217 (69,856) 264,642 13.49
Investments in Fidelity Variable Insurance
Products Fund Sub-Accounts:
Money Market 50,763 2,926,324 (2,668,087) 309,000 10.52
Equity-Income 36,057 152,664 (51,771) 136,950 11.35
Growth 8,616 108,493 (11,472) 105,637 15.75
Overseas 1,800 492,539 (425,913) 68,426 14.76
Investments in Federated Insurance
Management Series Sub-Accounts:
High Income Bond Fund II 6,794 79,303 (46,460) 39,637 9.93
Utility Fund II 18,262 60,836 (9,857) 69,241 11.16
U.S. Government Securities Fund II 13,480 112,549 (33,724) 92,305 10.06
Investments in Scudder Variable Life
Investment Fund Sub-Accounts:
Bond 1,861 33,218 (16,280) 18,799 9.95
Balanced 3,482 42,252 (7,601) 38,133 12.55
Growth and Income 7,306 19,949 (15,869) 11,386 11.00
Global Discovery 313 18,826 (2,471) 16,668 17.61
International 1,422 1,009,190 (999,355) 11,257 15.81
Investments in Strong Variable Insurance
Funds, Inc. Sub-Accounts:
Discovery Fund II - 4,310 (1,221) 3,089 11.43
Growth Fund II - 56,013 (14,129) 41,884 21.36
Investment in Strong Opportunity Fund II,
Inc. Sub-Accounts:
Opportunity Fund II 551 12,128 (4,616) 8,063 14.54
Investment in T. Rowe Price International
Series, Inc. Sub-Account:
International Stock 2,055 12,684 (349) 14,390 14.16
Investments in T. Rowe Price Equity Series,
Inc. Sub-Accounts:
New America Growth 1,518 18,037 (6,423) 13,132 12.50
Mid-Cap Growth 5,872 13,829 (2,848) 16,853 14.03
Equity Income 6,696 31,729 (4,998) 33,427 11.02
Investments in MFS Variable Insurance Trust
Sub-Accounts:
Growth with Income Series 6,884 33,729 (7,209) 33,404 11.77
Research Series - 18,660 (776) 17,884 13.54
Emerging Growth Series 2,345 25,348 (14,697) 12,996 20.46
Total Return Series 1,529 27,943 (3,991) 25,481 10.78
New Discovery Series 3,242 32,920 (8,889) 27,273 19.40
Investments in STI Classic Variable Trust
Sub-Accounts:
Capital Appreciation - 7,060 (45) 7,015 10.07
International Equity - - - - 10.50
Value Income Stock - 1,207 (5) 1,202 8.63
</TABLE>
43
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
PREMIER PLANNER CONTRACTS
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Goldman Sachs Variable
Insurance Trust Sub-Accounts:
CORE Small Cap Equity - 32,509 (10) 32,499 $ 12.19
International Equity - 22,158 (6) 22,152 12.29
Investments in J.P. Morgan Series Trust II
Sub-Account:
Small Company - 42,578 (11) 42,567 14.01
Investments in Lazard Retirement Series, Inc.
Sub-Accounts:
Emerging Markets - 11,806 (3) 11,803 13.27
International Equity - 27,215 (8) 27,207 11.25
Investments in LSA Variable Series Trust
Sub-Accounts:
Focused Equity - 34,239 (11) 34,228 12.49
Balanced - 386 - 386 10.40
Growth Equity - 5,186 (1,792) 3,394 12.22
Disciplined Equity - 684 - 684 11.49
Value Equity - 32 - 32 11.03
Emerging Growth Equity - 16,196 (5) 16,191 17.48
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc Sub-Accounts:
Mid Cap Growth - 409 - 409 13.80
Mid Cap Value - - - - 12.06
High Yield - 17,873 (5) 17,868 10.37
Investments in OCC Accumulation Trust
Sub-Accounts:
Equity - - - - 10.62
Small Cap - - - - 10.65
Investments in PIMCO Variable Insurance
Trust Sub-Accounts:
StocksPLUS Growth and Income - 21 - 21 11.64
Foreign Bond - 17,752 (5) 17,747 10.29
Total Return Bond - 54,524 (15) 54,509 10.13
Money Market - 45,793 (16) 45,777 10.07
Investments in Salomon Brothers Variable
Series Funds Sub-Account:
Capital - 49,271 (15) 49,256 11.54
</TABLE>
44
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
PREMIER PLANNER CONTRACTS WITH ENHANCED DEATH BENEFIT RIDER
Unit activity during 1999:
----------------------------------------------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
---------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Investments in Goldman Sachs Variable
Insurance Trust Sub-Accounts:
CORE Small Cap Equity - 3,676 (72) 3,604 $ 12.19
International Equity - 5,694 (73) 5,621 12.29
Investments in J.P. Morgan Series Trust II
Sub-Account:
Small Company - - - - 14.00
Investments in Lazard Retirement Series,
Inc. Sub-Accounts:
Emerging Markets - 2,809 - 2,809 13.26
International Equity - 4,067 (3) 4,064 11.24
Investments in LSA Variable Series Trust
Sub-Accounts:
Focused Equity - 8,361 (2) 8,359 12.48
Balanced - 7,128 (2) 7,126 10.40
Growth Equity - 24,922 (20) 24,902 12.21
Disciplined Equity - 11,939 (4) 11,935 11.48
Value Equity - 17,200 (17) 17,183 11.03
Emerging Growth Equity - 5,260 (1) 5,259 17.47
Investments in Morgan Stanley Dean Witter
Universal Funds, Inc Sub-Accounts:
Mid Cap Growth - 6,218 (2) 6,216 13.80
Mid Cap Value - 6,147 (126) 6,021 12.05
High Yield - - - - 10.36
Investments in OCC Accumulation Trust
Sub-Accounts:
Equity - 5,787 (3) 5,784 10.62
Small Cap - - - - 10.65
Investments in PIMCO Variable Insurance
Trust Sub-Accounts:
StocksPLUS Growth and Income - 12,781 (5) 12,776 11.64
Foreign Bond - - - - 10.28
Total Return Bond - 224 - 224 10.13
Money Market - 28,719 (18,369) 10,350 10.07
Investments in Salomon Brothers Variable
Series Funds Sub-Account:
Capital - - - - 11.53
</TABLE>
45
